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  #151  
Old 07-12-2017, 05:50 PM
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http://thehill.com/blogs/pundits-blo...-statehood-its

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The solution to Puerto Rico's debt crisis isn't statehood — it's default

In an overwhelming majority, Puerto Rican citizens recently voted in favor of becoming the 51st U.S. state. According to poll results, nearly 97 percent of Puerto Ricans were in favor of statehood. Puerto Rico’s governor, Ricardo Rosselló, declared the results a clear victory in favor of becoming a state — the solution he preferred. In a televised speech after announcing the results, he said, “the federal government will no longer be able to ignore the voice of the majority of the American citizens in Puerto Rico.”

What he should have said was the federal government could no longer ignore the voice of 23 percent of the American citizens of Puerto Rico because those are all that bothered to turn out for the vote. In a country where voter turnout is normally closer to 80 percent, a 23 percent turnout is hardly exciting.

Here is a territory that is so thrilled to become a U.S. state that over three-quarters of the population did not bother to even show up at the polls. The reason for this low turnout: they are only considering statehood because it seems like the best option to get out of the more than $70 billion debt crisis they are in.

.....
The solution to get Puerto Rico out

It’s not that the U.S. should do nothing for the territory of more than 3 million, but the government shouldn’t pretend that statehood is the best solution. Allowing Puerto Rico to default on its debt would be the best thing the U.S. could do for the territory. Looking to Detroit as an example, its municipal default gave the Motor City some breathing room and has allowed for a nascent economic recovery from its crisis.

The best way to remedy the current and desperate financial condition of Puerto Rico is to stop lending money to the government so it can no longer be squandered. Contrary to what certain governments’ and stakeholders’ actions might suggest, nothing is too big to fail. It is also the best hope we have of ending the trend of countries, states, and cities needing to be bailed out after borrowing more money than they can repay.

Denying Puerto Rico statehood in its time of need may sound like callous indifference, but at the end of the day, it is the best thing for the island. What Puerto Rico needs more than statehood is to be forced to own up to its obligations. 77 percent of Puerto Ricans made it clear that if the U.S. was their only option, they would rather not vote.

If Puerto Rico becomes a U.S. state, let it be because its people want to be an official part of this nation, not because they are desperate for a way out of their debt.

Chris Markowski (@ChrisMarko) is an author, investment banker, stock market analyst, and consumer advocate. He is the personality behind Watchdog on Wall Street and the founder of Markowski Investments.

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  #152  
Old 07-31-2017, 04:50 PM
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http://www.caribbeannewsnow.com/head...ine-35136.html

Quote:
Commentary: Puerto Rico is the canary in the Caribbean coal mine

By Rep. Sheryl Williams Stapleton

Overwhelming debt for states and municipalities has become almost commonplace in the United States today. First it was the city of Detroit, which filed for bankruptcy in July 2013, claiming a debt load of $18-20 billion.

.....
Here in New Mexico, the new outlook shows $7.4 billion in unfunded pension liabilities, with 46,000 retirees falling into the fiscal gap.

Yet while the challenges these debts present are enormous, these cities and states have a clear legal status under the US Constitution and regular attention paid to them. Territories, such as Puerto Rico and the US Virgin Islands (USVI) , where I was born and raised, aren’t nearly as lucky.
......
Puerto Rico is already embroiled in similar debt issues of an even greater magnitude. The island commonwealth, also home to American citizens with no right to vote in Congressional elections and a complicated legal relationship between its island government and the mainland, has a staggering $123 billion in bond debt and unfunded pension obligations. The island’s governor declared a form of bankruptcy in May of this year, a gesture that was seen by many as a move to step away from the responsibility to govern.
.....
Last summer, Congress passed PROMESA, which established an oversight board to get Puerto Rico’s finances sorted out. Unfortunately, a May 1st deadline passed without a real plan for addressing debt issues was reached, and the crisis is worsening by the day on the island. Every day that the island’s leaders, Congress and the oversight board stall without coming up with a reasonable plan, the economic situation grows worse.

