Gov. Charles W. Turnbull submitted to the Senate Friday legislation to allow the Public Finance Authority to issue $130 million in bonds and lend the proceeds to the government.
The money would be used for five purposes, according to the letter accompanying the legislation sent to Senate President Vargrave Richards. They are:
– To refund or pay certain outstanding obligations of the government and the authority, including previous revenue bond obligations issued to finance capital projects.
– To pay accrued working capital obligations of the government.
– To fund payments to encourage a reduction of the government workforce.
– To refinance the government tax and revenue anticipation notes issued earlier this year to borrow $35 million to meet payroll on an interim basis.
– To fund debt service reserve funds relating to the issuance of the bonds.
The government would issue general obligation loan notes to the PFA to be secured by the pledge of future gross receipts taxes.
This would result in the monthly gross receipts taxes being deposited in a special bank account to be applied to the bond payments. Only after that obligation was met would any excess be returned to the general fund.
By pledging the gross receipts tax for repayment of the bonds, the scope of any potential gross receipts tax reform could be limited during the repayment term of the bond for up to 30 years, according to the terms of the legislation.
However the borrowing hinges on pending congressional legislation to amend the Organic Act to allow the V.I. government to borrow money for working capital.
That legislation passed the House today, Monday. The U.S. Senate and President Clinton also must approve it.
If the Organic Act change is not approved, the V.I. government would then seek to issue an additional $180 million in bonds in order to pay off previously issued bonds, thus opening the revenue stream to repay the new bonds.
Another feature of the legislation would require all revenue bonds by the V.I. government or any of its quasi-independent agencies, including the Water and Power Authority, the Port Authority and the Housing Finance Authority, to be issued, coordinated and approved by the PFA.