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HomeNewsLocal newsSenate Approves WAPA Emergency Appropriation, Government Pay Raise Changes

Senate Approves WAPA Emergency Appropriation, Government Pay Raise Changes

The V.I. Legislature approved an emergency appropriation to pay $8.1 million towards the $21 million the territory’s two hospitals owe the V.I. Water and Power Authority on Friday. The move comes a week after the utility’s bond rating was downgraded by the Fitch ratings agency, largely over cash-flow problems closely tied to more than $42 million government agencies owe the utility.

The Legislature also amended legislation it passed March 31 increasing pay for many government employees to correct the bill’s figures.

Both bills were before the Legislature by request of Gov. Kenneth Mapp.

As of March 30, all V.I. government entities, including the territory’s two hospitals, owed WAPA $41 million, WAPA’s acting executive director, Julio Rhymer, told senators Friday.

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The Gov. Juan F. Luis Hospital, which has not directly paid a utility bill since 2011, owes $12.4 million for electricity and water, and the Schneider Regional Medical Center owes $9.6 million, for a combined past-due balance for just the hospitals of $22 million, according to the figures Rhymer provided.

The central government owes another $18.3 million.

Rhymer said, WAPA is struggling to pay its vendors, one of whom – Trafigura – has sued WAPA for $23.6 million in outstanding fuel costs.

At the end of March, Moody’s rating agency put WAPA on a negative watch, meaning it is considering downgrading the utility’s debt. And on April 15, the Fitch rating agency did downgrade over $227 million of WAPA’s existing bond debt, Rhymer said.

"The implications of this downgrade are major. The downgrades, in and of themselves, mean that the authority’s access to the credit market comes at a greater cost. Interest on borrowing will now cost the ratepayer more, and correspondingly, rates will increase," Rhymer said.

The move also puts the bonds below investment grade and several of WAPA’s power purchase contracts, including its contract to convert to propane fuel, require investment grade evaluations to maintain investment grade credit by two of the three rating agencies, he said.

V.I. Office of Management and Budget Director Nellon Bowry urged support for the appropriation, saying the downgrade of WAPA’s bonds and fiscal stress "carry the potential for spiraling out of control."

Schneider Chief Executive Officer Bernard Wheatley, JFL CEO Ken Okolo and other hospital officials testified the hospitals have not been paying WAPA bills because they are in a state of fiscal crisis and struggling to buy medicines, medical supplies and meet payroll.

Schneider is "very close to a critical event," Schneider Chief Financial Officer Scott Nothnagel said.

Officials cited large amounts of uncompensated care as a big contributor to the hospitals’ financial woes.

Several senators asked about reports of pay increases for some top hospital officials over the last few years, even as the Legislature made previous appropriations to help pay utility bills.

"There should be no more bailouts for you in order for you to then go on the backside and give pay raises to top employees and nonunionized employees," Sen. Kenneth Gittens said. "You need to be fiscally responsible. … I am truly hopeful that this is the last, last time," he said.

The money for the WAPA appropriation is coming from a recent settlement with Buchanan Ingersoll & Rooney and Bank of America over a 2006 tax-free government bond sale that the U.S. Internal Revenue Service later determined could not be tax-free. The territory paid the IRS $13.6 million in a settlement over the bonds and then sued its bond advisors for allowing it to happen, settling recently for $8.1 million (See Related Links below)

The Senate also approved changes to the language of a bill providing pay increases for most V.I. government employees. The pay increases bring the workers’ pay in line with previously negotiated union contracts.

Senators also voted to reconsider legislation it approved March 31, that appropriated money for pay raises, school lunches and a grab bag of other initiatives. The language of the bill approved in March reflected a $20 million appropriation for salary increases for the entire fiscal year, while the bill intended to appropriate $14.4 million for the remaining nine months of the fiscal year.

Another $5.1 million is for school lunches, substitute teachers and other priorities. The funding for the pay raises comes from the dwindling remains of a $220 million one-time windfall from the sale of the Hovensa refinery.

Both measures were approved unanimously, 15-0.

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