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SENATORS OKAY ISSUING OF $92M IN BONDS

Dec. 27, 2001 – In a special session called by Gov. Charles W. Turnbull, the Senate passed legislation Thursday authorizing the government and the Public Finance Authority to issue $92 million in tax-exempt bonds for several public and private capital projects.
The governor called the last-minute session in the midst of the yearend holidays — Christmas, the Crucian Christmas Festival, Boxing Day, Kwanzaa and New Year’s — to meet a Dec. 31 deadline for issuing bonds for capital projects.
Attracting the most attention from the lawmakers was $63 million destined for Hovensa as part of the long-term financing of the solid-waste disposal components of the company's ongoing coker project.
Sen. Alicia "Chucky" Hansen set the tone for further questioning when she asked early on if Hovensa's funding had to be "linked" to the other projects.
The other projects in the $92 million bond issue are:
– $10 million maximum in funding for mortgages through the V.I. Housing Authority for multi- and single-family homes in the Louis E. Brown Development on St. Croix.
– $15 million maximum to fund mortgages for 236 residential rental projects at the Brown Development.
– $4 million maximum in funding through the PFA for sewage facilities for a St. Croix manufacturing facility.
Also on the agenda was the re-submission by Turnbull of legislation to change government department and agency budgets to lump-sum from line-item budgets, a proposal voted down earlier this year by the body, and legislation to authorize the governor to declare a state of economic emergency following any man-made catastrophe which would have a negative effect on the economy.
Senate President Almando "Rocky" Liburd sent the lump-sum proposal to the Finance Committee, where the line-item budget originated to begin with, and the emergency proposal to the Government Operations Committee.
The session then went into Committee of the Whole to take testimony from Amadeo Francis, PFA finance director; Alex Moorhead, Hovensa vice president; George Dudley, Hovensa attorney; Ira R. Mills, Office of Management and Budget director; and Conrad Francois, VIHA executive director.
Francis, who will leave his PFA post on Dec. 31 after being terminated by the governor earlier this month, impressed upon the senators the urgency and economic importance of approving the bond proposal. "This will undoubtably be my last appearance in this chamber," he said. "We need legislative approval, and it must be done by Dec. 31."
Bond availability 'something we use or lose'
Francis added, "This is a new venture for the PFA. It will establish us in the marketplace and make it easier in the future for the Virgin Islands to negotiate." He stressed, "This is not a gift; it is something we use or lose."
Francis explained that federal law allows states and territories to issue private activity bonds that are tax exempt each year. Under questioning by senators, he stated more than once, "Absolutely and positively, there is no cost to the government."
Moorhead and Dudley told the lawmakers that the government will immediately benefit by collecting about $340,000 in bond-issuance fees from Hovensa. Moorhead said, "It is not a novel proposition for tax-exempt bonds to be issued to finance a privately owned facility, as is allowed under a provision of the federal Internal Revenue Code. Approximately $6 billion in tax-exempt bonds were issued this year to finance projects for private companies in the U.S."
In addition to paying the fees, Moorhead said, Hovensa will reimburse the government for legal fees and any other expenses it incurs in issuing the bonds. He stressed the urgency of the authorization before the end of the year. "Unfortunately, $10.6 million of the maximum amount of $63 million in private-activity bonds authorized to be issued … have been carried forward from the government's volume cap … since 1998," he said. As Internal Revenue Service regulations prohibit a cap being carried forward for more than three years, he added, "if the bonds aren't sold by next Monday, the government's ability to do so will be lost."
Moorhead also said the government will realize substantial benefits from providing the tax-exempt financing, in that the sooner Hovensa exhausts the refinery's tax loss carry-forward, the sooner the territory will receive income-tax payments as a result of the improved competitive position the refinery will enjoy upon completion of the coker project.
The refinery has no exemption from income tax, Moorhead noted. He said most refineries with which Hovensa competes for the sale of petroleum products already have a coker which enables them to process less-expensive heavy crude oil and enjoy a lower average cost of crude than Hovensa's.
Subcontractor labor relations are an issue
There appeared to be little question of the advantages of issuing the bonds, but several senators raised the issue of labor relations with the subcontractors used by Hovensa. "The issue here is abusing local employees," Hansen said.
She said she could not vote for the bill because of current labor conditions with Wyatt V.I., a Hovensa subcontractor. Sen. Norman Jn Baptiste also objected to assisting Hovensa with financing the coker project when, he said, some of its subcontractors are violating local labor laws regarding listing positions with the Labor Department, hiring of residents, and racial discrimination. The senators took a lunch break to draft amendments regarding these issues.
Most of the lawmakers, while acknowledging labor issues with Hovensa subcontractors, said Hovensa itself is a good corporate citizen.
