Sept. 23, 2002 — The University of the Virgin Islands Bulletin Board issued today includes:

Water Main Repairs on St. Thomas Campus Affect Traffic Flow
Work to repair the water main on the St. Thomas campus will occasionally require closure of the East Loop Road on the upper portion of the campus, between the Library's back parking lot and the Science and Math building.
Motorists are advised to proceed with caution through the area when the road is open. A physical plant spokesperson said the department regrets any inconvenience caused by occasional closures and is working to correct the problem as soon as possible. For more information call 693-1502.
St. Thomas Campus Bookstore to Close for Inventory Sept. 24
The St. Thomas Campus Bookstore will be closed for inventory from Tuesday, Sept. 24, through Monday, Sept. 30. The bookstore will reopen on Tuesday, Oct. 1. For more information call the bookstore at 693-1560.
Voter Registration Set Sept. 26 on UVI's St. Thomas Campus
The entire university community is invited to a voter registration session that will be conducted from 11 a.m. to 1 p.m. on Thursday, Sept. 26, on UVI's St. Thomas campus at the Cafeteria porch. V.I. residents who are at least 18 years of age are eligible to register. All are asked to bring proof of citizenship: birth certificates, naturalization papers, etc. Demonstrations of voting machine use will be offered and information on the candidates will be available.
St. Croix residents who are students on St. Thomas and won't be able to go home for Election Day can obtain absentee ballot forms. Individuals will also be able to sign up for transportation to the polls on Election Day.
Voter Registration Set Oct. 2 on UVI's St. Croix Campus
The University community and the general public are invited to participate in a voter registration drive on Wednesday, October 2, in the Student Center from 11:30 a.m. to 2:30 p.m. on UVI's St. Croix campus. The St. Croix Student Activities Office is sponsoring the event. For more information call Clint Ferris at 692-4188.
"For Better, For Worse" to Encore on St. Croix Sept. 28 and 29
The long-running comedy "For Better For Worse," by David Edgecombe, will encore on St. Croix with performances at 8 p.m. Sept. 28 and 29 at the Educational Complex in Kingshill.
"For Better For Worse" pokes fun at middle-class hypocrisies in a Caribbean society. Two youngsters, Sandra and Derek, decide they wish to have nothing to do with traditional notions of marriage and raising a family. But they soon find themselves in an enormous battle with Sandra's religious mother Ann, and even more so with Derek's politician father who's always on the lookout for votes. The end result is a comedic, sidesplitting look at life, love and society.
Tickets are $15 for adults and $8 for students and are now on sale now at the St. Croix campus UVI Bookstore, Sam Goody in Sunny Isle Shopping Center and John E's Gallery in Christiansted. For more information contact the Reichhold Center at 693-1550.
Oct. 1 Deadline Set for Scholarship Application
The UVI Scholarship Committee has announced the availability of additional scholarships for UVI students for the 2002-2003 academic year. The deadline to file applications for the scholarships is Oct. 1, 2002. Applications are available at the UVI Financial Aid, Academic Division and Student Activities offices on both campuses.
To be eligible, individuals must be full-time, matriculated UVI students in good academic standing (with a GPA of 2.5 or better) and demonstrate financial need. Those selected must provide a UVI transcript. Current scholarship recipients are ineligible. Past applicants who were not selected are strongly encouraged to re-apply.
SGA to Celebrate Diversity with Sharing of Cultural Foods
The Student Government Association and Student Activities Office on UVI's St. Thomas campus will launch a "Celebrate Diversity and Our Common
Heritage" program with "A Taste of Friendship" on Monday, Oct. 14, from
11 a.m. to 2 p.m. in the cafeteria. Faculty, staff and students are invited to contribute a cultural food dish and/or participate in a table presentation.
The deadline to register for participation is Friday, Oct. 4. To sign
up, contact the Student Activities Office at 693-1111.
For more on the University of the Virgin Islands, visit the website at www.uvi.edu.
Publisher's note : Like the St. Thomas Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.

The University community and the general public are invited to participate in a voter registration drive on Wednesday, Oct. 2, in the Student Center from 11:30 a.m. to 2:30 p.m. on UVI's St. Croix campus. The St. Croix Student Activities Office is sponsoring the event. For more information call Clint Ferris at 692-4188.

Sept. 23, 2002 – While the National Weather Service has upgraded Tropical Depression 13 to Tropical Storm Lili, it appears the Virgin Islands will be spared the worst of its effects. Miguel Sierra, a meteorologist with the National Weather Service in San Juan, said at mid-day Monday that he expects the storm to pass 150 to 200 miles south of the Virgin Islands starting Tuesday afternoon.
"St. Croix will be more affected," Sierra said, because of its more southerly position. He said Tropical Storm Lili will bring rain and thunderstorms to the area, with wind gusts of 35 to 45 mph expected, particularly when thunderstorms hit. He expects these conditions to continue through Tuesday night and into Wednesday morning.
Harold Baker, director of the V.I. Territorial Emergency Management Agency, said he expected showers and wind gusts to start Monday afternoon. "There might be some flooding," he added.
As of 11 p.m. Monday, Lili was centered at 12.7 degrees north latitude and 62.7 degrees west longitude, placing it about 95 miles west of the Grenadines.
Baker said he expected that by 2 a.m. Tuesday, the storm system will be 320 miles southeast of St. Croix and 275 miles southeast of St. Thomas. "It's moving very fast," he said.
According to the National Weather Service, the system was moving westward at nearly 17 mph with a sustained winds of 60 mph Monday night. The storm was expected to continue on a west to northwest track at a slightly slower speed with gradual strengthening over the next 24 hours. Winds of tropical storm force extended outward up to 105 miles from the center of the system.
Baker urged residents to expect the rain, wind and possible flooding that the storm will bring and to be prepared in case Tropical Storm Lili intensifies and/or veers toward the territory. "Maintain the same vigilance until you get the all clear," he said.
Sierra said that currently there are no other storm systems in the Atlantic Ocean that show signs of development.