Multiple classes of bondholders exist in Puerto Rico: general obligation bondholders, which are given priority by the island’s constitution, COFINA bondholders, whose debt holdings are tied to the sales tax, and PREPA bondholders, who own debt issued by the power authority. Bonistas del patio, or local “backyard bondholders”, also own a significant chunk of this debt. Given the political clout of both the bonistas del patio and the PREPA bondholders, each has been entertained with offers of side deals for the debt they own.

At the end of the day, singling these groups out for unique treatment is an ineffective strategy, and it makes a comprehensive deal, which Puerto Rico definitely needs, much harder. All will need to be dealt with in a fair fashion, to ensure that Puerto Rico can borrow cheaply and invest in its future, and be sure that smart policy trumps politics in pursuit of a fair deal for the island.

The Commonwealth of Puerto Rico is the canary in the coal mine for the Caribbean. Borrowing is a fact of life for governing bodies, and American cities, states and territories will need to do it again tomorrow and further down the road, to invest in infrastructure like roads, bridges and schools, as well as in the human capital of our children.

As a native of a US territory and an elected official in a US state, I have a reminder for Puerto Rico: what you do matters for the rest of us.


Sheryl Williams, the Minority Whip of the New Mexico State House of Representatives, who is also a native of the US Virgin Islands
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  #153  
Old 08-01-2017, 01:40 PM
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https://www.bondbuyer.com/opinion/th...mic-statistics

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Commentary
The other hidden crisis in Puerto Rico: Economic statistics

Last week Foundation for Puerto Rico, a local NGO on the Island, published a report that recommends a National System of Tourism Statistics for Puerto Rico. The report states that Puerto Rico inaccurately measures tourism activity by not following international recognized standards set by the World Tourism Organization. Therefore, government officials are incapable of evaluating sector performance, or conducting ROI analysis on advertising campaigns that cost as much as $30 million a year. However, that hasn’t stop the government from announcing positive returns from their efforts.

Nonetheless, the gap in tourism statistics is only a symptom of a deeper problem on the Island. In addition to the economic crisis, Puerto Rico has been stuck in a statistical crisis for over 30 years.


The United Nations develops a series of standards for the preparation of economic statistics in each country, known as the System of National Accounts. This System is the recommended framework for estimating economic activity in a country, from production, consumption, capital investment, income, stock flow, and other financial instruments. Based on these estimates a country can calculate its gross domestic product (GDP). From time to time the United Nations publishes new standards to adjust national accounting to new dynamics in the world economy.

The last time the UN published such standards was 2008. Prior to the 2008, standards were published in 1968 and 1993. However at the present time, economic statistics in Puerto Rico only meet the standards of 1968. In other words, Puerto Rico is measuring the economy as if it were 1968, as if things had not changed in the past 5 decades. Some relevant changes in the world economy include changes in the treatment of intellectual property and research and development (R & D), new financial vehicles, intermediate financial services and changes in the insurance market, among others. These areas of the economy have changed significantly, but because Puerto Rico does not use the latest UN standards the government probably is underestimating or overestimating their value or, in extreme cases, not even providing an estimate at all. Let's think about that for a moment -- How far off could economic estimates be in Puerto Rico? The truth is that nobody knows.

Unfortunately, the problem with economic statistics goes beyond the UN standards, as there are deeper management issues that run throughout the whole government, particularly at Puerto Rico Planning Board, the government entity responsible for national accounts. During the 50s and 60s the Planning Board was an innovative government agency with advanced statistical capabilities. However, it has not managed to keep up with methodological and technological advances, losing its relevance, within government and with the private sector.

We’ll provide some examples. We begin with an area that should be relatively simple in national accounts: data management and governance. This happens to be one of the major challenges at the Planning Board, as they rely on fragmented information systems and datasets, making it difficult for staff to collaborate and produce estimates on a timely fashion. Consequently, sub-programs within the Planning Board produce different estimates for the same variable.

