EXHIBIT L

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Exhibit L Page 1 of 101
October 14, 2016

Commonwealth of Puerto Rico Fiscal Plan

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Exhibit L Page 2 of 101
 The Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”), the Commonwealth of Puerto Rico (the “Commonwealth”), the 

Government Development Bank for Puerto Rico (“GDB”), and each of their respective officers, directors, employees, agents, attorneys, 

advisors, members, partners or affiliates (collectively, with AAFAF, the Commonwealth and GDB, 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 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 Commonwealth 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 

Commonwealth 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 

Commonwealth 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 Commonwealth, 

GDB, or any government instrumentality in the Commonwealth 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 accepting 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.

 The following does not express any opinion or contain any analysis as to the priority or validity of the debt or any purported security interest 

described herein and therefore is without prejudice to any legal or other argument that may now or in the future be asserted by the 

Commonwealth or any of its instrumentalities in any legal or other proceeding.

1

Disclaimer

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Exhibit L Page 3 of 101
I. Executive Summary..........................................................................................Page 3

II. Core Principles of the Fiscal Plan....................................................................Page 14

A. Minimize Impact of Austerity on Economic Growth

B. Improve Budgetary Controls and Financial Transparency

C. Rationalize Expenditures and Tax Policy to Promote Efficiency

D. Enact Structural Economic Measures and Invest in Growth

E. Protect Vulnerable Stakeholders

F. Create a Sustainable Debt Level That Allows for Growth

G. Partner with the Federal Government to Generate Growth

III. Fiscal Plan Projections ...................................................................................Page 79

IV. Footnotes........................................................................................................Page 94

V. Appendix – Additional Detail on Fiscal Plan Projections.................................Page 96

VI. Additional Information Provided Separately

A. Additional Detail on Bonded Debt Stock

B. Summary of Creditor Negotiations To Date

2

Table of Contents

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Exhibit L Page 4 of 101
Executive Summary

3

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Exhibit L Page 5 of 101
4

Introduction

 Puerto Rico’s GDP has contracted for nine of the last ten years in real terms, driven by the expiration of incentives provided 

under Section 936 of the U.S. tax code and the U.S. financial crisis, and exacerbated by outmigration and extraordinary 

austerity measures taken by the Commonwealth

 The extraordinary austerity measures taken in the last decade include: 

 Reducing government consumption by 12% in real terms from 2006 through 2015(1)

 Reducing public administration headcount by approximately 24%(2)

 Reducing or deferring critical capital expenditures

 Delaying tax refunds and vendor payments

 Implementing significant new revenue measures, including recent sales and petroleum products tax increases generating 

approximately $1.4 billion annually

 Depleting liquidity and undertaking extraordinary short-term borrowings from pension and insurance systems

 Reforming pensions, converting defined benefit plans to defined contribution plans

 These austerity measures have not been enough to eliminate deficits, which led to significant deficit financing and a ballooning

debt load during the period. Economic decline has also persisted, driving emigration to the U.S. mainland, as evidenced by 

Puerto Rico’s population declining by 9% over the decade

 In 2015, based on the work of a team led by former IMF First Deputy Managing Director Anne Krueger, the Commonwealth 

determined that a broad debt restructuring was necessary

 The Commonwealth commenced an effort to consensually renegotiate its debts based on a detailed Fiscal and Economic Growth 

Plan (“FEGP”) but such negotiations have, to date, not resulted in a definitive agreement with its creditors

 PROMESA was enacted in mid-2016 to provide Puerto Rico with the tools necessary to address its fiscal and economic crisis

 This Fiscal Plan is being presented pursuant to PROMESA and is the first step toward a permanent resolution of the 

Commonwealth’s ongoing crisis

 This Fiscal Plan identifies the resources available to support basic governmental services and promote growth; a specific 

debt restructuring proposal will be provided after receipt of input from the Oversight Board, as described further herein

The Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”) has experienced 

a persistent fiscal and economic crisis for the last decade, despite taking proactive steps to 

close its budgetary gaps and generate economic growth

(1) U.S. Bureau of Labor Statistics, Seasonally Adjusted Government Employment. Represents state and local government employees.

(2) Puerto Rico Planning Board. GDB Statistical Appendix – Table 3: Gross National Product in Constant 1954 Dollars. Government Consumption Expenditures. 

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Exhibit L Page 6 of 101
($17,944) 

($58,716) 

$17,023 

($34,967) 

($16,141) 

($8,177) 

($10,993) 

($5,460) 

($70,000)

($60,000)

($50,000)

($40,000)

($30,000)

($20,000)

($10,000)

–

 $10,000

 $20,000

 $30,000

Base Fin. Surplus PreDebt Serv. and Fiscal

Cliffs

Debt Service Base Fin. Gap Post Debt

Serv., Pre-Fiscal Cliffs

Loss of ACA Funding Act 154 Losses Incremental Pension

Contributions Req. by

Current Law

Est. Impact of Economic

Contraction

Base Fin. Gap

Puerto Rico projects a cumulative shortfall of revenues as compared to expenditures (a 

“financing gap”) of approximately $59 billion over the next ten years (the “Base Financing 

Gap” or the “Base Projections”)

5

Summary of Cumulative “Financing Gap” Under Current Laws and Policies from FY 2017 to FY 2026 ($ millions)(2)

 The Commonwealth’s current revenues are not sufficient to support existing current operations and debt service, despite the 

Commonwealth’s recent extraordinary efforts to close the financing gap. Three approaching fiscal cliffs, with an estimated ten year 

cumulative impact of $35.3 billion, will only further exacerbate the current crisis:

1. The depletion of Affordable Care Act (“ACA”) funds, which is estimated to occur in fiscal year (“FY”) 2018

2. The estimated loss of tax revenues from the conversion of Act 154 excise tax to a modified source income rule in FY 2018

3. The depletion of liquid assets in the retirement systems, expected to occur on or before FY 2018, will require increased 

contributions to the pension systems to avoid an interruption of benefit payments

 In addition, based on current policies and macroeconomic trends, economic contraction is expected to continue at an average rate of 

approximately 1.7% per year, resulting in an increase to the financing gap of $5.5 billion over the next decade as compared to a case 

in which the economy experiences 0% real growth(1)

 The size of the financing gap detailed below assumes no measures are taken to fill the gap; if the Commonwealth were forced to only 

pursue austerity-type measures to address this shortfall, it is estimated real GDP contraction would intensify 

(1) Inflation is illustratively held constant under both real growth assumptions at an average rate of 1.8% from 2018 to 2026. 

(2) Base Projections shown correspond to the revenues and expenses only of those entities included in the Fiscal Plan presented herein. See the "Fiscal Plan Projections" for greater details on entities included in the Plan.

(3) Note that for illustrative purposes, debt service excludes loans from GDB and certain bonded indebtedness of Commonwealth entities held by GDB. Numbers also include past due amounts and are net of debt service reserves. 

(4) Incremental contributions represent the Annual Additional Contributions (“AAC”) required to be paid to the Teachers and Judicial Retirement Systems and the Additional Uniform Contribution (“AUC”) required to be paid to the Employees 

Retirement System based on estimates provided by the Commonwealth’s actuaries incorporating updated assumptions regarding items such as changes in the size of the active membership and future payroll assumptions consistent with the 

Fiscal Plan. The amount shown includes payments of certain past-due amounts from previous years, as such amounts are assumed to have been paid in work performed by the actuaries. 

(5) Estimated impact of economic contraction corresponds to the estimated impact of real GDP growth going from 0% to an average of negative 1.7% from FY 2018 and FY 2026.

(4)

(3)

(5)

Under Current Laws and Policies, Puerto Rico Will Have a Significant Financing Gap

Based on Flat Real GDP 10 Yr

Base Revenue Before ACA, 154 Losses and Economic Contraction $202,043

Base Expenses Before Debt Serv. and Incr. Pension Contribution Req. by Current Law (185,020)

Base Financing Gap Pre-Debt Serv. and Fiscal Cliffs $17,023

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Exhibit L Page 7 of 101
6

To Address the Base Financing Gap and Restore Economic Growth, the 

Commonwealth Must Adhere to the Following Seven Principles

 The past decade’s material austerity measures, ranging from layoffs to tax increases, have not abated the

Commonwealth’s fiscal and economic crisis. Further austerity will only exacerbate outmigration and

accelerate the Commonwealth’s economic decline

 The Commonwealth’s Fiscal Plan ensures that critical fiscal discipline does not come at the expense of

long-term economic growth

 Puerto Rico has experienced persistent deficits, routinely overestimating revenue and failing to control

spending

 New rules and regulations must be implemented to enforce budgetary discipline, including improving

recently instituted third-party revenue validation, budgeting in compliance with GAAP, mandating all

spending to be approved through the annual budgetary process and improving regular budgetary

reporting and tracking

 The Commonwealth’s ability to properly monitor its fiscal position is hindered by obsolete financial,

accounting and payroll systems. This, in turn, impedes informed decision-making and the ability to

publish timely financial statements

 To correct this, Puerto Rico must invest in new IT infrastructure, reform financial reporting processes

and centralize treasury functions

 Finally, Puerto Rico must improve its regular economic and statistical reporting to enhance long-term

economic forecasting and tracking. Multi-year budgeting that reflects long-term economic forecasts

should be required

Minimize Impact 

of Austerity on 

Economic 

Growth

Improve 

Budgetary 

Controls and 

Financial 

Transparency

After a decade of recession, Puerto Rico’s economy must grow for the government to provide essential services

to the 3.5 million Americans living in Puerto Rico, as well as to support a sustainable debt burden. Without

economic growth, any level of debt service will be unsustainable and Puerto Rico will continue to face fiscal and

economic crises

1

2

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Exhibit L Page 8 of 101
7

 Although Puerto Rico does not control U.S. federal policies that have a significant impact on its economy, the

