Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

USVI Government to Guarantee Developer Leases

Posted in Corporate & Financial Services, Government Relations, Real Estate

drink on beachA bill recently passed in the U.S. Virgin Islands Legislature would allow the Government of the Virgin Islands to guarantee up to $20 million of hotel developers’ leases for up to 25 years, a move that supporters cheered as a boon to the islands’ economic development.

Under the legislation, the Public Finance Authority would have the power to issue loans backed by the full faith and credit of the Government of the Virgin Islands. St. Croix, in particular, stands to benefit from the legislation, as the island is suffering from a lack of new hotels despite there being a number of incentives for new hotel construction.

Some lawmakers had expressed concern about what should happen in the event of a developer failing to pay. However one of these officials, Sen. Janette Millin Young, says she was reassured that there would be sufficient preliminary measures established to prevent the government from having to spend unnecessary money on this program.

The construction of new hotels should provide a welcome economic boost to the U.S. Virgin Islands, as the economy is heavily reliant on tourism. On average, 680 cruise ships stop in the Territory each year, carrying 75 percent of the Territory’s 2.6 million annual visitors on shore. But because hotel construction has stalled lately, there are only about 5,000 hotel rooms available on the islands, putting considerable strain on the hospitality industry.

Tourism contributes to the local economy indirectly, as well. For example, rum taxes paid by visitors bring in another $80 million each year. However, much is dependent on the ability of hotels to accommodate these visitors, and it is hoped that the lease guarantees provided under the new legislation will jumpstart the much-needed development in the hospitality sector.

Although St. Croix is the largest island in the Territory, its local focus on smaller, more intimate tourist lodging leaves it in particular need of additional hotels. Adding to the strain has been the closure of the HOVENSA oil refinery in 2012, the economic effects of which still linger on the island. The 2011 Hotel Development Act was expected to spur major development activity, but a $500,000 annual fee included in the law proved to be restrictive to all but the largest hotels.

Between the lease guarantee and a change to the fee structure that will be more conducive to smaller and medium-sized hotels, it appears the days of insufficient hotel development on St. Croix, and throughout the Virgin Islands, may be approaching an end.

BoltNagi is a widely respected and well-established government relations law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

Case Examines the Rights of Condo Associations to Force Unit Auctions

Posted in Litigation

vacantVacant units at the Sapphire Beach condominiums on the East End of St. Thomas, U.S. Virgin Islands are at the center of a recent complaint submitted to the territorial court on behalf of condo unit owners, who claim the failure of the owners of those since-vacated units to pay common charges has put considerable financial burden those who remain in good standing.

The owners who filed the complaint have had to assume payment of those charges themselves, as well as forego necessary maintenance and other improvements and enhancements to common property. James Derr, the attorney for the Sapphire residents, says the condo association has missed out on about $250,000 in uncollected fees for both the units and marina slips.

In all, 13 condo units and eight marina slips at Sapphire Beach are vacant. Unfortunately, Sapphire Beach cannot simply sell those units to new buyers because there are liens on the properties, and until the lien-holders are paid or the liens are removed, foreclosures cannot be finalized. Bayside Resort Inc., the owner of record for the properties in question, owes property taxes on the units going back to 1999, in amounts somewhere between $35,000 and $40,000 per unit.

Because there has been no progress in collecting payment, the Sapphire Beach condo owners filing the complaint have asked the U.S. Virgin Islands government to auction off the condo units and marina slips in question. An auction, according to Derr, would likely result in what he described as “a long line of bidders” hoping to purchase the vacant units and marina slips.

The complaint comes on the heels of a recent audit report that criticized the Office of the Lieutenant Governor for its mishandling of property auctions in recent years, and is sure to keep attention focused on that office as it makes its way through the court system.

One factor that makes the Sapphire Beach condo owners’ complaint interesting is that the homeowners’ association filed the complaint as a taxpayer, citing a law that gives taxpayers the right to sue to force the Government of the Virgin Islands to enforce laws. In this case, the law in question provides for the public auctioning of property as a way of settling outstanding tax debts. Although this particular law has rarely been cited, it has come up in some pivotal cases during the time since the taxes on some of those Sapphire Beach condominiums were last paid.

