Projects and plans are in the pipeline to jumpstart the local economy, but a more significant rebound might not be evident until "summer to late 2010," Gov. John deJongh Jr. said in a candid conversation with reporters Thursday.
What's going to tide the territory over in the meantime, he said, is the proliferation of various capital and construction projects, continued stability in the hotel industry and an increase in cruise ship volume, which is set to jump once the new Oasis of the Seas begins calling on St. Thomas in December and more ships start coming to St. Croix.
Unlike many states and neighboring territories such as Puerto Rico, the Virgin Islands hasn't had a massive curtailing of government services or employee layoffs. The global economic crunch did stymie the introduction of a few new programs and cause an overall reduction in tax revenue that brought about a budget shortfall for fiscal year 2009, but a three-pronged strategy that combined local and federal stimulus efforts has helped combat any serious depression, deJongh said.
On Thursday, thousands took to Puerto Rico's streets to protest government efforts to close the territory's more than $3 billion deficit by laying off what national news reports have said ranges from 13,000 to 17,000 public-sector employees. The protest ended at Plaza Las Americas, bringing out, according to union leaders' estimates, between 100,000 to 200,000 residents.
While the strike isn't expected to have a "tremendous impact" on the Virgin Islands, the Puerto Rican government's efforts at stabilization is "indicative" of the "type of economy that we both have," deJongh said Thursday.
Once local revenues started to decline there were few options available for the government to pursue, he added. In developing an economic strategy, V.I. officials initially looked at borrowing money, and late last month, the first $100 million draw was made on a $250 million line of credit set up to support government operations.
"We couldn't afford to cut back in terms of the work force and our programs, particularly because of increased activity seen in the areas of law enforcement, education and health care," deJongh said Thursday.
Going after federal economic stimulus funds provided through the American Recovery and Reinvestment Act was the first priority and to date, the territory has secured $280 million -- $18 million for roads and capital improvement projects such as bus shelter renovations, and the remainder for the expansion of existing Education, Human Services, Labor and Energy Office programs, the governor said.
In June, the governor announced that the territory was eligible for $71 million in state fiscal stabilization funds under ARRA and, in the face of a more than $200 million budget shortfall anticipated for FY 2009, lobbied federal officials to grant more flexibility in how the funds could be spent. Most of the money would go toward maintaining educational programs, while the remainder would support general government services at its post recession levels.
The government filed its application in July but discussions on how the money will be spent are still ongoing and conference calls with federal officials have been scheduled to address some of the proposed initiatives, deJongh said Thursday.
Along with the $250 million line of credit, the territory's own stimulus package included the recent sale of about $86 million in new bonds for various capital projects, along with a refinancing of several hundred million in existing bonds at much lower interest rates.
Officials such as Public Finance Authority head Julito Francis have called the sale a "grand slam," which reflects increased confidence in the territory's ability to repay the bonds using its projected rum revenues.
"We had a very good reception at the bond market," deJongh said Thursday, adding that the government's ability to manage its deficit and projected budget shortfall has improved mainly because "we have been able to shift how we pay for it."
Projected rum revenues from the Diageo and Cruzan Rum distilleries are backing the bonds, giving the government a strong revenue source that’s "independent" of the local taxpayer and keeping the possibility of increasing taxes and fees to cover the shortfalls at bay.
And in the midst of the hard financial times, more than a few victories have been won. Local contractors will benefit from the opportunity to work on the proposed road and capital projects, innovative programs such as pre-apprenticeship training for young adults on solar water-heater installation have been created and, through the pursuit of ARRA funding, the government has been able to apply for grants for information technology, health information and broad band initiatives.
Even the Senate's recent move to quash the proposed unpaid holiday initiative has worked out, the governor said. While the $14 million in projected savings won't be coming through on that front, senators gave the various departments and agencies lump sum budgets and therefore more flexibility in how they spend their FY 2010 money.
Senators also reduced the number of unfilled or vacant positions in the budget, he added.
In a tourism based economy, there are adjustments that have to be made, particularly in the private sector, which has been impacted by a slow down in cruise ship traffic and consumer spending. But while several businesses -- particularly on Main Street, St. Thomas -- are closing, there are also new ones opening, and they will be helped along by government efforts to increase airlift and bring ships into port, the governor said.
There is some stabilizing in the St. Thomas market, and with increased cruise calls anticipated for St. Croix, there will be a boost for smaller vendors, taxi and tour operators and stores in both of the big island's historical towns, deJongh added.
"I think a lot of our merchants are holding on in a difficult time," he said. "I think that everything is poised to move forward, but a lot of our progress will depend on takes place in 2010. And even 2010 will be difficult here."