Fiscal Plan must implement structural reforms within Puerto Rico’s control. Overhauls are needed to local

policies to boost labor participation and productivity and create a business-friendly environment and attract

private investment

 The Plan includes investment to maintain existing infrastructure and invest in strategic growth-promoting

projects. Public-private partnerships must be leveraged to achieve efficiency gains

 The government must also catch-up on past-due payments to businesses and taxpayers, and build minimum

liquidity reserves to ensure government stability, another necessary predicate to growth

Enact 

Structural 

Economic 

Measures and 

Invest in 

Growth

To Address the Base Financing Gap and Restore Economic Growth, the 

Commonwealth Must Adhere to the Following Seven Principles (cont’d)

 Shocks to Puerto Rico’s most vulnerable constituencies, including the elderly, young, disabled and lowincome residents, are likely to have a higher negative multiplier effect on the island’s already weak economy

 Nearly half the island’s population lives in poverty and relies on a public healthcare system overburdened by

inequitable treatment under U.S. healthcare laws. Cuts to the system, even in the face of reductions in federal

transfers, would leave Puerto Rico residents without access to healthcare and promote outmigration and

further economic decline.

 The underperformance of local schools, together with crime rates that remain higher than the U.S. states,

suggest investments in education and public safety must also be protected

 Public pension plans must be adequately funded. The plans must build on prior reforms and ensure the

payment of an already meager average benefit that is only 53 percent of the average U.S. state

 The Fiscal Plan must also protect credit union depositors, who are generally low-income, as well as the

cooperative banking system in general, subject to recapitalization plans and effective governance reforms

Protect 

Vulnerable 

Stakeholders

 While further austerity is not the solution, the Commonwealth must stabilize its revenue base, improve its

revenue collections, and rationalize expenditures. The selection and structure of any fiscal measures, and the

timing of their implementation, must be designed to foster long-term growth and minimize negative

economic effects

 The Fiscal Plan should focus on efficiency gains by prioritizing tax enforcement, consolidating agencies with

overlapping functions and underutilized schools, further centralizing procurement to create economies of

scale, reducing workforce through retirement and attrition, and eliminating automatic expenditure increases

where there is no demonstrated need. Savings due to such efficiency gains should be reinvested to promote

growth

 The Fiscal Plan should also reform tax policy, including to transition the taxation of multinationals away

from the Act 154 excise tax in a manner that minimizes the impact on the Commonwealth’s revenue base

Rationalize 

Expenditures 

and Tax Policy 

to Promote 

Efficiency

3

4

5

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Exhibit L Page 9 of 101
8

To Address the Base Financing Gap and Restore Economic Growth, the 

Commonwealth Must Adhere to the Following Seven Principles (cont’d)

 Even after Puerto Rico implements the measures within its control, fiscal and economic recovery will be

immeasurably more difficult if the U.S. government does not act affirmatively to address some of Puerto Rico’s

most conspicuous fiscal and economic inequities

 The Commonwealth suffers from inequitable healthcare treatment relative to the U.S. states. Its Medicaid

reimbursement is capped

 Affordable Care Act funds that helped alleviate this inequity are expected to be depleted in FY 2018. Thereafter,

only local funds will be available to cover shortfalls for Puerto Rico’s struggling healthcare system. If not

addressed by the U.S. government, this deficiency in funding would devastate the Commonwealth's fiscal

accounts and social safety net

 The economic damage left by the repeal of Section 936 demonstrates the need for pro-growth federal policies

that are tailored to increase private-sector employment and investment, such as funding a Puerto Rico Earned

Income Tax Credit (“EITC”) and permanent, cost-effective tax incentives for business investment

Partner with 

the Federal 

Government 

to Generate 

Growth

 Without a substantial debt restructuring resulting in a sustainable debt burden, Puerto Rico’s growth potential

will continue to be hindered by the fear of future defaults, lower public and private investment and further

outmigration

 The sustainability of the debt burden must rely on objective criteria and realistic growth and fiscal

assumptions. The Fiscal Plan must provide the island with sufficient breathing space to guarantee the provision

of essential services, to implement smart, pro-growth fiscal and economic policies and to invest in its economy

 The restructuring plan must also offer a holistic solution for the Commonwealth’s tax-supported debt burden,

which is reliant on the single Commonwealth economy. Individual restructurings would be extremely

challenging given the interrelatedness of holders, insurers and sources of credit support. Accordingly, the Fiscal

Plan includes the tax-supported central government agencies and component units, including those identified

by the Oversight Board for inclusion in the Fiscal Plan(1)

 Finally, the debt proposal must include restrictions on the issuance of new indebtedness, including limitations

on the aggregate amount of tax supported debt, and must account for the impact on local holders

Create a 

Sustainable 

Debt Level 

That Allows 

for Growth

6

7

(1) See the list of entities specified by the Oversight Board for the first Fiscal Plan submission included in the document issued by the Board entitled “Covered Entities Under the PROMESA Act.”

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Exhibit L Page 10 of 101
Implementing the Policies Within Puerto Rico’s Control Would Reduce the TenYear Base Financing Gap by an Estimated $19 Billion

Even after implementation of revenue and expenditure measures that are within Puerto Rico’s 

control and the attendant growth it could generate, the Commonwealth would still face a tenyear financing gap of nearly $5.7 billion

9

 The $19 billion reduction in the deficit includes the potential benefits of a change in the Commonwealth’s real economic 

trajectory in the Base Projections from negative 1.7% to an average of 0.1%(1) growth, driven in part by new spending to 

promote stability and growth

 This revised growth rate assumes elimination of all debt service such that the Commonwealth can spend up to the 

amount of its internally generated surplus in any year to promote growth (i.e., no external financing of any remaining 

primary deficits, after the removal of debt service, is assumed)

 Given there is still a deficit after excluding all debt service, the economic impact of the measures may be muted

 The projections also assume no losses from Act 154 based on the assumption of a temporary extension of the excise tax via 

local legislation while the Commonwealth reforms its tax code(2)

($48,621) 

($39,914) 

($5,656) 

($58,716) 

$9,605 

$10,439 

($9,950) 

$8,707 

$34,258 

($62,000)

($52,000)

($42,000)

($32,000)

($22,000)

($12,000)

($2,000)

Base Fin. Gap Revenue Measures Expense Measures Spending to

Promote Stability

and Growth

Gap Post-Measures,

Pre-Economic

Impact

Est. Change in

Economic

Trajectory

Gap Post-Measures,

Post-Economic

Impact

Exclusion of Debt

Service

Gap Excluding Debt

Service and Before

US Gov't Action

Note: See later in the presentation for the complete list of entities included in the Fiscal Plan; covered entities specifically identified by the Oversight Board are included. Additional details on how the projections were prepared are provided later in the 

presentation. 

(1) Represents average real growth over the period FY 2018 to FY 2026.

(2) The projection assumes that Act 154 excise tax credit is not ruled to be uncreditable under U.S. tax law. 

(3) Includes principal and interest payments that may have been missed in FY 2016 and FY 2017. Debt service shown net of existing reserves used to pay debt service. Note that for illustrative purposes, debt service excludes debt held by GDB and 

excludes revenues otherwise allocated to COFINA FY 2017 debt service.

