Senators questioned Peter Chapman, executive director of the University of the Virgin Islands’ Research and Technology Park, on Wednesday about the entity’s operations and variable benefits offered to tenant companies. They also raised questions regarding an old contract that the park is forced to honor.
“This is my concern with the RT Park,” said Sen. Kurt Vialet (D-STX), chairman of the Senate Finance Committee. “We should know what benefits [RT Park companies] are getting, and we should know what is a charitable contribution.”
“You have Viya, you have Choice, you have major players. So when I see $1.5 million, a little bit over a million in charitable contributions, I don’t know if we’re getting the real bang for the buck,” Vialet added.
Chapman, along with UVI President David Hall and other UVI leaders, testified Wednesday before the Senate Finance Committee, mainly to present their budget.
The Research and Technology Park is a public corporation mandated to spur economic development in the territory by attracting tech businesses to the Virgin Islands in exchange for certain benefits. This model is similar to that of the Economic Development Authority, which gives tax breaks to its beneficiary companies – corporate and income tax cuts up to 90 percent and a full exemption on gross receipts, business property and excise taxes.
In return, EDC companies must maintain a certain number of employees based on the size of their operation and make charitable cash and in-kind contributions to the community.
Unlike the Economic Development Authority, however, which has set tax-reduction rates for its beneficiaries, the RT Park’s benefits system varies by company, or “tenant,” something that Vialet deemed problematic.
“When the law was originally written, it just gave way too much power to who was in charge of the RT Park,” Vialet said.
“It’s not a ‘one size fits all’ approach,” Chapman responded. “They don’t all take advantage of all exemptions.”
Vialet officially requested from Chapman a list of all companies under the RT Park and the exemptions they each receive as a result.
Another topic that raised eyebrows was an old contract costing the park up to $250,000 annually, something that both Chapman and Hall considered ill-advised. Hall said the contract predates Chapman, Chapman’s predecessor Gillian Marcelle and even Hall himself, who pointed to the “original director” as the dealmaker. Before Marcelle, who took over management of the RT Park in 2014, David Zumwalt was director from 2005 through part of 2014.
Hall and Chapman did not name the individual on the other end of the contract but expounded on the details. The individual not only received compensation for every business he brought into the RT Park, but he also received benefits for the revenue these businesses generated for the park, such as annual management fees.
“It is not a contract we can breach because it was binding,” Hall said. “But as Dr. Marcelle demonstrated and as Mr. Chapman has demonstrated, you can achieve the same result by using your own staff, and that’s what they’re doing now.”
“Unfortunately, there was a different model in the beginning of the RT Park, and until those companies, in essence, migrate out of the park, there will be that compensation that that person still receives,” Hall added.
The $250,000 “legacy commitment” is a significant portion of the RT Park’s roughly $3 million in annual revenues, $2 million of which come from annual management fees. Vialet called the deal a “dumb decision.”
“That doesn’t sound like a decision a university would make,” he said. “A lot of those original companies are local companies. Choice and Viya and all of those different groups, and you allow somebody to write that stupidity into a contract?”
Vialet acknowledged that the contract preceded Hall and Chapman, praising the changes that Chapman is making within the RT Park. But these “foolish contracts,” he said, cause issues in the territory, like the Diageo and Vital deals.
“You should breach that contract, and let them sue us,” Vialet said to chuckles from the audience. “Breach it, and prove that they did not bring in new companies because the bulk of what they brought in were already in the Virgin Islands.”
The RT Park has 56 tenant companies, Chapman said, operating mostly in data analytics, web content development, e-commerce, software development and licensing, tech-based management, telecommunications and information technology and software application development.
From 2019 to 2021, the RT Park expects that number to rise to 67 total companies, 42 of which are RT Park clients, while the rest are starting local businesses that fall under the park’s Accelerator Program.
Chapman also touted more than $1 million in scholarships and support that the park collected from RT Park client companies for UVI. This represents an increase of 35 percent over Fiscal Year 2018 and more than 500 percent over Fiscal Year 2017, Chapman said.
The RT Park is not requesting money from the general fund and has not requested any local funding for the past three years. Its Fiscal Year 2020 budget is slated for approval by its seven-member Board of Directors in September. In Fiscal Year 2019, however, the park posted roughly $3.5 million in expenditures, funded mainly through revenue from its clients.
The park’s largest expenditure categories in Fiscal Year 2019 include $771,000 in commitments to the university, $944,000 in personnel and fringe benefits and $739,000 in debt service. For the next fiscal year, these expenditures are projected to increase due to anticipated additional staffing and the launch of the park’s Accelerator Program.
Present during the Finance Committee budget hearing were Sens. Marvin Blyden (D-STT), Donna Frett-Gregory (D-STT), Janelle Sarauw (I-STT), Oakland Benta (D-STX) and Vialet. Non-committee members Sens. Allison Degazon (D-STX) and Novelle Francis (D-STX) were also present.