The Planning Board also lacks adequate internal controls to manage and store data, with little use of ERP’s for data processing and sharing. Most estimates and calculations are done in Excel sheets. Although the Planning Board has sophisticated information systems, they are often underutilized by the staff due to lack of training. It is inconceivable that in 2017 Puerto Rico still relies in Excel to produce its national accounts. All estimates and national account information should be stored and managed from a centralized database, with easy access to all departments and other government agencies.

There are also no formal audit processes at the Planning Board, estimates are reviewed only when there are outliers within the data. In most cases, simple imputation processes are used when there is insufficient data, rather than using scientific procedures accepted by the statistical community. It should also be noted that there is very little rigor with survey design at the Planning Board. Sometimes the samples are biased or incorrectly designed, producing invalid and imprecise estimates. This is because most analysts at the Planning Board lacked advanced knowledge in sampling techniques and all require training on survey methodology. Additionally, there is little documentation on statistical procedures used at each department, making knowledge transfer to new staff when employees retire very difficult. Therefore, one can only conclude that many estimates produced by the Planning Board of Puerto Rico are wrong.

However, we cannot blame everything on the Puerto Rico Planning Board, as we have other agencies that share the blame in this statistical crisis. The main conspirator for this crisis is the Department of Treasury. Treasury has the best sources of information on consumption and production in Puerto Rico, as it compiles data through the tax forms. However, the Department of the Treasury does not provide direct access to its databases, and when it does, it does not do so in an open format or in a format that facilitates the analysis of the information.

As a result, Planning Board staff spends considerable time tabulating by hand files that receives from Treasury. In order for the Planning Board or any other agency to produce reliable and recurring estimates and statistics, an open data culture of inter-agency data is needed, after all, there is only one government in Puerto Rico.
Another thing we want to highlight is the input/output table. The input/output table is a macroeconomic tool that measures the relationships that exist between the different sectors of an economy. This tool calculates inter-industry multiplier effects in Puerto Rico.

It is recommended to update the input/output table every five years, since the interrelationship between industries is not constant over time. However, the last input/output table published by the Planning Board is from 2002. Consequently, when the Governor of Puerto Rico announces the economic benefit of its policies, it does so using very old economic assumptions.

Lastly, econometric models at the Planning Board are not capable of making dynamic projections and simulations. In other words, they do not have the capacity to create different scenarios using Bayesian methodologies. Analysts at the Planning Board lack advanced degrees in econometrics. Therefore, the central government (and now the Fiscal Board) are forced to hire external consultants to create models using proprietary methodology and applications. Because the models are not internal, every governor hires his own economists to create models from scratch, using different assumptions every time. Thus, its practically impossible to compare economic projections from two different administrations.

Although much of these failures fall on the Planning Board, to be fair, the Board has lost much of its human capital. In 1994 the Economic Planning department at the Planning Board had 192 employees, it currently has fewer than 35. Likewise, the Social-Economic Department at the Planning Board, responsible for assessing the island's socio-economic development (health, education, poverty) had 28 employees in 1994; it now has only two.

The failures of the Planning Board are due to the lack of interest of the executive branch and the legislature for evidence-based decision-making. In Puerto Rico, budgets are made, programs are created and incentives are given with no impact evaluation. And since we don’t evaluate government programs in Puerto Rico, there is no sense of urgency in improving statistics.

We therefore call for the end of the current statistical system in Puerto Rico and urge the governor and the Fiscal Board to build a new one from scratch. They can piggyback on the work of the Puerto Rico Institute of Statistics. The Institute’s independence, rigor and autonomy have given them an untarnished reputation with the citizens of Puerto Rico. The Institute has also led a crusade to achieve universal access to information and transparency on the Island, efforts the Institute has led many times without government cooperation.