(3)

Implementation of measures consistent 

with principles outlined previously 

(apart from U.S. Government 

Partnership), including the change in 

the Commonwealth’s growth 

trajectory, would reduce the deficit by 

a cumulative $19 billion

Projections Including Measures ($ millions)

Note that as in the Base Projections, no 

additional austerity type measures are 

presumed to fill this remaining gap; if 

taken, such measures could reduce the 

GDP growth assumed in this scenario

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Exhibit L Page 11 of 101
$10,485 

$18,863 

($15,395) 

($5,656) 

$16,141 

$8,378 

($34,258) 

($25,000)

($10,000)

 $5,000

 $20,000

Gap Excluding Debt Service

and Before US Gov't Action

ACA Funding Replacement Surplus Excluding Debt

Service and After US Gov't

Action

Change in Economic

Trajectory

Surplus Excluding Debt

Service and After US Gov't

Action

Inclusion of Debt Service Gap Including Debt Service

and After US Gov't Action

10

 U.S. citizens living in Puerto Rico do not receive the same level of healthcare funding as citizens living in the 50 states

 Federal healthcare dollars, including Medicaid, are subject to a cap that does not apply to the states 

 ACA funds temporarily and partially offset this inequitable treatment, but such funds are expected to be exhausted in FY 2018 and 

the already struggling healthcare system cannot afford to be deprived of additional funding 

 Puerto Rico’s hospitals are already struggling to retain doctors and pay their vendors 

 Equitable treatment under the U.S. healthcare laws that, at the very least, restores funding at least equal to the level provided by 

ACA is essential for Puerto Rico to provide basic healthcare services to U.S. citizens living on the island and to help eliminate the 

Commonwealth’s financing gaps prior to debt service

 If Federal healthcare funding is kept at least at the level under current policies, (so the Commonwealth is not forced to dedicate 

other revenues to replace the loss of ACA funding), those Commonwealth revenues can be dedicated to additional investments that 

will drive a higher economic growth rate (the change in economic trajectory shown below represents an increase from 0.1% to an 

average of 1.4% over the period FY 2018 to FY 2026)(1)

 Additional actions from the U.S. government to increase private sector employment and investment, such as funding an Earned 

Income Tax Credit, the Child Tax Credit, Supplemental Social Security Income, and permanent, cost-effective tax incentives for 

business investment, could spark further growth than that estimated below

 Note that no allocation to creditors of the potential surplus before debt service shown below has been included in this Plan 

submission and the Commonwealth believes that creditors should share in both the benefits and risks of economic growth 

projections such as those included below 

The U.S. Government Must Become a Partner in Achieving Growth to Fully 

Eliminate the Commonwealth’s Financing Gaps

Estimated 10-Year Financing Gap Reductions From Certain U.S. Government Actions ($ millions)

Note: See later in the presentation for the fulsome list of entities included in the Fiscal Plan; covered entities specifically identified by the Oversight Board are included. Additional details on how the projections 

were prepared are provided later in the presentation. 

(1) The change in economic trajectory also represents an increase in inflation from 2.0% to an average of 2.50% over the period FY 2018 to FY 2026.

(2) Represents average real GDP growth of 1.4% and average inflation of 2.5% over the period FY 2018 through FY 2026.

(3) Includes principal and interest payments that may have been missed in FY 2016 and FY 2017. Debt service shown net of existing reserves used to pay debt service. Note that for illustrative purposes, debt 

service excludes debt held by GDB and excludes revenues otherwise allocated to COFINA FY 2017 debt service.

Equitable treatment under U.S. healthcare laws, combined with certain changes to other U.S. 

policies, are critical to Puerto Rico’s future 

(3)

(2)

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Exhibit L Page 12 of 101
Fiscal Plan Compliance with PROMESA

11

Fiscal Plan Requirements(1) Comments

1. Provide for estimates of revenues and 

expenditures in conformance with agreed 

accounting standards and be based on (i) 

applicable laws, or (ii) specific bills that 

require enactment in order to reasonably 

achieve the projections of the Fiscal Plan

 The Fiscal Plan submitted herein was prepared on a basis generally 

consistent with modified accrual approach, with the exception of 

certain elements.(2) All revenues and expenses are based on current 

Puerto Rico and federal law, unless otherwise provided for in 

proposed measures, the specific statutory changes for which can be 

developed in conjunction with the Oversight Board

2. Ensure the funding of essential public services

 The Plan is specifically designed to provide for essential services 

such as healthcare funding, public safety and education and to 

protect Puerto Rico’s most vulnerable residents and provide for 

sustainable economic growth. Catch up in payables to suppliers of 

essential services ensures stability of such services

3. Provide adequate funding for public pension 

systems

 Building upon previous pension reforms, the Fiscal Plan provides for 

funding of retirement benefits through payments of the actuariallydetermined AACs and AUCs for the entities included in the Fiscal 

Plan, and additional reforms 

4. Provide for the elimination of structural 

deficits

 The Fiscal Plan provides for the elimination of structural deficits 

assuming certain specified actions are taken by Puerto Rico and the 

U.S. government

Given PROMESA envisions an iterative process with the Oversight Board, full compliance 

with the 14 requirements of PROMESA is dependent upon feedback and recommendations 

from the Oversight Board. The Fiscal Plan contained herein, however, is a comprehensive 

proposal that provides a basis for full compliance and certification in the near-term, 

depending on the nature and timing of the Oversight Board’s feedback

(1) See Title II, Section 201(b) of PROMESA.

(2) Certain items, such as the payment of past-due payable amounts, are purposefully projected on a cash basis as they were expenses incurred in prior periods and therefore would not be captured by modified accrual.

11

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Exhibit L Page 13 of 101
12

Fiscal Plan Requirements(1) Comments

5. For fiscal years covered by a Fiscal Plan in 

which a stay under titles III or IV is not 

effective, provide for a debt burden that is 

sustainable 

 The Fiscal Plan provides principles to achieve a sustainable debt 

burden. A specific debt restructuring proposal will be provided 

following receipt of the Board’s recommendations and clarity 

regarding assumptions for U.S. government actions and appropriate 

economic growth rates. The final debt service level cannot exceed 

the projected surplus before debt service in the final Fiscal Plan and 

will be targeted not to exceed 15% of projected revenues

6. Improve fiscal governance, accountability and 

internal controls

 The Fiscal Plan includes specific measures to improve governance, 

accountability and internal controls

7. Enable the achievement of fiscal targets

 The Fiscal Plan is based on fiscal and growth targets developed in 

conjunction with outside advisors and mandates updates to 

reporting requirements to allow tracking of progress toward meeting 

fiscal targets. The growth targets are contingent upon the adoption 

and implementation of recommended Puerto Rico and federal 

government measures

8. Create independent forecasts of revenues for 

the period covered by the Fiscal Plan

 Revenue forecasts were developed in conjunction with outside 

advisors. The Commonwealth looks forward to validating its 

projections with the Board and its staff

9. Include a debt sustainability analysis (“DSA”)

 The Fiscal Plan shows that existing debt service is clearly not 

sustainable. A formal DSA of restructured debt service will be 

developed in conjunction with specific restructuring proposals

Fiscal Plan Compliance with PROMESA (cont’d)

(1) See Title II, Section 201(b) of PROMESA.

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Exhibit L Page 14 of 101
Fiscal Plan Compliance with PROMESA (cont’d)

13

Fiscal Plan Requirements(1) Comments

10. Provide for capital expenditures and 

investment necessary to promote 

economic growth

 The Fiscal Plan includes specifically identified capital projects intended 

to rebuild aging infrastructure and promote economic growth. 

Investments in the repayment of past-due amounts to suppliers and 

taxpayers are also intended to generate growth

11. Adopt appropriate recommendations 

submitted by the Oversight Board (under 

Section 205(a) of PROMESA)

 The Fiscal Plan includes specific fiscal and structural measures which 

are of the type covered under Section 205(a) of PROMESA. The 

Governor welcomes for consideration any additional recommendations 

by the Board

12. Include such additional information as 

the Oversight Board deems necessary

 The Fiscal Plan includes a significant number of specific fiscal and 

structural measures. The Governor welcomes for consideration any 

additional recommendations of the Board

13. Ensure that assets, funds, or resources of 

a territorial instrumentality are not 

loaned to, transferred to, or otherwise 

used for the benefit of a covered territorial 

instrumentality of a covered territory, 

unless permitted by the constitution of the 

territory, an approved plan of adjustment 

under title III, or a Qualifying 

Modification approved under title VI

 The Fiscal Plan suggests a holistic solution to the Commonwealth’s 

fiscal and economic challenges is necessary and suggests the total 

amount of resources available to pay any debt service. The Fiscal Plan 

does not provide a specific debt restructuring proposal or prescribe any 

treatment for any specific credit. And such proposal may require an 

adjustment plan for Qualifying Modification under title VI or 

numerous credits under title III. The debt restructuring proposal that 

will be submitted will comply with Sections 201(m) and 201(n) of 

PROMESA

14. Respect the relative lawful priorities or 

lawful liens, as may be applicable, in the 

constitution, other laws, or agreements of 

a covered territory or covered territorial 

instrumentality in effect prior to the date 

of enactment of PROMESA 

 The Fiscal Plan does not provide a specific debt restructuring proposal. 

The Fiscal Plan suggests a holistic solution to the Commonwealth’s 

debt burden, which may require an adjustment plan for numerous 

credits under title III and/or a Qualifying Modification under title VI. 

As noted above, the debt restructuring proposal that will be submitted 

will comply with Sections 201(m) and 201(n) of PROMESA

(1) See Title II, Section 201(b) of PROMESA.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 15 of 101
Core Principles of the Fiscal Plan

1. Minimize Impact of Austerity on Economic Growth

14

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 16 of 101
Since 2006, Puerto Rico’s Government Has Taken Significant Austerity 

Measures, Including a Large Headcount Reduction

The Government has taken significant steps to control and reduce expenses, including a 

significant reduction in public sector employment that has brought such employment as a 

percentage of the total population in line with state averages.(1) In contrast to prior 

administrations, the current administration decided that headcount reduction should occur 

through attrition, not layoffs

15

Public Sector Employment as a % of Total Population(3)(4)

0%

2%

4%

6%

8%

10%

12%

Puerto Rico Public Sector Employees (thousands)(2)

215

235

255

275

295

315

The significant reduction in public sector employment has 

reduced its share of total population to approximately 6%, 

which compares favorably to mainland states, where the 

typical share is between 5% and 8% 

(24%)

Reduction 

of 73K 

employees

(1) Public sector employment includes both Commonwealth government and municipality employment headcounts. 