Because the Sapphire Beach condominium association had previously asked the government to collect outstanding property taxes, and those pleas were met with silence, the hope is that filing this formal complaint will finally settle the matter.

BoltNagi is a widely respected and established real estate and government relations law firm serving individuals, businesses and agencies throughout the U.S. Virgin Islands.

Understanding Key Exemptions During Bankruptcy

Posted in Litigation

womanFiling for bankruptcy protection does not necessarily mean giving up all of your property and assets. In both Chapter 7 and Chapter 13 bankruptcy filings, exemptions allow you to hold onto certain assets. Depending on the particular item, your property may be protected up to a certain dollar amount. In other cases, the protection is unlimited.

Federal bankruptcy code and U.S. Virgin Islands territorial law may have different levels of protection for different types of assets, but you are required to use only one set of exemptions or the other — rather than picking and choosing when it comes to each item.

Chapter 7 and Chapter 13 bankruptcy exemptions work in different ways. In Chapter 7 bankruptcy, exemptions help you keep property and assets, and anything you’re able to exempt the trustee cannot sell. In Chapter 13 bankruptcy, exemptions allow you to keep your assets, but require you to pay back your debt within a certain amount of time. Your payments are determined by a combination of disposable income and non-exempt assets. The more you can exempt, the lower and more manageable your monthly payments will likely be.

U.S. Virgin Islands law provides protection for many different types of assets during a bankruptcy. In fact, most exempted assets are protected without a cap on the dollar amount. The exception to this rule is the homestead exemption, which is protected up to $30,000, plus a $3,000 exemption for household goods currently in use and owned by the head of the household. Otherwise, there is no maximum amount for other exempted assets, including a variety of government benefits like unemployment, disability and public assistance and life insurance policies.

Federal exemptions offer some slight variations, mostly in that many assets have caps on the dollar amounts that will be exempted. Home equity, for instance, is protected up to $22,975 (or $45,950 for a couple). However, federal law also provides for exemptions that Virgin Islands code does not, and in most cases, the limits are doubled for a couple filing jointly for bankruptcy. For example, motor vehicles up to $3,675 ($7,350 joint) are exempted. Jewelry, which is specifically not exempted through local law, is exempt up to $1,550 for an individual and twice that for a couple under the federal code.

It’s also important to note that choosing whether to use the territorial or the federal exemptions may depend on how long you have resided in the U.S. Virgin Islands. If you have not lived in the Territory for the two years prior to filing, you may face challenges in attempting to secure exemptions under the Virgin Islands code. For this reason, and because the distinctions between federal and territorial bankruptcy exemptions can be difficult to understand, you should work with a skilled bankruptcy attorney throughout the process. 

BoltNagi is a widely respected and well-established civil litigation law firm serving individuals and businesses throughout the U.S. Virgin Islands.

Tips for Setting Up Fair Time-Sharing and Visitation Schedules

Posted in Family Law & Children's Issues

visitationGoing through a divorce when you have kids involves taking into account numerous factors to make sure your children’s best interests are prioritized. The biggest challenge for many divorcing parents is setting up a fair time-sharing and visitation schedule that works well for everyone involved.

Parents are encouraged to come up with this schedule themselves, with the assistance of an experienced family law attorney and divorce mediator, in lieu of having the court determine it for them. If you are beginning the divorce process, there are few things you should consider related to visitation.

Set up a regular and predictable schedule

Custody arrangements typically fall into two different categories: joint custody and sole custody. Joint custody allows parents to have roughly equal time with their kids and provides for significant and frequent contact. Sole custody involves the kids living primarily with one parent, while usually visiting the other on a regularly scheduled basis. When the children are in school, they should adhere to a consistent schedule.

When school is out for the summer or during holiday breaks, parents may need to modify the schedule accordingly. It’s also common for parents to schedule a certain amount of time for vacations with their kids. Sometimes dates are prioritized and determined ahead of time, and other times parents are flexible with dates, but prioritize the duration of the vacation.

