The Senate Economic Development and Agriculture Committee on Monday unanimously voted to forward to the Rules Committee two bills amending the Hotel Development Act and the Tax Incremental Financing Act, praising the measures as important stimuli to create jobs and boost the territory’s economy.
Bills No. 32-0136 and 32-0137 would amend the Hotel Development Act and TIF Act in several ways, including removing the Public Finance Authority as the only entity to issue revenue bonds to real estate developers and pledging anticipated taxes to pay off debt.
The Senate Committee on Rules and Judiciary next will review and act on the bills before they are evaluated by the full Legislature.
“Our primary focus today is to set aside revenues and give developers more flexibility and less risk,” said Sen. Neville James, the committee chair.
George Dudley, attorney for Water Island Development Co., LLC, described the process, after the bills are approved, as being similar to a mortgage company that holds taxes and insurance in escrow for a property owner to be paid when due. In the end, the Virgin Islands Government will capture taxes on land and improvements, and the appreciation over time, not just on the land.
Marvin Pickering, director of the Bureau of Internal Revenue, testified that the legislation would have no impact on the BIR. No additional staff, funding or software would be necessary to handle additional taxes.
“These amendments are designed to lure investors to the territory and build new hotels on St. Thomas and St. Croix,” said Sen. Kurt Vialet, the bills’ sponsor “The onus is on developers but (the bills) offer a creative financing mechanism to go to the market for financing that project.”
Any developer will have access to the process, and Dudley said his client needs the amendments for certain aspects of the project. Water Island Development plans to build a 100-room hotel, 124 residences, a marina, a wastewater treatment plant and other infrastructure on 40 acres of St. Thomas’s nearest island. Principles in the $430 million development include Peter Briggs and Stephen Evans-Freke.
While supporting the bill, Sen. Dwane deGraff asked about the appreciation and resulting increase in taxes for landowners surrounding a new development. James pointed out that since the property increases in value, the owner has more equity for borrowing.
Sen. Nereida Rivera-O’Reilly wanted assurance that local workers will be used for the Water Island project. Dudley said the development will create 600 construction jobs, 300 permanent jobs and temporary and part-time work for around 1,000 people.
“These two pieces of legislation are going to be a new beginning – making it possible for many other investors to come forward and put their projects on the line,” Sen. Marvin Blyden said.
Sen. Brian Smith described the bills as a “win-win for the Virgin Islands” and Sen. Novelle Francis said the bills are a incentive for development.
During the hearing, senators also lamented the snail-like permitting process businesses encounter when trying to work in the territory, especially at Coastal Zone Management. Dudley said government delays of more than two years caused a multi-million-dollar hotel development and golf course to move from St. Thomas to St. Kitts.
“Puerto Rico is spitting out permits in 30 days,” Vialet said.
Pickering said Lt. Gov. Osbert Potter has formed a task force to attempt to streamline the permitting process.
Voting in favor of both bills were: James, Vialet, Blyden, DeGraff, Rivera-O’Reilly, Smith and Sens. Positive Nelson, Tregenza Roach and Sammuel Sanes. Sen. Alicia “Chucky” Hansen and Sen. Novelle Francis, who are not members of the committee, also attended the hearing.