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Senators Get Direction on How to Fix Ailing Economy

Feb. 9, 2005 – After hearing uncertainty in testimony from the governor's financial officers Tuesday, the Senate Committee of the Whole fared better Wednesday in receiving answers to what can be done to improve the fiscal condition of the territory.
The message received from the private sector representatives who testified resounded loud and clear – a public-private sector partnership needed to be formed for the improvement of the territory's economy.
"The time has come that we all step up, create a public-private sector partnership and work together for the benefit of everyone in the Virgin Islands," Fred Laue, president of the St. Croix Hotel and Tourism Association, said.
Laue told the senators that a Tourism Authority is "absolutely needed" in building the public-private partnership that would help St. Croix.
"In the years that I have been associated with tourism in the Virgin Islands, and after talking with many who have been here forever, the largest single deterrent to the growth and vitality of tourism are the disjointed efforts of the many different tourism related organizations and that includes the Department of Tourism," Laue said.
Committee Chairwoman Senate President Lorraine Berry, said she does not see a Tourism Authority being created at this time because Gov. Charles Turnbull and others are not in support of it. However, Berry said she is in support of a Tourism Board.
Laue said his organization has several goals for 2005, which include: promoting the marketing of St. Croix to the world, helping to develop an identity for St. Croix as an island for nature, cultural and heritage tourism, aiding in the development of a Hospitality and Culinary Arts School, helping St. Croix become a viable cruise ship port of call, promoting additional airlift to the island and supporting the building of new hotels and accommodations and the expansion of existing facilities.
Anna Maria Hector, president of the St. Croix Chamber of Commerce, also urged senators to form partnerships with the private sector.
"The government can benefit from engaging in strategic partnerships with the private sector and should also consider the outsourcing of certain services," Hector said. "Many solutions to our ongoing woes may be found in our own backyard."
Hector said many government services could be privatized to assist in the curtailing of waste and to provide more efficient services. She added many in the business community are willing and able to lend their expertise in assisting and advising in areas such as tourism, education and infrastructure development.
Of infrastructure development on St. Croix, Hector said, "We have begun to see some improvements in this area, but we are still behind."
Hector said St. Croix is still "plagued" by the nuisance of pitted roads, inadequate water supplies for farmers, raw sewage contamination, poor street lighting, unreliable electric power, few attractions and hotels, and rampant crime.
"Most apparent are the decrepit buildings in business districts that house unsavory characters blaring loud music and peddling carnal and other illegal wares at all hours and gives the appearance of a forgotten wasteland," Hector said. "Our appearance is key in marketing our product. Visitors and locals should be able to enjoy our historic architecture and picturesque towns in a climate of beauty, peace and tranquility."
Hector said other areas the chamber plans on addressing in 2005 are: tort reform, training and education, reliable power supply, improving customer service, airlifts and branded hotels.
Samuel Baptiste, president of Team St. Croix, told the senators a "major weakness" of the V.I. government was its attitude to the private sector. Baptiste said TRIAD Associates had done a study in March of 2001 on St. Croix's economic conditions and it was found that the government's help to new and expanding business was unsatisfactory.
"A common theme heard throughout their interviews was that the Virgin Islands was the most unfriendly environment for business in the Caribbean," Baptiste said.
Baptiste said his organization's "major focus" is to establish a culture of collaboration.
"Economic development is not about macroeconomic policy, but about human relations – the need to build a culture of trust, innovation and cooperation," Baptiste said. "Team St. Croix believes that there needs to be a change in the fixed ideas of both the government and the business community."
Beverly Nicholson, president of the V.I. Hotel and Tourism Association, brought some positive news before the senators – 2004 tourism figures were up.
Nicholson said this can be attributed to several factors, including: aggressive marketing by both the public and private sector, pent up demand for travel, weak dollar and global concerns of safety and security.
"Looking at the growth of the past year, it may be tempting to become satisfied with our position in the tourism marketplace," Nicholson said. "Instead we must be even more diligent in our pursuit to sustain the current trend."
Nicholson said tourism advertising must be increased. Through the launching of the Hotel and Tourism Association's Cooperative Marketing Initiative in 2004, Nicholson said, $500,000 has already been raised for advertising.