Hansen and Jn Baptiste offered amendments which were voted down. Hansen's was several pages long and touched on a myriad of issues severely restricting hiring and other personnel policies for Hovensa and other companies. The document was labeled "legal sufficiency not determined."
Sen. Carlton Dowe said although he supports employees' rights, he couldn't approve a proposal so broad and undefined in nature. He said the amendment needed work, and his colleagues agreed, voting it down along with a less-restrictive one from Jn Baptiste.
The senators passed an amendment by Sen. David Jones giving 10 percent of proceeds of each issue of bonds or notes to the St. Croix Community Development Foundation and related organizations on St. Thomas and St. John. Hansen amended that to include another 10 percent to go to a cancer center on St. Croix.
The session, which some had thought would take only a couple of hours, convened at 10 a.m. and adjourned at 4:30 p.m. It wasn't the first time this year that the governor called a last-minute session, several senators noted. Earlier, Turnbull called sessions to approve government health insurance contracts, to adopt legislation for the territory to get its share of the nationwide tobacco settlement, and to approve projects funded under the federal Community Development Block Grant program.
Questioned by Sen. David Jones about the hastily called session, Mills said it "wasn't the government's intention to hold the senators hostage." He said the legislation was sent to the Senate early in December, and when "we saw you weren't addressing it, we called the Senate president." He added that extensive legal matters with Hovensa had held up the issue.
A farewell to, and from, Francis
Liburd took the opportunity of Francis's appearance to remark upon his impending departure. "You are known throughout the world," Liburd said, "You represent a special kind of stature. I feel a real sense of loss. On behalf of everyone here, I want to thank you."
Francis said he felt he was leaving the PFA in a very good condition with a good reputation in the bond market. He praised Finance Commissioner Bernice Turnbull for her efforts.
"We're catching up," he said.
Francis said he hadn't the "slightest idea" who will succeed him, and he wouldn't comment on Turnbull's decision to terminate his contract. "I'll be available to anyone," he said. "If you need my advice, or if you just want to stop by to say hello."
Attending the session were Sens. Lorraine Berry, Roosevelt David, Adlah "Foncie" Donastorg, Dowe, Alicia Hansen, Emmett Hansen II, Jn Baptiste, Jones, Liburd, Vargrave Richards and Celestino A. White Sr. Sens. Adelbert Bryan, Douglas Canton Jr., Donald "Ducks" Cole and Norma Pickard-Samuel were absent.

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Dec. 27, 2001 - In a special session called by Gov. Charles W. Turnbull, the Senate passed legislation Thursday authorizing the government and the Public Finance Authority to issue $92 million in tax-exempt bonds for several public and private capital projects.
The governor called the last-minute session in the midst of the yearend holidays -- Christmas, the Crucian Christmas Festival, Boxing Day, Kwanzaa and New Year’s -- to meet a Dec. 31 deadline for issuing bonds for capital projects.
Attracting the most attention from the lawmakers was $63 million destined for Hovensa as part of the long-term financing of the solid-waste disposal components of the company's ongoing coker project.
Sen. Alicia "Chucky" Hansen set the tone for further questioning when she asked early on if Hovensa's funding had to be "linked" to the other projects.
The other projects in the $92 million bond issue are:
- $10 million maximum in funding for mortgages through the V.I. Housing Authority for multi- and single-family homes in the Louis E. Brown Development on St. Croix.
- $15 million maximum to fund mortgages for 236 residential rental projects at the Brown Development.
- $4 million maximum in funding through the PFA for sewage facilities for a St. Croix manufacturing facility.
Also on the agenda was the re-submission by Turnbull of legislation to change government department and agency budgets to lump-sum from line-item budgets, a proposal voted down earlier this year by the body, and legislation to authorize the governor to declare a state of economic emergency following any man-made catastrophe which would have a negative effect on the economy.
Senate President Almando "Rocky" Liburd sent the lump-sum proposal to the Finance Committee, where the line-item budget originated to begin with, and the emergency proposal to the Government Operations Committee.
The session then went into Committee of the Whole to take testimony from Amadeo Francis, PFA finance director; Alex Moorhead, Hovensa vice president; George Dudley, Hovensa attorney; Ira R. Mills, Office of Management and Budget director; and Conrad Francois, VIHA executive director.
Francis, who will leave his PFA post on Dec. 31 after being terminated by the governor earlier this month, impressed upon the senators the urgency and economic importance of approving the bond proposal. "This will undoubtably be my last appearance in this chamber," he said. "We need legislative approval, and it must be done by Dec. 31."
Bond availability 'something we use or lose'
Francis added, "This is a new venture for the PFA. It will establish us in the marketplace and make it easier in the future for the Virgin Islands to negotiate." He stressed, "This is not a gift; it is something we use or lose."
