Puerto Rico now faces a $495 million revenue shortfall for the year. Revenues have come in less than projected, and having pared government jobs under the former governor Luis Fortuño, Puerto Rico is now resorting to one-off financial maneuvers to fill the budget hole. Moody’s describes the moves in a May 15 report:
In our issuer comment of March 18, 2013, Puerto Rico Faces Large Mid-Year Budget Gap, we noted that full year revenues for fiscal 2013 were likely to be $910 million or 10.4 percent below initial estimates of $8.750 billion and 9.3 percent below fiscal 2012 revenues. Revised estimates showed the shortfall to be slightly larger at $965 million as of January 31, 2013. In response, the commonwealth has implemented a number of corrective measures, including modest expense reductions.
Puerto Rico’s revenues are likely to decline 9 percent from 2012, and it has no time to raise taxes to capture more. The commonwealth has resorted to refinancing debt and moving debt between entities. It brings to mind how shell games are played.
From the Moody’s report again:
The commonwealth also executed a number of deficit financing measures, as originally contemplated in the fiscal year 2013 budget. It executed a $333 million deficit financing via a bond anticipation note (BAN) with a private bank that it expects to take out with a future COFINA bond issue.
This is the mystery EMMA filing of April 30, 2013. The commonwealth borrowed money from a private bank and will replace it with an upcoming bond issue. It then intends to make $775 million of debt service payments with money from the PR Government Development Bank, (GDB) which will turn around and issue more debt: