CHEC plans $35 cruise fee
(CNS): The Cayman Islands will have the most expensive cruise passenger fees in the region if government goes ahead and signs a deal with China Harbour Engineering Company. According to a report commissioned by the Port Authority Board and conducted by KPMG in April last year, shortly after the premier terminated the talks with GLF Construction, the Chinese developers plan to charge the cruise lines US$35 per passenger, compared to a maximum of US$18.85 proposed by GLF. The report warns that the fee could be too high, and with no passenger guarantee underthe Chinese deal, the consultants warn of the real risk that Cayman could price itself out of the market.
The report (attached below) also reveals that if the cruise lines swallowed the $35, the profit to the Chinese over the fifty years that they would operate the cruise port could be quite significant. Furthermore, government would be giving up potential revenue with the Chinese deal for far longer than the time proposed by GLF, which would have seen the developer collecting on cruise fees for 25 years, not 51 as now proposed by CHEC.
KPMG was asked to make a comparison between the two proposal, which it said was difficult because at the time the consultants had few details on the CHEC proposal, referred to in the report as ‘Developer B’.
Noting significant differences between the two proposals, which made a true comparison difficult to make, the consultants did find that there were risks with developer B’s proposal. They pointed in particular to the requirement to relinquish the management of the port to the developer, relegating the Port Authority of the Cayman Islands (PACI) to a regulator from its current role as manager.
"Passing control of the port to a third party would require detailed concession agreements and contractual arrangements to ensure operations and management are in line with required standards – this creates contractual risk and increases the complexity of the project,” the firm stated.
It further noted that in 2008 PACI had made a decision that it should retain control of the port management as this was considered the most appropriate operating model.
Speaking about the fee increase and the failure of developer B to secure passenger guarantees from the cruise lines, KPMG said there was a potential risk that cruise lines will reduce the port of calls to Grand Cayman, or even avoid the destination altogether, in response to such a significant increase of some 100%.
However, the profit that could be made if the cruise lines accepted the fee would be significant and KPMG pointed to the need for the government to reduce the time period that CHEC would be managing the port in order to ensure the public purse benefited sooner from the profit.
On seeing KPMG’s report, the independent MLA for North Side, Ezzard Miller, said it was "alarming" to discover the Chinese would be doubling the fee proposed by GLF. He also noted that the Chinese could make a pure profit of over a billion dollars on this project. Compared to the proposal submitted by GLF, CHEC would be getting “three bites of the cherry”, he said: not only would they make the money on the financing agreement, they would also profit from the construction element and from what is now believed to be a 51-year lease on the port.
The independent member said the report made it clear that the GLF proposal was a far better deal for the Cayman people because they would cease collecting the passenger fee after 25 years, 30 at most, and there would be no upland retail to compete with local merchants.
He said that the project never required any government guarantees, contrary to claims made by the premier, as the only thing GLF needed to start work and get access to financing was the signed master agreement for the project.
The increase in fees would, if the cruise ships continued to come, produce a substantial return for the Chinese, which would be added to the profits the firm would make from the upland development, Miller stated.
The higher fees are down to the massive difference in cost as the CHEC plan for the two piers and upland element is expected to cost around $350 million, compared to the GLF proposal at around $175 million. The Beijing-based firm has also agreed to upgrade Spotts jetty and build a pier at the Turtle Farm in West Bay and will expect to recover costs for those two projects via the George Town facility.
Category: Politics
I don't really care what they charge if they get the same (or a higher) minimum passenger number guarantee that GLF were going to get. The whole thing here is preserving or increasing the number of cruise ship passengers spending money in Cayman. I don't beleive for a minute that if the cruise liners added $18 to the fare the cruisers would stay at home but if the Chinese are adopting a model that can make just as much moiney for them with half as many vistors then they have a conflict of interests with the cayman Island people.
I consider this berthing facility to be the most important investment issue on the Cayman horizon.
Why does the Cayman Islands government have a history of building a Rolls Royce when a Chevy would do? Pedro St James, Boatswain's Beach and the recent schools construction were projects built by different governments but all have a common thread, that being these jobs were classic white elephant examples of overkill construction projects.
