Gov. Alejandro García-Padilla and members of his fiscal team faced investors during a webcast Thursday, during which they defended the administration’s strategy thus far to turn around the island’s grim financial situation.
García-Padilla opened the two-hour call with a message of the island’s “commitment to fiscal discipline and self-sufficiency,” saying there are several initiatives in place to stabilize finances and grow the economy.
For one, he confirmed plans to roll out a comprehensive tax reform during the first half of the current fiscal year that began July 1, which “will provide certainty to our industrial base as well as small business owners.”
“We will simplify compliance and provide revenue consistency to the General Fund,” he added, without offering details of what the plan will represent for individuals who have been feeling the brunt of new taxes in recent months.
In the 80-page presentation, government officials offered a rundown of what the administration has done so far, including steps to secure liquidity, draft a budget without deficit financing, make public corporations self-sufficient, and grow the economy.
“When this administration took office, it embarked on a mission to implement fiscal and economic reform for the Commonwealth and its public corporations, with the intent of strengthening the creditworthiness and liquidity of the Commonwealth, providing mechanisms for the public corporations to achieve self-sustainability, and restoring economic growth to Puerto Rico,” Government Development Bank Chairman David Chafey said. “In less than two years, the Commonwealth has made substantial progress toward each of these goals.”
Looking ahead, the government is placing emphasis on five key priorities including making the Puerto Rico Electric Power Authority and the Highways and Transportation Authority self-sufficient in the long-run, executing on a balanced budget, delivering projected revenues and managing expenses, rolling out the aforementioned tax reform, and accessing the market.
To that final point, the GDB official told investors the agency expects to issue tax and revenue anticipation notes, known as TRANs, by Sept. 30.
“Given our commitment to improve and protect our credits, we believe our credit ratings will not preclude our market access and there is appetite from investors to provide liquidity, as needed, to the Commonwealth to support its reform plan,” Chafey said.
“The Commonwealth plans to refinance its TRANs in the first quarter of fiscal 2015 and will access the market as conditions permit to refinance short-term maturities and extend its liquidity horizon,” he added.
The administration also plans to continue defending last month’s approval of the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, which has drawn a series of downgrades that has pushed the island’s credit standing deeper into junk status in recent weeks.
Chafey said that despite the administration’s belief that the agencies have “severely misunderstood or misrepresented the actions and the intentions of the Commonwealth, we recognize that the downgrades have had an adverse impact on many of the investors who have supported us for many years.”
“We will continue working with the ratings agencies and expect to continue having a constructive dialogue with them,” he said. “We hope to help them gain a better understanding of the progress we have made in the past two years to improve the Commonwealth’s fiscal position and economic growth initiatives, with a goal of improving the ratings of our outstanding securities as early as possible.