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SPEND, TAX AND BORROW PLAN MET WITH HOSTILITY

May 21, 2003 – Senators and business leaders expressed concern bordering on astonishment Wednesday at the wide-ranging legislation Gov. Charles W. Turnbull submitted to the Legislature late Tuesday night as the administration's proposed solutions to the government's fiscal crisis.
The legislation, which calls for borrowing another $235 million through the floating of bonds backed by gross receipts taxes, contains few immediate revenue-generating measures and only one cost-cutting item.
Notable by their absence were several ideas advanced by the administration in recent weeks — cutting the government work week to 36 hours from the present 40 and increasing "sin" taxes on tobacco and alcohol.
Joe Aubain, executive director of the St. Thomas-St. John Chamber of Commerce, said: "I'm assuming this is one part of the package, and the cuts haven't come down yet. That is my assumption until I hear otherwise."
The set of six bills submitted by the governor includes many new and increased taxes, virtually all of them aimed at the business community. Among other things, they would:
– An increase in the gross receipts tax to 4.75 percent from 4 percent.
– A 2 percent excise tax on imported food items.
– New "environmental excise taxes" of 2 cents a pound on items manufactured in the territory or imported for business purposes; and, in the case of crude oil refined in the territory and petroleum products imported into the territory, of 20 cents a barrel.
– A rental car surcharge of $5 a day.
– A hotel room surcharge of 2 percent.
Noel Loftus, community activist and former St. Croix Chamber of Commerce president, pronounced himself "incredulous" at crude oil tax proposal.
How 20 cents adds up to $32 million
"That will cost Hovensa $32,850,000 a year," he said Wednesday afternoon. "The refinery produces 450,000 to 460,000 barrels a day. Take 450,000 a day times 20 cents a barrel; that's $90,000 a day times 365 days is $32,850,000 a year. I had to do the math three times; I couldn't believe it."
Hovensa reported repeatedly in the last year that it has been operating at a deficit, and its problems were compounded at the end of last year when political unrest and strikes in Venezuela, its partner and principal source of crude oil, cut off shipments of crude to the refinery.
Loftus added: "I want to know who were the advisers who suggested this to the governor. I can't believe it was the Bank of America, or any of the people who helped us write the five-year plan." His reference was to the Five Year Operating and Strategic Financial Plan for the government developed by the governor's Economic Recovery Task Force and submitted to him more than three years ago.
"Since 1985," Loftus continued, the business community has "asked for tax reform, and all we have gotten is increases. Our customs tax here is more expensive than in the states."
His conclusion: "There is no recovery plan. It is not balanced, not thought out, not responsible, and it won't work. If this passes, you will see more businesses close."
Loftus is currently president of the civic organization St. Croix Alive. "Barely," he added wryly.
Bleeding goes on unstemmed
Sen. Emmett Hansen II said on Wednesday that he is "extremely concerned about this level of borrowing and tying up the gross receipts tax once again. I would rather give the business community a break, rather than covering it in stone." His belief is that "we need to operate on two tracks: One, we need to seek to stem the bleeding immediately. Two is to shore up the long-term financial health of the government."
About the 20 cent-a-barrel excise tax on crude oil, which would apply strictly to Hovensa, Hansen said: " I don't even know if we can do that. It might be in breach of an agreement the V.I. government has with Hovensa. I believe whatever could have been taxed at the time of the agreement would have been done. I don't think they can retrofit something in the agreement for taxation purposes."
Alexander A. Moorhead, Hovensa vice president for government relations and community affairs, declined to comment on the tax Wednesday evening. "We are preparing a letter to the governor," he said. "We won't comment at this time, until the governor has had a chance to read the letter."
Sen. Carlton Dowe, speaking on WVWI Radio Wednesday, said: "If we borrow $235 million, we can expect the same results we have now at a later time. We have to stop the bleeding; we are not going to stop it by getting a loan and hiring more people."
Aubain was confounded. The government has more an expenditure problem than a revenue problem, he said, and yet "I see absolutely no reductions in terms of cost cutting. There's severe tax increases for the consumer and the private sector."
He added: "Speaking as executive director, if these measures should go through, it will send us on an unprecedented downward spiral."
Dowe expressed wonder at the governor's recent hiring of high-level government employees when there is supposed to be a "hiring freeze." He, too, expressed concern that "with the increase in the gross receipts tax, we are helping local businesses to go under. We need austerity measures."
Time elapsed vs. time allowed
Hansen and Dowe both said the legislation covers too wide a range of interests to consider all at one time. Both expressed doubt that the Senate could act on the proposals, submitted for Thursday's special session called by the governor, without more time to study them.
