Inner Circle Logistics, owned by local businessman Johann Clendenin, got its Economic Development Commission certificate in 2009, but a nine-year dispute over exemptions meant Inner Circle never got to use the extensive EDC benefits, and they are scheduled to expire within the month.
“To me, this is a dissonance between the board and its administrative staff, blocking me from going back and forth to the board,” Clendenin told the EDC board during a show of cause hearing on Tuesday.
EDC Board Member Eugene Farrell agreed.
“Throughout this whole situation here, I see a lot of back and forth, but nobody is really making a decision to help them with the issue. They’re going back and forth like a yo-yo, and again, no answers were being given to them.”
The EDC initially granted benefits to Inner Circle Logistics for the period between Jan. 1, 2009 and Dec. 31, 2018. During this time period, the company was set to receive corporate and income tax cuts – as much as 90 percent – and a full exemption on gross receipts, business property and excise taxes. In return, however, Inner Circle was required to maintain a certain number of employees and make specific charitable cash and in-kind contributions to the community.
The EDC board’s version of events was pretty straightforward. According to the board’s documents, Clendenin signed a draft certificate with the EDA in May 2009 and then-Board Chairman Percival Clouden signed the document in June.
As of 2014, Inner Circle has not yet commenced business operations. In a July 2014 letter to Clendenin, the EDC board indicated that it was granting a request by Inner Circle to suspend its EDC benefits between January 2013 and December 2014, and granted a reversal of the compliance fee for the same period. However, the recommendations also included a proviso that if Inner Circle failed to commence operations in January 2015, its EDC certificate would be terminated immediately.
EDC Director of Compliance Claude Gerard sent a letter to Clendenin dated September 2015 that Inner Circle was assigned a new compliance officer, Janella Harvey. On Tuesday, Gerard said he has not received any communication from Inner Circle besides a phone call from Clendenin roughly three weeks ago.
Clendenin’s camp, however, painted a picture of considerable efforts by the company to clarify its tax exemptions status once and for all. A few months after he signed the draft EDC agreement, Clendenin said he was informed that excise tax and customs duties tax exemptions for raw materials and component parts did not apply to his supply chain logistics company. According to EDA rules, only companies classified as manufacturing companies are eligible for those two exemptions and Clendenin’s EDC application and resulting EDC certificate did not indicate that Inner Circle was involved in manufacturing.
Clendenin insisted that the scope of work of his supply chain logistics company does include manufacturing, in spite of doubts by EDC board members. As an example, Clendenin said, Inner Circle might import materials from China to make picture frames to be assembled in the territory and sold in chain stores. This constitutes, manufacturing, he said.
In addition, Clendenin said that during the time of his application for EDC benefits, there was no field that allowed him to indicate that his company fell into the manufacturing business area.
Renee Andre, counsel for Inner Circle, produced a December 2012 email signed by then-EDA attorney Stacey Plaskett indicating that the two tax exemptions did apply to the supply chain company. In the letter, Plaskett wrote, “As such, it is my opinion that the exemption for excise tax for raw materials should be granted.” Andre added that while Plaskett’s letter did not specify the customs duties tax, that particular tax exemption also applied to raw materials and component parts used by manufacturing companies.
Gerard said he did not receive a copy of Plaskett’s letter. In spite of Plaskett’s communication to Inner Circle indicating that the matter would be brought before the board, it never was and a revised EDC certificate was never issued to Inner Circle.
Clendenin added that the EDC presented the agency’s correspondences to him, but did not present any of his responses.
For nine years, Clendenin’s case essentially has been bouncing back and forth between Inner Circle and various administrative staff at the EDA, but was never formally brought before the EDC board for any type of formal action until Tuesday’s show of cause hearing. Clouding the situation even more was the fact that key players involved in the discussion of Inner Circle’s case over the years either separated from the EDA or were not present during Tuesday’s hearing, tying the hands of both Inner Circle and the EDC board. The compliance officer handling Inner Circle’s case, for instance, is no longer with the EDA.
Now, Inner Circle’s benefits are ending, and the company is requesting that the EDC change the 10-year benefits date to commence in January 2019, with a certificate that reflects the tax exemptions granted to manufacturing companies. Board Chairman Jose Penn, however, balked at the prospect of granting a 10-year certification to a company based on decade-old data.
“I apologize for what you have gone through, but if we’re going to move forward, we’re going to need some current information,” said Penn. “Roads change. Conditions change. If we go with what you had 15 years ago, the landscape is different.”
Board Vice Chairman Philip Payne also indicated he was not comfortable voting on a 10-year benefits period without having seen an employment plan or other data that the EDC requires of new applicants.
Clendenin, however, countered that the EDC grants 30-year certificates. He said Inner Circle remains the same business, has the same location and has complied with other EDC requirements, including work with nonprofits. As for questions over why Inner Circle never made a formal request to modify its certificate, Clendenin said there was essentially nothing to modify.
“This wasn’t a modification. It was what was originally intended,” said Clendenin. “And when they asked us to spend the money to go through a modification process, I said it was inappropriate.”
When asked what undue stress the submission of updated financials would place on his company, Clendenin said further delays would prevent Inner Circle from approaching hurricane recovery companies like APTIM and offer to bring in materials unburdened by excise and customs duties taxes.
Board Secretary Haldane Davies eventually moved to require Inner Circle to submit revised business plans, updated five-year-projections, a business license, certificate of good standing and a Lieutenant Governor’s Report, all of which will be immediately reviewed by the board. Penn, Payne, Davies, Farrell and Board Member Juan Figueroa all voted yes.
The EDC board also heard from new applicants, including:
– Rock City Brewing, a St. Thomas company that intends to manufacture and market large-scale lager beer. The brewing facility sits on a 5,000-square-foot space housing a 180-barrel brewing system that can produce 6,000 gallons of product a day. Rocky City Brewing commits to employing a minimum of 10 full-time employees and will contribute to local charities in the amount of $50,000 a year, which will increase by $2,500 every year.
– Thriving Charity Advocates also applied for EDC benefits. For a one-time fee, the Tennessee-based company helps child-sponsorship nonprofits acquire time in popular concerts to present their causes and garner donations for the children they support. Thriving Charity Advocates commits to making a minimum capital investment of $100,000 and employing five full-time employees within one year of the EDC certification. It will also contribute $60,000 annually to local charities, which includes $20,000 toward educational initiatives.
The EDC board made no decisions on the new applications during Tuesday’s meeting.
Editor’s note: This story has been edited to correct the date of the EDC attorney’s email, and to make minor changes. The Source regrets the error.