Businesses prepare for 'giant gap in the economy'

ST. CROIX - It is hard to imagine a sector of the local economy that will not be affected by HOVENSA shutting down its refining operations.

In such a small-scale economy, the effects of such a large-scale closure undoubtedly will be huge.

The refinery provides a significant tax base for the local government, and it supports private sector businesses.

Its oil fuels the V.I. Water and Power Authority at a reduced cost.

Its gasoline runs local cars and boats.

Its workers - on average some of the highest-paid in the territory - rent and buy homes, cars, movie tickets and family dinners at local restaurants.

HOVENSA employees' children attend local schools, both public and private.

"There are a lot of very scared people," said Honnie Edwards, owner of Calabash Real Estate. "I think that all of us need to be concerned for the tough days ahead and the impact on our businesses, our schools and the housing - which is banking, insurance, landscaping, pools. I mean, it affects everything."

A number of residents and business owners fear that the loss of HOVENSA will entrench the territory in the recession, which is only now starting to really hit the Virgin Islands.

Michael Dembeck, executive director of the St. Croix Chamber of Commerce, said HOVENSA has been the "anchor" for the economy on the island, likening it to an anchor store at a mall.

"When your anchor pulls up and leaves, it leaves a giant gap in the economy," he said.

The Chamber has obvious concerns about the supply and cost of gasoline for motorists and oil for WAPA, as well as concerns about the ramifications the shut-down will have on local businesses, Dembeck said.

Some small-business owners already seem to have given up in the face of what may lie ahead, according to Christine Hilty, the vice president of Violette's Boutique in Christiansted and former president of the Christiansted Restaurant and Retail Association.

"I've already heard of a lot of retail shops that are closing," Hilty said, clarifying that she knew of two that definitely are closing their doors. "And that's only Day One."

Teachers at St. Croix Country Day School were advised to update their resumes Wednesday. The school draws about a quarter of its students from HOVENSA families, and tuition for those students makes up about a third of the school's tuition base. Good Hope School is similarly situated, given that HOVENSA paid the tuition for many of its employees' children to attend.

"And there's going to be a lot of families that are relocating if we can't find jobs for them," Edwards said.

While much is uncertain in the immediate aftermath of HOVENSA's announcement, many people are certain of the magnitude of the announcement's impact.

"This is going to be huge," Hilty said. "It's going to affect every aspect of everyone's life."

Upon hearing the news Tuesday night from Hess Corp. Chief Executive Officer John Hess, Gov. John deJongh Jr. during a press conference Wednesday described his immediate reaction as "shock."

"Even after the terrible economic realities of these past several years, it is hard to imagine any single piece of economic news worse for this territory than that delivered by Mr. Hess," deJongh said.

Evidence of HOVENSA's presence is woven into so many aspects of life on St. Croix, that Stuart Logan, the manager at Pinnacle Services, a HOVENSA contractor, also is the president of the St. Croix Chamber of Commerce. Pinnacle Services has received its 90-day notice from HOVENSA.

"The problem, of course, for private businesses is just how integrated all businesses on the island are with the refinery," he said. That integration encompasses suppliers of lumber and concrete to professionals such as attorneys and physicians to restaurants and grocery stores.

Collin Hodge, owner of Massive Management Consultation and a consultant with the Christiansted Restaurant and Retail Association, described the news as "the most devastating economic hit" that anyone between the ages of 18 and 50 has really experienced in the territory.

"The bottom line is that HOVENSA impacts every fiber of small businesses - and there were already businesses planning on closing in the next couple months," he said.

With an anticipated increase in energy bills that already were driving many businesses into the red, the result could be devastating. The retail sector already was coming off a historically bad year, with revenues down by more than 20 percent compared with 2010.

Hotels also feel the sting of WAPA bills and the anticipated increase is a worry, said Julie Printy, the general manager of the Palms at Pelican Cove.

On a daily basis, HOVENSA does not provide much income directly to The Palms, Printy said, noting that her concern lies more with the rippling effect the refinery's closure will have.

"It's a trickle effect all the way down, and it's really quite a sad day for St. Croix," she said. "I feel that it's going to raise the price, the cost of us doing business here. What does that look like? I don't know."

Amy Land-de-Wilde, the owner of Coldwell Banker Land-de-Wilde Realty, said the rental and real estate markets also will see a hit as workers leave.

"There will probably be a large volume of vacant rental properties. People will try to sell their houses, but there may be an increase in foreclosures," she said. "I think we'll have more properties on the market."

Land-de-Wilde said government representatives and business leaders need to step in to quell fears swelling in the community.

"Right now, everybody's in a state of shock," she said. "There's a sort of fear factor right now that is existing that has to settle down."

Officials from the territory's Chambers of Commerce are meeting with the governor today.

St. Thomas Chamber of Commerce President Richard Berry said that while HOVENSA's closing is "a catastrophic blow" to the territory's economy, leaders must come together.

"We as a business community - and a community as a whole - have been put in a position that we've never been put in before and it's going to take every ounce of intelligence and negotiating skills and everything else to get us out of this," Berry said. "We really need to put our heads together and figure out a way forward. We have a lot of challenges before us."

- Contact Daniel Shea at 714-9127 or email dshea@dailynews.vi.

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