CHARLOTTE AMALIE — The 34th Legislature of the Virgin Islands met in regular legislative session on Tuesday at the Earle B. Ottley Legislative Hall in St. Thomas. Lawmakers considered nominations, a resolution, and bills.
The Senate first convened into Committee of the Whole to take testimony on the following bills.
Bill No. 34-0299, an act ratifying the Redevelopment Agreement by and between the Government of the Virgin Islands and CREF3 USVI Hotel Owner, Inc., a United States Virgin Islands corporation.
Wayne L. Biggs, the Chief Executive Officer of the Virgin Islands Economic Development Authority (VIEDA) delivered testimony. Biggs state that the VIEDA is in full support of ratification of the development agreement by and between the Government of the Virgin Islands and CREF3 USVI Hotel Owner, Inc. The Hotel Development Act (HDA) which is administered by the VIDEA was originally passed into law in 2011. On September 6, 2019, the 33rd Legislature of the Virgin Islands passed significant HDA amendments, understanding that it was important to the economy to the territory to return hotels and resort properties that were damaged from Hurricanes Irma and Maria in September 2017 to proper operation, as well as assist future hotel and resort development projects with financing.
The former owners of Frenchman’s Reef Marriott Resort and Morning Star Beach, DiamondRock, filed an Economic Recovery Fee HDA application with the Economic Recovery Fee (ERF) committee to impose a 2.5 percent ERF to assist with financing, reconstruction, and renovation of the resort, pursuant to Chapter 29, VI Code, Section 1312 (c) (2). This request was approved on July 9, 2020. That approval allows DiamondRock to access a 2.5 percent ERF for a 30-year period as reimbursement for a portion of the cost to reconstruct and upgrade the resort. It requires DiamondRock to submit a HDA application for consideration of 50% of its Designated Hotel Room Occupancy Tax (DHROT) to reimburse DiamondRock a portion of the cost to reconstruct and upgrade the resort for a period of 30 years. The board approved DiamondRock’s request on November 20, 2020. It was granted the use of the DHROT at 50 perccent, or 6.25 percent of room revenues to be used to reimburse a portion of the costs of the reconstruction and upgrade of said resort for a period of 30 years, or until the time the direct investment of $136,300,000.00 is liquidated, whichever is earlier.
The CREF3 purchased the shares of DiamondRock on April 30, 2022. CREF3 filed an application with the VIDEA on September 3, 2021, requesting approval to secure 50 percent of DHROT and the right to charge an ERF of 2.5%. It also sought approval to issue Hotel Development Notes in accordance with VI Code to assist with the financing of the reconstruction and renovation of the resort. The Board voted unanimously to approve CREF’s use of the DHROT at 50 percent or 6.25 percent and access a 2.50 percent ERF for a period of 30 years or until such time the direct investment of 244,940,000 is liquidated, whichever is earlier. The board approved the first draft of redevelopment Agreement on July 7, 2022. It was approved by the board on August 9, 2022. It was submitted to the Governor for review and approval on August 17, 2022.
Renee Marie Andree, legal counsel for CREF USVI Hotel Owner Inc, also delivered testimony. CREF is the owner of the Westin Resort & Spa at Frenchman’s Reef (the Westin) and the new Autograph Collection, located on the southern shore of St. Thomas, widely known as Frenchman’s Reef. The Hotel Redevelopment Act, which is administered by the Economic Development Authority, was passed in 2011 to encourage and promote the development of new hotel properties, which were previously stalled due lack of financing options in the U.S. Virgin Islands. In 2019, the HDA was overhauled to promote the tourism industry of the USVI and to provide for the planning, financing, reconstruction, renovation, and maintenance of new and existing hotels in the territory.
Pursuant to Virgin Islands Code, Chapter 29, section 1313 a (2), up to 50 percent of the revenue generated from the hotel room occupancy tax for existing hotels where at least 70 percent of the units were damaged, such as by hurricanes, can be utilized for the development, construction, and renovation of the facility. The amendment also provides for the imposition of an ERF, which can be used to finance, fund, and cover the cost incurred for renovation, reconstruction and improvement and development of hotel properties and related facilities or infrastructure. The amount of the ERF is the difference between the percentage rate of hotel room occupancy tax application at the time of the application, which is currently 12.5 percent and a percentage rate over such tax, not to exceed 7.5 percent.
Ali Elam, the managing director of Hotel Acquisitions at Fortress Investment groups stated that since acquisition of the Resort in April 2021, Fortress has invested $191.9 million into the project, with an additional $78.9 million remaining to complete construction and open the resort. The total reinvestment into Frenchman’s Reef is projected to be $428 Million. Peter Brogan, Vice President of Hotel Asset Management at Fortress Investment Group, was also present representing CREF3. Brogan stated that the resort is expected to create over 900 direct and indirect jobs annually in the US Virgin Islands and generate $1.1 billion in spending in the US Virgin Islands over the next ten years. The resort is expected to generate $182 million in government tax revenue for the US Virgin Islands over that same ten-year period.
