Nov. 10, 2001 – While the terrorist acts of Sept. 11 have strained the territory's tourism industry, they also have opened the door to another: e-commerce on a grand scale. That was the well-received message from Alex Randall, one of a panel of business and government leaders who spent much of Saturday discussing the Virgin Islands economy.
Randall's idea is to declare the Virgin Islands an "oasis" for e-commerce businesses that are now facing state taxes on Internet transactions in their home jurisdictions. The Virgin Islands, he suggests, should pass legislation to declare itself a freeport for e-commerce for 100 years.
The suggestion was one of dozens put forward at the Public Forum on the Virgin Islands Economy sponsored by Sen. Lorraine Berry's Virgin Islanders for Democratic Action Club and held at the Holiday Inn Windward Passage Hotel on St. Thomas.
Tax attorney Marjorie Roberts concentrated on the territory's financial services industry, which she said is growing rapidly. "I counted 31" companies, she said, although not all of them are operational yet. "We've gotten on the map" with investment firms and other financial service providers, she said.
One thing making these companies feel comfortable about moving to or setting up in the Virgin Islands is that the territory is under U.S. trademark and intellectual property laws, Roberts said.
Financial services companies offer accounting, marketing, research, certified management and other professional positions that pay well, Roberts said. The only problem, she said, is that the territory might lag behind in providing a workforce sufficiently trained in those areas.
Juanita Young, controller at Globalvest Management Co., pointed to Ireland as a country that was in economic doldrums a few years ago and now has turned its economy around by building up its financial services industry.
Noting that she worked many years as controller for Sapphire Bay Beach Resort before taking her current job, Young said skills learned in the tourism trade are transferable.
Tourism representatives indicated they are not ready to give up on what has been the mainstay of the Virgin Islands economy for four decades years.
Susan Chandler, executive director of the V.I. Charter Yacht League, said a major step in revitalizing the marine industry will be to rebuild the Yacht Haven Hotel and Marina, once the center of charter activity, which has sat derelict since Hurricane Marilyn in 1995. (The new owners recently applied for a Coastal Zone Management permit to raze the dilapidated buildings and plan to build a 150-room hotel, 184 time-share units and a new marina.)
Another step needed is a marketing campaign to bring charter fleets back from the British Virgin Islands, Chandler said.
St. Thomas businessman Neil Weiss had several recommendations, including subsidizing major development by offering mortgage loans as low as 2.5 percent on as much as one-third of project costs; raising the gasoline tax by 10 cents a gallon; holding another referendum on casino gambling to see if there is support for expanding it to St. Thomas; and lobbying Congress to allow for individuals who set up residency for at least five years in the Virgin Islands to be exempt from estate taxes.
While the forum's emphasis was on solutions, several speakers outlined the gravity of the situation for the economy in general and for tourism in particular.
Jayne Hillner, vice president of the St. Thomas-St. John Hotel and Tourism Association, said, "Our season is shortening. It used to be 16 weeks, and now it is 12."
Marriott Frenchman's Reef, where she is general manager, has cut all salaries by 20 percent, she said. "We need some relief from the government," she added.
Wendell Snider, president of the St. Croix Hotel and Tourism Association, said hotel occupancy on St. Croix currently is 20 to 25 percent, whereas normally this time of year it runs 50 to 60 percent. Most hotel workers have been cut back to part-time positions, he said.
But, Snider said, the local hospitality industry's problems began well before the Sept. 11 attacks on the Pentagon and World Trade Center towers, which sent air travel and tourism into a tailspin.
Echoing that theme, Simon Jones-Hendrickson, University of the Virgin Islands economics professor, said it is "economic mismanagement," not terrorism, that is responsible for the territory's economic downturn.
Richard Moore, economist, said the Virgin Islands has the third-lowest average wage in the United States, while it has one of the highest costs of living. Saying current employment figures are an important economic indicator, he gave those for 2001 as 26,580 on St. Thomas-St. John and 18,470 on St. Croix. These are not bad numbers, he said, but actually lower than in 1979.
The private sector is shrinking economically, Moore said, and its employees are suffering financially. In 1978, the average wage for a private sector employee was $9,093, compared to $8,537 in government. By 1983, the two sectors had evened out. Now, government workers outstrip their business counterparts: The average government wage is $31,500, compared with an average private-sector wage of $25,100.
Delegate Donna Christian Christensen centered her remarks on the federal economic stimulus package that she said is expected to be finalized by Congress next week. While differences will have to be worked between the House and Senate versions, she said, the territory should be able to count on an increase in Medicaid benefits, income-tax rebates of $300 to $500, and the carry-over of the temporarily increased rum excise tax rebates to the territory.
Among other measures under consideration in Congress, she said, is relief for small businesses in the form of low- or no-interest loans.
Nadene Marchena, executive director of the Economic Development Commission, said applications for tax benefits from new businesses have not fallen off in the wake of Sept. 11.
Carmelo Rivera, president of the St. Croix Chamber of Commerce, and his St. Thomas-St. John counterpart, John de Jongh Jr., both made pitches for establishment of the Tourism Authority which was recommended in the Five Year Plan two years ago and approved by the 23rd Legislature in its final hours, but vetoed by Gov. Charles W. Turnbull. The authority would be a public-private agency with the majority of the members representing the business sector.
The audience for the forum was small but included many from the territory's informal "think tank" — UVI faculty, League of Women Voters representatives, Small Business Development Administration officials, Board of Tax Review members and financial services managers, as well as U.S. Interior Department officials.
