Government Prepares Condominium Tax for St.Maarten
Serene sanctuary. Natural play-ground. Stunning ocean views, timeless beauty. One of the world's most desirable and beautiful destinations. An island of exceptional treasures. These are some of the catchy phrases real estate developers use to attract potential buyers id investors. But will St. Maarten still be able to live up to all these nice descriptions once developers have finished constructing all these resorts, luxurious condominiums and villas? Some people, like Jadira Veen of St. Maarten Pride Foundation and real estate broker Peyton Cromwell of REMAX, are warning: this is going too fast A moratorium on large projects is needed, they say. Developer Marc Erato suggests a rest time for future large projects "to let the dust settle bit." Sources say Government is working on a condominium tax to mitigate the negative effects of the additional development.
We have to halt development for 15 years for nature to catch up and to give us time to fix our problems," said Veen. She was mostly referring to the already over loaded infrastructure, a concern of many on the island of St.Maarten. "We first have to fix our challenges: sewage, garbage, traffic and environmental issues. “We have to beautify our tourism product” said Veen. “I support a moratorium on new development until the infrastructure is up to par and can carry more," said Cromwell.
TOURMAP, the 2005 Tourism Master Plan, stated a similar suggestion. In the section "Key strategies" the makers of Tour Map mentioned discouraging of further development of accommodation in short/medium term other than in a limited number of locations. "In view of the sizeable incremental increase over the next five year period, the short to medium term (3 to 4 years) should focus on discouragement of large scale tourist accommodation developments, particularly in the Simpson Bay - Lowlands areas." An exception could be made for a five-star flagged integrated resort property, which would have to meet rigorous environmental conditions. In addition, it was stated in Tour Map, incentives should be provided for physical, operational and environmental upgrading. St. Maarten should become a more environmentally attractive and exciting destination, also because the island's visitors in the future will tend to be more environmentally and socially aware.
THE CARIBBEAN is one of the key worldwide villa/condominium destinations, with the demand for private villas for vacation stays increasing by almost 34 per cent in 2004. Tour Map of 2005 said about that development: "There has been significant growth in the development of villa accommodation in St. Maarten, limited only by the scarcity of suitable land. The growth in villa developments has the potential to have a negative environmental impact, placing strain on existing infrastructure and causing traffic congestion." Many of these villas and condominiums are rented via real estate agents to third persons when the owner is off-island. The annual rental revenue is estimated at US $8.6 million, catering to at least 10,000 visitors.
MARC ERATO, whose family developed Rainbow Beach Club in Cupecoy and Aquarius in Red Pond/ Gibbs Bay, said sales have been going fairly well. Aquarius has 280 condos, of which some 130 have already been sold. The 150 condos of Rainbow Beach Club have already been sold out for 2.5 years. Erato said the real estate market currently was a "bit soft," just like in most places of the world. He said the slump in real estate in the US would also affect St. Maarten, since some 90 per cent of the owners are US based. Erato anticipated that the market would improve again in 2009. Then more condos, timeshare and other real estate will sell well again. "There will be demand. That is how it always is," he said, referring to the several cycles of high and low demand that he has witnessed over the past years. He said the peak was three to four years ago. Infrastructure, apart from the airport, hasn't grown along with the economic development. Erato called the infrastructure "far from sufficient" and said it was bothering visitors. Asked if there was too much development going on, he cautiously suggested a halt on future large projects. "There should be a rest time. Get the current big developments out and then let the dust settle a bit. Let the infrastructure catch up and the market too." DEVELOPERS should help, said Daunesh Alcott of Century 21 and spokesperson for the Indigo Bay project in Cay Bay. He explained that Indigo Bay is trying to help government deal with the traffic congestion. Therefore the developer has donated land for the construction of Link 1, Phase 3. "Government is cash strapped and if developers are benefiting from the island, they should also be responsible to invest in the socio-economy. Link 1, Phase 3, once completed, will benefit everyone, Alcott said.
RE/MAX's Cromwell, a real estate broker with more than twenty years experience, suggested an impact fee. "This kind of fee is charged in most places in the world. It helps to pay for the infrastructure," Cromwell explained. The fee could be based on the value of the building permit fee. "The bigger you are, the more you have to pay. Developers have to contribute. It should become law immediately," he said.
Reliable sources within government say that legislation for a condominium tax is being prepared to make sure that visiting condominium and villa owners and investors contribute in some form. On the level of the hotels and resorts, a timeshare tax and room tax are already being charged. "There are no taxes on condos and villas to speak of," said Veen of St. Maarten Pride. "They pay nothing and are of no benefit, especially when considering that the development on prime property, mostly for non-residents, snatches up land which could be used for local people."
THERE IS much interest in St. Maarten, said Cromwell. "We are very well-placed in the market." Giving his vision on developments, Cromwell said that in 2003/2004 prices of real estate went up considerably. In the previous eight to nine years the value had increased 5 to 6 per cent per year. "It went up suddenly and between 2004 and 2007 it jumped up even more," he said. The average price of a condominium ranges from US $750,000 to over 3 million. "We used to be the regular guys, while St. Barths and Anguilla were for the millionaires. Now, those islands are for the billionaires and we are for the millionaires." At this moment things are a bit stable, with more supply on the market than demand.
DAMIR BRDJANOVIC, Associate Professor in urban sanitation at UNESCO-IHE, the institute for water education of the United Nations Educational, Scientific and Culture Organization is worried. "St. Maarten's infrastructure is not even sufficient to support the existing level of development and urbanization." Brdjanovic, the team leader of the evaluation of the GEBE and Intaquin proposals for an integrated water treatment system on St. Maarten, called the current water supply rather satisfactory. "But," he pointed out, "the desalination plant in Cay Bay has been running at its maximum capacity for a few years and the situation in the sanitation sector is poor. Coverage with sewerage is only 20 per cent, the wastewater treatment plant on A.Th. Illidge Road is overloaded and poorly performing. The storm water system is insufficient and solid waste management has some serious issues that need urgent solving," he said. He qualified transportation and mobility as a "real problem."
RESILIENCE is another factor that needs to be taken in consideration. Prof. Brdjanovic said how much more to build, or how much could be built without seriously affecting the resilience of the system was difficult to pinpoint, especially without a study. "Resilience is very interesting, as it can be compared to filling a plastic cup with water: you cannot see the level until suddenly the spill happens. One can think that the ecosystem can accept more and more development, until suddenly the system reacts dramatically. Often then it is too late to execute any efficient mitigation measures. I would say that the cup is more full than empty in St. Maarten's case." He argued that any new development which is not truly integrated will just be "another drop in the plastic cup." The extra people being brought in to do the construction work add even more pressure on the already fragile infrastructure, said environmentalist Veen.
Realtor Cromwell said about the importance of having a decent infrastructure: "It is a must. Without that, we will collapse."
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