Column: Key Questions Remain Unanswered

October 23, 2019 | 6 Comments

[Opinion column written by OBA Leader Craig Cannonier]

There’s probably no-one left in Bermuda who has not heard about Caroline Bay and its dramatic and extremely unfortunate demise.

The One Bermuda Alliance has been cast as the villains with former Finance Minister Bob Richards singled out for particular blame.

Before I go further, it must be made completely clear – the OBA stands side by side with Bob. That man worked tirelessly to bring this country back from the brink of economic collapse. Despite Caroline Bay, history will look very kindly on him.

Now to Caroline Bay.

The OBA has been singled out, but no context has been provided and none of the key players appear to have been asked the relevant, and important, questions. Key pieces of information are missing.

This is not an excuse as you will no doubt be thinking by now or be ready to write anonymously in the comments section. It is an explanation and an opportunity to ask the questions that no-one has deemed fit to ask to see where this went wrong and whether it can be fixed.

First of all, some context, because there really is a need to look at the big picture here. I have provided a detailed timeline which goes back to 2005. It is interesting and I would encourage people to take a moment to read it.

One part is of particular significance – in 2011 the Morgan’s Point Resort Act made it a requirement for Government to clean up all the asbestos, fuel storage tanks and pipelines, remediate Basset’s Cave and all contaminated soils and groundwater, and remove, or cap, the Navy landfill site.

The 2011 Agreements required, what was effectively, an unachievable site-wide residential standard for remediation – potentially costing the government hundreds of millions of dollars in cleanup costs.

At the time, we were trying to pull Bermuda’s economy back from the brink of disaster and the economic mess we had been left. We had to urgently create jobs, we had to bring new investment into Bermuda and we needed to increase the number of hotel beds.

This is the situation we inherited when we came into power in 2012. Nothing had been done by the previous Government regarding the agreement which stipulated that the clean-up had to happen within five years of its signing.

So, what were the options facing the OBA government at that time?

a] Do nothing. This would have invited a lawsuit from Morgan’s Point Ltd [MPL]. for reneging on the commitment given by the former PLP Government.

Government would have surely lost that lawsuit and had to either clean up the site to residential standards [costing hundreds of millions of dollars], or pay for same, plus pay legal fees. The site would have remained undeveloped.

b] Voluntarily honour the commitment of the previous PLP Government and clean up the site to residential standard and spend the hundreds of millions of dollars involved. That’s all. Notwithstanding all that cost, the project would have still never proceeded. It was clear that no foreign investor would have touched the project without the Government guarantee. The guarantee was tangible proof to investors that the remediation that was performed was not a sham, and that the project would not be further strangled by any government red tape.

c] Negotiate a workable land swap agreement to lower Government’s pollution remediation liabilities, and remediate the property, that’s all. With this option Government would have spent about $35 million then said to the developers, “You’re on your own.”

Without the guarantee no development would have occurred, for reasons given above, and the $35 million would have been spent for nothing.

d] Negotiate a workable land swap to lower remediation liabilities, remediate the property and provide support for the developers via a guarantee to enable development to get under way.

The land swap issue is complicated – land at Morgan’s Point is sub-divided into many parcels of land. The original PLP agreement required all parcels to be remediated to residential standard. For certain parcels this was virtually impossible. There were several others where remediation would have been extremely expensive as well. In the PLP agreement some parcels were leased to Morgan’s Point others had outright ownership transferred.

The OBA moved the bad parcels of land out from MPL back to the government and swapped to them, via ownership, some more good parcels of land, thus lowering our requirement for remediation. The quid pro quo was that MPL were relieved of the PLP agreement requirement to build a championship golf course at Morgan’s Point.

None of the above options were ideal. The OBA Government chose option [d], the only option that limited financial exposure and simultaneously acted as a catalyst for investment in tourism infrastructure.

This was certainly no “gamble” nor a “bet.” It was an investment, and all investments contain risks. But this was the only option that provided for the possibility of benefit for Bermuda.

We did what was needed at that time in order to help save this country. As Bob Richards said, given the same situation and the same dire economy, we would do it again. We also felt very comforted by the stellar reputation of Brian Dupperault.

