ST. THOMAS — After a week of deliberations on a consequential debt refinancing bill, the V.I. Legislature on Friday voted 8-5 in favor of an amended version that gives lawmakers a final say before any transaction is made.
“Let’s give the governor an opportunity to deliver — and if he doesn’t deliver, then we don’t ratify it,” said Senate Vice President Myron Jackson.
Bill 33-0363, which was requested by Gov. Albert Bryan Jr. earlier this month, purports to reduce the territory’s debt service payment and give the Virgin Islands access to the bond market for the first time in 11 years.
The bill does this by creating a separate financial entity, or Special Purpose Vehicle (SPV), that would take full control of the coveted rum cover-over monies that the territory collects from the U.S. Treasury.
These monies largely go toward debt service payments, with current interest rates averaging between 5.58% and 6.75%, after which any remaining funds go toward the rum companies and the V.I. government.
In the proposed bill, the SPV, untarnished by the V.I. government’s poor financial standing, would be poised to issue new bonds at lower interest rates, around 3.5%. That arrangement, according to Bryan, would reap $255 million in cash savings over the next three years and become a potential lifeline to the ailing Government Employees’ Retirement System.
Lawmakers, however, were skeptical, blasting the bill’s proponents for insufficient information, shaky assumptions and a lot of “fuzzy math.”
Sen. Kurt Vialet, who serves as chairman of the Senate Finance Committee, assailed the governor’s team for failing to reveal that the $255 million savings includes $130 million from the territory’s own debt service reserve fund, an emergency fund set aside to pay off debt in the event of a major disaster.
Vialet also questioned the bill’s goal to realize $52 million in net savings over a 20-year period. “How is that possible when they are already cashing out $130 million in monies that belong to the government of the Virgin Islands?” Vialet asked Friday. “They’re taking all the savings, putting it in the first three years and then on the back end, this government is going to lose $50-60 million.”
Bill proponents, while not revealing the total cost to the government of the 20-year refinancing measure, did acknowledge that initial cash savings will turn into a “dissavings” beyond the 10th year.
Richard Tortora of Capital Markets Advisors, who testified on behalf of the bill, said this would be remedied by another refinancing of the bonds around the 10-year mark — an assumption that market conditions will be still be favorable at that time.
Senators on Friday, hoping to mitigate this uncertainty, brought forth an amended bill to give the Legislature ratifying authority.
“The original legislation did not allow for the Legislature to ratify the financials, the cash flows and the transaction overall,” said Sen. Donna Frett-Gregory. “This amendment gives the Legislature the responsibility to review the transaction and to determine whether or not this transaction is in fact something that we are comfortable with for our retirees and for the future of the Virgin Islands.”
Sen. Alicia Barnes agreed. “Before any agreement or deal is consummated, this body has to approve the deal,” she said. “We have made it very clear to the Executive Branch that we want to see our dollars and the interest rates and market conditions maximized. We want optimal benefit for utilizing our cover-over funds.”
Senate Majority Leader Marvin Blyden and Sen. Allison DeGazon followed suit, insisting Friday’s vote wasn’t a greenlight for any deal, but rather an opportunity for the executive branch to gather more information for the Legislature.
“This amendment allows the governor and his team to bring back the facts and the data,” DeGazon said. “Let’s see if the securitization makes sense.”
Others like Javan James Sr., however, said the bill was not worth the gamble and that diversifying the economy and finding other revenue streams for GERS was preferred.
Sen. Janelle Sarauw referred to the measure would amount to “predatory lending” and was nothing more than “putting lipstick on a pig.”
Voting in favor of the amended measure were Barnes, Blyden, DeGazon, Frett-Gregory, Jackson, along with Senators Stedmann Hodge Jr., Athneil Thomas and Novelle Francis Jr.
Voting against were Vialet, James and Senators Oakland Benta, Dwayne DeGraff and Janelle Sarauw.
Senators Kenneth Gittens and Steven Payne Sr. were excused from Friday’s session.
“All that we can ask is you do your best, Mr. Governor, to make this happen,” Francis said. “Every single penny will have to go to GERS in order to receive my vote.”