V.I. Legislature committee holds bill to reform Economic Development Commission program
Published: February 5, 2014
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ST. THOMAS - The Senate Committee on Economic Development, Agriculture and Planning heard two bills Tuesday to revamp the Economic Development Authority.
One bill, to rename the Government Development Bank and merge it with the Small Business Development Agency, passed through the committee and was forwarded to the Rules and Judiciary Committee.
The second bill, to rehaul the EDA's Economic Development Commission tax incentive program, was held in committee for further consideration.
The two measures were sent to the Legislature by Gov. John deJongh Jr. in December, along with several others designed to update and revise the statues governing the Economic Development Commission, Government Development Bank, Small Business Development Agency, Enterprise Zone and the Sustainable Tourism Through Arts-Based Revenue Stream Production Act.
The EDC tax benefit program, designed to attract business to the territory, originally was enacted in 1972. No comprehensive revision to the code has been done since, deJongh said in his transmittal letter to Senate President Shawn-Michael Malone. The statute must be updated to reflect changing business models, industry practices and advancements in technology, deJongh said.
The proposed amendments will update areas of the current law that are considered outdated and cumbersome and do not allow for the current competitive marketplace, according to the governor.
One measure increases the benefit periods to 20 years for EDC companies operating in the St. Thomas-St. John District and to 30 years for the St. Croix District, if the beneficiary companies are in compliance with all provisions of the law.
St. Thomas-St. John Chamber of Commerce representatives testified Tuesday, strongly supporting many of the proposed revisions to the EDC program and submitting some suggestions for additional changes to the legislation.
While the chamber supports a provision to give an EDC company an additional 10 years of benefits if the company's initial investment is more than $10 million - and an additional five years if the investment is more than $1 million - the business owners had some proposed changes.
The chamber wants to remove language that limits investments to be made by "wholly owned subsidiaries." Attorney George Dudley explained that in today's economy, the need for "creative" investments are necessary.
For example, under the proposed legislation, Dudley said, one of his clients, Wyndham, would not be eligible for EDC benefits for its timeshare resort project in Smith Bay because it is being financed by a joint venture with partners outside the Wyndham company.
Another item in the bill requires a minimum of $100,000 capital investment, with an option to reduce it if the business will provide extra employment opportunities.
The chamber suggested that factors other than employment - such as charitable giving - be taken into account in determining whether a capital investment of less than $100,000 is appropriate.
The chamber also asked the Senate to relax some of the time frames included in the legislation to give companies enough time to get necessary permits and licenses needed to start construction or whatever other capital investment may be required to open for business.
The chamber also asked for clarifications on issues of grandfathered beneficiaries and application renewals.
Government Development Bank
The second bill would change the name of the Government Development Bank to the Economic Development Bank and combine the operations of the Small Business Development Agency into the Economic Development Bank.
The two entities already share staff responsibilities and have the same governing board members.
"The proposed merger would place all of the functions and personnel under the new Economic Development Bank, thus eliminating duplications of efforts, allowing for better loan servicing, technical assistance and collection efforts. This will also allow for a single loan portfolio and thus a single credit administration system," EDA Chief Executive Officer Percival Clouden said.
The proposed legislation also would allow the bank to accept collateral on micro-credit loans to secure debt. Part of the reason the bank currently has such a large amount of delinquent loans - $7.6 million - is because the law did not allow the bank to demand collateral on its loans, Clouden said.
- Contact reporter Aldeth Lewin at 714-9111 or email email@example.com.