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  #311  
Old 10-08-2019, 10:40 AM
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Mary Pat Campbell
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https://fixedincome.fidelity.com/ftg...094c0000_110.1

Quote:
Bondholders have lien on Puerto Rico pension bonds: Supreme Court
Spoiler:
The U.S. Supreme Court on Monday let stand a lower court ruling that bondholders have a perfected lien on local government revenue contributed to Puerto Rico’s pension system.

As result bondholders could claim 100 cents on the dollar on $3.2 billion of Employees Retirement System bonds rather than the 13 cents on the dollar that the Puerto Rico Oversight Board is allotting them in the plan of adjustment, said Chapman Strategic Advisors Managing Director James Spiotto. While they could claim this, there may be an issue as to whether they will be able to collect, he said.

The Puerto Rico Oversight Board and the local Puerto Rico government may try to take various legal and bureaucratic maneuvers to avoid paying 100 cents on the dollar, Spiotto said. Bondholders may ultimately choose to accept a more modest settlement.

The ERS bond debt has been in default since July 2017.

Also potentially affected are the pensions, for which the system has $31 billion in actuarial liability. In the plan of adjustment the board presented to the Puerto Rico District Court in late September, the board provided that there would be cuts in pension benefits for those with pensions greater than $1200 per month but that these cuts would be no greater than 8.5%.

The government is currently paying nearly $2 billion in the annual budget to fund the retiree pensions. This would be more than necessary to pay the ERS debt service in full. It remains to be seen if payments to the retirees will simply be diverted to the bondholders.

In August 2018 District Court Judge Laura Taylor Swain said that the bondholders didn’t have a perfected lien on government contributions to the system.

In January the First Circuit Court of Appeals agreed that the bondholders initially didn’t have a lien when the bonds were issued in 2008, but said that it was perfected with additional documents in 2015 and 2016.

On Monday the Supreme Court announced it had declined to hear a board appeal of the appeals court decision.

The board will now have to consider amending its proposed plan of adjustment to accommodate bondholder demands for better payments for the ERS bonds, Spiotto said.

The bondholders in the case, consisting of several hedge and investment funds, could try to resume an earlier effort to get Judge Swain to give them control over the Employees Retirement System.

The board now faces additional potential obstacles for its plan, Spiotto said. Hedge fund Aurelius and Puerto Rico trade union Unión de Trabajadores de la Industria Eléctrica y Riego will argue to the Supreme Court justices next week that the mode that the Puerto Rico Oversight, Management, and Economic Stability Act provided for appointing the board members was unconstitutional. Potentially, the justices could throw out everything that the board has done since its appointment in late summer of 2016.

Bond insurer Assured Guaranty (AGO) has appealed a first circuit decision that said that bondholders don’t have a lien on the Highways and Transportation Authority revenue so that the bonds need to be paid during the bankruptcy. This could also throw the board’s plans, as found in its HTA fiscal plan, into the air, Spiotto said.
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  #312  
Old 10-08-2019, 03:36 PM
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Mary Pat Campbell
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https://www.reuters.com/article/us-u...-idUSKBN1WM1GA

Quote:
U.S. Supreme Court turns away Puerto Rico pension fund dispute

Spoiler:
WASHINGTON (Reuters) - The U.S. Supreme Court on Monday declined to take up a dispute over the assets of Puerto Rico’s largest public sector pension fund even as the U.S. Caribbean island territory’s bankruptcy enters a major new phase.

FILE PHOTO: People arrive to attend a meeting of the Financial Oversight and Management board for Puerto Rico, a year after Hurricane Maria devastated Puerto Rico in San Juan, Puerto Rico, September 18, 2018. REUTERS/Carlos Barria/File Photo
The justices left in place a January 2019 lower court ruling that found that bondholders who own nearly $3 billion of debt issued by Puerto Rico’s Employees Retirement System have a legitimate claim on the pension fund’s assets. The justices refused to hear an appeal by Puerto Rico’s federally created financial oversight board of that ruling.

The Financial Oversight and Management Board of Puerto Rico said the decision will not affect the proposed plan of adjustment it filed in federal court on Sept. 27 for the bankrupt island’s core government debt, which includes an unfunded pension liability of more than $50 billion.

The plan’s allocation of a 13% recovery for bondholders’ investment was not contingent on the outcome of this case, according to a board statement.

Meanwhile, litigation over the validity of the bonds and the scope of bondholders’ security interest is ongoing.

The pension fund litigation dates back to 2017, when the board initiated Puerto Rico’s bankruptcy and challenged claims by bondholders on those assets.

U.S. District Judge Laura Taylor Swain, who is handling the matter, had ruled that the bondholders “do not possess a perfected security interest” over property pledged by the retirement system to pay the debt. The judge’s ruling pointed to the use of an incorrect version of the pension fund’s name in financing statements.

The Boston-based 1st U.S. Circuit Court of Appeals reversed the ruling, deciding that “the bondholders met the requirements for perfection beginning on December 17, 2015.”

In its petition to the high court, the board argued that the appeals court’s reversal threatened “the ability of creditors across the nation to engage in secured lending” by treating the incorrect name issue as an unique circumstance.

After running out of pension assets, Puerto Rico’s government turned to a “pay-as-you-go” system in which all public pension costs are paid through its general fund annually.

The court took its action on Monday on the first day of its new nine-month term.

On Oct. 15, the Supreme Court is due to hear arguments in another case involving the Puerto Rico oversight board over whether the board’s members were lawfully appointed.


https://www.pionline.com/courts/supr...on-bondholders
Quote:
Supreme Court declines technical challenge to Puerto Rico pension bondholders
Spoiler:
The U.S. Supreme Court on Monday declined to review a lower court ruling upholding the validity of security interests by pension bondholders seeking Puerto Rican pension assets before the start of bankruptcy proceedings.

The validity of the claims themselves is still being litigated at the District Court level.

The court declined a petition by Puerto Rico's Financial Oversight and Management Board and the Employees Retirement System of the Government of Puerto Rico that sought to reverse a January lower court decision siding with ERS bondholders holding more than $3 billion of ERS bonds.

The oversight board sued to invalidate those claims and to recover principal and interest payments of nearly $400 million made to ERS bondholders.

The January decision reversed a 2018 ruling by the judge overseeing Puerto Rico's complicated bankruptcy proceedings, U.S. District Judge Laura Taylor Swain in San Juan, who said the ERS bondholders' security interest was invalid in part because of incorrect names on some of the agreements.

Her ruling was later reversed by the 1st U.S. Circuit Court of Appeals in Boston, which prompted the oversight board's petition to the Supreme Court, arguing that the Boston court "committed blatant errors of law that threaten the ability of creditors across the nation to engage in secured lending."

In their Supreme Court petition, the ERS bondholders' group countered that it is the oversight board "that seeks to undermine confidence in secured transactions by pursuing endless, meritless litigation to avoid its obligations."

