Feb. 12, 2003 – After more than eight hours of often tense and emotional debate Wednesday, the Senate voted to let the government send out corrected 2001 commercial property tax bills now, despite a pending court challenge of the basis for assessing property; authorized funding for St. John's VITRAN bus system; and, after two years of pleas from Gov. Charles W. Turnbull, finally allowed executive departments and agencies to operate on lump-sum budgets.
The lawmakers soundly defeated a section of the lump-sum budget bill calling for deletion of the word "unionized" from a $4 million appropriation in the Fiscal Year 2003 budget for executive branch salary increases.
Turnbull called the session to consider two bills. One was to direct the Tax Assessor's Office to calculate commercial property taxes for the years 2001, 2002, 2003 and 2004 on the basis of the 1999 assessment, with the next valuation of such properties to occur in 2005.
The tax bill is intended to ease the collecting of commercial property taxes while a challenge to the territory's manner of assessing real property values for taxing purposes is before the District Court. Final documents in that case are to be submitted to Judge Thomas K. Moore next Tuesday, Attorney General Iver Stridiron said on Wednesday.
The lump-sum budget bill will give heads of departments and agencies discretion in allocating resources within their overall budgets, something Turnbull sought in vain on repeated occasions from the 24th Legislature as its Finance Committee, chaired by Alicia "Chucky" Hansen, dictated line-item budgets. This constraint, spelling out how much money could be spent for what, forced agency heads on numerous occasions to return to the committee hat in hand to request the reallocation of funds within their appropriations.
No 2001 commercial property tax bills have gone out due to concern that another court case, V.I. Berne Corp. et al. vs. Government of the V.I., which was settled in December 2000, prohibits the issuing of such bills until the tax assessor develops and implements uniform appraisal standards. (See "3-year freeze on property assessments proposed".)
Finance Commissioner Bernice Turnbull said on Wednesday that the FY 2002 tax bills could bring in $10 million to $11 million, money the government sorely needs to replenish diminishing funds. Speaking before the Senate session, she said revenues have improved since a January session where she had said a payless payday could loom on the horizon. "That's not there now," she said.
Lawyer: System overhaul is the answer
In a letter to Sens. Lorraine Berry and Shawn-Michael Malone, attorney David Bornn, who represents one of the plaintiffs in the current tax assessment court case, warned that passing the governor's legislation "will do nothing more than rearrange the deck chairs on the Titanic."
He said: "The only way to avoid a monumental court decision and takeover of the assessment system is to commit serious funding to overhaul of the system itself. This requires completely different legislative action."
According to Bornn, "The soon-to-be issued ruling of the court could affect and enjoin collection of all property taxes based on its concern that the entire system of tax assessment is erroneous and fails to determine and apply actual value to property tax assessment."
Both Berry and Malone voted in favor of the governor's measure on Wednesday.
Stridiron vehemently disagreed with Bornn's views. He said there would be no violation of the current settlement agreement, and that the government can continue sending out corrected commercial real property tax bills until such time as new guidelines are implemented.
Sen. Carlton Dowe asked why the government didn't wait for a decision in the current court case. He said some tax cases date back to 1994 and wondered how they could be considered based on a 1999 assessment.
Stridiron said property owners disputing their bills can appeal to the Tax Review Board, no matter the year. He said there should be no reason that using the 1999 assessments would "run afoul of the judge's decision."
Inability to collect commercial property taxes is causing the government a shortfall of millions of dollars. Tax Assessor Roy Martin said at a budget hearing last July that there are about 1,500 commercial property owners in the territory. Tax revenues for commercial property assessed on the basis of replacement value would be $9 million to $10 million this year, he said, but under court-ordered assessment on the basis of market value, they could be as little as $7 million.
Martin said on Wednesday that the estimated property taxes for 2001 total $58.6 million, including an estimated $10 million from commercial property taxes and $12 million from Hovensa. He said his department is implementing improvements in collection, but it's a "time-consuming and expensive process" which may take until 2005 to complete.
The tax assessment bill passed on a vote of 13-1, with Sen. Celestino A. White Sr. voting against.