Perhaps the Puerto Rico Institute Statistics can lead the difficult task of modernizing Puerto Rico’s system of national accounts. Maybe the governor can also look at the work of Foundation for Puerto Rico, who is leading an effort to create a national system of tourism statistics. Maybe other NGO’s can do the same with other industries. But the private sector must demand change first, and contribute to the effort. Government cannot and will not do it on their own.

Arnaldo Cruz
Arnaldo Cruz is co-founder and board member of the Center for Integrity and Public Policy.
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  #154  
Old 08-06-2017, 03:15 PM
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https://www.reuters.com/article/puer...-idUSL1N1KQ1HM

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Puerto Rico to furlough workers, proposes pension plan reform

Aug 4 (Reuters) - Puerto Rico's federally appointed financial oversight board said on Friday it will institute a two-day per month work furlough for government employees, excluding frontline law enforcement personnel, in an effort to achieve $218 million in savings.

The plan, which originally envisioned a four-day per month furlough, is set to begin on Sept. 1 and last throughout the 2018 fiscal year.

It is part of the board's efforts to implement fiscal changes and achieve $880 million in savings for "right-sizing" the government and shoring up the U.S. commonwealth's long-term economic viability.

Natalie Jaresko, the executive director of the oversight board, said the government had offered a number of ideas for achieving savings, only some of which met three broad criteria: 1) money-saving measures should have a clear and reasonable path to implementation; 2) be recurring and permanent; 3) and stem from a structural response to changing the nature of providing government services.

"The gap that didn't meet those three targets was $218 (million)," Jaresko said during a webcast of the board's ninth public meeting.

Furloughs could be scaled back or eliminated early if sufficient savings are achieved per the government's fiscal plan, the board said.

The board also discussed reforms of the pension system, which would include a 10 percent cut in benefits, as well as putting off a final decision over the partial or whole elimination of a public employee Christmas bonus until Sept. 30.

Puerto Rico is weighed down by roughly $72 billion in debt and another near $50 billion in unfunded pension liabilities. It suffers from migration and a 45 percent poverty rate.

Governor Ricardo Rossello's government rejects the furlough plan, which would impact over 138,000 employees. Rossello is scheduled to issue a declaration in response to the board's decisions on Friday afternoon.

Puerto Rico's Treasury Secretary, Raul Maldonado, told Reuters preliminary tax collections in July, the first month of fiscal 2018, are running $20 million to $30 million ahead of forecast.

However, in contrast, board member Andrew Biggs laid out the situation in stark terms during the meeting.

"The simple fact is that the government of Puerto Rico has run out of money," he said, adding that austerity measures, if done properly will "build confidence, will help the economy move forward and help counteract the difficult steps of raising taxes and cutting spending that right now we have no choice but to do."


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  #155  
Old 08-07-2017, 09:58 PM
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https://johnmuddlaw.com/2017/08/07/t...pension-fight/

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THE COMING PUBLIC PENSION FIGHT
The first in a series on Puerto Rico’s Pensions



Last week, the Supervisory Board held its 9th Public Meeting in Fajardo, Puerto Rico. A key item on the agenda, “Discussion of Pension Reform,” was over-shadowed by the pending fight over furloughs, but is perhaps one of the most important items discussed.



As many know, one of the critical issues before the Supervisory Board is how to address the future of Puerto Rico’s public pension system and a $49 billion actuarial deficit. In fact, this is one of the reasons Speaker Ryan and the Congressional Republicans insisted on having an expert like Andrew Biggs on the Board. His knowledge of pensions ostensibly would help reform Puerto Rico’s public pension system to become a model for cities and states across the country.



What PROMESA Says the Board Must Do



Section 211(a) of PROMESA requires the Board, if it determines pensions are underfunded, to “conduct an analysis prepared by an independent actuary […] to assist the Oversight Board in evaluating the fiscal and economic impact of the pension cash flows.” The Board hired Pension Trustee Advisors, Inc., a Colorado corporation, for this endeavor in February. To date, we have yet to see any documents or plans generated by this company or produced by the Board.



