Editor's note: Following is the full text of the State of the Territory address delivered by Gov. Charles W. Turnbull in the Earle B. Ottley Senate Chambers on St. Thomas on Jan. 13, 2003.
Reverend clergy, Senate President David Jones and other members of the 25 Legislature, Lt. Gov. Vargrave Richards, Delegate to Congress Donna M. Christensen, Presiding Judge Maria Cabret and other members of the Territorial Court, Judge Thomas Moore and other members of the federal judiciary, members of the Cabinet and agency heads, diplomatic corps, distinguished guests, my fellow Virgin Islanders and friends:
I am honored to appear before the Legislature and the people of the Virgin Islands this evening to deliver my fifth State of the Territory address, and the first of my second term, in accordance with the Revised Organic Act of 1954, as amended.
I congratulate all members of this body with a pledge to work with all of you in respect and unity to faithfully serve the people of our beloved Virgin Islands who elected us.
I am pleased to report tonight that, the State of the Territory is one of hope and of opportunities waiting to be tapped. While new challenges await us, we continue to improve and are fundamentally strong enough to meet any of the challenges the years ahead may bring.
Despite occasional bumps in the road along the way, we, as a community, have made steady progress in our journey to fiscal stability and economic and social betterment. Four years ago, we faced a litany of ills with which we are all too familiar for me to repeat in detail. The economy was stagnant, revenues were falling, deficits were climbing, tax refunds and vendor payments were unpaid, negotiated salary increases for hard-working government employees were unmet, and we faced the specter of bankruptcy and a possible federal takeover.
The foundation for a broad-based recovery was no accident. It was painstakingly laid as a result of the changes and policies we consciously and deliberately put in place. We refinanced our debt; and, using creative legal remedies, we secured the precedent-setting cancellation of our $46 million Hurricane Hugo loan.
This administration has revitalized and strengthened our relationship with the federal government by completing long-overdue financial audits and bringing the government into compliance with the Federal Single Audit Act for the first time. No other administration has achieved such a record of compliance with federal financial audit requirements. With new confidence placed in the Virgin Islands by federal agencies, we have succeeded in increasing federal grant funding for the territory by some 50 percent since January 1999. With this new confidence in our commitment and integrity, we have forged new and far-reaching partnerships with the federal government in critical areas, such as environmental protection in order to assure the delivery of clean water and clean air for our people.
The state of the territory's finances
Compliance with the Federal Single Audit Act has not only helped to revitalize our relationship with the federal government, but we can also assure that the required audited financial statements are the most accurate, if not the most comprehensive, indicator of our progress toward a structurally balanced General Fund budget, hence fiscal stability. These audits show continuous financial improvement from Fiscal Year 1999, when my administration reversed our financial course, continuing through the end of the Fiscal Year 2001, the year for which the last audit was just issued. The audits show that the government ended Fiscal Year 1999 with a General Fund deficit of approximately $50 million, half of the projected amount at the time we initiated stringent spending controls and launched a number of revenue-enhancement measures. The audits show that the government continued to make progress on the path toward fiscal recovery, ending Fiscal Year 2000 with a General Fund deficit of just $8 million.
The Fiscal Year 2001 financial audit, issued this past week, shows that the government actually ended the year with a General Fund surplus of some $35 million. And while we anticipate that the uncompleted Fiscal Year 2002 audit will show some slippage, it is undeniable that we are making steady financial progress and that our progress has allowed us to make a number of important improvements in the government's ability to deliver services and meet its obligations, including its contractual obligations to government workers.
Preliminary analysis by my fiscal task force indicates that, as a result of the national economic slowdown in the aftermath of the September 11, 2001, attacks on our country, total revenues collected by the Bureau of Internal Revenue (BIR) declined in Fiscal Year 2002 by some 3 percent. Appropriations by the Legislature for special projects increased spending by approximately 5 percent over the budget I submitted. While the financial audit for the fiscal year just concluded will likely show erosion of the surplus we carefully built up in the previous year, and perhaps even a slight deficit, our fiscal problems are not as severe as those faced by California, New York or many of the 39 states that are currently experiencing significant revenue shortfalls and fiscal distress as a result of the national economic downturn.
