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FY2011 ANNUAL REPORT 2 BOARDOFDIRECTORS AlbertBryan,Jr. CHAIRMAN NathanSimmonds VICECHAIRMAN LynnMillin-Maduro,Esq. SECRETARY RandolphAllen MEMBER JohnLewis MEMBER JosePenn MEMBER HenrySmith,Ph.D. MEMBER EXECUTIVESTAFF CHIEFEXECUTIVEOFFICER PercivalE.Clouden ASSISTANTCHIEFEXECUTIVEOFFICER AliciaBarnes PROJECTCOORDINATOR PaulArnold DIRECTOR,COMPLIANCE(EDC) MargaritaBenjamin DIRECTOR,LENDINGDIVISIONDianneDuinkerk DIRECTOR,APPLICATIONS(EDC) PaulFlemming DIRECTOR,MARKETING D.JerryGarcia DIRECTOR,ADMINISTRATIONandFINANCE ErnestHalliday DIRECTOR,ENTERPRISEZONE NadineMarchenaKean LEGALCOUNSEL StaceyPlaskett,Esq. SUPERINTENDENTofPARKS GeorgeSt.Rose 3 HOME DEPOT PHOTO: PhotosubmittedbyTheOfficeoftheGovernoroftheUSVI ALLOTHERIMAGES©LEEA.LASHLEY--www.leelashley.com COVERPHOTO: St.John,USVI BACKCOVERPHOTO: St.Croix,USVI MISSIONSTATEMENT The Virgin Islands Economic Development Authority (VIEDA)strivestobeacustomerservicebasedorganization that creates positive public/private sector partnerships for the enhancement of economic growth and develop- ment by meeting the challenges of the global economy and serving the needs of the business community, while embracing our unique cultural heritage and preserving ourpristinenaturalenvironment. 4 THEVIRGINISLANDSECONOMICDEVELOPMENTAUTHORITY The Virgin Islands Economic Development Authority (VIEDA) was created as a semi- autonomous government agency on February 1, 2001 to assume, integrate and unify the functions of the Government Development Bank (GDB), the Economic Development Commission (EDC), the Industrial Park Development Corporation (IPDC), the Small Business Development Agency (SBDA), and the Enterprise Zone Commission (EZC) under one executive board in order to achieve maximum efficiency, streamline operations, and develop comprehensive programs to promote and enhance the economic development of the Territory. The Authority accomplishes its mission by attracting multi-national investors to establish or relocate their businesses to the United States Virgin Islands and by providing financial assistance through its lending arm, namely the GDB and the SBDA, to emerging and established businesses in the Territory. The Authority is funded by the general fund, based on a budget request from the Governor and the VIEDA Board of Commissioners, which must ultimately be approved by the Legislature of the Virgin Islands. The powers of the Authority are exercised in a seven-member board, which is comprised of three (3) members that are appointed by the Governor from among heads of cabinet-level executive departments or agencies or from among the Governor’s executive staff, three (3) members who are not employees of the Government of the United States Virgin Islands and are appointed by the Governor with the advice and consent of the Legislature, and one (1) member appointed from the board or executive staff of the Government Employees’ Retirement System, the Virgin Islands Port Authority or the University of the Virgin Islands. 5 TABLEOFCONTENTS MISSIONSTATEMENT ....................................04 VIRGINISLANDSECONOMICDEVELOPMENTAUTHORITY........05 ECONOMICDEVELOPMENTCOMMISSION ....................11 INDUSTRIALPARKDEVELOPMENTCORPORATION .............22 LENDINGDIVISION.......................................24 ENTERPRISEZONECOMMISSION...........................31 MARKETINGINITIATIVES..................................34 TAXINCREMENTFINANCING...............................36 6 7 8 9 Message from the Chairman of the Board At the end of each fiscal year, it is customary to look back, to reflect upon what we could have done, should have done, and, if we are fortunate, what we have accomplished. We are indeed fortunate to recall the accomplishments of FY 2011, a year that was rife with challenges. We are proud to have been able to expand our capabilities by using both our imagination and the collective tools of the Virgin Islands Economic Development Authority (VIEDA) to continue to build the Territory’s economy. As business attraction decelerated, we focused on recapturing dollars that were moving out of the Territory and on retaining our current businesses. We are especially proud of our lending programs, owing to the strides made by the Government Development Bank (GDB) to create funding resources that provide flexible financing options for our small businesses. The GBA has made it is now possible for new entrepreneurs to enter the market, while it has assisted seasoned small business owners in keeping their doors open. The third quarter of FY 2011 heralded the return of viable prospects for the tax-incentive program administered by the Economic Development Commission (EDC), as we saw new companies begin to submit applications for tax benefits. This is in stark contrast to FY 2010, a period when the total number of EDC beneficiaries remained at a standstill. We are confident that this positive trend will continue in FY 2012 as the labors of our marketing efforts and the confidence in our program begin to take root. Our challenge in FY 2012 will be to weave an even tighter economic development blanket and use all of the VIEDA’s resources and tools to bring prosperity to the Territory. While we recognize that our success depends on collaboration with many agencies and institutions from both the public and private sectors, we will continue to lead the charge to facilitate new revenue and opportunities to the Territory. Sincerely, Albert Bryan Jr. Chairman of the Board Message from the Chief Executive Officer 10 As we continue to confront the economic challenges which are a global reality, the Virgin Islands Economic Development Authority is taking several important initiatives in two very critical areas--combating job losses and devising strategies to address budget deficits. These are areas of significance, identified for their particular impact on the local economy. With our goals in sight, we are engaging in aggressive marketing initiatives nationally and internationally with the intent of luring manufacturing entities, call centers, and financial service industries to our shores. We also recognize the singular importance of keeping the doors of our current businesses open and supporting them in every way possible. Thus, with regard to our Government Development