The U.S. Virgin Islands government is on the verge of making cuts to its operations to handle an imminent financial crisis.
Also to address territory's operating deficit, on Tuesday the Virgin Islands Senate Finance Committee approved a series of tax increases that would bring in $250 million over the next five years.
Separately, the Virgin Islands Water and Power Authority decided to go ahead with introducing an interim electrical rate increase on Wednesday, despite an order from the island's public service commission to not do so.
The ratings agencies have downgraded the government and the authority deep into speculative territory. The two entities have more than $2 billion in bonds outstanding.
As of Thursday Gov. Kenneth Mapp is preparing an executive order to substantially cut government spending, according to government spokesman Lonnie Soury. Mapp plans to lay off 5% to 10% of the government workforce, cut government services, make 20% cuts in government agency budgets, and possibly introduce shortened government work weeks, according to the Virgin Islands Consortium news web site.
Mapp's spokeswoman Cherie Munchez said that the Consortium story was "erroneous." She said the governor's position can be found in his state of the territory address, delivered Monday. In that speech Mapp said he would issue an order freezing vacant positions excepting those that are federally funded and those for teachers or first responders. He said he would curtail non-essential travel, suspend negotiations for salary increases, and ask his commissioners to reduce spending in all departments and agencies.
In his speech, Mapp also called for the legislative president and Supreme Court Chief Justice to reduce spending in their branches.
With the failure of the government's effort to sell a bond in mid-January, the government is trying to address a $110 million deficit this fiscal year.
According to Soury, the governor expects to release the executive order within the next seven days. The government believes it should wait for at least a few months before trying to sell a bond again.
Mapp's action follows a Virgin Islands Senate Finance Committee hearing on Tuesday where the committee voted 5-2 to adopt a series of tax increases on alcoholic and sugared beverages and tobacco products. It scaled back a proposed tax on timeshare properties to $25 a day of occupancy from the proposed $30 a day.
Because of the lower timeshare rate, the tax rise will now bring in less revenue. However, its revenue will go directly to the government rather than to compensating government workers for a pay cut that a court has since found to be illegal, as Mapp had proposed.
Before the tax measures go into effect, the Senate rules committee and the whole Senate will have to consider them.
Mapp is proposing an internet gross receipts tax that the legislature hasn't yet had hearings on.
The Water and Power Authority is also struggling with a financial crisis. On Jan. 12 the public service commission approved an interim electric price rise. On Jan. 26 the commission revoked the rise. On Saturday executive director Julio Rhymer, Sr. said that the public service commission's action "threatens continued operations of our power plants and threatens our ability to pay for fuel. Together, the islands could face rotating power outages, or worse, in the not too distant future."
On Tuesday Rhymer released a statement: "Due to the potential impact on the territory, and after consideration of the substantial and irreparable financial harm that would be inflicted on the authority due to the unlawful action taken by the PSC, WAPA has made the difficult decision to implement the interim base rate increase."
The authority said because it was entitled to implement the rate increase effective Wednesday because it had filed a motion with the commission for its reconsideration of the rate increase.
The Virgin Islands' public service commission couldn't be immediately reached for a comment.
