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Economic benefits ‘far outweigh’ hotel’s 15-year tax concessions: minister

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Fairmont Southampton (File photograph by Akil Simmons)

Economic benefits to Bermuda sparked by the reopening of the Fairmont Southampton will “far outweigh” the value of concessions designed to support the hotel’s redevelopment, the tourism minister insisted yesterday.

Vance Campbell earlier tabled legislation in the House of Assembly that would deliver tax relief for 15 years at the iconic resort.

A government spokesman confirmed that the Ministry of Finance has forecasted the value of the proposed concessions.

But he added that “the details of this and other aspects of the Bill will form part of the debate” in the House on May 6.

Mr Campbell explained: “This is a very simple premise.

“Without this relief, there would be no hotel; there would be no tax revenue as there would be nothing to tax; there would be no jobs at the hotel; and tourism would continue to suffer.

“The Bill tabled today is another step in our economic recovery.

“This redevelopment represents an investment of hundreds of millions of dollars in Bermuda.

“The value of any relief granted will be far outweighed by the economic benefits to the people of Bermuda.”

Gencom, the Miami-based investment company that owns the hotel through its subsidiary Westend Properties, said earlier that about $400 million was being invested in the Fairmont Southampton project, including $200 million of renovations.

Mr Campbell cited the Budget statement from David Burt, the Premier and Minister of Finance, when he said that “although tourism only contributes 5 per cent to our gross domestic product, it contributed approximately 14 per cent of the jobs in Bermuda in 2019”.

The tourism minister added today: “The Government is focused on creating jobs, renewing tourism and providing career opportunities for Bermudians.”

The news was hailed as “an important move for the tourism industry” by Charles Jeffers II, chief executive of the Bermuda Tourism Authority.

“We look forward to the return of the Fairmont Southampton’s inventory of rooms, conference facilities and the hundreds of jobs it will bring,” Mr Jeffers said.

“Redevelopment of the iconic property gives Bermuda a solid crack at restoring airlift, reclaiming group and convention business and visitor numbers to pre-pandemic levels.”

Under the Fairmont Southampton Hotel Act 2022, developers would be 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 would be an exemption from hotel occupancy tax for 15 years from the hotel’s opening.

The legislation would mean that land tax will not need to be paid for a period starting six years after the hotel opens until the 15th anniversary of its opening.

It added that to qualify for the land tax exemption, the developer must confirm that at least 70 per cent of staff at the hotel are Bermudian for the nine-year duration.

The Bill also provides that there would be full exemption from the employer’s share of payroll tax for 15 years after the hotel opens.

In that case, the minister responsible for workforce development will confirm each year “that a management training programme for Bermudians is in operation” at the hotel.

The Tourism Investment Act 2017 allowed for similar concessions to customs duty, hotel occupancy tax and payroll tax but limited those to five years in the case of refurbished hotels.

It said that the land tax exemption was applicable to new hotels.

Mr Campbell told MPs in a 15-minute sitting of the House: “Investors’ confidence in the island and its future must be met with nimble and flexible approaches to ensure we achieve the economic growth necessary for economic recovery.

“The Bill’s proposed grant of concessions for 15 years represents that flexible approach and honourable members will note that the extension of concessions for that period retains the same protections contained in the Tourism Investment Act 2017.”

He added: “I also wish for the public to know that this Bill deliberately contains the necessary protections for Bermudian employment and Bermudian upward mobility in the industry.

“The Government is determined that those Bermudians who choose careers in hospitality will be treated fairly and have every opportunity to grow in the industry according to their work ethic, interest and commitment.”

In his first ministerial statement since he was appointed tourism minister this month, Mr Campbell said that the Bill was "of national importance“.

He added that the Bill delivered “on a key undertaking made by the Government as part of negotiating the full extent of support required to make this redevelopment a reality”.

Mr Campbell said: “I can advise this honourable House that those discussions are at a technical and advanced stage, involving counsel for both sides working through the various practical aspects of the agreed heads of terms.

“The Ministry of Finance is fully engaged in these matters and it is my expectation that the honourable Premier and Minister of Finance will be in a position to further update this honourable House when this Bill is taken up for debate.”

Craig Cannonier, the Shadow Minister of Tourism, asked whether the Government was considering concessions of 15 years “to be a new standard for the industry”.

Mr Campbell said: “As and when the Government is required to entertain future development requests under this order, we will consider the terms that we have to make that happen for Bermuda.”

He added: “We will continue to be flexible as required.”

Michael Dunkley, also an MP for the Opposition One Bermuda Alliance, highlighted the Special Development Order made for the Fairmont Southampton in 2009.

He asked: “How does this Act have an impact on that SDO? Does it fall away or will it be used or will it be changed?”

Mr Campbell replied: “The 2009 SDO set out the parameters of development and if that plan is to be revisited, it will be up to the developer to follow the law and make an application.”

That order gave planning permission in principle for 130 fractional tourism and residential units.

Vance Campbell, the Minister of Tourism (Photograph supplied)

A Gencom consultant said this month that the Government was aware the company intended to "submit an amendment to the existing SDO“.

She added that economic, traffic and environmental studies were under way.

Environmental groups have raised concerns after they were shown conceptual drawings in mid-2021 that proposed more than 350 residential units at the site.

It is not known whether the plan has changed since then.

* To read the Bill or the tourism minister’s statement in full, click on the PDFs under “Related Media”.

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Published April 23, 2022 at 7:56 am (Updated April 23, 2022 at 7:56 am)

Economic benefits ‘far outweigh’ hotel’s 15-year tax concessions: minister

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