Aug. 22, 2001 – In its first hearing on Gov. Charles W. Turnbull's $551 million executive branch budget for Fiscal Year 2002, the Senate Finance Committee was told Wednesday that the territory's economy is headed for full-scale recovery in the coming year, fueled by increased tax collections and millions in projected and actual private-sector development.
The upbeat economic picture outlined by Ira Mills, director of the Office of Management and Budget, got the senators' attention when he said that "further proof of the economic revitalization in the territory can be seen in the planned construction of the Botany Bay Resort development estimated at $200 million."
Sen. Adlah "Foncie " Donastorg, a vocal opponent of the proposed development, expressed astonishment. He asked Mills, "Are you counting on this investment as a benchmark?" Mills said he felt the potential development should be included in private-sector projections.
Sen. Celestino A. White Sr. lost no time in claiming responsibility for getting the project off its feet. "It's not Turnbull and White," he said, "It's White, and White will do the legislation" to approve the project. He chided other senators for their development projects, claiming Botany Bay as his own. The proposed West End St. Thomas development has come under severe fire from civic and environmental groups on the island.
Mills told the committee that administration initiatives have created an "improved environment poised for private-sector investment." He cited the $75 million Ritz-Carlton Hotel timeshare expansion, the $7.5 million PriceSmart food warehouse, the $100 million restoration of the Yacht Haven Hotel and Marina on St. Thomas and — "most significantly," he said — the $535 million coker construction at the Hovensa refinery on St. Croix.
Although the V.I. economy showed marginal improvement during 2000 and Economic Research Bureau figures show a mixed level of growth, he said, renewed vitality in tourism, service and construction industries points to a "full-scale economic recovery."
Mills said that government initiatives, including the recently created Economic Development Authority, are expected to attract new investment in addition to about $200 million in public-sector project financing and more than $900 million in private-sector spending projects which he said are "either ongoing or slated to begin in fiscal years 2001 and 2002."
He did not elaborate on these projects.
Record tax collection
Also testifying were Louis Willis, director of the Internal Revenue Bureau, and Bernice Turnbull, Finance commissioner.
Willis painted a two-sided picture. He said he is confident the IRB will collect its portion of the revenues needed to sustain the FY 2002 budget. For the current fiscal year, he said, the bureau had collected a record $404.2 million as of July.
However, Willis said, President Bush's tax credit plan has thrown a monkey wrench into his plans. He said he anticipates a decrease of about $9 million in individual income-tax revenues for FY 2002 because of the plan. While the federal program reduces income tax rates for individuals, it has provisions increasing and expanding the child tax credit, relief to married persons and education incentives which benefit taxpayers but negatively impact the IRB's 2002 revenue collections, he said.
But, Willis noted, a reduction in the interest costs for late tax refunds should offset the projected decrease in revenues.
Donastorg wanted to know what formula Willis used to come up with his $100 million tax projections, wondering how a few corporate citizens could create such a "windfall."
In answer, Willis repeated what he has publicly stated since the governor announced the $100 million tax "windfall" earlier this year: Providing the territory's infrastructure remains solid, offering police and fire protection, public education and the other amenities investors expect, the revenue stream projections should remain sustainable.
Under senators' questioning about the federal income tax credit, Willis said, as he has previously stated, that no "rebate" checks will be issued this year. Taxpayers will get a credit on their 2001 taxes on April 15, he said. He claimed this is legal, saying, "The feds do it, too."
Mills said the estimated total revenues of $488 million for FY 2001 represent a 9.1 percent increase over the FY 2000 level of $447.4 million.
He said FY 2001 individual and corporate income taxes are estimated at $304.5 million, 8 percent more than the $254.4 collected in FY 2000; trade and excise taxes are estimated at $19 million, 1 percent more than the $18.9 million for FY 2000; and gross receipts taxes for FY 2001 are estimated at $94 million, up from $93.7 million for FY 2000.
The issue of funding unionized government employees' negotiated salary increases arose as Hansen quizzed Mills, who urged passage of $44 million in the budget's miscellaneous section to provide authority to continue the step increases scheduled for implementation in October.
Property tax issues
Bernice Turnbull was called away from the afternoon session before having an opportunity to elaborate on her testimony regarding personal property tax, or to defend her opposition to extending a six-month property-tax amnesty that ended Aug. 13 — something Hansen has been publicly demanding.
The Finance commissioner said property tax bills for 2000 were not issued in accordance with a law making taxes due on June 30 of each year. Therefore, she said, a new due date must be established. She said she has contacted the tax assessor about the matter. She did not explain how the apparent glitch occurred.
She added, "This means some of the revenues we anticipated, that we expected to receive in FY 2001, will not be realized until FY 2002." She said about $60 million in property taxes would be collected in FY 2002, adding that this is a "conservative number."
Turnbull said about $57 million is outstanding in delinquent property taxes. The department collected about $5.2 million during the amnesty period, she said, noting that "during that time, we could not aggressively enforce collections." However, she said, Finance will have four new enforcement officers on board in the next few weeks, and the department is moving toward a sale of delinquent properties by November.
Mills also spoke against any further property tax amnesty. "It sends the wrong message to the taxpayer who pays dutifully on time," he said. It also inspires people not to pay at all, and just wait for the next amnesty, he added.
Hansen countered that she wasn't interested in corporations benefitting from the amnesty, but just in the average man on the street who lives from paycheck to paycheck and may not be able to afford the taxes now. Mills said his point was not about corporations, but about small business owners who pay their taxes on time. Sen. David Jones said he favored extending the amnesty.
Much work, little time
The budget from Government House arrived at the Legislature on July 16, six weeks after it was due, on May 30. In order to have a budget in place by the start of FY 2002 on Oct. 1, Hansen has scheduled hearings morning, afternoon and evening – on St. Thomas this week, and on St. Croix through Labor Day weekend and on to Sept. 6.
She held hearings for 17 agencies before the budget arrived.
If the pace of progress on Wednesday's agenda was any indication, the hearings could continue until Thanksgiving. The meeting began a half hour late and abruptly recessed an hour later with no public explanation. It was scheduled to resume at 12:30 p.m. and got under way at 1:25 with a brief apology from Hansen, who said it had been necessary to resolve a "problem."
The meeting was adjourned at about 5:30 p.m. due to worsening weather caused by Tr
opical Storm Dean. The committee is scheduled to reconvene at 10 a.m. Thursday, weather permitting.
Still remaining from Wednesday's agenda are testimony from Tax Assessor Roy Martin, a government special funds status report (which may not be available owing to Commissioner Turnbull's absence), a report from the Economic Research Bureau, and an Insurance Fund status report. The posted Thursday morning schedule calls for reports from the Pubic Finance Authority and the West Indian Co.
Finance Committee members Hansen, Donastorg, Carlton Dowe, Norma Pickard-Samuel and Donald "Ducks" Cole attended the Wednesday's meeting, as did non-committee members. Jones, White, Lorraine Berry, Roosevelt David and Emmett Hansen II. Committee members Douglas Canton and Norman Jn. Baptiste were excused.
