Existing hotels in the Frederiksted or Christiansted low-tax "Enterprise Zones" will be eligible for casino licenses if they buy more downtown property with a portion of "net" profits from enterprise zone business revenues – if a bill before the Legislature becomes law.
The bill would enable the owner of one or more hotels – and any other businesses within St. Croix's two enterprise districts, to qualify for a casino license by spending 40 percent of net revenues – after taxes, wages and all other expenses from all its Enterprise Zone businesses – on either buying or renovating properties in the Enterprise Zones.
As the bill is written currently, the actual gambling revenues would be taxed normally and not subject to tax breaks. The legislation contains no specific waiver of casino gross receipts taxes, and V.I. law currently specifies that all casino revenues will be taxed "notwithstanding any other law to the contrary."
Businesses would continue to be eligible for the broad Enterprise Zone tax breaks they are already eligible for and, by investing appropriately in the community, be eligible to have a casino license and the revenues that come with it.
Bill 30-0432, sponsored by Sen. Nereida "Nellie" Rivera-O'Reilly, found both firm opposition and strong support during a Committee of the Whole hearing Monday in Frederiksted.
Introducing the measure, Rivera-O'Reilly pointed to the poor economic and dearth of new development on St. Croix.
"This aids existing hotels and helps them to stay open," Rivera-O'Reilly said. “It reinvests dollars directly toward the enhancement of respective town businesses. It increases foot traffic and activity in our towns.”
Casino Control Commission Chairwoman Violet Ann Golden testified in support of the bill, saying she helped to draft it and that it did little more than create a new category of casino license, while giving hotels an incentive to invest not just in their hotels, but in renovating the downtown areas.
Golden described the bill as a "simple amendment ... to add one category to the casino law to provide for hotel development in the enterprise zones of Christiansted and Frederiksted." She also said it would help revitalize the downtown areas. Golden said she did not always support gambling legislation and opposed the 2010 law to allow racetrack slot machines and divert gambling tax revenues from the St. Croix racetrack slot machines to horsemen instead of promoting tourism.
“The commission views the bill before us to add a new category to the casino law as a first step in reviving the historic towns, and we support the inclusion of the historic towns as the impetus for hotel and tourism development on St. Croix," Golden said.
Law professor and gambling industry consultant I. Nelson Rose testified about the limits of casino gambling for development, urging the Legislature to do some studies first.
Rose said the money generated by casino gambling is generally less than hoped for and comes with negative effects as local dollars go into gambling instead of goods and services at local businesses.
"A casino develops about one block," Rose said, adding that he consulted with the town of Windsor, Ontario, on casino development and advised them to go ahead, in part because they had a large, nearby source of customers in Detroit. Locals, by contrast, do most casino gambling on St. Croix, he pointed out.
Rose said he also advised Windsor that their gains would be offset by the need for more sewage treatment, more water, roads and utilities, and more traffic. And casino gamblers do not spend money in shops and restaurants, limiting the benefit.
While not necessarily opposed to this bill, Rose said, "The problem I see with this one, unlike the casino and racino, is this allows people who don't even have cars to easily get to the casino, which will bring in a much poorer clientele. I don't think it will attract tourists."
He urged the Legislature to "do the studies first. Don't rush into something this big and controversial with less than a week."
Shay Roberts, general manager of the Caravelle Hotel, read a letter from owner Sid Kalmans supporting the bill.
"There has never been a time that we needed a plan or project to jumpstart the economy as we do now. Right now we cannot wait for an ‘economic feasibility study’ or any other bureaucratic process. Businesses are closing and there is nothing on the horizon that suggests this situation will change," Kalmans said in the letter.
Divi Carina Bay Casino General Manager Anton Kuipers testified against the bill, saying it was unfair to Divi, which had played by the rules and built hotel rooms, to change the rules to make it easier for other players.
“All we have ever done or asked is that the playing field remain level and that all laws apply equally to everyone," Kuipers said.
He said proponents "are claiming that this bill must pass because something – anything – must be done to save St. Croix and nobody is talking about other ideas. The claim is that, regardless of whether or not this is a bad idea, at least it is an idea so let's run with it. With all due respect ... that is faulty logic."
