EXHIBIT D

(Commonwealth Fiscal Plan)

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Exhibit D Page 1 of 39
FISCAL	PLAN	FOR	PUERTO	RICO

San Juan, Puerto Rico

March 13, 2017

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Exhibit D Page 2 of 39
The Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”), the Government of Puerto Rico (the “Government”), and each of

their respective officers, directors, employees, agents, attorneys, advisors, members, partners or affiliates (collectively, with AAFAF and the

Government instrumentalities the “Parties”) make no representation or warranty, express or implied, to any third party with respect to the

information contained herein and all Parties expressly disclaim any such representations or warranties. The Government has had to rely upon

preliminary information and unaudited financials for 2015 and 2016, in addition to the inherent complexities that are part of a government in

transition, especially after a prolonged period of public finance obscurity. As such, AAFAF and the Government have made certain

assumptions that may materially change once more clarity and transparency takes hold, especially after the Government issues the past due

audited financials for 2015 and 2016 later this year.

The Parties do not owe or accept any duty or responsibility to any reader or recipient of this presentation, whether in contract or tort, and

shall not be liable for or in respect of any loss, damage (including without limitation consequential damages or lost profits) or expense of

whatsoever nature of such third party that may be caused by, or alleged to be caused by, the use of this presentation or that is otherwise

consequent upon the gaining of access to this document by such third party.

This document does not constitute an audit conducted in accordance with generally accepted auditing standards, an examination of internal

controls or other attestation or review services in accordance with standards established by the American Institute of Certified Public

Accountants or any other organization. Accordingly, the Parties do not express an opinion or any other form of assurance on the financial

statements or any financial or other information or the internal controls of the Government and the information contained herein.

Any statements and assumptions contained in this document, whether forward-looking or historical, are not guarantees of future

performance and involve certain risks, uncertainties, estimates and other assumptions made in this document. The economic and financial

condition of the Government and its instrumentalities is affected by various financial, social, economic, environmental and political factors. These factors can be very complex, may vary from one fiscal year to the next and are frequently the result of actions taken or not taken, not

only by the Government and its agencies and instrumentalities, but also by entities such as the government of the United States. Because of

the uncertainty and unpredictability of these factors, their impact cannot be included in the assumptions contained in this document. Future

events and actual results may differ materially from any estimates, projections, or statements contained herein. Nothing in this document

should be considered as an express or implied commitment to do or take, or to refrain from taking, any action by AAFAF, the Government, or

any government instrumentality in the Government or an admission of any fact or future event. Nothing in this document shall be considered

a solicitation, recommendation or advice to any person to participate, pursue or support a particular course of action or transaction, to

purchase or sell any security, or to make any investment decision.

By receiving this document, the recipient shall be deemed to have acknowledged and agreed to the terms of these limitations.

This document may contain capitalized terms that are not defined herein, or may contain terms that are discussed in other documents or that

are commonly understood. You should make no assumptions about the meaning of capitalized terms that are not defined, and you should

consult with advisors of AAFAF should clarification be required.

Disclaimer

2

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Exhibit D Page 3 of 39
I. Introduction

II. Financial	Projections

III. Fiscal	Reform	Measures

IV. Structural	Reforms

V. Debt	Sustainability	Analysis

VI. TSA	Liquidity	

VII. Financial	Control	Reform

Table	of	Contents

3

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Exhibit D Page 4 of 39
I.	INTRODUCTION

4

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Exhibit D Page 5 of 39
INTRODUCTION

What	the	Government’s	Proposed	Fiscal	Plan	Seeks	to	Achieve

Closing	the	Projected	Baseline	Fiscal	Plan	Deficit

• At	the	direction	of	the	Oversight	Board,	the	Government’s	new	administration	has	prepared	this	Fiscal	Plan	which	supersedes	the	prior	

administration’s	December	2016	fiscal	plan	that	was	rejected	by	the	Board.	From	the	date	the	new	administration	took	office,	AAFAF	and	

its	advisors	have	earnestly	worked	in	cooperation	with	the	Board’s	input	to	put	forth	a	credible	and	reliable	Fiscal	Plan	that	will	guide	

Puerto	Rico’s	fiscal	and	economic	recovery

• The	Fiscal	Plan	commits	to	fiscal	responsibility	and	implements	specific	revenue	enhancements	and	targeted	expenditure	reductions	to	

return	Puerto	Rico	to	fiscal	stability	and	economic	growth. In	particular,	the	Fiscal	Plan	averts	the	$67bn	fiscal	deficit	from	the	prior	

administration’s	plan	and	achieves	+$7.9bn	in	cumulative	cash	flow	available	for	debt	service	through	the	10	year	period

Further	Improvement

• The	Government	fully	appreciates	that	despite	fiscal	and	economic	uncertainties,	now	is	the	time	to	set	the	benchmark	for	the needed	

fiscal	and	economic	measures	as	outlined	in	the	Fiscal	Plan.		The	Government	is	demonstrating	its	commitment	to	correcting	the	mistakes	

of	the	past.		The	Government	is	also	mindful	that	in	stopping	the	cycle	of	deficit	spending,	it	must	do	so	without	undermining	economic	

recovery	or	endangering	the	health,	welfare	or	safety	of	the	3.5	million	US	citizens	living	in	Puerto	Rico

Bondholder	Negotiations	and	Consensus

• Per	PROMESA	Section	2.01(b)(1)(I),	the	fiscal	plan	must	provide	a	debt	sustainability	analysis.		The	Government’s	Fiscal	Plan consolidates	

available	cash	resources	that	can	be	made	available	for	debt	service	payments.		The	Fiscal	Plan	as	proposed	does	not	presume	cash	flow	for	

debt	service	for	any	particular	bondholder	constituency,	including	clawed	back	cash	and	special	revenues,	nor	does	it	take	a	position	with	

respect	to	asserted	constitutional	or	contractual	rights	and	remedies,	validity	of	any	bond	structure,	or	the	dedication	or	application	of	tax	

streams	/	available	resources

• The	Government	believes	that	any	fiscal	plan	should	reflect	commitment	to	develop	and	implement	operational	and	structural	

improvements	that	demonstrate	the	Government’s	willingness	to	achieve	maximum	payment	of	its	debt	obligations	as	restructured.		

However,	in	achieving	debt	sustainability,	Puerto	Rico’s	bondholders	will	be	called	upon	to	share	in	the	sacrifice	needed	for a	feasible	debt	

restructuring.	The	Government	believes	communication,	grounded	in	fiscal	responsibility,	can	create	the	opportunity	for	maximum	

consensus	among	stakeholders	and	pave	the	way	for	Puerto	Rico’s	long-term	fiscal	stability	and	economic	growth

5

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Exhibit D Page 6 of 39
INTRODUCTION

What	the	Fiscal	Plan	does	not	determine

Major	Entities	Impacted	by	the	Fiscal	Plan

• The	Fiscal	Plan	is	for	the	Government	as	a	covered	entity	under	PROMESA.	The	Government's	various	taxes,	fees	and	other	revenues are	

used	to	fund,	subsidize	or	guarantee	payments	of	the	debt	of	many	covered	entities	by	various	means.		Accordingly,	this	Fiscal	Plan	does	

provide	for	payment	of	expenses	and	capital	investments	in,	among	other	covered	entities:	(1)	Public	Building	Authority,	(2)	PR	Sales	Tax	

Financing	Corporation	(“COFINA”),	(3)	PR	Highways	and	Transportation	Authority	(“HTA”),	(4)	PR	Convention	Center	District	Authority	

(“PRCCDA”),	(5)	PR	Infrastructure	Finance	Authority	(“PRIFA”),	(6)	Employees'	Retirement	System	(“ERS”),	(7)	University	of	Puerto	Rico	