(2) U.S. Bureau of Labor Statistics, Seasonally Adjusted Government Employment. Represents state and local government employees.

(3) U.S. Department of Labor. Employment as of July 2016 and population as of July 2015.

(4) U.S. Census Bureau.

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Exhibit L Page 17 of 101
The Commonwealth Has Also Implemented a General Freeze on Public Sector 

Salaries and Other Spending

The Commonwealth has taken steps to control expenditures such as freezing employee 

salaries and cutting non-salary compensation, in recognition that salaries are already well 

below equivalent salaries in the states

16

$30,870 $35,190 

$69,910 

$59,680 $62,370 $61,270 $61,230 $57,730 

–

 $20,000

 $40,000

 $60,000

 $80,000

Police Salaries Teacher Salaries

Police and Teacher Salaries in Puerto Rico and Other Financially Stressed Jurisdictions(1)

Puerto

Rico

Illinois Detroit U.S. Average Puerto

Rico

Illinois Detroit U.S. Average

(1) U.S. Bureau of Labor Statistics, Occupational Employment Statistics and National Education Association. Teachers salaries shown herein represent salaries for Elementary School Teachers, except Special Education, which has the highest number 

of teachers.

(2) Act No. 66-2014, June 17, 2014, GDB. http://www.gdb-pur.com/investors_resources/documents/A-066-2014.pdf. 

 The Commonwealth’s Special Fiscal and Operational Sustainability Act (Act No. 66-2014) 

addresses Commonwealth spending by implementing various measures such as freezing increases 

in payroll costs and/or collective bargaining agreements, cutting non-salary compensation, freezing 

formula appropriations and reducing rates for school transportation costs and professional and 

purchased services(2)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 18 of 101
$1,926 

$1,700 

$1,500

$1,550

$1,600

$1,650

$1,700

$1,750

$1,800

$1,850

$1,900

$1,950

$2,000

2006 2015

17

As a Result of Austerity Measures, Government Consumption Expenditures Have 

Declined Below 2006 Levels

Per the Puerto Rico Planning Board, government consumption expenditures were 12% lower 

in FY 2015 than in FY 2006 on a real basis

Real Government Consumption Expenditures in FY 2006 and FY 2015(1)

($ millions, fixed at 1954 dollars)

Note: All figures are presented on a Puerto Rico fiscal year basis (July to June). 

(1) Puerto Rico Planning Board. GDB Statistical Appendix – Table 3: Gross National Product in Constant 1954 Dollars. Government Consumption Expenditures. 

(12%)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 19 of 101
18

(1) Note that the numbers shown will not correspond to the CAFR. 

(2) Office of Management and Budget, Presupuesto Consolidado de Mejoras Permanentes por Agencia. Actual figures shown unless indicated otherwise.

(3) FY 2017 budgeted figures shown reflect the Office of Management and Budget’s recommended budget for FY 2017.

Critical Capital Investment Has Also Been Dramatically Reduced, Leaving the 

Commonwealth’s Infrastructure in Disarray

Capital expenditures for Puerto Rico’s major agencies and component units (including PREPA 

and PRASA) have fallen by approximately 70% from FY 2007 to FY 2015. When excluding the 

impact of PREPA and PRASA capital expenditures, total investment declined by approximately 

76% over the period

 Note that the numbers shown below are inclusive of federal grants related to capital spending and 

are as reported by the Office of Management and Budget(1)

$1,858 

$1,654 $1,526 $1,497 

$1,323 

$950 

$774 $670 

$437 

$2,987 $3,115 

$2,500 

$2,256 

$2,033 

$1,797 

$1,498 

$1,257 

$907 

-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital Expenditures excl. PREPA & PRASA

Capital Expenditures incl. PREPA & PRASA

Actual Capital Expenditures of Major Commonwealth Agencies(2)

($ millions)

(70%)

(76%)

Budgeted capital expenditures for FY 2016 and FY 2017:(3)

2016 2017

Total CapEx incl. PREPA, PRASA $989 $933

Total CapEx excl. PREPA, PRASA $414 $37 8

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 20 of 101
Since 2007, past-due obligations of the Primary Government and Component Units owed to 

third-party vendors, taxpayers, and the pension systems have all markedly increased

19

The Government Has Also Been Forced to Delay Payments to Vendors and 

Taxpayers, as Well as Contributions to the Pension Systems

Primary Government and Component Unit Total Accounts Payable, Tax Refunds Payable, and Net Pension Obligation(1)

Note that the net pension obligation of the Primary Government is based upon an actuarial valuation and is distinct from the full unfunded liability of the retirement systems, instead representing the Primary Government’s obligation as a sponsor to 

fund its pensions.

(1) Commonwealth Comprehensive Annual Financial Reports. Figures sourced from Statement of Net Position. Note that accounts payable figures include both primary government and component units but exclude fiduciary funds. Payables are 

not limited to past-due balances. 

4.4 4.5 4.5 4.3 3.8 3.4 3.2 3.9 4.6 

0.3 0.3 0.2 0.4 0.4 0.4 0.9 

1.2 

0.8 

4.7 5.1 5.8 6.8 8.0 9.3 

11.2 

13.1 

14.6 

-

5.0

10.0

15.0

20.0

25.0

2006 2007 2008 2009 2010 2011 2012 2013 2014

Accounts Payable Tax Refunds Payable Net Pension Obligation

FY 2014 is shown as it is the last year of 

audited financials, but it is believed that 

payables to third-party vendors have 

increased materially since FY 2014

114%

($ billions)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 21 of 101
FY 2017 

Budget % of T otal 

General Fund Revenue (Pre-Measures)

Individual Income Taxes $1,966 21.6%

Corporate Income Taxes 1,525 16.8%

Non-Resident Withholding 7 63 8.4%

Sales and Use Tax 1,608 17 .7 %

Act 154 Excise Tax 1,924 21.1%

Alcoholic Beverages Excise Tax 27 2 3.0%

Tobacco Products Excise Tax 117 1.3%

Motor Vehicles Excise Tax 293 3.2%

Rum "Cover Over" Revenues 206 2.3%

Other General Fund Revenues 426 4.7 %

T otal General Fund Revenues $9,100 100.0%

These Expense Reductions Have All Come Hand-in-Hand with Significant 

Revenue Increases, Which Have Reduced Disposable Income

Revenues from the Act 154 excise tax imposed in 2011 and the 2015 increase in the Sales and 

Use Tax (“SUT”) to 11.5% now account for approximately 30% of General Fund revenues

20

FY 2017(1) General Fund Revenues

Act 154 excise tax revenues 

represent 21% of total projected 

FY 2017 GF Revenues

SUT increase from 7% to 11.5%, 

the highest in the U.S.(2), resulted 

in approximately $1 billion of 

incremental GF revenues in FY 

2016 and represents 

approximately 11% of projected 

FY 2017 GF Revenues

($ millions)

(1) Note that the Puerto Rico fiscal year runs from July to June.

(2) “Puerto Rico, At 11.5%, Has America’s Highest Sales Tax.” August 17, 2015, Forbes.

Note that Fiscal Plan projections 

have subsequently been reduced 

to $9,045 million due to lower 

lottery revenues

There have also been significant increases in taxes and charges outside of the General Fund. For example, 

the recent increases in the excise tax on petroleum products from $3.00 to $15.50 generates approximately 

$360 million of incremental revenues and the 2013 60% increase in water rates by PRASA generates 

approximately $330 million of incremental revenues

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 22 of 101
0.5% 

(1.2%)

(2.9%)

(3.8%) (3.6%)

(1.7%)

0.5% 

(0.1%)

(1.7%)

(0.6%)

2.9% 

0.0% 

(3.4%)

3.0% 

1.5% 

2.2% 

1.7% 

2.9% 

1.8% 

(5.0%)

(4.0%)

(3.0%)

(2.0%)

(1.0%)

–

 1.0%

 2.0%

 3.0%

 4.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Puerto Rico United States

 The GNP declines would have been even worse had it not been for large stimulus spending, such as the 

approximately $7.1 billion of funds allocated to Puerto Rico under the 2009 American Recovery and 

Reinvestment Act (ARRA) and the creation of a $500 million “Local Stimulus Fund” funded from the Puerto 

Rico Sales Tax Financing Corporation (“COFINA”) bond issuances in 2009 and 2010(1)

 Furthermore, tax reform enacted in 2011 sought to jumpstart the economy by reducing individual and 

corporate taxes by approximately $706 million, some provisions of which were later modified to address 

resulting revenue shortfalls

The combination of the 2006 elimination of Section 936 of the U.S. tax code, the onset of the 

U.S. financial crisis, and the aforementioned pro-cyclical austerity measures, have led to 

negative real GNP growth in every year but one since 2006

Real GNP Growth Rates – Puerto Rico vs. United States(2)(3)

21

All of These Austerity Measures Have Not Reversed and May Have in Fact 

Contributed to a Decade of Economic Contraction

(1) 2011 Comprehensive Annual Financial Report p. 27.

