What the Candidates Say: How Can the Territory Avoid Default and What’s Your Economic Plan?

In this series, the Source introduced the community to the platforms of the candidates for governor and gauged their approaches to issues in the territory. The Source sent each gubernatorial team a set of questions earlier this summer and ran the answers in the order in which each candidate responded. The Source invites comments on these articles, in the hopes of creating a dialogue among voters. This story covers all of the candidates’ answers to the first question to allow for easy comparison across candidates. The answers below are ordered per the ballot position of each candidate.

The Source: The V.I. government has a $100 million-plus annual deficit, currently cannot borrow on the private market and is not paying many of its obligations, to GERS, to WAPA, territorial nonprofits, sewage treatment contractors, trash haulers, health care contractors and more. But the territory has never missed a debt payment on its $2 billion in debt. How can the territory avoid default? What is your fiscal and economic plan?

1 – Kenneth E. Mapp

First, it is important to note that despite last year’s devastating storms, the Virgin Islands economy and our government’s fiscal outlook remain on a positive trajectory. Our budget is balanced, our bonds have rebounded and collections are up. Private and public sector salaries are on the rise and we anticipate additional revenues generated by the reopening of the refinery and the massive reconstruction projects underway.

This question somewhat conflates the central government’s bond payment obligations of $2 billion with vendor obligations from semi-autonomous entities. For example, the obligations to WAPA, sewage treatment contractors and trash haulers are largely attributable to the hospitals and the Waste Management Authority and are not directly controlled by the central government. We have worked to support the hospitals more financially (most notably through the expansion of Medicaid) and the Waste Management Authority, but in the case of the latter it must implement tipping fees approved by the Public Services Commission almost two years ago in order to effectively sustain operations and pay vendors on time.

Next, in the past, the annual deficit has, in fact, reached over $100 million with working capital used as a basis for financing the deficit. However, we point out that the Fiscal Year 2019 budget was balanced without any deficit financing and relies solely on revenues from the burgeoning growth in our economy that will be realized over the next seven years. In order to mitigate any shortfalls, we will continue to maximize our resources and enhance our collection efforts, which began in earnest during Fiscal Year 2016. Invariably, there will be shortfalls in our conservative projections of revenues. However, we do not anticipate a shortfall that would necessitate cuts to services and government layoffs per your question. Conversely, the Virgin Islands Government continues to strengthen its workforce in order to fill long vacant positions in law enforcement, education and social services and to facilitate our recovery effort. In furtherance of our fiscal planning, when shortfalls in revenues arise, the OMB director will control expenditures by reducing allotments, as we did in early 2016 – thereby giving some consideration to paying vendors first.

Finally, as part of our fiscal planning efforts, the government will continue to reorganize, digitize and consolidate the manner in which business is currently being conducted. For example, we have introduced a plan to restructure the hospital boards and organizational management of both hospitals in an effort to eliminate duplication of costs and systems as it is not necessary to have two CEOs, two CFOs and two financial management systems for our small hospitals. A minimum of $2 million can be realized by this reorganization.

2 – Adlah “Foncie” Donastorg

Mr. Donastorg did not supply answers to What The Candidates Say questions.

3 – Soraya Diase Coffelt

We must grow the tax base and reduce waste, abuse and misuse of the public’s money.

In summary, our VI FIRST strategic plan will do just that. As soon as we are sworn in, in January 2019, we will have teams of experts assembled to assist us with managing the government. We will immediately review all spending plans for all departments and agencies and cut wasteful, unnecessary spending. Nothing will be off the table, including such items as the huge number of government vehicles in the Governor’s Office, unnecessary travel, expensive hotel stays and restaurant expenses.

We will not issue a contract without thoroughly vetting and receiving multiple, competitive bids, not based on political favoritism or friendship but what is right for the budget and our people. The governor’s fleet of 30 vehicles, including the armored cars, will be sold off, except for fuel efficient ones, and we will lead by example and live, travel and drive modestly.

Here are some specific details as to how we intend to cut wasteful expenditures dramatically as we implement our strategic plan. Of course, these are not all of our plans, but only some of them:

OBJECTIVE ONE: Reduce fraud and corruption in government.

Strategy One: Reduce fraud and corruption in government by undertaking a multi-phase approach.

Tactics to implement include the following:

– Immediately follow V.I. laws that require financial accountability and transparency.

– Establish a multi-agency V.I. Public Corruption Task Force with V.I. and federal law enforcement.

– Advocate for more funding of and autonomy for the Office of the V.I. Inspector General and expand the scope of audits to be conducted in 2019-2020.

