The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar says it has “far exceeded” its commitment to provide Bahamian contractors with $400 million worth of work, beating this target by 67.8 per cent while more than 6,000 local jobs to-date.

Lance Millage, Baha Mar’s deputy financial officer, in a July 16 affidavit alleged that the developer had beaten its construction “bidding commitment by more than 50 per cent”.

His affidavit, which has been seen by Tribune Business, alleges: “In the Heads of Agreement, the applicants [Baha Mar] undertook to designate in aggregate a total of $400 million in works for bidding by Bahamian contractors and trade/work packages on a competitive cost, budget and quality basis.

“The applicants far exceeded this quantum. As at July 14, 2015, approximately $671.314 million in actual construction works have been awarded to Bahamian sub-contractors, exceeding the bidding commitment by more than 50 per cent.

“As at March 2015, the applicants have provided a total of 6,213 jobs for Bahamians over the life of the project to-date.”

Whether these economic impact statistics impress Bahamian contractors and sub-contractors who have been waiting several months to receive due payment for work done, and the more than 1,000 Baha Mar staff sitting at home as a result of the dispute with the developer’s Chinese parties, remains to be seen.

It is also unclear whether it will impress Supreme Court Justice Ian Winder, who tomorrow is due to rule on the Government’s petition to wind-up Baha Mar’s 14 Bahamian-domiciled companies over an alleged $59 million debt.

Still, Mr Millage argued that the Chapter 11 bankruptcy protection/reorganisation process provided the best chance for Baha Mar to fullfill its original economic impact projections.

“This would enable the direct contributions to the Bahamian economy, businesses and employees to continue as originally intended and forecasted,” he alleged of the Chapter 11 proceedings in Delaware.

“To date, Baha Mar has made significant direct investments in the Bahamian economy through its retention of Bahamian sub-contractors, suppliers and employees, and business arrangements with Bahamian companies.”

Ex-Prime Minister Hubert Ingraham secured the commitment from Baha Mar and its Chinese partners, China Construction America and the China Export-Import Bank, to increase the minimum value of work bid to Bahamian contractors to $400 million.

This doubled the value of what was initially going to be handed to Bahamian firms, with Mr Ingraham also gaining a pledge that at least 2,000 local construction jobs would be created over the project’s lifetime.

Meanwhile, disputing the Government’s assertion that Baha Mar had received $1.2 billion worth of investment incentives, Mr Millage said this was the figure for “the time horizon of the entire project”.

This, he added, was up to 2034, and the Government’s incentives and contributions to Baha Mar to-date were alleged to be $300 million at maximum.

He added that the two most valuable investment incentives, the 20-year real property tax reduction and 50 per cent cut in casino win taxes for 21 years, had yet to kick-in because they only started running when Baha Mar was open.

The real property tax and casino win tax breaks are pegged by the Government was being worth $396.956 million and $334.842 million, respectively, over those periods.

“The Government’s concessions and contributions served as an inducement for the developer, Sarkis Izmirlian, to make an $845 million common equity investment in the Baha Mar project, and Baha Mar to assume the responsibility of a $2.45 billion loan facility from the Export-Import Bank of China,” Mr Millage alleged.

“The cumulative revenues to the Government [from the project] are projected to exceed cumulative concessions by a factor of 4.7.

“Additionally, the cumulative total GDP impacts will exceed cumulative concessions by a factor of 30.4. Accordingly, for every $1 in Government concessions to the applicants, more than $30 would be generated in cumulative total Bahamian GDP.”

Baha Mar is also arguing that the Government has over-estimated the amount of casino taxes it owes by $4.826 million.

This, it claims, is because the latter has failed to account for the fact that the former Crystal Palace Casino was reduced below 10,000 square feet in size by December 2010, thereby taking it into a lower tax rate bracket.

As a result, Baha Mar is claiming that the outstanding taxes owed to the Gaming Board total $17.143 million and not the $21.969 million alleged by the Government.

Documents attached to Mr Millage’s affidavit show that the Government was aware from November 22, 2012, that the Crystal Palace Casino had been reduced to 9,794 square feet, and that Baha Mar was applying for the lower tax rate.

A letter sent to Senator Julian Russell, the Hotel Corporation of the Bahamas chairman, disclosed that the Crystal Palace Casino’s table games had been reduced from 40 in 2010 to 24 in 2011, and down to 18 in 2012.

As for slot machines, these had been cut from 404 in 2010 to 262 in 2011, and then down to 257 in 2012.

The letter, written by Robert Sands, Baha Mar’s senior vice-president of government and external affairs, said the equipment and floor space reductions had been co-ordinated with the Gaming Board, which had issued two approvals for the move.

“In light of the resizing of our gaming operations, I request your consideration in designating the Crystal Palace Casino as a facility with floor space of less than 10,000 square feet as of January 1, 2011 (retroactive basis,” Mr Sands wrote.

“Your approval is being sought to allow for the update of our financial records to properly reflect the outstanding gaming taxes based on the formula in the Casino Taxation Act.”

The Gaming Board, together with other Government entities such as the National Insurance Board (NIB) and the Treasurer, have filed their own individual winding-up petitions against different Baha Mar companies over alleged outstanding debts.

Separate and apart from the Government’s own ‘omnibus’ winding-up petition, they are asking the Supreme Court to appoint Bahamian accountant Ed Rahming, a partner in KRyS Global (Bahamas) as joint official liquidator with two UK accountants, Mark Cropper and Alastair Beveridge of AlixPartners Services.

NIB is also alleging that Baha Mar missed the July 15, 2015, deadline for providing its June contribution statements on behalf of its staff.

It is already claiming that Baha Mar owes outstanding contributions for April and May this year totalling (including interest to August 4) $685,417.