To the Editor:
I was disappointed to read Rob Jordan’s Aug. 31 Viewpoint piece arguing in favor of a Bar Harbor Port Authority. Jordan crafted an argument for a Bar Harbor Port Authority that was both confused and confusing. I offer my opinions as a lawyer who has advised banks in making loans and whose firm advises towns in negotiating loan terms.
The most troubling aspect of Jordan’s argument was its suggestion that, only with a Bar Harbor Port Authority, could the town develop the ferry terminal site in a manner “that Bar Harbor taxpayers will not be on the hook financially for the cost of purchasing and developing the site.” This is dead wrong, factually and legally. Let me explain why.
There are two types of bonds that any town can use for financing any project it undertakes. The first is a general obligation bond, and the second is a revenue bond.
General obligation bonds do put taxpayers at risk for any default. Were the town to build a cruise ship terminal that failed to generate the anticipated revenue, any shortfall in payments on a cruise ship terminal general obligation bond would have to be made up out of real estate tax revenues, other user fees the town charged or forced sale of town property. The modifying phrase, “general obligation,” describes the breadth of the town’s liability: it is an obligation that the town must satisfy without question unless it seeks the protection of a federal bankruptcy court.
A revenue bond limits the town’s exposure to a specified source of revenue. Were the town to issue a cruise ship terminal revenue bond, the lenders could only look to the flow of revenues to the cruise ship terminal for repayment of the bond. These revenues would be from monies paid by cruise ship operators for the privilege of bringing cruise ship passengers to Bar Harbor. Current revenues from cruise ships could be used to satisfy the bond.
The town of Bar Harbor can issue a revenue bond for development of a cruise ship terminal and never put taxpayer dollars at risk. It does not need to create a Bar Harbor Port Authority to do this.
A port authority would have no ability to assess or collect real estate taxes. Thus, the only bond it could issue would be a revenue bond. It would stand in the same position as the town if the town were to issue a revenue bond. Both would pay a higher interest rate to reflect the greater risk the lender is taking. I suspect the town of Bar Harbor, because it has a good track record in repaying bonds, would pay a slightly lower interest rate than a Bar Harbor Port Authority with no credit history.
Why, then, have some continued to advocate for a Bar Harbor Port Authority if the town, without any port authority, could issue a revenue bond and never put taxpayer dollars at risk?
One possible reason is that they know that the town charter requires any revenue bond to get an up or down vote at the annual town meeting. A bond to install parking meters downtown was defeated in a close vote at the June 6, 2017 town meeting. In contrast, a port authority could borrow money through a revenue bond by a simple majority vote of its directors.
The size of a cruise ship terminal revenue bond will determine the size of any cruise ship terminal. Any voter who wants final approval of the size of any cruise ship terminal to rest with the voters themselves should adamantly oppose creation of a port authority. It would strip the voters of direct control over the size and scope of any proposed cruise ship terminal. It would take power from the voters on an issue that voters care deeply about.