– Ensure that the federal and V.I. Inspectors General’s audits’ recommendations are implemented, and alleged criminal acts promptly referred for prosecution to the V.I. Attorney General’s Office or the U.S. Attorney’s Office Work with V.I. Attorney General to expand white collar crime investigation and prosecution division.

OBJECTIVE TWO: Cut all wasteful spending and misuse of public funds to free up dollars for reinvestment into needed areas.

Strategy One: Require all department and agency heads to develop a plan to eliminate waste and misuse of public funds for each area by a definite date, including, but not limited to, discretionary spending on vehicles and travel.

Teams of experts will work with each department and agency head to develop each plan.

Strategy Two: Review all plans submitted with each department and agency head and direct the implementation of waste cutting policies.

Tactics to implement include the following:

– As mentioned previously, immediately comply with all Federal and V.I. Inspector General audit recommendations to improve financial management and accountability

– Sell off the governor’s fleet of armored vehicles and other unnecessary vehicles. Choose government vehicles that are fuel efficient.

– Establish the governor’s residence at Government House or Catherineberg on St. Thomas, whichever is most cost effective, and live modestly, making all spending receipts available to the public.

– Commissioners and agency heads will be required to submit prior year’s budgets and current cost saving policies by a definite date.

– Governor’s office issues new executive orders on expending monies, especially directing that travel between the islands be severely curtailed and teleconferencing centers identified and used by government departments and agencies.

– Commissioners and agency heads implement new policies and report budget savings to governor and Legislature.

Strategy Three: Set clear goals with accountability for all commissioners and agencies’ leadership; provide incentives when department/agency improvement goals are met or exceeded.

Tactics to implement include the following:

– Implement proven strategic and project plan methodology and work and set KPIs (key performance indicators.) Specific improvement goals for each department and individual employees will be set.

– Conduct surveys randomly in future and track progress.

– If KPIs are not being reached, further evaluation as to why will occur and additional actions taken.

Strategy Four: Diligently work toward full compliance with court-imposed consent orders in our different departments to eliminate the astronomical costs of off-island monitors and use the money saved for employee bonuses and training, and for the purchase of modern equipment.

Tactics to implement include the following:

– Review existing compliance plans, and evaluate timetables and look for ways to move milestones forward without compromising goals.

– Evaluate the effectiveness of current contractors or personnel to deliver on past milestones and comply with new schedules.

– Tally the savings derived from condensing schedules.

– Rally employees to understand the importance of compliance and to buy-in to accelerated compliance schedules.

OBJECTIVE FOUR: Require each department and agency to adopt rules and regulations or update existing ones so that V.I. law is applied equally to all persons and that the public will know how each department/agency will operate with proper procedures in place and be able to keep each in check.

Strategy Five: Governor’s office issues executive order establishing deadline dates for review and/or issuance of new rules and regulations by each department/agency.

Tactics to implement include the following:

– V.I. laws often do not establish how laws are to be enforced or applied or about the procedures to be used within government entities. Departments and agencies must promulgate and administer rules and regulations that govern how laws will be enforced and ensure that laws are enforced equally and fairly. Commissioners of each department and heads of all agencies will be required to appoint a task force to conduct a review of existing regulations, if any, and update them, or draft new regulations.

– Departments/agencies comply with VI law regarding promulgation of rules and regulations.

See section C below for our plan to grow the economy and tax base.

In short, the tax base will grow, not through higher tax rates or fees, but by growing the economy and population base.

It all starts with a clear vision for the Virgin Islands – to become the economic powerhouse and leader in the Caribbean. It will be attained by implementing a detailed, long-term strategic plan with five components that work together to transform the lives of all Virgin Islanders.

Our transformational plan VI FIRST consists of the following:

F – Fight for our families – children, fathers and mothers – which includes strengthening our education system to promote literacy and job training programs for children and adults.

I – Ignite our tourism industry through diversification and investment.

R – Rebuild our business community to become extremely business friendly. We will make doing business in the Virgin Islands fair and easier to start and maintain for our residents and others.

S – Strengthen critical public services. Critical public services such as electric, health care and infrastructure will be improved, particularly now since we have access to federal disaster grants and other monies, and are eliminating the waste and misuse of public money.

T – Transform the inner workings of our government so that we trust our government. This includes fighting corruption and becoming public service oriented.

The journey to attain each transformational idea begins by setting measurable goals. To attain each goal, specific objectives are identified and then for each objective, specific strategies and tactics are created.

Once in office, the Governor’s Office will have teams of experts in all fields assist us in planning and moving forward. The Legislature will be a key partner as well.

