EXHIBIT 3 

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Exhibit CW Certified Fiscal Plan (2017) Page 1 of 38
FISCAL PLAN FOR PUERTO RICO

San Juan, Puerto Rico

March 13, 2017

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Exhibit CW Certified Fiscal Plan (2017) Page 2 of 38
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 CW Certified Fiscal Plan (2017) Page 3 of 38
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 CW Certified Fiscal Plan (2017) Page 4 of 38
I. INTRODUCTION

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Exhibit CW Certified Fiscal Plan (2017) Page 5 of 38
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 CW Certified Fiscal Plan (2017) Page 6 of 38
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 CW Certified Fiscal Plan (2017) Page 7 of 38
II. FINANCIAL PROJECTIONS

7

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Exhibit CW Certified Fiscal Plan (2017) Page 8 of 38
7,873

-31,708

-66,865

+39,580

Cash Flows

Post Measures

Excluding Debt Service

25,683

Debt

Service

Revenue

Measures

Expense

Measures

13,897

35,158

Base Financial Cash Flow pre-Measures

Cash Flows

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

1 See Section III, Fiscal Reform Measures for full detail

2 See Section II (B)

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 $66.9B which includes full cost of debt service and does not include the impact of revenue and expense 

measures

– Revenue and expense measures of $13.90B and $25.7B1

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

 Expense Measures: $19.2B of $25.1 (76%) due to Government right-sizing initiatives2

8

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Exhibit CW Certified Fiscal Plan (2017) Page 9 of 38
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 $16.4B, 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 CW Certified Fiscal Plan (2017) Page 10 of 38
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

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

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 $0.8B, 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 CW Certified Fiscal Plan (2017) Page 11 of 38
($MM)

Revenues before measures

FINANCIAL PROJECTIONS

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 $1,811.0 $1,760 $1,718 $1,709 $1,703 $1,708 $1,725 $1,752 $1,789 $1,836 $17,511

Corporate Income Taxes $1,515.0 1,473 1,437 1,430 1,424 1,429 1,443 1,466 1,497 1,536 14,649

Non-Resident Withholdings $685.0 666 650 647 644 646 652 663 677 694 6,624

Alcoholic Beverages $268.0 260 254 253 252 253 255 259 265 272 2,591

Cigarettes $112.0 109 106 106 105 106 107 108 111 114 1,083

Motor Vehicles $330.0 321 313 311 310 311 314 319 326 335 3,191

Excises on Off-Shore Shipment Rum $172.0 173 175 176 178 179 180 182 183 184 1,782

Other General Fund Revenue 506.0 386 377 375 373 374 378 384 392 402 3,948

Total 5,399 5,148 5,030 5,007 4,989 5,005 5,055 5,134 5,239 5,372 51,379

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 1,466.6 14,199

Other Non-Tax Revenues 579 576 582 594 622 630 635 642 649 665.8 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

11

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Exhibit CW Certified Fiscal Plan (2017) Page 12 of 38
($MM)

Non-interest expenses before measures

FINANCIAL PROJECTIONS

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) (395.5) (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)

AP paydow n - - - - - - - - - - - - - - - - - - - - - -

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)

12

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Exhibit CW Certified Fiscal Plan (2017) Page 13 of 38
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

13

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Exhibit CW Certified Fiscal Plan (2017) Page 14 of 38
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 

non-enterprise 

• 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 nonrecurring 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

14

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Exhibit CW Certified Fiscal Plan (2017) Page 15 of 38
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

Assumptions and Methodology: Macroeconomic factors

FINANCIAL PROJECTIONS

15

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Exhibit CW Certified Fiscal Plan (2017) Page 16 of 38
III. FISCAL REFORM MEASURES

16

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Exhibit CW Certified Fiscal Plan (2017) Page 17 of 38
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

1000 0 8 3 8 1 8 0 7 8 7 6 7 3 7 0

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

17

Excludes $1,310MM in 

supplier pay downs

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Exhibit CW Certified Fiscal Plan (2017) Page 18 of 38
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

18

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 19 of 38
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

19

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 20 of 38
Improve Payment 

Integrity

Pay for Value

Reduce Drug Cost

Reform Measures Description

945 1,001 795 842 892 750 500 3 8 110

2 5 8 4

3 8 6 0

4 5

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

20

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 21 of 38
Adjust Retirement 

Benefits

Contribution 

Segregation and New 

Benefit Plans

Reform Measures Initiative

4 5 4 6 4 7 4 7 4 8 4 9 5 0

3 7 3 6 3 3 3 1 2 8 2 4 2 1

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. 21

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 22 of 38
IV. STRUCTURAL REFORMS

22

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 23 of 38
 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

23

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 24 of 38
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. Thus, 

progression goes 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

 Need to further expand P3 pipeline by requesting identification of new projects 

with P3 potential from government heads, monetizing non-essential services 

with market interest and precedent2, additional infrastructure concessions3, and 

pursuit of strategic P3 categories4

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.

