Ritz tax break OK’d in 1998

The Cayman Islands government and developers of The Ritz-Carlton, Grand Cayman, have had arrangements regarding import duty concessions for nearly 15 years, when the resort property was still in the conceptual phase, according to public documents. 

The records were released by the Customs Department and the Public Finance section of Premier Juliana O’Connor-Connolly’s ministry following a request by the Caymanian Compass under the Freedom of Information law.  

The first agreement, dated 1 December, 1998, is between then-Cayman Islands Governor John Owen and five companies, including four headed up by Ritz developer Michael Ryan. The other company is Humphreys (Cayman) Ltd., the owner of Grand Cayman’s Holiday Inn, which was rased to make way for the Ritz. 

The 1998 agreement references the “agreed deferral … of payment to the Government of customs duty on all goods imported into Grand Cayman for the Hotel … for a period of three years from the date of import of such goods”. 

 

Waiver, deferment  

Duty concessions were revisited several years later. In a letter to the Ritz dated 22 October, 2004, then-Financial Secretary George McCarthy wrote that Cabinet had agreed to waive US$4.46 million in import duties, or 20 per cent of the US$22.3 million duty waiver requested by the resort. 

“The remaining US$17.84 million in duty would be deferred and paid in equal quarterly instalments over a seven-year period; the first payment to be made on 30 June, 2005,” according to Mr. McCarthy’s letter. “All the duty arising on the importation of items specified are to be fully paid to Government by March 2012.” 

According to the letter, the Ritz had requested the duty waiver in a letter dated 27 September, 2004, about two weeks after the devastating landfall of Hurricane Ivan. 

 

After Ivan 

The hurricane delayed the opening of the hotel until December 2005. Afterward, the developer and government renegotiated the duty payment schedule. 

In a letter dated 7 August, 2006, Collector of Customs J. Carlon Powery wrote to the chief financial officer of Ritz development company Cesar Hotelco (Cayman) Ltd., referring to a meeting held 13 July, 2006, between Mr. Powery, Financial Secretary Kenneth Jefferson and the finance manager of Customs and two Ritz representatives. 

“We agreed to a payment plan in respect of import duty that was deferred when various items were brought into the Islands for the purpose of constructing and out-fitting the above-mentioned development,” Mr. Powery wrote. “We agreed to a plan that involves quarterly payments of CI$347,818 being made to the Government of the Cayman Islands; the first payment due on 30 September, 2006 – with the last payment being due on 31 March, 2012.” 

According to Mr. Powery’s letter, the Ritz developer owed nearly CI$8 million (or US$9.52 million) as of 30 June, 2006. The government specified the total value of import duty deferred could not exceed US$17.84 million or CI$14.98 million. 

 

Duty issues  

A table also released by government indicates that the Ritz developer made the required quarterly payments of CI$347,818 from September 2006 to March 2009, paying CI$3.83 million. At that time, the developer had a total deferred import duty amount of CI$10.01 million, leaving a debt of CI$6.19 million to government. 

As the Compass has previously reported, the Ritz developer missed the payment due in June 2009 and then attempted to restart discussions with the government on a new duty payment arrangement. This did not pan out and the resort companies were put into receivership in March 2012. The Ritz properties were sold at auction 31 October, 2012, with winning bidder RC Cayman also being the resort’s secured creditor. 

After the auction, then-Premier McKeeva Bush and RC Cayman engaged in a public dispute over who exactly owes the government the CI$6.19 million. RC Cayman has filed legal actions against Cayman officials asking the court to compel the transfer of transfer of title to the Ritz properties. The Ritz buyers say they paid about CI$9.6 million in stamp duty (on the property transfer, not import duty) to the government on 20 December, 2012. 

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