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Charlotte Amalie
Friday, March 29, 2024
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PFA Moves Forward with Senate Approvals

Approval recently given by the Senate on three government financing proposals also passed through the Public Finance Authority board Wednesday, including one that would authorize a $13.6 million settlement with the Internal Revenue Service and another for a $40 million rolling line of credit that would help cover a $26 million cash flow shortfall for Fiscal Year 2013.

The settlement proposal was approved during a full legislative session Tuesday and deals with disputes with the IRS over whether certain tax exempt bonds were improperly refinanced by the territory.

A little more than a year ago, the IRS launched an audit of approximately $219.5 million in bonds issued by the government in 2006 to cover everything from new project financing to an advanced refunding of outstanding working capital bonds issued in 1999.

The audit determined that the portion of the bond proceeds that went toward the refunding violated IRS regulations and that the government instead had enough revenues that year that to retire the 1999 bonds instead of refunding them. The IRS has agreed to a $13.6 million settlement, which would come from a $40 million line of credit approved by senators in July.

The PFA board on Wednesday put their official stamp on both proposals. The $40 million line of credit was part of a budget package approved by the Legislature at the end of June, after the government announced that revenue projections were lower than anticipated, leaving a shortfall for FY13.

The rolling line of credit would be for up to $40 million annually and would be tapped in order to improve cash flow in the months when tax revenues are lower than average. The debt contract would require the loan to be paid in full that same fiscal year, so it would not add to the government’s overall debt.

An amendment in the nature of a substitute approved by the Senate at the end of July added to the proposal a clause saying that the government shall negotiate with the Government Employees Retirement System for the credit line.

Senators also approved Tuesday a proposal authorizing the government to refinance up to $90 million in existing bonds at lower interest rates, which would help save about $23.9 million a year and provide some funds needed to cover the anticipated FY14 budget shortfall.

The PFA also moved voted to move forward with the bond refinancing during Wednesday’s meeting.

In other news, PFA Board Chairman Gov. John deJongh Jr. also dismissed claims recently made by some senators that funds managed by the authority are not properly accounted for. The claims, and calls for an audit of the PFA, came out of Tuesday’s full legislative session as senators looked at whether or not to approve the $13.6 million IRS settlement.

“The generalization of their statements are irresponsible and without foundation, especially given the absence of any specific indication of what they are trying to determine,” deJongh said in a news release Wednesday evening. The governor referred to statements made by Sens. Terrence "Positive" Nelson and Clifford Graham, which he said included "fictional claims that money secured by the PFA has disappeared in the hands of private entities and that all funds managed by the authority have not been properly accounted for."

“Our bond documents are online, we have annual audits conducted by independent auditors, we respond to inquiries, as noted by the press, and PFA only issues bonds after receiving legislative approval and only for the specific purpose for which approval was given,” the governor explained.

PFA Executive Director Angel Dawson Jr. also said in the release that he was also "puzzled" by the call for an audit.

“We are always completely transparent with the Virgin Islands Legislature and the public when we borrow money for the territory to fund vital public projects," Dawson said. "The 30th Legislature has always been provided a full list of our projects and the sources from which they are funded.”

The governor added that senators also have access to all information relating to PFA funding.

“It is unfortunate that the senators are asking for and relying on an audit just because they do not want to spend the time to review the PFA documentation and then have a discussion with us,” deJongh said. “The PFA, even in these most difficult of economic times, has maintained its access to the capital market and investors to meet the financing needs of the territory. This could only be achieved based on a strong history of credibility and accountability.”

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