Pledge but no guarantee from Fast Ships

Gosford Council has received a pledge of $100,000 from Fast Ships Ltd toward the Ettalong terminal contingency funds, but no director's guarantee.

The council is also anticipating a letter from the State Government also agreeing to $100,000.

The situation was disclosed in a report to the council from its officers about the long-awaited Ettalong fast ferry to Sydney.

The council received a letter from Fast Ships Ltd committing $100,000 to the Ettalong fast ferry terminal and wharf contingency funds.

The report from council officers to councillors stated: "It is appropriate to advise council that although the tenders received are below the $4.3 million available, there is only a contingency of some 7.5 per cent.

"This could be seen as adequate.

"However, discussions were held with Fast Ships Ltd and the State Government during which it was advised that, as Council is not prepared to put in any additional funds, they will be required to each guarantee up to an additional $100,000 towards the project in the event of an overrun of expenditure.

"Accordingly, there is now contingency of 10 per cent which is considered adequate and which one would expect to have for a project of this type and cost.

"In saying this, however, it is important that council realises that although a 10 per cent contingency is available, the project could still exceed the available funds due to such events as inclement weather and/or other similar occurrences.

Following discussions with Council's solicitors, the Chairman of Fast Ships Limited was requested to provide a "directors' guarantee" for the project.

The council staff report states: "Given the substantial size of the project and the time and cost associated with attempting to establish the ferry service, it was agreed that the Directors should be approached to determine if they were prepared to guarantee a certain sum of money to ensure the viability of the service in the future."

"Although the construction costs of the facility are being met by the State Government, there will be ongoing maintenance costs and, in the event of the service ultimately being determined unviable, this would then place maintenance responsibilities on Council until another operator could be attracted.

"However, the Chairman of Fast Ships Limited advised that the directors were not prepared to enter into such a guarantee.

"This is not a major concern as, if it is found this project is not financially viable, council would have a considerable asset and could seek another operator or purpose for the facility.

A matter which has not been previously addressed by Council in detail is the access to the terminal and wharf by third party ferry operators.

Given the terminal and wharf have been financed by the State Government and owned by Council, there must be the ability for other commercial ferry operators to use these facilities.

However, Fast Ships Ltd has a commercial lease with Council and will pay lease fees to Council, as well as being responsible for the maintenance of the terminal and wharf.

"It is therefore appropriate that if other ferry operators are permitted to use the terminal and wharf, they must make a contribution to the upkeep of such.

"It is believed that these charges need to be determined prior to the fast ferry service commencing.

"The main (larger) wharf has been designed to accommodate the proposed fast ferry which will carry approximately 450 passengers.

"There is the possibility in the future that a similar size vessel may wish to make use of the wharf and terminal and such commercial operator must make a contribution to the expenses associated with the running of the wharf and terminal.

"In the event of such a service wishing to commence, and given it would be a similar service to the fast ferry, ie a commercial operation, it is believed that the two operators should confer to determine an appropriate charge for the use of the wharf and terminal facilities.

"If the two operators, ie Fast Ships Limited and any proposed operator, cannot agree on a commercial rate, then the matter would be referred to council for adjudication and if this is still unsuccessful, an independent arbitrator would be called upon whose decision would be final.

"It is expected that the adjudicator in this case would be well versed in the running of wharves and terminals in order that a fair return is received by Fast Ships Limited as the lessee of the wharf and terminal.

"Given Fast Ships Limited is a commercial operation, but bearing in mind the wharf and terminal are to be constructed with public funds, the smaller commercial ferry operators who may only make use of the smaller feeder wharf should also be required to make a contribution to the upkeep of the facilities.

"Discussions with the Transport Co-ordination Authority resulted in discussions with Independent Pricing and Regulatory Tribunal (IPART) who advised that some ferry operators' prices are regulated by IPART and they must make an annual submission to IPART who then sets the maximum passenger fare.

"This does create some problems when attempting to determine a cost per passenger for the use of the feeder wharf as IPART may not agree to the smaller ferry operator passing on the full charge sought by Fast Ships Limited.

"If this is the case, the smaller ferry operator would be required to meet any additional costs from his/her profits.

"In saying this however, the smaller ferry operators will benefit by increased passenger usage in having Fast Ships Limited operating regularly from the larger wharf.

"Accordingly, a cost per passenger payable by the smaller ferry operators to Fast Ships Limited needs to be determined.

"This must be fair and equitable to the smaller operators and Fast Ships Limited as the lessee, and also politically acceptable.

"In this regard, meetings will be arranged to enable a recommendation to Council on the cost which Fast Ships Limited might charge the smaller ferry operators wishing to use the feeder wharf.

Council agenda FS.061, May 6