The Christie administration has activated a clause in the Hawksbill Creek Agreement (HCA) that could force the Grand Bahama Port Authority (GBPA) to fork over millions of dollars, but Minister for Grand Bahama Dr. Michael Darville, who touted the development during his contribution to debate on the administration's 2016/2017 budget, did not disclose exactly how much money the government is "owed" by the GBPA. Guardian Business understands this is because the government cannot yet say.

And in fact, Shadow Minister of Finance Peter Turnquest raised the question during his contribution to budget debate last week, and Darville, who spoke yesterday, did not answer.

The Christie administration has activated section 5.1 of the Hawksbill Creek Agreement, which allows the government to invoice the port authority in the event that the government outspends the GBPA in the operation of the city of Freeport. Darville claimed this was one of the plusses of the memorandum of understanding (MOU) between the GBPA, Hutchison Whampoa Limited, the Mediterranean Shipping Company (MSC) and the government.

Among the "key points" of the MOU was the issue of government reimbursement.

"There has been much debate between the Grand Bahama Port Authority and the government of The Bahamas as to who spends more money in its operations of the city of Freeport. However, the government of The Bahamas holds firm to its belief that it spends more money in services rendered by its various agencies, to operate in the city of Freeport," Darville told the House of Assembly yesterday.

"Subsequently, under section 5.1 of the Hawksbill Creek Agreement, whenever this happens, the government of The Bahamas is permitted to invoice the Grand Bahama Port Authority for the difference with interest. This clause was never activated by previous governments. However, during the negotiations, the Hawksbill Creek Review Committee brought this to the government's attention; and determined the amount they feel is owed to the government.

"The Grand Bahama Port Authority is aware of this figure; and under the memorandum of understanding, has agreed to address the government of The Bahamas concerning this important matter at an appointed time," he said.

Darville did not cite the figure, however. It appears that the government cannot verify what it has spent in Freeport, and thus cannot say what the port authority owes.

Property
Meanwhile, the minister deemed the MOU "a very complicated document, with many moving parts", and sought to distill the arrangement down to essential "key points". Among the most critical areas addressed in the agreement is real property tax.

The MOU keeps all concessions on real property tax and real property levies firmly intact and unchanged for citizens of The Bahamas, Darville added.

"In other words, these taxes will not be imposed on Bahamians. In contrast, as it relates to foreign developers and foreign-based property and/or land, the government of The Bahamas and the Grand Bahama Port Authority have agreed to offer such concessions on real property tax and real property levy on a case-by-case basis, which means that, moving forward, this concession will no longer be automatic for existing nor new licensees.

"Instead, a foreign development or foreign-based business will have to meet the government's requirements in terms of their plans to develop the property, and meet certain employment threshold levels," he said.

Darville explained that only after these requirements are met will such concessions be offered, and that such approval will be actively and intensely scrutinized and reviewed every five years from the date of approval to ensure that licensees are consistently following the requirements.

Key points
Noting that decisions relative to the city of Freeport and on behalf the GBPA's 2,500 registered licensees are made by the GBPA's board of directors, Darville touted the MOU provision affording the government two seats on the GBPA board. He said through these seats, the people of Grand Bahama would have - for the first time ever - seats on that board with voting rights, and would play an important role in the new corporate governance of Freeport.

"These representatives will be able to speak to issues of policy and decisions that affect industry, the operation of the city, the business community and the rights of ordinary Grand Bahamians. These two board members will also have 'consultative power', meaning that they can act as mediators, in the event that the board is unable to agree on key decisions," Darville said.

He also touted the MOU provision that would allow a seat on the board for a representative chosen from among the GBPA licensees.

The MOU also speaks to the regulatory framework in the City of Freeport. Darville said since URCA regulates cable and telecommunications, and utilities, inclusive of water and electricity, the government will use the Freeport by-laws to seek to ensure the regulatory policies of the Grand Bahama Port Authority are in line with URCA's policies, thereby allowing the regulations in the city of Freeport to be in sync with those of the rest of The Bahamas. He drew particular reference to "the way in which these companies conduct their businesses and create their pricing structures".

The MOU also addresses the licensee appeal process, and Darville pointed out that the agreement allows the government to establish an appeals board, consisting of members of the government and the GBPA, which for the first time, would afford licensees to appeal any decision made by the port authority, ranging from fee structure to business categorization.

Another of Darville's 'key points' related to the government taking an equity stake in land owned by GBPA principals.

"The principals of the Grand Bahama Port Authority have agreed to establish a new company, called NewCo, to which all land owned by them and their subsidiaries will be transferred. The government of The Bahamas will own a stake in that company; and through this arrangement, the government will have a board seat in Grand Bahama Development Company (DevCo), as well as the new company.

"This would allow the government to finally have some influence in land development on Grand Bahama, and the people of this country to finally have equity, as it relates to these matters," he said.

Darville also noted that the MOU allows the government to cause the creation of a new department in the GBPA, with its sole purpose being the marketing, promotion and advertising of Grand Bahama Island, as both a destination and as an investment haven. This Grand Bahama development fund would seek the revitalization of the local economy to attract international businesses, maintain and expand existing businesses. It would also support social and infrastructural advances through concession management.

Darville likened the reopening of West Sunrise Highway to the fall of the Berlin Wall.

"This administration has heard the cries of the people of Grand Bahama in this regard; and resultantly, is in active dialogue with the Grand Bahama Port Authority and the property owners, Harcourt Development... I am happy to report that the West Sunrise Highway will be reopened, which will create commerce at the International Bazaar and reduce the time for tourists en route to the Lucayan strip," he reported.

Darville touted the establishment of an effective "one-stop shop" within the Ministry of Grand Bahama in conjunction with the Office of the Prime Minister.

The body would liaise with other public sector counterparts on the investor's behalf, in order to ensure that the application process is a more timely and seamless one.

"This will ease the burden of conducting business on Grand Bahama Island, for international and local investors alike. We are currently working with our consultants to incorporate a model that would allow for a true partnership, which would establish joint governance and regular review to ensure accountability, execution of responsibilities; and that would be in accordance with international best practices," he said.

Concessions
The main tax concessions under the Hawksbill Creek Agreement, which include customs duties, export taxes, excise taxes and certain stamp taxes, will remain fully intact until 2054, when the agreement will expire.

Darville explained that the provisions that expired this year, under the HCA, were concessions relative to real property tax, real property levies and personal property tax, capital levies on taxes, on capital gains or capital appreciation and a zero tax regime in respect of the earnings of the Grand Bahama Port Authority and the earnings of port licensees.

K. Quincy Parker, Guardian Business Editor

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