(“UPR”),	(8)	Puerto	Rico	Industrial	Development	Company	(“PRIDCO”),	and	(9)	Government	Development	Bank	(“GDB”)

Major	Entities	Not	Covered	by	the	Fiscal	Plan

• There	are	four	entities	whose	revenues	and	expenses	are	not	included	in	this	Fiscal	Plan:	(1)	Puerto	Rico	Electric	Power	Authority	

(“PREPA”),	(2)	Puerto	Rico	Aqueduct	and	Sewer	Authority	(“PRASA”),	(3)	The	Children's	Trust	Fund	and	(4)	Puerto	Rico	Housing	Finance	

Authority	(“PRHFA”).	As	a	result,	this	Fiscal	Plan	does	not	take	a	position	with	respect	to	these	entities’	financial	prospects	or	the	debt	

sustainability	of	such	entities

Legal	&	contractual	issues	not	determined	by	the	Fiscal	Plan

The	Fiscal	Plan	does	not	attempt	to	resolve,	among	others,	the	following	issues:

• The	mechanisms	by	which	projected	cash	flow	available	for	debt	service	should	be	allocated	to	different	debt	instruments

• What	is	an	essential	service	for	purposes	of	the	exercise	of	the	Government's	police	power

• The	scope,	timing	or	specific	use	of	revenues	to	be	frozen	or	redirected	as	'claw	back'	revenue

• The	value,	validity	and	/or	perfection	of	pledges

• Whether	any	particular	bond	or	debt	issuance	may	have	been	improvidently	issued

• What	the	Government	is	permitted	to	accomplish	through		the		increase	or	decrease	of	dedicated	taxes,	fees,	tolls	or	other	revenue	

sources

6

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Exhibit D Page 7 of 39
II.		FINANCIAL	PROJECTIONS

7

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Exhibit D Page 8 of 39
7,873

-31,708

-66,836

Debt

Service

Revenue

Measures

13,897

25,683

35,129

Base	Financial

Cash	Flows

+39,580

Cash	Flow	pre-Measures Cash	Flows

Post	Measures

Excluding	Debt	Service

Expense

Measures

The	Government	will	undertake	fiscal	measures	that	will	reduce	the	fiscal	gap	by	$39.6B,	and	

create	a	10	year	cash	flow	surplus	of	$7.9B

FINANCIAL	PROJECTIONS

Accumulated ACA	funding

loss of	$16.1B

($MM)

§ Based	on	the	currently	stated	debt	obligations,	the	10-year	budget	gap	is	expected	to	reach	$66.9B

– ~$35.1B	of	expected	principal	and	interest	payments	during	the	forecast	period

§ The	Fiscal	Plan	estimates	cash	flows	available	for	debt	service.	The	chart	below	shows	the	key	components	of	the	forecast,	including:

– Base	fiscal	gap	of	$66.8B	which	includes	full	cost	of	debt	service	and	does	not	include	the	impact	of	revenue	and	expense	measures

– Revenue	and	expense	measures	of	$13.9B	and	$25.7B1

§ Revenue	Measures:	stabilizing	corporate	tax	revenue	through	tax	reform	positively	affects	cash	flows	by	$7.9B

§ Expense	Measures:	$19.2B	of	$25.7B	(79%)	due to	Government right-sizing initiatives2

1	See	Section	IV,	Fiscal	Reform	Measures	for	full	detail

2	See	government	right-sizing	section

8 3	Includes	$1,415	of	past	due	P&I	(Aug	1,	2015	to	July	1,	2016),	and	$277	in	Other	Adjustments.

3

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Exhibit D Page 9 of 39
The	current	fiscal	plan	is	a	significant	departure	from	the	version	presented	in	October,	as	it	

commits	to	higher	revenue	and	expense	measures	of	$4.4B	and	$16.4	B,	respectively

§ The	October	proposed	Fiscal	Plan	estimated	negative	cumulative	cash	flows	pre-debt	service	over	the	projection	period	(’17-’26)	of	($4.9B)	

vs.	the	Current	Fiscal	Plan	projections	estimating	positive	cumulative	cash	flows	pre-debt	service	of	$7.92B.	The	change	is	comprised	

primarily	of:	

– Negative net	impact on cash	flows available for debt service,	pre-Measures of	-$8.0B

• Decrease in	total	revenues of	$1.7B

• Decreased	expenses	of	$6.3B

– Enhanced	revenue	measures	of	$4.4B

– Additional	savings	from	Expense	Measures	of	$16.4B

FINANCIAL	PROJECTIONS

($MM)

7,873

-4,947

Revenue

Measures

4,352

Changes	to	

Expenses	Baseline

6,301

Changes	to	

Revenue	Baseline

October	Fiscal	Plan

cum.	Cash	Flows

pre	Debt	Service

Cash	Flows

Post	Measures

Excluding	Debt	Service

Expense

Measures

16,427

1,658

9

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Exhibit D Page 10 of 39
Fiscal year ending June 30 ($ in millions) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 '17 - '26 total

PR Nominal GNP Growth (2.2%) (2.8%) (2.4%) (0.5%) (0.4%) 0.3% 1.0% 1.6% 2.1% 2.6%

Revenues before Measures $18,952 $17,511 $16,407 $16,434 $16,494 $16,590 $16,746 $16,953 $17,204 $17,509 $170,799

Noninterest Exp. before Measures ($17,872) ($18,981) ($19,233) ($19,512) ($19,950) ($20,477) ($20,884) ($21,310) ($21,973) ($22,316) ($202,507)

Cash flows pre-Measures $1,080 ($1,470) ($2,826) ($3,077) ($3,456) ($3,886) ($4,139) ($4,357) ($4,769) ($4,807) ($31,708)

Measures

Revenue measures -- 924 1,381 1,384 1,531 1,633 1,740 1,752 1,766 1,785 13,897.1

Expense measures -- 951 2,012 2,415 2,983 3,156 3,255 3,357 3,724 3,830 25,683.3

Net impact of measures -- 1,875 3,393 3,799 4,515 4,789 4,995 5,108 5,491 5,615 39,580

Cash flows post-Measures, before Debt Service $1,080 $404 $567 $722 $1,059 $903 $857 $751 $722 $808 $7,873

($MM)

A	summary	of	financials	for	the	10-year	projection	period	shows	positive	cash	flows	postmeasures,	before	debt	service	of	$7.9B

Cash	flows	post-measures,	before	debt	service	trends:

§ FY	2017	estimate	of	$1.1B,	declining	to	a	low	of	$0.4B	in	FY	2018,	driven	by	GNP	contraction	and	ERS	Paygo contributions	of	$1.0B	in	FY	

2018	

§ Forecast	peaks	at	$1.1B	in	FY	2021	before	declining	to	$0.8B	by	FY	2026.		Decline	is	primarily	driven	by	Affordable	Care	Act	(“ACA”)	funding	

expiration	that	increase	steadily	from	~$0.9B	in	FY	2018	to	~$2.4B	in	FY	2026	

§ Expense	measures	include	$1.3B	in	supplier	payment	pay	downs	through	the	projection	period

FINANCIAL	PROJECTIONS

2	 This addback is illustrative,	and	is not reflected in	the amounts available for debt service elswhere in	this Plan

1 Full	details in	Appendix

1

1

10

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Exhibit D Page 11 of 39
Fiscal year ending June 30 ($ in millions) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 '17 - '26 total

PR Nominal GNP Growth (2.2%) (2.8%) (2.4%) (0.5%) (0.4%) 0.3% 1.0% 1.6% 2.1% 2.6%

Revenues

General Fund Revenues:

Individual Income Taxes $1,892 $1,760 $1,718 $1,709 $1,703 $1,708 $1,725 $1,752 $1,789 $1,836 $17,592

Corporate Income Taxes 1,515 1,473 1,437 1,430 1,424 1,429 1,443 1,466 1,497 1,536 14,649

