<< Peninsula News 3 December 2002 - Council prepares ferry deed>>

Council prepares ferry deed

Gosford Council has agreed in principle to the completion of a deed between the council and the State Government for acceptance of the $4.3 million grant for the Ettalong Fast Ferry wharf.

The deed provides for a lease and sub-lease with Fast Ships Ltd, conditional upon the $4.3 million grant being advanced to the council, and access to the wharf being available to other ferry operators.

The term of the lease will be 10 years with a 10-year option.

Commencement will be from the date of delivery of the vessel to Fast Ships Ltd to provide the service required by the lease and sub-lease, and the annual rental will be $275,000 per annum (plus GST) and subject to annual CPI adjustments.

For the first five years of the lease, the council will require an annual rental of $147,600 (plus GST) and annual CPI adjustments, thereafter reverting to $275,000 per annum.

Fast Ships Ltd had requested from a rent free period of five years in order to recoup costs accrued in preparing the proposal to this stage.

A staff report to the Council stated: "Given that Council has previously resolved not to contribute financially towards the proposal, any rent free period was seen as a cost to the ratepayer and, accordingly, Fast Ships Ltd has been advised that the council does not agree to a rent-free period."

Fast Ships Ltd would be granted a licence to enter into possession of the premises at a nominal fee for the period from the date of practical completion to the date of commencement of the lease and sub-lease for the purpose of fitting out and securing the premises.

An amount of $125,000 would be taken from the annual rental and placed in a sinking fund for replacement of the facility.

The council already has acquired the land on which the terminal will be constructed from the Department of Land and Water Conservation for $100,000.

The land below the high water mark on which the wharf will be constructed is leased to council by the Crown.

One of the major ongoing costs associated with the terminal and the wharf in particular will be the maintenance cost.

The lease agreement will include recognition that the lessee, Fast Ships Ltd, is entirely responsible for the maintenance of both facilities and that a sinking fund is established by the council for replacement of the facilities when necessary or at the end of the lease period.

The staff report told Council it could not guard against failure of the fast ferry service or the company going into liquidation.

The council's solicitor prepared a draft lease and sub-lease which formed the basis on which council agreed to lease both the terminal and wharf to Fast Ships Ld.

The sub-lease has been prepared on the basis that Fast Ships Ltd is the lessee of both the terminal and wharf and that if other companies or vessels use the facilities, they must be prepared to make a contribution to Fast Ships Ltd.

Emergency vessels may use the premises without charge during emergency situations.

As the facility is a commercial undertaking with defined time slots for commercial operators as determined by the lessee, recreational and non-scheduled commercial passenger ferry operators will not be provided with a licence except in cases of emergency.

The council's solicitor advised the Council that the previous leases prepared for the proposed agreement with Fast Ships Ltd were adequate in their terms for the current arrangement.

Council had spent a considerable amount preparing the previous leases and it was seen as an advantage to use them.

The solicitor indicated that the only matter of substance which would need to be addressed in the leases was the rental repayments and the amounts had been based on advice from the Council's valuer.

The original draft lease agreement with Fast Ships Ltd contained a requirement that Fast Ships Ltd provide the council with a bank guarantee or cash bond of $500,000.

However, now the funding is being guaranteed by the State Government, this condition has been deleted.

The Council was told that the Department of Land and Water Conservation, as head lessor, must consent to matters relating to the wharf.

Council agenda FS.176, November 26