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Bryan Says Things Are Looking Up For USVI Financially Despite COVID-19 Pandemic

CHARLOTTE AMALIE — Governor Albert Bryan. heard largely positive projections for Fiscal Year 2021 from the revenue-generating agencies and departments of the Government of the Virgin Islands during the Office of Management & Budget’s (OMB) 2021 Revenue Estimating Conference on Tuesday.

In her Revenue Forecast before the presentations by the 18 agencies and departments reporting their revenue projections to Governor Bryan and Lt. Governor Tregenza A. Roach Esq.,  OMB Director Jenifer O’Neal is projecting a 2021 Total Gross Revenue of $909,023,773, which Governor Bryan pointed out is $71 million higher than the legislative appropriation of $838,933,534.

“Today, as a result of our administration’s efforts, the Government of the Virgin islands can make good on longstanding obligations and realize additional revenue without having to add fees or raise taxes,” Governor Bryan said. “After nine years of all kinds of different schemes to pay back the 8 percent owed to government employees, this administration is in a financial position make those employees whole.”

The Governor underscored that the Bryan-Roach Administration continues to stabilize the Government of the Virgin Islands’ financial situation and revenue remains strong despite the setbacks of the pandemic.

“We’ve worked with the Legislature and were able to do another $30 million of capital projects in road paving, in putting in docks, putting in boat ramps, all while dealing with COVID and keeping the numbers strong by our solid Tourism numbers,” Governor Bryan said.

“And even though our expenditures are up, we’re still keeping whole and keeping a tight rein on making sure that we spend the People’s money responsibly; that we pay the vendors that we owe; that we pay people back what we owe them and we’re going to release another $20 million in income tax refunds,” the Governor said. “We sent down a supplemental budget to the Legislature for about $25 million dollars and by October, November we’ll be able to pay out the 8 percent. Going into the new year, every single week I’m getting a notice of new revenue coming to the Territory.”

The Governor said the Bryan-Roach Administration continues to be transparent with its revenues and fiscal management as it continues diligently tracking and forecasting revenue while navigating COVID and continuing to monitor revenues to ensure it meets revenue projections.

Director O’Neal now will use the different projections that were presented Tuesday to derive a comprehensive overview and revenue forecast for the Territory.

Copies of the different agency and department presentations are available to download at the OMB website at omb.vi.gov and video of the livestream of the 2021 Spring Revenue Estimating Conference is available on the OMB Facebook page (click here).

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Governor Bryan Submits First Ever 2-Year Executive Budget, Revenues Projected to Increase For Fiscal Years 2022 and 2023

CHARLOTTE AMALIE — Governor Albert Bryan has submitted to the 34th Legislature the first ever two-year Executive Budget and said revenue projections continue to increase during the next two years, providing an optimistic outlook for Fiscal Years 2022 and 2023.

Also included in the balanced budgets for both years are a number of highlights:

  • Wage increases for government employees of 4% in FY 2022 and 3% in FY 2023
  • $110M over both fiscal years for tax refunds
  • $38 million for repayment of the 8% salary cut
  • Funding for over 1,200 vacant government positions in FY 2022
  • Up to $10 million in FY 2023 for unfunded obligations as deemed by the GERS judgement
  • $2 million for ongoing payments to medical providers for Worker’s Compensation
  • Over $15 million to be placed in the Rainy-Day Fund across both years

The Office of Management and Budget proposes a General Fund budget of $963,020,472 and Total Budget of $1,485,472,985 for FY 2022 and a General Fund budget of $976,372,193 and Total Budget of $1,513,302,379 for FY 2023.

Regarding the FY 2022 budget, it has increased an average of 20% over FY 2021, and a number of departments, including the Department of Justice, the Bureau of Corrections, the Motor Vehicles Bureau, Department of Human Services, and the Department of Agriculture have received increases over 30% from FY 2021. Schneider Regional Medical Center, Juan F. Luis Hospital and the Waste Management Authority also received increased budgets of 7% or higher than FY 2021.

Governor Bryan noted that this time last year the Territory was faced with many uncertainties relative to the economic instability brought on by the COVID-19 pandemic.

“While there has been some impact to our main economic driver, tourism, I am happy to present a budget that is undeniably increased and able to serve the needs of the people of the Virgin Islands,” Governor Bryan said. “In the midst of the pandemic, my administration has been agile and resourceful as we made real-time changes to our operations including the utilization of technology and remote work while maintaining our services to the community.

