Virgin Islands Real Estate Trends

As reported in the USVI Daily News:

"First-time home buyers in the Virgin Islands are eligible for a tax credit of up to $8,000 that is being given to other new homeowners in the mainland United States under the American Recovery and Reinvestment Act.

Delegate to Congress Donna Christensen said in a press release that there had been concern about the tax credit's availability in the territory because language in the stimulus bill states that people who are residents of the 50 states and Washington, D.C., are eligible for it.

Internal Revenue Bureau Director Claudette Watson-Anderson said the territory's residents are eligible for the tax credit because the territorial tax code is exactly the same as the federal tax code.

The tax credit is not expected to affect the territory's revenues. Watson-Anderson said the credit should be covered by funds from the federal government to reimburse the Virgin Islands for several tax reductions.

"It should be coming out of the $50 million that the federal government is going to give us to pay out credits," Watson-Anderson said.

The credit is available to qualified people buying their first primary residence this year, and will be applied to 2009 income taxes. For information, contact the IRB at 773-1040 on St. Croix, 715-1040 on St. Thomas, and 777-1446 on St. John."

Is this advertising exciting enough to bring visitors to our lovely paradise?

Excerpt from the US Virgin Islands aily News:

ST. THOMAS - The V.I. Tourism Department showed off the territory's new brand, slogan and advertising campaign Tuesday at the USVI Hotel and Tourism Association's 16th annual Destination Symposium.

The new ads feature the slogan, "You, Unscripted." The slogan embodies the new brand, which focuses on the visitor's desire to create their own, unique vacation experience, Tourism Commissioner Beverly Nicholson-Doty said.

The ads show people who have "lost" their everyday identities and "found" a new one through their Virgin Islands vacation. For example, one print ad shows a woman swimming in turquoise waters. It says, "lost: multi-tasker, found: mermaid." A mermaid tail has been drawn on top of the photograph to illustrate the fantasy of the vacation experience.

Sebastian Benjamin is the USVI account director at JWT, the Atlanta-based advertising agency contracted by Tourism to develop the territory's new brand and create the new ads. The agency holds a $10 million contract with the department, $1.2 million of which was used to develop the new branding for the territory. The funding for the contract comes from the Tourism Advertising Revolving Fund.

Benjamin said the idea is to appeal to travelers who want a diversity of experiences.

"It invites you to lose the label of who you are when you're back home," Benjamin said about the new campaign.

The tourism industry professionals at Tuesday's meeting were impressed with the new campaign.

"It's really fantastic what they've done," said Sharlene Brenkus, Wyndham Sugar Bay director of sales and marketing.

Her colleague Arianne Valentino, global sales director for the Wyndham Hotel Group, agreed.

"You take our everyday lives and you allow us to escape," she said. "I'm blown away."

Since the 9-11 terrorist attacks, the department has pushed the fact that the islands are under the U.S. flag with the slogan "America's Caribbean." Nicholson-Doty said the idea behind that branding strategy was to make Americans feel safe and comfortable with travel to the territory.

The fears following 9-11 have faded and to compete against other Caribbean destinations, Tourism has expanded its reach to new, international markets that do not respond to the "America's Caribbean" theme.

To develop the new platform, Tourism's marketing team talked to a wide range of people in the territory's key markets. Through interviews and focus groups, the department was able to get a better feel for what today's traveler is looking for in a Caribbean destination - an authentic experience of a destination and a trip that goes "off the beaten path."

The $6 million campaign will consist of 30-second television spots, magazine, newspaper and Internet advertising. The ads will target a range of market segments including bridal and romance, culture and heritage, sailing and yachting, meetings and incentives, divers and African-American travelers.

The national print and television ads started running Monday. Nicholson-Doty said they will do a short, six-week run now, then hold off until the fall when marketing will ramp up in preparation for the coming tourist season.

The new ads were shot on all three islands in February using local actors recruited through open casting calls. The soundtrack for the radio and television ads was recorded by the Rising Stars Steel Orchestra. 

Tourism officials said JWT worked with local vendors including caterers, casting, scouting, make-up artists, wardrobe and production services - contributing about $1 million to local economy, according to Tourism.

