A bill to double the gas tax but lower the actual price Virgin Islands motorists pay at the pump was passed by the Senate Finance Committee Friday, creating a revenue source that will provide the basis for replacing the territory’s aging, inefficient generating equipment, thereby eventually lowering the cost of electricity from the Water and Power Authority.
Senate Bill 29-0304, written by Finance Committee chairman Sen. Carlton "Ital" Dowe, would do three basic things:
- Increase the tax charged on a gallon of gasoline or diesel from seven cents to 14 cents. The increase would return the tax to the level it was at before 2005.
- Exempt imported fuels from a six-percent customs duty tax. The tax has not been collected because gasoline and diesel in the territory has been produced at Hovensa on St. Croix. With the closure of the refinery, fuel will now be imported from outside the U.S. Virgin Islands. At the current price of gasoline, the six-percent tax would cost about 21 cents per gallon, the Senate panel said.
Together, the current gas tax and the customs duty would cost motorists about 28 cents a gallon at the pump when imported gasoline becomes standard. Those two features of the bill would cut that amount in half.
- It would also divert the new gas tax revenue into a fund which would be used to support improvements to the generating equipment of the Water and Power Authority. The current equipment is old and has been badly maintained, running at low efficiency. New equipment could operate more efficiently, bringing down the amount of fuel needed to run it.
Saying WAPA was an issue that affects every Virgin Islander, Dowe likened the plan to trading in a 1954 Cadillac for a modern, fuel-efficient 2013 vehicle.
Hugo Hodge Jr., executive director of WAPA, said with the utility’s negative credit rating, it would be difficult to secure funding for the project.
"The authority’s financial is, to say the least, challenging," he told the senators.
Dowe’s bill will set up a fund specifically for the purpose, and borrowers will be able to see the revenue source dedicated to the project.
Service station owner Roan Creque urged the senators to back the bill wholeheartedly.
"When I am told I am going to be saving 14 cents a gallon on fuel there’s only one thing I have to say to that – Let’s do it now!" he said.
Similarly, former Sen. Allie-Allision Petrus, who recently had to close two of his businesses because soaring utility costs made them unprofitable, backed the proposal.
"If there was ever such a thing as a good and perfect bill … this would be it," he said.
Senate President Ronald Russell supported the idea of the bill, saying WAPA has to replace its aging infrastructure with new, more efficient equipment. But he suggested his fellow senators should go a step further. If a 14 cent increase was good, leaving the customs duty in place would make the tax on a gallon of gasoline 35 cents.
"If the idea is to help WAPA, why not help WAPA more?" he asked.
While creating the gas-tax backed fund will be the "least painful" short-term solution, Hodge warned that the fix won’t happen overnight. WAPA has 14 generating units to replace on the two islands. From the time the process starts, it will take about two years for the permitting process and another 18 months or more for construction.
The committee passed the bill unanimously. Voting yes were Dowe, Sens. Shawn-Michael Malone, Janet Millen-Young, Nereida “Nellie” Rivera-O’Reilly and Celestino White. Committee member Sen. Sammuel Sanes was absent.
The bill now goes to the Senate Rules Committee for further discussion.