(2) Puerto Rico Fiscal Authority Agency and Financial Advisory Authority. Economic Activity Index (“EAI”) Reports for Puerto Rico GNP data and the U.S. Bureau of Economic Analysis for the United States GNP data. Both Puerto Rico and U.S. 

fiscal data reported on a Puerto Rico fiscal year basis (July to June).

(3) Puerto Rico values are based on real GNP calculated at 1954 prices; U.S. values are based on real GNP at 2009 prices.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 23 of 101
The Economic Crisis Has Compromised the Government’s Ability to Provide 

Essential Services

Past due payments to suppliers have called into question the government’s ability to provide 

its residents with essential police, education and healthcare services

22

“Administrators detailed both delayed funding from insurers 

and government sources, and how the hospital had to 

delay and prioritize payments to provide basic care 

for its patients. ‘We are hanging by a thread,’ said Dr. 

Juan Nazaro, executive director of the hospital” 

 -The Atlantic(3)

“The island reached a tentative deal...with Total Petroleum Puerto Rico Corp. 

after the company warned it would no longer supply state vehicles 

with gasoline because of the government’s $16 million debt”

-Danny Hernández, 

Spokesman for the General Services Administration(1)

“Carmen Warrel, spokesperson for the Special Education Steering 

Committee parent’s association, highlighted that there are cases, such as 

the Instituto Modelo de Enseñanza, which is contracted by the 

Department of Education to serve students with autism, who 

have announced closure at the end of the month if not paid”

-Univision(2)

(1) “Puerto Rico’s Crisis Threatens to cut Gas, Power Supplies,” January 11, 2016, Caribbean Business. http://caribbeanbusiness.com/puerto-ricos-crisis-threatens-to-cut-gas-power-supplies/.

(2) “Servicios de Educación Especial afectados por falta de liquidez en Puerto Rico,” January 18, 2016, Univision Agencia EFE. http://www.univision.com/noticias/educacion-especial/servicios-deeducacion-especial-afectados-por-falta-de-liquidez-en-puerto-rico.

(3) “Will Puerto Rico’s Debt Crisis Spark a Humanitarian Disaster,” May 13, 2016, The Atlantic. http://www.theatlantic.com/politics/archive/2016/05/puerto-rico-treasury-visit/482562/.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 24 of 101
Puerto Rico Net Outgoing Air Passenger Traffic 

(Total on a Rolling Last Twelve Month Basis)(2) Puerto Rico Population 2006 to 2015(1)

298 

321 

3.8 

3.5 

3.4

3.5

3.6

3.7

3.8

3.9

4.0

295

300

305

310

315

320

325

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

9-Year Growth

United States: 7.7%

Puerto Rico: (8.7%)

Puerto Rico lost approximately 331,000 people 

in the period from 2006 to 2015

(millions)

-

20,000

40,000

60,000

80,000

100,000

120,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Based on outgoing passengers less incoming 

passengers, it appears the pace of those 

migrating from the island may be increasing

Puerto 

Rico

U.S.

23

The Economic Crisis Has Led to Material Outmigration from the Island, the Pace 

of Which Appears to Be Intensifying

Puerto Rico’s population declined by approximately 9% from 2006 to 2015 and the rate of 

outmigration appears to be increasing 

(1) U.S. Census Bureau, Population Division. Yearly data shown as of July 1.

(2) Puerto Rico Institute of Statistics.

Outmigration has only exacerbated the Commonwealth’s fiscal 

and economic challenges and has a material impact on the 

Commonwealth’s long-term economic potential 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 25 of 101
601 598 595 589 581 

 200

 400

 600

 800

1991 1992 1993 1994 1995

Washington, D.C. Population (thousands)(3)

3,679 3,634 3,593 3,535 3,474 

 3,200

 3,400

 3,600

 3,800

2011 2012 2013 2014 2015

(1) U.S. Census Bureau, Population Division, Annual Estimates of the Resident Population.

(2) Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2015. Source: U.S. Census Bureau, Population Division.

(3) Time Series of District of Columbia Intercensal Population Estimates by County: April 1, 1990 to April 1, 2000. Source: Population Division, U.S. Census Bureau.

(4) Compares D.C.’s population from 1980-2000, during such period there was a 10.4% decline. U.S. Census Bureau Intercensal Population Estimates of the Total Resident Population of States. 

24

Puerto Rico’s population 

declined by 

approximately 6%, or 

205K, from 2011-2015

The District of Columbia’s population 

declined by approximately 3%, or 20K,

from 1991-1995. While over a longer time 

period (through 2000), D.C. had a larger 

economic and demographic shift, if 

current trends continue, Puerto Rico’s 

shift may surpass that of D.C. not only on 

a nominal basis but also on a percentage 

basis(4)

731 714 704 699 690 

 200

 400

 600

 800

2009 2010 2011 2012 2013

On a percentage basis, outmigration from the island has exceeded that experienced in Washington D.C. 

prior to the implementation of a control board and is comparable to that experienced in Detroit prior to its 

Chapter 9 filing; however, in absolute terms, Puerto Rico’s total population loss is far greater than either 

Detroit or D.C.

Puerto Rico Population (thousands)(1)

Detroit Population (thousands)(2)

In Fact, Puerto Rico’s Outmigration Leading Up to its Default Dwarfs that 

Experienced by Other Troubled Jurisdictions

Detroit’s population 

declined by 

approximately 6%, or 

41K, from 2009-2013

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 26 of 101
16%

22%

46%

10%

20%

30%

40%

50%

United States Mississippi Puerto Rico

The Economic Crisis and Austerity Actions Taken to Date Have Negatively 

Impacted the Population, Nearly Half of Whom Live Below the Poverty Line

Puerto Rico’s economic collapse has created deteriorating conditions for those living in 

poverty, while they continue to face a cost of living comparable to the U.S. 

25

Per Capita Disposable Income(2)

$38 

$40 

$41 

$39 

$40 

$42 

$44 

$44 

$46 

$14 

$14 

$15 

$16 

$16 

$17 

$17 

$18 

$18 

$0

$50

2006 2007 2008 2009 2010 2011 2012 2013 2014

Though Puerto Rico’s per capita disposable income is 

only ~40% of the U.S. average, ~70% of the population 

of Puerto Rico lives in the San Juan MSA, which is 

ranked 47th highest out of 298 U.S. metropolitan areas 

and 11.6% above the average due to some of the highest 

prices for utilities, groceries and goods and services in 

the country(3)

United 

States

Puerto 

Rico

Population below the Poverty Level (2014)(1)

($ thousands)

(Highest State)

Cost of Living(3)(4)

Rank Urban Area Cost of Living Index

1. Manhattan, NY 227

2. Honolulu, HI 188

3. San Francisco, CA 176

4. Brookly n, NY 173

...

47 . San Juan, PR 112

...

296. Richmond, IN 81

297 . Harlingen, TX 80

298. McAllen, TX 7 8

Average = 100

(1) U.S. Census Bureau. Current Population Survey, Annual Social and Economic Supplement, 2015 United States data. Puerto Rico poverty level based on 2014 American Community Survey 1-Year estimates.

(2) GDB Statistical Appendix (Selected Series of Income and Product, Total and Per Capita). U.S. Bureau of Economic Analysis (U.S. Personal Income and Population). 

(3) The Institute of Statistics of Puerto Rico. Index Cost of Living, June 17, 2016.

(4) Council for Community and Economic Research.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 27 of 101
Breaking the Vicious Cycle

26

Increase Real 

GDP Growth

Stronger 

Fiscal Position

Space for 

Structural 

Reform, 

Investment

Strong Job 

market, 

population 

growth

Improved 

Potential GDP

Lower Real 

GDP Growth

Weaker Fiscal 

Position, 

Deficits

No Space for 

Reform or 

Investment

Poor Job 

Market, High 

Migration to 

U.S. 

Declining 

Potential GDP Virtuous 

Cycle

Vicious 

Cycle

Austerity measures have not reversed Puerto Rico’s economic decline nor helped 

Puerto Rico’s impoverished residents. All the measures outlined further in the Fiscal 

Plan are based on the guiding principle that more austerity measures are simply not 

the answer to Puerto Rico’s current crisis. 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 28 of 101
Core Principles of the Fiscal Plan

2. Improve Budgetary Controls and Financial Transparency 

27

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 29 of 101
The Commonwealth has historically failed to meet revenue estimates, failed to control 

spending, and failed to consistently produce timely financial statements

28

General Fund Revenues(1) ($ millions)

(1) Commonwealth of Puerto Rico CAFR, Statement of Revenues, Expenditures, and Changes – Budget and Actual – Budget Basis – General Fund.