Berry asked the private sector representatives whether there were specific governmental policies that were hindering the business community. Most of them said the permitting process of several government agencies were "burdens" to the business community.
"The need for improved processing of Coastal Zoning Management, Department of Planning and Natural Resources and Environmental Protection Agency permitting is essential," Nicholson said. "It can take months for a business to receive approval on a 10-by-10 foot office addition."
Hector said tort reform is needed because the Virgin Islands has become an "increasingly litigious society" and liability insurance has increased as a result.
"It's just too costly for investors to do business here," Hector said, adding that overall increased litigation and frivolous lawsuits have burdened V.I. businesses with increased costs of doing business.
Cassan Pancham, outgoing president of the St. Thomas-St. John Chamber of Commerce, said the Waste Management Authority fees, when implemented, would have a negative impact on costs and prices in the territory.
Pancham said tax reform is needed.
"This should be a critical initiative, which should establish a new tax regime in the territory and a strategy for future tax decisions," Pancham said.
Pancham told senators the increasing cost of power also needs to be addressed.
"For business, if the higher costs persist, at some point in time it has to be passed on by means of higher prices," Pancham said. "In terms of the outages, this creates business interruptions and revenue losses all around. Not all businesses can afford the investment in back-up generators."
He added, "I think this is an area of growing concern, and we should all support [the V.I. Water and Power Authority's] efforts to improve on both fronts."
Pancham told Berry the Economic Development Commission program also needed to be re-evaluated. He suggested that the EDC and the government focus on the "important sub-sector" of designated service businesses (DSB) and the "captive insurance industry."
Benjamin Rivera Jr., executive director of the USVI Economic Alliance, agreed. Riviera, who had not been formerly invited to testify, said his reason for requesting an appearance was to "shed some light" on what is taking place within the DSB community.
"The general mood, at the moment, in the DSB community is similar to having been informed that a close relative has
been diagnosed with a terminal disease," Rivera said. "Depression, anxiety, uncertainty, anger, stress and the lack of hope have caused many to question whether or not they will remain as participants in this program."
Rivera said while only a few EDC companies have permanently closed some companies – though still open for business – have lost many partners.
"Many have testified that only a handful of companies have left the program, but the size of partnerships that remain is an important indicator about the future revenue collections of the V.I. government," Rivera said.
Rivera said this affects the territory's small businesses because owners of DSB's have become "much more conservative" in their daily spending to reduce and eliminate costs.
"In the months to come, our government must be proactive rather than reactive as it has demonstrated in past dealings with these issues if it expects to preserve the significant revenue streams from the DSB's," Rivera told the senators. "There is much work to be done and we need your commitment as well as that of the executive branch to listen closely to our concerns and take these matters seriously as we attempt to move forward to stabilize, protect and grow the EDC program.
Berry said she and the Legislature would work in partnership with the business community in ensuring the viability of the private sector.
"We, also, have to offset the changes in the EDC program, President Bush's tax cuts and also domestic program cuts," Berry said.
Sen. Shawn-Michael Malone thanked the testifiers for participating in the hearing.
"You have provided some valuable input to the process that we're about to engage in," Malone said.
In the afternoon, the senators also heard testimony from Kent Bernier, assistant to the governor for economic affairs; Edward Thomas, chief executive officer of the West Indian Company, Ltd.; Darlan Brin, executive director of the V.I. Port Authority; and Keith Richards, assistant to the governor for capital projects and long-term planning.
Richards told the senators over $70 million worth of capital projects were started or have been completed under the direction of the Lt. Gov. Vargrave Richards. He mentioned the Mon Bijou Flood Control Project and the Frederiksted Revitalization project.
Sen. Celestino White asked both Thomas and Brin whether WICO or the Port Authority had provided monies in the American Airlines contract that Richards recently signed. Both said no.
Several senators asked why the St. Croix economy was lagging.
"There is no reason why St. Croix is not participating in the economic boom in every other Caribbean Island," Bernier said. "We need to get our public and private sector working together to get St. Croix moving."
Sens. Berry, Malone, White, Craig Barshinger, Roosevelt David, Liston Davis, Adlah "Foncie" Donastorg, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Neville James, Norman Jn Baptiste, Terrence "Positive" Nelson, Usie Richards and Ronald Russell were present at the hearing. Sen. Louis Hill, whose brother passed away, was excused.
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