Senate amends borrowing plan to allow deJongh more flexibility with $50M loan
Published: July 17, 2014
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ST. THOMAS - In special session Wednesday, senators approved part of the governor's proposal to amend a bill borrowing $50 million to help the territory's hospitals pay their utility bills, address other needs and help close the current fiscal year's budget deficit.
A second measure - to amend the previous authorization for the design-build contract for Paul E. Joseph Stadium on St. Croix - was split off of the governor's proposal by senators Wednesday and will be sent to committee for further deliberation.
On Monday, Gov. John deJongh Jr. called the 30th Legislature into special session to consider the measure, which was in response to a bill passed by the Senate last month.
In June, the governor sent proposed legislation to the Senate to borrow $169 million. The borrowing would have covered the $30 million budget shortfall for the current fiscal year and fund a number of what the governor called critical needs, including paying both hospitals' outstanding utility bills and giving the hospitals a cash infusion of about $15 million each.
At a session later that month, the Senate rejected the governor's plan, tabling the legislation indefinitely.
Instead, the Senate introduced and passed its own plan - a bill authorizing the government to re-issue a short-term working capital loan for $50 million that must be repaid in 270 days.
In the measure deJongh submitted Monday, that authorization is amended to allow the government to issue a short-term note in anticipation of issuing longer-term bonds or issue a loan that is converted to a long-term maturity after the 270 days.
After the session began, the body broke into Committee of the Whole to take testimony.
Finance Commissioner and Executive Director of the Public Finance Authority Angel Dawson Jr. shared correspondence from First Bank with senators Wednesday that indicated the bank would not be interested in financing a $50 million loan due in only 270 days.
FirstBank is the institution that currently holds the $40 million working capital line of credit that the government is using to mitigate cash shortfalls and that must be paid in full by Sept. 30.
The bank said they would be willing to consider a longer-term loan for the government.
Dawson said the bank's unasked question is, "What is the source of our repayment?"
By converting the short-term loan into a longer-term loan or bond, the repayment can be backed by another revenue stream - in this case Gross Receipts taxes - and the annual debt service payment would be smaller, Dawson said.
The $50 million
The $50 million authorized by the Senate will go to the hospitals and toward other needs in the government including:
- $1 million for Luis Hospital to upgrade medical records.
- $11 million for Luis Hospital to meet payroll from July to September.
- $7 million for Schneider Hospital to pay outstanding accounts payable.
- $3.5 million for capital improvements for Schneider Hospital.
- $1.5 million to the V.I. Human Services Department to pay Sea View Nursing Home an outstanding debt.
- $12 million to the V.I. Water and Power Authority to pay a portion of the government's outstanding utility bills of $5.25 million for each hospital and $1.5 million for the Bureau of Corrections.
The earmarks total about $36 million, leaving about $14 million to help address the government's current $27 million budget shortfall, Dawson said.
WAPA Executive Director Hugo Hodge Jr. testified about just how important it is for the amendment to pass and WAPA to get the $12 million that is owed. He said it makes up a large chunk of the utility's operating budget, and it could affect bond ratings and ability to float bonds.
Each hospital's chief executive officer also testified about the need for the cash infusion.
Luis Hospital Interim CEO Kendall Griffith said the hospital only made payroll last week by choosing not to pay vendors or buy needed medical supplies.
He said the hospital only had $45,538 in its bank account and will need $2.5 million just to pay the next payroll and cover vendor commitments for the month of July.
DeJongh thanked the senators for passing the amendments to the borrowing authorization but said he was disappointed with the body's decision to send the Paul E. Joseph stadium legislation through the committee process.
The proposal for the stadium would have provided flexibility to the government by allowing it to use different sources to back financing the $20 million project.
"This is the second time that the 30th Legislature has flatly refused to consider this already authorized project that is presently in negotiations with a contractor - a contractor selected through the government's procurement process. The project is vital to job creation and economic opportunity on St. Croix, we can ill afford to let a multi-million dollar project with so much potential for St. Croix specifically and the territory in general languish in the Senate. I remain hopeful that the committee of jurisdiction will move post-haste to consider this most important project," deJongh said in a written statement issued Wednesday afternoon.
Fourteen senators voted in favor of approving the first section, sending the second section to committee. Sen. Judi Buckley was absent.
- Contact Aldeth Lewin at 714-9111 or email email@example.com.