V.I. revenue loss through closure estimated at $60M
Published: January 19, 2012
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ST. CROIX - As the V.I. government grapples with declining government revenues, an estimated $67.5 million budget deficit and its own set of layoffs, one fear is that the repercussions of HOVENSA's closure will deepen the local recession by cutting off a large segment of government revenue from the refinery and its employees.
Preliminary projections place the lost revenue paid by HOVENSA through real property taxes and employee income taxes "at a minimum" of $60 million, Gov. John deJongh Jr. said.
"We're still working those through, but I think it's safe to say that the impact is going to be tremendous," deJongh said during a press conference Wednesday. "We're now assessing that situation."
Past projections have maintained that HOVENSA accounts for about 20 percent of the territory's gross domestic product.
DeJongh said he has asked Senate President Ronald Russell to hasten the passage of a bill that senators have told him would eliminate the need for further dismissals of government employees. About 500 government positions have been eliminated since Dec. 30, and the governor has said another 500 dismissals could be necessary this month to address the deficit.
The specifics of that bill still are largely unknown to the public, but it is scheduled to go before the Senate during a Legislative session on Friday.
The refinery's employees - 1,200 direct employees and 950 contract employees, according to HOVENSA spokesman Alex Moorhead - make up 10 percent of St. Croix's entire workforce, according to the V.I. Labor Department's most recent figures. A loss of that many workers would double the number of unemployed people on St. Croix to more than 4,400 people and raise the unemployment rate on the island to about 20 percent.
The workforce for the territory is about 50,800, and the territory's unemployment rate would increase from 8.5 percent to 13 percent, according to the most recent figures, which do not take into account the 500 government jobs lost.
DeJongh met Wednesday morning with officials from the V.I. Water and Power Authority and representatives from various departments and agencies in his Cabinet. They will be charged with assessing HOVENSA's actions and identifying what actions we can take to mitigate its impacts, the governor said.
Additional layoffs could prove debilitating for an unemployment system that already is overburdened, according to officials. Between 3,500 and 4,000 people receive unemployment benefits, said V.I. Labor Commissioner Albert Bryan Jr.
The local government is having trouble meeting its obligations, however, and is incurring about $1 million in monthly debt to the federal government to cover its costs, said V.I. Delegate to Congress Donna Christensen. That figure could jump to $2 million monthly with the newly unemployed.
The territory already is in debt to the U.S. Labor Department for almost $30 million, she said.
"We're only beginning to envision the possible repercussions for us and how wide-reaching they would be," said V.I. Delegate to Congress Donna Christensen.
Just how many former HOVENSA employees end up receiving unemployment benefits is yet to be determined. Workers will not be eligible to apply for benefits for another 90 days, after which HOVENSA will clear most of them from the payrolls, officials said.
Because of the degree of specialization and skill that many of the jobs require - and the absence of similarly high-paying jobs - the possibility exists that some of the workers will leave the territory in search of work.
The average annual gross pay for a HOVENSA employee is about $62,000, according to government figures.
DeJongh and Christensen both said they planned to explore how the refinery's existing assets could be leveraged and utilized to produce revenue and jobs.
"We need to not only look at the negative impact, but we have to also look at the opportunities," Christensen said. "They have a port. They have high-grade electrical generation turbines."
DeJongh said the immediate strategy is to help workers and families directly affected, then to speak with HOVENSA about its plans for the oil storage terminal, and then to formulate a longer-term strategy to get the economy back on track.
DeJongh said he planned to push long-stalled development projects on St. Croix to boost construction jobs in the short term, while developing a more comprehensive economic strategy.
As operating costs continue to rise for most businesses, some business owners questioned the government's stance toward the private sector.
"We have been too resistant to outside investors and to the principle of free enterprise," said Collin Hodge, owner of Massive Management Consultation and consultant to the Christiansted Restaurant and Retail Association. "I mean, new monies have to come from somewhere."
Hodge said the government needs to realize that the private sector "is the center of the economy."
- Contact Daniel Shea at 714-9127 or email email@example.com.