Nevertheless, these national trends, combined with a number of local factors, have resulted in short-term pressures on our cash reserves and on our cash flow situation. These local factors include a recent court ruling which prevented the government from collecting millions of dollars in commercial property taxes and the inability, to date, of our hospitals to reimburse the government for $18 million advanced by the government last year to cover personnel and certain other costs. These cash-flow pressures will require corrective action to avoid more serious financial consequences. It is important to understand that a cash-flow problem is not the same as a full-blown fiscal crisis, such as the government experienced in 1999, when my administration first assumed office. We are not facing bankruptcy or payless paydays or a federal takeover.
The rudiments of our economy remain strong. Unlike many of our competitor destinations, the territory's tourism program has survived the worst of the 911 impact and continues to grow. Revenues, while basically flat in the last year, were still almost $100 million above the levels collected in FY 2000 and almost $120 million more than the totals collected in FY 1999. Considering national and international trends and uncertainties, over which the government has no control, revenues are positioned to increase to record levels in the coming fiscal year. Thus concerns about the so-called $100 million "windfall," collected in FY 2001, were misplaced. There was no one-time "windfall." Rather, as a result of our disciplined tax-collection efforts and the success of our reinvigorated Economic Development Commission (EDC) program, the $100 million increase has been built into our revenue base. Indeed, preliminary estimates indicate that the Bureau of Internal Revenue increased its total collections last month by some 25 percent over previous record levels in December of 2001.
We take pride in bringing these islands back from the brink of disaster, but we know the job is not done. We know that uncertainty and financial dangers still loom on the horizon. We face the possibility of armed conflict with Iraq. We face the challenge of protecting our homeland from terrorism. We face continued sluggishness in the national economy and uncertain prospects for the coming year. Therefore, we must be prepared to make mid-course corrections if circumstances require. I believe, however, that we are stronger, and as a result of the decisions we have already made and the policies we have implemented, we are better prepared to meet these new challenges than many other sister jurisdictions.
Facing the future: An agenda for continued progress
Given the v
olatility of the times, the Turnbull-Richards administration in 2003 will aggressively develop new sources of revenue, both at the local and federal level. We will continue to maintain fiscal discipline to ensure that government resources are spend wisely and effectively.
New and additional sources of revenue and debt restructuring
We persuaded Congress to change the rum-tax formula and increase the amount of rum taxes returned to the territory each year. Under the new formula the territory receives an additional $20 million a year, based on an historic levels of rum production in the Virgin Islands. We negotiated a landmark agreement with the U.S. Environmental Protection Agency (EPA) to allow a 20-percent increase in rum production, resulting in a further 20-percent increase in our rum revenues. We anticipate the government will received $13 million to $15 million per year in additional rum tax revenues. We will continue to work closely with Delegate Donna Christensen to extend the rum tax formula, temporarily passed by Congress last year and due to expire at the end of 2003.
We will work closely with the Bush administration and the Congress to minimize any negative impact that the President's recently proposed economic stimulus package might have on the territory, and to ensure that the territory receives its fair share of intended benefits. We will seek to participate in the President's proposed $6 billion program of assistance to the states to cover increased Medicaid costs and homeland security. Building on the progress we made last year in a Senate bill, we will work to ensure that any federal income tax rebates enacted by Congress are extended to Virgin Islands taxpayers and paid from the federal treasury.
We will work with the Congress to include in the economic-stimulus bill our far-reaching, cost-sharing proposal for the administration of the Earned Income Tax Credit (EITC) program in the Virgin Islands. While this program, which is mandated by our mirror-income tax code, has provided substantial and effective financial relief to our low-income residents over the years, it has also been a financial burden on the local treasury, costing some $15 million a year.
Under our proposal, which is supported by the other U.S. territories with mirror-income tax codes, the federal government would pick up 60 percent of the cost of the program by allowing Virgin Islands employers to advance 60 percent of the estimated amount of qualified employees' tax credit and to deduct that amount from the Social Security tax payments the employer must file with the U.S. Treasury. This proposal, if approved by the Congress, will speed financial relief to our neediest workers, save the Virgin Islands government $10 million a year, and help cushion the loss of any future revenues caused by any acceleration of income tax rate reductions included in the President's plan.
