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February 01, 2005
State of the Territory Address tonight
A year ago, Gov. Charles Turnbull declared the Virgin Islands' economy in initial stages of recovery and said with "cautious optimism" that better times were ahead in his State of the Territory Address.
Turnbull trumpeted the Economic Development Commission tax-incentive program as one of the "key elements in our fiscal recovery plan." The program lures businesses to the islands with attractive tax breaks - up to 100 percent of personal income taxes.
"In addition to creating good paying jobs for our young people with business and accounting degrees and generating substantial revenues for the government, the EDC program is continuing to have a positive effect throughout our economy," Turnbull said.
What a difference a year makes.
In October, both houses of the U.S. Congress passed a bill that brings strict new residency and source of income rules to EDC beneficiaries. The rules state that business owners must spend 183 days a year in the territory and that all money made on the U.S. mainland would no longer be eligible for the tax breaks the program provides.
Months later, the impact of those new rules looms as an ominous question mark. The territory is waiting on the results of an economic analysis from PricewaterhouseCoopers.
Turnbull, local politicians and EDC representatives have been in close contact with the federal government, hoping to persuade the U.S. Treasury Department to create exceptions to the new rules that are favorable to the program so that beneficiaries do not leave the territory. At least four businesses have indicated to the V.I. Labor Department they will shut down operations in the territory because of the changes in the law, according to documents released last week.
In tonight's State of the Territory speech, Turnbull is sure to address the economic impact of the changes to the EDC laws and may have numbers to back up his analysis. On Friday, Government House spokesman James O'Bryan Jr. was tight-lipped about what the governor may say, but he promised Turnbull will not beat around the bush.
"He is going to be straightforward and frank," O'Bryan said.
The territory's economic condition historically has dominated Turnbull's State of the Territory addresses, and this year should be no different.
In April, Turnbull presented a sobering budget forecast to Democratic senators. The analysis, prepared by Banc of America Securities, projected that the territory will have a $92.4 million deficit by the end of Fiscal Year 2005 - including a $9.5 million General Fund shortfall.
"Reliance on one-time revenue sources and long-term debt are not sustainable solutions," Turnbull wrote. "Tough choices must be made immediately to prevent acute financial distress in the future. We must substantially reduce the cost of government operations."
The FY 2005 budget attempted to do that, with Turnbull trimming his proposal to $565 million - $25 million less than he proposed for the FY 2004 budget. Three new taxes were included in Turnbull's proposal, all of which were taken out by the Senate.
The Senate passed a $607 million budget, which was signed into law - except for about $10 million for negotiated raises for unionized government employees and V.I. Legislature staff. With the uncertainty caused by the changes to federal laws governing the EDC tax incentive program, Turnbull said the territory may not be able to sustain the raises.
All of the financial news in the last year was not bad, however. The Federal Emergency Management Agency forgave the territory's $185 million loan for damages caused in Hurricane Marilyn in 1995, and Internal Revenue Bureau Director Louis Willis said that tax collections are improving.
With economic decline, increasing jobless rates, high crime, mixed messages on government tourism promotion and a perception among residents of government apathy, the future of St. Croix is likely to consume a large portion of Turnbull's speech.
Though many of the issues that face St. Croix are not new, voters in November brought the island's plight to the forefront. Four of the seven senators representing St. Croix are new, and the freshman at-large senator won his seat from St. Croix votes. The 26th Legislature is setting St. Croix's concerns at the top of their agenda, and talk of re-energizing the island is on the lips of the territory's policymakers.
Last year, Turnbull trumpeted more than $45 million in expected capital projects coming to St. Croix in his State of the Territory Address. Many of these projects, including road repairs and the restoration of Times Square, are under way or completed.
However, road repairs are not a solution to the island's flagging economy. According to the V.I. Bureau of Labor Statistics, St. Croix's unemployment rate was 10.1 percent in November - 2Â percent higher than that on St. Thomas.
