Gov. García-Padilla steps up to the podium where San Juan Mayor Carmen Yulín Cruz awaits. To the governor’s left is Kenneth McClintock, former Secretary of State. (Credit: La Fortaleza/Alex Rafael Román)

Gov. Alejandro García-Padilla, flanked by members of the current and previous administration, inaugurated Tuesday the second phase of the Bahía Urbana redevelopment project in Old San Juan, between Piers 7 and 8, at a cost of $40 million. The new facilities will create 100 direct and indirect jobs.

“Today is a great day when we proudly show what we can achieve when we come together and work with great effort on behalf of the island,” said García-Padilla, accompanied by San Juan Mayor Carmen Yulín Cruz, former Secretary of State Kenneth McClintock — who represented former Gov. Luis Fortuño — Tourism Company Executive Director Ingrid Rivera-Rocafort and Ports Authority Executive Director Víctor Suárez.

The redevelopment of the San Juan pier and ports area has been overseen and redesigned by six administrations, including the current one.

The first conceptualization of a plan to develop the entire San Juan waterfront area was done in the 80s under the leadership of then Gov. Rafael Hernández-Colón, which later became known as “Paseo Portuario.” Subsequently, former Gov. Pedro Rossello expanded the initiative by establishing what he called the “Golden Triangle,” while his sucessor Sila María Calderón continued moving the concept forward by opening the Convention Center, building the bridges connecting the islet of San Juan and building the first facilities of the Muelle Panamericano in Miramar.

Under former Gov. Aníbal Acevedo-Vilá, the so-called San Juan Waterfront project was establishes that included, among other things, developing open areas, planting vegetation and installing urban art. Then, the Fortuño administration proposed the Bahía Urbana project connecting Piers 7 and 8 and installing world-class facilities.

Attractions includes cultural, sports and artistic events. Among the attractions scheduled to inaugurate Bahía Urbana is Café 8, an outdoor restaurant overlooking the Bay where visitors can enjoy light snacks and dishes such as salads, sandwiches, seafood as well as grilled options, all with a Puerto Rican flair.

Other attractions are Urban Beach, a water park, a state of the art trapeze school, water taxis, sea planes, mooring for boats and yachts, a central urban market area, and an open air amphitheater. Bahía Urbana will open daily to the public from 6 a.m. to 11 p.m., including holidays.

Late last year, the Bahía Urbana operation and management contract was granted to SMG Latin America.

The Treasury Department is looking to shore up $8 million in uncollected IVU. (Credit: © Mauricio Pascual)

Puerto Rico individual and corporate taxpayers who have a sales and use tax (known as IVU for its initials in Spanish) debt with the Treasury Department will be able to pay without penalty through a tax amnesty good through June 30. The agency expects to collect $8 million through the initiative, Treasury officials said Monday.

“The tax amnesty is a unique opportunity, which I do not foresee repeating, for citizens and businesses to catch up with their taxes, and in turn is a mechanism to raise funds for the fight against tax evasion by business who collect sales and use tax from citizens, but don’t remit a payment to Treasury,” agency Secretary Melba Acosta said.

To be eligible for the Tax Amnesty 2013 break, taxpayers will have to either pay the entire principal sum they owe — which will be free of interest, surcharges and penalties — or agree to a payment plan subject to the aforementioned additional charges, on or before June 30. Taxpayers who opt for payment plans must make a down payment of 10 percent of the debt.

Treasury noted that the following types of debt are eligible under the terms of the amnesty: income tax; inheritance and donations; excise taxes; IVU; withholding at source of income tax; any taxes related to Law 7 of 2009 pertaining to special taxes on real estate; any taxes associated with Law 73 of 2009 related to economic incentives for the development of Puerto Rico; any tax imposed under Law 74 of 2010 related to tourism development; any tax imposed under Law 83 of 2010 related to green energy incentives; any tax related to Law 27 of 2011 related to film industry incentives; any tax related to Law 20 of 2012 on exported services; and any tax imposed by any law of a similar nature or that has a special income tax rate.

Taxpayers looking to pay or set up a payment plan can go to any of the 16 service centers Treasury has set up islandwide in: Barceloneta, Caguas, Guaynabo (2) , Mayagüez (2), Ponce (2), San Juan (2), Arecibo, Bayamón, Caguas, Carolina, Humacao, and Río Piedras.

This is the first amnesty approved related to sales and use tax debt. Treasury plans to use the money collected to achieve its goal of fighting tax evasion related to collected, but unremitted IVU money. The portion of the funds earmarked for Treasury will be used to improve the oversight and IVU uptake by hiring additional staff and improve collections by updating and modernizing the agency’s information systems. At present, the IVU uptake is estimated at around 60 percent.

To read the full press release in Spanish, click HERE.

The use of tobacco in Puerto Rico translates into more than 2,483 deaths each year and approximately $1.04 billion in health care costs and $1.05 billion in lost productivity. (Credit: www.wikipedia.org)

Puerto Rico Treasury Department officials told lawmakers Friday that collections stemming from the proposed increase in the excise tax on cigarettes and tobacco should go in their entirety to the General Fund and not distributed for other purposes, as proposed by the three measures under consideration by the Legislature.