The Supreme Court's denial does not affect Ms. Swain's June 27 ruling that the ERS bondholders do not have any security interest in the post-bankruptcy assets of the retirement system assets. The validity of ERS bondholder claims is still a subject of litigation.

On Oct. 15, the Supreme Court will hear arguments in another bondholder case challenging the legitimacy of the oversight board members' appointments.

On Sept. 27, the oversight board filed an adjustment plan that calls for reducing bondholder and other debt by 60% and cutting some public pension benefits by 8.5%, in order to reduce $35 billion in debt to $12 billion as it works to exit bankruptcy. That plan does not include an agreement with the ERS bondholders.

When the oversight board began in 2016, Puerto Rico had more than $50 billion in unfunded pension liabilities and no assets. By fiscal year 2018, it was able to make benefit payments only as revenue came in.
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  #313  
Old 10-09-2019, 12:35 PM
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https://www.bloomberg.com/news/artic...ts-spark-anger

Quote:
Puerto Rico Board’s Proposed Pension Cuts Spark Anger
By Michael Deibert
‎October‎ ‎7‎, ‎2019‎ ‎4‎:‎20‎ ‎PM‎ ‎EDT
Protests from streets to judiciary follow long-expected move
Retirees who earn $1,200 a month would see a 8.5% pension cut
Spoiler:
When Puerto Rico Governor Wanda Vazquez announced late last month that she was acceding to requests from the commonwealth’s Congressionally mandated fiscal oversight board to slash some government-worker pensions by as much as 8.5%, the reaction was swift.






Protesters returned to the front of the governor’s mansion in San Juan’s colonial quarter - the site of protests that eventually ousted former governor Ricardo Rossello this past summer - and even at what they believed to be the private homes of board members, chanting and banging on pots and pans in what is known as a cacerolazo (the name coming from the Spanish word for a pot used to cook stew, cacerola).


Adding her voice to the street protests, Maite Oronoz Rodríguez, the head of Puerto Rico’s Supreme Court, sent a letter to the board warning of mass resignations in the island’s judiciary because of pension concerns, stating that “after a lifetime of dedication and service to Puerto Rico, our judges do not deserve to be speculating about their future based on the limited information” she said the board had made public about its plans.


Despite her televised statement that she did “not support any reduction in benefits to retirees,” Vazquez nevertheless said she wanted the board to finish its work “as soon as possible” and said that the cuts now would avoid the need for larger pension cuts of up to 25% in the future.

While Vazquez’s administration opposes cutting pensions, it won’t obstruct the progress of the federal board’s debt adjustment plan, Eli Diaz Atienza, the governor’s non-voting board representative, said during a public meeting of the board last month. Still, the administration will seek to alleviate future pension cuts through the commonwealth’s budget, Diaz Atienza said.

“Central to the government’s consideration of the plan, however, is the government’s stated commitment to the priority of pension payments and in practice to take steps where necessary and appropriate to restore and mitigate the impact of any future pension reductions through the exercise of government policy measures in the commonwealth’s budget or through additional sources of revenue,” Diaz Atienza said during the meeting.

Related: Puerto Rico Board Unveils Proposal to Slash Debt, Pensions

The board, for its part, trumpeted the plan, saying in a statement that it delivered “meaningful reductions from bondholders, providing, on average, a more than 60% blended reduction in total commonwealth liabilities and “strengthens pensions by establishing an independent pension reserve trust to ensure” that benefits could be paid “regardless of the economic or political situation” on the island.

The plan includes an 8.5% pension cut to retirees who earn more than $1,200 a month, which would affect an estimated 40% of retirees. The tentative agreement with retirees does provide for additional payments if Puerto Rico’s finances improve. If the commonwealth’s surplus is higher than projected during the next 15 years, retirees will receive 10% of that additional cash to make up for any cuts in the pension benefits, according to details of the plan posted on the federal board’s website.

“We think it’s an incredibly unfair process that has led up to this point negotiating the retirement system,” said Armando Santiago Pintado, the coordinator with the Let’s Build Another Agreement organization, which describes itself as a mobilization campaign to defend the island’s essential services and includes retired teachers, government workers and university professors.

“This move is a systemic risk for Puerto Rico,” Santiago said.

Referring to the Puerto Rican government’s plan of adjustment, which critics have charged is too generous to bondholders, Santiago said it would deplete urgently needed resources and that “we’re going to be right back into bankruptcy in the near term.”
In 2016, the U.S. Congress passed a law called Promesa that gave Puerto Rico the ability to seek bankruptcy and created the federal oversight board to manage the island’s finances. Though the board has the power to make binding policy choices over the objections of the island’s elected government, a federal judge concluded it has only budgetary tools and negotiations to force compliance from elected officials and legislators in terms of adopting new laws or modifying or repealing existing ones.
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  #314  
Old 10-10-2019, 12:56 PM
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https://jacobinmag.com/2019/10/ameri...o-ampr-pension

Quote:
Why Is the American Federation of Teachers Giving Away Educators’ Rights in Puerto Rico?
Unions should fight for both their members and the entire working class. Yet in Puerto Rico, the American Federation of Teachers affiliate is doing neither, partnering with the island’s unaccountable Fiscal Control Board to impose massive cuts to teachers’ retirement funds.


Spoiler:
In the weeks before Puerto Ricans rose up and took down governor Ricardo Rosselló this summer, educators on the island banded together to defeat a corrupt deal that would have destroyed their pensions. Now they’re organizing against a new version of the same rotten plan. The fight begs a basic question: Why is the American Federation of Teachers (AFT) spending millions of dollars to give away Puerto Rican teachers’ rights?

The rank-and-file uprising in June stopped a sweetheart deal that was negotiated in secret between the Asociación de Maestros de Puerto Rico (AMPR), which is the local affiliate of the AFT, and the unaccountable Fiscal Control Board that imposes budget cuts and austerity in Puerto Rico. In a highly unusual maneuver, the union opted to spend a year in backdoor negotiations with the widely detested board rather than negotiate with the Department of Education out in the open and with the input of educators.

If passed, the agreement would have increased the retirement age, significantly lowered educators’ retirement salaries, and eliminated the pensions of active and future educators, turning them into 401(k)s — with zero employer contributions. It would have also reduced sick days and holidays, and eliminated bonuses — all under the banner of fiscal responsibility and debt repayment.

The educators’ rebellion stunned bosses and union leaders alike in June, but a new round of struggle is now underway. During the last week of September, the Fiscal Control Board, known as “la junta,” revealed its long-awaited austerity plan for Puerto Rico. The plan recycles key parts of the agreement for active educators between the AMPR/AFT and the junta that was voted down by educators in June and proposes an 8.5 percent cut for current retirees with pension benefits totaling over $1,200 a month — a reduction that was decided upon by the federally appointed Committee of Retired Employees (COR) and accepted by the union bosses.

When asked what impact the 8.5 percent cut would have, retired industrial technology teacher Pedro Pastrana Ortiz replied, “[The cut will mean retirees] living without water and without electricity. It will bring us back to the time of Hurricane María, or to the 1940s when we didn’t have basic amenities in our homes.”