OMB director: "Unionized" not "all-inclusive"
The governor's request that the word "unionized" be deleted from a $4 million appropriation from the FY 2003 budget brought fire throughout the long day. Ira Mills, director of the Office of Management and Budget, and Karen Andrews, the administration's chief labor negotiator, said the measure was intended to cover all affected employees, union and non-union, classified and unclassified, a total of between 900 and 1,000 persons.
Specifically, they said the raises have already been given, and the money is needed to fund them. Mills said the funding is needed to satisfy all union agreements and non-union salary increases. He said raises were negotiated for various categories of government workers after the administration submitted its FY 2003 budget — for practical nurses, corrections officers (Seafarers International Union), enforcement officers (United Steelworkers of America) and security guards (Seafarers International Union de Puerto Rico).
"At no time" would the administration be taking away money from the unionized employees, Mills said. It requested the word "unionized" not be used as it is "not all-inclusive for affected employees."
At issue with the senators was the fate of raises negotiated with the firefighters union. Andrews had announced in January that they could not at present be funded.
Gov. Turnbull signed a bill passed by the 24th Legislature in its last session, on Dec. 23, which appropriated $3.6 million from the Indirect Cost Fund and $2.5 million from the Industrial Development Fund to cover increases negotiated with the following bargaining units:
– International Association of Firefighters – supervisors, $400,000.
– International Association of Firefighters – firefighters, $1.9 million.
– United Steelworkers of America – various departments and agencies, $3.8 million.
However, in his cover letter to then-Senate President Almando "Rocky" Liburd, the governor said he was "not in favor of raiding the Indirect Cost Fund to support non-federal salary increases for which this government lacks resources, because it jeopardizes all federal programs."
Although senators questioned Andrews and Mills over and over again throughout the daytime session, they appeared dissatisfied with the answers received. Finally, White made a motion to allow Luis "Tito" Morales, Central Labor Council leader, to testify, although he was not listed on the agenda as a witness. On a 7-6 vote, Morales was allowed to make his case.
Morales reiterated pleas to fund raises for the firefighters.
Mills said "the heart of the issue is the Indirect Cost Fund." He said: "Last December at a meeting with federal age
ncies including Education, the Indirect Cost Fund came up. The federal agencies asked the Inspector General to review the fund. The federal government's position is that the fund traditionally is primarily to assist federal programs and agencies using them. It's a major issue we have to review within the department."
Senate President David Jones said the funding sources must be valid. "The Legislature in its desire to assist in funding the negotiated contracts identified the Indirect Cost Fund, which cannot be used," he said. We have to revisit the issue and find an alternative funding source."
Mills insisted he didn't wish to treat one group ahead of another in funding pay raises, to which Jones agreed. "We shouldn't discriminate," the Senate president said, "but the issue remains whether the $4 million can be used for those contract from the Dec. 23 session" — the firefighters' contracts.
Mills said the only way would be "to roll back salary increases for union and non-union employees which are already given. You'd be taking from some and giving back to others."
Jones said the funding source isn't "credible." Mills reiterated what he had been saying all day: "Again I think you have to recognize where we are at this point. We have $532 million in projected resources, with $587 in obligations."
Responding to a query from Berry, Andrews said it would take $7 million to fund all pending negotiated contracts.
Sen. Louis Hill stated several times that the entire salary system needs to be examined and restructured, since it is fraught with inequities. Sen. Adlah "Foncie" Donastorg agreed, questioning the wisdom of the government committing to raises for union employees, then leaving them with nothing.
The measure was defeated on a 9-5 vote. Sens. Douglas Canton, Roosevelt David, Jones, Luther Renee and Ronald Russell voted in favor. Sens. Norman Jn Baptiste, Berry, Donastorg, Dowe, Hill, Liburd, Malone, Raymond "Usie" Richards and White voted against.
The senators approved the measure allowing funding for VITRAN buses on St. John to remain available until expended. On an amendment by David, they increased the funding to $1.2 million from $700,000.
Toward the end of the session, Richards was named minority leader in a resolution introduced by White and approved by Jones.
All senators were present except for Emmett Hansen II, who was excused.
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