U.S. Virgin Islands calls for increased rum tax, more aid

U.S. Virgin Islands Gov. Albert Bryan Jr. asked a U.S. Senate committee for an increased rum cover tax, more federal aid, and laxer Environmental Protection Agency enforcement.

Bryan said the U.S. Congress should extend the rum cover tax rate at $13.25 rather than $10.50 per proof gallon retroactively for 2022 as well as for 2023.

In prepared marks to the U.S. Senate Energy and Natural Resources Committee Bryan asked Congress to make the higher rate permanent.

When the territorial government refinanced matching funds bonds in March, it assumed the higher rate would be authorized indefinitely and it used that assumption to claim it had solved its problem of underfunding the territory’s pension system.

Not having the higher rates is expected to cost the territory $60 million a year.

Moody’s Investors Service has said the lower rum cover rate pressures the islands’ retirement system, which before the bond sale, was expected to run out of money by December 2024.

If the pension system ran out of money, the government would likely default on its matching fund bonds, Moody’s said this summer. The ratings agency rates the bonds Caa2.

Congress should waive the cost share on federal hurricane aid stemming from two powerful 2017 hurricanes, Bryan said. The local 10% share the federal government currently expects the territory to cover would amount to a year of general funds, Bryan said. The Federal Emergency Management Agency has the right to waive the local share.

Bryan asked Congress to lift the annual $135 million cap on Medicaid aid for the territory, since the territory’s needs will exceed that this year and the territorial government would have to cover those costs. He said states do not have Medicaid aid caps.

The U.S. Environmental Protection Agency’s “very aggressive” environmental enforcement, that led to shutting down of St. Croix’s oil refinery in 2021, was another concern Bryan raised. The refinery normally accounts for 20% of the islands’ employment. “If we can’t get the refinery up, we cannot be sustainable.”

Finally, he said the U.S. Virgin Islands would “love” to have a Caribbean energy grid and he specifically mentioned Puerto Rico.

St. Thomas, one of three main U.S. Virgin Islands, is less than 15 miles from the Puerto Rican island of Culebra, which receives electricity from the Puerto Rico mainland.