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Sept. 23, 2002 – The Reichhold Center for the Arts will hold open auditions for its holiday season production of "Folk Nativity: A Caribbean Christmas Musical" on Oct. 2 and 3 at the theater.
"Actors who have a talent for song and dance are encouraged to apply," said David Edgecombe, director of Reichhold Center, who also will direct the production. "We are especially looking for individuals who will commit to the hard work necessary to make the musical an excellent production."
"Folk Nativity" will be presented on Nov. 30 and Dec. 1 at 8 p.m. as part of the Reichhold Center's 2002-2003 season.
Written by Alwin Bully and Einstar LeBlanc, "Folk Nativity" is musical depiction of an eccentric hermit who is on trial for the theft of a stem of bananas and other crimes. In his defense, he tells the Christmas story. Written in 1976, the play has toured the Caribbean and remains a traditional holiday favorite.
This will be the Reichhold's second mounting of the play, which made its local debut as the theater's 2000 Christmas season offering. For background on the work and an interview with Bully, see "Reichhold keeping a Caribbean Christmas".
Edgecombe also directed the production two years ago. Josephine Thomas-Lewis will be back as musical director while also serving as producer.
The tryouts will begin at 6 p.m. Those interested in auditioning are asked to call the Reichhold office at 693-1550 or Thomas-Lewis at 779-2339 for more information.

Publisher's note : Like the St. Thomas Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.

Sept. 23, 2002 – The Reichhold Center for the Arts will hold open auditions for its holiday season production of "Folk Nativity: A Caribbean Christmas Musical" on Oct. 2 and 3 at the theater.
"Actors who have a talent for song and dance are encouraged to apply," said David Edgecombe, director of Reichhold Center, who also will direct the production. "We are especially looking for individuals who will commit to the hard work necessary to make the musical an excellent production."
"Folk Nativity" will be presented on Nov. 30 and Dec. 1 at 8 p.m. as part of the Reichhold Center's 2002-2003 season.
Written by Alwin Bully and Einstar LeBlanc, "Folk Nativity" is musical depiction of an eccentric hermit who is on trial for the theft of a stem of bananas and other crimes. In his defense, he tells the Christmas story. Written in 1976, the play has toured the Caribbean and remains a traditional holiday favorite.
This will be the Reichhold's second mounting of the play, which made its local debut as the theater's 2000 Christmas season offering. For background on the work and an interview with Bully, see "Reichhold keeping a Caribbean Christmas".
Edgecombe also directed the production two years ago. Josephine Thomas-Lewis will be back as musical director while also serving as producer.
The tryouts will begin at 6 p.m. Those interested in auditioning are asked to call the Reichhold office at 693-1550 or Thomas-Lewis at 779-2339 for more information.

Publisher's note : Like the St. John Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.

