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...;,. - BILL NO. 28-0029



TWENTY-EIGHT LEGISLATURE OF THE VIRGIN ISLANDS

Regular Session

2009

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An Act authorizing the Governor to borrow monies from public funds of the Virgin

Islands and to enter into financial instruments as necessary and proper to offset cash flow problems caused by shortfalls in the collection of revenues, and to create working capital, avoid layoffs of Government Employees, pay essential vendors and meet the operating expenses of the Government for the 2009 and 2010 fiscal years, and for other purposes

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WHEREAS, the United States recession has negatively affected commerce, tourism and revenues of the Virgin Islands; and

WHEREAS, the Government of the Virgin Islands has been unable to collect real property taxes since 2006 as a result of an ongoing litigation; and

WHEREAS, it has been predicted that the recession in the United States will continue for the remainder of this year and will probably begin to improve in 2010; and

WHEREAS, there are shortfalls in projected revenues for the 2009 and 2010 fiscal years; and

WHEREAS, the money in the General Fund of the Government of the Virgin Islands is insufficient to cover operating expenses and other important financial obligations; and

WHEREAS, the Government of the Virgin Islands will very soon need additional funds to provide for working capital and satisfy other financial obligations; and

WHEREAS, some financial flexibility of the Government is necessary to address problems fulfilling payroll obligations, meet vendor payments, sustain working capital for the operating expenses of the government, or meet any existing or pending financial emergency; and

WHEREAS, this. financial flexibility would also enable the Governor to manage more effectively government revenues and funds and the structuring of loans, notes, bonds and other evidence of indebtedness as necessary and proper; and

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WHEREAS, this financial flexibility would better address shortfalls in revenues or taxes collected or to be collected and other financial challenges of the Government; and

WHEREAS, the Government is interested in ensuring that (i) that the Lieutenant Governor implements 33 V.I.C. §2494 to provide citizens some flexibility to make payments under payment plans on real property taxes outstanding since 2006; and (ii) offer incentives for real property owners. to remit real property taxes through discounts and other payment incentives for early payment; and

WHEREAS, any loan to be made must be taken first from public funds and accounts of, the Government of the Virgin Islands, but if this limitation proves counterproductive, then loans, notes or other evidence of indebtedness must be obtained from banks or' other financial institutions or through public or private bond or note offerings; and

\VHEREAS, funds used or indebtedness entered into by the Governor may also be repaid from revenues, including gross receipts taxes to be collected or Internal Revenue Matching Fund revenues and additional revenues created as a result of an improvement in the economy; and

WHEREAS, the Legislature's grant of this financial flexibility to the Executive Branch is not unprecedented, as similar actions have been taken,such as a short-term borrowing authorization act, which granted the Governor authorization to enter loan agreements for fiscal years ending September 30, 1982, September 30, 1995 and September 30, 1999, to meet cash flow problems then occurring,and it is the.intent of the Legislature that short-term borrowing under this Act be used exclusively to offset cash flow problems caused by shortfalls in the collection of taxes and other anticipated revenues; Now, Therefore,

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Be it enacted by the Legislature of-the Virgin Islands:

SECTION 1. (a) Notwithstanding any other law to the contrary, the Governor of the Virgin Islands, acting through the Commissioner of finance may, subject to paragraph (g) (2), borrow monies from any public fund of the Virgin Islands, in anticipation of collection of taxes and other revenues, or acting through the Virgin Islands Public Finance Authority, in anticipation of collection of taxes and other revenues, may enter into any loan, note, bond or other indebtedness not inconsistent with section 8 ofthe Revised Organic Act of the Virgin Islands, to cover the projected shortfalls in revenue collection in fiscal years 2009 and 20 10 to pay only those fixed, mandatory operating costs, including payroll, utilities, rents, ongoing essential contract obligations and other fixed mandatory operating costs authorized in Act No. 7028 and the act making appropriations for the operation of the Government for the fiscal year beginning October 1,2009 and ending September 30, 2010. Nothing in this subsection may be construed as authorizing any department or agency of the Government to use loan funds to hire additional employees or to incur any obligation not authorized by Act No. 7028 or the act making appropriations for the operation of the Government for the fiscal year beginning October 1,2009 and ending September 30, 2010.

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(b) If the Governor determines the need to borrow pursuant to subsection (a)

of this section, the Governor shall first seek to borrow the monies from public funds and accounts of the Government of the Virgin Islands. If funds are not available from these accounts in an amount sufficient to meet the purposes of subsection (a), the Virgin Islands Public Finance Authority and the Governor, on behalf of the Government of the Virgin Islands, may borrow from a bank or other financial institution or issue bonds, notes or other evidence of indebtedness, not inconsistent with section 8 of the Revised Organic Act of the Virgin Islands, to carry out the purpose of subsection(a).

