Aug. 1, 2002 – The V.I. government's Fiscal Year 2002 revenues likely will fall $40 million to $50 million short of last year's projections, Ira Mills, director of the Office and Management, told the Senate Finance Committee on Wednesday.
Louis Willis, Internal Revenue Bureau director, added to the grim news at the FY 2003 budget hearing. He said he now anticipates an increase of 14 percent, or $2.3 million, in real property tax revenues for FY 2002, but a shortfall of 14 percent, or $3 million, in corporate taxes.
And Willis said he expects a reduction of 17 percent, or $2.5 million, in excise taxes; a drop of 4 percent, or $3 million, in gross receipts taxes; and a decrease of about 4 percent, or $500,000, in individual income tax revenues for 2002.
"The higher estimated level of revenues projected for this fiscal year may not yet be realized," Mills told the committee. He said the situation became apparent when he reviewed the April and May collections when the latter became available in June. "A different mix of the taxpayer base, review of the filings for April 15, coupled with the extensions filed, demand that we reassess collections which may come in August, or, worst case, October 2002," he said.
Uncertainty regarding the "due date" for payment of FY 2001 commercial property taxes further complicates the picture, Mills said. The closer to the end of the year that residential and commercial property taxes come due, he said, "the riskier will be the available resources to cover the projected obligations in this fiscal year."
He added, "The revised resource estimates for FY 2002 must now guide revised spending levels for the remainder of the fiscal year. A downward adjustment must now be prudently made. We have begun to assess the distribution of this across departments and agencies, and must do it for all branches as well."
As far as FY 2003, Mills said he is holding to his earlier projections. At the Finance Committee's opening budget hearing on June 11, he and other administration fiscal officials gave a generally optimistic picture of anticipated economic activity for the fiscal year to begin on Oct. 1. At that time, he projected General Fund revenues of $567.7 million for 2003, with 58 percent, or $329 million, coming from gross personal income taxes.
At the same June hearing, Tax Assessor Roy Martin estimated FY 2003 property taxes at $48.3 million plus another $14 million from Hovensa. And Finance Commissioner Bernice Turnbull said the government was owed more than $30 million in delinquent property taxes.
At that time, Mills cited capital improvement and tourism-related projects as the basis for the outlook: $35 million in private activity bonds the Public Finance Authority issued in May for the Seven Hills Beach Resort and Casino planned for Robin Bay on St. Croix; a $12 million Botany Bay development on St. Thomas; the rebuilding of the Yacht Haven Hotel; and two public projects — the Enighed Pond commercial port on St. John and the Red Hook marine terminal on St. Thomas. He also said PFA infrastructure changes would attract long-term investment in the territory.
On Wednesday, Mills also made a familiar plea to the Finance Committee chair, Sen. Alicia "Chucky" Hansen, for "even some form of modified line-item budget." Such pleas from the administration have fallen on deaf ears since last year, when the committee instituted line-item budgets specifying how much can be spent for what, rather than lump-sum budgets that would allow for discretionary expenditures within an agency's overall allocation. For FY 2003, the committee has made one exception, granting a lump-sum budget to the Office of the Inspector General.
Mills noted there are lump-sum amounts in each agency and department's personnel list covering the top managerial exempt salary adjustments.
One area where the financial picture looks rosy is cruise ship traffic, according to testimony presented by Edward E. Thomas St., chief executive of The West Indian Co.
Presenting an overview of the independent entity, which adopts its own budget, Thomas said he anticipates an "excellent" cruise ship season. He said 832 port calls are scheduled for FY 2003, bringing an estimated 1.9 million passengers. He said these passengers should spend about $1 billion, generating about $44 million in gross receipts taxes for the government.
With one exception, Wednesday's testimony concluded the committee's FY 2003 budget hearings. Hansen has yet to announce when the twice-postponed budget hearing for the Office of the Lieutenant Governor will be held. The committee is scheduled to meet on Aug. 7 to review and mark up the budgets that it will send to the governor.
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