Key questions remain unanswered on Morgan’s Point
There is 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 villain 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 appears 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 the 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 US 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 clean-up 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 for reneging on the commitment given by the former Progressive Labour Party government. The 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 the Government’s pollution remediation liabilities, and remediate the property, that’s all. With this option, the 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 earlier, 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 subdivided 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 was relieved of the PLP agreement requirement to build a championship golf course at Morgan’s Point.
None of the above options was 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 to help save this country. As Mr 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 Duperreault.
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 present 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 the 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 the 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? 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, the 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 owing 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 the 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 the 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?
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 is incorporated and given permission by the Government to hold land
3, In June 2006, resort development plans for Southlands are submitted to the Government for approval
4, After further negotiations with the Government, Southlands Ltd pursues agreement with Jumeirah as a branded partner and signs agreement with Jumeirah in January 2007
5, Ewart Brown, the Minister of Tourism, supports development and a draft special development order is gazetted in December 2006, which gives Southlands Ltd the right to develop the property. [Draft Southlands Resort Development (Warwick Parish) Special Development Order March, 2007.]
6, Final SDO for the Southlands development is issued in August 2007
7, During this period, significant environmental and public protests against the proposed development are under way, 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 is to be acquired by the Government for use as parkland and open space, and in exchange Southlands Limited/Morgan’s Point Limited) is 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 took three 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 is given 80 acres of freehold land and 128.4 acres of leasehold land in exchange for the 36.8-acre Southlands property
12, The Act also requires complete government remediation of all polluted elements of the Morgan’s Point land within five years of the execution of the 2011 Leasehold and Freehold Agreements
13, The 2011 agreements require 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 require what is effectively an unachievable site-wide “Residential Standard” for remediation — potentially costing the Government hundreds of millions of dollars in clean-up costs
15, No remediation is carried out by the PLP government in the 18 months after the execution of the agreements, leaving the new OBA government in December 2012 with only two thirds of the five-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 renegotiates 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 is 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 renegotiated arrangements with MPL allow the development to proceed, creating jobs and effectively using 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 and the former United Bermuda Party government in mid-1998. It should be noted that the West Group included funds for the remediation of the Morgan’s Point site in its bid proposal
19, The new 2014 Morgan’s Point Resort Act gives MPL 86.7 acres of freehold land and 97 acres of leasehold land. This equates 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 provide the 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 clean-up liability that could end up costing hundreds of millions of dollars
• Craig Cannonier is the Leader of the One Bermuda Alliance and the opposition MP for Devonshire South Central (Constituency 12)
Girl, 16, dies in US treatment facility
Gas station justified to fire pump attendant
Point of order
Funding crisis for leading charity
RBYC celebrates 175 years with sail past
Life safety device business set to expand
Overcoming his disabilities
Take Our Poll