Tax Breaks and Up Front Cash – How the Hotel Deal Would Work
Prince George, B.C. – There has been much talk about proposed tax breaks and lump sum payments in order to seal the deal to build the Marriott Courtyard Hotel in downtown Prince George. The fact is, it will be Northern Development Initiative Trust that has the final say.
It was in 2011 that the City, NDIT, and Initiatives Prince George came up with a plan to spur development in the downtown. Accessing dollars from a special NDIT fund, a developer could apply to have either a ten year break in Municipal taxes based on the difference in the assessed value because of the improvements, or get a lump sum payment up front of what those estimated municipal taxes would be over the 10 year period. The lump sum payment would then be paid back to NDIT by the amount collected in taxes over the ten years.
What is different in the deal for the hotel, is that the City is looking to change the agreement with NDIT so the property owner could get a combination of both the lump sum payment and a tax break.
Here’s how it would work:
Hypothetically, if the completed hotel is assessed at $30 million, it’s estimated the municipal taxes over that decade would be $5 million or about $ 500 thousand annually. Under the current Revitalization Tax Incentive program, the project would be entitled to $5 million.
Under that scenario, the project is entitled to $5 million, but there is only about $3.2 million left in the applicable NDIT fund, so,a mix of lump sum dollars and tax breaks is being proposed. The property owner would get that full amount up front and pay the City $320 thousand a year in taxes for the next ten years to repay the NDIT. The $1.8 million dollar balance, would equate to about $180 thousand dollars a year in municipal taxes for ten years. Under the proposal, the property owner would be exempt from paying the $180 thousand a year in municipal taxes for a full decade.
Once this ten year period has lapsed, the property owner is responsible for their full annual tax payment.
The special NDIT fund that currently exists is a one-time project. Once that fund has been depleted the program is over, there won’t be any money to offer to other developers. The money repaid to NDIT would go into general funds.
This is not a done deal.
The proposal to change the existing agreement has been submitted to NDIT staff for review. The Mayor and administration have indicated they will work with NDIT to change the existing contract and it is the Board of the Trust which will decide if this proposal should or shouldn’t be approved.
At this time, there is no word on when the Board may consider this proposal and make a decision on whether or not it can go ahead.