Interior of a boutique hotel, not affiliated with current USVI developments.
On Thursday, members of the Economic Development Commission heard a request from a St. Croix hotel developer to grant a more relaxed timeline within which to meet commitments related to hiring and providing employee benefits.
Last July, the VIEDC board approved a 30-year, 100% tax incentive package to Historic Heritage Holdings LLP, the company which plans to construct and operate a boutique hotel on St. Croix. On Thursday, Chief Financial Officer Camila Devlin told EDC commissioners that “over the past two years, our construction timelines have shifted in ways that were not anticipated at the time of approval.”
Construction delays, said Ms. Devlin, “have materially affected our capital planning, staffing projections, and the timing of benefit implementation. The originally approved structure assumes a level of operations readiness that …we simply do not have yet.” As examples of the inordinate delays being experienced, Ms. Devlin noted that the provision of temporary power to one of the buildings is still being awaited over four months since the request was submitted.
Asked to expand on the challenges being experienced, majority owner of Historic Heritage Peter Zielke listed weather and shipping delays as two main factors causing timelines to slip. “From a permitting perspective, we’re actually doing really well,” he said, praising the efficiency of the Department of Planning and Natural Resources. However, “overall construction here is a lot of delays that you wouldn’t see elsewhere,” Mr. Zielke concluded.
“Each delay carries a financial impact, straining available capital and creating cash flow pressure at a stage when the project is not yet producing consistent operating revenue,” Ms. Devlin complained. Historic Heritage was also reluctant to press ahead with the hiring plan as stipulated previously, as she says the benefit plans established under the EDC framework may have to be extended to employees at “non-EDC sister companies,” which would be “financially unrealistic” while the large-scale construction project is still ongoing.
“Therefore, our proposal is a phased approach…a restructuring of timing,” Ms. Devlin offered. Instead of an initial 15 full-time employees, the company wants permission from the EDC to only hire 10 full-time employees in the first phase of operation, when 25 hotel rooms have been completed. In phase two, instead of adding five additional full-time employees to the affiliated business service, the company will create three dual-purpose roles that can serve the hotel venture and the affiliated family business in the finance and administration departments.
Noting that the anticipated second phase of the project may not be at hand “for many years to come,” Ms. Devlin emphasized that the modification request was pursuant to ensuring the project’s "feasibility and long-term success," adding, "the phased approach we are proposing allows us to remain compliant while still delivering meaningful employee benefits to our team.”
At the end of the presentation, EDC members seemed sympathetic to the plight of Heritage Holdings. Commissioner Phillip Payne commended Mr. Zielke and Ms. Devlin for the work the company was doing in downtown Christiansted, saying that it would make the community “a greater place to be and a greater place to live.” He expressed empathy for the construction delays, which EDC Chair Kevin Rodriguez offered to assist with “any bottleneck” in his capacity as deputy chief of staff to Governor Albert Bryan Jr.
Following a discussion on the subject in closed executive session, commissioners voted to approve the new tax incentive framework requested by Historic Heritage, dividing the project – and the employment and benefit responsibilities – into two phases.
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