DeJongh Signs Cruzan Subsidy Changes

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Gov. John deJongh Jr. signed into law increases to government subsidies to the Diageo distillery based on its bulk rum production to match those provided by Puerto Rico to its distilleries, while taking action on a slew of bills and resolutions Monday.

The legislation, requested by deJongh, amends the territory’s 2009 agreement with Cruzan dedicating remitted rum tax revenues to pay for bonds to expand Cruzan and build a wastewater treatment plant. The 2009 agreement sets up a schedule of gradually declining subsidies. For Cruzan’s bulk rum, that subsidy was 40 percent of bulk rum-related federal excise tax revenues through 2010, reduced to 31.5 percent in April of 2011 and reduced again to 18 percent at the beginning of this month.

Under the schedule signed by deJongh Monday, the bulk rum subsidy will decrease from 31.5 percent to 25 percent, rather than the 18 percent provided in the 2009 agreement. And this enhanced incentive will remain in effect through 2018, so long as Cruzan meets detailed bulk rum sales goals, rising from 7.4 million gallons this year to 9.5 million gallons in 2018.

Without the changes, Cruzan would lose millions of gallons of bulk rum sales, costing the territory millions of dollars in cover-over federal excise tax revenues, Cruzan’s corporate owners and administration officials testified during a recent Committee of the Whole hearing in Frederiksted.

Cruzan Rum President Gary Nelthropp testified in committee that competitors knew Cruzan’s bulk rum incentive rate would be going to 18 percent and as a result, Puerto Rico suppliers have been provided a rate of at least 25 percent by the government of Puerto Rico.

Puerto Rico’s Seralles distillery, which manufactured Captain Morgan and other rum for Diageo until Diageo built its facility on St. Croix, has been directly competing for, and wooing major bulk rum customers away from Cruzan, because the difference in subsidy levels means Cruzan cannot match their prices, Nelthropp and others with Cruzan and parent company Beam Global Spirits say.
The governor thanked the Legislature for ratifying the changes, in a statements announcing his actions on 18 bills and five resolutions Monday.

DeJongh approved a bill authorizing the government to begin negotiating the acquisition of land to be used for a speedway on St. Thomas, but said the 180 day period to identify a site specified in the bill was unrealistic.

He signed a bill creating the V.I. Commission on Aging to augment the administration’s efforts to address the needs of the territory’s growing senior population.

DeJongh also approved establishment of an agricultural education program for the territory’s public schools, and has instructed the commissioners of Education and Agriculture to incorporate the program into the school curriculum. As yet, the program remains unfunded, the governor said.

The governor approved another bill authorizing a request for bids to establish a technical school on St. Thomas, despite some misgivings from Education officials. “I recognize and endorse the need to focus our limited resources on bolstering the existing technical and vocation instruction programs available at the Raphael O. Wheatley Skill Center in St. Thomas and the St. Croix Educational Complex Vocational School,” deJongh wrote in his letter announcing the actions.

A bill honoring Police Officer Cuthbert “Kimba” Ezekiel Chapman, who lost his life in the line of duty during a 2004 armed robbery, was also signed into law. The governor signed another bill honoring late Governor Juan Francisco Luis by making his birthday, July 10, a special day of recognition in the territory.

He approved a bill bringing the territory further into compliance with the federal Individuals with Disabilities Education Act, and another bill that enhances the territory’s Plant Closing Law.

The governor also signed into law an adjustment on the tax on imported fuels and redirection of the proceeds to be used to finance new Virgin Islands Water and Power Authority (WAPA) generating units for St. Thomas-St. John.

Governor deJongh used his veto pen on two modifications to election law passed by the Legislature, saying their timing makes them a violation of federal statutes that restrict amendments to election law before elections.

He also line-item vetoed some measures impacting the fiscal year 2012 budget and vetoed bills and amendments:

making changes to the territory’s probate code;
a bill expanding the Public Services Commission’s regulatory authority over WAPA;
a bill intended to expand small-scale hotel development opportunities that the administration believes poorly defined its parameters;
a proposed change to the school year calendar because of what Government House describes as some erroneous language in the bill;
the reestablishment of the V.I. Commission on Youth, saying it would create an unfunded commission whose purpose other existing groups are better suited to engage.

The governor acknowledged resolutions to raise awareness of the prevalence of cardiovascular disease among women, to petition the federal government to assist in lowering energy costs through grants and subsidies, to limit any further impact of the Hovensa refinery closure, and to honor Joseph “Joemeat” Sprauve’s contributions to the people of the territory and the game of baseball.

The governor ended the bill transmittal letter saying adherence to the language of a resolution regarding fishing “would likely have devastating consequences for the territory’s fishing and tourism industries” due to violations of federal laws and international treaties.

1 COMMENT

  1. The people of the Virgin Islands should be given a list of all of the companies and corporations that the VI Government presently subsidizes and the total dollar amount of ALL of those subsidies.
    Our tax dollars at work.

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