The Governor’s Office will also organize a private-public steering committee with representation from the Legislature, as well as commissioners, government agencies, boards and the private sector to oversee the development and implementation of the economic growth phase of the plan.

Input into the plan will be extensive, including primary market research.

Once our plan is put into motion, personnel, budgets, and timing will be set and shared with all Virgin Islanders. Progress toward our goals will be reported quarterly.

The ultimate success of the plan will be the result of the hard work and dedication of all government and private sector workers, as well as the individual efforts of all Virgin Islanders. As a united “one,” we will transform the Virgin Islands from a place of hopelessness for many, to a thriving community for all.

4 – Janette Millin Young

The U.S. Virgin Islands needs to change its leadership and direction. The Janette Millin Young-Edgar Bengoa administration takes the posture that we are already in default category due to our deplorable fiscal conditions and junk bonds status as per the major financial credit agencies. Our fiscal team would be sufficient to advise and craft solutions to our fiscal problems. We do not believe a fiscal board is the best solution to our problems. The greatest challenges that we will overcome are rebranding the Virgin Islands tourism product and facilitating new investors to consider us as long-term markets. We will invest in our local agricultural and manufacturing industries, as well as in vocational training. Our administration will become the greatest champions for new economic investment and economic growth.

With greater inflows of funds, we will be able to improve our tax base and address our critical fiscal issues. Additionally, our administration will make our commissioners and directors more accountable for their departments. With current laws already on the books, we will make sure that they are enforced. And we will work to rebuild the infrastructure to make energy more affordable to attract new businesses.

The Long Term Economic Plan offers our people the stability and certainty needed to keep the recovery going. It has three steps:

1. More and Better Jobs

2. Investing in Public Services

By keeping the recovery going, the aim of our plan is to make job available to everyone who is qualified.

5 – Albert Bryan

The government must establish realistic and conservative budget practices. We can no longer continue to spend more than we have. Budgets that are based on overly optimistic forecasts of revenues only set us up for failure in meeting our financial obligations. The law requires that budgets be based on the verified revenue collections of prior years. This prevents an escalation of government spending during an economic downturn and is a smart budget practice. We must also end the politically motivated practice of long-term borrowing for short-term gains. We should gradually reduce spending until we get to a sustainable level that does not require us to borrow to make ends meet.

As revenues increase we can then increase expenditures accordingly. It is politically difficult, but the financially prudent thing to do.

The first step of a Bryan/Roach Administration will be to stabilize our government and restore the trust of the investment market and the federal government in our ability to properly manage our fiscal affairs properly. To do this we must address the longstanding structural deficit that has hampered government operations. We plan to take action to resolve the looming pension crisis at GERS. We will be realistic and conservative in projecting revenues and will propose budgets that remain within those parameters. We will also take steps to improve our management of federal grants. As our local economy continues to stagnate, we must ensure that we are maximizing our receipt and utilization of federal funds. We will establish a proactive federal grant policy that clearly describes the processes and procedures that all agencies within the government must use to account for and report on federal grant award activities so Virgin Islanders will be reassured that we are the best stewards of their government’s dollars. We will then continuously train all relevant staff in how to adhere to the policy to ensure that all awarded money is spent appropriately.

Our approach to economic recovery calls for a focus on attracting new revenues to the territory through outside investment. The Virgin Islands has many economic incentives, but we do a poor job of promoting those investment opportunities. We must focus our efforts on targeting industries that complement our economy, and pursue them aggressively. There are opportunities to leverage the investments made in broadband infrastructure to lure information technology and e-commerce investments. We will pursue strategies to re-engineer the tourist experience by attracting new investment to this sector and diversifying our tourism product. The territory has extensive financial incentives for hotel development and will promote these more effectively. Additionally, we will be proposing the establishment of a free trade zone on St. Croix as an additional incentive for manufacturing companies. But these plans all require affordable and reliable power and a modern and properly maintained infrastructure which will also be our priorities.

6 – Moleto A. Smith Jr.

The territory can avoid default on its bond obligations by ensuring that revenue sources that secure the debt are not adversely impaired and by establishing a comprehensive strategic approach to accelerate the retirement of the debts while incentivizing economic growth and implementing comprehensive government reforms to make government more efficient.

The Smith-Frederick Administration will focus on the expanding and diversifying the economy while eliminating wasteful practices, and making government more business efficient through the appropriate use of technology.