We will also move aggressively to complete the administrative process of canceling our $160 million Hurricane Marilyn FEMA [Federal Emergency Management Agency] loan. While I am hopeful that our carefully prepared petition and supporting documentation will result in complete forgiveness of the Marilyn loan under the administrative provisions of the FEMA statute, we are prepared to utilize the same creative remedies that we successfully employed in canceling the $46 million Hugo loan in order to eliminate this burdensome debt from our books.
We will proceed early this year with plans to refinance our 1999 bond issue to take advantage of favorable interest rates to reduce our debt-service payments.
Economic development
The Turnbull-Richards administration is committed to grow the economy of these islands, recognizing that fiscal stability, meaningful employment opportunities, and a quality standard of living are all dependent on a healthy and vibrant private-sector economy. Under the leadership of Lt. Gov. Vargrave Richards, we will focus particular attention on the problems of St. Croix and the need to rebuild the economy of the "Big Island."
Lt. Gov. Richards will shortly convene a meeting with all the stakeholders — public and private sector and community groups — to ensure that all are aboard in the grand crusade to improve the economy of St. Croix.
We will build a $35 million state-of-the-art convention center on St. Croix, linked to the planned development of new hotels, which will expand on our efforts promoting a pronounced tourism identity for St. Croix. Together, with over $1 billion in planned private- sector investments in hotel and tourism-related projects, we are committed to promote St. Croix, with its natural beauty and historic charm, as the destination of choice for major conventions in the United States and around the world.
Much of the infrastructure needed for this revitalization is already in place. The completion of the multimillion-dollar expansion of the Henry Rohlsen International Airport enables us to introduce jumbo jets from different markets throughout the United States and the world. The Robin Bay project, with which Mr. Jermaine Jackson is associated, to construct the $500 million Seven Hills Beach Resort and Casino, and the $150 million Golden Gaming hotel and time-share development are on track and will jump start St. Croix's economy. This year, we will propose new legislation to establish a St. Croix Historic District Development Corp. to facilitate new public-private partnerships and promote redevelopment in the historic districts of Christiansted and Frederiksted.
With these investments, the future looks bright for increasing the number of visitors in the lucrative overnight and convention markets. We are also working hard to bring back the cruise lines and to increase the number of day visitors to St. Croix as well. We are investing millions of dollars in our national advertising budget to specifically market St. Croix. In 2003 we will start and complete the extension of the Christiansted boardwalk to Gallows Bay and initiate major restoration and landscaping of the Frederiksted waterfront.
Relative to the economic recovery of St. Croix, I wish to state, however, an unfortunate cloud looms in the form of Video Lottery Terminals (VLT's) in the territory. Three times this body in its former self sent me a bill approving VLT's, and three times I vetoed the measure. Unfortunately, however, the 24th Legislature overrode my last veto. Most, if not all, of my vetoes of legislation is justified. They are only done after careful review. Such was the case with the VLT legislation. VLT's, among other things, harm the economy of the Virgin Islands in general and St. Croix in particular. Consequently, I will be forwarding to this body legislation to repeal VLT's.
On St. Thomas, the Ritz-Carlton has just completed a $75 million expansion, and the $165 million Botany Bay project is scheduled to commence construction shortly. I am pleased to report that, last week, the new owners of the Yacht Haven Hotel filed for permits to demolish the hurricane-damaged structures next to the WICO dock and to construct a world-class hotel with 125 rooms, along with a new retail and office complex and a refurbished marina for 160 sailboats and mega-yachts. This project will be developed in conjunction with The West Indian Co. and will eliminate a major eyesore while providing an important link to downtown and helping to restore the unparalleled grandeur of the Charlotte Amalie harbor. We remain steadfastly committed to the revitalization of our marine industry.
While we have increased our tourism advertising and marketing budget more than 400 percent since 1999, it is critical that our marketing dollars be wisely invested in today's competitive climate. This administration continues to advocate the establishment of a Tourism Authority in which all stakeholders are equally and fairly represented.