Days to Produce Fiscal Year Audited Financial Statements(1)

 $6,000

 $6,500

 $7,000

 $7,500

 $8,000

 $8,500

 $9,000

 $9,500

 $10,000

Original Budget Actuals

596

365

443

301 302

479

408

351

397

257 282

345 304

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Fiscal Plan Must Address Legacy of Lax Budget Controls, Fragmented DecisionMaking and Delays in Presentation of Fiscal and Economic Information

General Fund Actual Deficit(1) ($ millions)

($2,500)

($2,000)

($1,500)

($1,000)

($500)

– 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 30 of 101
Institute New Budgetary Rules and Practices to Impose Budgetary Discipline

In light of the Commonwealth’s chronic budget deficits and repeated failure to meet revenue

estimates, it should institute new rules and practices to impose budgetary discipline. Without

effective budgetary and other controls, it will be challenging to measure performance under the

Fiscal Plan and make necessary real-time adjustments

Budgetary Planning and Implementation

 Require Budgets to be prepared in accordance with “Modified Accrual Accounting Standards” (as

defined by GASB)

 Implement multi-year budgeting requirement to identify trends and enable long-term planning

 Eliminate Commonwealth’s Special Revenue Funds, and account and budget for all revenue and

expenditure transactions in the General Fund (except for Federal Grants)

 Improve revenue projections by relying on third-party validation process

 Implement quarterly General Fund budgetary revision process based on actual revenues and

expenditures in order to make timely budgetary adjustments

Tax Expenditure Inventory and Budget

 Require perpetual inventory of tax credits issued and outstanding in order to measure impact on

revenue estimates

 Require periodic reporting on cost/benefit analysis of tax expenditures

 Require Annual Tax Expenditure Budget that prepares annual revenue estimates on a “gross basis”,

then adjusts to reflect the impact of existing and proposed tax exemptions, exclusions and deductions

 Require annual budgetary approval of tax credits, like any other budget line item

Additional Controls

 Enact regulations so that OMB/Treasury can hold UPR, Legislative Assembly and dependent agencies

and public corporations accountable for their expenditures

 Require periodic measurement and reporting of the capture rate of all taxes

 Prohibit legislation with fiscal or budgetary impact to be approved during the fiscal year without new

sources of revenues

 Close all operating funds at the end of each fiscal year

 Require Federal Funds reimbursement reconciliation on a monthly basis

Reform 

Budgetary 

Rules and 

Processes

29

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 31 of 101
Make Fiscal and Economic Data Transparent, Reliable and Timely

Strengthen 

Economic 

and 

Statistical 

Analysis

The Commonwealth must be equipped with transparent, reliable and timely macroeconomic data

that allows for better economic forecasting

 Adopt the Institute of Statistics and the Planning Board’s five-year plan to strengthen the economic statistical

system and analysis by modernizing national accounts with an estimated investment of $3 million per year

 Reorganize and expand Puerto Rico’s current five national accounts into seven accounts (Net Income and Gross

Product, Personal Income and Outlays, Government Receipts and Expenditures, Foreign Transactions-Current,

Foreign Transactions-Capital, Gross Savings and Investment and Private Sector Income)

 Present national accounting statistics in accordance with the 2008 United Nations standards and publish full

sets of quarterly statistics

 Develop a new forecasting model for Puerto Rico’s national accounts with technical assistance from the U.S.

Bureau of Labor Statistics and the U.S. Bureau of Economic Analysis

30

Obsolete financial and accounting systems, combined with a lack of integration of agencies under

the same platform, hinders the ability to timely monitor expenses, complete annual audits and

publish fiscal and financial data

Invest in 

Systems to 

Develop and 

Report 

Accurate 

Financial 

Data

 Invest in new financial, accounting and payroll systems to streamline internal accounting and reporting processes

and sharing of information in order to provide real-time data and accelerate the preparation and publication of

interim and audited financial statements

 Execute agency and public corporation consolidation plan (described in Section 3), which will reduce the number

of reporting entities in the Commonwealth’s financial statements and simplify related audit procedures

 Consolidate agencies’ finance divisions, supplier payment processing and management of federal grants in a

shared service center

 Create Commonwealth Financial Reporting Office in order to properly coordinate the production and

dissemination of fiscal and financial data within the newly created Department of Treasury and Finance

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 32 of 101
31

Enhance Financial Controls and Fiscal and Economic Decision-Making

Develop 

Performance 

Metrics

Agencies lack proper KPI’s and benchmarking data that facilitate budget development

and execution

 Complete the development of performance metrics for the principal agencies and departments of the

Government: Education, Health, Police, Justice and Children and Families

 Establish an electronic system to publish performance metrics in order to improve execution and

enhance transparency

Reorganize 

Fiscal and 

Economic 

Decision 

Making 

Structures

A well-structured approach towards financial and economic development decisions will

help improve forecasting and financial and economic decision-making

 Consolidate the functions of the Treasury Department, OMB and AAFAF into new Department of

Treasury and Finance to better manage and coordinate fiscal and financial policy

 Submit and pass legislation to implement new Department of Economic Development and Commerce

organizational structure and business plan

The Commonwealth currently has a highly fragmented treasury system that lacks 

emphasis on fiscal and financial controls and provides little visibility of the 

Government’s consolidated financial position. The centralization of treasury functions in 

the central government can provide significant communication, visibility and efficiency 

benefits

Ensure all 

Spending 

Flows 

Through a 

Single 

Treasury

 Establish by legislation centralized single treasury functions across Commonwealth agencies and

dependent public corporations to enhance visibility, reduce financing costs and improve cash flow

management

 Single Treasury account should be used for all spending to make sure it is controlled and consistent

with the budget

 Single Treasury account will also provide visibility into the Commonwealth’s consolidated fiscal

position

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 33 of 101
Core Principles of the Fiscal Plan

3. Rationalize Expenditures and Tax Policy To Promote 

Efficiency

32

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 34 of 101
The Commonwealth Can Achieve Efficiency Gains by Consolidating Overlapping 

Agencies and by Further Centralizing Procurement to Capture Cost Savings 

Puerto Rico’s government is composed of 114 agencies and public corporations with over 519 local and 

regional offices throughout the island, creating a highly fragmented structure with redundancies and limited 

economies of scale

Number of Agencies and Public Corporations Estimated Impact vs. Base Projections ($ millions) (1)

33

 In order for the Commonwealth to achieve operational efficiencies, it must pursue the following measures:

 Continue implementation of the Government Reorganization and Efficiency Plan (EO 2015-23), so as to 

consolidate local government offices and increase the use of technology and shared services

 A redesign of governmental structures as proposed by OMB and UPR’s Public Administration Faculty, 

which will lead to a consolidation of approximately 48 government entities, generating savings in rent and 

utilities and facilitating future workforce attrition

 The Commonwealth can benefit from additional operational efficiencies by continuing efforts to ensure that 

certain purchases of materials and supplies are managed by a new, modern, procurement system in the Puerto 

Rico General Services Administration, as well as facilitating the process by which local businesses become 

vendors of the U.S. General Services Administration

 This is estimated to achieve approximately 4% in savings. Economies of scale made available by Section 

406 of PROMESA, which allows the Commonwealth to make purchases through the U.S. GSA, can help 

meet this goal

6 6

114

128

144

108 9 6

6 7

4 7

1955 1965 1975 1985 1995 2005 2015 2018P

-48

6 0 8 0

120 120 122 124 127 129 131

4 5 4 6

4 3 4 4 4 5 4 1 4 2

3 6

2 8

88

2017

0

2024

171

2023

168

2022

165

2021

162

2020

161

2019

116

2018 2026

178

2025

174

Operational Efficiencies Centralized Procurement

(1) Centro de Estudios Multidisciplinarios Sobre Gobierno y Asuntos Públicos; “Estudio sobre la Organización y el Desempeño de la Rama Ejecutiva”.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 35 of 101
In Addition to Consolidating Agencies, the Commonwealth Should Continue to 

Implement its School Consolidation and Reinvestment Program

 In light of the continued decline in enrollment and school utilization, the Puerto Rico Department of Education 

(“PRDE”) will continue to execute its School Consolidation Plan, which it has been carrying out over the last 

three years (155 schools already consolidated with academic performance increasing in consolidated schools(1))

 The consolidation process is based on specific parameters such as academic performance, enrollment, 

school utilization and distance. As it continues to right-size its resources, the PRDE will ultimately position 

itself to deliver higher quality education with better compensated teachers

 The Commonwealth will complete the remaining phases of PRDE’s restructuring plan, which requires overhauling 

management and operations to focus on moving personnel from administrative positions back into school-based 

positions

Since 2005, enrollment at PR public schools has declined 37%, which has led to a reduction in school 

utilization and a decrease in the student to teacher ratio to 12:1, as compared to the U.S. average of 16:1

Actual and Projected Student Enrollment (in thousands) (2)

34

(1) Based on standardiszed tests (META PR)

(2) Department of Education's historic, actual and projected student enrollment as of October 2016.

