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LAWMAKERS CONSIDER PROPOSED BILL TO OFFSET CASH SHORTFALLS

Published: Jun 22, 2020

ST. THOMAS – Members of the Committee on Finance chaired by Sen. Kurt A. Vialet convened in a meeting at the Capitol Building on Tuesday to receive testimony from officials of the Office of Management and Budget (OMB) on BR 20-1200 – G33-044 – An act authorizing the Governor to borrow monies from public funds of the Virgin Islands to offset cash flow problems caused by shortfalls in the collection of revenues resulting from the COVID-19 Pandemic and to create working capital. The Virgin Islands Public Finance Authority (VIPFA) and the Administration and Finance of the VI Public Finance Authority were amongst invited Testifiers.

The legislation, proposed by Senators Novelle E. Francis, Jr. and Kurt A. Vialet by the request of the Governor of the U.S. Virgin Islands Albert Bryan, Jr. seeks to avoid layoffs of Government Employees, pay essential obligations, meet the operating expenses of the Government for the remainder of the fiscal year 2020, and to issue a Revenue Anticipation Note in the maximum amount of $60,000,000 to provide funding for authorized governmental operations. OMB Director Jenifer O’Neal noted that the Governor’s Financial Team, VIPFA’s Bond Counsel, and the Office of Legal Counsel, negotiated with Banco Popular de Puerto Rico and First Bank of Puerto Rico regarding the Revenue Anticipation Notes.

Furthermore, the measure will rescind and repeal Act 8292 which enables authorization to meet the mandates to borrow funds from the Bond Counsel and the Banks. The $60,000,000 short-term loan has a 5.5% interest rate that must be paid in full one year from the date of issuance. In response to Sen. Alicia Barnes’ query regarding the repayment plan, O’Neal mentioned that monies from property taxes, gross receipt taxes, and income taxes will be used to pay off the note. “It seems to me that there is a problem collecting and processing monies because there is a delay of agencies putting funds into government coffers,” Sen. Athneil “Bobby” Thomas said. Kirk Callwood, Sr., Executive Director of the V.I. Public Finance Authority mentioned that although this must be reviewed by each revenue collecting agency, the Department is committed to assist agencies with developing a plan.

Presently, the Government of the Virgin Islands (GVI) has a revenue shortfall totaling $150 million for the remainder of FY 2020. O’Neal indicated that as a result of the adverse effect of the COVID-19 Pandemic and the lack of collections of excise taxes and income taxes, there are financial challenges to meet GVI’s obligations and bi-weekly payroll estimated at $20 million. As of December 2018, GVI remains unable to collect excise taxes due to pending litigation. Moreover, O’Neal noted that the short-term note of $60 million will also be utilized to pay vendors, outstanding allotment releases, maintain working capital, and operating expenses of GVI upon closure of the loan by the end of July 2020. Sen. Donna Frett Gregory said, “Accountability is key for the central government. Offices that collect outstanding revenues need to extend work hours; yet those offices close by 3:00 pm.”

Sen. Kurt Vialet shared the importance of the loan. “The $60 million will allow GVI to have financial flexibility. Payroll and all obligations must be met. Outstanding balance owed to vendors should decrease. Developing a plan to collect revenues is also significant. Lastly, revenue-generating offices should operate full time and not by reduced hours.”                       ###                                                                       

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