To get through a cash shortage this summer, Puerto Rico's government may borrow from the island's semi-autonomous government entities.
Puerto Rico chief of staff Victor Suárez Meléndez put forward the proposal a few hours before the Government Development Bank for Puerto Rico reported that total net liquidity had decreased 24% to $778 million on May 31 from a month earlier.
Suárez Meléndez said Monday morning the public entities may purchase some of the Tax and Revenue Anticipation Notes that Puerto Rico anticipates selling.
Suárez Meléndez said Gov. Alejandro García Padilla would submit a bill this week to the legislature to allow this sort of lending. The State Insurance Fund, the Administration for Compensating for Automobile Accidents, and the Insurance Fund for Temporary Non-occupational Incapacity were among the entities that might participate, he said.
In early May Puerto Rico issued a financial report stating that the government's liquidity situation was getting tight. The report indicated that the commonwealth could pay off its debts in the rest of the fiscal year, which ends on July 1. However, the report cited concerns over its ability to pay off all its debts in July and August. The administration is seeking to get a balanced budget through the legislature so that it can sell a $2.9 billion bond to rebuild liquidity, which could be used to make those payments.
On Monday Suárez Meléndez said he remained optimistic that the government could sell this $2.9 billion bond through the Puerto Rico Infrastructure Finance Authority. However, he also said that the conditions are not yet ripe for it to be sold.
Borrowing through the semi-autonomous bodies would be an additional option to gain liquidity.
Since most of the government's revenues come in at the end of its fiscal year, it has done intra-year borrowing for decades from banks.
In October and November several banks bought $700 million of TRANs and offered a $200 million line of credit to the Government Development Bank for Puerto Rico. The GDB in turn offered $1.2 billion in short-term money to the Puerto Rico government, $300 million of which was its own money.
The government may continue to borrow some money from banks in the coming months.
Suárez Meléndez said he had no time frame as to when the semi-autonomous entities would lend their money.
The proposal by the government to allow loans by semi-autonomous bodies to the government continues its steps to move the money of autonomous entities to the central government to provide liquidity. Starting in February 2014 the government has been shifting the island's public corporations' deposits from private banks to the GDB. As of March 30 over $1 billion in deposits had been shifted in that manner, according to a Puerto Rico Treasury official. "We continue to increase the volume of deposits from the public corporations and agencies," the official said then.
On March 30 the Treasury official also told The Bond Buyer that as of Dec. 31, 2014 the Puerto Rico government had $6.5 billion in "operating liquidity." Of this total about $4.5 billion were deposits at the GDB and about $2 billion were in commercial banks.
The official didn't explain the difference between the $4.5 billion "operating liquidity" at the GDB and the officially announced $1.09 billion of "total net liquidity" that the GDB reported as having on Dec. 31.
In announcing the May 31 liquidity position on Monday afternoon, the GDB said that it expects this month to receive a principal loan payment of $100 million from the Treasury and a payment from appropriations of $174 million.
