May 22, 2003 — Try as he might, there was nothing that Public Finance Authority head Julito Francis could say Friday to keep senators from passing a bill authorizing the PFA to issue an up to $50 million loan guarantee for a major St. Thomas development.
Francis repeatedly said during Friday's Appropriations and Budget Committee meeting that the bill as written was pointless. He told senators they would instead have to authorize the PFA to tap into a specific funding source — either gross receipts taxes or matching fund revenues — that could be used to secure the loan. And as it currently stands, both revenue streams, which are pledged against various government bond issues, are almost maxed out and continue to decrease as the economy worsens, Francis added.
A Senate mandate increasing the gross receipts tax exemption for certain small businesses has also cut into the collections, and there won't be much room within the matching funds or rum revenues until the Diageo distillery gets up and running, Francis said. He suggested the developer explore some other financing options, such as applying for federal economic stimulus funds provided for under the American Recovery and Reinvestment Act.
"We have to be able to know how we're going to pay — as the bill stands, if it goes forward, it says that PFA has no means to guarantee," Francis explained.
But bill sponsor Sen. Shawn-Michael Malone said his intention was simply to open up the lines of communication between the PFA and Wintdots Development, a limited liability company owned by the Elskoe family, whose property — bordered by Estate Thomas on the north, Frenchman's Bay on the south and Paradise Point on the east — will be used as the site for a set of luxury condominiums, timeshare units and a 40-room boutique hotel, among other things.
The Flagberry Hill project has received the Senate's support since a bill to rezone the approximately 23-acres of property from R-2 (residential low density) to R-3 (residential medium density) was passed in full session about two years ago. The same kind of support was evident Friday.
"The fact that this project is spearheaded by a prominent local family lends credibility to your request," Sen. Craig W. Barshinger said to members of the project team. "It will have a stamp on it that's Virgin Islands in nature."
Wintdots also owns half of Paradise Point, which will provide shopping opportunities for Flagberry Hill residents and an alternate entrance for construction, said Dean Luke, Wintdots' acting chairman.
The project will be financed by Connecticut-based Greenwich Financial Partners, whose representative said Friday that the government's loan guarantee would help the developer secure a lower interest rate — at this point, the proposed interest rate on the table is between eight and 15-percent — and provides the company with some financial re-enforcement in case of an emergency.
"We're not looking for the PFA or the Virgin Islands to set aside $50 million," said Rick Sable, one of Greenwich's managing partners. The money would be released in phases, like a regular construction loan, and would essentially be put toward the first phase of the project — the construction of an on-site alternative energy plant, he added.
"We would like a progressive release of the guarantee," he explained. "The first phase of our financial plan calls for about $14 million, and as that is released and guaranteed, it increases the value of the property, and that way, we're always creating and adding value. It gives us assurity that in the worse case scenario, there's a backup."
Sable couldn't say whether Greenwich would continue to finance the plant without the guarantee, since the loan package was worked on by a team of managers, who are still finalizing the terms and conditions.
Malone said later that he is aware the government probably wouldn't be able to guarantee the entire $50 million, but might be able to parcel it out in increments of $5 million or $10 million.
"The PFA has already said it doesn't have a lot of information on the project, or enough money for the guarantee," he said. "So, I wasn't going to include the exact form of financing today. This will allow the developer to sit down with the PFA to determine, through the proper due diligence, if they're willing to issue a guarantee and if the government has the resources for it."
Once that's figured out, the project would come back to the Legislature, which would determine where the money would be coming from, Malone added. The bill also does not say that the PFA must issue the guarantee — only that it "may" issue a guarantee.
"We didn't want to be too hasty," Malone said. "The PFA has to sit and really take a look at what they would be financing."
Voting for the bill Friday were Sens. Carlton "Ital" Dowe, Louis P. Hill, Wayne James, Sammuel Sanes and Patrick Simeon Sprauve. Barshinger abstained after an amendment proposed by Malone was approved without debate, while Sen. Terrence "Positive" Nelson — who did attend Friday's meeting — was not on the floor for the vote.
Senators also unanimously approved a bill appropriating $500,000 from the General Fund to Human Services to expand their home- and community-based support services for senior citizens 60 years and older. Sprauve, the bill's sponsor, said the effort was the first of many special initiatives to provide care for the elderly, disabled and mentally ill.
"It's just a drop in the bucket, but at least it's a first step," he said Friday, after the bill was approved.
Present Friday were Barshinger, Dowe, Sen. Adlah "Foncie" Donastorg, Hill, James , Sanes and Sprauve.
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