Sept. 22, 2002 – The report submitted to the Public Services Commission on Sept. 13 by the hearing examiner for its investigation into the rates of Innovative Telephone:
– Included two key decisions that may reduce Innovative profits in the future;
– Cast some light on hidden accounting practices of the phone company.
– Denied a refund to phone company customers.
– Demonstrated the unusual balance of powers in utility regulation in the territory.
– Left some mysteries unsolved.
Frederick G. Watts, senior partner in a St. Thomas law firm, was appointed by the PSC to conduct the first of what are now legally mandated biennial financial reviews of the telephone company. Also participating in that process, which began last year, were the phone company and AUS Pathways Inc., a mainland consulting firm that works in the utility field.
The 53-page report written by Watts, resembles a carefully drafted decision by a judge after a long investigation and several hearings. Watts was often called upon to make complex legal and economic judgments on such arcane matters as the "cost of equity" — i.e., what is the appropriate profit for the phone company. In some instances, two or more expert witnesses disagreed as to, for example, what, if any, extra profits should be allowed for investors dealing with the V.I. economy, as opposed to that of the mainland.
Rulings that could affect rate of return
As to reducing the profit level for Innovative – which is not discussed in those words in the Hearing Examiner's Report – two decisions were made following lengthy and conflicting testimony.
In the first instance, Watts ruled that Innovative could not count as expenses any taxes that the phone company did not pay but would have paid, had the V.I. government's Economic Development Commission not granted the company extensive tax breaks.
The bottom-line significance of that decision is that the company can no longer claim these "taxes" as expenses, and thus cannot pass on to its telephone users a claimed business expense that in the view of the hearing examiner did not exist.
Innovative argued that its EDC tax exemptions (90 percent of corporate income taxes and 100 percent of property and gross receipts taxes) should be disregarded, and the taxes should be viewed as having been paid, because the arrangement between the EDC and the phone company is not subject to regulation by the PSC. Watts rejected that argument.
The dollar amounts of taxes not paid but claimed as expenses was not disclosed in the report.
Mainland observers marveled that Innovative even attempted the argument, given the recent controversies in business circles about "creative accounting" by the likes of Enron and Global Crossing.
Much of the Hearing Examiner's Report covers the complex question of the appropriate rate of return for Innovative. Since the phone company in effect has a monopoly, its rates are subject to approval by the PSC. The commission by law must find that rate of return higher than 8 percent is "imperative" before it can go into effect.
The witness for Innovative in this regard argued that the risks encountered by Innovative were such that a 13.84 percent rate of return was warranted, and asked that the hearing examiner recommend that rate. Watts, however, after calculating the relative sizes of the phone company's debts, both short and long term, and the value of the equity (or ownership) stake, concluded that the PSC should regard 10.62 percent as an "imperative" rate of return, and not the larger margin asked by the phone company.
Intimations of accounting practices
As to Innovative's secretive finances, some clues emerged between the lines of the report, clues that are that much more interesting because of the phone company's continuing success in keeping its finances hidden from public scrutiny.
(The Source had asked to see the financial reports submitted by the company to the PSC, something that is routinely available to the press and the public from agencies that regulate mainland phone companies. Innovative strongly opposed the request. The PSC voted to deny the request, with commission member Alric Simmonds, the governor's deputy chief of staff, casting the deciding vote for secrecy in what otherwise would have been a 3-3 tie. See "PSC drops 911 fee probe, denies access to records".)
The mystery of how Innovative is able to secure such huge subsidies from a Federal Communications Commission-sponsored agency — $25 million a year — given the low-wage, low-tax nature of the V.I. economy may have been solved in part by Innovative's claims to the hearing examiner that taxes not paid should be counted as taxes paid.
Were Innovative's subsidy applications to Washington also based, in part, on such a claim, the expense base charged in those applications would be similarly enlarged, and thus the subsidy would grow as well. It is not known whether Innovative's non-payment of taxes is claimed as an expense in the subsidy reporting system.
Two other murky pieces of financial reporting were studied by the hearing examiner:
– The interactions of the finances of the phone company and those of its parent corporation, Innovative Communication Corp. Watts quoted the technical consultants as saying "the public does not benefit from the current practice of 'capturing' all of the benefits of a consolidated tax filing at the parent level and not 'flowing back' a portion of that benefit to the regulated telephone company."
In lay terms, the non-regulated parent company, ICC, is getting the benefits that might otherwise go to the regulated phone company, and the regulated phone company does not have to lower its rates to customers as a result.
– Innovative's reporting on investments in modern technology. The report stated that "… the technical consultants observed several practices on the part of the company that were challenged. Specifically, the method used to account for investment in network modernization and addition was not complete, and therefore did not meet the used and useful test generally applied to rate base adjustments."
In other words, to count as an actual investment, which legitimately earns a rate of return, an expenditure must be for something useful — something, in fact, used, and accounted for appropriately.
Refund to customers denied
While Watts appeared concerned about these accounting practices in terms of setting appropriate rates for Virgin Islands telephone services, the same practices, if carried out in the reports to Washington, might overstate the company's expenditures, and thus overstate the subsidies owed to the phone company.
As to whether Innovative's finances were such as to warrant a rebate to consumers, Watts wrote that "it is incumbent upon the hearing examiner to state that Innovative has not overearned its authorized rate of return in the test year. Accordingly, the hearing examiner finds no basis to order a 'rebate' or 'refund' of any portion of the earnings realized by Innovative Telephone Company during that period of time as proposed by the technical consultants [AUS] in their submission to this proceeding."
An unusual balance of powers in regulation
Regulating utilities in the Virgin Islands is a different process than is usually seen on the mainland. This can be seen by reading between the lines of the Hearing Examiner's Report.
The principal difference between mainland and V.I. practices is the total absence of consumer advocates in the latter process.
Mainland rate-setting processes often have either non-governmental consumer groups playing a formal role in the hearing or, as in the case of the District of Columbia, have a tax-supported organization appearing on behalf of the co nsumers. These entities study the issues, write briefs, argue before the hearing examiner and otherwise play a major role in the decision-making process.
Not so in the Virgin Islands. As Watts was careful to state in his long, thoughtful report, the participants in the process included only the phone company and the PSC's technical consultants, the New Jersey-based AUS Pathways. No other voices were raised.
AUS argued for a rebate to phone users and questioned some of Innovative's accounting practices. But there were no consumer advocates asking, for instance, why Innovative, with the largest per-line subsidy for a company of its size in the United States (about $31.20 per line per month), should have a monthly consumer fee ($18.55 per line) that is higher than 90 percent of the mainland phone bills, according to a General Accounting Office study. The federal subsidy is supposed to lower phone bills in hard-to-serve parts of the nation, such as the sparsely populated mountain states and the Alaskan outback.
Had AUS, or anyone else, raised these two points, it presumably would have been documented in the Hearing Examiner's Report. There was no such mention in the report.
Unanswered questions
While Watts' report cast some light on some of Innovative's murky financial transactions, it left some questions unanswered. There is, for example, the question of what the gross and net income of Innovative Telephone are.
In 1999, the last year for which data are available, Innovative had a gross income of $122 million, according to the FCC, which no longer releases such information.
In 1997, the last year such a report was available, the U.S. Department of Agriculture, then a lender to the V.I. Telephone Corp., which became Innovative Telephone, reported the profit of the firm was $16,105,000.
Given Innovative's aggressive business activity, and the fact that the federal subsidy has increased by $10 million a year since 1997, it would seem unlikely that either the gross or the net income of Innovative could have declined since that time.
With this as background, the Hearing Examiner's Report speaks of "total revenues of more than $51 million" for calendar year 2001. The report does not further define "total revenues" for the year. It may be that the definition of "total revenues" used currently by the company and the definition of "gross income" used by the FCC in the past are quite different.
Then there is the question of the "Lifeline" account. Lifeline is a small-scale, federally funded program that provides several hundred low-income V.I. residents with a specific subsidy to meet their phone bills. The program is used sparingly in the USVI, and much more vigorously in California, where a much higher proportion of phone users are assisted.
This is a pass-through subsidy, unlike the major subsidies (of $31.20 per line per month) that go directly to Innovative. In the case of Lifeline, the moneys go to the low-income residents in the form of lower rates.
Given this background, there is this puzzling passage in the report:
"… Innovative sought restoration of the $2.2 million Lifeline account to the revenue [i.e. profits] requirement for the company. Innovative argues that it is required to contribute to this account by PSC actions and it should have been recognized by the consultants …"
How can a pass-through subsidy to one group of consumers be used to justify higher rates for the balance of the customers? How can Innovative "be required to contribute" to a program that appears to be 100 percent federally funded?
The hearing examiner ruled that "additional scheduled contributions to the Lifeline account" by Innovative could be suspended on the grounds that the accumulated sum at the present "appears to meet all foreseeable needs."

