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activities of its harbor and upon its natural beauty and attractions for tourists and winter residents. Some of the effects of the temporarily disrupted harbor business in St. Thomas incident to the war were offset in the past 2 years by improvements in the island's economy due to the suddenly expanded liquor business. Recently the harbor of Charlotte Amalie began to show signs of a recurrence of its once healthy activity as neutral ships again were permitted to call here for bunkers.

A hint of what postwar tourism might mean to the economy of the islands has been given by the increasing use of the recreational facilities of the island of St. Thomas, in recent months, by the Army as a rest and recreation area for short furloughs of GIs from nearby bases. Our limited hotel facilities were overtaxed, indicating the imperative need for additional hotels before any concentrated emphasis is placed on advertising the islands as a postwar resort. It is doubtful, however, if American capital can be persuaded to invest until there is proof of the willingness of local capital to assist.

A tremendous advance for the islands was the recent merging of a Puerto Rican air line, servicing the Virgin Islands and Puerto Rico, with one of the large national air lines bringing new, modern, and fast air equipment to the Islands, as well as the recent extension of daily air service from the mainland to the island of St. Thomas by another American air line. The tourist possibilities thus opened are vast.

Here, as possibly in no other place under the American flag, Americans seeking relief from sweltering summers and zero weather may find perpetual sunshine, equable climate, good beaches, excellent sport fishing, horseback riding on mountain trails with unsurpassed views, and may live in substantial comfort among a friendly, law-abiding, and intelligent people.

As for centuries past, the economic story of the island of St. Croix still revolves around the growing and processing of sugarcane even though the cane acreage of the island is now less than one-third of what it was in the island's heyday. Literally a drop in the bucket of the world's sugar market, St. Croix this year produced 4,040 tons of raw sugar, while 3,200 tons of cane were processed for rum. And thisthe major economic factor of the island of St. Croix-is perenially handicapped by lack of rainfall, marginal low-yield land, and sugar prices.

The Virgin Islands Co., operating St. Croix' only sugar mill and 1 of its 2 distilleries, continues to be the substance as well as the nucleus of the island's economic life. It provides wage employment in field and factory and self-employment by its processing of cane for over 500 small farmers. For a quarter of a century, sugar has been a losing business in St. Croix, but in 1944 the Virgin Islands Co. was able to balance out a decade of losses in sugar by unusual profits on rum. It has been and is a project affording the employment and facilities and public services which private enterprises were unable to continue and which no one would undertake.

FISCAL

For the fourth successive fiscal year the municipality of St. Thomas and St. John operated without a Federal deficit appropriation. On June 30, 1945, the treasury of the municipality of St. Thomas and St. John showed a revenue surplus of $104,919.71. Conversely, the municipality of St. Croix operated with a Federal deficit appropriation of $100,000. Of this amount, approximately $51,000 was unexpended as of June 30, 1945.

The municipality of St. Thomas and St. John.The actual revenues of the municipality of St. Thomas and St. John amounted to $1,257,416.53, including $112,151.97 transferred from surplus funds of the preceding year, and $7,200 from the operating fund of the St. Thomas Virgin Islands lottery. The comparable figure for the fiscal year ended June 30, 1944, was $1,617,705.36. Thus, total income in the fiscal year 1945 showed a decrease under the preceding year's income of 22.27 percent.

Income-tax collections at $941,090.47 reflected a decrease of 27.35 percent when compared with the amount of $1,295,380.50 collected in the preceding fiscal year. Real property taxes yielded $63,902.63, as compared with $56,825.28 in the preceding year, an increase of 12.45 percent. Gasoline taxes and automobile license fees were $17,803.37 compared with $17,823.24 in 1944, a decrease of 0.11 percent. Customs revenues yielded $12,900 compared with $39,800 in 1944, a decrease of 67.59 percent. Pilotage fees decreased 2.5 percent from $4,587.57 in 1944, to $4,470.22 in 1945.

Revenues from income tax and customs dues reflected the tapering down of rum sales to the United States, a general slump in local business due to the curtailment of military projects and other public-works programs; and a decrease in shipping activities due to war conditions.

The budget for this municipality carried total appropriations of $1,152,496.82. Major departmental appropriations were: Public works and fire, $310,013.23; education, $191,680; municipal hospital, $128,428.75; police and prison, $63,912.50; the legislature, $38,700; sanitation service, $26,800.03; social welfare, $78,055; and harbor, $27,800.

The municipality of St. Crois.—The revenues of the municipality of St. Croix amounted to $515,383.28, compared with $262,684.89 in the preceding year, an increase of 96.20 percent. Income-tax collections were $391,075.63, as compared with $114,836.45 in 1944, an increase of 240.55 percent. Real-property taxes yielded $53,660.06, and in 1944, $48,358.86, an increase of 10.96 percent.

· The budget for this municipality carried total appropriations of $589,558, of which local revenues were estimated at $489,558, and a Federal appropriation of $100,000. Major departmental appropriations were: Public works, $134,764; education, $78,249; police and prison, $50,843; Christiansted Hospital, $40,662; Frederiksted Hospital, $33,882; the Kingshill Home, $29,950; the legislature, $13,610; and the sanitation service, $11,148.

