Dear Source,
The news that the Virgin Islands Port Authority will seek to impose a 25 percent increase in landing and passenger fees comes at a time when the local economy cannot afford to absorb the action.
The Port Authority is the portal where all economic activities commence whether by sea or by air. Visitor arrivals by air are crucial, since they spend more than cruise ship arrivals by virtue of length of stay and the number of activities in which they participate. These activities include car rentals, longer opportunities for shopping and probably with more disposable income to spend. (This is not to say that cruise passenger arrivals are not important, of course they are.)
The air operations arm of the Port Authority has to realize a certain flow of income to cover its operating expenses as well as bond retirement. So it is understandable that the VIPA's financial consultant would recommend the increased fees; such increases, however, cannot and should not come at the expense of the territory's overall economic survival.
The announcement of cutbacks from the airline now serving the territory will cause great harm` not only to the tourism industry but to the whole territorial economy. Any reduction of flights will have an adverse impact on the airline employees at the airports, taxi drivers, ancillary airport concession employees, Port Authority employees, hotel employees — and onward to the man on the street and government employees. No one will be exempt from the adverse effects.
This news comes at a time when airlines are struggling to survive nationwide, and at least one of the lines which now serve the Virgin Islands is struggling in bankruptcy. The airlines do not want to absorb the costs in view of their tough economic situation, although the user agreement executed by the airlines and the Port Authority calls for the airlines to assist the Port Authority in its airport bond retirement in the event that the Port's revenues are unable to generate the income to do so. This places the airlines and VIPA in a dilemma.
There is no question that the Virgin Islands cannot afford to lose one flight from any of the airlines now serving the territory; it was tough enough acquiring their service. It took approximately five years to persuade U.S. Airways to come in, a shorter amount of time to persuade Delta and Continental. All are needed to expand the airlift from East Coast gateways. If there is a cutback, it will be difficult to bring them back the level of service the territory now receives. The equipment now serving the territory could be repositioned to serve other destinations.
This proposed action comes at a time when St. Croix's tourism industry was looking forward to additional flights from American Airlines to add seats to that island and boost the overnight long-stay traffic. The increase in fees could also adversely affect new hotel development on St. Croix since airlift is one of the key elements in planning for a new property.
It is my opinion that the governor and the Legislature of the Virgin Islands should step in to this situation and assess it to determine how both branches could find the resources to financially assist the air operations of Port Authority and avoid the proposed increase in fees. The situation might require an annual appropriation to the Port Authority to cover the shortfall until such time as VIPA's improved income stream makes it unnecessary.
I believe that the bond covenant for the air operations does not permit revenue from the sea operations to retire debt on the air operations, but that could be revisited, if so. There are legal implications, no doubt, in whatever action(s) may be taken.
Overall, the tax revenue picture for the entire government could become worse than it is now if air arrivals are reduced. Gross receipts, excise, corporate and individual income taxes will be adversely affected across the board, which will cause further reductions in expenditure outlays in the current and near-future government budgets.
The people of the Virgin Islands now have first-class airport and seaport facilities on all three islands and they must be supported fully to ensure that the overall economy continues to produce the needed revenue to the Treasury of the Virgin Islands. No effort should be lost or wasted in the pursuit of maintaining the current level of air service to the Virgin Islands.
Eric E. Dawson
Fairfax, Va.
Editor's note: Eric Dawson was formerly a V.I. Commissioner of the Economic Development and Agriculture Department.
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