One of the measures, House Bill 896, proposes that a portion of the proceeds go to the Retirement System; the second, Senate Bill 845, proposes an excise tax on the sale of smokeless tobacco with proceeds going to the General Fund.

Meanwhile, Senate Bill 486, proposes splitting the collected revenue into a portion for the University of Puerto Rico’s Comprehensive Cancer Center, another portion for the Health Department’s Special Fund for Tobacco Control, and an allocation to the Health Reform’s Special Fiscal Stabilization Fund.

In his testimony, Joel Rivera, legal advisor to Treasury Secretary Melba Acosta, said House Bill 896 provides an increase in the excise tax from $11.15 to $14.50 for fiscal year 2013-2014 and $16.73 for fiscal year 2014-2015.

“We recommend an amendment to set the excise tax at $16.15 for every hundred sticks, or fraction, starting in 2013-2014. This would be in line with revenues included in the budget,” Rivera said, speaking on Acosta’s behalf.

By increasing the tax as recommended, the government estimates it would shore up $47 million in new money.

Rivera warned against altering proposed revenue collection measures earmarked to boost the General Fund. Furthermore, he said the $9.8 billion budget that has been proposed for fiscal 2014 already includes an allocation for the Retirement System.

The Treasury Department prefers that all money collected enters the General Fund, he said, to have greater control over the different distributions that are made, including the Retirement System.

During the hearing, Laura A. Vélez, executive director of the Puerto Rican Lung Association, said that while she admitted the precariousness of the Retirement System’s finances and the pressing need to rescue it financially, she disagreed with using the product of increased excise taxes on tobacco products to solve the problem.

The association, she said, supports the objectives of the three measures because they are “an additional mechanism to discourage addiction to tobacco-based products whose detrimental consequences on health have been widely studied and scientifically documented.”

Finally, Health Department representatives confirmed during the hearing that the use of tobacco in Puerto Rico translates into more than 2,483 deaths each year and approximately $1.04 billion in health care costs and $1.05 billion in lost productivity.

GDB President Javier Ferrer and Treasury Secretary Melba Acosta.

Government Development Bank President Javier Ferrer and Puerto Rico Treasury Secretary Melba Acosta took off to New York Wednesday to meet with credit ratings agencies S&P, Fitch and Moody’s to continue informing on the administration’s efforts to stabilize the government’s finances.

During the meetings taking place today, Ferrer and Acosta will present to the rating agencies details of the recently approved pension reform and the progress made to close Fiscal 2013’s budget gap.

“From the beginning, we’ve said that we’re going be in constant communication with the rating agencies to keep them informed of the steps we’re taking to face the complex fiscal matters that require action on our part to stabilize Puerto Rico’s finances. These meetings, which are customary, are part of this effort,” Ferrer said.

On a separate note, Acosta pointed out that the measures implemented by the present administration have already reduced the budget gap for this fiscal year from $965 million to $445 million, with respect to revenues.

Furthermore, she said necessary measures have been taken to reduce expenditures from $140 million to around $50 million, which are included in the current $2.1 billion deficit.

“We hope that the recently approved tax amnesty will help us to continue reducing this gap,” she said, adding “the fiscal team and the legislative assembly are working swiftly assessing next year’s budget, which includes revenue enhancement and expense reduction measures, as well as new mechanisms to improve collections and reduce tax evasion.”

Since taking office, Gov. Alejandro García-Padilla’s economic team has been taking steps to ward off a potential downgrade of the island’s credit to “junk” status, something that could come as early as summer, several sources have told this media outlet.

Grace Santana, head of the IFA and the P3 Authority

Grace Santana, who is pulling double-duty for the Gov. García-Padilla administration as head of the Puerto Rico Infrastructure Financing Authority as well as the Public-Private Partnerships Authority, is a firm believer that the private sector should take over the task of developing new infrastructure projects when the government can’t — but not take over existing facilities through long-term contracts.

“P3s centralize economic development when the government doesn’t have cash flow. They must be a mechanism to develop new infrastructure, not a mechanism to privatize government functions,” said Santana, who took over the reins of the P3 Authority in March, less than two months after being appointed to the helm of the Infrastructure Financing Authority, known as AFI.

With that in mind, last month the P3 Authority issued a call to all government agencies and municipalities to submit an inventory of necessary projects that could eventually be developed as P3 ventures. So far, four such projects have been identified: the Caguas-San Juan commuter train; the Hatillo-Aguadilla highway connector; a Women’s Correctional Facility; and the Río Piedras Medical Center Outpatient Clinic.

The $4.5 million clinic proposed by the Medical Services Administration, will go out for bids this week. The proposal entails building a new 28,000 square-foot facility adjacent to the Medical Center’s ER, to accommodate a waiting area for 140 people and space for ambulatory clinics.

The $4.5 million Río Piedras Medical Center Outpatient Clinic proposed by the Medical Services Administration, will go out for bids this week.

Agencies and municipal government have until May 13 to submit their proposals, Santana said.

