The Public Finance Authority board gave the thumbs-up Friday to a major bond refinancing, a move aimed at saving the government millions of dollars in fiscal years 2011 and 2012.
"This is a particularly fortuitous opportunity given the current financial condition of the government," PFA financial advisor David Paul said during the board meeting on St. Thomas.
The plan is to refinance $275 million in existing 1998 Series A Matching Fund bonds — for a savings of 4.2 percent or about $11 million — and $101 million in 1998 Series E Matching Fund bonds, which would yield $5.4 million in savings.
The refinancing should be complete by the end of October and would be "pursued alongside" the sale of $87 million in new matching fund bonds that will finance a variety of local capital projects, Paul said.
Board members also authorized the PFA to begin working with California-based Juno Settlement Funds and St. Thomas-based Pole Financial on a proposed financial program geared toward reducing the Government Employees’ Retirement System’s $1.2 billion unfunded liability.
The PFA has been authorized to enter into an asset acquisition agreement with the two companies, which will look into whether the program is a feasible option for the government. Meanwhile, the PFA — the financing arm of the government — will decide after six months whether to move forward with the proposal or walk away from the table.
Under the program, the PFA will float $400 million in bonds, which will be used to invest in a pool of term life insurance policies that would ultimately provide an annuity stream of revenue for GERS. The proposal was recently outlined in a New York Times article and was described by Paul on Friday as a mechanism to help with pension plans that is "catching hold in the country."
"If the structure can meet the requirements of bond investors, then they will buy the bonds, and once the bonds are retired, there will be a residual pool of policies that can be pledged to GERS," Paul explained. "This agreement is a commitment to give the companies license to go and meet with the underwriters but it doesn’t obligate the PFA board or the Legislature to approve anything or consent to a contract."
There’s about a 20 percent chance the transaction will go to closing, but in the meantime, the government should still look into other viable ways to pay down on the debt, he added.
In other news, board members approved:
- a reprogramming request that shifts $1.7 million from a V.I. Waste Management Authority project to Public Works. Most of the money, which comes from the interest earned on 2004 matching fund bond proceeds, will be used to renovate the St. Thomas offices shared by both WMA and Public Works, while $400,000 will be used to repair roads running into Coki Point and in front of the Red Hook ferry terminal;
- another reprogramming request that puts $300,000 in the hands of Public Works to complete the second phase of repairs — mostly electrical work and the installation of new air conditioning units — at St. Croix’s John H. Woodson Junior High School. The money would be enough to tide Public Works over until the new matching fund bonds are issued, according to department Commissioner Darryl Smalls;
- an authorization for the issuance of up to $20 million in tax increment financing (TIF) bond anticipation notes to fund the public portions of the proposed Island Crossing Center on St. Croix (the original authorization, approved in January, allowed for up to $14.5 million in bond anticipation notes);
- a request for a $2.6 million increase in the PFA’s FY 2009 budget, bringing the overall total to $8.7 million (the extra funds, according to PFA head Julito Francis, will cover some "unexpected expenditures");
- the appointment of Housing, Parks and Recreation Commissioner St. Claire N. Williams to fill the spot on the West Indian Co. Ltd’s board of directors left vacant by the resignation of attorney Jessica Gallivan, who was recently confirmed as a Magistrate Court judge; and
- bringing on public relations giant Edelman as an advisor to the government on various capital project initiatives.
Board members present during Friday’s meeting were Angel Dawson Jr., Debra Gottlieb, Gov. John deJongh Jr., and Keith O’Neale Jr.
Board members Roy D. Jackson and Pablo O’Neill were absent.
