Tonight’s Hotel Revitalization Tax Exemption Bylaw – Why You should Pay Attention

Ron Bolin: Jan.23, 2012

At its meeting this evening (Jan. 23,2012, 7pm in the Auditorium of the Conference Centre) Council will, among other matters:

consider amending “REVITALIZATION TAX EXEMPTION BYLAW NO. 7143” to include renovations to existing hotels and motels that achieves any one or more of the following:

  • adds services
  • adds rooms
  • improves the quality of the stay for the visiting public;”

A great number of questions arise from this this amendment and indeed from the original bylaw (which has not yet been passed).  Many of them revolve around section 7(1) in the bylaw which states that:

“Council may provide a Tax Exemption under this Bylaw to an owner of eligible lands where:

(1) the new construction value, or the demolition and reconstruction value of the Project, as determined based on the building permit(s) issued, must be two million dollars ($2,000,000.00) or greater;”

Questions like these need clarification:

  • How are the demolition and reconstruction values as determined by building permit(s) issued calculated?  And how do these relate to assessed value?
  • Where does renovation fit in?  Extensive renovations/upgrades can be made which do not add to assessment now or later: i.e. Furniture, bedding, fixtures, etc., which are not part of the structure.  It is not clear whether such items can be counted toward the $2,000,000.. Items which are not permitted in calculating the exemption should be clearly identified.
  • What is the anticipated exemption (i.e. the amount by which other property tax payers rates will be raised) based on each $2,000,000 of exemption and remembering that the original hotel was supposed to cost $52,000,000 (the same estimate that was presented as the cost of the VICC)?
  • How will the exemption be changed by the annual changes in assessment?  And how do they impact over the 10 year time frame, i.e. are they compounding?
  • Why is the $2,000,000 lower limit figure given in the bylaw not shown in the Revitalization Tax Exemption Agreement which will be signed by those requesting the exemption?
  • Why is the exemption based on land and improvements rather than improvements alone?
  • Why are strata units considered for exemption?

The last scheme in aid of business which Council passed, the VICC, left us with over $3 million in overpayments on our contract with Millennium/Suro/Triarc, and, all-in, several millions per year in operating grants and loan payments.  Can we afford another such decision to provide aid to business, particularly in light of the letter to the City from the President of Nanaimo’s Hospitality Association that clearly states:

“The revenue deterioration that will be experienced by the entire hospitality sector with the addition of a taxpayer-subsidised hotel will be severe.”

I think we all know who will be expected to make up the difference.  This is another scheme with good intentions but without a well-defined business plan and no projections or risk assessment.  Council would be well advised to stop this train wreck before it goes any further and do some proper business planning and risk analysis.  If this were a great idea, we could sell shares in it to our local businesses and investors as was done not so long ago for the Malaspina Hotel and the Arena when capitalism was still in vogue.

I am sure that if you read the bylaw and accompanying documents you will find many other questions which need to be examined before we move ahead with such a bylaw –or not.

The documents can be found in the agenda for tonight’s (Jan 23) meeting on the City’s web site at:

http://www.nanaimo.ca/UploadedFilesPath/Site_Structure/Corporate_Services/Corporate_Administration/2012_Agendas/C120123A.pdf

pp: 28-48 and 113-126  (As far as I can determine, the docs on 113-126 are the relevant ones for tonights meeting, but this was not clear to me.

Read it and weep.  And then contact your Councillors.

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