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GOVERNOR SUBMITS THREE PROPOSALS TO ESTABLISH TAX INCREMENT FINANCING, SPECIAL ASSESSMENT DISTRICTS AND FINANCING IN THE VIRGIN ISLANDS

Governor John P. deJongh, Jr. on Thursday submitted legislation that will establish tax increment financing and will expand economic opportunities for all Virgin Islanders. In a letter to the Senate accompanying the three proposed bills, deJongh wrote that it is his firmly held belief that "economic opportunities are best achieved through public-private partnerships which "harness the energy and ingenuity of the private sector with the vast resources of the government." 

DeJongh described tax increment financing (TIF) as a proven approach for achieving the goals of economic expansion. "Many states and municipalities have implemented TIF legislation which has generated significant funding of public infrastructure improvements and other investments in support of a broad range of economic development projects. Fundamentally, TIF works by allowing projects to be financed by pledging the increases in tax revenues that can be reasonably anticipated to be collected by government once the financed project or activity is completed. In addition, the TIF concept presented also incorporates the use of special assessments financing. This mechanism works by forming of special assessment districts within a designated TIF area, where public infrastructure is to be constructed, such as sewers and water mains, and a special assessment is paid on the real property comprising the special assessment district to assist in the funding of said public improvements and the overall TIF development," deJongh explained in his letter which accompanied the proposed bills.

Tax Increment and Special Assessment Financing (SAF) have become widely-used vehicles for public financing for economic development projects in the United States. The first legislation of this type was passed in 1952 in the State of California, and as of today has been enacted in 49 states and the District of Columbia. In 2007 alone, over $1.0 billion dollars in TIF bonds and notes were issued, and over the last ten years the top 100 issuers of TIF bonds completed over 2,000 bond issues, with a par amount exceeding $33.0 billion, thereby indicating a strong acceptance by investors.

Tax Increment Financing and Special Assessments Financing are flexible and established tools used for financing a variety of costs and improvements pertaining to public infrastructure, land acquisition, utilities, planning costs and various other costs for retail and residential development projects, as well as sports facilities and urban revitalization. "They have been the development tool utilized in cities as large as Atlanta—where the entire Underground project was supported by TIF funding — Chicago and San Francisco, as well as in smaller and mid-sized communities. Projects financed by TIF and SAF have included affordable housing, waterfront development, urban revitalization and public infrastructure, such as the multi-phased on-going South Waterfront revitalization project in Knoxville, Tennessee," deJongh wrote.

The creation of TIF and SAF will follow a process that includes an application and review process through the Virgin Islands Economic Development Authority, approval by the Senate for the levying of a tax or approving the issuance of bonds, and approval by the Virgin Islands Public Finance Authority (PFA) for any bond issuance. Therefore, the entire process includes a review and approval process that maintains Senate authorization and PFA approval, but ultimately such bonds will be special obligation bonds secured solely by the pledge of the TIF, and not the broader support of the credit of the of the Government or the PFA. Further, members of the public also have an opportunity to comment on the proposed projects, thus, making the process transparent to the community.

"I hope that we will all agree that this legislation will provide an important tool as we work to support new investments across our community," deJongh said in his transmittal letter. 

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