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ISLAND RESOURCES FOUNDATION ~JATER ISLAND CASE HISTORY IN VIRGIN ISLAND DEVELOPMENT Excerpted From: STUDY OF WATER ISLAND ECONOMIC DEVELOPMENT OPTIONS Prepared By Island Resources Foundation For Virgin Islands Department of Commerce March 1980 Occasional Paper #39 RED HOOK CENTER BOX 33. ST. THOMAS, U.S. VIRGIN ISLANDS 00802 • (809) 775-3225 -1- DEVELOPMENTAL HISTORY THE SETTING Water Island, situated just off the south coast and with- in the greater harbor area of St. Thomas, is the fourth largest of the u.S. Virgin Islands, with a total of 491.5 square acres. Volcanic in ori- gin, it has shallow soils of the Cramer grav- elly clay loam variety, a dense, semi-arid vegetation and a rather steeply sloping ter- rain. A primary ridge line 200 to 290 feet above sea level runs down the center of the Island in a north-south direction. Among the Island's outstanding natural fea- tures are rugged, steep cliffs along the south- ern and southeastern shorelines, some 10 sand or sand and gravel beaches, a number of small bays and peninsulas and four salt ponds with associated mangrove systems. There is limit- ed variety of wildlife: a colony of Bahama Pin-Tail ducks inhabits the Limestone Bay Salt Pond; there are 20 to 30 Red Bi~l Tropic Bird nests on the south shore cliffs; import- ed Bob-White quail roam the island, and large green iguana can be found in abundance. Be- cause of the absence of the mongoose, it is possible that many species rendered extinct by that predator on the other main islands may survive on Water Island. Water Island allegedly received its name from the fresh water once found in association with its several salt ponds. A 1719 map by the Dutchman Gerald van Keulen shows a "fresh water. pond" at -a location just north of Car- oline Point. It is likely that the existence of this pond drew the first European settlers to Water Island, for the same map depicts the house of one Albert de Ruyter in close prox- imity to it. Today that pond is dry, and a stone wall at its edge has been filled up with debris. There is a possibility that this fresh water source, and any others like it through- out the island, might once again be tapped. -2 - The potential of the island's ground water resources has never been explored. PRE-HISTORIC PERIOD Based on the limited evidence available, human occupancy of Water Island seems to have begun around the time of Christ. To date, archaeologists have found five Indian sites, all of which are located at sheltered bays along the western coastline (see Map No. 1 below). Pot shards, stone tools and other evidence recovered from very cursory surveys and excavations at these sites indicate small scale, casual occupation by itinerant fisher- folk and shell gatherers, rather than exten- sive i permanent settlement by agricultural- ists. Negroid skeletons have been found at two of these sites 2 , but there is debate over whether they were intrusive or not. None of the five archaeological sites have been nominated to the National Register of Historic Places. However, the acting terri- torial archaeologist points out that three sites have not yet been systematically ex- vacated, and that the Elephant Bay site may be of considerable importance because of the early Saladoid pottery found there during a recent exploratory dig. 3 HISTORICAL PERIOD TO 19S0 Information respecting human occupation and use of Water Island during the colonial period ~s diffi- cult to come by. A num- ber of legends and tales have grown up around Water Island, as with many other offshore is- lands and cays. There are stories of pirates and buried treasure; accounts of grand man- sions, luxuriant cane fields and ownership by a Hohenzollern prince. None of these, how- ever, could be substantiated from the records on hand, and most appear to be more fiction than fact. S The availability of easily accessible fresh water in sheltered bays may have attracted £/.-ve. .{.ncUan .cae}:, .-j ijiC\'i!l~ " '.-, ( 1- . :";0 - ':Ii - * * <0 MAP NO, 1 AL SITE ARCHAEOLOGIC . L -:'SITE HISTORICA. SALT POND 66 -4- seafarers to the island well in advance of the actual settlement of St. Thomas, but no evidence is available to support this conjec- ture. The Island was, however, used by early settlers as a source of food. One of the first undertakings of the Danish colonizers who arrived on St. Thomas in 1672 was to stock Water Island with cattle and goats in order to insure themselves of an accessible supply of meat. This stock belonged to the Danish West India Company, which not only used it to feed its St. Thomas colonists, but also, in the early settlement years, marketed it to ships and neighboring colonies in exchange for eXEortable commodities like sugar and to- bacco. By 1680 Water Island was reported to be well pop- ulated with livestock, and, in consequence, much frequented by ships and foraging exped- itions from the nascent settlement at nearby Charlotte Amalie. Colonists also fished in the salt ponds, drugging the fish with a mix- ture of bark from the local stinkwood tree (Piscid- ia carthagenensis Jacq.) and lime mortar.7 The more well-to-do made outings to Water Is- land for both practical and recreational pur- poses. In 1686, for example, Vice-Governor Christopher Heins led a group of men and wo- men on a hunting and fishing party to the is- land. Using a seine, they caught plenty of fish, but brought back little game, even though in the words of one participant, there were "many wild bucks and goats as well as some wild cows, bulls and calves, land7 in the bays there are manv pelicans, flamIngoes, ducks and other birds. ,,"'8 Although the Danish West India Company must have stationed some men on Water Island to prevent poaching, the earliest record of hu- man habitation that could be found was the van Keulen 1719 map of St. Thomas Harbor, which depicts the house of Albert de Ruyter on a small hill overlooking Ruyter's Bay. By 1730, according to a map of that date, de Ruyter was operating a plantation at the north- ern part of the island. tiveo:toc.R. Atbe.Jd de. Ruy:te.JL --5- By the end of the eighteenth century there were two plantations on Water Island: Car- olina~ Lyst, comprising the northern portion and Providence, comprising the southern part. According to title records found at the St. Thomas Recorder of Deeds Office, the two plan- tations were under separate ownership for the first sixty years or so of the nineteenth cen- tury.+ In the 1860's, they were consolidated under the single ownership of Joseph Daniel*, a wealthy local merchant. Water Island re- mained in the possession of the Daniel family until 1905, when they sold it to agents of the East Asiatic Company. The records are silent about what crops, if any, were cultivated on the two plantations. Nor are there any population statisti~s. There is evidence that Peter Tamaryn**, a free negro * Title records clearly refute the legend that Daniel received Water Island from the British because of his services to them during their occupation on St. Thom- as beuveen 1807 and 1815. Daniel purchased Providence estate in 1850 and during the 1860' s bought up par- cels of Carolina's Lyst from members of the Woods family. ** Peter Tamaryn is perhaps the most intriguing of all the owners of Water Island. He was the son of ~~ngo Tamaryn, the free negro commander of the Free Negro Corps formed by the Danes in 1721 to help them police against slave unrest. Mingo and his Corps helped quell the St. John slave rebellion of 1733-34, and in later years were employed to track down and sub- due bands of runaway and rebel slaves. Peter took command of the Corps when his father died in 1765. See Kay Larsen, Dansk Vestindinien 1666-1917 (Copenhagen, 1927) p. 87. It is not known how Peter acquired title to his estate. Conceivably he or his father came in to ownership by virtue of their loyal service to the Danish Crown. + See Table 1. TAaLE I! WATER ISLAND OWNERSHIP HISTORY TO 1944 DATE PROVIDENCE ESTATE CAROLINA'S LYST ESTATE 1803 Peter Tamaryn Owner? Feb. 1807 Alexander Kerr? Auctioned to Archibald Kerr after death of Peter Tamaryn March 1819 ? A. Kerr deeds to Baron Lucas de Bretton April 1828 ? Auctioned to Christian D. Eckhardt after death of Lucas de Bretton Nov. 1828 M.E. Duranto deeds to Miss Elizabeth Brathwaite Jan. 1829 - C.D. Eckhardt deeds to A. Helm & Owen Bro wn March 1829 - A. Helm deeds his share to Owen Brown May 1831 E. Brathwaite deeds to Joseph - Couperism June 1831 - o. Brown deeds to Cosmo Frankcovich August 1838 J. Couperism deeds to Jean - L. Garcia Sept. 1839 - Auctioned to James Hazzel, Jr. after death of C. Frankcovich Dec. 1841 - J. Hazzel, Jr. deeds to Benjamin Borton July 1843 - 1/2 auctioned to John Quirk after death 0 f B. Borton. 1/2 auctioned to John William Woods, Susan Woods, Elizabeth Jane Woods, Isabella Woods June 1850 J.L. Garcia deeds to Joseph - Daniel May 1851 - J. Quirk deeds 1/2 to Raimond Certain october 1859 - E.J. (Woods) Lagois deeds her share to Joseph Danie 1 Dec. 1859 - Susan (Woods) Sawyer deeds her share to Joseph Daniel March 1860 - R. certain deeds 1/2 to Eugene Pannet -6- - 7- TABLE I. (CONT.) DATE PROVI DENCE ESTATE CAROLINA'S LYST ESTATE April 1860 - widow of John W. Woods deeds her share to Joseph Daniel July 1865 - Widow of E. Pannet deeds 1/2 to A. Roste Nov. 1865 - T. Abbott (husband of Isabella Woods?) deeds his share to Joseph Daniel March 1866 - A. Rostend deeds 1/2 to Joseph Daniel Oct. 1899 Joseph Daniels deeds to his heirs: S. (Daniel) Huntington, Christopher Daniel, Joseph Daniel, Charles Daniel, F. (Daniel) Stiven Jan. 1905 Daniel heirs deed to J.P. Thorsen Feb. 1905 J.P. Thorsen deeds to N.C.E. Hansen May 1905 N.C.E. Hansen deeds to Capt. H.N. Andersen March 1911 Capt. H.N. Andersen deeds to East Asiatic Co., Ltd. June 1944 U.S. Government (Dept. of Defense) acquires from East Asiatic Co. through condemnation SOURCE: st. Thomas Matriculs (tax lists) 1787-1900; "Water Island" file Recorder of Deeds Office, St. Thomas. nd - 8- who owned Carolina's Lyst~ had, at the time of his death in 1806, twenty-nine slaves and an undisclosed number of cattle on that estate. The Daniels are alsb reported to have raised goats and cattle, although they are said to have valued the island more as a summer re- treat and hunting preserve than as an econom- ic investment. 9 Little physical evidence of the plantation per- iod has survived. Ruins of the Providence es- tate buildings, probably constructed by the Daniel family, can be found at Providence Point. Except for an old cistern, which is still in- tact, they have been incorporated into a pri- vate residence. Ruins associated with the de Ruyter/Carolina Lyst estate on the northern end of the island have been found by an Island Re- sources Foundation survey team. These latter ruins are of historical significance because of their association with the Tamaryns, one of oldest and most prominent free black families in the Virgin Islands. The East Asiatic Company, a Danish joint-stock company which purchased Water Island through its agents in 1905 and in its own name in 1911, planned to spend large sums to develop it into a major coaling and bunkering facility. Behind this ambitious development program lay two mo- tives: 1) to capitalize on the anticipated in- crease in St. Thomas commerce in consequence of the opening of the Panama Canal; 2) to capital- ize on a practice, originated under the Daniel's, whereby the Russian, French and German Navies leased the island as a base of operations for winter maneuvers and gunnery practice. 10 Al- though in 1905 the Company sent out a team of engineers to design extensive new facilities, for reasons that are unc1ear 11 nothing came of the scheme. World War I and the subsequent sale of the Dan- ish West Indies to the United States in 1917 put to rest the Company's plans for Water Is- land, although it did retain ownership until 1944, when the U.S. Government acquired it for $10,000.00 through condemnation proceedings.12 * Title records in the St. Thomas Recorder of Deeds office show that in 1806 Peter Tamaryn owned Carolina's Lyst; how- ever, tax records in the Danish arChives indicate that he owned Providence. It is possible that he may have owned both estates, and, thus, the whole of Water Island. According to the Danish matricu1s, Tamaryn had 15 acres ;n l'YrrnT;c:;nnc: l1nr1pr (,,111t-i,,~t-ion ::Jt- t-he t.ime of his death. -9- The U.S. Government seized Water Island for the explicit purpose of establishing a coastal de- fence installation there. Title was vested with the Department of Defense, which immediat- ely set to work constructing a large army base on the southern part of the island known as Fort Segarra. Some fifty-three structures, in- cluding barracks, gun emplacements, watch towers, underground bunkers and other military facilities soon appeared, as did an infrastructure of docks, roads, water, sewage and power systems.* The total cost of this massive development effort was offically put at $1,583,000.00,13 although local gossip placed it closer to $3,000,000.00+ 4 Buildings and infrastructure facilities con- structed by the Army still standing by 1953 are shown in Map No.2. When World War II ended, construction was abrupt- ly halted and the defensive garrison was replac- ed by a unit of the Army!s Chemical Warfare Division, which used the island to conduct se- cret experiments with poison gasses for several years. After the Chemical Warfare Divison abandoned the Island in 1950, the Army turned it over to the Department of the Interior by revocable per- mi t for five years. In December 1951 the term of the permit was made indefinite, but it re- mained subject to revocation by the Army at any time. The Department of the Interior, in its turn, as- signed the permit to the St. Thomas Development Authority, an instrumentality of the territor- ial government, in the hopes that that body could negotiate a long-term lease with a pros- pective developer. It was at this point, in 1951, that Walter and Floride Phillips, a New York couple looking for a retirement hom~ appear- ed upon the scene. WATER ISLAND, INC. 1951-1965 The Phillipses had heard about the avail- ability of Water Island through Isidor Paiewonski, a St. Thomas businessman. After making an on- site inspection in March 1951, they joined forces *For a detailed description of improvements made by the Anny, see page 15 below. FofLt SegaJULa. WaLteA and Flo~de Phi££ip~ -4 ~- S AIRPOFiT } r:> / / , PROVIDENCE ZI, FLAMINGO POINT MAP NO.2. ARMY FACILITIES IN 1952 // // / // 47, ///// // /" // DOCKS /// // SANDY // / // RUYTER // BAY -- <::nIIDrj;:· E AMALI~J~i",~ uU' C H A R L~}!.V'':iL;~OCOOO~ I /~O \ il\nl~\ \ ~'fU 1 I, . __ ..... ~- , .1F"iF1~~~~f\\\~~~~~3fln, ,lnru 1\", '" 'I' _---. ~ " A", // AS '.j ••.••• / TH 0 M ru. / . ST. .. ,' / (I", 'J / ..-' -- / . ( ~ ~ BANANA POINT HARBOR ~ \-. ~ POI NT Buildin" Numh~r 1\. 29 DEseRl PTlON Loc:.-tr-d on Rainbow Point: M:tin Building or "Club BuildiT}.&· ;~, ti' ;62, 33. } Buildings which Can be converlt·d • I Into rooms 30 Emplo)'e("~ Quarters and \Vodcshr<r 27 28 37. 38 B 41. 42. 43, 46 39 '0 45 47 C 2. 3, '. 8. 9. 10, ( 11. 13, 15. 22 ) 14 51, 52 53 16 17 21 2~ 24 25 48. 49 Chlorinator Outdoor Movie Theatre Booths Gun Emplacements Loca.ted on Providence Point: Buildinf:5 which Can 'be convcrtec into rooms Salt \Vater Cistern Salt \Vater Pump House Gun Emplacement Dock Located on Fbmingo Point: Buildings which can b~ con'VC'rtrd into rooms Subleased for residential purpostt: Unc!erground Concrete Fort Steel Observation 'Tower Locatec! In other areas: Buildings whir:h can be con·· .. ~rtt~ into rooms Base end station \.ele,·ated~ Electric PC_~I'" Pl.::nl Sa!t \V.;'lt~r ?uMP Hou!;c Main Dock \Vater Ccnch,.....,cnf Concret~ F'!s~r"\'oir Salt \V1.ler Cickrn Undergroufld CO;lcret"e IgJoos Due to Jack of spac~. {hE numbers of indtr;du:i buildings intended to be converted into r(tor.a ~~~ Ilot shown on rhe map but the groups ~rC' ;ndic~r~' by A. Band C. MAP 0 F 'w ATE R I S LAN 0 AND ST. T H 'J;vi ASH ARB 0 R ~ SCALE or 1ot1(.