After Maria, the US Virgin Islands are Running out of Money

by Dec 14, 2017United States Virgin Islands0 comments

Puerto Rico is not the only US territory currently involved in a debt crisis. The United States Virgin Islands have had a financial crisis of their own, and the economic future of the US Virgin Islands is in serious jeopardy. The Islands have been steadily accumulating debt, and by 2017, the US Virgin Islands had accumulated so much debt that the bond market had refused to lend them any more money. The governor was in the process of negotiating with the bond market again when Hurricanes Irma and Maria devastated the islands in September–storms that not only damaged much of the tourist industry, but decimated most of the islands’ infrastructure. Nellon Bowry, Governor Mapp’s Office of Management and budget director, recently told the United States Senate Committee on Finance that the 2017 budget already had a shortfall of $81 million. In an effort to draw in much needed revenue to combat the budget deficit that the government was facing, in March of 2017, Governor Kenneth Mapp decided to sign several  bills into law, most of which were connected to the edited Revenue Enhancement and Economic Recovery Act. Included in this signing by the governor was Bill No. 32-0007 which established a minimum baseline property tax of $360.00 after application of exemptions and credits. And widely unpopular, the “sin tax,” also known as Bill No. 32-0005, authorized the collection of revenues on alcoholic beverages, sweet carbonated beverages, cigarettes, and timeshare unit owners. These revenues did very little to lower the debt, as the core economic issues went far beyond applying a simple tax raise and austerity on citizens who were already struggling.

The territory’s 2017 debt pales in comparison to 2018 budget shortfalls, as the damage from hurricanes Maria and Irma raised this crisis to a new level.  Bowry also informed lawmakers that the 2018 budget shortfall was $453 million, and after adding the 2017 deficit of 81 million to this already staggeringly high number, the US Virgin Islands are in debt to the tune of 534 million. The US federal government made an offer to lawmakers in the US Virgin Islands, and naturally, it came with strings attached. The Community Disaster Loan bill (CDL) would lend $500 million to the territory, but in order to immediately receive the first $300 million, the US Virgin Islands government would have to agree to pay back the federal government before it paid back its already delinquent  bond market debts because the US Treasury stated that it would not accept a subordinate lien. In 2016 the US Virgin Islands government passed a measure placing a lien on the territory’s Matching Fund Revenue (MFR) bonds to assure that bondholders were paid first, thus making the acceptance of the CDL loan a giant risk for a territory that is not only facing an economic crisis, but a humanitarian one as well after Irma and Maria.

Recognizing that Puerto Rico and the US Virgin islands need more than a quick fix for their problems, Senator Bernie Sanders has proposed a solution. Senator Kirsten Gillibrand, co-sponsor of Sanders’ bill S.2165, also known as the Puerto Rico and Virgin Islands Equitable Rebuild Act of 2017, refers to bill S.2165 as the “New Marshall Plan” because similar to the original Marshall Plan, which was enacted in order to help Europe recover after experiencing utter devastation caused by World War II, Sanders’ bill is meant to provide a long term plan to deal with the damage caused by Maria and Irma in the Caribbean Basin, as Puerto Rico and the US Virgin Islands are in desperate need of significant help in order to rebuild sustainable infrastructure in the territories affected. Sanders’ bill calls for $146 billion, which will be used to overhaul the islands’ energy, medical, and housing infrastructure, provide debt relief and fund environmental cleanup, and will limit privatization with the hope that dubious one-sided deals like the Whitefish Energy scandal, may be avoided in the future.