Virgin Islands Gov. Albert Bryan Jr. said he’s trying to address his government’s $4.4 billion pension system underfunding.
Bryan made the remarks about the Government Employees Retirement System in his annual state-of-the-territory address Monday night, delivered to the Virgin Islands Senate.
“The pending insolvency of the Government Employees Retirement System remains a looming threat to the economic and fiscal well-being of the territory,” Bryan said.
“To preserve the pension of existing retirees, we must approach this from two directions,” Bryan said. “We must provide a cash infusion to increase the investment portfolio of the system before it liquidates its assets to the point of insolvency. Then we must restructure the existing benefits package to make the plan for current and future employees more sustainable.”
Bryan then went on to exclusively talk about generating cash. “We have been actively pursuing sustainable revenue streams that are large enough to support a bond issuance to provide the necessary cash infusion.”
Bryan said that his government was in discussions with rum distillers interested in operating in the islands. He offered support for the senate’s effort to capture gasoline excise taxes. Finally, he urged the senate to pass an amendment to a cannabis law that would tax the cannabis industry and allocate 75% of the revenue to the pension system.
Concerning the island’s debt, he noted that S&P Global Ratings had changed the outlook on the islands’ grant anticipation revenue (GARVEE) bonds to stable from negative in December. The rating is A.
S&P explained the outlook change by saying that the summer 2017 hurricanes hadn’t reduced the pledged Transportation Trust Fund revenue as the agency had originally expected.
In September Moody’s Investors Service resolved a ratings watch with direction uncertain by giving a stable outlook for its Caa3 issuer default rating for the islands. It also affirmed its Caa2 and Caa3 ratings on the islands’ four matching fund revenue bond liens.
Bryan said, “The upgraded bond ratings are due to recent improvements in the government’s liquidity and near-term financial position driven by the receipt of federal disaster assistance, a surge in tax revenues from reconstruction and an increase in concession fees from the Limetree refinery facility.”
“This puts the territory in a much-improved position to secure financing for major capital improvement and other projects at lower, more favorable rates,” Bryan said. He added that the government had “no immediate need for central government borrowing.”
In response to Bryan’s statement about Moody’s action, Moody’s Analyst Ken Kurtz said, “The Caa3 issuer rating we have on the U.S. Virgin Islands is unchanged and a change in outlook is not the same as a change in rating.”
In September Kurtz said, “Despite some recent improvement in the government's liquidity and near-term financial position, the rating incorporates the risk that the reemergence of a significant structural deficit, combined with the expected insolvency of the Government Employees' Retirement System, will lead the government to restructure its debt.”
On Thursday the Virgin Islands Public Service Commission approved a base rate increase for the struggling Water and Power Authority. The increase counterbalances an already approved decrease in a WAPA fuel charge. Bryan thanked the commission for the action.
The governor committed to hiring an Office of Disaster Recovery project monitor to oversee WAPA.
“With any assessment of any government and general community well-being, there is a mixture of good news and bad news,” Bryan said. “However, our good news is starting to outweigh the bad news.”