“These projections speak to positive investments being made in our economy, and that has stabilized our collections even throughout the pandemic. With continued disaster recovery funding and additional pandemic relief support being made available to the Territory through legislative acts such as the CARES Act and the American Rescue Plan, my administration is committed to ‘Building a Better Tomorrow,’ Governor Bryan said. “Capitalizing on these opportunities, we are making investments that will keep us on a long-term path of prosperity and stability.”

Other key initiatives presented in the budget include:

  • Creation of the Office of Gun Violence Prevention and the Office of Health Information Exchange within the Office of the Governor
  • Development of the Virgin Islands Territorial Park System through a collaboration with the Office of the Governor and the Department of Planning & Natural Resources
  • $12 million over 2 years for the expanded Workforce Development Program at the Department of Labor.

The Bryan-Roach Administration also has budgeted to continue reinvesting in the Territory’s infrastructure, street paving and maintenance and is prepared to expend in excess of $1 billion over the next two years inclusive of disaster recovery projects.

The Territory has almost $3 billion currently available in federal grant funds to expend, with additional funds also already obligated but not yet received, and the Bryan-Roach Administration is committed to ensuring that as many projects as possible are started and completed by fiscal year 2023 to continue the strong economic growth.

The Governor said the benefits of presenting the Executive Budget in a biennial budget format for the first time include more time being spent on the management, oversight and implementation of the spending programs. The Administration anticipates making necessary adjustments prior to the start of FY 2023 as projections are updated and additional needs are determined, he said.

“This two-year budget was built utilizing our new budgeting software, OpenGov, and is the result of significant collaboration with departments and agencies and other stakeholders to address their needs and the needs of the Territory,” OMB Director Jenifer O’Neal said. “The result provides a strong blueprint for fiscal years 2022 and 2023 amid ever changing demands brought to the forefront by the ongoing COVID-19 pandemic.”

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Government Revenues Down Due To COVID-19: Office of Management And Budget

CHARLOTTE AMALIE — The administration’s Office of Management and Budget held its fall Revenue Estimating Conference on Wednesday where 18 of the government’s revenue-generating agencies provided a revenue outlook for Fiscal Year 2021. 

Governor Albert Bryan, OMB Director Jenifer O’Neal, and members of the governor’s cabinet shared the FY 21 revenue forecast with attendees at the virtual conference, which included members of the 33rd Legislature and Senators-elect who will join the 34th Legislature in January. 

Bryan said Wednesday that despite the adverse effects of COVID-19 on the economy, the USVI will maintain a level of stability through this fiscal year largely due to the administration’s cost-cutting and efforts to move forward government projects. 

 “Government projects are the things that stand between us and a real economic catastrophe. It’s not if it’s coming; it’s when it’s coming,” Bryan said. “Our ability to handle the finances thus far during this past year has proven very beneficial to us. We’re in a good cash position right now, and we’re in a good financial position. But we cannot stop there.” 

OMB Director O’Neal forecast a FY 2021 revenue of $773.4 million, which is down from FY 2019 actual revenue of $845.2 million. 

The Director’s breakdown of the revenue forecast for FY 2021 is: 

  • Individual Income Tax – $407.1 million ($443.7 million in FY 2019) 
  • Gross Receipts Tax – $185.9 million ($190.1 million in FY 2019) 
  • Real Property Tax – $53 million ($56 million in FY 2019) 
  • Corporate Income Tax – $60.7 million ($67.4 million in FY 2019) 
  • Trade & Excise Tax – $2.1 million ($2 million in FY 2019) 
  • Other Operating Revenue – $64.5 million ($86 million in FY 2019) 

 “We do expect for 2021 the number is lower because, again, in the 2020 calendar year so far, we’ve had a number of closures, and a number of businesses have not been open for a long period of time,” O’Neal said. “A lot of people haven’t really been working, so we do expect our tax base will be a lot less and collections, therefore, will be a lot less in 2021.” 

According to a Moody’s Revenue Analysis done for OMB, the FY 2021 budgeted revenue of $773.4 million is followed by an estimated FY 2022 revenue of $756.3 million and an estimated FY 2023 revenue of $850.4 million. 