Instead, the government with the support of the Board moved first. Since February, Puerto Rico passed a law to convert the government and its component units into a single employer and although the Board instructed that pensions had to be cut by 10% by fiscal year 2020 in the Fiscal Plan, the Board green-lighted the government to move over $2 billion from the General Fund to the public pension system. At the same time, neither Governor Rosselló nor the Board provided any monies for debt service in FY18. This had the effect of elevating payment of public pensions above secured creditors.



Then, on May 21, 2017, the Board filed a Title III bankruptcy petition for the Government Retirement and the Judiciary Retirement Fund. Further, the government passed a measure to transfer $390,480,000 from the Central Government, Judiciary and Teacher’s retirement funds to the General Fund for the payment of pensions, known as RC 188.



All of this was done with the Board’s approval, but not without opposition from other stakeholders. On July 27, 2017, Altair Global Credit Opportunities Fund (A), LLC and others filed an adversary proceeding to challenge this action by the Puerto Rican Government. Altair & company claim they have a lien over Government contributions to the retirement fund and that RC188 is null and void; that they hold a secured claim to the full extent of their allowed claim against the ERS; that they hold a secured claim to the full extent of their allowed claim against the Commonwealth and that their lien continues in any Pledged Property transferred to the Commonwealth from the ERS. They also claim that the transfer of the Pledged Property from the ERS to the Commonwealth pursuant to Joint Resolution 188, on its face, constitutes an unconstitutional taking of private property without just compensation within the meaning of the U.S. and P.R. Takings Clauses; and that RC 188 substantially interferes with their contract rights with the ERS in violation of the U.S. and P.R. Contracts Clauses. Finally, they also ask for damages and that PROMESA does not preclude such claim. Since it was filed only recently, we have no idea how Judge Swain will handle it, except that it will be done swiftly.



Echoes of the Chrysler-UAW Pension Bailout



This strategy by the Board – elevating pensioners over secured bondholders – evokes memories of the Chrysler bankruptcy, which saw the Obama Administration support unsecured UAW pensioners become secured creditors – literally jumping the line ahead of actual secured creditors. The judge in that case was none other than Judge Arthur Gonzalez, the key architect behind the Board’s legal strategy.



Neither the Constitution nor PROMESA explicitly do not allow for the payment of public pensions to be put ahead of bondholders, which was the ultimate outcome in the Chrysler case. Now, the PR Supreme Court granted pensioners rights in Bayron Toro v. Serra, 119 D.P.R. 605, 608 (1987), stating that, “Once an employee is retired, when he has complied with all the conditions for his retirement, his pension is not subject to changes or impairments.” However, this precedent is subject to Article VI, Section 8 of the PR Constitution that states:



“In case the available revenues including surplus for any fiscal year are insufficient to meet the appropriations made for that year, interest on the public debt and amortization thereof shall first be paid, and other disbursements shall thereafter be made in accordance with the order of priorities established by law.”



While Section 201(b)(1)(C) of PROMESA states that the Fiscal Plan must “provide adequate funding for public pension systems,” Section 201(b)(1)(N) requires the Fiscal Plan to “respect the relative lawful priorities or lawful liens, as may be applicable, in the constitution, other laws.”



Moreover, the Committee on Natural Resources Report on PROMESA states the following:



“The Committee acknowledges the concern as to the ambiguity of the language regarding the funding of public pension systems. To clarify, Section 201(b)(1)(C) tasks the Oversight Board with ensuring fiscal plans ‘provide adequate funding for public pension systems.’ This language should not be interpreted to reprioritize pension liabilities ahead of the lawful priorities or liens of bondholders as established under the territory’s constitution, laws, or other agreements. While this language seeks to provide an adequate level of funding for pension systems, it does not allow for pensions to be unduly favored over other indebtedness in a restructuring.”