I see this happening with the cruise ship berthing facility. From 1 port to 3 ports with large shopping areas attached ect… ect…
It is like going to a real estate agent to buy a house and saying you are looking at a $1000,000 house and the real estate agent shows you houses for $250,000. The normal buyer simply makes it clear what price range they can afford but the Cayman Islands government does not do this instead they look at $500,000 houses.
They pay $60 in Bermuda….whats the problem??? First you guys were against the cruise passengers, now you are against increasing their fees…do you guys really know what you want???
Tee detractors are good people, who have been brainwashed by the likes of the Duppy Conqueror,. In the old daysthe Duppy frightened people in the hope he could frighten their souls out of them. In 2012, our own Duppy Conqueror from the North frighthens people with absurd "tales" of corruption, gloom and doom" trying to scare peple to vote for him for he is all Intelligent as his last name declares and he has all the answers while he divides and conquers and indeed ruin swhat liitle we can still obtain. T
There are may Caymannians who dont like many of the Policies or many of the projects because of lack of info, but People dont listen to the Duppy Conqueror" for what we have, will be even more had and he will fly away to Cuba to live in a Communist country, if things get hard dont make him fool you.I wonder why he na like Chinese food.
Rasroots.
All this does not add up. The Cruise Line will not accept that fee and then, if they want to just continue on their way like some ships do now. Then we will have a expensive dock managed by the Chinese. Somebody wake me up from this nightmare. Mr. Bush these people are not to be messed with and their strategy of controlling the Caribean and quite frankly scary given their track record. I see it as a dangerous mistake.
Cayman has priced its self out of the market on everything else…why not this??
The Chinese have replaced the IMF. Watch "Life and Debt" which chronicles the issues Jamaica went through with the IMF. Then switch Jamaica with Cayman and IMF with the Chinese. Notice any similarities? The infrastructure works the Chinese are doing around the world in under-developed countries is not charity work. They are out to make money and these countries with no credit are giving away their future prosperity whether they realise it or not.
With a cursory review of the KPMG Report and with the outline in this Article, it is abundantly clear that this UDP Administration is completely and utterly inept. The UDP are literally giving away Cayman’s only real significant leverage and bargaining tools such as but not limited to the Ports (Cruise and Air), Hundreds of Millions of Dollars worth of real property situated along the West Bay Road corridor, Barkers beach and the real potential to create a genuine third Pillar of this rather frail economy by giving away Medical Tourism for the next 100 years to one lone entity!
At this rate these “dimwits and wanna bees” are creating a very high probability of Direct Taxes being implemented in the not so distant future. Moreover to corroboratethis prediction, the sheer fact that Dr. Shetty and his Agents have already sensed this forthcoming conundrum for the Cayman Islands due to this Gowermint’s sheer abundance of stupidity, arrogance and greed. He cleverly negotiated with these poster children for incompetence, to allow him not to pay any taxes not for twenty years but when you peruse the entire MoU one hundred years! This agreement binds successive governments for at least the next one hundred years!
It does not take a Doctoral degree in economics to figure out that the ordinary resident of these islands will be straddled with these lost benefits along with those contained in the Enterprise City agreement and more than likely in the nuances of the ForCayman Alliance with Mr. Dart. There is an old adage, “There is no such thing as a Free Lunch” ! However, once again only in the Cayman Islands such wise and time tested sayings are completely and utterly dismissed.
Utter garbage, dont you listen to the talk show, utter nonsense go whack ya bush somewhere else.
There are examples out there that show what kind of effect this will have. The cruise lines are not monitored and there are no restraints on how they operate. They hold the power and until we stand together as one (all caribbean islands) they will continue to run our waters like pirates, holding us hostage.
Maybe our Government should look at what increased cruise tax did to Alaska..they have now had to decrease taxes to woo back the cruise lines.
http://www.taxgirl.com/alaska-hopes-to-woo-cruise-ships-with-tax-break/
Cayman does have another choice..still build a pier, keep it small, keep it exclusive, keep it luxury. The ones that spend the money. These smaller ships want to come here but the passangers dont like having to battle with 20,000+ visitors in down town George Town. it would also provide the right kind of market needed for Cayman Brac, preserving what we have.
This talk about Cuba opening up… its gonna happen. We have what they would offer already plus a bit more as we have structure and amenities for the luxury market, lets not spoil it with over development.
