Senate revisits debate over RT Park benefits
Published: June 14, 2014
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ST. CROIX - Controversy and contention were the order of the day on Friday as the 30th Legislature took testimony related to the University of the Virgin Islands Research and Technology Park.
At issue is an amendment that sought to protect the tax incentive benefits of RT Park tenants and that was offered and passed at the April 24 legislative session.
Gov. John deJongh Jr. vetoed the measure - and it has become a political hot potato, with different politicians jockeying for position to have their points of view heard.
The Senate spent hours grilling deJongh administration officials Friday afternoon and evening, while deJongh spoke out on at least one radio show Friday morning and Government House made public a letter he wrote to senators about the issue.
RT Park tenants do not pay Gross Receipts taxes, and they get substantial reductions on their corporate income tax liability. Recent V.I. attorney general opinions contend that many of the park's tenants are not eligible to receive the park's tax breaks.
The amendment that was offered April 24 by Senate President Shawn-Michael Malone attempts to fix the problem and protect the existing benefits for park tenants.
The measure was an amendment to a bill the governor originally sent to the Senate merging the Economic Development Bank with the Small Business Development Agency.
DeJongh vetoed the entire bill because of the amendment.
However, the Senate is likely to consider an override of the veto at its session on Wednesday, and senators said Friday's testimony would help them decide.
Attorney General Vincent Frazer said Friday that on July 17, 2013, the V.I. Justice Department began researching the statutes at the governor's request to determine whether a business has to be physically located within the RT Park building to qualify as an RT Park tenant.
In August, Frazer issued a confidential opinion to the governor, opining that V.I. Code requires physical presence to be an RT Park tenant, and that "virtual tenancy" is "a legal fiction." The basis for that opinion is a section of V.I. Code that indicates certain benefits are limited "for the development and expansion of business activities in one or more research and technology parks," according to Frazer.
"In this instance we read the words 'in one or more research and technology parks' as explicitly placing the beneficiary companies in the corporation's facility," Frazer said.
A series of meetings between the governor and RT Park officials began to reconcile the issue of virtual tenancies, Frazer said.
In February, the governor asked for an opinion about whether a shared common space agreement with a business that is a virtual tenant would qualify it as an actual tenant and establish the location of the revenue at the RT Park, according to Frazer.
The Attorney General's Office issued an opinion saying it would, he said.
Frazer said that as far as he knows, the RT Park "endeavoured to have executed that agreement and to ensure stability with the 15 tenants which are non-ISP/Cable TV tenants," although discussions stopped after the proposed amendment the Senate passed came up, he said.
RT Park Executive Director David Zumwalt said during his testimony that the RT Park board amended its existing agreements with 15 tenants by adding a "physically shared common space" agreement, to bring them into compliance with the attorney general's opinion.
The governor also asked for an opinion about whether Internet service providers and cable television providers would be considered knowledge-based businesses or electronic commerce businesses within the scope of pertinent sections of V.I. Code, according to Frazer.
Frazer said that in January, his office issued an opinion that Internet service providers and cable television providers are not knowledge-based businesses or electronic commerce businesses under the law.
Based on that opinion, the Internal Revenue Bureau then issued letters in April notifying the three ISP and cable TV provider tenants that it would seek to terminate their tax benefits effective Dec. 14.
"This date was chosen to provide an opportunity for these tenants, the RT Park and the executive branch to engage in developing a strategy and plan to realign the RT Park back to its core purposes while also protecting the integrity of the territory's tax incentive program," Frazer said.
The three companies affected by the attorney general's opinion - Innovative Entities, Choice Communications and Broadband V.I. - have not been offered the physical tenancy amendment to their RT Park Agreements because, in the attorney general's opinion, they are not knowledge-based businesses or e-commerce businesses, according to Zumwalt.
Zumwalt said that the three companies have Park Tenant Agreements with the RT Park. They are good faith agreements, conducted after doing due diligence, and should be protected as valid legal contracts, he said.
Senators on Friday raised a variety of questions and concerns about potential breaches of contract with the three companies.
They also argued that virtual offices are legitimate, and noted that for years, the RT Park had no physical building.
Sen. Clifford Graham said the amendment senators passed was intended to clarify the existing law.
Some senators also suggested that the opinion pertaining to Internet service providers might have more to do with trying to get them to sign on with the V.I. Next Generation Network, the government's corporation that will provide wholesale broadband middle-mile service to Internet service providers.
Sen. Craig Barshinger said he thinks there's something more going on when this kind of attention and energy goes toward looking into "an incentive program that's working."
Sen. Janette Millin Young said that the political and personal attacks over the issue had gotten out of hand.
However, a number of people at the hearing noted that posturing over the issue has left an impression of instability, which does not bode well for drawing businesses.
"I think we're well-intentioned, but at some point, we have to work this out," Millin Young said.
- Contact Joy Blackburn at 714-9145 or email email@example.com.