(9 t:::=:E~~F=' :-::::","':"";'::--l====l o \ MACA~A!A r\l,M'3 =======., GRAVEL ROADS \1/8 T r:;' R T ~ I 8 N n T N r. . nj;:j;:j;:RTt\Ir:: rTRrlllllR (1953,)p.8. , f-1 <:) -11- with two brothers from New York - Raymond and Edward Bill* - to form a local corporation called Water Island, Inc., which signed a lease with the St. Thomas Development Authority on August 1, 1951. Copies of the first lease are not locally avail- able, and therefore have not bee~ examined. The Department of Interior has stated: 15 This lease was for an initial term of 35 years, with an option for the lessee to have an additional 25 years for a total of 60 years. The lease was draft- ed to accommodate the Water Island, Inc. development plan for the Island. This plan had two phases - short term and long term. The short term phase con- templated the expenditure of $200,000 to rehabilitate and convert existing dilapidated Army barracks into a resort hotel with not less than 50 rooms and related facilities. It was anticipat- ed that title to or full control over Water Island would eventually be ac- quired by the Development Authority and that, thereafter, the occupancy by lessee would be firm and no longer be subject to revocation by the Army. When that event occurred the lessee could then be expected to launch into its long range plan involving substantially increased investment for further hotel and residential development and con- struction. The initial $200,000 was considered to be high risk capital be- cause of the right of revocation by the Army. After that right was extinguish- ed, it was felt that the term of the lease would be readily mortgagable to provide the money for the long range plan. * There were three other corporate officers: Dr. Roy A. Anduze and }flY. and :Mrs. Harry Loucks, al1 residents of St. Thomas. -12- According to an account given b16h'alter Phillips in 1956, the terms of the lease were that the Army should retain own- ership and give the developer a forty year (sic?) lease at a rental of $3,000.00 a year. In return, the lease- holder had to agree to spend $200,000 on improvements to the island and, with- in five years, provide fifty rooms of hotel space - the general idea being that such a development would contri- bute to the Virgin Islands tourist trade and provide employment for local labor. Although less than pleased with the terms of the lease, the Phillipses signed it "just to get things going". Once it had been signed, they iw~ediately turned their attention not only to having it changed, but to having the island transferred from the jurisdiction of the Army to the Department of Interior. 17 The Phillipses had two main probl'ems wi th their lease. In the first place they recognized that the Army's right of revocation would hamper even their short-term plans. Secondly, they feared that eventual transfer of the Island to the Virgin Islands Government might also be detri- mental to their development scheme. As Walter Phillips explained to the Department of Inter- ior in 1972: 18 It was felt that a lease from the federal government would be stronger and result in greater development of Water Island .... We believed people would be more inclined to invest in subleases and develop the Island if the deal was from the U.S. govern- ment. We wanted to get Water Island removed from the vagaries and change- ability of local politics. The Phillipses, assisted by Governor Morris de Castro and members of the St. Thomas Develop- ment Authority, spent the better part of the next twelve months lobbying to have the Army transfer Water Island to the Department of -13- Interior. On July 11, 1952 President Truman signed Public Law 511 (82nd. Congress) author- izing the transfer. On November 3, 1952 the General Services Administration delegated to Interior the authority to lease the property. On December 10, 1952 Interior executed a new lease with Water Island, Inc. The provisions of the 1952' lrease need not con- cern us here. The developmental framework which the lease mandates is, however, relevant, for it has largely determined the developmental process on Water Island during the past three decades. Like its predecessor, the 1952 lease was ex- plicitly intended to promote the Virgin Islands' economy. After affirming that the Island had been transferred from the Army to the Interior Department "so that it might be developed in such a manner as to contribute effectively to the economy of the Virgin Islands", the lease goes on to specify that "development of the area as a tourist resort appears to be the most effective use to l",hich it may be put". Section 1 is even more explicit on the nature of the preferred development. "The leased pro- pe rty and improvements, It its ta tes, "shall be developed into a resort area." Yet, al though the lease seemingly restricts development to the tourist sector, it offers an extremely broad definition of what constitutes a "resort area", to wi t: Comprising dwelling and recreational facilities and ancillary service fac- ilities and parts thereof may be de- voted to residences, whether private or cooperative or otherwise, agricul- ture, horticulture, the breeding and raising of livestock and poultry and other purposes. Moreover, Section 7 allo'ws sub-lessees to en- gage in unspecified "commercial, revenue-pro- ducing purposes" providing the approval of the f1.e1l old de.ve1.opme.n.t -14- Secretary of Interior is first obtained. The latitude thus allowed is so great that Mr. J. Robert "Bud" Bishop, the current leasehold- er, has stated that he believes he could estab- lish light industries, such as watch manufac- turing, so long as the tourists had access to the facility. Despite the stated objective of creating a tour- ist resort complex on Water Island, the only tourist facility actually required by the lease was a fifty room hotel, which Water Island, Inc. agreed to have operational "through conversion of presently existing buildings or otherwise" by January 1, 1958. No investment or capital improvement level was established, although Section 4 obligated Water Island, Inc. to have a minimum paid in capital of $200,000.00 with- in ninety days from January 1, 1953. Once the matter of the lease had been resolved to its satisfaction, Water Island, Inc. turned its attention to Phase I of its development strategy - the establishment of a 50 room hotel resort. At this point a major difference of opinion arose between the Phillipses and their partners, the Bills, over the most appropriate development strategy. The Bills wanted to raise a large amount of investment capital in order to build an elaborate resort complex; whereas the Phillipses preferred a low-ke~ informal and simple operation, with a view to improving the existing facilities "on a sort of pay-as-you- go basis".19 The disagreement was resolved when the Phillipses bought out the Bills for $25,000.00. They then launched a public stock issue to raise $269,000.00 needed to complete Phase I of their development program. Water Island, Inc.'s hotel development program was based on converting the facilities left be- hind by the Army into a medium-size hotel oper- ation that would accommodate one hundred guests. The 1953 stock offer described these facilities as follows: 20 There are extensive improvements on Water Island which were built by the -15- United States Army during World War II . There are 33 single s tori ed buildings with concrete foundations, concrete floors and concrete block Halls, most of which are 22'8" in width and of varying lengths ranging up to 16 8 ' 8" . Th ere is a w ate r s up - ply system, consisting of a water catchment area of 90,000 square feet of concrete and transite, with a cov- ered concrete reservoir of 250,000 gallon capacity and water distribu- tion mains; a power plant with three diesel-operated generators with total capacity of 45,000 Hatts and electri- cal distribution lines; a sewer system; a salt water system for flushing toi- lets. There are about 7 1/2 miles of roads, partly macadam and the remain- der gravel. There are two docks and a telephone cable to the mainland of St. Thomas. Reputedly, the estimated market value of the en- tire installation was only $60,000.00 1n 1952. 