Port Authority losses critical, financial committee hears

Officials with the Port Authority of the Cayman Islands have told legislators that the agency is in desperate financial trouble and largely helpless to address its fiscal woes due to a slumping economy, rising costs and bare-bones staffing. 

In two sessions of the Public Accounts Committee late last week, members joined Auditor General Alastair Swarbrick to hear the authority’s chief financial officer James Parsons and director Paul Hurlston lament the parlous state of the entity’s finances and board conflicts regarding hiring. 

Questioning by the five-member committee came in the wake of Mr. Swarbrick’s July 2012 “qualified opinion” regarding authority accounts, in which he worried about unresolved conflicts of interest among the board, non-collection of nearly $550,000 in tendering fees and the general ability of the authority “to continue operating as a going concern.” 

Mr. Parsons told the committee that the problems dated as far back as 2003, when the authority agreed not to increase fees for the Florida-Caribbean Cruise Association in exchange for financial support to help build facilities at the George Town port. 

Already, the Florida-Caribbean Cruise Association pays to land each passenger in George Town, offsetting port-maintenance costs, in addition to ship-to-shore tendering fees. However, recent proposed fee increases were rejected by the cruise association, while both passenger and cargo volumes have slumped, damaging authority coffers. 

“The FCCA said you can’t raise fees. I advised that we needed to do something, but nothing has happened since the 2011/’12 and 2013 audits.” Mr. Parsons told the committee. 

Meanwhile, he continued, “cargo has dropped 50 percent over the last eight years. Cruise has dropped 23 percent. Operational costs have remained. We had a small increase in fees in 2010, but a board meeting decided to scrap it.” 

“There is not a lot the port can do to cut,” he said, pointing to personnel costs and the two freight cranes. “Salaries were cut 7 percent in 2010, but we have a lot of operational costs on our cranes. We did a major overhaul, which cost a lot of money, and then did a second overhaul.”  

“Cargo operations are labor-intensive,” he added. “If you start cutting personnel, it would affect our activities.” 

“Since 2008, I’ve been saying this cannot continue. Either we increase fees or downsize. We are now looking at how best we can raise fees that should have been raised 10 years ago,” Mr. Parsons said. 

Cargo operations, traditionally supplying 75 percent to 78 percent of port revenues, used to pay for themselves, he said. “But over the last five years cruise contributions and tenancies at the port, 22 percent to 25 percent of revenues,” had declined, while ongoing subsidies to the Cayman Brac port remained half-a-million dollars per year, he added.  

“We have not kept up with the cost of doing business,” he said. “We have had huge costs for security since 2004 and the port has not charged.” 

A 2011 KPMG study had addressed financial issues for the next three years and the authority had paid off a half-million-dollar loan, but “the cash flow just isn’t there,” Mr. Parsons said, between “consultancy and legal fees and capital” outlays. Summer doldrums had prevented the authority from making any payments to government, which indirectly subsidized the port at $3.5 million annually.  

George Town legislator Winston Connolly asked why the board had never taken Mr. Parsons’s advice. 

Saying he was not a board member, Mr. Parsons conceded, frankly, “I can’t answer that. In the last two years, I was only into the board once. I was presenting the KPMG report and was cut short after 15 minutes.” 

Mr. Hurlston, meanwhile, told Public Accounts Committee Chairman Roy McTaggart that he could only hope for “the continued viability of the port.” 

He said the financial problems had begun “three years ago, starting in 2009. Our biggest accounts payable is to government. We have paid $1 million per year to all others,” he said, while “costs had increased dramatically. And we lost 50 per cent of our resources.” 

“We have taken all steps to reduce expenditures, but there comes a point where we are now. KPMG recommended policies and procedures, but no one has acted. I have instructed the board to look again,” Mr. Hurlston said. 

He said he hoped a prospective fee increase would “bring [the port] back into line,” while admitting “there is not much we can do about Cayman Brac. Traffic is low.”  

Meanwhile, George Town representative Joey Hew asked Mr. Hurlston about instructions from former Premier McKeeva Bush, also an accounts committee member, to hire two people at the authority for $1,000 per month “to monitor activities in North Sound.”  

Mr. Connolly observed that no work had been completed, no reports filed and $90,000 spent during the course of the project.  

Mr. Hurlston said the pair reported to Mr. Bush, tracking boats at the Sand Bar. They had originally been hired in 2004, terminated in 2005 and rehired later. 

Mr. Bush rejected any suggestions of wrongdoing, saying the move remedied a chaotic situation at the Sand Bar and that any interference by his ministry “was good interference.” 

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Port Authority officials have told lawmakers that the agency is in desperate financial trouble and largely helpless to address the problem. – Photo: Jeff Brammer
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