COMMITTEE ON FINANCE

BILL NO. 29-0038

Twenty-Ninth Legislature of the Virgin Islands

March 11, 2011

An Act authorizing the funding for the Broadband Expansion Project and relating matters

PROPOSED BY: Senator Ronald E. Russell by Request of the Governor

1 Be it enacted by the Legislature of the Virgin Islands:

2 WHEREAS, the Government, the Public Finance Authority (“Authority”) and

3 the Virgin Islands Water and Power Authority (“WAPA”) have been exploring

4 opportunities to develop, coordinate and operate a territory-wide broadband system to

5 expand access and better serve the private citizens, business community and public

6 institutions of the Virgin Islands and the Government; and

7 WHEREAS, the Authority applied for and received all four of the U.S.

8 Department of Commerce’s National Telecommunications Information Association

9 (NTIA”) Broadband Technology Opportunity Program Grants (the “Federal Broadband

10 Grants”) to finance a portion of the Broadband Expansion Project; and

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1 WHEREAS, the Virgin Islands is the only state or territory to have been awarded

2 all four BTOP grants, including the state Broadband Data and Development (“SBDD”)

3 project, the Comprehensive Community Infrastructure Project (“CCI”), the Public

4 Computer Centers (“PCC”) projects and the Sustainable Broadband Adoption (“SBA”)

5 program application: and as a result the Territory has thus been recognized as embracing

6 a truly comprehensive BTOP project; and

7 WHEREAS, the Government, the Authority, viNGN, INC. (“viNGN”) and

8 WAPA, or a wholly owned subsidiary of WAPA, intend to enter into various agreements

9 to share resources and expertise and to allocate their respective obligations in connection

10 with such Broadband Expansion Project; and

11 WHEREAS, as a condition of the Federal Broadband Grant, the Authority is

12 required to provide $29,386,379.00 of funds and /or an in-kind contribution, as a “match”

13 to such federal Broadband Grant, WAPA will provide a portion of such “match” through

14 the contribution of easement (or access) rights to certain of its assets, maintenance

15 services and other in-kind contribution with a minimum value of $15,500,000; and

16 WHEREAS, WAPA is in possession of conduits, utility pole rights, easement

17 and other element which will be used for the Broadband Expansion Projects; and

18 WHEREAS, joint cooperation between the Authority and WAPA in the form of

19 mutual aid and in-kind sharing of services and facilities, as well across purchases of

20 communications and power services between PFA and WAPA, was integral to the

21 application for and approval of the Federal “Broadband Grants; and

22 WHEREAS, the Legislature has authorized the Authority, or a wholly owned

23 subsidiary of the Authority, to serve as a public corporation to qualify for and to

24 implement the Broadband Extension Project, ad to do such other things as necessary to

25 implement administer and operate the programs as applied for and approved by the
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1 Department of Commerce, pursuant to Act NO. 7240, and as required under the Federal

2 Board band Grants; and

3 WHEREAS, the Authority and the Government have committed to provide for a

4 portion of the financing of the Broadband Expansion Project in one or more transactions

5 with tax-exempt and/or taxable bond anticipation notes , bonds or other evidence of

6 evidence of indebtedness, or other funds of the Authority of the Government in advance

7 of the issuance of such bond anticipation notes, bonds or other evidence of indebtedness

8 (the “Broadband Expansion Project Financing”), for the development and construction of

9 road work infrastructure and the acquisition of equipment relating to the Broadband

10 Expansion Project and the acquisition and construction o improvements to an

11 administrative headquarters for the Broadband Project; and

12 WHEREAS, the Authority has entered into an Indenture of Trust, dated as of

13 November 1, 1999, as amended and supplemented (collectively, the “indenture”)

14 authorized under the Virgin Islands Revised Organic Act, As amended, 48 U.S.C.A.

