Until it gets bonds replacing a $31 million loan from Banco Popular, the territory will spend $5.2 million more to service the short-term loan than the V.I. Next Generation Network projected to spend on long-term bond financing, officials told the V.I. Legislature Friday.
The viNGN oversees the territory's broadband initiative, which is being funded in large part by four federal grants through the National Telecommunication Information Administration's Broadband Technology Opportunities Program. The Economic Development, Energy and Agriculture Committee held an oversight hearing Friday to look into how the federal and local money is being spent and receive the latest information on the project's progress.
By far the largest grant is a $58.9 million Comprehensive Community Infrastructure grant to build a fiber optic "middle mile" network, that would then sell low-cost, high-bandwidth connections to private Internet providers. That grant requires $14.1 million in local cash matching funds, and $15.2 million in in-kind matching committed, in the form of conduit and other V.I. Water and Power Authority infrastructure. The other grants, which fund building of 28 public computer centers, outreach, computer training and broadband mapping projects, require another $198,000 in local cash matching, and another $2 million in in-kind matching.
All the matching cash, as well as cash reserves to keep the projects moving while awaiting federal reimbursement, came from a bond anticipation note secured from Banco Popular, with the intent of quickly paying the short-term loan with low-interest, long-term municipal bonds. The loan was entered around the middle of 2011, but bonding has not yet been secured.
Vicki Johnson, who heads the Office of Economic Opportunity in the Public Finance Authority and is overseeing the federal grants on the project, testified the bond anticipation note was converted into a five-year loan at $6.25 percent interest. Principal and interest payments on the loan come to $626,000 per month, Johnson testified.
"I did the math and that's over $7.5 million per year, but when the project was proposed to the Legislature, it was estimated at $2.2 million per year," Sen. Nereida "Nellie" Rivera-O'Reilly said.
"Yes, it was considered as a bond at that time," Johnson said, explaining that the bond would have been at a lower interest rate and stretched over a much longer period of time, resulting in lower monthly and annual payments.
Several senators asked if or when bond financing would be secured.
"That is being worked on as we speak," said Johnson, who would not predict when it might occur, other than to say that it would happen as soon as possible.
The money to pay the debt service was coming from gross receipts tax revenues, Johnson said, which prompted several senators to suggest the viNGN should pay the government the cost of that loan once it is functioning and making revenue.
That concern aside, Johnson and viNGN Chief Executive Officer Larry Kupfer testified the giant network project has all the funding it will need and will be trenching and installing fiber starting in September. The entire project is due to be complete by the end of June, 2013.
No votes were taken at the information-gathering hearing.