The Forgotten Island

The Forgotten Island

The following is a Speech given at a Luncheon Meeting of the Grand Bahama Chamber of Commerce on Wednesday, the 25th March, 2015:

My speech today is titled “The Forgotten Island” because for years I have been saying that the only Investors that we get in Freeport are either those that are ship-wrecked or those that get off by plane by accident (But it is remarkable to note that those few who do by happenstance arrive very often fall in love with what Freeport has to offer).

Let me say immediately that, aside from the depressing state of the economic affairs of Freeport, I am excited about the prospects we have before us in this exciting year of 2015, to bring about change in our wonderful town, to cause it to be the work engine and job production engine that it should be for the whole Bahamas.

I believe this year will mark the beginning of a new experience for Freeport and The Bahamas, subject to certain things happening.

I am especially excited at the Prime Minister’s appointment of the Hawksbill Creek Agreement Review Committee headed by our own Dr. Marcus Bethel, and by the continuing works over these past few years by our own Minister for Grand Bahama, Dr. Michael Darville, and the Minister for Tourism in trying to stem the downward spiral in which we have found ourselves in the Freeport and wider Grand Bahama economy.

I believe the appointment of this Blue Ribbon Committee bespeaks the belief held by the Prime Minister and growing members of the Government that Freeport needs to be given the ability to grow and prosper, and they understand what needs to happen to accomplish this goal.

One of the published important tasks of the Committee is to “create a framework for immediate and long-term investment promotion on the Island to attract investors that can operate assets competitively at a world class standard, and effectively and efficiently utilize the land resources with proper environmental safeguards.”

This designated task for a Government Committee is extremely important and significant, not only for what is says but because it signifies to me the first time that the Bahamas Government has declared its active interest in and intended direct involvement in the attraction of visitors/investors to our Island.

You will note the Government’s use of the words “Investment Promotion”.

This is Big!

Just as important were the Prime Minister’s obiter comments that, and I quote: “following the death of Sir Jack Hayward and Edward St. George, there are entities around the world expressing an interest in the purchase of The Grand Bahama Port Authority.   The Committee will be able to assist me, as Prime Minister, and their work will be of immense value even though that is not within their terms of reference in the event of some purchaser manifesting in the near future with the intention to purchase, we would want to ensure that we are transparent and open in all that we do with the Bahamian people because there is a lot at stake here in Grand Bahama.”

More on this later.

In my Call to Action Article of 2012, I advised then of the deplorable condition of Tourism in Freeport, which I then described as -O- in my estimation and belief.   Since then, the Ministry of Tourism has done, together with Hutchison, a major job in attracting Memories to our shores and in providing additional airlift which has, I believe, stemmed the Tourism dip.

There still remains much to be done.

We are still a long way from attracting the Quality Tourist to our shores, which would probably take some further years of marketing and the building of more luxury hotel product.   These are the tourists that fully support our restaurants, bars, fine shops and we are in dire need of their patronage.   These are also the Tourists that would invest in the vibrant second-home market we need to create.

I pointed out in 2012 that the Island was then and remains now in dire need of Development Investors to take advantage of our Sixty miles of pristine beaches and over Twenty miles of canal frontage: Development-ready Land that is the finest in The Bahamas and indeed in the Caribbean.

I explained in 2012 that I felt then and feel now that a major shift change could take place in our economy within a mere 2 years by concentrating on the luxury condominium/condominium hotel/second-home market: this is more true today.

An actual survey of the Construction Industry in Freeport:-

  • Housing of over 3,000 sq. ft. presently under construction – 0
  • Hotel Resort/Condominium buildings presently under construction – 0
  • Commercial Buildings presently under construction – 0

How did we get to this impasse, where even the Prime Minister noted a few weeks ago that Nassau/Paradise Island are experiencing a boom in the upscale, high-end construction of second homes and luxury condominium construction, followed closely by Abaco and Exuma but that Freeport’s ECONOMY was STAGNANT.

P.M.O. (Professional Marketing Organization)

When the Government extended the tax exemptions of the Hawksbill Creek Agreement in 1993, one of the major conditions was the establishment by the Port Authority and DevCo of “an organization to promote Grand Bahama Internationally”: a P.M.O.

This P.M.O. was never established and, accordingly, especially after the Perfect Storms of 2004, our Island was and remains Forgotten.

I believe and pray that the Government realizes that Freeport and Grand Bahama represent the one Island in The Bahamas where the next 10,000 jobs can be created and, for this reason and many others, I believe that the Committee and the Government should have as their goal, rather than the short term goal of the payment of taxes into the general Treasury by the residents of this stagnant economy, BUT the revitalization of the Freeport economy by the establishment of this P.M.O. fully funded by the Port Authority and DevCo, to be made up of a Board of Directors in equal parts of the 3 groups of Government/Port Authority/ DevCo and the Licensees.

What can this P.M.O. do?

