The Puerto Rico government has approved new revenue for the Puerto Rico Highways and Transportation Authority.
Some analysts had recently raised concerns about the financial stability of the authority. As of May the authority had $5.2 billion in bond debt outstanding, according to Janney Capital Markets. In addition, it owes a little less than $2.2 billion to the Government Development Bank of Puerto Rico, according to the bank.
In May there was a government discussion on revenue measures to restore stability to the authority.
The Puerto Rico legislature and governor approved two acts to provide additional revenues to the authority on Wednesday.
The measures will shift $62 million per year in car license fee revenues to the authority. It will increase the petroleum products tax to $9.25 per barrel from $3, generating $189 million in additional annual revenue for the authority. Finally, it will transfer $30 million in annual cigarette tax revenues to the authority.
The measures also require that every four years the petroleum products tax will be adjusted for inflation and given an additional 1.5 percentage point boost.
“This is significant,” wrote Municipal Market Advisors managing director Robert Donahue in an e-mail. “The PRHTA loans had become a huge liability threatening GDB’s solvency, and this last-minute revenue action may avert the large GDB loan write-downs, and potential downgrades, just two days before books close.
“While MMA is encouraged that Puerto Rico’s political leadership has recognized, and responded to, the serious concerns, the commonwealth is not out of the woods,” Donahue continued. “This action signals the avoidance of a credit threat but does not resolve the island’s longer term challenges: restoring structural budgetary balance, reducing reliance on debt, reviving moribund public agencies, and, perhaps most importantly, restoring life to the island’s depressed economy.”