Senate delays decision on funding for impending legal battle with HOVENSA
Published: August 21, 2013
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ST. CROIX - After hours of discussion and debate on Tuesday about the situation with HOVENSA, the 30th Legislature ultimately voted to send to committee a bill that would have appropriated $5 million for resources to pursue litigation against the company.
The move will have the Finance Committee considering the appropriation, likely as part of the Fiscal Year 2014 budget process. Gov. John deJongh Jr. had requested the funding for FY 2014 anyway.
DeJongh called the Senate into special session Tuesday to consider three pieces of legislation.
The Senate ultimately passed two of them - an appropriation for a $13.6 million payout to settle issues arising from an Internal Revenue Service audit of a 2006 Public Finance Authority bond issuance and an authorization for the PFA to issue up to $90 million in Revenue Refunding bonds to refund and restructure 2004 and 2009 series bonds for a more favorable interest rate.
The government needed the money for the settlement by Aug. 27 and the bond refunding needed to be done before Oct. 1 in order to realize the savings for FY 2014, according to testimony Tuesday.
However, after much discussion, senators said that the HOVENSA litigation appropriation needed to be discussed in committee, which can be done in time for the 2014 budget.
The request for the $5 million appropriation came as HOVENSA and the V.I. government edge closer to litigation after the 30th Legislature's Aug. 7 rejection of a proposed amendment to the company's agreement with the government.
The requested appropriation is for the V.I. Justice Department to fund the government's response to the HOVENSA closure, including legal, financial and consultant and industry expert advice and representation, as well as any litigation costs.
However, deJongh made it clear that the legal battle brewing with HOVENSA is likely to cost far more.
So did V.I. Attorney General Vincent Frazer as he testified Tuesday, calling the $5 million a "first installment to prepare our response to this dispute."
Frazer told senators that litigation is the most costly option and could cost more than $18 million.
He said the government has a litigation strategy but remains hopeful "that we do not have to go very far into the implementation of that strategy. Because we know that there are agencies who can use this money to provide services to the residents of this territory.
"We hope that we can resolve this dispute before we begin to spend one third of the $5 million, by getting a reasonable settlement," Frazer told the senators.
He also noted the clear possibility that once litigation begins, the specter of a bankruptcy filing by HOVENSA is possible.
Although Frazer told senators he was trying to prepare them for what would come with litigation - for what to expect and what will likely be involved in the case - some senators did not like the tone of his testimony.
Sen. Alicia Hansen said her position is that once the Legislature turned down the agreement, the executive branch should go "full-force," either heading back to the negotiating table or letting HOVENSA know "we will fight them."
"I think it is a wrong message to send to HOVENSA," she said of Frazer's prepared testimony. "HOVENSA needs to know that if they're willing to hold us hostage, we're willing to fight them to the bitter end."
Frazer said that although the government feels "strongly" about its position, he felt it was important to also explain that there is another side and to prepare lawmakers for what litigation will bring and what to expect.
He said that once litigation begins, more funding will be necessary.
"Once we start down the road, we have to keep putting gas in the tank," he said.
Sen. Nereida Rivera-O'Reilly said she had good reason for voting against the HOVENSA agreement, but that since she voted against it, she felt she also must vote to support litigation to protect the interests of people in the territory.
Sen. Judi Buckley, who voted for the agreement, said she was voting against the $5 million appropriation because she does not feel litigation is in the best interest of the territory.
Sen. Terrence Nelson said his no vote on the agreement was not meant as a directive for the government to proceed into litigation.
A number of senators said they didn't see the rush for the appropriation to be considered at a special session.
Ultimately, after discussions throughout the day, senators voted on Tuesday night to send the bill to the Finance Committee for further consideration, with Senators Craig Barshinger, Buckley, Diane Capehart, Donald Cole, Kenneth Gittens, Clifford Graham, Myron Jackson, Shawn-Michael Malone, Nelson, Clarence Payne III, Sammuel Sanes and Janette Millin-Young voting yes and Hansen, Rivera-O'Reilly and Sen. Tregenza Roach, who also said he supports the money for litigation, voting no.
- Contact Joy Blackburn at 714-9145 or email firstname.lastname@example.org.