Some of the key points from the various agencies’ presentations at the Revenue Estimating Conference include: 

  • The Property Tax collection forecast for FY 2021 of $58 million is on track with FY 2020’s forecast of $54.7 million and actual amount of $62.9 million. 
  • Excise Tax losses as of October 30, 2020, are $80.9 million. 
  • Total Tax Revenue for FY 2020 was $822,379,518, comprising $262 million in Gross Receipts Taxes; $454 million of individual income taxes; $68 million of corporate income taxes; and $32.4 million in finds from other Bureau of Internal Revenue funds. 
  • As of October, the Territory’s unemployment rate is 9.4% with 4,220 unemployed – 1,700 of 20,867 unemployed on St. Croix (8.1%) and 2,520 of 24,050 unemployed on St. Thomas-St. John (10.1%). 
  • Air visitor arrivals from January-August 2020 were 281,699, down 39% from 464,926 from the same period in 2019. 
  • Hotel Tax revenue from FY 2020 was $17.7 million, down from $20.5 million in FY 2019. 
  • Cruise arrivals are not anticipated to return until spring 2021, and expected passenger arrivals will be down considerably for the year. 
  • Hotel Tax revenues will be reduced for FY 2021, and the continued postponement of major properties, such as the Marriott, coming back online further contribute to the delay in revenue growth. 
  • Airlines continue to bring back service with increased frequency, and additional carriers are introducing service. 

Video of the entire Revenue Estimating Conference is available on WTJX’s Facebook page and copies of the presentations are available on the OMB website: omb.vi.gov

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OMB Spring Revenue Estimating Conference Coming Up On June 2

CHARLOTTE AMALIE — The Office of Management and Budget Director Jenifer C. O’Neal informs the public of the upcoming Spring Revenue Estimating Conference to be held on June 2.

Due to the COVID-19 pandemic, the conference will be held via Zoom from 9a.m.-5:00p.m. and streamed live online.

Presentations will be given by revenue generating agencies departments and semi-autonomous agencies regarding their projected revenues for fiscal year 2021.

Presentations will be approximately five minutes with 10-minute question and answer segments that is open to the public for participation.

If you have any questions, please contact Monique C. Creque, special assistant to the director, at 340-774-0750 extension 203 or Chenelle Baker at extension 207.

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GUEST EDITORIAL: Grow V.I. Economy By 50 Percent Or Cut General Fund Outlays

Written By: GARY POKORNY

On January 28, 2019 Governor Albert Bryan Jr. gave his first State of the Territory Address. I would encourage every citizen of the Virgin Islands to read this speech.

Governor Bryan was clear: The General Fund has virtually no cash on hand, and $600 million in short term accounts payables. This is on top of the billions in long-term debt held by bondholders and the massive $5 billion underfunding of GERS.

He said the General Fund has and continues to experience an on-going structural deficit – which means more is committed to spending for current programs than money coming in. It has recently varied between $250 million and $450 million annually. And according to the governor, it potentially gets worse in 2020, once the Fed recovery money is gone and reconstruction is all but wrapped up. The 2018 change in federal tax law and the potential for the courts to eliminate the Excise tax will only serve to further reduce tax revenues to the General Fund in 2019.

According to the United Nations Population Division the population of the Virgin Islands peaked in 1998 and has been falling ever since. They estimate the population will continue declining right through 2100.

Now for the good news. There is a new administration at the helm that has been quite forthright and understands the urgent need for bold action: “We must have bold, aggressive, and long-term plan to grow our economy, create jobs and generate wealth…..The window to restart our private-sector economy to avert fiscal collapse is very small, and it is closing rapidly.”

At the same time, he shared the cost cutting side of the equation, “I assure you that I will stand beside you in making those tough decisions. That means we have to be conservative with our budgeting and certain government expenditures will have to be cut.”

So there you have it, either grow the private sector of the economy enough to bring in an additional $450 million in tax revenue annually. Or cut government spending by $450 million.

The economy would need to grow by $2.2 billion dollars to bring in enough new revenue to cover a $450 million deficit. Looking back at the history of the Virgin Islands, it takes $5 in GDP to deliver $1 to the GVI coffers. So, to raise the needed $450 million we would multiply by five and add to the current GDP of $3.7 billion. In 2020 the economy would need to grow to $6 billion, an astounding +60 percent rate.

Let us be honest. This is not going to happen. Reference my earlier point: as the population has thinned out the ability to produce more (GDP) also declines. Over the long term the population needs to reverse and grow: More people mean more consumption, greater GDP and more tax revenue. But the jobs must be created, and the people must be qualified. How many temporary workers have been flown in from outside the territory to do the work only to have them fail to pay their taxes to the VI but pay them to the federal government instead? To make matters worse, there are many, many vacant high paying jobs going unfilled. For example, the VIPA board at their February 20 meeting agreed to offer $2000 to cover relocation expenses for highly skilled applicants. They can’t fill these positions now!

