Taxpayers to get more protection over Fairmont Southampton
Taxpayer-backed support for the redevelopment of the Fairmont Southampton is expected to be better safeguarded under legislation slated for debate by MPs tomorrow.
The Act would allow for a rebate arrangement to make sure that levies linked to the iconic hotel can be used to repay a government-guaranteed loan, a tourism ministry spokesman said.
A string of incentives approved last May was estimated to provide between $121 million and $133 million in tax concessions over 15 years to resort owners Westend Properties, an affiliate of Miami-based investment firm Gencom.
Legislators heard then that the Government would give a guarantee of up to $75 million, representing 21 per cent of the revised cost of the project, which was $376 million at the time.
Lieutenant-Colonel David Burch, the Minister of Public Works, told MPs this month that the spend was now expected to be $450 million.
A spokesman for the Ministry of Tourism and the Cabinet Office said yesterday: “The Public Treasury (Administration and Payments) Amendment Act 2023 was passed by the House of Assembly to facilitate a rebate of taxes paid into the Consolidated Fund.
“With the approval of the legislature, the 2023 Fairmont Southampton Act will be the first rebate arrangement into which the Government will enter to ensure that the taxes collected go to pay the loan provided to the developers by the local lending institution.
“This legislative package provides the framework for the protection of the taxpayers of Bermuda by ensuring that these taxes are committed to the repayment of the loan, which is secured by a government guarantee.”
Under the Fairmont Southampton Hotel Act 2022, which received assent last May, the developer was entitled to full relief for 15 years from customs duty on building materials, furnishings, fixtures and equipment needed for the redevelopment of the hotel.
There was an exemption from hotel occupancy tax for 15 years from the hotel’s opening date – that is, when its initial operating licence takes effect.
Land tax would not need to be paid for a period starting six years after the opening date and ending on its 15th anniversary, as long as there was written confirmation that, over the duration, at least 70 per cent of staff were Bermudian.
The Act also allowed for full exemption from the employer’s share of payroll tax for 15 years after opening, under the condition that a management training programme for Bermudians was in operation at the hotel.
In the Fairmont Southampton Hotel Act 2023 to be considered tomorrow, it is provided that the hotel developer – Westend Properties and “its successors in title to the hotel or part thereof” – would be entitled to a full rebate from customs duty paid in relation to any building materials, furnishings, fixtures and equipment needed for the redevelopment.
This would be in place for 15 years after the hotel’s opening date, minus any period for which customs duty relief is granted on the items up until the opening date.
Rebates also covered hotel occupancy tax, land tax and the employer’s share of payroll tax under similar conditions to those linked to the relief provided in the 2022 Act.
To qualify for the return payments, the 2023 legislation said, the developer must “pay each of the hotel taxes due … in accordance with the applicable legislation”.
David Burt, the Premier and Minister of Finance, said last week when MPs passed the public treasury amendment act.“
He added: “If in the case of difficulty in the future, we want to ensure that any agreement can survive insolvency and that we can make sure we have the ability to restructure said agreement.
“The Government is learning, observing, listening, making sure that it is building in protections that did not exist previously to make sure that the Government is in as strong a position as possible inside of this particular matter.”
Yesterday, the Ministry of Tourism and the Cabinet Office spokesman said that the Fairmont Southampton Hotel Act 2022 was “not in force”.
He added: “The minister will set out the legislative framework in Friday’s debate.”
Amendments to public treasury legislation passed by MPs last week will mean that payments can be made out of the Consolidated Fund for tax, fee or duty rebates, to which someone is entitled under any Act.
In the Fairmont Southampton Hotel Act 2023, “hotel” means not only the 593-guest room building but also “its associated restaurants and facilities, including any development or redevelopment of the scheduled land as developed or redeveloped by the hotel developer”.
The schedule showed land that appeared to include units at Astwood Cove and Faraway, both in Warwick.
The ministry spokesman said yesterday: “These properties are staff housing and as such form part of the overall demise of property, in keeping with longstanding practice.”
• To see the legislation referenced in this article, click on the PDFs under “Related Media”.
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