EXHIBIT 15 

Case:17-03283-LTS Doc#:4014-11 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 15 Page 1 of 4
Corey Brady - Weil, Gotshal & Manges LLP

2018-10-03 00:23:53

Puerto Rico

Rosselló Pledges to Protect ‘Most Vulnerable’ in Pension Reform

Wed 02/15/2017 18:04 PM

Gov. Ricardo Rosselló acknowledged today that changes in pension benefits for some government

retirees may be on the horizon. However, he stressed that the “most vulnerable” pensioners will not

only be protected from cuts but could see their circumstances improve under pension reform

measures that are expected to be incorporated into the administration's proposed long-term fiscal

plan.

“We are going to protect the most vulnerable sectors. That is why we have made a distinction

between the proposals of the fiscal oversight board and our proposals. We are developing them

during long nights with a committed team so that we can fit together those numbers with our public

policy and present an agenda of transformation and change and fiscal responsibility. One of the

pillars of that plan is protect the most vulnerable of our society,” the governor said during a press

conference this afternoon.

The governor also denied the existence of any negative fallout regarding his decision not to extend

the contract of Puerto Rico Electric Power Authority Chief Restructuring Officer Lisa Donahue and her

team at AlixPartners, which expires today.

Pension Reform

The administration faces a Feb. 28 deadline to submit a proposed long-term fiscal plan to the

PROMESA oversight board that will chart the route for Puerto Rico to reach budget balance in two

years. Last month, the board unveiled a suggested $4.5 billion fiscal adjustment blueprint for the

commonwealth that included a 10%, or $200 million, cut in annual pension costs. The administration

rejected many of the suggested measures and said it would present alternatives and work with the

board to find “an acceptable balance.” PROMESA oversight board chairman José Carrión

subsequently acknowledged that the government could set its own policy and that arriving at budget

balance is the crucial factor, rather than how the commonwealth gets there.

Rosselló said the lowest-paid government pensioners have “difficulty paying for their medicine” and

“cutting their pensions by 10% would be throwing them into poverty.”

The governor said a major goal of his administration’s pension reform will be to separate the defined

benefits pension plan funding and the defined contributions pension plan funding, which are

currently commingled. Employees hired after 2000 are in a defined contribution plan, and the defined

benefit program was brought to a close during the 2013 pension reform.

The governor indicated that the defined benefits system will be handled on a pay-as-you-go basis,

while the defined contributions program will be spun off to the private sector and run as a 401(k)-

type program.

“We will measure each pensioners’ contribution depending on the numbers, but it is categorically

established that the most vulnerable and the poorest will be protected, and in some cases we will

improve their circumstances,” the governor said. “Everything is subject to seeing how big the

problem is, but those who have more should contribute more.”

Last month, the administration told the PROMESA board that among the measures it is considering

is taxing pension benefits for the largest recipients like ordinary income. The board has also discussed

the importance of protecting the most vulnerable while making the pension system “financially

sustainable.”

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The commonwealth has been paying $14 million in monthly interest payments on its $3.1 billion of

outstanding pension obligation bonds. However, it suspended deposits to a POB trust last June, and

the existing reserves are expected to dry up by May, Moody’s Investors Service said in a report this

week.

A POB lawsuit against the commonwealth over the suspension of the POB trust wassettled last

month with an agreement that employer contributions would be segregated in a separate account at

Banco Popular during the length of the PROMESA litigation stay, which runs until May 1.

No Fallout Over Donahue Exit

Addressing today’s expiration of PREPA’s contract with CRO Lisa Donahue and her team at

AlixPartners, Rosselló said that the move will save the commonwealth government “tens of millions

of dollars” and that talks with PREPA creditors regarding modifications to the restructuring support

agreement remain ongoing.

“There has not been any signal by the compaňeros who signed the accord that they want to break it,”

the governor said, referring to PREPA’s creditors. “To the contrary, they have granted the extension

to look for better alternatives for Puerto Rico.”

The governor reiterated that the administration’s public policy is against a PREPA rate hike and that

its analysis of the RSA is looking for “the public policy to be tied in some way to this restructuring and

that we can resolve not just the financial problems but the structural problems of PREPA.”

The governor spoke during a press conference in which he enacted a law creating the Puerto Rico

Community and Socio-economic Development Office, which looks to streamline and make more

efficient government processes and services involving community groups and the nonprofit sector.

Rosselló also said the law will enable nonprofits and community groups to take over many of the 340

services identified by his administration that are currently provided by government. Pointing to a

study by Estudios Técnicos, the governor said that island nonprofits can deliver for $1 a service that

costs the government $7 to deliver. In the case of education, its costs the government $20 to provide

the same service a nonprofit can provide for $1.

The governor said not only will costs be cut, services will be improved. A federal Temporary

Assistance to Needy Families welfare-to-work program is administered by the government in six

regions by the government and one region by a nonprofit. The governor said the commonwealth is

facing $20 million in fines because the six government-run areas have not met goals, while the

seventh region run by the nonprofit has exceeded federal expectations.

The new office will replace the Special Communities Office, which was created more than a decade

ago through a project of former Gov. Sila Calderon that established a “permanent” billion dollar trust

aimed at development projects in marginalized communities across the island. The money is now

gone, and the new director of the office, Jesús Vélez, said he is undertaking exhaustive audit to find

out where it went, while working to get additional federal funding sources for community projects.

Vélez said there was a $101 million in Special Communities fund at the Government Development

Bank when the previous administration declared a financial emergency at the institution and

restricted withdrawals from it.

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Case:17-03283-LTS Doc#:4014-11 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 15 Page 3 of 4
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