The body also considered Bill No. 34-0289, an act amending Act No. 8474 relating to the fiscal year 2022 operating budget for the Government of the Virgin Islands to appropriate the sum of $40,000,000 to pay outstanding liabilities from the General Fund in the fiscal year ending September 30, 2022. Jennifer C. O’Neal, the Director of the Office of Management and Budget delivered testimony.
According to O’Neal’s testimony, on or about July 12, 2022, the Honorable Governor Albert Bryan submitted proposed legislation to appropriate the sum of $25,000,000 in the fiscal year ending September 30, 2022, from the General Fund to pay retroactive wages owed to employees and retirees of the Government of the Virgin Islands. Furthermore, on August 15, 2022, the Governor submitted new proposed legislation that increased the sum to $40,000,000.
Act No. 6984 established the Retroactive Wage Commission which identified employees who worked and were owed retroactive ages between Fiscal Year 1990 and Fiscal Year 2001. The project took four years to complete, and it was reported that the government owed 10,174 current and retired employees a total of $221,099,963.17. This act further provided $45 Million from the Insurance Guaranty Fund to execute the retroactive payments for all Government Employees and retirees owed. The Retroactive Wage Commission voted unanimously on August 6, 2010, to pay an equal percentage of 16.7 percent to all affected individuals. Payments totaling $38,520,503.45 were issued in October 2010 to active employees, retirees, and survivors. Act No. 4245 (amended by Act No. 8411 in Fiscal Year 2020) appropriated $10 Million from the General Fund to continue retroactive payments. The checks were mailed on July 23, 2021, and some payments were issued via direct deposit on July 22, 2021. A flat sum of $1,700 was paid to those affected instead of a percentage as was previously done. The GVI was able to pay 121 individuals their full amounts, owed at a total of $147,237.68. This reduced the number of individuals owed to 10,593.
Of the $10 Million appropriated in Act 8411, $6,876,843.69 has been paid to retirees and $319,714.40 to survivors for a total paid of $7,196,558.09. Between Act No. 6984 and Act No. 8411, a total of $45,717,061.54 has been paid to retirees, employees, and survivors. Survivor payments are currently being paid on a weekly basis from the remaining $2.8 million. The Division of Personnel has calculated the current balance owed to all individuals is $175,382,901.63. It is expected that if the proposed $40 Million is appropriated by the Legislature, the balance will be reduced to $135,382,901.63. Governor Bryan has included $25 Million for the next two fiscal years to eradicate this government debt. The Division of Personnel is also creating a portal so that individuals can see the initial amount owed to them, payment amounts, and balance owed. The website is expected to be live in nine months.
Senate President Donna Frett-Gregory voiced concern over the proposed sum, stating it may not be sufficient, saying that all owed retro payments are not equal, and voiced concern over lump sum payments as opposed to percentage payments.
The body then returned to Legislative Session to consider the following resolution, nominees, and bills.
Bill No. 34-0300, a resolution to reorganize the Thirty-Fourth Legislature of the Virgin Islands to fill a vacancy in the Majority Caucus. The resolution was voted upon favorably.
The following nominees were all voted upon unanimously:
Gerson Martinez to the V.I. Aquaculture and Mariculture Commission, Dale Brown to the Virgin Islands Conservation District, Carl Tesitor, Jr. to the Virgin Islands Conservation District, Dr. Learie Lindsay to the V.I. Board of Medical Examiners, and William DeLeone to the UVI Research and Technology Park Board of Directors.
The following bills were all voted upon favorably:
Bill No. 34-0244, an act amending title 27 Virgin Islands Code, chapter 4, section 191(a) and (d) to expand and clarify the definition of naturopathic medicine and the physical modalities used in the practice of naturopathy.
Bill No. 34-0299, an act ratifying the Redevelopment Agreement by and between the Government of the Virgin Islands and CREF3 USVI Hotel Owner, Inc., a United States Virgin Islands corporation.
Bill No. 34-0301, an act repealing section 2 of Act 8569 relating to the definition of agriculture processing plant.
Bill No. 34-0289, an act amending Act No. 8474 relating to the fiscal year 2022 operating budget for the Government of the Virgin Islands to appropriate the sum of $40,000,000 to pay outstanding liabilities from the General Fund in the fiscal year ending September 30, 2022.
All Senators were present at Tuesday’s legislative session.
