Puerto Rico revenues $600 mln less than projected

SAN JUAN | BY NICK BROWN

ReutersREUTERS
The Puerto Rican government reported about $8.96 billion in total revenues in fiscal year 2015, some $604 million less than it had projected due to its stalled economy, according to a financial report released on Friday night.

Puerto Rico, which issued the report around 9:30 p.m. local time on Friday (1:30 a.m. GMT), said individual income tax collections were $61 million less than projected while sales taxes were $109 million less, signs of lagging economic activity on an island where the poverty rate is about 45 percent.

Last month, the report said, the U.S. commonwealth reduced its projected fiscal 2016 revenues to $9.45 billion from $9.8 billion, citing shortfalls at the end of fiscal 2015 that lowered the base used to calculate the following year’s budget.

Steps to make up the difference, it said, may require legislation or decreasing certain agencies’ budgets.

The government said it faces $69.9 billion in tax-backed debt, debt backed by good faith and credit, and other public sector debt. It defaulted on a piece of its debt earlier this year, and faces looming payments in December and January.

It said it planned to fund the $330 million January payment from an account held by the island’s Treasury Department at the Government Development Bank, Puerto Rico’s bond issuing authority.

Puerto Rico has asked bondholders to restructure its debt, but the creditors have resisted cuts to repayments, demanding the government take steps to rein in spending and reduce employee headcount.

Puerto Rico’s central government employs nearly 90,000, the report shows, already a 12 percent reduction since early 2013. The central government performs many functions that U.S. states typically leave to municipalities, like public education, police and fire protection.

Puerto Rico’s debt service payments will rise 30 percent in fiscal 2016, to $1.475 billion, and special pension contributions will increase 16 percent, to $652 million, according to the report. The commonwealth will try to cover the increases in part through higher taxes imposed this year, which are projected to boost sales tax collections by $1.1 billion.

The report repeated 2014 data showing a $30.1 billion liability in Puerto Rico’s public employee pension, suggesting the fund could be depleted by 2021.

Standard & Poor’s, in a September report, said it believes the pension could be exhausted sooner than that because Puerto Rico funded less than its actuarial recommendation in 2015. (Editing by Tom Hogue)

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