Republican Moves on Puerto Rico Show Bipartisan Opening

Bill would give island’s public companies access to chapter 9 in exchange for oversight
Por NICK TIMIRAOS

WASHINGTON—Republicans offered legislation to address Puerto Rico’s fiscal crisis on Wednesday, signaling a growing bipartisan appetite to head off what lawmakers said could soon become a humanitarian crisis.

In the House, Rep. Sean Duffy (R., Wis.) introduced a bill that would give Puerto Rico’s public corporations access to chapter 9 of the bankruptcy code if the island’s government accepts the establishment of a five-member financial-oversight board with the authority to oversee the island’s finances and budgets.

The bill is the first from a Republican to endorse a debt-restructuring overhaul that so far has attracted only Democratic support. The bill adopts a piece of a larger proposal put forward by the White House in October.

he U.S. Capitol building in Washington, D.C. Republicans in the House and Senate have offered legislation to address Puerto Rico’s debt crisis. ILLUSTRATION: BLOOMBERG

he U.S. Capitol building in Washington, D.C. Republicans in the House and Senate have offered legislation to address Puerto Rico’s debt crisis. ILLUSTRATION: BLOOMBERG

A top Treasury Department adviser on Wednesday urged Congress to consider pairing debt restructuring with increased fiscal oversight, which was largely reflected in Mr. Duffy’s bill. The approach “is a tried and true combination to resolve debt crises, both domestically and abroad,” said Antonio Weiss, the adviser, in a speech in Washington.

Supporters of the bankruptcy-code change say Puerto Rico’s municipalities should have the same right as those in U.S. states to restructure debts using chapter 9 of the U.S. bankruptcy code. Territories don’t have that option right now.

The alternative, backers say, will be drawn-out lawsuits to renegotiate debts across multiple courts with myriad creditor groups, chilling any prospect for economic recovery on the island.

Senate Republicans, meanwhile, offered a package that is silent on whether to grant a bankruptcy option. Instead, it would create an “assistance authority” with the power to formulate budgets and borrow money on behalf of the local government. The bill was introduced by three top Republicans, Sens. Orrin Hatch of Utah, who chairs the Senate Finance Committee; Lisa Murkowski of Alaska, who chairs the Senate Energy and Natural Resources Committee; and Charles Grassley of Iowa, who chairs the Senate Judiciary Committee.

The proposal would cut in half the portion of the federal payroll tax paid by employees for five years, reducing it from 6.2% to 3.1%. It also calls for greater technical assistance to the island and a series of reports on the territory’s public pensions and health care.

Separately, Democrats stepped up calls Wednesday to include their own bankruptcy restructuring bill in a larger so-called “omnibus” package of spending measures to fund the federal government. Congress must pass that package before it adjourns for its holiday recess. The issue has urgency now because Puerto Rico has said it may be unable to make debt payments totaling around $950 million on Jan. 1.

Rep. Luis Gutierrez (D., Ill.) said Wednesday he would not vote for an omnibus bill that doesn’t address the Puerto Rican debt crisis. He spoke at a press conference with Puerto Rico’s governor, who visited Washington to press lawmakers on the issue.

Puerto Rico is unable to borrow in the capital markets and Gov. Alejandro García Padilla has said the territory can’t pay its debts in the absence of deep cuts in public services that he won’t permit. Mr. García Padilla said Wednesday he would be open to a fiscal oversight board that respected the island’s sovereignty as part of a broader legislative package.

The White House has gone one step further than the bankruptcy proposals introduced in Congress by proposing to create a new regime that would allow the commonwealth to restructure debts owed by the central government, a tool that isn’t available to U.S. states in chapter 9.

“The question is not whether the commonwealth will restructure its debts, but when, and at what cost to the economic safety and well-being of its citizens,” said Mr. Weiss, the Treasury adviser.

Write to Nick Timiraos at nick.timiraos@wsj.com

Los comentarios para este artículo han sido cerrados.