Finally, holidays and special occasions need to be accounted for, often taking priority over the normal time-sharing schedule. These occasions likely require the most cooperation on the part of parents, and it’s important to account for the kids’ best interests and preferences.

Determine what type of visitation is best for your kids

In cases in which one parent has sole custody, it may be necessary to restrict the circumstances of visitation in a way that keeps the children’s best interests in mind. Depending on your specific situation, supervised or otherwise restricted visitation may be necessary. This can be a contentious issue and may require the guidance of an experienced mediator or family law attorney.

All children are different, and you’ll want to take the specific ages, personalities, interests, special needs, extracurricular schedules and wishes of your children into account when setting up a visitation schedule. Your goal should be to provide stability, routine and a sense of normalcy, even though their family situation is undergoing a significant change.

Remember that schedules can be modified

You’ll never know how a schedule will work out until you’ve tried it out, and while sometimes the agreed-upon arrangement works well for everyone in the family, it may become necessary to make adjustments. Ideally, there will be agreement about what needs to change and how, in which you can modify the agreement somewhat easily. If you cannot come to an agreement yourselves, it may require an arbitrator or judge to resolve the issue.

Divorce can be difficult on children, but by setting up a strong visitation and time-sharing arrangement, you can help your entire family move forward in a positive way.

BoltNagi is an established and respected family law firm serving clients throughout the U.S. Virgin Islands.

Research & Technology Park Earns LEED Silver Certification

Posted in Community Affairs

lightbulb2As part of its ongoing mission to promote sustainability through environmental design and energy efficiency, the University of the Virgin Islands recently received confirmation of an initial success.

The Research and Technology Park building on the St. Croix campus has been certified green by the Green Building Certification Institute. RTPark is now considered a LEED Silver certified building, a designation given to structures that meet a series of strict requirements for energy and environmental awareness in design.

During every phase of the building process, and continuing throughout its time as an operating facility, RTPark has focused considerable attention on making choices that would reflect a consciousness of sustainability. This includes components related to energy, water, lighting and building materials that all reflect this attention on environmental responsibility. In addition, RTPark’s LEED certification has another benefit, according to Executive Director David Zumwalt, as the certification should free up about $500,000 in federal funding for the building, which can be put toward the reduction of the campus’ debt.

The LEED certification process is based on a 100-point scale in which projects can earn points in five different categories. Pre-requisites exist in each category before points will even be awarded. There is also the possibility of earning up to 10 extra credit points for design innovation and demonstrating awareness of and addressing concerns specific to the region. A building that is certified Silver has earned between 50 and 59 points. The five categories under consideration are the overall sustainability of the building site, water efficiency, energy and atmospheric efficiency, the use of materials and resources and indoor environmental quality.

The designers of RTPark put considerable focus on energy and water use efficiency. The site has storm water and rainwater systems, including underground tanks and cisterns that are designed to reduce the facility’s water demands by collecting and storing precipitation. There’s also solar power to heat the building’s water, while solar and wind are being used to reduce utility costs.

Additionally, the building itself is situated so that southern exposure is limited and easterly breezes can be taken advantage of by the wind turbine. Its light-colored exterior also reflects radiant heat during the daytime, allowing for a reduction in cooling costs.

LEED Silver certification for RTPark is a considerable achievement for the project, and as this is but one of several sustainable projects either completed or in progress at the University of the Virgin Islands, it reflects well on the school’s work toward promoting sustainability.

BoltNagi is a widely respected and well-established government relations law firm serving clients throughout the U.S. Virgin Islands.

 

Community Event Looks at Loan Guarantees to Boost Commercial Lending

Posted in Corporate & Financial Services

housesAt an economic roundtable hosted by Senator Diane Capehart and IBCVI & Co. in August, an investment advisor proposed using federal grants and loans to guarantee commercial bank loans, noting it would allow U.S. Virgin Islands banks to increase lending to startups and capital projects. Many commercial banks have been reluctant to lend in the territory, even when the investment opportunities seem consistent with institutional policies and missions.

