As it faces a seemingly continuous barrage regarding its treatment of turtles and alleged failed efforts as a conservation facility, what may have escaped more direct attention is the dreadful state of financial affairs within the Cayman Islands’ second-ranked tourism destination; a situation that, according to its own managers, won’t be fixed for many years.
Over the past four government budgets, including the current 2012/13, the Cayman Islands government has spent or plans to spend an average of $9.775 million each year in ‘equity investments’ for the continued operation of the Turtle Farm.
That works out to about $175 dollars per year for each resident of the Cayman Islands, using a population figure of 56,000.
The payments, according to Turtle Farm Chief Financial Officer Phillip Fourie, are mostly to pay off debt accumulated by the farm during a redevelopment and expansion effort that was undertaken between 2001 and 2004 and other loans that were taken since that time
For instance, this year Fourie says about $6 million will be paid from the government subsidy to retire the principle and pay off interest on that debt. The other $4.5 million will go to making up operational costs of the farm that its revenues cannot support.
The majority of the remaining facility debt, about $31 million as of the end of October, will be paid off by 2019 or earlier, according to farm officials.
However, it is doubtful, and Turtle Farm Managing Director Tim Adam would not give a date for when, the tourism facility might come close to breaking even – much less make any money – within the next several years.
“I’m not going to make any promises I can’t keep,” Adam says.
The Cayman Turtle Farm, which was taken over by the local government in 1983, receives about 230,000 visitors per year. That makes it the most popular land attraction for visitors in the Cayman Islands and the second most popular attraction overall next to Stingray City and the Sandbar in Grand Cayman’s North Sound.
However, to just “break even”, Adam estimates the facility would have to draw twice that number – 460,000 people – about one-quarter of Cayman’s current yearly total visitors, counting both cruise ship and stayover tourist numbers.
That number is not likely to be reached unless Grand Cayman can install a new cruise ship berthing facility in George Town and/or a berthing facility at the West Bay Public Beach. When the Turtle Farm was expanded in the early part of last decade, the business model called for the construction of a cruise dock at the public beach.
“In the current scenario, where we don’t have a cruise dock…we have to bear in mind that about 70 per cent of our revenues come from the cruise business,” Adam says.
He also says an aggressive tourism marketing campaign targeted at stayover visitors is under way, but that alone won’t make the numbers the farm needs to be solvent one day.
According to budget records reviewed by the Journal, the Cayman Turtle Farm had a net operating deficit for the 2011/12 year of $7.4 million. For the current 2012/13 year, that deficit is projected at nearly $8.1 million.
Fourie says that’s not all operating losses, some is what accountants would refer to as “book costs”; depreciation, staff pension liabilities and interest being paid to retire loans.
Financial records show the overall net loss figures for the Turtle Farm have dropped from about $13 million in 2007/08 to about $8 million in 2010/11.
Personnel costs for the farm operation have dropped by about $1.8 million in the last two years, mainly due to the layoff of 20 staff members at the facility in mid-2010.
Revenues have increased slightly in recent years, but they are not keeping up with the costs of operating the Turtle Farm.
While some of that could be considered good or at least better news, other farm operating costs have increased. For instance, the facility’s electric bill went from $1.2 million in 2009 to $1.7 million in 2010; an increase of more than 40 per cent in a single year.
The farm also lost $3 million in depreciated assets in one year between the 2011/12 and 2012/13 fiscal years.
Financial concerns with the Cayman Turtle Farm, which have been reported over a number of years, were brought to light again in a report released by the United Kingdom-based World Society for the Protection of Animals last month.
The report focuses mainly on general health and humane treatment concerns at the Cayman Turtle Farm in Grand Cayman, but the review also sharply criticised the tourism facility’s current business model.
That model, when first established, was mainly focused on the sale of turtle products; not only meat, but oils, shells and other products, according to the agency’s report.
When the Convention on International Trade in Endangered Species was established, such trade outside of the Cayman Islands became illegal.
