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1 1 VIRGIN ISLANDS ECONOMIC DEVELOPMENT AUTHORITY 2 TESTIMONY BY DWAYNE A. BENJAMIN, SR. 3 COMMITTEE OF THE WHOLE 4 36th LEGISLATURE OF THE VIRGIN ISLANDS 5 ST. THOMAS, VIRGIN ISLANDS 6 7 Good afternoon, Senator Novelle E. Francis, Jr., Chairman, members of the Committee on 8 Budget, Appropriations and Finance, Legislative staff, the Virgin Islands Economic Development 9 Authority (“USVIEDA” or “the Authority”) team, and the viewing and listening audience. I am 10 Dwayne A. Benjamin, Assistant Chief Executive Officer of the Virgin Islands Economic 11 Development Authority. I bring greetings on behalf of Wayne L. Biggs, Jr., Chief Executive Officer 12 of the Virgin Islands Economic Development Authority, who is out of Territory on official business 13 presenting along with other colleagues at the International Economic Development Council 14 Leadership Summit and is unable to attend today. I am joined today by USVIEDA team member, 15 Kirk Callwood, Associate Managing Director, Economic Development. It is indeed my pleasure to 16 give support of the proposed amendments to 29 V.I.C. § 1313 of the Hotel Development and 17 Finance Program Act (“HDA”). 18 The Virgin Islands Hotel Development program is designed to assist in the development of hotels, 19 resorts and related hotel facilities to increase opportunities in tourism enterprises in the U.S. Virgin 20 Islands so as to facilitate and to accelerate opportunity for employment in these enterprises, 21 2 particularly of unemployed and underemployed residents of the jurisdiction in which the hotel 22 investment is to be made. 23 By way of background, the Hotel Development and Finance Program Act (“HDA”) was enacted in 24 2011, and subsequently amended in 2018 (Act 8030), and thereafter in 2019 (Act 8056) to include 25 amongst other amendments the Economic Recovery Fee (“ERF”) Incentives. The program allows 26 for the use of future gains in hotel room occupancy taxes and casino taxes to assist in the 27 development areas which would not happen solely through private investment in the reasonably 28 foreseeable future. Monies generated from the Hotel Development and Finance Program are 29 deposited into a separate hotel development and finance trust fund which is established for each 30 approved project. Funds allocated and deposited into the hotel development and finance trust 31 fund are from the hotel and casino taxes generated from the approved project. 32 The Hotel Development Program was created to encourage and promote investment in and 33 development of hotels and related facilities in the U.S. Virgin Islands to include reconstruction and 34 renovation of existing hotel facilities. This program is administered through the Virgin Islands 35 Economic Development Commission, which is a subsidiary entity wholly administered and 36 operated by the Virgin Islands Economic Development Authority. 37 Currently, developers may receive as follows: 38 (1) For New Hotel Projects (all non-appealable development permits have not been finalized 39 prior to the effective date of this act) - 100% of the revenues generated from the Designated Hotel 40 Room Occupancy Tax, Designated Casino Tax on Gross Revenue, and the Economic Recovery 41 Fee, if applicable, shall be allocated to and deposited into the Project’s Fund. 42 3 (2) For Hotel Projects where not less than 70% of the units have not been able to be occupied 43 due to natural events or related effects- 50% of the revenues generated from the Designated Hotel 44 Room Occupancy Tax and the Designated Casino Tax on Gross Revenue shall be allocated and 45 deposited into the Project’s Fund; and 100% of the revenues generated from the Economic 46 Recovery Fee, if applicable, shall be allocated to and deposited into the Project’s Fund; and 47 (3) For Reconstruction and Renovation of existing hotel sites where less than 70% of the units 48 have not been able to be occupied due to natural events or related effects - 100% of the revenues 49 generated from the Economic Recovery Fee, and no revenues generated from the Designated 50 Hotel Room Occupancy Tax and the Designated Casino Tax on Gross Revenue shall be allocated 51 to and deposited into the Project’s Fund. 52 Designated Hotel Occupancy Tax and Economic Recovery Fee are granted for a period of 30 53 years or until such time the direct investment is liquidated, whichever is earlier. The amount of 54 the Economic Recovery Fee for any approved ERF project shall not be greater than 7.5%. 55 To date the USVIEDA has considered applications for the redevelopment of two existing hotel 56 properties, RC Hotels (Virgin Islands), Inc d/b/a the Ritz Carlton St. Thomas and CREF3 USVI 57 Hotel Owner, Inc. d/b/a The Westin St. Thomas Beach Resort & Spa and Bouy Haus Beach Resort 58 St. Thomas, Autograph Collection. The USVIEDA has considered the application for the 59 development of one new hotel property, Haven Development, LLC d/b/a Hampton by Hilton St. 60 Thomas, the first new hotel development in over 30 years in the U.S. Virgin Islands, adding 126 61 rooms to the hotel inventory. As a result of the Designated Hotel Occupancy Tax and/or Economic 62 Recovery Fee, these Developers were able to reinvest and upgrade the existing properties that 63 were shuttered as a result of Hurricanes Irma and Maria and invest in the construction of a new 64 4 property resulting in direct, indirect, and induced activities spurring economic growth in the 65 Territory. 66 The proposed amendments to § 1313 of the HDA, if approved, will allow existing hotel properties 67 located in the St. Croix District to access 100 percent of the Designated Hotel Occupancy Tax for 68 hotel facility improvement and/or expansion projects based on project spend in excess of $25 69 million and the addition of at least 25 percent more rooms within a 5-year timeline or 50 percent 70 of the Designated Hotel Occupancy Tax for hotel facility improvement and/or expansion projects 71 based on project spend in excess of $10 million within a 2-year timeline. 72 The three HDA projects previously mentioned are all located within the St. Thomas/St. John 73 District. Hotel development in the St. Croix District remains in a proverbial quandary of which 74 comes first, “the chicken or the egg”. Airlines indicate that they don’t add additional flights to the 75 St. Croix market because there is not enough hotel room inventory to support additional airlift, 76 and investors indicate that financing hotel projects is too risky on St. Croix because there is not 77 enough airlift to support the development of additional hotel rooms. Allowing the Designated Hotel 78 Occupancy Tax to be rebated for improvement and/or expansion projects on St. Croix is a game 79 changer as it reduces investment risk and helps to encourage investment in projects. Additionally, 80 it is less risky and easier for going concerns with a historical track record to secure financing than 81 it is for start-up projects. This would be another tool in our toolbox to encourage the development 82 of more rooms and/or additional facilities at existing hotel properties on St. Croix thereby 83 increasing room inventory, improving facilities that enhance the Territory’s overall tourism product, 84 and improving the guest experience. 85 We acknowledge that approved projects for existing hotels may have a slight impact on the 86 Tourism Revolving Fund as occupancy taxes will be rebated to liquidate the approve project debt, 87 5 but we believe the long term benefits of increasing the hotel room inventory and the expansion of 88 hotel facilities that improve the guest experience will outweigh the short-term costs. 89 Thank you for the opportunity to provide testimony supporting the proposed amendments to 29 90 V.I.C. § 1313 of the Hotel Development and Finance Program Act (“HDA”). I remain available to 91 answer any questions that you or members of the committee may have. 92 93 Again, thank you. 94