15 Subsection 1574 et seq. (West 1987) (the Revised Organic act”) Title 29, Chapter 15, of

16 the Virgin Islands Code (the PFA Act, and together with the Organic Act, the “Act”),

17 pursuant to which the Authority previously has issued its bonds; and

18 WHEREAS, in order to provide a portion of the funds necessary to implement

19 the Broadband Expansion Project, the Authority intends to issue up to $42,500.00

20 aggregate principal amount of its bonds anticipation notes, bonds or other evidences of

21 indebtedness in one or more series (the”Series 2011A Gross Taxes Bonds) and, pursuant

22 to one or more loan agreements (collectively, the“Series Loan Agreement”), against

23 delivery , loan the proceeds thereof to the Government and/or viNGN (the series 2011A

24 Loan Notes”), to fund any necessary reserves in connection therewith and to pay costs of

25 bonds insurance or liquidity facility cost if any and related costs of issuance of such bond

26 anticipation notes, bonds or other evidence of indebtedness; and

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1 WHEREAS, WAPA or a wholly owned subsidiary of WAPA, shall provide

2 services in connection with the Federal Broadband Grants and administer and maintain

3 compliance with the requirement of the Federal Broadway Grants; and

4 WHEREAS, to authorize WAPA to provide necessary advanced communications

5 and telecommunications capabilities and services required to implement the Broadband

6 Expansion Project and satisfy the terms of the Federal Broadband Grants, Virgin Islands

7 code Title 30 Chapter 5, Section 105 shall be amended to authorize WAPA, or a wholly

8 owned WAPA subsidiary of WAPA, to originate and receive high quality voice, data

9 graphics, video and other communications and information using any technology and to

10 own operate and provide advanced telecommunications systems necessary for

11 implementation of the federal Broadband rants; and

12 WHEREAS, to authorize WAPA or a wholly owned subsidiary of WAPA, to

13 enter into agreements with the Authority and/or viNGN for the use of WAPA’s electric

14 system and water system assets, it is necessary to amend WAPA’s enabling legislation to

15 authorize WAPA to provide in addition to its electric and water services, wholesale

16 advanced communications and telecommunications capabilities and services; and

17 WHEREAS, to authorize WAPA to provide the necessary advanced

18 communications and telecommunications capabilities and services required to implement

19 the Broadband Expansion Project and satisfy the terms of the Federal Broadband Grants,

20 Virgin Islands Code title 30 chapter 5, section 105 shall be amended to authorize WAPA,

21 or a wholly owned subsidiary of WAPA, to operate and provide wholesale advanced

22 telecommunications systems necessary for implementation of the Federal Broadband

23 Grant, to the extent such services are not otherwise adequate provided;

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1 Be it enacted by the Legislature of the Virgin Islands:

2 SECTION 1. Authorization to borrow

3 (A) Authorization to borrow on a General Obligation Basis. The authority is

4 authorized to issue up to $42,500,000 aggregate amount of Series 2011A Gross Receipts Taxes

5 Bonds for the purpose of providing a portion of the funds which, together with the in-kind

6 contribution made by WAPA of $15,500,00, shall be applied to (i) implement Broadband

7 Expansion Project, (ii) fund any necessary reserves, (iii) pay the cost of issuance of the Series

8 2011A Gross Receipts taxes Bonds and Series 2011A Loan Notes, (iv) pay capitalized interest, if

9 any, and (v) pay the cost of any liquiditu facility or bond insurance relating to the Series 2011A

10 Gross Receipts Taxes Bonds. The Government is hereby authorized to issue the Series 2011

11 Loan Notes and execute the Series 2011A Loan Agreement to evidence its obligation to repay the

12 Series 2011A Loan.

13 (B) Authorization to Pledge Gross Receipts Tax Revenues The Government is

14 hereby authorized to pledge the gross receipts taxes imposed and the resulting tax revenues

15 collected and to be collected by the Government (together with all fined, interest, penalties and

16 other charges assessed, imposed or otherwise payable in relation to such taxes and revenues

17 hereinafter referred to as “Gross receipts Tax Revenues” pursuant to Title 33, Section 43 of the

18 Virgin Islands Code (the “Gross Receipts Taxes Act”), as security for repayment of the Series

19 2011A Loan Notes on a senior lien basis and/or a subordinate basis with the security pledged for

20 the repayment of the Outstanding Bonds under the Indenture (as such is defined therein), subject

