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PFA Gives Green Light for $250 Million in Bonds

Just about a week after getting the go-ahead from the Senate, the Public Finance Authority board moved ahead with a resolution to float up to $250 million in new bonds to help get the government through its current budget deficit.
Last year senators authorized the government to borrow up to $250 million to plug multi-million-dollar funding gaps projected for both fiscal years 2010 and 2011. This initial proposal allowed officials to float bonds, tap into government public fund accounts, or turn to a bank or other financial institution for money.
At the time, the government opted to borrow $50 million from internal funds, which will be repaid from a portion of the $250 million line of credit subsequently opened with the banking syndicate formed by Banco Popular and FirstBank. It was said that the debt would be repaid within three to five years, converting any money left over after the interest is paid off into a short-term loan.
To date, the government has drawn down about $175 million on the line of credit, but is looking to pay down $100 million by floating $250 million worth of bonds by next month. That would free up some more money for next fiscal year, which may be a few short months away, but is still fuzzy in terms of the final economic picture, officials have said.
Another $150 million in bond proceeds would be put toward closing the FY 2010 budget deficit, now estimated at $170 million.
To accomplish all this, senators passed a bill last week bumping the Senate’s current borrowing authorization to $500 million, and PFA board members wasted no time Monday in moving ahead with the bond issue, which will be repaid by the increases anticipated in rum revenues flowing into the territory once the new Captain Morgan Rum and expanded Cruzan Rum facilities are in full swing.
Gov. John deJongh Jr., chairman of the PFA board, said Monday that the Senate still has not yet sent up the final version of the bill, which he still has to sign into law.
The bonds are expected to be repaid in 20 years, at an interest rate not to exceed 8.5 percent. Officials said Monday they actually expect to lock in a 5- to 5.4-percent interest rate, and hope to get the final bond documents into the Senate next week for review.
Meanwhile, officials will be renegotiating with FirstBank and Banco Popular to "reinstate" the line of credit so it can be used for FY 2011. The budget deficit anticipated for next year is about $250 million, so other measures will have to be put in place to cover the shortfall, deJongh said.
Otherwise, PFA board members approved a number of funding requests that will help push various capital projects forward, such as the renovations to Fort Christian and the construction of the new library and archives center on St. Thomas.
Approved during Monday’s meeting were resolutions:
-putting $55,000 from the authority’s project administration fund and $50,000 from the now cancelled Hospital Facilities/Old Department of Labor and Education Building Project toward the installation of new playground equipment and a tennis/paddleball wall at the D.C. Canegata Sports Complex on St. Croix, along with the retrofitting of lights, and work on the restrooms and bleachers at the Sub Base tennis courts on St. Thomas;
– pulling $12,000 from the authority’s project administration fund for the completion of the first phase of renovations to Fort Christian on St. Thomas (Public Works Commissioner Darryl Smalls said the money will be repaid by the Federal Emergency Management Agency, and is needed as soon as possible so the project can move into Phase II);
-approving amendments to the contracts for Jaredian Design Group and Balbo Construction for additional design plans and construction on the new St. Thomas Library and Records Center Project, for a total cost of nearly $1.4 million, which will be split between interest earned on the 2006 gross receipt bonds and interest earnings on the 1999 swap option account at Banco Popular (the additional funding puts the total cost of the project at around $20 million to date, according to officials); and
-extending for 90 days an asset-acquisition agreement between the PFA and California-based Juno Settlement, which, working in conjunction with St. Thomas-based Pole Financial, is working on a proposed financial program geared toward reducing the Government Employees’ Retirement System’s $1.2 billion unfunded liability.
In executive session, board members also adopted a resolution authorizing the PFA to begin negotiations with the government to acquire some property.
Board members present during Monday’s meeting were Finance Commissioner Angel Dawson, deJongh, Office of Management and Budget Director Debra Gottlieb and Keith O’Neale Jr.
Board members Roy D. Jackson and Pablo O’Neill were absent.

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