Lawmakers yesterday removed an amendment from the federal tax-extender bill that would have changed the way the federal government allocates rum-tax revenue to Puerto Rico and the U.S. Virgin Islands.

Sen. George LeMieux, R-Fla., last week filed the amendment to HR 4213, the tax-extender bill. The initiative aimed to calculate rum-tax revenue distributions by population rather than the current system which bases such allocations on the number of barrels produced in each territory.

Rum-tax receipts currently repay nearly $3 billion of outstanding rum-tax bonds in the commonwealth and the USVI.

Lawmakers were unable to move on the amendment within a set time frame.

“We could not get a consent agreement work out to get Sen. LeMieux’s amendment pending and force a vote before cloture was invoked this afternoon,” said LeMieux spokesman Ken Lundberg. “Cloture was invoked and under Senate rules, considerations of amendments that expand the scope of a bill after cloture fall away. Sen. LeMieux’s amendment would expand the scope of the bill, so it’s no longer able to be attached to the bill.”

The senator could place the amendment on other tax legislation moving through Congress. He has yet to announce any such plan.

Puerto Rico has nearly $2 billion of rum-tax bonds outstanding through the Puerto Rico Infrastructure Financing Authority. Bacardi & Co. is the major rum producer in the commonwealth.

The Virgin Islands Public Finance Authority has $767.2 million of total outstanding rum-tax debt.

Another measure regarding rum-tax revenues currently sits in the House Ways and Means Committee and would limit the subsidies that rum producers receive from the Virgin Islands and Puerto Rico to 10% of rum tax revenue. Puerto Rico’s resident commissioner, Pedro Pierluisi, filed the bill, HR 2122, last year after USVI announced agreements with Diageo PLC, maker of Captain Morgan rum, and Cruzan VIRIL Ltd., in which the spirit producers will receive subsidies of nearly 40% in future years, far above Pierluisi’s 10% cap.

In return, Diageo and Cruzan have pledged to make rum in the USVI for 30 years. Diageo will move its production of Captain Morgan rum to USVI from Puerto Rico in 2011. Along with the subsidies, the VIPFA sold rum-tax bonds to help finance the new distillery for Captain Morgan and upgrade and improve Cruzan’s facility.

It remains to be seen if acting House Ways and Means chairman Sen. Sandy Levin, D-Mich. will take up HR 2122. The bill is currently not scheduled for a hearing or a vote, according to Matthew Beck, communications director and policy adviser to the committee. Levin now heads the committee after Rep. Charles Rangel, D-NY, last week stepped down from the post. Rangel had long said the two territories should work out the rum-tax disagreement themselves and opted not to move on the bill.

Losing Captain Morgan rum production will reduce Puerto Rico’s rum-tax revenue by $120 million beginning in 2012, according to Javier Vazquez, executive director of the Puerto Rico Industrial Development Co., which oversees the Rums for Puerto Rico program. That initiative helps promote the commonwealth’s rum industry through marketing campaigns and events.

In fiscal 2009, Puerto Rico received $395.7 million of rum-tax receipts. It allocates 6% of its rum-tax revenue to Rums for Puerto Rico, according to Vazquez. The commonwealth does not give molasses subsidies to its rum makers.

Even with the loss of $120 million of rum-tax revenue per year, Puerto Rico’s rum-tax bonds will continue to have adequate debt service coverage, according to Horacio Aldrete, analyst at Standard & Poor’s.

In looking at USVI’s rum debt, the official statements for Series 2009A Diageo Project bonds for $250 million and Series 2009A Cruzan Project bonds for $39.1 million, state that if Pierluisi’s bill were to become law, the subsidies stipulated in the Diageo and Cruzan contracts would be called into question.

“If the proposed legislation were in effect today, a portion of the benefits to be received by Cruzan and Diageo USVI from the government under the Cruzan Agreement and the Diageo Agreement, respectively, would be inconsistent with the law.”

The USVI will pay Cruzan 30% to 40% of rum-tax revenue over time while Diageo’s payments will range from 31% to 39%, according to Fiscal Strategies Group, VIPFA’s financial adviser. At the same time, the territory anticipates its general fund will benefit from additional rum-tax revenues.

Conservative projections estimate that expanding Cruzan’s production and bringing in Captain Morgan will increase the territory’s rum tax revenue to $226.3 million in fiscal 2012 from $106.8 million in fiscal 2009, according to the OS for Series 2009A Cruzan Project bonds. That amount is expected to increase gradually to $429.3 million in fiscal 2035.

Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s are all watching legislation that would alter the revenue stream that secures rum-tax bonds.

“At this point it’s our opinion that the U.S. government won’t take any actions to adversely impact any one of its territories,” said Moody’s analyst Kimberly Lyons. “The federal government is aware that the debt is secured by this revenue source and additionally, even going further, this revenue source provides substantial general funds to support the Virgin Islands as well. At this point, we’re just monitoring it. We included in our report that any impact or adverse legislation could lead to a rating change. I don’t think that we’re there yet, but we always reserve the right to revisit our ratings at anytime.”

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