The V.I. Public Finance Authority added $4 million to its $7.1 million annual budget Thursday at the recommendation of Gov. Kenneth Mapp, chairman of the authority, and approved extending $20 million in annual contracts to process expected disaster relief aid from the federal government.
The board meeting began with a budget presentation by Valdamier Collens, PFA director and Finance commissioner, and Margaret Guarino, PFA’s director of financial management, for $1.7 million in administrative expenses and $5.3 million for professional services. The administrative costs were the same as the previous year with a slight increase for consulting fees, they said.
The governor asked repeatedly if it was a sufficient, given the PFA’s necessity to apply for and manage large amounts of money to mitigate the territory’s hurricane damage. Eventually, $4 million was added to the budget to cover the “extraordinary costs of consultants.”
“I think you made a wise decision and I can defend it,” Mapp said in approval.
The governor rationalized that since the PFA, under the Office of the Governor, is dealing with the U.S. Treasury and FEMA to secure millions of dollars in grants and community disaster loans, more funds than ever will be needed to hire the consultants. Mapp estimated the total hurricane-related damages exceed $7.5 billion.
Hopefully, the fees will be recouped after the loans are dispersed, Mapp said. The PFA writes the first check and should expect to be repaid by agencies, such as the Waste Management Authority and the University of the Virgin Islands, who can’t pay consultants up front.
“You can’t be in the middle of this process and run out of steam, run out of gas,” Mapp said.
Also on the PFA’s agenda Thursday was approval of a one-year, $15 million contract with Witt O’Brien, an emergency management and disaster response company based in Washington D.C., to help the territory secure and manage disaster funding. The contract provides for annual renewal for as much as $15 million each year for nine years. According to Mapp, the company is respected by FEMA and the federal government for its work after Hurricanes Katrina and Sandy.
“We’re willing to put $15 million on the table to get $7.5 billion,” the governor said.
The PFA also approved a contract for London-based Ernst and Young at $5 million a year to track funding, oversee compliance with federal requirements and monitor insurance recovery. That contract also has the option of being renewed for up to nine years.
Mapp said payment of both contracts will be reimbursed by FEMA through the community disaster loan and other programs.
Witt O’Brien and Ernst and Young have different functions whose duties will not overlap, said Guarino.
After an executive session, the board reported they also voted to approve $350,000 in legal fees from three months for Squire, Patton Boggs, LLP and Greenberg, Taurig, LLP.
The initial community disaster loan from FEMA is for $250 million to the central government. It includes $110 million for roads, $75 million for the V.I. Water and Power Authority, $24 million for the Schneider Regional Hospital and $22 million for the Gov. Juan Luis Hospital.
The U.S. Treasury and FEMA have expressed initial approval of the $250 million loan for 20 years, with no payments the first two years. Beginning October 2019, interest-only payments will be required until October 2022, when full payments – principle and interest- will pay off the remainder of the loan. Collens, who helped negotiate the loan, said the interest rate would be less than three percent.
The loan can be used for government operations – salaries, maintenance, supplies and unrelated disaster expenses – such as some consultant costs, Mapp said. The loan does not cover capital repairs or improvements.
There are federal grants that may be available for capital expenses.
As security for loan, the federal government will purchase bonds backed by gross receipts taxes upon approval by the V.I. Legislature, Collens said, as well as matching fund bonds and “the full faith and credit of the Government of the Virgin Islands.”
Attending the meeting were board members Mapp, Collens, Nellon Bowry and Keith O’Neil. Pablo O’Neil was absent.