"I am not being rushed into making hasty decisions," Hansen said. "I am annoyed at the amount of time [the administration] has taken since we learned of this impending fiscal crisis, and the time we are given to consider it." With the bills sent down from Government House late Tuesday night, lawmakers essentially had Wednesday to review them.
"I would like some hard and fast answers about how this borrowing is going to affect us," Hansen said. "If it is supposed to effect a turnaround, that's not what I'm seeing. I am very dismayed. We are sending mixed signals to our constituents when we run out and hire people at high salaries before we have a solution in place."
Dowe noted that the governor adopted at least one of the 25 revenue-generating measures proposed to him by the Minority Caucus last week: levying a fee on cargo containers. The governor has recommended fees of $30 fee per trip on 20-foot containers entering V.I. ports and $50 per trip on containers of 40 or more feet.
"Anti-tourism" taxes astound hoteliers
David Yamada, president of the St. Thomas-St. John Hotel and Tourism Association, and Richard Doumeng, a former president of the association, both expressed astonishment at the governor's tax proposals. Yamada is general manager of the Renaissance Grand Beach Resort, and Doumeng is general manager of Bolongo Bay Beach Club and Villas, which his family owns.
Of the proposed hotel room surcharge, which in effect would increase in the hotel room tax to 10 percent from 8 percent, Yamada said: "I'm not sure what economic indicator justifies an 11 percent increase. And the other thing is that it is going to the General Fund, not the Tourism [Revolving and Advertising] Fund. The room tax is supposed to go into a marketing fund, not to cover the government's shortfalls."
Yamada was also upset at the proposed $5-a-day surcharge on rental cars and jeeps. "We already have a reputation of being an expensive destination," he said. "With a quick calculation, on a $26-a-day rental, that's a 19 percent increase."
Doumeng said Turnbull "will go down in history as the anti-tourism governor. He is the most aggressively anti-tourism governor we
have ever had."
The existing 8 percent hotel room tax "is spent unwisely," Doumeng said, "and 10 percent is just 2 percent more to tax the overnight visitor." Government officials, he said, "do everything to make it harder for the overnight visitor — they raise landing fees, increasing airline costs, then they make it more expensive to stay here, then they make it more expensive to drive here with the $5 surcharge. Then they tax the businesses that are trying to have them here with more gross receipts taxes."
He continued, "The gross receipts is a regressive tax to begin with. The only ones who pay are the small businesses who don't qualify for EDC benefits. The big businesses aren't affected."
The proposed environmental excise tax, he said, is to help cover the costs of solid waste management, wastewater treatment infrastructure repairs and improvements and other urgent environmental requirements mandated by federal court orders, consent orders and agreements.
The measure calls for "every individual, firm, corporation or other association doing business in the V.I., except those exempted or excluded . . . [to] pay an environmental excise tax of 2 cents per pound on all goods produced in or brought in to the V.I. for use in a business."
It also states that when an article is sold more than once in the course of trade, its weight shall be included in the environmental excise tax calculation.
Food for thought
Another proposed excise tax, of 2 percent on food imports, is puzzling. Evidently, nutritious food will be taxed but junk food won't. The bill calls for the tax on "foodstuffs, which means all nutritive matter intended for consumption for purposes of the growth, repair, or maintenance of vital processes (including noncarbonated drinking water) but expressly excluding such items as confectionary, chewing gum, carbonated drinks, soda water, soft drinks and other beverages and all other matters not consumed primarily for nutritive purposes."
"Maintenance of vital processes" presumably refers to the custom of eating in order to keep alive. Under the governor's proposals, then, food — already excessively expensive in the territory — would be further taxed by the cargo container, by increases in the road tax and motor fuel tax, by an increase in the gross receipts tax and, finally, by the new excise taxes. And the taxes, of course, would be passed on to the consumer.
The bills also include the by now traditional raiding of various government funds. Among them:
– $600,000 from the Land Bank Fund to the Public Works Department for a public cemetery on St. Thomas.
– $2.3 million from the Union Arbitration Award and Government Employees Increment Fund as a contribution to the General Fund.
– $750,000 from the General Fund to the Property and Procurement Department for plans for a Workforce Development Center.
The governor's proposals also include changing the number of government paydays to 24 from 26 by making the pay periods bi-monthly instead of every other week, and increasing the stamp tax on the sale of real estate valued at more than $100,000 — to 2.5 percent on property worth $101,000 to $500,000, 3 percent for property worth $501,000 to $1 million, and 3.5 percent for property worth over $1 million.
For a complete breakdown of the proposals, see "Outline of bills submitted to special session".)

