Bonds

Puerto Rico board believes PREPA plan can be approved without modification

The Puerto Rico Oversight Board’s proposed Puerto Rico Electric Power Authority plan of adjustment can be approved in its current form despite a recent appeals court ruling undermining the assumptions that underlies it, said board Executive Director Robert Mujica Jr.

“We believe that the current plan that we have is confirmable as it is and we’re waiting for the court to do that,” Mujica said Monday at a budget press briefing.

The recent First Circuit Court of Appeals ruling that PREPA bondholders have a perfected lien on the authority’s net revenues as well money in the authority’s sinking and subordinate funds, “has impacted that” confirmation, he continued. The board wants the appeals court to reconsider what he described as a “narrow issue.”

Puerto Rico Oversight Board Executive Director Robert Mujica Jr. said “anything is possible” in reference to the timing of the end of the PREPA bankruptcy.

Darren McGee, Office of Gov. Kathy Hochul

“We’re probably going to be in court for a long time,” Mujica said about the PREPA bankruptcy, although the board remains “very hopeful” that will not be the case.

This weekend the board approved fiscal year 2025 budgets for PREPA, the commonwealth of Puerto Rico, the University of Puerto Rico, the Puerto Rico Sales Tax Finance Corp. (COFINA), the Puerto Rico Industrial Development Company, the Public Corporation for the Insurance and Supervision of Cooperatives, and the Municipal Revenues Collection Center. It had already approved budgets for the Puerto Rico Aqueducts and Sewer Authority and Highways and Transportation Authority.

Puerto Rico’s fiscal year starts on July 1.

The board’s commonwealth budget differed from the local legislature’s budget, which means it will not count towards the four consecutive years of balanced budgets required by the act for the board to disband.

Mujica said the legislature recently passed a bill affecting the budget that would cost more than $500 million, despite board warnings not to do so. The board’s budget negates that bill.

Puerto Rico’s needs “budget reform,” he added.

The new budget includes a provision that requires bills that “modify the use or purposes of the funds allocated in this budget” to contain “a prior certification of compliance with the fiscal plan” and identify a source of funds.

Gov. Pedro Pierluisi’s press secretary didn’t respond immediately to a request for a comment.

The fiscal 2025 general fund budget is $13.1 billion. Combined the $4.9 billion special revenue fund, the $15.3 billion federal fund budget, and the general fund compose the $33.3 billion consolidated commonwealth budget.

Money allocated for general fund spending is up 3% from a year earlier.

Mujica said overall funding for University of Puerto Rico, including contingent money from the commonwealth general fund, was increasing slightly to $1.256 billion in this fiscal year from $1.252 billion last fiscal year.

Of this, $501 million is promised from the general fund. The board is also setting aside $121 million in possible additional general fund funding if the university follows certain board-requested policies.

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