City to entice hotel developers through tax exemptions

Nanaimo wants more and better quality hotel rooms near the Vancouver Island Conference Centre.

In an effort to build more and better quality hotel rooms near the Vancouver Island Conference Centre, Nanaimo council passed a tax exemption directed at potential developers Monday.

The 10-year tax exemption would kick in on any new hotel project. It would include only the city portion of taxes collected and would not affect the current tax base.

Nanaimo Mayor John Ruttan said the VICC, which is being subsidized for $1 million annually by Nanaimo taxpayers, is hindered by a lack of quality hotel rooms in the downtown area.

It isn’t operating anywhere close to it’s full potential and as a result, isn’t able to generate the revenue needed to make a substantial profit, he said.

“We have 400 quality rooms in the downtown area with conference quality within one kilometre. The VICC can seat 1,300 people and feed 950 at a sitting and yet with only 400 rooms, we’re limiting the size of conventions that we could attract,” said Ruttan. “People who organize these conferences have one basic question and that is ‘how far are the hotels to the conference centre?’ and without one right there, and without enough rooms available, those organizers respectfully decline.”

Ian Howat, director of strategic relationships for the city, said while a hotel attached to the convention centre is the key target, the exemption will apply to any property zoned for a hotel.

“The intent of the bylaw is to encourage an increase in the quality of hotel rooms in Nanaimo, not necessarily increase the quantity,” said Howat. “Of course, we would like to see a hotel at the conference centre and that is definitely one of the reasons for doing this. When we considered the hotel for the conference centre we felt it was also necessary to offer it to all of the hotel-zoned properties in the city of Nanaimo.”

Howat added that potential developers have indicated a tax incentive would be welcome.

“There has been renewed interest but it remains to be seen whether this bears fruit,” he said.

It’s estimated a developer could save as much as $1 million annually in municipal taxes on a $40-million hotel.

In the city’s ill-fated deal with Millennium/Suro, contracted by Nanaimo’s previous council, land at Maffeo Sutton Park was included for developers to build condo units as incentive. Council recently voided that offer, forcing city hall to find another way to entice developers.

“I think by going ahead with this, we’re demonstrating flexibility,” said Ruttan. “We’re trying to say to the developers that we are prepared to look at options to get it built. Options that I think are financially viable to a builder in my opinion.”

The bylaw only addresses new hotel construction, as well as demolition and reconstruction on hotel-zone properties. It is likely, however, an amendment will be brought forward for council’s consideration to provide an exemption for hotels that undergo major renovations to bring their room quality up to higher standards.

Howat said “more challenging discussion’ will have to take place with the hotel industry before that can happen.