(c) The Govemor may not take any action under subsection (a) of this section,

without first providing:

(1) written notification to the Legislature of the Virgin Islands that the

shortfall in projected revenues requires the Governor to undertake short-term borrowing. to meet the operating expenses identified in subsection (a), and

(2) a written financial plan concerning monies to be borrowed from

public funds or the issuance of notes, bonds, loans or other evidences of indebtedness, or both which must include:

(A) A detailed statement of revenues collected and

expenditures made;

(B) A statement of the current cash flow and liabilities;

(C) A statement of all outstanding bond and debt service

obligations;

(D) A statement of the balances of all government funds;

(E) An estimated schedule for collection of anticipated

revenues;

(F) A detailed explanation of the reasons. for the borrowing;

(G) A detailed description of the proposed borrowing and

financial transactions;

(H) A complete list of the expenses to be paid from the loan or

other indebtedness;

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(I) A detailed schedule of repayment of any loan, note or other

indebtedness or of the retirement of any bond issue;

(J) Recommendations for reduction of budgeted programs or

increases in appropriations;

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(K) Recommendations for any legislation for corrective

measures to restore fiscal soundness, and ..

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(L) Such other information as necessary to determine the need

for a short-term loan or other indebtedness.

(d) If the loan or other indebtedness is made to the Virgin Islands Public

Finance Authority, the Virgin Islands Public Finance Authority may lend the proceeds of the borrowing to the Government of the Virgin Islands to pay operating costs of the Government and to enter into all necessary and appropriate agreements to carry out this subsection, on such terms and conditions as the Virgin Islands Public Finance Authority and the Government of the Virgin Islands agree are necessary or appropriate and are not inconsistent with this section and the Revised Organic Act of the Virgin Islands.

(e) The Governor or the Governor's designee shall forward to the Legislature

of the Virgin Islands copies of all transactions, documents or files pertinent to the authority granted under this Act, and all documents and terms pertaining to applications for or documents of ongoing negotiations on notes, bonds, loans or other evidence of indebtedness granted under this Actwithin a reasonable time, but not less than 14 days exclusive of local and federal holidays and before any such notes, bonds, loans or other financial transactions become legally binding on the Government of the Virgin Islands. The report must specifically identify each fund and account from which monies were borrowed.and the amount borrowed, and must also specifically identify any note, bond or other evidence of indebtedness entered, amount and terms of the instrument.

(f) In addition to the reporting requirements under subsection (e), the

Governor or the Governor's designee shall submit to the Legislature a quarterly report of the Government's financial status starting from the enactment to the expiration of this Act. The report must cover, without limitation:

(1) whether or not cash flow problems exist or are imminent;

(2) actions taken by the Executive Branch or intended to be taken to

adequately address the cash flow problems or the risks of imminent cash flow problems;

(3) any government services or benefits likely to be adversely

impacted by existing or imminent cash flow problems;

(4) the impact the existing or imminent cash flow problems may have

on, without limitation, the private sector, gas and energy rates, real estate values, tourism, and public and private employment and other relevant areas .of the Virgin Islands;

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(5) any public funds used or to be used pursuant to subsection (a) of

this section;

(6) any notes, bonds or other indebtedness, or loans, to be entered

pursuant to subsection (a) of this Act; and

(7) any legislation required from any Legislative Branch necessary and

proper to further helpaddress the existing or imminent financial emergency.

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(g) (1) The aggregate of any internal government bon-owing or financial transaction or combination of them under this section for the purposes enumerated under subsection (a):

(A) must not exceed $250,000,000 in principal amount, plus

associated fees, charges and carrying costs over the two-fiscal years;

(B) must, in the case of a financial transaction, be secured by or

payable from, gross receipts taxes or Internal Revenue Matching funds as necessary and sufficient to repay the principal and interest on the bonds, notes or other evidence of indebtedness when due; however, the Virgin Islands Public Finance Authority may issue its bonds to repay the notes or other evidence of indebtedness;

(C) must be retired by the end of fiscal year with revenues

collected for the fiscal year in which the inter-government: borrowing or the financial transaction was executed.

(2) Nothing in this Act may be construed as authorizing the Governor

to exceed the maximum principal amount authorized in this subsection or to use any portion of the amount authorized for any purpose not authorized in this section, and nothing in this Act may. be construed as authorizing borrowing from any government funds which. results in an impairment of obligation of contracts.

