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Control of Water Island was transferred from the federal government to the territorial government on December 12, 1996, for the sum of ,000,000.00 (the same amount the federal government paid for the entire U. Virgin Islands in 1917) making Water Island the "Last Virgin". Virgin Islands government announced plans to further develop Water Island, and to increase the amount of residential housing to deal with chronic shortages on Saint Thomas.

In the late 1990s, the Department of the Interior began transferring Water Island land to the long-time residential leaseholders. The Water Island Civic Association (WICA) was formed in the mid 1960s to help improve the quality of life on Water Island.

From 1944 to 1950, the island was under the operation of the Department of Defense.

Gun emplacements, tunnels and underground rooms which were created during the Second World War building efforts are still visible. Army Corps of Engineers and soil samples are monitored from the former chemical test sites to ensure "that no residual contamination remains from previous Department of Defense activities." The island can be reached by a people ferry from Crown Bay Marina or by other vessels.

The site is now open for viewing, and tunnels and underground chambers are open for tours. The ferry takes passengers to Phillips Landing where golf carts are available to rent for exploring the island.

It was an area about 50 feet (15 m) long strewn with vegetation and rocks and only extended about 10 feet (3.0 m) from the water line.

The trees and brush were removed, 200 truck loads of rock and gravel were hauled off, and the beach stone was broken up with a bulldozer.

This was all accomplished under the direction of Walter Phillips, the Master Leaseholder in the early 1950s.