The V.I. Public Finance Authority has approved the issuance of bonds Tuesday to expand the Cruzan VIRIL rum distillery on St. Croix in an effort bring more revenues into the territory’s coffers.
The deal, struck between the government of the Virgin Islands and Cruzan VIRIL, was approved by the 28th Legislature in October and signed into law by Gov. John deJongh Jr. this month.
Under the contract, Cruzan VIRIL will produce all of its Cruzan, Ronrico and bulk rum to be sold in the U.S. on St. Croix for at least the next 30 years and the V.I. government will float bonds to fund the distillery’s expansion. The bonds are backed by future rum tax revenues.
The PFA board authorized staff to issue up to $105 million in Cruzan Project Bonds: $30 million for a wastewater treatment facility at the Cruzan distillery and up to $75 million to expand the distillery’s production capacities. Rum tax revenues will be used to repay the bonds.
PFA Director of Finance and Administration Julito Francis said that while the authorization is for $105 million, the first issuance will be for $40 million. That will pay for the wastewater facility and the initial expansion costs, he said. The rest of the bonds will be issued down the line as needed, Francis said.
Government officials hope that by increasing the distillery’s capacity, currently capped because the Environmental Protection Agency has limited the amount of wastewater the distillery can discharge into coastal waters, and helping to promote Cruzan, sales of local rum in the U.S. will bolster the territory’s long-term financial stability. Currently, for every proof gallon of Virgin Islands-produced rum sold in the U.S., the federal government collects $13.50 in taxes, of which $13.25 is returned to the territory.
(resource: Trading Markets)