SAN JUAN, Puerto Rico – Puerto Rico government officials said Thursday they are seeking a 68 per cent increase in an oil tax to help sell up to $2.9 billion in bonds and strengthen one of the island’s largest public corporations amid bankruptcy concerns.
Officials said the move also would help boost cash reserves at the Government Development Bank, which oversees the island’s debt transactions, and allow for the refinancing of at least $1 billion in loans made to Puerto Rico’s Highway and Transportation Authority.
Legislators filed a measure Thursday that could raise the excise tax on a barrel of crude oil from $9.25 to $15.50, to generate $178 million a year. It also would allow the Highway and Transportation Authority’s loan to be transferred to Puerto Rico’s Infrastructure Financing Authority, which is authorized to issue bonds.
Bank officials said the government would access the market by March 31.
“The commonwealth is working to make public corporations self-sustaining,” bank chairman David Chafey said in a webcast to update investors on Puerto Rico’s fiscal situation as the U.S. territory enters its eighth year in recession and struggles with $73 billion in public debt.
Many U.S. investors feared Puerto Rico’s indebted public corporations would file for bankruptcy after Gov. Alejandro Garcia Padilla approved a new debt-restructuring law in late June.
Natalia Guzman, the bank’s senior vice-president, said the bill filed Thursday offers an alternative to restructuring.
The bill “provides a permanent solution to the Highway and Transportation Authority’s recurring cash shortfall,” she said, noting that the agency has relied on the bank to fund its liquidity needs since 2009.
By December 2012, the agency’s debt with the bank reached more than $2.2 billion with no repayment source, the bill states. This in turn affected the bank’s liquidity, with the Highway and Transportation Authority’s debt representing 21 per cent of the bank’s loan portfolio.
Legislators say that if approved, the petroleum tax increase will not affect the price of electricity on an island where power bills on average are more than twice those on the U.S. mainland.
The announcement comes the same week in which Moody’s warned that the Government Development Bank’s liquidity could fall as much as 22 per cent if there was no new bond offering to refinance the Highway and Transportation Authority’s debt.