In last week’s State of the Territory Address, Gov. John deJongh Jr. said he didn’t expect the economy to really turn around until the end of 2010 or the beginning of 2011, and on Wednesday, his financial team members are expected to tell senators pretty much the same thing.
While it’s a little too early to start crunching the budget numbers, deJongh elaborated more on the local financial picture during an interview Monday, saying that until the turnaround comes, the territory will continue to see decreases in revenues across the board, and will continue to rely heavily on rum receipts and borrowed money as the government continues to run a monthly deficit of $25 million.
And there’s a strong chance, he added, that the government will have to go back to the Legislature for more money until things start to pick up. Realistically, deJongh said, the passenger and airline traffic needed to sustain the territory’s tourism-based economy is there, but people just are not spending like they used to.
And while the government is hoping for some kind of settlement this year to its long-standing court battle over property tax collections, it still might not be able to issue the multiple bills it needs to make up for the years of outstanding payments that have been tied up in the freeze.
But the news isn’t all doom and gloom. Around the same time last year, revenues had dropped by 25 to 30 percent, compared to a 15 to 20 percent drop this year, deJongh said. And if airlift and passenger levels stay the same, the economic turnaround should coincide with the start of the 2010-2011 cruise ship season, where a projected increase in spending should pump more dollars into the government’s coffers.
In the meantime, the focus is also on boosting jobs in the public and private sector, and tapping into as much federal dollars as possible, he said. Road projects now coming online — which range from asphalting to building retaining walls — will help boost construction jobs, while government investments in infrastructure will benefit the private sector, deJongh said.
Bonds recently floated by the government are being put toward these private-sector investments, both in construction and maintenance, he said. In downtown St. Thomas, for example, the government will be looking more at regulating traffic flow and beefing up the area to make it more attractive. Meanwhile, Public Works will soon be putting out a request for proposals for improvements to Market Square, deJongh said.
Because of the economic conditions, several downtown businesses have closed in the past year. While deJongh said that’s not too unusual during times like these, he also anticipates new and more diverse stores opening to keep the area competitive and on par with nearby shopping destinations, such as St. Maarten and St. Lucia.
The biggest challenge now is making sure passenger traffic is evenly distributed throughout the islands, which ties into the government’s efforts in working with local taxi drivers, reworking where passengers are dropped off and Tourism-promotion efforts, he said.
But while the government continues to build its tourism industry, the availability of federal stimulus funds have made it possible to tap into other industries.
The V.I. Port Authority, for example, has been "aggressive" in submission of grant applications for things like port security, while the government has just been awarded more than $1 million that will be put toward identifying pockets where there is little to no broadband capacity in the territory, deJongh said.
In a report recently submitted to the Legislature, the territory’s Office of Economic Opportunity — tasked with overseeing and tracking the stimulus funds once they are awarded or begin to flow into the territory — noted that by the end of fiscal year 2011, the U.S. Virgin Islands is expected to receive $310 million from the federal act, which includes tax incentives and tax relief for residents.
Tax incentives and relief funding include about $20 million in low-income housing grants, $26 million given to the Internal Revenue Bureau for individual tax relief during the first year of the recovery period, and $4 million in additional unemployment benefits, along with one-time payments to both veterans and social security beneficiaries.
To date, the territory has received more than $128 million in formula grant funds — most of which have gone to the V.I. Energy Office, Housing Finance Authority, Public Works, law enforcement and the Housing Authority — and has submitted more than $174 million in grant applications for health technology, programs at the university, and fire station construction, along with more than $6.5 million for local nonprofits and businesses.
"As the report demonstrates, all [federal stimulus] funds awarded to the Virgin Islands have been accepted," deJongh wrote in a letter recently sent to Senate President Louis P. Hill along with the report. In addition, deJongh noted that 200 V.I. jobs have been created by the federal money.
Senators are expected to delve into the contents of the report and grill members of the governor’s financial team on this year’s revised revenue projections during a Committee of the Whole hearing scheduled for 10 a.m. Wednesday.
To review the Office of Economic Opportunity’s activities, residents can visit http://oeo.usvipfa.com.