THE Baha Mar deal recently agreed by the Christie administration, as outlined in the heads of agreement (HOA) released on April 30, amounts to a “disgraceful betrayal” of the government’s sacred duty to protect the public interest, a former high ranking hotel executive told The Tribune last night.
“In their rush to open the resort as a last-minute election ploy,” said lawyer Michael Scott, a former chairman of the Hotel Corporation of The Bahamas, “the PLP has cut an amazingly sweet deal for the buyers, while burdening the Bahamian people with additional financial responsibilities totalling somewhere in the region of $1 billion.”
Mr Scott said that during his tenure as chairman of the Hotel Corporation in 2011, the Baha Mar deal with the original developer, Sarkis Izmirlian, was renegotiated to the significant advantage of the country.
“That agreement contained numerous infrastructural obligations for the developer,” he said. “For example Clause 1.6 which spoke to the responsibility of the developer to provide electrification, water and sewage and other utilities. These responsibilities are missing from the new HOA, meaning that the Bahamian people will now have to pay for them.
“In transferring all of these infrastructural obligations onto the backs of the Bahamian people, the government has betrayed the citizens of this country and future generations to come. At a time when our debt continues to skyrocket in the face of an anaemic economy and grossly irresponsible fiscal policies, where are we supposed to come up with the hundreds upon hundreds of millions it will cost to fulfil these obligations? Perhaps Christie plans to squeeze the taxpayer even more than he already has.”
Mr Scott said that “one is forced to wonder what on earth could have compelled those involved in the negotiations - individuals such as Jerome Fitzgerald and Allyson Maynard-Gibson - to give such fantastic terms to Perfect Luck,” terms that would have never been extended to Mr Izmirlian he suggested.
Perfect Luck is the special purpose vehicle (SPV) created by China Export-Import Bank, Baha Mar’s secured creditor, to purchase the resort’s assets from the receivers.
“In addition to the infrastructural commitments,” he said, “the 2011 version of the deal mandated that Baha Mar build 3,450 rooms. That is reduced by 425 rooms in the new agreement. There was also, at Clause 1.16, an obligation to build a marina. However this has disappeared from the new deal, as has Clause 1.18, which required Baha Mar to build a second golf course.
“And yet, despite such generously reduced responsibilities on the part of the developer and such an increased burden on the Bahamas, the current deal goes far beyond the 2011 version in rolling out the red carpet for the new owners.
“Take, for example, clause 7.5 of the new HOA: The concessions are predicated on the expenditure of $2 billion or the incurring of losses in that amount or some lesser amount. In the grant of these concessions we have effectively financed this investment.
“Look also at Clause 7.7. Why are we writing off $10.75 million in casino taxes? This money is sorely needed by the Treasury - which former Prime Minister Hubert Ingraham (suggested) is broke.
“Perhaps the most egregious section is Clause 8,” said Mr Scott. “The public does not have access to the Asset Transfer Agreement of September 2016 or the Share Transfer Agreement of November 2016. We are still unable to detect the meat of the ‘giveaways’ or the tax breaks under the Hotels Encouragement Act. It is highly likely that the Bahamian people got an even worse deal than we are aware of.”
Mr Scott said that Perfect Luck has a tax concession for the years 2017 to 2019.
“This is what has financed the payment of the employee severance at Baha Mar and the liquidated damages settlement for the building contractors. Legally, this ‘financing’ could not have been accomplished unilaterally by the minister of finance, meaning that the heads of agreement requires the approval of Parliament which should have been obtained before the payments were made. Authority for this can be found in the Financial Administration and Audit Act,” he said.