Kuipers said the spread of casino gambling has reduced its draw, so that it is no more than an amenity for visitors, and the answer for everyone is to attract more tourists rather than try to spread the same casino revenues around more. "We have been good solid corporate citizens who have provided entertainment for the local population and the tourists that come to St. Croix. It is no secret that we have more local players than we do tourists, and right there is the challenge that is facing all of us," he said.
"My suggestion is to invest in our tourism product and drive the demand, Kuipers said.
He added later that, if Jamaica can achieve 80 percent occupancy, there is no reason why St. Croix cannot do better.”
Kuipers also said that just building a casino in a blighted area does not mean they will fix any area other than the casino, and that many studies suggest the area immediately surrounding urban casinos gets worse.
Nadine Marchena Kean, director of the V.I. Economic Development Authority's Enterprise Zone Commission, urged the Legislature to wait and move deliberately.
Kean raised concerns about the bill's requirement that a portion of "net" revenues be invested in the enterprise zones, pointing out that net revenues can easily be manipulated out of existence by changing salaries or making investments. Kean also said the bill did nothing to help develop the towns "outside of the much needed rehabilitation of buildings."
Kean suggested residents do not want a casino, saying that when the EDA held charrettes on the town plans, "the topic of casino was brought up and the community definitively indicated that they did not want casino gaming as part of their community development plan and as such it was not included in the Christiansted Town Plan."
Of the six to seven senators present at the hearing, several said they supported the general aims of the bill, but nearly all said it needed more study and consideration before it comes to a vote.
"I think this is the first step in looking at this legislation," said Sen. Donald Cole. "I need to be informed on whether this will, in fact, produce what proponents say it will," he said.
Sen. Kenneth Gittens said, "I do support the measure but I want to caution my fellow senators to take their time."
Sen. Tregenza Roach said, "I need a lot more time because I do not want to make the wrong decision." He said he appreciated the goal of helping the downtowns but was concerned about making it very easy for the very poorest to gamble.
Roach told an anecdote about a St. Thomas video lottery player taking two dimes and five pennies to the bartender, asking for a quarter because she was convinced the machine was about to pay out.
Sen. Terrence "Positive" Nelson said he did not see the need to rush the bill. Nelson, who said he has a bill to legalize marijuana that is not being heard in committee, said "I'll be damned if you are going to talk about gambling as the save-all for our community and you don't want to talk about marijuana."
"Don't you think your hotel rooms would be filled if we had legalized marijuana?" Nelson asked Kuipers.
"I do, senator," Kuipers replied.
Sen. Alicia "Chucky" Hansen said she opposed the bill. "I think it will stop the hotels we are looking for. ... The reality is, it is not going to deliver. It is going to take away from the existing businesses," she said.
This is the third legislative proposal since 2008 to soften V.I. law to enable a casino in Christiansted. In some respects this legislation is similar to the past two – one in 2008 and a second in 2011 – but it is much less generous than those two proposals, which were both unsuccessful. And those earlier proposals were aimed at benefitting specific businesses that were seeking customized benefits, while this legislation is more generally applicable to any potential downtown hotel owner.
In 2011, a St. Croix development company named Christiansted Renewal Group pushed legislation promising to revitalize the town while promoting a bill giving itself major tax breaks and the right to build a stand-alone casino. While promoters emphasized renovating the town, they did not plan to do so themselves. Instead they proposed that the government allocate casino taxes from their project to revitalization. But the Legislature can already devote any tax revenues to revitalization if it chooses.
That bill, sponsored by then-Sen. Ronald Russell, also said "licensees shall not be required to pay any other taxes and fees on any income derived from the operation of the casino or the rental of property to the operator of the casino." This would have meant the Christiansted Renewal Group development company could have rented out the entire operation to a management company and then kept the rental income tax-free.
In 2008, St. Croix resident John Boyd pushed for legislation to allow a freestanding casino in Christiansted near Gallows Bay. Boyd sweetened his request for a special status as a stand-alone casino by requiring 50 percent of net profits go to "community reinvestment," and another 10 percent to charitable contributions. He also proposed incorporating a number of small stalls for local restaurants and retail stores.
No votes were taken during the information gathering hearing of the Committee of the Whole.