 Capital Improvement Investment: ~$5B | Jobs Created: ~100,000

10-Year Impact

(Project timeline includes P3 concessions included in Externalization measures)

P3 Project Identification

 Identified initial list of 

priority projects with P3 

potential

 Assessing project 

business cases and 

impact on the economy

 Split into 3 groups based 

on projected 

sequencing1, designed to 

launch in 2017, 2018 

and 2019

Transport

Energy

Water

0

7

Social infra

43

8

Other

Waste mgmt

22

20

1 Based on existing level of detail, known roadblocks, project complexity 2 May include parking, National Parks, government-owned hotel properties, Puerto Rico 

lottery, state insurance fund, parking 3 May include regional airports, passenger ports 4 E.g. express lanes with dynamic tolling on existing congested roadways, 

broadband, infrastructure P3s including real estate funded infrastructure development

INFRASTRUCTURE / P3 REFORM – P3 Program 

24

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 25 of 38
V. DEBT SUSTAINABILITY ANALYSIS

25

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 26 of 38
 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

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 11,725 6,155 -- -- 17,880 -- 2,138 --

HTA2 4,106 135 6 -- 4,247 1,734 978 101

PBA 4,012 -- 117 -- 4,129 182 776 6

GDB3, 4 3,182 -- 742 203 4,126 -- 1,887 --

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

PRIFA5 1,566 409 232 -- 2,207 127 465 2

PFC 1,025 -- 172 -- 1,197 -- 258 --

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 3,897 -- --

Total $41,511 $7,293 $2,444 $668 $51,916 $6,409 $10,575 $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 $55,658 $7,933 $2,457 $3,188 $69,236 $8,795 $14,619 $518

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

Plus: Loans from GDB/MFA Entities 8,795

Public Sector Debt $74,265

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

26

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 27 of 38
FY 2018 – FY 2027 debt service ($MM)

The table below summarizes the annual debt service through FY 2027 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

Fiscal year ending June 30, 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Cash Interest

GO $714 $699 $680 $658 $641 $621 $597 $571 $545 $518

PBA 183 179 175 171 165 158 153 147 140 135

COFINA 690 690 690 689 696 702 708 714 711 708

HTA1

 207 201 197 191 182 174 170 166 160 151

PRIFA2

 80 77 75 72 69 65 61 57 53 45

PRCCDA 18 17 17 16 15 15 14 13 12 11

PFC 56 54 53 52 50 48 47 44 42 40

UPR3

 24 22 21 20 18 17 15 14 12 11

ERS 167 167 167 167 164 159 155 154 152 151

GDB 150 135 92 69 54 49 34 21 14 3

PRIDCO 8 7 7 6 5 5 4 3 2 2

Total $2,296 $2,249 $2,172 $2,109 $2,059 $2,014 $1,957 $1,904 $1,844 $1,774

Principal

GO $351 $392 $439 $334 $358 $378 $402 $428 $454 $481

PBA 66 70 74 101 109 100 101 107 96 106

COFINA 19 48 78 98 120 159 203 248 294 344

HTA1

 148 90 120 170 158 101 85 114 187 149

PRIFA2

 48 50 51 54 62 86 64 72 74 221

PRCCDA 12 13 14 14 15 16 17 17 18 19

PFC 30 32 33 34 36 37 39 41 43 46

UPR3

 25 26 27 29 30 31 33 35 24 26

ERS (0) -- (0) 50 70 80 19 22 29 36

GDB 277 848 432 434 143 47 541 -- 248 127

PRIDCO 10 11 11 11 13 13 14 15 16 17

Total $987 $1,579 $1,280 $1,328 $1,112 $1,049 $1,518 $1,099 $1,484 $1,573

Total debt service

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

PBA 249 249 249 272 273 258 254 253 236 241

COFINA 709 738 768 786 816 861 911 962 1,006 1,052

HTA1

 355 291 317 362 340 275 254 280 347 300

PRIFA2

 127 127 126 126 130 151 125 130 127 267

PRCCDA 30 30 30 30 30 30 30 30 30 30

PFC 86 86 86 86 86 86 86 86 85 85

UPR3

 48 48 48 48 48 48 48 48 36 36

ERS 167 167 167 217 234 239 174 176 181 187

GDB 428 983 525 503 196 97 575 21 261 130

PRIDCO 18 18 18 16 18 18 18 18 18 18

Total $3,283 $3,828 $3,453 $3,437 $3,171 $3,063 $3,475 $3,003 $3,329 $3,347

27

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 28 of 38
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

28

DEBT SUBSTAINABILITY

Debt sustainability

Debt sustainability sensitivity analysis ($MM)

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) (4,807) (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#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 29 of 38
VI. TSA LIQUIDITY

29

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 30 of 38
TSA Liquidity

Weekly cash flow forecast through 2017FY

(a) Excludes clawback account.

30

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#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 31 of 38
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

LIQUIDITY DISCUSSION

31

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 32 of 38
VII. FINANCIAL CONTROL REFORM

32

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 33 of 38
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

FINANCIAL CONTROLS

33

Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 34 of 38
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)

FINANCIAL CONTROLS

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Exhibit CW Certified Fiscal Plan (2017) Page 35 of 38
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

FINANCIAL CONTROLS

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Exhibit CW Certified Fiscal Plan (2017) Page 36 of 38
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 

FINANCIAL CONTROLS

36

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Exhibit CW Certified Fiscal Plan (2017) Page 37 of 38
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

FINANCIAL CONTROLS

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Case:17-03283-LTS Doc#:3126-3 Filed:05/23/18 Entered:05/23/18 11:45:37 Desc:

Exhibit CW Certified Fiscal Plan (2017) Page 38 of 38