Saying a new fee could destroy the timeshare economy in the territory, the American Resort Development Association has filed suit in federal court to challenge the constitutionality of the newly-enacted $25 daily charge on timeshare occupation.
The suit names the government of the Virgin Islands as defendant, and was served on Gov. Kenneth Mapp and Attorney General Claude Walker.
The suit claims the fee on timeshare occupancy violates the Constitution by intentionally targeting non-resident timeshare owners.
The fee became effective Monday, as did additional taxes on the import of beer, liquor, cigarettes and carbonated drinks.
“Gov. Mapp targeted timeshare owners for the occupancy fee because he and the Virgin Islands senators know that timeshares are overwhelmingly owned by non-residents, who are ineligible to vote in the Virgin Islands, and therefore are disadvantaged with respect to mounting political opposition to the imposition of the Timeshare Impact Fee,” the suit argues.
The suit points out that more than 99 percent of timeshare units in the territory are owned by non-residents.
“This targeted, discriminatory, revenue legislation that has the purposeful intent to impose fees almost exclusively on interstate commerce violated the Commerce Clause” of the Constitution, the suit argues.
The suit asks the court to find the fee unconstitutional and unenforceable, and seeks a permanent injunction “to enjoin the Government of the U.S. Virgin Islands from enforcing this unconstitutional statute.”
The suit was filed by the resort association’s Resort Owners’ Coalition, which describes itself as a non-profit organization representing more than 1.6 million timeshare owners.
No one with the V.I. government commented regarding the lawsuit. Sam Topp, the Government House spokesman, said he had been told no notice of the described action has been received by the V.I. Justice Department.
On its website, the coalition has provided members with updates on the tax since Mapp asked a special Legislature session to address the proposal.
The coalition’s language has suggested the new tax will backfire.
“Enacting such an excessive fee will likely cause a dramatic negative effect on the 70 percent occupancy rate experienced currently in the USVI. The region then becomes a less attractive vacation destination when compared to other Caribbean locations that do not have this type of fee, or may charge a substantially lower amount,” said Robert Clements, vice president of regulatory affairs for the coalition.
“As occupancy rates fall, tax/fee revenues and consumer spending drop over time, reducing the number of jobs and contributions to the local economy. Over the last 25 years, timeshare has been the only sector of the USVI tourism industry that has witnessed sustained growth and development. This fee would unravel that history quickly and definitively,” the coalition has told its members.
The coalition’s website also lists contact information for government leaders who supported the new tax and those who opposed it.
“Timeshare owners already pay the highest assessed real estate property tax in the territory,” the coalition argues. “This fee will drive people to book their timeshare and future vacations in other markets to avoid the additional $175 per week fee that it will cost to vacation in the USVI,” the coalition argues.
“The fee is discriminatory and will drastically impact the future growth and health of the timeshare industry in the U.S. Virgin Islands,” said Ken McKelvey, chairman of the coalition. He described the fee as “an exorbitant burden on the ability of the territory to compete with similar markets.”
Despite the lawsuit, Clements said the association and the coalition are not seeking “to do anything that detrimental” to the Virgin Islands economy.
“It has always been our position that we want to work constructively with the government. We said that when they first proposed this,” Clements said.
“We will continue to want to work constructively with the government,” he said.