Comments on the STT & STX Airport Project
- Warren Mosler
- Aug 15
- 2 min read
I have reviewed the available information on the airport construction projects, and discovered that the advertised cost of $1.2 billion is grossly overstated, as it does not include any tax revenues the USVI collects as the money is spent.
This is a common mistake of stateside companies that work with US state and local governments, where, unlike the USVI they do not collect or retain Federal income taxes.
During the 4 year construction process, as the $1.2 billion is spent, the USVI will be collecting and retaining over $250 million of tax revenues, which reduces the net cost of the projects to under $950 million. Furthermore, while I don't have details as to the financing arrangements, which are reported to be $500 million of the $1.2 billion, I'm confident that I have the capital markets knowledge and experience to reduce those by at least $100 million, bringing the total cost down to approximately $850 million.
The good news for the airlines is that this reduction brings the cost per passenger below the cost they have already proposed in their alternative plan, which means this is now a lower cost option for the airlines than the one they proposed. I've requested a meeting to discuss this in detail with the parties involved.
This is yet another example of the benefits of an understanding of the underlying fundamentals of USVI finance.
It also sheds light on how the decades of lack of financial sophistication has led to, and continues to contribute to, the demise of much of the USVI's infrastructure, including the medical sector, WAPA, public safety, and public roads.
In this case, a project desperately needed, is on the verge of rejection solely due to a misreading and gross overstatement of the costs to be billed to the airlines.
Given the true costs, it comes in at a price the airlines have already approved and can immediately move forward.
