The Puerto Rico House of Representatives passed a bill to help the Puerto Rico Aqueduct and Sewer Authority sell bonds.
The legislation passed Thursday, House Bill 2786, would set up the Corporation for the Revitalization of the Aqueduct and Sewer Authority, which would issue bonds. The bill prohibits increases of water and sewer rates in the next three years. It also prohibits more than 20% of rate revenue going to pay for capital improvement bonds. Calculation of this 20% would not include revenue paying off bonds the corporation sold to refinance existing PRASA bonds.
Inability to sell a bond amid Puerto Rico's debt crisis has forced PRASA to halt 55 projects already under construction, delayed the start of 86 projects in its capital improvement program, and left the authority in arrears on $140 million in debt with its suppliers and contractors, according to the House.
On March 4 PRASA warned that it may have to default on certain loans and bonds with the Puerto Rico Infrastructure Finance Authority, the Government Development Bank for Puerto Rico, and the United States Department of Agriculture. In a posting to the Electronic Municipal Marketplace Access web site, PRASA said if this bill did not become law and if it was not able to sell a bond, its board might approve the defaults.
The defaults would not be defaults on PRASA's bonds under section 8.01 of the Master Agreement of Trust.
PRASA increased its water rates by 60% in the second half of 2013 with an aim to covering operating expenses, debt service, and providing reserves through the end of fiscal year 2017. However, PRASA also assumed it would be able to sell a bond to cover capital improvement expenses.
Because of decisions by the Government Development Bank for Puerto Rico and Puerto Rico's low speculative grade credit, PRASA has not been able to sell a bond, according to a House of Representatives press statement.
PRASA had $4.75 billion of debt outstanding as of Dec. 31, according to a PRASA spokeswoman. The bill will become law only if the Puerto Rico Senate passes it and the governor signs it.
