The Senate Finance Committee probed at delinquent property tax collections and the chimera of weekend villas producing millions of dollars in unpaid room occupancy tax on Tuesday, but it found no silver bullet to solve the territory’s $70.5 million budget shortfall.
To date the Fiscal Year 2014 appropriation level is $757.3 million while the administration now projects revenue of $686.8 million, including $25 million from a working capital loan, according to Management and Budget Director Debra Gottlieb.
While giving updated revenue figures, said Gottlieb there was $84 million still outstanding in long-delinquent property taxes. As of Jan.21, the government had collected $15.7 million in property taxes for the year, of which $8.4 million was for delinquent taxes, she said.
The government anticipates sending out both the 2013 and 2014 property tax bills this year and projects total property tax revenues of $105.6 million, she said. The government held four auctions – two in each district, auctioning off 50 properties – and the government collected delinquent taxes of $289,000 on total sales of $1.24 million, Gottlieb said.
Sen. Judi Buckley of St. Croix asked members of the governor’s financial team whether more aggressive collection efforts might bring a big piece of that delinquent $84 million for this year’s budget.
The Office of the Lieutenant Governor is collecting a lot of delinquent property tax, but most of the debt goes back many years and many of the original debtors are deceased, said Delbert Hewitt, director of operations for the Office of the Lieutenant Governor. "The key is we have to continue to do the auctions … because it puts the land in the hands of persons who can pay," Hewitt said. "But the $84 million is spread over a wide number of years and is very difficult to collect," he said.
Buckley asked if the debt cannot be readily collected, should it be written off.
Hewitt replied that the debt should not be written off and can be collected by auctioning delinquent properties but that it involves hundreds of properties and requires many more auctions.
Over the last year, some senators have suggested there may be millions of dollars in uncollected room occupancy tax from villa and condominium owners who rent out their properties online, and V.I. Internal Revenue Bureau Executive Director Claudette Watson-Anderson has testified several times that there may be some money, but that most property owners do pay and whatever can be collected is not likely to be many millions of dollars.
On Tuesday, Gottlieb and Watson-Anderson discussed getting room tax from villas in more detail, saying the government is going after those who do not pay, but reiterating that any sums collected will not go far to solve the budget gap.
Gottlieb read testimony from the Department of Tourism, saying Tourism "is aware that there are some owners who will go to great lengths to avoid not only room tax but also being properly licensed, paying gross receipt tax and reporting their room occupancy information" to the Bureau of Economic Research.
Gottlieb shared an example of how an owner can operate under the radar by posting a listing that describes the property and gives an email address, but does not have any names or addresses.
Watson-Anderson said IRB has developed a process to assess the under-reporting of room occupancy tax, she said. As of Feb. 14, there were 1,676 properties advertised on the internet, with 24 on Water Island and St. James; 276 on St. Croix; 576 on St. Thomas; and 800 on St. John.
"The data suggests that the majority of these properties are managed by Virgin Islands property management businesses that are responsible for collecting and remitting the hotel room occupancy tax," Watson-Anderson said.
The IRB is creating an inventory of all V.I. villas and other rental assets, checking which ones are not in compliance, and sending those owners notification that they are not in compliance, she said.
Citing other cost-reduction measures since 2007, Gottlieb told the committee the government workforce has shrunk from 8,845 employees to 6,670 today.
Sen. Myron Jackson asked if any more cuts to the government payroll would be counterproductive, since they would weaken the already ailing Government Employee Retirement System.
"Yes, that would be an unintended consequence," Gottlieb said.
Jackson pressed her on whether that consequence makes further cuts a bad idea.
While you need money to pay retirees pensions, "you also need the money to pay the salaries," she said.
In addition to the budget crisis, Gottlieb asked the Legislature to act on Government Employee Retirement System and other reforms sent down from Government House.
There were no votes during the information gathering hearing.
Present were Buckley, Jackson, Sens. Donald Cole, Kenneth Gittens, Clifford Graham, Nereida "Nellie" Rivera-O’Reilly, Clarence Payne and Janette Millin Young. No members were absent.
