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Virgin Islands Port Authority to Expand Channel

Virgin Islands Port Authority to Expand Channel

BY KATIE WORTH


Your economy depends on cruise ship tourism. The cruise ship industry demands you dredge your port deeper to prepare for a new class of larger ships on an extremely tight timeline. But your the ports doesn’t really have the financing to pay for such an ambitious project, especially on short notice. What do you do?

If you’re the Virgin Islands Port Authority (VIPA), the answer is – you find a way.

The Port Authority’s board of directors is facing this dilemma about its facility in Crown Bay Cargo Port. The port is the island’s main cargo facility, and the second most important harbor for cruise ships calling on St. Thomas, after the West Indies Co. Dock (WICO) in Charlotte Amelie. But the WICO dock is frequently booked, so cruise ships – particularly Royal Caribbean’s ships Oasis of the Seas and Allure of the Seas – dock at Crown Bay.

But Crown Bay is shallow enough that it won’t be able to accommodate the next class of large ships, scheduled to begin cruising in October 2014. So Royal Caribbean approached VIPA leaders to ask them to dredge the port before that deadline, explained VIPA acting Executive Director David Mapp. Since then, representatives from other cruise lines have also asked for the expansion.

The port authority is still wrapping its head around the exact scale necessary for the project, and how much it will cost, Mapp said. It plans to meet with the Army Corps of Engineers in November to help clarify these questions.
Crown Bay has two entrance channels, and one dock devoted to cruise ships. Its west entrance channel is between 40 and 50 feet deep, while its east entrance channel is 30 feet deep, said Dale Gregory, director of engineering for the port authority. The south side of the pier is 38 to 40 feet deep, and wide enough to accommodate the Oasis and Allure, but the north side is just 32 feet, and only about 200 feet wide, he said.

The cruise industry has asked that both sides of the docks and both entrances be at least 36 feet deep, and that the turning basin be expanded to 1,450 feet in diameter, also with an minimum 36-foot depth, Gregory said. The exact location of the turning basin is under negotiation, because the location requested by Royal Caribbean is near coral reefs that the agency would like to protect.

The last time Crown Bay was dredged was for its expansion six years ago, when Great Lakes Dredge & Dock was hired to dredge the harbor. But this would be an expansion well beyond that, said Gregory.

But questions remain as to how to pay for the project. The funding would have to come from a bond issuance, though it’s unclear how large that bond would need to be. At a board of directors meeting in October, board members actively questioned whether the authority could afford such a project. Though the revenues of the authority’s marine division was once between 300 and 400 percent of its debt liabilities, that ration has fallen to be about 155 percent of its liabilities.

Gordon Finch, head of the agency’s finance committee, was taken aback by that figure and said he wasn’t sure the authority could afford the project, reported the St. Thomas Source.

“There’s no sense in talking about this huge project that the cruise line wants when we can’t even justify to ourselves, let alone the bond rating agencies, that we have the ability [to finance it],” Finch said, according to the publication. “I want to go through a very rigorous analysis of what exactly is our ability to cover debt on the marine side.”

In order to do that analysis, agency engineers are working quickly to get a better sense of the scope of the project.
Mapp told IDR that the board ultimately decided to commit to the project, because it is too important to the island’s tourism economy to consider otherwise.

“Let me establish this: We are going to do the project – that’s a mandate we have from our board. So it’s not a project we are ‘contemplating.’ We are going to do the project and the difference is that we’re working on the scope of the project to determine what exactly we need to do, we haven’t nailed that down,” Mapp said.
However, he said, they will be considering a “slightly less ambitious project” if financing does not allow for the full scope.

The authority last issued a bond in 2003, but afterward allowed its bond rating (then a BBB+) to lapse, reported the St. Thomas Source. Standard and Poor’s would have to reinstate it, which will require financial paperwork from the last several years. Only after the bond rating is reinstated can the authority issue a bond.

“There is a concern with the financing, and we have our consultants looking into that. We know we have to come up with a scenario for financing of the project, but again, the mandate is that we will dredge,” Mapp told IDR.

He noted that after dredging, the larger ships coming in will bring in more revenue, since the authority charges fees based on both the draft of the visiting ship and the number of passengers disembark and spend money on shopping,
sightseeing, and restaurants.

Even if it secures the necessary financing, it could be difficult to accomplish the project on the timeline demanded by the cruise lines. The dredging could take a year to 15 months, so in order to hit the October 2014 deadline, all the financing and permits must be in place by next summer.

Gregory said that dredging could be a boon for the cargo ships that call in Crown Bay as well, although the cargo shipping industry has not specifically requested the expansion.

The board is scheduled to meet in November, after meeting with the Corps of Engineers, to further discuss the proposal.

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