Alter City applies for full tax breaks across the board

Tinian casino investor Alter City Group has applied for full tax benefits across the board, or the full amount that the Commonwealth’s qualifying certificate program allows.

These benefits, if granted, would not apply to their casino operations, as they have expressed plans to contract these to a third party.

In applying for the tax benefits with the Commonwealth Development Authority, the resort sees the qualifying certificate as part of its long-term investment plan and a “pillar” to set up its total $1.2-billion Plumeria Golf and Casino project on Tinian.

ACG managing director Ken Lin said they are mainly asking for these benefits “during the construction period” of their $1.2-billion integrated resort at Puntan Diablo on Tinian. These will cover all the import and export abatements, among others. “We are not looking for the casino part for QC. It’s mainly for developer’s tax and export and import tax and also for the BGRT tax,” Lin said.

“It’s nothing to do with casino,” added CEO Edvon Sze. “It’s all about projects, building this resort complex.”

Sze said they are asking for the qualifying certificate to cover the “entire 25-year period for our lease.” “We are asking for whatever CDA is able to give us. But this is subject to CDA board approval. I am not sure how much in terms of the rate or percentage they are going to give us, or in terms of the length of years…But what we applied for is what the law allows us to apply.”

Projections

Alter City has applied for tax abatement for the 2-percent developer’s tax and 100 percent off on the business gross revenue, bar, and excise taxes. They also have asked for a rebate of the 100 percent of income taxes during construction and operational phases of its resort for a period up to 25 years.

For the period of the qualifying certificate—from 2015 to 2039—they estimate total tax revenues, for hotel occupancy, wage and salary, and coastal resource management fees paid to the CNMI, at some $1.947 billion.

Tax incentives, if granted, would amount to $1.22 billion. This means the CNMI would realize a net positive tax contribution of $727,036,911.

The Tinian investor group has expressed their intent contract its casino operations to the third party, and have said they will not be directly involved in its casino activity.

ACG plans to lease its casino facilities to this third party, and as a result, the casino’s operations, revenues, and expenses would be realized solely by this third party and would not receive a boost from the resort’s requested tax benefits.

In 2019, the group projects hotel occupancy taxes at an estimated $15.27 million paid out to the CNMI government.

Within its first five years, hotel tax payments are estimated at $147.43 million. For a span of 20 years, these payments would total some $1.77 billion.

In 2019, wage and salary taxes are estimated to be paid to the CNMI are at $1.5 million. Within its first five years, this is estimated at some $14.73 million and in span of 20 years it would amount to some $168 million.

Plans

The resort is estimated to cost $604 million within its first five-year construction period. This will need an estimated 5,000 construction workers. The resort estimates the worker’s annual wage and salary taxes to amount to some $2.5 million.

Projecting out toward the goods and services paid out by these workers—assuming half of their gross pay goes to these—the company has tallied expenses of about $31.46 million. Assuming a tax rate of 3 percent, local vendors patronized are expected to pay out some $943,000 in BGRT.

A first year payroll of about $28 million is projected for its 955 employees. And at a projected 30 percent of food and beverage cost of sales, the resort will spend a projected $3.4 million on local vendors.

During construction, the casino resort will need a range of 4,000-5,000 workers. In Year 1 of operation—targeted for 2019—the investors plan to fill more than 80 manager and supervisor positions. About 860 non-manager positions will also be needed. Executives have expressed plans to partner with the Northern Marianas College to set up job training programs for the local population.

For the first 12 months, the resort expects to bring in nearly 312,000 visitors in its first year of operations—an increase of 26,000 visitors per month based on the FY’14 data base, or a 700-percent increase on top of FY 14 3,5000 visitors per month.

Beijing, Shanghai, Guangzhou, Tokyo, Osaka, and Seoul—the resort’s target markets—lie just four to five hours away.

If their $1.2-billion project is realized, the Tinian population would reportedly double or triple. In light of this, the company plans on opening a healthcare clinic on its property, with services also geared to locals in coordination with the government. And on the education end, the group has expressed plans to set up a foundation to award scholarships to Tinian residents who attend the NMC campus on Tinian.

Alter City has also committed to investing some $5 million in airport and ferry dock upgrades to open direct flights to Tinian or restart ferry operations between Saipan and Tinian. This is on top of their plans for a rapid transit system rail across the near six-mile stretch of ocean between the islands. For this project, Alter City projects a preliminary cost of about $657 million.