Home News Local news Market Move Opens Extra $4.6 Million for Infrastructure Projects

Market Move Opens Extra $4.6 Million for Infrastructure Projects

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Feb. 8, 2008 — The Public Finance Authority now has an extra $4.6 million worth of financing available for three long-standing capital-improvement projects, thanks to board members' decision to terminate a "risky" swap-option agreement with UBS, an international investment banking and securities business.
The agreement was executed two years ago after PFA board members voted to axe a deal with Lehman Brothers to refinance $300 million worth of bonds issued by the authority in 1999. During a meeting in June 2006, former PFA head Kent Bernier Sr. said the swap with UBS would allow the authority to take advantage of a lower interest rate market and yield approximately $12 million to $15 million in additional savings on the bond issue.
The money, he said, would reimburse the PFA for project funds and bond proceeds put toward the construction of a new library on St. Thomas, improvements to the access road to the Analy Bay development project on St. Croix, and government efforts to connect the Gallows Bay development project on St. Croix to the Christiansted Bypass.
Fluctuations in interest rates over the past few months have since made the agreement more "risky," said Julito Francis, PFA director of finance and administration, addressing board members during a meeting Friday at Government House. While interest rates were "relatively flat" at the time the swap was made, the market has recently become more volatile, costing the authority about $53,000 over the past six months, he added.
Though Francis said the PFA received about $14 million in upfront financing for the three projects, it also had to pay out about $22 million to enter into the swap.
"It's a very complicated mechanism," he added after the meeting. "Everything has to line up perfectly, but the problem is that we don't control what happens in the market, which has gotten more and more volatile over the last 15 months. So we have to get out of it now, because we don't know where it will be in the future."
Taking about 15 minutes to deal with the rest of its agenda, board members also put their stamp of approval on three funding requests:
— $200,000 in additional financing from interest earned on 2003 bond proceeds to the Department of Planning and Natural Resources to continue the J. Antonio Jarvis House Rehabilitation Project;
— $1.5 million from the authority's project fund to cover renovations to Government House, including the public relations building, office of the governor's legal counsel and the first lady's garden; and
— $300,000 from the authority's project fund to the Youth Rehabilitation Center on St. Croix to cover architectural and engineering services for the construction of new facilities.
Board members present during Friday's board meeting were Gov. John deJongh Jr., Office of Management and Budget Director Debra Gottlieb and Finance Commissioner Claudette Watson-Anderson. Board member Roy D. Jackson was absent.
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