Isnt it strange that a letter dated almost a year ago is being treated like as if nothing in it has changed since it was written.
What is even stranger, why was the public kept in the dark for so long? The silence on the part of the Port Authority is deafening.
I guess we can't blame Port Authority too much, maybe its board was fearful they might get sued over the termination of the italian developer and as a result perhaps they were afraid to make anything public – the news media suggested sometime ago that the board had voted to restore the Italian developer, but were overturned by government and certain board members were replaced in the process. Maybe they were just trying to protect themselves from being sued over a government decision – can't say I blame them much.
Can the Leader of the country Mao Tse Bush and his protege Foolio please explain how this deal represents value for money to the Cayman Islands especially after they have read the KPMG report?
The Port Authority and CI Govt have now received an opinion from their own attorney (Priestley’s) and now the KPMG report which both clearly state this is not a good deal for the country, please tell us all how this deal really is in our best interests because the main beneficiary appears to CHEC and a few loyal fools who are naive to believe the latest fable that the country will get a 40percent share of profits in about 30 years. Does anyone really believe that the Chinese and CHEC are as fool fool in business negotiations as our elected leaders?
At this point can anybody really believe anything said by the UDP and the revolving door of ‘expert’ negotiators (Mr. CGT and Foolio) on the most expensive capital works project in the history of these islands? I guess they haven’t figured out that Cayman cannot afford to get this wrong.
I hear the UDP has appointed a Director of Labour – but I dont ever recall seeing an advert for this position.
People will be surprised to hear who the new UDP crony is.
Reported by T&T news:
http://www.guardian.co.tt/news/2010/12/05/ruins-and-broken-promises
Any company the size of CHEC will have some disagreements and contract disputes somewhere in the world…this aint no Arch & Godfrey or McAlpine now.
If this venture (for the want of a better term) fails, and the incomenecessary to repay the debt does not materialize, does it mean that Red China will, by default, own a piece of Cayman?
I dont think Red America will allow that.
Do you think America cares about Cayman?
Do you have any idea how many Chinese companies are registered here and how much money our government makes out of the financial transactions going every day back and forth ?? Bank of China, the state bank, has been operating here for over 25 years.
Get with the 19th century please.
What is your point? Registering an offshore bank or company here for tax or other business purposes for the past 25 years, does not mean they automatically get to own a piece of Cayman, so what is the relevance of your post? On the other hand, being allowed to manage / operate our port facilities for a half-century, seems to suggest they will technically have rights to a piece of Cayman for a time until they get their money back. Will the government ensure that ownership remains vested with the Port Authority while the Chinese manage / operate the facility, or will the Chinese own it during that specified time? What happens if there is a problem with revenue collection e.g. not enough cruiseships visiting visiting so less head tax collected than anticipated, or retail operations not doing well as envisioned? What happens if their money is not repaid by the time 51 years draws to a close – will it be extended to another 51 years? What happens if the government of that time refuses to extend, and they haven't gotten their money back? Things need to be clarified to the public. One can just imagine the complexities that will go into the contract between government and the Chinese. Be careful what you wish for, you might just feel the heavy hand of China coming down on you, in a way you never expected.
Although I have not been against the things the UDP have been doing and sometimes have support Bush when others bashed him. In this I have to say that Bush is just downright stupid to outsource this to CHEC. I must say that his unfounding support on this deal has me looking at him in a different light, it kind of makes me think that he must be getting something out of it.
Getting something out of it….?
Duh……no s#*t Sherlock.
I know that it is too much to expect that the minions of Esteemed Leader would do any research or that Esteemed Leader would deviate from his chose routine of Fire Ready Aim, but did anyone check out what happened to other countries cruise industries when they tried to raise the fees this much? Check out Tahiti – their brilliant politicians permitted a similar rise in port fees for cruise ships and they went from several ships per day to one very small ship per week – and the ships did not come back when they were forced to reduce their port charges to the previous low rate.
Mr. Bush if I do remember you was the same one that said we couldnt get a better deal than what Cohen was also offering look what happen. How much will the chinese cost us this time ???????
That is way too high! Consider the type of passengers that go on cruiseliners. It's too high of a price and that is exactly what's going to happen; we are going to price ourselves out of the market. It needs to be priced competitively and should there may an increase in price across the market, then Cayman can change accordingly.
