The Puerto Rico Gov. Alejandro García Padilla has signed into law bills setting up a city sales tax bond structure.
The new laws are based on an agreement that the governor made with a group of Puerto Rican mayors in mid-January.
The laws will create a structure similar to the Puerto Rico Sales Tax Financing Corp. (COFINA) for the municipalities. A 1% sliver of the sales tax will pass through this new vehicle, known as COFIM, and allow the municipalities to sell bonds backed by this sales tax sliver.
Using this new vehicle, the Government Development Bank of Puerto Rico plans to refinance approximately $600 million in municipal loans on its books.
The bills specify that a final 0.5% sales tax sliver will pass through COFINA before being delivered to the municipalities' redemption, development and improvement funds. Like all COFINA money, in fiscal years' early months it will be used to cover debt service of the national government's COFINA bonds.