Non-Resident Withholdings 685 666 650 647 644 646 652 663 677 694 6,624

Alcoholic Beverages 268 260 254 253 252 253 255 259 265 272 2,591

Cigarettes 112 109 106 106 105 106 107 108 111 114 1,083

Motor Vehicles 330 321 313 311 310 311 314 319 326 335 3,191

Excises on Off-Shore Shipment Rum 206 173 175 176 178 179 180 182 183 184 1,816

Other General Fund Revenue 391 386 377 375 373 374 378 384 392 402 3,833

Total 5,399 5,148 5,030 5,007 4,989 5,005 5,055 5,134 5,239 5,372 51,378

General Fund Portion of SUT (10.5%) 1,718 1,655 1,596 1,553 1,511 1,484 1,472 1,474 1,487 1,512 15,463

Net Act 154 2,075 1,556 1,038 1,038 1,038 1,038 1,038 1,038 1,038 1,038 11,931

General Fund Revenue $9,192 $8,360 $7,664 $7,598 $7,538 $7,527 $7,565 $7,646 $7,764 $7,921 $78,773

Additional SUT (COFINA, FAM & Cine) 850 877 906 936 968 1,003 1,039 1,078 1,118 1,161 9,936

Other Tax Revenues 1,337 1,396 1,401 1,411 1,423 1,429 1,436 1,445 1,455 1,467 14,199

Other Non-Tax Revenues 579 576 582 594 622 630 635 642 649 666 6,174

Adj. Revenue before Measures $11,958 $11,208 $10,552 $10,539 $10,550 $10,588 $10,675 $10,810 $10,986 $11,215 $109,082

Federal Transfers 6,994 7,168 7,372 7,477 7,623 7,835 8,023 8,212 8,469 8,675 77,847

Loss of Affordable Care Act ("ACA") Funding -- (865) (1,516) (1,582) (1,680) (1,833) (1,953) (2,069) (2,251) (2,382) (16,130)

Revenues before Measures $18,952 $17,511 $16,407 $16,434 $16,494 $16,590 $16,746 $16,953 $17,204 $17,509 $170,799

($MM)

Revenues Before Measures

FINANCIAL	PROJECTIONS

11

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Exhibit D Page 12 of 39
($MM)

Non-Interest Expenses	Before Measures

FINANCIAL	PROJECTIONS

12

Fiscal year ending June 30 ($ in millions) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 '17 - '26 total

Expenses

General Fund Expenditures:

Direct Payroll ($3,271) ($3,309) ($3,342) ($3,375) ($3,413) ($3,458) ($3,509) ($3,563) ($3,619) ($3,675) ($34,532)

Direct Operational Expenses (907) (918) (926) (936) (946) (959) (973) (988) (1,003) (1,019) (9,574)

Utilities (260) (332) (352) (360) (373) (372) (369) (374) (387) (395) (3,575)

Special Appropriations (3,890) (4,037) (4,068) (4,068) (4,209) (4,140) (4,143) (4,136) (4,250) (4,147) (41,087)

General Fund Expenses (8,329) (8,596) (8,688) (8,738) (8,941) (8,929) (8,993) (9,060) (9,259) (9,236) (88,768)

Other:

Paygo Contributions in Excess of Asset Balance -- (989) (1,014) (985) (964) (1,151) (1,177) (1,217) (1,251) (1,278) (10,026)

Run-Rate Capital Expenditures (283) (400) (407) (415) (422) (429) (437) (445) (453) (462) (4,154)

Total other (283) (1,389) (1,421) (1,400) (1,386) (1,581) (1,614) (1,662) (1,704) (1,739) (14,180)

Component Units, Non-GF Funds and Ent. Funds:

Net Deficit of Special Revenue Funds (110) (130) (146) (154) (162) (169) (173) (176) (176) (174) (1,571)

Independently Forecasted Non-Enterprise CUs (452) (380) (433) (558) (639) (752) (859) (963) (1,109) (1,210) (7,356)

HTA Operational Expenses (246) (234) (236) (238) (239) (243) (246) (250) (254) (258) (2,444)

Other (44) (41) (30) (30) (30) (31) (31) (32) (32) (33) (335)

Total (853) (785) (845) (980) (1,071) (1,194) (1,310) (1,420) (1,572) (1,675) (11,705)

Disbur. of Tax Revenues to Entities Outside Plan (335) (302) (304) (307) (313) (314) (316) (319) (322) (334) (3,168)

Adj. Expenses before Measures ($9,800) ($11,071) ($11,259) ($11,425) ($11,712) ($12,018) ($12,234) ($12,461) ($12,857) ($12,984) ($117,822)

Federal Programs (6,994) (7,168) (7,372) (7,477) (7,623) (7,835) (8,023) (8,212) (8,469) (8,675) (77,847)

Reconciliation Adjustment (585) (592) (598) (604) (610) (618) (627) (637) (647) (657) (6,175)

Other non-recurring (493) (150) (5) (5) (5) (5) -- -- -- -- (663)

Total (8,072) (7,910) (7,975) (8,086) (8,238) (8,458) (8,650) (8,849) (9,116) (9,332) (84,685)

Noninterest Exp. before Measures ($17,872) ($18,981) ($19,233) ($19,512) ($19,950) ($20,477) ($20,884) ($21,310) ($21,973) ($22,316) ($202,507)

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Exhibit D Page 13 of 39
0

2,075

391

3,407

2,568

1,916

2,673

1,038

2,132

-2,382

402

3,371

2

1

Category Description

‘17	Revenue

$MM

3

4

5

• Individual	Income	Taxes

• Corporate	Income	Taxes

• General	Fund

• Act	154

• Act	154	/	Foreign	Company	Tax	

Losses

• General	Fund	Portion	of	SUT (10.5%)

• Additional	SUT (COFINA,	FAM,	&	

Cine)

• Loss	of	Affordable	Care	Act	(“ACA”)	

Funding

6

Taxes

Other	

General	Fund	

Revenue

Act	154

SUT

ACA	Loss

Component	

Units

2017	– 2026	Growth	Methodology

• Grows	with	PR	Nominal	GNP	Growth	Factor

• Excludes	corporate	tax	reform	and	compliance	impact	

which	is	included	within	fiscal	measure	reform	analyses

• Grows	with	PR	Nominal	GNP	Growth	Factor

• Act	154	revenue	is	sustained	at	2017	levels	until	2026

• Losses	equal	(519)	in	2018,	double	in	2019,	and	sustained	

at	2019	levels

• Total	SUT grown	at	PR	Nominal	GNP	growth

• Allocation	proportions	grow	at	historical	levels

• Initial	decrease	from	(865)	in	2018	to	(1,516)	in	2019

• Annual	growth	in	loss	of	6.7%	from	2019	to	2026

‘26	Revenue

$MM

• Other	Tax	Revenues

• Other	Non-Tax	Revenues

• Grows	with	PR	Nominal	GNP	Growth	Factor	&	Elasticity

Assumptions	and	Methodology:	Revenue

13

FINANCIAL	PROJECTIONS

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Exhibit D Page 14 of 39
0

-260

-907

-3,271

-3,890

-284

-4,147

-396

-462

-1,278

-1,019

-3,675

2

1

3

4

5

6

• Payroll	and	Operational	Expenses

• Education	Payroll

• Police	Payroll

• Legislature	

• Department	of	Education

• Other	Agencies

• Power	and	Water

• PBA	Operating	Subsidy	(Rent)

• Insurance	Premiums	

• UPR

• Judicial	and	Municipalities	

• Retirement	Systems	

• Health	Insurance

• Required	Pay-go	contribution:	ERS,	

TRS	and	JRS

Direct	Payroll

Direct	

Operational	

Expenses

Utilities

Special	

Appropriations

Paygo

Contributions	

in	Excess	of	

Asset	Balance

Run-Rate	

Capital	

Expenditures

• Non-Growth	Capital	Expenditures	in	

the	Base	(Run-Rate)