The Financial Guru from West Bay must have dreamt this one up? Well I guess we can forget about cruise visitor should this excellent idea go through?
Few of us truly care how many bottles of mix or Rolex watches are sold in George Town. Still, most of us should agree that landing fees are a critical line item for the annual finances of the CI Government. Shouldn't we therefore be investigating what happens to that line item with and without a pier and how that needle moves with CHEC or other partners? Isn't that the singular item that matters in this equation (if we can leave the environmental debate out for a momment)?
How about something gets started?
Get Dart back to do it! And restart negotiations now.
What? How is 99 years better than 51 or 25 as proposed by the more recent 2? What are you smoking?
Dart is all knowing and all good. He does what is best for Cayman. Is not Caymana Bay proof enough?!?!?!?! Give yourself to him. Amen.
As uaual Ezzard and the hosts of the radio talk show were railing against the chinese deal with upmost assurance when if you actually read the report you would have no doubt determined that KPMG states in their summary that there is not enought information to make an accurate study. Apparently those on air this morning were able to go where KPMG were unable. Isn't it wonderful to make sweeping statements with little information and yet be sure that you are correct. So I guess the sky isn't falling after all, thank goodness I was able to read the report.
It is you who does not understand ! The point is, things seem to have been done in reverse order. A developer is fired first, then reports are done AFTER the decision is made. The report should have been commissioned first, then a duly informed decision should have been made based on its findings. If KPMG lacked sufficient information to assess CHEC's proposal properly and compare it to the other developer's, then KPMG should have been given any other details they required to properly complete their analysis on CHEC's deal. Accordingly without sufficient information, it would appear that KPMG might have found CHEC's proposal to be risky due to unknowns / uncertainties surrounding their proposal, and one can understand why they could not complete a proper study / assessment of CHEC's deal, or to do a proper comparison to the other developer's, hence the reason they had to qualify their report with the statement that they did not have enough information to do a proper study. All this shows, is that the decision to fire the previous developer WITHOUT A PROPER ANALYSIS OR STUDY being done or taken into consideration first, makes this whole thing seem even more strange.
Does anyone else also find it strange that Bush nixed the deal with GLF right after he flew to Italy to look "at a bridge"?
Yes, it is strange, but that does not matter, as it seems both the italians and chinese companies are qualified to handle the job. The italian company builds ports, bridges, roads, and other infrastucture works globally. A large infrastucture job was underway to protect Venice. The chinese also does similar infrastucture jobs. Government and Chamber reps went to Jamaica to view roads and bridges in Jamaica being built by the chinese, who were also working to improve the Palisadoes shoreline. What matters is that the reason given for terminating GLF was they reportedly couldn't prove they could finance the project, which, as it turns out, was not exactly the case because the news media suggested they had procured interest from Citibank and were waiting to sign the contract with government to allow them to sign with Citibank. It appears funding was made to be the core issue, not what projects were inspected during visits.
Agreed, but you would have to be an idiot not to see that that Italian deal was a much better deal. There are no guaranteed increases in passengers and the port fees are too high. This will just chase more people away.
Wow! That is more than double the cost of $18!
We have been sold out by our leader to the Chinese. Now I see why he wears the Black Power suit. UDP is a disgrace to these Islands.
That wah yah get! You all go following Mckeeva Bush & his greedy ways! That wah yah get! For sure the cruise ships won't stop in Cayman anymore! We are being sold out to the Chinese & Dart, it is a shame & disgrace, all because of the greed & selfishness of one man & his few cronies! How sad!
Cayman has an innate ability to understand just how much cost the market will bear, then exceed it
Couple this with what is perhaps currently the world's highest airport passenger facility charge (PFC)……(which was NOT the doing of this Gov't).
Nowhere near the highest.
Dey all alike.
The market will determine what fee that can be charged.
The only use for postulating a usage fee is so that you can produce a theoretical cost / benefit for any project. It is always actual operation which can determine the actual fee.
And this will be independent of any guesstimates made by either side. So why bother to make them, or even be concerned.
When in operation, the fee will be adjusted to optimize the product of the fee multiplied by the number of passengers paying it. This is what happens in any market to optimize profit.
How are things these days on planet Neptune?
