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Charlotte Amalie
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HomeNewsArchivesSenators Fume Over Tax Benefits for Vitelco

Senators Fume Over Tax Benefits for Vitelco

June 2, 2005 – Virgin Islands senators are so upset with the Economic Development Commission approving benefits for the V.I. telephone company that they may try to pass a bill to make it illegal.
Sen. Ronald Russell brought up the idea early in a hearing Thursday on St. Thomas. He said he had requested a draft bill be written that prevents utilities from receiving EDC tax benefits. Five hours later, just before the hearing ended, Sen. Louis Hill suggested a special session of the Legislature be called to consider such a measure.
The EDC has recommended that Vitelco, now known as Innovative Telephone Co., receive an extension of its benefits. The company is only waiting approval from Gov. Charles W. Turnbull for the benefits to go into effect. At the hearing, Vitelco president David Sharp said the company's request amounted to about $4 million a year in benefits, down from the $10 million a year it previously received. He said the company had received tax breaks for about 40 years, and that the breaks were good for the territory, adding that Vitelco provided about 400 quality jobs for Virgin Islanders.
Testifiers and senators presented many reasons why they thought the telephone company should not get the tax breaks.
Luis "Tito" Morales of the United Steelworkers of America said the EDC program was established to create new jobs and new investments in the Virgin Islands — two things Vitelco is not doing.
The hearing Thursday was a continuation of a hearing held last month. Most members of the EDC decided not to attend that meeting.
They were subpoenaed to attend this meeting, but even though they showed up, senators still thought the commission members were being uncooperative. Commissioners refused to answer questions from the senators. Members would not answer even whether they voted up or down on the recommendation for Vitelco benefits.
Frank Schulterbrandt, director of the EDC, said the process was not complete, and the commission would only be able to talk about it after the governor approves the benefits.
Commission members said that the "deliberative process" was immune to public scrutiny. They also stated that what happened in an executive session was privileged information.
Generally, any public body that controls public money has to take action in a public forum. Votes generally can't be taken in executive session.
Sen. Adlah "Foncie" Donastorg, who chaired the hearing, said the commission does have some privileges to keep information about the company it is reviewing confidential, but he would be reviewing whether the commission had the right to keep secret all of its deliberations and its votes. He said the commission members' refusal to provide information about their decision threw a cloud of suspicion over government activities.
Commission members refused to give any information about why they made their decision, saying only that it was based on what was good for Virgin Islanders after a cost analysis. However, on questioning from senators about how much the Virgin Islands would lose because of these benefits, no commission member could give a figure.
Sen. Terrence "Positive" Nelson aggressively questioned whether the benefits would be retroactive. Louis Willis, director of the V.I. Internal Revenue Bureau and also a member of the commission, said the Virgin Islands would have to pay money back to Vitelco if the tax benefit package was approved retroactively.
"We cannot afford to pay that money to Vitelco," Nelson said.
Sen. Juan Figueroa-Serville expressed frustration at commission members for answering that they could not "recall" or "divulge" information about why they made the recommendation for Vitelco to receive the tax benefits. "I got up this morning to go to work and get some answers, and I have to deal with this," he said.
Beyond discussion of the EDC benefits, much of the hearing focused on what some termed a loan and others termed an investment in the Belize telephone company. Vitelco made an approximately $28 million loan to parent company Innovative Communication Corp. to help purchase a share of the Belize telephone company. That move has led to a battle in Belize for control of the company.
Nelson, who spent much of his question time trying to determine what "the monster ICC really was," asked whether this was actually a loan by Vitelco to itself. Nelson also wondered out loud why a company that was confident in making high-risk loans of $28 million needed tax breaks.
Sen. Liston Davis pointed out that Vitelco was not part of the EDC program when it made the loan.
Valencio Jackson, chairman of the Public Services Commission, was also one of the testifiers. He said Vitelco was granted a rate increase after an official from the company said it would no longer need tax benefits. He said the rate increase was to help Vitelco meet its allowable profit margin. Jackson said he wrote a letter to the EDC saying that the PSC did not support tax benefits for Vitelco. However, EDC Chairman Dean Plaskett and Schulterbrandt both said they did not recall such a letter.
Also debated at the hearing was whether Vitelco was a monopoly. Sharp said that Vitelco did get competition from cell phone companies. No other company provides land line service in the Virgin Islands.
Russell pointed out that many customers in St. Croix were having a serious phone problem (See "Telephones Out For a Week, Cause Business Problems").
Donastorg said Vitelco's service in the Virgin Islands was like the service to a "Third World country." He said he and other people in the islands keep hearing the messages "all circuits are busy" or "your special code has been entered incorrectly."
Sharp said that the former message is generally not the V.I. phone company's fault: It was the fault of cellular phone companies who did not have enough lines.
EDC member Mary Ann Pickard did not attend the hearing. Ray A. Clarke, assistant chief of security for the legislature, reported that Pickard now resides in Savannah, Ga. Plaskett said he had no knowledge of where Pickard lived.
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