Publisher's note : Like the St. Thomas Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.

Sept. 23, 2002 – The blood drive held Saturday at Schooner Bay Market in Gallows Bay was a tremendous success, according to the sponsors – the St. Croix Board of Realtors. Thirty eight pints of blood were collected by the staff of the Juan F. Luis Hospital Blood Mobile and 59 other people made appointments to visit the JFL Blood Bank this week. "We had a huge turnout, I only wish we could have accommodated more donors." Dwaine Ford, president-elect of the local board of Realtors and organizer of the event, said.
The local Realtors were responding to the severe blood shortage announced by the islands' hospital. "It costs JFL Hospital $250 to purchase a pint of blood from the Puerto Rico blood bank and that's if they have enough to spare." Ford said, stressing the need for more local donation.
In addition, the many St. Croix residents who waited patiently for their turn to donate, were joined by eight New York City Firefighters who were vacationing on St. Croix as guests of Vacation St. Croix and Bluewater Travel. "I contacted the firemen by email prior to their arrival and asked if they would make an appearance.
"They quickly agreed to not only make an appearance but also donated a much needed pint of blood."Carl Gotts, owner with his wife Marti of Vacation St. Croix, said. Gotts served as a volunteer at the event . While waiting, the uniformed FDNY members posed for photos and shared stories with their fellow donors. Prior to arriving at the blood drive the FDNY guests had spent that morning at the Queen Louise Home for Children where they met the children and gave out gifts.
People wishing to donate blood can call the JFL Hospital blood bank and make an appointment through the hospital main number 778-6311. The blood bank is open Monday through Friday from 8:30 am to 4:30 pm.