The EDA sponsored 2040 Vision won’t even be rolled out until October 1, 2019. In the meantime, the government digs a deeper hole to the tune of more than a $1,000,000 a day. In the time it took to write this article, about one hour, $41,600 in new account payables were rung up. And who suffers? Tax payers’ due refunds. Vendors to the government -– I call them small businesses and individuals. Don’t forget about those paying into GERS and those wondering when their pension will be halved. The list goes on and on.

Off course, bondholders and government employees are always the first to be made good.

So, we wait patiently for the governor’s team to put forth the plan that explains how much of the deficit will be covered by new tax revenue in a growing economy and how much planned government expenditures will need to be cut. Let’s face it, you can’t stiff small businesses forever and as he said in the speech you can’t kick the can down the road any longer on GERS – the territory is out of road. The longer the wait, the deeper the accounts payable hole.

The likely outcome will be slight economic growth into 2020, maybe enough to stop digging a deeper cavern of a hole but certainly not enough to significantly reduce the annual GVI deficit.

My only encouraging thought is this: You won’t find $450 million to cut in one place. Rather, you may find a million dollars in 450 places.

Take UVI for example. The General Fund already allocates $30,000,000 annually. They have fewer than 3,000 students enrolled with a dismal graduation rate of 36 percent. The people of the Virgin Islands are subsidizing each student to the tune of $10,000 a year already. And now they want to double down with free tuition and ADD more cost to the General Fund. The university claims they only need three more million to make their budget balance, that they have endowments, etc. Why not keep the tuition in place then cut the outlay to UVI? We might just find more than a million in this one place……. As I said to Governor Mapp when I met him shortly after he took office: Leadership starts at the top, if you aren’t for real, we are all in trouble. I offer the same advice now.

Respectively submitted,

Gary Pokorny

http://population.city/us-virgin-islands/

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Gov. Bryan Announces OMB Director, Fire Services and BIR Directors

CHRISTIANSTED — Governor Albert Bryan, Jr on Thursday announced Jenifer O’Neal as Director of the Office of Management and Budget (OMB), rounding out his financial team which includes the Commissioner of the Department of Finance, Kirk Callwood and Director of the Internal Revenue Bureau (IRB) Joel Lee. The governor also announced Daryl George, Sr. as Director of the Virgin Islands Fire Service.

O’Neal, a finance executive with over 25 of years of expertise, is a former Deputy Director of the Office of Management and Budget and with in-depth policy knowledge and experience managing components of the territory’s budget. She also served as the Chief Financial Officer of the Department of Human Services, where she conducted analyses of federal funds awarded to the department and was employed by the Government of British Virgin Islands as a Senior Policy Analyst.

O’Neal has also served as an adjunct professor both at the University of the Virgin Islands and at H. Lavity Stoutt Community College in Tortola. She holds a Masters of Business Administration in Finance and International Business from Towson University-University of Baltimore and a Bachelor of Science in Finance from the University of Baltimore, Maryland.

“We are at a critical point in the territory’s history, given our financial challenges, and our administration has put together a financial team that is implementing a comprehensive financial strategy to utilize the key functions of the Department of Finance, OMB and IRB to right-the-course of the territory’s fiscal standing. We have the right people in place, and I thank Ms. O’Neal for her willingness to serve the people of the Virgin Islands in our administration,” Governor Bryan said.

Governor Bryan also announced Daryl A. George Sr. as Director of the Virgin Islands Fire Service (VIFS) Thursday. 

George, a veteran firefighter with 20 years experience is a former Assistant Director of the Virgin Islands Fire Service and former Special Assistant to the Director of the Fire Service and Program Coordinator of the Junior Fighter Corps from 1997 through 2014.

“I appreciate Mr. George’s enthusiasm to serve,” Bryan said. “I look forward to him leading the Virgin Islands Fire Service in a collaborative working relationship with our Commissioner of Health and the Director of the Virgin Islands EMS. This collaboration will move the merger of Fire and EMS forward, and to improve our emergency response times and overall efficiency within our VIEMS and VIFS.” 

George has extensive training in the areas of Fire Service Management, Emergency Operations, and Incident Command. During his tenure at the VIFS, he played an integral role in the construction of the Emile Berry and Omar E. Brown Fire Stations, and the establishment of two warehouses for ladder apparatuses in the  St. Croix and St. Thomas districts. He also played a key role in the acquisition of office space for the Arson and Prevention Unit on St. John and many initiatives to enhance the Fire Service Operation territory-wide. 