The economy on all three islands will also get a major boost from the capital construction and improvement program. St. Croix will benefit from $145 million of new capital proj
ect spending, including further renovations to the Charles Harwood Complex, construction of new housing on the island, federally financed road repairs and construction of the Christiansted bypass. Construction of the Mon Bijou flood control project and several projects to improve our environmental infrastructure are also scheduled to take place. St. Croix will also benefit from Hovensa's plans to commence construction later this year of a $650 million desulphurization unit to meet federal Clean Air Act standards.
With financing established, construction will commence soon on the new $6 million-state-of-the art passenger terminal at Red Hook and the $16 million Enighed Pond Cargo Port on St. John. The St. Thomas economy will also get a boost from the Port Authority's expansion of the Crown Bay dock and the construction of a $30 million retail complex at the other side of the Charlotte Amalie harbor. The docking facilities will provide two additional berths for new classes of luxury cruise ships now being built. The Port Authority is expected to close the financing for this important project this week.
One little-noticed but most important success of this administration has been the gradual transformation of the Virgin Islands economy over the last three years through the establishment of new businesses, particularly in the financial services sector, under our restructured Economic Development Authority (EDA) program. Since the reorganization, the EDA has reviewed over 115 new applications. In the last year alone, EDA approved over 90 new applicants, including over 40 new financial services companies, many with operations on St. Croix. This new industry has been responsible for much of the record increase in revenues during the last two years. This administration is committed to the continued development of these new industries over the next four years. We will persuade Congress to enact new federal tax incentives to further enhance the competitive position of the Virgin Islands financial services industry in comparison to foreign jurisdictions and to further develop this promising and growing sector.
We will also work with Congress to enact new tax incentives for U.S. high tech companies to establish manufacturing operations in the territory for export to other world markets. We will aggressively recruit new high-tech companies to establish operations in UVI's planned technology park. Our initial efforts in this new sector are also beginning to pay off. I am pleased to report that the EDA approved last summer the application for the territory's first bio-tech company.
Protecting our environment
To lay the foundation for future economic growth while protecting the quality of life for future generations, we must renew our commitment to protect our incomparable and priceless natural resources and to increase our investment in our under-funded environmental infrastructure. In the past year, we demonstrated our commitment in this important area with notable successes.
In 2002 on St. Thomas, we successfully completed negotiations for the acquisition of the Wheaton Estate, ensuring the preservation of magnificent Magens Bay for future generations. We completed initial steps to acquire the Lindqvist Beach property for use as a public beach. I have also approved legislation establishing the historic Marine Park on the east end of St. Croix.
Last August, we dedicated two new state-of-the-art-wastewater treatment facilities at Cruz Bay on St. John and at Mangrove Lagoon on St. Thomas. In September, we successfully negotiated with EPA and the U.S. Department of Justice for the construction of two new wastewater treatment facilities on St. Croix and at Airport Lagoon on St. Thomas over the next five years. We anticipate that the $60 million to $80 million cost of these projects, which will enable the Virgin Islands to achieve full compliance with the stringent standards of the Federal Clean Water Act for the first time in 25 years, will be financed with a combination of new Interior Department grants and new rum tax revenues generated by the rum accord we negotiated last summer with EPA.
We are making progress in our efforts to close the Anguilla landfill on St. Croix and to develop a permanent solution for the disposal of all the territory's solid waste. We are negotiating with Landfill Technologies Inc. of Puerto Rico to construct early this spring a temporary "bale and wrap" facility to meet Federal Aviation Administration and other federal regulatory requirements while a permanent solution is developed and implemented.
To comply with federal standards and assure that adequate resources and attention are devoted to these environmental concerns, I am today calling on this Legislature to swiftly enact my proposal to create an independent Waste Management Authority for the Virgin Islands.
Improving education
Education remains the No. 1 priority of this administration. We are committed to the highest standard of student achievement. We will collaborate with all stakeholders — teachers, parents, administrators, students, support staff, the private sector, institutions of faith, and the community at large — to give all our people, and especially the young, good quality education from pre-school to university level.
This administration is committed to increasing the number of highly qualified staff at all levels in our public schools by increasing funding for salaries and staff development efforts; increasing collaboration with the University of the Virgin Islands on pre-service efforts to ensure training and availability of highly qualified teachers; establishing a dedicated Education Fund; increasing significantly the number of fully certified teachers in all public schools and increasing and expanding the substitute teachers pool to include qualified retirees and public/private sector individuals with specific expertise.