The WSPA report does admit that a transition from turtle product trade to tourism seemed a logical alternative at the time.
“However … over the last few decades the farm’s own financial reporting suggest that it has consistently represented a significant drain on the Cayman Islands economy,” the WSPA report opined.
It didn’t work.
Audits going back to late 2010 reveal that the Cayman Turtle Farm received just more than $28 million in “equity injections” – essentially government subsidies – between July 2007 and November 2010 to keep the government-owned tourism attraction operating.
In addition, auditors with KPMG noted in their report on the financial statements for the Turtle Farm for the years ended 30 June, 2007, and 30 June, 2008, that government also provided an interest-free loan of $939,000 to the facility during the 2007/08 budget year.
“Without this ongoing support a material uncertainty exists that casts significant doubt about the [Turtle Farm’s] ability to continue as a going concern,” auditors wrote in their independent report, which was released Monday in the Legislative Assembly.
Also, auditors noted in February 2009, government provided additional guarantees of US$5.5 million for a bank overdraft facility.
“Cost overruns of the Boatswain’s Beach project [a name that is no longer used at the facility], lower than projected visitor numbers and operating costs in excess of initial budgets, have given rise to significant business risks,” the auditors’ report stated, adding that those losses have plagued the facility since the 2005/06 year.
The World Society for the Protection of Animals suggested that the Turtle Farm transition into a conservation-rescue operation to support itself.
The organisation gave the example of Reunion Island, where commercial turtle production was discontinued after international trading privileges in turtle products were revoked, as well as growth and disease issues with the turtle stock. The conservation operation there now, known as the Kelonia Observatory of Marine Turtles, is seen by WSPA as a potential model for the Turtle Farm.
“Kelonia now operates as a sea turtle research and education centre with a major focus on the provision of care for injured and ill sea turtles,” the WSPA report states. The nonprofit venture was partially funded by the European Union and now covers 67 per cent of its operating costs.
The rest is covered by government subsidies.
“Following the transition away from commercial production, it is evident that turtles remain an important element of Reunion Island’s cultural inheritance,” the WSPA report states. “Those involved believe the importance of turtles is stronger today than in the days of farming.”
More than turtle meat
Turtle Farm officials, including Adam, have said that WSPA did not propose any viable alternatives to their current business plan and, in any case, the organisation does not appreciate the total value of the farm to the Cayman Islands.
“While the Cayman Turtle Farm is currently not operating at a profit, the business model embraces this redevelopment and expanded mission,” farm officials noted. “In recent years, the Cayman Turtle Farm has cut operating expenditures and overhead costs and improved revenues while also continually maintaining and enhancing the facility to be a world-class tourist attraction.”
The facility noted that it has maintained visitor numbers despite a decline in the overall number of cruise passengers coming to Cayman over the last few years.
“We maintain that this approach by the WSPA is in direct contravention of their stated intent to assist the Cayman Turtle Farm in a transition to what they would consider a more financially viable tourism model,” the statement read. “It seems that they believe they can only achieve this goal by seeking to smear our reputation and sabotage our business.”
Both the farm and the government have stated the report was an attempt to “shut down” Turtle Farm operations that was “completely incompatible” with the agency’s claims that it hoped to transition the Cayman Turtle Farm’s current business model.
“That claim is in itself contradictory given that the WSPA has also claimed that sea turtles cannot be humanely held in captivity,” the farm’s response read.
Adam says the farm is much more to the Cayman Islands in a cultural sense, but also in an economic one.
Not only to some 230,000 people who visit the farm each year, those visitors use local buses, taxis and tour vehicles to get there; supporting the local transportation business.
The Turtle Farm employs about 87 people – 95 per cent of whom are ‘local residents’. It also purchases goods and services in the local economy and gives tourists a tour option that they can’t take advantage of anywhere else in the world.
“The operational deficit isn’t the sum total of what the Turtle Farm contributes,” Adam says. “It has a significant positive impact on the local economy.”