Puerto Rico's cash position was 24% below projection in February

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Puerto Rico’s cash position was 24% below the pre-Hurricane Maria projection as of Feb. 23, showing increased financial pressure after earlier reports had shown limited deterioration.

According to a cash flow summary posted to the Electronic Municipal Marketplace Access web site, Puerto Rico’s primary central government account, the Treasury Single Account, contained $1.56 billion as of Feb. 23. Before Maria hit on Sept. 20, the government had projected that on that date there would be $2.061 billion.

The deterioration comes as the Puerto Rico Oversight Board is working to create a “certified” approved version of a five-year fiscal plan for the commonwealth’s government. In a version of the plan the government of Gov. Ricardo Rosselló submitted on Feb. 12, there was expected to be enough cash flow in this period for between 8.8% and 16.8% of debt service to be paid.

As of Nov. 17 the Treasury Single Account had been 1% below the pre-Maria projections.

It remains to be seen if the latest revenue readings change how the board calculates the available cash flow.

The Feb. 12 plan didn’t specify that excess cash flow would be used for debt service, according to a municipal bond analyst who spoke anonymously, citing his company's policy. The “excess pre-debt service cash flow might be needed for recovery related projects and purposes, leaving less than some observers believe for debt service.”

The Feb. 23 cash flow report transformed a $343 million reconciliation adjustment planned for Feb. 23 as a reserve account. Instead of a $343 million debit, the line is being treated as a $300 million loss, representing the loan the central government made to the Puerto Rico Electric Power Authority on Feb. 23.

The loan is considered a debit on the fiscal year 2018 liquidity plan because the government doesn’t expect it to be paid back in the fiscal year.

In other Puerto Rico revenue news, on Wednesday the Puerto Rico Treasury said General Fund net revenues were down 5.2% in the first seven months of the fiscal year compared with projections. In dollar terms, the biggest shortfalls were in Law 154 foreign corporation profit taxes ($135.4 million) and sales and use taxes ($80 million). Total General Fund revenues in the period were $4.218 billion.

In January net revenues were 12.2% below projection. In cash terms, the biggest discrepancies were in sales and use taxes and Law 154 taxes coming in $54.8 million and $47.2 million short, respectively, and individual income taxes coming in $43.2 million above expectations.

According to Treasury Secretary Raúl Maldonado Gautier, income taxes were above expectations because Hurricane Maria had made employers postpone payments for the first few months of the fiscal year to January.

Also, some of the proceeds from December, a heavy shopping month, were received this year in December, whereas in the past they had been gained in January, the secretary said.

Another explanation of the decline sales and use taxes for the General Fund was that the guaranteed collection sum for the Puerto Rico Sales Tax Financing Corp. (COFINA) wasn’t completed until February this year, while in past years it was completed in early January.

In still other fiscal news, Puerto Rico’s Fiscal Agency and Financial Advisory Authority released a report Thursday on Puerto Rico’s government account holdings. As of Jan. 31 the amount had risen to $7.1 billion, from $6.9 billion on Dec. 31.

Both sums include the COFINA trust accounts, which many COFINA holders believe belong to them. As of Jan. 31 this account held $1.14 billion.

It is one of several accounts that are part of a “restricted accounts/subject to Title III proceedings accounts” listed as holding $2.3 billion. Non-Treasury Single Account central government accounts had $843 million. Pension related accounts (not the pension investment accounts) had $298 million. The public corporations and other legally separate entities held $1.84 billion. The Treasury Single Account had $1.77 billion.

The $7.1 billion total doesn’t include legislative branch, judicial branch, municipal, Government Development Bank, and investment accounts.

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PROMESA Commonwealth of Puerto Rico University of Puerto Rico Puerto Rico Industrial Development Co Puerto Rico Employees Retirement System Puerto Rico Aqueduct & Sewer Authority Puerto Rico Public Buildings Authority Puerto Rico Public Finance Corporation Puerto Rico Infrastructure Financial Authority Puerto Rico Electric Power Authority Puerto Rico Highway & Transportation Authority Puerto Rico Sales Tax Financing Corp (COFINA) Government Development Bank for Puerto Rico Puerto Rico