Samples of the print ads and a 30-second television spot can be viewed at www.usvimarketing.com.

The new brand and advertising campaign is the final piece of the department's overhaul. In December, the new logo - a multicolored moko jumbie juggling three stars - was unveiled. Benjamin said that while many Caribbean islands have moko jumbies as part of their culture, no one has used the image as a logo before.

In January, the new $250,000 website - www.visitusvi.com - was launched. Benjamin said it is receiving about 63,600 visitors a month and each person is spending about five minutes looking at the site. Visitors to the website can plan their trip, link to local businesses and view maps of the islands.

Soon, additional features will be added to the site including a full translation into Spanish, a travel agent education section and the ability for businesses to respond to requests for proposals sought by the department.

Fans of Herman Wouk chuckle at the latest uproar on the property tax issue!

As reported in the Virgin Islands Daily News:

"The U.S. 3rd Circuit Court of Appeals ruled in an opinion published Tuesday that the V.I. government is prohibited from sending out property tax bills - causing thousands of property tax bills sent out last month to be immediately rescinded and making the territory's already strained budget situation more tenuous.

In the opinion written by Chief Judge Anthony Scirica and agreed to by judges Thomas Ambro and D. Brooks Smith, the high court upheld the September 2008 order from Chief V.I. District Court Judge Curtis Gomez that said the government has no authority to send out property tax bills right now and the government is in contempt of court.

"We find no clear error in the District Court's underlying findings of fact, and we agree with the District Court's application of fact to law," the opinion states.

The opinion invalidates all of the 2006 property tax bills sent out last month. In a statement sent out by Government House on Tuesday night, Government House spokesman Jean Greaux Jr. said that tax bills that have been sent out will all be rescinded, and the executive order setting July 1 as the due date for the tax bills will be vacated.

According to the statement, the lack of taxes will represent about a $28 million loss in revenues.

Several months ago, Gov. John deJongh Jr.'s financial team had pegged the territory's projected financial shortfall at $188 million for the current fiscal year. It is not clear where property tax revenues fit into those projections.

Government officials who were hoping to use their interpretation of the laws and previous court rulings to justify sending out property tax bills had little to say about the 3rd Circuit's opinion on Tuesday. Government House did not wish to comment beyond a short statement released Tuesday evening, and Greaux did not return telephone calls seeking more information.

Attorney General Vincent Frazer declined to comment on Tuesday. Justice Department spokeswoman Sara Lezama said that Frazer and other top-level officials needed Tuesday to fully understand the ruling and decide what comes next.

Tax Assessor Bernadette Williams could not be reached for comment.

This is the newest twist in the territory's long and convoluted journey to arrive at a fair and equitable property tax system. Litigation about the fairness of the territory's property tax valuations and assessments has stretched back almost a decade, after a group of commercial property tax owners sued the government in District Court because they believed the system of assessing property taxes was unfair and unconstitutional.

Three years of property taxes have gone uncollected because of the legal quagmire.

Last August, the government sent out tax bills for 2006 using newly assessed property valuations and a new formula for calculating the taxes based on use of the property. Because the court had not yet given the government permission to send out the property taxes, Gomez held the government in contempt of court.

Gomez ordered all new tax bills to be rescinded and imposed a $5,000 daily fine against the government until it complies with the order directing the government to pay plaintiffs' attorneys' fees and other costs and ordering the creation of a new government account - the Property Tax Contempt Expense Fund - to satisfy payments the government must make.

The V.I. government immediately appealed the contempt ruling to the 3rd U.S. Circuit Court of Appeals. The government also requested that the hearing be expedited and that the high court postpone enforcement of the contempt order. In October, the 3rd Circuit granted the government's motion.

At that time, government officials saw the stay as a green light to reissue tax bills. Government officials reasoned that since the contempt ruling invalidated the new tax bills, it followed that a stay of that order allowed the government to issue valid tax bills.

In January, the government and attorneys for the property owners who initially brought the property tax litigation in 2000 argued the legitimacy of Gomez's contempt ruling before the 3rd Circuit in Philadelphia.