21 The Phillipses arrived in September 1953 to over- see the work of remodelling. After reactivating the Army's water, sewer and electric systems, they concentrated on converting a cluster of buildings on the Rainbow Point promontory into hotel rooms, restaurant, bar, kitchen and other facilities. The development program effected consisted of converting the largest building (168'8" x 22'8 11 ) into a "Club House" containing a ki tchen, din- bui1..cUVl.9 C.OVl.VUJ.J"cOVl. ing room, lounge, lobby, bar, office and ter- races for outdoor dining and dancing. Several nearby barracks buildings, measuring 96'8" x 22 1 8" were remodelled, so that each contained eight hotel rooms. Several other smaller struc- tures in the vicinity were converted into staff quarters, workrooms, storehouses and a laundry. The Water Island Hotel officially opened for business on January 1, 1954. By that time thirty hotel rooms and two guest cottages, capable of hoteX accommodating fifty to sixty guests were avail- able for use. However, whereas significant -16 - progress had been m~de during 1953 with respect to hotel development, little was accomplished in the years that followed. In 1958, when the lease required that the fifty hotel rooms had to be completed, Water Island Hotel only had 31 rooms and 2 guest cottages, according to the TRAVEL AGENTS HANDBOOK issued by the Virgin Islands Department of Tourism and Trade for that year. In 1959, twelve newly con- verted efficiency apartment~ under separate ownership,* were added to the hotel's operation, but these were the only new additions made to the hotel between 1954 and 1965. 22** By 1954 then, hotel development by Water Island had virtually come to a halt, a fact underscored by figures which show that between 1956 and 1965 only about $4,000 was spent on building rem~~­ eling, compared to $121,035 in prior years. * The Dvel ve efficiency apartments added in 1959 actually belonged to the Flamingo Bay Corporation, established by George and Richard Freeman. (George Freeman was a Director of Water ISland, Inc. fTOm 1958 through 1974.) In 1957 the Freeman's acquired a sub-lease for four acres containing four unimproved buildings for $21,475 ($20,600 as full paYlTIent for possessory interest and $875 as rent from 1957 to 1992). They Ivere authoriz- ed. by their sub-lease with Water Island, Inc. to oper- ate their own hotel, bar and restaurant. The Free- man's invested about $125,000 to convert DvO of their four barracks into efficiency apartments, and they signed a management contract with Water Island, Inc. whereby the latter agreed to manage the apart- ments and provide services in exchange for 40 percent of the profit. xx During 1965 1Vater ISland, Inc. spent $178,779 on marina development in Flamingo Bay. A channel was opened up betlveen Flamingo Bay and the Lagoon. The Bay and the Lagoon were dredged and two buildings were constructed, one as a dining room, bar, kitchen and the other as a maintenance shop for cars and boats. F WrM.l1go Bay -17- One major reason that the hotel failed to expand after 1953 was the Phillipses' dedication to mov- ing ahead with Phase II of their development scheme - residential development and construc- tion. They viewed the attraction of permanent settlers to their island home as far more "chal- lenging" and desirable than the operation of a hotel. Certainly by 1956 they saw long-term residents as their primary objective. "We needed the hotel," explained Mrs. Phillips in 1956, "so that the pro- spective settlers could have someplace to stay while they picked out their site and built their home." And Walter Phillips explained at the same time that with respect to the hotel their ultim- ate goal was to have facilities for no more than one hundred guests. 24 According to the Comptroller's 1972 Audit Report, between 1952 and 1966 Water Island, Inc. sold 121 sub-leases, comprising 298.02 acres for a total financial consideration of $403,835 and total an- nual rent of $3,075. The history of these sub- leases is documented in Tablerr below. The acre- age involved ranged from 165 to .50 acres, al- though the vast majority (101) were about one acre plots. The bulk of the sub-leases were executed between 1956 and 1961 when 246.25 acres were sold to seventy persons. The sub-lessees or "cottagers" acquired their lots for an "initial payment", which ranged from be- tween $2,500. to $3,000. per unimproved acre in the 1950' s to about $3,500. in the 1960' s. They also paid a nominal annual rent, usually about $25.00, for the duration of their lease. Lots with old Army buildings on them went for an "initial payment" of about $5,000. per acre. It is not clear exactly what the "initial pay- ments" were made for. Article 2 of the sub- leases states that these monies constitute full payment "for the possessory interest of the cot- tager". However, with respect to local tax sub- sidies, Walter Phillips has also taken the posi- tion that initial payments were not for a real estate transaction, but were prepayments of the cost of furnishing hotel services, were therefore lLebide.~ de.ve1..opme.Vl;t i~a.1. payme.ntI.:, -18 - TABLE II' \"IATER I SLAND SUB-LEASES 1954-1966 , . NO. OF SUB- YEAR LEASES 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 3 8 10 15 9 12 12 12 6 10 9 10 4 NO. OF TOTAL AVER. COST ACRES JI.MOUNT PER ACRE LEASED RECEIVED OF LAND 4 18,5001 10.45 35,6001 175.51 53,500 18 61,9001 8.5 22,335 17.5 44,8001 13 40,500 12.75 37,500 6 9 17,5001 31,5001 31,900 2,628 3,4462 3,115 2,941 3,5002 3,378 9 30,5001 . 3,5002 3.5 12,0001 3,429 NOTES 1. For two acres of land, each with one remodeled building. The other two acres were sold in con- sideration for architectural services. 1. Includes sale of 3.7 acres with 3 buildings, 2 remodeled for $16,000 2. Calculated on sale of 6.75 unimoro ed acres for $19,600. 1. Includes one sale for 165 acres. 2. Calculated on sale of 10.5 acres for $25,900. 1. Includes sale of 4 acres ~ith 4 unimrroved buildin~s for $20,000. 2. Calculated on sale of 14 ncreS for $41,900. 1. Excludes undisclosed sum received for 4.5 acres. 2. Calculated on 13 acres for 544,800 1. Includes sale of one acre for special considerations. 2. Calculated on 5 acres for $17,500. 1. Excludes one sale for 1600 sq. ft. 1. Includes sale of 2 acres for special consideration. 2. Calcualted on 7 acres for $28,000. 1. Includes $5,150 paid to W.I. Hotel and Beach Club, Inc. SouJl.c.e.: U.S. ComplJwlie.Jt o~ the. VilLgiH 1-6,/!.anclo, Aud-i;:t Re.pold No. 356-72-99 (7972), Exiubd B. -19- part of the hotel operation and consequently were eligible for local tax subsidies.