Realizing that creditors and Congress are onto them, the Board has attempted to mask their strategy.



In their latest document, “Explanatory Memorandum on Pension Reform,” the Board claims, “expenditures are being reduced throughout the Commonwealth’s budget and holders of government bonds are not likely to be repaid in full. Retirement plan participants, like other unsecured creditors, will have a reduction in the amounts paid to them by the Commonwealth.” Board member Ana Matosantos went further, rejecting Christian Sobrino’s claim that Governor Rosselló will fund 100% of the public pensioner’s benefits, stating “honoring 100% of the obligations is not workable.”



The Board has shown its hand, and they will face a stiff test before Judge Swain. Congress was clear that funding pensions was important, but not equal to or above existing constitutional and lawful priorities. To date, the Board and Puerto Rico have decided unsecured pensioners have higher priority.



Why is the Board and the government putting payment of pensions before payment of public debt in direct contradiction of both PROMESA and the Puerto Rican Constitution? Why is the Board pursuing this legal strategy?



I will explore and hope to explain the reasons for this in my series on public pensions in Puerto Rico.




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Old 08-07-2017, 09:59 PM
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Explanatory memo on pension reform:

https://juntasupervision.pr.gov/wp-c...46972517a9.pdf
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Old 08-15-2017, 09:53 AM
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The low voter turnout is a complex issue on its own and it can't be boiled down to "77 percent of Puerto Ricans made it clear that if the U.S. was their only option, they would rather not vote.":

- The vote was on a Sunday, traditionally Puerto Rico votes during a weekday and they make it a holiday.
- More importantly, there were a lot of issues regarding how two of the statuses were defined on the ballot, this was the reason why many people boycotted the vote altogether.
- With republicans in control of the house and congress, I suspect that many people doubt that even if statehood were to win legitimately, the US would acknowledge or integrate PR as a state.

Traditionally the status quo and statehood share about half of the votes each with a small (less than 5%) of the total vote going to statehood. Given the low voter turnout, it takes a really desperate government to be able to claim that this is the will of the people with a straight face, but in a way they forced their own hand by forcing this vote that a lot of people had trouble with.
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Old 08-25-2017, 06:03 AM
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https://www.bna.com/looming-water-crisis-n73014463542/

Quote:
Looming Water Crisis in Puerto Rico, Where Cash Has Run Dry

A public health crisis is imminent in Puerto Rico as its main provider of water and sewer services has lost the ability to borrow money, a consequence of the island’s still unfolding debt problems, a former water official and others familiar with the U.S. commonwealth told Bloomberg BNA.

Construction on pipes, filtration systems, and other water infrastructure projects in Puerto Rico is at a standstill. This may already be impacting the safety of drinking water for its 3.4 million residents: the credit problems have coincided with an increase in water quality violations, according to EPA enforcement data reviewed by Bloomberg BNA.

Amid the debt crisis, the Environmental Protection Agency has cut off Puerto Rico from accessing the water infrastructure loans it regularly provides to all 50 states. Peter Grevatt, head of the agency’s drinking water office, said the island may never be able to fully repay the hundreds of millions of dollars in loans it took out from the EPA to build up its water infrastructure.

The situation is also driving some companies off the island: consulting and engineering firms, including Black & Veatch, CH2M, and CDM Smith, have all but shut down operations there, according to the former head of the island’s primary water utility.

“At some point, something is going to give,” Alberto Lazaro, who ran the Puerto Rico Aqueduct and Sewer Authority, or PRASA, until last year, told Bloomberg BNA. “It’s impossible to run a water utility if you can’t have capital expenditures.”

Lazaro first brought the crisis to the EPA’s attention in a 2016 letter, obtained by Bloomberg BNA, which sounded the alarm that the island’s water infrastructure is “at risk of deteriorating and even failing.”

