Nelson proposes $4 billion V.I. bailout
Published: April 7, 2014
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ST. THOMAS - Sen. Terrence Nelson has a plan to borrow $4 billion to bail out the territorial government and make major infrastructure improvements.
He said the 30th Legislature is facing a budget shortfall of approximately $40 million and no real solutions to address the territory's deficits and debt have been offered.
"It's a two part approach," he said. "The thinking is very simple."
The first part is to consolidate all the territory's debt.
Nelson said the outstanding bonds backed by Gross Receipts Tax and rum revenues total about $2.04 billion. It would pay off the V.I. Water and Power Authority's bond debt as well, he said.
Refinancing the debt should save the government money, Nelson said.
"With the restructuring of the debt, we free up some cash flow," he said.
The new debt would be used to pay off all of the outstanding retroactive salary increases owed to government workers, cover money owed to the Government Employees Retirement System, and establish a true rainy day and disaster fund, Nelson said.
The second part of Nelson's plan is investing about $2 billion in the territory's infrastructure.
The investments would include transforming the V.I. Water and Power Authority's power plants, rebuilding roads, giving GERS some direct cash infusion to offset the unfunded liability, purchase a ferryboat to reinstate the St. Croix-St. Thomas route, and set money aside for low-interest small business loans.
"We are anticipating with all of this activity, it would stimulate the economy, put a lot of people to work while we repair our infrastructure," he said.
"If we can lower utility costs, we should see a resurgence of small businesses opening."
Public Works could be outfitted with the necessary equipment so that a lot of road work currently contracted out can be done in house, he said.
While Nelson's original idea was to get the federal government to bail out the territory, for the last five months he has been working with a private sector investor, Global Trade & Finance, and Morgan Stanley.
Last month, a group from Global Trade & Finance came to the territory and spent four days touring government facilities, meeting with government officials and getting a better understanding for the territory's needs.
Morgan Stanley gave Puerto Rico a $3.5 billion bail out in March, Nelson said.
"They've already stated their ability and willingness to help us with this," Nelson said.
Nelson invited Finance Commissioner Angel Dawson Jr. to join two teleconferences with Morgan Stanley to share information about the territory's indebtedness.
Dawson would not say if Nelson's plan is feasible or give his opinion on it, he said he was just there for informational purposes.
"I would need to see a formal proposal to evaluate what may be offered," Dawson said.
Nelson made the first presentation of his plan to his fellow senators last week during a closed door meeting to discuss the current financial crisis. He said they seemed interested and wanted to be in on a call with the investors to ask questions.
The proposal would need to be turned into a bill and go through the Senate's committee process. If approved it would need the governor's signature, or a veto override, to become law.
"The legislation would authorize the bond and specifies the projects we want completed," Nelson said. "This is a feasible and achievable plan."
Nelson said if he has the support of his colleagues and the process moves along without major obstacles, he anticipates the bill coming to committee for hearing this summer.
Once it becomes law, the money will move quickly. He said the investors would parcel it out in $400 million drawdowns, the first of which would come within a few months of approval.
"The reason why we're even going along this route, is our needs are so urgent," Nelson said. "We cannot wait on the little trickles of revenue streams that are being considered by the Legislature."