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State of the Territory: Difficult Times Ahead, But Storm Will Pass, Governor Says

Jan. 26, 2009 — Making it clear the Virgin Islands is in a recession that's likely to get worse before it gets better, Gov. John deJongh Jr. still struck an optimistic chord Monday night in his third State of the Territory Address, saying the community's future success hinges on its ability to stand strong, resolute and unified in the face of overwhelming hardship.
Calling on the theme established by President Barack Obama in his inaugural address, deJongh said that everyone — from the average citizen to the members of the new Legislature — would have to work together, make some serious sacrifices and put aside the "things that divide us" in an effort to "build a strong and bright future." (To read the complete address, click here.)
"We come together here tonight at a time of grave uncertainty and economic distress," the governor said at the beginning of his speech. "One year ago, as I stood before you, I suggested that the U.S. economy was on the verge of a recession. Today no one any longer doubts that an economic crisis is upon us, and that we are now in the midst of a recession whose hurricane-strength force and effect are yet to be fully revealed, its course not yet trackable."
But Virgin Islanders understand hurricanes, deJongh said. Over the past few months, the governor and members of his financial team haven't kept the state of the territory's budget a secret: General Fund cash balances are down by almost $90 million, or 38 percent from fiscal year 2008, deJongh reiterated Monday. The territory may also face a tax-revenue shortfall of about $146 million — worse if property taxes aren't collected soon, he said.
Meanwhile, the government's longstanding property-tax case will eventually be resolved, and Virgin Islanders have to prepare to pay their bills, the governor said. Even in the worst of times, the $60 or $70 million anticipated each year from real-property tax collections is needed to help fund essential government services, deJongh said. This year the money is also needed to help offset the budget shortfall that will come from the projected decline in gross receipts and income taxes, he said.
Additionally, allegations of factual errors being made during the revaluation process — particularly on St. John — will be investigated and can be corrected. But the realities of the housing market cannot be ignored, and the government's challenge is to find ways to bring in some more affordable-housing opportunities, the governor said.
"As the economic storm worsens, we must remember all that we have learned about enduring hardship and remember the lesions passed on from our parents and grandparents," he said, looking around at the expansive sea of faces listening intently in the Earle B. Ottley Legislative Hall. "Prepare for the worst. Hope for the best. Reach out a hand to those worse than you. Remain strong and resolute. Our strength resides in our homes, in our families, in our communities and in our faith. And however severe the storm, this too shall pass."
Battening Down the Hatches
Over the past year, government officials have tried to prepare for the breaking of the storm. They have worked with Delegate Donna M. Christensen to strengthen the territory's ties with national leaders and submitted $700 million worth of capital projects for inclusion in the new federal economic-stimulus package. Efforts have also been made to diversify the territory's revenue stream, which is just beginning to take a significant hit, the governor said. Chief among those efforts is the strengthening of the territory's rum industry, which focuses not only on the new Captain Morgan rum distillery on St. Croix but also on the future of Cruzan Rum.
"We are working with Beam Global, the new owners of Cruzan Rum, to see how together we can expand their rum production, and to find a permanent solution to the waste-treatment issues," the governor said. "Taken together, the expanding production by Diageo and Beam Global will combine to build our leadership in the rum industry, as our rum industry will become the home to multiple international brands. And we will have ongoing rum revenues exceeding $200 million annually."
Officials are still trying to solidify the local Economic Development Commission tax-incentive program by working out the longstanding issues of source income and residency requirements. Steps have also been taken to firm up the relationship with several other federal agencies, such as Housing and Urban Development, the Federal Emergency Management Agency and the U.S. Department of Education, which shares with local government the goal of improving the oversight and management of federal funds, deJongh said.
Building a relationship with the federal government means showing that the territory can manage its money and stay in compliance with federal regulations, the governor said. Referring to the government's continuous push for an increase in the local Medicaid cap, deJongh said he has secured a technical-assistance grant from the Department of the Interior to do an updated survey of the territory's uninsured population. Additional help from the National Governor's Association will allow the government to conduct a survey of the territory's uncompensated care costs, he added.
"Armed with this data and a revised sate plan which will allow us to spend the federal dollars we receive, we will be in an even stronger position to advocate for our fair share of Medicaid and SCHIP dollars," deJongh said. "And with the new ability to spend all the federal health-care dollars that come to us, we will be able to change our Medicaid eligibility requirements, expand the services we offer and provide coverage to a vastly increased number of individual families who need it most."
"Residue of Wrongdoing"
Efforts on the home front to boost the economy have revolved around a central theme: one government working together to meet the community's needs, he said. This includes weeding out the culture of corruption that had taken root throughout previous administrations — the most recent example of which is the arrest of several former Schneider Regional Medical Center officials.