• Growth	Capex

• Growth	based	on	previous	year	multiplied	by	PR	Inflation	

and	Inflation	pass-through	to	payroll

• Growth	based	on	previous	year	multiplied	by	PR	Inflation	

and	Inflation	pass-through	to	payroll

• PBA	Operating	Subsidy	maintains

• Power	and	water	have	initial	increase	due	to	subsidy	

reduction	with	steady	year-over-year	growth	until	2026

• UPR,	Judicial	and	Municipalities	increase	in	2018,	maintain	

steady-state	following	initial	growth

• Paygo program	for	ERS,	TRS	and	JRS	is	initiated	in	2018	

with	initial	expenses	of	$989MM

• Steady	growth	in	expenses	starting	in	2020

• Initial	increase	in	2018	to	$400MM	and	steady	growth	in	

following	years	based	on	previous	year	multiplied	by	PR	

Inflation	following

Assumptions	and	Methodology:	Expenses	(1/2)

Category Description

2017

$MM 2017	– 2016	Growth	Methodology

2026

$MM

FINANCIAL	PROJECTIONS

14

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Exhibit D Page 15 of 39
Assumptions	and	Methodology:	Expenses	(2/2)

-853

-493

-585

0

-1,675

-657

8

7

9

• Reconciliation	Adjustment

• Payment	of	Past-Due	Tax	Refunds

• Transition	and	restructuring	costs	

Reconciliation	

Adjustment

Other	NonRecurring

Component	

Units

• Net	Deficit	of	Special	Revenue	Funds

• Independently	forecasted	nonenterprise	

• HTA Operational	Expenses	

• Initial	increase	in	2018	to	$592MM	with	steady	increase	

until	2026

• Reconciliation	adjustment	based	on	midrange	estimate	

provided	by	E&Y analysis	and	audit

• Initial	decline	in	tax	refunds	in	2018	from	$493MM	to	

$150MM,	decline	in	2019	from	$150MM	to	$5MM,	and	

elimination	of	non-recurring	expenses	in	2023

• Costs	to	implement	restructuring	($370MM	over	10	years)

• Net	Deficit	of	Special	Revenue	Funds	growth	is	based	

on	previous	year	multiplied	by	PR	Inflation

• Non-enterprise	expenses	include	ASEM,	ASES,	ADEA,	

PRCCDA,	PRIDCO,	PRITA,	Tourism,	and	UPR deficits

• PBA	and	the	Port	Authority	run	a	surplus	in	2017	that	

transitions	towards	deficit	beginning	in	2018

• Initial	HTA decline	in	expenses	due	to	a	reduction	in	

Past	Due	AP	costs

Category Description

2017

$MM 2017	– 2026	Growth	Methodology

2026

$MM

FINANCIAL	PROJECTIONS

15

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Exhibit D Page 16 of 39
2

1

Category Description,	%

3

4

2017	– 2026	Growth	Methodology

PR	Nominal	

GNP	Growth	

Factor

PR	Inflation

PR	

Population	

Growth	

Factor

US	

Population	

Growth

• Initial	decrease	to	97.2%	in	2019

• Increase	in	2020	to	99.5%

• Steady,	minimal	growth	until	2026	

• Initial	negative	inflation	of	-0.2%	in	2017	

increasing	to	1.2%	in	2018,	1.0%	in	2019	with	

steady,	minimal	growth	in	Inflation	until	2026

• Maintenance	of	2017	PR	Population	Growth	

Factor	of	99.8%

• Maintenance	of	2017	US	Population	Growth	of	

100.8%	until	2024,	where	it	drops	to	100.7%

2.6 2.1 1.6 1.0 0.3

-0.5 -0.4

-2.4 -2.8 -2.2

1.1 1.3 1.5 1.5 1.6 1.6 1.2 1.0 1.0

-0.2

-0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2

0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.7 0.7

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Assumptions	and	Methodology:	Macroeconomic	Factors

FINANCIAL	PROJECTIONS

16

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Exhibit D Page 17 of 39
III.	FISCAL	REFORM	MEASURES

17

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Exhibit D Page 18 of 39
FISCAL	REFORM	MEASURES

Fiscal	Reform	measures	reduce	the	10-year	financing	gap	by	$39.6B	

Note:	Values	may	not	add	up	due	to	rounding;	Excludes	expenditures	related	to	rehabilitation	of	trade	terms	with	local	suppliers

Estimated	Impact,	$MM

1,633 1,740 1,752 1,766 1,785 1,381 1,384 1,531

924

Revenue

Enhancement A

2,597 2,651 2,706 2,758 2,543 2,414 2,094 1,713

851

Government

Right-sizing B

Reducing

Healthcare

Spending

C

Pension

Reform D

892 945 1,001 750 795 842

299 500

100

0 0 83 81 80 78 76 73 70

TOTAL

2018 2019 2020 2021 2022 2023 2024 2025 2026 10-year	Total

13,897

20,329

6,123

541

40,890

5,257 5,370 5,491 5,051 4,777

4,061

5,615

3,393

1,875

18

Excludes	$1,310MM	in	

supplier	pay	downs

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Exhibit D Page 19 of 39
Tax	Compliance

Corporate	Tax	

Reform

Adjust	Taxes	and	

Fees

Reform	Measures Description

788 838 938 1,038 1,038 1,038 1,038 519 688

404 408 415 424 435 403 300 405

150

292 294 299 305 313 291 292

255

293

1,785

2025

1,766

2024

1,752

924

2023

1,740

2022

1,633

2021

1,531

2020

1,384

2019

1,381

2018 2026

Corporate	Tax	Reform

Tax	Compliance

Adjust	Taxes	and	Fees

Revenue	Enhancement	Measures,	$MM

$519MM

REVENUE	ENHANCEMENT

Hacienda	will	embark	in	a	multi-year	transformation	process	to	reduce	leakage,	improve	

revenue	collections	and	adjust	fees

§ The	Government	will	use	the	breathing	room	provided	by	the	extension	of	Act	154	to	seek	a	

more	stable,	consistent	corporate	tax	policy	that	implements	a	broad-based	regime	with	

fewer	exemptions	by	no	later	than	January	2019

§ Increase	tobacco-related	products	excise	tax	and	implement	new	property	tax	regime

§ Revise	fees	including	licenses,	traffic	fines,	insurance	fees	and	other	charges	for	services	to	

keep	up	with	market	trends

§ Reduce	leakage	by	increasing	electronic	SUT	tax	collections	at	the	point	of	sale,	including	

internet	sales

§ Improve	revenue	collections	by	using	advanced	analytics,	expanding	capacity	and	conducting	

targeted	interventions

$255MM

$150MM

Note:	To	meet	fiscal	plan	objectives,	the	Government	may	consider	additional	measures.