So, to the next part of this saga.

While the focus has been on the OBA and the guarantee, people have failed to ask a series of very important questions. There is a lack of information in the public domain making it difficult to judge what really happened.

Bob said the OBA was not told of any problems while in Government, but the current Government said it was notified of problems soon after the general election.

To this day, we have no idea about the issues it was facing and no idea if Government was able to, or did, offer a solution and whether deals were rejected.

There was a shake-up of the Caroline Bay Board and Government installed its own person, meaning they must have had a direct line to updates on the project’s situation. They would have known all along what was happening, so what did they do? I would be interested in seeing the Board minutes.

This one is really important.

What actually went wrong with the development? It was not the guarantee that caused this to stop, the development itself went belly up – why?

Slideshow of the now inactive development as it appeared in October of last year:


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We really need to know the full story from the developers. In view of the support Bermuda gave them, they owe the country an explanation. That sounds like passing the buck, I know, but it is the reality.

In February this year Government announced that new financing was ‘close to happening’. What happened? We have had no explanation whatsoever.

The OBA also knows a deal for new investment in Caroline Bay was on the table before the guarantee was called in – we said so in a media statement.

We cannot go into detail due to confidentiality reasons, but we know it was there, we know that Government was briefed, we know it would have been hugely beneficial for Bermuda and Bermudians.

What happened? Did Government’s head in the sand attitude to immigration have an impact? The OBA believes it did.

Are there now any plans to get this back on track? Is Government going to let the development rot? The Finance Minister said, “Finally, we must bring this project to conclusion.” What did he mean?

My last question – can we now make Caroline Bay happen? We at the OBA are prepared to roll up our sleeves and help fix this. Who will join us?

Timeline

  • 1. In early 2005 the Southlands team [Brian Duperreault, Nelson Hunt and Craig Christensen] begin their meetings with the Department of Tourism and the Government.
  • 2. December 2005 Southlands Limited was incorporated and given permission by the Government to hold land.
  • 3. In June 2006 resort development plans for Southlands were submitted to the Government for approval.
  • 4. Following further negotiations with government, Southlands Ltd pursues agreement with Jumeirah as a branded partner and signs agreement with Jumeirah in January 2007.
  • 5. Minister of Tourism, Dr Ewart Brown, supports development and a draft SDO was Gazetted in December 2006, which gave Southlands Limited the right to develop the property. [Draft Southlands Resort Development [Warwick Parish] Special Development Order March, 2007.]
  • 6. Final SDO for the Southlands development was issued in August 2007.
  • 7. During this period, significant environmental and public protests against the proposed development were underway, particularly in the Warwick Constituency held by Alex Scott.
  • 8. Further negotiation between Government and Southlands Limited resulted in a formal land swap agreement in April 2008,
  • 9. Under the land swap, Southlands was to be acquired by Government for use as parkland and open space and in exchange Southlands Limited/Morgan’s Point Limited [MPL] was to receive environmentally remediated freehold and leasehold land at the former US Naval Annex and the ability to develop the former base lands property
  • 10. The PLP government took 3 years to formally complete the swap agreement resulting in Freehold and Leasehold Exchange Agreements in 2011 and The Morgan’s Point Resort Act 2011 setting out the MPL development rights in lieu of an SDO.
  • 11. Under the 2011 Act, MPL were given 80 acres of freehold land and 128.4 acres of leasehold land in exchange for the 36.8 acres Southlands property.
  • 12. The Act also required complete government remediation of all polluted elements of the Morgan’s Point land within 5 years of the execution of the 2011 Leasehold and Freehold Agreements.
  • 13. The 2011 agreements required the government to rebate all asbestos, close/remove fuel storage tanks and pipelines, remediate Basset’s Cave and all contaminated soils and groundwater, and remove, or cap, the Navy landfill site.
  • 14. The 2011 Agreements required, what was effectively, an unachievable site-wide “Residential Standard” for remediation – potentially costing the government hundreds of millions of dollars in cleanup costs
  • 15. No remediation had been carried out by the PLP government in the 18 months following the execution of the agreements, leaving the new OBA government in December 2012 with only two thirds of the 5 year term remaining to complete the extensive remediation required under the terms of the Agreements.
  • 16. Over the course of 2013/14 the OBA Cabinet renegotiated the terms and conditions of the 2011 Act and Leasehold and Freehold Agreements with MPL, resulting in a new Act and Agreements in 2014 and including a government financial guarantee on the initial portions of the development.
  • 17. It was apparent that the developers would be unable to obtain financing from lenders on the brownfield development site without a government guarantee over the initial stages of the resort development.
  • 18. The re-negotiated arrangements with MPL allowed the development to proceed creating jobs and effectively utilizing the 250 acre peninsula which had been in limbo since 1998/99 when the former PLP government was unable to convince Jerry Halpin, the Principal of the West Group, to proceed with his winning resort bid and Jack Nicklaus golf course agreed by the Bermuda Land Development Company [BLDC] and the former UBP government in mid-1998. It should be noted that the West Group included funds for the remediation of the Morgan’s Point site in their bid proposal.
  • 19. The new 2014 Morgan’s Point Resort Act gave MPL 86.7 acres of freehold land and 97 acres of leasehold land. This equated to an increase of 6.7 acres of freehold land and a decrease of 31 acres of leasehold land. The 2014 Act and amended Agreements also provided government with additional time and the flexibility to remediate Basset’s Cave and other contaminated areas at a lower standard than “Residential”, thus removing the cleanup liability that could end up costing hundreds of millions of dollars.

