Abercrombie and a contractor debate
a request for city and state tax waivers
The Army should yank a $7 billion Army housing contract from the winning bidder if the company continues to "extort" state and city tax exemptions to finance its construction costs, said U.S. Rep. Neil Abercrombie.
"If the private developer can't fulfill their obligations, just as any contract with the city or for the state, for that matter, then you go to the next bidder," Abercrombie told the City Council's Budget Committee yesterday.
But a spokesman for Actus Lend Lease said the company is seeking the tax breaks not for its bottom line, but to provide additional amenities for military families.
"Our fees are fixed with or without the waivers. The money that the waivers will provide will go toward quality-of-life issues such as new community centers, such as new swimming pools," said Ryan Mielke, regional communications director. "It's very disheartening to read and to hear any kind of language that might lead people to believe that we would do otherwise."
Actus won the bid to construct, renovate, operate and maintain 7,700 military housing units for the Army during the next 50 years.
Abercrombie testified by telephone from Washington, D.C., on a Council bill that would make it clear that a contractor who develops and retains possession of federal property would be responsible for the real property taxes.
Abercrombie said he is concerned that Actus "low-balled" its original bid to undercut other competitors and is now trying to gain state general excise tax and city property tax exemptions to finance construction. The waivers were originally designed to help finance post-construction operations and maintenance.
Abercrombie sent documents to the Council, which he said illustrates how the company is now trying to reduce its original bid by 2,000 housing units if it does not get waivers for state general excise taxes and property taxes. In its original bid, the company said it would pay those taxes.
Mielke said that if the company does not get the waivers, there might be construction delays but no loss of housing units.
Mielke also noted that the company did not get the bid solely on price. "I think what won this project for us was the quality of homes that we're bringing to these families," he said. "We have a demonstrated track record. We're not Johnny-come-lately."
He said besides working on mainland bases, the company has built more than 1,000 military homes in Hawaii.
"Whether the waiver and the benefit of that waiver is realized in the construction phase or throughout the 50-year period ... that recurring waiver of benefit would go toward everything, whether it is maintenance, whether it is operations, whether it is a new community center," he said.
The Budget Committee approved the bill, which now moves to the full Council, and members expressed concern about the effect some of the privately developed homes might have on city services.
But Mielke said that there are no plans to use city services.
"Property taxes are typically given for fire, police, refuse pickup. These (military) projects don't get city and county services. ... Those will be paid for by the project, by us," he said. "So if we don't get the waivers, we're still going to provide them."