21 to the lien on the Gross Receipt Tax Revenues required for the Required Annual Moderate

22 Income Housing Fund Deposit. The Special Escrow Agreement, dated as of November 1, 1999,

23 entered into by and among the government, the Authority and the Bank of New York Mellon

24 Trust Company, N.A., as successor Special Escrow Agent (the “Special Escrow Agent”) as

25 amended (collectively, the “Special Escrow Agreement”) and the Collecting Agent Agreement,

26 dated as of November 1, 1999, entered into by and among the Government, the Authority, the

27 Special Escrow Agent and First Bank Puerto Rico, as successor Collecting Agent (the “Collecting

28 Agent”), as amended (collectively, the “Collecting Agent Agreement”) providing for the deposit
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1 and administration of funds for the benefit of the holders of the outstanding Gross receipts Taxes

2 Bonds, the Series 2011A Gross Receipts Taxes Bonds and any Additional Bonds (as defined

3 below), shall remain in full force and effect for so long as any of the Series 2011A Gross Receipts

4 Taxes bonds, or any additional loans made with the proceeds of Additional Bond issue under a

5 duly authorized supplement to the Indenture for the Series 2011A gross Receipts taxes Bonds

6 (“Additional bonds”), are outstanding.

7 In connection with the issuance of the Series 2011A Gross receipts Taxes Bonds and in

8 furtherance of the pledge of the Gross Receipts Tax Revenues authorized herein, the

9 government and the Authority are hereby authorized to execute one or more agreements or

10 other instruments, pursuant to which (i) all Gross Receipts Tax revenues shall continue to be

11 delivered directly from the Virgin Islands Internal Revenue to the Collecting Agent for delivery

12 to the Special Escrow Agent for deposit to the Special Escrow Account, known as the “Gross

13 Receipt Taxes Special Agent Escrow Account”’ which account shall be maintained in the

14 custody of the Special Escrow Agent and shall be held separate from any other fund

15 and accounts of the Government or the Special Escrow Agent, (ii) the Government

16 shall pledge and assign to the Authority, and shall in return assign to the Trustee, on

17 behalf of the holders of the outstanding Gross receipts Taxes Bonds, the Series 2011A

18 Gross receipts taxes Bonds and any Additional bonds, and lien on and a security

19 interest in all such amounts deposited into the Gross receipts Taxes Special Escrow

20 Account, (iii) the Special Escrow Agent shall remit, or cause to be remitted, from

21 amounts on deposit in the Gross receipts Taxes Special Escrow account, (x) first, to the Trustee,

22 such amounts as are necessary under the Indenture and any supplemental indenture thereto or

23 the respective loan agreement, to satisfy the Government’s payment obligations then due, and

24 (y) second, to the Government, for use by the Government for any lawful purpose, and (iv) the

25 Government shall covenant that, in the event the Government discontinues the imposition of the

26 Gross Receipts Tax revenue and substitutes another source of revenues in lieu thereof, the

27 government shall use its best efforts to add or substitute such source of revenues (the
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1 “Substitute Revenues”) to pledge security for the repayment for the series 2011A Loan Notes,

2 which Substitute Revenues will be deposited into the Gross Receipt Taxes Special Escrow

3 Account, be subject to the security interest granted therein and be remitted therefrom in the

4 same manner as authorized in clauses (i), (ii) and (iii) above. Notwithstanding any

5 other law, rule or regulation to the contrary, upon deposit of the Gross Receipts Tax

6 Revenue into the Gross Receipts Taxes special Escrow Account, such amounts so

7 deposited shall not be subject to any prior lien and security interests authorized by this

8 paragraph (b)

9 (C) Non-Impairment Covenant In furtherance of the pledge of the Gross

10 Receipts Tax Revenues authorized by this Act, the Government is hereby authorized and

11 directed to covenant and agree for the benefit of the holders of the outstanding Gross

12 Receipts and directed to the Series 2011A Gross Receipts Taxes Bond and any

13 Additional Bonds that, for so long as any related loan notes issued by the Government

14 remain unpaid, the Government shall continue to (i) take all steps necessary to ensure the

