The U.S. Virgin Islands’ air arrivals, overnight guests and hotel tax revenues are way up over previous years and government revenue is up substantially, fed by tourism and federal disaster relief spending, according to the latest numbers presented Tuesday at the biannual revenue estimating conference.
The Legislature established the conference in 2013 as a deep look into the tax revenues numbers, to help it get more and clearer budget detail than it gets from regular budget hearings. The Office of Management and Budget and all the executive agencies report on their revenue-generating activities and officials give an update on tax collections.
From January to May the territory has seen 332,654 air visitor arrivals, which is up 77 percent over 2020, but also 13 percent above 2019, a more normal, pre-pandemic year, according to Tourism Commissioner Joseph Boschulte’s presentation.
The summer months are traditionally very slow, but airplanes are coming in full, according to Boschulte.
“Summer 2021 air arrival numbers rival or surpass traditional winter numbers,” he said.
“The Caribbean has been open. We have been doing a very good job of convincing them to come to the U.S. Virgin Islands,” he said.
“What’s been very helpful in our success is our travel portal. … People feel better knowing there is some level of safety,” Boschulte said. By the same token, it is possible the recent spike in U.S. and territorial cases could potentially slow this trend in the upcoming months, “but so far it still looks very, very strong for us.”
According to Boschulte’s presentation, Divi Resort on St. Croix and Frenchman’s Reef and Noni Beach on St. Thomas are all still offline, leaving 675 preexisting hotel rooms unavailable. The territory has 2,600 usable hotel rooms, 900 villas and 2,200 “sharing accommodations,” such as Airbnb, showing the impact and importance of Airbnb and other methods of renting out private rooms and houses.
Hotel revenue tax collections are up sharply. At $24.2 million for October through June, hotel tax revenues are already far above the totals for each of the last three years, with three months left in the fiscal year.
While October and November both saw much lower revenues than usual, March, April, May and June all saw huge increases. June saw $4.5 million, versus $1.3 million in 2019 and $1.7 million in 2018.
Income Tax Revenue Driving Revenues Up
Tourism has funneled money throughout the economy, indirectly generating government revenue. And federal hurricane and pandemic aid have played a big role. For government revenue, Internal Revenue Bureau Director Joel Lee said the biggest driver of all is individual income tax, projected to generate $118.9 million for fiscal year 2021. That is $38 million, or 48 percent, more than last year and more than double 2018 receipts.
Corporate income tax is up too, projected at $22.9 million, versus $18.5 million last year.
Federal pandemic payments to individuals totaled $223 million. While the payments to individuals are tax-free, that money is largely spent in the local economy, generating revenues for businesses.
Disaster recovery funding will remain an important economic engine for years to come too.
According to the Housing Finance Authority, Federal Emergency Management Agency hurricane recovery grants for home repairs, paid to major contractors AECOM and APTIM, have totaled more than three-quarters of a billion dollars since 2018. AECOM has been paid $500 million in total since 2018. Half, or $251 million, was paid in 2021, and the year is not yet over. This generated $12.6 million in gross receipts tax revenue for 2021 alone.
APTIM has been paid $111.1 million, with $45.1 million in 2021 so far, generating $2.3 million in revenue for the V.I. government in 2021 so far. Around 6,516 homes have been repaired.
The territory has gotten hundreds of millions of dollars in federal Community Development Block Grant Disaster Relief funding.
The Housing Finance Authority anticipates spending $28 million of that in 2022, and much larger amounts every year after that for a full decade.