CPA justifies refusal to takeover marina

The Commonwealth Ports Authority has stood pat on its refusal to takeover the management of the controversial Outer Cove Marina due to the possible impact it may have on the agency’s 1998 seaport bond agreement.

Executive Director Carlos H. Salas, in a written testimony submitted to the Senate, said CPA is not in any position to discuss proposals to assume control of the Outer Cove Marina because of the agency’s current financial constraints.

Mr. Salas explained that the seaport bond indenture agreement, which requires the ports authority to maintain a debt service ratio of 1.25, virtually prohibits CPA from taking over the Marina from the cash-strapped Marine Revitalization Corporation.

“Though CPA is currently meeting this requirement, the additional financial responsibilities and liability associated with a takeover of the Outer Cove Marina, the liability of MRC would likely put CPA in legal and financial jeopardy,” he pointed out.

CPA board members are concerned about the lack of equity owner Anthony Pellegrino has in MRC, and the additional liability that would come along with a takeover since a physical repair of the Marina may be required, said Mr. Salas.

Seaport facilities chair Francisco Q. Guerrero estimates that CPA would have to borrow as much as $4 million to assume control of the facility, which is believed would not benefit the ports authority in any way.

Discussions by CPA board members and management centered on MRC’s serious financial problems, with cumulative losses close to a million dollars, and concerns on the deteriorating condition of the pier structure, said Mr. Salas.

The CPA Board has rejected the takeover proposal on two occasions already: first was in June 1999, then again last month upon the recommendation of Mr. Guerrero’s committee which found that the agency could not take on the additional liability and continue to meet the debt service ratio requirement.

Mr. Pellegrino earlier asked the ports authority to take control of the $4.3 million Outer Cove Marina which, he said, could mean additional revenues without practically infusing fresh capital since major improvements have already been undertaken for the facility.

Under the takeover proposal, CPA would assume all liabilities of MRC including the payment for the $4.3 million loans from various commercial banks which were used to develop the Marina.

Existing contract guarantees that control of the Outer Cove Marina will be transferred to the ports authority in 11 years. It also stated that MRC would build and operate the facility during which period.