ST. THOMAS — V.I. lawmakers on Thursday narrowly approved amendments to a divisive debt refinancing law signed by Gov. Albert Bryan Jr. The amendments, which were requested by Bryan’s own financial team, reignited a fierce debate on the Senate floor over the law’s short-term gain and long-term gamble.
Act 8329, which was spawned by the Bryan administration this summer, aims to reduce the territory’s debt service payment and allow the Virgin Islands to reenter the bond market for the first time in 11 years.
The act does this by creating a separate financial entity, or Special Purpose Vehicle (SPV), that would take control of the coveted rum cover-over monies that the territory collects from the U.S. Treasury.
Since the SPV would be independent and untarnished by the V.I. government’s poor financial standing, it would purportedly attract more investors in the bond market, use the rum cover-over monies as collateral and issue new bonds at lower interest rates, around 3.5% as opposed to the current 5.58-6.75%, as issued by the V.I. Public Finance Authority.
This new 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.
On Thursday, during a special session, Bryan’s financial team and legal advisors proposed Bill 33-0372, which included a number of amendments to the law.
Most notably, the U.S. Treasury required that rum cover-over monies first flow into a government-owned entity before the SPV. As such, an amendment called for the creation of a government “Restricted Account” that would receive the cover-over monies and — within a day — transfer them to the SPV.
Another notable amendment called for the Legislature to ratify certain ministerial and administrative changes to the agreements with the territory’s rum companies, Diageo and Cruzan Rum.
Some lawmakers took issue with the ratification, insisting any changes to such agreements should require the parties — in this case, the rum companies — to appear before the Legislature.
PFA Director Nathan Simmonds disagreed.
“Considering our understanding that the changes that were made were ministerial and administrative, we did not think there was a need for the rum companies to be here to just simply say that they agree with changes because their signature speaks to that effect,” he said.
Following an hourslong Committee of the Whole hearing, lawmakers entered the session, where a testy debate ensued over the law’s viability.
Sen. Kenneth Gittens called the law a “filthy band-aid on an open wound.”
“The Legislature cannot and must not turn over its oversight responsibility to a private entity … being wholly unaccountable to the people of the Virgin Islands,” he said.
Sen. Kurt Vialet called out his colleagues who supported the bill for not reading it thoroughly and compromising.
“My vote is ‘no’ because the structure is poor,” he said. “They are paying no debt savings for the first three years, just so they can pile all the savings and put it on the back end so you’re paying more. When you look at the numbers, something is wrong.”
Indeed, Vialet insisted that $150 million of the much-touted $255 million savings would come from the territory’s own Debt Service Reserve Fund, and the territory would start to incur massive “dissavings” past the 10-year mark of the 20-year refinancing period.
Sen. Javan James Sr. referred to the bill and the overall law as another bad business deal by the territory akin to the deal with Diageo, which failed to produce huge savings to GERS as touted.
“Time after time, the Virgin Islands enters into agreements that we end up losing, he said. “We are suffering because of a bad deal made years ago and now we’re trying to make up for it.”
Senators who supported the bill and the overall law did so acknowledging its shortcomings, insisting the law was not perfect but a short-term bridge to better remedies.
“If it gives you some time to breathe, some time to catch yourself and make some better decisions … maybe we can implement what many people have said,” said Sen. Allison DeGazon. “But if you have a noose around your neck and you can’t breathe, how can you make decisions?”
The Legislature voted 8-6 in favor of Bill 33-0372, with an amendment to ensure interest rates don’t exceed 3.75% in the bond market.
Voting in favor were Senators Alicia Barnes, Marvin Blyden, Allison DeGazon, Stedmann Hodge Jr., Myron Jackson, Steven Payne Sr., Athneil Thomas, and Donna Frett-Gregory.
Voting against were Senators Oakland Benta, Dwayne DeGraff, Kenneth Gittens, Javan James Sr., Janelle Sarauw, and Kurt Vialet.
Sen. Novelle Francis Jr. was absent.