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PFA Approves More Funding for King's Alley Hotel Project

June 7, 2006 – The Public Finance Authority moved through an ambitious agenda during a board of directors meeting Wednesday, authorizing financing for several projects, including additional funding for the King's Alley Hotel development on St. Croix, money for V.I. Fire Services and a bond issue for Hovensa to build sewage and wastewater treatment plants at its facility.
According to Kent Bernier Sr., PFA interim executive director, approximately $826,000 is needed to complete the King's Alley project, which he anticipated would be completed by June 30. Bernier did not specify where the money for the project would be coming from. However, in February the PFA board approved the release of $1.5 million from the 1994 Government Construction Fund to complete the "shell" of the hotel (See "PFA Board Approves Additional $1.5M for King's Alley Hotel").
During Wednesday's meeting, Bernier said the extra money would go toward purchasing light fixtures, metal screens, ceiling panels, plumbing fixtures and gas tanks for the hotel, among other things.
In other news, the board also authorized a $4 million loan through Banco Popular for V.I. Fire Services to purchase new equipment, train firefighters and fund repairs to stations across the territory. Fire Services Director Merwin Potter said that the money "was critical" and would get the agency "back on the right track."
The three-year financing package – with an annual interest rate of 4.9 percent – was awarded to Banco Popular after it was put out to bid, Potter said.
The PFA handles all debt issues for the V.I. government.
The board also authorized $9 million in additional funding for the construction of a new library on St. Thomas, $2 million to improve the access road to the Annaly Bay development project on St. Croix, and $3 million to the Public Works Department to connect the Gallows Bay development project on St. Croix to the proposed Christiansted bypass.
Bernier told board members that the projects would be paid for by unused bond proceeds or various funds that are currently sitting in some of the authority's project accounts.
When asked after the meeting, however, Bernier would not give the total amount of money available for use.
During the meeting, representatives from the Division of Libraries, Archives and Museums under the Department of Planning and Natural Resources gave board members a brief overview on the new library, which would be built behind the Plaza Extra supermarket on St. Thomas. The $9 million, they said, would help improve the standard of the library – increasing the project from $90 per square foot to approximately $250 per square foot – and would fund the construction of a new records building within the complex.
Claudette Lewis, executive assistant director of DPNR, said the records center would be about 13,000 square feet and would serve as a warehouse for various documents. It would also house a "governor's records room," she said, which would store documents from different administrations. "As administrations change, a lot of the records go to the dump," she said. "This records center would be a place for those records to go, at least for a certain period of time, and the public could come in and pull them up," she said.
"The $9 million is a step in the right direction," Lewis added.
With the additional funding, the total cost of the project would be $11.3 million. According to John Woods, owner of Jaredian Design Group – contracted to build the facility – the money is needed "immediately" for groundwork to begin.
Additionally, the board unanimously voted to terminate a 2003 agreement between the authority and investment bank Lehman Brothers Inc. to refinance $300 million worth of bonds issued by the PFA in 1999.
The bond issue, which was backed by gross receipts taxes, was used to fund $134 million in tax refunds, money owed by the V.I. government to vendors and retirement incentives, among other things. While most of the money realized from the bond issue was used, about $8 million remains unexpended.
In 2003, the Legislature passed a measure authorizing the PFA to enter into the deal with Lehman Brothers as a way to realize savings on the bond issue. However, given the current drop in interest rates, Kent Bernier Sr., interim executive director of the PFA, recommended during the Wednesday's meeting that the PFA terminate the agreement and refinance the bonds with UBS – an investment banking and securities business–which could yield approximately $12 million to $15 million in additional savings for the authority and $500,000 worth of savings for the government.
Some of the money garnered from the refinancing would go toward reimbursing the $14 million approved for the new library on St. Thomas and the two road projects on St. Croix.
The authority also voted to authorize the approval of approximately $103 million worth of public activity bonds for Hovensa, which would fund the construction of wastewater and solid waste management facilities at its St. Croix plant.
Every year the federal government authorizes financial institutions within the states and territories to issue private activity bonds to aid private businesses with infrastructure improvements. At a PFA meeting held in February, Kenneth Mapp, former PFA executive director, said private activity bonds have not been issued by the authority for the past two years, leaving $103 million worth of bonds available for use in 2006.
In exchange for issuing the bonds on behalf of Hovensa, the PFA will receive a 1 percent transaction fee. "So if the bonds are sold for $10 million, then $1 million of that would go to the authority, plus administrative expenses," attorney Margaret Angel, representing Hovensa, explained. The refinery would, however, be responsible for repaying the bonds.
Board members also authorized a $2.2 million loan between the West Indian Co. Ltd. and Banco Popular for the extension of the dock located behind Havensight Mall on St. Thomas. Edward Thomas, executive director of WICO, said the PFA had to authorize the loan because they are WICO's main shareholder.
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