Tourism, while slowly increasing on St. Croix, is nowhere near the volume on St. Thomas. The lack of a comprehensive plan from the V.I. government to bring more cruise ships to St. Croix - as they promised to provide to the Florida-Caribbean Cruise Association in 2001 - has raised suspicions about the government's sincerity in efforts to reinvigorate tourism.
Turnbull, a former Education commissioner, is sure to praise the territory's public high schools for being close to regaining accreditation.
In late 2004, two of the territory's high schools - Charlotte Amalie and Ivanna Eudora Kean - received approval for reaccreditation from a visiting team of academic professionals representing the Middle States Commission on Secondary Schools. Central High School and St. Croix Educational Complex will host Middle States visiting teams this year.
While getting closer to accreditation is praiseworthy, educators, students and parents have loudly protested the physical condition of the schools and department-wide policies throughout the last year. The education community spent much of the last year trying to get Turnbull to notice their plight.
Most recently, protests over the condition of facilities shook Addelita Cancryn Junior High School. A written response provided completion dates for two short-term projects at the school, but left out several long-term problems - such as rebuilding classrooms destroyed by arson in November.
Cancryn is not the only school that has expressed problems to Turnbull. Educators and students from Kean marched on Government House in October to protest the lack of an alternative education program for troubled students. Several other schools had unscheduled days off this year because of sewage on campus or transfers of educators.
Turnbull is likely to mention the territory's ongoing war on crime but having recently vetoed a comprehensive bill to bring major reforms to criminal justice, he will have to be careful in choosing his words.
At the close of the 25th Legislature, senators unanimously approved the Omnibus Justice Bill of 2004, which would have established a panel of civilians to review allegations of serious crimes against law enforcement officers and update laws regarding stalking, child pornography, drunken driving, drugs, child custody and human trafficking. Turnbull vetoed the entire bill, saying several sections "are in need of additional fine-tuning."
Meanwhile, crime in the territory is on the rise, going against the downward trend of violence in the rest of the United States. According to recent statistics from the Federal Bureau of Investigation, violent crime in the territory rose 13 percent in the first half of 2004. In the rest of the country, violent crime fell 2 percent.
Looking at all of 2004, violent crime was on the upswing. In 2003, the territory saw 30 homicides, 134 robberies and 44 shootings. Last year, there were 36 homicides, 153 armed robberies and 68 shootings, according to statistics compiled by The Daily News.
The one thing that has soundly improved territorywide in the last year is tourism, and Turnbull is sure to talk about the increasing numbers of visitors.
According to recent statistics from the V.I. Bureau of Economic Research, more than 2 million people visited the territory during the first 10 months of 2004 - an 11.3 increase over visitors in 2003.
Cruise ship calls, passengers traveling by air and hotel occupancy all are on the rise territorywide. Biweekly Danish charter flights to St. Croix starting last year have helped boost that island's air visitors and hotel occupancy.
Several long-awaited capital projects are finally on their way to completion, and Turnbull will certainly recap their progress.
After many years, the V.I. Waste Management Authority is finally a reality. The authority is responsible for the territory's waste disposal systems and is in charge of compliance with federal mandates to upgrade the territory's solid waste and sewer systems. To bring the territory into compliance with federal mandates, Turnbull signed a $123 million contract with VWNA Caribbean in April to design, build and manage two new wastewater treatment plants on St. Thomas and St. Croix.
The former Yacht Haven Hotel, a dilapidated eyesore on St. Thomas for almost a decade, is finally being rebuilt. Property owners IN-USVI began demolishing the Havensight site's six buildings in March to make way for a more-than $150 million hotel-marina project.
The Christiansted boardwalk extension, giving seaplane passengers arriving on St. Croix easier access to the downtown area, is in progress. The Crown Bay Cruise and Commercial Center is on target to be ready for businesses in May. The long-awaited dredging of St. John's Enighed Pond also should be finished this year.
Posted by afinta at February 1, 2005 09:43 PM