* The sub-leases were sold to individuals, almost all of whom intended them for residential use. Four of the sub-leases had buildings on them that had been remodeled by Water Island, Inc. Five others contained unimproved buildings. The vast majority of the lots were vacant, and many were left undeveloped by the sub-lessees. In 1972 (when the first figures became avail- able) 62 of 121 sub-leased parcels were still vacant. Others were improved into residences or apartment units. In 1972 there were 58 homes, 4 apartment buildings (with a total of 32 rooms) and 1 duplex. In 1972 only 25 of the sub-lessees were permanent residents. The largest sub-lease, comprising about 156.5 acres (as surveyed by the Department of the Interior in March 1978) in the northeastern part of the island, was executed with Clarence Doh~ny on July 1, 1956. Two years later this sub-lease was assigned to Warren H. Corning, who in turn assigned it to the Sprat Bay Club, Inc. on May 2, 1960. Sprat Bay Club, Inc. was formed as an exclusive residential housing pro- ject which sold sub-leases as shares to its mem- bers. By 1972 thirty-five families owned shares approximating 80 acres. The remaining 80 acres of land had been set aside as open space, a natural area (40 acres around Sprat Point) roads, beaches and other common use facilities. In 1972 only four owners had built residenc~s, the remainder were undeveloped and vacant. * TI1e U.S. Comptroller's office has taken exception to the fact that V. I. tax subsidies have been allowed for the "initial payments" on the grounds that these cannot be construed as part of the hotel operation. Walter Phillips has contested that opinion and has refused to repay the subsidies. As of 1980, the issue remains un- resolved, and is currently before the courts. SpJta:t Bay -20- Phillips justified his preference for permanent settlers on the following grounds: 25 It was felt that persons living here the year round or for extended stays would provide a much more stable and dependable type of business than tran- sient tourists, who would be here for only a few days. This type of custom- er would tap an entirely different market than the transient hotel guest. Furthermore, since they would give a substantial investment, their interest would tend to be permanent. Thus, if the sublessees paid for the construc- tion of the houses, this would permii. a much greater development than would be possible from the sources of the Hotel alone. The construction of these houses provided employment to large numbers of workers and considerable business to suppliers of materials. The persons occupying them year round or for varying periods not only pro- vided business for the Hotel but gave employment to various types of workers, and business to local merchants supply- ing food, supplies, furniture, taxi- cabs and services. But one of the great advantages so far as the local economy is concerned, is that they pay their income taxes here, which stay in the Treasury of the Virgin Islands. Considerable controversy has arisen over whether the residential development program initiated by Water Island, Inc. after 1954 was in conformance with the development objectives of the lease. In 1972 the U.S. Comptroller ajgued that Water Island was being developed principally as a res- idential area and not as a tourist resort, as required, and therefore questioned whether the lease had been complied with and whether such develonment was in the best interests of the Virgin· ISlands. 26 Walter Phillips defended his emphasis on resi- den tia 1 deve lopmen t by poin tir.f, out tha this original scheme, accepted by Governor Morris -21- de Castro, the St. Thomas Development Authority and subsequently the Department of the Interior, explicitly called for the establishment of a "cottage" type resort which would involve hotel rooms, as well as privately owned apartments and residential units. This type of develop- ment was allowed and explicitly protected by the 1952 lease. The sub-leases, he claimed, provided for the structures built on them to be part of the resort operation and the sub-leases were entitled to hotel services. 27 It is beyond the scope of this report to enter into the legal arguments surrounding this mat- ter. It is clear, however, that in terms of development Water Island, Inc. de-emphasized hotel operations in the strict sense and,focus- ed on the expansion of residential units through- out the island. Whether these residential units were actually part of the hotel operation is open to question. Certainly the fragmentary evidence available suggests that relatively few of the sub-lessees actually made their private residences available to hotel guests. On December 3, 1965 Water Island, Inc., with the approval of the Department of Interior,' sold its Master Lease with all its assets, rights and obligations to the Water Isle Hotel and Beach Club, Inc. The sale price was $645,160, accord- ing to Water Inc.'s Annual Report for 1965. During the fifteen years it held the lease, Water Island, Inc. had made a substantial contribution to the development of Water Island. Between 1952 and 1965 it had spent a total of $465,064 on improvements, most of which went to remodel- ing the old army buildings as part of the hotel. Employment opportunities for thirty-five to sixty- five persons had been created. 28 A base of services, including water, sewers, electricity, telephone, garbage disposal, mail distribution, roads and ferry transportation, had been esta- blished. While overall profits were not as sub- stantial as either the developer or Interior may have wished, they were nonetheless suffi- cient to keep the Corporation in business. The net worth of the Corporation itself grew from $106,990 in 1952 to $700,646 in 1965. Table III -22- summarizes salient financial information for Water Island, Inc. between 1956-1965. The in- creased corporate assets for these years were due to equipment and furnishing acquisitions, rather than capital construction which had bas- ically been completed by 1955. TABLE III: SELECTED FINANCIAL DATA, WATER ISLAND, INC. 1956-65. GROSS INCOME- HOTEL YEAR ROOMS 1956 42,805 1957 54,280 1958 55,775 1959 70,347 1960 67,684 1961 102,643 1962 113,201 1963 80,705 1964 83,574 1965 93,086 GROSS INCOME- SUB LEASES N/A 65,095 31,535 51,809 47,425 35,376 17,451 44,075 24,578 37,408 GROSS INCOME- APTS. -0- -0- -0- 10,701 10,503 15,065 9,712 10,082 21,377 19,464 TOTAL GROSS RECEIPTS 71 ,962 122,643 104,104 138,396 145,078 160,842 105,170 135,029, 120,113 160,318 NET ANNUAL PROFIT BEFORE NET Tft,XES ASSETS 7 ,072 288 , 740 44,717 290,742 17,151 251,938 37,102 364,147 31,198 400,092 71 ,665 498,436 830 483,223 26,426 511,224 11,628 527,482 53,622 729,032 Source: Water Island, Inc. Annual Reports. Annual Reports for the years 1952-1954 could not be 1 oca ted. The most obvious developmental legacy under Water Island, Inc. was the spread of private residences and the settlement of some twenty families throughout the island. Residential expansion was heaviest along the ridgeline be- tween the underground fort and catchment hill, -23- where there was already a high concentration of old Army buildings. But, by the 1960's the res- idential units also began to spread northward along the central ridgeline. Several roads were opened up to the northern end of the island, but only four houses had been built in that sector. WATER ISLE HOTEL & BEACH CLUB, INC. 1966-1980 Water Island under The advent of Water Isle Hotel and Beach Club (hereafter WIHBC) marked a radical denarture from the development philo- sophy and pattern of Walter and Floride Phillips. The Phillipses had come to Water Island seek- ing a retirement home, not an investment. In order to obtain a favorable lease to their own island in the sun they had to obligate them- selves to develop it as a tourist resort. Once they had gotten a medium sized hotel operation- al - the minimal development required by their lease - they concentrated on establishing a residential community, a goal more in keeping with their personal interest in Water Island. Under the Phillipses, development, whether ho- tel or residential, proceeded at a casual, care- fully modula ted pace. I1After all,11 Wal ter Phillips once observed, I1the ori&"inal idea be- hind this was to take it easy."Z::! Edward J. McCardle, President and guiding spir- it of WIHBC, was another kettle of fish alto- gether. A high-powered, well-capitalized, stateside businessman and developer, owner of the highly successful Pheasant Run Lodge in Illinois, he viewed Water Island as a prime in- vestment opportunity by which he could capital- ize on the 1960's tourist boom in the Virgin Islands. Ends dictate means. Whereas the Phillipses em- phasized residential development as the basis of a cohesive, relaxed community life style, McCardle stressed the hotel and expanded fac- ilities for transient tourists as the engine of his profits. McCardle's concept of a re- sort complex, which harkened back to that of the Bills, contrasted sharply with that of the n.ew pWQ,6ophy E. ]. Mc.Ccuul1e. -24- Phillipses. l11Ve are planning a riviera on the Caribbean," he informed one Illinois newspaper. "When our construction is complete," he contin- ued, "we will have the largest, most luxurious resort in the islands." McCardle's overall develoument plan called for an investment of $2,000,000 to create three multi-storied hotels capable of housing 800 guests, restaurants, 300 Mediterranean style villas, a shopping center, private yacht and tennis clubs, a boat harbor and marina. 