Nov. 25, 2006 — With a little more than a month to go before a new administration takes office, Gov. Charles W. Turnbull has submitted three major financial proposals to the Legislature for consideration — including a bill to determine whether purchasing the V.I. Telephone Co. (Vitelco) and other Innovative Communication Corp. companies would be "in the best interest" of the territory.
Senators will have the opportunity to consider the bill during a special Legislative session scheduled for Tuesday. Two other bills submitted by Turnbull call for the issuance of $600 million worth of pension-obligation bonds to finance a portion of the more than $1 billion Government Employees Retirement System unfunded liability, and the issuance of $185 million in bonds to pay off bonds issued by the Public Finance Authority in 1999 and 2003.
A fourth proposal calls for senators to ratify a marketing agreement between the government and V.I. Rum Industries Ltd. to finance the promotion of Cruzan and Conch Republic brand rums.
Purchasing Vitelco
In the latest twist to the ICC bankruptcy saga, ICC owner Jeffrey Prosser approached the V.I. government earlier this month about buying several of his companies — including Vitelco; Innovative Cable TV on St. Thomas-St. John and St. Croix; and Vitelcom Cellular and VI Powernet, among others — for about $650 million. (See "Prosser Seeking V.I. Government Bailout.")
While several senators have spoken out against the deal, two closed-door meetings have taken place at the Public Finance Authority building on St. Thomas involving Turnbull, his financial advisors and members of the government's financial team. (See "Brief: Governor Holds Secret Meeting.")
Senators said they had expected to see a bill dealing with the purchase early last week, to be considered at a special session on Friday. Sen. Celestino A. White, speaking on Wednesday, said he would not be prepared to vote in favor of the bill, and advised Turnbull to spend Thursday "enjoying Thanksgiving, and to spend Friday getting rid of the waste."
However, Turnbull's bill, which came down around 7 p.m. Friday, does not lay out a potential deal. Instead it calls for a $300,000 appropriation from the general fund to the Office of Management and Budget to hire experts who will determine whether the purchase "is in the best interest of the government."
The bill states that the "professional evaluation" would allow the government to do its "due diligence" and investigate the potential acquisition.
Floating Bonds
Another bill submitted by Turnbull calls for the issuance of $600 million worth of pension-obligation bonds in an effort to pay down a portion of the more than $1 billion unfunded liability.
During a Senate hearing in January, a similar proposal was made by GERS financial advisors, who said that the $600 million bond issue, along with a $49.9 million increase in the government's annual contributions to the system, would bring the unfunded liability down to $431.8 million.
At the time, GERS financial advisors said the issuance of pension-obligation bonds would not cause the government to go further into debt, but would rather provide an immediate infusion of cash into the system. However, Nathan Simmonds, chair of the government's fiscal team, told senators that the recommendation was "not viable for the government." Given that GERS does not have the authority to issue pension-obligation bonds, he said, the responsibility to pay them back would fall to the government.
Since then, Simmonds has said that the government's financial team has continued to work with the GERS board of trustees in looking into a viable way to address the unfunded liability — including the feasibility of issuing pension-obligation bonds. Three months ago Simmonds said the cost of issuing pension-obligation bonds could be greatly reduced, since the territory received a Baa3 investment-grade bond rating from Moody's Investors Service.
A third bill submitted by Turnbull on Friday authorizes the PFA to issue $185 worth of bonds to pay off all or a portion of outstanding bonds issued by the authority in 1999 and 2003.
Marketing Rum
In an effort to step up Cruzan Rum promotion, Turnbull has also asked senators to approve a five-year marketing agreement between the government and V.I. Rum Industries Ltd.
Currently the territory receives annual excise tax rebates from the federal government for V.I. rum sold throughout the mainland. Last year, these revenues amounted to more than $87 million.
According to documents sent Friday by Turnbull to Senate President Lorraine L. Berry, the marketing agreement is designed to increase the rebates by giving V.I. Rum Industries the funds to step up promotion efforts for Cruzan and Conch Republic brand rums.
In exchange for V.I. Rum Industries initially investing its own money for the promotions, the V.I. government will pay the company 35 percent of any excess tax revenues it receives each year as a result of the marketing efforts.
"The government will make no marketing … payments in the event there is no increase in rum sales," the agreement states.
Back Talk Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.