Sept. 22, 2002 – The report submitted to the Public Services Commission on Sept. 13 by the hearing examiner for its investigation into the rates of Innovative Telephone:
– Included two key decisions that may reduce Innovative profits in the future.
– Cast some light on hidden accounting practices of the phone company.
– Denied a refund to phone company customers.
– Demonstrated the unusual balance of powers in utility regulation in the territory.
– Left some mysteries unsolved.
Frederick G. Watts, senior partner in a St. Thomas law firm, was appointed by the PSC to conduct the first of what are now legally mandated biennial financial reviews of the telephone company. Also participating in that process, which began last year, were the phone company and AUS Pathways Inc., a mainland consulting firm that works in the utility field.
The 53-page report written by Watts, resembles a carefully drafted decision by a judge after a long investigation and several hearings. Watts was often called upon to make complex legal and economic judgments on such arcane matters as the "cost of equity" — i.e., what is the appropriate profit for the phone company. In some instances, two or more expert witnesses disagreed as to, for example, what, if any, extra profits should be allowed for investors dealing with the V.I. economy, as opposed to that of the mainland.
Rulings that could affect rate of return
As to reducing the profit level for Innovative – which is not discussed in those words in the Hearing Examiner's Report – two decisions were made following lengthy and conflicting testimony.
In the first instance, Watts ruled that Innovative could not count as expenses any taxes that the phone company did not pay but would have paid, had the V.I. government's Economic Development Commission not granted the company extensive tax breaks.
The bottom-line significance of that decision is that the company can no longer claim these "taxes" as expenses, and thus cannot pass on to its telephone users a claimed business expense that in the view of the hearing examiner did not exist.
Innovative argued that its EDC tax exemptions (90 percent of corporate income taxes and 100 percent of property and gross receipts taxes) should be disregarded, and the taxes should be viewed as having been paid, because the arrangement between the EDC and the phone company is not subject to regulation by the PSC. Watts rejected that argument.
The dollar amounts of taxes not paid but claimed as expenses was not disclosed in the report.
Mainland observers marveled that Innovative even attempted the argument, given the recent controversies in business circles about "creative accounting" by the likes of Enron and Global Crossing.
Much of the Hearing Examiner's Report covers the complex question of the appropriate rate of return for Innovative. Since the phone company in effect has a monopoly, its rates are subject to approval by the PSC. The commission by law must find that rate of return higher than 8 percent is "imperative" before it can go into effect.
The witness for Innovative in this regard argued that the risks encountered by Innovative were such that a 13.84 percent rate of return was warranted, and asked that the hearing examiner recommend that rate. Watts, however, after calculating the relative sizes of the phone company's debts, both short and long term, and the value of the equity (or ownership) stake, concluded that the PSC should regard 10.62 percent as an "imperative" rate of return, and not the larger margin asked by the phone company.
Intimations of accounting practices
As to Innovative's secretive finances, some clues emerged between the lines of the report, clues that are that much more interesting because of the phone company's continuing success in keeping its finances hidden from public scrutiny.
(The Source had asked to see the financial reports submitted by the company to the PSC, something that is routinely available to the press and the public from agencies that regulate mainland phone companies. Innovative strongly opposed the request. The PSC voted to deny the request, with commission member Alric Simmonds, the governor's deputy chief of staff, casting the deciding vote for secrecy in what otherwise would have been a 3-3 tie. See "PSC drops 911 fee probe, denies access to records".)
The mystery of how Innovative is able to secure such huge subsidies from a Federal Communications Commission-sponsored agency — $25 million a year — given the low-wage, low-tax nature of the V.I. economy may have been solved in part by Innovative's claims to the hearing examiner that taxes not paid should be counted as taxes paid.
Were Innovative's subsidy applications to Washington also based, in part, on such a claim, the expense base charged in those applications would be similarly enlarged, and thus the subsidy would grow as well. It is not known whether Innovative's non-payment of taxes is claimed as an expense in the subsidy reporting system.
Two other murky pieces of financial reporting were studied by the hearing examiner:
– The interactions of the finances of the phone company and those of its parent corporation, Innovative Communication Corp. Watts quoted the technical consultants as saying "the public does not benefit from the current practice of 'capturing' all of the benefits of a consolidated tax filing at the parent level and not 'flowing back' a portion of that benefit to the regulated telephone company."
In lay terms, the non-regulated parent company, ICC, is getting the benefits that might otherwise go to the regulated phone company, and the regulated phone company does not have to lower its rates to customers as a result.
– Innovative's reporting on investments in modern technology. The report stated that "… the technical consultants observed several practices on the part of the company that were challenged. Specifically, the method used to account for investment in network modernization and addition was not complete, and therefore did not meet the used and useful test generally applied to rate base adjustments."
In other words, to count as an actual investment, which legitimately earns a rate of return, an expenditure must be for something useful — something, in fact, used, and accounted for appropriately.
Refund to customers denied
While Watts appeared concerned about these accounting practices in terms of setting appropriate rates for Virgin Islands telephone services, the same practices, if carried out in the reports to Washington, might overstate the company's expenditures, and thus overstate the subsidies owed to the phone company.
As to whether Innovative's finances were such as to warrant a rebate to consumers, Watts wrote that "it is incumbent upon the hearing examiner to state that Innovative has not overearned its authorized rate of return in the test year. Accordingly, the hearing examiner finds no basis to order a 'rebate' or 'refund' of any portion of the earnings realized by Innovative Telephone Company during that period of time as proposed by the technical consultants [AUS] in their submission to this proceeding."
An unusual balance of powers in regulation
Regulating utilities in the Virgin Islands is a different process than is usually seen on the mainland. This can be seen by reading between the lines of the Hearing Examiner's Report.
The principal difference between mainland and V.I. practices is the total absence of consumer advocates in the latter process.
Mainland rate-setting processes often have either non-governmental consumer groups playing a formal role in the hearing or, as in the case of the District of Columbia, have a tax-supported organization appearing on behalf of the cons umers. These entities study the issues, write briefs, argue before the hearing examiner and otherwise play a major role in the decision-making process.
Not so in the Virgin Islands. As Watts was careful to state in his long, thoughtful report, the participants in the process included only the phone company and the PSC's technical consultants, the New Jersey-based AUS Pathways. No other voices were raised.
AUS argued for a rebate to phone users and questioned some of Innovative's accounting practices. But there were no consumer advocates asking, for instance, why Innovative, with the largest per-line subsidy for a company of its size in the United States (about $31.20 per line per month), should have a monthly consumer fee ($18.55 per line) that is higher than 90 percent of the mainland phone bills, according to a General Accounting Office study. The federal subsidy is supposed to lower phone bills in hard-to-serve parts of the nation, such as the sparsely populated mountain states and the Alaskan outback.
Had AUS, or anyone else, raised these two points, it presumably would have been documented in the Hearing Examiner's Report. There was no such mention in the report.
Unanswered questions
While Watts' report cast some light on some of Innovative's murky financial transactions, it left some questions unanswered. There is, for example, the question of what the gross and net income of Innovative Telephone are.
In 1999, the last year for which data are available, Innovative had a gross income of $122 million, according to the FCC, which no longer releases such information.
In 1997, the last year such a report was available, the U.S. Department of Agriculture, then a lender to the V.I. Telephone Corp., which became Innovative Telephone, reported the profit of the firm was $16,105,000.
Given Innovative's aggressive business activity, and the fact that the federal subsidy has increased by $10 million a year since 1997, it would seem unlikely that either the gross or the net income of Innovative could have declined since that time.
With this as background, the Hearing Examiner's Report speaks of "total revenues of more than $51 million" for calendar year 2001. The report does not further define "total revenues" for the year. It may be that the definition of "total revenues" used currently by the company and the definition of "gross income" used by the FCC in the past are quite different.
Then there is the question of the "Lifeline" account. Lifeline is a small-scale, federally funded program that provides several hundred low-income V.I. residents with a specific subsidy to meet their phone bills. The program is used sparingly in the USVI, and much more vigorously in California, where a much higher proportion of phone users are assisted.
This is a pass-through subsidy, unlike the major subsidies (of $31.20 per line per month) that go directly to Innovative. In the case of Lifeline, the moneys go to the low-income residents in the form of lower rates.
Given this background, there is this puzzling passage in the report:
"… Innovative sought restoration of the $2.2 million Lifeline account to the revenue [i.e. profits] requirement for the company. Innovative argues that it is required to contribute to this account by PSC actions and it should have been recognized by the consultants …"
How can a pass-through subsidy to one group of consumers be used to justify higher rates for the balance of the customers? How can Innovative "be required to contribute" to a program that appears to be 100 percent federally funded?
The hearing examiner ruled that "additional scheduled contributions to the Lifeline account" by Innovative could be suspended on the grounds that the accumulated sum at the present "appears to meet all foreseeable needs."

