While the U.S. Virgin Islands’ bonds are still rated in junk status, there are some significant signs of improvement and glimmers of hope for economic recovery in the territory. The price of some of the Territory’s bonds has more than doubled since the end of 2017, thanks in large part to a boom in construction during the post-hurricane rebuild and the reopening of the St. Croix oil refinery. Now, economic experts in the Territory feel good about the growth in the local economy believe there is a positive future for the territory’s bond ratings.
This information comes from Electronic Municipal Marketplace Access (EMMA), a website operated by the Municipal Securities Rulemaking Board. On December 28, 2017, a customer bought $2 million worth of U.S. Virgin Islands gross receipts tax bonds maturing in 2039 at 44 cents on the dollar. Recently, a different customer bought $1 million of the bonds at 95 cents on the dollar, representing an increase of more than 100 percent.
In a statement, the President of Capital Markets Advisors, Richard Tortora, said this increase in bond price shows “a reflection of increased investor confidence in the Virgin Islands.”
What’s driving economic improvement?
A major factor in the slip of bond prices in the second half of 2017 was the destruction caused by Hurricanes Irma and Maria, a pair of Category 5 hurricanes that wiped out a significant amount of the islands’ infrastructure, housing stock and businesses and has severely inhibited tourism in its aftermath. Still, the Territory’s government made full bond payments in October 2017, April 2018 and October 2018.
The slow but steady work the Territory has done to rebuild infrastructure and businesses since the storms and restore and even improve on many services and offerings around the Territory has been the main driving force of this economic improvement.
Revenue is projected to increase for the Territory in the next fiscal year, as well. Projections for the 2019 budget currently sit at $1.311 billion in revenue, compared to $1.278 billion in projected revenue for fiscal year 2018. During the last six months, the U.S. Virgin Islands has seen the largest gross receipts tax collection in years at $191.3 million, as well as $452.9 million in income tax and $63 million in real property taxes.
While the Government of the Virgin Islands has already drawn on $215 million of a federal Community Disaster Loan approved after the hurricanes, it may or may not end up needing to draw on the remaining $81 million available to it.
There is still much work to do for the U.S. Virgin Islands to see a full recovery from Hurricanes Irma and Maria, but a significant amount of progress has been made, and officials in the Territory can feel good about the economic prospects moving forward.
Tom Bolt is Managing Attorney and Chair of the Government Relations Practice Group at BoltNagi PC, a full-service business law firm based on St. Thomas, U.S. Virgin Islands.