Francis explained that federal law allows states and territories to issue private activity bonds that are tax exempt each year. Under questioning by senators, he stated more than once, "Absolutely and positively, there is no cost to the government."
Moorhead and Dudley told the lawmakers that the government will immediately benefit by collecting about $340,000 in bond-issuance fees from Hovensa. Moorhead said, "It is not a novel proposition for tax-exempt bonds to be issued to finance a privately owned facility, as is allowed under a provision of the federal Internal Revenue Code. Approximately $6 billion in tax-exempt bonds were issued this year to finance projects for private companies in the U.S."
In addition to paying the fees, Moorhead said, Hovensa will reimburse the government for legal fees and any other expenses it incurs in issuing the bonds. He stressed the urgency of the authorization before the end of the year. "Unfortunately, $10.6 million of the maximum amount of $63 million in private-activity bonds authorized to be issued ... have been carried forward from the government's volume cap ... since 1998," he said. As Internal Revenue Service regulations prohibit a cap being carried forward for more than three years, he added, "if the bonds aren't sold by next Monday, the government's ability to do so will be lost."
Moorhead also said the government will realize substantial benefits from providing the tax-exempt financing, in that the sooner Hovensa exhausts the refinery's tax loss carry-forward, the sooner the territory will receive income-tax payments as a result of the improved competitive position the refinery will enjoy upon completion of the coker project.
The refinery has no exemption from income tax, Moorhead noted. He said most refineries with which Hovensa competes for the sale of petroleum products already have a coker which enables them to process less-expensive heavy crude oil and enjoy a lower average cost of crude than Hovensa's.
Subcontractor labor relations are an issue
There appeared to be little question of the advantages of issuing the bonds, but several senators raised the issue of labor relations with the subcontractors used by Hovensa. "The issue here is abusing local employees," Hansen said.
She said she could not vote for the bill because of current labor conditions with Wyatt V.I., a Hovensa subcontractor. Sen. Norman Jn Baptiste also objected to assisting Hovensa with financing the coker project when, he said, some of its subcontractors are violating local labor laws regarding listing positions with the Labor Department, hiring of residents, and racial discrimination. The senators took a lunch break to draft amendments regarding these issues.
Most of the lawmakers, while acknowledging labor issues with Hovensa subcontractors, said Hovensa itself is a good corporate citizen.
Hansen and Jn Baptiste offered amendments which were voted down. Hansen's was several pages long and touched on a myriad of issues severely restricting hiring and other personnel policies for Hovensa and other companies. The document was labeled "legal sufficiency not determined."
Sen. Carlton Dowe said although he supports employees' rights, he couldn't approve a proposal so broad and undefined in nature. He said the amendment needed work, and his colleagues agreed, voting it down along with a less-restrictive one from Jn Baptiste.
The senators passed an amendment by Sen. David Jones giving 10 percent of proceeds of each issue of bonds or notes to the St. Croix Community Development Foundation and related organizations on St. Thomas and St. John. Hansen amended that to include another 10 percent to go to a cancer center on St. Croix.
The session, which some had thought would take only a couple of hours, convened at 10 a.m. and adjourned at 4:30 p.m. It wasn't the first time this year that the governor called a last-minute session, several senators noted. Earlier, Turnbull called sessions to approve government health insurance contracts, to adopt legislation for the territory to get its share of the nationwide tobacco settlement, and to approve projects funded under the federal Community Development Block Grant program.
Questioned by Sen. David Jones about the hastily called session, Mills said it "wasn't the government's intention to hold the senators hostage." He said the legislation was sent to the Senate early in December, and when "we saw you weren't addressing it, we called the Senate president." He added that extensive legal matters with Hovensa had held up the issue.
A farewell to, and from, Francis
Liburd took the opportunity of Francis's appearance to remark upon his impending departure. "You are known throughout the world," Liburd said, "You represent a special kind of stature. I feel a real sense of loss. On behalf of everyone here, I want to thank you."
Francis said he felt he was leaving the PFA in a very good condition with a good reputation in the bond market. He praised Finance Commissioner Bernice Turnbull for her efforts. "We're catching up," he said.
Francis said he hadn't the "slightest idea" who will succeed him, and he wouldn't comment on Turnbull's decision to terminate his contract. "I'll be available to anyone," he said. "If you need my advice, or if you just want to stop by to say hello."
Attending the session were Sens. Lorraine Berry, Roosevelt David, Adlah "Foncie" Donastorg, Dowe, Alicia Hansen, Emmett Hansen II, Jn Baptiste, Jones, Liburd, Vargrave Richards and Celestino A. White Sr. Sens. Adelbert Bryan, Douglas Canton Jr., Donald "Ducks" Cole and Norma Pickard-Samuel were absent.