Gov. Kenneth Mapp said at a press conference Wednesday his administration is considering more ways to cut spending if the Legislature does not implement proposed new revenue measures or if those measures do not generate enough money to make ends meet.
The territory has a roughly $100 million shortfall this year and a somewhat larger ongoing structural deficit. Bond rating agencies downgraded the territory’s debt in January, increasing borrowing costs and making it more difficult to borrow, after the Legislature tabled tax increases aimed at shoring up the government’s revenues in December. On Jan. 11, the government held a bond sale, with some of the revenues to go to the current year’s operating expenses, but withdrew the sale due to insufficient buyer interest.
Tax proposals are again before the Legislature. Meanwhile, Mapp recently announced that he directed his cabinet officers to cut government spending by 10 percent between March 1 and the end of the fiscal year in September.
To help make ends meet, Mapp said the government is considering closing government offices and nonessential operations four hours per work week. Reduced work weeks if necessary “would effect all of us, from me down,” he said.
Also all lights would be turned off at 8 p.m. at public recreation facilities to cut electricity costs. All public schools may be closed every other Friday until the end of the school year and remaining school staff would be placed on a 36-hour work week during the summer months.
Mapp said in part of the discussion about the Department of Education, “the law requires 180 days” of instruction, he said. “But the law presupposes sufficient funding … lack of cash means non-ability to pay for.”
More austerity measures under consideration include sharply cutting overtime at the V.I. Police Department, Fire Service, and Bureau of Corrections.
All travel paid for from the government’s General Fund will continue to be sharply curtailed, as already directed under a recent executive order, Mapp said. The only exception would be travel paid for with federal funds.
“Let me emphasize these are not decisions,” but things they are considering if they become necessary, Mapp said.
They are requesting the courts to put up to $1.5 million in cuts on the table and asking the Legislature to take a million dollar cut also, he said.
Mapp said many of these painful measures will not be necessary if the Legislature acts soon on the tax increases before it. Mapp said the crisis is serious and urged some members of the Legislature not to “play games” when describing the impact of the taxes and fees being proposed.
But he said taxes “cannot fill the entire gap,” so some reductions will be needed.
Mapp got testy when asked about costs for him to stay in a hotel and for new vehicles for his use when he is asking for austerity elsewhere.
“The silly must end … the last governor lived in his home on St. Thomas. I live in my home on St. Croix. When I go to St. Thomas, and I go on average two nights a week, I stay in a hotel,” he said. He said the question was whether it was the Ritz Carlton or another hotel.
“When I go to St. Thomas, I will stay where I feel it is appropriate and where I feel safe,” he said.
On the recent purchase of a new vehicle, he said, “From 1954, the government has been buying vehicles for governors.”
“I don’t know if you believe I should go down in a bicycle with a sidecar and that would make you happy,” Mapp said, adding that these expenses are not the reason the government is facing a $130 million structural deficit.
With vehement opposition from the business community, the Senate is considering tax increases aimed at reassuring markets and raising revenue to pay government salaries and keep schools and fire stations open. Mapp said the opposition to the increases was excessive and that their amount “is not egregious and will not hurt the economy of the territory.”
The proposals include a measure to assess timeshare owners the existing hotel room occupancy tax of 12.5 percent and repeal the former timeshare occupancy tax. It will also assess a $25 per day fee for timeshare units. Excise taxes on foreign and domestic beer will increase from $2.08 and $1.55 per case, respectively, to $6.08 and $5; and cigarettes, from the current 45 percent to 45 percent plus $8 per cartoon; sodas will see a new tax of $0.36 per case plus half a cent per fluid ounce. Liquor and wine will go up from the current per case and per gallon fees to 10 percent of their value.
The governor pushed back against statements by Sen. Alicia “Chucky” Hansen, saying on her radio show that that property tax is “designed to punish veterans and senior citizens,” saying the tax will not be increased for any property owner and the proposal would limit the use of property tax credits so that a tax obligation could not be reduced under $360 per year using tax credits.
If a property tax bill is currently under $360 without the application of credits, then that tax bill would remain the same, he said. There is also an exemption to the new floor for those whose incomes are less than $30,000 per year or $50,000 per year for a family. (See related links below)
Mapp said the economy is growing but “cannot increase fast enough to eradicate a structural deficit of $130 million to $170 million.”
“I am confident that we will make it through this difficult time in the least painful way possible,” the governor said.
He also also described a new effort to enhance revenue through a formal partnership with AirBnB, the room rental website. The agreement will let the territory recoup hotel occupancy taxes through the company, he said. The government is also working to ensure all residences renting out five or more individual units are properly licensed, both for safety and health inspections and for the fee revenue.
“In St. Croix alone, there are more than 2,400 AirBnB accommodations,” Mapp said.
In December, Internal Revenue Bureau Director Marvin Pickering told senators that he and other officials recently met with Airbnb officials and were looking for a model to get information from Airbnb on V.I.-based revenues. Mapp’s announcement Wednesday appears to indicate those meetings bore some fruit.
Tourism Commissioner Beverly Nicholson-Doty has negotiated the contract with AirBnB and “we are now going to implement this process,” Mapp said Wednesday.
Mapp also announced the nomination of Lloyd Bough to replace Randolph Bennet as commissioner of Property and Procurement.
Mapp will shortly leave for Washington to attend the National Governors Association winter meeting, where he serves as a member of the Committee on Homeland Security and Border Protection. He also plans meetings with Trump administration officials, including the president, as well as members of Congress.