A reduction in already low pensions for Puerto Rican teachers and school personnel — who receive pensions in lieu of paying into or collecting Social Security — would have a catastrophic impact on an already vulnerable, aging population. “The reality is that retired educators in Puerto Rico already live from paycheck to paycheck,” commented retired social worker Gladys Padilla. “What we receive right now is not even enough for a decent life.”

The destruction of the retirement system in Puerto Rico would have ripple effects far beyond educators. “The agreement will have a terrible impact on whole families,” retired elementary school teacher Eulalia Centeno said in January in testimony before Judge Laura Taylor Swain, the federally appointed judge who will ultimately decide on the future of pensions in Puerto Rico. “They could lose their homes or be forced to migrate. Children, grandchildren, young people, and even those who have not been born will be forced to live through the worst crisis Puerto Rico has ever seen.”

The junta openly advocates for the billions of dollars of illegitimate debt to be paid for on the backs of workers. Serving as a US-imposed dictatorship, it advocates for the interest of big business, the lowering of the minimum wage, the privatization of public services, and the gutting of public-sector pensions and job protections across the board.

When they were first presented with the proposal from the AMPR/AFT, it came as no surprise to Puerto Rican educators that the junta was coming for their rights. But what confused and outraged many was finding out that the union went behind their backs to give away their rights — and then sprung the results on them during the last week of school.

“We were completely caught off guard,” explained Hugo Delgado-Martí, a twelfth-grade physics teacher. “It was the last week of school when the Asociación came out with their lousy deal. They said that a week later, during our first week of vacation, we would have to vote. This really bothered a lot of people.”

Even though educators were starting their summer break, they mobilized to vote down the proposal. Spearheaded by the militant K–12 educators’ union in Puerto Rico, the Federación de Maestros de Puerto Rico (FMPR), they organized informational meetings in schools, handed out leaflets, distributed analyses of the agreement, and started a social media campaign.

Within one week, the campaign to vote no picked up steam, and photos, videos, and posts by educators explaining in words, pictures, and song why they would reject the proposal went viral in Puerto Rico. The flowering of democracy and creativity at the grassroots overtook the AMPR/AFT’s million-dollar propaganda machine.

At the end of the week, the scene at the voting booths looked quite different. Instead of using schools or other publicly accessible sites as voting locations, the AMPR/AFT rented private venues in order to prevent Vote No campaigners from getting anywhere nearby. When teachers opposed to the proposal came to hand out literature and talk to their colleagues, the police were called.

Even observers trying to conduct exit polls were not allowed near the voting stations. At the Pedrín Zorrilla Coliseum in San Juan, where polling was taking place for the region, observers attempted to hand out pens so that ballots filled out in pencil couldn’t be changed. But AMPR/AFT representatives called the police on observers, and police blocked their entrance into the facility, even driving them out of the parking lot. Meanwhile, Vote Yes campaigners were allowed to hand out literature freely to everyone going in to vote.

Paul Figueroa attempted to observe the elections but was not let anywhere near the building by police. Figueroa commented on the experience: “It was a real assault on democracy. While our government was decrying dictatorship in Venezuela, the AMPR, AFT, and Fiscal Control Board used the Puerto Rican Police Department as their henchmen to deny our teachers their democratic process.”

This conflict between the AMPR/AFT and the FMPR is not new. The AMPR hasn’t always been the exclusive representative of Puerto Rican educators. The FMPR used to hold that position, and it used to be the AFT affiliate in Puerto Rico. In 2005, the FMPR voted to reject the colonial role the AFT has played on the island, and it disaffiliated from the international union after a reform caucus was elected to the FMPR leadership. In January 2008, when the FMPR membership voted to go on an illegal strike to defend public education, the government decertified, vilified, and isolated the union, later taking away their ability to even collect dues from their members.

The AMPR became the exclusive representative of Puerto Rican educators in 2016, and the AFT started collecting educators’ dues again when the AMPR affiliated with the AFT the following year. At the heart of the disagreement between the AMPR/AFT and the FMPR has been a debate between business unionism and class-struggle unionism. The business unionism that is practiced by the AFT and the AMPR accepts that the privatization of education is inevitable, and seeks to mediate the terms of that privatization and sell those terms to their members as a lesser evil. The class struggle unionism of the FMPR, on the other hand, rejects the idea that privatization is legitimate or inevitable and seeks to leverage the power of the rank and file over the power of the privatizers and colonial vultures in Puerto Rico.

Today, the AMPR/AFT is asking for a vote of confidence to continue to negotiate on behalf of educators. But the leadership of the AMPR/AFT is already continuing negotiations despite a serious crisis of legitimacy, after journalists revealed corruption and conflict of interest at its highest levels. It came out that the AMPR itself, as well as union president Aida Díaz’s husband and daughter, have received millions of dollars in contracts from the Department of Education. In light of these revelations, Díaz resigned this summer, but then postponed her resignation.

The AMPR/AFT has a lot to gain from the compromised role that it has played. The June agreement promised that in exchange for selling out teachers, the junta would pay the AFT and AMPR’s legal and operational fees. They were also guaranteed a lump sum of $200 million to distribute to their members in order to ensure they vote in favor of the proposal. The government promised that the AMPR will remain the exclusive and unchallenged bargaining representative of educators, and that the AMPR’s flailing health plan will be forced on all 25,000 of the island’s tenured teachers.

A lot is at stake for the union — it stands to lose everything promised to it by the government if educators reject the deal again. According to teachers I spoke to, the AMPR has been working in coordination with school administrations since the beginning of the 2019–2020 school year to try to keep the FMPR out of schools and prevent them from meeting with educators. But the rank-and-file campaign held the AMPR/AFT accountable in June. It can — and is likely to — do it again.

Judge Swain has given until November 30 for the negotiation of educators’ pensions, and the talks continue. The austerity plan is supported by the current, unelected governor of Puerto Rico, Wanda Vázquez, and the Puerto Rican courts never take the side of the workers unless forced to. As the politicians and the courts try to make workers pay for the crisis caused by the rich, educators will be mobilized in the streets to demonstrate their power again.

Pastrana Ortiz of the FMPR’s Retiree Chapter explained, “They are going to raise our electrical and water bills to pay the debt to the bondholders. They view the government bonds and energy authority bonds as legitimate debt that must be paid. But the debt that they owe us, the retirees — that is not legitimate debt? It doesn’t have to be paid? In reality, we had a contract with the government that would guarantee us a decent standard of living in our old age. So this is what we are saying to retirees: your pension is not a luxury, it’s not even a benefit. Your pension is part of your salary that the government was holding for your retirement for your old age. And we have to defend it in whatever way necessary.”

As Mercedes Martinez, the president of the FMPR, said: “If these cuts go through, they will leave us in extreme poverty. Teachers will resign in mass if this goes through . . . But we can beat this thing. We can and will beat if everyone joins in to play their historic role in this process.”