- Craig Cannonier

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Comments (6)

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  1. Nunya says:

    “We cannot go into detail due to confidentiality reasons, but we know it was there, we know that Government was briefed, we know it would have been hugely beneficial for Bermuda and Bermudians.

    What happened? Did Government’s head in the sand attitude to immigration have an impact? The OBA believes it did.”

    This needs to be explored further. If the Government rejected an investor’s approach to salvage the project due to their anti-immigration stance then it must be made public as that decision resulted in the Government raising the debt ceiling and borrowing more. That decision affects each and every person on this island.

    Every aspect of how this project failed needs to be made public. Everything.

  2. toadinthehole says:

    At last an article that gives us the big picture and a detailed timeline of what actually happened. It seems clear that the OBA was handed the mother of all hospital passes by the PLP who negotiated a contract that could have cost this country hundreds of millions of dollars!
    it is also clear that it must have been known by the PLP that swapping the land for Southlands would have massive financial implications and would be far less attractive to investors.
    The OBA will be blamed for the guarantee, but at least we now know why….

  3. Eve says:

    Why the OBA didn’t do a thorough investigation of the development, the financing and the individuals behind the development before they approved and committed financial support for a risky venture, is the key question. The OBA blindly went ahead when there were enough warning signs that should have told them to put a ‘stop’ on the development until they were assured the taxpayer would not have to bail out the developers. The OBA ‘ego’ stopped them from questioning the developers about obvious problems, instead they used threat of lawsuit by Morgan’s Point Ltd. based on 2011 PLP agreement. If MPL did sue that cost would have been a fraction of what it will cost now. Bermuda government’s have not held developers accountable and basically given them free reign especially after shovels hit the sand. Developers in Bermuda have been no better than politicians, they both spin promises and never build what they promised!!

  4. Yup yup says:

    It’s a valid question but do you have evidence to make such an assertion? It’s possible they did do a proper due diligence but the project still failed. Building hotels is an inherently risky venture around the world.

    It seems to me, taking the information at face value, that the Government had very little option but to find a way for the project to proceed. I hope the current Government take a similarly pragmatic approach to finding a solution. I don’t care about the blame game, we need the jobs!!

    • Eve says:

      Bermuda needs jobs but the governments cannot keep buying jobs! If the Government bails out this development they will be the most expensive jobs ever and impossible to recover the cost. Bermuda is in financial difficulty now because this government and their predecessors have ‘opened the purse’ to buy jobs the tax base could not support.
      The OBA could have included penalty clauses to hold MPL liable if they didn’t reach goals that would protect the government.

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