Meanwhile, she confirmed that the P3 announced last year to build a 600-bed juvenile correctional facility in Yauco has been placed on hold, after four consortia were shortlisted last August to move on to the competitive procurement process to develop the complex.

“It was placed on hold to give this administration the opportunity to express itself on it,” Santana said. “We’re in close communication with the Department of Corrections and Rehabilitation regarding that facility and we expect to have an announcement on whether we move forward, soon.”

The public official said the six-person team that makes up the P3 Authority is all in place, except for two people, including one who will be in charge of closely monitoring the compliance of the P3 contracts granted to private operators to manage the PR2 and PR5 toll roads and the Luis Muñoz Marín International Airport.

21^st Century public school initiative moving forward
In an interview, Santana confirmed that AFI is moving forward with its flagship initiative, the “Schools for the 21^st Century” program begun under the former Gov. Luis Fortuño administration.

The program has a $770 million budget, with which it will complete 36 schools currently in the construction phase, plus another 50 that have yet to close on the paperwork, she said.

“We have to speed up that process of getting the paperwork done because we have the funding for it,” Santana said, adding that the program has $59 million of the total budget still available, and is not tied to any other project.

The Doctor Cayetano Coll y Toste school built in Arecibo last year is part of the Schools for the 21st Century program.

“We’ve asked the Education Department to tell us what their plan is for that budget, to see if we can put it to use. We’re working on using about $12 million of that to remodel a number of schools over the summer so they’ll be ready to use next school year. We would also like to use some of that money to buy desks, blackboards and other necessary items for the classroom.”

“The ‘Schools for the 21^st Century’ program is AFI’s biggest initiative, and the one with the most problems,” she said. “For example, it had 12 people signing off on project certifications to enable payments, and if one person was unavailable or out sick, that piece of paper had to wait until that person came back. We’ve brought that number down to four people.”

She also confirmed that the agency is aggressively working on cutting down the time it takes to cut checks from as many as four or five months to 40 days.

“This isn’t only about the fact that the economy doesn’t move, but it has also to do with the fact that it blows small businesses out of the market if they have unpaid certifications pending for months,” she said. “We’re acting quickly on decision-making that has to do with the progress of infrastructure projects, including payments.”

Statistics Institute Executive Director Mario Marazzi-Santiago.

Puerto Rico Statistics Institute Executive Director Mario Marazzi asked the Legislature to assign the agency a budget of a little more than $1.2 million for fiscal 2014, when it has set out to undertake 25 projects to expand and improve information databases.

While $1.01 million would come from the General Fund to ensure the functioning of the Institute and the continuity of its projects, another $250,000 would come as a special assignment for improvements in the statistical methodology used to calculate the island’s Gross Domestic Product and employment surveys.

In testimony presented Wednesday, Marazzi noted that the requested budget represents a fraction of the $5 million assigned by the law that created the Institute in 2003, which “never materialized.”

The Statistics Institute is currently operating with a budget of $641,000, or “21 percent of what was anticipated would be required” to run the agency, he said.

“For starters, we should indicate that this administration’s government platform emphasizes the need to strengthen government statistics functions in various areas such as public safety, education, and transparency,” he said. “We believe it is important that in subsequent years the Institute receives the assignments that allow us to … meet a variety of needs that still need to be addressed and that are not included in this petition.”

Despite the financial shortfall, Marazzi said the agency has pushed forward with a number of projects and is looking to get started on others in the pipeline.

Over the next fiscal year, the Institute has set out to:

• Expand and update the Puerto Rico statistics inventory;
• Advise Puerto Rico Trade in the implementation of the Jobs Act Now law;
• Complete the development of the School Dropouts Early Detection System and make the tool available to schools and teachers;
• Advise the Education Department in developing a Dropout Report required by Law 165-2011;
• Ensure adequate representation of the government before the U.S. Census Bureau;
• Prepare a “Homeless Count” for the Family Department;
• Develop a database of child abuse cases, in collaboration with the Family Department;
• Prepare a website to collect statistical data of child protection cases, currently filled manually by Family Department officials;
• Develop new supplemental questionnaires to the Labor Department’s “Labor Force Survey” so as to leverage the households survey to produce new statistics on Puerto Rico, which have never been prepared and are needed;
• Organize a public comment period for the Health Department’s new death certificate;
• Develop a Statistical Release Schedule for 2014;
• Respond to requests for statistics from citizens, researchers, agency heads, legislators, businesspeople, etc.;
• Seek to ensure that international and federal data banks contain complete information on Puerto Rico;
• Advise the Puerto Rico Federal Affairs Administration in promoting the inclusion of the island in statistics produced by federal government agencies and non-governmental agencies;
• Develop methodology and a program to measure the government workforce in a standardized way using the Office of the Comptroller’s job registry;
• Advise the Education Department in relation to statistics on the incidence of violent or criminal activity in schools that the agency must provide the Justice Department, the Puerto Rico Police, the Office for Youth Affairs and the Legislature;
• Review the Retail Sales Survey methodology, update the questionnaire and sample, and ensure the industries are identified using the North American Industrial Classification System;
• Advise the Education Department in implementing the Program for International Student Assessment tests in Puerto Rico;
• Complete various publications, namely the 2012 Migrant Profile, the 2011-2012 Educational System Profile, and the Purchasing Managers Manufacturing Index for Puerto Rico;
• Conduct the 2012-13 Puerto Rico Science and Technology Survey, which measures the economic value of local R&D. The last survey was done in 2009;
• Coordinate education statistics on Puerto Rico for UNESCO and telecommunications statistics for the International Telecommunications Union;
• Expand the workshops and academies program to train government workers responsible for creating statistics;
• Coordinate participation of government statistical personnel and develop opportunities in the U.S. mainland, through the University of Maryland’s “Joint Program on Survey Methodology;”
• Carry out educational activities and exhibits to mark the International Year of Statistics 2013, and;
• Modernize the Institute’s information systems.