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May 21, 2003 - Senators and business leaders expressed concern bordering on astonishment Wednesday at the wide-ranging legislation Gov. Charles W. Turnbull submitted to the Legislature late Tuesday night as the administration's proposed solutions to the government's fiscal crisis.
The legislation, which calls for borrowing another $235 million through the floating of bonds backed by gross receipts taxes, contains few immediate revenue-generating measures and only one cost-cutting item.
Notable by their absence were several ideas advanced by the administration in recent weeks -- cutting the government work week to 36 hours from the present 40 and increasing "sin" taxes on tobacco and alcohol.
Joe Aubain, executive director of the St. Thomas-St. John Chamber of Commerce, said: "I'm assuming this is one part of the package, and the cuts haven't come down yet. That is my assumption until I hear otherwise."
The set of six bills submitted by the governor includes many new and increased taxes, virtually all of them aimed at the business community. Among other things, they would:
- An increase in the gross receipts tax to 4.75 percent from 4 percent.
- A 2 percent excise tax on imported food items.
- New "environmental excise taxes" of 2 cents a pound on items manufactured in the territory or imported for business purposes; and, in the case of crude oil refined in the territory and petroleum products imported into the territory, of 20 cents a barrel.
- A rental car surcharge of $5 a day.
- A hotel room surcharge of 2 percent.
Noel Loftus, community activist and former St. Croix Chamber of Commerce president, pronounced himself "incredulous" at crude oil tax proposal.
How 20 cents adds up to $32 million
"That will cost Hovensa $32,850,000 a year," he said Wednesday afternoon. "The refinery produces 450,000 to 460,000 barrels a day. Take 450,000 a day times 20 cents a barrel; that's $90,000 a day times 365 days is $32,850,000 a year. I had to do the math three times; I couldn't believe it."
Hovensa reported repeatedly in the last year that it has been operating at a deficit, and its problems were compounded at the end of last year when political unrest and strikes in Venezuela, its partner and principal source of crude oil, cut off shipments of crude to the refinery.
Loftus added: "I want to know who were the advisers who suggested this to the governor. I can't believe it was the Bank of America, or any of the people who helped us write the five-year plan." His reference was to the Five Year Operating and Strategic Financial Plan for the government developed by the governor's Economic Recovery Task Force and submitted to him more than three years ago.
"Since 1985," Loftus continued, the business community has "asked for tax reform, and all we have gotten is increases. Our customs tax here is more expensive than in the states."
His conclusion: "There is no recovery plan. It is not balanced, not thought out, not responsible, and it won't work. If this passes, you will see more businesses close."
Loftus is currently president of the civic organization St. Croix Alive. "Barely," he added wryly.
Bleeding goes on unstemmed
Sen. Emmett Hansen II said on Wednesday that he is "extremely concerned about this level of borrowing and tying up the gross receipts tax once again. I would rather give the business community a break, rather than covering it in stone." His belief is that "we need to operate on two tracks: One, we need to seek to stem the bleeding immediately. Two is to shore up the long-term financial health of the government."
About the 20 cent-a-barrel excise tax on crude oil, which would apply strictly to Hovensa, Hansen said: " I don't even know if we can do that. It might be in breach of an agreement the V.I. government has with Hovensa. I believe whatever could have been taxed at the time of the agreement would have been done. I don't think they can retrofit something in the agreement for taxation purposes."
Alexander A. Moorhead, Hovensa vice president for government relations and community affairs, declined to comment on the tax Wednesday evening. "We are preparing a letter to the governor," he said. "We won't comment at this time, until the governor has had a chance to read the letter."
Sen. Carlton Dowe, speaking on WVWI Radio Wednesday, said: "If we borrow $235 million, we can expect the same results we have now at a later time. We have to stop the bleeding; we are not going to stop it by getting a loan and hiring more people."
Aubain was confounded. The government has more an expenditure problem than a revenue problem, he said, and yet "I see absolutely no reductions in terms of cost cutting. There's severe tax increases for the consumer and the private sector."
He added: "Speaking as executive director, if these measures should go through, it will send us on an unprecedented downward spiral."
Dowe expressed wonder at the governor's recent hiring of high-level government employees when there is supposed to be a "hiring freeze." He, too, expressed concern that "with the increase in the gross receipts tax, we are helping local businesses to go under. We need austerity measures."
Time elapsed vs. time allowed
Hansen and Dowe both said the legislation covers too wide a range of interests to consider all at one time. Both expressed doubt that the Senate could act on the proposals, submitted for Thursday's special session called by the governor, without more time to study them.