2018	Impact

19

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Exhibit D Page 20 of 39
Non-Personnel	

Related

Personnel	Related

Reduction	of	

Subsidies

Reform	Measures Description

819 830 842 855 868 882

695 785 796 808 820 832

411 750 825 900 929 960 989 1,018 1,044

668 459

190

602 505 250

2021

2,414

2020

2,094

2019

1,713

2018

851

2026

2,758

2025

2,706

2024

2,651

2023

2,597

2022

2,543

Government	Right-Sizing	Measures1,	$MM

$250MM

GOVERNMENT	RIGHT-SIZING

The	Government	must	embark	on	a	transformative	journey	in	order	to	provide	core	services	to	

citizens	in	an	efficient	and	fiscally	responsible	manner

§ Freeze	on	payroll	increases	for	fiscal	years	2018	to	2020

§ Improve	employee	mobilization	across	government,	uniform	fringe	benefits	and	eliminate	

vacation	and	sick	day	liquidations	to	produce	higher	attrition	rates	or	other	payroll-related	

savings

§ Gradually	reduce	general	fund	subsidies	to	the	University	of	Puerto	Rico,	municipalities	and	

other	direct	subsidies	to	the	private	sector

§ Proactively	engage	with	the	University	of	Puerto	Rico,	municipalities,	as	well	as	industry	

partners,	to	mitigate	the	economic	development	impact	of	subsidy	removal

§ Freeze	on	operational	cost	increases	for	fiscal	years	2018	to	2020

§ Re-design	the	way	the	Government	works	by	reducing	non-core	expenses,	externalizing	

services	to	private	entities,	centralizing	services	to	eliminate	duplication,	achieve	procurement	

savings	or	other	cost-cutting	measures

$411MM

$190MM

Reduction	of	Subsidies

Non-Personnel	Related

Personnel	Related

Note:	To	meet	fiscal	plan	objectives,	the	Government	may	consider	additional	measures.

1)	Post	2018,	the	relative	distribution	of	savings	between	personnel	and	non-personnel	related	expenses	will	be	decided	as	part	of	updates	to	the	Fiscal	Plan	and	the	annual	budget

2018	Impact

20

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Exhibit D Page 21 of 39
Improve	Payment	

Integrity

Pay	for	Value

Reduce	Drug	Cost

Reform	Measures Description

945 1,001 795 842 892 750 500 38 110

25 84

38 60

45

2023

842

2022

795

2019

299

2018

100

2026

1,001

2025

945

2024

892

2021

750

2020

500

Reducing	Healthcare	Spending	Measures,	$MM

$38MM

REDUCING	HEALTHCARE	SPENDING

The	Government	will	focus	on	improving	efficiencies,	adjusting	benefits	and	developing	a	new	

healthcare	model	in	order	to	achieve	savings	in	healthcare	spend

§ Establish	uniformed	fee	schedules	and	limit	reimbursement	rates	for	providers	

§ Replace	current	profit	sharing	arrangement	with	MCOs	and	replace	with	a	Medical	Loss	Ratio

Modify	Benefits	

Package

§ Evaluate	services	that	could	be	capped	and/or	eliminated	from	the	current	benefit	package	

without	adversely	affecting	access	for	Mi Salud beneficiaries

§ Reduce	outpatient	drug	spending	by	increase	pharmacy	discounts	on	branded	drugs,	enforce	

mandatory	dispensing	of	generic	drugs,	updating	the	preferred	formulary	and	establishing	

shared-savings	initiatives	

§ Establish	partnerships	to	increase	the	scrutiny	of	premium	payments	for	beneficiaries	that	

have	left	the	system	or	have	another	health	insurance	plan

§ Establish	Medicaid	Fraud	Control	Unit	and	implement	the	Medicaid	Management	Information	

System	to	reduce	waste,	fraud	and	abuse

$0

$38MM

$25MM

Reduce	Drug	Cost

Pay	for	Value

New	Healthcare	Model

Modify	Benefits	Package

Improve	Payment	Integrity

New	Healthcare	

Model

§ Develop	a	new	healthcare	model	in	which	the	Government	pays	for	basic,	less	costly	benefits	

and	the	patient	pays	for	premium	services	selected	resulting	in	cost	reductions	attributed	to	

greater	competition	along	with	the	capped	PMPM	amount

$0

Note:	To	meet	fiscal	plan	objectives,	the	Government	may	consider	additional	measures.

2018	Impact

21

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Exhibit D Page 22 of 39
Adjust	Retirement	

Benefits

Contribution	

Segregation	and	New	

Benefit	Plans

Reform	Measures Initiative

45 46 47 47 48 49 50

37 36 33 31 28 24 21

2026

70

0

2018

0

2025

73

2024

76

2023

78

2022

80

2021

81

2020

83

2019

Pension	Reform	Measures,	$MM

$0

PENSION	REFORM

Segmentation	of	the	defined	contribution	structure	will	protect	the	retirement	savings	of	

government	employees

§ Switch	to	pay-as-you-go	model,	segregate	prospective	employee	contributions,	facilitate	

Social	Security	enrollment	and	improve	investment	alternatives

2018	Impact

§ Protect	benefits	for	lowest	pension	income	earners.	Progressive	strategy	to	reduce	retirement	

benefit	costs	including	other	post-employment	benefits. $0

Changes	to	Special	Laws

Changes	to	Pension	Benefits

Note:	To	meet	fiscal	plan	objectives,	the	Government	may	consider	additional	measures. 22

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Exhibit D Page 23 of 39
IV.	STRUCTURAL	REFORMS

23

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Exhibit D Page 24 of 39
§ Externalize	the	overseeing	of	marketing	

efforts	&	continuity	under	a	single	brand	

and	as	a	unified	front	representing	all	of	

Puerto	Rico’s	tourism	components

§ Promote	productivity	growth,	attract	FDI	

&	incentivize	investments	in	technology	

through	collaboration	with	the	private	

sector

Implementing	the	package	of	structural	reforms	will	provide	a	cumulative	2.0%	increase	in	GNP	

growth

Improve	Ease	of	Business	Activity Improve	Capital	Efficiency

1a Increase	Labor	Participation

2b Public-Private	Partnerships

1b Permitting	Process	Reform

2a Infrastructure	Reform 3a Energy	Reform

1c Tax	Reform	

1 2 3 Energy	Reform

§ Institute	public	policy	measures	aimed	to	

attract	new	businesses,	create	new	

employment	opportunities,	and	foster	

private	sector	employment	growth	to	

increase	labor	demand

§ Change	welfare	and	labor	incentives	to	

encourage	greater	sector	participation	

thus	increasing	labor	supply

§ Centralize,	streamline,	and	modernize	

and	expedite	permitting	processes;	

increase	business	friendly	environmental	

and	economic	growth

§ Leverage	key	public	assets	through	long	

term	concessions	to	optimize	quality	of	

public	infrastructure,	services	to	public	

and	sustainable	operations	and	

maintenance

§ Augmenting	competitiveness	by	

investing	in	critical	infrastructure	and	

quality	of	public	services	in	roads,	ports,	

telecommunications,	water	and	waste,	

knowledge	services,	and	other	

strategically	important	sectors

§ Leverage	and	facilitate	expedited	private	

sector	investments	in	modern,	costefficient,	and	environmentally	compliant	

energy	infrastructure;	reform	PREPA	

operations	and	services	to	clients;	and	

allow	for	greater	competition	in	energy	

generation

§ Lower	marginal	tax	rates	and	broaden	the	

tax	base;	simplify	and	optimize	the	

existing	tax	code	to	achieve	gains	in	

efficiency,	ease	of	doing	business	and	

reducing	tax	evasion

STRUCTURAL	REFORM	MEASURES

4a Enterprise	Puerto	Rico

4b Destination	Marketing	Organization

Promoting	Economic	Development 4

2c Critical	Projects

§ Implement	management	system	to	boost	

development	of	critical	projects	through	

expedited	processes

1d Regulatory	Reform

§ Reduce	unnecessary	regulatory	burdens	

to	reduce	the	drag	of	government	on	the	

private	sector

24

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Exhibit D Page 25 of 39
Key	Considerations	in	the	Overall	P3	Implementation P3	Key	Target	Areas	%

The	initial	stage	of	the	P3	program	includes	launching	of	~$5B	of	projects	during	the	2017-2019	

calendar	years	that	have	been	identified	and	are	in	project	preparation

§ Project	sequencing	is	designed	to	effectively	progress	the	advancement	of	

projects	and	avoid	major	obstacles	in	the	shortest	timeline	possible (i.e.,	

progression	from	easily	executable/advanced	permitting	to	more	difficult/less	

advanced	projects)

§ Need	to	promote	and	improve	funding	models	to	use	private	funds,	where	

relevant,	as	leverage	to	maximize	the	unused	federal	funds	current	available

2017 2018 2019

Q-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19

Group	1

Projects

Group	2

Projects

Group	3

Projects

• Launch	Group	1	Projects

• Estimated	value	~$1B

• Launch	Group	2	Projects

• Estimated	value	~$2B

• Launch	Group	3	Projects

• Estimated	value	$2B

• Invest	in	preparing	Group	2

• Data	gathering,	due	diligence,	etc.