“The reliability of the key statistics related to Puerto Rico’s economy has been questioned both in the international and federal and local scopes, which impacts the credibility that investors in the world could have toward Puerto Rico and its government, and it also increases financing costs that our government pays,” Marazzi said.

To get everything done, the agency needs four new jobs.

OMB Executive Director Carlos Rivas testifies Tuesday as Treasury Secretary Melba Acosta and Planning Board President Luis García-Pelatti listen on.

Puerto Rico Government Development Bank President Javier Ferrer told lawmakers Tuesday that without the necessary measures, the institution he heads will not have the capacity to float petitions by public corporations by summer.

“The bank does have capital, but if no action is taken, on June 30 the GDB will not [have any],” said Ferrer in response to questions from Finance Committee Chair Sen. José Nadal-Power. “We need the approval of laws that result in recurring revenue, to repay loans.”

Currently, the Puerto Rico Highway Authority is the GDB’s main burden, representing more than 25 percent of the loans in its portfolio, with more than $7 billion in debt, Ferrer said.

Other corporations draining the GDB’s coffers are the Puerto Rico Aqueduct and Sewer Authority and the Ports Authority.

Other members of the government’s economic team also testified during Tuesday’s budget hearings held jointly by the House and Senate.

In her presentation, Treasury Secretary Melba Acosta defended the recommended $9.8 billion budget for Fiscal 2014, to be able to meet government promises, including granting police officers sick pay and covering salary hikes for public employees approved through collective bargaining agreements under the prior administration.

In her lengthy presentation, Acosta outlined the most significant proposals to shore up taxes, including increasing cigarette taxes to $16.15 from $11.15 for every 100 sticks — which would generate $47 million in new money — and imposing a new 1 percent tax on insurance policies underwritten by local companies, which would generate another $101 million for Treasury.

Those measures are in addition to a number of adjustments to close loopholes and improve the level of collections and shore up new revenue.

The list includes tweaking the exemptions granted to resellers, who currently pay no taxes on good purchased for their businesses and effecting a 2 percent surcharge on self-employed people who make up to $200,000 a year. With its approval, Treasury would collect $50 million a year.

Another measure in the works entails placing an additional threshold on taxpayers who buy homes worth $1 million or more, limiting their mortgage interest deductions to a maximum of $35,000 a year. That would shore up $16 million in new revenue, Acosta said.

Meanwhile, Office of Management and Budget Executive Director Carlos Rivas said the proposed budget is “fiscally responsible, because one, it assumes and includes all of the island’s fiscal obligations and two, it dramatically reduces the projected deficit, and three, it limits increases in operating costs to the amount that covers the actual government operation.

Gov. García-Padilla (at center) arrives at the Legislature to deliver his first Budget and State of the Commonwealth address. Behind him are House Speaker Jaime Perelló and Senate President Eduardo Bhatia. (Credit: La Fortaleza)

Puerto Rico Gov. Alejandro García-Padilla presented Thursday a consolidated budget of $29 billion and an operating budget of $9.83 billion for fiscal 2014, representing a $750 million increase when compared to the current budget, which he said will be covered with new revenue.

The proposed operating budget falls about $200 million short of the projected revenue intake for Fiscal 2014 of $9.6 billion. The gap increases to $775 million when the planned financing of $575 million in debt is factored in.

Still, the $775 million deficit is about 66 percent lower than the $2.2 billion gap in last year’s fiscal budget, which García-Padilla’s economic team said earlier in the day would be eliminated by fiscal 2015.

During his first Budget and State of the Commonwealth address, García-Padilla also announced that effective Dec. 1, the sales and use tax would be reduced to 6.5 percent from the current 7 percent.

On the topic of the sales tax, Treasury Secretary Melba Acosta said in a meeting with the media ahead of the governor’s speech that the agency will propose a number of adjustments to close loopholes and improve the level of collections and shore up new revenue.

The list includes tweaking the exemptions granted to resellers, who currently pay no taxes on good purchased for their businesses and effecting a 2 percent surcharge on self-employed people who make up to $200,000 a year. With its approval, Treasury would collect $50 million a year.

“That affects 1,665 out of 184,294 tax returns, or 0.9 percent of the population,” Acosta said.

Another measure in the works entails placing an additional threshold on taxpayers who buy homes worth $1 million or more, limiting their mortgage interest deductions to a maximum of $35,000 a year. That would shore up $16 million in new revenue, Acosta said.

