Oct. 6, 2005 A bill to provide $7 million in startup loan financing for the construction of the University of the Virgin Islands' Technology Park on St. Croix generated some concern from the Senate's Finance Committee on Thursday. While all senators were in favor of the bill, issues were raised about how long it would take to construct the park, since the project has been in the works since 2001.
Sen. Usie R. Richards, the bill's sponsor, said the Legislature had already provided three appropriations totaling about $5 million for the park in previous budgets, but nothing has happened yet.
Malcolm Kirwan, the park's executive director, said $4.5 million of that money has been allotted from the Office of Management and Budget, of which $2 million was spent on legal and administrative services, master planning procedures and other start-up activities.
Kirwan added that about $2 million is still available to be spent, but he also said beginning construction on the park is contingent upon the $7 million loan. UVI is looking into alternative methods of financing, such as federal grants or private sector employment, but Kirwan pointed out the loan was suggested by the Legislature in 2004 as part of an economic development initiative package for St. Croix (See "Financing for Tech Park Uncertain Without a Loan"). In that package, financing for the park and other projects to stimulate the economy would be provided from $65 million in bond proceeds.
However, when asked if Legislative approval of the loan would allow construction to start immediately, Kirwan said there are other non-financial problems causing delays. The university is awaiting clarification from the U.S. Treasury Department on certain rules and regulations in the American Jobs Creation Act, he said.
According to Kirwan, these rules have cast doubt upon whether revenues generated by U.S. companies that have offices within the park can be counted as local revenues. "It's like if Amazon.com set up an office in the park, and sold products to consumers on the mainland. These rules prohibit the revenues generated from those sales to be counted as revenues for the territory," Kirwan said.
When asked how much longer this problem would continue to hold up any progress on the park, Kirwan said the university has been assured that the U.S. Treasury Department supports the building of the park and will draft regulations to ensure that it will function. In the interim, the park will be able to proceed with certain startup operations.
"In the worst-case scenario if these rules aren't changed then the businesses within the park will only be able to do business with international companies," Kirwan said, adding this will allow revenues to be generated for the Virgin Islands.
Further questioning regarding the delays in construction also revealed that the university still has to acquire 10 acres of land for the park from the Department of Agriculture.
Sen. Norman Jn Baptiste also pointed out the loan has no provisions relating to how the university would repay the $7 million. He said he would feel more comfortable if something were negotiated.
Reading from a letter submitted to the Finance Committee from UVI President Laverne Ragster, Kirwan said the loan shouldn't have to be repaid until the park has started to generate some money.
Kirwan also did a little negotiating on his own. "I assume the government would want to make an investment in this park," he said. "I also assume that if it doesn't live up to everyone's expectations and produce enough money, we would have to repay the loan. But if we exceed expectations and generate a lot of revenues, then the government would waive the requirement to pay back the loan."
Kirwan added that UVI anticipates the park will generate $1 million in its first year, $2.6 million in its second year, $3.6 million in its third year, $5.3 million in its fourth year and $9.4 million in its fifth year. "By the third year, we hope to be completely self-sufficient," Kirwan said. "And by the fourth or fifth year, we anticipate that we will be creating 300 jobs for residents on St. Croix."
Pleased by these statements, senators unanimously approved the bill, which will go to the Rules and Judiciary Committee for further consideration.
Richards added that testimony from Kenneth Mapp, executive director of the Public Finance Authority, must give testimony on the bill at that time. Because the PFA has authority to float bonds needed to acquire the $65 million for the entire economic development package, its input is needed on the bill, Richards said.
The senators also heard testimony from Lynn A. Millin, an attorney with the Department of Property and Procurement, on lease agreements between the government and:
— Walter Seipel and Associates LLC to operate a laundry and commercial structure, and to lease space to retail and commercial businesses. The agreement, set for 30 years with the option to renew, stipulates rent is $12,000 per year, payable in equal monthly installments of $1,000.
— Kent Corp., for the operation of a commercial structure, and leasing space to retail businesses and offices. Located across the street from Nisky Center on St. Thomas, the space is being leased by Leopold T. Barbel for $61,200 per year, payable in monthly installments of $5,100 for the first five years of the lease. Millin said Thursday that Barbel will be making various improvements on the property, and until the construction is complete, the rent will be reduced to $3,500 a month. Millin added that Barbel, before the formation of the Kent Corp., has been leasing the building for the past 30 years at the lesser rate.
— Tropical Marine Inc. for a piece of land in Estate Nadir, St. Thomas. Millin said Tropical Marine owners Levette and Carmen Ruan want to lease the property adjacent to the business to build a fence to keep vagrants out of the marina, to beautify the premises and to construct additional parking. Rent for this land, which does not pose a threat to any nearby mangroves, is set at $1,200 per year, payable in monthly installments of $100.
While senators unanimously approved all three agreements, they were concerned that rent charged on government properties is too low. Sen. Ronald E. Russell, for example, said that the $60 million in unanticipated revenues recently discovered by the government has changed the economic climate of the territory and as such, property values should be more competitive.
Millin said the Department of Property and Procurement has responded to improvements made in areas such as Crown Bay and Subbase by making increases in rent, and therefore, rent charged on government properties is "not that low." Millin added lease agreements for Walter Seipel and Associates, as well as the Kent Corporation, are prime examples, because rent has increased on these properties as improvements were made to the areas.
Millin also said these increases are part of Property and Procurement's plan to "beef up" the monitoring of government properties. Millin said it was recently discovered that many tenants on government land didn't have lease agreements. "We've been working hard to fix that," Millin said. "We anticipate the Legislature will be inundated with more lease agreements in the next few weeks."
Millin also explained that Tropical Marine Inc. will be charged a low rent because there will be no commercial business operated on the new piece of land.
Present at Thursday's meeting were Sens. Adlah "Foncie" Donastorg, Juan Figueroa-Serville, Neville James, Jn Baptiste, Terrence "Positive" Nelson and Richards. Sen. Roosevelt C. David was absent.
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