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Port Authority Approves Video Lottery Terminals, Names Hobson Director

Oct. 22, 2008 — The V.I. Port Authority Board gave the green light Wednesday to video lottery terminals for the departure lounge of the Cyril E. King Airport.
The lease agreement with FHM Consultants will earn the authority the greater of a minimum annual guaranteed base rent of $50 per square foot of rent per year (each machine takes up about 20 square feet), or seven percent of gross revenues from the machines. FHM has requested a five-year lease for the space against the windows between Gates 7A and 8.
"Seven percent is something that we negotiated," said VIPA Property Manager Denise M. Mills. Proceeds from the VLTs help to fund education and pharmaceutical assistance in the territory. About 22 percent of the proceeds go to the VLTs' operators.
FHM Consultants will have to provide financial reports on a quarterly basis and unplug the terminals at night.
Don C. Mills, VIPA's legal counsel, said he had spent a considerable amount of time researching the legal aspects and could find no restriction in the statutes preventing the activity at the airport.
The board today also confirmed the appointment of Kenneth Hobson as VIPA's executive director. The three-year contract details have yet to be ironed out, according to board member and Public Works Commissioner Darryl A. Smalls. Hobson has served as interim executive director since Feb. 22, when Darlan Brin announced his retirement from the position. (See "Brin Retires as VIPA Director.")
Today's decision by the board in executive session came as a surprise, Hobson said.
"I wasn't aware that that they were going to discuss it today," he said.
In other actions, the board ratified the FY 2006 independent audit by Ernst and Young.
VIPA's current monthly financial statement showed revenues for August 2008 down by $941,623 over August 2007. The trend disappointed board member Gordon A. Finch, who pointed to the increase in operating losses.
"Compared to the last fiscal year, we are doing extremely poorly," he said. "This trend has got be reversed or the Port Authority will be just like any other agency — swimming in red [ink]."
The board unanimously approved a new contract for financial advisor Justin Moorehead of Seslia and Company. This action came after Standard and Poor's suspended VIPA's bonds rating.
"One reason why our rating on Wall Street has been suspended is because of lack of oversight," Finch said. "We need a financial advisor. This [contract] should never have been allowed to lapse."
It will be hard to get the rating reinstated in the current economic environment, Finch told the board.
"Our rating was lifted because of lack of timely financial information," Finch said. "A financial advisor will be able to monitor this."
All financial reports have been sent to Standard and Poor's, according to Judith James, VIPA's director of administration and finance. The only information that has not been provided to Standard and Poor's were the 2006 and 2007 audits, James told the board.
"I have answered all questions that Standard and Poor's has asked," she said. "They have [the audit for FY] 2006 now, and what they are missing is the 2007 audit."
The board denied requests for reductions in fees and rents from Sea Trans and the St. Croix Taxi Cab Association, citing the authority's financial condition and fact that its costs are not decreasing.
The board approved an expansion of rights for Caribbean Host to sell designer jewelry and watches at the Cyril E. King Airport in exchange for negotiated increases in percentage of gross receipts.
The retailer will now pay the greater of a square footage rental fee or an 11 percent of gross receipts up to $500,000 annually, or 12 percent for up to $1.6 million and 15 percent for gross receipts exceeding that figure.
On a positive note, as of Oct. 14 airline traffic into St. Thomas is up by 3.25 percent, according to Tourism Commissioner Beverly Nicholson-Doty, who chairs the board's Airline Committee.
"On St. Croix we have recaptured all but nine percent [of airline traffic]," Nicolson-Doty said, noting that American Eagle was back up to seven of its nine flights, Delta has increased the size of the airplanes it's using and US Airways will return in December.
Board members attending Wednesday's meeting were Finch, Attorney General Vincent Frazer, Nicholson-Doty, Robert O'Connor Jr., Hector Peguero, Smalls and Yvonne E.L. Thraen. Labor Commissioner Albert Bryan Jr. and Cassan Pancham were absent.
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