319 302 336 353 365 370

411

493

576

-17%

2021P

CAGR

-4%

Oct-16 2017P 2018P 2019P 2020P

-37%

2005 2010 2015

Estimated Impact vs. Base Projections ($ millions)

2 8

5 7

8 5

113 115 117 119 121 123

1 4

1 4

1 4

1 4 1 4 1 5 1 5 1 5 1 5

2021

99

2019

129

2022

127

2020 2024

131

2025

136

2023

134

2018

0

71

42

2017 2026

139

Overhaul of Management and Operations School Consolidation

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 36 of 101
Given the Interconnectedness of Puerto Rico’s Hospital Systems, the 

Commonwealth Can Also Achieve Cost Savings Via Hospital Consolidations

 Creating the Puerto Rico Medical Center Campus organized around specialty institutions will 

integrate all government hospitals into a single organization

 Phase 1 contemplates merging Administration of Medical Services of Puerto Rico (“ASEM”), 

the University Hospital and University Pediatric Hospital (“HOPU”)

 Phase 2 would further merge the Industrial Hospital, currently run by the State Insurance 

Fund, as well as other government-run hospitals

 Implementing functional P3s at state hospitals (billings, admissions, maintenance and food 

services, among other support services) will bring best in class practices, centralize functions and 

streamline processes

35

The Puerto Rico’s hospital system is highly fragmented and can capture significant efficiency gains by 

integrating hospital administration and leveraging P3s

Estimated Impact vs. Base Projections ($ millions)

1 2

2 4 2 4 2 4 2 4 2 5 2 5 2 6 2 6

1 0

1 9 1 9 1 9 1 9 2 0 2 0 2 0 2 1

-2

-2

2025

47

2026

46

2024

45 45 44

2021

43

2018

43

2023

43

2019 2022

-4

22

2017 2020

Hospital Consolidations Functional P3s

Interconnected Relationship Among Health Care System(1)

(1) Interviews, V2A Analysis. “RCM” stands for UPR’s Medical Sciences Campus.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 37 of 101
Puerto Rico Must Implement Measures to Control Increasing Health Care Costs

 Implement STAR-like(1) rating system and establish a provider payment scale based on performance

 ASES is developing a Primary Medical Group (“PMG”) quality monitoring program that would allow the 

agency to monitor quality, utilization and cost of the Commonwealth healthcare program (“Reforma”)

 Standardize health protocols and fee schedules by creating a uniform guide for medical procedures and 

corresponding medical service fee schedules 

 These initiatives are designed to decrease medical costs close the per member per month (“PMPM”) gap 

among PMGs, as shown in the graph below

 Reduce the number of federally qualified healthcare centers receiving grants under Section 330 of the Federal 

Public Health Service Act that are located near existing hospitals or clinics and adjust the wrap-around payment 

formula for services rendered by these centers to beneficiaries of Reforma

36

Puerto Rico’s health care system should implement initiatives designed to improve medical quality, 

utilization and cost

Estimated Impact vs. Base Projections ($ millions)

3 0 3 0 3 0 3 0 3 1 3 1 3 2 3 2 3 3

1 5 1 5 1 5 1 5 1 6 1 6 1 6 1 6

8

50

2019

50

2018

43

2017

0

2026

55

2025

54

2024

53

2023

52

2022

51

2021

50

2020

Centers 330 STAR-like Rating System Health Protocols

(1) Centers for Medicare and Medicaid Services (“CMS”) Five Star Quality Rating System.

(2) ASES’ “Proyecto de Evaluación y Monitoreo de Calidad de Proveedores” 2015-2016.

PMGs Max and Average PMPM Cost(2)

Average PMPM PMPM most expensive PMG PMPM Gap

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 38 of 101
 The Fiscal Plan proposes to extend through FY 2021 Act 66’s freeze of new hires, formula-based appropriations 

for UPR, the Judicial Branch and municipalities, as well as a freeze of service costs, increases in salaries and 

collective bargaining agreements

 After FY 2021, the Fiscal Plan permanently fixes these appropriations at their fiscal year 2014 levels and only 

allows them to grow after 2021 at the rate of the previous fiscal year’s inflation(1)

Act No. 66-2011, which froze new hires, salaries and formula-based appropriations, is due to expire in June 

2017. The Fiscal Plan extends most of Act 66’s fiscal control measures and proposes to permanently repeal 

formula appropriations and convert them to fixed amounts adjusted annually by inflation

Additional Cost Savings Can Also Be Achieved by Avoiding Programmed 

Expenditure Increases That Are Not Based on Assessments of Need 

37

(1) Net Revisions to GF Budget Formulas, Payroll, Operating Expenses and Water Utilities represents the effective replacement for the reduction in municipalities subsidies and Extend Act 

66 measures after FY2021 to continue capturing savings already achieved

(2) Adjusted General Fund Budget excluding debt service and AUC’s embedded in the General Fund.

. 

2018 2019 2020 2021 2022 2023 2024 2025 2026

9,400

9,200

8,800

9,000

0

8,600

8,400

8,472

9,016

9,354

8,888

Adjusted General Fund Budgeted Expenses (2) ($ millions)

Without Act 66 Extend Act 66 and Fix Formula Appropriations

338

2020 2025 2026

0

2023

368

416

2021

336

2017

384 400

2018 2019

178

257

353

2022 2024

Extend Act 66 Fix Formula Appropriations

Estimated Impact vs. Base Projections ($ millions)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 39 of 101
To Reduce Their Potential Economic Impact, Proposed Workforce Related Cost 

Savings Are to Occur Through Retirement or Attrition

 In order to achieve these attrition targets, the Office of Management 

and Budget (“OMB”) will:

 Implement Act 211-2015 offering Pre-Retirement Program 

(PRP) windows to select public sector employees 

 Implement new government-wide employee classification 

programs to improve mobility and allocation of human 

resources

 The Commonwealth will benchmark public sector benefits to those of 

the private sector, which would also work to increase productivity 

and facilitate attrition efforts

The Fiscal Plan calls for the Commonwealth to reduce its payroll costs, but does so through a 2% annual 

payroll attrition target that relies on the Commonwealth replacing departing workers only when necessary

38

87 ,283 86,559 84,692 97 ,528

2019 2020

-12,836

2017 2018

Estimated Employee Headcount Attrition(1)

1,136 12,836 2,97 6

8,7 24

GF & CU 

Attrition

Act 211-2015 DOE Attrition Total

3,676

2020

3,451

2017 2018

3,522

2019

3,546

-2%

Estimated Payroll Costs(2) ($ millions)

(1) Estimated headcount based on OMB’s analysis of General Fund and Component Units employees included in the Base Projections, excluding the University of Puerto Rico. Impact of 

Act 211-2015 based on preliminary analysis of employees that meet basic criteria. 

(2) Act 211-2015 attrition estimate based on initial estimates of eligible employees.

Estimated Impact vs. Base Projections ($ millions)

246 251

237 242 229 233 225

155

131

0

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 40 of 101
Reduce Subsidies and Other Special Appropriations

39

2016

Special 

Appropriations

8,028

General Fund 

(net) 59%

41%

Formulas

Health Insurance

Retirement Systems

15% Other

3,329

2016

27%

44%

15%

Includes $361MM for 

Municipalities

Includes $49MM 

for Special Laws

Adjusted FY2016 General Fund Budgeted Expenses (1) ($ millions) Estimated Impact vs. Base Projections ($ millions)

100

200

300 300 300 300 300

4 6

4 5

4 4

4 3 4 2 4 1 4 0 3 9

4 7 5 0

2020

145

47

2017

0

2021

96

2018 2019

244

2024

341

2023

342 340

2022

343 339

2025 2026

Municipal Subsidy

TRS Special Law Benefits

 The Commonwealth would enact legislation beginning in FY 2018 to gradually adjust subsidies provided to the municipalities by the 

central government, while also empowering the municipalities with the proper legal, administrative and operational tools to offset 

such a decrease 

 Municipalities may present revenue generation and expense reduction initiatives, which may include changes to municipal 

license fees, modernization of property tax regimes and municipal consolidations, among others

 Note that the municipalities are contributors to the Employees Retirement System and the Fiscal Plan assumes that the central

government does not cover any amounts related to the municipalities (approximately $100MM per year). The municipalities ability 

to contribute such amount could be at risk, particularly if they are not made covered entities

 In addition, the Commonwealth would modify special laws benefits granted to the Department of Education’s employees that retired

before 2014, Christmas bonus, medicine bonus, and medical insurance plan continuation, which are in addition to the benefits 

related to pensions

 Formula appropriation to UPR is to be frozen until 2021 and thereafter only grown at inflation. No further cuts are contemplated due 

to the importance of higher education to the island’s economic development

 UPR will need to implement measures to enhance efficiency and re-invest in education

The central government’s precarious fiscal situation is exacerbated by sizable subsidies to other governmental entities, 

including municipalities, as well as by benefits legislated through special laws

(1) Adjusted General Fund Budget excluding debt service. 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 41 of 101
The Commonwealth Must Increase Revenue Collections by Boosting its Capture 

