Puerto Rico Governor Looks to Revisit ’08 Bond Bill; Speaker Wants to Wait

While Puerto Rico Gov. Anibal Acevedo Vila yesterday announced that he will call back the Legislature for a second special session to work on a $425 million bond bill for fiscal 2008, House Speaker Jose Aponte said he does not approve of voting on the borrowing initiative before the March primary election.

“It’s not responsible and we’re not going to approve before March 9,” Aponte said.

While the administration and the Legislature work on the fiscal 2008 bond measure, the Puerto Rico Public Buildings Authority today will sell $906 million of tax-exempt new-money and refunding debt to generate roughly $24 million of present-value savings and support school and government building projects.

The island’s first special session began on Nov. 14, with the Senate approving a slightly larger $450 million bond bill. In response to the House failing to pick up the measure by Monday, the end of the special session, Acevedo Vila, a member of the Popular Democratic Party, is calling for lawmakers to return once again on Thursday to continue working on the borrowing plan and other economic initiatives.

While Aponte declined to say what amount of debt he would find fiscally sound, the House leader and member of the New Progressive Party said he would approve a smaller borrowing package after the primary election. Current plans call for $175 million of the $425 million bond bill to pay down debt the government owes the Government Development Bank for Puerto Rico while the remaining funds will help support infrastructure projects throughout the island.

According to Aponte and other NPP members, lawmakers should postpone approving the bond bill as there are municipalities that have yet to receive funds from previous bond sales.

“There are some distributions that still haven’t been assigned from previous bills,” said Raul Candelario, general director for the House Treasury and Finance Commission. “And they don’t want to do another one while the municipalities still haven’t received the monies from other bonds that were made before.”

Yet Senate President Kenneth McClintock said the government has allocated bond funds to local governments that have completed the required municipal ordinances necessary before receiving the funds.

“The only money that hasn’t been dispersed is of those municipalities that have not completed the legal requirements to receive the disbursement,” McClintock said. “So that’s not a correct argument.”

More than 10 PDP mayors on Monday met with Aponte to try and convince him to take up the bond bill, but the speaker maintained that the borrowing initiative must wait as officials continue to assess sales-tax revenue collections and the unaudited fiscal 2007 $322 million budget shortfall.

While the bill continues to stall in the Legislature, Puerto Rico officials are confident the municipal market has firmed up enough to sell $906 million of debt today. The bonds were set to price on Nov. 7, but officials postponed the sale as 30-year rates rose to 4.49%, according to Luis Alfaro, financing adviser at the GDB.

The authority will refund $573 million of previous debt to generate the $24 million in savings while selling $333 million of new money for capital projects.

While the new money is fixed rate, the refunding will offer $150 million of variable-rate debt that the authority will swap into fixed in an agreement with RBC Capital Markets as counterparty. MBIA Insurance Corp. will insure the variable-rate bonds.

Lehman Brothers will price the bonds and Squire, Sanders & Dempsey LLP is bond counsel.

Separately, the GDB yesterday approved the governor’s recommendation to appoint Jorge Irizarry as president of the bank while naming a new chairman, Rafael Martinez-Maragida, to replace outgoing chairman Alfredo Salazar. New to the seven-member board is Ana Irma Vila, who was appointed by the governor yesterday.

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