The Cayman Islands Port Authority is anticipating an operating surplus of about $2 million at the end of its current budget year in June, the authority’s chief financial officer told the Legislative Assembly on Wednesday.
The figure, if achieved, would represent a dramatic turnaround in an agency that operated at a nearly $4 million loss during the government’s 2011/12 financial year and had operating losses of $800,000 during the 2013/14 year.
“We are now seeing a very good turnaround,” James Parsons told the assembly’s Public Accounts Committee. “Had this been a company other than the baby of the government, we probably would have folded.”
Auditor General Alastair Swarbrick’s office has expressed concern about the financial performance of the port, which had been a profit-making entity for the local government until the last several years.
In the 2012/2013 fiscal year, the public agency lost more than $2.6 million, according to statements released in Legislative Assembly.
Mr. Swarbrick noted in his evaluation of the agency’s financial statements that such losses prompted significant concern about its ability to continue operating.
“Given that the Port Authority has already increased fees in 2010, there is limited room for further maneuver on the revenue generation side, if the expected downward trajectory of cargo and cruise passenger volumes continues,” Mr. Swarbrick wrote in an evaluation of the port’s financial statements from 2012/13.
Port acting director Clement Reid told lawmakers Wednesday that, since that report was issued, a major boost in cruise ship visitor numbers in 2014 and so far in 2015 has helped tremendously with port finances.
In 2013, Cayman had one of its weakest years in the past decade for cruise passengers, with fewer than 1.4 million visitors. In 2014, the number of cruise visitors rose to more than 1.6 million. However, auditors also noted that a significant revenue source of the port, cruise passenger tender fees, remained uncollected during 2012/13 because of a dispute with the cruise lines.
“The authority amended its tender fees in March 2010, along with other fees, but before the implementation of those fees, it was realized that the charges to the tender company will only be passed on to the cruise lines,” the audit report stated. “The fees conflicted with the Florida-Caribbean Cruise Association agreement and were never charged.”
The loss of anticipated port revenue from the tender fees was estimated at more than $500,000 per year for the 2011/12 and 2012/13 government budgets. In testimony before the Legislative Assembly’s Public Accounts Committee, port officials noted that cargo shipments also dropped off by half between 2005 and 2013, while operational costs during that period stayed roughly the same.
Mr. Reid said Wednesday that he expected the issue with the tender/cruise passenger fees to remain until the port pays off its existing loans taken out for improvements to the Royal Watler cruise terminal. Mr. Parsons said that was expected to occur in September 2017.
Port officials explained that an agreement with the Florida-Caribbean Cruise Association allows the government to charge an extra $1 for each passenger arrival to assist in retiring the debt from the Royal Watler expansion. However, part of the agreement includes a contingency that no other passenger fees would be raised at the port until the loan was paid off.
Public Accounts Committee Chairman Roy McTaggart asked why government would have agreed to such an arrangement where it could not adjust fees as necessary.
Port officials said the arrangements had been made under previous governments and that the deal with the FCCA could not be altered at present.