Aug. 8, 2003 – V.I. Lottery and Water and Power Authority officials faced lengthy interrogations about pressing government and public concerns as the Senate Finance Committee continued its Fiscal Year 2004 budget hearings on Thursday.
Paul Flemming, who took over as V.I. Lottery executive director at the end of May after the governor fired his predecessor, Austin Andrews, told the committee that his top priority is to raise the levels of expectation and confidence in the politically and financially troubled lottery system he inherited.
"Revitalizing the Virgin Islands Lottery, in this our 67th year of existence, so that our stakeholders, our players, our dealers, our employees and our commission can have a full measure of expectation and confidence that this is indeed the very best lottery possible is our primary goal," he stated.
Flemming cited as the major obstacles that must be overcome to attain that goal:
"Untimely financial reports, lack of adequate staffing, a need to improve our computer network system, lack of internal control, lack of accountability, lack of strategic direction, inadequate collection of contractual obligation to the government, non-compliance with policies and procedures, inadequate revenue-generating strategies, outstanding employee receivable accounts, and low morale."
That litany led to heated rounds of questioning from the committee, with senators demanding, among other tings, an account of the present conditions employees face and a proposal of measures to generate new lottery revenues.
"How would you best describe the present morale situation?" the committee chair, Sen. Adlah "Foncie" Donastorg, asked.
Flemming responded that the "situation is one of improvement, as I have been working on identifying the issues and challenges as we go along." He stressed the importance of employing key individuals who are able to implement laws and policies and are reliable regarding the collection of accounts.
The Finance Committee held hearings into V.I. Lottery operations in April 23 and May 12 in connection with an audit it undertook of the agency's financial situation. In testimony on both occasions, Andrews failed to provide answers and fiscal documentation the committee had sought. (See "Lottery chief would like $4M debt forgiven".) On May 16, Gov. Charles W. Turnbull fired him.
Flemming's reference in his testimony Thursday to video lottery terminals and the agency's contract with the Powerball organization as instruments for generating revenues also sparked controversy within the committee.
"The Powerball and the Caribbean Lottery Services, a sub-contractor of the Virgin Islands Lottery [remain] two such revenue-generating services," he said in his presentation. "CLS projected revenues based on the FY 2003 budget to be $21 million from current games. We expect 10 percent of that projected sum, approximately $2.1 million."
Donastorg questioned Flemming further on the Powerball contract, stating that tickets for the game are being sold outside the territory for higher prices, with the government not receiving any of the revenue.
"The government has only been asking for 12 percent of every dollar generated by the sale of Powerball tickets," Donastorg stated, "but to find out that we are not even receiving anything from the sale of these tickets is ridiculous."
Flemming said he had been called by a Caribbean Lottery Services executive and told that people were buying Powerball tickets in bulk from CLS and then taking them down island and selling them for twice the price in the territory.
"We have not be able to come in contact with them as yet," Flemming said of the persons involved.
As far as revenues from video lottery terminals, which by law can operate only in the St. Thomas-St. John district, "We are projecting over $4 million from this project in FY 2004," Flemming said.
That figure, however, is down from the initial projection of $15 million.
"This is only because the $15 million is based on a fully implemented VLT system," Flemming said. "As of now, there are only two operational sites, so the process has been very slow."
VLT operations became legal at the end of 2002 when the 24th Legislature overrode Turnbull's third veto of enabling legislation. Three video lottery sites had been established by the company with the exclusive contract for their installation and operation when the 25th Legislature took up a measure sought by the governor to repeal the legalization. On April 15, the Senate defeated that measure. (See "VLT's to remain a fact of St. Thomas-St. John life".)
In testimony Thursday, V.I. Lottery representatives also addressed the issue of outside competition, especially that of the Puerto Rico lottery, whose ticket prices are significantly lower than those of the Virgin Islands.
"I would like to implement a one-on-one competitive system," Flemming said, "by looking at the pricing structure in order to make our product equally attractive."
He said the V.I. Lottery prints 32,000 tickets, while 52,000 are printed by its Puerto Rican competitor. "Obviously, there is a better chance of winning when playing the V.I. Lottery," he said.
Water and Power Authority
WAPA's executive director, Alberto Bruno-Vega, presented an overview of the authority's financial outlook for the coming fiscal year. As a semi-independent agency, WAPA adopts its own budget and operates on its own revenues.
The senators honed in on continuing concerns about the territory's street lighting, which became WAPA's responsibility at the end of 2001.
"I feel uncomfortable," Donastorg said. "I've received calls from many members of the community, and it seems that they are suffering the burden of the street lighting project." He related one caller's complaint that her bill had increased almost 100 percent since WAPA took over the street lighting from the Public Works Department.
"That cannot be the fault of WAPA," Bruno-Vega responded. "We have only had two increases this year, a 9 percent increase that became effective in March, and a 10 percent increase that became effective in April — that is only a 20 percent increase. The only other contributing factor is consumption."
Bruno-Vega said street lighting is one of the authority's main priorities for FY 2004.
Donastorg remarked that WAPA billing increases for the LEAC, or levelized energy adjustment clause, surcharge may be an example of "taxation without representation," noting that taxes on gasoline have gone up as well. The LEAC surcharge is tied to the world market cost of oil to WAPA.
Bruno-Vega acknowledged the point. "If Iraqi oil were pumping," he said, "then this particular tax would go down. However, it is not pumping; thus we are hurting, and we are hurting badly."
Bruno-Vega also provided information about FY 2004 plans to install a new potable water line to serve the St. Thomas East End and St. John.
Magens Bay Authority
In his presentation before the Finance Committee, the general manager of the Magens Bay Authority did something he hasn't done in recent years: He asked for money.
William Jowers testified that "the authority is a semi-autonomous, self-sustaining agency and up until this point has not depended upon the local government to supplement its annual budget." However, he added, "We did not receive any federal funds in FY 2003, and none is expected in FY 2004."
In his short presentation Jowers said the authority's accomplishments for FY 2003 have included opening the No. 3 bathhouse at Magens Bay beach, starting a major re
novation of the Drake's Seat property overlooking the bay, and entering into an agreement with the American Red Cross for Magens Bay to become a lifeguard training facility.
Jowers said the authority also has started resurfacing portions of the inner Magens Bay road but that financial help from the government is needed for this endeavor. "We've had bids from contractors on this project with some totaling over $100,000," he said. "At this time, this price is just out of our reach."
He also asked for funds to supply the beach with more security guards and police.
His requests seemed to have the support of the committee.
"It is my understanding that more people swim at Magens Bay than at any other beach in the territory," Donastorg said. "It is a large tourist attraction, and we should all help as much as possible."
He also said he would request funding from the Planning and Natural Resources Department to help pay for the authority's water testing.
Committee members present in addition to Donastorg were Sens. Roosevelt David, Louis Hill, Luther Renee and Ronald Russell. Two committee members, Sens. Shawn-Michael Malone and Norman Jn Baptiste, were absent. Sens. Carlton Dowe, Usie Richards and Celestino A. White Sr., who are not members of the committee, also were present.
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