Publisher's note : Like the St. John Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.

Sept. 22, 2002 – The report submitted to the Public Services Commission on Sept. 13 by the hearing examiner for its investigation into the rates of Innovative Telephone:
– Included two key decisions that may reduce Innovative profits in the future.
– Cast some light on hidden accounting practices of the phone company.
– Denied a refund to phone company customers.
– Demonstrated the unusual balance of powers in utility regulation in the territory.
– Left some mysteries unsolved.
Frederick G. Watts, senior partner in a St. Thomas law firm, was appointed by the PSC to conduct the first of what are now legally mandated biennial financial reviews of the telephone company. Also participating in that process, which began last year, were the phone company and AUS Pathways Inc., a mainland consulting firm that works in the utility field.
The 53-page report written by Watts, resembles a carefully drafted decision by a judge after a long investigation and several hearings. Watts was often called upon to make complex legal and economic judgments on such arcane matters as the "cost of equity" — i.e., what is the appropriate profit for the phone company. In some instances, two or more expert witnesses disagreed as to, for example, what, if any, extra profits should be allowed for investors dealing with the V.I. economy, as opposed to that of the mainland.
Rulings that could affect rate of return
As to reducing the profit level for Innovative – which is not discussed in those words in the Hearing Examiner's Report – two decisions were made following lengthy and conflicting testimony.
In the first instance, Watts ruled that Innovative could not count as expenses any taxes that the phone company did not pay but would have paid, had the V.I. government's Economic Development Commission not granted the company extensive tax breaks.
The bottom-line significance of that decision is that the company can no longer claim these "taxes" as expenses, and thus cannot pass on to its telephone users a claimed business expense that in the view of the hearing examiner did not exist.
Innovative argued that its EDC tax exemptions (90 percent of corporate income taxes and 100 percent of property and gross receipts taxes) should be disregarded, and the taxes should be viewed as having been paid, because the arrangement between the EDC and the phone company is not subject to regulation by the PSC. Watts rejected that argument.
The dollar amounts of taxes not paid but claimed as expenses was not disclosed in the report.
Mainland observers marveled that Innovative even attempted the argument, given the recent controversies in business circles about "creative accounting" by the likes of Enron and Global Crossing.
Much of the Hearing Examiner's Report covers the complex question of the appropriate rate of return for Innovative. Since the phone company in effect has a monopoly, its rates are subject to approval by the PSC. The commission by law must find that rate of return higher than 8 percent is "imperative" before it can go into effect.
The witness for Innovative in this regard argued that the risks encountered by Innovative were such that a 13.84 percent rate of return was warranted, and asked that the hearing examiner recommend that rate. Watts, however, after calculating the relative sizes of the phone company's debts, both short and long term, and the value of the equity (or ownership) stake, concluded that the PSC should regard 10.62 percent as an "imperative" rate of return, and not the larger margin asked by the phone company.
Intimations of accounting practices
As to Innovative's secretive finances, some clues emerged between the lines of the report, clues that are that much more interesting because of the phone company's continuing success in keeping its finances hidden from public scrutiny.
(The Source had asked to see the financial reports submitted by the company to the PSC, something that is routinely available to the press and the public from agencies that regulate mainland phone companies. Innovative strongly opposed the request. The PSC voted to deny the request, with commission member Alric Simmonds, the governor's deputy chief of staff, casting the deciding vote for secrecy in what otherwise would have been a 3-3 tie. See "PSC drops 911 fee probe, denies access to records".)
The mystery of how Innovative is able to secure such huge subsidies from a Federal Communications Commission-sponsored agency — $25 million a year — given the low-wage, low-tax nature of the V.I. economy may have been solved in part by Innovative's claims to the hearing examiner that taxes not paid should be counted as taxes paid.
Were Innovative's subsidy applications to Washington also based, in part, on such a claim, the expense base charged in those applications would be similarly enlarged, and thus the subsidy would grow as well. It is not known whether Innovative's non-payment of taxes is claimed as an expense in the subsidy reporting system.
Two other murky pieces of financial reporting were studied by the hearing examiner:
– The interactions of the finances of the phone company and those of its parent corporation, Innovative Communication Corp. Watts quoted the technical consultants as saying "the public does not benefit from the current practice of 'capturing' all of the benefits of a consolidated tax filing at the parent level and not 'flowing back' a portion of that benefit to the regulated telephone company."
In lay terms, the non-regulated parent company, ICC, is getting the benefits that might otherwise go to the regulated phone company, and the regulated phone company does not have to lower its rates to customers as a result.