Bank, we continue to pursue the refunding of our programs through the federal government with the objective of making financial and technical resources available to our small business community. The Authority’s Fiscal Year 2011 goal and objectives were developed consistently with our mission and mandate. As we embark on FY 2012, we remain cognizant of our mission to be a customer service-based organization which creates positive public and private sector partnerships for the enhancement of economic growth and development while meeting the challenges of our economy in general and serving the needs of our business community in particular. Sincerely, Percival E. Clouden Chief Executive Officer 11 THEECONOMICDEVELOPMENTCOMMISSION The Economic Development Commission (EDC) is charged with promoting the growth, development and diversification of the economy of the United States Virgin Islands by developing the human and economic resources of the Territory, preserving job opportunities for residents of the U.S. Virgin Islands, and promoting capital formation to support industrial development in the Territory. The EDC is comprised of the Applications Unit, which is the first point of contact by a business seeking to apply for economic development benefits, and the Compliance Unit, which monitors beneficiaries to ensure that they comply with the terms and conditions of their certificates and with other requirements of law. The mission of the Applications Division, consistent with the Economic Development Commission (EDC) Program, is to facilitate the promotion of the growth, development, and diversification of the economy of the United States Virgin Islands by processing (evaluating, analyzing and preparing) application packages for submission to the V.I. Economic Development Authority’s (VIEDA) Governing Board of Directors (hereafter referred to as “The Board”) for consideration of a recommendation for the granting of economic development benefits. VISION The Applications Division is a functioning entity of the VIEDA that facilitates the mandate of enhanced economic sustainability and diversity in the U.S. Virgin Islands by processing applications expeditiously to ensure the program’s integrity. SHORT-TERMGOALS In FY 2011, the Applications Division • assisted the Marketing Division with increasing awareness about the EDC program • continued its efforts to process all applications in a timely manner • focused on enhancing the cost-benefit analysis tools used in the application evaluation process to ensure that all qualitative and quantitative data are appropriately collected to comprehensively ascertain fiscal and economic implications. • focused on aggressively expediting all pending applications while addressing the issues that affect the timely issuance of approved certificates. LONG-TERMGOALS The Applications Division plans to • continue its working relationship with the Marketing Division to actively recruit new applicants through trade shows, conferences, and target meetings • periodically revisit strategic work-unit plans in the event that major shifts may occur in the national and international economic markets • host mini-workshops with potential beneficiaries on the proper procedures for completing EDC applications to enhance stakeholders’ understanding of applicable procedures and the timely processing of applications. This can ultimately lead to achieving the targeted 80-day timeline of processing applications. APPLICATIONSDIVISION 12 HIGHLIGHTS AND ACTIVITIES In FY 2011, the EDC received 17 applications. Fourteen (14) were new applications and three were received for extension or modification of tax benefits. Of the 17 applications received, 12 were approved by the Board for benefits; seven (7) are pending a decision by the Board, and one was tabled for additional information. The 14 new applications that were received represented 233 potential full-time jobs, a payroll of $6,797,409, and capital investments in the amount of $25,676,000. NEWPOLICIESANDPROCEDURES To streamline the application process, the Applications Division completed a comprehensive revision of the current application adopted by the EDC. Additionally, a policy change was made by a resolution to reduce the period for an application to remain incomplete from the time it is submitted to the EDC to being scheduled for a public hearing. The resolution also reduces the period from the date of the public hearing to the completion date of the application, which is now six months from the filing date of the application. ONLINEAPPLICATIONS The strategic initiative to implement the EDC online application has been completed. This added component to the EDC program provides the applicant with another method of filing EDC applications. The online version of the EDC application enhances and expedites the completion of the application process. 14 TABLE1-GRAPH1:EconomicDevelopmentCommission–FYHistoricalApplicationInformation No. of Apps Received No. of Apps Approved No. of Apps Tabled or Denied Apps Pending Job Opportunities Approximate Wages of New Apps Minimum Potential Investment of New Apps 11 3 1 7 60 1,888,379 10,393,300 24 10 1 13 282 13,507,347 67,391,888 26 20 1 6 213 6,629,473 19,836,030 24 20 0 4 1,218 37,708,081 613,966,946 28 25 1 2 743 20,705,713 312,814,477 14 10 1 6 233 6,797,409 25,676,000 Table 1: Economic Development Commission - FY Historical Application Information # of Apps Received # of Apps Approved # of AppsTabled or Denied Apps Pending Job Opportunities Approx. Wages of New Apps Minimum Potential Investment of New Apps FY2008 FY2007 FY2006 FY2009 FY2010 FY2011 In FY 2011, the EDC received 14 applications compared to 11 that were received in FY 2010, a 22 percent increase that represents three (3) applications. Both payroll and investments increased by 72 percent and 60 percent , respectively, as depicted in Table 1 below. This is partly due to an increased interest in the EDC program resulting from the EDC online application, the website, and the work of the EDC’s economic development practitioners. However, in addition to the impact of the global economic recession on our Territory, the 2004 American Jobs Creation Act continues to have an unfavorable impact on the EDC Program. Below, Table 1 represents the quantitative analysis of the fluctuations in new applications received during the past six years. 