U.S. Virgin Islands government is grappling with a revenue shortfall in the aftermath of the two category 5 hurricanes that hit just before the start of its fiscal year.
According to the Virgin Islands Consortium web site, the government is trying to overcome a 36% deficit in the current fiscal year, even after figuring in a $300 million federal disaster loan. The fiscal year started Oct. 1, amid infrastructure devastation that followed Hurricanes Irma and Maria in September.
The Islands’ Senate has decided to borrow no more than $500 million total in federal community disaster loans, Sen. Jean Forde said. “We certainly don’t want to get too far further into debt.”
The islands’ government and water and power authority had more than $2 billion in debt before any federal loan.
This fall S&P Global Ratings and Fitch Ratings withdrew their ratings, which had been deep in the speculative range, after the islands' government stopped sharing financial information with them.
Moody’s Investors Service rates the senior and subordinated matching fund bonds Caa1 and the subordinated indenture Diageo and Cruzan bonds Caa2. Moody’s has both ratings under review with the direction uncertain.
The Virgin Islands Senate has also voted for the government to draw down no more than $300 million of this money initially, Forde said. The government may take more of this loan later this fiscal year.
On Friday the Virgin Islands Senate approved federal terms on the community disaster loan, according to a spokesman for the government. The federal government insisted that the loans be given first liens on the government revenue, but this lien in no greater than the first liens that the islands’ senior gross receipts tax bonds. These bonds hold the general obligation rating of the Virgin Islands.
The majority of the federal loan money will be securitized as matching funds and gross receipts tax bonds owed to the U.S. Treasury, the Virgin Islands spokesman said.
“We’ve been devastated,” Sen. Forde said. “Our economy has been heavily injured.”
The government doesn’t have a fiscal year 2018 budget in place, even though the fiscal year started Oct. 1. Instead, it is operating on a rollover of the fiscal year 2017 budget. The Senate plans to address the financial shortfall in a fiscal year 2018 budget still to be adopted.
While the Senate Finance Committee met Wednesday, it decided to postpone making decisions until it can gather better financial information, Forde said.
A spokesman for Gov. Kenneth Mapp said local officials have asked the federal government for $7.5 billion in grants for disaster assistance and repair.
The islands have been damaged by heavy rains since Hurricanes Irma and Maria, Forde said.
An impeded transportation system has made it hard to get legislators from the three main islands together to make a decision since the storms, Forde said. In the past legislators could stay over for multi-day sessions when away from their home island, but this has become impossible with a lack of available hotel rooms. The St. Croix legislative building has been completely destroyed, leaving legislative buildings on the two northern islands for meetings.