Extra! Extra! Get Your Copy of the Second Berth Assessment Here!

I received a copy of Due Diligence Assessment of Plans for Second Berth at the Sydney Marine Terminal!

Thanks, ACOA! I thought I’d have to wait for the movie.

It’s the assessment prepared by management and consulting firm CPCS for the Atlantic Canada Opportunities Agency and the Nova Scotia Department of Transportation and Infrastructure Renewal on the case for the CBRM’s second berth. The municipality has already set aside the Satanic amount of $6,666,667 and is now looking to the feds and province for the rest of the funding for the $20 million project.

The report comes down in favor of the project:

[I]t is our opinion that the second berth project has merit. It is not based on speculative traffic, but rather existing business that is growing and is expected to continue to grow. It would also afford the Port of Sydney an opportunity to accommodate certain non-cruise related cargo business outside the cruise season (we nevertheless expect other cargo opportunities to be limited to ad hoc needs relating to project cargo, ship repair, etc.)

Here are the things I noted in the report:

 

1) Economic Impact

The Port of Sydney Development Corporation (or “The Sydney Port Corporation” as its referred to in the document) has been stating in its Facebook ads that without the second berth “we will lose out on as much as $48 million in new business.”

That’s taken from the “Economic Impacts of a Second Berth” section of the report and the first thing you need to know about that figure is:

The unit expenditures (per cruise ship, passenger and crew member) are anchored in the estimates generated by BREA’s surveys, inflated to 2016 using the Consumer Price Index (CPI) for Nova Scotia.

BREA is Business Research & Economic Advisors, the firm that did the 2012 economic impact study of the cruise industry on the Port of Sydney. Using BREA’s calculations as an “anchor” means CPCS accepts that 95% of passengers and crew members disembark in Sydney, that each passenger spends $66 and each crew member spends $49.41. (BREA based its spending figures on passenger surveys, but Memorial University Professor Ross Klein, a cruise industry critic, says those numbers have been industry standards for years.)

The second thing you have to know is that CPCS modeled two scenarios intended to calculate the value of the business we could expect from a second berth. Both are calculated over 30 years. One does indeed come up with a figure for direct and indirect GDP impacts of $47.9 million. But other comes up with a figure of $19.9 million.

And achieving either total, according to CPCS, depends on the port’s ability to solve two other problems associated with cruise traffic:

Key issues around the number and quality of motor coaches available to serve tourists and the quality of the “local experience” offered must at the same time be addressed to enable the full benefit of the second berth.

 

2) Cost Overruns

The main risk CPCS identified with the project was the possibility that it could come in over budget:

As a general rule, public works projects tend to be over budget and there do not appear to be any provision for contingencies in the cost estimates for the second berth project. We feel that the risk of cost overruns on the second berth project are compounded by the fact that the cost estimates are largely based on preliminary (and now somewhat dated) engineering studies.

Adding to the uncertainty is the necessity to purchase land for the project:

Other cost components, including the acquisition of the North Lands Property & Water Lot (the “Nickerson Property”), estimated to cost $1.5 million, may also be underestimated. We understand, for example, that the owner of the Nickerson Property is seeking $6 million for the property. We further understand that this land is contaminated. It is unclear to what extent the cost of environmental remediation is included in the estimate (though CBRM and the Port of Sydney have both indicated that adequate provision for environmental remediation is included in the cost estimates for the project).

Those seems like reasonable things to be concerned about.

 

3) “Other” Business

I’ve been fascinated by the calculation of how much non-cruise business the Port of Sydney has been losing for want of a second berth ever since I first heard PSDC CEO Marlene Usher throw out an estimate of $500,000 during the corporation’s first AGM in 2016. Bernadette MacNeil, who heads the port’s cruise operations, also quoted me the figure of $500,000 when I spoke to her earlier this year. I’ve wanted to see the evidence for that figure and finally here it is — kind of. This table from the report purports to show lost revenue “since the beginning of 2014 when the Port began tracking the information.”

Lost Revenue, Port of Sydney Development Corporation.

The total they say they’ve tracked is not $500,000 now, which means it definitely wasn’t $500,000 a year ago, when Usher made the claim. And even here, there’s an element of magic involved in the calculations — the wharfage estimate is “based on average revenues when vessels with project cargo use our docks, our operations manager used a multiplier of 1.5x based on our docks and the industry standard.”

 

Any Questions?

Whether you are a confirmed supporter of the second berth project or a hardened skeptic, you might like to know how the question of cost-overruns is being handled, or where we’re going to get more buses, or how much public money will be spent to create better “experiences” for cruise ship passengers, or how much “other” business can we reasonably expect to see at a new berth.

That’s called having an informed discussion of the project and maybe we’ll actually have one on Saturday, at 2 PM, at the Joan Harriss Cruise Pavilion.

 

 

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