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  #315  
Old 10-10-2019, 02:47 PM
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https://www.scotusblog.com/2019/10/a...o-debt-crisis/

Quote:
Argument preview: Justices to hear argument in appointments clause dispute arising from Puerto Rico debt crisis

Spoiler:
The Constitution’s appointments clause provides that the president nominates, but the Senate must confirm, principal “Officers of the United States,” although Congress can also give the president the power to appoint “inferior Officers.” Next week the Supreme Court will hear oral argument on the scope of both this clause and the ancient remedy known as the “de facto officer” doctrine, which blesses an official’s actions even when his appointment is later discovered to have been invalid. The questions before the court may be a law nerd’s dream, but the justices’ resolution of these issues could have powerful real-world implications.


In 2015, Puerto Rico faced a financial crisis. The island was operating under a crushing debt – over $70 billion – that it was unable to repay. Because the island’s debt was not only massive but also held by a large number of individual investors on the U.S. mainland, in 2016 Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to restructure the commonwealth’s debt.

PROMESA created a Financial Oversight and Management Board to make fiscal, legal and governance reforms to bring financial stability back to Puerto Rico, including by restructuring the island’s debt. The board is made up of seven voting members, six of whom are supposed to be chosen from a list compiled by members of Congress; if they are chosen that way, Senate confirmation is not required. The law also gives the president discretion to select the seventh voting member of the board.

In May 2017, the board began proceedings in a federal court in Puerto Rico to restructure the island’s debt. But Aurelius Investment, a hedge fund that had invested in distressed Puerto Rico bonds, and a labor union that represents employees of Puerto Rico’s electric utility challenged the appointment of the board members. The U.S. Court of Appeals for the 1st Circuit agreed, ruling that the board members are “Officers of the United States” who must be nominated by the president and confirmed by the Senate.

But the court of appeals rejected a request by Aurelius and the union to invalidate all the actions that the board had already taken. Instead, relying on the de facto officer doctrine, the court of appeals concluded that those actions should stand. Reversing them, the court of appeals explained, would have “negative consequences for the many, if not thousands, of innocent third parties who have relied on the Board’s actions until now” and would “likely introduce further delay into a historic debt restructuring process that was already turned upside down” by “the ravage of hurricanes.”

The lower court’s ruling spawned five separate petitions for review: three – from the board, the federal government and a committee of unsecured creditors – asking the justices to review the 1st Circuit’s ruling that the appointment of the board members violated the Constitution and two more – from Aurelius and the union – asking the court to weigh in on whether the de facto officer doctrine prevents invalidation of the board’s prior actions. The justices granted all five petitions at the end of June and fast-tracked the cases for oral argument in October.

The threshold question before the justices is whether the appointment of the board’s members must comply with the appointments clause. The board, the federal government and others argue that the appointments clause only applies to “officers of the United States,” which means officers of the federal government. It does not extend to the local government of a territory like Puerto Rico, as confirmed by the fact that other words in the appointment clause (such as Congress and the president) also refer to the national government.

Further evidence that Congress does not need to comply with the appointments clause, they say, can be found in the territory clause of the Constitution, which gives Congress “full and complete legislative authority over the people of the Territories and all the departments of the territorial governments.” And historically, they add, Congress has not always complied with the appointments clause when selecting officers for U.S. territories.

Here, they argue, there is no doubt that the members of the board are officers of Puerto Rico, rather than officers of the United States: Congress clearly intended the board to be a local entity that acts for Puerto Rico, rather than part of the federal government. And they warn of serious consequences if the 1st Circuit’s ruling is upheld. The board, for example, cautions that the ruling “throws into doubt the legality of” its actions and “threatens the progress that Puerto Rico has made to this point,” while the federal government tells the justices that the ruling “threatens to upend the government of all five major U.S. territories and the District of Columbia.”

Aurelius and the union counter that the appointments clause does indeed apply to members of the board because they are “officers of the United States.” Board members are “appointed, overseen, and removable by the federal government alone,” they contend, and the board members “exercise significant federal authority” that goes beyond the authority exercised by territorial officials – for example, the sole power to enforce PROMESA in federal court and “investigative powers that sweep far beyond Puerto Rico.”

Aurelius and the union reject any suggestion that the territory clause carves out some sort of exception to the appointments clause. And allowing the 1st Circuit’s ruling to stand, they assure the justices, would not pose a threat to other territorial officers because it has long been understood that “purely local, territorial officers who enact and enforce primarily local law” are not “officers of the United States” and “may be elected or appointed in any manner of ways.”

The board and the government (among others) argue in the alternative that, although the board members’ appointments were legitimate, it is in any event well established that the de facto officer doctrine applies when it is later determined that appointments violate the Constitution. They stress that the harm from invalidating the board’s past actions as it attempted to restructure billions of dollars in debt would be significant – as one group of bondholders put it, it could “wreak havoc with the entire economy of Puerto Rico.” Indeed, they note, one proceeding filed by the board has already led to the confirmation of a plan to adjust billions of dollars’ worth of Puerto Rico’s debt by issuing new bonds, which are already on the market.

By contrast, they suggest, the benefit to Aurelius and the union would be minimal, because the proceedings that the board has initiated are no different from any other bankruptcy case in which Aurelius has participated – the board does not, for example, prosecute or adjudicate the case. And the violation, if it existed, was relatively small, because Congress did help to select the members of the board even if they were not confirmed by the Senate.

Aurelius and the union push back, arguing that the de facto officer doctrine should not apply and the board’s actions should be invalid. The Supreme Court has made clear that the de facto officer doctrine should not apply to violations of the Constitution, they contend, and it would be particularly inappropriate to apply the doctrine here, when the violation of the appropriations clause was “so open and notorious.” Adding insult to injury, they continue, the board has continued to work even after the 1st Circuit ruled that its members’ appointments violated the appointments clause.

Aurelius suggests that a ruling that the de facto officer doctrine applies to this case could lead to a variety of undesirable effects. First, it observes, private parties won’t have an incentive (and may not even have a legal right to sue) if a remedy is not available for past violations of the appointments clause. Second, it contends, such a result “would also encourage Congress to usurp executive authority, confident that it will suffer no repercussions.”

Aurelius also urged the justices not to be swayed by dire warnings that chaos will ensue if the de facto officer doctrine does not apply. These claims, it argues, “boil down to an extraordinary assertion that the constitutional violation here is simply too blatant and too big to remedy” – an argument that “turns the Constitution upside down.”

Next week’s argument, which the justices expanded to 80 minutes, will feature four different lawyers debating these questions. Although we won’t know for some time how the court is likely to rule, we can be sure that lawyers, law professors and the bond markets, as well as residents of Puerto Rico, will all be waiting anxiously for the result.
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  #316  
Old 10-10-2019, 04:14 PM
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https://fixedincome.fidelity.com/ftg...1e8a0000_110.1
Quote:
Supreme Court considers legitimacy of Puerto Rico Oversight Board
Spoiler:
The U.S. Supreme Court hears oral arguments next Tuesday on the legitimacy of the debt restructuring being imposed on Puerto Rico by a Financial Oversight and Management Board whose members were not confirmed by the U.S. Senate.

