This is the first of a series on the best practices for our community to consider in revitalizing the Virgin Islands industrial incentive — or IDC — program.
It is clearly evident that any company engaged exclusively in the business of exporting commodities or services, with virtually no market in the location where the production occurs, must receive a set of tax/fee incentives sufficient to induce that company to operate there.
Such is the case with HOVENSA, Globalvest or any other similarly situated IDC beneficiary. These companies have no other reason to operate in the Virgin Islands, given that taxes and fees do exist.
Other factors, such as beautiful beaches, labor supply quality or onerous labor market legislation, may support or devalue the forgiveness of certain taxes/fees.
The balance of benefits offered to these companies and those received by the V.I. are unrelated. The benefits to be offered allow them to earn a level of profit greater than could be earned at any other feasible location.
That is the reason for locating in the Virgin Islands. If such were not true, the company would be obliged to locate wherever their profits are highest.
The analysis for determining the level of benefits to be provided rests not on a comparison between the benefits that would accrue to the Virgin Islands and the benefits that would accrue to the company.
Rather, the analysis must be based on a comparison between the cost of doing business in the Virgin Islands as opposed to the cost of doing business in another location. The bargaining is implicitly and truly between competing locations and not between a company and any particular country, state or territory.
It is possible to offer (more/less) benefits than are sufficient. If the benefit package results in the company earning a profit (higher/lower) than could be earned at the next best location, the (excess/deficiency) in benefits provided equals the difference in the benefit package available in the V.I. and the next best locations, plus one dollar; not between the value of benefits offered to the company and those received by the jurisdiction.
This perspective is the correct guide for use in deliberating the appropriateness of any benefit package offered to a new company or in considering a renewal/renegotiation of same.
Unfortunately, this perspective was extravagantly violated by the U.S. Interior Department, in what is inaccurately titled an "Audit Report" on the Hess Oil Virgin Islands Corp.'s Economic Impact on the Virgin Islands; Report No. 92-I-384, February 1992.
Beyond a number of factual errors that should have been caught during editing, the report reveals a misguided understanding of regional economic development programming.
The report's most damaging assertion is "We believe that the (V.I.) Government should attempt to negotiate additional tax concessions from Hess Oil in order to reach an agreement that more equitably balances Hess Oil's tax exemptions with benefits provided to the Virgin Islands." (par. 2 cover letter from Harold Bloom).
As shown above, this perspective and comparison is patently incorrect and damages the image of the Virgin Islands as a community able to negotiate tax/fee forgiveness packages beneficial to both parties.
In the next article, I'll offer a view on the implications regarding the export orientation of the company.
Richard W. Moore is a consulting economist in the Virgin Islands. He can be reached at 340- 774-4272.

If you were one of the fortunate people who received Vitelco's Christmas cards this year, you were gazing at the artwork of artist Eunice Summer.
She enhanced the cards with reproductions of waterfront and Carnival scenes — very Caribbean, as is Eunice, who has made St. Thomas her home for 24 years.
It is just in the past six years, since she retired after more than 20 years as a psychotherapist with the Human Services Department, that she has devoted herself to her first love — painting.
Her deep affection for the Caribbean in all its colors and costumes, flora and fauna, is evident in her brilliant work.
Summer said the piece shown, The Three Graces, is the only time the three graces have been portrayed as black women.
Eunice spent time in the British Virgin Islands before coming to St. Thomas, and Virgin Gorda still claims a part of her heart. This is where actor Morgan Freeman first saw Eunice's work, and commissioned her to do his portrait.
Freeman wasn't the easiest person to paint as he didn't want to "sit" for a portrait. Instead, Eunice whose love of the sea is limited to painting it, had to endure a sailboat ride from Virgin Gorda to St. Thomas to get her initial sketch. However, her story had a happy ending.
"You have captured my soul," Freeman said when he saw the portrait.
"But, you know," she added, "he is an actor."
Eunice took first prize for her enamels in the Caribbean Color show earlier this year in St. John. Her paintings hang in many private collections in the Caribbean and the U.S., and 70th Art Gallery at 130 E. 70th St. in Manhattan is now carrying her work. She has a show coming up next spring at Color of Joy on St. Thomas' east end.