While waiting for the ruling from the 3rd Circuit, the V.I. government last month again sent out 2006 property tax bills and the governor issued an executive order mandating that they be paid by July 1.

At the time, Frazer said that the government's fiscal situation was "quite dire," and that the government must be able to get the money it needs to operate.

No information was available on Tuesday about how many people had paid those bills to date.

In the 20-page opinion, the 3rd Circuit judges reaffirmed several decisions they had made during the lifespan of the litigation. The appellate court agreed with Gomez's ruling. The court order prohibiting new tax bills is still valid, the 3rd Circuit's opinion states, and Gomez correctly ruled that there are still benchmarks the territory must reach to have a fair and equitable tax system.

"We see no abuse of discretion," the opinion states.

James Derr, the lead attorney for the property owners who brought the initial lawsuit, said that the opinion was what the plaintiffs expected. No new legal ground was broken in the opinion, and the 3rd Circuit basically reiterated legal points it had made before.

"Unfortunately, the government put itself in something of a quandary," Derr said. "The government needs money, and the government sent out tax bills. People paid their taxes, and now the government has to recall them. It will be a real problem for the government."

Derr said he hopes all of the attorneys involved in the case can come together before Gomez soon for a status conference to reaffirm where things stand and what should be done next. "

Stay tuned for more island insanity...

For those of you who are looking to buy in the U.S. Virgin Islands and may qualify as a "first time home buyer",  please be advised that the tax credit that is being offered nationwide is currently NOT applicable to the Virgin Islands.

Our VITAR leadership is working with Delegate Christensen and top NAR personnel to address this situation.

We will post when this situation is resolved. Hopefully this does not deter you from exploring real estate opportunities available in our beautiful U.S. Virgin Islands.

Our motto remains - "We love paradise and it shows!"

A recent article by Steven Etkind & Roger Lorence of Sadis & Goldberg LLP describes Sen. Carl Levin, Democrat of Michigan, as having “declared war” on offshore funds managed by U.S. investment advisors with his “Stop Tax Haven Abuse Act” (S. 506).

Sadis & Goldberg LLP represents over five hundred domestic and offshore hedge funds and venture capital funds, registered investment companies, registered investment advisers and broker-dealers.

No doubt, there is much to fear with this proposed legislation.

Interestingly, the US Virgin Islands may be an excellent solution for offshore funds managed by US investment advisors. How?

The US Virgin Islands Economic Development Program administered by the Economic Development Commission (EDC Program).

The US Virgin Islands EDC Program falls under jurisdicton of the US Department of the Interior and is authorized jointly by the United States tax laws (IRC §934 & §937) and the United States Virgin Islands tax laws. It is a legitimate program whose purpose is to draw business to the US Virgin Islands, help the Virgin Islands economy diversify, and is designed to produce significant, positive economic benefits to the Territory of the US Virgin Islands and its residents.

To do so, the US Virgin Islands EDC Program offers various tax incentives, which include:

• 90% exemption on US income tax (results in a top federal tax rate of 3.5%!)
• 100% exemption on 4% gross receipts tax
• 100% exemption on 0.75% real property tax
• 100% exemption on 4.2% excise tax
• 100% exemption on 7% US Customs import duty
• 1% VI Customs Duties instead of 6%

These incentives can allow a fund domiciled and managed in the US Virgin Islands nearly the same efficiencies as the offshore model, but with some great upsides regarding this Congressional Bill.

• Not a tax haven - The US Virgin Islands is a US territory under the US flag and protection.
• No bank secrecy laws - there are no bank secrecy laws that are being utilized to hide assets or transactions.
• Authorized by Congress - the US Virgin Islands Economic Development Program is congressionally approved, legal and transparent..

With the US Virgin Islands EDC Program having such solid legal footing and the “Stop Tax Haven Abuse Act” being such a hot topic in Washington, we encourage domestic and offshore hedge funds and venture capital funds, registered investment companies, registered investment advisers and broker-dealers to consider moving to the USVI.

The first website is www.64west.com, and it centers on what services are available at its Global Crossing facility located on the northern shore of St. Croix, David Zumwalt, Tech Park's executive director, said Thursday at a press conference.

