Vetoed legislation seeking to tighten restrictions on who can be considered a resident for the purposes of the Economic Development Commission’s tax incentive program resurfaced Friday under a new bill number at a meeting of the Senate Committee on Economic Development, Agriculture and Planning.
The original bill, which was passed by special order on Dec. 15, was vetoed by Gov. Kenneth E. Mapp on Jan. 4. It proposed that nonresidents hired by EDC beneficiaries be prevented from being counted towards the companies’ required number of local hires even if they are domiciled in the territory for a more than a year, which is the current precondition.
EDC beneficiaries are required to maintain a workforce composed of at least 80 percent Virgin Islands residents. Critics of the program say that EDC companies are able to continually expand by importing employees from outside the territory and reporting them as residents the following year, thereby keeping their percentage above the threshold without creating new jobs for Virgin Islanders.
The bill as written would not prevent anyone who moves to the territory as an EDC hire from becoming a bona fide V.I. resident. It would only prevent those individuals’ residency status from changing in the eyes of the Economic Development Authority as long as they are working for the beneficiary who hired them.
Sen. Tregenza A. Roach, who sponsored both bills, which have identical language, said the territory needs to ensure it isn’t giving major tax breaks to companies that aren’t committed to hiring locally.
The bill has its opponents, including the chambers of commerce in both districts and the Economic Development Authority itself, who say it would likely have unintended negative effects on the local economy.
All three entities sent representatives to testify against the bill Friday, all of whom said creating new barriers to compliance for EDC beneficiaries will prompt companies to leave the territory for locations with less restrictive programs.
The governor, Roach said, was “scathing” in his veto message of the original bill. “I think the only thing the governor got correct was the bill number,” he said.
Mapp was particularly critical of the barrier he said the bill placed on Virgin Islanders living outside the territory who may want to return home to work for an EDC company. But Roach said current law already includes language that qualifies those individuals as resident hires.
Individuals living outside the territory who attended a V.I. school for six years, or graduated from one of the territory’s high schools or the University of the Virgin Islands, count as residents for the purposes of the EDC’s incentives program.
Roach said that support for an override of Mapp’s veto existed in the Legislature, but he chose to bring a new version of the bill to committee instead to hear testimony from its opponents and ensure transparency.
Wayne Biggs, the EDA’s chief executive officer, said he believes the bill would hurt the territory’s revenue generating capacity by driving away potential EDC companies and impeding the growth of those already active in the territory. Nevertheless, he said, he could see the bill has “noble intentions.”
“We understand that there are public concerns and perceptions that a beneficiary can circumvent the hiring of existing residents by waiting for the one year requirement to be met prior to hiring additional nonresidents,” Biggs said.
Sen. Myron D. Jackson responded, “I don’t believe it’s perception. I believe it’s reality.” Jackson said he will support the bill again on its second trip through the Legislature.
Jackson said the territory has a larger problem that it needs to address. In many industries, he said, Virgin Islanders are “excluded from the marketplace.” EDC beneficiary companies are just one example.
Testimony against the bill frequently returned to the idea that in the case of highly specialized fields, such as finance, EDC companies often have no choice but to recruit employees from off-island due to the small pool of options in the territory.
Senators, for the most part, were sympathetic to that message but impatient with the idea that more resources aren’t spent on training programs and education partnerships to get residents into high-paying positions. Current laws require that EDC companies train residents for positions before looking elsewhere, but Roach said it was unclear to what extent these are being enforced.
Sen. Almando “Rocky” Liburd said, “The real deal is that folks out there still believe that there’s not enough effort given to hiring people locally.”
Roach said, “I am really tired of hearing the Virgin Islands doesn’t have this skill or that skill, or this type of employee or that type of employee. Because I really don’t know what the objective basis is to determine if that is correct. I will submit that there has to be some skill that we don’t have here. We don’t have an astronaut; I don’t know of any. But in regard to other questions, I’m not quite sure.”
Greg Ferguson, a St. Thomas attorney testifying on behalf of the St. Thomas-St. John Chamber of Commerce, said nonresident hires are often instrumental in bringing new knowledge and skillsets to employees in the territory, skillsets they would be hard pressed to acquire otherwise without leaving the Virgin Islands.
Ferguson said, “This bill destroys the EDC’s ability to engage in one of its core functions: the training of local employees in new skills to keep USVI residents employed in good paying jobs at home in the territory.”
If EDC beneficiaries are allowed to expand by bringing in specialists from off-island, they will begin to expand their workforce of local residents as well, he said.
Ferguson said the bill under consideration would also add additional confusion to an already technical set of requirements for EDC beneficiaries. An increase in those requirements over the last decade, he said, has been a major factor in the decrease of active EDC companies in the territory from approximately 110 ten years ago to 60 today.
“It’s important to note that the constant changes to EDC law, particularly the ones that put burdens on compliance for EDC companies, effectively hinder the development of this program,” he said.
In almost all cases, Ferguson added, beneficiaries really do want to hire V.I. residents as often as they can. When they can’t find a qualified candidate living in the territory, companies often turn to Virgin Islanders on the mainland who qualify as residents and already have successful careers in their fields.
Legislation passed in 2011 called for a Department of Labor database of credentialed Virgin Islanders on the mainland for possible recruitment back to the territory. The database was funded with contributions from hotels receiving tax benefits.
That database has not yet materialized, a fact that Roach and other senators expressed frustration over.
Biggs directed questions about the database to Labor Commissioner Catherine Hendry who, despite a request for testimony, asked by letter to be excused from the hearing on the same day it was held and did not send a representative.
Senators said they found testimony at the hearing “compelling” and voted to hold the new bill in committee for further discussion.
Jackson, Liburd, Roach, Sens. Janette Millin Young, Nereida “Nellie” Rivera-O’Reilly and Clifford Graham all voted yes on the motion. Sens. Novelle Francis, Neville James and Kurt Vialet were absent when the vote was taken.
An amendment to the motion by Roach proposing to have the bill heard at the committee’s next meeting failed with three senators voting yes, three voting no and three absent.
Also testifying at the hearing were Bureau of Economic Research Director Bernadette Melendez, St. Croix Chamber of Commerce President Kimberly McCollum, labor leader Luis "Tito" Morales, BER senior economist Donnie Dorsett, attorney Renee Andre and Melanie Gomez, chief talent officer at International Capital and Management Co.