Gov. Roy L. Schneider, in one of his final official acts, has pardoned five convicted criminals, including Ruthlyn White, the wife of his No. 1 legislative ally.
Other media had previously reported Schneider's pardon of Franke Hoheb, convicted 14 years ago of conspiracy to distribute marijuana, but the Daily News on Saturday reported that Schneider also pardoned White, former policeman David Husbands, Jacqueline Simmonds Richards and Jackie Monsanto Swan.
Scheider came into office criticizing his predecessor, Gov. Alexander A. Farrelly, for the 11th-hour pardons of 12 criminals, including five murderers.
Schneider's pardons were for less serious crimes.
White, the wife of Sen. Celestino A. White Sr., was convicted in 1992 of assaulting a police officer. Her arrest caused a storm of controversy when Raymond Hyndman, then chief of police, ordered an underling to erase the blotter entry on the incident.
Farrelly reprimanded Hyndman. Schneider later named him deputy police commissioner, a position he held until he retired last year.
Hoheb, 46, is a former deputy Housing commissioner whose company managed the temporary housing complex in Nazareth. He said he realized he had made a serious error in judgment, but petitioned Schneider to pardon him because he did not want a long-ago mistake to preclude him from running for office or holding a Cabinet position in a future administration.
Husbands' conviction involved a fight while he was off-duty. The Daily News had no information on Richards' or Swan's convictions.

Esso Virgin Islands has paid $294,200 in penalties for violating the Clean Air Act and the New Source Performance Standards for bulk gasoline terminals.
The penalties were the result of a civil complaint filed by the U.S. government charging Esso V.I. with violating federal environmental regulations, the Daily News reported Saturday.
As part of the settlement approved by District Court, Esso must perform certain tasks, including:
— Instituting certain monitoring and maintenance precautions relating to loading tank trucks.
— Conducting monthly leak detection surveys.
— Submitting to Environmental Protection Agency monitoring to ensure compliance.
U.S. Attorney James A. Hurd Jr. said his office will continue to enforce federal environmental laws and collect debts owed to the United States.

The former Virgin Isle Hotel has been deeded to the Virgin Islands
government.
The owners stipulated that the once-posh, now derelict, hotel be used for a public purpose, said Kevin Rames, attorney for the consortium that owns the property.
The Maribe Hotel Corp. had a price tag of $4 million on the property but
had no acceptable offers, due to the location, according to the Daily News.
The hotel, which was destroyed nine years ago in Hurricane Hugo, is located
in Upper John Dunkoe near Altona.
Rames said the owners determined the location was more suited for a
government project, such as an office complex.
He said he could not project what the cost of rehabilitation might be or
whether the government would choose to rebuild or demolish the buildings.
The property in recent years has become a haven for vagrants, and neighbors have complained about its appearance and the activities it harbors.

According to local flacks, the Virgin Islands can be self-sufficient with agriculture and ranching — given the right conditions. Anyone can answer all questions, outline solutions to any problem, be all things to all people; using that simple word: given!
Whether one is growing meat, produce or people, the ingredients are the same: space, water and nutrients. Given our priorities, people receive the best land, most of the water and imported nutrients.
There is still the old machismo thing — quantity vs. quality. Then there are relatives, friends and others who relocate to better their standard of living. And they all vote! Of course, there is no shrimp, pepper, fish, cabbage, papaya or yam vote.
The easiest place to plant produce, grow livestock and build low-cost housing is on gentle, well- watered land. In the Virgin Islands, this scarce commodity is given to people.
When economists and planners suggest land-use plans, they are attacked by politicians selling their souls for the popular vote. Instead of acting as educated surrogates for the masses, our senators too often scurry about prostituting themselves to please the masses' most base emotions.
If a man wants to build a commercial temple in a residential zone and can call upon the taxi driver's extended family voting block and the immigrant West Indian voting block, he has political clout.
When the opponents are seen as a gaggle of expatriates and a few old Virgin Islands families who have become strangers in their own land, the temple is a done deal, notwithstanding zoning by the professionals, wishes of the immediate community or constitutional legalities.
Districting with senators responsible to a well-defined constituency would solve some of this problem. A land-use plan and an attorney general with fortitude, elected to uphold the law, could solve even more.
The major item in our race to oblivion is motivation. Only Rastafarians and government grant gourmets appear motivated to grow anything outside of people.
Well-meaning agrarians farm marginal land on the West End, yielding survival living for a few families. Then this wasteland is given to ranchers?? Cattle take up far too much land and eat too many nutrients in exchange for scant meat. The truly productive meat producer is the humble rabbit.
Island ranching depends on minimal human population and lots of empty land. Otherwise, it is a rich man's hobby. In the Virgin Islands we support this hobby with local tax grants and federal feed grants. Few Virgin Islanders can afford the real cost of this meat.
An agrarian cycle requires a fine balance of resources. How many people use how much water, which becomes how much sewage, which can be treated to produce how much agricultural water, with what nutrient levels, piped where to support what type of growth?
What are the costs of developing the water, treating the sewage and getting the outputs to the users? How much rubbish and garbage can we recycle and use, how much can we dispose of, and what are the costs? How much land should be devoted to people and where is it? What relationship do we want between imports and locally produced goods?
All the glossy newspaper articles are so much smoke without hard, calculated logic and economics. In the Virgin Islands we have proven time and time again that we are not willing to make hard decisions. Instead we wallow down the path to disaster with the hope that some far off savior will keep us from becoming another Antigua — and ultimately Haiti.
Are we really so short on vision? Do we really want to practice survival living on the edge of a garbage dump? It does appear so.

