The Bryan administration has submitted legislation to the 36th Legislature that would allow a wholly owned subsidiary of the Virgin Islands Public Finance Authority to issue tax-exempt bonds for hotel development projects, beginning with the Westin Frenchman’s Reef Resort and Spa on St. Thomas.
The measure amends the Hotel Development Act to expand the financing tools available to developers and lower borrowing costs, while the administration maintains that the government of the Virgin Islands would not take on debt, guarantee the bonds, or operate the hotel.
Gov. Albert Bryan Jr. said in an exchange with the Source Wednesday that the proposal was initiated by the ownership group of Frenchman’s Reef following the completion of major reconstruction and redevelopment work at the property. The current owner of the Frenchman’s Reef property is an affiliate of Fortress Investment Group, a global private investment firm that acquired the resort from DiamondRock in 2021 and financed its redevelopment following Hurricanes Irma and Maria.
The amendment would allow the owner to refinance its private construction debt at tax-exempt interest rates.
“This was actually a request from the investors, and we thought it was a great opportunity,” Bryan said, adding that the financing mechanism is standard in the hospitality finance industry. He emphasized that “the bonds are the developer’s responsibility” and that there is no pledge of government revenues or assets.
A press release issued Wednesday stated that the refinancing would be structured through a Public Finance Authority subsidiary and compared the arrangement to industrial development bonds commonly issued in other jurisdictions. The administration said the approach reduces private borrowing costs, accelerates tourism investment, and does not create taxpayer liability.
In a transmittal letter delivered Oct. 22 to Senate President Milton Potter, Bryan wrote that the tax-exempt financing would replace the developer’s current private financing structure, and that the public benefit comes at the end of the repayment period. “The benefit for Fortress is that the tax-exempt bonds would replace the corporate debt and equity on the Frenchman’s Reef property,” the letter states. “The direct benefit for the Government is that upon the final redemption of the bonds, in 30 years or so, the Frenchman’s Reef property would revert to government ownership.”
Bryan said the proposal aligns with a model already used across the territory, where major hotels operate under long-term leases on government-owned land. He cited Emerald Beach, the former Beachcomber Hotel, Hotel on the Cay, and portions of Yacht Haven as examples. During his term, the administration executed a new long-term lease for Hotel on the Cay, is preparing to rebid the Beachcomber site, and noted that the Emerald Beach lease will expire soon.
“The concept of leasing government land for developments that revert back to the government is not new,” Bryan said. “What’s new is using this financing structure to acquire the asset at the end.”
The governor also noted that the Frenchman’s Reef proposal would not result in public operation of the hotel and would not alter its current hotel management contract. Davidson Hospitality would continue managing the property.
The proposal now moves to the 36th Legislature, where lawmakers are expected to review the financing structure, the scope of the amendment to the Hotel Development Act, and the conditions surrounding eventual public ownership of the property. No hearing date has yet been set.
St. Croix Source
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