Virgin Islands Senate passes $1.4 billion deal without pensions benefit

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The Virgin Islands Senate approved a $1.4 billion oil refinery deal without directing any of the benefits to go to the islands’ underfunded pension system, which the governor had advocated.

U.S. Virgin Islands Gov. Kenneth Mapp said the project will lead to an additional $615 million in direct revenues for the government over the next 10 fiscal years. The reopening and operating of the facility will also contribute to the local economy, thereby indirectly increasing government revenues. The government hasn’t made an estimate of this indirect effect.

For comparison, the approved fiscal year 2017 General Fund budget was around $865 million. Adding $61.5 million to $865 million would be a 7.1% increase.

Mapp had proposed that half the government’s revenue from the oil refinery would go to the Government Employees Retirement System. In January Moody’s Investors Service said that as of Sept. 30, 2016, the island’s government had a net pension liability under Generally Accepted Accounting Principles of $4.6 billion, which it described as “extremely large.”

On Thursday the Senate approved the deal for the $1.4 billion investment reopening an oil refinery in St. Croix. In the deal ArcLight agreed to restore the oil refining operations next to Limetree storage facilities. ArcLight is operating those storage facilities.

The Senate didn’t take action on Mapp’s request that half the money go to the retirement system.

Mapp said he was “particularly concerned” about the removal of these provisions and he urged action to direct funds to the system.

The closing of the St. Croix oil refinery in early 2012 cost 2,000 workers their jobs and pushed the islands’ into an economic decline that lasted through 2016.

If the debt of the island’s financially distressed Water and Power Authority is included, the Virgin Islands has over $2 billion in debt outstanding. All of it is rated deep in speculative territory.

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Speculative grade bonds Public pensions Virgin Islands Public Finance Authority Government of the Virgin Islands Virgin Islands Water and Power Authority U.S. Virgin Islands
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