The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s estimated $407.714 million worth of real property tax breaks are equivalent to more than 70 per cent of the total arrears owed to the Government at the end of the 2011-2012 fiscal year.

The $1.2 billion in investment incentives granted by the Government to the developer are broken down in a July 19, 2015, affidavit from Sir Baltron Bethel, Prime Minister Perry Christie’s senior policy advisor.

Baha Mar received $10.758 million in real property tax breaks between 2005 and 2012, according to Sir Baltron, with a further 20-year moratorium until 2034 freeing the developer from an estimated $396.956 million worth of payments.

Baha Mar’s total breaks in this area are equivalent to 70.34 per cent of the $579.601 million that the Auditor-General said was owed to the Government in total outstanding real property tax payments at the end of the 2011-2012 fiscal year.

Meanwhile, Sir Baltron’s affidavit reveals that Baha Mar’s Hotels Encouragement Act agreement with the Government also entitles it to some $286.312 million worth of import duty breaks on construction materials.

The developer has a 50 per cent reduction on the statutory casino win tax rate for 21 years, a break that is estimated to be worth $334.842 million to Baha Mar.

It will be relieved of $76.014 million in casino floor tax obligations via the incentives it has obtained, while the Government has also committed to financing $49.503 million in infrastructure costs (road re-routings etc) and paying $37.968 million in marketing funds up until 2034.

The extent of the $1.2 billion concessions granted to Baha Mar has already sparked suggestions that the Bahamian people should have at least a 25 per cent equity stake in Baha Mar, as the incentives make the project worth $4.7 billion.

The details contained in Sir Baltron’s affidavit will also prompt debate over the Bahamas’ foreign direct investment (FDI) model, and the extent to which this nation continues to trade land and taxes for jobs.

Many observers will question whether the Government is conceding too much to investors, and front-loading these incentives unnecessarily, and whether their granting should be done in stages and tied to specific performance.

Sir Baltron’s affidavit, meanwhile, reveals that the Government was aware of Baha Mar’s concerns over the opening date, and whether its contractor could meet it, from “toward the end of 2014”.

A guaranteed opening date from the project’s main contractor, China Construction America, remains a key sticking point for Baha Mar, as evidenced by a message from Thomas Dunlap, its president, at the weekend.

Referring to a draft Memorandum of Understanding (MoU) circulating between the parties, Mr Dunlap said: “CCA’s construction counsel have inserted language that effectively dilutes CCA’s latest assurances that the project will be ready for opening by December of this year, imperilling (yet again) an opening being achieved on time for the traditional tourist high season in the Bahamas.”

In other Baha Mar-related developments yesterday, accounting profession sources expressed further concern about the selection of PricewaterhouseCoopers (PwC) as the provisional liquidators.

Tribune Business contacts provided evidence showing that PwC is the external auditor for CCA’s parent, China State Construction Engineering Corporation, thereby creating the appearance of a ‘conflict of interest’ in acting as Baha Mar’s provisional liquidators.

But Gowon Bowe, one of the PwC partners that would take on the Baha Mar assignment if the winding-up petition is approved by the Supreme Court, told Tribune Business that “persons are making incorrect assumptions”.

Pledging that PwC would “try to dispel the mischief” via its court filings, he added: “If we have relationships with one of the parties or the other, we have to manage that through our independence and compliance protocols that exist. There is no matter of non-disclosure or compliance that is not known to the parties at this time.”

Mr Bowe expressed hope that PwC’s proposed appointment became “a moot point”, and that the Baha Mar stakeholders would be able to resolve their differences before Friday’s wind-up.