In April 2008, the Tech Park spent about $2.6 million to secure a 15-year lease for space and bandwidth in the Global Crossing fiber optic hub that funnels a tremendous amount of data traversing the western hemisphere.

In addition to access to ultra-high bandwith, the Tech Park has signed contracts with three "strategic partners" - Tropical Towers Inc., Baltimore Technology Park, doing business as Adveniat, and JetPay - to provide telecommunications, web hosting and other data center services and transaction processing services.

As part of its marketing efforts of these services, the Tech Park established the brand name "64 West," which is derived from the location of the Virgin Islands: 64 west longitude.

The second web site is www.ecommerceisland.com and its focus is on the tax incentives available through the Tech Park's subsidiary UVI Tech Park Protected Cell Corp.

Under V.I. law, the subsidiary can award qualifying companies - which show they can help build a sustainable technology sector and generate revenue for the Tech Park - benefits similar to the tax breaks offered by the territory's Economic Development Commission.

If approved, the companies are designated protected cell companies that are eligible for tax breaks including up to 90 percent reduction in V.I. source income tax liability, and exemptions on property, excise and withholding taxes and customs duties.

Tech Park board chairman Auguste Rimpel Jr. said having the three strategic partners, which are protected cell companies, in place is a major milestone and now the message needs to get out that the park is open for business.

Top executives from the three strategic partners also attended the conference and expressed their support and commitment to the Tech Park.

BTP chairman Tom Cunningham likened the Global Crossing hub as a gold or silver mine for the territory. He said his company already has invested and installed $500,000 in equipment at the Global Crossing facility so far.

There are millions of digital products that companies are selling today from newsletters, services and software, he said.

The Tech Park's overall mission to develop local internships, and training in the technology sector also is critical, he said.

As a former teacher in Belize, Cunningham said that the industry is always changing and there is a constant need for mentoring and teaching.

"This is a great day. We have all the strategic partners in place," said Trent Voigt, chairman of Texas-based Jetpay, which is one the world's larger payment processing corporations for credit card merchants worldwide providing high-speed authorizations, transactions and processing.

Last year, JetPay processed about $17 billion in payments, he said.

JetPay is working with local banks, and the resulting deposits from his company's transactions will be a huge asset to businesses in the territory, he said.

Voigt said that JetPay is deeply committed to customer service and wants to establish a local call center in the Tech Park's proposed 20,000-square-foot office complex on 10 acres of land set aside on the university's St. Croix campus.

The construction of the facility has been slow moving.

On Wednesday, the Tech Park board approved preliminary plans for the building. The facility will cost $9.9 million, but the Tech Park has only $7.5 million in its coffers at this time.

Tech Park management will seek additional money through federal agencies and programs slated to get large chunks of federal stimulus funds earmarked for broadband development.

Tropical Towers is the sister company of Massachusetts-based Atlantic Tele-Network, a publicly traded telecommunications company with more than $388 million in assets, Cornelius Prior, ATN's chairman said."

Hopefully this has a positive effect on island life and our economy. Maybe it's time that the islands moved into the modern age and out of its sometime archaic ways.

St. Thomas Carnival - an annual celebration steeped in Virgin Islands tradition and culture - spans a three-week period beginning on April 12 with the Prince and Princess Show and ending May 2 with the Adults' Parade, fireworks, and Last Lap.

The 2009 winning theme was submitted by Monica Rabsatt, and "Echoes Through Time" will be packed with entertainment, Carnival officials said. About two dozen events appear on the schedule including musical entertainment, calypso competitions, traditional games, family events, cultural fairs, parades and pageants.

Carnival is a catalyst that brings the entire community together, and this year's events will be great, Caswil Callender, the committee's executive director, said at a press conference on Wednesday.

Committee officials announced that the Carnival Village this year will be "Chummy's Carnival Kitchen," in honor of Rosalind "Chummy" Titley, who has been a booth owner in the village for many years.

The Cultural Fair will also be named "Marie's Local Delights" after longtime vendor Marie David.

Wayne Dawson will be the marshal of the Children's Parade and Sen. Shawn-Michael Malone will be the marshal of the Adults' Parade.

