USVI Governor Commends Congressional Black Caucus Members' Support Against Retroactive Economic Legislation

Jun 08, 2010, 15:07 ET from Office of U.S. Virgin Islands Governor John P. deJongh, Jr.

Letter from CBC Members Adds to Momentum for USVI's Economic Partnerships

Long-Term Agreements Are Revitalizing Territory's Economy

ST. THOMAS, U.S. Virgin Islands, June 8 /PRNewswire-USNewswire/ -- Members of the Congressional Black Caucus (CBC) have written to Senator Robert Menendez of New Jersey urging him not to move forward with S.3208, legislation that would undo economic development agreements between the U.S. Virgin Islands and two rum industry partners, Diageo and Fortune Brands. The CBC members highlighted the fact that retroactive changes to the territory's partnerships would cause considerable unnecessary harm to the U.S. Virgin Islands' rum industry, the local government's finances and the territory's residents.

U.S. Virgin Islands Governor John P. deJongh, Jr., lauded the letter's 18 signatories. According to deJongh, "Our partnerships are in the best interests of the U.S. Virgin Islands and the United States, and we appreciate that Congress increasingly recognizes that efforts by Puerto Rico to interfere in our economic development efforts would harm our economy. I thank the members of the Congressional Black Caucus for their efforts to protect these important agreements. They are smart investments that already are ensuring we recover from the global recession and last year's 30 percent drop in local tax revenue."

The House of Representatives recently passed the tax extenders bill without changing the existing rum excise tax cover-over economic development program. This will allow the territories to continue receiving $13.25 of every $13.50 in excise taxes paid by their rum producers through the cover-over program, including a $2.75 portion that is regularly extended by Congress.

"The rum cover-over program is essential to generating economic growth in the U.S. Virgin Islands. I commend the House of Representatives for assuring the program's continued success through the tax extenders bill, and now that the Memorial Day recess is finished, I urge the Senate to follow suit. I strongly encourage them to reject harmful amendments from Puerto Rican allies hoping to overturn the territory's partnerships and harm our economy, including a punitive proposal from Senator LeMieux targeting the U.S. Virgin Islands," said deJongh.

"Our investments and partnerships will grow rum production, and, therefore, our annual rum cover-over revenue from $90 million to $240 million. That's a great return on investment that directly benefits our residents. We are rebuilding the U.S. Virgin Islands' economy, improving the environment through new, clean facilities, creating American jobs and modernizing the rum industry," deJongh continued. "Construction is halfway done at Diageo's distillery and Fortune Brands has broken ground on Cruzan Rum facilities that will improve the environment."

Full text of the letter from the CBC members to Senator Menendez follows.

Honorable Robert Menendez

U.S. Senate

528 Hart Senate Building

Washington, DC 20510

May 11, 2010

Dear Senator Menendez,

We note with alarm that a bill that you have introduced has the potential to cause irreparable harm to the economy and the people of the U.S. Virgin Islands. We believe that capping at 10 percent the amount of rum cover over funds that the Territorial governments can utilize to invest in their local rum industry is a punitive measure that will damage that small U.S. Territory's ability to maintain its fragile economy during these perilous times.

We understand that the Congress provided this program to the Territories as a means of building their economies through the development of their infrastructure. As you are well aware, it is difficult for island citizens, especially for those who live in a small, geographically isolated Territory like the U.S. Virgin Islands to travel elsewhere for work when an industry folds. Your bill S.3208 has the potential to shutter a centuries old industry as it would interfere in legally binding contracts that were designed to enhance its growth and strengthen both its economic and environmental performance.

We know of the ongoing campaign by Puerto Rican advocacy groups to undo the public-private partnerships with the two rum producers that are currently expanding or constructing plants on St. Croix. This is unfortunate because it is based on the false assumptions that the Virgin Islands lured one of the rum producers away from Puerto Rico. The company had already decided to leave that Territory and was seriously considering a foreign destination, when it decided to remain in the U.S., keeping much needed jobs on our shores.

It would be unfair if Congress were to be persuaded by the misinformation spread by self-interested opponents to change the rules retroactively and to "undo" contracts lawfully entered into, years after their effective date. Congress, of course, has the right to legislate prospectively and to set the parameters for future contracts. But proposing legislation that would limit subsidies already granted to the rum companies without concern for the destructive consequences to the Virgin Islands economy is unnecessarily punitive. In addition to potentially shuttering the plants, it would cause a destructive ripple effect in that territory's economy as proceeds from rum revenues are used to back its infrastructure bonds. Congress must avoid interfering with contracts negotiated in good faith reliance on existing law. Before taking any action on this bill, we hope that you will consider the true devastation that this proposed legislation would impose on the people of the U.S. Virgin Islands.

Very truly yours,

Barbara Lee

Diane Watson

Carolyn Kilpatrick

Yvette Clarke

Al Green

John Lewis

David Scott

Gwen Moore

Danny K. Davis

Hank Johnson

Bennie Thompson

James E. Clyburn

Emanuel Cleaver

Sheila Jackson Lee

Laura Richardson

Bobby L. Rush

Alcee Hastings

Donna Christensen

SOURCE Office of U.S. Virgin Islands Governor John P. deJongh, Jr.