15 TABLE2-GRAPH2:EconomicDevelopmentCommission–FYHistoricalApplicationComparison 20 11 2 7 236 $6,517,410 $93,076,000 9 2 0 6 48 $1,576,379 $9,325,000 TABLE 2: APPLICATION - COMPARISON TO PRIOR YEAR STATISTICS Applications Received Applications Approved Applications Tabled/Denied Applications Pending Job Opportunities Approximate Wages of New Applications Minimal Potential Investment of New Applications FY2010 FY2011 FY2010 FY2011 No. of Apps Received No. of Apps Approved No. of Apps Tabled or Denied Apps Pending Job Opportunities Approximate Wages of New Apps Minimum Potential Investment of New Apps Despite the effects the economic downturn has had on the EDC Program, there was a moderate increase in the number of inquires made and applications submitted during the last fiscal year. Our strategic approach in FY 2011 was to focus on retaining the current EDC beneficiaries. However, the Applications Division continued to seek opportunities to attract new investors to the Territory, recognizing that both business retention and attraction contribute to the sustainability and growth of the economy. To achieve these objectives, members of the Board responded favorably to the requests of beneficiaries for modifications, extensions and requirement waivers. 16 The Compliance Division ensures the integrity of the Economic Development Commission Program and assists the beneficiaries in meeting the requirements outlined in their certificates of benefits. The certificates are usually provided for new applicants, for extension or transfer of benefits, or for waivers of standard requirements. The Compliance Division reports its findings to the Commission, which has the legal authority to assess fines for non-compliance. Funds derived from such penalties may be used to support education, workforce development, and training programs within the Territory. HIGHLIGHTS AND ACTIVITIES ORIENTATIONS During FY 2011, 14 certificates of benefits for beneficiaries were executed. Of these certificates, seven(7) were issued to new beneficiaries in these respective industries: five(5) Designated Service Businesses, one(1) in the SBP/Marine Industry, and one(1) Manufacturer. One of these businesses was granted benefits under the EDC’s Small Business Program. Of the 14 certificates, these remaining five(5) beneficiaries received extensions: four(4) hotels and one(1) Marine Industry business. Two(2) Designated Service Businesses received a transfer of benefits. Two(2) transfer certificates were issued and 10 orientations were performed which included one contract that was executed in the previous fiscal year. The certificates issued to beneficiaries during FY 2011 contributed to the employment of 1,033 full-time employees, annual wages of approximately $18,363,339, investments of approximately $30,658,000, annual contributions of $727,500, and annual scholarships of $33,000. COMPLIANCEDIVISION BENEFICIARY PETITION 567 SGB, LLC Alliance Management Partners, LLC Alpha Value Worldwide, Inc. Atlantic Industries, Inc. American Management Solutions AVisco, LP Diamond Rock Frenchman’s Owner Diamond Rock Frenchman’s Owner Feddersen Designs, LLC Grapetree Shores d/b/a Divi Carina Bay Golden Eagle Financial, LLLP Heavy Materials, LLC Intrepid Investments, LLC Patriot Lift Company, LLC Professional Holding Company VI, LLC Standard Pacific Capital Holdings, LLLP TAG Virgin Islands, Inc. Tropico Management LP Windward Capital LLC Employment Extension Employment Waiver Termination Employment Extension Suspension of Benefits Extension of Deadline Employment Waiver Procurement Waiver Extension of Investment Deadline Procurement Waiver Employment Waiver Contribution Waiver Employment Deadline Extension Employment/Internship Waiver Waiver Life Insurance Termination Extension Employment Waiver Termination Employment Waiver PETITIONSTOTHEBOARD A total of 21 petitions submitted by beneficiaries were presented before the Board for deliberation. Nine (9) beneficiaries requested Extensions or Waivers of Employment, two (2) requested Procurement Waivers, two (2) requested Suspension of Benefits, four (4) requested Termination of Benefits, one (1) petitioned for a Procurement Waiver, one (1) requested a waiver of Life Insurance, one (1) petitioned for a Contribution Waiver, and one (1) petitioned for an Extension of Investment Deadline: TABLE2:BeneficiariesandPetitionsinFY2011 17 TABLE1:CertificatesofBenefitsIssuedinFY2011 Cane Bay Partners VI, LLLP Caribbean Inflatable Boats & Liferafts Celtic Therapeutic Management Diamond Rock Frenchman’s Owner Emerald Beach Corporation Financial Trust Company IGY-AYH St. Thomas Holdings Kazi Management St. Croix Kazi Management VI, LLC Lexington Management, LLC Oson VI Sugar Bay Club & Resort Corp. The Buccaneer, Inc. Tropical Plastic Corporation White Bay Group USVI, LLLP As of September 30, 2011, there were 93 active companies in the EDC Program. (New) (New) (New) (Ext) (Ext) (Ext) (Transfer) (New) (Transfer) (New) (New) (Ext) (Ext) (New) (New) DSB - Investment Management SB - Marine Facility DSB - Investment Management & Advisory Services Hotel Hotel DSB - Investment Management SB - Marine Facility DSB - Investment Management DBS - Investment Management DSB - Investment Management DSB - Investment Management Hotel Hotel Manufacturer - Plastic Bottles DSB - Investment Management BENEFICIARIES INDUSTRY Bates Trucking & Trash Removal CBI Acquisitions, LLC Clearwater Consulting Concept, LLLP Denali Asset Management, LLLP Drury Capital, Inc. GeoNet BioFuels, Inc. Lizard Management, VI LLLP Marmarus Management Company, LLC Odyssey VI, LLLP Sparco Management, LLLP TAG Virgin Islands, Inc. Tutu Park LTD US Viking, LLC Windward Capital, LLC Non-Compliance Scholarship Non-Compliance Procurement Non-Compliance - Show Cause Full Compliance Non-Compliance Residency Full Compliance Non-Compliance Procurement & Special Conditions Full Compliance Non-Compliance Procurement & Special Conditions Non-Compliance Procurement & Special Conditions Non-Compliance Procurement & Special Conditions Full Compliance Full Compliance Full Compliance COMPLIANCE REPORTS COMPLETED AS OF September 30, 2011 COMPLIANCEREVIEWS REPORTS As of September 30, 2011, 14 compliance reports were completed as reflected below. Of the completed reports, six (6) beneficiaries were found to be in full compliance with their certificates of benefits. Additionally, eight (8) reviews were being finalized with draft reports submitted for the Directors’ review. Bellavista Properties, Inc. BD Specialties d/b/a Billy Dees Special Tees Communications Technologies, Inc. Four Winds Plaza Corp. Gemini Design, Inc. Global Capital Advisors, LLC HAI-2 Kazi Management St. Thomas Plastic Bottle Manufacturer, Inc. The March Group Tropico Management, LP Valance Company, Inc. Yacht Haven USVI, LLC Plantation View, Inc. Palms Court Harborview Secret Harbor Beach Resort COMPLIANCE REPORTS IN PROGRESS AS OF September 30, 2011 19 ELIGIBLESUPPLIERS Forty-one (41) applications were filed in FY 2011. Thirty-four (34) applications were approved and four (4) were denied. See the following table. COMPLIANCE REPORTS RESOLUTIONS AS OF September 30, 2011 Scholarship Requirement Charitable Contribution Ordered to show cause - Employment; Reporting Requirement; Falsify information Residency Requirement Internship Requirement Charitable Contribution & Medical Insurance Procurement Requirements Charitable Contribution & Retirement Plan Procurement Requirements Residency, Reporting & Contribution Requirements Employment & Educational Assistance Educational Assistance Bates Trucking & Trash Removal Caribbean Reservations Clearwater Consulting Concepts Drury Capital, Inc. Globalvest Management Company, LP Mario Virgin Crystal MIFR (Virgin Islands) n/k/a Diamond Rock Frenchman’s Owner Redhead Management, Inc. South Bay Partners, LLLP Sparco Management, LLLP TAG Virgin Islands,LLC Tropex, Inc. Accepted $7,000 in contributions made in lieu of scholarships. Extensions granted to fulfill shortfall of $60,570. Accepted settlement offer made to Board pending final terms of agreement. $2,500 to EDC Industrial Promotion Fund Approved to make a contribution of $20,000 to UVI-CELL to satisfy the shortfal and deem in compliance. Granted a reprieve Assessed a $5,000 fine (10 violations @ $500) Granted a reprieve w/proviso if certificate is reactivated. Rescind findings and deem in compliance $2,500 to the EDC Industrial Promotion Fund $2,500 to the Territorial Scholarship Fund $2,500 to the University of the Virgin Islands $14,727.32 (employment) and $40,280 (educational assistance to be paid to the EDC Industrial Promotion Fund $2,200 to University of the VI RESOLUTIONS Twelve (12) compliance cases were presented to the Board for deliberation on non- compliance matters. Two (2) beneficiaries were granted reprieves, one (1) was found in compliance, one (1) was settled, one (1) was granted an extension to comply, two (2) were deemed in compliance, one (1) was suspended, one (1) was ordered to show cause, and one (1) was assessed a penalty of $5,000. See findings and resolution details below. 3RC Anthony Miller d/b/a Island Digital Billy D’s Budget Rent a Car Caribbean Industrial Products, LLC C&C Painting Electricity Wise Strategies Enviro Tech Solutions Fibernet Follman Construction Frank Hazel Landscaping Harrigan’s Asphalt Paving & Seal Coating Hera Psaros d/b/a Design Lab Holiday Construction Hospitality Management Goods & Services Instrument and Control Systems Island Cash Itiba JRS Voice & Data Independent Contractor John Lewis d/b/a Lewis Consulting Gasoline, Propane & Diesel IT Services Screen Printing, Clothing Manufactory Car Rental Services Sanitation & Cleaning Products Painting Contractors Energy Saving Solar Systems Conservation Environmental Consulting & Field Management Computer Network & Fiber Optics Installation Construction Contractor Masonry & Tile Asphalt Paving Interior Decorating Construction Contractor Masonry & Carpentry Electrical Construction & Maintenance Cash Processing & ATM Services Skin Care Products Data Wiring Installation Business & Management Consulting ELIGIBLE VIRGIN ISLANDS SUPPLIERS CERTIFIED in FY 2011 APPLICANTS TYPE OF BUSINESS 20 14 9 12 14 15 11 18 16 16 19 27 26 EDC CERTIFICATES Executed Orientation FY2006 FY2005 FY2007 FY2008 FY2009 FY2010 14 9 FY2011 STATISTICALCOMPARISONS FY2009throughFY2011 Jeremy Francabandero Kilroy LA View, LLC Leon A. Monsanto d/b/a Monsanto Electric, Inc. M-Squared, LLC March-Chelle d/b/a #1 Steam Carpet Upholstery Ramesh Williams d/b/a Light & Bulbs Reef Transportation Resort Adventure Centers, Inc. Serenity Builders St. Thomas-St. John Underground Utilities SK Tile & Plaster St. John Projects, Inc. Xecutive Waste Management & Rentals Carpentry Dry Cleaning Masonry & Carpentry Electrician Interior Design Cleaning & Janitorial Lights & Bulbs Ferry Transportation Recreational, Excursions and Tours Construction Contractors Electrician Masonry & Tile Management & Consulting Septic Tank Waste The Compliance Division completed a review of all Eligible Virgin Islands Suppliers in this program and a total of 150 were removed from the listing due to their failure to comply with annual reporting requirements to update their certification. At the end of the fiscal year, 10 businesses were recertified as Eligible Virgin Islands Suppliers and were re-added to the supplier listing. As of September 30, 2011, a total of 293 businesses are certified as Eligible Virgin Islands Suppliers. Eligible Suppliers table (continued) 25 13 12 9 4 5 14 9 5 14 7 7 26 12 14 17 8 9 COMPLIANCE REPORTS Completed Compliance Non-Compliance FY2006 FY2005 FY2007 FY2008 FY2009 FY2010 14 6 8 FY2011 46 29 7 13 28 25 3 0 47 43 3 4 36 23 0 13 28 23 2 3 30 32 ELIGIBLE SUPPLIERS Received Approved Denied Pending FY2006 FY2005 FY2007 FY2008 FY2009 FY2010 41 34 4 3 FY2011 21 22 INDUSTRIALPARKDEVELOPMENTCORPORATION The Industrial Park Development (IPDC) is chartered as a public corporation to acquire and operate industrial parks in the U.S. Virgin Islands and to complement the activities of the V.I. Economic Development Authority. Presently, there are two (2) industrial parks that fall under the auspices of the IPDC, the Williams D. Roebuck Industrial Park and the St. Thomas Industrial Park. The William D. Roebuck Industrial Park, located between the historic towns of Christiansted and Frederiksted on the island of St. Croix, is the larger of the two industrial parks. Situated within four (4) adjoining buildings, this park consists of 148,160 square feet of commercial space of which 75,176 square feet is currently occupied