The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar has accused the Bahamas Electricity Corporation (BEC) of arbitrarily switching $12 million in unpaid power bills to different accounts, thereby “masking the reality” of how this debt built up.

Lance Millage, the developer’s deputy chief financial officer, alleged in a July 16 affidavit that it “never agreed” to BEC transferring $6 million from each of the accounts for the former Wyndham resort and old laundry/chilled water plant facility.

The debts, he claimed, were instead switched by BEC to the electricity accounts for the Melia Nassau Beach Resort and the new golf course clubhouse.

Mr Millage, responding to the Government’s allegation that Baha Mar owes BEC some $26.345 million, blasted the debt transfers for creating a “distorted” picture.

“The balances cited do not accurately reflect the status of those accounts,” he alleged. “Specifically, BEC has unilaterally undertaken the following transactions.”

Mr Millage said that without the $6 million debt switch from the Wyndham account to the Melia’s, the former resort’s unpaid account balance would be $11.604 million.

And a similar $6 million switch from the ex-laundry plant account to that for the golf course clubhouse had reduced the former’s outstanding balance to $9.458 million.

“The applicants [Baha Mar] never agreed to these transfers, and they facilitated BEC’s own purposes,” Mr Millage alleged. “I understand those purposes to be keeping its account payable in respect of each account under $10 million.

“These transfers distort the fact that the outstanding amounts payable on the former Wyndham hotel and energy plant are higher than reflected, and risk masking the reality of why they accrued over time. The total balances of both accounts as at June 30, 2015, is $20.522 million.”

Mr Millage’s affidavit does not explain what he means by “masking the reality” of why Baha Mar’s BEC debts built up. Some observers, though, may interpret it as a possible reference to outstanding balances the developer may have inherited when it purchased the Wyndham and related facilities from billionaire investor, Philip Ruffin.

Still, Baha Mar does not dispute that BEC is owed significant sums. Yet Mr Millage continued: “I am informed by Robert Sands , senior vice-president of administration and external affairs at Baha Mar that, in respect of the outstanding utility payables accrued at the Wyndham-related property, the Government was informed numerous times in multiple meetings that a significant portion of the accruals on these two accounts was due to the fact that the hotel property was not receiving revenues but continued nonetheless in good faith to employ hundreds of Bahamian nationals before the facilities were closed on February 14, 2015.”

Mr Millage’s affidavit, sworn in response to the Government’s winding-up petition and allegation that Baha Mar owes it nearly $59 million, denies that the developer is responsible for several BEC accounts cited by the Christie administration.

The document challenges many of the Government’s figures, and disputes Baha Mar’s responsibility for several debts owed to it and its agencies.

“The Government’s evidence does not provide a balanced analysis of the respective credits and debits between the parties,” Mr Millage alleged, adding that both sides owed each other “substantial sums” and had been exercising “forbearance” towards one another.

In particular, the Baha Mar executive alleged:

• The Government has over-estimated the amount of casino taxes owed by $4.826 million. This is because it 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.

• Of the $166,169 said to be owed to the Department of Immigration in unpaid work permit fees, Baha Mar alleged that $111,833 or 67.3 per cent (two-thirds of the total) was supposed to be paid by its contractor.

The developer argued that under its Heads of Agreement and the associated Immigration Policy, “payment is the responsibility” of China Construction America (CCA) Bahamas for all its work permits. Baha Mar merely submitted the applications.

• Then, Baha Mar is claiming that the Government owes it $59 million. It bases this largely on the $20.861 million said to be due to the developer for the West Bay Street re-routing ($13.219 million for the road, $7.642 million for associated public infrastructure).

The Government has been using that $21 million sum to pay the salaries of Baha Mar employees for the past two months, yet the developer also claims it owes $799,635 for the new police and fire station building and $500,000 for an oil spill clean-up.

Finally, Baha Mar claims $4.884 million is outstanding in cooperative marketing contributions. For good measure, it then throws in the $4 million per annum marketing support due from the Government over the next eight years - a total of $32 million.

• And, while the Government has agreed to $1.2 billion worth of investment incentives for Baha Mar, these were due to kick-in over a period of 30 years. The developer argued that, to-date, it had accessed no more than $300 million worth of these concessions.

“The applicants [Baha Mar] do not owe the Government of the Bahamas approximately $58.996 million,” Mr Millage alleged. “Certain of the sums which have accrued in favour of the Government are not due and payable at this time.”

He cited real property tax, alleged by the Government to be due on 12 separate real estate parcels, to illustrate the last point.

Via Baha Mar’s Heads of Agreement and associated Hotels Encouragement Act agreement, which was extended last year until end-2016, “none of these sums are actually due to be paid at this time”. And the debts listed by the Government exceeded those sums invoiced to the developer.

Mr Millage alleged that all real property tax due between the 2011 Heads of Agreement and the opening of Baha Mar’s new hotels only became payable at the latter date. And all these sums were due anyway to be repaid to Baha Mar.

“In summary, as a result of the provisions of the Heads of Agreement and the Hotels Encouragement Act, the applicants effectively owe no real property tax whatsoever,” Mr Millage alleged, “as all amounts billed and payable will be remitted back to [Baha Mar].

“Additionally, the quantum of real property taxes identified [by the Government] exceed any amounts invoiced to the applicants to-date in respect of those parcels by $114,359.”

Baha Mar alleged its records showed it owed just $11,769 in unpaid work permit fees, adding that the Government’s calculations included “long withdrawn or cancelled permits” and sums previously paid.

And, while not disputing that the Melia and Wyndham owe the Government a combined $2.6 million in hotel guest taxes, Baha Mar is disputing the alleged $512,500 airlift subsidy debt. It claims this should be $325,000.