The board of trustees for the Government Employees Retirements System seemed heartened that their investments earned more than 4 percent in March in a falling stock market but recognized it is not enough to pay for $3 billion in unfunded liability.
At Thursday’s board meeting, GERS investment officer Bruce Thomas reported the overall return on investment for March was 4.1 percent but he said other income sources for the territory’s government retirees are not producing. The entity’s assets of $736 million are declining by the day – from $751 million reported in January.
So-called alternative investments were highlighted in an audit by the V.I. Inspector General in 2015. The report faults GERS for decades of bad investments to the tune of $192 million.
The report cited the purchase of Havensight Mall, loans to Carambola Resort and Seaborne Airlines, and an $8 million loan in 2014 to V. I. Finest Foods as questionable investments or loans with below market interest rates.
A few of the system’s real estate holdings were discussed and GERS Administrator Austin Nibbs acknowledged some have lost value in a short time.
Responding to questions from retiree Eurman Fahie, Nibbs said although the GERS complex cost $11 million to build a few years ago, it only appraises for $3.1 million. Problems with the contractor added to the cost and when they tried to collect performance insurance, they discovered the company had declared bankruptcy, he said.
Since the appraisal was completed before there were tenants, Nibbs expects a higher value now that the buildings are occupied.
Another undervalued property owned by GERS is land in Estate Coakley Bay that was purchased for $5 million seven years ago. Now it is worth about $2.4 million, Fahie said.
“That’s the market. I don’t have control over that,” Nibbs replied.
GERS rental income is also declining. Although $448,000 has been collected year-to-date, more than $269,000 is overdue – mostly by the V.I. government, Nibbs reported. The Department of Justice owes $112,000 and the Personnel Department is owes $35,000.
The Gov. Juan Luis Hospital, a government subsidized agency, owes millions in past-due employer contributions and Nibbs said, if an agreement to make regular payments isn’t worked out, he will begin legal action in May.
The V.I. government is responsible also for a debt of $40 million in “missing” employer contributions. The government is also responsible for neglecting to fund GERS with $7 million a year, since 2014, from rum cover-over rebates.
Declining employer and employee contributions and the rising number of retirees are the root causes for the unsustainability of the retirement system and the reasons a total collapse of the system is predicted by 2025.
Nibbs reported there are currently 8,472 annuities with a gross payroll of $10.1 million a month. In 2015 alone, 299 government employees applied for retirement, and between October 2015 and April 2016, 152 retirees were added to the system.
According to the schedule of payments and disbursements for Fiscal Year 2016, almost $83 million has been collected and around $136 million paid out. There has been some improvement – in 2015 during the same period only $73 million was collected, but almost $150 million disbursed.
Board members present at the meeting on St. Croix were Wilbur Callender, chair, Michael McDonald, Leona Smith, Desmond Maynard, Ross, Carol Callwood and Vincent Liger.