USVI Public Records

Document text

GOVERNMENT OF THE VIRGIN ISLANDS OF THE UNITED STATES PUBLIC SERVICES COMMISSION IN RE ) ) TRANSPORTATION SERVICES OF ST. ) DOCKET NUMBER 601 JOHN, INC. AND VARLACK VENTURES, _ ) ORDER 51/2013 INC. PETITION FOR RATE INCREASE ) ) ORDER WHEREAS, on May 4, 2012, Transportation Services of St. John Inc. and Varlack Ventures, Inc. (hereinafter “Ferry Franchisees or Ferry Companies”) submitted a report regarding the request and justification for an increase in fares to the Virgin Islands Public Services Commission (hereinafter “PSC” or the “Commission”); and WHEREAS, at the July 19, 2012, meeting the Commission appointed Attorney Dolace N. McLean as Hearing Examiner to preside over the hearings for the Ferry Franchisees’ Petition for an increase in rates; and WHEREAS, on December 21, 2012, the Ferry Franchisees and the PSC staff submitted a Stipulation of Facts regarding the matters involved in the rate investigation proceedings and the related joint recommendation to the Hearing Examiner; and WHEREAS, on February 27, 2013, and February 28, 2013, on the islands of St. John and St. Thomas respectively, public hearings were conducted to obtain comment and information from interested parties and members of the public; and WHEREAS, on July 31, 2013, the Commission received the Final Report and Recommendations from the Hearing Examiner; and WHEREAS, on August 15, 2013, the Commission held a special meeting in the Commission’s offices on both St. Thomas and St. Croix; and WHEREAS, upon careful review and deliberation the Commission voted to accept the Hearing Examiner’s report and recommendations with amendments; and NOW THEREFORE, the Commission finds and orders: 1. That the Hearing Examiner’s report is ADOPTED, with amendments to paragraphs 6, 8, 10, 11, 12 and 15. mes oe way, these grants are deemed earned when the relevant expenses to which they apply, in a particular fiscal year. They are fo be recognized in the Profit and Loss accounts in the same period in which those relevant operating expenses for the period or fiscal year are recognized, 7. Application of Recognition Principles to V I Government Subsidy. The subsidy received from the Government of the Virgin Islands is a revenue-based grant that does not impose specific performance conditions on the ferry boat companies for the recognition of the subsidy as revenues. Consequently, in keeping with guidelines of the AICPA and IFRS, government grant revenues are deemed earned and should be recognized in the period for which the award is given to match expenses of the same period and only for this period. 8. The ferry companies should utilize an accrual system for grant revenues based on the principle that revenues from grants and subsidies are to be recognized only when they are both “eared” and “receivable”. Both of these conditions must apply for revenue recognition or revenue accrual to take place. 9, Government grant revenues are deemed “earned” in the year to which the appropriation applies, irrespective of when the funds are received. Revenue-based grants are deemed “earned” when the relevant expenses for the fiscal year to which they apply have been incurred. They are deemed “receivable” when a check for the amount of the grant has been . prepared by the Department of Finance and is approved for release to the ferry companies by the appropriate government officials. Only when a Virgin Islands Government grant of a subsidy to the Ferry Boat Companies has been earned and is receivable, as defined in this stipulation and joint recommendation, should that subsidy be recognized on the company’s books. 10. Projection of Government subsidies, which have not been earned and which are not yet receivable, should not be taken into account for purposes of setting the rates because they are an uncertain and unreliable source of income to the companies. Such a procedure would put the ferry companies at great financial risk and subject the companies to a level of financial instability which will further erode the already strained financial position of the companies. However, when subsidies are actually “receivable”, within the meaning of that term under GAP, they should be recognized as revenues applicable fo the year in which they were “earned”. Subsidies shall be recognized and applied by the ferry hoat companies to the fiscal year stipulated in the MOU with the Government of the Virgin Islands, and MOU’s shall be drafted to reflect that stipulation. Revenue recognition principles based on GAP should be consistently applied in all rate determination and rate adjustment cases. That is to say that rate determination and rate adjustment will be based on “revenue” and not “cash flows”. 11. The Ferry Boat Companies accept the concept of rate rebalancing when, for revenue recognition purposes, an appropriated subsidy, not previously taken into account in the “Test Year” or the period of Interest, is subsequently received after a rate increase goes into effect. The proper application of rate rebalancing is to calculate rate adjustments using the same principles of grant revenue recognition that apply to rate determination. Grant revenues will be recognized when deemed earned in the year to which they apply and when they are receivable based on the approval of the release of grant funds, as described above. 12. If a subsidy is received which is expressly designated by the Virgin Islands Goverment for capital purposes, or otherwise specifically designated for a purpose other than subsidy of rates, treatment of the subsidy should recognize the stated legislative purpose, but the same principles regarding the time of recognition on the companies’ books described above should apply. 13. The parties jointly recommend to the Hearing Examiner that the facts set forth in this stipulation be adopied as part of the record in this proceeding. The parties further jointly recommend that a rate increase as set forth in paragraph 1 above, should be approved, as presented in the attached Exhibit A. 14. The parties also jointly recommend that the Hearing Examiner recommend treatment of Government Subsidies to the Ferry Boat companies, in accord with the accounting principles set forth above, to govern the present rate case and to guide future rate review, in order to allow the companies a return on their investment that will “ensure confidence in the financial integrity of the enterprise, so as to maintain its credit and to atiract capital.” The joint recommendation is also intended to insure that the interests of the rate payers are protected, that rates a fair and reasonable, and that the burden of the necessary revenue increase in appropriately allocated to minimize the burden on the consumer groups least able io sustain any increase in expense at this time. 15. The parties also agree to final implementation of all outstanding requirements of the 2008 Ferry Rate Investigation, except to the extent that changed circumstances or known changes in actual passenger levels, revenues and expenses, render the previous requirements no longer appropriate, Specifically, the Independent Third Party Ticketing Company shall be implemented, provided that the cost of implementing this procedure is estimated and approved, and that amount is added to the revenue requirements set forth in this stipulation, and to the fare increase authorized. Respectfully submitted, Da * fot sto. Re _ TT Maria Tankenson Hodge Attorney for Transportation Services of St. John, Inc. and Varlack Ventures, Inc. Hodge & Frangois (340) 774-6845 maria@hodgefrancois.com Dated: Iails, Locabe Peithad ko T ani sha Bailey-Roka Legal Counsel to the PSC (340) 778-6010 Tbail002@aol.com one EXHIBIT A — PROPOSED NEW FARES - STIPULATION AGREEMENT Current Proposed | Change Fares New Fare Cruz Bay to Red - Hook Adult $6.00 $6.00 $0.00 | Fourist $6.00 $7.00 $1.00 Child $1.00 $1.00 $0.00 Senior $1.50 $1.50 $0,00 } Commuter $3.50 $3.50 $0.00 Bulk $3.00 $3.50 $0.50 | Students $2.06 $3.25 $1.25 | Teachers $3.00 $4.00 $1.00 Baggage $2.50 | ee $1.50 | Cruz Bay to Downtown Adult $12.00 $12.00 | $0.00 Tourist $12.00 $13.00 $1.00 Child $3.50 $3.50 $0.00 Senior $6.00 56.00 $0.00 Commuter $7.00 | $7.00 $0.00 Bulk $9.50 $10.00 $0.50 Baggage $2.50 $4.00 | $1.50 | Edubit A