221129 NOTICE OF CORRESPONDENCE VERSION NOVEMBER 29, 2022 1 

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

----------------------------------------------------------x 

In re: PROMESA

Title III

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of No. 17 BK 3283-LTS

THE COMMONWEALTH OF PUERTO RICO, (Jointly Administered)

et al., 

Debtors.1

----------------------------------------------------------x 

NOTICE OF CORRESPONDENCE RECEIVED BY THE COURT

The Court has received and reviewed the attached correspondence, described 

below, from interested persons in the above-captioned cases. Although the Court cannot respond 

individually to all of those who have expressed their thoughts or concerns, the Court is deeply 

mindful of the impact of the fiscal crisis on lives, institutions, and expectations, and of the 

importance of the issues that are raised in these unprecedented cases.

1. Email dated October 30, 2022 from José I. Galindez

2. Email dated November 21, 2022 from Richard Hirsch

Dated: November 29, 2022 

1 The Debtors in these title III cases, along with each Debtor’s respective title III case number listed as a 

bankruptcy case number due to software limitations and the last four (4) digits of each Debtor’s federal tax 

identification number, as applicable, are the (i) Commonwealth of Puerto Rico (the “Commonwealth”) 

(Bankruptcy Case No. 17-BK-3283 (LTS)) (Last Four Digits of Federal Tax ID: 3481), (ii) Employees 

Retirement System of the Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case 

No. 17-BK-3566 (LTS)) (Last Four Digits of Federal Tax ID: 9686), (iii) Puerto Rico Highways and 

Transportation Authority (“HTA”) (Bankruptcy Case No. 17-BK-3567 (LTS)) (Last Four Digits of Federal 

Tax ID: 3808), (iv) Puerto Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 17-

BK-3284 (LTS)) (Last Four Digits of Federal Tax ID: 8474); (v) Puerto Rico Electric Power Authority 

(“PREPA”) (Bankruptcy Case No. 17-BK-4780) (Last Four Digits of Federal Tax ID: 3747); and (vi) 

Puerto Rico Public Buildings Authority (“PBA”) (Bankruptcy Case No. 19-BK-5233-LTS) (Last Four 

Digits of Federal Tax ID: 3801).

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PREPA Debt Servicing 

Alternatives

Jose I. Galindez, CSCP

October 2022

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Quick refresher on regressive household expens

• A regressive tax or expense is one which is assessed or inc

regardless of income and which low‐ and high‐income ear

same or nearly the same dollar amount.

• This kind of tax or expense is a proportionally bigger burd

income earners than high‐income earners because they co

much larger percentage of the low‐earners’ income.

• Examples of highly regressive expenses or taxes:

• Sales tax (IVU, VAT, etc) on basic goods and services

• Tolls, fuel taxes, liquor, tobacco, etc.

• Power and water costs are partially regressive expenses o

because there’s a minimum ‘consumption point’ which ev

income households cannot drop below.

• That ‘minimum level cost’ is proportionally a much larger burde

income household than it is for a more affluent household

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Puerto Rico’s Electricity Prices and Usage:

• PR’s residential electricity rate of $.2567 per kW/h** is th

highest rate in the US and is 66% higher than the US aver

$.1542 cents per kW/h.*

• PR’s average monthly power bill is $110.47; 14th highest i

• PR has the lowest power consumption rate per capita of t

states with 5.02 megawatt hours used annually per perso

• Puerto Rico’s old, inefficient plants make us the 35th highe

state with 3,643.47 kg of CO2 emissions per resident.

• During the first eight months of 2022 the average PREPA/

customer spent 21 hours per month without power** ve

national average of just 8 hours per year*

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But wait, there’s more: PR’s Taxes and Tolls

• Beyond spending 3x more on electricity per household th

the US, our Sales Tax (IVU) of 11.5% is the highest in the n

the only one in double‐digits.