Gov. Bryan Announces OMB Director, Fire Services and BIR Directors
Daryl George Sr., the director of the Virgin Islands Fire Service
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EMMA WEBSITE: Price of Virgin Islands Bonds Doubled; BB Says WAPA To Raise Rates

NEW YORK — The price of some U.S. Virgin Islands bonds’ on the secondary market has more than doubled since the end of last year, The Bond Buyer reports today.

According to the Electronic Municipal Marketplace Access web site, on December 28, 2017 a customer bought $2 million of Virgin Islands gross receipts tax bonds maturing in 2039 at 44 cents on the dollar.

On Thursday a customer bought $1 million of the bonds at 95 cents on the dollar.

The territory’s rum tax bonds have also shot up. According to EMMA on January 2 a customer bought $1.5 million of Virgin Islands matching fund bonds maturing in 2024 at 63 cents on the dollar. On October 5 another customer bought $1.05 million of the bonds at 100.625 cents on the dollar.

The rise in the bonds’ market bonds is “a reflection of increased investor confidence in the Virgin Islands,” said Richard Tortora, president of Capital Markets Advisors. Capital Markets is the municipal adviser to the territory.

The two category 5 hurricanes that hit the Virgin Islands in late summer 2017 were factors in the slip of its bond prices later in the year, he said. But the government made full bond payments on October 1, 2017, April 1, and this past October 1, he said.

The territory’s economy is largely reliant on rum production and tourism. The hurricanes have had limited impact on rum production and rum production facilities, Tortora said.

While tourism was initially hit hard, cruises have returned fairly strongly, Tortura said. Airline-based tourism hasn’t come back quite as much because some hotels are still closed. Yet tourism is on the path to normal levels.

The Virgin Islands was quicker than Puerto Rico in bringing back its electrical and water infrastructure, Tortora said.

The territory has also benefited from not being hit by any major storms this season, he said. The season ends at the end of November.

Triet Nguyen, Axios Advisors managing partner, said the recovery in Virgin Island bonds was helped by developments in Puerto Rico.

“We believe the rebound in the Virgin island bonds was in sympathy with the improved outlook for Puerto Rico bonds, now that a settlement between the general obligation and COFINA [Puerto Rico Sales Tax Financing Corp.] bondholders is in sight,” Nguyen said. “It also reflects the recognition that the USVI government has displayed a more creditor-friendly attitude and a much more professional approach to managing its debt problem than its Puerto Rican counterpart.”

The closing of the HOVENSA oil refinery in early 2012 cost 2,000 workers their jobs and pushed the islands into an economic decline that lasted through 2016. In July the Virgin Islands Senate passed a $1.4 billion deal to reopen the oil refinery on St. Croix.

On October 5 Governor Kenneth Mapp signed a fiscal year 2019 budget. The Virgin Islands fiscal year started on October 1.

The budget has $1.0725 billion in local, transfer and other funds and $238.7 million in federal sources. In the coming fiscal year, “Revenue lost by the tourism industry through the temporary closure of the territory’s major hotels will be partially offset by the revenues derived from the reconstruction boom,” according to a statement from Mapp’s office.

This year’s budget projects $1.311 billion in revenues, compared with $1.278 billion in the fiscal 2018 budget, according to Julio Rhymer, director of the Virgin Islands Office of Management and Budget.

The government has already drawn $215 million of a federal Community Disaster Loan approved after the hurricanes. It may or may not draw on the remaining $81 million available, Rhymer said.

The Community Disaster Loan, Federal Emergency Management Agency, Community Development Block Grant, and other federal aid after the hurricanes are not included in the island’s official budget, Rhymer said.

“As a result of economic activity in the U.S .Virgin Islands during the past six months we are expecting the largest gross receipts tax collection in years at $191.3 million, $452.9 million in income taxes and $63 million in real property taxes,” Finance Commissioner Valdamier Collens said.

The one ratings agency that is still covering the central government’s bonds, Moody’s Investors Service, is skeptical. In January it downgraded its rating on the matching funds (rum tax) bonds to Caa3 and said there was a “high likelihood” of a government default on the bonds. When Moody’s was contacted in July, its analyst said that the opening of the oil refinery was likely to have only a minimal impact on the territory’s finances.

Meanwhile, on Friday the Virgin Islands Water and Power Authority posted a financial notice to EMMA saying that the Public Services Commission approved a roughly four cents per kWh increase for July through December of this year.

WAPA said it planned to ask the PSC for surcharges and temporary rate increases to support various expenses. Additionally, the authority expects to “submit a full base rate case” to the PSC in early 2019.

–THE BOND BUYER

https://www.bondbuyer.com/news/virgin-islands-bonds-have-recovered-sharply