– Innovative's reporting on investments in modern technology. The report stated that "… the technical consultants observed several practices on the part of the company that were challenged. Specifically, the method used to account for investment in network modernization and addition was not complete, and therefore did not meet the used and useful test generally applied to rate base adjustments."
In other words, to count as an actual investment, which legitimately earns a rate of return, an expenditure must be for something useful — something, in fact, used, and accounted for appropriately.
Refund to customers denied
While Watts appeared concerned about these accounting practices in terms of setting appropriate rates for Virgin Islands telephone services, the same practices, if carried out in the reports to Washington, might overstate the company's expenditures, and thus overstate the subsidies owed to the phone company.
As to whether Innovative's finances were such as to warrant a rebate to consumers, Watts wrote that "it is incumbent upon the hearing examiner to state that Innovative has not overearned its authorized rate of return in the test year. Accordingly, the hearing examiner finds no basis to order a 'rebate' or 'refund' of any portion of the earnings realized by Innovative Telephone Company during that period of time as proposed by the technical consultants [AUS] in their submission to this proceeding."
An unusual balance of powers in regulation
Regulating utilities in the Virgin Islands is a different process than is usually seen on the mainland. This can be seen by reading between the lines of the Hearing Examiner's Report.
The principal difference between mainland and V.I. practices is the total absence of consumer advocates in the latter process.
Mainland rate-setting processes often have either non-governmental consumer groups playing a formal role in the hearing or, as in the case of the District of Columbia, have a tax-supported organization appearing on behalf of the con sumers. These entities study the issues, write briefs, argue before the hearing examiner and otherwise play a major role in the decision-making process.
Not so in the Virgin Islands. As Watts was careful to state in his long, thoughtful report, the participants in the process included only the phone company and the PSC's technical consultants, the New Jersey-based AUS Pathways. No other voices were raised.
AUS argued for a rebate to phone users and questioned some of Innovative's accounting practices. But there were no consumer advocates asking, for instance, why Innovative, with the largest per-line subsidy for a company of its size in the United States (about $31.20 per line per month), should have a monthly consumer fee ($18.55 per line) that is higher than 90 percent of the mainland phone bills, according to a General Accounting Office study. The federal subsidy is supposed to lower phone bills in hard-to-serve parts of the nation, such as the sparsely populated mountain states and the Alaskan outback.
Had AUS, or anyone else, raised these two points, it presumably would have been documented in the Hearing Examiner's Report. There was no such mention in the report.
Unanswered questions
While Watts' report cast some light on some of Innovative's murky financial transactions, it left some questions unanswered. There is, for example, the question of what the gross and net income of Innovative Telephone are.
In 1999, the last year for which data are available, Innovative had a gross income of $122 million, according to the FCC, which no longer releases such information.
In 1997, the last year such a report was available, the U.S. Department of Agriculture, then a lender to the V.I. Telephone Corp., which became Innovative Telephone, reported the profit of the firm was $16,105,000.
Given Innovative's aggressive business activity, and the fact that the federal subsidy has increased by $10 million a year since 1997, it would seem unlikely that either the gross or the net income of Innovative could have declined since that time.
With this as background, the Hearing Examiner's Report speaks of "total revenues of more than $51 million" for calendar year 2001. The report does not further define "total revenues" for the year. It may be that the definition of "total revenues" used currently by the company and the definition of "gross income" used by the FCC in the past are quite different.
Then there is the question of the "Lifeline" account. Lifeline is a small-scale, federally funded program that provides several hundred low-income V.I. residents with a specific subsidy to meet their phone bills. The program is used sparingly in the USVI, and much more vigorously in California, where a much higher proportion of phone users are assisted.
This is a pass-through subsidy, unlike the major subsidies (of $31.20 per line per month) that go directly to Innovative. In the case of Lifeline, the moneys go to the low-income residents in the form of lower rates.
Given this background, there is this puzzling passage in the report:
"… Innovative sought restoration of the $2.2 million Lifeline account to the revenue [i.e. profits] requirement for the company. Innovative argues that it is required to contribute to this account by PSC actions and it should have been recognized by the consultants …"
How can a pass-through subsidy to one group of consumers be used to justify higher rates for the balance of the customers? How can Innovative "be required to contribute" to a program that appears to be 100 percent federally funded?
The hearing examiner ruled that "additional scheduled contributions to the Lifeline account" by Innovative could be suspended on the grounds that the accumulated sum at the present "appears to meet all foreseeable needs."