Of the Federal appropriation of $100,000 for defraying the deficit of the municipality of St. Croix for the fiscal year 1945, approximately $51,000 has not been expended and will be returned to the Treasury of the United States as an unobligated balance of the said appropriation. This unexpected situation is due to an unprecedented increase in income taxes from the rum industry during the fiscal year 1945. As the deficit appropriation is not considered to be an outright grant to the municipal government, and is accountable to the Comptroller General of the United States in the same manner as all other direct Federal appropriations, it is held that when local revenues exceed, as they did in 1945, the normal operating requirements of the municipal government, the resulting saving in the Federal deficit appropriation does not belong to the municipal government, and is to be returned to the United States.

The wide variation in revenues of the municipality of St. Croix for the years 1944 and 1945 was due almost entirely to a corresponding rise and fall of income taxes from the rum industry, as predicted in last year's annual report, this unusual revenue resulting as it did from increased distilleries' profits could not be counted upon as a stable source of future revenue. Prices and profits dropped suddenly and precipitously when, by reason of the so-called "whisky holidays” the distillation of beverage spirits was permitted by continental producers.

The Virgin Islands Co., which had lost $300,000 up to 1944, made a profit of over $700,000 in that year, and paid an income tax of $207,000 to the municipal treasury of St. Croix in 1945. Yet the municipality of St. Croix faces total budgetary collapse in the coming fiscal year because of the withdrawal of a Federal deficit appropriation based on the previous year's prosperity when, in fact, the Virgin Islands Co. will pay only about $14,000 in income taxes in 1946, as it shipped no rum after the first week of July 1944.

In St. Croix, long-neglected municipal services were greatlyimproved during the year under review. Meager municipal salaries were increased. They are, however, still below the level of comparable positions in Federal agencies and lower than salaries in St. Thomas. Maintenance appropriations of all departments were increased in 1945 due to the additional funds made available as a result of the large income tax paid by the Virgin Islands Co.

The Congress disapproved a Federal deficit appropriation for the coming 'fiscal year, apparently due to the temporary prosperity which

the municipality enjoyed in the fiscal year 1945. As a result of this action, the municipal treasury of St. Croix faces a deficit of $152,000 in 1946, unless a deficiency appropriation is passed in the near future. The administration of the government of the Virgin Islands is convinced that community services in St. Croix are still far below a decent minimum, and that any further reduction in expenses cannot be made without impairing the already inadequate health, sanitation, educational, and relief services of the municipal government. No factor can be found at this time to relieve the picture of the continued dependence of the island of St. Croix on Federal assistance.

PUBLIC WORKS DEPARTMENT Due to the continuation of the war emergency, the public works department confined itself to the accomplishment of work which could be done with materials obtainable here and in Puerto Rico. The construction of water supply units, under a Federal Works Agency appropriation, was completed with the exception of protective fencing and piping. Eleven new water supply units were completed. The present water storage capacity of the public supply units totals 3,483,000 gallons. Completion of work now underway would assure a water supply of over 3 million gallons for use of the general public. Several new roads were constructed, others were widened and improved. A series of masonry steps were also completed. Drainage gutters were cleaned, paved, and reconstructed.

Following up the preparation and revision of preliminary estimates covering various projects for the development of the islands, under the 10 million dollar bill passed by Congress, the Department carried out various assignments in connection with studies being made on such projects as water supply facilities, electric power plant and distribution system, and sewage disposal. Experimental dams were constructed in accordance with instructions presented by consultant engineers of the Federal Works Agency.

In St. John the Department conducted extensive surveys in connection with the development of homesteads.

St. Croix was fortunate to receive an increase in appropriations, for this Department, from $66,000 in 1944 to $135,000. In addition to the ordinary maintenance of public structures, many of them were given thorough overhauling long needed, and such improvements as conditions required. Concrete gutters throughout both towns were repaired where needed, and more than a mile of additional drainage was installed. Much of the island's 110 miles of dirt roads was regraded; and the wharves and sea-walls received their share of attention to the extent of available funds.

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POLICE AND PRISON DEPARTMENT The director of police of St. Thomas reports that a total of 1,137 persons were arrested during the fiscal year ended June 30, 1945, as against 1,182 arrests in the preceding year. The major portion of these cases were for disorderly conduct, violations of the automobile ordinance, and other minor offenses.

The outstanding contribution in this fiscal year has been several lectures and demonstrations on police work given by officers of the Federal Bureau of Investigation.

The director of police of St. Croix reported that there were 154 cases filed with 129 convictions as against 237 cases filed and 212 convictions during the preceding year. The police department of St. Croix also received the benefit of lectures under the auspices of the Federal Bureau of Investigation.

POLICE COURT

The police judge of the municipality of St. Thomas and St. John reported that 1,019 persons were tried for criminal offenses during the year, the greater number of which were for violations of the automobile ordinance. This was a slight decrease under the preceding year when 1,122 persons were tried for criminal offenses. Fifteen persons were tried in St. John. In St. Croix, 320 criminal cases were tried, representing a decrease under last year's figure of 363 cases.

PUBLIC LIBRARIES

Adult and juvenile attendance and the circulation of books in the public libraries of both municipalities have been satisfactory, considering the limited space and books available. In St. Thomas, the juvenile department conducted its annual story hour activities. In St. Croix, increased appropriations permitted purchasing of a large number of books. In both municipalities the salaries paid are too low, in addition to the fact that both libraries are understaffed.

HARBOR DEPARTMENT

This year again reflected a very bad period in shipping, due to war regulations and other iestrictions. A total of 204 vessels, with gross tonnage of 264,640, entered St. Thomas, of which 40 were United States Government owned ships with a gross tonnage of 68,709. Shipping, therefore, showed a slight increase compared with last year's figures of a total of 242 vessels with gross tonnage of 259,577.

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