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Charlotte Amalie
Monday, July 15, 2024
HomeNewsLocal newsUSVI Projects Strong 2025 Revenue, Bryan Urges Caution

USVI Projects Strong 2025 Revenue, Bryan Urges Caution

Gov. Albert Bryan Jr. praised revenue projections but urged fiscal restraint at the Spring Revenue Estimating Conference Tuesday. (Screenshot from Facebook live stream)

Government agencies predicted continued strong revenue collections in the territory in 2025 but Gov. Albert Bryan Jr. urged a conservative approach, warning Tuesday that expenses were also on the rise.

While the U.S. Virgin Islands’ prime economic indicator — the Tourism Department — projected a positive finish to 2024 and robust 2025, Bryan warned inflation across the U.S. economy and a growing labor shortage locally could eat away at perceived gains.

“We’re in a place where I can tell you our revenues are going to continue to increase for the next, I would say, the next five to 10 years. We’re going to have positive revenue growth every single year, guaranteed. I’m telling you. You heard it right here first time,” Bryan said at the annual Spring Revenue Estimating Conference on Tuesday. “But that’s not the problem. What we need to have is an expense-estimating conference.”

Inflation — which reduces a dollar’s buying power — has slowed recently but less in the Virgin Islands than on the mainland. Bryan said mainland inflation was at roughly two percent, but St. Thomas was around 14 percent. In 2019, USVI inflation was estimated at 3.8 percent. In 2022 it was 9.8 percent but fell in 2023 to 8.4 percent. Goods and services cost more. It’s rapid economic growth in the territory that has caused inflation to surpass the national average, the governor said.

“We’ve invested in a lot of things in our economy and they’re starting to pay off,” he said. “In Education alone right now, there’s more than $850 million in projects on track. So what we’re going to see is increasing revenues but those revenues eaten away.”

The cost of insurance, fuel for power plants, and union-negotiated wages continue to rise as well, he said.

“The priorities for us as an administration are the expenses. How do we manage expenses not only for us but for our residents,” Bryan said. “The expenses are real and they’re not going down any time soon”

On the positive side, tourism to the territory has exceeded its pre-pandemic levels, by some measures, and rivals the anomalous COVID year where the Virgin Islands was one of the few places on Earth welcoming visitors, said Tourism Commissioner Joseph Boschulte.

In February, the Virgin Islands collected nearly $16.48 million in hotel taxes, just shy of the roughly $16.66 million collected in 2022 and significantly up from 2023’s $13.35 million. Overall in 2022, the territory collected $57,872,462 in hotel tax, which dropped in the post-pandemic year of 2023 to $40,885,692. In 2024, Boschulte predicted $43,307,034 in hotel taxes — and projected more than $45 million in hotel tax collections in 2025.

Vacation rentals like Airbnb and VRBO also remained strong. From March 2021 to March 2022, roughly 3,243 rooms in the so-called sharing economy brought in $382,828,220 in taxes. The same 12-month period a year later brought in $421,708,390 from 3,593 available rooms. And March 2023 to March 2024 brought in $364,178,750 from 3,721 available rooms.

This coincided with hotel re-openings. The balance of room rates and room availability continues to shift with new hotels expected to come online in 2025 and beyond. The Hampton by Hilton will add 126 rooms to St. Thomas in 2025. Hotel on the Key is scheduled to open 78 rooms in 2026 on St. Croix, where the Hibiscus Hotel would add 100 rooms in 2027. Boschulte said only Anguilla and St. Barths rival the Virgin Islands in high room rates.

Boschulte projected a 23 percent increase in non-stop flights from the mainland in 2024 over 2023 — which is 56 percent above pre-pandemic 2019 levels. A 25 percent increase in passenger seats flying into St. Thomas from the mainland and a 17 percent increase in seats flying into St. Croix were also predicted for 2024’s tally.

Cruise arrivals were up too, increasing 600,000 over 2023, Boschulte said, to reach an estimated 1.6 million. Tourism predicted 1.7 million cruise passengers in 2025.

While often maligned for increasingly stingy spending habits on Main Street, cruise passengers actually spend more per person per day in the USVI than anywhere else in the Caribbean, Boschulte said. But their tastes have changed. Modern cruise passengers are far more apt to buy tours than jewelry.

“They think differently. Their buying habits are more around experiences than about timepieces,” the commissioner said. “You have to diversify your product.”

He praised bars and restaurants opening in cruise passenger-heavy districts.

The annual conference where various revenue-generating government departments project the upcoming year’s take is a far cry from the perennial structural deficits of the early 2000s, Bryan said. Back then, former Gov. Charles Turnbull and former Congressional Delegate Donna Christensen had been at odds over a plan to appoint an independent financial overseer to approve spending.

“We don’t talk about it anymore, and when people say the Virgin Islands has come a long way, we’ve come a long way in terms of our finances and what we do,” Bryan said.

In early 2006, Turnbull told Washington he had purged 20 percent of government jobs over seven years and increased revenue by 35 percent while limiting expenditures to a four percent increase.

Jobs are again a problem in the territory but this time it’s a severe labor shortage, Bryan and other officials said.

Labor Department Commissioner Gary Molloy said only 685 people had applied for the 1,937 open jobs in the territory as of Monday. While most of those open jobs were for office and administrative support roles, food services, and healthcare, Bryan worried a dearth of qualified construction workers would put a crimp in the territory’s vast building plans. Schools, hotels, and housing all need able bodies, he said.

The Licensing and Consumer Affairs Department predicted a modest increase in collections in 2025, up nearly $180,000 for a total of $5,607,477. As licenses dip slightly, Director Horace Graham predicted fines for noncompliance may rise.

Likewise, the Department of Planning and Natural Resources saw a dip in building permit applications and anchoring fees and projected more fines would be issued. Total revenue collected by DPNR rose from $7 million in 2022 to $7.9 million in 2023 and was projected to plateau at $7.3 million at the end of 2024. Almost all that money comes from various permits and leasing submerged lands now filled, like Crown Bay.

Property tax collections were projected to remain flat from 2023 to 2024 at $61 million. That could change in 2025, rising to $64 million.

The Office of Management and Budget predicted property lease revenue of $3,775,853 in 2024, which would increase to $3,94,646 in 2025.

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