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HomeNewsLocal newsSenate Veto Override Will Expand Spending Revenues On Private Hotel Construction

Senate Veto Override Will Expand Spending Revenues On Private Hotel Construction

Sen. Kurt Vialet, chairman of the Senate Finance Committee. (Photo by Onaje Simmonds, Legislature of the Virgin Islands 2017 Summer Intern)
Sen. Kurt Vialet, chairman of the Senate Finance Committee. (Photo by Onaje Simmonds, Legislature of the Virgin Islands 2017 Summer Intern)

The Legislature voted April 4 to override the governor’s vetoes on two bills that will broaden the ways tax revenues can be used to finance hotel construction and renovation and put statutory liens on V.I. government revenues to secure private construction lending.

The senators also overrode vetoes to enact laws banning government employees from taking government salaries and pensions at the same time and letting the supervisor of elections set times for early voting.

One of the bills, Bill 32-0137, expands Tax Increment Finance benefits to use future tax revenues to pay for purely private projects.

TIF financing pledges the future increase in tax revenues, the incremental difference between what sort of taxes, especially property taxes, that are paid on a property and the expected increase in tax revenue that results from developing the property, as security for loans to pay for that development.

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First enacted during Gov. John deJongh Jr.’s administration, this sort of TIF financing was used to pay for government infrastructure for the shopping center that houses St. Croix’s Home Depot. The idea is to bootstrap development without directly paying out of government coffers, by pledging only tax revenues that would not exist without the development. The V.I. law only allows the financing for government-owned infrastructure.

The law, sponsored by Sens. Kurt Vialet (D-STT) Marvin Blyden (D-STT), Neville James (D-STX) and Novelle Francis (D-STX) expands this financing to private buildings, and from only new construction to include “repair or remodeling.”

It expands the sources that can be used to secure the financing to include casino receipts and hotel occupancy tax revenues, in addition to the property taxes and gross receipts taxes already allowed.

Mapp vetoed similar similar legislation in 2016, saying it would give “the owners of the hotel and casino at Caravelle Hotel access to pledge government revenues to fund its capital investment requirement.”

At the time, slot machine operator VIGL had announced plans to build new hotel rooms to meet its casino license requirement at the Caravelle Hotel. The U.S. Virgin Islands legalized casino gambling as a way to incentivize hotel development on underdeveloped St. Croix. Developers must build or renovate 75 rooms for the license type the Caravelle holds.

VIGL recently announced it will not be building any hotel rooms after all but has instead bought the King Christian Hotel and Company Street Hotel in Christiansted and plans to remodel enough rooms to meet the license requirement.

This new version of the legislation would also change V.I. law to allow TIF financing for remodeling hotel rooms.

VIGL has not announced plans to use this tax-financing program and did not testify at the August committee hearing on the legislation.

In his January veto message, Potter said the bill’s statutory lien provisions were not enforceable as written. During session April 4, senators added new statutory lien provisions- placing a legal lien on V.I. government revenues to secure any private loans entered into under the law.

The other bill, Bill 32-0136, changes the territory’s Hotel Development tax benefit program to enhance the security for a potential lender. Under existing law, enacted in 2011, a hotel developer can have the Public Finance Authority set up a trust fund into which its casino and hotel occupancy taxes will go. Those funds can be used to pay off loans incurred to build the hotel.

The changes allow the tax money to be paid to a trustee or a trustee’s agent, bypassing the PFA. It also creates a statutory lien on the funds, in principle preventing the V.I. government from doing anything else with the funds.

Here too, Potter cited the statutory lien language as the cause of the veto and here too senators changed the lien language.

Senators voted to override Potter’s veto and enact a bill repealing a 1996 law and a 2001 law that allow many V.I. government workers to retire, start taking a Government Employee Retirement System pension, then return to work for the government while continuing to receive their pension and not contributing to the pension system. In essence the law allows people to simultaneously receive government employee retirement pensions while still working.

“While I believe that it is absolutely necessary for us to address the GERS unfunded liability, we must do so in a manner that is clear and designed to adequately address the issues plaguing the GERS,” Potter wrote in January.

The pension plan is massively underfunded and projected to liquidate its entire trust fund by 2023 and possibly as early as 2020. The problems are due to numerous past unfunded benefit increases, a reluctance on the part of the Legislature and GERS to increase employee pension contributions enough to make the plan solvent and an increasing ratio of retirees to employees who pay into the system.

The changes should have some impact on the plan’s solvency and the amount of ongoing funding available to pay pensions once the trust fund is exhausted.

And the Legislature overrode a veto to enact a measure giving the supervisor of elections, with the approval of the board of elections, the power to set early voting times and dates.

“The measure simply does not ensure that voters are provided some certainty for early voting,” Potter wrote in his January veto message. Senators voted for the overrides without discussion. All 15 senators were present.

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