As of June 9, the U.S. Virgin Islands is no longer tied to the Puerto Rico Oversight Management and Economic Stability Act (PROMESA), a development that was referred to as a “significant victory” by Stacey Plaskett, the territory’s delegate to Congress.
The bill passed after Congress made changes to a particularly controversial section that would have extended the option to have an oversight board presiding over American territories beyond Puerto Rico. Now, the U.S. Virgin Islands and various other territories are no longer included in the bill.
However, there is an exception in place. The Territory could be re-included if lawsuits are filed by bondholders or other potential challengers. Thus, while this amendment to the bill and its passage did mark a major victory for the U.S. Virgin Islands, it could be temporary.
Much of the concern surrounding the bill revolved around the potential negative effects an inclusion of the U.S. Virgin Islands in the Puerto Rico bill could have on the Territory’s bonded indebtedness. However, officials with the U.S. Department of the Treasury have argued that if some territories are left out and others are included, bondholders could sue the federal government. These bondholders tend to view the bill as a means for the federal government to legally allow Puerto Rico to skip out on paying back the debt it owes.
If local bonds would have been negatively affected, it could have had a large impact on the territory’s economy. Just the reports of the U.S. Virgin Islands potentially being included in the bill caused interest rates here to increase slightly—an actual inclusion could have caused those rates to soar to new heights.
As it stands, the PROMESA bill would place all financial affairs in Puerto Rico under direct control of the U.S. federal government. Puerto Rico currently has $72 billion in debt, which would be legally reduced and forgiven under the new law in a process similar to Chapter 9 bankruptcy.
Still room for improvement
Although Plaskett is pleased with the bill’s amendment, she went on record to say it still is a flawed piece of legislation. She blames Republicans in Congress for removing certain recommendations, proposed by President Barack Obama, that were made with the intention of stimulating greater economic growth.
Plaskett also believes the powers of the Oversight Board are far too broad and that the entire piece of legislation goes too far in removing Puerto Rico’s autonomy. She worries about what would happen if such a piece of legislation were enacted to provide similar oversight over the U.S. Virgin Islands.
For more information on the PROMESA bill and what it means for businesses and investors in the U.S. Virgin Islands, consult a knowledgeable business and corporate law attorney today.
Tom Bolt is Managing Attorney for BoltNagi, a respected and well-established business and government relations law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.