A central component of our economic plan relates to health care. The Smith-Frederick Administration believes that the most comprehensive growth industry in the Virgin Islands is health care. The Smith-Frederick Administration would create a university hospital system by moving the hospitals under the University of the Virgin Islands, investing in the completion of the medical school and creating a robust health care infrastructure that supports medical tourism, economic development, intellectual and cultural exchange between the mainland and the Caribbean, and most importantly, creates good, high paying jobs to give opportunity to our young people to stay in or return to the Virgin Islands, while at the same time, providing the Virgin Islands community with high quality world-class health care. Other key components of our strategic vision for sustainable economic development are the following:

Foster sustainable economic development through strategies that strategically diversify the economy, promote employment and foster the increase in the circulation of dollars in the local economy, as well as position the territory as a regional leader in the global marketplace in the following manner:

Tourism
– Enhance and increase the Virgin Islands market position as a world leader in the Caribbean for cruise ship tourism.

– Develop the Virgin Islands, particularly St. Croix, as the premier world class destination for up-market stay-over tourism in the Caribbean and Latin America, to include state-of-the-art business and trade group convention destination.

– Expand marketing emphasis by targeting emerging world markets in Latin America, Africa and Asia, such as Brazil, China and Nigeria.

– Increase the Virgin Islands’ market position in areas of agri-tourism, sports and entertainment tourism, marine tourism, cultural/historic tourism and cultural exchange tourism within the Caribbean, the Caribbean Diaspora and the world.

TRANS-SHIPMENT
– Develop a comprehensive state-of-the-art trans-shipment hub, designated as a duty free zone, on St. Croix for the transshipment of cargo containers and other goods and products to and from the Caribbean, Latin America and other parts of the world.

AGRI-BUSINESS
– Facilitate sustainable commercial investments in agriculture that incorporate local farmers, farmer cooperatives and producers, enhances the agricultural infrastructure and promotes food security for the territory.

FINANCIAL SERVICES
– Establish the Virgin Islands as a regional leader in the financial services sector for US-based and non-US based financial services entities for banking, insurance, trust entities, private equity and others.

ENTREPRENEURIAL DEVELOPMENT
– Strongly support small and mid-size business development by providing comprehensive wrap-around support services for business start-ups and existing businesses in need of professional and technical assistance.

TAX POLICY
– Review, and reform where necessary, all tax policies in order to promote and sustain economic development and growth, and to attract new investments that promote sustainable employment. This will also include, exploring a graduated scale for gross receipt taxes, with the aim of transitioning from the gross receipts tax to a sales tax over time.

TRADE RELATIONS
– Seek associate membership in the Caribbean Community (CARICOM) to promote and leverage trade relations and intellectual exchange within the Caribbean and beyond.”

7 – Warren Mosler

Rum revenues first pay for the debt, and the USVI general fund gets only what’s left over, so default is unlikely on the largest part of our debt, the rum cover over bonds. WAPA will continue to raise rates to cover it’s debt, and unless a change is made, the GERS fund will be depleted in 4 more years and the government will be obligated to pay the retirees out of the general fund, causing our operating deficit to further deteriorate. And because the government can no longer borrow, instead it simply doesn’t pay it’s bills, which means it’s borrowing from those people. A senator recently told me the operating deficit for this year is over $200 million with no plan apart from not paying people who are owed money. This is why my proposals for bringing new revenues into the territory are critical, as that is the only way to prevent massive layoffs, large cutbacks in benefit payments to retirees, and a federal takeover similar to Puerto Rico, which only makes matters much worse as large portions of the population are forced by desperate circumstances to leave the territory.

When asked of the specifics of his economic plan, Candidate Mosler directed the Source to his campaign website www.mosler4governor.com which he said describes his plan in full.

These are the headline bullet points:

*Restructure the USVI debt to reduce interest charges by over $50 million per year which also returns $175 million in reserve funds to the USVI.

*Contribute the $600 million of rum cover over bonds previously authorized but not yet sold to the GERS to increase their assets to $1.3 billion.

*Allow employees to get lump sum payments should they so request. This reduces the government’s liability by approximately twice the payments.

*Put in service non stop flights between NYC and St. Croix to boost the economy.

*Partner with cruise ship companies to restore St. Thomas as their featured destination. Their executives know exactly what needs to be done, and we need to listen to them.

*Reduce the number of Senators to 7, representing 3 geographic districts of equal population on St. Thomas and St. Croix, and 1 for St. John.

*Make all USVI schools, public and private, free for all students, so admission to the private schools will be based on merit and not on money. This both improves the education, and also, because the private schools cost half as much per student as the public schools, the annual savings for the USVI will likely be over $50 million.

*Provide full and immediate transparency and accountability of USVI finances and activities, and adequately fund the Inspector General and Attorney General. Personally, I have 0 tolerance for any form of corruption.