We already have the product but it needs an organized Professional Group of 2 or 3 professionals continuously on the road at seminars, private meetings and professional marketing events in Florida and across the Globe and constantly bringing International Groups to our Island. e.g. Florida Market

In the Florida Market alone, there are 20 multi-Billion Dollar Development Groups presently building over 100,000 luxury condominium units, most of which will be completed at the end of 2015.   These Groups are going to be looking for places to go.

The Bahamas is HOT and Freeport need not miss this second boom period – we missed the boom of 2002- 2008 completely for the lack of this P.M.O. and we are now missing the current boom which started in 2011 for this same reason.

Real Property Tax

I have changed my previous opinion that the Real Property Tax exemption should not be extended.

In 2012, I argued that though for Forty years Freeport had enjoyed an exclusive exemption from Real Property Tax (which Tax was imposed in the rest of The Bahamas) the fact of this exemption had not benefitted Freeport especially these past 20 years because, of course, Freeport had not promoted the exemption or itself as other areas of The Bahamas: Nassau/Paradise Island/Harbour Island/Abaco and Exuma, all of which pay Real Property Tax, are outstripping Freeport and are prospering.   All, again, for lack of a P.M.O.: the Forgotten Island.

I also argued in 2012 that new investors and land sales were also stymied because the present owners of the land (of which DevCo and the Ownership Families own the larger part) have no carrying cost.   This is still true.

I now believe that the exemption should be extended, say for a further 10 years, subject to the establishment of the P.M.O. as I described before and perhaps a proviso that any and all undeveloped land should pay Real Property Tax if it remains undeveloped after the next 5 years, in any event.

I know there are any number of proposals that are being made and discussed on this subject but I believe the bottom line should be that we take this opportunity to reactivate the Freeport economy and make it a major, prosperous factor in the Bahamian economy, creating and attracting those next 10,000 jobs that the Country needs.

There is nothing to be gained from taxes in a stagnant economy!

Ownership Families

On the issue of the Port Authority and the Ownership Families, I believe my position is well known.

I am embarrassed to say here publicly that Free Enterprise has failed us and I agree with Sir Jack Hayward’s own reported opinion (often recently expressed) that the present Ownership Families “need to go” But Free Enterprise is resilient and I believe, and the Government also believes, it is still the way to go.

In 2012, I expressed that from my reading of the Hawksbill Creek Agreement and my knowledge of Freeport, the ownership of the Port Authority and its assets to include DevCo should be in the hands of a Developer.   It was not meant to be a fiefdom to be handed down to new generations.   Our experience of the last 12 years is proof of this.

I believe the Government has also come to this conclusion, hence the obiter task given by the Prime Minister to his Committee to advise on.

I also believe that given the failure of the Ownership Families, especially over these past 12 years and their continuing deteriorating relationship with Hutchison, that effective change in the direction of Freeport can only happen when this sale by the Ownership Families takes place and soon.

Conclusion

Accordingly, I am excited about this year of change, that indeed the burgeoning investment climate being experienced in the other Islands of The Bahamas has brought the stark contrast of the stagnant Freeport Economy to the attention of the Prime Minister and the Ministry of Finance and that the Government, after these many, many years, is prepared to be proactive in the Freeport Economy and accepts responsibility in this Area.

All this speaks well for this year of change BUT the big change must be this: we in particular as Bahamians and Bahamian residents must be proactive: the Government has asked for our input and we need to give it.

For too long, we as Licensees have feared for our position in this Company Town: this must change and we must ALL agitate for good things to happen.

Terence Gape

March 2015

Please feel free to share your thoughts.

tgape-mainABOUT THE WRITER

Terence Gape is a Counsel and Attorney who has practiced in Freeport for more than Forty (40) years. You can read his Call to Action pamphlet and his Speech “The Forgotten Island” at: http://calltoactionfreeport.com.”

Top aerial photo credit: Bahamas Photographer. Used by permission.

 

Freeport and Tax Concessions: The Hawksbill Creek Agreement (“HCA”)

Freeport and Tax Concessions: The Hawksbill Creek Agreement (“HCA”)

I have read with interest Carey Leonard’s Article which appeared in the Tribune of the 11th and the Guardian of the 12th instant.

In his Article, Carey espoused the immediate extension by Government of the expiring Tax Concessions under the HCA in order “to create Bahamian jobs.”

While we all agree that the creation of jobs is the ultimate and immediate goal of any negotiations or consideration over the renewal of the Tax Exemptions, it must also be agreed that because of the ineptitude and/or gross mis-management by the Families and DevCo (Families and Hutchison) over the past 12 years, in particular, Freeport’s economy remains in crisis.

To use the Prime Minister’s expression concerning the malaise being suffered by Freeport and Grand Bahama:

“We face the reality that significant new development is not taking place in Freeport in the same manner as other Islands in The Bahamas that have neither the tax nor infrastructural advantage of Freeport.   Unemployment is also higher in Freeport and Grand Bahama than in these other islands.   We must therefore question why these conditions exist and set about to address them.”

