July 25, 2005 — Representatives from the Economic Development Authority testified Monday before the Finance Committee that St. Croix has weaknesses in reputation, attitudes, and infrastructure, which may appear "unattractive" to investors from outside the territory.
EDA Director Frank Schulterbrandt added that "St. Croix requires a unique strategyand the community needs to get together to assess what exactly its weaknesses are, and how to fix them," Schulterbrandt said.
EDA officials also said that some investors are just not interested in pursuing opportunities on the island because residents are telling them not to.
"We take investors over to St. Croix, show them the island, promote our tax incentives, but Ive had some of them tell me that residents from St. Croix come up to them and tell them not to invest in the island because the economy is so bad," one EDA employee said.
In order to combat some of the problem, Schulterbrandt suggested that the V.I. move away from endorsing a tourism-based economywhich generally caters to the development of hotels and casinosand invest money in other local ventures, such as the marine or sports medicine industries.
"The marine industry is making a comeback, and there are a lot of physicians down here who are already engaged in sports medicinewe can develop these industries locally, and have more control over them, and they can provide a great source of economic stimulus," Schulterbrandt said.
Still worried that a negative picture has been painted of St. Croix, Sens. Juan Figueroa-Serville, Norman Jn. Baptiste, and Louis P. Hill questioned Schulterbrandt extensively on what is being done to market the islandand the rest of the territoryto foreign investors.
Schulterbrandt said that while no money has been provided in the Executive Budget in past years to accommodate advertising and marketing costs, a new budget request for $4.3 million for fiscal year 2006 will allow the EDA to take ads out in international magazines, and allow for meetings with representatives from the Asian and European markets.
Schulterbrandt added that these measures are also necessary because of the recent shift in the manufacturing industry, where many companies are pulling out of the territory in order to reap the benefits of cheaper labor costs elsewhere.
"We must adjust our economic development strategy to compete for service-oriented companies, which require a college degree and highly skilled individuals who are technologically trained for evolving economies," Schulterbrandt said.
Jn Baptiste then responded to Schulterbrandt that many workers in the territory will never have that level of education. "We need to cater to individuals without degrees, and compensate them fairly. They are going to be at risk here [if a strategy is implemented to accommodate employees with more education], and they need to be provided for we need to diversify the economy to provide more jobs for them also," Jn Baptiste said.
Schulterbrandt added that the EDA is also looking to expand agriculture and aquaculture, retirement facilities, hotel and resort, and hi-tech manufacturing industries.
EDA representatives additionally said that the need to diversify stems from a loss in revenue due to the recent change in tax laws implemented by the federal government, as well as the negative impact created by the Jobs Creation Act.
"A number of EDC companies have closed, or announced their intent to close within the last three years; a number of others have laid off employeesall are looking to Washington to provide regulatory relief many just dont want to deal with the IRS, and the new tax changes," Schulterbrandt said.
Sen. Roosevelt C. David expressed his concern that new federal tax law changes have also caused a delay in the activation of EDC certificates.
Schulterbrandt responded that "there has been a delay in the activation of certificates because EDC companies are going through the process of fully understanding the new rules established under federal tax laws and the Job Creation Act," Schulterbrandt said.
David was also concerned about a delay in loan applications at the Government Development Bank, a financial institution that provides financial resources — loans, credit — to businesses in the VI, and helps these businesses grow into mainstream commercial banking customers.
In response, Schulterbrandt noted that 56 loan packages have been received this yearwith 36 approved, 4 declined, and 13 in various stages of the approval process.
However, Schulterbrandt did add that the failure of some companies to repay loans to the bank has resulted in a 60-percent delinquency rate.
"Our staff is actively working to bring that down to 20 percent and has implemented new repayment options such as e-payments, account debit, and credit/debit/ATM card repayments," Schulterbrandt said.
Schulterbrandt further said that additional revenues will be garnered from fees and penalties tied to late payments, as well as a request from the EDA that EDC beneficiaries give the Authority five percent of their first 50 million dollars in revenues. "This will allow us to sustain our operations, and eventually function without the money given from the General Fund."
The EDA also made reference to the Industrial Park Development Corporation, where parks in both St. Thomas and St. Croix have not yet reached their full capacity.
"St. Croix is at 60 percent capacity, and St. Thomas at 75 percent capacitywe intend to have them both filled by the end of the year," Schulterbrandt said.
Senators present for Mondays hearing were David, Adlah "Foncie" Donastorg, Hill, Jn Baptiste, Nelson, Figueroa-Serville, and Usie Richards. Sen. Neville James was excused.
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