by three (3) beneficiaries of the Economic Development Commission’s tax incentive program, or the EDC Program, along with AEG Services/Virgin Islands New Generation Network (viNGN). At the end of FY 2011, 51 percent (51%) of the space was occupied, a five percent (5%) increase in occupancy from the previous year. Consisting of 20,000 square feet of commercial space, the St. Thomas Industrial Park, which is also occupied by three (3) EDC companies, has experienced an occupancy level of 75 percent (75%) for the past four (4) fiscal years. The IPDC is solely funded by rental income. The occupancy levels in both parks are expected to increase since the U.S. Department of Commerce has lifted occupancy restrictions that limited the leasing of park space to only EDC companies. Now that the space can be leased on the open market, the VIEDA is likely to receive an onslaught of inquiries from prospective clients. In addition to the two aforementioned properties, the IPDC also owns the building that houses the VIEDA’s headquarters on St. Croix, which is located at No. 4 King Street in Frederiksted. That structure, known as the Old Flemming Building, was purchased in 2002. VI INDUSTRIAL PARK DEVELOPMENT CORPORATION - OCCUPANCY / VACANCY (%) WILLIAM D. ROEBUCK ST. THOMAS VI INDUSTRIAL PARK DEVELOPMENT CORPORATION - OCCUPANCY / VACANCY (%) 24 EDALENDINGDIVISION (GOVERNMENTDEVELOPMENTBANK) The Government Development Bank (GDB) of the U.S. Virgin Islands was created by legislation in 1978 “to aid the insular government in the performance of its duties to develop the economies of the United States Virgin Islands,” but it was not until 1997 that the GDB was actually funded, staffed and began its operations. Since that year, the GDB has provided access to capital for small and medium-sized businesses in the Territory. The overall picture for the GDB, one of two entities in the Lending Division of the VIEDA, was positive throughout the fiscal year, with a 107% increase in the dollar value of the loans approved, a 13 percent (13%) increase in collections and the addition of two (2) new loan programs. LOANFINANCING During FY 2011, the Lending Division processed 36 loan packages for financing under the GDB/SBDA loan programs. Of that amount, 27 loans were approved and five (5) were declined. By the end of the fiscal year, the total loans processed were valued at $2,758,958, which represents an increase of $1,429,458, or 107% over the previous fiscal year. This increase may be attributed to the increase in the dollar amounts of the loans processed. The St. Croix district received $1,944,347 to support 15 loans, and the St. Thomas-St. John district received the remaining $814,611 for 12 loans. Four (4) loans were declined in the St. Croix district and one (1) in the St. Thomas-St. John district. 25 The GDB continues to administer and monitor the Intermediary Relending Program (or IRP Loan), a component of the U.S. Department of Agriculture; the Micro-Credit Loan Program (or MICRO Loan); the Farmers and Fishermen Loan Program; the Transportation Loan Program; and the Economic Development Loan Program. The current IRP loan portfolio consists of 12 loans valued at approximately $528,388 and the Micro-Credit loan portfolio consists of 148 loans valued at approximately $2,677,063. The Farmers and Fishermen loan portfolio consists of 74 loans valued at approximately $268,676, and the Economic Development Loan Program consists of 14 loans valued at approximately $1,804,380. In FY 2011, in response to the VIEDA’s federal grant application, the U.S. Department of Treasury awarded the Territory $13.1 million as a participating state in the State Small Business Credit Initiative Program (SSBCI). This program was established by the 2010 Small Business Jobs Act which led to the development of a new and innovative loan program that was designed to help small businesses expand and create jobs in the Territory. Designated by Governor John P. deJongh, Jr. as the entity to implement the SSBCI for the U.S. Virgin Islands, the VIEDA’s GDB will use SSBCI funds to support a Collateral Support Program ($3,601,424); a Credit Guarantee Program ($4,084,176); and a Payment, Surety, and Performance Bonding Program ($5,000,000). The SSBCI program will provide one dollar to every $10 loaned to small businesses through approved local banks which have the potential to circulate $131 million in loans throughout the Territory. $1,898.3 $860.6 $409.0 $920.5 $535.0 $512.5 $484.3 $668.0 $435.0 $259.0 LOANS APPROVED FOR STX vs STT/STJ STX (RED) STT/STJ (BLUE) FY2008 FY2007 LOANS APPROVED FOR: FY2009 FY2010 FY2011 26 27 COLLECTIONS The Lending Division has shown a steady increase in collections. In FY 2011, collections were recorded at $176,596 representing a 23 percent (23%) increase over the previous fiscal year. This increase was due primarily to the assistance of two independent collection agencies - one in each district - that have been assigned to accounts that have been delinquent for 151 days or more. OTHERLOANPROGRAMS The Tour Bus Leasing Program, established three years ago to enhance St. Croix as a competitive cruise ship destination, is currently being utilized by two tour bus operators. At the end of the fiscal year, a total of 26 buses were being leased by the two operators. The Tour Bus Leasing Program will be reviewed for continuity purposes in FY 2012. The Bonding Surety Program, which is designed to assist small and medium-sized contractors in obtaining performance and payment bonds is now in its second year. During FY 2011, the Lending Division reported a total of six (6) bonds that were valued at $807,097. The Virgin Islands Energy Loan Rebate Program, in the second quarter of FY 2011, issued a total of 410 loans valued at $1,024,782 compared to 175 loans valued at $1,024,782 at the end of FY 2011 in comparison to 175 loans valued at $406,637 during the previous fiscal year. This Energy Loan Rebate Program was created to provide homeowners and small business owners with opportunities to finance the purchase and installation of Solar Water Heaters. AWARDMAY2011 In FY 2011, the GDB received the Financial Advocate of the Year Award from the U.S. Virgin Islands Small Business Development Agency (SBDC) during Small Business Week in the Territory. 