Home News Local news PFA Negotiates With Hovensa Over Bond Issuance

PFA Negotiates With Hovensa Over Bond Issuance


Feb. 22, 2006 — A Public Finance Authority board meeting got off to a late start Wednesday, causing many items on the agenda to be pushed back until the next scheduled meeting.
Topics that were not discussed included financing for Fire Services and updates on the construction of the new Tutu Park Library, along with projects at the Addelita Cancryn Junior High School on St. Thomas and Central High School on St. Croix.
Board members also voted to hold discussion on the purchase of the Anchor Inn Hotel on St. Croix, and the status of architectural and engineering services for the Fredericksted Economic Revitalization Project.
However, board members did authorize PFA Executive Director Kenneth Mapp to continue negotiations with HOVENSA relating to the issuance of approximately $103 million in private activity bonds. HOVENSA will use the bond proceeds to fund the construction of wastewater and solid waste management facilities at its St. Croix plant.
Every year the federal government authorizes financial institutions within the states and territories to issue private activity bonds to aid private businesses with infrastructure improvements. According to Mapp, private activity bonds have not been issued by the PFA for the past two years, leaving $103 million worth of bonds available for use in 2006.
Mapp said the PFA has issued $250 million worth of private activity bonds to HOVENSA in the past, in exchange for a 1 percent transaction fee. "So, if the bond issue is $250 million, then we get to keep $2.5 million of that," he said when contacted Wednesday evening. "The company would then get to utilize the bond proceeds once the bonds have been issued. That's what we've done before with HOVENSA."
This time, however, Mapp said that instead of the transaction fee, the PFA wanted the refinery to sell fuel to the territory at cost. Mapp explained that representatives from HOVENSA indicated they did not agree with the idea, but said they would instead pay a higher transaction fee. "The company said they would lose more money over the life of the bonds if we were to cap the fuel prices, but did agree to pay the highest transaction fee allowed by V.I. law, which is 1.38 percent," he said. "However, notwithstanding that they lower the cost of the fuel to the territory, HOVENSA would be getting significant savings with this agreement over the life of the bonds."
Since board members concurred with Mapp's assessment, they unanimously voted to continue negotiations with the refinery and put an agreement in place with the company before April 15.
Board members also approved a request by Golden Gaming LLC for a six-month extension on an agreement between the company and the PFA to provide partial financing for the construction of Golden's proposed hotel and resort development project on St. Croix. (See "Golden Gaming Gets One More Chance".)
Paul Golden, the company's chief executive officer, told board members that funding for the rest of the project is "almost" in place, but delays in the permitting process have kept the company from being able to secure any loans.
Golden explained that while the company's Coastal Zone Management permit expired on Jan. 15, a permit extension request was filed on Dec. 12. "However, the Board of Land Use Appeals will not meet to consider the request until March 23, which would be three months after we filed for the extension," Golden said.
After the meeting, Golden said the company's efforts to attain funding for the project are being negatively impacted by the lack of a building permit. "No one wants to give a loan to someone who doesn't have the proper permits," he said.
During the meeting, Golden told board members that despite this and other permitting setbacks, a significant amount of progress has been made on the project, which has helped to increase the scope of development. "In phase one alone, we plan on building 716 rooms, and that number will double in future phases," he said. "Otherwise, we're moving full-speed ahead on everything that we can, including the completion of the construction documents."
Golden said he anticipates a groundbreaking in June or July.
In other action, the board also approved three appropriations for the various Public Works projects on St. Thomas and St. Croix. These include:
–$3.5 million for the expansion of the highway in Long Bay on St. Thomas.
–$5.8 million for the construction of the Christiansted bypass on St. Croix.
–$170,000 to repair Scott Free Road on St. Thomas.
The money to fund the projects will come from the 1989 highway series bond issue.
Finance Commissioner Bernice Turnbull sparked a debate during the meeting by stating that the 1989 bond proceeds have already been committed to repay the central government for funding past Public Works projects.
Mapp disagreed and said that more than $10 million in proceeds still remained in the PFA portfolio from the1989 bonds.
Turnbull said she did not believe the money was still available and told Mapp that she would conduct an analysis of funds to see whether they had already been obligated.
The board further voted to reprogram $1 million from funds earmarked for the construction of the Carifest Theme Park to the Legislature for repairs to Government House on St. Thomas.
"We had set aside $10 million in funding for the park, which was supposed to have been used by Dec. 31," Ira Mills, director of the Office of Management and Budget, said after the meeting. "Since they haven't yet been expended, we're reprogramming $1 million for repairs to Government House."
All board members were present at Wednesday's meeting.
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