The U.S. Chamber of Commerce and American Civil Liberties Union are among the parties that have filed friend of the court briefs.

A high court ruling in the case could have a far-reaching impact on capital markets as well as on the separation of powers between the executive and legislative branches. The court's decision could even invalidate the work of the Oversight Board.

And the wild card part of this case is whether the justices decide to take an expansive look back on early 20th century decisions known as the Insular Cases and rule on the constitutional rights of U.S. citizens living in territories outside the 50 states.

The appeal comes from the Oversight Board, which lost an appellate court lawsuit filed by the hedge fund Aurelius Investment and other hedge funds as well a labor union representing utility workers.

The First Circuit of the U.S. Court of Appeals ruled that the appointment of members of the Oversight Board violated the separation of powers contained in the Appointments Clause of the U.S. Constitution because President Barack Obama’s appointees were not first confirmed by the U.S. Senate.

The Oversight Board was created by Congress under the 2016 Puerto Rico Oversight, Management, and Economic Stability Act to address the commonwealth’s debt crisis.

The federal government’s brief said Congress acted because “Puerto Rico faced the most debilitating fiscal emergency in its history” with the commonwealth and its instrumentalities loaded with “around $71.5 billion in outstanding debt, more than the whole annual output of the island’s economy.”

“Their credit ratings had been downgraded to junk, leaving them unable to borrow money on the bond markets,” the government said. “Nor could they get debt relief through the federal bankruptcy code.”

It was because of this “financial catastrophe” and “humanitarian crisis for the more than three million U.S. citizens living in Puerto Rico” that Congress acted.

But the Oversight Board and the federal government argue that the Appointments Clause does not apply in this case under Article IV of the Constitution, which empowers Congress to admit new states and administer the territories.

So the question for the court is whether some parts of the Constitution, such as the Appointments Clause, don’t apply to territories.

The utility workers union, Unión de Trabajadores de la Industria Eléctrica y Riego Inc. (UTIER), represents employees of the Puerto Rico Electric Power Authority (PREPA), who say in their court filing they have been “extremely harmed” by the “profound austerity measures” imposed by the Oversight Board on their salaries, bonuses, pension and health plans.

“The Oversight Board has rushed to finalize as many actions as possible, all while holding an unconstitutional appointment, thus, having no authority to act,” UTIER said in its filing.

The appellate court, however, allowed the Oversight Board’s previous actions to stand under the so-called de facto officer doctrine as long as a new board was promptly nominated by the president and confirmed by the Senate.

President Donald Trump has renominated all of the Oversight Board’s members since that ruling, but the Senate has not voted on confirmation.

The U.S. Chamber of Commerce argues in its friend of the court brief that the de facto officer doctrine should not be allowed to paper over constitutional errors.

“Never before has the court endorsed use of the de facto officer doctrine to excuse structural constitutional errors that go to the core of preserving political accountability and protecting individual liberty,” the chamber’s brief said.

The chamber requests that the case be remanded to the lower courts “unless and until the constitutional violation has been cured.”

The ACLU and its sister chapter in Puerto Rico have asked the high court to not use the so-called Insular cases to decide whether the members of the Oversight Board required Senate confirmation under the Appointments Clause.

The Insular Cases from the early 20th century said residents of territories had only some of the protections of the U.S. Constitution.

Those rulings distinguish between incorporated territories destined for eventual statehood such as Alaska and unincorporated territories that were not.

“The Insular Cases, which impose a second-class constitutional status on all who live in so-called ‘unincorporated’ territories, explicitly rest on outdated racist assumptions about the inferiority of ‘alien races,’ and depart in unprincipled ways from the fundamental constitutional tenet of limited government,” the ACLU said.

Those Supreme Court decisions came under Chief Justice Melville Fuller, who also led the 1896 majority decision in Plessy v. Ferguson that established the “separate but equal doctrine” of racial segregation.

“Obviously Plessy was overturned by Brown v. Board of Education 58 years later,” said Rafael Cox Alomar, a professor of law at the University of the District of Columbia, who is one of four constitutional scholars who filed a friend of the court brief.

Cox Alomar said the law professors are asking the high court to either not use the Insular cases in deciding the case or that they be overruled.

“They are the consequence of a racist approach,” he told The Bond Buyer. “We are saying the Constitution fully applies to Puerto Rico.”


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Old 10-15-2019, 04:55 PM
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https://www.wsj.com/articles/puerto-...rt-11571094825
Quote:
Puerto Rico at the Supreme Court
Congress has the power to manage territories as it wants.

Spoiler:
Amid a spiraling economic crisis in Puerto Rico, Congress established a control board to impose outside discipline. The Supreme Court on Tuesday will consider the board's constitutionality in a case that ostensibly pits Congress's plenary authority over U.S. territories against the Appointments Clause. Yet there is no real constitutional conflict between the two.

Congress in 2016 enacted a law known as Promesa establishing a seven-member board modeled on Washington, D.C.'s financial control board of the 1990s. Promesa allows the board to oversee fiscal decisions and established a bankruptcy-like mechanism that authorized the board to restructure $70 billion in debt and $50 billion in pension obligations.

The hedge fund Aurelius, which owns Puerto Rican bonds, argues that the board violates the Appointments Clause requiring "officers of the United States" to be appointed by the President with the advice and consent of the Senate. Promesa allowed the President to appoint members from a list of nominations by the House Speaker (two), Senate Majority Leader (two), House Minority Leader (one) and Senate Minority Leader (one). The President could choose the seventh, and none of the members have to be confirmed by the Senate.

According to Aurelius, the board vitiates constitutional protections that safeguard liberty and prevent abuses of power. But members of the D.C. control board weren't confirmed by the Senate. And Article IV grants Congress "power to dispose of and make all needful Rules and Regulations" for territories. Congress can structure territorial governments as it chooses.

For instance, the Northwest Ordinance of 1789 provided for a territorial legislature with one house that was popularly elected and another comprised of appointees chosen by the President from lists proposed by the elected house and confirmed by the U.S. Senate.

The Court has long held that the Constitution's structural safeguards including the Appointments Clause do not apply to territories. As Antonin Scalia noted in Freytag (1991), "Congress may endow territorial governments with a plural executive; it may allow the executive to legislate; it may dispense with the legislature or judiciary altogether."

While Aurelius argues that board members are officers of the United States, Promesa explicitly invokes Article IV and limits their jurisdiction to Puerto Rico. Congress in effect reorganized Puerto Rico's government and vested the board with litigation and budgetary power held by local politicians.

While siding with Aurelius, the First Circuit Court of Appeals invoked the "de facto officer" doctrine from English common law to sustain the board's prior actions and avoid chaos for other parties in the restructuring. While courts must balance the equities in deciding relief, Aurelius has a point that this doctrine was misapplied and has asked the Court for review.