Because there is a shortage of funds available for direct investment, Darnell Carpenter of Synergy Group said that being able to guarantee loans by backing them with federal grant money would reduce some of the risk to lenders. He suggested working with the Community Development Financial Institutions Fund, a U.S. Treasury program dedicated to working on behalf of underserved and distressed communities through local economic empowerment. The CDFI Fund is able to promote access to capital, which is the major problem facing the USVI business community. Part of the problem locally is that many banks don’t have personnel whose dedicated role is to focus on community development lending, and some don’t even have staff members with any experience at all in this area.

The CDFI Fund, as its focus is solely on economically distressed areas, could be beneficial to the U.S. Virgin Islands. The Fund uses U.S. census data to classify areas — specifically, census tracts — as qualified, severely distressed or not qualified. Vast areas of St. Croix and most of St. Thomas are considered eligible for CDFI funding.

According to Carpenter, Synergy Group has put together a request for a $60 million loan to build a new nursing home. With a federal loan guarantee, he believes local banks will be more likely to provide loans for the project, which would offer a much-needed economic boost to the area.

Another serious drawback to the U.S. Virgin Islands economy is the lack of a certified community development entity. A CDE functions as a facilitator of relations between lenders and investors and local businesses. Carpenter said that the establishment of a CDE could help to connect organizations and businesses with funding opportunities they might not otherwise be able to access.

Commercial lending, particularly to small businesses, is a critical component of economic growth. The inability of a small business to obtain credit — a major problem right now in the territory — prevents it from growing. This has an effect on job creation, as businesses without sufficient growth have no need to hire additional employees. An economy that struggles to create jobs is an economy that will have a difficult time sustaining itself.

Fortunately, the mood at the roundtable seemed to indicate some willingness to explore the possibilities provided by the CDFI Fund and the potential establishment of a CDE to help increase commercial lending and foster economic growth in the U.S. Virgin Islands.

BoltNagi is an established and respected government relations law firm serving businesses and organizations throughout the U.S. Virgin Islands.

Public Finance Authority Sells Nearly $50 Million in Bonds to Fund Projects

Posted in Community Affairs, Government Relations

penniesIn a move that Governor John deJongh, Jr., said would help the U.S. Virgin Islands fund projects already approved by the senate, the Virgin Islands Public Finance Authority (PFA) sold $49.6 million in bonds at the end of August. Among other projects, the funds will provide working capital to territorial hospitals and the general fund, as well as the payment of Water and Power Authority (WAPA) receivables from the Government of the Virgin Islands.

The PFA was established in 1988 by the Legislature of the Virgin Islands as a means of promoting and sustaining economic and social development in the Territory. A public corporation, the PFA exists to help the government in responsibly and effectively carrying out its duties. The Authority is also able to assist private enterprises that its board believes will provide a benefit to residents of the territory, either through increased employment opportunities or through the general betterment of society.

Due to the recent bond sales, a number of long-term problems will be addressed, including:

  • The WAPA experienced a net loss of $10 million in 2013 and its government accounts receivable topped $25 million at year’s end, an increase of nearly $7 million in a year’s time.
  • Luis Hospital of St. Croix and Schneider Regional Medical Center on St. Thomas have both struggled financially in recent years, and the Government proposes to utilize some funding earmarked for the hospitals to pay their WAPA bills. Luis Hospital owes $9.1 million and Schneider owes $4.3 million.
  • The USVI Bureau of Corrections also owes WAPA just under $900,000.
  • The USVI government has a current budget shortfall of $27 million.

The Government of the Virgin Islands has already approved some plans and earmarked specific dollar amounts that will go toward improving the financial footing of various institutions:

  • The WAPA will receive $12 million as payment for part of the government’s outstanding utility bills. Just over $5 million will be paid for each of the two hospitals, and the other $1.5 million for the Bureau of Corrections.
  • Luis Hospital will receive $11 million to meet payroll through September, as well as $1 million to upgrade its medical records.
  • Schneider Regional Medical Center will receive $7 million to cover outstanding accounts payable and about $3 million for capital improvements.
  • The VI Human Services Department owes the Sea View Nursing Home $1.5 million, which these new funds will cover.
  • The remaining $14 million will be set aside with the intention of addressing the government’s budget shortfall.