28 EDALENDINGDIVISION (SMALLBUSINESSDEVELOPMENTAGENCY) The Small Business Development Agency (SBDA) was originally created by legislation in 1969. Since its inception, the SBDA has been one of the catalysts in developing the economy of the U.S. Virgin Islands through its lending programs. This agency currently has the following six (6) loan programs in its lending portfolio: the Small Business Development Agency Direct Loan Program; the Farmers and Fishermen Loan Program; the Frederiksted Loan Program; the Economic Development Administration Loan Programs 3801 and 3804, which are components of the U.S. Economic Development Administration (U.S. EDA); and the Transportation Loan Program, which was introduced in FY 2010. HIGHLIGHTS AND ACTIVITIES A new loan initiative that was added to the SBDA’s loan portfolio is the State Trade and Export Promotion Program, or STEP. During the fourth quarter of FY 2011, a federal grant in the amount of $489,646 was awarded to the Territory by the U.S. Small Business Administration for this program. This three-year pilot trade and export initiative authorized by the Small Business Jobs Act of 2010 is designed to help the small business sector of states and territories grow, create jobs, increase their exporting activities, and raise the value of exports for those small businesses that are currently exporting goods and services. Presently, the SBDA loan portfolio has a total of 226 loans valued at approximately $5,837,224. The SBDA Direct Loan portfolio has 202 loans valued at approximately $5,275,941. The Frederiksted Loan portfolio comprises 10 loans valued at approximately $117,311; the EDAS 3801 loan portfolio consists of five (5) loans valued at approximately $249,785; and the U.S. EDA loan portfolio consists of nine (9) loans valued at approximately $194,207. 29 The graph below depicts loans approved under the GDB and SBDA Loan Programs for both the St. Croix and the St. Thomas/St. John districts for FY 2009 through FY 2011. GDB (RED) SBDA (BLUE) $2,325.9 $406.0 $1,128.5 $201.0 $555.0 $492.5 LOANS APPROVED FOR GDB vs SBDA LOANS APPROVED FOR: 2009 2010 2011 $897.6 $793.7 $928.2 $859.1 $844.4 TOTAL COLLECTIONS TOTAL COLLECTIONS FY2008 FY2007 FY2009 FY2010 FY2011 COLLECTIONS As previously stated, collections have continued to improve over the past six consecutive years and more recently with the assistance of two independent collection agencies. In FY 2011, the SBDA collected a total of $932,429, a 23 percent (23%) increase compared to $756,833 in FY 2010. The chart below depicts the total collections received for the GDB and SBDA loan programs combined: For the last five years, the Enterprise Zone Commission has been dedicated to the revitalization of depressed and distressed neighborhoods and communities within the Virgin Islands. Applicable zones have been identified within the towns of Christiansted and Frederiksted on the island of St. Croix and the historic neighborhood of Savanne on St. Thomas. Despite the challenges of revitalizing mixed-use neighborhoods with limited funding, the Enterprise Zone Commission continues to be performance and results-driven. Over the last five (5) years, expenditures by the EZC’s beneficiaries have averaged $1.1 million annually. In FY 2011 there were approximately 35 businesses which were either created as a result of the Enterprise Zone Program or which were able to expand their scope as a result of its benefits. In Fiscal Year 2011, the EZC Program expanded by 77%, which represented a commitment of $881,000 in investment and direct employment estimated at 70 jobs. A FY 2011 cost-benefit analysis of the program shows that for every $1 forgone in taxes, $7.19 has been expended in the community by EZC beneficiaries. This accounts for direct expenditures only. ENTERPRISEZONECOMMISSION The Enterprise Zone Commission (EZC) was created by the Virgin Islands Legislature with the passage of Act. No. 6294 to revitalize blighted and distressed communities which once were socially and economically vibrant. The authorizing act provides for tax incentives and economic development benefits free from regulatory barriers which inhibit economic growth. The act also encourages collaboration among public, private and non-profit entities in order to accomplish the desired objectives. 30 31 The success of the Enterprise Zone Commission is due to ongoing collaborations with public, private and non-profit organizations within the Territory and to the programs developed by the Commission. PUBLICSAFETY&CRIMEPREVENTION Public Safety and Crime Prevention continues to be a challenge for the Enterprise Zone Commission, as crime continues to rise within the neighborhoods. However, there has been some positive activity. In 2009, for example, the Enterprise Zone Commission applied for an Edward Byrne Grant to board up abandoned buildings which were identified by the Police Department, Fire Services, and the Department of Health as being public nuisances within the zones. A major concern was that some buildings were being used for illicit activities. The board-up process included contacting property owners for permission to enter their buildings, requesting the approval of the Historic Preservation Committee, purchasing materials, and working with the Department of Public Works to secure each building. With a grant of $40,000 from the Law Enforcement Planning Commission (LEPC), two phases of board-ups were completed in FY 2011. Perhaps the EZC’s most significant achievement for the year was a summer program which engaged the youth of one EZC community. Due to cost-saving measures implemented by the Enterprise Zone Commission, the agency was able to conduct the summer program which involved neighborhood youth in the painting of renderings on the boarded-up buildings. This program will be expanded and duplicated in all three enterprise zones during FY 2012. Rehabiltation Investment Machinery Total Capital Investment Salary TOTAL BENEFIT Capital Investment (towards income/gross) Employee Allowance (towards income/gross) Machinery Allowance (towards income/gross) Property Tax Differential TOTAL COST COST: BENEFIT $2,612,905 $89,553 $2,702,458 $2,766,611 $5,469,069 $653,227 $9,000 $8,955 $0 $671,182 1 to 8.15 $293,054 $12,189 $305,243 $251,719 $556,962 $73,264 $3,000 $1,219 $0** $77,483 1 to 7.19 COST: BENEFIT CUMULATIVE FY2010 32 