By RASHAD ROLLE
Tribune Staff Reporter
THE government will have to revamp its fiscal projections with its purchase of the Grand Lucayan resort, Press Secretary Anthony Newbold said yesterday, conceding that buying the hotel is akin to dealing with the aftermath of a major hurricane.
"It has to revise its fiscal projections and all of the expectations that it had," he said.
"As you said, it's been likened to a hurricane. That was one of the things the minister of finance said, 'Please God, don't send us a hurricane.' Everything is going to have to be revamped and looked at in those terms.
"This is something the government didn't expect that it would have to do. There's this hotel that's sitting out there, a couple thousand people not working, we got to get involved so the government gets involved. Prime Minister said we got to buy this hotel, well everything that goes with that now has to be factored against what was planned for the fiscal health of the nation over the next several months."
Since coming to office in 2017, the Minnis administration has embraced austerity measures, slashing budgets for government ministries by ten percent and raising value added tax to 12 percent.
During the budget debate, the government emphasised its three-year fiscal consolidation plan that would result in a gradual reduction of the deficit.
"We are one hurricane away from total disaster," Deputy Prime Minister and Minister of Finance Peter Turnquest said earlier this year as he defended the VAT increase.
Yesterday, former Tourism Minister Obie Wilchcombe said notwithstanding the cost of purchasing and renovating the Grand Lucayan properties, it could cost more than $60m per year to operate them. However, he said removing the current owner, Hutchinson Whampoa, provides a good opportunity for the government to act as broker and find either operators or a private buyer for the resort. As for the $65m resort price tag, he said granting Hutchinson Whampoa a tax holiday is an option in the government's tool-kit that could considerably lower the purchase cost.
"I can be corrected, but the Bahamas government today is contributing $15m to $17m a year to the operation," Mr Wilchcombe said of the government's subsidisation of the resort, "and this is down from when the two resorts were operational in 2011 when the government was spending $29m.
"On top of the purchase, which could result in payments of $5m over seven installments, it could cost around $10m to $20m for marketing when you consider that the government has had to contribute $10m to Baha Mar for their marketing.
"The general operations are going to run you into tens of millions of dollars. You're talking about employing more than 1,000 people or more than 1,500 or 2,000 people when you put the three properties together. Then of course there are the general things that go along with it, the food purchasing, etc; it will be too much for the government to carry."
The former minister added: "The government has to find a way to become the broker. It has to find a way to lease-to-own then have in their back pocket a company that would come to the table immediately to take over the property for the government. The difficulty many of the operators had was Hutchinson Whampoa. They thought Hutchinson didn't really want to sell or relinquish its shares or ownership and they found the pricing to be too high for them, so the government, once it takes ownership, then becomes the broker and could find many interested parties."
Asked yesterday if the government is in discussions with an operator to run the hotels, Mr Newbold could not say but noted that is the goal.
"I don't know how soon they will have someone there but you know governments don't run hotels," he said. "Governments never do. Someone else would run it so discussions are ongoing."
On Saturday, Prime Minister Dr Hubert Minnis said this week he will explain the government's Grand Lucayan decision. Yesterday, Mr Newbold could not say when this will happen.
He said Dr Minnis will give a national address next month on September 17 to discuss social programmes like the Over-the-Hill and the small business development initiatives.