ST. CROIX — Lawmakers have broadened the governor’s hotel financing plan into an expanded framework that adds nonprofit participation, strengthens bond rules, and sets firm limits on government liability.
Governor Albert Bryan Jr. had submitted a brief bill to amend the Virgin Islands Hotel Development Act by creating a new subsidiary of the Public Finance Authority to issue tax-exempt bonds known as the Virgin Islands Hotel Development Financing Corporation.
The Legislature approved a more detailed structure that established clear rules for nonprofit participation, bond issuance, and asset management. The Legislature’s six-page bill was sponsored by Senate President Milton Potter and Senators Marise James and Kurt Vialet.
While the governor’s proposed bill and the Senate’s amendment in the nature of a substitute both defined VIHDFC as controlled by the PFA, senators narrowed the governor’s broader definition that applied to “one or more hotels” to cover only “qualified hotels” as permitted under the law. Senators also created detailed operational rules and liability protections.
During a Committee of the Whole meeting on November 18 ahead of legislative session later the same day, Vialet said the majority caucus withheld the governor’s proposal after concerns surfaced during discussions with executive branch officials. He said senators then drafted a letter to Government House outlining their objections.
“The concerns of the majority was protection for the people of the Virgin Islands, protection for the PFA, and to make sure that in no way we’re going to be obligated to pay back a dime as a result of this transaction,” Vialet said.
Prior to the full body unanimously approving the measure during its November 18 session, Potter pointed out that the body included protections that addressed their concerns.
“Some things may be perceived as redundant, maybe, but I think given the role that we play, I think it allay a lot of our concerns and some anxieties that we may have,” he said during the COW meeting, adding that senators were comfortable with the final product.
The Senate clarified that bonds issued under VIHDFC are not general obligations of the corporation, the PFA, or the VI government. The legislation further clarified that neither the government nor PFA officers are liable for VIHDFC debt and that bonds, notes, or other indebtedness do not constitute government debt. If the hotel is sold prior to final maturity of the bonds, all net proceeds from such sale after repayment of the bonds and costs related thereto will be transmitted to the government.
The adopted legislation also included language relating to the authority to issue bonds for nonprofit organizations.
VIHDFC is authorized to issue tax-exempt or taxable revenue bonds, notes, or other obligations as a conduit issuer for qualified nonprofit organizations described in section 501(c)(3) of the Internal Revenue Code to finance or refinance capital projects, facilities, equipment, operating, and debt service reserves, or other eligible expenditures. The nonprofit must maintain tax-exempt status, comply with federal tax rules, and ensure the project serves a public purpose without exposing the government to financial risk. All bonds are special, limited obligations, payable solely from loan repayments, project revenues, or security provided by the nonprofit.
After Bryan signed Bill No. 36-0216 (Act No. 9063) into law on November 20, Government House issued a statement the next day indicating that the financing structure is intended to lower borrowing costs for hotel developers without creating public debt or taxpayer guarantees, aligning the territory’s longstanding hotel incentives with tools widely used in other U.S. jurisdictions. Government House noted one immediate application is the Frenchman’s Reef resort complex on St. Thomas, including the Westin Frenchman’s Bay Beach Resort. Under the terms of the legislation, after an expected 30-year bond term and full repayment, title to the Frenchman’s Reef property would transfer to the people of the Virgin Islands, giving the government the option to lease or sell the resort in the public interest under normal processes.
“This is the model we should pursue across our tourism economy,” Bryan said in a statement. “We welcome private capital and expertise, we protect taxpayers from risk, and we build in a clear path for long-term ownership by the people of these islands. With this bill, Frenchman’s Reef will not just be a symbol of our hospitality industry. In time, it will be an asset owned by Virgin Islanders.”
