The Committee on Government Operations, Consumer Affairs, Energy, Environment and Planning OK’d a bill Thursday that would require board members of the Government Employees Retirement System to have greater financial expertise. Much of the conversation at the hearing centered on the pension system’s sale of the Carambola resort on St. Croix.
Due largely to a series of acts by the Legislature in the 1980s and 1990s, the Government Employees Retirement System pays out in the neighborhood of $100 million more every year than it takes in and must liquidate all of its assets to pay current pension checks. Any asset left on its books when it can no longer meet pension obligations will be sold off in a less controlled manner, to generate immediate cash.
Government Employees Retirement System Board Chairman Wilbert Callender and two other GERS officials appeared evasive responding to questions from senators until Callender said, “[The sale] was a complicated process. There was a combination of proceeds from the purchaser and insurance proceeds which totaled approximately $30 million. We don’t have the details.”
It soon came to light that only $9.5 million of that total had come from the buyer, and the bulk of the money was from insurance proceeds due to storm damage. Of this money, Callender said $4 million was spent on repairs to the property before it was sold.
These details were made public at the time of the sale.
“Insurance proceeds shouldn’t be part of the sale,” noncommittee member Sen. Janelle Sarauw said. “Carambola was given away basically is the point we are coming to. You are adding those numbers up and totaling it as part of the sale and that is not correct. If you can’t distinguish that it proves the point that we need expertise on the board.”
The GERS did the insurance funds and hence made a substantial profit on the sale.
Callender said the last appraisal figure he could remember for the property was $12 million, but it might be inaccurate since he didn’t remember if the board requested an appraisal at all. The property was appraised at $15 million before the storms damaged it.
GERS Board Counsel Pedro Williams said the board came to the decision “because the hotel was losing money at full occupancy.”
Sen. Kurt Vialet, who sponsored the bill under discussion, wasn’t convinced and said it was a lie that Carambola wasn’t making money. “You sold it for $9 million when we were making money at 100 percent capacity and a smaller amount of staff, and you are going to tell me that was a wise investment of the board?”
“Carambola should not have been sold it should have been leased,” he added. “And the time period of when they sold it was the most irresponsible decision.”
Sen. Marvin Blyden agreed with his colleague.
“As far as investments and decisions that were made as of late, they were really bad decisions. I do not believe Carambola should have been sold. Carambola’s a gem. It’s a cash cow once managed properly, and we should have tried to bring in someone who can manage it and assist in a five-star hotel being established and kept it in our portfolio,” Blyden said.
As noted above, GERS is liquidating its assets at the rate of $100 million per year and must liquidate all of its assets before 2024 or sooner to pay current pension checks.
Sen. Myron Jackson, who first proposed questions about the details surrounding the sale, said he felt what GERS sold it for was a steal. Sen. Alicia Barnes said the entire thing was embarrassing.
The committee voted unanimously in favor of a bill that would require more financially experienced GERS board members. The senators present for the vote were Barnes, Blyden, Jackson, Allison DeGazon, Javan James and Athneil Thomas. Sen. Kenneth Gittens was absent due to illness.
The bill will now be forwarded to the Rules and Judiciary Committee.