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Event comes in under budget

Bermuda's total financial commitment to the America's Cup is likely to come in significantly below the $77 million envisaged three years ago, according to the latest projections.

In particular, the Bermuda Government's $25 million guarantee against commercial sponsorship is expected to stand at $15 million when the final tally is calculated.

Figures provided by Grant Gibbons, the Minister of Economic Development, detail the finances underpinning the event — and the building of Cross Island is not included.

The land reclamation project was proposed in 2009, but got “accelerated” once the island secured hosting the races, and proceeded under the West End Development Company's infrastructure plan.

“The $39 million project was financed entirely by Wedco through a local bank with a government guarantee — and the cost will be amortised and serviced through future rental and other revenues anticipated from the use of Wedco's Cross Island site,” the minister told The Royal Gazette.

America's Cup spending, from 2014 through March 31 of this year, was projected at $39.6 million in the latest Budget book, which the minister said consisted of:

• $23.7 million on capital infrastructure spending by the ACBDA, such as work on the South Basin dock and other Dockyard facilities;

• $15.9 million for “current account or operational spending” over the last three years — including $10 million of the $15 million in sponsorship payments to the America's Cup Event Authority, which must be spent in Bermuda under the agreement.

Current expenditure for 2017/18 is projected at $27.56 million, and capital spending at $1.29 million, for a total of $28.85 million.

This comprises $7.56 million for on-water and on-land expenditures to stage the event — plus $20 million in sponsorship fees.

The 2017/18 sponsorship breaks down to two components: the final $5 million of the original $15 million sponsorship fee, and the Government's residual liability to the ACEA under the $25 million commercial sponsorship guarantee.

Under the agreement with the ACEA, the Government committed to the $15 million sponsorship fee over a three-year period, to be paid in Bermuda dollars and spent in Bermuda.

The last $5 million will be paid out this fiscal year. The first $1 million was paid in December 2014 when the agreement was set, with an additional $4 million in 2015 and $5 million in 2016.

Also under the agreement with the ACEA, the Government committed to an additional commercial sponsorship guarantee of $25 million — but this is to be reduced by transactions ranging from ticket sales and venue rentals to Bermuda-introduced sponsors.

There has been $15 million allocated in the 2017/18 Budget to cover the Government's estimate of the outstanding liability under this $25 million guarantee, once these reductions have been added up.

Dr Gibbons said the reductions would vary according to the transactions between the ACEA, Oracle Team USA and Softbank Team Japan, and the sponsor, as follows:

• Cash sponsorship: 30 per cent of net sponsorship revenues;

• Budget-relieving non-cash consideration or value-in-kind — 15 per cent of net sponsorship revenues. Net values are equal to gross sponsorship revenue — total cash or budget-relieving value-in-kind, less the sponsorship delivery costs. “Each commercial sponsorship deal has unique characteristics in terms of the number of hospitality passes per day and whether they are just for Bermuda events or all events globally,” Dr Gibbons said. “Several sponsorship entities have licence deals with minimum revenue guarantees to the ACEA, but the specific value will not be determined until after the final events, when actual revenue numbers are known — which further complicates the ability to estimate the final credit to Bermuda/ACBDA to be applied against the additional sponsorship fee.”

As of January 2017, more than $20 million in closed sponsorship deals had been introduced by Bermuda/ACBDA to ACEA, Oracle Team USA and Softbank Team Japan.

The island's $25 million sponsorship guarantee also stands to be reduced by Bermuda's share of public access ticket revenue and venue revenue.

This includes performance measures such as ongoing ticket sales by the ACEA for their AC35 events — as well as a share of ACEA's venue rentals.

Dr Gibbons said the final tallies would be added up after the last of the events.

Under the Government's agreement with the ACEA, the final calculation of the residual sponsorship guarantee liability will be carried out in August of this year.

Based on current Budget book estimates, the final sponsorship payment under the guarantee is expected to be approximately $15 million.

Hosting the races “promises maximum benefits to the island, not just this year, but far beyond”, Dr Gibbons added.

“In the years ahead, the America's Cup will continue working for Bermudians through the infrastructure improvements it generated and by helping to position Bermuda tourism for long-term success — and it is no exaggeration to say that every Bermudian has a stake in its success.”

Great news: the 35th America's Cup is likely to come in significantly below the $77 million envisaged three years ago, according to the latest projections

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Published May 30, 2017 at 9:00 am (Updated May 30, 2017 at 12:32 am)

Event comes in under budget

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