Improving the academic performance of students in our public schools will be accomplished in part by introducing new programs and strategies to decrease the number of dropouts overall but, especially, at the 9th grade level. We are committed to increasing the overall level of reading comprehension of all students and to increasing the number of advanced-placement courses offered at the high school level. Special emphasis will be placed at the primary and elementary level to make sure our students receive a firm foundation in the basics — reading, writing and arithmetic.
I will personally oversee our efforts to regain accreditation, to reform our education system, to improve the academic performances of our schools, and to enhance the opportunities for our young people to lead rewarding and fulfilling lives.
We will achieve accreditation for all four of our high schools in the shortest time possible. In the last year, we have moved swiftly to correct the shortcomings in the four areas identified by the Middle States Association of Colleges and Schools: teacher absenteeism, student attendance, site-based management, and substitute teacher pool. We have raised teacher salaries in order to attract and retain qualified teachers. We have provided increased funds for site-based management and empowered our school principals to address the particular needs of individual schools. We have transferred hiring authority from the central government to the Department of Education in critical areas, including the authority to hire qualified substitute teachers from an expanded pool of teachers. We have increased the use of technology and videoconferencing in the classroom to enhance instruction and to address specific concerns identified by the association. We have met every deadline for corrective action set by the association for accreditation, which we expect, in early 2004.
We will develop a plan, with federal assistance, to restore or replace all of our older, aging schools over time with new and beautifully designed schools and first-class facilities.
Improving the quality of life in the Virgin Islands: Health, housing and social welfare
This administration is committed to ensuring that every Virgin Islander has access to high-quality health care, including mental health services, and affordable housing. This year we will undertake several major new initiatives to increase resources for our hospitals and health care system, as well as to build new affordable housing and to increase home ownership in the territory.
Access to high-quality medical care is a basic human right. We will strengthen our health care system and empower all of our residents to adopt preventative approaches to well-being. We will rigorously recruit qualified Virgin Islanders and others in medical specialties and services. New state-of-the-art mental health facilities on both St. Thomas and St. Croix will be developed. Construction of the much-needed cancer center at the Roy L. Schneider Hospital and the cardiac treatment center at the Juan F. Luis Hospital will soon commence.
We will work closely with the Congress and the Bush administration to reach agreement on increasing the cap on Medicaid payments for the Virgin Islands hospitals and the Department of Health. This will help relieve current fiscal pressures on our hospitals and ensure that they have adequate resources to provide quality care to the poor and underprivileged in our community.
We will also continue to work to make home ownership more affordable for our residents. Recently, in this regard, Lt. Gov. Richards traveled to London, England, to meet with 60 syndicates of Lloyd's of London as well as Royal Sun Alliance of Puerto Rico. The lieutenant governor stressed the need to begin to facilitate dialogue between carriers and consumers, the need to expand capacity and the number of carriers in the territory, and the need to address the issue of fair and equitable compensation.
Last year, the Virgin Islands Housing Finance Authority completed the construction of three units at Concordia, St. Croix, and commenced construction of 30 new units at Mt. Pleasant and an additional 52 units at Estate Fortuna on St. Thomas. In the coming year, the authority will also commence construction of 24 modern townhouses on St. John, 22 moderate-income homes at Estate Solitude on St. Croix, and 14 moderate-income homes at Estate Nazareth on St. Thomas. The Virgin Islands Housing Authority is also planning to commence construction of a $40 million project at the Louis Brown Complex on St. Croix and the $34 million Hoffman-Nullyberg Project on St. Thomas. Additionally, we are working with a private, non-profit corporation on a $15 million development to construct 160 units at the old Virgin Islands Hotel for qualified veterans. Financing is expected to be completed later this month, and construction is scheduled to begin later this spring.
In addition to providing an increased stock of affordable housing, we are also committed to providing better maintenance of existing housing units for residents of our public housing projects. The recent restructuring of the Housing Authority under its new leadership will lead to better services for these too-often-ignored residents.
