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Freeport Tax Regime Repeal Must Pressure ‘The Two Free Riders’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Grand Bahama Port Authority (GBPA) attorney yesterday expressed hope that the promised repeal of Freeport’s new investment regime will pressure “the two free riders” whose impact on Bahamians is “five times’ greater” than Baha Mar’s.

Carey Leonard told Tribune Business that the Minnis administration needed to ensure there was “some quid pro quo” if it granted the Port Group of Companies, and Hutchison Whampoa’s Freeport investments, an automatic 20-year extension of their real property tax exemptions.

Pointing out that, unlike other licensees, both also enjoyed exemptions from Freeport’s service charges, Mr Leonard suggested the Government require them to undertake multi-million dollar infrastructure upgrades in return for tax break renewals.

Mr Leonard was speaking after yesterday’s ‘Speech from the Throne’, which placed Grand Bahama - and Freeport - at the centre of the new government’s plans for reviving the Bahamian economy.

Dame Marguerite Pindling, the Governor-General, confirmed that among the Minnis administration’s objectives is the “repeal and replace” of the Grand Bahama (Port Area) Investment Incentives Act 2016.

While there was no mention of what will take its place, the strategy is “to ensure that all [GBPA] licensees receive equal treatment under the law”.

That is not the case under the 2016 Act, passed by the former Christie government, which automatically granted Freeport’s two largest investors - the GBPA and Hutchison - an automatic 20-year extension of their tax breaks, while the former’s other 3,500 licensees had to apply to the Government for theirs.

Besides pledging to establish technology and financial services hubs in Grand Bahama, and promoting the island as a movie and TV production location, the ‘Speech from the Throne’ also emphasised the island’s importance to the overall Bahamian economy.

“My Government realises that a healthy and strong Grand Bahamian economy is vital to the growth and development of the entire Bahamas,” Dame Marguerite said.

Mr Leonard yesterday expressed particular delight that a government, at least verbally, had finally signalled it understood Grand Bahama’s potential and ability to pull the nation “out of the economic doldrums”.

“I’m delighted to hear that,” he told Tribune Business. “I think it’s a very positive step forward. I think that’s going to give people a great deal of encouragement; that for once, we’ve had someone come out and say they recognise the importance of Grand Bahama to the economy.

“If they follow this, and sustain it, Grand Bahama can really help to increase the GDP, and help pull the Bahamas out of the economic doldrums. The potential is here.”

Mr Leonard, now an attorney with Callenders & Co, called for the Government’s “repeal and replace” of the 2016 Act to focus on ensuring the GBPA and Hutchison Whampoa live up to their developmental obligations.

“Depending on how they review the issue, perhaps it will put some pressure on the two companies that got a free ride with the incentives Act,” he told Tribune Business.

“If the Hutchison Group and the Port Group of Companies are going to get some sort of exemption from real property tax, there should be some quid pro quo, because they’re already exempt from service charges.

“There should be requirements for infrastructure development,” he added. “Our roads need some serious attention, and the landscaping that was once so beautiful in the ‘garden city’ has been allowed to decay badly.”

Mr Leonard said that while such infrastructure upgrades would incur a multi-million dollar bill, this would be outweighed by the benefits - including to the GBPA and Hutchison - who, as Freeport’s largest landowners, should see their real estate assets increase in value.

“It would improve the land values for everybody, not just DevCo and the Port, but all landowners,” he argued of an infrastructure programme. “We’ve not seen the same property value increases that Nassau has. The property values in Grand Bahama have absolutely collapsed.”

Many observers felt the Christie administration, by giving the GBPA and Hutchison an automatic 20-year tax break renewal, let Freeport’s two largest investors ‘off the hook’ and surrendered all leverage over them.

The Grand Bahama Development Company (DevCo), a 50/50 joint venture between the two companies, and the GBPA’s Freeport Commercial & Industrial affiliate are the city’s two largest landowners, but any pressure to develop their vast holdings was removed by the real property tax exemption removing all ‘carrying costs’.

It was felt at the time that the Christie administration had ‘traded off’ the tax breaks extension in return for Hutchison waiving its port exclusivity, and facilitating the Carnival port in east Grand Bahama, and agreeing to the Container Port’s $300 million Phase V expansion.

“They’re the ones that can really help drive the economy,” Mr Leonard said of the GBPA and DevCo (Hutchison). “The reason I think the Government have to put the pressure on both these companies is that they have a tremendous effect on the lives of one-sixth of the population of the entire country.

“The effect they have is five times’ greater, maybe 10 times’ greater, than Baha Mar’s in terms of employment. The Government has every right to step in, especially with the Port Authority, as they effectively regulate the lives of Bahamians. If they spend more money on infrastructure, their own assets will grow as well.”

Mr Leonard also urged Hutchison Whampoa to “seriously and sensibly sell-off” the Grand Lucayan hotel, Freeport’s largest resort, and called on the Government to support any purchaser of the property.

Acknowledging that this was vital to reviving employment, and Freeport’s wider tourism and hotel sector, he added: “Hutchison hold on and hold on, and negotiate people to death. That happened with Memories, and that has got to stop.

“One of the first key things they [the Government] could do to help get things moving is to get that hotel sold.”

Tribune Business exclusively revealed prior to the general election that the Canadian-based real estate developer, the Wynn Group, was the Grand Lucayan’s potential purchaser. However, little has been heard of the deal progressing since former prime minister, Perry Christie, announced that Wynn and Hutchison had signed a Letter of Intent (LOI) just prior to the general election.

This newspaper understands that Wynn’s plans call for an expanded casino, branded by Hard Rock, and the construction of two new condo hotel towers at the Grand Lucayan. However, it is unclear whether the LOI has progressed to a sales agreement, amid suggestions that Wynn is still finalising its acquisition financing.

Mr Leonard also acknowledged that much remained to be done to translate the Government’s ‘Speech from the Throne’ promises into reality.

“Everything they said is wonderful, but putting it into effect is a whole new ball game,” he told Tribune Business. ‘It takes energy and effort, but I applaud the new government for what it’s trying to do.”

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