The Bryan administration Thursday took steps toward plans to issue tax-exempt bonds to the owners of Frenchman’s Reef on St. Thomas after the V.I. Public Finance Authority board of directors approved the creation of the V.I. Hotel Development Financing Corporation.
Nathan Simmonds, the authority’s finance administration director, said the move was similar to the PFA’s establishment of the V.I. Transportation Infrastructure Corporation to administer the GARVEE bonds funding the territory’s road and ferry projects.
“The need to create subsidiaries for the issuance of bonds has grown out of changes in the regulations governing municipal securities,” he said. “The PFA is not at this time able to provide audited financial statements of the government, and as a result we need to create a vehicle by which we can continue to issue bonds for development projects in the territory.”
Responding to a follow-up question from board member Dorothy Isaacs, Simmonds acknowledged that the government has been behind on its audits “for quite some time.”
“Whenever we do get very close, something happens that sets us back,” he said. “Last time we were close was just before Irma-Maria, and then that happened and that set us back. But we’re close … we’re starting to work on the 2024 audits, and hopefully that will be finished in a few months, and then the ‘25, and we’ll be caught up.”
The new subsidiary will be able to issue tax-exempt bonds for hotel development projects and would, according to a proposal Government House announced two weeks ago, allow the current owner of Frenchman’s Reef to use those bonds to “refinance and recoup its initial private investment in the property’s redevelopment by accessing lower, tax-exempt interest rates. This is comparable to industrial development bonds widely used across the United States.”
Simmonds said Thursday that the hotel’s owners would be responsible for the funds, not the government or the PFA.
“At the end of the 30-year period, however, the property — the Frenchman’s Reef Hotel and Buoy Haus — would revert to the government of the Virgin Islands.”
“That is my concern about this,” Isaacs said Thursday. “Why would we want to end up owning a property like that?”
“Why would we want to own any property? I mean, well, I hear people ask this question all the time, and … it is so insulting to me that we as Virgin Islanders aren’t confident and are scared of getting an asset for free,” Gov. Albert Bryan Jr., who chairs the PFA board, answered. “Essentially, we’re already paying for this asset because our Hotel Development Act bonds essentially restored it.”
Bryan said the territory already owns Emerald Beach, Hotel on the Cay, the shuttered Beachcomber Hotel and that it will eventually own the Hampton by Hilton in Havensight.
“We already are in the hotel business,” he said. “I guess we just don’t see it from that perspective. The asset — just like we own the seaplane terminal and a host of other properties on St. Thomas and St. Croix that we lease out to private entities, the same will be done. Or if, 30 years from now, there is a government that wants to operate and run a hotel, then so be it. But the fact is, we’re acquiring an asset with a current value of over $400 million that will probably have a future value somewhere in the neighborhood of eight hundred to a billion dollars — if not more — through this transaction.”
The board also authorized a $10 million payout from the PFA’s debt service reserve fund, allocating $6 million to the V.I. Port Authority for Charlotte Amalie Harbor dredging costs and $2 million to demolish the abandoned Addelita Cancryn School. The V.I. Public Works Department will receive the remaining $2 million for work on Leonardo “Nardo” Trotman Drive.
Later, the board accepted Disaster Recovery Office Director Adrienne Williams-Octalien’s recommendation of MCN Build to renovate and restore the St. Croix Educational Complex through the territory’s Rebuild USVI initiative. Williams-Octalien said the contractor’s total estimate for the project came in at $224.5 million — approximately $130 million less than the other responsive bidder.
St. Croix Source
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