V.I. government sells nearly $50M in bonds to buoy hospitals, cut deficit
Published: August 29, 2014
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ST. THOMAS - The V.I. government sold $49.6 million Gross Receipts Tax bonds this week, keeping the hospitals and government afloat for a little longer.
The V.I. Public Finance Authority, the financial arm of the government, closed on the bond sale Wednesday, according to a statement released by Government House.
The Public Finance Authority secured an average interest of 4.04 percent for the 20-year bond issue.
The V.I. Legislature authorized the borrowing at a special session last month.
Investor demand was strong, as mutual fund companies and asset managers put in significant orders for the bonds, allowing the interest costs on each of the term bonds to be pushed down by 10 points, according to Government House.
"This is a good time to be in the market, and a good time for the investment community to come on board. We greatly appreciate the strong support for this issue," Finance Commissioner and PFA Executive Director Angel Dawson Jr. said in a written statement. "We will now have resources available to help our hospitals and WAPA with critical cash flow needs, and make a dent in the General Fund needs as well."
The Public Finance Authority tried to negotiate a long-term deficit financing package with FirstBank, the institution that currently holds a $40 million line of credit for the government, but was unable to do so.
Gov. John deJongh Jr. originally had asked the Legislature for the authority to borrow $169 million to close the budget gap, fund a number of capital projects and fund the hospitals' utility debts and payroll shortfalls.
The Senate rejected the governor's proposal and instead gave him the authority only to turn the existing $40 million line of credit with FirstBank into a $50 million loan to be paid back in 270 days.
DeJongh responded by calling the Senate into special session to consider a proposal that modified the Senate's bill, allowing the government to make it a longer-term loan backed by Gross Receipts taxes. The Legislature approved the governor's second proposal in July.
The $49.6 million 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.
DeJongh, who serves as chairman of the Public Finance Authority, said despite the territory's economic challenges, the government's efforts to be transparent have been rewarded with solid bond ratings and investor support.
"We continue to keep the bond rating agencies and institutional investor apprised of both our challenges and our plans to address those challenges. We have been gratified by the scrutiny that investors have done, and the affirmation of progress that the demand for our bonds represents. There are a lot of challenging situations for municipal bond investors today, and we have worked hard to make sure that the investment community has complete transparency about our efforts," deJongh said Wednesday.
The Public Finance Authority's financial advisor, David Paul, said the response on the bond market was positive, and the interest rates offered are the lowest the territory has seen.
"That is a great vote of confidence for the territory," Paul said.
- Contact Aldeth Lewin at 714-9111 or email email@example.com.