Ensuring the public safety
The success of our efforts to build a stronger community, as well as a stronger economy, depends ultimately on our ability to control crime, especially violent crime. This past year witnessed an unacceptable increase in violent crimes, including murder and robbery. Most of our violent crime is caused by a handful of the same criminals and much of it is drug-related. We have increased the number of police officers to patrol public areas, and we are installing security cameras and increasing the use of high-tech equipment and technology to make our islands safe for tourists and residents alike. With community-based policing, new technology and aggressive law enforcement techniques, we will seek out the violent among us and prosecute them.
To assist us in this crusade, we will strengthen our police force by hiring more officers; providing state-of-the-art equipment, resources, training and adequate compensation for all law enforcement personnel; establishing a dedicated Public Safety Fund; expanding Project Exile; and increasing police presence in all communities, especially in high crime and tourist areas, and increasing the numbers of qualified law-enforcement personnel across the territory. We will continue to work with the federal government to strengthen our law-enforcement capabilities and to improve our cooperation with federal agencies in the fight against drug trafficking and violent crime. But we will not rest until the battle against crime is won.
Call for reform
As I stated in my inaugural address, the Turnbull-Richards administration supports and will advocate convening a Fifth Constitutional Convention to draft a constitution that addresses the future political, social and economic development of the territory. This will allow for more effective government and a structure that is more responsive to the needs of all residents, while enhancing and empowering local autonomy for the islands of St. Croix, St. John and St. Thomas through municipal government. Through this constitution we should establish a local appeals court system, to include a supreme court, to adjudicate all local issues without the need to appeal to the federal 3rd Circuit Court of Appeals.
The Virgin Islands is currently the only jurisdiction under the United States flag that does not have its own appellate court to interpret its laws. A basic foundation of democratic government rests on the premise that local courts should interpret local laws. The establishment of a Supreme Court of the Virgin Islands will be a significant milestone in the territory's quest for greater self-determination. Almost 20 years ago Congress, as part of the Omnibus Territories Act, authorized the creation of a Virgin Islands Supreme Court. Our sister territory of Guam, acting pursuant to that same authority, established its supreme court in 1996. We in the Virgin Islands should now avail ourselves of this very important authority conferred on us by the Congress.
I urge this body to expeditiously pass a constitutional convention bill so that we can address reform on a whole, instead of in a piece-meal fashion.
Permit me now to touch on a few other issues. With regards to the recent controversy relative to Section 39 of Bill No. 24-0307 relative to increasing the compensation for elected officials. After much consideration, review, and noting public reaction, I decided to line-item veto the above mentioned section.
The protest against the measure becoming law was in keeping with the tradition of America democracy, of which we are a part. However, I would be remiss if I did not note the great disrespect to God, country, homeland, and people of African descent that took place during some of the demonstrations.
Making loud, disturbing noises during holy prayers is disrespect to our Creator. Doing likewise during the singing and the playing of our national anthems is disrespectful to our great country, the United States of America and all that it stands for, the same is true relative to "The Virgin Islands March" and our territory. And finally, the same is true relative to "Lift Every Voice and Sing." We must do better. We must teach our children how to protest and still respect our Creator, our country, our homeland, and our African heritage.
Another issue of concern is the alarming level of societal conflict in our Virgin Islands. Our territory is a village and whatever happens in the village, in some way, affects all of us. There is too much unnecessary conflict and even violence in our families, in our homes, in our schools, in our government, and in other institutions. We have to do better.
So, my fellow Virgin Islanders, while we can take some comfort in the progress we have made in the last four years, we know the job is not done. There will be setbacks and disappointments along the way. There will be crosses to bear, rivers to bridge and rocky mountains to scale. But we, as a people, will never give up. With deep gr
atitude for the faith you placed in Lt. Gov. Richards and me last November, with God's help and your support and prayers, we will roll up our sleeves and go to work. We are headed in the right direction, and we will not look back.
To quote the late Gov. Alexander A. Farrelly, who left us last year, "Standing together, working together, we will move forward together — forward towards those shared goals that destiny, which has always been before us, has drawn us — forward to that day when we shall all stand together in harmony, and with the full gratitude that comes of knowing we have all worked together to make it happen; then we will be able to say, Thank you, Lord, for letting us become true Virgin Islanders."
May God bless this august body and this notable gathering. May God bless the United States Virgin Islands. May God bless the United States of America. May God bless us all. Thank you and good night.

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