• Invest	heavily	in	preparing	Group	3

• Data	gathering,	due	diligence,	etc.

10-Year	Impact à Capital	Improvement	Investment:		~$5B		|			Jobs	Created:		~100,000

(Project	timeline	includes	P3	concessions	included	in	Externalization	measures)

P3	Project	Identification

§ Identified	initial	list	of	

priority	projects	with	P3	

potential

§ Assessed	project	business	

cases	and	impacts	on	

priority	infrastructure	

needs,	the	economy,	and	

efficient	delivery	of	public	

services

§ Split	into	3	groups	based	

on	projected	sequencing,	

designed	to	launch	in	

2017,	2018	and	2019

Transport

Energy

Water

0

7 Social	infra

43

8

Other

Waste	mgmt

22

20

INFRASTRUCTURE	/	P3	REFORM	– P3	Program	

25

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Exhibit D Page 26 of 39
V.	DEBT	SUSTAINABILITY	ANALYSIS

26

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Exhibit D Page 27 of 39
§ Below	is	a	summary	of	the	debt	(excluding	pension	liabilities)	considered	in	the	fiscal	plan

§ Note:	Amounts	are	estimated	as	of	February	2017	and	based	upon	preliminary	unaudited	numbers	provided	to	AAFAF	by	issuer	agencies	and	from	

publicly	available	information.	On	behalf	of	the	Board,	Ernst	&	Young	is	conducting	an	assessment	of	the	debt	outstanding	to	confirm	these	figures.	

Estimated	amounts	are	subject	to	further	review	and	may	change

Summary	of	debt	outstanding	as	of	February	2017	($MM)

Debt	summary

DEBT	SUBSTAINABILITY

27

Unpaid Total Bonds & Loans from Total Debt DSRF

Issuers included in Fiscal Plan Bond principal CAB P&I1 Private Loans Private loans GDB/MFA Entities Service FY 17-19 Balance

GO $12,013 $84 $1,146 $24 $13,267 $169 $3,284 --

COFINA 11,425 6,155 -- -- 17,580 -- 2,121 --

HTA2 3,983 135 6 -- 4,124 1,734 997 101

PBA 3,980 -- 117 -- 4,097 182 782 6

GDB3, 4 3,182 -- 742 203 4,126 -- 1,863 --

ERS 2,658 498 -- -- 3,156 -- 500 44

PRIFA5 1,566 409 232 -- 2,207 49 464 2

PFC 1,025 -- 172 -- 1,197 -- 257 --

UPR6 496 -- -- 0 496 76 145 61

PRCCDA 386 -- -- -- 386 145 91 9

PRIDCO 145 11 -- -- 156 78 54 19

AMA -- -- -- 28 28 -- -- --

Other Central Gov't Entities 197 -- 29 413 639 3,975 -- --

Total $41,056 $7,293 $2,444 $668 $51,461 $6,409 $10,558 $242

Debt Issuers not incl. in Fiscal Plan

PREPA 8,259 -- -- 697 8,956 36 2,775 6

PRASA7 3,943 28 13 584 4,568 229 995 93

Children's Trust 847 613 -- -- 1,460 -- 140 85

HFA 542 -- -- -- 542 85 134 33

PRIICO -- -- -- 98 98 -- -- --

Municipality Related Debt8 556 -- -- 1,140 1,696 2,036 n.a. 59

Total $14,147 $641 $13 $2,520 $17,320 $2,386 $4,044 $276

Total $55,203 $7,933 $2,457 $3,188 $68,781 $8,795 $14,602 $518

Less: GDB Bonds (excl. TDF) (3,766)

Plus: Loans from GDB/MFA Entities 8,795

Public Sector Debt $73,810

Notes:

1) Unpaid principal and interest includes debt service that has been paid by insurers and is owed by the government

2) HTA includes Teodoro Moscoso bonds

3) GDB private loans includes Tourism Development Fund ("TDF") guarantees 

4) Includes GDB Senior Guaranteed Notes Series 2013-B1 ("CFSE") 

5) PRIFA includes PRIFA Rum bonds, PRIFA Petroleum Products Excise Tax BANs, PRIFA Port Authority bonds and $34.9m of PRIFA ASSMCA bonds

6) UPR includes $64.2m of AFICA Desarrollos Universitarios University Plaza Project bonds 

7) PRASA bonds includes Revenue Bonds, Rural Development Bonds, Guaranteed 2008 Ref Bonds

8) Municipality Related Debt includes AFICA Guyanabo Municipal Government Center and Guaynabo Warehouse for Emergencies bonds

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 28 of 39
FY	2017	– FY	2026	debt	service	($MM)

The	table	below	summarizes	the	annual	debt	service	through	FY	2026	for	all	issuers	included	in	the	fiscal	plan

1 HTA	includes	Teodoro	Moscoso Bridge

2 PRIFA	includes	PRIFA	BANs

3 UPR	includes	AFICA	UPP

DEBT	SUBSTAINABILITY

Debt	Service	Schedule

28

Fiscal year ending June 30, 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Cash Interest

GO $733 $714 $699 $680 $658 $641 $621 $597 $571 $545

PBA 186 186 183 179 175 169 163 157 151 145

COFINA 686 685 684 697 709 703 696 688 680 671

HTA1 206 201 194 188 182 175 167 160 153 145

PRIFA2 86 80 77 75 72 69 65 61 57 53

PRCCDA 19 18 17 17 16 15 15 14 13 12

PFC 56 55 54 53 51 50 48 47 44 42

UPR3 25 24 22 21 20 18 17 15 14 12

ERS 167 167 167 167 167 164 159 155 154 152

GDB 163 142 125 79 55 46 43 18 16 11

PRIDCO 8 8 7 7 6 5 5 4 3 2

Total $2,333 $2,279 $2,229 $2,161 $2,109 $2,054 $1,999 $1,916 $1,857 $1,790

Principal

GO $395 $351 $392 $439 $334 $358 $378 $402 $428 $454

PBA 91 66 70 74 100 102 96 103 107 100

COFINA 0 19 48 78 98 120 159 203 248 294

HTA1 131 140 126 136 142 150 146 155 164 169

PRIFA2 124 48 50 51 54 62 86 64 72 74

PRCCDA 12 12 13 14 14 15 16 17 17 18

PFC 29 30 32 33 34 36 37 39 41 43

UPR3 23 25 26 27 29 30 31 33 35 24

ERS (0) 0 -- 0 50 70 80 19 22 29

GDB 309 277 848 432 434 143 47 541 -- 248

PRIDCO 10 10 11 11 11 13 13 14 15 16

Total $1,124 $979 $1,614 $1,296 $1,299 $1,097 $1,091 $1,590 $1,149 $1,470

Total debt service

GO $1,128 $1,066 $1,090 $1,118 $991 $999 $999 $999 $999 $999

PBA 277 253 252 253 274 270 259 260 258 245

COFINA 686 704 732 776 807 823 855 891 928 965

HTA1 337 340 320 324 324 325 314 315 317 314

PRIFA2 210 127 127 126 126 130 151 125 130 127

PRCCDA 30 30 30 30 30 30 30 30 30 30

PFC 86 86 86 85 85 85 85 86 86 85

UPR3 48 48 48 48 48 48 48 48 48 36

ERS 167 167 167 167 217 234 239 174 176 181

GDB 472 419 973 512 488 189 91 559 16 259

PRIDCO 18 18 18 18 16 18 18 18 18 18

Total $3,457 $3,257 $3,843 $3,457 $3,408 $3,152 $3,090 $3,506 $3,006 $3,261

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 29 of 39
Debt	sustainability	sensitivity	analysis	($MM)