“The budget closes the gaps in corporate contributions and addresses other similar issues, with revenue measures that do not affect the upper-middle class or middle class, or lower middle class, or the poor,” García-Padilla said. “Those who earn more will pay more, and those who earn less will pay less.”

Stagnant growth
During the meeting with the media, Planning Board President Luis García-Pelatti offered economic projections which while positive, basically confirming there will be no growth this or next fiscal year.

Reporters meet with Chief of Staff Ingrid Vila, Treasury Secretary Melba Acosta and Planning Board President Luis García-Pelatti prior to the address. (Credit: La Fortaleza)

“The prior administration said growth would be at 1.2 percent in fiscal 2013. During the transition that was brought down to 0.6 percent. After all of the analysis we’ve done, we’ve corrected that to -0.4 percent,” García-Pelatti said.

He estimated growth at 0.2 percent for fiscal 2014, which in the eyes of most economists is the same as no growth at all.

“The truth is that it doesn’t really matter whether it’s –0.4 percent or –0.7 percent or –0.2 percent. The problem is that the economy has lost the ability to grow and will not recover for several years,” said Economist José J. Villamil, founder of analyst firm Estudios Técnicos. “Since the mid 70s to the present, the economy has grown by just over 2.0 percent per year, which is terrible.”

Meanwhile, Vicente Feliciano, president of Advantage Business Consulting, called the prediction for 2014, “somewhat optimistic but not outlandish.”

“Fiscal adjustments and pension reform were necessary and unavoidable. The alternative was downgrading and junk bond status. However, they would be a burden on the efforts for economic recovery going forward,” Feliciano said.

Iván “Pudge” Rodríguez, García-Padilla and Roberto Alomar. (Credit: La Fortaleza)

The second Economic Development Summit took place at the Puerto Rico Convention Center Tuesday, when members of Gov. Alejandro García-Padilla’s economic team summarized what agencies have been up to since January to further the administration’s agenda to spur private-sector jobs and activity.

Details emerged during a brief question-and-answer session moderated by Economic Development and Commerce Secretary Alberto Bacó at the event that drew about 400 participants.

Puerto Rico Industrial Development Company Executive Director Antonio Medina said so far, the agency has identified three key areas of potential growth for the island: biopharmaceuticals; information technology; and so-called “flag” industries.

“In the medical devices sector, we know there are many companies considering expanding and adding new product lines to their Puerto Rico operations, increasing payroll, all in response to the sector’s global growth,” Medina said. “As for flag industries, it’s a sector that has pretty much created by itself and there is now a critical mass. We’re working on organizing a cluster to sponsor specific business activities to get the word out about the benefits these types of companies have in Puerto Rico.”

Flag companies are based on U.S. soil and employ U.S. citizens, meeting the requirements for federal government procurement.

“These companies are growing because more indsutries are increasingly requiring that their products be made on American soil, and we can take advantage of that,” Bacó said, noting the García-Padilla administration will host at least 10 more gatherings like Tuesday’s during the rest of the term.

Meanwhile, Roosevelt Roads Redevelopment Authority Executive Director María L. Blazquez-Arzuaga confirmed that the agency expects to sign off on the transfer of Parcels I and II from the Navy on May 7, paving the way for redevelopment of the former naval base in Ceiba to get going.

“We hope to have RFPs out by summer and be able to award projects and have the start in 2014,” she said.

Approximately 3,000 acres will be open for development by zones, she said.

Meanwhile, José Maeso, executive director of the Puerto Rico Energy Affairs Administration, confirmed that the next financing cycle for eco-friendly projects through the “Green Energy Fund” will open in early August.

Since its inception, the fund has made subsidized the development of hundreds of residential and commercial renewable energy projects throughout the island.

The Green Energy Fund is divided into two tiers. The first tier, which will open for applications Wednesday, comprises projects built to generate between 15 and 100 kilowatts of energy. Participants receive rebates of up to 40 percent on the purchase and installation of an energy conservation system. Interested parties are required to participate in a competitive application process that takes place online.

For her part, Ivelisse Acevedo, interim Economic Development Bank President said in the first 100 days of the current administration, the agency has approved 95 loans to small businesses totaling $54 million.

Currently, the agency is working on establishing a collaboration agreement with the Youth Affairs Administration to be able to approve loans of up to $10,000 to that segment of the population looking to develop microindustries. The latter agency would have to guarantee the loans, Bacó said.

Tuesday’s event had the distinct appearance of being a major exercise in public relations, complete with appearances by Puerto Rican baseball legends Iván “Pudge” Rodríguez and Roberto Alomar, who flanked the governor during his allocution.

After confirming that his administration has spurred the creation of 16,000 since January, most of them in response to incentives provided through the Jobs Act Now, García-Padilla again handed out bats to private-sector companies that are hiring and “hitting it out of the park” for Puerto Rico.

The same baseball analogy was used during the first such summit held in January, when the law was signed.

