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Charlotte Amalie
Saturday, May 18, 2024
HomeNewsLocal newsSkeptical Lawmakers Call EDA Projections 'Fluff'

Skeptical Lawmakers Call EDA Projections ‘Fluff’

Kamal Latham, CEO of the Economic Development Authority, testifies at Tuesday’s Finance Committee hearing. (V.I. Legislature Photo)
Kamal Latham, CEO of the Economic Development Authority, testifies at Tuesday’s Finance Committee hearing. (V.I. Legislature Photo)

Lawmakers on Tuesday expressed incredulity at projections issued by the V.I. Economic Development Authority, with Senate Finance Committee Chairman Sen. Kurt Vialet (D-STX) calling agency leadership’s goal of attracting 25 new investor applications in a year “fluff.”

“You guys stood up and told the public today that you’re going to get 50 companies in two years, and it’s not true. Not that it’s not true but it’s not feasible,” Vialet said.

Kamal Latham, chief executive officer of the Economic Development Authority, shared the projections during Tuesday’s Finance Committee Hearing at the University of the Virgin Islands on St. Croix. According to Latham, the 71 companies currently receiving Economic Development Authority benefits could soon rise in number through an aggressive strategy and marketing campaign backed by a 17 percent increase in funding this year.

“Our goal over the next two years is to increase the number of new EDC companies by 25 in Fiscal Year 2020 and 25 in Fiscal Year 2021,” Latham said, adding that the business-marketing budget the agency is requesting will help achieve the next fiscal year’s goal and lay the groundwork for Fiscal Year 2021.

The Economic Development Authority attracts new businesses to the territory using tax breaks: as much as 90 percent in corporate and income tax cuts and a full exemption on gross receipts, business property and excise taxes. In return, EDC companies must maintain a certain number of employees and make specific charitable cash and in-kind contributions to the community.

The 50 new companies the authority expects to recruit over the next two years would contribute 250 new local jobs, up to $27.4 million in wages and salaries, $6 million in capital investments and $2.5 million in charitable contributions, according to Latham.

Latham’s projections come at a cost: an additional $1 million dollars to support what he called “a bold and ambitious approach to economic development.” This would bring the authority’s total budget request to $6.88 million for Fiscal Year 2020.

The $1 million increase would go toward an extensive plan involving sponsorships of 35 events within specific industries, including hotel, manufacturing and high-net worth individuals. It will also fund 10 entities at $25,000, each to generate leads for the authority, according to EDA officials.

On top of aggressive recruitment, the path to 50 new companies would involve a set of plans, including launching the Qualified Opportunity Zone Program in the territory and a global trade and investment program targeting Europe, Asia, Latin America, and Africa, according to Latham.

“This funding increase will go towards business marketing, because we believe that this is an area that will yield a high return on investment to promote economic growth, job creation, and wealth generation. It is a budget that will help create the momentum to build the most resilient island economy within the next two to three years,” Latham said.

Vialet was not convinced.

“How are you going to get 25 companies in 12 months, when you fully well know it takes 18 to 24 months. The 25 and 50 is fluff. It is feel good. And we shouldn’t have feel good. Just be honest and say what the projections are for next year,” Vialet said.

Vialet was referencing data from Wayne Biggs, the authority’s assistant chief executive officer, who testified that it can take 18 to 24 months before a lead can turn into an actual application. Latham said the authority is not starting from scratch, and converting leads does not have to take 18 to 24 months. Shanell Petersen, the authority’s marketing director, added that the authority currently has 126 active leads.

The requested increase in funding faced another hurdle: salary increases for the authority’s management level employees that, according to Latham, were not approved by the governor. Lawmakers noted that 10 of the authority’s employees earn six-figure salaries, more than some commissioners, while rank-and-file employees’ collective bargaining efforts are yielding minute increases. Classified positions averaged a $1,000 increase in salaries while unclassified positions averaged $10,000, even $20,000 in one instance, according to Vialet.

“Don’t waste your money putting a committee together for morale,” Vialet said, referring to Latham’s statement that the authority will convene a committee to address low employee morale.

“There is no committee that would ever justify to those employees who receive those minimal increases and see management that have received those tremendous increases … Don’t waste your time trying to build morale when, in essence, you literally destroyed it,” he said.

Vialet said the Finance Committee will have a meeting to see if they will fund all the positions the authority listed.

Tuesday’s hearing occurred on the same day that the authority released an independent economic impact analysis of the Economic Development Authority’s tax incentive program to the territory. The study, done by the UVI Institute for Leadership and Organizational Effectiveness, spanned the years 2013 through 2015. According to the study, the EDC accounted for $9.7 million in charitable contributions, $309 million in taxes and duties, $1 billion in wages and salaries, and $1.5 billion in territory-wide economic output.

Virgin Islands Energy Office
Kyle Fleming, director of the V.I. Energy Office, also testified before the Senate Finance Committee to defend his agency’s budget. For Fiscal Year 2020, the Energy Office, which monitors and coordinates energy policies in the territory, is asking for $1.34 million. The amount reflects an increase of $27,203 from the agency’s Fiscal Year 2019 budget appropriation.

Of the total budget request, roughly $716,000 would go toward personnel, with another $326,000 for fringe benefits.

The Energy Office is also expected to receive $478,000 in federal funds. The budget request would cover 13 positions with general fund money, while federal funds will cover two positions.

Among the Energy Office’s priorities is the development of an Energy Assurance Plan, which Fleming called the “playbook for coordination” during energy emergencies in the territory. This has been a priority since the 2017 hurricanes, according to Fleming. It would involve inter-agency and community training exercises and a detailed assessment of the energy demands of critical infrastructures.

Present at Tuesday’s Finance Committee hearing were Sens. Marvin Blyden (D-STT), Alicia Barnes (D-STX), Oakland Benta (D-STX), Dwayne DeGraff (D-STT), Donna Frett-Gregory (D-STT) Sarauw and Vialet. Non-committee member Sen. Allison Degazon (D-STX) was also present.

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  1. I do not know ANYONE who can predict the future, whether by educated guess or magic. When projections are made for future returns, skepticism is very reasonable. While the EDC program has possibly had its successes, I do not believe they have measured up to anything as predicted or expected. These companies certainly have not benefited the community as a whole, but they have benefited a small number of people very lucratively. And existing non-EDC companies have paid the price for the EDC companies tax breaks. Instead of trying to attract companies through ‘prostitution’, why not spend the monies being thrown about to clean up the town areas, fix the infrastructure, and make it attractive for tax-paying businesses? Once people see a welcoming and user-friendly atmosphere, they will come knocking! Change MUST start from within!