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Legislature Overrides Veto to Spend $1 Million It May Not Have

The V.I. Legislature voted 10-5 Tuesday to override Gov. John deJongh Jr.’s veto of a $1 million appropriation without knowing whether or not the money actually exists and under the assumption that the government is inexplicably lying about the fund being over-appropriated

The measure appropriated $1 million from the St. John Capital Improvement Fund to buy a specific plot of land on St. John for the V.I. Waste Management Authority to use for a convenience center. It was part of an omnibus bill approved in November of 2013 that contained a number of unrelated legislative mandates. [Act 7574]

The governor vetoed the passage, saying the fund is substantially over-appropriated and, hence, the money appropriated does not exist. DeJongh also said he objected to the measure because he feels "it sets a dangerous precedent" to legislate that a government agency purchase property for an independent agency that already has the independent authority to acquire land and manage its assets.

Sen. Craig Barshinger moved for the override, saying "our research says conclusively" that there have been no appropriations since a past report indicated there was $5 million in the account, and so the money must be there and can be appropriated.

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Sen. Nereida "Nellie" Rivera-O’Reilly asked V.I. Legislature Post Auditor Jose George to explain the research and its conclusion. George said the Legislature’s information suggested a balance of $5 million at the end of September 2013. Since then, the governor’s financial team had sent the Legislature "an adjustment, stating there were $9 million in encumbrances" on that fund.

George did not say the money was actually available, but that more research was needed.

"The post audit position is we need to verify the validity of those encumbrances," George said. "In order to establish whether the fund is over appropriated, that has to be researched.”

"There is more to it than that," said Senate President Shawn-Michael Malone without elaborating.

Senators did not address or discuss of deJongh’s stated objection to setting up independent instrumentalities like VIWMA with the power to purchase land, and then to steamroll over that independence by legislatively mandating what land it buys.

Voting to override the governor’s veto and appropriate $1 million from the St. John Capital Improvement Fund were Barshinger, Malone, Sens. Diane Capehart, Donald Cole, Kenneth Gittens, Myron Jackson, Terrence "Positive" Nelson, Sammuel Sanes and Janette Millin Young. Voting no were O’Reilly, Sens. Judi Buckley, Clifford Graham, Alicia "Chucky" Hansen and Tregenza Roach.

The Legislature also overrode deJongh’s veto of another part of the omnibus bill requiring the V.I. Internal Revenue Bureau to assign two employees to audit people renting out apartments and homes on a daily and weekly basis. DeJongh approved part of the same measure that increased penalties for not paying occupancy tax, but he vetoed the Legislature’s assignment of agency personnel to that task, saying it violated the principle of separation of powers and the executive branch’s role to manage and direct agency employees.

The Revised Organic Act of 1954, federal law which sets up the territory’s government structure, explicitly gives the governor "general supervision and control of all the departments, bureaus, agencies and other instrumentalities of the executive branch."

"I don’t understand why the governor vetoed that," said Sen. Janette Millin Young. There was no mention of deJongh’s stated reason for vetoing it. "This is real money. It is not a phantom item," Young continued. "According to our analysis we have a conservative estimate of $20 million" that could be collected in unpaid hotel tax, she said.

That $20 million figure comes from a presentation made by St. Thomas property manager and real estate agent Kirk Boeger at a legislative economic conference in 2012. (See: Millions in V.I. Hotel Taxes Uncollected on Vacation Rentals? in Related Links below.) It is not a study or a detailed analysis, but rather a collection of guesses and estimates based generally on Boeger’s experience and informal napkin-type arithmetic. [Kirk Boeger Presentation]

Boeger himself did not claim that the numbers were necessarily correct and acknowledged he does not really know what the actual numbers are, and he qualifies his conclusions by saying he "estimates" and "guesses" and "would not be surprised" if they are that high.

"How about owners that are collecting the hotel tax? How do we know they are paying it? My guess is that can only be confirmed by IRB," Boeger said at the outset of his presentation.