Governor deJongh acknowledges that the U.S. Virgin Islands faces some economic challenges, but also points out that investor confidence is high and credits the government’s transparency as facilitating this confidence. Hopefully, the recent sale of PFA bonds will help to address key budget shortfalls and financial hurdles throughout the territory.

BoltNagi is an established and well-respected government relations law firm serving clients throughout the U.S. Virgin Islands.

Budget Cuts Could Impact Tourism Industry

Posted in Community Affairs

carnival 2For the U.S. Virgin Islands, the news that the three major seasonal festivals — already feeling the impact of budget cuts from last year — will be faced with additional cuts in fiscal year 2015 is cause for concern. The combination of two years of reduced budgets and the lingering effects of some unpredictable events in 2013 could affect the territory’s tourism industry.

Tourism in the U.S. Virgin Islands accounts for almost 80 percent of the territory’s GDP and employment, and with St. Thomas Carnival and other festivals regularly yielding $65 million in economic activity, festival organizers are puzzled by the reluctance to spend the money necessary to make the event a success. To provide the events and services that support a tourist economy, organizers say, the Governor will need to allocate more funds for festival committees. They voiced their concerns at a hearing in August before the 30th Legislature’s Committee on Finance.

The festivals each face specific problems of their own. While St. Croix’s Christiansted Mini Village continues to be a popular and well-attended festival each year, organizers are dealing with the impact of a number of misfortunes as of late. Prior to the allocation of funds for 2014, the festival had already contracted with some vendors. As a result of those funds being cut by more than $100,000 since 2013, some of those vendors still haven’t been paid.

Additionally, last year’s visitors missed out on some key performances due to heavy rains. Because funds had already been paid to these performers, organizers lost significant money and missed out on potential income when they had to cancel the events. The proposed budget cuts for fiscal year 2015 have organizers debating the merits of a single-day food festival in place of the Mini Village.

Meanwhile, St. Thomas’ Carnival has been experiencing declining revenues that have resulted from a decrease in attendance at paid events, although it seems those attendees have simply migrated to the free events. Carnival’s version of the bad weather that troubled the festivities on St. Croix turned out to be the theft of all of its electrical wiring, which will need to be replaced. Unfortunately, this added cost puts Carnival organizers’ request at $700,000, far above the Governor’s proposed budget of $500,000 — already a substantial reduction from the current fiscal year’s allotment.

As festival organizers attempt to formulate plans in light of the latest round of budget cuts, the territorial government has its own suggestions. Sen. Clifford Graham, Finance Committee Chair for the 30th Legislature, recommended the festival committees meet with various government agencies to establish uniformity and fairness related to paying fees and issuing permits. Despite hearing from all of the festival committees, the budget meeting did not result in any votes taking place that might provide hope to festival organizers, residents or tourists in the coming months.

BoltNagi is a widely respected and well-established government relations law firm serving clients throughout the U.S. Virgin Islands.

BoltNagi Attorney Kömives Wins Third Circuit Appeal in Intellectual Property Case

Posted in Litigation

oceanThis summer, attorney Lisa Michelle Kömives of BoltNagi briefed and argued a winning appeal on behalf of Defendants, Virgin Island Sailing School and its founder, H. Scott Dempster, where the federal Third Circuit Court of Appeal upheld the District Court of the Virgin Islands’ (“District Court”) dismissal of trade dress infringement and unjust enrichment claims asserted against the Defendants by Fair Wind Sailing, Inc. (“Fair Wind”).

Fair Wind is a Michigan-based corporation that runs sailing schools throughout the country, including the U.S. Virgin Islands.  Fair Wind claimed that Virgin Island Sailing School, among other things, was infringing on its trade dress—or the overall image or presentation of its services— in violation of the Lanham Act. For example, Fair Wind claimed that Virgin Island Sailing School used the same size and type of boats, similar marketing techniques, similar teaching curricula and similar feedback procedures.