INFRASTRUCTURE,HOUSINGANDNEIGHBORHOODDEVELOPMENT Infrastructure, Housing and Neighborhood Development is the key to achieving the Enterprise Zone Commission’s mandate of revitalization. The challenge in accomplishing the mandate is primarily due to the lack of funding and to the issue of multiple ownership (ownership of a single property by several persons). For the last three years, the Enterprise Zone Commission has undertaken an educational campaign focused on educating property owners about the challenges of multiple ownership during its very successful Estate Planning Conferences. The attendance at these conferences has grown each year, and to date almost 400 residents have attended. During FY 2012, funding will be sought for the introduction of two new programs. The first, entitled Save- A-Building Program, is a joint initiative between the EZC and property owners. The goal is to identify and repair valuable properties that are in disarray and to place them for rental on the open market. Upon recovery of funds expended on these properties, the EZC will return them to the respective owners. Owners will be required to utilize the time period in which their property is within the control of the EZC to establish a process by which these properties will subsequently be managed and maintained. The second program is the Historic Walk, which will improve streetscapes and have neighborhood youth research the history of certain historic buildings with the goal of placing identifying markers on buildings that are of historic significance. 33 A&N Holdings II, LLC Kalima Center, Inc. Larry R. WitKop Orneth La Corbiniere d/b/a Kings Court Bhawandeen Persad, Inc. Morymac, LLC Chelsnia Rental, LLP Tropical Cleaners & Launderers, Inc. Gary Thomas d/b/a Flower Dan, Inc. BLBJ Property Management, LLC Michael and Kimberly Sanford Andrew Simpson, P.C. Laundry Time, LLC Bryan’s Marine Service, LLC Joseph Baker USVI Management Corp. Olivia H. Henry Samuel T. & Rosemary Grey Chelsnia Rental, LLP Diane M. Russell Juanita Fergus Blackbird Properties, LLC **Approved by the EZC Board** 20-20A Market Street, Frederiksted St. Croix, VI #54 King Street, Christiansted St. Croix, VI No. 21 Regjerrings Gade, Savan St. Thomas, VI 16 & 17 King Street, Christiansted St. Croix, VI 22 Gamle Gade, Savan St. Thomas, VI 00802 9B Prince Street, Christiansted St. Croix, VI 20-20A Market Street, Christiansted St. Croix, VI 16 & 17 King Street, Christiansted St. Croix, VI 33C King Street, Christiansted St. Croix, VI #10A East Street, Christiansted St. Croix, VI 14ABA Church Street, Christiansted St. Croix, VI 14-AB Church Street, Christiansted St. Croix, VI 1AB & 1 BB Estate Mount Welcome, Plot #2 5AB Hospital Street, Christiansted St. Croix, VI 42AB Company Street, Christiansted St. Croix, VI 44A Queen Cross Street, Christiansted St. Croix, VI 23B Hospital Street, Frederiksted St. Croix, VI 19A East Street, Christiansted St. Croix, VI 21B Queen Street, Christiansted St. Croix, VI 49 Hospital Street, Frederiksted, St. Croix, VI 19B-20 Strand Street, Christiansted St. Croix, VI 14A-14C Strand Street, Frederiksted, St. Croix, VI ENTERPRISE ZONE BENEFICIARY CARE PROGRAM COMPANY NAME LOCATION TOWNPLANIMPLEMENTATION The Enterprise Zone Commission began work on plans for the historic towns of Christiansted, Frederiksted and Savanne in FY 2011. This was mandated by the Enterprise Zone Strategic Plan and the passage of Act No. 7197, the latter offering tax incentives to promote the planned growth of the enterprise zones. In conjunction with its stakeholders Our Town Frederiksted and the Frederiksted Economic Development Association, the staff of the Enterprise Zone Commission has begun work on the Frederiksted Plan. The consolidated plan for Frederiksted is the result of a collaborative effort by many stakeholders. The completion of the first draft can be attributed to this collaboration. After a review by the stakeholders, a public meeting will be scheduled to encourage further input. It is expected that the Frederiksted Plan will be completed by Spring 2012. However, the fiscal year will be dominated by the activities of the Christiansted and Savanne charrettes, which will run concurrently. Nonetheless, plans for both of these areas are expected to be completed by December 2012. BUSINESSDEVELOPMENT During FY 2011, the Governing Board of the Enterprise Zone Commission granted tax benefits to the following five (5) businesses: Chelsnia II, Blackbird Properties, Inc., Diane Russell, Juanita Fergus, and Samuel & Rosemary Grey. These entities have proposed to invest more than $881,000. 34 In FY 2011, despite the challenges of the current global economic crisis, the VIEDA continued to move forward in its responsibility as the leader of economic expansion in the U.S. Virgin Islands. Guided by the VIEDA’s Marketing plan, the VIEDA implemented marketing and public relations strategies geared at assisting its internal audiences not only with business retention and expansion, but by also assisting in the creation of new opportunities for entrepreneurs. External audiences were also targeted with strategies to attract new investors while the VIEDA still focused on target industries that will sustain the economy of the U.S. Virgin Islands. HIGHLIGHTS AND ACTIVITIES EXTERNALMARKETINGINITIATIVES To remain competitive in attracting new businesses to the Territory, the VIEDA entered into a contractual agreement with a global lead generation firm to assist with identifying at least 30 pre- qualified potential beneficiaries in the near term. INTERNALMARKETINGINITIATIVES Locally, the Marketing Division continued to assist the Authority’s entities and divisions in disseminating key information to the public about the VIEDA’s initiatives and programs through press releases, print and radio advertisements, periodicals, brochures, and radio interviews. This is an effort made by the Authority to encourage more local residents to participate in the economic development of the Territory by becoming entrepreneurs. MARKETINGINITIATIVES The Marketing and Public Relations Unit promotes the five (5) entities of the V.I. Economic Development Authority (VIEDA) and the activities and events that contribute to the enhancement of economic development in the U.S. Virgin Islands. This unit is also responsible for assisting the VIEDA in educating local residents and investors about the economic development programs available through the Authority to spur economic growth. 