"Without significant research, it is difficult to put an estimate on what is missing from hotel tax. 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 that figure may even be higher," Boeger said. (Emphasis added)

IRB collected a total of $15.7 million in hotel tax in 2012 and $22 million in 2013. That means for Boeger’s and the Legislature’s projection to be accurate, annual income from room and villa rentals in the territory who are dodging taxes would have to exceed that from all hotel guests – and also all currently tax paying villa renters – in the territory combined.

IRB Director Claudette Watson-Anderson testified to the Legislature in August and again in October of 2013 that she did not believe there were millions of dollars to be collected, but that collection could be improved and some money retrieved.

In August, she testified that generally "property managers are really good about submitting" their tax information. However, she also said that resources for enforcement are limited.

Responding to a question from Sen. Craig Barshinger in October, Watson-Anderson said, "The senator is under the impression that villa owners do not pay hotel taxes and that is patently untrue." Barshinger responded that he never said they paid no taxes, "just a huge portion is missing."

"We think it is about $10 million," Barshinger said in October.

The Legislature voted 15-0 to override deJongh’s veto of the mandate to devote two employees to rental villa tax collections.

The Legislature overrode another line-item veto in the same omnibus bill, that enhances penalties for assaulting teachers and Education Department bureaucrats, but declares that students under age 18 enrolled in any V.I. public education program of any kind are exempt from the criminal penalties.

DeJongh wrote to the Legislature that he vetoed it "on the basis that as drafted it would not withstand constitutional scrutiny."

There was no discussion of whether the measure would withstand constitutional scrutiny in the courts.

Another measure enacted over deJongh’s veto requires that $120,000 of a $150,000 appropriation for cultural and historical education go to cultural "activities" rather than regular classroom study. DeJongh had objected that it is redundant and infringes on the principle of separation of powers. Thirteen senators voted to override, with Buckley and Roach voting no.

Lastly the Legislature overrode deJongh to enact legislation that gives government employees who work rotating shifts the same 10 percent bump in pay for night shifts that current law gives just to employees who work regular night shifts. DeJongh had objected that it is "a matter more appropriately addressed through the collective bargaining process. It should not be a legislative matter and .. would further add to this territory’s deficit."

Night differential pay for all government employees is currently set by statute, not by collective bargaining agreements. Thirteen senators voted to override. Capehart and Buckley voted no.

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The V.I. Legislature voted 10-5 Tuesday to override Gov. John deJongh Jr.'s veto of a $1 million appropriation without knowing whether or not the money actually exists and under the assumption that the government is inexplicably lying about the fund being over-appropriated

The measure appropriated $1 million from the St. John Capital Improvement Fund to buy a specific plot of land on St. John for the V.I. Waste Management Authority to use for a convenience center. It was part of an omnibus bill approved in November of 2013 that contained a number of unrelated legislative mandates. [Act 7574]

The governor vetoed the passage, saying the fund is substantially over-appropriated and, hence, the money appropriated does not exist. DeJongh also said he objected to the measure because he feels "it sets a dangerous precedent" to legislate that a government agency purchase property for an independent agency that already has the independent authority to acquire land and manage its assets.

Sen. Craig Barshinger moved for the override, saying "our research says conclusively" that there have been no appropriations since a past report indicated there was $5 million in the account, and so the money must be there and can be appropriated.

Sen. Nereida "Nellie" Rivera-O'Reilly asked V.I. Legislature Post Auditor Jose George to explain the research and its conclusion. George said the Legislature's information suggested a balance of $5 million at the end of September 2013. Since then, the governor's financial team had sent the Legislature "an adjustment, stating there were $9 million in encumbrances" on that fund.

George did not say the money was actually available, but that more research was needed.

"The post audit position is we need to verify the validity of those encumbrances," George said. "In order to establish whether the fund is over appropriated, that has to be researched.”

"There is more to it than that," said Senate President Shawn-Michael Malone without elaborating.

Senators did not address or discuss of deJongh's stated objection to setting up independent instrumentalities like VIWMA with the power to purchase land, and then to steamroll over that independence by legislatively mandating what land it buys.

Voting to override the governor's veto and appropriate $1 million from the St. John Capital Improvement Fund were Barshinger, Malone, Sens. Diane Capehart, Donald Cole, Kenneth Gittens, Myron Jackson, Terrence "Positive" Nelson, Sammuel Sanes and Janette Millin Young. Voting no were O'Reilly, Sens. Judi Buckley, Clifford Graham, Alicia "Chucky" Hansen and Tregenza Roach.

