Bill filed to allow Puerto Rico towns to borrow without gov’t bank authorization
SAN JUAN – New Progressive Party (NPP) Sen. Abel Nazario has presented a bill to allow municipalities to take out loans from Puerto Rico cooperatives without requiring authorization from the Government Development Bank (GDB).
The GDB has been practically inoperative since 2015, which means it cannot issue loans and has frozen agency and municipal accounts. Its fiscal plan contemplates the institution’s closure and liquidation in 10 years.
This has seriously affected municipal finances, which also face commonwealth government funding cuts of more than $300 million.
Senate Bill 535 amends the Municipal Financing Act of 1996 to allow towns to apply for loans with credit unions, guaranteeing such obligations with the Redemption Fund, without it being necessary to require and obtain prior authorization of the GDB and to establish that the loan term cannot exceed 30 years.
The measure comes at a time when the GDB is renegotiating its debt with creditors under the consensual resolution provisions of the Promesa law’s Title VI and when the certified fiscal plan for the agency that regulates cooperatives, the Cooperatives Supervision & Insurance Corp. (Cossec by its Spanish acronym), includes an injection of funds for these financial institutions while the solvency of many of these is being tested.
“It is vitally important that this Legislative Assembly provide the municipalities with the necessary powers so they can subsist and fulfill their obligations. That is why we deem it deserving to allow them to apply for credit union loans,” Nazario said in writing.
The measure was referred to the Municipal Affairs and Treasury committees.