.....
Borrowing Ability Gone

Across the country, the vast majority of water infrastructure projects are financed with borrowed money, coming either from the private bond market or from the federal government.

With investors spooked by the island’s crippling debt load, PRASA has effectively lost access to the bond market. And it’s lost access to the EPA’s State Revolving Fund loan program, the main source of federal assistance for water infrastructure projects. The territorial government has acknowledged to the EPA that it likely won’t be able to pay back any new loans and, furthermore, won’t be able to contribute required matching funds.

Stacey Isaac Berahzer, a water specialist at the University of North Carolina Environmental Finance Center, said Puerto Rico is in a nearly impossible situation: while taking on more debt could be ruinous, waiting for years or even decades to store away enough cash to build new infrastructure isn’t a viable solution either.

She said the latter option would, in essence, require the island’s ratepayers to fund infrastructure projects they may never get to benefit from in their lifetimes. The center works with decision makers to assess the effectiveness of environmental finance policies.

“Puerto Rico has been slowly going down this cliff,” Isaac Berahzer told Bloomberg BNA. “It’s a tough predicament.”

......
Where Did The Money Go?

The irony of the situation is that the finances of PRASA itself were managed relatively well before the debt crisis set in, according to a report from the EPA’s Inspector General earlier this year.

Before 2013, the authority had healthy reserves sitting in the island’s main infrastructure bank.

Then, Puerto Rico Gov. Alejandro Garcia Padilla transferred $245 million out of this bank into a special fund to cover the island’s widening budget shortfalls. In 2014, Garcia Padilla signed a law that restricted how much agencies like PRASA could withdraw from this government-run bank.

“We didn’t see this coming,” Lazaro told Bloomberg BNA. “We had sufficient income and revenues to maintain our financial plans. ... [But] the rating agencies said ‘Even though they have all this, they’re in Puerto Rico and it doesn’t look good there,’ and we got degraded.”

The bank has since entered a bankruptcy-like proceeding, although the island itself is legally prohibited from declaring itself bankrupt. It could take a decade or more for PRASA and other agencies to recover the funds they had deposited, according to the inspector general. Those funds include nearly $200 million in loans that had come from the EPA.

PRASA’s current leaders didn’t respond to Bloomberg BNA calls and emails.

Crisis a Long Time Coming

Barry Bosworth, an economist at the Brookings Institution who has researched Puerto Rico’s finances, said the island’s political leaders simply made too many promises to their constituents.

Over the past 10 to 15 years, the size of Puerto Rico’s economy steadily shrunk, he said. Its typical role as a source of cheap manufacturing labor for American companies was usurped by developing countries in Asia, Africa and elsewhere, where the cost of labor is far cheaper, Bosworth said. But despite this contracting economy, the island’s political leaders continued to spend.

“It has now reached an absolute crisis point,” he told Bloomberg BNA. “It can’t keep going on like this. Why investors continued to loan money to Puerto Rico over the last decade is beyond me.”
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Old 08-25-2017, 06:04 AM
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PENSIONS

https://apnews.com/e58bd1cdcdd74d29a...gling-retirees

Quote:
Puerto Rico creates new pension plan for struggling retirees

SAN JUAN, Puerto Rico (AP) — Puerto Rico’s governor on Wednesday signed a law that establishes a pay-as-you-go pension plan and sets aside $2 billion this year for tens of thousands of retirees who depend on a public pension system that’s expected to run out of money next month.

Gov. Ricardo Rossello said the government’s general fund will now be responsible for ensuring retirees get a monthly check, and that the new defined-contribution plan will operate similar to a 401K retirement savings program. The current system faces nearly $50 billion in liabilities.

“If we had left things as they are, our retirees starting as early as September would not have received pension payments that they worked decades for in public service,” he said.

The announcement comes just weeks after a federal control board overseeing Puerto Rico’s finances said the pension system will face a 10 percent cut given the island’s deep economic crisis. Government officials rejected that measure and said they would create their own law to protect retirees.

