Senate Passes Hotel Development Tax Benefit Bill

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Senate Majority Leader Celestino White and Senate President Ronald Russell confer during Tuesday's session.Would-be V.I. hotel developers will be able to pledge their future hotel and casino taxes as loan collateral if a bill approved by the Legislature Tuesday is signed into law by Gov. John deJongh Jr.

The bill, sponsored by Sen. Louis Hill and others, would create a hotel development program within the V.I. Economic Development Authority that’s similar to, but more generous than, the tax-increment financing (TIF) spearheaded by the deJongh administration in order to bring Home Depot to St. Croix.

"The purpose of the measure was to create a mechanism to help potential hotel developers on St. Croix secure financing," Hill said after the measure passed. "My hope is the governor will sign this and then I expect developers will try to secure financing, and we will quickly see some results for St. Croix."

Along with helping developers with information about financing, the program would administer trust funds for each qualifying new development, placing hotel and casino taxes from the qualifying development into the fund, which would then be used to pay a portion of the developer’s loans.

As with the TIF program, the government loses no real revenue because the taxes that would go toward developers’ loan payments would not be owed the government at all if the projects they finance do not come to fruition, Hill said.

In some ways, the bill is less stringent and more generous than existing TIF legislation. In this bill, EDA is not responsible for performing the feasibility study for each development, there is no requirement for a public hearing, and the program does not require the Legislature to approve the development plan. However, the developer will have to acquire private sector financing, unlike the TIF program, which directly funds development projects.

Also, a TIF recipient may not receive Economic Development Commission tax-exemption benefits, but a beneficiary of this proposed new program would be able to get EDC benefits.

During committee hearings, developers of new hotels, such as those hoping to build on St. Croix at Williams and Punch, Robin Bay and Great Pond, support the bill.

The St. Croix and St. Thomas Hotel and Tourism associations, St. Croix Chamber of Commerce and the owners of Divi Carina Bay Resort and Casino opposed the plan, arguing it places an unfair burden on existing hotels.

Before passing the bill, senators approved a series of amendments, restricting the scope of the act and imposing additional requirements on developers.

Senators approved a proposal from Sen. Craig Barshinger to restrict the program to either St. Croix hotels or hotel properties elsewhere in the territory which have been derelict for at least five years.

Senators also adopted amendments from Sen. Nereida "Nellie" Rivera-O’Reilly to:
— require at least 80 percent of employees to be V.I. residents of at least five years or a graduate of a V.I. high school or demonstrate that it is impractical and get a waiver from the Labor Department;
— require 30 percent of management to be similarly local;
— punish violations of these and other requirements of the program by reducing the tax benefit by 10 percent per month;
— increase from $200,000 to $500,000 the sum any hotel that is a beneficiary of the program would pay in lieu of room and casino taxes to the Tourism Department for marketing;
— and require all beneficiaries to pay $2,500 annually for a database designed to recruit U.S. Virgin Islanders living abroad.

Senators also approved an amendment from Sen. Carlton "Ital" Dowe attaching $20,000 of the $500,000 each beneficiary must set aside and earmarking it for scholarships to students whose college major is in hotel management.

Voting for the bill as amended were: Barshinger, Hill, Dowe, O’Reilly, Sens. Alicia "Chucky" Hansen, Neville James, Sammuel Sanes, Patrick Sprauve and Alvin Williams.

Voting nay were Sens. Usie Richards, Ronald Russell, Celestino White and Janette Millin-Young.

1 COMMENT

  1. Unless they get rid of all the crime here, there won’t be any need for a hotel bill because no one will want to come here. Clean up the human garbage off the streets of paradise or the streets will REMAIN empty. Look around you people – our residents are leaving for safer ground. We are a small territory and there are too many murders and robberies here – WAY TOO MANY!

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