By NEIL HARTNELL
Tribune Business Editor
Hope Town is warning the Government it "will not settle" for the 'floor' on its real property tax collection deal, which could prove a "model" for the entire Bahamas if better structured.
Jeremy Sweeting, the district's chief councillor, told Tribune Business almost $1 million worth of real property taxes had been claimed in the 13 months since the former Christie administration signed the collection 'outsourcing agreement' with the Abaco-based district council.
He admitted, though, that the February 1, 2017, agreement wasn't "exactly what we had hoped for" in terms of the sum the Hope Town District Council can retain from the taxes collected on the Public Treasury's behalf.
Mr Sweeting disclosed that the council will only receive a "rebate" on the arrears it recovers, with 'current' property taxes collected excluded from the calculation. And the agreement gives the Government significant flexibility in determining how much Hope Town can retain.
While it provides for a maximum 10 per cent 'retention', the agreement also allows the Ministry of Finance to cut this to "no less than 2 per cent". Mr Sweeting told Tribune Business that, with the first 'rebate' due imminently, the Hope Town District Council was unlikely to continue with the deal if it only received 3-4 per cent of the near-$500,000 arrears collected to-date.
Pointing out that "a lot of work" was required to collect real property taxes from foreign owners, especially those in default, Mr Sweeting suggested that Hope Town's agreement could be a "win-win for all" and act as a model for the outsourcing of Family Island collections.
The Government collected taxes that had been "sitting on the books for years", and which it ordinarily would never get, at little to no cost to itself, while local councils obtained funds that could be used to undertake critical infrastructure projects in their areas. If expanded elsewhere in the Bahamas it could prove a critical financing source for local government and Family Island communities. Mr Sweeting said Deputy Prime Minister and minister of finance, K P Turnquest, and Frankie Campbell, minister of transport and local government, showed they were alive to the potential benefits when they met with him recently.
The Hope Town chief councillor revealed that Mr Campbell had indicated his Ministry was considering similar arrangements for outsourcing the collection of Port Department fees to local councils in the Family Islands.
Calling for his district to be fairly compensated for its tax enforcement efforts, Mr Sweeting emphasised that the 2 per cent rebate 'floor' had to "improve" and that he was looking to the Minnis administration to effect this.
"It wasn't exactly what we were hoping for," he told Tribune Business of the agreement with the former Christie administration. "It was a starting point at least.
"The Ministry of Finance at the time wanted to put language in the agreement that gave us back up to 10 per cent. We told them we appreciated the fact a 'ceiling' was in there, but we needed a 'floor'. Up to 10 per cent could have been 0.1 per cent, 1 per cent...."
Mr Sweeting said that following numerous meetings, conferences and "visits to Nassau" by the District Council and its representatives, the then-government eventually inserted a 'floor' of "not less than 2 per cent".
"We've made it clear to the current minister that if we only see the council get 2-3 per cent back, we probably won't continue with it," Mr Sweeting told Tribune Business. "If it's closer to 8-10 per cent, we probably would.
"Under the current agreement, we don't get any rebate back on accounts that are current, only on accounts that are in arrears. Up until January 31, which made it the one-year mark, we had collected $880,606. The amount of arrears was $564,474."
Based on those figures, Hope Town District Council would reclaim a $56,474 'rebate' if the Government applies the maximum 10 per cent. But, should it adopt the 'floor', the council would only retain a paltry $11,290 for its efforts.
The chief councillor also warned he and his fellow members "take great umbrage" over the fact that a Florida-based company hired by the Christie administration to pursue foreign property tax defaulters was likely retaining 20-25 per cent of what it recovered, a percentage far greater than what Hope Town will currently see.
Mr Sweeting said 74 per cent of the real property taxes collected during that first year had come from Man-O-War Cay, his home town, and where he had "put in a lot of hours" and focused his efforts.
Yet he pointed out that Man-O-War Cay accounted for just 19 per cent of the Hope Town district's taxable properties. "There's a lot more potential out there," Mr Sweeting said. "We just need to up the collections in Hope Town and Great Guana Cay, where Baker's Bay is..." Both locations contain high-end, multi-million dollar properties owned by foreigners, who are the only property tax payers in the Family Islands.
The Hope Town chief councillor added that the $489,412 in real property tax arrears collected on Man-O-War Cay was just under 50 per cent of the total amount deemed outstanding and past due.
"With Man-O-War Cay, we have collected 45.2 per cent of the arrears on the books within the first year. We put a dent in the arrears in that community," he told Tribune Business.
"Just in the first week of February, the second year of this programme, we've collected $100,000. We're getting close to the $1 million mark."
Mr Sweeting and the council's performance suggests that real property tax collections in the Family Islands can be significantly enhanced by employing persons 'on the ground', and who have the necessary community contacts and knowledge, to pursue and persuade defaulters to pay up. It can also assist with payment convenience and the 'ease of doing business'.
"We feel that more than 10 per cent can be retained by the district where it can go to infrastructure upgrades and deal with other issues," he told Tribune Business. "We have major infrastructure issues in our townships. We need a lot of road repairs. We have three public docking facilities in the townships in desperate need of repair.
"The funding we get from central government is rather small; grants to our budgets. This is something [the property tax rebate] we're looking forward to for our projects. It can be a great programme, but we need to ensure as close to 10 per cent as possible is retained rather than 3-4 per cent.
"It is a lot of work. Fifty thousand dollars could do a little of something, $10,000-$15,000 some minor thing. We need attention in our district for capital projects. It could also benefit central government. That was our pitch to central government," Mr Sweeting continued.
"It's a win-win. A lot of taxes have been sitting on the books for years, and we felt we could collect them. Even if we get a small percentage back, we can start getting some of these projects done. It's a win all around."
The collection 'outsourcing' was provided for by a 2015 change to the Real Property Tax Act, and Mr Sweeting said Hope Town was the only local government authority to see the potential value and "knock at the door".
The council's agreement is open-ended and can be terminated by either side, and Mr Sweeting praised the two Cabinet ministers for flying to Abaco to meet with him and his colleagues to discuss their concerns.
"In the next month or two we will get the first rebate back, and want to make it clear: We will not settle for 2-3 per cent," he told Tribune Business. "That's what we're looking for, and we wanted to stress that.
"We want this administration to give us a better, stronger agreement so we can be more effective and show the community our worth, what we're doing and tackling some of the major infrastructural challenges by getting some of the monies back in from our rebate.
"They [Messrs Turnquest and Campbell] never made any concrete commitment at the meeting, but were definitely listening to what we had to say. We're expecting great things. The floor is 2 per cent and we're hoping that improves." Adding to the sensitivity is the persistent belief among Abaco residents that they contribute far more to the Treasury than they receive.
Mr Sweeting said his discussions with the two ministers also included traffic improvements in Hope Town, with the Government also in "the preliminary stages" of studying whether to extend collection 'outsourcing' to the Port Department's mooring, registration and pierage fees.
"They also want to use our programme with real property tax as a model to extend to the rest of the Bahamas," the chief councillor told Tribune Business.