*Updated: See Editor’s Note Below* The V.I. Legislature will have approval power over some members of the University of the Virgin Islands Research and Technology Park tax-break vehicle if a bill approved in committee is enacted into law.
Currently the RTPark is governed by a seven-member board of trustees that includes UVI’s president, the chair of UVI’s board of trustees, two more members chosen by the board of trustees and three members appointed by the governor at his sole discretion.
Legislation sponsored by Sen. Nereida Rivera-O’Reilly [Bill 31-0263] specifies that the three chosen by the governor are to be "from the private sector" and will be subject to approval by the Legislature.
RTPark Board Chairman Edward Thomas and UVI President David Hall both testified that they did not object to the bill, which they felt would not affect day-to-day operations. But both also said they did not believe the change was necessary.
While senators were generally supportive, Sen. Tregenza Roach said it "gives me pause" that many boards and commissions are short of a full complement of members and that putting the Legislature into the process could make it harder to get members onto the board quickly.
Thomas and Hall agreed, with Thomas saying the board often had to act quickly.
Roach voted in favor of sending the bill out of committee.
Introducing the measure to the Committee on Education and Workforce Development, Rivera-O’Reilly said the Legislature needed greater oversight over who the board members are. She said that while the Legislature has no say in the membership "it was this body and members of the Legislature who had to take action to save the RTPark from a hostile takeover" during the previous administration.
Rivera-O’Reilly said the bill originated in the 30th Legislature. She said there was "an attempt made by the previous governor to eliminate the RTPark and its tenants.”
Particularly the ISPs were targeted in what I believe was an attempt to devalue Innovative and save VINGN," Rivera-O’Reilly said.
"I was targeted by special interest groups throughout the rest of that term as punishment for my attempts to rescue the RTPark," she said.
Innovative is a privately owned internet, telephone and cable television company. The V.I. Next Generation Network is a high-speed fiber-optic network, paid for by federal grants and owned by the people of the Virgin Islands.
Sen. Kenneth Gittens agreed with Rivera-O’Reilly that there "was almost a hostile takeover" of the RTPark and that "we did take some blows in the 30th Legislature."
Gittens and Rivera-O’Reilly agreed the RTPark needed more oversight now.
From 2009 to 2011, without any public announcement of the decision or open hearings on the question, the RTPark quietly gave tax breaks to three of the territory’s largest internet service providers and largest companies: Broadband V.I.; Choice Communications; and all of the Innovative entities, except landline service, including their ISP, wireless telephone and cable television businesses and their operation of CBS affiliate TV2 in the U.S. Virgin Islands. When the Public Service Commission held hearings to authorize transfer of control of Innovative in 2010, the application for tax breaks, granted one year later, was not mentioned during extensive discussion of the company’s financial condition, nor in subsequent PSC hearings.
There was notice, buried in the minutes posted in a subsection of the now-defunct RTPark website. But no public debate, press releases or news coverage at the time. Nor were these particular tax exemptions mentioned during annual budget hearings before the Legislature.
Choice and Innovative are now both owned by Atlantic Tele-Network or ATN. Michael Prior, son of founder Cornelius Prior, has been president of ATN since 2005.
At former Gov. John deJongh Jr.’s request, then-Attorney-General Vincent Frazer wrote three legal opinions that concluded ISPs cannot legally receive RTPark tax breaks and tenants must have an actual presence on the RTPark grounds to meet the legal and common definition of "tenant," and for that and other reasons, found those tax breaks were given improperly.
But the government determined those benefits were given improperly, based on a binding legal opinion issued by Frazer, and notified the ISPs the benefits would expire.
In early 2014, the Legislature quietly attached an amendment to another bill during session, changing the law governing RTPark’s ability to grant 100 percent tax break to include effectively any business that conducts any business online.
Rivera-O’Reilly initially introduced the changes as an amendment to an unrelated bill during the April 24, 2014 legislative session. Rivera-O’Reilly read the amendment aloud, then said it was needed "because of the lack of clarity on what businesses should be solely directed to the tech park," adding that "a number of applications are on hold."
There was no testimony, discussion or debate before the senators approved it unanimously in a few seconds, then moved on to the next in a long series of votes on bills.
DeJongh then vetoed the measure, saying the changes "radically alter the policies and procedures of both the RTPark and the government generally with respect to encouraging economic development through the targeted use of tax incentives."
"Moreover, the amendments seek to make permanent what may well prove to be an improper grant of benefits to Internet service providers that have cost – and will cost – our treasury dearly. This last action not only unilaterally took tax-paying entities off the tax rolls but has put smaller and locally owned and managed businesses at a very unfair disadvantage in this new and developing industry by forcing them to compete against larger companies which do not have to pay the taxes the smaller businesses must pay," deJongh said.
Those opinions led to the V.I. Internal Revenue Bureau notifying the ISPs their RTPark tax breaks would expire in December and not be renewed.
The Legislature held a hearing promoting the override of the veto. The hearing began with a video produced by the Legislature praising the measure and urging its passage. Senators then peppered administration officials with hostile questions and gave proponents a friendly reception, and the hearing closed with then-Senate President Shawn-Michael Malone again urging the Senate to pass the legislation. (See Related Links below)
Representatives of the three affected companies testified in favor of Malone’s legislation to explicitly include their business types in the technology park tax breaks, arguing that they had applied for them in good faith, kept their end of the agreement, paying fees to the RTPark, and also needed the tax breaks to survive against competition.
The V.I. Legislature overrode the governor’s veto during legislative session in June of 2014.
Rivera-O’Reilly has said keeping the ISPs off the tax rolls would cost the V.I. government about $2.6 million in lost tax revenue annually, while deJongh estimated much higher losses.
Of currently sitting senators, Gittens, Rivera-O’Reilly, Sens. Clifford Graham, Myron Jackson, Positive Nelson and Sammuel Sanes voted for the override. Roach and Sen. Janette Millin Young voted against the override.
On Tuesday, Gittens asked how many of the RTPark’s 35 "tenants" were located at the RTPark. Thomas said none were at the RTPark.
"So none of the businesses are actually housed in there currently?" Gittens asked.
Hall said, "That is correct. And it wasn’t designed for that. I think the vision shifted before it was constructed. … Businesses want to set up house in different locations," Hall said.
Thomas testified about the RTPark’s finances, saying it generated a $400,000 surplus over the last fiscal year and projected somewhat less this year. Hall said he believed that in the long run, it could provide about $500,000 per year in value for UVI, including infrastructure, internships, scholarships and technical assistance.
Rivera-O’Reilly said she does not believe the improved finances are the result of improving operations but a result "of there being absolutely no employees anymore," at the RTPark.
"What remains there is a very, very slim operation," she said.
In recent committee hearings, she has objected to the RTPark making most of their staff temporary contract employees.
"I would submit that it is broken," Rivera-O’Reilly said Tuesday. She said, "This body is charged with oversight responsibility" and giving the Legislature some say in who is on the RTPark board would help with oversight.
Voting to send the bill out of committee were Gittens, Roach, Sens. Justin Harrigan, Myron Jackson and Jean Forde. Nelson and Sen. Kurt Vialet were absent. Rivera-O’Reilly, not a committee member, was also preset
Editor’s Note: This story has been updated to indicated RTPark benefits were granted to territorial ISPs in 2009 and also in 2011, and to indicate that Innovative’s landline service is not included in the tax breaks.