Last week, the Cayman Islands government held a press conference to announce Verdant Isle Port Partners as the preferred bidder for the cruise and cargo port. The Compass featured an extensive report on the key questions and answers about the deal that were addressed by the government. We asked readers to submit any questions they felt were not answered in that story, and we endeavour to answer those questions here.

Does Verdant Isle have the right to the revenue stream for a limited period of time or does this last indefinitely?

Verdant Isle will take around US$8 per passenger for 25 years in return for designing, building, financing and maintaining the port. Based on 2 million passengers, they would take around $16 million per year.

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That fee has a 2.5% annual increase dialled in, so the fees would increase slightly each year to account for inflation. Government will still take around US$10 per passenger for an assortment of taxes, port fees and environmental protection fees. After 25 years, the full revenue stream reverts to government.

How much bigger is the cargo port going to be?

Numerous options were considered for the cargo port, including a longer pier that could allow for much larger ships.

Of the three options proposed by Verdant Isle, government eventually opted for the least expensive, bringing in the project for CI$196.5 million. That means the redevelopment will deliver 30,000 additional square feet of space on the dock for cargo and a new third berth for cargo ships.

The expansion is expected to be adequate to meet Cayman’s cargo needs for at least the next 10‑15 years.

How exactly are Carnival and Royal Caribbean involved?

The two cruise lines are partners in Verdant Isle, which is a consortium set up to bid on the port project. The other partners are McAlpine Cayman Ltd. and Orion Marine Construction. Verdant Isle is funding the CI$196.5 million construction project through its own capital (40%) and a bank loan (60%).

What happens if the project goes over budget?

Based on what government has said, it appears that the risk and reward is all on Verdant Isle. If it goes over budget, it will presumably take longer for the company to make its money back when it starts collecting revenue from the port fees.

Who is responsible for maintenance?

Verdant Isle is responsible for funding general upkeep and major repairs in the event of a storm. Presumably it would seek to insure against that eventuality, but again the risk and expense is with Verdant Isle, according to what government has said.

Is there any government guarantee for the loan?

Verdant Isle has taken out a loan with First Caribbean to help fund the construction. It is understood that there is no government guarantee.

If and when the contract is signed, government is offering Verdant Isle a 25‑year revenue stream for the port, which presumably it can use as collateral for the loan.

Will there still be tenders?

The new dock has space for four cruise ships, so it is likely that tenders will be needed on days when there are more ships in port. There is space in the new dock design for tenders, but it remains to be seen how they will operate with reduced business. There is also the possibility that some cruise ships will self-tender.

For the passengers who take tenders ashore, will the breakdown remain the same?

They will still be charged the government taxes and the fee to use the tender boats.

Has there been a study made on the new jobs that will be created? Will salaries equate to Cayman’s national average income?

The Outline Business Case published in 2013 concluded that there would be 490 jobs created during construction and an additional 1,000 new jobs in the long term. This was based on consultant PwCs operating assumption that, over time, the amount of cruise visitors to the Cayman Islands would steadily decline without a port and would steadily increase if a port was built.

The consultants also suggested that cruise passengers would spend longer onshore if there were a dock.

There has been no specific study on jobs, or any list of jobs and salaries. Tourism Minister Moses Kirkconnell said it would be the same type of jobs that the cruise industry supports now, “only more of them”.

He referenced taxi drivers, tour operators, restaurants and bars among those who would benefit.

If a referendum takes place, how will that work?

If the Elections Office verifies the petition calling for a referendum and finds that there are signatures from 25% of the electorate, there will be a people-initiated referendum.

According to the Constitution, government gets to set the question. It will do that by passing a bespoke port referendum law in the Legislative Assembly, which will also set out the date and terms of the vote.

Based on the Constitution, it will require 50% plus one of the electorate to vote against the port, for the result to be binding. A simple majority of those that turn up to the polls is not sufficient. In other words, it would take at least 10,585 Caymanian voters to show up and vote against the port for the project to be stopped.

Once the petition target is reached, how long will it take to hold a referendum?

Once the Elections Office confirms that the target has been met, government will prepare a bill for the referendum to be debated in the Legislative Assembly. There would be a 21‑day notice period from the publication of the bill until it can be debated and passed by legislators. Once that has taken place, the Elections Office estimates it would take 10 weeks to organise polling, including provisions for postal votes, ahead of ‘Decision Day’. Based on that timeline, it seems unlikely that a referendum could be held before late November. Much depends on how long it takes to verify the petition signatures. The Elections Office stated that, as of Tuesday, it had verified 80% of the signatures submitted.

2 COMMENTS

  1. The requirement of more than 50% of the entire electorate in this referendum is not how they are usually run.

    In fact it almost guarantees that any referendum on any subject would fail.

    By contrast the UK is leaving the EU after a referendum in which just 17.2 million voted to leave. About 1/3 of the electorate. The referendum turnout was 71.8%.

    Under Cayman rules the UK would have remained.

    https://www.bbc.com/news/uk-politics-32810887

  2. I think you might need to expand the comment made on the amount of money taken in per year. There is a 2.5% pa uplift which makes a big difference. The first year will be around $16mio, the last year will be nearer $30mio, with the per head tax take going up to about $14.80, and a total ‘cost’ of around $560mio. That’s assuming there is no change in passenger totals and they stick at 2mio. If you factor in 2% growth in passenger numbers then the total ‘cost’ goes to $735mio. The risk is that passenger numbers don’t grow, or decline, and you are left with less income, which is the risk the developer takes. However, the break even point is around 9 years, excluding cost of financing, so its not that great of a risk, For me this makes sense for Cayman to finance this with a Government Bond and cut out the middle man.