DeJongh vetoes bill putting GERS in charge of Texas oil company
Published: July 26, 2014
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ST. THOMAS - Gov. John deJongh Jr. vetoed a bill passed at the last regular session that he said was flawed and was hurriedly amended and adopted by the Legislature, possibly putting the territory at financial risk.
The axed bill was a version of a measure he had sent to the Legislature in January to create a subsidiary of the V.I. Public Finance Authority to hold the assets of Lonesome Dove Petroleum Company Inc.
DeJongh had sent an amended version again in March.
The governor's bill was heard in the Senate Finance Committee in April, but the committee held it.
It was then special-ordered to the floor during a regular Senate session in June, amended and passed.
Included in the governor's proposal was a directive to use the revenue stream to support early childhood education and health care and hospital facilities.
However, the Senate voted to change the bill to place the company under the ownership of the Government Employees' Retirement System, with all of its revenues going to address the system's $1 billion unfunded liability.
The oil company came into receivership of the Virgin Islands government in 1992 as part of an effort to collect $21.8 million in taxes, penalties and fees from the company.
Now, the federal receiver is ready to transfer the corporate shares of the company to the V.I. government and end the receivership action.
"In order to move the court to formally conclude the corporate receivership and turn the company over to the Virgin Islands, we must establish a suitable public institutional framework to enable the territory to exercise its right to dominion and control over the company. This necessity is borne out of the need to keep the company in existence and continuing to pay its tax obligation to the territory," deJongh said in his transmittal letter to Senate President Shawn-Michael Malone.
The company's assets are oil, gas and mineral interest leases, and it has no hard assets, such as land, buildings, equipment or exclusive ownership of leasehold rights.
The company also has no employees.
Over the years, the territory has collected $19 million in owed taxes, all of which were deposited into the Union Arbitration Award and Government Employees Increment Fund.
The government collects about $1 million a year in revenues from the company's leases, and revenue collections could be higher as the market improves.
In his transmittal letter to Malone, deJongh said the Public Finance Authority is set up to receive a government-owned subsidiary such as Lonesome Dove and has the statutory authority and the experience to do so. The Public Finance Authority owns other subsidiaries like West Indian Co. and the V.I. Next Generation Network.
The GERS may not have the legal authority to own such a company, according to the governor.
"The charter of the GERS board contains only the vague grant of authority to 'authorize the purchase and sale of investments,'" deJongh said. "There is no mention of the GERS being able to own and/or operate a company much less one as specialized as the type of entity being administered herein."
The money that comes to the V.I. government from Lonesome Dove is a repayment of a $30 million tax obligation and therefore is not taxable by the federal government. If the money is going to GERS, it would be taxable and end up costing the General Fund millions in lost revenue, deJongh said.
He urged the senators to not take the "normal route" of simply overriding his veto, but instead to reconsider the original measure and work with his administration to find a workable solution that addresses the desires of both sides.
"To achieve the desired outcome in the vetoed measure, I propose that we work together on an acceptable mechanism that would allow for an eventual transfer of the assets to GERS when they are at their highest value, then to be monetized and applied toward the unfunded liability when we can mitigate the federal tax impact. I believe such an approach would achieve all of these most worthy objectives and serve multiple groups in our community," he said.
- Contact reporter Aldeth Lewin at 714-9111 or email email@example.com.