The Tribune

• PLP Act ‘like sword of Damocles’ for business

• Attorney: Uncertainty deterring investment

• Urges more ‘transparency’ on hotel, airport

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has been urged to finally give Freeport’s private sector the certainty it urgently needs by fulfilling a key 2017 campaign pledge to repeal Christie-era investment legislation.

Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, told Tribune Business that the city’s business community was becoming increasingly nervous that a Philip Davis-led PLP administration might seek to revive the Grand Bahama (Port Area) Investment Incentives Act 2016.

That legislation, which was passed by Parliament but never implemented, met with furious opposition and resistance from corporate Freeport because it would have forced all the GBPA’s 3,500 licensees - bar the Port Authority, its Hutchison Whampoa partner and their business interests - to apply annually to the central government in Nassau for the renewal of key tax breaks.

These incentives included exemptions from real property tax, income tax and capital gains tax, and the former Christie administration sought to tie their grant/renewal to companies avoiding job cuts by maintaining their existing workforces for five years. It also threatened to impose financial penalties on businesses who failed to live up to the promises they made in return for receiving the renewed tax breaks.

The 2016 Act was also seen as an attack on Freeport’s founding treaty, and an attempt to undermine the Hawksbill Creek Agreement, by forcing GBPA licensees to apply to Nassau for benefits and rights this already provided them.

Now, with a general election drawing near, Mr Leonard said he and many others in the private sector fear that a Davis-led administration will dust-off and seek to implement an investment-deterring Act that has never been repealed by the Minnis government despite its early promises to do so.

“We are still waiting for this government to do something about what I call the ‘Disincentives Act’ passed in 2016,” he told this newspaper. “It does not give any relief from real property tax for second home owners, so why build a second home in Freeport? They need to get a licence, and then it’s completely discretionary as to whether the Government will give it [the incentives] or not.

“Why invest in the Port area if you have to pay service charges as well as real property tax? That’s double taxation. This government has had three-and-half years to fix that and they haven’t. They’ve done nothing to repeal this legislation. It’s like the sword of Damocles over one’s head. If I’m at the discretion of the Government of the day, why would I bother to invest?”

Repealing the Christie administration’s legislation topped the Free National Movement’s (FNM) list of 2017 campaign pledges for Grand Bahama. It said: “To jumpstart and fix the Grand Bahama economy so that we may maximise and realise new, substantial sustainable development benefits the FNM will....

“Repeal and replace the Grand Bahama (Port Area) Investment Incentives Act 2016 to ensure that all licensees receive equal treatment under the law.” Another prominent Freeport source, speaking on condition of anonymity, backed Mr Leonard’s concerns over the Minnis administration’s failure to-date to deliver on its top Freeport campaign pledge.

“I don’t know where we stand with that,” they said in relation to the 2016 Act. “All I know is that everybody proceeded as if that Act does not exist, and the FNM promised to repeal that which they haven’t done.”

They added that they understood the GBPA-appointed REEF committee, which was charged with proposing reforms to Freeport’s governance, investment and commerce frameworks, was examining “what would be the ideal things” to include in legislation to repeal the 2016 Act. “If you wave a magic wand, what would you like to see,” they added of the brief that has been provided.

K Peter Turnquest, former deputy prime minister, had talked of replacing the PLP legislation with the Grand Bahama (Port Area) Extension of Tax Exemptions Bill 2017 just five months after taking office but this was seemingly never followed through on.

Another Freeport private sector contact, also speaking on condition of anonymity, agreed that the Christie-era legislation represents an “abrogation” of the Hawksbill Creek Agreement, but it had not been approved by the GBPA’s licensees. They added that the GBPA “threw its licensees under the bus” by accepting, with Hutchison Whampoa, a 20-year blanket renewal of their own tax breaks.

Meanwhile, Mr Leonard, now an attorney with Callenders & Co, called on the Minnis administration to be “more transparent” over its progress on the Grand Lucayan’s sale and Grand Bahama International Airport (GBIA) purchase so that Freeport businesses can properly plan for the future.

“This secrecy makes life rather complicated,” he argued to Tribune Business. “How can businesses make plans if they don’t know what’s going on? If you say that you are working on the airport, and that it will take another three to six months, you can give yourself some leeway but without saying anything businesses can’t make any decisions.

“Businesses need time to make decisions and get financing in place to get it all going. The longer they have to wait for a definitive and transparent answer from the Government, the longer the economy is going to be held up.

“If they know the hotel [the Grand Lucayan] is going to be sold by such a date, perhaps I will invest more in stock for my restaurant. If you are a tour operator with outdoor excursions, if I know the hotel will be sold and open in three to six months I will know when to start marketing.”

Dionisio D’Aguilar, minister of tourism and aviation, last week said the Government was “on the cusp” of completing Grand Bahama International Airport’s purchase although he provided no indication of a timeline for when the deal will close or construction work starts.

He also voiced optimism that “all of the ducks have been lined up” to finally complete the Grand Lucayan’s long-awaited sale to the ITM/Royal Caribbean joint venture, although again no timeline was provided for the deal’s closing.

Mr D’Aguilar told the House of Assembly during the mid-year Budget debate that he believed talks between the Government and potential purchaser are “nearing the end of the journey” more than a year after the two sides held a lavish signing ceremony in Freeport to herald the deal.

Acknowledging that the Government’s efforts to exit ownership of Freeport’s ‘flagship’ resort property have “taken many twists and turns”, and blaming the pandemic for scuppering an earlier closing, Mr D’Aguilar said commercial terms for the sale have now largely been agreed but did not disclose them.

He argued that COVID-19, which has devastated the cruise-dependent businesses of Royal Caribbean and ITM, had complicated closing the sale given the multi-billion dollar losses both purchasing parties have incurred.

And the deal was made “that much more complex” by ITM/Royal Caribbean’s need to negotiate a separate agreement with Hutchison Whampoa, controlling 50 percent owner of Freeport Harbour Company, for the redevelopment of Freeport Harbour via the addition of two new cruise berths.