The District Court found that Fair Wind failed to adequately state claims for both trade dress infringement and unjust enrichment. Attorney Kömives demonstrated to both the District Court and the Third Circuit that Fair Wind did not plead a sufficiently clear definition of the features that it claimed constituted its “trade dress.”  Furthermore, she also demonstrated that the “trade dress” allegedly infringed upon was nonfunctional, was not inherently distinctive, nor had it acquired such a distinctiveness through Fair Wind’s use of the same.  In her arguments, Attorney Kömives demonstrated that all of the products and features Fair Wind sought to claim as its “trade dress” were simply types of boats, marketing techniques and teaching methods that any sailing school might use, or even need to use, and together they did not form any sort of visual effect that was entitled to protection.

On Attorney Kömives’ motion, the District Court also awarded the Defendants the majority of the attorneys’ fees incurred in defending the case.  On appeal, also briefed and argued by Attorney Kömives, the Third Circuit Court of Appeal upheld a portion of the attorneys’ fee award and remanded to the District Court to consider the balance of the award under a standard newly articulated by the United States Supreme Court while the appeal to the Third Circuit was pending.

This case is another example of the value-added litigation services provided to clients by the litigation team at BoltNagi, a highly respected U.S. Virgin Islands law firm.

Key Legal Issues to Consider in a Merger or Acquisition in US Virgin Islands

Posted in Corporate & Financial Services

3000884104_714507a1a4_oMerger and acquisition transactions can be quite complicated and require both the acquiring and target companies to address the following issues in detail to avoid challenges later on:

1)      The structure of the deal. When arranging a stock purchase, asset sale or merger, it’s important to consider the transferability of liability, which is transferred to the acquiring company in a stock purchase but designated between the companies in an asset sale. A pre-closing consent to assignment may have to be obtained, and stockholder approval may be necessary. The deal may also be structured to avoid tax consequences.

2)      Financing the deal. Although cash is a convenient and assuring option for the target company, it may affect the acquiring company’s debt rating or capital structure. The other financing option is equity, which offers more flexibility all around.

3)      Working capital adjustments. A working capital adjustment will probably have to be made to ensure the business can continue to fulfill its requirements and protect the acquiring company from target initiating, increased debt collection, delayed inventory acquisition or selling inventory to make payments.

4)      Contingencies to paying the purchase price. If an escrow is included, the terms should be carefully defined. An earn-out may be needed to moderate the gap between the valuation of the acquiring and target companies.

5)      Representations and warranties. It is imperative for the target company to review the acquirer’s representations, warranties and disclosure schedules to ensure there are no breaches of authority, capitalization, compliance with law, employment, ERISA, financial statements, intellectual property, material contracts, tax and other matters.

6)      Caps to target indemnification. The provisions of target indemnification should include minimum claim amounts required for the acquirer to seek indemnification, any caps at the escrow or other level and any exceptions to the caps, including breaches of fundamental representations like tax or intellectual property.

7)      Stockholder liability. Regarding indemnification, the liability of the target company’s stockholders has to be determined as either joint (in which the individual stockholders are liable for 100 percent of future damages) or several (in which individual stockholders are only liable for their proportion of contribution to the damages).

8)      Conditions of closing. For the companies to close the transaction, a list of closing conditions should include the absence of litigation, delivery of the target’s legal opinion, the stockholder voting threshold for approval, appropriate board removal and the absence of unfavorable material change in the target’s conditions.

9)      Review of long-term lead items. The companies should determine whether a Hart-Scott-Rodino filing is required and whether its filing will be delayed. They should also figure out how any necessary third-party notices or consents will be made.

10)  Covenants against competing and solicitation. The selling shareholders must draw a covenant not to compete against or solicit clients from the target and acquiring companies for a designated period of time.

If these considerations are carefully evaluated and followed, a merger or acquisition should be able to move along efficiently and easily. Working with a skilled attorney can provide additional benefit to facilitate the transaction.

BoltNagi is a respected and established business law firm serving companies and organizations throughout the U.S. Virgin Islands.