After rejecting the governor’s economic-recovery proposals in December, the V.I. Senate on Tuesday passed its own bill to allow the government to borrow up to $120 million, lift the sunset date of the most recent gross-receipts tax hike, and make other changes supporters hope will prevent employee firings and fix fiscal year 2012’s projected $67.5 million deficit.
However, opponents argue that the Employment Relation and Economic Recovery Act of 2012 will be ineffective because it does not come with an increase to the gross receipts tax.
In his proposals, Gov. John deJongh Jr. sought to increase the gross receipts tax rate from 4.5 percent to 5 percent. On Tuesday, after the Senate approved its Economic Recovery Act by a 10-5 vote, its members narrowly defeated a proposed amendment to V.I. Code that would have done what deJongh wanted and raised the gross receipts tax rate to 5 percent.
Without the promise of that extra gross receipts tax revenue for collateral, the administration will not be able to get the $120 million in financing it needs, according to those who supported the tax increase.
“Basically we are saying, ‘Yes we authorize you to borrow, we want you to go and borrow,’ but we are telling you, ‘You’re not going to get the instrument you need to do it,’” said Sen. Majority Leader Celestino White Sr., who voted in favor of both the Economic Recovery Act and gross receipts tax increase.
In a prepared statement, deJongh framed the Employment Relation and Economic Recovery Act’s passage as a failure.
“To authorize a borrowing without providing the means of repayment is the same as offering to lend one’s car and then removing the tires,” deJongh said.
“Every senator at the session today understood what they were doing,” deJongh continued. “Each senator understood fully that to vote against the increase in the Gross Receipts Tax in the absence of any other revenue generating alternative was a vote to dismiss government workers.”
Sen. Shawn-Michael Malone supported the Economic Recovery Act, but did not vote for the gross receipts tax increase. After Tuesday’s meeting, Malone said he was not sure the gross receipts tax increase was necessary for securing the $120 million loan.
“That’s what we heard from the governor,” Malone said. “We never heard from a banker.”
Malone said the Economic Recovery Act’s other revenue-generating provisions should be able to produce the necessary collateral.
Sen. Janette Millin Young, who voted against both pieces of legislation, said the gross receipts tax increase would result in an estimated $17 million in revenue, which is not enough to convince her to raise business owners’ bills.
“Is that the number that’s actually going to convince the bank to lend or not to lend?” Young said. “Those are the type of questions I have.”
In addition to authorizing the government to borrow $120 million for paying its past-due V.I. Water and Power Authority bills, issuing citizens’ overdue tax-refund checks, and continuing to provide payroll for government employees, the Economic Recovery Act would:
— Make the 4.5 percent gross receipt tax rate permanent by removing its June 30, 2013 end date from V.I. Code;
— Direct the V.I. Internal Revenue Bureau to implement an early payment discount program for businesses required to pay gross receipts taxes. Under the program, businesses will receive a 10 percent reduction of one year’s estimated annual gross receipt taxes, as well as a 10 percent reduction to any delinquent amounts they might owe. The program would start April 1, and end Sept. 30, 2012;
— Reduce the required balance of the Insurance Guaranty Fund from $50 million to $10 million, so that those revenues can be rerouted into the general fund;
— Direct the governor to submit quarterly reports on the government’s financial status, as well as submit a 24-month-long budget to the Senate on or before May 30, 2014;
— Order the tax assessor to issue 2009, 2010, and 2011 property-tax bills that are based on the 1998 property-assessment rates;
— Amend V.I. Code, so that government workers who request to participate in the Voluntary Leave Without Pay Program will be granted immediate leave, and that they will not have to get approval from the head of their agency or department;
— Revise V.I. Code related to aspiring University of the Virgin Islands Research and Technology Park tenants and companies. Under the changes, the Technology Park’s board must forward all favorable tenant and Protected Cell Corporation applications to the governor for consideration. If the governor does not respond with a decision to approve or reject the plans within 60 calendar days, the Technology Park board can proceed with issuing the appropriate certificates.
Voting For the Employment Relation and Economic Recovery Act of 2012:
Sen. Malone, Sen. White, Sen. Carlton Dowe, Sen. Alicia Hansen, Sen. Louis Hill, Sen. Usie Richards, Sen. President Ronald Russell, Sen. Sammuel Sanes, Sen. Patrick Sprauve and Sen. Alvin Williams Jr.
Voting Against the Employment Relation and Economic Recovery Act of 2012:
Sen. Craig Barshinger, Sen. Neville James, Sen. Terrence Nelson, Sen. Nereida Rivera-O’Reilly, and Sen. Young.
Voting For increasing gross receipts tax:
Sen. Dowe, Sen. Hansen, Sen. Richards, Sen. President Russell, Sen. Sanes, Sen. Sprauve, and Sen. White
Voting Against increasing gross receipts tax:
Sen. Barshinger, Sen. Hill, Sen. James, Sen. Malone, Sen. Nelson, Sen. Rivera O’Reilly, Sen. Williams and Sen. Young
