Dart presses government to honor deal

Government attempting to renegotiate hotel tax rebate

Cayman’s largest developer Dart Realty has requested that government “confirm its commitment” to fulfill its “outstanding obligations” under the National Roads Authority agreement, including the closure of a second section of West Bay Road and a 50 percent rebate on hotel room taxes. 

The developer says it is moving ahead with its side of the bargain and has spent nearly $25 million to date on the construction of the Kimpton hotel, as well as $30 million on the extension of the Esterley Tibbetts Highway into West Bay. 

Premier Alden McLaughlin said Monday that his administration had made “no progress” in its efforts to renegotiate parts of the agreement struck between the developer and the previous government. 

High on the list of government’s concerns is a 10-year rebate on room taxes given to Dart for any hotel developed or refurbished within the next 30 years – a concession that consultants estimated would be worth around $60 million within 20 years. 

Hotel taxes are currently charged at 13 percent of the price of a room, so for every tourist booking a $100 hotel room in the Cayman Islands, government would ordinarily get $13. 

Jackie Doak, chief operating officer of Dart Realty, said the developer had been willing to discuss alternatives to the rebate but expected government to honor its “contractual obligations” if no acceptable amendments could be agreed. 

Negotiations appear to be gridlocked currently. On Monday, Kurt Tibbetts, the minister for infrastructure, commented, “One side can see one way and the other side doesn’t see it that way up to now.” 

Ms. Doak said Dart had last met with government officials on Feb. 5 and was still waiting for an invitation to continue discussions over its requested changes to the National Roads Authority agreement. 

She said, “The NRA Agreement is a binding agreement and Dart continues to fulfill all of its obligations. On a number of occasions, most recently on March 18, we have requested that government confirm its commitment to address its outstanding obligations. We have not received a substantive response from government.” 

She said Dart had received assurances that the second half of the West Bay Road closure would take place as agreed, but had been given no dates for implementation. 

Meanwhile, work continues on the Kimpton hotel, with the foundations nearing completion, and the official opening penciled in for summer 2016. 

Ms. Doak said government had first indicated a desire to renegotiate the hotel tax rebate – which was part of the signed agreement – in July last year.  

She said the developer had proposed “several different solutions” following meetings in October last year, and government had replied with a proposal of additional changes. 

She said Dart was prepared to discuss the changes, despite having a signed agreement in hand. 

But, she added, “In the absence of any agreed amendments, we expect government to honor its contractual obligations made under the executed NRA Agreement.” 

A PwC value-for-money report estimated the value of the hotel tax rebate at around $60 million over 20 years and expressed concern that this and other concessions would put other players in the local hotel market at a competitive disadvantage. The report also concluded that the first hotel alone would be worth $755 million in economic benefits for Cayman over the 20-year period. 

Ms. Doak said this week that similar hotel tax rebates are used across the world to stimulate hotel development. 

“The hotel tax rebate is a widely used incentive structure in many jurisdictions, and its purpose in the NRA Agreement was to incentivize Dart Realty to develop resort hotels in the area of the West Bay Road closure.  

“The incentive also functions as a mechanism for Dart to recover some of the extensive investments in the infrastructure and economy that we have made in performing our obligations under the agreement,” she said. 

Dart-Building-Site-S

Dart says workers at the Kimpton hotel site have clocked Workers on site have clocked up 93,238 man hours so far. PHOTO: JAMES WHITTAKER
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7 COMMENTS

  1. Does this developer have a signed contract or is it acting under a memorandum of understanding (MOU)?. What is a National Roads Authority agreement, and how can it involve hotel fees. This is clear as mud, since due process was abandoned and so much shreds of red tape clouds ones view, everything seem in stealth mode. Money up front for delinquent mortgages, how generous, and what an excellent example of unorthodox out of the box, around the box, through the box, over the box, statesmanship by our first premiere.

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  2. I think the government has beaten this deal to death. What is done is done. The only way forward is to leave as is and pass laws in legislation to tax any resident that makes say 5 million in income p.a. or have assets of 10m.

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  3. I am sure this is a prelude to an ugly lawsuit that will end up costing Cayman Millions in addition to soiling their reputation. As a country that basically spent themselves into nearly billion dollar hole and is now relying on Public Private partnerships to help dig them out and keep the country afloat they really need to be careful with this. I am sure that anyone considering getting into bed with the CIG on any business deal that requires them to put out a lot of upfront money is watching this closely saying that could be me after the next election. This is probably why the Ironwood developers want the CIG to put all the duty revenue towards paying them back in such a short time in lieu of allowing them to pay it back over a long period of time like the Dart Deal does. They don’t want to take the chance of the next administration reniging on them like the PPM did to Dart.

    The PPM all know that this deal will bring needed economic benefits into Caymans economy. This is all about politics and trying to overshadow that last administration. People keep pointing to the part of the report that says these concessions are worth 60 Million Dollars to Dart over the next 20 years while refusing to acknowledge the fact that the same report states that his investment into Cayman will be worth 755 Million Dollars to Cayman over the same period of time. How smart is a man that says I would rather have nothing than to give you a piece of the pie even though you’re the one baking it.

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  4. Hugh, Tax one Tax all. The US is trying that taxing only millionaires and it’s failing miserably. Once you start taxing only a certain group of people you will end up taxing them all. Cayman needs to get used to this word anyway because eventually it will be their only way out of the hole. Try taxing the Millionaires in Cayman and see how quickly they start to leave because Cayman’s tax free status is the biggest drawing point there is for people to invest here. Without that, Cayman would be no difference than other Caribbean Islands. Contrary to popular belief Cayman does not have a monopoly on warm weather and blue water. Nor does it have that safe crime free reputation any longer.

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  5. Wow!! The 50% tax rebate looks interesting. My dictionary indicates that a rebate can be a return (an amount) from a payment or bill. As a frequent visitor to the Cayman Islands for more than 50 years might I anticipate a return from the government (or from Dart)? Since the income from the tax has always been on the visitor and paid to the CI Treasury, how can a rebate be made to anyone other than the payer?

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  6. If the hotel is not built, Government continues to get 0% of the tax.

    If the hotel is built, Government gets 30 million over 20 years.

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  7. Actually Reginald, the report says that just the first hotel is worth 755 Million to Cayman over the next 20 Years and Dart’s long term plans would mean them investing over a Billion Dollars into developments in Cayman over the next 20 year, which easily justifies a 60 Million Dollar concession. Hell the already spent 30 Million building the Road and another 5 Million to help people save their homes from foreclosures. Although I’m not sure what the CIG actually did with that money.

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