Commonwealth of Puerto Rico – Union Objects to COFINA Plan as Economically Unfeasible, Inevitable Path to Further Bond Defaults

January 2, 2019 – Union PROSOL-UTIER objected [Docket No. 4592] to the Second Amended Title III Plan of Adjustment for Puerto Rico Sales Tax Financing Corporation (the “COFINA Plan”).

 

The objection states, “The COFINA Plan is mainly based in the settlement of the Commonwealth-Puerto Rico Sales Tax Financing Corporation dispute proposed by the Financial Oversight and Management Board for Puerto Rico (“FOMB”) that is pending of approval by this Honorable Court (“COFINA Settlement”) [Docket Entry 4067]….PROSOL-UTIER opposes the confirmation of the COFINA Plan based on substantive considerations regarding compliance with PROMESA and the reliability of the Fiscal Plans for the Commonwealth of Puerto Rico and COFINA. Judicial evaluation of the validity of the actions of the FOMB under Title II of PROMESA is finally ripe….PROSOL-UTIER opposes the COFINA Plan founded in the conclusions of the expert report of José Israel Alameda-Lozada, Ph.D. (‘Dr. Alameda’), professor of Economics at the University of Puerto Rico, Mayagüez Campus and Professional Economic Planner, that is attached as Exhibit 1 (‘the Study’). The Study concludes that the Commonwealth of Puerto Rico and COFINA Fiscal Plans (collectively ‘Fiscal Plans’) do not comply with PROMESA, among other things, for lack of a definition of the term ‘essential services’, they are not economically feasible and lack scientific reliability to develop dependable revenue and expenditures projections that are indispensable to address the confirmation of the COFINA Plan. 

Dr. Alameda has refuted the reliability of the COFINA Plan and the sustainability of the debt restructuring for Puerto Rico’s sales tax -backed bonds. In essence, Dr. Alameda concludes that it can be reliably foreseen that the COFINA Plan will bring many unreasonable and negative economic and social consequences for Puerto Rico, that this Honorable Court is now in the position to prevent, such as the impairment of the resources available to pay for essential services and for the pensions of more than 167,000 retirees. Dr. Alameda’s findings could be summarized in the following: (1) the COFINA Plan is uncertain and totally unreliable; (2) the COFINA Plan cannot be consistent with the Fiscal Plans because they are uncertain and totally unreliable; (3) the Fiscal Plans and the COFINA Plan are not feasible; (4) the Fiscal Plans and the COFINA Plan do not ensure the funding of essential public services; (5) the Fiscal Plans and the COFINA Plan do not provide adequate funding for public pension systems; (6) the Fiscal Plans and the COFINA Plan do not provide for the elimination of structural deficits; and, (7) before or after 2034, the Fiscal Plans and the COFINA Plan will lead Puerto Rico to another default of payment in the bondholders obligations. In sum, the Fiscal Plans are not economically feasible and lack scientific reliability to develop dependable revenue and expenditures projections, which are indispensable to address the confirmation of the COFINA Plan. ”