30 McCardle initially focussed on expanding the existing hotel, which was renamed the Water Island Colony Club. Between 1966 and 1968 WIHBC spent about $2,000,000 on construction of four large hotel buildings (three of which were three stories high), all of which were clustered around the old hotel complex on Rain- bow Point. The Flamingo Bay marina was com- pleted and a deep water dock erected in the Bay just below the Hotel. A number of private vil- las were also constructed in ·the vicinity of the hotel overlooking the lagoon behind Flam- ingo Bay. Water Island Colony Club officially opened for business in 1967 with sixty-three rooms in op- eration and more under construction. By 1970, one further building had been added and the Hotel offered 110 rooms, three cottages (with a total of eight bedrooms) and 22 villas (38 bedrooms), making it one of the largest hotels in the Virgin Islands at that time. But as with so many other developers in the 1960's, McCardle's reach had exceeded his grasp. Whereas, he had projected a total investment of $2,000,000 for his entire project, the first phase alone had cost approximately $2,600,000 by 1970. Thereafter, investments fell off markedly and no new facilities were added. Moreover, hotel business did not live up to ex- pectations. Gross receipts soared to $1,313,190 in 1968, but the amount steadily declined in subsequent years, sinking to a low of $170,721 in 1977. Between 1966 and 1978 the resort hotel. e.xpalt6..lo 11 £aJtg e. no tel. e.c.ol1oni-c. ptwb£e.m6 -25- operation only made a net profit in three years (1969-1971), Corporate assets, which stood at $2,694,091 in 1971, plunged to $1,884,560 in 1976. Financial data for WIHBC between 1965 and 1978 is summarized in Table IV. Reviewer ratings of the Hotel were not favor- able. For example, the 1969-70 version of FIELDINGS GUIDE TO THE CARIBBEAN, praised the new ambiance, but its reviewer concluded: "Good potential; hasn't quite jelled yet." The 1973-74 FIELDINGS found the hotel lacking in nearly every respect: the grounds were dirty, the staff surly, service poor and the entire package grossly overpriced. "Something must be done," stated the reviewer, "to correct the massive operational shambles that plague the facility." Meanwhile, McCardle was doing little to pro- mote further residential development on Water Island. Between 1965 and 1978 only three new sub-leases, totaling 2.25 acres were sold, for total initial payments of $48,000, plus total annual rent of $300. In the same period, while 24 new villas had been constructed, just 10 were sold to private individuals, only one of whom was a permanent resident. It should be noted, however, that since 1972 the number of homes has grown from 58 to 73, and the number of permanent year round resident cottagers from about 50 to 100. The overall resident popul- ation has increased steadily as well, to an estimated annual average of 170 to 250 persons, depending on the season. McCardle's economic problems were compounded by social and political troubles. Exclusiv- ist and discriminatory attitudes, policies and actions by WIHBC from 1965 onward enraged many Virgin ISlanders, who began to question a federal lease which reserved a substantial land mass for the exclusive benefit of a white enclave community. In 1972 a citizens commit- tee wrote to President Nixon urging that Water Island be turned over to the Virgin Islands Government for living and recreational space. These sentiments were echoed in a letter from po 0 JL f1.£Lti n.g.6 -26- TABLE IV: SELECTED FINANCIAL DATA - WATER ISLE HOTEL AND BEACH CLUB, INC. 1966-1978 TOTAL TOTAL REPAIRS PROPERTY GROSS TOTAL AND NET AND EQUIP. TOTAL YEAR RECEI PTS INCOME PAYROLL MAItHEN. PROFIT VALUE ASSETS 1966 125,323 140,247 49,611 9,259 -35,031 N/A 1,208,297 1967 237,314 -77,357 67,194 47,411 -123,777 N/A 1,786,461 1968 1,313,190 477 , 639 255,353 128,550 -53,000 1,878,283 2,066,261 1969 1,244,467 510 ,928 215,724 66,911 + 698 2,233,084 2,444,342 1970 1,076,944 433,104 174,723 54,497 +30,897 1,930,353 2,614,855 1971 1,138,860 569,375 191,320 75,199 +83,166 1,930,353 2,694,091 1972 not avail. N/A N/A N/A N/A N/A N/A 1973 1,028,262 321,286 277 ,983 137,988 -51,923 1,749,809 2,512,675 1974 289,775 118,969 69,784 50,762 -47,573 1,633,944 2,228,170 1975 245,458 97,219 61,357 71,632 -37,273 2,513,036 2,021,567 1976 314,905 109,411 76,545 50,461 -16,509 2,522,516 1,884,560 1977 170,721 -243,830 N/A 42,408 -148,436 2,286,384 2,189,617 1978 183,593 -3,779 N/A N/A -3,779 N/A N/A Source: Water Isle Hotel and Beach Club, Inc. Annual Reports - 27- Senator Percival H. Reese to Secretary Rogers C. Morton, and a Bill was introduced in the V.I. Legislature petitioning the federal gov- ernment to transfer Water Island to the Vir- gin Island Government at the expiration of the twenty-year lease in December 1972. In 1972, the V.I. Senate established a Water Island Commission to investigate all aspects of the Water Island lease "so that the people of the Virgin Islands, through duly elected representatives, may have available factual information for the formulation of policy and an official position with regard to the renew- al of the Water Island lease and other matters pertaining to the future use and development of Water Island." After examining the evidence and conducting public hearings the Commission concluded that the lease appeared to be valid and had been complied with by the two holders of the Master Lease. However, it lamented the highly favor- able terms of the lease, and questioned wheth- er by granting exclusive and poorly defined developmental rights to a solitary developer, the federal government had acted in the best interests of the people of the Virgin Islands. 3l Despite public outcry in the Virgin Islands and a 1972 Audit Report by the U.S. Comptrol- ler questioning whether heavy emphasis on res- idential development was in accordance with the intention of the lease and in the best in- terest of both the territorial and federal governments, the Department of the Interior renewed the Master Lease without any changes, for a period of twenty years, starting January 1, 1973. Resolution of the lease question did nothing to improve the hotel's financial picture, which went from bad to worse. National recession and local socio-racial unrest which helped to slow down the Virgin Islands tourism econ- omy in the mid-19 70' s, combined 1vi th mismanage- ment, and poor marketing to accelerate the ho- tel's decline. Starting in 1974, the hotel operated on an irregular basis, and a number ho;teJ.. -6hu;tdowYl. -28- of employees were dropped from the payroll, which fell from $277,983 in 1973 to a mere $69,784 the following year. By 1977 problems had intensified to such an extent that the hotel actually shut down operations, and suf- fered a net operating loss of $148,436. The hotel reopened in December 1977 with a new name - Sugar Bird and under the new management of Be ach Management Corporation, a De law are group headed by J. Robert "Bud" Bishop, which had acquired a fifty percent interest in WIHBC on a management basis. In December 1978 Water