Developer Joseph McCloskey-Diaz is among the most recent Puerto Rico residents to file for bankruptcy protection. (Credit: © Mauricio Pascual)

Puerto Rico Food distributor Pedro Barba e Hijos Inc., Humacao drugstore owner Manuel Mediavilla Inc., and developer Joseph McCloskey-Diaz — who was involved in a highly-publicized mortgage fraud scheme in 2009 — were among the most recent commercial bankruptcy filings, with upward of $20 million in combined debt.

Pedro Barba e Hijos, Inc. a San Juan-based company that distributes rice, vegetables, codfish, tuna, conserves of seafood, garlic, peppers, among other goods, filed for Chapter 11 protection against creditors who are owed more than $7.8 million, according to information submitted to the U.S. Bankruptcy Court in San Juan.

The company established in 1994 listed among its bigger debts more than $4.2 million owed to Citibank, N.A., and more than $1 million to Canada’s Drummond Export Inc. In the filing submitted last week, Pedro Barba e Hijos reported a little more than $2.1 million in assets.

Meanwhile, Manuel Mediavilla Inc., the parent company of several businesses in Humacao — including a drugstore and a furniture store — is also seeking Chapter 11 protection from the court, listing nearly $2.5 million in debt. Individuals Manuel Mediavilla and Maydin Meléndez, submitted a related case citing another $3.9 million in debt, court records show.

Manuel Mediavilla Inc. owns and operates Tu Farmacia y Mas, a drugstore that has been in business in Humacao since 1990.

Rounding out the trio of major bankruptcy applications submitted in court last week is a Chapter 11 petition by McCloskey-Diaz, with a little more than $5 million in debt.

About four years ago, McCloskey was among 10 people who were indicted by a federal grand jury on criminal counts of conspiracy, mortgage fraud and money laundering related to a scheme through which luxury properties were sold in the upscale Palmas del Mar community in Humacao in exchange for kickbacks. He is also the former owner of the DoubleTree Hotel in Condado.

In February, McCloskey was sentenced to more than two years in jail.

Econo’s distribution center in Carolina.

The Puerto Rico Justice Department’s Office of Monopolistic Affairs announced Tuesday it has filed a complaint against Supermercados Econo Inc. for violations to fair competition rules after failing to notify about recent changes in its grocery store chain’s composition.

Econo is what is known as a voluntary chain, an exception included in the Statute of Monopolies to allow small independent companies to join forces in purchasing, marketing and sales to compete against companies with greater turnover.

These types of voluntary chains have to be certified every two years by Puerto Rico Trade and the Monopolistic Affairs office. The chains must also abide by Puerto Rico Trade regulations that order them to notify Justice Department of any changes in their composition, said Jesús Alvarado-Rivera, deputy secretary of the agency’s Monopolistic Affairs division.

“We have information that Econo has opened at least one new store in Cayey, which did not exist at the time the last certification was granted to the voluntary chain. This means a change in the chain’s composition, which had to be previously notified to the appropriate agencies,” said Alvarado-Rivera.

He added that since the opening of the new facility was not notified in accordance with applicable laws and regulations, it is a “violation to be addressed as soon as possible to ensure compliance with fair competition rules,” the government official said.

Attempts to reach Econo representatives were unsuccessful Tuesday.

Econo must present the required paperwork to the aforementioned agencies as soon as changes in its composition occur.

“If the chains don’t report these changes when they occur, we can not ensure that their presence in the market is not excessive, representing harm to competition. Otherwise, companies could abuse the advantages granted through the voluntary chains exception,” Alvarado-Rivera added.

Supermercados Econo was founded in 1970 in Hato Rey and has close to 60 individually-owned stores throughout the island that employ about 5,000 people. The company has a distribution center in Carolina that supplies inventory to store owners who leverage their combined volumes to drive down costs.

From left: Secretary of State David Bernier; Julio Fontanet, dean of the Inter American University Law School; Vivian Neptune, dean of the UPR Law School; and Former Secretary of State Kenneth McClintock.

The Puerto Rico State Department has a backlog of about 20,000 trademark and corporation registration applications pending review, which it is looking to eliminate this year, Secretary of State David Bernier said Tuesday.

To get there, the agency has reached agreements with the University of Puerto Rico Law School and the Inter American University Law School to bring in student interns to speed up the process of updating those records.

“The State Department is the gateway to the island’s economic activity. The first thing a company does when it decides to establish itself on the island is to incorporate and register their trademarks,” Bernier said. “That’s the reason behind our efforts to ensure efficiency in the process.”

“If we want to be competitive, we have to be efficient in the services provided to citizens and corporations doing business in the island. The backlog is unacceptable,” Bernier said, adding that in the first 100 days that the current administration has been in office, staff has managed to reduce the backlog by about half.

The current backlog includes about 5,000 new trademark applications and another 13,000 or so petitions for amendments to existing records. Another 2,000 applications are pending review for corporate registrations, mergers, amendments or dissolution, said Francisco Rodríguez, deputy secretary of services at the State Department.

“We’re not behind in new corporation registrations. The backlog is related to applications that were not computerized,” he said. “The goal is to catch up by the end of the year and put mechanisms in place so we never fall behind again.”