(h) 30,2010.

The. authority of the Governor granted by this Act expires on September

SECTION 2. (a) Within 30 days after the enactment of this Act, the Lieutenant Government shall promulgate rules and regulations pursuant to 33 VJ.C. §2494 to prescribe installments payments, payroll deductions, early payment incentives or other methods for taxpayers to pay outstanding real property taxes. The Lieutenant Governor shall provide public notice of the rules and regulations within 10 days after their approval and shall maintain a permanent file of the rules and regulations at the Office of the Lieutenant Governor for public inspection.

(b) If monies are needed from the' V.1. Insurance Guaranty Fund for the

purposes described in Section 1, but are required either (i) to satisfy the obligations of the V.1. Insurance Guaranty Fund; or (ii) to implement any approved recommendations ofthe Retroactive Wage Commission established pursuant to Act No. 6984, implementation of any such recommendations must be done in accordance with the requirements set forth.in Section 2 of Act No 6984, and the Government shall take all reasonable steps necessary to reimburse the V.1. Insurance Guaranty Fund in such equal amount by. any available means, including seeking authorization for additional financing, if necessary. In the event monies are used from the V.I. Insurance Guaranty Fund for the purposes described in Section 1, no member insurer of the V.I. Insurance Guaranty Association maybe assessed under 22 V.I.C. §237(a)(3) until all funds withdrawn from the V.I. Insurance Guaranty Fund for the purposes described in Section 1 have been repaid by the Government.

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Thus passed by the Legislature of the Virgin Islands on May 28, 2009.

Witness our Hands and Seal of the Legislature of the Virgin Islands this Day of June, A.D., 2009.

tl~d/

President

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Legislative Secretary

Bill No. 28-0029 is hereby approved

Witness my hand and the Seal of the Government of the United States Virgin Islands at C~otteAmalie, St. Thomas, this 5 tI day of June,

A.D., 2009. ~

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(. John P.Ae Jj , r ..

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THE UNITED STATES VIRGIN ISLANDS20U9 JUN -s ff1·4= 06

OFFICE OF THE GOVERNOR R E

GOVERNMENT HOUSE

Charlotte Amalie, V.I. 00802

340-774-0001

June 5, 2009

VIA MESSENGER

Honorable Louis Patrick Hill President

28th Legislature of the Virgin Islands Capitol Building

St. Thomas, VI 00802

RE: Governor's actions on Bill No. 28-0029

Dear President Hill:

I have approved Bill No. 28-0029, now Act No. 7064, and return the same to you pursuant to Section 9( d) of the Revised Organic Act of the Virgin Islands of 1954 ("Revised Organic Act"), as amended: I thank the members of the .28th Legislature for their prompt attention to our fiscal and financial challenges and favorable approval of this legislation. The borrowings to be executed are only one of a number of measures that we are instituting to address the downturn in our economy.

However, I note that the measure, as passed, does not provide the Government of the Virgin Islands ("Government") with the ability to use any portion of the proceeds to make overdue payments on prior year obligations, including, sums owed to vendors who successfully completed their contractual obligations to the Government, but have not yet been fully compensated. As we continue to . feel the negative effects of the international economic slowdown,and the U.S. Virgin Islands enters its annual slow season, I believe it prudent to put these monies into the hands of those who have assisted the Government in providing services to the public and place these additional dollars in circulation in our economy. Of course,any such '<"ment of prior year obligations could only be made if sufficient funds were available

.ent of all current obligations.

The present legislation also requires the Government to retire any debt under the authority of this law by the end of the same fiscal year in which said debt was incurred. My financial team previously testified that the economic doldrums are expected to continue

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Governor John P. de Jongh Jr. to Senator Louis Patrick Hin June 5, 2009

RE: Governor's actions on Bill No. 28~0029

throughout the rest of the current fiscal year and well into Fiscal Year 2010. As recently noted by the National Governors Association and the National Association of State Budget Officers,

most states fmd themselves facing the same or similar fiscal challenges in this and the following fiscal years. Therefore, a legal requirement mandating the retirement of any debt within the same fiscal year in which it is incurred will only increase the fiscal strain on the Government in the following fiscal year, and not provide the relief intended to be obtained by utilizing these financial tools.

Enclosed are the amendments, which will address my above-stated concerns, and I respectfully request that the 28th Legislature consider and approve them. Thank you for your consideration in this regard.

Enclosure:

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