But Aurelius wants to pick and choose when the board's authorities are valid based on its financial interests. The hedge fund recently agreed not to contest the board's authority to approve a settlement of sales-tax bonds in which it received a favorable outcome. Sorry, guys, you can't have the law both ways.

Promesa requires a federal judge to ensure that the board's debt decisions are in the best interests of creditors, so Aurelius will have another chance to contest its treatment. But the Justices shouldn't stop the board from exercising powers granted by Congress under the Constitution.


transcript of oral arguments:
https://www.supremecourt.gov/oral_ar...-1334_ljgm.pdf

SCOTUSblog:
https://www.scotusblog.com/case-file...r-puerto-rico/

https://www.scotusblog.com/2019/10/a...ersight-board/
Quote:
Argument analysis: Justices weigh appointments dispute – and nature of Puerto Rico oversight board
Spoiler:
The Supreme Court heard oral argument this morning in a dispute over the validity of appointments to a board created by Congress to bring financial stability back to Puerto Rico. With billions of dollars potentially at stake, the courtroom was packed with spectators, many of whom had flown in from Puerto Rico. And although the justices had been asked to resolve questions involving the interpretation of the Constitution and the applicability of an ancient remedy known as the “de facto officer” doctrine, the outcome of the case could hinge on a relatively simple question – whether, as seemed likely, a majority of the justices believe that the board’s duties are primarily local in nature.


Donald B. Verrilli, Jr. arguing for Financial Oversight and Management Board for Puerto Rico (Art Lien)


In 2016, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Among other things, PROMESA created a Financial Oversight and Management Board to make various reforms to bring financial stability back to Puerto Rico, including by restructuring the island’s massive – over $70 billion – debt. The board is made up of seven voting members. Six are selected from a list compiled by members of Congress and do not require Senate confirmation; the president has discretion to select the seventh.

After the board began proceedings in federal court to restructure the debt, Aurelius Investment – a hedge fund that had invested in distressed Puerto Rico bonds – and a local labor union challenged the method by which the board’s members had been appointed. Under the Constitution’s appointments clause, although the president nominates principal “Officers of the United States,” the Senate must also confirm them. The U.S. Court of Appeals for the 1st Circuit agreed with Aurelius and the union that the board members were “Officers of the United States” who should have been nominated by the president and confirmed by the Senate. But the court of appeals declined to invalidate all the actions that the board had already taken. Relying on the “de facto officer” doctrine, which blesses an official’s actions even when his appointment is later discovered to have been invalid, the court of appeals allowed those actions to stand because of the problems that reversing them might create. The Supreme Court agreed in June to review the 1st Circuit’s decision.

Arguing on behalf of the board, Donald Verrilli urged the justices to focus on the nature of the board’s authority. PROMESA, he stressed, sets up an entity that operates within the territorial government, and the board acts on behalf of Puerto Rico.

Justice Elena Kagan pressed Verrilli to look at the fuller picture. Wasn’t Congress, she asked, thinking about the broader interests of the United States, where many investors on the mainland also held part of Puerto Rico’s debt, rather than just Puerto Rico when it passed PROMESA? Congress could have gone with a bailout of Puerto Rico, Kagan suggested, but opted not to because a bail-out would have been more expensive for the United States overall.

Verrilli insisted that the justices should “look at the best evidence of what Congress did”: It “told this board to act for Puerto Rico.”

But that response from Verrilli elicited a question that Chief Justice John Roberts would repeat several times throughout the 80 minutes of oral argument: “What if,” Roberts queried, “we don’t think it’s all or nothing” – that is, the board’s activities are both territorial and also have a broader impact?

Verrilli held firm. Congress instructed the board, he responded, to address Puerto Rico’s debt problems by acting in Puerto Rico’s interests.


Jeffrey B. Wall, Principal Deputy Solicitor General (Art Lien)

Appearing on behalf of the United States, Deputy Solicitor General Jeffrey Wall echoed Verrilli’s argument that the “hallmark” to determine whether the appointments clause applies “has always been ‘what kind of power are you exercising?’” And “everything that the board is doing,” he continued, “it’s doing in Puerto Rico.”

In response to questions from Justices Stephen Breyer and Sonia Sotomayor, Wall addressed what might happen if the court were to rule that the appointments to the board violated the appointments clause. “What difference would it make,” Breyer asked, if you still prevail on the “de facto officer” doctrine, so that the board’s past actions would still be valid?

Wall cautioned that even if the president appointed the same board members, the Senate would still need time to act, and he predicted that there would be other obstacles, such as challenges to the new board’s efforts to ratify the old board’s prior actions.

But his warnings about might happen if the court were to rule that the appointments violated the Constitution and the “de facto officer” doctrine does not apply were even more dire. I have “no idea how one unwinds this,” Wall said. If the board were shut down, he told the justices, it “imperils a process in which we have made really substantial gains in the past three years.” And more broadly, every test that the challengers have proposed would result in some set of territorial officers – such as judges in the District of Columbia – also being classified as federal officers.


Theodore B. Olson for Aurelius Investment, LLC (Art Lien)

Theodore Olson – who, like Verrilli, is a former U.S. solicitor general – argued on behalf of Aurelius. He portrayed the board as a very different kind of institution, reiterating that the insolvency of Puerto Rico is a “national issue.” Congress was dealing with a federal problem, he emphasized, and it came up with a federal solution – the board.

Olson faced skepticism from Justice Samuel Alito about his client’s motives for challenging the validity of the board members’ appointments. Noting that he might be “excessively cynical,” Alito asked Olson whether Olson and his client were “just here to defend the Constitution” or whether they in fact had a “concrete grievance.”

Olson shot back that his client was being subjected to a process governed by officials who were appointed in violation of the Constitution.

But Alito pressed on, wondering aloud whether “there is no money issue involved here?” Olson acknowledged the billions of dollars at stake in the debt restructuring, prompting Alito to quip that Olson’s client “wants more of it.”

Kagan suggested that the tests proposed by Aurelius, on the one hand, and the government and the board, on the other, might not be that different after all. If you can agree on a test, Kagan observed to Olson, that is “not a bad thing.”

After Olson again stressed that the board was acting “primarily nationally,” Sotomayor noted that the government and the board regard the board’s duties as local – dealing, for example, with the budget.

Olson pushed back, pointing the justices to PROMESA itself. The insolvency of a U.S. territory is not a local matter, he declared. Congress wanted to avoid a “fiscal catastrophe” and a “humanitarian crisis.”

But Justice Brett Kavanaugh appeared unconvinced. “If we conclude that the board’s powers are primarily local,” he asked, “do you lose?”


