With a flourish of a pen Friday, Tim Duncan and the V.I. government became partners in a venture that could mean millions of dollars for both for years to come.
Duncan, the rising star of the National Basketball Association, and Gov. Charles W. Turnbull signed a tentative, 15-year contract under which the Crucian All-Star would pay his personal income taxes in the territory and promote the islands in exchange for significant tax breaks for his new business, T.D. Enterprises.
Observers expect the V.I. Legislature will unanimously approve the deal.
At the contract signing at the Buccaneer Hotel on Friday, Duncan was his usual low-key self, saying only a few words to a crowd of friends, family, politicians and other people.
"Thanks," Duncan said. "It’s going to be great for the Virgin Islands and myself."
Following Duncan’s lead, the governor also kept his comments brief, saying that the contract has "tremendous" potential to provide tax revenue and publicity for the Virgin Islands.
"This is a win-win proposal for the territory and Tim Duncan," Turnbull said. "These are the same type of incentives our government has provided to so many businesses that have established themselves in the territory."
For appearing free in three government tourism advertisements annually and T.D. Enterprises receiving 100 percent exemptions in income, gross receipts and excise taxes, Duncan will pay taxes on his NBA income in the territory. Property taxes will also be waived on T.D. Enterprises’ executive headquarters, two merchandising outlets and/or two sports bar locations.
In return, the V.I. government will get about one-third of Duncan’s annual $3.33 million NBA income in taxes, said Joel Holt, Duncan’s lawyer on St. Croix. But the government’s take should increase substantially because Duncan is in the last year of his current three-year, $10 million contract.
It’s likely Duncan’s next contract will be in the neighborhood of $70 million to $80 million over seven years, said Charles Banks, Duncan’s financial adviser. If Duncan signs such a deal the V.I. could collect, on the low end, almost $4 million a year in taxes.
Banks said other possibilities include a shorter contract for more money each year. However, the NBA currently has an $11 million cap on what players can earn per season.
"To have his NBA income taxed in the U.S. when it could be taxed here (in the V.I.) is a no brainer," said Banks.
Once operational, T.D. Enterprises will manage such ventures as Duncan’s endorsement deals, which currently bring in about $2 million a year, Banks said. The company’s exemptions would save Duncan about $800,000 a year in taxes. That savings, said Banks, will likely be poured back into the business and investments in the territory.
Originally, the plan was to use the Industrial Development Commission to obtain benefits for T.D. Enterprises, Banks said. But the IDC program restricts beneficiaries to certain businesses, he said. Duncan’s contract with the government will allow him to dabble in everything but casino gaming.
"The reason we went this way was it gives more flexibility for the types of businesses he can get involved in," Banks said, citing real estate and national franchises locally as options. "In the long run, there is no reason Tim shouldn’t own hotels and buildings."
The contract also states that T.D. Enterprises’ stockholders, limited to six persons, will be exempt from personal income taxes for as long as they are residents of the territory.
Banks said that currently Duncan is the sole owner of the company and will remain so into the near future. The contract states that "to the maximum extent possible, T.D. Enterprises Inc. and Tim Duncan shall employ U.S. Virgin Islands residents in their business activities …" in the territory.
