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Senate Looks at More Hotel Building Incentives

A 2011 law letting would-be V.I. hotel developers pledge their future hotel and casino taxes as loan collateral will be expanded to include hotels on the territory’s smaller cays and made less expensive for smaller hotels, if a bill considered in committee Tuesday becomes law.

The 2011 Hotel Development Act created a hotel development program within the V.I. Economic Development Authority that is similar to, but more generous than, the tax-increment financing spearheaded by Gov. John deJongh Jr.’s administration in order to bring Home Depot to St. Croix.

Along with helping developers with information about financing, the program will administer trust funds for each qualifying new development, placing hotel and casino taxes from the qualifying development into the fund, which would then be used to pay a portion of the developer’s loans.

As with the TIF program, the government loses no real revenue because the taxes that would go toward developers’ loan payments would not be owed the government at all if the projects they finance do not come to fruition. But the hotel program also allows hotels to simultaneously receive generous Economic Development Commission tax breaks.

Economic Development Authority Executive Director Percival Clouden testified that the 2011 law did not spur investment as hoped, largely because it contained a $500,000 annual fee that discouraged small and medium-sized hotels. He said, "There is a trend for high end hotels to seek private islands." There have been inquiries about Little St. James, Hassel Island and other smaller cays and this would allow Protestant Cay in Christiansted Harbor to expand or renovate its hotel rooms, Clouden said.

The new bill deletes language restricting the program to the three major U.S. Virgin Islands and creates a three-tier contribution schedule based on the hotel’s gross revenues. As written, the bill is unclear what the fees will be. Clouden suggested a $50,000 annual fee for hotels with up to $1 million in annual revenue; $200,000 for hotels with revenues between $1 million and $5 million; and $500,000 for hotels with revenues greater than $5 million.

Sen. Nereida "Nellie" Rivera-O’Reilly asked her fellow senators why she should support this measure, when her bill to create a new category of casino licenses for hotels in Christiansted and Frederiksted was held in committee yesterday. (See Related Links below)

Rivera-O’Reilly said she would vote for the bill, saying "to oppose the bill is to oppose development on St. Croix."

Sen. Tregenza Roach said he was drafting an amendment to the bill and hoped it would be held.

Sen. Shawn-Michael Malone moved to hold the bill for amendment and further discussion. Voting to hold the bill in the Committee on Economic Development, Agriculture and Planning were Malone, Sens. Myron Jackson, Clifford Graham and Janette Millin Young. Rivera-O’Reilly, Sens. Sammuel Sanes and Diane Capehart were absent at the time of the vote, although all attended at least part of the hearing.

The committee unanimously approved a major Coastal Zone Management permit to dredge the East Gregerie Channel in Crown Bay and a section of the area along the northern portion of the pier at the Austin "Babe" Monsanto Marine Terminal. CZM Director Jean-Pierre Oriol testified in support of the permit.

Cruise lines asked for the dredging, V.I. Port Authority Director Carlton "Ital" Dowe said. "The completion of this dredging is critical to the Virgin Islands economy as St. Thomas stands to lose cruise ship calls in the 2015 cruise season if the ships are unable to berth safely in Crown Bay," he said. If it is completed on schedule, St. Thomas may see an increase in cruise traffic, he said.

Dowe said VIPA submitted a joint CZM and Army Corps of Engineers permit application in April of 2013. They have received approval from the CZM commission and expect the rest of the permitting process to be competed before the end of summer. If that happens, dredging should begin in September and be completed in November, Dowe said.

Dredging should cost $3.5 million and the board is looking to find the best option to fund it, he said.

The committee voted to hold in committee two CZM permits for the V.I. Next Generation Network that would allow it to lay fiber optic cables between St. Croix, St. Thomas and Water Island. Larry Kuipfer, viNGN’s executive director, said viNGN is currently paying $40,000 per month for 2.5 gigabits per second of service between St. Croix and St. Thomas. "The high capacity fiber optic cables that we are installing will eliminate this expense and provide vastly increased and more reliable connectivity that can be utilized by all of our customers who are the Internet service providers," he said.

The new cables were manufactured by Alcatel-Lucent and are on ship and will be installed after all the permits have been approved, he said. The cables each have 24 strands of fiber and they are between half an inch and an inch and a half in thickness, depending on how thick their steel armor is. Routes selected to avoid sensitive marine habitats and areas where there is a high risk of damage to the cable, he said.

Plans call for a segment between Brewer’s Bay, St. Thomas, and Frederiksted, St. Croix; Great Bay, St. Thomas, and Christiansted, St. Croix; and Brewers Bay, St. Thomas, and Flamingo Bay, Water Island. Later they plan a second cable to Water Island, starting at Careening Point/Villa Olga on St. Thomas.

Rivera-O’Reilly moved to hold the permits until the committee received an environmental report from CZM and other unspecified information from viNGN. The committee voted to hold the permits. Sen. Janette Millin Young, the committee chairwoman, told Kuipfer the committee would consider the permit again when it met in August.

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