Through the agreements with the universities, the State Department expects to have a total of 20 interns rotating through the registry office, Rodríguez noted.

By increasing staff, the State Department will be able to extend trademark and corporation registration services to offices that currently only process passports, in Plaza Las Americas, Arecibo, Fajardo, Guayama and Mayagüez, which will open soon.

“In 2014, we should be operating under international quality standards, processing corporation registration petitions within 48 hours and trademarks in less than 60 days,” Bernier said.

The State Department accepts manual and online corporate and trademark registration applications for several years, with the latter method gaining momentum during former Secretary of State Kenneth McClintock’s tenure.

The current backlog seems significant considering that Comptrollers Office records show that between 2009 and 2012, the State Department granted seven contracts worth more than $13.7 million to North Carolina-based FileOne Inc., a company specializing in secretary of state records management processes.

Those contracts are valid through 2014 and Rodríguez said they will be honored.

The agency’s central office in San Juan and the Capital Center location in Hato Rey will open from 6:30 a.m. to midnight tonight.

Citizens who wish to drop off their returns in person at the Puerta de Tierra facility will be able to drive through stations set up at the Capitolio Plaza Condominium, Paseo Covadonga on the north side, the agency’s plaza and on Ponce de León, near the Olympic House.

Another office that will be operating on an extended schedule today is the Taxpayers Service Center in San Juan, with extended hours through 6 p.m. and the Technical Consults call center at (787) 722-0216 (option 8), also through 6 p.m.

Meanwhile, offices in Arecibo, Bayamón, Guayama, Ponce, Carolina, Caguas, Mayagüez, Fajardo, Humacao and several others times will also open for longer today to give last-minute filers a chance to get their paperwork in on time. (See graphic for detailed schedule.)

Treasury’s internal post office at Puerta de Tierra will be open from 6 a.m. to midnight today. The agency also reminded taxpayers that they can still fill and file their returns online anytime throughout the day via www.planillas2012.com.

The Government Leaders Forum will take place through Wednesday in Río de Janeiro.

Three high-ranking Puerto Rico government officials, Gov. Alejandro García Padilla, Economic Development and Commerce Secretary Alberto Bacó and Puerto Rico Industrial Development Company Executive Director Antonio Medina, jetted off to Brazil Sunday to participate in “The Government Leaders Forum — Latin America and The Caribbean,” hosted by Microsoft.

The forum will focus on the “Driving impact today for a brighter future” theme, with special emphasis on areas of interest to policymakers and government heads across the region, including topics such as national competitiveness, social development, economic growth and education, according to the event’s website.

“We can and must create jobs widening horizons looking to Latin America, looking to Europe and the world,” said the governor, adding the trip is part of his administration’s “commitment to promoting Puerto Rico as an investment destination.”

He is slated to meet in the city of Sao Paulo with Brazilian executives to begin positioning the island beyond the usual U.S. markets.

The Government Leaders Forum, which will take place through Wednesday in Río de Janeiro, has drawn heads of countries throughout Latin America to its prior editions, namely former U.S. Secretary of State Madeleine Albright, President of Mexico Felipe Calderón, President of Brazil Luiz Inácio Lula Da Silva, President of Colombia Álvaro Uribe, President of Panama Ricardo Martinelli and President Bill Clinton.

Last year, President Sebastián Piñera of Chile and President Juan Manuel Santos of Colombia had what forum organizers described as “a historic conversation” using virtual presence technology to discuss their national information, communications and technology strategies with the audience in Washington, D.C., — where the event took place in 2012 — from their respective countries.

García-Padilla is slated to deliver the closing remarks following a discussion on “Innovation and Society” on Tuesday, according to the event’s preliminary agenda.

Although Microsoft Corp. invited García-Padilla, the trip will be paid for with public funds, La Fortaleza said Sunday. However, the cost of the trip to Brazil was not revealed.

Gov. García-Padilla did not make a public appearance Thursday, instead pre-recording a message about the Retirement System changes.

Amid outcry from many public workers who will see their pension benefits dwindle once they retire from their government jobs, Puerto Rican lawmakers approved and Gov. Alejandro García-Padilla signed a sweeping reform aimed at “rescuing” the Commonwealth’s Employees Retirement System.

The reform, together with an annual legislative appropriation from the General Fund, will eliminate the System’s cash flow deficit that threatened to leave thousands of retirees without the pensions they now receive, Puerto Rico Government Development Bank President Javier Ferrer said late Thursday.

“Today, after an open and inclusive public hearing process and after years of debate on how to address the System’s recurrent shortfall, the Legislative Assembly has passed a pension reform that will safeguard the System, preserve the pensions of our retirees and, for the first time, offer a lifetime annuity to all our public employees upon retirement, while taking into consideration the most disadvantaged individuals,” he said.

“Very few other jurisdictions have implemented a pension reform as extensive and comprehensive as this one, necessary due to the precarious situation of our System,” Ferrer added. “Today we have done justice both to Puerto Rico retirees and ordinary citizens, who will not have to pay more and more from their pockets to cover benefits accrued by public employees.”