It is incumbent therefore for the Government to consider, and it is considering, the way forward given the present moribund conditions of the investment climate in Freeport considering that the Tax Concessions have been in place this past 30 years in particular.

That this will take some further time considering the 12 proposals made by the Hawksbill Creek Agreement Review Committee is obvious.

Work of the Committee

I must say publicly and happily that I endorse the findings of the Committee and feel they have done excellent work and, in my opinion, their findings and recommendations accord with the opinion of the majority of the Grand Bahama public and, particularly, with  the requirement for a change in the ownership and governance of the “Port Authority” going forward.

Carey and others seem to be developing an argument that the Tax Exemptions not being immediately renewed, and somehow an immediate resurgence of the Freeport Economy not happening, is the fault of the Government.  I would point out that this present deplorable condition of the Freeport/Grand Bahama economy is NOT the fault of the Government and the Committee is quite right that there is a need for significant changes to take place before these Exemptions should be universally granted.

The Government and the Committee are on the right course.

The Status Quo

The failure of DevCo this past 16 years proves that Hutchison will not work with a partner (the Families) that they do not have any respect for – whether right or wrong.   This is fine but Freeport, and Grand Bahama, and all Bahamians have suffered for this.

Thus, the present ownership and direction of DevCo cannot stand.

The Families have taken over $300M out of Freeport and The Bahamas since 1993 and have not re-invested in Freeport.   Never had a plan!

The Families have proven, particularly since Lady Henrietta sold her Power  Company shares in 2009/2010 and, in particular, since the economic crisis of 2008, that they will not themselves invest capital in the Port Area.   The Government cannot leave us in their hands.   Never had a plan!

A “bald” renewal of the Exemptions would leave the status quo in place.   Why should these people be “rewarded” for their failure?   The Government is NOT to blame for this failure.

Long Term Future and Stability of Freeport

I do agree with my good friend Carey’s argument and that of my very good friend, Fred Smith,  that the integrity of the structure of the HCA should be maintained going forward and this seems to be the intent of Dr. Marcus’ Committee and the Government but I do not agree that the Tax Exemptions must be renewed in favour of the present governing body namely, the Families and DevCo (Hutchison) because they have shown no ability to utilize these Concessions for the benefit and growth of the Freeport Community – quite the contrary.   I believe the Committee and the Government are quite correct that the leverage it holds now must be used to effect necessary changes  in the ownership and governance of the GBPA, DevCo and Port Group and/or in the short term to cause the present ownership Group to re-invest to cause certain things to happen whilst maintaining the purpose, structure and administrative responsibilities of a properly constituted GBPA for the benefit of ALL BAHAMIANS.

Concessions to Industrial Sector

I do believe however that as the Prime Minister has said:

“It is the clear intention of the Government not to place those existing stakeholders in Freeport with major investments that are contributing significantly to the economy of Grand Bahama and will continue to do so, at a tax disadvantage.   It is not the intention of the Government to do anything to harm the economy of Grand Bahama.”

I believe this applies directly to the Industrial Investors in and around the Harbour.   It is interesting to note these Investors would not suffer any of the threatened taxes, even if they were outside the Port Area, as they would be “covered” by the Industries Encouragement Act and other Legislation (hotels are already exempted by the Hotel Encouragement Act).

There are 3 major Industrial Companies slated to begin major expansions in the next 6090 days in or around the Industrial Sector and in Grand Bahama:-

  1. Pharmachem;
  2. Container Port Phase V;
  3. Carnival Cruise Port (outside the Port Area).

(Aligned to this is the agreement on “Ports” to be granted by Hutchison so that the 3 Projects can proceed also within the same time-frame).

These 3 Projects, when started, can give Freeport and Grand Bahama “breathing” space to get the recommendations of the Committee put in place for the long term future and stability of Freeport and that of The Bahamas in general.

Accordingly, while I would agree that additional time may be needed to decide what to do about the Tourism/Real Estate/Developer Sector and what should have been its prime movers: “the Families”, DevCo and particularly Port Group Ltd., there is no reason an Extension could not be granted NOW to the Industrial Sector so these projects could proceed AND I do exhort the Government so to do.

Conclusion

I continue to believe that Freeport and Grand Bahama have a great future and can be the engine of growth for The Bahamas but it is necessary for the Port Authority Group of Companies to specifically include Port Group Ltd. as the asset holding company and DevCo to be owned and managed by a Developer with capital and marketing ability.

It is therefore critical that at this juncture we get the right thing done.

 

tgape-mainABOUT THE WRITER

Terence Gape is a Counsel and Attorney who has practiced in Freeport for more than Forty (40) years. You can read his Call to Action pamphlet and his Speech “The Forgotten Island” at: http://calltoactionfreeport.com.”

Top aerial photo credit: Bahamas Photographer. Used by permission.