Heres what a golden egg looks like

So I was pretty surprised when I determined what the allowable profit number for the ferry service was. But once I understood that, it made a few other things clear, principally why there had never seemed to be much of a marketing effort. Presumably money spent on marketing would have been outside of the allowable expenditures defined in the operating agreement and more passengers was of no concequence.

So how in heck did the make their money. I remember Tim Banks one time telling me how the system worked and that the way to make money from Government was not a big fat appointment to the Senate. Thats for small fry, and besides you might actually have to do some work for it. The way to make real money was to lease or rent something to government. I was let in on this little gem when the DVA building was being built in Charlottetown. I hope the facts are straight but here is how the story was told to me.

When DVA was going to move to Charlottetown there was no place for them to go so here was how the big payoff worked. About 20 Liberal supporters were rounded up, I believe they were all from Toronto and a deal was put together. It went something like this. The Bank of Montreal loaned each of them $50,000.00, that makes 1 million. Then on the strength of a long term lease a mortgage was put in place and the building was constructed. Now a 20 year lease to the Federal government is something pretty solid to take to the Bank as security for a loan and a mortgage. So for the sake of illustration lets say the mortgage amount was 9 million dollars. We now have the 10 million dollars to build the thing. But the money has to be paid back ( to simplify things lets forget about interest) So we need three things
1. A repayment plan for the $1,000.000.00 over 5 years.
2. A repayment plan for the 9 million over the 20 years
3. A lease agreement where governmnet pays the developer a yearly fee for the building.

So lets make sure that the lease terms include at least $200,000.00 per year to cover the short term loans, and that clears those in 5 years. Then we need $450.000.00 per year for 20 years to clear the mortgage. But isn't any investor entitled to a profit, well of course they are and here is where it gets sweet. How much profit. Well let me tell you at the end of the day some "friends are going to be well rewarded" and the beauty of it is that no one has to do anything for it. Management fees are built in to costs, you can't lose and when the 20 years are up and the building is paid for does anyone think the lease fees are going down, fat chance. Twenty guys spend their days on the golf course and the beach for life. Kind of makes a guy want to go out an take out a party membership doesn't it. We've seen the same thing in various forms here on the Island. Think about it, remember when Government paid millions for Elmer Lawtons warehouse, and thats all they got. Then we had Dundarave, and Tim got his in there to, although that went through a tendering process, and the big payoff came when Government put a halt to the condominium side of the project and Tim held them up for ransom and now receives, what is it 1.7 million per year for the Greenwich interprative centre, good for him. And to put the lease rental game in perspective I read a report from public works a few years ago where Government was paying for a million or so square feet of office space that was empty. Hmm starting to see how it works.

So anyway if you want to verify a few things there is lots of public documents that point you in the right direction concerning the ferry. Although ownership has changed hands now, at the time of the fixed link debate and you did some here are the answers you would have probably gotten.

A check of International shipping registries will show who owned the ferries that Northumberland used. When you find that only one of the boats was owned by the Federal Government, I bet a few light bulbs will start coming on in your head.

If you check with the Provincial Community Affairs Department you will discover that the same same Corporate name showing in shipping registries happens to be a PEI Company and no its not Northumberland Ferries but how much you want to bet the Board Directors of Northumberland Holdings both are the same.

So here is where the golden egg makes its appearance. Try this scenario on for size.

Northumberland Ferries is granted the first concession. In order to make it work they need a ferry so they found one called the Erie Isle. Now because we already know how the DVA deal worked is it a stretch of the imagination to think this could have been the same. Except it wasn't quite the same because of the concession so here it is, drum roll please.

Northumberland Holdings Ltd. buys the ferry and it costs say, $1000.00 per year to pay for it, so it is then leased it to the Department of Transport for say, $1500.00 per year, then the Feds lease it to Northumberland Ferries for $1.00 per year so they can run the concession. Northumberland ferries is the goose, but Northumberland Holdings is the golden egg. Isn't it sweet in its simplicity, and if you think that Mitch MacLean built that big house down on the waterfront because of his hard work, well think again.

Isn't Amarica wonderful. But I do have to give Mitch MacLean some credit, I don't know how "The Cat" works but from where I sit I am impressed that its there and its making money, I hear that he did put it together. But somone told me once that the old Island expression applies to him better than anyone " he's so mean he won't shit away from home."