"I am not being rushed into making hasty decisions," Hansen said. "I am annoyed at the amount of time [the administration] has taken since we learned of this impending fiscal crisis, and the time we are given to consider it." With the bills sent down from Government House late Tuesday night, lawmakers essentially had Wednesday to review them.
"I would like some hard and fast answers about how this borrowing is going to affect us," Hansen said. "If it is supposed to effect a turnaround, that's not what I'm seeing. I am very dismayed. We are sending mixed signals to our constituents when we run out and hire people at high salaries before we have a solution in place."
Dowe noted that the governor adopted at least one of the 25 revenue-generating measures proposed to him by the Minority Caucus last week: levying a fee on cargo containers. The governor has recommended fees of $30 fee per trip on 20-foot containers entering V.I. ports and $50 per trip on containers of 40 or more feet.
"Anti-tourism" taxes astound hoteliers
David Yamada, president of the St. Thomas-St. John Hotel and Tourism Association, and Richard Doumeng, a former president of the association, both expressed astonishment at the governor's tax proposals. Yamada is general manager of the Renaissance Grand Beach Resort, and Doumeng is general manager of Bolongo Bay Beach Club and Villas, which his family owns.
Of the proposed hotel room surcharge, which in effect would increase in the hotel room tax to 10 percent from 8 percent, Yamada said: "I'm not sure what economic indicator justifies an 11 percent increase. And the other thing is that it is going to the General Fund, not the Tourism [Revolving and Advertising] Fund. The room tax is supposed to go into a marketing fund, not to cover the government's shortfalls."
Yamada was also upset at the proposed $5-a-day surcharge on rental cars and jeeps. "We already have a reputation of being an expensive destination," he said. "With a quick calculation, on a $26-a-day rental, that's a 19 percent increase."
Doumeng said Turnbull "will go down in history as the anti-tourism governor. He is the most aggressively anti-tourism governor we have ever had."
The existing 8 percent hotel room tax "is spent unwisely," Doumeng said, "and 10 percent is just 2 percent more to tax the overnight visitor." Government officials, he said, "do everything to make it harder for the overnight visitor -- they raise landing fees, increasing airline costs, then they make it more expensive to stay here, then they make it more expensive to drive here with the $5 surcharge. Then they tax the businesses that are trying to have them here with more gross receipts taxes."
He continued, "The gross receipts is a regressive tax to begin with. The only ones who pay are the small businesses who don't qualify for EDC benefits. The big businesses aren't affected."
The proposed environmental excise tax, he said, is to help cover the costs of solid waste management, wastewater treatment infrastructure repairs and improvements and other urgent environmental requirements mandated by federal court orders, consent orders and agreements.
The measure calls for "every individual, firm, corporation or other association doing business in the V.I., except those exempted or excluded . . . [to] pay an environmental excise tax of 2 cents per pound on all goods produced in or brought in to the V.I. for use in a business."
It also states that when an article is sold more than once in the course of trade, its weight shall be included in the environmental excise tax calculation.
Food for thought
Another proposed excise tax, of 2 percent on food imports, is puzzling. Evidently, nutritious food will be taxed but junk food won't. The bill calls for the tax on "foodstuffs, which means all nutritive matter intended for consumption for purposes of the growth, repair, or maintenance of vital processes (including noncarbonated drinking water) but expressly excluding such items as confectionary, chewing gum, carbonated drinks, soda water, soft drinks and other beverages and all other matters not consumed primarily for nutritive purposes."
"Maintenance of vital processes" presumably refers to the custom of eating in order to keep alive. Under the governor's proposals, then, food -- already excessively expensive in the territory -- would be further taxed by the cargo container, by increases in the road tax and motor fuel tax, by an increase in the gross receipts tax and, finally, by the new excise taxes. And the taxes, of course, would be passed on to the consumer.
The bills also include the by now traditional raiding of various government funds. Among them:
- $600,000 from the Land Bank Fund to the Public Works Department for a public cemetery on St. Thomas.
- $2.3 million from the Union Arbitration Award and Government Employees Increment Fund as a contribution to the General Fund.
- $750,000 from the General Fund to the Property and Procurement Department for plans for a Workforce Development Center.
The governor's proposals also include changing the number of government paydays to 24 from 26 by making the pay periods bi-monthly instead of every other week, and increasing the stamp tax on the sale of real estate valued at more than $100,000 -- to 2.5 percent on property worth $101,000 to $500,000, 3 percent for property worth $501,000 to $1 million, and 3.5 percent for property worth over $1 million.
For a complete breakdown of the proposals, see "Outline of bills submitted to special session".)

Publisher's note : Like the St. Croix Source now? Find out how you can love us twice as much -- and show your support for the islands' free and independent news voice ... click here.