EDA, RTPark Competing for Clients

Officials from the V.I. Economic Development Authority and the University of the Virgin Islands Research and Technology Park disagreed on how the large established EDA tax benefit program and smaller new RTPark tax benefit program should divide their focus during committee hearings Thursday.

The Committee on Economic Development, Agriculture and Planning voted out of committee a bill sponsored by Sen. Shawn-Michael Malone changing and updating many of the definitions and terms in the economic development laws. The bill changes the name of the Industrial Economic Program/Park to Economic Development Authority/Program and increasing the beneficiaries’ contract periods.

Benefit terms would be extended to 20 years for St. Thomas and St. John beneficiaries and 30 years for St. Croix businesses in compliance with the program.

Sen. Nereida “Nellie” Rivera-O’Reilly objected, as she did in February, that the extended term would not be a sufficient incentive to attract businesses to St. Croix instead of St. Thomas.

Another proposed change is to increase per diem allowances for commissioners, including government employees, from $50 to $150.

Sen. Janette Millin Young, the committee chair, said the Senate is working with the legislation submitted by the governor to streamline the agency, changing names and merging functions for efficiency.

“We resolved as a body that we are going to be tackling both whatever is happening at the RTPark and whatever’s happening at the EDA,” Millin Young said. “We’re going to work together to have long-term policy that’s going to be definitive so that there’s no more confusion in the future as to what each agency is here to do, how it’s supposed to impact economic development here in the territory and ultimately not give the impression to the general public that we’re only about giving scholarships to the rich.”

Percival Clouden, chief executive officer of the Virgin Islands Economic Development Authority, supported the measure though they proposed an amendment in the nature of a substitute, changing some of the definitions and terms.

“It is critical that ‘electronic commerce’ or ‘e-commerce’ companies not be eliminated from EDC program eligibility. The EDA and its government partners need to be able to clearly present the programs and options to each investor – no ambiguity,” said Clouden.

RTPark Executive Director David Zumwalt said, “If we are going to be in a discussion of what part of e-commerce comes to the park and what part goes somewhere else, I think we will be in discussion constantly. I think e-commerce should be in the RTPark."

Millin Young said she wished there was an arbiter to weigh the testimony, since the two seemed to be in direct conflict.

Clouden said he would like all businesses to "be given the opportunity to sit with both entities and the business should be able to decide which fits its business model more effectively. And I say effectively you know both of us know that means the bottom line."

"E-commerce is so wide so we have to be very cautious in how we proceed," Clouden said. "Our mission at RTPark and EDA is to work collaboratively with each other and with the companies we bring to the territory," he continued.

EDA Assistant CEO Jennifer Nugent Hill emphasized that the authority required much more in exchange for generous tax breaks than the RTPark, which she said was designed to promote the technology sector while benefitting UVI.

"EDC has employment requirements and mandates certain levels of investment in the community. It also says you must be a responsible corporate citizen and asks that you contribute to charities, often of their own choice," she said. "The issue that I think this has stirred up is defining who are the e-commerce businesses, who defines the benefits they receive and what they give us in exchange."

Zumwalt said RTPark tax breaks have led to greater investment, even if it is not mandated by the RTPark agreements.

"We have seen aggressive investment by the ISPs into their networks so they could grow at a faster rate than they had been," Zumwalt said.

Sen. Myron Jackson asked, "And that benefit, you think justifies them being in the park?"

Zumwalt replied, "The cost is a little over $2 million a year and the benefit is well over $2 million so yes I think it is worth it."

It is not clear what portion of total spending and employment by the pre-existing telecom companies was expressly caused by RTPark tax breaks. Innovative, for instance, negotiated and signed an agreement with the Public Services Commission, committing to investing $15 million a year for four years – $60 million – to improve its network as part of its negotiated transfer of control.

Innovative’s RTPark tax breaks were in place at the time, but were not discussed during public hearings on the transfer in 2010 or mentioned in the hearing examiner’s report. At the time, officials with parent company, National Rural Utilities Cooperative Finance Corp., said it could easily afford the investments, which they said were necessary in order to improve the value of the company to eventually sell it and avoid taking a loss on its loans to Innovative and Jeffrey Prosser. (See Related Links below)

Sen. Clifford Graham introduced an amendment in the nature of a substitute, incorporating suggested changes to the language suggested by the V.I. Chambers of Commerce when the bill was vetted in committee in February. (See Related Links below)

The committee approved the bill as amended, sending it on for further consideration by the Rules and Judiciary Committee.

Voting yea were Jackson, Graham, Young, Malone and Sen. Nereida "Nellie" Rivera-O’Reilly. Sens. Sammuel Sanes and Diane Capehart were absent.

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