Dear Editor,

I do not respond to Letters to the Editor, as I believe each person has a right to express their opinion – whether I agree or disagree. However, as the saying goes, “One is entitled to his own opinion but he is not entitled to his own facts.” Therefore, given the importance of our partnership with the rum companies and net cover-over revenues to government operations, I feel it is important to respond to an opinion piece dated April 29 that just made up its own facts.

The decision of Diageo to locate its rum distillery on St. Croix instead of another location to produce their signature Captain Morgan Rum has served us well. In 2007, Cruzan VIRIL was our only rum producer, and ownership of the local operation had changed frequently in the past ten years. Cruzan sales produced $86 million in cover-over revenues that year and the General Fund received a net of $21 million, after funding $47 million of debt service on Government bonds. This year, the combined cover-over revenues produced by the sales of our two rum partners totaled $237 million, with a net to the General Fund in the current year of approximately $78 million, after funding $58 million of bonds issued for public purposes and $4 million set aside for community facilities. This answers the often-asked question of where is the $240 million that I referred to in 2010. These are facts.

Our agreements to date have been conservatively structured. The core support that we have agreed to provide for molasses, operating costs and marketing builds each brand in the U.S. market. In exchange for increased contributions, our partners agreed to commit to exclusive production of their signature rum for a 30-year period on the island of St. Croix. That is to say, the level of funding under those agreements was to invest in those companies, and those long-term agreements provided assurances that we will receive the returns on that investment for years. These are facts.

These rum agreements have been key to our economic sustainability over the past five years. In the midst of the worst recession in a century, we were able to issue over $500 million of bonds, payable solely from those new revenues, to continue to provide education, health care and law enforcement services, along with other areas, to generate capital projects to ensure private sector activity and, quite frankly, just to keep our Government and our economy above water. If we did not have the debt service payments associated with the $500 million in bonds, the net to the General Fund this year would have been approximately $89 million, or four times what it had been in 2007. Therefore, on the strength of Cruzan VIRIL and Diageo USVI we were able to borrow at a critical time for essential items, and still increased the net contribution to the General Fund. These are facts.

Today, seven years later, our core revenues remain deeply impaired by the recession. Our personal income tax collections remain down 34 percent from 2007, corporate income taxes are down 59 percent, and gross receipt tax revenues are up 6 percent, but only after the tax rate has been increased. Only the cover-over revenues have grown, as the net cover-over revenues available for General Fund appropriations of $78 million is almost four times the $21 million available in 2007. The importance of those growing revenues is evident, as the net cover-over revenues more than doubled over that timeframe to 18 percent of our total General Fund expenditures. These are facts.

For some it has been easy to give short shrift to that reality, but one can only imagine the damage to our community if we had not had the flexibility to do what we did: to withstand the economic pressures and keep our government and our entire economy working. I am proud of what we have achieved and hope that throughout the term of these relationships we will build on the foundations. And even as we have ensured our continuity, we have taken a range of other steps critical to our future. We have invested in a broadband infrastructure. We have commenced the transition from oil to propane to reduce energy costs. We have strengthened our early childhood programs. We have sustained airlift and remained competitive with other cruise destinations. Under health care reform, we are implementing Medicaid expansion. We have successfully fought in tax court to preserve our economic development program and now seeing an increase in applications. And we have drafted a plan to address the unfunded pension system liability. These are the facts.

Sincerely,
John P. deJongh Jr.
Governor
United States Virgin Islands