This sounds are profitable as the Boatswain Beach, I mean Turle Farm, project. Based on the crap that Puppet Mac said some years back, that tourist attraction should be generating loads of income. Instead, it is costing millions of dollars each year!!!
Bollocks!!!!!!!!!!!!!!!
That is IF any passengers will be here, to pay the fee.
By which time all passengers are long gone to other destinations. Cayman keeps fooling itself that it is the only girl on the block and ships will keep coming no matter how the cruise lines are treated and their business played with by people who don't know what they are doing in the first place and who price themselves out of the market.
I still don't believe there is any need for a cruise ship dock. How much traffic, trash and human congestion do we need here? I do believe we need moorings for these big ships to stop dropping anchors in the harbor. How much easier is it for them to drop a mooring rope as opposed to raising an anchor when the wind blows up?
I agree whole heartedly, why spend all of this money on cruise passengers who spend on average 100 dollars per visit (no hotel, no restaurant, no car).
Govt should be concentrating on stay-over tourists who spend on average 1000 dollars per visit (plus hotel, plus restaurants, plus car).
You are correct, Mr.Flag!
Kiss of death for the cruise business.
The cruise lines are already struggling to make ends meet and fill the boats, they won't pay it.
When will we Get more imformatiom concerning the port idea for pageant beach… This beginning to look alot more positive than what these chinese offering.
I have just returned from a trip to Jamaica during which every conversation I had with a Jamaican turned to CHEC. Their comment was always the same " I hope you get a fixed price contract with them as they are masters at cost overruns. Even the Contractor General in Jamaica has asked the newly elected Government to renegotiate the contacts with CHEC because they are costing that country so much.
As for the visit by the Chamer of Comics (sorry Commerce) members to CHEC projects I wonder why they were incapable of reporting back with the truth.
The Chinese apparently use so little mechanical labor that the local labor force is unwilling to work the long hours doing the manual labor that is expected of the chinsese workers and that is used as justification for bringing in even more chinese labor. There were long lines of chinese laborers seen daily moving the materials from one site to the other manually rather than by truck when the Chinese Cultural Center was being built in Kingston. Imagine the sight of length of steel being moved through the streets of of George Town by a human chain or of bags of cement being moved by long lines of wheel barrow rather than truck! The cost of manual labor is that cheap to the Chinese.
Then there is the story of the Chinese laborers threatening to burn down their own accommodation if conditions weren't improved.
I could go on but Cayman be warned you are in for a major culture shock if CHEC get a foothold.
If after two days of talking to business people I was able to hear so many horror stories I wonder if their hearing aids were turned off of were their CIG chaperones so tightly controlling what they saw and who they spoke to that the trip was pointless.
There were photos too showing the Chinese laborers wearing flipflops (they did have the hard hats on though), while the Jamaicans wore steel-toe boots. They don't seem care about proper safety gear for workers. And the Chamber of Comics (to borrrow your phrase, so appropriate), were not taken anywhere near the living barracks. Remember too they reported MUCH later that there seemed to be a a casino on the plans/ drawings. So much for fact-finding. I guess the expenses paid trip they took at the generosity of CHEC clouded their fact-finding eyes. What a joke.
Ask anyone from Turks and Caicos about the Chinese construction workers living in tents too.
Here you go again, xxxxing up the last little bit of your failing economy. Mac wants the Chinese deal because there’s something in it for him. What’s in it for the Chinese is an ownership interest in Cayman. What’s in it doe Cayman is a “SOLD” sticker and xxxx all else. They’ll just stop coming and that will be the end of that.
Why does the Government need to spend millions on a dock? Google St Maarten’s cruise ship dock and see how basic it is but it does the trick.
Why do we want all these cruise ships anyway. Carnival is so cheap none of there passengers spend any money. They clutter the sand bar and beach and for what a few extra bucks. What I dont understand is that we only want to cater to the high end stay over tourist ,so why not cater to the high end cruise ships? If we did there would be less traffic, less wear and tear at the sand bar and maybe more stay over tourists as they can feel free to go down any day of the week to shop duty free unless they stay past Friday or walk the beach without having to bump and step over thousands of USD$300.00 sheep on a seven day cruisers.Who interests is this really about? DART and SMATT? or are we being fooled that its for the local boat owners and the taxis and buses?