15 receipt and maximization of Gross Receipts Tax Revenues and if applicable the

16 Substitute revenues and the deposit of all Gross Receipt Tax Revenue and if applicable

17 the Substitute revenues, into the Gross receipt Taxes Special Escrow Account, (ii) to the

18 extent permitted by law, defend, preserve and protect such pledge, lien and security

19 interest and all rights of the holders of such loan notes against all claims and demands of

20 third parties, (iii) not revoke, terminate or amend such pledge, lien and security interest in

21 any way that materially adversely affect the rights of any holder of such loan notes or

22 bondholders, (iv) not taken any action that would, directly or indirectly, result in the

23 repeal, rescission or termination of the Gross Receipts Tax Act (or any successor

24 provision) or a reduction in the rate or rates at which the Gross Receipts Tax Revenues

25 are imposed or levied or a restriction or reduction in the application of theGross receipt

26 Tax Revenues in general if such action would materially adversely affect the rights of any
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1 holder of such a loan notes or bondholders, or (v) not take any action or fail to take any

2 action which will limit, restrict or in any say impair in general the collection, transfer,

3 deposit to or disbursement of gross receipts tax Revenues from the Gross Receipts tax

4 Special Escrow Account, or allow permit or suffer to exist any prior lien, attachment or

5 pledge (other than any lien and pledge authorized herein) of Gross receipts tax receipts

6 Tax Revenues deposited into or required to be deposited in the Gross Receipts taxes

7 Special Escrow Account.

8 (D) Authorization to Assign Series 2011A Loan notes and Series 2011A Loan

9 Agreement. In connection with the issuance by the Authority of the Series 2011A Gross

10 Receipts taxes Bonds, the Authority is hereby authorized to assign to the Trustee, for the

11 benefit of the holders of the series 2011A loan Notes and the Series 2011A Loan

12 Agreement or other instruments authorized herein, subject to and in accordance with the

13 terms of the Indenture and the Series 2011A Loan Agreement.

14 (E) Authorization to Execute all Necessary Agreemnts. The Government,

15 acting by the Governor or Commissioner of Finance, WAPA, the Authority, acting by the

16 Chairman and of viNGN, acting by the Chairman of viNGN (or such other member(s)

17 designated in the resolution of viNGN), are each hereby authorized to (i) execute and

18 deliver all documents and agreement necessary or advisable in connection with the

19 issuance of the bonds anticipation and agreements necessary or advisable in connection

20 with the issuance of the bond anticipation notes, bonds and other evidence of

21 indebtedness authorized herein (ii) loan the proceeds of the Authority bonds, notes and

22 other evidence of indebtedness to the government of viNGN as contemplated herein, and

23 (iii) pay all expenses associated with the issuance of the bonds notes and other evidence

24 of indebtedness authorized herein, including, without limitation any costs or expenses

25 required to be paid by or in relation to the Series 2011A Loan agreement authorized

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1 herein, including any liquidity facility or bond insurance policy relating to the Series

2 2011A gross Receipts taxes Bonds.

3 SECTION 2. Interest Rate and term

4 Neither the Series 2011A Gross receipts taxes Bonds nor the Series 2011A Loan

5 Notes shall bear interest at a rate in excess of ten percent per. annum on nay federally tax-

6 exempt bonds or twelve percent per annum on any federally taxable bonds. The

7 respective terms of the Series 2011A gross Receipts taxes Bond and of the Series 2011A

8 Loan Notes shall not exceed thirty years from the date of issuance thereof.

9 SECTION 3 Amendment of 30 VIC chapter 5 30 VIC. Chapter 5, Section 105

10 is hereby amended as follows:

11 (A) The first paragraph of Section 105 of Title 30 Chapter 5 is hereby

12 amended to insert after “facilities incidental or appropriate thereto,” the following:

13 “including the providing of services for wholesale advanced communications

14 capabilities and services and telecommunications systems,”

15 SECTION 4. Effective Date. This Act shall take effect immediately upon

16 approval thereof by the Governor.

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18 BR11-0544/March 1, 2011/
19 G29-0001

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