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86th year, No. 23811 TUESDAY, DECEMBER 13, 2016 $1
86
A Pulitzer Prize-Winning Newspaper
ST. CROIX ST. JOHN ST. THOMAS TORTOLA
CELEBRATING THE PEOPLE, CULTURES AND HISTORY OF THE VIRGIN ISLANDS SINCE 1930
Mini
Page
Pages 28-29
Tax hikes
With government piggy bank empty
Mapp turns to taxpayers for cash
Unpaid vendor says
trash haulers might
stop collections Page 3
V.I. teams
rack up
golds
in P.R.
Back Page
Centennial
Countdown
Sin taxes on alcohol, tobacco and soda
and taxes on property and time-share owners
would fund court-ordered back pay Page 5
Businesses to face spike in unemployment insurance rate
to help V.I. government pay $69 million federal bill Page 2
Complex looks for
win in Puerto Rico
Back Page
Digging
up V.I.’s
past
Pages 10-11
Boat parade spreads
Christmas cheer
Page 24
www.virginislandsdailynews.com Twitter: @VIDailyNews www.facebook.com/virginislandsdailynews ISSN 2159-3019
2 The Virgin Islands Daily News VIRGIN ISLANDS
Tuesday, December 13, 2016
V.I. businesses face higher unemployment taxes
as territory struggles to pay down $69 million debt
By BRIAN O’CONNOR
Daily News Staff
Territory business owners will pay
four times the normal federal unemployment
tax rate this year because
of an unpaid government debt, documents
show.
The federal unemployment insurance
tax rate is traditionally 6 percent
on the first $7,000 an employee
makes. However, the federal government
usually offers a credit of 5.4
percent, meaning most employers actually
pay about 0.6 percent, according
to the IRS.
States — and territories — with
unemployment insurance programs
meeting federal standards are required
to meet their unemployment
obligations. When a state can’t meet
its unemployment obligations, it’s
entitled to take loans from the Federal
Unemployment Insurance Trust
Fund.
Federal documents show only one
state and one jurisdiction — California
and the U.S. Virgin Islands — are
currently in that position.
The territory owes $69,138,266.61
in loans, according to the U.S. Department
of Treasury website.
In fiscal year 2017, which began
Oct. 1, the loans have accrued
$294,349.15 in interest payments
alone.
The V.I. Labor Department is in
charge of administering unemployment
insurance. Labor Commissioner
Catherine Hendry did not return a
number of phone calls seeking comment.
Government House spokeswoman
Cherie Munchez would not comment,
saying that Hendry would issue
a prepared statement about the debt
by Wednesday.
Provisions of the Federal Unemployment
Tax Act stipulate that in
states or territories with outstanding
balances in the fund, businesses are
subject to a credit reduction, which is
collected and directed toward the unpaid
balance, according to Robert Pavosevich,
Supervisor of the Actuarial
Team in the Office of Unemployment
Insurance’s Division of Fiscal and
Actuarial Services in the Department
of Labor.
Virgin Islands business owners
will pay the original 0.6 percent, plus
an additional 1.8 percent caused by
the unpaid balance, for a total of 2.4
percent, Pavosevich said.
At the fully discounted rate, an
employer would pay $42 for each
employee earning $7,000. At the Virgin
Islands rate, employers will have
to pay $168.
After two years with an unpaid
balance, the discount decreases by
0.3 percent each year until the total
discount disappears, Pavosevich said.
“It’s capped at 6 percent,” Pavosevich
said.
At the full 6 percent, employers
will have to pay $420 for each new
employee earning $7,000 that comes
on board. By law, that money can’t
come out of the wages themselves
and is paid out of the profits or losses
that employers face, said Charles
Engeman, an attorney who served on
the Unemployment Insurance Advisory
Council under the administration
of Gov. John deJongh Jr.
Without payment on the loan — or
waivers or relief, which has happened
three times since 2013 — the rate is
scheduled to max out by 2028. That’s
barring the imposition of step increases,
which can happen if the state
has an outstanding balance for a certain
number of years, or if — as was
the case in the tax year 2012 — step
increases are piled on by other provisions
of the law, which could move
the unemployment tax rate up faster.