The Legislature also overrode deJongh's veto of another part of the omnibus bill requiring the V.I. Internal Revenue Bureau to assign two employees to audit people renting out apartments and homes on a daily and weekly basis. DeJongh approved part of the same measure that increased penalties for not paying occupancy tax, but he vetoed the Legislature's assignment of agency personnel to that task, saying it violated the principle of separation of powers and the executive branch's role to manage and direct agency employees.

The Revised Organic Act of 1954, federal law which sets up the territory's government structure, explicitly gives the governor "general supervision and control of all the departments, bureaus, agencies and other instrumentalities of the executive branch."

"I don't understand why the governor vetoed that," said Sen. Janette Millin Young. There was no mention of deJongh's stated reason for vetoing it. "This is real money. It is not a phantom item," Young continued. "According to our analysis we have a conservative estimate of $20 million" that could be collected in unpaid hotel tax, she said.

That $20 million figure comes from a presentation made by St. Thomas property manager and real estate agent Kirk Boeger at a legislative economic conference in 2012. (See: Millions in V.I. Hotel Taxes Uncollected on Vacation Rentals? in Related Links below.) It is not a study or a detailed analysis, but rather a collection of guesses and estimates based generally on Boeger's experience and informal napkin-type arithmetic. [Kirk Boeger Presentation]

Boeger himself did not claim that the numbers were necessarily correct and acknowledged he does not really know what the actual numbers are, and he qualifies his conclusions by saying he "estimates" and "guesses" and "would not be surprised" if they are that high.

"How about owners that are collecting the hotel tax? How do we know they are paying it? My guess is that can only be confirmed by IRB," Boeger said at the outset of his presentation.

"Without significant research, it is difficult to put an estimate on what is missing from hotel tax. 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 that figure may even be higher," Boeger said. (Emphasis added)

IRB collected a total of $15.7 million in hotel tax in 2012 and $22 million in 2013. That means for Boeger's and the Legislature's projection to be accurate, annual income from room and villa rentals in the territory who are dodging taxes would have to exceed that from all hotel guests – and also all currently tax paying villa renters – in the territory combined.

IRB Director Claudette Watson-Anderson testified to the Legislature in August and again in October of 2013 that she did not believe there were millions of dollars to be collected, but that collection could be improved and some money retrieved.

In August, she testified that generally "property managers are really good about submitting" their tax information. However, she also said that resources for enforcement are limited.

Responding to a question from Sen. Craig Barshinger in October, Watson-Anderson said, "The senator is under the impression that villa owners do not pay hotel taxes and that is patently untrue." Barshinger responded that he never said they paid no taxes, "just a huge portion is missing."

"We think it is about $10 million," Barshinger said in October.

The Legislature voted 15-0 to override deJongh's veto of the mandate to devote two employees to rental villa tax collections.

The Legislature overrode another line-item veto in the same omnibus bill, that enhances penalties for assaulting teachers and Education Department bureaucrats, but declares that students under age 18 enrolled in any V.I. public education program of any kind are exempt from the criminal penalties.

DeJongh wrote to the Legislature that he vetoed it "on the basis that as drafted it would not withstand constitutional scrutiny."

There was no discussion of whether the measure would withstand constitutional scrutiny in the courts.

Another measure enacted over deJongh's veto requires that $120,000 of a $150,000 appropriation for cultural and historical education go to cultural "activities" rather than regular classroom study. DeJongh had objected that it is redundant and infringes on the principle of separation of powers. Thirteen senators voted to override, with Buckley and Roach voting no.

Lastly the Legislature overrode deJongh to enact legislation that gives government employees who work rotating shifts the same 10 percent bump in pay for night shifts that current law gives just to employees who work regular night shifts. DeJongh had objected that it is "a matter more appropriately addressed through the collective bargaining process. It should not be a legislative matter and .. would further add to this territory's deficit."

Night differential pay for all government employees is currently set by statute, not by collective bargaining agreements. Thirteen senators voted to override. Capehart and Buckley voted no.