March 23, 2005 – Two members of the Economic Development Commission spoke from opposite sides of the fence Tuesday about a recent tax benefits renewal package approved by the commission for the local phone company.
During a Senate Government Operations and Consumer Protection hearing, called to determine the reason for the renewal, EDC members Randolph Allen and Louis Willis offered opposing views on the matter.
For weeks EDC officials had been tight-lipped as to how and why commission members cast their votes on the Vitelco package, saying the vote was taken during an executive session and therefore was not public information. The controversial 3-1 vote, with one member abstaining, upset some community members, including a few lawmakers, who felt Vitelco, also known as Innovative Telephone, was not entitled to another round of tax breaks.
On Tuesday evening Allen broke the silence. Despite the admonition from other EDC officials, Allen disclosed his vote and his reasoning publicly. When Sen. Louis P. Hill first asked Allen about the vote, EDC legal counsel Rosalie Simmonds-Ballentine interrupted Allen, telling Hill that the information was "off-limits" to the Senate body.
"So board members can hide behind some closed door and vote," Hill asked. "Why should the vote of the board be privileged?"
Hill told Simmonds-Ballentine the Senate doesn't have the privilege of casting votes on legislation in secret and that the public is fully informed about how each senator voted on any given matter.
Simmonds-Ballentine said the rules and regulations of the EDC did allow for secret voting.
Committee chairman Sen. Adlah "Foncie" Donastorg asked if Allen would be "spanked" or face retribution for revealing the information to the senators.
"I am not his mother to spank him," Simmonds-Ballentine said, but added she could advise him, as the commission's legal counsel, not to divulge the information.
After several minutes of bantering between Simmonds-Ballentine and the senators about the law, Allen simply said, "I voted no."
Allen revealed he was the sole commission member to vote against the Vitelco renewal package.
In response to questions from Donastorg about why he voted against further benefits for Vitelco, Allen said the recommendations for the telephone company's benefit package were not favorable, in his opinion.
"I didn't see anything in the staff report that made approving the package justifiable."
Allen further said that Vitelco wanted to make its benefit package retroactive to the time the previous benefits expired, and "that really bothered me." He added that Vitelco's funds were "co-mingled" with other subsidiaries of Innovative Communications Corp., and the telephone company's application included employees that worked for other Innovative subsidiaries as well, and that influenced his decision.
Customer representatives for the telephone company, for example, also handle accounts for consumers with cable television accounts since ICC moved its St. Thomas business offices for the subsidiaries into one office space above Office Max in Tutu, Allen said.
EDC member Willis, spurred on by Allen's disclosure, said that he voted in the affirmative for the telephone company.
"I voted for the Virgin Islands Telephone Corporation," Willis said, and not for the parent company ICC. He added the benefit package only applied to the phone company and not to any of the other ICC subsidiaries – Innovative Cable, Vitelcellular, Virgin Islands Daily News, or Cable TV 2.
Public Services Commission Chairman Valencio Jackson, who was also present at the hearing to answer questions, said the utility had told the PSC previously that they would not apply for a renewal of the tax benefits. Vitelco was then informed that if it did seek the renewal, company representatives had to come before the PSC first. But they didn't, which raised the ire of PSC members at the time the application was revealed
Because of Vitelco's statement that it did not intend to reapply for EDC benefits, the PSC approved a rate increase for the company last year, Jackson said, and would now have to conduct another rate investigation if the benefit package was "substantial."
Willis, in explaining his vote, said, "See, they have to go back to the PSC. What happens after that is the rates for telephone will go down in the territory."
Willis said, knowing this, he granted his yes vote. Willis said he was looking out for the community because he knew the utility's rates would go down by granting them the benefits.
His statements were met with an eruption of laughter among senators. Donastorg reminded Willis that Vitelco had been a beneficiary for 10 years and prices kept going up.
"The company came to us and said they would pay 100 percent of corporate taxes," Willis said, in further explaining his vote.
Donastorg asked him how were the senators to know what Vitelco wanted or was being granted when the EDC did not want to reveal that to the public.
Willis said the company was offering to pay all its corporate income taxes while receiving 100 percent exemption on gross receipts, excise taxes, property taxes and a 1 percent exemption on customs duties. He added the corporate income taxes represented about $8.8 million of the $15 million total that would be realized by the government each year if Vitelco paid all its taxes.
The benefits would be retroactive to Oct. 1, 2003.
Both Donastorg and Sen. Celestino White asked Willis what the government would receive in exchange for those benefits. Willis said Vitelco would employ 350 people, a reduction from the 421 employees under the previous benefit package, and invest $75 million in the territory, a reduction from the $100 million investment required under the previous agreement.
White said the contributions are basically the same as the previous agreement, in fact, reduced in some instances, and said he didn't see why the government wanted to accept the package.
White asked Willis if Gov. Charles W. Turnbull had called during the executive session to influence the vote.
Willis said he received a call from the governor telling him to attend the meeting and "vote the right way."
White said he understood that several of the other government officials on the commission got calls from Turnbull as well. He asked Allen, who is an official with the United Steelworkers of America, whether Turnbull had called him.
Allen said he did not receive any calls from the governor.
Under questioning from Hill, Willis refused to say whether Vitelco had paid any taxes since the company told the EDC they would not apply for renewed benefits.
Willis said that information was privileged.
Senators asked Willis and Allen whether the EDC staff had provided information about Vitelco's violations to them before the vote. Willis said yes, but under further questioning could not remember what the violations were.
Frank Schulterbrandt, Economic Development Authority chief executive officer, told the senators Vitelco was fined $500,000 for the violations, which included failing to meet employment requirements.
Sen. Terrence "Positive" Nelson said he didn't feel the fine matched the violations. "If you are going to give penalties," he said, "see to it that the residents are protected." He said even though the EDC is getting $500,000 how does that translate back to the ratepayers. It was revealed at the hearing that Vitelco failed to pay unemployment insurance during the benefit period, among other things.
Donastorg moved to subpoena the other EDC members along with ICC vice president Samuel Ebbesen who failed to show up for the hearing .Hill amended the motion to also subpoena David Sharp, Vitelco president. The motion, as amended, passed with a 5-0 vote.
Committee members present at the hearing were: Sens.
Liston Davis, Donastorg, Hill, Juan Figueroa-Serville, Shawn-Michael Malone and Nelson. Malone was absent from the floor at the time of the vote. Sen. Ronald Russell was excused. White, who is not a member of the committee, was also present.
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