March 17, 2008 — Bills recently submitted to the Legislature by Gov. John deJongh Jr. are designed to stimulate economic development in the territory by giving developers a little government support and mechanisms by which to fund their projects.
DeJongh's first bill is built on a system called tax-increment financing (TIF), which allows for developments to be built using any additional revenue that a particular project is expected to generate. The system is comprehensive, and involves approval from both the Economic Development Authority and the local community, according to Nathan Simmonds, the governor's senior policy advisor.
"Say a developer wants to build a development like the Crown Bay Commercial Center," Simmonds explained Monday. "They would first have to submit their development plans and go through a public review process and hearing. If the development is approved, the anticipated revenues that would be generated from that project — like property taxes, gross receipts and other taxes that would increase as a result of the development — would be used to fund the cost of the infrastructure associated with the project, such as roads, sidewalks, lighting, traffic controls, that sort of thing."
TIF revenues would be pledged against any bonds needed to finance the project, which would also require approval from both the Senate and Public Finance Authority, Simmonds said. The project would also have to be located within a specially designated TIF district, or an area the government has declared a public infrastructure zone, he said.
Another bill allows for the implementation of special-assessment financing, which would allow the developer to assess a special tax against the project to repay the bonds. Simmonds explained the concept by pointing to the mixed-use Yacht Haven Grande on St. Thomas.
"Let's say the government had declared that area a special tax district, had approved the project and had issued bonds through the PFA to cover the cost of the infrastructure," he said. "Later on, it may be that the additional revenue that's going to be generated by the project is not going to be sufficient to repay the bonds. In that case, we can add a special assessment, meaning that the taxes associated with this project — such as gross-receipts taxes — will be collected normally through the tax system, and will be set aside by the EDA to repay the bonds."
Once the bonds are repaid, Simmonds said, the additional revenue generated by the development would go straight into the government's coffers. Meanwhile, neither the government nor the local taxpayer will be held responsible for repaying the bonds, he said.
The TIF and special-assessment financing systems would help to finance much-needed public infrastructure improvements while providing a mechanism for a "broad range" of private development projects," deJongh said, according to a recent news release.
"Tax-increment financing and special-assessments financing are flexible and established tools used for financing a variety of costs and improvements pertaining to public infrastructure, land acquisition, utilities, planning costs and various other costs for retail and residential development projects, as well as sports facilities and urban revitalization," deJongh recently wrote in a letter to Senate President Usie R. Richards.
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