Faced with a budget deficit of more than $1.7 million, V.I. Port Authority board members debated Wednesday how to plug the fiscal hole without hurting either VIPA employees or the transportation customers the territory depends on for revenue and tourism.

At the monthly board meeting at Port Authority headquarters in St. Thomas, Director of Administration and Finance Judith James read out the budget figures as of Feb. 28, 2011, which showed a total operating loss of $1.7 million, based on revenues of $20.1 million.

The deficit is squarely in the aviation division of the agency, which showed a loss of nearly $4 million, as compared to the marine side, which showed a profit of $2.1 million.

The deficit has decreased 37 percent compared to last year, when losses totaled $2.7 million. This improvement resulted from a reduction in operating expenses by roughly 1 percent and an increase in operating revenues by 4 percent between fiscal year 2010 and 2011.

Despite these gains, the board struggled with how to continue to reduce the gap between expenses and revenues.

The initial discussion centered around the idea of raising airport landing fees or wharfage fees, but many raised concerns about how that would play with merchants already hit hard by the recession.

"Is it realistic to begin the process of raising rates during tough times?" asked Attorney General Vincent Frazer, a board member. "Once we start down the path of raising rates, I don’t think we can turn back. Perhaps we should tackle the other part of the equation, which is the reduction of expenses."

Tourism Commissioner Beverly Nicholson-Doty warned that airlines may not take kindly to an increase in landing fees, especially considering how the industry is already being squeezed by skyrocketing fuel costs.

As an example she asked the board to imagine the ripple effect if American Airlines, for example, decided to reduce the number of flights to St. Croix from two per day to one per day if they didn’t agree with a proposed rate hike.

"Raising fees when demand is low may dig us into a larger hole," Doty said. "It seems fundamentally wrong. Instead we should incrementally raise rates while lowering expenses."

James added that the total number of passengers entering the territory was down 6 percent compared to last year, which equated to 40,000 fewer visitors.

But board member Gordon Finch countered that the recession was also hurting VIPA, which had to consider its own bottom line. "Times are tight for VIPA, too," he said.

James noted that the authority had already made some cuts in its own budget, including a 5-percent reduction last year in benefit costs. But she warned against further cuts.

"Hard decisions have to be made about how much Port Authority can absorb," she said. "We have to implement some sort of fee increase or it will come back to hurt us."

Frazer insisted that VIPA make a greater effort to see how much it could squeeze its own expenses, particularly in the area of personnel, which is the largest piece. He said rate increases can wait.

"The reality is that personnel costs must be reduced, he said. "It will be difficult because that’s sort of a sacred cow in the V.I. We will have an opportunity to raise rates, but not now."
Finch conceded, and proposed an indefinite hiring freeze at VIPA. His motion called for any positions at VIPA that are now vacant, or become vacant, to not be filled with new personnel. The motion passed.
In other business, the board:
– voted to accept the Ernst & Young audit of fiscal year 2009, and include the rate calculations made of the marine system bond coverage ratios;
– voted to authorize the executive director to negotiate a concession agreement with the St. Thomas Taxi Association for two years with a two-year option for the use of the Austin "Babe" Monsanto facility, and to begin the negotiation process with regard to all other marine and aviation facilities; and
– agreed to visit the Crown Bay shopping plaza to inspect a newly-built kiosk, to determine if it impedes the flow of visitor traffic or negatively affects trade of adjacent merchants.
Present were Robert O’Connor Jr., Finch, Nicholson-Doty, Yvonne E. L. Thraen, Darryl Smalls, and Frazer. Absent were Cassan Pancham and Albert Bryan Jr.

David Mapp is currently acting executive director of Port Authority while Kenn Hobson is out on medical leave.