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Sept. 19, 2002 – The expansion of the Anti-litter and Beautification Commission's recycling program means that St. Thomas and St. John residents now can add glass, corrugated cardboard, office paper and newspaper to the list of materials they can save up for sending back into circulation.
The commission has for some time recycled aluminum cans and clear No. 1 plastic bottles.
On St. Croix, alumninum cans and other non-ferrous metal items are collected for recycling.
"Our environment is dependent on lessening the amount of things that go into the Bovoni landfill," says Cordell Jacobs, director of the Anti-litter and Beautification Commission on St. Thomas and St. John.
The landfill is fast filling up, he says, but whatever residents can do to keep items from ending up there will extend its life. He and the commission's recycling coordinator, Caroline Browne, were appalled to see what goes to the landfill that could better end its life elsewhere.
Yard trimmings and fruit and vegetable peels are a good case in point. Residents put them into plastic bags and throw them in trash bins. The plastic bags prevent the speedy decomposition of the plant material, and the bags themselves don't decompose for ages.
Instead, Browne suggests, pile the trimmings in a corner of a yard or throw them and the peelings down the hill into the bush, where they will quickly rot or animals will carry them away.
Browne said Virgin Islanders need to adjust their mindset to recycle and re-use items that now go into the garbage, and thereby reduce the volume of material thrown away. "Our elders re-used and recycled," she says, noting that it was common to see cracker tins recycled into pots for plants.
Jacobs says he's so enthusiastic about recycling that he's not shy about checking out the contents of friends' garbage cans so he can advise them on ways to recycle. While he and Brown didn't mention the plastic grocery bag problem, recycling mavens know that taking your own canvas bags with you to the supermarket will help cut the number of "disposable" plastic ones that can rapidly pile up in your home.
People who recycle won't get rich at it, but it's the right thing to do, Jacobs says. The commission pays 50 cents a pound for aluminum cans and 25 cents a pound for all other items.
Aluminum cans and glass and plastic bottles should be rinsed, and the plastic bottles should have their caps removed. Cardboard must have staples and tape removed and then be flattened.
Jacobs said all of the materials now up for recycling except for the glass gets shipped off-island. The commission is looking at ways to use recycled glass locally. Crushed glass is "good for a base mixture when building roads, and it makes good backfill," he says.
On St. Thomas and St. John, the Anti-Litter and Beautification Commission has hired Zahn's to replace Sanitary Trash Removal Services for the intake of recyclable items, Jacobs says, because Zahn's was willing to expand the list of items recycled.
To get its recycling messages out to the public, the commission is airing programs on local radio stations — at 10:45 a.m. Mondays on WGOD, at 8:45 a.m. Wednesdays on WSTA and at 7:25 a.m. Fridays on WVWI.
The commission also is planning to sponsor a recycling fair on Oct. 5 at PriceSmart. Browne said a program will be held from 11 a.m. to 1 p.m. and displays and information on recycling will be available to the public all day, from 8 a.m. to 5 p.m. She said the fair will feature displays of items from the trash that have been turned into "treasures."
Recycling at the library level
Browne will be taking her message about "re-using, reducing and recycling" to the Children's Room at the Enid M. Baa Library on Saturday at 10:30 a.m.
As a special guest for the library's weekly Children's Reading Program, Browne will guide the youngsters present in determining ways that they and other library patrons can recycle while at the library, out and about in the community, at school and at home.
"Public libraries may have indeed been one of the first organizations to recycle," Baa's head librarian, Diane Moody, points out. "They collected, sorted and housed books to be used over and over again by many users." For more information about Saturday's program and other Children's Room operations, call Moody or Audrey Muriel at 774-0630.
Recycling intake: when and where
On St. Thomas, Zahn's recycling intake is on Saturday from 8 a.m. to 5 p.m. at PriceSmart and Lockhart Gardens and on Fridays, same hours, at the cricket field next to Ivanna Eudora Kean High School. On Sundays, from 2 to 6 p.m., you can drop your recyclables off at the USO building on the Charlotte Amalie waterfront.
On St. John, Zahn's is at the public tennis courts from 8 a.m. to 4 p.m. on Wednesdays.
On St. Croix, Community Recycling collects non-ferrous metals at its location on Queen Mary Highway in Anna's Hope. It also holds the contract to recycle aluminum cans for the Boys and Girls Club of St. Croix. The company pays 25 cents a pound for aluminum cans and various prices for other metals. Drop-off is from 8 a.m. to 5 p.m. Monday through Friday and from 8 a.m. to 2 p.m. on Saturdays.
Non-ferrous metals include copper, brass and materials found in radiators and condensers, aluminum window frames, and insulated wire. If you have a question about whether a metal item is recyclable, call Community Recycling at 778-0100.

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