“It looks like they’re not making
much headway,” Pavosevich said, referring
to the territory’s debt.
The territory wasn’t alone in 2011,
the first year the rate went up. In all,
20 states and the Virgin Islands received
a 0.3 percent credit reduction
that year, federal documents show.
That’s in part because of the lingering
effects of the Great Recession,
said Bennett Chan, a lawyer who
represents several businesses and has
worked with the St. Thomas-St. John
Chamber of Commerce in the past.
In general terms, states collected
more money than they paid out during
the years leading up to the 2008
market collapse, creating large surpluses.
Sometimes those surpluses
were subject to financial raids. Other
times — as was the case in the territory
— the surpluses were used as
a cause to reduce the amounts collected
for unemployment insurance.
When large-scale unemployment hit
as a result of the recession, surpluses
turned into deficits, Chan said.
“A lot of states were blindsided
by the Great Recession,” Chan said.
“They also had big surpluses and
never foresaw that there would be
this sudden inflow in unemployment
claims.”
Territorial officials were late in reacting
to bring the rate back up to address
the issue, Chan said.
“If we had done it earlier, we probably
would have collected enough,”
he said. “Now they want to make it
up when times are hard.”
In many cases, the government
can’t say what each employer owes
“
I don’t think there’s enough political willpower to do
the kinds of thing necessary to fix the system.
— Charles Engeman,
an attorney who served on the Unemployment Insurance Advisory
Council under the administration of Gov. John deJongh Jr.
“
The business owners always bear the brunt of
whatever deficiencies we have. We have to, at some
point, find other sources of revenue for the
government. Any time there’s any sort of additional
tax burden, fee burden, licensing burden, it’s always
a point of concern.
— Kimberly McCollum,
president of the St. Croix Chamber of Commerce
or has paid in surplus, Engeman said.
The system originally was set up so
that employers faced a roller coaster,
Engeman said.
Each employer had a rate based
on a three-year average. If an employer’s
account paid out more in
benefits than they contributed, the
rate would go up to 5.4 percent. After
three years, the employer’s rate would
drop down to 0.1 percent, because at
5.4 percent, the rate exceeded likely
contributions.
At 0.1 percent, if anyone were laid
off, it immediately moved the employer
back to the 5.4 percent rate.
Employers would oscillate between
the 5.4 percent rate and the 0.1 percent
rate.
“It was 5.4 for many employers,
and that’s what an average employer
would pay out over the course of 17
years for one employee,” Engeman
said.
As a result, the unemployment
insurance fund accumulated large
surpluses. To reduce the surpluses,
the V.I. Labor Department dropped
the automatic increase based on a
negative account, and lowered the
minimum rate to 0. Less money came
in, even as unemployment rates remained
high and benefits remained
expensive.
A few steps could help move
the system back to sound footing,
Engeman said. For example, better
record-keeping would help reduce
delinquencies. Reducing unemployment
insurance benefits and
reducing the amount of time the
unemployed are eligible for unemployment
would both help. Verifying
that those collecting unemployment
are seeking employment, and
generally reducing fraud also would
help, Engeman said.
“I don’t think there’s enough political
willpower to do the kinds of thing
necessary to fix the system,” he said.
Chamber of Commerce officials
on both islands decried any increase
in taxes or fees for businesses.
“Despite what the governor and
the senators think, the economy of
the Virgin Islands is not doing that
well,” said Tom Brunt III, a member
of the St. Thomas-St. John Chamber
of Commerce Board of Directors.
Kimberly McCollum, president of
the St. Croix Chamber of Commerce,
said any increases to fees or taxes was
worrying.
“The business owners always bear
the brunt of whatever deficiencies we
have,” she said. “We have to, at some
point, find other sources of revenue
for the government. Any time there’s
any sort of additional tax burden, fee
burden, licensing burden, it’s always
a point of concern.”
The folly of the situation is compounded
by the fact that business
owners themselves aren’t allowed to
file for unemployment if they lose
their jobs, McCollum said.
“You’re still paying unemployment
taxes on what you’re paid, but you are
not allowed to request compensation
should you find yourself in a position
to file for unemployment,” she said.
— Contact Brian O’Connor at
340-714-9130 or email boconnor@
dailynews.vi.