The	table	below	summarizes	the	annual	cash	flow	available	for	debt	service,	and	calculates	implied	debt	capacity	based	on	a	

range	of	interest	rates	and	coverage	ratios	assuming	an	illustrative	35	year	term

• Cash	flow	available	for	debt	service	incorporates	(i)	the	payment	of	essential	services,	(ii)	benefit	of	clawback	revenues	and	(iii)	a	

prudent	contingency	reserve

• In	the	Fiscal	Plan	summarized	below,	the	cash	flow	after	Measures	but	before	Debt	Service	averages	$787m	per	year	during	the	period	

2017	- 2026

DEBT	SUBSTAINABILITY

Debt	sustainability

29

Fiscal	year	ending	June	30	($	in	millions) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 '17	- '26	total

Baseline	Projections

Revenues $18,952 $17,511 $16,407 $16,434 $16,494 $16,590 $16,746 $16,953 $17,204 $17,509 $170,799

Expenses (17,872) (18,981) (19,233) (19,512) (19,950) (20,477) (20,884) (21,310) (21,973) (22,316) (202,507)

Cash	Flow	Excl.	Debt	Service	&	Measures 1,080 (1,470) (2,826) (3,077) (3,456) (3,886) (4,139) (4,357) (4,769) (4,808) (31,708)

Impact	of	Measures

Revenue	Measures -- 924 1,381 1,384 1,531 1,633 1,740 1,752 1,766 1,785 13,897

Expense	Measures -- 951 2,012 2,415 2,983 3,156 3,255 3,357 3,724 3,830 25,683

Total	Measures -- 1,875 3,393 3,799 4,515 4,789 4,995 5,108 5,491 5,615 39,580

Cash	Flow	Available	for	Debt	Service $1,080 $404 $567 $722 $1,059 $903 $857 $751 $722 $808 $7,873

Illustrative	Sustainable	Debt	Capacity	Sizing	Analysis

Sensitivity	Analysis:		Implied	Debt	Capacity	at	10%	Contingency

Illustrative	Cash	Flow	Available		 $700 $750 $800 $850 $900 $950 $1,000 $1,050 $1,100

3.5% 12,600 13,500 14,400 15,301 16,201 17,101 18,001 18,901 19,801

Sensitivity	Analysis:		PV	Rate	% 4.0% 11,759 12,599 13,439 14,278 15,118 15,958 16,798 17,638 18,478

4.5% 11,000 11,786 12,572 13,358 14,143 14,929 15,715 16,501 17,286

Sensitivity	Analysis:		Implied	Debt	Capacity	at	4%	PV	Rate

Illustrative	Cash	Flow	Available		 $700 $750 $800 $850 $900 $950 $1,000 $1,050 $1,100

5.0% 12,412 13,299 14,185 15,072 15,958 16,845 17,731 18,618 19,505

Sensitivity	Analysis:		%	Contingency 10.0% 11,759 12,599 13,439 14,278 15,118 15,958 16,798 17,638 18,478

15.0% 11,105 11,899 12,692 13,485 14,278 15,072 15,865 16,658 17,451

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 30 of 39
VI.	TSA	LIQUIDITY

30

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 31 of 39
TSA	LIQUIDITY

Weekly cash	flow forecast through 2017FY

(a) Excludes	clawback	account. 31

Cash	Flows	Before	Cliffs,	Measures	and	Debt Fcst	-	1 Fcst	-	2 Fcst	-	3 Fcst	-	4 Fcst	-	5 Fcst	-	6 Fcst	-	7 Fcst	-	8 Fcst	-	9 Fcst	-	10 Fcst	-	11 Fcst	-	12 Fcst	-	13 Fcst	-	14 Fcst	-	15 Fcst	-	16

(figures	in	$mm) 3/17 3/24 3/31 4/7 4/14 4/21 4/28 5/5 5/12 5/19 5/26 6/2 6/9 6/16 6/23 6/30

1 General	Collections $349 $254 $58 $71 $66 $760 $186 $63 $66 $334 $60 $44 $59 $134 $520 $57

2 Sales	and	Use	Tax 18 13 146 5 17 14 163 5 18 5 167 4 5 18 14 171

3 Excise	Tax	through	Banco	Popular 64 – – – 77 – – – – 68 – – – 57 – –

4 Rum	Tax – 10 – – – 11 – – – 18 – – – – 22 –

5 Electronic	Lottery	 – – – – – – – – – – – – – – 14 37

6 Subtotal $432 $277 $204 $76 $161 $784 $349 $68 $84 $424 $227 $48 $64 $210 $570 $265

7 Employee/Judiciary	Retirement	Admin. – – – – 56 – – – 56 – – – – 56 – –

8 Teachers	Retirement	System – – – – 70 – – – – – – – – – – –

9 Retirement	System	Transfers – – – – $127 – – – $56 – – – – $56 – –

10 Federal	Funds 93 110 83 123 95 119 123 95 126 93 123 49 99 107 107 121

11 Other	Inflows 9 – 11 – – 9 11 – – – – 11 – – – 11

12 Tax	Revenue	Anticipation	Notes – – – – – – – – – – – – – – – –

13 Total	Inflows $534 $388 $298 $199 $382 $912 $483 $163 $267 $517 $350 $108 $163 $373 $677 $397

14 Payroll	and	Related	Costs (18) (51) (120) (23) (95) (62) (101) (35) (90) (65) (96) (18) (22) (95) (56) (106)

15 Pension	Benefits – – (87) – (82) – (87) – (82) – (87) – – (82) – (87)

16 Health	Insurance	Administration	-	ASES (53) (53) (55) (53) (53) (53) (60) (53) (53) (53) (53) (7) (53) (53) (53) (55)

17 University	of	Puerto	Rico	-	UPR (18) (18) (24) (18) (18) (18) (24) (18) (18) (18) (18) (6) – (36) (18) (24)

18 Muni.	Revenue	Collection	Center	-	CRIM (21) (8) (8) (8) (8) (8) (8) (8) (8) (8) (8) – – (15) (8) (26)

19 Highway	Transportation	Authority	-	HTA – – (16) – – – (16) – (19) – – (19) – – (19) (19)

20 Public	Building	Authority	-	PBA	/	AEP (9) (4) (4) (4) (4) (4) (4) (4) (4) (4) – (4) (4) (4) (4) (4)

21 Other	Governmental	Entities (20) (9) (54) 25 (20) (9) (54) 25 (20) (9) (12) (18) (3) (20) (9) (63)

22 Subtotal	-	Government	Entity	Transfers ($120) ($92) ($160) ($57) ($103) ($92) ($165) ($57) ($122) ($92) ($90) ($54) ($59) ($128) ($111) ($191)

23 Supplier	Payments (57) (57) (58) (86) (86) (86) (87) (68) (68) (68) (68) (53) (65) (65) (65) (66)

24 Other	Legislative	Appropriations (24) (14) (5) (2) – (38) (5) (6) (22) (10) (5) (4) – (16) (22) (5)

25 Tax	Refunds (12) (13) (4) (1) (6) (39) (4) (7) (4) (4) (31) (3) (1) (4) (6) (41)

26 Nutrition	Assistance	Program (30) (70) (22) (35) (40) (54) (36) (22) (43) (56) (36) (16) (37) (30) (70) (20)

27 Other	Disbursements – – – – – – – – – – – (4) – – – (4)

28 Contingency (16) (16) (16) (29) (29) (29) (29) (29) (29) (29) (29) (23) (23) (23) (23) (23)

29 Tax	Revenue	Anticipation	Notes – – – – – – (152) – – – – (137) – – – (135)

30 Total	Outflows ($277) ($313) ($472) ($233) ($440) ($399) ($665) ($223) ($459) ($324) ($442) ($312) ($208) ($443) ($353) ($676)

