Movement collects over 21,000 signatures against Cofina agreement
SAN JUAN – The Citizens’ Front for the Auditing of the Debt, a movement of students and activists, on Friday sent to U.S. District Judge Laura Taylor Swain 21,000 signatures opposing the agreement between Puerto Rico’s fiscal oversight board and Sales Tax Financing Corp., or Cofina, bondholders.
The group said the objective is to request that private interests be made second in priority to “the needs of the people of Puerto Rico and the burden that said pact represents for this and future generations.”
The organization submitted its petition on the deadline set in the bankruptcy-like process to present objections to the agreement that the group says “condemns the people to pay double what the government received and 40 more years of IVU [Spanish acronym for Puerto Rico’s sales and use tax], among other defects.”
Also making the request are unions, pensioners, cooperatives and experts, “such as Nobel prize-winning economist Joseph Stiglitz, who consider it disastrous” for the island.
Beginning Tuesday, Judge Swain, who presides over Puerto Rico’s bankruptcy proceedings, will be considering, until January, the agreement.
“We urge Judge Swain to place the essential needs and interests of the people of Puerto Rico above all considerations,” group spokesperson Eva Prados said. “An agreement that is fair to the people, a people who are already suffering in a very deteriorated economy, which has pushed thousands to emigrate, is in her hands.”
The Front obtained the signatures against the agreement in less than two weeks, via a petition, titled “Judge Swain: Reject COFINA agreement proposed by the Fiscal Control Board, at change.org, which had nearly 23,000 signatures Monday.
In its message to Judge Swain, the organization wrote that those who struggle to survive the consequences of decisions made by Puerto Rican and federal officials are not present in her courtroom.
“They say we are debtors, but we had little participation in the questionable and possibly illegal decisions made by our governments,” Prados said.
On Friday, several unions and organizations also banded together to oppose Cofina’s disclosure statement contending it is a bad deal for the people of Puerto Rico.
Cofina is slated to restructure its $17 billion debt after reaching an agreement with creditors. On Nov. 20, there will be a hearing to determine the adequacy of Cofina’s disclosure statement.
The Puerto Rico Electric Power Authority Retirees Association, the Games of Chance Inspectors Association, the National Union of Educators and Education Workers, the Independent Professionals Union, the Housing Bank Workers Union, the Office and Trade Employees Union; the Aqueduct and Sewer Authority Independent Workers Uninon, Insular Union of Industrial and Electrical Construction Workers, the Public Buildings Authority Office and Professional Workers Union; the Vamos Movement of Citizen Action, among others joined objections raised by the Service Employees International Union (SEIU) and United Auto Workers (UAW) in opposing the settlement of the Commonwealth-Cofina dispute.
They argued that the settlement is not in the best interest of the commonwealth or the people of Puerto Rico because the island has a bond debt that needs to be reduced if the island is ever to regain a secure financial footing.
“Given its deep and widespread poverty, its unreliable and fragile infrastructure, and its feeble rate of growth, Puerto Rico has far more pressing social and economic needs than most U.S. states, and so should emerge from these reorganization proceedings with — at most — no heavier a debt load than the average U.S. state. The proposed settlement, however, would make that outcome virtually impossible,” they said.
The settlement is divided into two parts. The first resolves the commonwealth-Cofina dispute, in which both sides divide sales and use tax proceeds. The second involves Cofina senior and junior bondholders, in which these exchange their bonds for new ones that will be paid for more than 40 years.
If the agreement, which was negotiated by the court, is finalized, a portion of the sales-and-use tax would be shared to pay Cofina debt. Existing bonds would be exchanged for new bonds to be issued under a single Cofina bond class (i.e., there would be no senior or subordinated debt) as follows: Senior bondholders will receive approximately 93% of the principal of the bonds they currently hold. Holders of subordinated debt will receive about 56% of the principal of the bonds they currently hold.
“Under the settlement, payments to the new COFINA bondholders would, in 2019, consume virtually the entire debt service that Puerto Rico could pay if it were to achieve a debt-to-revenue ratio no higher than the average U.S. state. That would leave Puerto Rico little or nothing to pay its other bond debt and would undermine its ability to provide essential services to its people,” the groups said.
“In years after 2019, the situation would only worsen. Under the settlement, the Cofina payments would escalate by 4% a year, far outstripping the projected long-term growth rate of Puerto Rico’s economy and its tax revenues. The swelling payments to the new COFINA bondholders would divert funds that Puerto Rico desperately needs for rebuilding its economy and meeting the needs of its people,” they said.
Also last week, two unions representing teachers and other public employees in Puerto Rico, the American Federation of Teachers and the American Federation of State, County and Municipal Employees, filed a lawsuit on behalf of their members, whose retirement accounts were allegedly mismanaged by the Puerto Rican government.