• Highway tolls per mile are among the highest in the US:

• Caguas to San Juan = $1.50 for 13.3 miles, or $.11 per mile

• Miami to Ft. Pierce via the FL Turnpike: $7.60 for 127 miles or $

• Tobacco: total tax on a pack of smokes in PR is $4.26 ($3.4

IVU); the second‐highest total tax rate in the US.

• Even progressive taxes are far more regressive in PR than 

• Taxable income of $61.5k in the US would yield a Federal tax of 

• Same taxable income in PR would pay $8,430.00, or 33% more.

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PREPA Debt servicing:

• PREPA’s current $9b bond debts amount to approx. $6,100

connected customer

• Given the average power bill of $110.47, if those $6.1k we

in 15 years, power cost per customer would increase by 3

• $6100/180 = $33.78 which is 30.5% of the current $110.47 average bi

• If implemented as a kW/h ‘surcharge’, PR’s cost per kW/h 

increase by approx. $.10 to $.35 per kW/h and our power 

look like this:

• A $100 power bill would become $130.50• A $200 power bill would become $261.00• A $400 power bill would become $532.00

The economic and societal impact of such a rate would be 

considering the national average cost per kW/h of $

We must try to find another avenue for servicing the PR

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Fortunately, we have another option: set‐asides 

burgeoning General Fund

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General Fund income

• Population decreased by nearly 450,000 over the last decade (3,718• With 2020 an understandable outlier due to pandemic, per capita i

General Fund have increased by 63% over the decade shown:

2011 2012 2013 2014 2015 2016 2017 2018 201

GF income p/p $2,194 $2,369 $2,368 $2,538 $2,562 $2,673 $2,773 $2,806 $3,4

General Fu

de Hacien

Population 

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General Fund Revenues v. GDP

• GDP closely foll

revenues until 2

• Economic activi

Federal financia

Hurricane Maria 

efforts and gove

controls trigger

revenue increas

• 2022 YTD data s

continuation of 

of accelerating 

• As of March 2

reported GF r

running $510

previous 2022 

Genera

GDP da

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021GF Income in M $8,158 $8,667 $8,562 $9,036 $8,960 $9,175 $9,334 $9,313 $11,375 $9,288 $11,668

GDP in tens of millions $10,033 $10,348 $10,785 $11,310 $11,775 $11,626 $11,777 $10,957 $11,101 $10,542 $10,600

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IVU Revenue’s dramatic growth in last 5 yea

• Income Tax reve

relatively flat ov

period studied

• Sales Tax (IVU) r

increased nearly 

same horizon.

• Flat income tax 

IVU revenues ha

suggests income 

‘missing’ a lot o

• IVU revenues sh

an inordinately 

through 2030 as 

COR3 and other 

disbursed

Dollars in Thousands

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Key take‐aways on the Revenue side

• General Fund total and per capita revenues trend shows a heal

revenue acceleration since 2019 primarily driven by IVU revenu

• With 80% of the Federal aid for María and the earthquakes yet 

economic activity will remain high through the next decade...

• Social Security’s 8.7% COLA adjustment for 2023 will add ~$73m 

income to Puerto Rico’s eligible recipients, further stimulating e

activity and General Fund revenues in 2023 and beyond:

• The General Fund should be the source of PREPA Debt Servici

the 1.5 million PREPA/LUMA customers.

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Proposal: 

• Reduce State IVU by $.015, dropping the effective tax rate t

• Create an ‘IVU Revenue Set‐Aside’ in the GF in the amount 

fund PREPA debt servicing, generating ~$275m annually (or 

• Reducing IVU 1.5% would spur consumption by immediatel

disposable income and shrink our cost of living gap vs the L

• The 1% IVU set‐aside would cover most of the debt servicin

2017 2018 2019 202

Current IVU Revenues $1,698 $1,645 $2,299 $1,6IVU Set Aside for PREPA debt servicing ($.015) $185 $179 $251 $17

2017 2018 2019 202

Current IVU Revenues $1,698 $1,645 $2,299 $1,6

IVU give back to consumers($.015) $243 $235 $329 $23

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Proposal, cont... 

