Matching Puerto Rico’s tax breaks is key to competing for companies to invest in the U.S. Virgin Islands under the V.I. Economic Development Commission tax benefit program, current tax beneficiaries said at a summit with Economic Development Authority and EDC officials on Tuesday.
The annual summit serves to help beneficiaries better understand the rules and requirements of the program and to get feedback on how it could be improved, according to EDA Chief Operating Officer Jennifer Nugent-Hill. The EDA oversees a variety of economic development programs, including the EDC, the Industrial Park Development Corp., the Small Business Development Agency and the Enterprise Zone Commission.
Businesses receiving tax benefits also said increasing confidence that rules, regulations and laws will not change; allowing shorter contracts; improving health care; and reducing crime would all help make the tax benefit program more attractive to potential investors.
Anthony Weeks, co-host of the weekly EDA talk show "VIEDA focus on the marketplace," asked a panel of current beneficiaries how the program could attract and retain more businesses.
William Neville, a managing member of software company US Viking, suggested having “legislation on the books to try to have the benefits apply as broadly as possible, so we don’t see industries drawn to other countries."
Brad Lenhart, chief financial officer of Denali Asset Management, said Puerto Rico “seems to be who we are constantly competing against and we have all seen how they are stepping up their efforts.”
“If we can’t match what they are doing, what can we offer that is different and better? I don’t have the answer to that right now. But in the short run I think we do need to consider what they are doing and make adjustments, and I think the EDA is already making strides to do so," Lenhart said.
Many companies balk at long contracts expected on St. Croix and may choose to set up on St. Thomas instead, Neville said.
"Uncertainty" about the future and changes to the rules play a role too, and anything to reduce that uncertainty would help, suggested Timothy Hayes, general counsel for Ocwen Mortgage Servicing.
"Will the laws change in a radical fashion that will adversely affect my business?" Hayes asked rhetorically. Whether on the investment side, employment laws or securities regulations, "any time I don’t what the regulator … is going to do, I don’t like it – and if I sense that uncertainty out there, that will keep me from making a commitment," Hayes added.
Retaining companies might be easier if the EDA had an "ambassador" to help CEOs and support staff understand how life on these small islands is different from the mainland, suggested Lenhart. He said EDA officials talk to the decision makers at the top, but when they bring support staff, "they fail to tell them not to expect a Walgreens on every corner." A little preparation would smooth the transition, he said.
"Often it is not the executive who has a hard time," because that person goes right to work and is busy, Lenhart said. "Whoever is staying at home tends to suffer the change more than the person who goes to work," he said.
Addressing the crowd during lunch, Gov. John deJongh Jr. spoke of "removing structural obstacles to moving forward," such as streamlining and speeding up the EDC application process. He also emphasized the importance of competing for tourist business, noting it now "is our primary industry."
"We have more and different competitors that are much more sophisticated than in the past," deJongh said.
Company representatives at the summit seemed to appreciate the opportunity for feedback from EDA officials.
"I think the exchange was very positive," said Elizabeth Armstrong, owner and general manager of The Buccaneer Hotel on St. Croix, an EDC tax beneficiary. "EDC is definitely the way forward, I think. We need to attract more businesses," she said.
There will be a second summit on St. Thomas on Thursday from 8 a.m. to 5 p.m. at Frenchman’s Reef and Morning Star Marriott Beach Resort.