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Water Island Lease

Water Island belonged to the US Army which began building an Army base there, Fort Segarra, during World War II. Construction ceased when the war ended, and the Army discontinued use of the Island in 1950, whereupon it leased the Island to the development Authority of the Municipality of St. Thomas and St. John. Even though the Authority had only a five-year lease, which the Army could cancel at any time, the Authority nevertheless subleased the whole Island to the Water Island Inc., a Virgin Islands corporation formed by a white continental, Walter Phillips, for the purpose of commercially developing the Island. Congress transferred Water Island from the Army to the Interior Department in 1952, which promptly gave Phillips’ Water island Inc. a long lease with firm rights of renewal.*

The lease granted to Phillips was a rare example of an extraordinarily generous lease of US public land without competitive bidding to a private party for private profit. The entire Island of 500 acres, “including all improvements and persona; property thereon and beaches and riparian rights appurtenant thereto,” was leased by the Secretary of the Interior to Walter Phillips for a term of 20 years with an option renewable by Phillips - not the Secretary - for a further period of 20 years, or, in other words, a 40-year non-revocable lease until 1992.

Concerning the facilities left by the US Army, the Secretary not only granted Phillips the right to occupy all government “improvements” - structures, docks, utilities, - on the Island etc. “without obligation on the lessee for maintenance and repair,” but also he granted Phillips the right “to make such alterations and additions” or to effect “the removal” of such improvements. “ The Lessee shall have a promissory interest made or acquired by it.” The Interior Department’s interest, according to the lease, was that the Island “might be developed in such a manner as to contribute effectively to the economy of the Virgin Islands.” The lessee and sub-lessees , nevertheless, were specifically exempted from paying property taxes to the virgin Islands Government. Upon termination of the lease, they were to be reimbursed at “fair value” by the Interior Department. For his part, Phillips was required to pay an annual rent of $3,000 plus 3% of gross receipts in excess of $200,000 and 4% in excess of $300,000. Thus, Phillips gained control of one of the oldest geologic formations and choicest pieces of real estate in the Caribbean. Thereafter, a resort hotel and permanent and vacation homes were built on the Island.

America’s Virgin Islands A History of Human Rights and Wrongs, William W. Bower

*II was said that the bill presented before congress authorizing the transfer of Water Island from the Department of Defense, which could not transfer land to the Department of the Interior, which could was written by Phillip's own attorneys. The bill was passed by both houses of congress and signed by the President.