In approving the bill merging the Industrial Development Commission, the Government Development Bank, the Industrial Park Development Corp. and the Small Business Development Agency into a new Economic Development Authority, Gov. Charles W. Turnbull substantially cut IDC benefits. He halved the original proposal's initial term for benefits from 20 to 10 years, limited renewal of benefits and made the benefit percentage subject to review.
But Sen. Adlah "Foncie" Donastorg said Thursday he is still concerned that the tax benefits program amounts to "corporate welfare."
Turnbull announced the bill's signing Monday, saying "it will lead to more efficient and effective use of our limited resources to promote economic development through the expansion of established business, and luring of new businesses to set up their operations in the territory through the creation of a more streamlined organization."
Proponents of the measure hope it will avoid duplication of services and positions, reduce expenses for personnel, physical plant and operations, and develop comprehensive programs for the islands' economic development.
The administration also made some important changes to the bill, some of them in line with earlier suggestions from Donastorg, who objected to provisions that could have granted 100 percent benefits for up to 40 years.
Through line-item vetoes, the governor amended the bill to provide 100 percent benefits to eligible entities for 10 years, with the possibility of one 10-year renewal at a percentage to be determined "after public hearing and with the governor's approval."
But Donastorg remains concerned that the IDC program amounts to "corporate welfare."
"While the governor has addressed some of my concerns by line-item vetoes, in particular minimizing the number of years of eligibility, there still remains two major problems," Donastorg said.
He said the bill apparently does not allow the IDC to negotiate the percentage of benefits for the initial 10-year term, thus depriving the government of much-needed revenues. In addition, Donastorg said, "the IDC was established to lure new investment, new capital, create new jobs, but that is not happening here. You have existing companies that will be applying not only for renewals but for additional benefits."
Last month, Donastorg said he was concerned that the bill would allow current beneficiaries, particularly V.I. Telephone Corp.'s parent company, Innovative Communication Corp., to apply for exemptions for its other holdings.
Vitelco is now the only Innovative company to receive IDC benefits. Innovative owns several other V.I. telecommunications companies, including VitelCellular, Vitelcom, St. Thomas-St. John Cable TV, St. Croix Cable TV, ICC TV and an internet service provider, VIPowerNet. ICC also owns the Virgin Islands Daily News.
Existing companies such as Innovative, Donastorg said, "are not hiring more, not investing more. All they're doing is trying to improve their profit margins by taking advantage of IDC benefits."
Before signing the bill, the governor also changed the types of businesses under Category III, which originally included "Regulated Utilities, Banking, Health Care Facilities, and such other industries or businesses as may be deemed appropriate by the Commission." Eliminated were the words "regulated" and "banking."
Thus the four new categories created are as follows:
Category I – Rum and dairy production; watch and jewelry manufacturing/assembly.
Category II – Production/assembly other than jewelry and watches; agriculture/food processing; food processing, marine industry, raw materials processing; hotel/guest houses; transportation and telecommunications.
Category IIa – Service businesses including but not limited to investment management and advisors; research and development; business consultants and management consultants; software developers; e-commerce businesses; international public relations firms; international trading and distribution.
Category III – Utilities; health-care facilities; recreational facilities.
The semiautonomous board of the Economic Development Authority would consist of seven members appointed by the governor with the advice and consent of the Legislature. Three members, one from each island, cannot be government employees, three will be from the cabinet or executive departments and one would be appointed from the Government Employees Retirement System, V.I. Port Authority or the University of the Virgin Islands.
The new authority originally included the Bureau of Economic Research as well. Turnbull eliminated that language in the bill to keep the bureau under the aegis of the executive branch.
The bill is slated to go into effect on March 1.
