The Commonwealth Development Authority board approved yesterday a “limited” qualifying certificate for project developer Saipan Surfrider, LLC, which plans to build a hotel in Chalan Kanoa.
During a special meeting, the board also unanimously voted to recommend to Gov. Eloy S. Inos the approval of Saipan Surfrider's QC application that would allow it to obtain tax breaks, based on certain conditions and requirements.
Saipan Surfrider, LLC plans to build the Surfrider Resort Spa & Beach Club at the sites of the former Pacific Gardenia and Silver Hotel. It submitted late last year a QC application requesting tax breaks on the business gross revenue, excise, bar, and developer taxes.
R. Dan Murrell, Triple J Enterprises senior vice president who represented Saipan Surfrider at the meeting, thanked the board for its decision but refused to provide further comments.
CDA staff recommended the approval of the QC application for BGRT and excise tax but with certain provisions. The board made changes to the recommended conditions and requirements during its over three-hour executive session Tuesday.
On the excise tax, the board approved “a 100 percent rebate on excise taxes for furniture, fixtures, and equipment.for the duration of construction activities subject to the cap on excise tax that have been set forth.”
The excise tax relief is capped at $57,000 and would exclude heavy equipment and light trucks. These benefits “shall cease upon commencement of full operations.”
Meanwhile, BGRT relief is established as follows: a) 20 percent rebate on BGRT for years 1 through 6; b) 30 percent rebate on BGRT multiplied by the ratio of resident employees for years 1 through 6; c) 30 percent rebate on BGRT multiplied by the ratio of resident managerial employees for years 1 through 6; and d) 20 percent rebate on BGRT multiplied by the ratio of local purchases of goods and services used in the operations of the business to total purchases of the same goods and services for years 1 through 6.
BGRT benefits are subject to a $664,000 cap.
The board said that at the end of years 3, 4, and 5, Saipan Surfrider's cash flow position will be examined.
“After these examinations, if it is determined that Saipan Surfrider, LLC has achieved both a positive cash flow at the end of years 3, 4, and 5, and a cumulative positive cash flow at the end of that year, the benefits automatically cease,” said the board.
The board also specified that the restaurants at the proposed hotel resort should not be Tony Roma's or Capricciosa, two restaurants already owned by Saipan Surfrider's affiliate, Triple J Enterprises, which are also enrolled in the QC program and the QC for which will expire within the month.
“If these restaurants are to be relocated to the [Surfrider Resort Spa & Beach Club], the BGRT benefit should exclude revenues from the two restaurants,” said the board.
The QC approval also requires Saipan Surfrider to maintain and beautify the beach and pavilions at the Laly 4 Beach, which is within the project site. Beautification efforts shall include a once-a-month cleanup, yearly painting of the pavilions, and “maintenance and renovation as needed.”
In an interview after Tuesday's meeting, board chair Pedro I. Itibus said the board came up with a decision that is “fair” for both the applicant and the CNMI.
Itibus said that in making the decision, the board took into consideration the financial analysis submitted by Saipan Surfrider, which reflected that the applicant is able to earn back its investment “within a short period of time” and given the abatement on BGRT and excise tax alone.
“Because of the way we looked at the financial inputs and gains, this is the best solution or reasons that we came up with,” Itibus told Saipan Tribune.
He noted that CDA is “not anti-business” and would like to work closely with any developer interested in taking advantage of the agency's QC program.
Executive director Manuel A. Sablan agreed with the board's decision, saying that the conditions and requirements set are tied to the program's objective to generate economic activity and employment opportunities.
The construction of the $12.1-million proposed hotel will be done in three phases. It will feature 60 hotel rooms, the main restaurant, a Korean BBQ restaurant, Japanese noodle house, beach club, modern health spa, and space rentals for shops.