Senate OKs hike in Cruzan's subsidies

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ST. THOMAS - Despite grumbling about giving more of the territory's revenues away, senators approved an amendment to the government's agreement with Cruzan Rum that will increase the rum manufacturer's subsidy.

Currently, Cruzan gets 25 percent of the territory's cover-over on rum it produces. The measure approved at Wednesday's legislative session increases that to 46 percent.

At a hearing Friday, Cruzan officials told senators that they cannot compete with Puerto Rico, which has offered their rum producers up to 25 percent but allows the governor of the commonwealth to increase that level to 46 percent upon a finding of necessity.

When rum produced in the Virgin Islands is sold in the United States, a direct revenue stream is generated for the V.I. government through rum excise tax revenues. For every proof-gallon of Virgin Islands-produced rum exported to the U.S. mainland, the federal government collects $13.50 in excise taxes, of which $10.50 is returned to the territory. That rebate is also called the rum cover-over.

In 1999, the U.S. Congress passed legislation that temporarily increased the cover-over rate to $13.25 per proof-gallon. Since then, that temporary increase has been renewed or extended multiple times, every year or two with a package of other tax measures. The higher rate currently is expired, but Congress is expected to consider renewing the extenders again this year.

Puerto Rico receives the same types of benefits from the cover-over program as the Virgin Islands.

Under the bill the Senate approved Wednesday, the governor would be able to execute such an agreement without getting ratification from the Legislature - and without letting the public know.

Sen. Clifford Graham called Cruzan the "cash cow" of the government. He said while he does not want to give up more, the territory cannot run the risk of losing the rum producer.

"If I don't help Cruzan, I'm going to lose Cruzan," he said.

Sens. Craig Barshinger, Judi Buckely, Diane Capehart, Donald Cole, Kenneth Gittens, Graham, Alecia Hansen, Myron Jackson, Shawn-Michael Malone, Terrence Nelson, Nereida Rivera-O'Reilly, Clarence Payne III and Sammuel Sanes voted in favor. Senators Tregenza Roach and Janette Millin Young voted against.

- Contact Aldeth Lewin at 714-9111 or email

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