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HomeNewsArchives'2-CENTS' TAX IS NOW LAW, BUT THAT COULD CHANGE

'2-CENTS' TAX IS NOW LAW, BUT THAT COULD CHANGE

July 14, 2003 – Gov. Charles W. Turnbull, working into the evening Monday as the territory's most prominent patient at Roy L. Schneider Hospital, signed into law his new tax of 2 cents a pound on most anything imported into or made in the territory.
While rejecting private-sector blanket condemnations of the measure — which he proposed as an "environmental excise tax" and the Senate renamed an "environmental user fee" — Turnbull conceded — now terming it an "infrastructure user fee" — that the law does need some tweaking. And toward that end he sent the Senate a new bill calling for five revisions in what is to be exempted from the tax.
How the Senate will respond to that initiative remains to be seen. Senate President David Jones said earlier this month that he was ready to repeal the measure, and that the Legislature "cannot support the bill as passed."
Turnbull, who was admitted to the hospital on Monday with what was diagnosed as a bleeding ulcer, said in his transmittal letter to Jones that the revenues will be used for upgrading the territory's wastewater and solid-waste infrastructure system to conform to federal mandates. Repairs that must be made in the next 15 months are expected to cost $19 million, he said, an interim solid-waste management program is tagged at $9.5 million, and the cost of new wastewater treatment plants on St. Thomas and St. Croix together are estimated at around $50 million.
He said the need to raise revenues to meet these costs "will require sacrifices by all residents and businesses." Responding to one of many concerns that have been raised, he said he never intended the fee to be applied to potable water produced by the Water and Power Authority.
He recommended expanding the fee exemptions to include molasses and the barrels used in the production of rum, the produce of dairy operators and other farmers, all construction materials including sand and aggregate, and fossil or synthetic fuel products; and limiting the fee for heavy construction equipment to $200.
The 2-cent legislation also includes provisions to increase the highway user tax on vehicle imports, commonly called the "road tax," to 16 cents per pound from the current 11 cents; impose fees on containers each time they are shipped into the territory, at the rates of $30 for those 20 feet long and $50 for those 40 feet or more in length; and repeal the special authority granted the V.I. Lottery executive director earlier to assume the powers of the V.I. Lottery Commission when there are insufficient members to attain a quorum.
A veto of $9 million more in cutbacks
With two line-item vetoes, Turnbull signed another of his bills, this one increasing license fees for banking institutions, imposing a 2 percent excise tax on food items, imposing a 4 percent tax on items worth more than $1,000 imported for personal use, making payrolls semi-monthly instead of bi-weekly, requiring The West Indian Co. to pay $1 million annually to the General Fund in lieu of taxes, adding $25 to unemployment benefits for each dependent child, imposing a moratorium on fees for new business licenses on St. Croix and reducing by half the fees for renewing such businesses, authorizing inter-fund borrowing for the executive branch, and allowing the government to increase fees by up to $100 a year, instead of the current 10 percent cap.
Turnbull vetoed a section appropriating $2.5 million from the Insurance Guaranty Fund for the University of the Virgin Islands Technology Park. Saying he is all for the park but all against raiding the insurance fund, he submitted a new bill appropriating the $2.5 million from the General Fund.
The governor also vetoed the section reducing executive branch Fiscal Year 2003 appropriations by $9 million above and beyond his own $46 million reduction instituted earlier this year. He listed a page and a half of what he said would be the effects of the further cuts. Among them:
– Inability of the Education Department to meet two payrolls.
– No overtime pay for police covering for fellow officers now deployed by the National Guard to the Mideast.
– The layoff of 20 Corrections Bureau officers, eight assistant attorneys general, 50 clinical and other staff at the hospitals, and 10 to 15 recreational facilities personnel.
– Elimination of payments for the foster care of 116 children and the acute care of adults with severe disabilities, of free electricity and water for public housing tenants, and of VITRAN service.
– Delay in the completion of federally mandated government audits.
Legal implications of language
The governor also vetoed wording inserted by the Senate into his bill relating to property assessment and the current moratorium on the collection of property taxes. The bill entitles those who pay their 1999 through 2004 commercial and personal property taxes prior to enactment of a court-ordered revised property assessment system to receive credits for any overpayments and to be billed retroactively for any underpayments; authorizes the Board of Tax Review to designate a hearing officer; establishes a Tax Assessor's Revolving Fund consisting of 1 percent of property tax revenues or up to $500,000, and provides for the fund to be used for maintaining and improving the Office of Tax Assessor.
The veto was of language spelling out a change in the basis of real property assessment for tax purposes, from replacement value to market value. This is a key issue in the ruling of District Judge Thomas K. Moore in May in a consolidated case of commercial and personal property owners challenging the current assessment practice and in several earlier cases. The V.I. Justice Department has appealed the ruling on points of sovereignty and self-governance, arguing that the District Court lacks jurisdiction in the matter.
Turnbull said he vetoed the amended sections because the language "would negatively impact on our sovereign legislative power and damage our position before the Court of Appeals and the Supreme Court." He said the version he submitted was carefully worded in accordance with the court's May opinion so that "the suggestions would allow the court to relieve the government of the most stringent terms of the injunction, pending resolution of all appeals and other outstanding issues."
The governor further stated that "our own experts" believe changing to market-value assessment "may very well mean significant increases in taxes for many Virgin Islanders and which may very well be applied retroactively for many years."
Other bills signed into law
Turnbull also signed into law without any line-item vetoes or recommended revisions:
– His bill making Water and Power Authority hazardous duty workers eligible for early retirement, appropriating $2.3 million to the General Fund from the Union Arbitration Award and Government Employees Increment Fund, and appropriating $600,000 from the Land Bank Fund for a new St. Thomas cemetery.
– His bill appropriating $9.4 million from the General Fund for federally mandated wastewater system repairs and maintenance, appropriating $7 million from the General Fund to cover the government's share of increased health insurance premium costs, appropriating another $1.5 million from the General Fund for emergency wastewater system repairs, increasing allocations to the Finance Department by about $2.4 million to cover the cost of audits, and pushing date provisions of the V.I. Tax Study Commission farther into the future.
All five bills were passed in a special session called by the governor on July 18-19 to address his package of proposals for dealing with the territory's fiscal crisis. The sixth bill that he placed before the body at that time is scheduled to be taken up by the full Senate on Tuesday: the request for authorization to borrow another $235 million on the bond market and use $100 of the proceeds for government operations and the other $135 million for ca
pital projects intended to stimulate the economy.
(For a summary of what the governor had proposed to the Legislature and what became of the bills en route to Senate approval, see "What's been proposed, amended and approved".)
Turnbull also signed into law on Monday two other bills not related to the fiscal crisis. One abolishes the current six-year statute of limitations for collecting student loans. The other, adopted in the Senate session of June 18 without having gone through the hearing process, establishes a new V.I. Election Fund.
The governor also acknowledged two Senate resolutions, one conferring the V.I. Medal of Honor on Dr. Alfred O. Heath and the other urging the administration to implement various measures to address the fiscal crisis. "This administration has already implemented a majority of the proposed measures and continues to implement other cost-saving measures. I urge the Legislature to likewise," Turnbull wrote.

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