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Smith v. Government of Virgin Islands

February 28, 1964

NORMAND SMITH AND NANCY L. SMITH, APPELLANTS,
v.
GOVERNMENT OF THE VIRGIN ISLANDS, AND HARVEY ALUMINUM (INCORPORATED) AND HARVEY ALUMINA VIRGIN ISLANDS, INC., INTERVENERS. HARRY NEUMANN, APPELLANT, V. GOVERNMENT OF THE VIRGIN ISLANDS, HARVEY ALUMINA VIRGIN ISLANDS, INC. AND HARVEY ALUMINUM (INCORPORATED).



Author: Kalodner

Before KALODNER, STALEY and SMITH, Circuit Judges.

KALODNER, Circuit Judge.

These appeals are from an Order of the District Court dismissing, for failure to state a claim upon which relief can be granted, two consolidated separate taxpayer suits brought by the appellants to enjoin the performance by the Government of the Virgin Islands ("Government") of an Agreement, ratified and adopted by Act 814*fn1 of the Legislature of the Virgin Islands, with Harvey Alumina Virgin Islands, Inc. ("Harvey")*fn2 relating to the development by Harvey, on the Island of St. Croix, of a $25,000,000 alumina*fn3 plant, including a deep-water access channel and turnabout area.

The pertinent provisions of the Agreement may be high-lighted as follows: Government was (1) to convey to Harvey as site for the alumina plant, subject to the approval of the Federal Aviation Agency of the United States, some 700 acres known as Airport Land, as to which it held a restricted title*fn4, and such title as it had in a 500-acre salt water marshland described as Krause Lagoon*fn5; (2) to grant Harvey certain tax exemptions and subsidies for a 16-year period*fn6; (3) to "use its best efforts" to enable Harvey to obtain reimbursement of no more than $3,000,000 of Harvey's cost, in developing the deep-water channel and its turnabout area from certain so-called matching funds payable by the United States to Government with the proviso that if allocations from the matching funds proved insufficient that Harvey could secure reimbursement from Government's "unobligated non-tax revenues", and if the latter were insufficient, Harvey could "offset" unpaid balances against its obligation to pay Government taxes other than income taxes*fn7; and (4) to maintain the channel and its turnabout area free from obstructions and dredged to their completed dimensions.

The Agreement prefaced its covenanting provisions with this statement of policy:

"WHEREAS, it is the policy of the Government to alleviate under-employment in the Virgin Islands, to improve the quality of employment through the offering of employment involving higher skills, to have established in the Virgin Islands self-sustaining business enterprises and to encourage the investment of capital in the Virgin Islands, all to the end that the economy of the Virgin Islands may rest on a broader base; and

"WHEREAS, Harvey and Harvey Aluminum desire to acquire and operate processing and other facilities for the production of alumina and related products in the Caribbean area which Harvey anticipates will require the expenditure of $25,000,000, more or less, and (as reflected in the project information previously submitted by Harvey to the Government and referred to below) provide employment to approximately 400 persons; and

"WHEREAS, Harvey and Harvey Aluminum are willing to locate such facilities in the Virgin Islands, but only at the request and with the authorization of the Government and in accordance with other terms and provisions, all as set forth below; and

"WHEREAS, the Government considers that such facilities, if established, would promote the public interest by assisting in the economic development of the Virgin Islands; and

"WHEREAS, the Government after due investigation and consideration has determined that the construction and operation of such facilities would not be prejudicial to the health or welfare of the inhabitants of the Virgin Islands or to local property owners; and

"WHEREAS, as an inducement to Harvey and Harvey Aluminum to locate such facilities in the Virgin Islands, the Government is prepared to provide certain properties and a deepwater access channel in the vicinity of the Krause Lagoon area of St. Croix where it is presently contemplated that such facilities will be located, to grant certain tax exemptions and subsidies, and to comply with the other terms and provisions set forth below in order to authorize, facilitate and promote the establishment and operation of such facilities in the Virgin Islands;

"NOW, THEREFORE, the parties hereto mutually covenant and agree as follows:"

The Act 814 which adopted and ratified the Agreement and authorized the Governor of the Virgin Islands to carry out its provisions, it was stated:

"To Ratify and Adopt a Certain Agreement of February 8, 1962, Relating to an Alumina Plant Development in the Island of St. Croix and for Other Purposes.

"Be it enacted by the Legislature of the Virgin Islands:

"Section 1. The Legislature of the Virgin Islands hereby finds and declares:

"(1) that it is essential to the stability of the Virgin Islands economy that dependence on tourism be relieved through the establishment of industrial operations capable of providing and sustaining large scale employment and of contributing significantly toward a wider base for insular economic well-being;

"(2) that there is an existing and urgent necessity for the creation of additional water and power facilities as contemplated by the agreement referred to in the following paragraph the surpluses of which could be made available for the use of the ...


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