ISSN 2159-3019
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Tuesday, December 13, 2016 VIRGIN ISLANDS
The Virgin Islands Daily News 3
Work stoppage threat gets Waste Management to table
By JONATHAN AUSTIN
Daily News Staff
A Waste Management Authority
contractor had planned a work stoppage
this week because the Virgin Islands
Waste Management Authority
owes vendors a lot of money and they
can’t keep working for nothing.
However, discussions with administrators
at Waste Management led Peter
Caproni, owner of Your Environmental
Services Inc., to say he’s holding off on
urging garbage collection vendors to
stop work on Wednesday.
“I’m not intent on messing up our
communities,” said Caproni, whose
company picks up the bin sites on St.
John.
“We’ve created a dialogue. I am
a fair person,” Caproni said. “I want
to listen to what they have to say. It
seems as though they’re going to put
together an offer.”
Caproni had told The Daily News
on Monday he was announcing a
work stoppage beginning Wednesday.
He said he and other haulers were going
to stop emptying scores of bins
across St. Thomas and St. John because
Waste Management had failed
to pay them for weeks or months.
Caproni said he has worked 26
years in trash removal and roll on/
By BRIAN O’CONNOR
Daily News Staff
Police officials dismissed this week
multiple complaints filed by a former
employee against high-ranking members
of the V.I. Police Department.
The complaints are all filed by
Lynne Harrison, the former director
of the Police Training Bureau.
In one such complaint, Harrison
alleges Deputy Commissioner Curtis
Griffin Jr. was “receiving compensation
when absence from employment
without proper leave documentation,”
and “payroll fraud/embezzlement
— falsifying timekeeping records,
or when employees are not working
while on the job.”
In a letter attached to the claim,
Harrison says that from August 2016
to the present, Griffin received compensation
while not reporting for
duty at the department.
“In addition, he has not left forwarding
contact information to those
under his supervision and often was
not available during contact attempts
occurring during normal working
hours,” Harrison wrote. “Griffin was
available only via VIPD email which
was delayed or not deliverable, thus
leaving him ineffective and not suitable
to be classified as working telecommuting.”
Griffin dismissed the complaints
roll off services in the territory. He
said his company empties “all the
rear load bins on St. John,” and does
emergency Waste Management Authority
work on St. Thomas.
Contacted by The Daily News,
Waste Management Authority executives
were unaware Caproni and possibly
two other haulers were walking
off the job.
Roger Merritt Jr., the newly hired
executive director of the agency, said
Monday evening he wants to meet
with all the contracted haulers to see
what they are owed and come up with
a plan to get them paid.
“I understand that the haulers need
to get paid,” Merritt said. “We need
to ensure we are able to make timely
payments.”
Caproni said he is willing to listen,
but the answer has to be that the
Waste Management Authority comes
up with payment for services already
rendered.
“The solution is, you pay your bills
on time,” he said.
Patrick Charles, one of the vendors
Caproni mentioned, said Monday that
he has “reasons to be on board” with
a work stoppage, though he couldn’t
make such a decision alone.
“I realize that he is upset,” Charles
said, referring to Caproni. “It is time
for anybody to get upset. I’m in
agreement with him.”
Charles said his firm empties bins
on St. Thomas and hauls trash from
Waste Management Authority collection
sites in a number of government
housing communities.
Regarding how much Waste Management
owes him, Charles replied:
“It depends on what you call a lot.
They’re two months behind, now.”
Caproni wouldn’t say how
much Waste Management owes
him in total.
“It’s a big amount of money,” he
said. “I’m fed up with the whole
thing.”
Caproni said he estimated that
Waste Management owes various
vendors millions of dollars.
The Waste Management Authority’s
inability to pay vendors has been
a topic during Senate testimony over
the years.
Steve Aubin, who was interim executive
director of the Waste Management
Authority for most of 2016,
against him, and said he welcomed
an investigation.
“I want them to investigate because
I’m hoping — when all is done
— I’m hoping that maybe I can sue
her for slander,” he said. “I have nothing
to hide.”
Harrison’s letter calls for Griffin to
be investigated.
“While his explanation of absence
has been reported as a long term medical