Another U.S. territory is facing financial distress. The U.S. Virgin Islands has joined Puerto Rico in an effort to stay afloat.
The islands owe more than $2 billion to bondholders and creditors, according to Reuters. “For years the U.S. Virgin Islands funded essential public services with help from Wall Street. Investors lined up to purchase its triple-tax-exempt bonds, a form of debt free from municipal, state and federal taxes.”
Firms have downgraded the territory’s credit rating to junk, which has affected the bond market in the region. “With the U.S. Virgin Islands shut out of the credit markets after a failed January bond issue, officials are scrambling to stabilize its finances after years of taking on debt to plug yawning budget holes.”
To help settle the bond debt, “The governor has sent down a five-year plan, and this is just one small portion of his plan to ensure that the territory is self-sufficient,” said Tamarah Parson-Smalls, Bureau of Internal Revenue chief counsel, in a Marketplace.org article. Gov. Kenneth E. Mapp approved sections of a bill to increase taxes on alcoholic beverages and impose an Environmental/Infrastructure Impact Fee on timeshare owners. According to the article, “some vacationers in the U.S. Virgin Islands will face a new $25-a-day fee for using a timeshare. The fees are expected to bring in $19 million per year.
The Virgin Islands also face more than $3 billion in unfunded pension and health care. Debt loads for the Virgin Islands and Puerto Rico have surpassed 50% of their gross domestic products, said Reuters. The government and two public hospitals owe the territory’s water and power authority (WAPA) nearly $30 million. WAPA in turn owes two former fuel vendors $44 million, added Reuters.
In March, Gov. Mapp requested an 8% budget reduction for cost saving measures. There is a projected $100 million budget shortfall this year. “[I am] confident that, together, we can achieve the fiscal balance that has for too long eluded us,” he said according to his website.
-Michael Miller, editorial associate