Board members did not immediately respond to a request for comment. The board also has said that all newly hired employees in Puerto Rico will be enrolled in Social Security. Currently, local teachers and police officers do not receive Social Security and depend solely on the public pension system.

Those representing retired Puerto Rico union workers lamented the new law was approved without any public hearings or input from retirees. They also said that any cut to the public pension system would be devastating.

“We have retirees who receive $500, $800 a month, and they can’t live off of that,” said Dwight Rodriguez, president of a federation representing retirees of the Puerto Rican Workers Central union.

Andres Miranda, vice president of that federation, said in a phone interview that his organization also wants an investigation into why the public pension system is nearly depleted.

“The crisis that the system faces is caused by the government, not the retirees,” he said.

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Old 08-25-2017, 06:33 AM
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Mary Pat Campbell
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http://thehill.com/blogs/pundits-blo...or-own-removal

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Puerto Rico financial board creating grounds for own removal

Scanning recent tax revenues, one would think that all is well in Puerto Rico. On Aug. 2, the Puerto Rican Treasury Department announced that tax collection for the first month of fiscal year 2018 was ahead of its forecast. In addition, there was the publication of data showing the government collected more than $150 million above the forecasted revenue figures in fiscal year 2017.

Yet, on Friday, the federally-appointed financial oversight board announced the implementation of a two-day government furlough program beginning this September, along with a 10-percent cut to public pension benefits beginning in fiscal year 2020.

This proposed program came in response to the liquidity problems facing the government, but Puerto Rico Governor Ricky Rossello disputes the board assertion noting that, “There is about $1.4 billion to $1.7 billion. Cash flow is there and is a result of the measures we have taken so far.”


This issue is very worrying because the Puerto Rican government informed Judge Laura Taylor Swain, who is overseeing the island's bankruptcy proceedings, that by the end of June, cash flow would be $290 million. Now, Rossello’s administration said the government ended with almost $1.8 billion in cash on June 30.

According to new information arising from the ninth meeting of the fiscal board last Friday, oversight of the finances of the commonwealth are clearly lacking. The budget was certified weeks ago, and the government did not meet the plan. Furthermore, in March, the liquidity report concluded cash flow was at $230 million.

All of this news comes on top of the lack of financial transparency that has governed the actions of the Puerto Rican government and the financial oversight board. One thing is clear: The actions taken by the board and Gov. Rossello’s administration are ripping off bondholders.

For the last few months, the unelected seven-member fiscal board set up under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) has been pursuing a policy to lead Puerto Rico back to the markets. However, this policy is being pursued in the belief that the island can quickly regain access via fiscal consolidation, and given the lack of definition of what is an essential service, this consolidation is amounting to basically reducing debt service payments.

The current situation has seen the board and government follow the policy of taking almost every government entity through Title III bankruptcy instead of following the route of fair, transparent and open negotiations with creditors, many of whom are Puerto Ricans. Consequently, this path results in a cut to bondholder payments totaling almost 80 percent of the expected payments for the next 10 fiscal years.

Instead of following a strong fiscal policy that includes a real fiscal consolidation and the subsequent return to sound finances, Puerto Rico has chosen to violate creditors' rights and fail to pay the money creditors are owed.

The fiscal board established by Congress has chosen to disregard the words and intent of the PROMESA legislation, refusing to amend the fiscal plan for more debt service payments in spite of the better-than-expected revenue figures. It has misrepresented the liquidity figures in court by arguing that the government will be out of cash by Nov. 1.

Now, it turns out, given the refusal to pay bondholders, the government is sitting with millions in cash, which wasn't accounted for in the evidence presented to Judge Swain.

After all of the time the fiscal board has spent litigating against creditors, the most recent meeting of the board reveals its failure to establish the real fiscal condition of the commonwealth. The decisions and disregard of the fiscal board are laying the groundwork for a clear vote of no confidence.

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