35 The VIEDA also supports other local government agencies that host community events that highlight the educational achievements of young people in the Virgin Islands as a means of recognizing the value of investing in the Territory’s future leaders. GLOBALPRESENCEANDTECHNOLOGY As recommended in the Marketing Plan during FY 2011, the VIEDA also took steps to improve its global visibility through a series of Search Engine Optimization (SEO) strategies with the assistance of BizVI Group LLC, a local website developer and technical consulting firm. These strategies are still being implemented as the VIEDA firmly believes that technology offers tremendous opportunities for attracting outside investors while maintaining its connection with local residents. Hence, the Authority continues to focus on updating its website with information of public interest. The VIEDA will continue to utilize its Marketing Plan and will consider recommendations for adjustments to this plan that will meet the current challenges of our economic conditions. This can help ensure that the best and most updated strategies are utilized to help the U.S. Virgin Islands remain competitive in this global economy. In spite of the current economic climate, the VIEDA acknowledges that marketing and public relations are still essential for any business to remain competitive, attract new customers and increase profits. As an economic development organization, the VIEDA is also cognizant of the fact that continued marketing of the U.S. Virgin Islands – and its tax incentive programs - is extremely important in fostering activities that can help sustain our economy to ensure the vibrance and quality of life of our Territory. 36 TAXINCREMENTFINANCING (TIF) Enacted by the Government of the Virgin Islands in June 2007, the Tax Increment Financing (TIF) Program serves as a means of promoting growth and development in financing the cost of housing; retaining and attracting industries and commerce; increasing transportation and public services; improving public utilities; and enhancing educational, recreational, medical, cultural and other facilities to benefit the people of the Virgin Islands. The Board of the V.I. Economic Development Authority (VIEDA) is committed to being proactive in utilizing Project Finance and its many tools to expand the economy of the Virgin Islands. Through the creation of its Project Finance Subcommittee (hereafter referred to as “The Subcommittee), the VIEDA is working proactively to provide incentives for development throughout the Territory. HIGHLIGHTS AND ACTIVITIES In September 2011, the Island Crossing Shopping Center opened the doors of its anchor tenant, Home Depot. Officials, including Governor John P. deJongh, Jr., pictured in the photograph on the following page, addressed an enthusiastic crowd at the store’s grand opening and participated in the board-cutting ceremony to welcome Home Depot and at least 150 new full-time jobs on St. Croix. Lt. Governor Gregory R. Francis, not pictured, also participated in this event and provided remarks on this milestone in our Territory. During the construction of the pad and vertical for the tenant, more than 100 construction jobs were created. This shopping center, the Territory’s first TIF project, is a 44-acre mixed-use development built by a Virgin Islands company, Caribbean Development Partners, LLC. In 2009, the Government of the Virgin Islands, through the work of the VIEDA, issued its first series of TIF Bond Anticipation Notes. In 2008, legislation which implements tax increment financing in the U.S. Virgin Islands was approved. The Administration’s proposal of this legislation creates another economic development option for those interested in making significant investment in the Territory. The Subcommittee is currently reviewing federal grants to develop the necessary feasibility studies for the creation of TIF areas, more commonly called District-Wide TIFs. The district-wide approach is applied in a speculative manner after careful and meticulous development studies for large areas or districts (in our case, territory). The approach encompasses a mix of land uses over wide areas or pockets with the intent of changing the character or nature of the community by reversing decline and encouraging redevelopment. The Board expects to present these proposed areas by the middle of 2013 for ratification by the Virgin Islands’ Government. NEWMARKETTAXCREDITS(NMTC) The VIEDA has entered into a Memoranda of Understanding (MOUs) for the development of the application for New Market Tax Credits (NMTC). The NMTC Program was enacted on December 21, 2000 to create and provide tax credit incentives for investors for equity investments in certified Community Development Entities (CDEs). Since 2001, this federal program has allocated $26 billion dollars for this purpose. The demographics of the U.S. Virgin Islands make this Territory an ideal location with appropriate projects to utilize NMTC by investors. HOTEL DEVELOPMENT FINANCE In 2011, the Legislature of the Virgin Islands enacted the Hotel Development Finance Act to promote tourism, through financial assistance, to developers of hotel and resorts, particularly on the island of St. Croix. The VIEDA approved a Project Development Plan that will enable developers to pledge portions of future hotel and casino tax revenues to finance the development of new hotels and the rehabilitation of existing ones in the Territory. The VIEDA looks forward to receiving applications for this economic development tool. 37 38 39 FINANCIALS Financials - 40 Financials - 41 Financials - 42 Financials - 43 Financials - 44 Financials - 45 Financials - 46 Financials - 47 Financials - 48 Financials - 49 Financials - 50 Financials - 51 Financials - 52 Financials - 53 Financials - 54 Financials - 55 Financials - 56 Financials - 57 Financials - 58 Financials - 59 Financials - 60 Financials - 61 Financials - 62 Financials - 63 Financials - 64 Financials - 65 Financials - 66 Financials - 67 NOTES NOTES NOTES 71 72 ST.THOMAS 5055NORREGADE, ST.THOMAS,VI00802 (340)774-8104 www.usvieda.org ST.CROIX 116KINGSTREET, FREDERIKSTED,ST.CROIX,VI00840 (340)773-6499