Gov. Kenneth Mapp announced he disapproved 10-year extensions of the Economic Development Commission’s 90 percent tax breaks for Windward Passage and Sugar Bay resorts on St. Thomas, saying in a press conference Thursday both hotels were in violation of employment, tax and other EDC requirements.
Along with violations at the two hotels, Mapp said he was pushed to disapprove the applications because changes the Legislature made to the EDC law in 2014 removed the ability of EDC to give a sliding scale of benefits. (See Related Links below)
Several times Mapp emphasized he would like to see changes to the EDC law, repealing aspects of the 2014 loosening of requirements.
Mapp said he met with U.S. Treasury officials in February and was told Treasury would relax residency requirements and support amendments to the Jobs Act that will help the territory attract "tech jobs."
"But the exchange is they want us to police and regulate the benefits in the program," Mapp said.
With the two resorts, Mapp said, "both are below the required number of employees" in their agreements. According to Mapp, one of the two has not filed taxes in the last five years; one owes Unemployment Insurance payments to the Labor Department; and "one intends to invest a mere $690,000 over the next 10 years."
For a large hotel, that amount is not enough for basic maintenance, much less any improvements, Mapp said.
The administration is "fully supportive of the private sector," Mapp said, but once a company has been established for 10 or 15 years and is well established, "there must be some avenue to wean off those benefits."
To be approved for renewed benefits, EDC beneficiaries must be fully compliant with the law, hiring requirements, file and pay taxes, and "that going forward there is a real contribution to the expansion of that business and a real contribution to the economy of the territory," Mapp said.
"We are not going to just grant benefits ad infinitum, just forever," he said.
The governor cited a Jan. 2015 V.I. Inspector General audit of the EDC program that found the program’s economic benefits blunted by effectively automatic renewal of benefits, regardless of actual compliance. [Act 7651]
That audit also criticized the 2014 loosening of EDC rules, raising issue, as Mapp did, with the possibility of 20-year and even 30-year extensions on St. Croix, of full, 90 percent tax breaks for companies that are already decades old.
Mapp asked the Legislature to review that statute and return "some sliding scale of benefits."
Without being able to eventually wean companies off the tax breaks, "we will not be able to provide an adequate infrastructure to grow the economy" or provide government services, Mapp said.
V.I. Inspector General Steven van Beverhoudt hailed Mapp’s move as "a breath of fresh air," Thursday afternoon.
"We have an administration that is paying attention to what we are saying, which is a positive thing and very refreshing to hear," van Beverhoudt said.
Van Beverhoudt said the program is designed to help get businesses set up and make money, but not to just give permanent, string-free tax forgiveness.
"We are all for businesses making hundreds of millions of dollars, but leave some of it in the territory so everybody can share in the benefits," he said.
He praised Mapp’s mention of last year’s changes to EDC law.
"I’m glad he wants the Legislature to amend the law they passed last October, basically giving the benefits for 30 or 40 years without the government being able to negotiate," he said. "We are all for being business friendly, but the government should also be more businesslike."
