Cruise pier development must be self-funding
Premier Alden McLaughlin confirmed Tuesday that Cabinet has formally approved the decision to move to the next phase of the proposed cruise pier development, which will involve discussions with cruise lines on a preferred financing model.
United Kingdom approval of the port development in George Town harbor will depend on the Cayman Islands government’s ability to show the project is self-funding.
Mr. McLaughlin acknowledged, “We are still a long way from saying this project is a go.”
He said it is not yet certain whether the development would be under way before the next election in 2017.
“The outcome of the discussions with the Foreign and Commonwealth Office are really going to be predicated on how well we present the case that this is a self-financing project and not something that is going to require the use of current revenues,” he said.
The business case produced by consultants PwC suggests that the $156 million project could be funded through a combination of the fees that currently go to tender operators, around $5 per passenger, and a share of the $14 per-passenger “head tax” charged by government for every cruise ship visitor.
Based on an estimate of two million cruise passengers per year, the $5 tender fees would provide a revenue stream of $10 million annually for the dock.
If government does sacrifice a share of the passenger taxes to cover construction costs, it would likely have to satisfy the Foreign ad Commonwealth Office that there would be a sufficient increase in the number of passengers to divert those fees without seriously affecting overall annual revenues.
Those questions, and other financing options, will have to be finalized through negotiations with the cruise lines and approved by the FCO before launching an open bidding process for the contract to design and build the cruise facility.
Involvement of the cruise lines, particularly Royal Caribbean and Carnival, which together account for more than 80 percent of passengers coming into Cayman, is considered essential to the process. Further complicating the process is uncertainty about the overall cost of the project. The $156 million price tag could increase substantially if government decides to move the piers into deeper water. Mitigation measures, such as coral relocation, could also add to the costs.
Mr. McLaughlin suggested the next phase of the project, involving those detailed discussions with the cruise lines over the funding model, would be pivotal. He could not give a time line for when that would be completed, but said he was hopeful that all issues could be resolved and the project under way before the next general election.
One option that remains off the table for financing the port is “upland development.” On some islands, cruise lines have helped pay for pier developments through associated retail developments. Both Premier McLaughlin and Tourism Minister Moses Kirkconnell say this is not an option for the Cayman Islands.