EDC Applicants in Limbo While Board Lacks Quorum

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IGY CEO Tom Mukamal, left, and VP of Corporate Services Charles Irons testify before the EDC in December. (File photo)
IGY CEO Tom Mukamal, left, and VP of Corporate Services Charles Irons testify before the EDC in December. (File photo)

Three businesses, including Yacht Haven Hotel, are waiting indefinitely for the final verdict on their application for Economic Development Commission benefits after four EDC board members’ terms automatically expired at the end of the Mapp administration.

“We don’t have a quorum to have a meeting until new members are appointed by the governor,” said Wayne Biggs, Jr., assistant chief executive officer of the Economic Development Authority. “So we’re just waiting on that appointment and we’ll take the decisions to the board once we get some initial members.

EDC companies enjoy as much as 90 percent in corporate and income tax cuts, as well as a full exemption on gross receipts, business property and excise taxes. In return, they must maintain a certain number of employees and make specified charitable cash and in-kind contributions to the community.

Chairman Jose Penn, Vice Chairman Philip Payne and Secretary Haldane Davies are still serving on the board until they find replacements, according to Biggs. Four new members are needed to complete the board, but only one more is required to make quorum and resume board meetings.

“I know the governor has been working on that,” said Biggs. “We’ve gotten word that he’s working on appointing board members, but you would have to check with his staff.”

Government House Communications Director Richard Motta, Jr. said on Thursday that no new appointments for EDA board positions have come across his desk.

The appointments will still need to go through the Senate confirmation process, Biggs pointed out. Biggs said he could not provide an estimated time frame on when new board members would be installed.

Some businesses with pending applications have expressed that EDC benefits are critical to their launch, including Yacht Haven Hotel, the first major hotel construction in the territory in 38 years. Tom Mukamal, chief executive officer of Island Global Yachting, said in December it is critical to the hotel project moving forward. The other requirement, Mukamal said, was the $10 million loan from the Virgin Islands government promised during the Mapp administration.

Island Global Yachting owns YHG Hotel and sister company Yacht Haven USVI, which also needs board approval for various modifications in its EDC certificate.

In its application, YHG Hotel committed to a minimum capital investment of $30 million and promised to employ at least 30 full-time employees within one year of EDC certifications, plus 20 to 50 part-time and seasonal workers. YHG Hotel employees would also receive health insurance, with YHG paying 60 percent of their premiums, and $30,000 in life insurance. With the EDC certificate indefinitely delayed, the hotel’s capital investment and employment commitment also are on hold.

Rock City Brewing, a St. Thomas company seeking to manufacture and market large-scale lager beer, is also waiting for EDC approval before jump-starting operations. In exchange for the EDC benefits, Rocky City Brewing commits to employing a minimum of 10 full-time employees and will contribute to local charities in the amount of $50,000 a year, which will increase by $2,500 every year.

Brothers Joe and John Brugos were expecting a decision from the agency during its Jan. 14 decision meeting, but are now waiting indefinitely. Without the EDC benefits, the Brugoses cannot make moves to acquire a 50,000-square-foot space that will house a 180-barrel brewing system capable of producing 6,000 gallons of product a day. They project a production rate of 50,000 cases of beer on the first year of operation, and up to 330,000 cases a year in five years.

Thriving Charity Advocates, a Tennessee-based company, also awaits a decision from the EDC board. The company helps child-sponsorship nonprofits acquire time in popular concerts to present their causes and garner donations for the children they support. Thriving Charity Advocates commits to making a minimum capital investment of $100,000 and employing five full-time employees within one year of the EDC certification. It will also contribute $60,000 annually to local charities, which includes $20,000 toward educational initiatives.

Revenue from EDC businesses formed part of the Mapp administration’s 2017 plan to reduce the territory’s deficit by $837 million over five years. Mapp’s plan included reducing expenses to the tune of $121 million and increasing revenues by about $716 million through new taxes, economic development through capital expenses, and EDC expansion, according to then-Finance Commissioner Valdamier Collens.

At the time, Collens estimated about $255 million of the $837 million would come from EDC revenues, based on a goal of five new EDC beneficiaries per year, each contributing $5 million per year, starting in Fiscal Year 2018.

The number of companies in the EDC program, however, showed a decline between 2011 and 2018: in 2011, EDC program listed 98 companies, then 84 in 2012. In August 2016, the number dropped to 66 tax benefit recipients, including about 15 that are long-time V.I. companies such as hotels, paving companies and shopping malls. As of Dec. 31 2018, the VIEDA website listed 61 tax benefit recipients.

Biggs said all other areas of the EDA are functioning normally and Mapp-appointed EDA Chief Executive Officer Kamal Latham is still at the helm of the agency. Decisions on new applications for EDC benefits, however, as well as loans amounting to more than $25,000 require board approval.

Original Source: https://stjohnsource.com/2019/01/27/edc-applicants-in-limbo-while-board-lacks-quorum/