The government gets a head tax from the cruisers.
It is a signifigant source of government revenue.
Not if all the money goes to CHEC, which is what seems to be proposed. If there was a Govt tax on top of this, the article would have stated that because the fee to the cruise passenger would be even more!
IF Government also gets a head tax, that would make the "port fee" that cruisers pay $35 PLUS the $ to Govt. I suspect that Govt will no longer get that money. Even the Dart port deal was better than this.
Does anyone know or can explain WHY when a certain cruise line offered to build this a few years back and also put 30 million to do so and it was turned down. It was the last tourism minister. The CEO then offered Roatan,Honduras the same deal and it is now in full operation. I believe it was Celebrity Cruises.
The Chinese fee is twice as much because their dock costs twice as much. Apparently bush think the chinese are a better deal because their deal is twice as big. You will never finish paying for a 300 Million dollar dock. Why not spend half that.
Thanks to the opacity of the offshore world we may never know what is really happening on this one. Isn’t. The irony delicious?
Well it seems to get better and better each day with the Chinese folks and our premiers decision to go with them for the new dock.I can just see it now bad as it is already for the north sound snorkle boats that they will get even less than before when the cruise ships try to make up the difference in fees for each arriving passenger which will be very costly.I have said time and time again that the north sound boats trips are way too under priced and should be much higher so that they can keep the numbers down and still make good money.It makes for a much better experience for the passengers and this in turn MIGHT encourage them to come back as stay over visitors.Time will tell on this whole issue and I hope for Cayman's sake this whole thing does not back fire on us.
Spot on comment.
The money has to come from somewhere and the cruise lines will simply offset it by ripping off their Caymanian service providers.
Ripping off the Caymanian service providers even MORE than they do already, you mean. We have been on many cruises and we NEVER book tours through the ship. We pay a lot less to book directly with a tour operator and this ensures that the operator gets all of the money. Most tours are at least 4 times the price if you book them on the ship.
Rarely does a day go by when more evidence is found that shows clearly that McKeeva Bush either has no idea what he is doing or that he does know what he is doing and is intent on destroying the Cayman Islands. How can anyone support this man at this point?
$ 35.00 is a fair price to pay for the use of a pier. It's almost half that right now to ride the tenders.
Shows how much you know! The tenders charge $4.50 per head, Check your facts before giving out incorrect information
What makes you right and me wrong? Show the people the proof. NO! You know why ? You are the one who's incorrect!
Rubbish. totally incorrect.
…Mac Foo, is that you?? parroting whatever the chinese told you?
But the Premier knows he's right, so nothing else matters.
What's the Big Deal. We have been pricing ourselves out of the market for 15 years!
Well there must be some reason CHEC was chosen.
Wonder what that is? Should we ask the son of the Bangladesh President who is presently serving a jail sentence for dealing with CHEC
All I know is that unless somebody starts building a frickin cruise ship port soon we might as well kiss the million plus cruise ship passengers tourists dollars goodbye as the cruise ships will just go elsewhere. We are years behind our competitors!
Let’s get this thing moving now !
Agreed…but do we give it to the people who wanted 25 years or the Chinese who want 50?
Stop your stupidity. RCCL is bringing their Oasis ship to Cayman Soon. Cruise piers cannot be used in Cayman 12 months of the years. FCCA members are happy with tendering at US$12.50 pp but not US$35 pp that it would cost after building.
True, but if you give it to the Chinese, the merchants downtown won't benefit, because with the massive retail operations planned by them, the tourists won't venture much further into town. Mostly it seems the Chinese and their local "elite" counterparts who are favoured enough to be allowed "shares" in their operations, will benefit.
Why I ask do we only now hear of a study done nine months ago. So much for transparency in these islands. We really do need a clean brush. Ezzard and Alden we are in your hands. We need stop this deal with the Chinese even Confucius would agree.
Agreed Chris……Cayman what are you doing ? Your future is out of control by the politico's running the country. This dock deal is a disaster. The country needs a port deal that is TRANSPARENT so you do not not conderm your children to paying for politico folleys and self interest. Folks if you don't start standing up for yourselves instead of following a leader who is self motivated you will end up like the depositers in First Cayman Bank.
Lachlan MacTavish