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PDP rep wants to stop Cofina payments to fund UPR, municipalities

By on March 7, 2017

PDP Reps. Luis Raúl Torres

PDP Rep. Luis Raúl Torres

SAN JUAN – Popular Democratic Party Rep. Luis Raúl Torres introduced on Tuesday legislation that would stop payments to the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) bondholders to divert that money to municipalities and to the University of Puerto Rico.

The issue about the legality of Cofina is part of a lawsuit in federal court in which general obligation (GO) bondholders want sales and use tax (IVU by its Spanish acronym) revenue currrently paid to Cofina bondholders to be diverted to pay GOs, contending that their debt is guaranteed by the good faith and credit established in the Puerto Rico Constitution.
The GOs are challenging the constitutionality of the act that created Cofina and the structure that diverts IVU revenue to pay Cofina bonds.
Cofina critics contend the structure was created to purposefully circumvent constitutional debt limits as it is not considered part of the general fund and has been used to borrow money.
Puerto Rico’s Constitution does not permit the issuance of debt payable from general fund revenue other than GO and guaranteed bonds.
Not diverting funds to pay Cofina would add about $800 million more in revenue to the general fund.
Right now, the Financial Oversight and Management Board wants the government to cut $300 million to the UPR. Cities are slated to lose nearly $400 million in general fund allocations.

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