City Offers 10 Years Without Taxes as Incentive for New Hotel
The article below came up in the local newspaper, The Nanaimo Daily News, last week and I thought it was worth sharing despite the delay. The hotel was never built due to financial issues with the developer who was supposed to commence the build about the same time as the economy changed a few years back. This was and continues to be a time when development companies who were leveraging a fair amount of debt for projects that suddenly stopped selling as quickly as projected, for the prices projected, took a hit. We’re still seeing a bit of the aftermath and this ongoing saga with the hotel downtown is part of that aftermath.
For the armchair market watchers out there, don’t read too much into this in terms of what it means for the local real estate market. Having it built would make for a busier downtown and more revenue for the conference centre and of course tourism dollars in town overall, yes. But all of that is still just one peice of the larger, and ever morphing, puzzle that is Nanaimo’s real estate market. I am sharing this mainly to get the word out about the tax incentive because I would really like to see this hotel built. I would like to see more density and activity downtown and this is one way in which I can encourage that.
And here is the article in question:
Tax break proposed for hotel project
After struggling to entice developers, city considers incentive plan that includes 10-year exemption
City officials are proposing new tax break incentives to spur construction of a conference centre hotel.
Nanaimo has been struggling to entice developers to build a hotel downtown, adjacent to the Vancouver Island Conference Centre. The $75 million facility is losing about $1 million a year largely because staff can’t book larger events.
With no bids to build the hotel and a growing need to lodge guests, the city is considering a new incentive package, beginning with a 10-year municipal tax exemption.
City officials are confident tax breaks will renew interest in the VICC hotel and improve Nanaimo’s stock of quality hotel rooms, laying the groundwork for larger conferences and tourism.
The previous incentive package to build twin condos at Maffeo Sutton Park was pulled by council earlier this year.
“One of the first things hotel developers want to know is what financial incentives we’re prepared to offer,” said Mayor John Ruttan.
“After looking somewhat unsuccessfully for three years, this is something we need to look at.”
Nanaimo has been unsuccessful in finding a developer to create the dream hotel, largely because it’s expected to be a break-even operation in the short term. There are not enough tourists coming to the city to inspire investors to put up the construction costs, said city manager Al Kenning.
The hotel is supposed to go hand-in-hand with the conference centre, a facility that has been handicapped in booking large events because of the lack of hotel rooms downtown Nanaimo.
The VICC has the potential to house over 1000 guests, but finds booking more than 500 challenging. Guests would have to look outside of Nanaimo to find accommodation.
The 10-year exemption is a key issue for council to consider, Kenning said. City staff believes it will lower costs enough to make investing in the hotel more viable.
There has already been several developers interested, according to Kenning.
The tax incentive program is geared at the VICC hotel, but will apply to any development or re-development in Nanaimo. The city wants to boost the total inventory of quality rooms it has to offer tourists.
According to Ruttan there are only about 400 rooms within a kilometre of the downtown core.
Susan Cudahy, chief executive officer for Nanaimo Economic Development Corporation, calls the proposal responsible and innovative. Quality hotel rooms are needed if Nanaimo is going to market itself as a tourist destination.
“This is the right step forward,” she said.