Aug. 19, 2003 – The president of the St. Croix Chamber of Commerce submitted a position paper on behalf of the organization to Gov. Charles W. Turnbull and his financial team on May 12 titled "Economic Recovery Plan 2003." It was one of several such documents presented by V.I. business organizations at a meeting at Government House on St. Thomas.
More than three months later, the chamber's Frank J. Fox has yet to hear anything in response to his proposal.
"All of the governor's economic advisers were there — Louis Willis, Bernice Turnbull, Ira Mills, maybe 20 to 25 people in the room," Fox recalled on Tuesday, referring to the Internal Revenue Bureau director, the Finance commissioner and the Office of Management and Budget director.
Also at the meeting — and presenting their own recommendations to address the territory's fiscal crisis — were representatives of the territory's two Chambers of Commerce, two hotel associations and a taxi association, he said. (See "Public, private sectors differ on fiscal answers".)
The meeting was the second that the administration officials held with business leaders. At the first, "they asked us to come back with the private-sector recommendations," Fox said. "That is what the St. Croix Chamber presented. The other groups all had their own."
At the start of his paper, Fox told the governor: "The chamber wants to play a meaningful role, and you can count on the chamber to do all it can to help."
The proposal called for a multifaceted approach to solving the territory's fiscal problems — increasing revenues, reducing expenses, increasing taxes, "very likely" some interim borrowing, and "possibly some assistance from Washington, D.C."
To increase revenues, Fox strongly urged a focus on licensing captive insurance and captive management companies. The territory "has the best captive laws in the world," he said, "and with the new Internal Revenue Service guidelines that require payment of the excise tax on reinsurance purchased from foreign firms, the U.S.V.I. stands poised to reap a windfall."
Captive insurance companies are set up by multinational companies to manage risk in-house and to reinsure risk directly with the market, bypassing agent commissions and insurers' profits and taking advantage of available tax benefits. Fox noted that the British Virgin Islands gets a substantial portion of its income through the activities of captives — and that it "courts them so aggressively," advertising that "a new captive can be licensed in two to three weeks."
He noted that captives attract other service companies such as mutual funds and money managers and utilize the services of accountants, lawyers and bankers.
Overall, Fox wrote, there is only one "long-term, sane, practical way out of the present dilemma" — private sector growth that will general new public revenues. But he said the V.I. government goes out of its way to make opening a business time-consuming. "The greatest contribution that the government can make to improve the business climate in the territory is to get out of the way … Stop requiring needless documents, and make it easy for the necessary documents to be provided," he wrote.
Also time-consuming, he said — keeping in mind that in business, "time is money" — is the procedure for getting a V.I. driver's license that involves at least three visits to the Motor Vehicles Bureau. He recommended that the government "increase the fee for those who want to pay more to save time."
To reduce government expenses, the chamber endorsed a number of recommendations presented earlier by the Senate Minority including a 10 percent pay cut for top officials; consolidation of offices into government-owned buildings; a hiring freeze except in the safety, health and education sectors; utilization of teleconferencing as an alternative to interisland travel; repeal of legislation allowing government retirees to be rehired while they continue to draw retirement benefits; and suspension of professional and personal service contracts to fill exempt positions since last November.
Fox also advocated raising the annual deductible in government health insurance to $250 per person from $50, and then gradually raising it to $500; block purchasing drugs for the two hospitals and the Health Department; reducing the number of paid holidays to no more than14; eliminating "management" positions where fewer than three persons are being supervised; disbanding the V.I. Lottery; and embarking on "a systematic but realistic reduction in the number of government workers" at the rate of 4 percent per year while also decreasing the payroll by 6 percent per year (thus ensuring that more top-level than lower-paid employees are terminated).
Under the heading "tax increases," the paper opposed any increase in the gross receipts, hotel and "sin" (liquor and tobacco) taxes. It called for a 4 percent tax on consumer-imported items to make the playing field level for local retailers, and for increasing the annual fees for captive insurance companies after five years.
Attached to the position paper were three appendices. The first consisted of three articles about the economic benefits of captive insurance industries in the British Virgin Islands, Bermuda and Ireland. The second was a listing of companies that had complained to the Chamber of Commerce about delays in getting business licenses. The third recommended ways to streamline the driver's license application process while increasing revenues.
Since submitting the proposal in May, "I haven't heard a word," Fox said on Tuesday. "I haven't seen any of those recommendations that were made put into effect except for the tax on personal imports over $1,000."
Despite the developments since mid-May in the territory's fiscal picture, "I still think it has a lot of merit," he said of the position paper. The recommendations, "if implemented, would help us a great deal," he said. "We are not going to get out of out crisis in a year or 18 months, but in three or four years, we could do it."
To access the full text of the position paper, go to "St. Croix business community's recovery plan" in the "Data" section..
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