July 24, 2007 — Though the Public Finance Authority receives no money from the General Fund, Senators sent agency representatives back to their offices Tuesday to get more information on projected earnings and expenses for fiscal year 2007.
PFA Executive Director Julito Francis explained during the first round of budget hearings that the authority's FY 2008 budget would not appear before the authority's board of directors until August or September. Since the agency primarily relies on a portion of the territory's rum revenues to cover its expenses instead of spending money from the General Fund, Francis spent more time delving into his upcoming plans for the PFA rather than providing a detailed explanation of the agency's expenses.
Senators, however, said they needed to know exactly how the PFA's yearly budget is broken up and what expenditures the authority incurred during FY 2007. Returning after an hour's recess with the additional documentation, Francis explained that the PFA's FY 2007 budget totaled about $4.7 million.
Of that amount, only 59 percent, or $2.8 million has been spent to date — leaving the PFA with a large surplus with only a few months left to go in the current fiscal year. In FY 2008, Francis said, some of the same expenses might not recur, since the PFA has since cut a few of its costs — including the salary designated for the PFA's executive director.
Francis said his salary equals that of a regular government commissioner. The authority's two previous directors, however, were on contract, in one instance making up to $100 an hour. The authority's policy has since changed, and professional-services contracts have not been extended to any of the PFA's small staff of employees, he said.
The rest of the hearing focused mainly on Francis' goals for the agency, which include turning over the management of all capital-improvement projects to the Department of Public Works by the start of FY 2008. In the past, the PFA has come under scrutiny for managing a few of the projects it finances, including the renovation of the King's Alley Hotel on St. Croix.
At a recent PFA meeting, Francis announced that the PFA is soliciting bids from parties interested in managing, leasing or purchasing King's Alley, for which construction is about 98 percent complete. During Tuesday's Senate meeting, PFA representatives explained that remaining work on the project includes installing a proper drainage system to make sure the hotel's lobby doesn't flood and making sure the property is secure.
Francis pegged the transfer of capital-improvement projects to Public Works as his "number-one priority" in pushing the PFA forward.
"For the first eight weeks on the job, at least 60 percent of my time has been consumed in addressing litigation issues that have stemmed from the PFA's direct role in managing prior and outgoing capital projects," Francis said. "These litigation matters will continue throughout the fiscal year and well into FY 2008. Therefore, under the deJongh- Francis administration, the PFA … will instead focus its efforts on its primary intended purposes as outlined by statute and seek to expand its role as a financial-management entity."
Zeroing in on capital-improvement projects for St. Croix, many senators lamented the fact that the PFA board has decided to put financing for a $32 million convention center out to bid. Once tied to a resort and casino proposed by developer Paul Golden, the ability to construct the convention center through financing provided by the PFA could eventually be snatched up by other competitors, senators said.
Francis maintained that the government has not withdrawn its support for the development of Golden's resort. However, he added that he supports the PFA board's decision to put the convention center out for bid, since the proposed resort and casino has been in the pipeline for about seven years.
Another of Francis’ goals is potentially expanding the PFA's financial role to include conducting cost-benefit analyses of proposed capital-improvement projects and pooling the government's available financial assets into one large investment pool.
The PFA would then take on the role of managing the government's investments, with the exception of those opportunities explored by the Government Employees' Retirement System, Francis said.
Interestingly, the financial position and fate of GERS did not come up during Monday's meeting, even though the PFA would bear the responsibility of floating the pension-obligation bonds needed to pay down a portion of the system's more than $1 billion unfunded liability.
Asked after the meeting whether the authority has moved on floating the bonds, Francis said the PFA is already searching for underwriters who would be responsible for dealing with such items as the pension-obligation bonds and how they would fit into the authority's bonding limitations.
By law, the general-obligation debt of the PFA — such things as gross receipts and other bonds — cannot exceed 10 percent of the total assessed value of taxable property in the territory. As of 2005, that means the authority's bonding capacity totaled about $789.3 million.
Since new property-tax valuations have been calculated recently, the bonding capacity may increase, Francis explained. To date, however, the territory may only add to its general-obligation debt by about $47 million, he added.
This is significant, since the financial arms of the government have sought a way to float the pension-obligation bonds — which may total up to $600 million — without erasing the remainder of the territory's bonding capacity. Francis said the PFA is still trying to achieve this goal, but he does not yet know the amount of bonds that will be issued.
Present during Tuesday's meeting were Sens. Liston Davis, Carlton "Ital" Dowe, Juan Figueroa-Serville, Neville James, Terrence "Positive" Nelson and James Weber III.
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