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Charlotte Amalie
Friday, March 29, 2024
HomeNewsArchivesBOND ISSUE WILL FACE HEAVY TEST FRIDAY

BOND ISSUE WILL FACE HEAVY TEST FRIDAY

Gov. Charles W. Turnbull's proposal to borrow up to $180 million to keep the government afloat will face some heavy scrutiny Friday at the Legislature.
Without the loan, the administration says it will run out of working capital in November, raising the specter of 2,500 layoffs.
But most of the Senate Finance Committee members who met with the governor and administration officials Monday night for a private briefing on the proposal apparently were not convinced that more borrowing is the answer.
"I'm leaning toward voting no," said Sen. Lorraine Berry, Finance Committee chairwoman, adding that most of the members of her committee seem similarly inclined. "I don't think the votes are there" for passage.
However, she said, "I asked the post auditor to do an analysis" of the bill, which should be available before the Legislature meets Friday in Committee of the Whole.
The figures are confusing in part because the proposal includes two contingencies that depend on federal approval – the forgiveness of the territory's $28 million Federal Emergency Management Agency debt for hurricane recovery funds and the authority to use any government revenues to back bond issues.
If the government does not get congressional approval to float general obligation bonds, it will have to restructure its Matching Fund (rebated federal taxes on rum) bonds in order to borrow more, and that will hike the cost of the loan. Either way, the loan appears costly.
According to an administration "1999 Financing Overview," if the government does not borrow now, it will have a $67.5 million deficit for the 2000 fiscal year, which begins Friday. With the loan, it is showing a $22.5 million surplus in operating revenues for FY 2000.
However, the same chart shows the loan will push the government into a deficit of $48.7 million in FY 2001, as opposed to a projected deficit of $35.8 million if it doesn't borrow.
If it doesn't borrow more now, the government will be back in the black by 2003, according to the chart. With the loan, it does not show a surplus again until 2004. And at that point, the with-financing surplus is projected to be $5 million, and the without-financing projection is $17.9 million.
Of course, if the FEMA debt is turned into a grant, the picture will look brighter either with or without the bond.
Tumbull's proposal relies on gross receipts taxes to back the bond issue. According to the Financing Overview, the average annual collection over the past 10 years, including low years due to hurricanes, has been $78.7 million.
No one in the administration has made it clear how the revenues under the current budget would be affected if the gross receipts taxes are pledged for a bond issue. Right now, gross receipts for FY 2000, projected to be $85.5 million, are a major revenue source to support the governor's $432 million budget.
If the government moves ahead with the bond issue, it will not be the first time it has borrowed to meet operating costs.
In 1983, the Legislature floated a $30 million bond issue to finance raises for government workers.
"That's the first crazy thing I voted against," said Berry, who was a freshman senator that year.
Earlier this year, the government borrowed $35 million to help finance the payroll. That's one of the obligations the administration wants to pay off with the current bond proposal.
"Are we just postponing the day of reckoning?" Berry asked.

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