Calling it "one of the most significant pieces of legislation to affect the U.S. Virgin Islands," Gov. John deJongh Jr. signed into law a new borrowing bill that would allow the government to float $250 million in bonds to help cover the territory’s current and projected budget deficits.
In a letter sent this week to Senate President Louis P. Hill, deJongh said several of the bill’s sections "serve the collective purpose of supporting sustainability for the government…as we work our way through the worst economic collapse to have confronted the U.S. economy, and by extension our economy, since the Great Depression."
Fiscal year 2010 is expected to wrap with a $170 million budget deficit, while an approximately $250 million deficit is projected for FY 2011.
Last year, senators authorized the government to borrow up to $250 million to plug the multi-million dollar funding gaps. 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 up to $50 million from internal funds, which will be repaid by a portion of a more-than-$200-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 the final economic picture is still fuzzy, officials have said.
To make all this possible, the bill essentially doubled the government’s current authorization to an overall $500 million, while senators tacked on an amendment extending the pay-off period for the bonds to 20 years.
In signing the bill into law, deJongh also kept all other amendments adopted during the Senate’s last full session, called specifically to consider the bill, which passed on a narrow 8–7 vote.
Other amendments:
-call for the government to set aside a portion of its share of the gross annual rum revenues expected to flow into the territory once new and expanded rum facilities on St. Croix are in full swing in an effort to more quickly pay off the line of credit and bonds;
-appropriate $500,000 from the Education Initiative Fund to the V.I. Board of Education for its Nursing Scholarship Program;
-appropriate more money from the Education Initiative Fund to the Education departments for textbooks, vocational tools, school supplies and security equipment at Ivanna Eudora Kean High School;
-appropriate $50,000 from the Education Initiative Fund to the V.I. Board of Education for cardiovascular technologist scholarships and calls for the board, in conjunction with the territory’s high schools, to conduct a public awareness campaign to generate interest in the scholarships;
-set aside $5 million from the new bond proceeds for the Tourism Department to "re-brand" the territory as a year-round tourism destination;
-reprogram money to cover budget shortfalls for the Justice Department;
-allow rum revenues to be used for capital projects so Public works can make road and culvert repairs in both districts; and
-extend the implementation date for the recently passed Probate Code and Fiduciary Relations Act from May 1, 2010 to Jan 1, 2011.
DeJongh’s support for the bill was also echoed this week in a press release from local Democratic Party State Chairman Luis "Tito" Morales, who said he was writing to "salute and commend" both deJongh and the senators who passed the bill.
"For those who argue that we should let nature take its course, that our citizens should be led to suffer as unaided victims of economic forces beyond their control, we say that such callous calculations are inconsistent with the ideals of the Democratic Party and good government," the release said. "Clearly the options to borrowing, of significant layoffs or large reductions in pay from government employees, at this stage of the fiscal year would have been counterproductive by reducing revenues further and increasing social service costs beyond current obligations."
Hill also sent a statement out Tuesday, saying that in passing the bill, senators wanted to make sure government continued to function.
"Clearly no one wanted to borrow, but the financial figures spoke for themselves and we each understood, without a doubt, that by not borrowing, there would have been catastrophic disruption to the entire V.I. economy," Hill said.
Amendments tacked onto the bill also provided "fundamental" supplies "desperately needed" by local high school and junior high school students to complete their courses, and made sure funds were available for scholarships needed to train students to fill positions currently filled by off-island contractors.
