Downtown property owners will be able to receive both a repayable grant from Northern Development Initiative Trust and an exemption from property taxes from the city under a new agreement.
Approved by city council on Monday and by the NDIT board of directors in mid-December, the agreement resolves a conflict between the two after NDIT expressed concerns about the city putting $3.2-million towards the Marriott hotel project.
NDIT declined to provide an additional $1.8 million due to the risk of not recovering those funds should the owner stop paying property tax. Under the new terms, the city has agreed to become fully liable for any outstanding money owed if the owner stops paying.
Property owners may now apply for both the grant, called an "early benefit," and the tax exemption, provided the total sought does not exceed the maximum total value of the exemption calculated for the property.
They can also apply solely for one over the other and of the two, the grant from NDIT is probably more advantageous because the property owner gets the money up front. The benefit of the tax exemption is that it's spread over 10 years.
However, the city remains limited to a $5-million allotment from NDIT for the grants. Moreover, $1.6 million had gone to other projects, leaving $3.4 million in the pot, NDIT spokeswoman Kim Hayhurst confirmed Tuesday.
Planning and development manager Ian Wells provided an example of how the new process works during Monday's meeting.
"If the property owner is entitled to a $200,000 tax exemption in the first year, if you took that over 10 years, that would equate to $2 million," Wells said. "So, the owner with this proposed change would have the ability to take $1 million-dollar early benefit and the other $1 million over the 10 years at $100,000 a year."
The city will no longer have the ability to extend payments to NDIT beyond 10 years if the taxes collected are less than the amount owing to the trust, Wells added. The city must also pay the money back in equal payments over the 10-year period.
Estimates have shown the Marriott could qualify for as much as $5 million worth of breaks.
Council voted unanimously in favour of the revised agreement, which was included in the city's agenda package as an additional item.
"I like the clarity of this and the simplicity of the way it's been worked out," Coun. Susan Scott said.
In a statement, NDIT CEO Joel McKay said the new arrangement works for both sides by allowing the city "flexibility to provide incentives to attract investment," while also ensuring the grants are repaid.
"The amended agreement is an example of the strength of the relationship between the City of Prince George and the trust, as well as the benefit of a flexible approach to supporting the economic growth and resiliency of our region," McKay said.