31 Net	Cash	Flows	Excluding	Debt	Service,	Fiscal	Cliffs	and	Measures $257 $75 ($174) ($34) ($58) $513 ($182) ($60) ($193) $194 ($92) ($204) ($44) ($70) $324 ($279)

32 Bank	Cash	Position,	Beginning	(a) $319 $576 $650 $477 $442 $384 $897 $716 $655 $462 $656 $564 $360 $316 $246 $570

33 Bank	Cash	Position,	Ending	(a) $576 $650 $477 $442 $384 $897 $716 $655 $462 $656 $564 $360 $316 $246 $570 $291

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 32 of 39
Liquidity	Principles	for	FY	2018

▪ No	external	short-term	financing

▪ Rollout of	Disbursement Authorization Group in	order to	enforce priority of	payments through

defined critical services (see Section VII)

▪ Consolidate	dispersed	treasury	functions	and	put	in	place	oversight	over	accounts	not	centrally	

managed	

▪ Refine	and	regularly update 13	week cash	analysis with detailed forecasting of	cash	receipts and	

disbursements

▪ Provide detailed daily performance	projections,	results,	and	variances

1	Cash	management	authority	is	granted	to	AAFAF	under	Act	5-2017	and	other	relevant	legislation 32

TSA	LIQUIDITY

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 33 of 39
VII.	FINANCIAL	CONTROL	REFORM

33

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 34 of 39
Current	state	of	financial	controls	

§ Cash is not centrally managed

– No central office has visibility across all spending

– Procurement agencies do not actively enforce terms and specifications

– Limited coordinated effort to eliminate major cash outlays

– Limited sweep of cash into general fund accounts

– Cash disbursements is a manual and subjective process handled at Hacienda

– No formal structure for reporting and release of audited financials

§ Target is to improve level of detail on forecasting and specificity around

assumptions

– “Top-down” approach, based on prior year’s Budget

– Bank-to-book reconciliations are not often prepared in a timely manner

– No tracking mechanisms exist to measure intra-year actual expenditures vs.

budget on an accrual basis

34

FINANCIAL	CONTROLS

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 35 of 39
Budget	certification	per	PROMESA § 202

March April May June

7/1:

▪ Beginning	of	

FY2018

3/13:

▪ Certification	of	Fiscal	

Plan

July

6/5:

▪ Budget	

certification

4/28:

▪ Submit	budget	

and	

implementation	

plan	to	Oversight	

Board

5/22:

▪ Submit	revised	

budgets	and	

supporting	

documents	to	

Board,	if	

necessary

4/14:

▪ Adopt	procedures	

to	deliver	timely	

statements	and	to	

make	public	per	

PROMESA §

202(a)

3/17:

▪ Set	timeline	for	

budget	

certification	per	

PROMESA § 202	

(a)

▪ Work	with	

Oversight	Board	

in	designing	a	

reporting	

structure	and	

reporting	forms	

6/30:

▪ Last	day	for	budget	

certification	per	

PROMESA § 202(e)

35

FINANCIAL	CONTROLS

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 36 of 39
Quarterly	budget	compliance	process	per	PROMESA § 203

Quarterly	Action

Reporting1

External	auditing

Correction	of	

variance

Certification	of	

variance	/	or	

Budget	

reductions	by	

Board	

Termination	of	

budget	

reductions

PROMESA section Description

Proposed	dates

(mm/dd/yy)

▪ § 203	(a)	 ▪ Governor	to	submit	a	report	describing:	(1)	the	actual	cash	revenues,	

expenditures,	and	flows	and	(2)	any	other	information	requested	by	the	Board

▪ Q1:	10/15/171

▪ Q2:	1/16/18

▪ Q3:	4/16/18

▪ Q4:	7/16/18

▪ § 203	(b)	 ▪ Oversight	Board	to	communicate	the	result	of	external	auditing	report	to	the	

government	and	identify	any	inconsistencies	with	the	projected	revenues,	

expenditures,	or	cash	flows	set	forth	in	the	certified	Budget	for	such	quarter

▪ Q1:	11/10/17

▪ Q2:	2/12/18

▪ Q3:	5/10/18

▪ Q4:	8/10/18

▪ § 203	(b) ▪ Government	to	provide	additional	information	regarding	any	inconsistencies	

with	the	certified	budget	and	implement	remedial	action	to	correct	variances

▪ Q1:	11/20/17

▪ Q2:	2/20/18

▪ Q3:	5/21/18

▪ Q4:	8/20/18

▪ § 203	(c)	and	(d) ▪ Board	to	certify	that	the	government	is	at	variance	with	the	applicable	certified	

Budget,	and	that	the	Government	has	initiated	such	measures	as	the	Board	

considers	sufficient	to	correct	it

▪ If	the	variances	are	not	corrected,	the	Board	shall	make	appropriate	reductions	

in	nondebt expenditures	and	may	institute	automatic	hiring	freezes	in	

instrumentalities	and	prohibit	them	from	entering	in	any	contract	in	excess	of	

$100,000

▪ Q1:	12/11/17

▪ Q2:	3/12/18

▪ Q3:	6/11/18

▪ Q4:	9/10/18

▪ § 203	(e) ▪ The	Board	should	decide	whether	the	government	or	instrumentality	has	made	

the	appropriate	measures	to	reduce	expenditures	or	increase	revenues	and	

cancel	the	reductions	

▪ Ongoing

1	Per	PROMESA,	these	dates	must	be	15	days	after	end	of	each	quarter

36

FINANCIAL	CONTROLS

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 37 of 39
Budget	and	Forecasting	process

Set,	update,	and	

track	targets	every	

quarter

§ Use	performance	metrics,	e.g.,:

– Status?	On	track	/	Delayed	/	Completed

– Reached	target?

– Above	/	below	past	instances?	

§ Implement	measures	to	correct	variances	from	budget

Set	guiding	

principles	for	budget	

and	forecasting

§ Budget	should	be	prepared...

– Within	the	confines	of	the	overall	fiscal	plan

– As	a	positive	cash	balance	with	sufficient	safety	margin,	due	to	lack	

of	access	to	capital	markets	

Define	a	timeline	for	

each	quarter’s	

budget	

§ Certification	process	must	adhere	to	PROMESA requirements

§ Should	include,	but	not	be	limited	to:

– Certification	process	according	to	PROMESA requirements

– Reporting,	external	auditing,	and	variance	certifications		

37

FINANCIAL	CONTROLS

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 38 of 39
Disbursement	process

Set,	update,	and	track	

metrics	every	quarter

§ Establish	preventive	measures	

§ Implement	detective	procedures	to	correct	problems	before	

they	arise

§ Design	a	process	to	correct	variances	from	budget	mid-year

Implement	a	centralized	

disbursement	digital	

database	

§ Centralize	into	a	single	Treasury	account	with	a	corresponding	

database	

§ Update	and	review	periodically

§ Set	a	minimum	available	liquidity	threshold	and	an	alertsystem

Define	disbursement	

process

§ Set	guidelines	and	principles

§ Work	to	match	budget	to	disbursement	authorizations

§ Identify	an	effective,	centralized,	and	time-sensitive	

disbursement	process	that	involves	the	adequate	authorities

– Incorporate	a	mechanism	that	confirms	alignment	

between	revenues	and	expenses

38

FINANCIAL	CONTROLS

Case:17-03283-LTS Doc#:240-4 Filed:05/31/17 Entered:05/31/17 17:37:19 Desc:

Exhibit D Page 39 of 39