The government of the Virgin Islands’ new 2040 Vision infrastructure economic development plan must address the financial hardship caused by the current operational status of the Virgin Island Water and Power Authority. In any great society, a government must address infrastructure for a utility’s development plan. In the aftermath of the 2017 unprecedented storms, an already compromised economic infrastructure spiraled downward comparable to the 2008 recession. 2008 saw the banks subsidized by the federal reserve in an amount equal to 10 trillion dollars, quantitative easing 1, 2 & 3 and even with those efforts, 10 years later, the recovery is not complete. We now see lower interest rates on your CD’s and a 21 trillion-dollar deficit by the federal government.
A comprehensive restructuring, stabilization of rate and correction of a systemic mismanagement of the Authority must be established and enacted with intentional enforcement. This is the only path that will result in rates that are manageable for every household and every business. We cannot willfully create a division of the haves and have nots among our one people. The various elected officials including the office of the Governor, the Delegate, the Legislature and the offices of PFA and Port Authority along with our federal partners in the EPA, the US Commerce Department, USDA and Interior Secretary must have a joint conversation with the people of the USVI concerning solutions for both the short and long term.
The office of the Governor should declare a state of emergency to mitigate these compounded disasters thereby allowing funding to be directed to essential areas that directly impact the citizens and lessen the possibility of an additional financial crisis through special interest funding. As you have so often stated beginning in your campaign season, we must act based on the needs of the people. It is time to put in place the mandates necessary to immediately accomplish the lowering of taxes, unemployment and increasing the recreational quality of life. The territory must use every available tool in the toolbox including a financial services team capable of bringing the best practices, financial services and the vision to set the territory on the path to financial solvency.
In the two years since the 2017 storms, the territory has off and on operated under a state of emergency under our former leadership. WAPA has been hard pressed to re-establish its pre-hurricane revenue streams that was inadequate at best. This has caused a hardship that has been passed on to both residential and commercial users of the utility and places the 2040 Vision plan in jeopardy. The economic impact to potential residents and corporate businesses is impaired by the high cost of this essential utility.
WAPA is currently performing at 60 mgs. This reflects approximately 50% of the pre-storm output of 110 mgs and even less of the potential capacity of 120 mgs. In 1983, WAPA performed at 200 mgs. This reduction in output creates the conversation of how the debt service is met. WAPA’s current model is a rate structure of 43 cents per kilowatt hour, one of the highest in the nation. Performing at the pre-storm rate of output could potentially drop the rate and that savings passed on to the users. This would create more on-line users of this essential service affordable to residents and businesses. At this juncture, an infusion of capital is needed to provide immediate relief. The only identified source of grant money would be the CBDG-R funds. Re-assigning 100 million, the key to the success of the proposed action plan, as a subsidy would help to mitigate the significant shortfall that WAPA is experiencing and within a short period, users would see lower bills due to the economic impact of revenue shortage post hurricanes.
The Betty’s Hope property that is currently under the Port Authority jurisdiction should be used to create a solar farm that is an intergovernmental partnership. The project would entail 300 acres and is a much more viable alternative to the previous can grass proposal. The study conducted by Duff and Phelps, a paid consultant, has been shelved after a cost of nearly a half million dollars. The 60 mgs would result in a cost saving to the customer in the direct form of a rate reduction as US Commerce Director, Wilbur Roy did for Culebra, Puerto Rico.
The ArcLight deal left on the table by the 32nd legislature should be included in the 2040 Vision economic plan. This deal that was valued at 70 million should be re-evaluated as a possible joint venture with WAPA, thanks to Mr. Vialet and the 32nd legislature’s golden parachute. The excess fuel capacity could be sold to tourism partners such as cruise ships, yachts and day charter operators. Crown Bay port plays host to these segments along with others. This would potentially create a revenue stream of more than 1 million dollars annually. A 5-year plan, managed internally and not contracted out will add to the bottom operating line of WAPA.
There are potentially out-sourced contracts that could be handled in-house. As an example, the tree-trimming contract with Asplundh could be in-sourced and that money retained for operations. Another practice that needs to be eliminated is the renting of properties for office and warehouse space from private individuals and bring the security contract in house and utilize employees. WAPA needs a 40,000+ sq. ft property that it is either purchasing or use repurpose property/land that is already under the control of the territory. This is not a new idea and had been previously brought forward by both Hugo Hodge and Julio Rhymer with plans for a design build that are on file.
The 25% interest in VIGN should be leveraged as a joint venture with VIYA. It is important to develop revenue streams from potential royalties. As VIYA grows in the telecommunication business, WAPA should also capture the growth in the form of revenue. Currently the 25% interest is not being used to the benefit of WAPA.
The events of 2017 created a significant loss of revenue that further crippled WAPA’s ability to be self-sustaining. Prior to 2017, the territory sustained economic losses such as the Hovensa closing, decreased production at Diago and the inability of the territory to pay the utilities supplied to the numerous offices and facilities under the umbrella of government. 2017 only added to the previous year’s losses. The Vision 2040 plan must take all of this into account as the EDC moves forward in its ambitious plan to add new companies to the territory.
Renewables and alternative energy cannot be ignored. In 2015, Elmo Roebuck, Jr., Policy Director stated “if the net metering program was without a cap, and a great portion of the territory’s residents decided to make the move to solar energy, it would be almost impossible for WAPA to function, which would then leave residents who could not afford to make the switch from the public utility’s power grids to solar without any form of energy”. With a debt of 1.2 billion dollars on the back of the people of the Virgin Islands and in the aftermath of the 2017 hurricanes, the interest in being off the grid is renewed. This puts WAPA in a precarious position. The cap instituted by legislature was meant to stem the loss of revenue to the utility. Businesses are the largest end user of the utility, particularly lodging establishments. In the aftermath of the hurricanes of 2017, many of the large lodging establishments remain unopen, a significant loss of revenue near 2 million dollars monthly. In the interim, until these businesses re-open, the territory needs to subsidize this loss of revenue with the CBDG-R funds for a period of 2 years. These funds are meant for recovery. The territory then needs to re-assign the occupancy tax, for a period of 5 years, to WAPA to offset the net-metering choice of any lodging establishment that makes the choice to net-meter. This will allow the infrastructure rebuilding to stabilize on the investment.
The 32nd legislature approved 160 million dollars to Vitol in the face of mounting debts by WAPA. This is nearly twice what the PSC recommended. 40 million dollars of this 160 million debt service was for the structural facility that was not authorized by the PSC. This entire debt needs to be restructured with at least 20 million dollars securitized over a 20-year period. This debt is a burden to the people of the Virgin Islands.
The territorial finance team with the board and management of WAPA should be pursuing a vision exercise that is in alignment with the 2040 Vision plan. This shall and must include the concerns and guidance of the people of the Virgin Islands and our federal partners. A conscious framework of input will frame the policies in a legal framework that will allow WAPA to move forward as a semi-autonomous agency that is self-sustaining as it was meant to be and offer the services that will serve the public with rates that are affordable.
Submitted on Wednesday by Kent E. Bernier, Sr., a Public Services Commission commissioner
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