Local spending, not the tourist dollar, brought a merrier Christmas to island retailers this year. Locals, who had not been much in evidence all year, made up for it this season.
Kathryn Peterson, owner of the Leather Shop, said her biggest surprise this season has been local spending, which made all the difference.
"Sales were spectacular and above expectations," she said.
Corrine Van Rensselaer, who owns the Color of Joy, had a "wonderful season, up from last year both in the store and the frame shop." Almost all her business is local.
Echoing this trend, Debbie Shaw, hardline manager at Kmart, said, "Sales were excellent — better than anticipated,and better than last year."
But this wasn't the case everywhere.
Many stores, especially those dependent on the tourist dollar, suffered.
The Pampered Pirate's Sarah Kemp reported sales down 15 percent from last season.
"I think with the cheaper cruises, the cruise ship clientele has changed appreciably," Kemp said. "They simply aren't spending like they used to."
Meene Sahni of Carnival Gifts at Havensight said, "Sales were 50 percent lower than a regular heavy cruise ship day."
Anatalia Turbe of the venerable La Belle Creole in Frenchtown said she didn't reap the benefits of local spending either.
Joan Henle, retail director for Pussers, said that while their St. Thomas stores didn't do well, both the St. John and British Virgin Islands outlets did quite nicely.
The larger Main Street merchants are traditionally reluctant to release sales figures but many said they were happy, overall, with their Christmas sales.
Thomas B. Brunt III, president of the St. Thomas-St. John Chamber of Commerce, said people he talked to on Christmas Eve had done well. In general, it seems most stores are doing better than last year, he said.
Brunt had a prediction: "The stores and business who will do really well are those who have invested in their businesses. Those people who have made physical improvements, invested in new inventory and who have spent time and money training their employees will reap the rewards of their investments."

Gov. Roy L. Schneider has signed six new contracts, Government House announced Thursday, Schneider's last official working day in office.
The contracts, all relating to health and human services, are for:
— Medical Services of Northwest Florida Inc. to provide registered nurses, midwives, nurse practitioners, licensed practical nurses and certified registered nurses to the Juan F. Luis Hospital on St. Croix. The one-year contract is for $2.5 million.
— William M. Karr and Associates to furnish all labor, materials and equipment to design and renovate the Queen Louise Home on St. Thomas, which was damaged by Hurricane Marilyn. The work is to be completed in 180 days for $693,132.
— Howard University Hospital to screen newborns for sickle cell disease, congenital hypothyroidism and other diseases. The one-year contract is for $33,933.
— Roy D. Jackson to audit Community Health Services at the East End Family Health Center on St. Thomas. Jackson will be paid $19,000 for one year.
— Zenon Construction Corp. to install a new perimeter fence at the Youth Rehabilitation Center on St. Croix within 60 days. The contract is for $245,540.
— Caribbean Quality Control Services Inc. to inspect the construction of the Anguilla (Figtree) sewage force main on St. Croix. The $84,380 project is to be completed within four months. The project is funded by the V.I. Public Finance Authority through $2.5 million in bond proceeds, the release noted.

The Federal Transit Administration has awarded a $161,296 grant to the Public Works Department for bus support service for St. Thomas, St. John and St. Croix, Government House has announced.
The total project costs $287,936, according to the release, which had no information on how the money will be used or divided among the islands.