Sept. 17, 2002 – The only way to save the Government Employees Retirement System from collapse is to increase contributions from both employees and their employers — government agencies and departments — according to GERS attorney Alphonse Nibbs.
GERS is near collapse because it is paying out more in benefits than it is collecting in contributions, Nibbs and Lawrence Bryan, system administrator, told the Senate Committee on Economic Development, Agriculture and Consumer Protection on Monday.
"It started two or three years ago," Bryan said.
Sen. Roosevelt David termed GERS "very close to death's door." "If this system collapses, the entire community will be devastated," he said, noting that he expects crime to increase if that happens. He accused fellow senators of taking the situation too lightly.
Nibbs, attorney for the GERS board of trustees, said the board has repeatedly brought the problem to the Senate's attention "The body stayed silent and has not acted appropriately to put forth the best solution for the people," he said.
Raymond James, GERS board vice chair, put the unfunded liability figure at $518 million, but fellow board member Yvonne Bowsky said the figure was closer to $800 million.
"If we don't act now, it will go higher," Sen. Emmett Hansen II said.
Bryan said GERS loans total $100.8 million. The system has made 6,273 personal loans totaling $62.9 million, 1,763 retiree loans totaling $9.3 million, 999 mortgage loans totaling $26.9 million, 31 land loans totaling $358,628, and 158 auto loans totaling $1.2 million. These loans account for 20.7 percent of the system's allocated operating expenses.
While several officials of the territory's banking community were invited to testify on their institutions' rates, points and closing costs, none showed up to do so.
"I think they have something to hide. They said they were going to be here," said Sen. Adelbert Bryan, the committee chair. When the banks want something, he said, their officers are quick to appear at Senate hearings.
Lloyd Williams said he had noticed a large number of mortgage foreclosures in the past few months. He said this was uncommon for the territory, and "someone should wave the flag and protect the consumer." He also said that mortgage rates nationally are as low as 4.7 percent, but the best he could find in the territory was two points higher than that.
Sen. Bryan said most of the territory's banks are "predatory lenders" because they receive various exemptions and benefits but don't reinvest in the community. He had particularly harsh words for V.I. Community Bank, because it receives Economic Development Commission tax breaks. "They should have lower rates," he said.
The committee heard from Ken Kenion of the finance company Commoloco. He said that the number of finance companies in the territory has dropped from four to one because the maximum interest rate allowed at such companies is capped at 19.5 percent. He said loans made through finance companies locally stand at $30 million.
The senators heard audio testimony from Lt. Gov. Gerard Luz James II. Speaking to the committee via the Legislature Building telecommunications system, James said that banks want a financial services act, and that this is in the works. He said the V.I. Banking Board received the document last week.
Committee members present for the session were Sens. Bryan, David, Hansen and Vargrave Richards. Not present were Donald "Ducks" Cole, Norman Jn Baptiste and Celestino A. White Sr.
Publisher's note : Like the St. Croix Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.