However, public workers who witnessed the moment when lawmakers approved Bill 888 did not agree. Many were angry and indignant about losing benefits after working for decades, while others recriminated legislators for not cutting back their own salaries and benefits.

Labor groups representing thousands of government workers are expected to hold a news conference today to discuss their plans, revealing Thursday that they will file a lawsuit to halt the implementation of the law, saying it violates collective bargaining agreements in place.

After signing the measure, García-Padilla released a statement saying enacting the reform “was was not a simple process. It was an issue that was sidestepped for the past 60 years. No government had assumed responsibility to reform the Retirement System to ensure a fair and dignified livelihood for employees who built this island.”

“It is an issue that if we had not taken care of now, would have irrevocably disrupted Puerto Rico’s entire economic structure,” he said.

GDB President Javier Ferrer

The cash-strapped Retirement System has been under close scrutiny by stateside credit agencies who have warned about slashing Puerto Rico’s credit ratings to “junk” in the absence of action, something that would produce catastrophic consequences for the island’s economy.

It remains to be seen whether the reform approved will be enough to appease Standard & Poor’s, Moody’s and Fitch Ratings.

Basic points of the reform
The government’s decision to enact the reform sought “to strike a reasonable balance between the System’s fiscal crisis and the social and economic reality of our retirees and our public employees,” Ferrer said.

Among the changes are:

1. Benefits accrued by all retirees are grandfathered by the reform;
2. Minimum pension will be increased to $500 from $400;
3. Benefits accrued up to June 30, 2013 by active public employees under the defined benefit plans of Law 447 of 1951 and of Law 1 of 1990 are grandfathered by the reform;
4. Retirement age will be increased for some groups of employees;
5. Employee contribution to the system will be increased to 10 percent from 8.275 percent;
6. Active public employees will be granted future benefits based on a defined contribution plan (similar to the system 2000), which will be paid through a lifetime annuity (the “new hybrid plan”);
7. Special laws’ benefits are modified (and the resulting savings will be allocated to the system); and
8. Benefits payable to public employees under the system 2000 will be converted to a lifetime annuity.

The bill signed Thursday night was an amended version of the original measure introduced by the executive branch last month, said Treasury Secretary Melba Acosta.

1. A staggered increase in the retirement age to 61 years for participants under Act 447, instead of 65 years as proposed in the original bill.
2. Keeping the retirement age at 65 years for participants under Act 1 and a staggered increase in the retirement age to 65 years for participants under System 2000, instead of 67 years as proposed in the original bill.
3. Establishing the retirement age of state and municipal police officers, firefighters, and custody officers at 55 years, instead of 58 as proposed in the original bill.
4. Establishing the retirement age for new employees, joining the System after July 1, 2013, at age 67 and at age 58 for new state and municipal police officers, firefighters, and custody officers.
5. Changing the benefits granted by Special Laws as follows: Keeping the medical plan contribution unaltered, up to a maximum $1,200; Keeping the medication bonus unaltered at $100; Reducing the Christmas bonus to $200 from $600; and Eliminating the summer bonus.
6. Extending the period to retire from July 1, 2013, to December 31, 2013, for those employees who joined the System before April 1, 1990 and who may retire with 55 years of age or more, and 30 years of service or who may retire with 30 years of service or more, at any age. The maximum pension benefit for those who have reached at least 55 years of age will be 60 percent of their average salary, and for those who are less than 55 years old, the maximum pension will be 55 percent of their average salary.
7. Establishing the rate to purchase services not credited at 9.5 percent, instead of 15 percent as established in a circular letter. The purchase of services not credited may be up to a maximum of 60 percent of the average salary for those who complete 30 years of service as of June 30, 2013.
8. Veterans benefit: Veterans may purchase service for military leave rendered before June 30, 2013, at any time. Additionally, public employees in active military service may make voluntary contributions to their accounts under the New Hybrid Plan for periods in military service.

Acosta said the amendments were “the result of effective teamwork and ongoing communication between the legislative and executive branches, leading to a legislation that maintains the spirit and main objective of the original bill while addressing the concerns and suggestions submitted by pensioners, public employees and other sectors during the public hearings.”

Treasury Secretary Melba Acosta (Credit: © Mauricio Pascual)

The Commonwealth Retirement System is dragging a shortfall of about $36 billion, and without a significant reform, funds were expected to run out next year.

“We’ve said that the time has come to act responsibly and to stop kicking the can down the road because the present and future pensions of our public employees are at stake. The time has come because we came to understand that the crisis of the System is not merely a financial matter; it’s not just dollars and cents,” Ferrer said. “It’s about thousands of public employees who, absent any action, would be left without a pension after having served the government for a large part of their lives.”

Meanwhile, Acosta said the reform’s “impact and the sacrifice produced will be equally shared.”

“Everyone contributes. Retirees contribute through reduced special bonuses. Active public employees, through the change in benefit structure, changes in the retirement age for some groups of employees and the increase in employee contribution,” Acosta said.

“Finally, government employers and taxpayers in general contribute through the increase in employer contributions of Law 116, the allocation to the System of the savings produced by the changes in Special Laws’ benefits, and an additional annual legislative appropriation for the System during the next decades,” she said.