July 22, 2008 — Within the next month, Public Finance Authority representatives will come to the Senate for authorization to float up to $300 million in new bonds that will help subsidize the agency's five-year capital-improvement plan, a PFA official said Tuesday.
Currently, the government can issue no more than $1.69 billion in bonds — a ceiling that amounts to no more than 10 percent of the total assessed value of taxable property in the Virgin Islands. As of June, the territory's general-obligation debt totaled about $721.3 million, said Julito A.H. Francis, PFA director of finance and administration, during the first round of budget hearings on St. Thomas.
Though the agency's plan was not made public during Tuesday's hearing, the authority is only looking to issue $75 million to $100 million in new bonds right off the bat to make sure specified projects actually move forward on a "timely basis," Francis said.
Sometimes capital projects outlined by departments and agencies are not ready to move forward right away. As the projects languish, construction costs and other expenses continue to rise, making funds previously earmarked by the PFA "insufficient," Francis said. Currently, about $100 million in bond proceeds is sitting in the bank, waiting to be spent on projects that have remained on the drawing board for months or years, he added.
To keep the PFA from losing any excess interest earned on the bonds, the authority's board recently shifted some of the proceeds from outstanding projects to capital-improvements that include the completion of the Juan Luis Hospital's Cardiac Center on St. Croix and repairs to government facilities in both districts.
The extra $100 million should be spent on the V.I. Water and Power Authority, helping to fund repairs that would keep the lights on and water running on all three islands, senators said.
"I see us playing with the WAPA issue too much," said Finance Committee chairman Sen. Terrence "Positive" Nelson. "We're talking about reprogramming bills and all that kind of stuff, but it seems like the governor is shooting all over the place and not hitting the target — and WAPA is the target. It seems as if the Legislature is going to have to set the spending policy in this case."
Departments and agencies still have first claim to the money they've requested, whether it's being spent or not, Francis said. Though WAPA does have the ability to float its own bonds, the PFA could better help the utility if it came up with a comprehensive production and spending plan, he added.
In addition to floating the new bonds, the authority plans to:
— issue up to $250 million in special-project bonds to finance the construction of a new Captain Morgan rum distillery on St. Croix;
— possibly issue up to $600 million in pension-obligation bonds to pay down a portion of the retirement system's unfunded liability; and
— refinance a portion of bonds issued in 1998, 2003 and 2004 at a more favorable interest rate — if the market improves.
Debt-service payments on outstanding bond issues — and a fleet-financing package for V.I. Fire Services — total about $89.7 million each year.
As a public corporation and autonomous government entity, the PFA does not receive any money from the General Fund. It's fiscal year 2009 budget — pegged at $5.7 million — is funded by contributions from the Internal Revenue Matching Fund (the territory's rum revenues) and the PFA's project and administration fund.
Present during Tuesday's meetings were Sens. Liston Davis, Juan Figueroa-Serville, Louis P. Hill, Neville James, Nelson, Ronald E. Russell and James Weber III.
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