Island Hotel and Beach Club, Inc. was liquidated into its parent or- ganization, Water Island Hotel and Beach Club, Ltd. On August 2, 1979 the Department of the Interior approved the assignment of the Master Lease from Water Island Hotel and Beach Club, Inc. to Water Island Hotel and Beach Club, Ltd. Meanwhile, on August 4, 1978 Water Island Hotel and Beach Club, Inc. had sold its interest in the Master Lease to Beach Management Corpora- tion, subject to approval by the Department of Interior. The sale price was $2,183,000 - a figure which has since risen to $2,883,000 because of complications in closing the tran- saction. Beach Management Corporation asked Interior not only to approve the assignment of the Lease, but to renew it for twenty years (later chang- ed to forty years to facilitate financing), plus implement over $600,000 in improvements. Gov- ernor Juan Luis wrote to Interior's Office of the Te'rri tOTies on June 16, 1978, in support of a twenty year extension.' On February 15, 1979 Interior approved the assignment of the lease to Beach Management Corporation. Accordingly, a proposed lease was worked out along lines suggested by Beach Man- agement Corporation. It provided for a higher Vl.W maYl.age.me.nt '-29- mInImum rent, guarantees that the hotel would be open year arou~d and would be kept in good repair, construction of new sewer lines and a sewage treatment plant, compliance with the local free beach law, and releasing the feder- al government from any obligation to purchase hotel improvements at the termination of the Ie as e. Interior forwarded the proposed lease to the General Services Administration, which de- clined to approve it on the grounds that a high- er level of rent was called for and that the question of compensation for the possessory In- terests should, first be resolved. While Interior and the GSA exchanged correspon- dence, memorandums and legal opinions on the matter, the Virgin Islands Government wrote to Interior that it wanted to be party to the re- negotiation process, and, through the concern of Rep. Phillip Burton, the U.S. Congress also became involved. In consequence of widening interest in the future of Water Island the fed- eral government asked the Government of the Virgin Islands to carry out an extensive study of the legal and economic issues involved in transferring ownership to the Virgin Islands Government. Further federal action would be deferred until the results of the study are known. Most of the discussion surrounding Water Island during the past decade has concentrated on le- . gal (lease) or political (status) issues. In the last two years attention has centered al- most exclusively on the legal obligations of the federal government under Section 10 of the Lease and how these might be renegotiated. Little serious consideration has thus far been devoted to how Water Island can best be dev~l­ oped in the socio-economic interests of the Virgin Islands, which, after all, was the ra- tionale of tne original lease. Nothing in the public discussion has encourag- ed Virgin Islanders to view Water Island as a baslc development resource. During the 1972 lease renewal controversy there was a spontan- eous expression of local concern for the future of Water Island. An ad hoc Citizens Committee pJLOpO!.;, e.d .te.a.oe. c.hange..o wide.nzng inte.JLe..ot - 30- proposed that the island be used to expand ttliving and recreational space tt for Virgin Is- landers. Others suggested locating low income housing projects there. 32 The only develop- ment recommendation made by the Water Island Commission was that the Virgin Islands Govern- ment should designate any Sprat Bay Club, Inc. property it might acquire tlperpetually as open space (greenbelts 4 outdoor recreation, wildlife preserves, etcJt3~ All of these development alternatives were predicated on the assumption that title would pass from the federal to the territorial government. When that transfer did not occur and when Interior renewed the lease for an additional twenty years, local public opinio~ fell silent. For its part Interior has never deviated from the developmental strategy it prescribed in the 1952 lease (itself a compromise with the Phil- lipses). In 1972 Interior renewed the lease without any alterations despite the fact that many Virgin Islanders openly doubted whether the hotel/residential pattern squared with lo- cal socio-economic interests, despite the con- clusion of the Water Island Commission tlthcit the impact which the Department of the Inter- ior expected would be made on the economy of the Virgin Islands has not in fact been realiz- ed~34 and despite the U.S. Comptroller's Report questioning the economic desirability .of future. residential development. Nor does it appear that the alternative development options sug- gested by Virgin Islanders at the time were given serious consideration. This predilection toward the status quo has conditioned Interior's position with respect to the lease renewal requested in 1978 by Beach Management Corporation. Interior's position vis a vis future development was summed up by ~Brewster Chapman, Jr., former Assistant Sol- icitor for Territorial Affairs, who wrote to Ruth van Cleve on July 5, 1978: 35 It seems, ln realistically analyzing the problems created by Section 10 of the lease, that the current uses, im- provements and operations on Water loc.al. dc.veiopme.ltt -<-de.CLO - 31- Island will always be substantially as they are today. Consequently, in its negotiations with Beach Management Corporation, Interior did nothing to modify the vague, "tourist resort" develop- ment program outlined in the original 1952 lease, and required only that the hotel be open year round and properly maintained. In- asmuch as Beach Management Corporation appar- ently submitted no proposed long-term develop- ment plan as part of its request for an exten- sion, and is currently taking the position that it cannot formulate such a plan until the issue of the lease is resolved and short-term financ- ing obtained, Interior's precipita"tB support for the proposed new lease can hardly be consider- ed a commitment to insuring that future devel- opment will promote the socio-economic well- being of the Virgin Islands. Meanwhile, development of any sort on Water Is- land has come to a virtual standstill. Within the last decade not one new residential lot has been sold. Given the uncertain status of the lease prospective homeowners hesitate to build and find it impossible to obtain mort- gages at any terms. The hotel continues to operate at a net loss (in 1979 it has an over- all occupancy rate of 46 percent), and its plans to upgrade existing faciltiies are stymied by the lengthy lease renegotiation process. March 1980 -32- FOOTNOTES 1. Bullen, Ripley P. tlCeramic Periods of St. Thomas and St. John Islands, Virgin Islands," The William L. Bryant Foundation American Studies, Report No. 4 (1962), pp. 34-35. 2. Buxton, L.H.D., J.C. Trevor and Alvarez H. Julien, tlSkeletal Remains from the Virgin Islands;" MAN, Vol. XXXVIII, No. 47, pp. 47-51; Hatt, Gudmund, "On Pottery from the Virgin Islands," Ibid, pp. 52- 53; Ste"hlard, T.D., "Negro Skeletal Remains from Indian Sites in the West Indies," MAN, Vo1. XXXIX, No .. 52, pp. 48- 53. - 3. Personal communication from Emily Lundberg, Office of Archaeological Services~ V.I. Department of Con- servation and Cultural Affairs. The five archaeolo- gical sites, all of which are located along the western shoreline, are potential obstacles to fu- ture development, since they are subject to federal laws governing cultural resources on federal propert- ies, including: Antiquities Act of 1906 (P.L. 59-209; 34 Stat. 225; 16 U.S.C. 431-433); the National Histor- ic Preservation Act of 1966 (P.L. 89-665); 80 Stat. 915; 16 U.S.C. 470); the National Environmental Pol- icy Act of 1969 (P.L. 91-190); Stat. 852; 42 U.S.C. 4321-4327); Executive Order 11593 of May 13, 1971 (36 FR 8921, 16 U.S.C. 470) and the Archaeological and Historic Preservation Act of 1974 (P.L. 93-291; 88 Stat. 174; 16 U.S.C. 469). It should be pointed out that to date none of these laws have ever been enforced on Water Island. 