Senate Amends Puerto Rico Water Authority Bill
SAN JUAN – The Puerto Rico Senate on Monday passed, with a 22-3 vote, an amended version of House legislation that would allow the Puerto Rico Aqueduct and Sewer Authority (Prasa) to create a corporation that will carry out a one-time bond issuance to pay for capital improvement projects and pay $150 million to contractors.
The bill was amended to prevent Prasa from using a securitization mechanism to continue borrowing and to prevent the corporation from using the bond issuance to cancel debt in order to prevent hedge funds from benefitting from the transaction.
“We are stopping this leak,”said Sen. Ramón Luis Nieves, chairman of the Senate Energy Affairs and Water Resources Committee, adding that hedge funds have been lobbying Congress against the bill that would allow Puerto Rico to restructure its debt.
The legislation will now have to go back to the House, which must concur with the amendments. With the bill, Prasa will be exempt from the Puerto Rico Emergency Moratorium & Financial Rehabilitation Act.
Nieves said that contrary to the Puerto Rico Electric Power Authority, Prasa is not insolvent and has been paying its debt to bondholders.
Prasa traditionally borrows money from external sources to finance its capital improvements, but for the past four years has been unable to access the bond market because the government has repeatedly given the wrong perception that the entity is having financial difficulties.
One of the instances that prevented Prasa from borrowing money was after the government put the entity’s name in the local bankruptcy law as one of the entities that could benefit from the law, Nieves said.
While Prepa has close to $9 billion in debt, Prasa’s debt is $5 billion and it has been paying creditors, he said.
The legislation, Nieves said, also seeks to rid Prasa from political intervention and would overhaul its governing board. “Prasa should not be a victim of the political partisan sway,” Nieves said.
The Senate also gave the green light to House legislation that would amend the law to Promote the Individual Investors, or Act 22, to ensure that investors who move to Puerto Rico to benefit from tax incentives, comply with minimum requirements of civism.
The island has already granted 509 decrees to individual investors and expects to grant more than 2,500 by 2019. The bill seeks to ensure that the goal of the law, which is to promote economic development, is fulfilled.
“The concession of tax incentives and tax credits should not be used by criminals or unscrupulous people,” states the bill authored by Rep. Carlos Vargas Ferrer, who died in a car accident last year.
The amendments will require investors seeking decrees to buy property in Puerto Rico and have bank accounts on the island. The investors must also provide a sworn statement stating whether they have been the target of a probe. House Bill 2610 will also allow the Treasury secretary to revoke any decree obtained fraudulently.