March 4, 2004 – Fifty companies that have been approved for new Economic Development Commission tax benefits have not activated their certificates, Frank Schulterbrandt Economic Development Authority chief executive officer, told a Senate committee on Wednesday.
Responding to questioning by Sen. Lorraine Berry at an Economic Development, Agriculture and Consumer Protection Committee meeting, Schulterbrandt said the reason for the inaction on the part of some of them is the recent case involving a partner in an EDC beneficiary company who pleaded guilty to federal charges of attempted tax evasion. (See "Partner in IDC firm pleads guilty to tax fraud".)
Schulterbrandt said the newly certified beneficiary companies are waiting for further clarification of EDC regulations and that he is working along with the Internal Revenue Bureau to provide that information.
Sen. Usie Richards asked Schulterbrandt whether the EDA had thought about reducing the level of tax benefits offered by the Economic Development Commission. Currently, EDC beneficiaries can receive up to 100 percent exemption on gross receipts, excise and real property taxes, up to 90 percent exemption on local corporate income taxes and dividends, and partial exemptions on excise taxes on imported materials — all for an initial 10-year period — except for the Frederiksted area, for which it's an initial 15 years.
"You just can't arbitrarily reduce things without a basis," Schulterbrandt said. He said before any such change is contemplated, there needs to be a study to determine how it would affect existing companies and whether it would deter new ones from coming to do business in the territory.
Currently, he said, 108 businesses are receiving EDC benefits.
Schulterbrandt also told the committee that the EDA is promoting the government's Micro-Credit Loan Program, despite some lawmakers' claims to the contrary.
The loan program, which is for St. Croix residents only, provides financing to small business owners including farmers, fishermen and taxi drivers. At Wednesday's hearing, Sen. Roosevelt David told Schulterbrandt that "very few people" on St. Croix knows the program exists. David, a onetime banker, sponsored the legislation to create the program.
"We have started in earnest to promote the program," Schulterbrandt said.
He said the EDA did so at last month's St. Croix Agriculture and Food Fair after receiving $2 million from the Public Finance Authority to fund the continuation of the program. The EDA also is coordinating with the University of the Virgin Islands Small Business Development Center to promote the program, he said.
Asked about the prospects for removal of the $10,000 cap on loans to individuals, Schulterbrandt said the EDA is considering lifting the ceiling to make it more feasible for small entrepreneurs to expand their businesses. However, the authority would have to monitor the lending program closely and be "more restrictive," he said, adding that a major problem is people with bad credit.
Kenneth Mapp, Public Finance Authority director of finance and administration, told the committee that he expects the PFA board to ratify the contract for the Frederiksted Revitalization Project on March 11 and that construction should begin shortly thereafter. He said that 80 percent of those to be employed on the project must have been V.I. residents for at least one year.
Committee members attending the hearing were Sen. Luther Renee, the chair; and Sens. Berry, Douglas E. Canton Jr., David, Emmett Hansen II and Almando "Rocky" Liburd. Sen. Celestino A. White Sr. was not present. Sen. Usie Richards, who is not a member of the committee, also attended the meeting.
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