4. The only historical account of Water Island is Phillips, Walter H. "History of Water Island," The Daily Ne"hls (St. Thomas), August 1, 1965, p. 67-68, which is gener- ally informative and reliable. 5. Most of the legends are pandered in Cochran, Ha~ilton, These Are The Virgin Islands (1937), p. 5, 44-49; see also Phillips, ibid. and J.C. Work, A Short History of the Virgin Isla~(N.D.), p. 29. 6. Westergaard, Waldemar, The Danish West Indies under Company Rule (1671-1754) (1917), p. 43. 7. Br~nsted, Johannes, (ed.), Vore Gamle Tropekolonier, vo1. I (1966), p. 134. = 33- 8. Ibjd. 9. Ibjd.; Richard Thruelsen, "An Island of Their Own," ~Saturday Evening Post, December 1, 1956. 10. Ibid.; U.S. Consular Despatches, St. Thomas, Payne toP i e r c e, 4 Feb. 1 9 0 4; 5 June 19 0 5; Th e Bull e t in (St. Thomas) 11 Feb., 14 Feb., 7 March, 29 May 1905. The American consular representative in St. Thomas shared a prevailing opinion that the East Asiatic Company (reportedly controlled by Germany's Hamburg- American Steamship Line) was actually fronting for the German Government, which was surreptitiously endeavoring to establish a German commercial and naval base in St. Thomas. If this assumption was correct, the Company may have acquired Water Island in order to.guarantee its long-term availability for the exclusive use of the German Navy. 11. It is likely that the scheme was given up because the East Asiatic Company acquired the West India Company Ltd. around the same time, and decided to concentrate on expanding and upgrading the docking and coaling facilities at Long Bay. 12. Although the East Asiatic Company, through its agent the West India Company, signed a stipulation that the condemnation was a "fri endly taking" and waving all rights of appeal, it may well be that the Com- pany still has a claim to Water Island on the grounds that the waiver was signed under duress and that own- ership was protected by Treaty rights. Mr. Klav Thomsen, current Director of the West Indian Company, has suggested an interest in investigating this matter. 13. U.S. Comptroller of the Virgin Islands, Audit Report No. 356-72-99 "Report of Lessees' Compliance with the Pro vis ion s 0 f Lea s e for Vi' ate r I sIan d", (19 7 2 ) p. 8. It is not clear where the Comptroller obtained this figure, or whether it relfects both material and labor costs. 14. Thruelsen, op. cit. 15. U.S. Department of Interior Files (hereafter DOIF), C. Brewster Chapman, Jr., to Herman Marcuse, Depart- ment of Justice, May 29, 1979. 16. Thruelsen, op. cit. -34- 17. Ibid. 18. DOIF, Walter Phillips to Thomas F. Dunn, 15 August 1972. 19. Thruelsen, op. cit. 20. Offering Circular, New Issue, of Water Island, Inc. January 13, 1953, p. 4. 21. U.S. Comptroller of the Virgin Islands, op. cit., p. 8. 22. The 1963 Fodor's GUIDE TO THE CARIBBEAN stated that Water Island Hotel offered 31 hotel rooms, 12 ef- ficiencies and 2 cottages. 23. Information taken from the Annual Reports of Water I s land, Inc. 24. Thrue1sen, op. cit. 25. DOIF, Walter Phillips to Thomas F. Dunn, 15 August, 1972. 26. U.S. Comptroller of the Virgin Islands, op. cit. 21. nOIF, Walter Phillips to Thomas F. Dunn, 15 August, 1972. 28. Water Island file, Industrial Incentive Division, V.I. Department of Commerce. 29. Thruelsen, op. cit. 30. Item in the Helen Auble Collection, Island Resources Founda tion, Inc. 31. Report of the Water Island Commission, September 22, 1972. 32. Information from the records of the Water Island Commission in possession of Mr. Alton Adams, Jr., Chairman of the Commission. 33. Report of the Water Island Commission, September 22, 1972, p. 12. 34. Ibid, p. 7. 35. DOIF, Memorandum from C. Brewster Chapman, Jr. to Director, Office of Territorial Affairs, July 5, 1978. -35- W.I. CHRONOLOGY 1944 TO PRESENT June 19, 1944 U.S. Department of Defense acquires Water Island from the East Asiatic Company/West Indian Company for $10,000 through condemnation. 1945-1950 Army constructs major military base on Water Island. 1950 Army vacates Water Island and turns it over to the Department of the In- terior by revocable permit. Depart- ment of Interior assigns permit to St. Thomas Development Authority. August 1, 1951 St. Thomas Development Authority leases Water Island for thirty-five years to Water Island, Inc., for de- velopment of a tourist resort. July 11, 1952 President Truman signed Public Law 511 (82nd. Cong.) authorizing trans- fer of Water Island from the Depart- ment of Defense to the Department of the Interior. November 3, 1952 General Services Administration dele- gates authority to the Department of Interior to lease Water Island. December 10, 1952 Water Island, Inc. signs new twenty year lease (with 20 year renewal op- tion) with the Department of the In- terior. January 1, 1954 Water Island Hotel officially opens for bus ines s . January 26, 1954 First major sub-lease executed by Water Island Inc. July 1, 1956 Largest single sub-lease executed by Clarence Doheny for 156.5 acres in the northern part of the island. 1957 Flamingo Bay Corporation established to operate twelve efficiency apart- ments as part of the hotel. -36- October 10, 1958 Clarence Doheny assigns his sub-lease to Warren H. Corning. May 2, 1960 Warren H. Corning sells his sub-lease to the Sprat Bay Club, Inc. for devel- opment as a residential housing com- munity. 1962 Water Island Civic Association estab- lished to represent the interests of residential property owners. 1965 Water Island, Inc. opens up a channel between Flamingo Bay and the Lagoon, and starts development of a marina complex. December 3, 1965 Water Island, Inc. sells the Master Lease to the Water Island Hotel and Beach Club, Inc. headed by Edward J. McCardle. 1966 Ambitious new hotel expansion program initiated by Water Island Hotel and Beach Club, Inc. 1967 Water Island Colony Club hotel officially opened for business with sixty-three rooms and more under construction. March 21, 1972 Bill No. 5382 introduced in the V.I. Senate by Alexander Moorhead, Jr. call- ing for a Legislative petition to the Secretary of Interior requesting the transfer of Water Island to the Virgin Islands Government. April 1972 Comptroller of the Virgin Islands is- sues Audit Report questioning whether Water Island was being developed in the best interests of the federal and ter- ritorial governments. June 10, 1972 Citizen's Committee in St. Thomas pet- itions President Nixon to turn over Water Island to t~e Virgin Islands Government for use as recreational and living space. -37- 1972 V.I. Legislature establishes a Water Island Commission to study the lease and other matters relating to the de- velopment of Water Island. January 1, 1973 Department of Interior renews Master Lease with Water Island Hotel and Beach Club, Inc. until December 1992. March 12, 1973 V.I. Delegate Ron DeLugo introduces Bill H.R. 5461 in the u.s. Congress authorizing the Department of the Interior to acquire some of the out- standing leasehold interests in Water Island and transfer the island to the Virgin Islands Government. 1977 Water Island Colony Club shuts down operation. Reopens in December as the Sugar Bird Hotel under the manage- ment of Beach Management Corporation headed by J. Robert Bishop. May 10, 1978 Beach Managem~nt Corporation requests the Department of the Interior to ex- tend the Master Lease for twenty years to facilitate its development plans. August 4, 1978 Water Island Hotel and Beach Club, Inc. assigns the Master Lease to Beach Man- agement Corporation under a contract- purchase agreement. February 15, 1979 Department of the Interior approves as- signment of the Master Lease from Water Island Hotel and Beach Club, Inc. to Beach Management Corporation.