• Using 2021 as the last full year of data available to me, tota

into the General Fund would drop by ~600m annually

• Numbers below show ‘retroactive effect’ just for illustration purpo

• The $600m shortfall illustrated above is likely to be less give

• The positive effect the IVU cut would have on the overall econom

moderately expanded expenditures and hence, IVU collection.

• The positive effect on households and businesses alike by avoidin

inflationary power cost increases

2017 2018 2019 202

Current IVU Revenues 1,698 $ $1,645 $2,299 $1,6

Adjusted IVU Revenuesinto GF ($.08) 1,294 $ $1,253 $1,752 $1,2

General Fund Ret Revenue Delta $ (404) $ (392) $ (547) $ (3

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Summary

• Flat‐lined Income Tax revenues versus the sizeable increas

consumption‐driven revenues (IVU) suggest something’s n

the ‘capturing’ of Income Taxes

• Recent trend on increasing IVU revenues should continue 

of unspent COR3 funds and other projects continue to stim

economic activity for the next decade.

• Further government expense reduction opportunities abo

beyond the many outstanding successes of the PROMESA 

• The burgeoning IVU revenues into the General Fund provi

• A small percentage reduction to the State IVU

• Funding most if not all of the PREPA negotiated debt settlement

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Example of Expenditure reduction opportun

• Our Legislature:

• 78 legislators, or 1 legislator per 41,025 residents

• Base salary of $72k per annum, plus ~$35k in per diems + incidentals.

• 2023 approved budget of $133m, for a net cost of $1.7k per Legislato

• US State Legislatures:

• 7,383 total legislators, or 1 legislator per 44,697 residents **

• Basic average wages of $29k per annum **

• 20 of the 50 Legislature provide zero funds for aides or other ‘support

for except for chamber leadership positions**

• Average cost per Legislator of $911k**

Key take‐aways:• Our Legislature is markedly more expensive than the US state 

• 10% more expensive per Resident; 80% more expensive per Legislato

• Our Legislature’s budget should be further reduced by at least 

• * Puerto Rico Oficina de Gere

• ** National Conference of St

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1

SwainDPRCorresp NYSD

From: Richard Hirsch 

Sent: Monday, November 21, 2022 3:13 PM

To: NYSD Swain Corresp

Cc: Hirsch Richard

Subject: Thanksgiving, Christmas and New Year's wishes

CAUTION - EXTERNAL: 

Hello Judge Laura Swain, 

My wife and our family are a few of the many thousands of people who fortunately, or unfortunately, invested in Puerto 

Rico bonds over 5 years ago. There are certainly risks in every investment; little did I personally know anything about 

these investments until Puerto Rico declared that they would no longer honor their promises. My wife and I looked 

forward to the income these municipal bonds were supposed to generate as they would have been very helpful to us in 

our retirement years, our children and our five grandchildren. For five years we have been waiting. Unfortunately for our 

family, my wife died of Pancreatic cancer and will never see the fruits of her investments. 

I have been following the progress of the legal proceedings as best I can via my broker and reading Cate Long’s 

comments on Twitter. I 

recently read that you had set a deadline of 12/1/22 for settlement of the Prepa bonds lawsuit(s) and that certainly was a 

ray of hope to all of our family members. You and your staff are to be commended for your dedication, ethics and 

commitment to overseeing the proceedings and to obtaining the best results possible for the bond holders and for Puerto 

Rico. 

Please, please, please, continue to do everything possible to expedite the resolution of this unfortunate legal dispute so 

that all of the investors can begin to enjoy the promised returns from these investments. As I am 75 years old, I too would 

like to enjoy the fruits of our labors while I am still around to see it. 

Best wishes to you, your family, your staff and thank you again for your continued efforts. 

Richard B. Hirsch 

CAUTION - EXTERNAL EMAIL: This email originated outside the Judiciary. Exercise caution when opening attachments 

or clicking on links. 

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