The Virgin Islands lie off the eastern edge of Puerto Rico. The islands are controlled by the governments of the United States and Great Britain. The U.S. Virgin Islands (USVI) consist of fifty small islands. The most populated of the USVI are St. Croix, St. Thomas, and St. John. Together the USVI have just over 100,000 residents. In 1989, Hurricane Hugo devastated the tourist islands. Many properties were destroyed, as was much of the islands infrastructure. A depression ensued during which many of the air flights to the islands ceased. In 1995 the two leading employers – Hess Oil and Virgin Island Alumina – cut production and downsized by 650 employees. Casino gambling, an idea that had been rejected several times before, suddenly became popular. A referendum was authorized, and the voters endorsed casinos by a narrow margin. On 3 November 1995, the Virgin Islands’ representative assembly followed the popular will by passing legislation authorizing casino licenses. The law was amended on 6 March 1997.
The legislation provides for up to six casinos in hotels on St. Croix island. The first of the six opened in 2000 at the Divi Carina Bay Resort. The resort now has only 126 rooms, twenty villas, and a convention center. The licenses are issued by a board of commissioners appointed by the governor. Of the six licenses, one must go to a company that is obligated to build a 1,500-room hotel and have a gaming area of 20,000 square feet or more in the facility, along with convention and banquet facilities. Two licenses go to hotels with at least 300 rooms and a casino of 10,000 square feet or more, while another two go to hotels of at least 200 rooms located in two historic districts of the island. A smaller casino may be licensed in another hotel with at least 150 rooms. The Divi Carina barely qualifies. Licensing fees are related to the size of the casino. The taxation formula for the casinos is an 8% win tax for their first two years, then 10% for the next two years, and 12% thereafter. The taxation formula was derived from the laws of New Jersey. As in New Jersey, the casinos must also make investments of 1.25% of their gross revenues in development projects on the island. The casinos are also subject to the U.S. cash transaction reporting rules and the reporting rules of the Internal Revenue Service.
Many of the details of the New Jersey gaming law were incorporated into the legislation, as the lawmakers felt that the “strict” regulatory model of New Jersey would best suit the Virgin Islands’ needs for high integrity. The needs may indeed have been met in their entirety. No one can challenge the integrity of casino gaming in the Virgin Islands.
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