"The residue of wrongdoing that has been uncovered will remain with us for some time," deJongh said. "It has damaged us financially, it has undermined our credibility as a community and it has placed the delivery of health-care services under a cloud. But the old description is no longer an accurate description of our government — and it is becoming less and less true as time allows our efforts to take hold. Surely there are still pockets of bad practice and wrongdoing that survive. But increasingly, these areas are being exposed and corrected. I will not rest until the perception and the reality become one and the Virgin Islands government is one of transparency, open process, honest dealing and fairness."
Speaking in his first State of the Territory Address about the need to shore up some squabbles between various government departments and agencies — particularly the V.I. Port Authority and West Indian Co. Ltd. — the governor said Monday that many of these old conflicts have been buried, with both sides working together to come up with initiatives and projects to enhance the territory's economic future.
WICO and VIPA have joined hands on a $9 million dredging project to address the needs of the local cruise-ship industry, while the V.I. Water and Power Authority and V.I. Waste Management Authority have been collaborating on the development of new generation facilities that would allow the government to finally shut down St. Croix's Anguilla landfill, lock in substantial reductions in energy costs and increase WAPA's production on St. Thomas by 40 percent and on St. Croix by 30 percent. WAPA's added push for
alternative-energy sources has showed the authority's willingness to "move beyond the old rules," deJongh said.
"This path includes the implementation of rebate programs to provide immediate relief to those hardest hit, and support for solar-energy initiatives that will move us to the day when our territory will be powered by the sun," the governor said. "We are drafting new rules and regulations to support distributed power production from wind and solar sources by allowing greater flexibility in net metering."
While gas prices have finally began to drop, talks are ongoing with Hovensa to reduce the cost of fuel supplied to the territory, deJongh said.
"As we work together over the coming year, we must remain focused on the main goal and objective: to manage our affairs so that we can emerge from this crisis and our economy intact, indeed more durable and capable of offering ever-greater opportunities for our residents," the governor said. "This long-term focus demands that we remain steadfast in our commitment to the three essential elements upon which our future must be built: economic development, education and public safety."
More money will come down for local schools, more investments will be made in professional development and greater attention will be given to early-childhood education, which includes the continued renovation of several ballparks and playgrounds throughout the territory, the governor said. While there is no quick fix to the crime issues facing the Virgin Islands, efforts are being made to reduce the V.I. Police Department's manpower shortage and put more vehicles on the roads. One important priority in the coming months is the implementation of a new 911 system, which will do away with dead zones and calls being rerouted to Puerto Rico, among other things, the governor said.
The new system also goes along with a bill submitted to the Legislature to create a stand-alone V.I. Territorial Emergency Management Agency within the executive branch. DeJongh submitted the bill Monday.
Signs of Economic Life
Capital development projects have continued in both districts, and still "bear fruit" despite the slowdown in the economy, according to deJongh. On St. Croix, that includes the new Island Crossings Shopping Center, the Estate Bonne Esperance and Estate Pearl housing developments, the Robins Bay project, and the William and Punch Development, which recently received approval from the Coastal Zone Management Commission. Work within the Williams Delight Housing Community continues to move forward, while the government's community-revitalization efforts have also led to partnerships with numerous local organizations.
On St. Thomas, ongoing projects include the Estate Donoe affordable-housing development, the construction of a regional library and records center, and the completion of Raphune Vistas, another homeownership development. Both the Pond Bay and Calabash Boom housing developments on St. John remain on track, deJongh said.
"The capital investment will not come without a price for each of us," he said. "We all know the difficulties created by large public infrastructure projects. Traffic at Mandela Circle or Red Hook, or at the Christiansted bypass or the roundabout in Cruz Bay, cause delays on the best of days and test our patience at the worst. These inconveniences disrupt our daily routines, strain our planning and traffic-management skills. We will continue to make every effort to mitigate the problems caused by these projects and those that we are planning and must undertake in the future."
Indeed, the sacrifices — and belt-tightening — will come at every level over the next year or so, as the economic storm continues to pass, the governor said. This year's and next year's budgets have already been adjusted downward and it's likely that the number of layoffs and business closings will continue to rise, he said.
But the commitment of local residents and government leaders to make things better must prevail, he said.
"Within our territory, our future success — that of ourselves, our families and our communities and of our neighbors — rests with our ability to embrace those things that unites us, and set aside those things that might, in another time divide us," deJongh said. "What a poet wrote many centuries ago rings more true today than ever: No man is an island unto himself and neither are our islands, islands unto themselves — we all need each other.
"And so it is, with a spirit of determination, and faith in what we might yet create together, that I call on each and every one in this new Senate to imagine a future that is different from the past, and to make the choice to work together, with each other and with me, so that we might weather these turbulent times and build a strong and bright future together."
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