The committee receives financial assistance from the government each year to help fund the festivities and also heavily relies upon sponsorships to put on the weeks-long Carnival.

This year, the government has appropriated $550,000 to fund events, with $300,000 coming from from the Tourism Advertisement Revolving Fund, and $250,000 from the General Fund.

Last year, the committee received $600,000 from the government, Callender said.

While public funds are critical, Callender said that the committee still needs about $500,000 more to meet all expenses.

Callender said that the economic downturn has severely cut its sponsorship from the private sector this year.

St. Thomas Carnival injects millions of dollars into the territory's economy each year and the business community needs to help out because they are beneficiaries of the economic boost, he said.

"We cannot accomplish our goal without the support of the business community," Callender said, adding that if enough funds are not collected, the committee will end up in the red.

As reported recently in the Virgin Islands Daily News:

In a decision with major implications for development on the territory's offshore cays, a large-scale residential development has been permitted for a rocky island north of St. Thomas.

The St. Thomas Coastal Zone Management Committee voted unanimously Tuesday night to allow the luxury Thatch Cay Ocean and Beach Club to be built during the next decade.

Thatch Cay LLC, of which Paul Lange of Atlanta and Isaac Levy of California are principals, had applied to build 101 homes and 24 support buildings on Thatch. The roughly 230-acre island lies about half a mile north of Coki Point.

Project architect Robert deJongh thanked CZM for its confidence and support. "We recognize that this is a major undertaking, and we pledge to you that we will do a fine job," he said.

Lange could not say how soon construction would begin or how much the development was projected to cost.

The project will include a community center, clubhouses, yoga pavilion, spa, two dining areas, two tennis courts, sewage treatment plants, a reverse osmosis plant, generators, a fuel storage facility, 21-slip dock, 25 boat moorings and a helicopter landing area.

Of the three artificial beach areas the developers proposed to construct, the CZM committee allowed only two to go forward. A beach proposed for Stony Bay on the island's western end is not permissible because it could send sand to the sea in storm surges, CZM staff said. The sand could damage federally threatened elkhorn coral.

CZM attached another 21 special conditions to the major land and water permit - including a requirement that the developers pay for CZM to hire at least one independent permit compliance monitor.

Other special conditions included:

- No pump-out or refueling services can be provided at the permitted dock, and no additional docks will be permitted for any future development on Thatch Cay.

- No more than 25 boats can be moored in the mooring field, and five moorings must be reserved for the public. No live-aboard boats are allowed in the area.

- The Crown Bay dock shall be the primary staging area for moving construction materials to Thatch Cay. The Red Hook dock is only to be used when Crown Bay is unavailable.

- No topsoil may be taken to the cay for landscaping.

- The developers must reach a memorandum of understanding with the V.I. Division of Fish and Wildlife regarding the endangered Virgin Islands tree boa, which may be present on the island.

- The developers must develop a formal plan to remove Thatch Cay's hundreds of feral goats in consultation with federal and local authorities.

- No water from constructed swimming pools can be discharged into the ocean.

The developers will pay $35,000 per year for 20 years as an occupancy fee for using submerged lands. The company will build a 316-foot-long dock and a 60-foot-wide barge landing at Eva Point on Thatch Cay's southeast shore.

The St. Thomas CZM Committee's decision Tuesday was a departure from other recent decisions regarding development of offshore cays.

Last June, the committee rejected a proposal to carve 162-acre Great St. James into 53 lots for private residences. And in October, the committee turned down an application to subdivide 26 acres into 16 residential lots in Inner Brass.

Thatch Cay LLC, however, offered more detailed plans on infrastructure and public services. Those issues included providing power and water, collecting trash, disposing of sewage and keeping the island safe.

The developers will install a submarine cable from Coki Point to provide V.I. Water and Power and Authority electricity to the project. They also will cluster sewage treatment systems on the island and pay all costs to transport solid waste to the Bovoni Landfill.

Thatch Cay LLC will provide full-time security on the island and work with the V.I. Fire Service to train staff to respond to fires.

Committee chairman Austin Monsanto and members Sarah Simmonds, Winston Adams, Fern LaBorde and Henry Harrigan were present for Tuesday's meeting.