Hotels snub tax breaks for renovation?

Unless hotel owners and proprietors take advantage of the tax incentives offered by the government in exchange of renovation and improvement of their facilities, the CNMI construction industry will remain inactive in the next few years.

Contractors on the island remain hopeful that members of Hotel Association will take a giant step to renovate and improve their hotel premises to take advantage of the tax incentives, thus, help in the recovery of the construction sector.

In December last year, Gov. Pedro P. Tenorio signed into law House Bill 12-199 to promote economic development in the CNMI by offering tax abatement and rebate incentives in exchange of development of desirable facilities.

The bill is now Public Law 12-32 aims to project a more investor-friendly climate in the Commonwealth, with hopes to stimulate economic growth.

Mr. Tenorio stressed the need to make the Northern Marianas pro-active and to seek solutions that will eventually end its present economic woes.

Under the law, abatement or a rebate of up to 100 percent of all taxes of any nature paid or to be paid to the CNMI government, if its in the economic interest of the Commonwealth will be issued to a beneficiary with qualifying certificate for a period of 25 consecutive years.

The Commonwealth Development Authority was appointed to review and analyze in detail these applications in light of the issuance of the qualifying certificate.

But Efrain F. Camacho, president of EFC Engineers and Architects disclosed that there has not been any sign of activities being undertaken by hotel operators and owners possibly due to lack of knowledge on the existing law.

Unless renovation, improvements and possibly construction of another hotel comes along, the construction sector is not likely to see much action until 2004, said Mr. Camacho.

On the other hand, contractors revealed that in most cases, hotels get a facelift or renovation only after five years in operation. This still depends on how serious the activities in these hotels are or how big their market is and the frequency of functions being held.

On Saipan, hotels are likely to renovate, expand and improve only after 12 years because of the economic distress which affected the tourism industry.

Aside from this, contractors explained that remaining hope for the construction industry would be a government order instructing strict compliance with ADA provisions, in terms of infrastructure and other facilities.

As a consequence, Northern Marianas hotels will be forced to comply with it or face severe penalties.

Earlier projections disclosed the Commonwealth’s construction sector will be flat and slow in the next two years. This could be brought about by the economic crisis, financing problems and certain government policies that need to threshed out.

Apart from financing problems and delayed payments, problems on issuance of construction permits and certain government policies has affected several construction projects in the past.

In 1999, construction sector fell below the $20 million mark despite initial capital funds of $100 million to boost the economy three years ago.

Records obtained from the commerce department’s Central Statistics Division noted that only 20 permits for commercial structures have been approved by the SCD in the last quarter of 1999.

This is translated into measly $200,000 worth of construction activities in the commercial sector. In the residential sector, the safety division code in the same period approved the construction of 44 housing units throughout the Northern Marianas which amounted to around $2.4 million.