Jessica E. Méndez-Colberg for Unión de Trabajadores de la Industria Eléctrica y Riego, Inc. (Art Lien)

Arguing on behalf of a labor union that represents employees of Puerto Rico’s electric utility, lawyer Jessica Mendez-Colberg pleaded with the justices to overrule the Insular Cases, a group of Supreme Court cases dating back to the early 20th century that allow Americans in U.S. territories to be treated differently. Referring to the words on the front of the Supreme Court building, she contended that “Equal Justice Under Law should mean the same thing here as in Puerto Rico.”

The justices mostly allowed Mendez-Colberg to speak without interruption. Only Roberts spoke up, telling her that he thought “the argument was whether the appointments clause” applies to the board. “I just don’t see the pertinence” of the Insular Cases to this issue, he concluded.

In his rebuttal, Verrilli contended that the challengers had filed this lawsuit “because they want a new board.” If the board members’ appointments are deemed invalid, he continued, the challengers will fight ratification of the board’s prior decisions “tooth and nail” for “years and years.” But, he made clear, there is no need to reach the issue of a remedy for a violation of the appointments clause at all. And although predicting the outcome of a case based on the oral argument is always hazardous, it seemed likely after this morning’s argument that there are at least five justices who agree with Verrilli. A decision is expected sometime next year.

This post was originally published at Howe on the Court.


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Old 10-21-2019, 10:53 AM
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https://fixedincome.fidelity.com/ftg...9c360000_110.1

Quote:
Puerto Rico board says future may be bleaker than expected

Spoiler:
Puerto Rico’s Oversight Board said there may less money to pay bondholders than it has projected and Puerto Rico’s $18 billion in bank accounts allows for no additional money to pay bondholders.

The board made these arguments in two documents it made public on the Electronic Municipal Marketplace Access web site Thursday night. The documents had been circulated to bondholders over the last 30 days in confidential mediation talks.

Government financial reports since Hurricanes Maria and Irma hit in late summer 2017 have shown more revenue than either the board or the local Treasury Department had projected. Some bondholders have used those reports to urge a more generous settlement.

The first document, “Commonwealth Fiscal Plan Risks,” argued that several sources of revenue have been coming in more slowly than the May-approved fiscal plan had projected, existing sources of revenue could easily take substantial cuts, and that there was a danger that needed structural adjustments would not be made.

“There are no game changers in this document,” said John Ceffalio, AllianceBernstein (AB) municipal credit analyst.

“The discussion of the risks to the fiscal plan is instructive,” Ceffalio continued. “The plan is fragile and the disclosure outlines the many reasons for this fragility.

“Two things stood out to me. First, this confirms the slower than expected pace of disaster aid. This is concerning because disaster aid is the only positive driver in today’s Puerto Rico economy. Second, the document highlights the deterioration of local sub-Commonwealth level government finances. This likely means austerity at the local level, which would be an economic drag, and I worry it may also mean restructuring the debts of those local governments.”

Ceffalio said since Puerto Rico has historically been weak with disclosure, he welcomed the release of information.

“The Commonwealth Fiscal Plan Risks document does a nice job of discussing the many factors potentially affecting the surplus projections for Puerto Rico,” said Robert Chirinko, University of Illinois professor.

“Commonwealth Fiscal Plan Risks” points to several ways the board’s fiscal plan projections for revenue may be overly optimistic. As reactions to economic or political uncertainty, population could decline more quickly than had been projected. Another storm, financial crisis, or health epidemic could also be causes of greater migration.

Puerto Rico could get substantially less federal Hurricane Maria and Irma disaster aid than the plan had projected. The board’s “Commonwealth Fiscal Plan Risks” says there might be a $30 billion shortfall on what it had projected to be $69 billion in aid. Also this aid is being delivered more slowly to the island. If the former materializes or the latter continues, there would be less economic stimulus than the fiscal plan had expected.

The board said the federal government may also cut its funding of local Medicaid.

The board points out that 85% of the exceedance in fiscal year 2019 revenues compared with the May fiscal plan came from just four taxes: corporate income taxes, Act 154 foreign corporate excise tax, motor vehicles, and other General Fund revenue.

Experience shows that corporate income tax booms are usually followed by busts, the board said. Puerto Rico is particularly susceptible because much of the corporate income tax revenue comes from just a few corporations.

The Act 154 revenues could be lost quickly when the United States revokes tax creditability for U.S. taxes, as U.S. Secretary of the Treasury Steven Mnuchin has said will be done.

The surge in motor vehicle tax revenue after the hurricanes appears to be subsiding, he said.

On structural reforms the report said, “the government is behind on implementing all of the major structural reforms required to drive economic growth on the island.”

Of particular concern are the potential impact of energy and ease-of-doing-business measures. The board estimates the former would contribute $12.9 billion to surplus for fiscal year 2019 to 2049 and the latter would contribute $16.6 billion in that period.

Additionally, the board said that its government fiscal measures are at risk. Due to local government inaction there is a possibility of reducing full time equivalent employment by 50% less than the fiscal plan envisions. That would cost Puerto Rico $20.3 billion from fiscal 2019 to fiscal 2049.

The board’s efforts to curb healthcare costs are imperiled by poor implementation and new federal benefit requirements. Together these could cost the government $27.8 billion through fiscal 2049.

The board’s fiscal plan projects to reduce subsidies to the University of Puerto Rico and municipalities. A lack of progress in lowering these costs, could force the central government to continue these subsidies. That might cost $16.3 billion through fiscal 2049.

The board points out that 21% of all municipalities rely on Commonwealth government subsidies for at least 40% of their revenue and 41% of municipalities rely on these subsidies for at least 30% of their revenue.

The second document the board released Thursday evening says that of $18.06 billion available as of June 30, $11.11 billion was restricted or was for non-Commonwealth central government or non-Title III bankruptcy entities. This left a total of $6.9 billion potentially available for debt payments.

However, the board said there were already claims for all of this money. First, the board is setting aside $2 billion for a “base cash consideration” for general obligation and Public Building Authority bond holders. It also assumes $2 billion for a “working capital requirement,” $1.6 billion for “union and retiree settlements,” $900 million for “maximum excess cash,” $632 million for purchasing Employees Retirement System assets, $400 million for a “cash/bond consideration toggle,” and $200 million for “convenience class.”

If these sums are set aside, the government is hypothetically left with an $827 million deficit.


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Old 10-23-2019, 06:53 AM
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https://fixedincome.fidelity.com/ftg...f94a0000_110.1

Quote:
Puerto Rico House votes to resist pension cuts

Spoiler:
The Puerto Rico House voted unanimously to not collaborate with pension cuts found in Puerto Rico’s proposed plan of adjustment.

The House voted 49 to 0 with two members absent on Monday for the resolution that was addressed at a Puerto Rico Oversight Board plan of adjustment. The plan includes 8.5% cuts to pension amounts over $1200 per month.

Though Municipal bankruptcy experts said the House action may lead to battles when it comes to implementing the pension cuts and the plan in the medium and long-term, they had mixed opinions on whether it would prevent court approval.

