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Phone Company Tax-Benefit Foes Gathering Strength

Nov. 30, 2004 — Local attorney Maria Tankenson Hodge on Tuesday urged Economic Development Authority Chief Executive Officer Frank Schulterbrandt to disapprove Innovative Telephone's renewal application for tax benefits.
The EDA will host a public hearing on St. Croix Thursday to take public testimony before considering the telephone company's request for an extension of its benefits under the Economic Development Commission program.
Hodge wrote a letter to Schulterbrandt she is requesting be read into the record at that meeting, and the Source obtained a copy of it.
"At this time, there is no justification to give the company another tax exemption," Hodge said in the letter.
Innovative received tax breaks from the government under the EDC program for several years: from October 1998 when it was known as Vitelco until its benefits expired in September 2003.
According to Hodge, before Vitelco itself began receiving EDC benefits, its parent company was granted benefits as an incentive to build out the phone system in the Virgin Islands, and, in that grant, the company was given an exclusive franchise – a monopoly – on land-line telephone service in the Territory.
"I believe the record will confirm that this single company has received – directly or through its parent company – tax exemptions going back more than a quarter of a century," Hodge said.
Hodge stated further that the Public Services Commission, which regulates the telephone company, has set Innovative's rate of return and ensured the company will make "above and beyond" what it would pay out in taxes.
"For this reason, Vitelco does not need an exemption from taxes to be encouraged to make appropriate capital investments in the Virgin Islands," Hodge said. "Every dollar it invests is, by law, entitled to a reasonable return, including a profit over and above the taxes it pays. That means that the present phone bills paid by customers in the V.I. are reimbursing Vitelco for all the taxes it should pay the government of the V.I. – income taxes, property taxes, etc."
Hodge said further, "There is no reason whatever for the EDC to allow the phone company to avoid paying these taxes to the government that so desperately needs the revenue, when the applicant is already being fully reimbursed for these very taxes."
Hodge requested that Schulterbrandt read her letter into the record at the Thursday hearing because she will not be able to attend due to previous engagements.
Since the company applied for an extension of its benefits earlier this year, its request has been met with staunch opposition not only by Hodge, but several senators and even its own regulatory body, the Public Services Commission.
Innovative's renewal application was held up because of its failure to comply with some of the previous terms of its benefits. The telephone company has since settled with the EDC for its noncompliance but was told a public hearing first had to occur before a renewal could be granted. (See "Senators Oppose EDC's Settlement with Innovative").
Sen. Louis Hill is one of several legislators opposed to a renewal of Innovative's tax benefits. Hill said Tuesday because the telephone company is a monopoly and is given a "guaranteed rate of return" by the PSC, it should not be allowed to receive tax benefits.
"Clearly the company is being used to expand the owner's [Jeffrey Prosser] business ventures," Hill said, referring to a recent move by the telephone company to sell $81 million in preferred stock, some of which was loaned to the parent company Innovative Communications Corp. for the purchase of a telecommunications company in Belize. (See "Stop Spending Stock Proceeds, Phone Company Told").
Hill said the money should have been used to improve service to the territory's ratepayers.
"The service that the company is giving right now is terrible," Hill said. "I think it is absolutely wrong that the company is now coming back for a renewal.
Hill said he would be attending Thursday's meeting and would express his views to the EDC.
Sen. Adlah "Foncie" Donastorg, who has previously expressed strong opposition to Innovative's renewal request, did not return calls Tuesday on whether he would attend the hearing.
The PSC has also opposed Innovative's bid for a renewal of its tax benefits. The company had told the commission last April that it would not renew its benefits. Based on this, Innovative was allowed a rate increase.
In July, the PSC voted to inform the EDC that the rate increases were given based on the commission's belief that the telephone company would not seek a renewal. (See "PSC Irked by Innovative Bid to Renew Tax Breaks").
PSC Commissioner Valencio Jackson said Friday evening he had not been aware that a public hearing was scheduled, and he would make plans to attend.
"If the renewal is granted," Jackson said. "The PSC will have no choice but to proceed with a rate investigation."

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