Tuesday, May 26, 2015

'Conference' Centre Hotel - Not About Conferences?

Is this just a bad deal for Nanaimo taxpayers?

The whole premise behind offering up a ten year tax exemption to a hotel developer was to encourage the market to build a hotel that would bolster our ailing conference business. That was the rational that the previous council under Mayor Ruttan used to sell the tax give-away. Originally it was restricted to this one piece of property until that council learned they were meddling too much in the marketplace, and had to extend the offer city-wide to anyone building a new hotel/motel or renovating an existing one. Good business sense? If not paying taxes for ten years is your business model, it is not a very sound model. However, if it is a free gift offered by a desperate city administration, no business would refuse the offer.

The city also has a parking agreement with the developer giving them use of up to 255 non-designated parking spaces in the underground garage at the VICC.

The deal with the SSSManhao company not only includes the ten year tax exemption, but it pretty much gives away the control of the conference centre in the deal based on the 'Conference Centre Operations - Right of First Negotiation' agreement the city gave to SSS Manhao, which runs with the land. In other words even if the city were able to sell the Conference Centre, this agreement must be assumed by any future purchaser.

A staff report claims that an important component of this hotel is enabling higher capacity conferences to be scheduled in the VICC. However, that seems to be contradicted by the stated business plan as explained by the hotel developer, which was to see 70,000+ tourists come to the hotel through their Asian tour company. How many rooms would be left for the purpose increasing conferences is questionable if 200 Asian tourists are visiting the hotel on a daily average. Of course this business would be a boon to downtown and the casino perhaps, but would do nothing for the conference centre.

The Right of First Negotiation contains some ambiguous and troublesome language which would seem to pretty much turn over the upside of this taxpayer funded facility to the developer while Nanaimo taxpayers assume all the downside.

The argument that this will increase our convention business is supported by the claim the hotel operator will be required to make a 'block' of rooms available for conventions with as much as one years notice. How would that be enforced if there was a conflict between a tour the tour operator was bringing to the hotel and a conference the VICC wanted to host? How it would be enforced is even more a problem if the same company is operating both the tour business and the conference business.

The agreement states:

Assignment by the City

16. The city agrees not to sell, transfer or otherwise convey or offer to sell, transfer or otherwise convey the Conference Centre unless the City first assigns this Right of First Negotiation to the purchaser and in that case:
(c) the purchaser must enter into an assumption agreement with Manhao agreeing to assume all of the City's obligations under this Agreement.

Negotiation by City Staff

19. For certainty, this Right of First Negotiation does not entitle Manhao to enter into negotiations with Council of the City, and instead, Manhao agrees that negotiations on behalf of the City may be conducted by the City Manager or any other senior City staff person or persons.

With this agreement in place are the City's hands tied?

Both during and since the recent election there has been talk about taking a look at the VICC which is costing Nanaimo taxpayers several million dollars for a facility that is under utilized and is chasing what is arguably a waning business. This agreement with SSSManhao would seem to pretty much tie the hands of the City with regards to any re-purposing efforts they may wish to undertake. For example, how would this agreement mesh with the notion that VIU might establish a downtown campus on this site?

Arbitraton

All disputes arising out of or in connection to this agreement will be resolved by arbitration in accordance with the Commercial Arbitration Act of British Columbia. It does not require a law degree to see how an argument could be made by SSSManao if the city should decide it is in our best interests to re-purpose the conference centre to which they have the Right of First Negotiation and claim to 255 parking spaces. That is just for a start.

Good deal?? You be the judge.


allvoices

4 comments:

  1. I have watched this ongoing mess that has done nothing but show the incompetence and negligence of our former Mayor and Council regarding this project. They are all over there head and out of their league. They have done nothing for the taxpayer but pass the burden of their giveaways to those that can't afford it. It's disgraceful.

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  2. If you only want to pay the mayor $60/year and the city manager $220/year - where do you think the qualified people are going to go work? This is why our council is full of retirees, travel agents, realtors,etc because anyone else gets paid way more for less work and a hassle.

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  3. The TIME is NOW to change the contract (if not dump it).

    Extension ONLY if they put up $1-million, no refund, to confirm they'll build the hotel within a couple of years. If not, the million goes to pay down the city budget and lower our taxes. AND city hall CUTS OUT the part about they get first dibs on running the conference centre. Obviously they're more interested (it seems, if they can) bringing Chinese tourists here - not conferences!

    Kev

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  4. Too many red flags on this deal. This company either has no money or they are not honorable, either way we shouldn't be dealing with them. The city needs to exercise their right to a buy back, as the land value has surely gone way up in the past few years.

    They need to revisit the tax break too, if they enter into another sale with a hotel developer. I can see offering a partial tax break but a 100% exemption for 10 years is ludicrous, we're no longer in desperate times but council seems to be acting desperately. The entire situation has turned into a bit of a debacle IMO.

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