“The board hasn’t built a constituency with the legislature and, as campaign season approaches, the Puerto Rican politicians will increasingly run against the board’s policies" Municipal Markets Analytics Partner Matt Fabian said. "This should be a concern for anyone planning to own a bond with a maturity beyond the board’s ultimate date of departure.”

The Oversight Board has a mandate under the Puerto Rico Oversight, Management and Economic Stability Act to restructure about $123 billion of bond and pension obligations and restore fiscal stability to the local government. The board is to remain in operation until the local government has had a balanced budget for three consecutive years.

The purpose of the House resolution, according to a translation of the summary, is: “To express the most absolute and energetic rejection of the Legislature of Puerto Rico to the Fiscal Oversight Board Plan of Adjustment to recommend to the federal court a cut of 8.5% to the amount that our public pensioners receive from the Government of Puerto Rico; to express that the legislature will not approve legislation that makes the aforementioned adjustment plan feasible; to authorize the presidents of the House of Representatives and the Senate of Puerto Rico to perform all the acts they deem necessary to enforce the rejection declared above; and for other related purposes.”

James Spiotto, managing director of Chapman Strategic Advisors, said that Title III bankruptcy Judge Laura Taylor Swain didn’t need the approval of the Puerto Rico House or Senate’s support of the plan to confirm it. However, after approval the legislature could attempt to over-appropriate money for the pensions so the pensions could be paid at the originally promised levels.

In that case parties could go to a court to get it to order the lower levels of spending but by then things would have gotten messy, Spiotto said. It would be better for the board and legislature to discuss their differences now rather than turning to suits later, said Spiotto, who is an expert on U.S. municipal bankruptcies.

Spiotto said Puerto Rico's case was the first time since World War II in which at least one body of the local government is united in opposition to the actions of the control board. Gov. Wanda Vázquez has said that she supports the plan of adjustment as a package, even if she would rather it didn’t cut pensions.

“Ideally, you would want cooperation between the legislature and the Fiscal Oversight Board in order to structurally balance operations and for the commonwealth to re-enter the debt market," said Howard Cure, director of municipal bond research at Evercore (EVR). "This will be a test of the board’s authority to go ahead with this pension cut in light of the opposition.”

Shaun Burgess, portfolio analyst at Cumberland Advisors, said, “My understanding is that advancement of the plan depends on Judge Swain’s approval and not legislative action.

"Whether the House’s action could be road block at some point in the future remains to be seen,” Burgess continued, cautioning that he is not a lawyer.

Unlike Spiotto, Puerto Rico attorney John Mudd saw the House motion as a potential problem before any court approval of a plan. He said in an email, “The board has made it clear that if the legislature refuses to enact the required laws, it will go to Judge Swain for an order to that effect. If Swain agrees, that’s it. BUT if she does not, it could mean the dismissal of Title III.”

He said the Puerto Rico Senate is likely to follow the House’s lead in approving a similar resolution.

Spiotto said the proposed pension cut would be modest compared to those in found in other municipal bankruptcies. In the Central Falls, R.I. bankruptcy pension benefits were cut by 50%, he said.


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Old 11-03-2019, 07:41 AM
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https://www.orlandosentinel.com/opin...ywe-story.html
Quote:
Puerto Rican retirees worry PROMESA breaks pension promise | Commentary
Spoiler:
For Puerto Rican retirees living in Florida, the critical question of the long-term security of their pensions is a constant source of worry.

On Wednesday, the House of Representatives’ Natural Resources Committee heard testimony from a cross-section of Puerto Ricans and other stakeholders as it considers amendments to PROMESA, the 2016 law that created a financial oversight board — also referred to as the “junta” — for Puerto Rico. The junta has implemented austerity measures that have created misery on the island in an effort to pay off the vulture funds that have scooped up Puerto Rico’s debt. And as discussions swirl around the future of Puerto Rico’s pensions, retirees are looking to Congress to protect their much-needed income.

Maria Revelles
Maria Revelles (Courtesy photo)
One of those retirees is Jose Colon, a 67-year-old retiree who worked for the workers’ compensation fund for Puerto Rico but is one of the tens of thousands forced to leave the island and now lives in Meadow Woods. Jose is worried that cuts to his pension will push him into bankruptcy. With mortgage payments, a son in college and close to $1,000 a month in medical insurance and other related bills, he needs every dollar he gets just to make ends meet. He says that any cuts to his monthly check would push him into poverty after a life of service for workers on the island.

There has been some good news from the island that gave retirees like Jose a feeling of optimism — at least for now.

In October, Puerto Rico’s legislature passed a resolution opposing the proposed plan of adjustment and warned they would vote down any legislation that could implement the junta's proposed pension cuts of up to 8.5 percent as well as cuts to other essential services. But the resolution still needs to pass the Puerto Rican Senate to have any teeth to fight back against the junta’s plan to slash retiree payments.

For three years the junta’s austerity measures have cruelly targeted some of the most vulnerable people on the island. Retirees — many living precariously on meager pensions — have seen their retirement income cut and cut again.

As the punishing austerity measures crushed public investment and led to decaying infrastructure, frequent power outages and the loss of other vital services, the damages from two hurricanes in September 2017 were the final straw for many Puerto Ricans. The exodus to the States has been unprecedented. In 2018, the island lost 4.4 percent of its population. Of the 142,000 residents who left, over 47,000 moved to Florida.

Natural Resources Committee Chair Representative Raul Grijalva has said he wants to amend PROMESA to protect pensions and ensure it doesn’t cause further suffering for Puerto Ricans. But Puerto Rico’s chief financial officer and the executive director of the junta have pushed back, seemingly more concerned about bondholders than the millions of Puerto Ricans suffering under austerity.

Hundreds of thousands of retirees could see their pensions cut again and again if there are no amendments to PROMESA’s heartless austerity push. Nearly 27,000 retired school teachers (nearly 3 in 4), who are ineligible for social security in Puerto Rico, are facing permanent cuts to their already modest pensions.

While these cuts are disastrous at a human level, they will also place more pressure on local communities as Puerto Rican senior citizens lose vital resources they need and money they put into the local economy also dries up.

Our representative, Darren Soto, who sits on the Natural Resources Committee, has called for amendments to PROMESA to ensure Puerto Ricans have more control over the island’s budget and the debt repayment process.

It’s encouraging to see Representative Soto and other committee members’ questions about cancellation of the debt. It’s a discussion we need to have. We are also encouraged by Soto’s push for a consensus on protecting essential services and boosting economic growth — and protecting retirees’ pensions will be a key part of that.

We urge Rep. Soto and the Florida Congressional delegation, including Sens. Rubio and Scott, to call for 100 percent protection of pensions and cancellation of Puerto Rico’s debt to ensure that essential services are safe from bondholders in the future.

We are watching what our elected officials are doing, we are organizing and we will fight for justice for retirees, children and all Puerto Ricans, on the streets, in the halls of Congress and next year at the ballot box.

The author leads the work in Florida of VAMOS4PR, a network of stateside groups committed to helping Puerto Rico. She is based in Orlando.


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