Tax Deal For New Holiday Inn Draws Discussion And Fire
Is the tax abatement proposed for a new Holiday Inn Hotel appropriate in the way it is structured - to pay upfront infrastructure costs - and is such an abatement bending the policy too much were questions up for debate by Council.
Up for debate was a motion discussed in-camera at the January 13, 2020 Executive Committee. A debate which drew a letter from the hotel association seemingly questioning the entire exercise.
In that motion Council agreed to the developer’s request to upgrade services to the property, located at 195 and 211 Diefenbaker Drive, with a minimum six inch water or eight inch sewer and 12 inch storm sewer with costs and interest recovered in foregoing year one of a regular property tax abatement.
Under the regular property tax abatement policy developers receive a progressive and declining property tax over five years starting at 100 percent tax free and dropping 20 percent each year until in year six 100 percent of the taxes are owing.
For the proposed Holiday Inn project the developer agreed to forego the 100 percent tax abatement year - to pay for the infrastructure - and start at 80 percent tax free dropping 20 percent each year until in year five 100 percent of the taxes are owing.
Asking for a reconsideration of Executive Committee’s motion Councillor Brian Swanson said in his opinion the manner the purchasing agreement was set up with the unnamed developer was improper and went against the true spirit of the tax abatement policy at the potential determent of already existing and struggling hoteliers.
“First of all the City’s present tax abatement policy is that any commercial property receive 100 percent tax abatement in year one, 80 percent in year two, 60 percent in year three, 40 percent in year four and 20 percent in year five. I have spoken against the nature of this policy recently as a couple of weeks ago when we did the Exhibition Company land sales and I mentioned at the time how the owners of the Mall had indicated they don’t understand providing tax incentives when there is such a surplus of retail space in the city…I would argue it is the same principle when it comes to hotels,” Councillor Swanson said.
“Providing tax emptions to retail space and hotel space I believe is unecessary and in the long term very foolish. Manufacturing I can go along with but to start interfering in the marketplace in respect to retail and hotel development with tax incentives I disagree with.”
Councillor Swanson said in the request for the proposed Holiday Inn “the developer made a request for the Cty to pay for uprgraded water and sewer service which had been denied as we were told as recently last week to another hotel who had made a similar request (for an upgrade to their sewer and water service) and that had been denied.”
He saw it as an unfair advantage and the City would have to foot an initial bill.
“What is happening in this situation is the City is going to have to pay an upfront cost and it should be a cost of the developer in exchange for reducing the tax abatement in the following year. I think that is a dangeroud precedent to set. We are allowing a developer to leverage a tax abatement into upfornt development contribution from the City. We are going to help finance the project on the front end.”
“They (Moose Jaw Hotel Association) have a different and realistic view”
Councillor Swanson said he was aware that other members of Council had all received communications from the Hotel Association in Moose Jaw about their concerns about the proposed Holiday Inn development.
“It is very possible that the developer will be receiving the benefit and someone else will be paying the exemption. It is nt necessarily going to be one and the same person,” Councillor Swanson claimed. “We should not get in in the front end of financing capital development…we should not be getting into a position where a developer can leverage a tax abatement as a financial contribution from the City that they can take to a bank and use as equity on the project.”
Mayor Fraser Tolmie said on Monday morning he had spoken to the Hotellier Association to help clarify the points they brought out in their letter.
The letter was not made public by the City.
“The facts that were presented to them were a little bit different from what was shared at the meeting,” Mayor Tolmie said, adding “I would just like to say I never gone into Walmart and had the Walmart greeter say to me you know don’t buy the toothpaste here. Or go to SuperStore or Co-op or Safeway and have an employee come up and say to me don’t buy the cereal here. We live in a free market, free enterprise system and Holiday Inn has come to us and they’re a flagship (corporation that wants to build here.”
The Mayor said he had driven around and taken pictures over the past weekend to prove the local hotels were being utilized and there was a demand. He presented his photographs as anecdotal evidence as to the lack of hotel room vacancy in the city.
“This is not an anomoly…we have seen tremendous things happening here.”
“Holiday Inn wants to build another hotel here…building a hotel here means jobs,” he said.
Mayor Tolmie claimed Holiday Inn wanted to build another hotel in the city because of the amount of events as well as the $700 million natural gas fired power plant SaskPower will be building in the new Southeast Industrial Park.
“It is a zero net deal…we are offsetting taxes. Taxes will be paid in the first year.”
“Holiday Inn wants to build another hotel here…building a hotel here means jobs”
Councillor Heather Eby said although the deal seemed to be outside of regular tax policy in her opinion it fit the intent of the policy.
“I have heard about a surplus of retail space…it amazes me how many people drive to Regina to the surplus retail space there,” Councillor Eby said, adding there were those who wanted to bring the stores in Regina to the city.
Councillor Swanson reiterated his earlier views stating that the Hotel Association was willing to meet with Council and explain their side of the argument.
“They (Hotel Association) have a completely different and realistic view.”
Mayor Tolmie said the hotel room space was needed for the events and concerts happening in the community as well as the hundreds of people working on the SaskPower natural gax fired generating station.
“We do want people to come to our community…we are being aggressive in going out and marketing our community…I am very excited and looking forward to it,” he said.
In a 6 -1 vote with Councillor Swanson opposed the motion passed.
No purchase price was released for the land from the City.