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Charlotte Amalie
Saturday, May 28, 2022
HomeCommentaryOp-edOp-Ed: Urgent Open Letter to USVI Citizens and Retirees on Behalf of...

Op-Ed: Urgent Open Letter to USVI Citizens and Retirees on Behalf of GRUFF

St. Thomas GERS building (Source photo by Don Buchanan)
St. Thomas GERS building (Source photo by Don Buchanan)

Act 8330 was a misguided approach to addressing USVI’s debt obligations with respect to the $1 billion of bonds backed by the Matching Fund Receipts (MFR), specifically, and USVI’s finances generally. Now, as the refinancing transaction contemplated by Act 8330 has been canceled, Governor Bryan appears intent upon making the $85 million bond payment due today, October 1 – opting for yet another misguided approach to the matter, at the expense of the people of the Virgin Islands.

It is likely true that the Government technically has or will have enough money to make the bond payment (it should have received its annual MFR remittance from the U.S. Treasury earlier this week), but it does not have sufficient money to pay the bondholders plus adequately fund all of the public services needed in the territory. So, essentially, by making the bond payment, the Governor would be preferring the bondholders over the needs of the people who elected him.

In May, the Trustees of the Government Employees’ Retirement System (GERS) delivered a letter to the Governor, indicating that it needed a cash infusion of $195 million and that without such funding, the Trustees would be recommending a 42% cut in accrued pension benefit payments starting January 1, 2021. This would be an unconscionable blow to one of the most vulnerable portions of the USVI population. In contrast to the bond payment, the Governor has not made and has not indicated that he can and will make this payment to retirees.

During the fiscal budget hearings in the Legislature earlier this month, the Chief Justice of the Virgin Islands judiciary presented testimony, criticizing the harsh proposal of a $3.5 million cut in the judiciary’s budget and the negative impact it will have on the justice system. There was other testimony regarding the fact that the Office of Disciplinary Counsel is woefully understaffed with just one staff attorney, struggling to handle roughly 200 cases on her own. These are just two examples of a system-wide problem: there simply is not enough money to properly support Government functions.

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Last week, the Public Services Commission indicated that the Water and Power Authority (WAPA) will likely need a “bailout” from the Government to stay afloat. And, of course, on a longer-term basis, WAPA needs to be completely overhauled and modernized to provide cost-efficient, environmentally-sound, and reliable power. Where is that money coming from?

The Governor may have the money now to make the $85 million bond payment today to the MFR bondholders, but only if he ignores these other urgent needs of the people of USVI.

Federal statute 26 vU.S.C. 7652(b)(3)(A) provides that the MFR which is to be deposited before October 1 by the U.S. Treasury with the Virgin Islands Treasury “may be expended as the legislature may determine.” Citizens should call their Senators – immediately, before the bond payment is made today — and express their opposition to the use of the MFR revenues to make the bond payment and their support for using USVI’s precious resources first to meet the needs of the people of the territory.

Editor’s note: Robert D. Gordon is a financial restructuring attorney and partner in the New York office of Jenner & Block LLP. He currently serves as lead counsel for the Official Retirees Committee in Puerto Rico’s restructuring proceedings, and he served as lead counsel for the two Detroit retirement systems in Detroit’s landmark bankruptcy case. The opinions stated herein are not intended to and do not constitute legal advice to a client and are not intended to address by inference, analogy, or otherwise any matter other than the current matter.

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St. Thomas GERS building (Source photo by Don Buchanan)
St. Thomas GERS building (Source photo by Don Buchanan)
Act 8330 was a misguided approach to addressing USVI’s debt obligations with respect to the $1 billion of bonds backed by the Matching Fund Receipts (MFR), specifically, and USVI’s finances generally. Now, as the refinancing transaction contemplated by Act 8330 has been canceled, Governor Bryan appears intent upon making the $85 million bond payment due today, October 1 – opting for yet another misguided approach to the matter, at the expense of the people of the Virgin Islands. It is likely true that the Government technically has or will have enough money to make the bond payment (it should have received its annual MFR remittance from the U.S. Treasury earlier this week), but it does not have sufficient money to pay the bondholders plus adequately fund all of the public services needed in the territory. So, essentially, by making the bond payment, the Governor would be preferring the bondholders over the needs of the people who elected him. In May, the Trustees of the Government Employees’ Retirement System (GERS) delivered a letter to the Governor, indicating that it needed a cash infusion of $195 million and that without such funding, the Trustees would be recommending a 42% cut in accrued pension benefit payments starting January 1, 2021. This would be an unconscionable blow to one of the most vulnerable portions of the USVI population. In contrast to the bond payment, the Governor has not made and has not indicated that he can and will make this payment to retirees. During the fiscal budget hearings in the Legislature earlier this month, the Chief Justice of the Virgin Islands judiciary presented testimony, criticizing the harsh proposal of a $3.5 million cut in the judiciary’s budget and the negative impact it will have on the justice system. There was other testimony regarding the fact that the Office of Disciplinary Counsel is woefully understaffed with just one staff attorney, struggling to handle roughly 200 cases on her own. These are just two examples of a system-wide problem: there simply is not enough money to properly support Government functions. Last week, the Public Services Commission indicated that the Water and Power Authority (WAPA) will likely need a “bailout” from the Government to stay afloat. And, of course, on a longer-term basis, WAPA needs to be completely overhauled and modernized to provide cost-efficient, environmentally-sound, and reliable power. Where is that money coming from? The Governor may have the money now to make the $85 million bond payment today to the MFR bondholders, but only if he ignores these other urgent needs of the people of USVI. Federal statute 26 vU.S.C. 7652(b)(3)(A) provides that the MFR which is to be deposited before October 1 by the U.S. Treasury with the Virgin Islands Treasury “may be expended as the legislature may determine.” Citizens should call their Senators – immediately, before the bond payment is made today -- and express their opposition to the use of the MFR revenues to make the bond payment and their support for using USVI’s precious resources first to meet the needs of the people of the territory. Editor’s note: Robert D. Gordon is a financial restructuring attorney and partner in the New York office of Jenner & Block LLP. He currently serves as lead counsel for the Official Retirees Committee in Puerto Rico’s restructuring proceedings, and he served as lead counsel for the two Detroit retirement systems in Detroit’s landmark bankruptcy case. The opinions stated herein are not intended to and do not constitute legal advice to a client and are not intended to address by inference, analogy, or otherwise any matter other than the current matter.