The Economic Development Authority governing board approved raises for its staff and a request by The Ritz-Carlton, St. Thomas to implement a 7.5 percent Hotel Economic Recovery Fee at its meeting on Tuesday, before discussing repairs and upgrades to the territory’s industrial parks.
The pay increases – the result of a collective bargaining agreement between the EDA and the union representing Local 8249 that the board approved in a 6-0 vote after an hour-long executive session – will see union and non-union workers receive pay hikes of 5 percent in 2022 and 4 percent in 2023. Supervisory senior and executive management will receive a 3 percent increase in 2022 and a 2 percent raise in 2023.
The agreement with The Ritz-Carlton, St. Thomas will allow the resort to implement a 7.5 percent Hotel Economic Recovery Fee to recoup about $32.6 million it spent to rebuild the property on the east end of St. Thomas after the twin Category 5 hurricanes of September 2017.
According to information presented at the meeting the hotel, a recipient of tax breaks through the EDA, sustained roof damage to most of its buildings in the storms that rendered 70 percent of its 180 rooms uninhabitable. The 30-acre property is also home to The Ritz-Carlton Club of 105 two- and three-bedroom timeshares.
The Hotel Economic Recovery Fee was enacted as part of the Hotel Recovery Act that was signed into law in 2019 by Gov. Albert Bryan Jr. It allows hotels to collect 7.5 percent on top of the occupancy tax of 12.5 percent of the gross room rate to finance improvements. They may use the money as leverage in order to receive financing or as leverage to recoup some of their original investment.
The Ritz-Carlton, St. Thomas can levy the tax for 30 years, “or until such time as the direct investment cost of $32.6 million is liquidated, whichever is earlier,” according to the agreement with the EDA. It also must provide a detailed report on its collections to the authority by March 31 each year.
Board Chairman Kevin Rodriquez, Vice Chairman Gary Molloy, Secretary Haldane Davies, and members Jose Penn, and Positive Nelson voted in favor of the measure. Member Philip Payne declined to vote.
In other business, EDA Chief Executive Officer Wayne Biggs Jr. updated the board on plans to repair, storm harden and build new office space at the Virgin Islands Industrial Park on St. Thomas, also damaged in the 2017 hurricanes.
The Federal Emergency Management Agency has approved a total of $17.7 million for the St. Thomas project and repairs to the William D. Roebuck Industrial Park and Fleming Building on St. Croix under an agreement that will see it fund 90 percent of the cost, said Biggs.
About $8.2 million of the money will be spent on the St. Thomas property and $9.1 million on the Roebuck site, said Biggs, who said the EDA opted for what is known as a Section 428 agreement with FEMA for the repairs that will allow the authority to use any leftover funds on other projects, subject to the agency’s approval.
The Fleming Building, which houses the EDA offices on St. Croix, also is slated for about $403,000 in interior repairs under FEMA’s Public Assistance Program, said Biggs. It too will be updated to withstand future hurricane events, while maintaining the 1867 façade, he said.
One hiccup with the Roebuck park is that FEMA has designated it a primary site for first responders and has deemed that it be upgraded to withstand 180 mph winds, while preliminary estimates are that the 40-year-old buildings can be retrofitted for 160 mph, said Biggs. That may require a return to FEMA for further modification, he said.
“We’re not sure why we’re designated as primary buildings because we really have no first responders here in the building. We do have an administrative office for [the Bureau of Corrections] but of course, none of their security facilities or a jail or anything like that is here,” said Biggs.
“The only other thing we can think of is that FEMA does have a warehouse here where they have some disaster goods, but that’s in building number three, and [the engineers] indicated to us that that is the strongest of the buildings, and they think they may be able to get that one up to 180 mph,” said Biggs.
Plans for the Virgin Islands Industrial Park include 10,000 square feet of new office space that will allow the EDA to move from leased space of about 7,000 square feet at the Nisky Center, said Biggs.
“It provides us some additional space for growth and also a larger conference room” that could also double as a training center, and offer more workspace, said Biggs.
The park – home to four buildings providing 20,000 square feet of commercial space on a hill overlooking Crown Bay, Sub Base and the Cyril E. King Airport – was eligible for full replacement by FEMA because more than half of it was damaged in the storms. However, Biggs said the EDA opted to repair, harden and modernize the facility so funds can be spent on the expansion.
The new office space will be built atop and beside the existing Building 4 at the west end of the park, said Biggs, and will include hurricane glass rated for 180 mph winds. While architectural and engineering plans are still being developed, he anticipates both the St. Thomas and St. Croix projects to go out for bid in the first quarter of 2022 and construction to start soon after, with a 12- to 18-month timeline for completion.
“With about $17 million worth of repairs we have to come up with roughly $1.7 million but I think it will be well worth it to have a new facility, not only the office building at the facilities over on St. Thomas but also to renovate and retrofit the buildings here on St. Croix,” said Biggs. He said he would bring ideas for raising the matching funds to the board in the future.
In Economic Development Bank business, the board voted unanimously to accept an offer-in-compromise from Carifest Inc. that will see the EDB accept the company’s deed in lieu of foreclosure on its property at 18F Estate Bovoni on St. Thomas, which was held as collateral against its debt.
The property will be sold for no less than its appraised value, according to a summary of the executive session decision that did not provide any further details about the transaction, including how much is owed to the bank.