V.I. can institute financial discipline or risk default

[TexasTowelie]

by Nellon Bowry, who served as Office of Management and Budget director, resides on St. Croix


Dear Editor

The V.I. government’s recent attempt to refinance outstanding debt of the Public Finance Authority required the creation of a special purpose financing vehicle — titled the Matching Fund Securitization Corporation.

The Matching Fund Securitization Corporation was necessary because the PFA’s extremely poor credit rating precludes its access to the bond market. The PFA is also an special purpose financing vehicle. It was created 32 years ago with similar motivation: to issue debt on behalf of the V.I. government, because its underlying credit was losing favor in the bond markets.

The failure of the financing, the second failed attempt in four years, highlights two related issues concerning the V.I. government’s fiscal and financial management: the PFA is no longer able to fulfill its statutory mandate, and therefore needs to be repurposed; and the use of special purpose financing vehicles to bypass its poor credit rating, is abetting the V.I. government’s dereliction of its duty, to do — according to an Aug. 25 published report — “what is necessary to be considered a financially responsible borrower.”

The PFA was created by the Government Capital Improvement Act of 1988 (Act No. 5365), “due to a general decline in investor acceptance of securities of the Virgin Islands.” It was established as a public corporation and autonomous government entity, with a mandate to aid the V.I. government in performing its fiscal duties, and to raise and manage capital for essential public projects. Pursuant to this mandate, it was authorized to issue and to sell bonds, and to manage the proceeds.

Read more: http://www.virginislandsdailynews.com/opinion/v-i-can-institute-financial-discipline-or-risk-default/article_d812dc74-fd80-5db0-a6dc-cfc9c9d9f885.html