Trying To Save The Plan of adjuSTmenT

Bill Enabling Plan of Adjustment Goes Back to Legislature for a Vote

With new language agreed between the Legislature and La Fortaleza, but not the FOMB

Yaritza Rivera Clemente, The Weekly Journal

Editor’s note: This is a developing story. Even with the objections that the Financial Oversight and Management Board (FOMB) has about the most recent changes made to the enabling law on the proposed Plan of Adjustment (POA), the Legislature were scheduled to approve Tuesday the legislation that contains new provisions on the general obligation bonds issue, while a new day of demonstrations against the POA took place on the outskirts of the Capitol.

House Bill 1003 — which creates the Law to End the Bankruptcy of Puerto Rico — would go down to a vote with new language arising from the agreement reached over the weekend between the majority delegations of the Senate and the House of Representatives, together with La Fortaleza. However, the FOMB was not a part of this agreement.

In statements to the press, House Speaker Rafael “Tatito” Hernández said the measure would be approved and the language would be defended in court. Yesterday, the executive director of the FOMB, Natalie Jaresko, described during the urgent meeting summoned by the federal Judge Laura Taylor Swain, that the new amendments to the bill were like a “poisonous pill.”

In response, Hernández said, “We are going to fight it as a government, all with a single message and it will be very difficult for the Board to back down.” He added that he knows the FOMB is against the new amendments and therefore, he would try to resolve the matter in court.

The House Speaker defended the amendments, arguing that they do not have a fiscal impact on the POA and that this should be emphasized during the mediation process ordered by Judge Swain.

On Monday, the FOMB issued a statement: “After months of discussions with the Puerto Rico Government, the Oversight Board has repeatedly defined, clarified, and reiterated its position on the terms that would be acceptable for the legislation needed to provide for the issuance of the new general obligation bonds as part of the 7th Amended Plan of Adjustment. The Puerto Rico House of Representatives passed House Bill 1003, which was mutually satisfactory.

“The Oversight Board urges the Puerto Rico Senate to pass – and the Governor to sign – House Bill 1003 with the same terms.

“Passing the bill with changes that create ambiguities or new obligations will not enable the Oversight Board to agree. The Oversight Board hopes the Senate will take this opportunity to enable the Commonwealth to emerge from bankruptcy and realize the new investment and growth that typically occur when public sector bankruptcies end,” the FOMB said.

For the measure to be approved in the House, at least 26 votes are needed, while in the Senate, 14 votes are needed. “The expectation and commitment is to approve [the bill] in both bodies... The expectation is that, if this is done early, the bill will go out tomorrow (today) to La Fortaleza for the governor to sign,” Hernández stressed.

Passing the bill with changes that create ambiguities or new obligations will not enable the Oversight Board to agree. The Oversight Board hopes the Senate will take this opportunity to enable the Commonwealth to emerge from bankruptcy and realize the new investment and growth that typically occur when public sector bankruptcies end.

Substantial changes

The measure underwent several changes, but the most substantial is located in Article 104 on the protection of pensions for government retirees.

“For purposes of clarity, this law will be immediately rendered ineffective and any transaction, issuance or management related to it will be void if it is ordered and proceeds with any cuts to the pensions of government employees in the Adjustment or Restructuring Plan. The validity of this law is conditional on zero cuts in pensions,” states the new amendment.

Meanwhile, Senate President José Luis Dalmau

Santiago specified that, although there were doubts with the language included in the past versions of the measure, modifications have been made to obtain the necessary votes in the upper chamber.

“If there are things to improve, then we will work on them. I have not closed doors; if I had closed doors, I would have presented the measure and then we would have defeated it. I left it alive, looking for spaces of convergence,” he said, as he expressed confidence that the Board could be convinced to accept the latest changes. - Managing Editor Rosario Fajardo contributed to this story.