July 15, 2004 The Economic Development Authority, testifying before the Senate Finance Committee Wednesday, requested an increase in funding for its fiscal year 2005 budget to hire more staff.
Frank Schulterbrandt, EDA chief executive officer, requested $2.9 million, an increase of $154,526 over what was requested for 2004.
Schulterbrandt told senators the increase is necessary to hire more staff to fulfill the mandate of his agency.
Four agencies fall under the umbrella of the EDA: the Economic Development Commission, the Small Business Development Agency, the Industrial Park Development Corp. and The Government Development Bank.
The agency has not "enforced its end of the bargain" in completing compliance audits to ensure that beneficiaries of the EDC program were meeting their requirements to the V.I. government, Schulterbrandt said. This was mostly due to under staffing, he added.
EDC beneficiaries are required to hire local residents and make investments in the community in exchange for 90 percent tax breaks.
Efforts to complete compliance audits of the companies have stepped up, especially since the U.S. Congress recently passed a bill to deter investors who were abusing the program. (see "U.S. Bill to Restrict EDC Firms Causing V.I. Concern")
"Each EDC beneficiary knows that they have to comply with local and federal law," Schulterbrandt said Wednesday.
Currently, the Internal Revenue Service is investigating cases of alleged abuse of the tax benefits. Schulterbrandt said the IRS also determines whether individuals are bona fide residents of the territory.
"I am not the taxing authority," Schulterbrandt said. The IRS has jurisdiction over that."
Schulterbrandt said the EDC has processed 40 new applications so far for this fiscal year. This represents a potential 1,497 jobs and $40.6 million in payroll and $59.3 million in potential capital investment in the territory, he said.
"We are getting quite a diversified group of potential applicants,"
Schulterbrandt said. "The fastest growing category for tax incentives continues to be in the area of designated financial services."
Sen. Louis Hill told Schulterbrandt he thinks the agency should become self-sufficient.
"You should institute the necessary fees to bring you to self-sufficiency," Hill said.
Sen. Ronald Russell also told Schulterbrandt they should think of reducing the income tax exemptions from 90 percent to 85 percent.
"You can't arbitrarily reduce benefits to the beneficiaries,"
Schulterbrandt said. "Moving from 90 to 85 percent may seem small to the public, but to the beneficiaries it's huge."
Schulterbrandt said his agency has been thinking about reducing the benefits but first has to find out the impact to the beneficiaries and the territory's economy.
Schulterbrandt also said 13 loans have been approved for the micro loan program, which provides financing exclusively for St. Croix entrepreneurs.
On Tuesday the Senate approved legislation that would increase the cap on the loan program from $10,000 to $25,000.
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