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HomeNewsLocal newsSenate Minority Hashes Out Proposed Sin Taxes; Looks at Territory’s Financial Needs

Senate Minority Hashes Out Proposed Sin Taxes; Looks at Territory’s Financial Needs

Calling themselves the “People’s Voice Coalition,” members of the Senate’s minority met Friday to formally organize and sound off on issues ranging from the government’s financial affairs to the continued absence of Senator-elect Kevin Rodriquez.

Friday’s organizational press conference on St. Thomas was opened by minority leader Sen. Positive Nelson, who said that the goal of the caucus was not to oppose the new majority or the governor. Instead, members – including Sens. Dwayne DeGraff, Alicia “Chucky” Hansen, Janette Millin Young and Tregenza Roach – said the caucus has put together a legislative agenda impacting areas such as agriculture, education, tourism, public safety and tax relief that they hope can be supported by all.

Despite the peaceful tone, however, the gloves began to come off Friday as members also spoke about the new “sin taxes” proposed by Gov. Kenneth Mapp, the state of the territory’s economy and the further downgrading this week of the government’s existing and proposed bonds by Fitch ratings.

“Presently the Virgin Islands is in crisis,” Hansen said during the Friday press conference. “And it is the responsibility of leaders to move people from oppression, from pain to joy and to a better way of living.”

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“People depend on us to help them,” Hansen continued. “They don’t depend on us to just serve ourselves and forget them.”

In late 2016, the Legislature authorized the sale of approximately $247 million in new bonds, but in December the government decided to "turn away" from its first attempt at the bond market because of unfavorable conditions, the governor said at a press conference last week.

After a second attempt last Wednesday, the government decided to “abort” the transaction after finding that there were orders for only $127 million in senior lien bonds and $13 million in subordinate lien bonds.

At the time, Mapp said the “incomplete appetite” of investors for V.I. government bonds was due to the territory’s growing reliance on debt to pay current expenses and the federal intervention in neighboring Puerto Rico’s debt crisis, which have affected borrowers’ perceptions of V.I. creditworthiness, leading all three major bond rating companies to downgrade U.S. Virgin Islands debt, increasing the likely cost of borrowing.

In past borrowing transactions, Mapp said, the government was supposed to have put forward a plan for resolving its structural deficit, which would give bond holders more confidence. He added that since “no plan has ever materialized,” the government was left with no other choice but to send again to the Senate the proposal for new taxes, including taxes on cigarettes, alcohol, sugar – specifically on carbonated sugar beverages – and timeshare rentals that failed to gain approval in the 31st Legislature.

Along with the same general issues of rising debt levels and structural deficits, Fitch cited the territory’s inability to sell bonds on Jan. 12 and cited the failure to enact tax increases to generate more revenues, saying: "According to the USVI, market reception to the bonds is contingent on USVI passage of tax reform measures. Enactment of the tax reform measures requires legislative agreement, which is inherently uncertain."

At Friday’s press conference, Nelson said the truth behind the downgrades is that the bond agencies simply didn’t have “confidence” in the governor’s new five-year tax plan.

“The reason for the downgrade is because the governor is not ready for the truth,” Nelson said. “The rating agencies don’t believe in the five-year plan. It doesn’t give them any confidence.”

It’s the same for the business community, added Millin Young. In past weeks, senators have been asked to come to meetings at Government House to discuss the “sin taxes” and have seen some of the same concerns from members of the business community.

“They said, ‘Governor, if you want us to pay more, you have to … show us you think there’s a problem, because we cannot see it,’” Millin Young said Friday. “You’re living good, but the rest of the people are hungry. We speak to people every day.”

Senators also said that at the meetings that Government House officials made the territory’s financial situation appear worse by “omitting” certain proposed revenue sources, including the money expected to come in from racinos to be set up on St. Thomas and St. Croix.

Officials were also “unprepared” to answer various financial questions, senators added.

Don’t support the sin tax proposals and, even if they passed, the amount of the increase has to be tempered,” Nelson said. Other senators added that instead of holding meetings to discuss the financials, Mapp should be putting his energy into writing his State of the Territory Address – which has been postponed until the end of the month – and making the information public.

Minority members said alternatives to the tax proposals could include cutting layers of administrative personnel within the government who might not be doing anything and redistributing employees within the “oversaturated” areas of government to those offices that are understaffed.

Nelson also proposed the legalization of marijuana as an option.

“To throw it all on the people now is injustice,” Nelson said about the tax proposals. “Someone has to stand up and tell the emperor that you are not clothed in the finest cloth; you are naked.”

Hansen said that while the government continues searching for money, the Senate is operating short one member and should focus on making some kind of decision on the empty seat belonging to Rodriquez, who is still fighting out a court case challenging his eligibility to run for office.

The Legislature is the first branch of government and has the power to act, she said.

“The institution should not stay mum,” she continued. “This is the first branch of government and we should take a stand.”

Rodriquez most recently filed a case in District Court to see if the Legislature, now that its members have been sworn in, can decide to seat him.

Speaking after the press conference, Senate President Myron Jackson congratulated the minority caucus on its organization and said he agreed with statements made by senators about the Legislature’s role within the government.

“I agree that this is a coequal branch of government and, likewise, likewise this institution should be respected as any other branch,” Jackson said. “I do agree that the governor doesn’t hold the purse strings to the government and, as a coequal branch, we should function as mandated by law. The personal references made in there, however, those are their opinions.”

Asked about the sin taxes, Jackson added that the big question is what impact the proposal would have on residents and on visitors.

“They’re not taxes on the essentials of life. We’re talking about tobacco, liquor and drinks,” Jackson said. “But I would say there are concerns in terms of our ability, since we’re been a free port for hundreds of years, to shoulder these taxes. And even though the market has changed, we have to agree that as a territory, the volume of sales in terms of some of these products is still extremely high.”

The governor’s responsibility is to look at how the number of visitors coming into the territory and to see how the government can bring in any additional revenues from tourist sales, but there still needs to be a discussion on how the local community is impacted, Jackson said.

Meetings at Government House have given members of the business community a chance to speak, but the Senate still needs to hear from more local restaurant or small business owners on how the taxes will impact them, Jackson added.

Jackson acknowledged that the Legislature is a party to the suit filed by Rodriquez and will be filing its response through “outside council” next week.

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