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HomeNewsLocal newsDisaster Recovery Office Spent $2 Billion of $8 Billion Fed Aid

Disaster Recovery Office Spent $2 Billion of $8 Billion Fed Aid

Public Finance Authority Director of Finance and Administration Nathan Simmonds at Tuesday’s Finance Committee budget hearing. (Photo by Alvin Burke and Barry Leerdam, Legislature of the Virgin Islands)

The Disaster Recovery Office, set up after the devastating twin hurricanes of 2017, has spent $1.94 billion and obligated $4.45 billion, or more than 56 percent of the anticipated $8 billion in federal disaster recovery funds appropriated for the territory, Director Adrienne Williams-Octalien told senators during budget hearings Tuesday.

Meanwhile, the Public Finance Authority has expended $127 million out of $207.6 million in V.I. government bond funds, with $80 million left to spend, from government bonds dating back as far as 2003.

Williams said the federal disaster recovery spending has been and will continue to circulate throughout the U.S. Virgin Islands economy. She said the office projects the territory will spend about $521 million across all recovery programs in 2022 alone. Recovery spending should directly generate about $26 million in gross receipts taxes for Fiscal Year 2022 and another $20 million or so in 2023, she said.

Later, Internal Revenue Bureau Director Joel Lee reported on the territory’s tax revenues, which have been bumped up by hurricane recovery spending, COVID-19 pandemic relief and growing federal alcohol excise tax remittances. Personal income tax and gross receipt tax revenues increased in 2018, 2019 and 2020, and only dipped a little in 2020, despite the pandemic delivering a severe blow to local tourism.

In the upcoming year, Disaster Recovery plans to finalize Federal Emergency Management Agency obligations for 205 projects and start construction on 58 projects, including Arthur A. Richards Junior High School, Charlotte Kimmelman Cancer Institute, Myrah Keating Clinic, Gallows Bay and other road projects, the Vincent Mason Pool, and 35 parks and recreational facilities amongst others, Williams said. It also anticipates 135 recovery projects will help generate gross receipts tax revenues in 2022.

The PFA was created to handle V.I. government bond funding, separating the local gross receipts tax and federal alcohol excise tax revenues that pay the bonds from the regular appropriations process. The Office of Disaster Recovery was created to oversee the influx of disaster aid, get projects funded, and ensure they are executed in accordance with the rules and regulations of all federal programs. It monitors and reports on the obligations and expenditures of federal funding sources.

PFA Director of Administration Nathan Simmonds itemized V.I. government debts totaling almost $2 billion, of which about $798 million is general obligation debt, payable by the government’s treasury, secured by gross receipts tax revenues. Of that, about $206 million are in Community Disaster Loans. Other officials have said in the past they are hopeful those federal government loans might be eventually forgiven. Another $708 million is V.I. government debt secured by federal excise tax remittances, which came to $273 million for 2021.

Another $240.6 million secured by federal alcohol excise tax revenues is for loans for the Cruzan Rum and Diageo distilleries. Those loans are set up so that the government is not on the hook if the excise tax revenues do not materialize.

There are some $71 million in Federal Highway Grant Anticipation Revenue Bonds. These “GARVEE” bonds are secured solely by future federal highway funds.

The PFA also is the guarantor for a $42 million bank loan to the West Indian Company and there are several other, smaller debts under its purview.

Simmonds said the PFA currently has about $80.6 million in unexpended bond and loan proceeds for capital projects funding within the various departments and agencies.

“Despite the COVID-19 pandemic, approximately $20 million in capital project funding from bond proceeds were expended during 2020,” Simmonds said.

It has $318.3 million under management, and investment earnings for 2020 were about $6.5 million.

Public Works projects account for the vast bulk of the $80 million the PFA still has yet to spend. Public Works has $54 million left out of $128.5 million allocated to it, mostly for road work.

Much of the undone work is on St. Croix. There remains $8 million in GARVEE bond money for work on Mahogany Road; $7 million for Hams Bluff Road; $5 million for Spring Gut Road; $3 million for Rattan Road; $3 million for Prince Street in Frederiksted and $2.5 million for Christiansted street work.

Sen. Kurt Vialet (D-STX) asked whether there had been any money spent in the past year on the planned rebuild of Paul E. Joseph Stadium. Simmonds said no, but there is still $8.2 million available. His detailed list of projects also says $16.8 million was previously expended on the project.

The PFA’s internal budget is separate from the overall budget process, funded directly by gross receipts tax revenues and alcohol excise tax revenues, according to the terms of bond indentures. This year it has a budget of $11 million, of which $9 million is for PFA, with $5 million from gross receipts taxes and $4 million from alcohol excise taxes. It is requesting another $2 million from the territory’s General Fund as the budget for the Office of Disaster Recovery. The Disaster Recovery Office was originally funded by a federal grant, but that funding has expired, Simmonds said.

The PFA budget includes $2.56 million for administration, a 5 percent decrease from last year. The remaining $6.3 million will pass through for professional services, like accounting, auditing and financial advisory services.

Internal Revenue Bureau Director Joel Lee presented that agency’s proposed budgets of just over $14.15 million for 2022 and $14.19 million in 2023. The 2022 budget is 13.59 percent more than the Bureau’s 2021 budget. The FY 2022 budget request includes $7.24 million for personnel costs; $3.94 million for related fringe benefits and $2.12 million for other services. The FY 2023 budget is very similar.

No votes were taken at the information-gathering oversight hearing. Present were: Sens. Vialet, Marvin Blyden, Donna Frett-Gregory, Janelle Sarauw, Samuel Carrion, Dwayne DeGraff, Javan James, Kenneth Gittens, Novelle Francis, Carla Joseph and Genevieve Whitaker. No committee members were absent.

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