With more budget cuts coming and businesses hurting, the V.I. Legislature entertained revenue generating notions from cracking down on hotel tax collections to decriminalizing marijuana at its economic summit on St. Thomas Monday.
Acting on a resolution it passed in January, the Legislature brought together economists, financial experts, accountants and businesspeople to look at economic forecasts and brainstorm for ways to soften the cuts and raise new revenues, while avoiding causing any more pain to the economy.
Kirk Boeger, owner of Real Solutions Real Estate and Management Services, testified extensively on how and why many condos and home are rented out to tourists and vacationers, estimating that many millions of dollars in annual tax revenue is not being collected, but could be.
Many homeowners and condo owners on St. John and throughout the U.S. Virgin Islands, including himself, post rental and contact information online at the vacation rental by owner website www.vrbo.com, Boeger said. A year ago, he looked at the properties listed just for the area of Sapphire Beach Resort on St. Thomas, he said.
"Of these 44 properties, 14 collected hotel tax whereas the other 30 made no mention of charging hotel tax," Boeger said. Even if they mention the tax, it does not mean they are collecting it and turning it over to IRB, he added.
Just a week ago, there were 116 listings at vrbo.com for Sapphire Beach Resort, he said. If the same proportion holds true, roughly 79 are not paying tax, just at that location. According to Boeger, in his experience, each condo should be generating about $25,000 per year. If they paid the 10 percent hotel tax, that would represent nearly $200,000 in new revenue just from that small area, he said.
Nice full homes for rent on St. John and St. Thomas fetch upward of a thousand dollars per night, generating $75,000 to $150,000 per year, Boeger said, adding that getting firm numbers would take much more research.
"But I would not be surprised if the V.I. is missing collections for upwards of $20 million per year from hotel tax alone and the figure may even be higher," Boeger said. Many property managers are unlicensed, so the government is also losing licensing fees, gross receipts taxes and probably income tax, Boeger said.
The Legislature can act right away by writing to all the condo associations, and not wait for the administration to act, said Senate President Ronald Russell.
"We can’t administrate, but we can take this information and take the initiative," Russell said. Working with Boeger, legislative staff would help collaborate with the Office of the Lieutenant Governor, share the information Boeger provided, and discuss getting a notice in to property owners with upcoming property assessments.
The Legislature’s Post Auditor Jose George, who once served as director of the V.I. Office of Management and Budget, gave a presentation urging the government to change how it defines its revenues and expenses, to exclude off-budget internal and external borrowing. He also recommended having a CPA provide verifiable receipts, and other process-oriented changes.
In the long run, the government may need to look at consolidating more services, so they are not duplicated on several islands, he suggested.
Some speakers talked about drawing more visitors to the territory, and selling more local products. Sen. Terrence "Positive" Nelson asked whether hotel owners believed decriminalizing marijuana or having medical marijuana would help or hurt business.
University of the Virgin Islands economist Simon Jones-Hendrickson said the issue "should be studied, to see the financial impacts of medical marijuana in California" before making any decisions.
George said he agreed "100 percent" with studying whether decriminalization could generate revenue.
Boeger also said he could support such a move.
"New York is talking about legalizing in small amounts and I think another state too," Boeger said. "The Virgin Islands should look into something like this that no one else offers. … But we should do something soon or everyone will be on the bandwagon. … I don’t think it’s a bad idea myself, but I’m one of 120,000," he said.
No one spoke in opposition to the idea.
Erik Ackerson, former executive director of the V.I. Charter Yacht League, said "a surprisingly large number" of commercial vessels operate in territorial waters with no license, and gave a long list of suggestions on how the government might get more revenue without increasing taxes or fees by greater enforcement of existing regulations.
Among the simpler notions, Ackerson suggested a comprehensive mooring and anchoring plan be executed. "A designated and well-marked parking lot garners more profitability and requires less manpower to enforce and identify vessels than our current application," Ackerson said.
"A multi-tiered, multi-colored system would be most beneficial so that a visiting cruising yacht, live-aboard or recreational vessel is not charged in the same range as a commercial vessel. If we cannot currently afford the cost of doing so, consider leasing out the mooring operation to a private entity much like the BVI is currently doing," Ackerson suggested.
Ackerson also said the V.I. Port Authority should consider providing alternative methods of collecting fees from visiting yachts and commercial vessels, not just a cash only policy, which he said is the current policy.
"The current method is of particular concern to mega yacht captains who must now keep larger than usual amounts of cash on board," he said. It is also an unwieldy and nontransparent way to handle payments in an age when even restaurant waiters can process credit cards with a handheld device they carry with them, Ackerson said.
Sen. Janette Millin-Young, who chaired the meeting, said she was surprised and outraged at the amount of tax revenue was being left on the table, telling Boeger "if we did half what you suggest and Mr. Ackerson suggested, we would be in true paradise." The budget deficit eliminated, she said.
No votes were taken at the information gathering hearing. Russell said the information and perspectives gleaned from the summit would be used during the budget process.
