GERS: Seaborne owes $187,000 in consulting fees

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ST. THOMAS - The Government Employees Retirement System insists that Seaborne Airlines still owes the system nearly $187,000 in outstanding legal and financial consulting fees.

During its monthly meeting Thursday, the system's board of trustees discussed the matter during a lengthy executive session.

The airline ran a full-page advertisement in The Daily News on Thursday featuring a letter from Seaborne to the community.

The letter asserted that Seaborne, which announced in December that it is moving its headquarters to Puerto Rico, had invested close to $100 million in the territory.

The advertisement also assured the community that, after the announcement of its move, Seaborne had paid the "less than $4 million" in loans from GERS.

"These loans have been paid in full, with interest. There is a dispute concerning third-party fees, which Seaborne hopes to settle amicably," the advertisement said.

The amount in dispute is $186,998.60, according to GERS Administrator Austin Nibbs.

During its executive session, the board voted to authorize Nibbs to use "whatever legal remedies available" if the airline does not respond within a reasonable time regarding the disputed payment.

"If they come back with something outrageous, then we can go through arbitration," Nibbs told The Daily News after the meeting.

The disputed amount is from legal and financial consulting fees that GERS acquired beginning in October while trying to help the airline restructure its loan, Nibbs said.

In December 2009, GERS loaned $3.3 million to Seaborne at an 8.25 percent interest rate for a five-year term.

In September 2012, the board modified the loan terms, dropping the interest rate to 6.23 percent and loaning the airline another $1.5 million to expand operations.

In May last year, negotiations began to restructure the loan a second time, at which point the airline halted payments until the December payment, according to Nibbs.

Development trip

During Thursday's meeting, the board also discussed a trip last week by the four members of the GERS development committee and Nibbs to Houston to view housing models that could be used in GERS's own development plans.

GERS wants to build a hotel, convention center, restaurant, office space, senior living facility and 105 single-family lots on 120 acres that it owns across from Cost-U-Less on St. Thomas.

GERS bought the property from a local family in 2006 for $4.5 million.

The land runs from Weymouth Rhymer Highway - just east of the Donoe bypass intersection - up over the hill toward Frenchman's Bay on the south side of the island. The land is split into two parcels: the northern half, which will contain the hotel and convention center, and the southern half, which will be the home lots.

The homes that the development committee viewed in Houston were about 1,350 square-feet and consisted of about three bedrooms and two-and-a-half bathrooms, according to committee member Leona Smith.

The homes would cost about $250,000 each to construct if they include cisterns, Smith said. They also generate their own power, making it possible to sell power back to the V.I. Water and Power Authority, she said.

Asset study

The board also voted to approve an asset allocation study, which is expected to be conducted every five years. The study, conducted by the board's financial advisement firm, Meketa, began in November, Nibbs said.

The conclusion of the study found that the retirement system needs to increase its assets to improve its financial condition.

"Asset allocation is the biggest driver of long-term performance, and a more diversified asset allocation policy nearly always leads to a better long-term position for a plan," the study said.

The final conclusion of the study was that, despite many possible economic scenarios, the board may have to decrease benefits or increase contributions to improve its condition.

Interest rate increase

The board voted to increase the interest rate on new alternative investments to no less than 10 percent.

Previously, the policy was to set the interest rates for any alternative investments at 7.5 percent, the actuarial assumed rate.

"This is the type of returns - double digits return - that are expected from alternative investments, which are high-risk," Nibbs said. "As high-risk investments, GERS is expected to receive higher returns."

Other agenda items

During the executive session, the board also discussed an energy initiative opportunity with ICGroup, its investment with Orbitel and the management agreement with the West Indian Company Limited. No action was taken on any of those items.

The board also discussed in executive session the settlement agreement between GERS and the V.I. government regarding payments to the retirement system, and Nibbs said a meeting with Gov. John deJongh Jr. is tentatively scheduled for February.

- Contact Jenny Kane at 714-9102 or email

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