Governor to give State of the Territory address against backdrop of difficult economic times

ST. THOMAS - As Gov. John deJongh Jr. gives his seventh State of the Territory address tonight, he will discuss the reality of the territory's troubled economy while giving hope for a better future.

The territory has been struggling to make ends meet since the recession hit in 2008. Since then, the government has whittled away its reserves, barely able to pay its employees and unable to pay refunds to taxpayers without borrowing millions to do so.

Last year, deJongh accused the 29th Legislature of being against all his proposals but not coming up with their own creative ideas to solve the territory's problems.

It is likely that with a new group of senators in place for the 30th Legislature, the governor will extend an olive branch to the institution and ask for cooperation and a renewed spirit of unity among the branches of government.

The V.I. government may be facing a budget shortfall for Fiscal Year 2013. Office of Management Budget Director Debra Gottlieb said Friday that the government's revenue projections are currently being revised, and she does not know exactly what the budget shortfall may be.

However, a shortfall is likely, because the 29th Legislature did not approve a number of the governor's budget balancing proposals submitted with his budget plan in June. Gottlieb said she is hopeful some proposals will be picked up by members of the 30th Legislature.

Last year, the Senate tabled four of the governor's proposals, including changing the government's health insurance program from a 65/35 employer-employee split to a 60/40 split. Another measure would have saved about $1.9 million a year by eliminating the night-shift payroll differential, which gives higher pay rates to government employees who work at night.

DeJongh also proposed a measure to eliminate the government's obligation to pay half of the malpractice insurance premiums for private practice physicians who also do work for the government, along with another piece of enabling legislation to force semi-autonomous and autonomous agencies to pick up the cost of health insurance for their retirees.

Instead, the 29th Legislature simply added vague language to the main budget bill allowing the government to use up to $14 million in local funds - except from the St. John and St. Croix Capital Improvement Funds and the V.I. Water and Power Authority Generating and Infrastructure Fund - for operating costs.

When he signed the bill into law, deJongh said the territory's "precarious financial conditions" mandates that the government "access the monies only to the extent that we are able to identify appropriate funds to be tapped for such support."

The FY 2013 budget does include funding to restore the 8 percent pay cuts in July. The V.I. government implemented those cuts in 2011.

Government employees will be listening closely tonight to see whether the governor plans to stick with the plan to restore the cuts or ask the employees to make additional sacrifices.

In the last two years, the government has terminated almost all of its temporary and per diem workers and let hundreds of part-time and full-time workers go in an effort to reduce the government's bi-weekly payroll obligation.

The displaced workers, coupled with the 8 percent salary cuts, have had a ripple effect in the larger territorial economy, leaving less money to circulate among local businesses.

Businesses also have suffered with exorbitant utility bills, an increase of the Gross Receipts Tax from 4 percent to 5 percent and the increase in unemployment insurance tax.

The government's revenues already were dangerously low, but when HOVENSA officials announced last January that the oil refinery was shutting down production, it created an even bigger concern.

DeJongh estimated that losing HOVENSA will cost the government approximately $100 million a year in lost tax revenue.

The decision to shut down refining operations led to negotiations between the company and the V.I. government, because that kind of change in operations requires revising HOVENSA's 1998 concession agreement with the government, which runs through the end of 2022.

In March, deJongh announced that the V.I. government and HOVENSA had worked out an interim agreement under which HOVENSA would supply WAPA with discounted fuel through the end of 2012; would keep open its truck-loading rack, where local gas station owners can obtain their fuel; and would be allowed to operate for now as an oil storage terminal.

In December, the interim agreement was extended until Feb. 28; however, WAPA reached an agreement in October with Trafigura AG for it to provide fuel oil to the utility.

The territory's residents will be looking to deJongh tonight to see if any new agreements or plans for the refinery will be announced.

Last year, deJongh made an announcement in his State of the Territory speech about a plan to invest in a sports complex at the site of the former Paul E. Joseph stadium on St. Croix.

An agreement, which required Senate approval, was signed in February and called for the government to put up $30 million in taxpayer money.

The remaining $25 million for the project was to have come from private-sector partners.

The Daily News found that some of the off-island contractors the government intended to partner with had misrepresented credentials and connections; amassed a history of financial troubles, foreclosures and failures that cast doubt on their ability to provide funds for the project; and had earned the distrust of some stateside governments.

The day the story was published, deJongh asked the Senate to table the proposal indefinitely.

DeJongh has expressed his commitment to rebuilding the stadium, but to date has not yet released a new request for proposals.

St. Croix residents in particular will be looking to the governor tonight to see what will become of the sports complex project.

In past years, deJongh has used the annual speech to make announcements about shake-ups in his cabinet.

Earlier this month, V.I. Police Commissioner Henry White Jr. resigned his post after only one year on the job. He told The Daily News it was impossible to implement reforms in the department because of a culture of favoritism, nepotism and politicism.

Last week, former St. Thomas Police Chief Rodney Querrard Sr. came out of retirement and was hired as assistant police commissioner and then immediately was named acting police commissioner.

With crime rates still unbearably high, residents will be eager to hear what deJongh has planned for the future of law enforcement in the territory.

The governor also likely will address education, tourism, energy costs, the government's retirement system, economic development, and other important issues facing the territory.

The governor will address the V.I. Legislature in formal session at 7 p.m. tonight at the Ottley Legislative Hall on St. Thomas.

- Contact reporter Aldeth Lewin at 714-9111 or email alewin@dailynews.vi.

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