U.S. Virgin Islands

The agency cited the permanent raise to the rum tax cover for the improved outlook.

The Public Service Commission said it will reconsider rates at its August meeting.

Without the increase U.S. Virgin Islands matching funds bonds would have defaulted in the next few years, some observers said.

The U.S. Virgin Islands WAPA said the Public Service Commission's reduction of electric rates jeopardizes its ability to pay bills and provide electric service.

The effects could hit island economies, like those of Puerto Rico and the U.S. Virgin Islands, whose bonds are speculative grade partly because of fiscal concerns.

KBRA said the negative outlook reflects declining coverage of maximum annual debt service coverage from both a lower tax rate and declining rum sales.

Management is hiring a municipal advisor to evaluate its financial strategy.

The introduction of new engines in a northern power plant and the opening of a solar farm in the south have reduced the authority's operating costs.

Observers say the decision may be a credit positive for the financially struggling utility

The governor says borrowing $50 million is "imperative" but the senate majority leader says "continuing to borrow is not the answer."