U.S. Virgin Islands’ Gov. Albert Bryan Jr. said a proposed refunding of the territory’s matching fund bonds is the solution to his government’s unfunded pension problem.
“As we truthfully assess the situation, [the Government Employees Retirement System] is already insolvent and on the verge of complete collapse,” Bryan said in his annual State of the Territory speech Monday night. “The actuaries are predicting the system to run out of assets on or before October 2024.”
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According to Moody’s Investors Service, the island’s adjusted net pension liability was $3.3 billion as of fiscal 2019.
Virgin Islands Sen. Kurt Vialet said he expects the legislature to approve the refunding on Monday and send it to the governor for his signature thereafter. Vialet, who is chairman of the Subcommittee on GERS, Restructuring, Solvency, and Economic Development, said the bill in its current form does not contain an interest rate cap.
This would be the government's fourth attempt at a bond refunding in recent years. It last tried to do this in September 2020 but the market demanded an interest rate over a cap the Senate had required to not exceed on the deal.
The current bill asks the government to act in good faith and with due diligence.
As of April 1, 2019, the USVI had $716 million of general obligation debt, most of it in bonds. It also had $1.04 billion of matching fund bond debt, all of which Vialet said likely would be refunded. The figures are from the approved fiscal 2020 budget and they exclude the debt of the Water and Power Authority.
Moody's rates the senior tranches of the matching fund bonds Caa2 and the subordinate tranches Caa3. It does not rate the general obligation debt.
Bryan said his government is gaining financial strength. Total tax revenues in fiscal 2020 and 2021 were around $839 million. “This is 10% greater than fiscal year 2019 and more than 30% greater than the revenues collected in fiscal year 2018."
Bryan said revenues have come in beyond projections for three consecutive years and the government has reduced its debt by $500 million in the last three years. In the past 12 months, the government has paid over $120 million of past due obligations, such as past due income tax refunds and promised, but unpaid, pay increases.
The governor said there would be increased disbursements of federal funding connected with the devastating 2017 hurricanes and the COVID-19 pandemic in the current and coming fiscal years. Not only will this allow government to complete important capital projects but it will also
Bryan said hotels had managed in recent years to maintain the highest room rates in the Caribbean. These rates went from an average of $295 per night in 2020 to $495 per night in 2021. Hotels are reopening, Airbnb lodgings are burgeoning, and Bryan said the tourism sector would have a good year.
West Indies Petroleum is about to
The U.S. Census reported the islands’ population has declined 18% from 2010 to 2020, leaving the population at 84,146. Bryan said the government must think of ways to increase the population to about 117,000. Success on this front will be important for the economy.
On the Water and Power Authority, Bryan noted it had hired a new chief executive officer on Jan. 10 and the CEO would soon be hiring a new chief financial officer and chief operating officer.
The governor said WAPA “has three urgent priorities: expedite the installation of the recently delivered Wartsila generators that will improve power plant efficiency, immediately refinance the debt owed to VITOL for the construction of the propane terminals, and fast track the renewable energy projects in the pipeline.”