Rate and Reducing Tax Evasion

 Upgrade technology and leverage its use by:

 Improving Integrated Merchant Portal System (PICO) 

 Implementing New Internal Revenue Integrated System (SURI)

 Implementing Automated System for Customs Data (ASYCUDA) 

 Expand alternative delivery and payment channels’ capabilities by:

 Increasing transactions and services online, through a call center and in banks and credit unions

 Transforming its 89 collection centers into 27 Integrated Service Centers throughout the island

 Improve tax enforcement by:

 Restricting the use of amnesties and closing agreements to increase revenue certainty and reduce tax evasion

 Leveraging joint ventures between the Central Government and municipalities for greater SUT oversight (2)

 Creating the Office of Tax Return Compliance and Office of Transfer Pricing Policies 

 Tackling widespread use of illegal video lottery machines that erode Puerto Rico’s tax base by implementing and enforcing tax on, 

and regulating, video lottery games

 Require periodic measurement and reporting of the capture rate of all taxes

The Commonwealth lacks an effective tax administration infrastructure, resulting in significant tax evasion

and high administrative and compliance costs. In order to increase capture rates the Commonwealth will:

40

(1) Video Lottery estimates based on Christiansen Capital Advisors, LLC study adjusted for Puerto Rico income levels. Estimates are net of ~35% allocation to CRIM.

(2) Joint Ventures exist for 48 municipalities. Remaining 30 joint ventures are expected to be completed under this measure. 

Estimated Impact ($ millions)

2 5

3 0 3 5 3 5 3 5 3 5 3 5 3 5 3 5

2026

92

2025

92

2024

92

2023

92

2022

92

2021

92

2020

90

2019

81

2018

66

2017

10

Tax Enforcement

Upgrade Technology

Expand Delivery Channels

6 6 6 4 7 2 6 9 7 5 7 7 8 1

7 0

5 5

0

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Estimated Impact of Video Lottery(1) vs. Base Projections ($ millions)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 42 of 101
The Commonwealth Must Address Upcoming Act 154 Revenue Cliff by Changing 

its Tax Code to Substitute Projected Revenue Shortfalls 

41

 Act 154’s transition in FY2018 to a tax based on the Modified Source Income Rule is estimated to result in a loss 

of half of estimated tax revenues. The Commonwealth proposes to temporarily extend Act 154 excise tax (2-3 

years) to give the government sufficient time to renegotiate individual tax grants and reform its tax code such that 

it replaces Act 154 revenues in full to current levels

 Assumes no adverse decisions by the IRS during this interim period 

The Commonwealth is currently highly dependent on receipts from the Act 154 excise tax (approximately 

21% of General Fund revenues), which is due to be replaced by a “Modified Source Income Rule” tax in 

December 2017 (FY 2018). Extension of Act 154’s excise tax for a short transition period is necessary in 

order to ensure revenue certainty while a new corporate tax regime for multinationals is implemented

Act 154 Projected Revenues - Pre Measure ($ millions)

1,924 1,924

2025

1,924

2024

962

1,924

2017

962

962

481

962

962

962

1,924

2020

1,924

2019

1,924

2018

1,924

1,443

1,924

2022

1,924

2021

962

962 962

2023

962

962

962

962

2026

962

962

962

Act 154 4% 

Excise Tax

Act 154 

Modified 

Source Income

2018

1,924

481

2017 2024

1,924

962

2023

1,924

962

2020

1,924

962

2019

1,924 1,924

962

2025

1,924

962

2026

962

2022

1,924

962

2021

1,924

962

Impact of Measure ($ millions)

Extension of 

Act 154 4% 

Excise Tax

New Tax 

Regime

Impact of 4% Excise Tax Extension and New Tax Regime

Act 154 Revenue

Revenue Loss due to Modified Source Income Rule Switch

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 43 of 101
Core Principles of the Fiscal Plan

4. Enact Structural Economic Measures and Invest in Growth

42

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 44 of 101
4.6% 5.8%

9.6%

8.1%

7.4%

6.2%

5.3%

10.6%

11.8%

16.4%

14.4% 14.2% 13.8%

12.1%

0%

4%

8%

12%

16%

20%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Puerto Rico Unemployment Rate 2006-2015(4)

Puerto 

Rico

United 

States 

Average

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

The number of private sector jobs in Puerto Rico as a percentage of the total population is materially 

lower than any mainland state, helping drive high unemployment, which is double that of the U.S. 

average, and a low labor force participation as Puerto Rico residents face dismal job prospects(1)

49% 49% 47%

46% 44% 43% 42% 41% 41% 40%

66% 66% 66% 66% 65% 64% 64% 64% 63% 63%

35%

40%

45%

50%

55%

60%

65%

70%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Labor Force Participation 2006-2015(5)

Private Payroll Employment as a Percentage of Total Population by State – 2015(2)(3)

Puerto 

Rico

United 

States 

Average

The Plan Must Boost Private Employment and Labor Force Participation Levels, 

Which Are the Lowest in the United States

43

(1) Reflects percentage of people working or looking for work over the total population over 16 years 

of age.

(2) U.S. Department of Labor. Employment as of July 2016 and population as of July 2015.

(3) U.S. Census Bureau.

(4) Bureau of Labor Statistics (Non-Farm Payroll Employment Survey).

(5) Puerto Rico Fiscal Authority Agency and Financial Advisory Authority. U.S. figures from the Bureau of 

Labor Statistics Current Population Survey and represent January values. 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 45 of 101
Only 40% of Puerto Rico’s adult population (vs. 63% in the U.S.) is employed or looking for 

work. A significant portion of the population is either receiving welfare, informally employed 

or both. The Commonwealth must adopt pro-growth labor market policies, implement an 

earned income tax credit program and reform welfare programs

44

The Commonwealth Must Implement Structural Reforms to Increase 

Labor Demand and Participation 

 The Puerto Rico private labor market is subject to federal labor regulations and unique local regulations such as 8-

hour work days based on calendar days (instead of 24-hour periods) and mandatory Christmas bonus and 

severance payments

 For Puerto Rico to increase its competitiveness and labor participation, and cognizant of the fact that Puerto 

Ricans can move freely to the mainland, the Commonwealth must review its labor laws in order to pursue two 

dual objectives:

 Preserve its revenue base 

 Increase labor participation rates

In the FEGP, the Commonwealth previously proposed to enact labor reforms that included: 

paying overtime calculated based on hours worked in excess of 40 hours per week, easing 

the process to waive the Christmas bonus, and limiting the mandatory severance to six 

months. Puerto Rico’s continuing economic contraction and increasing outmigration 

illustrates an urgent need not to reduce personal incomes of Puerto Rico’s residents, which 

could induce further outmigration. Any labor reform must be evaluated in light of those 

circumstances. Further, the Commonwealth believes that any reduction in the minimum 

wage would be an incentive for people to migrate to the mainland

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 46 of 101
Establish 

EITC

 Establish an EITC that targets families with 

children, headed by working age persons, to 

stimulate employment among low-wage workers, 

reduce informal economy activities, bring families 

into the tax system and offset sales tax regressivity

9 Invest ~$150 million per year in EITC program

9 Former Commonwealth EITC program (2006-2014) 

did not differentiate among claimants by filing status, 

presence of dependents or age of the tax filers

Initiative Highlights

Welfare 

Reform

 Reform Nutritional Assistance Program (“NAP”) 

Benefits

9 Modify NAP income thresholds for the 

Commonwealth so that program participants 

experience a more gradual and income-targeted 

reduction in NAP benefits when entering the 

workforce to eliminate the current cliff effect on 

benefit reduction

45

The Commonwealth Must Implement Structural Reforms to Increase Labor 

Demand and Labor Participation (cont.)

 Apply to US Department of Housing and Urban 

Development (“HUD”)’s “Moving to Work” program 

to receive waivers of rules that govern public 

housing and federal Section 8 voucher program

9 Program’s goal is to give incentives to families with 

children, where the head of household is working, 

seeking work, or is preparing for work to obtain 

employment, become economically self-sufficient and 

increase housing choices for low income families

9 After receiving waiver, local Housing Department to 

develop rent structures that allow residents to 

increase their earnings through work without penalty

 Apply to HUD’s “Jobs Plus Pilot Program” 9 Program incentivizes employment through incomedisregards for working families, and provides a set of 

services designed to support work including employer 

linkages, job placement and counseling, educational 

advancement, and financial counseling

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 47 of 101
Following the full phase-out of Section 936 in 2006, private investment in Puerto Rico has declined 

dramatically. Today, private investment as a percent of GNP(1) is nearly half of the level in 2006, when the 

phase out of Section 936 began. Furthermore, Puerto Rico has not created an attractive platform to attract 

and replace foregone investments

46

The Plan Must Set Forth Reforms Designed to Reverse Recent Dramatic 

Declines in Private Sector Investment

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Private

Machinery and

Equipment

Private

Construction

Puerto Rico’s Nominal Gross Fixed Investment – Private Sector (Construction, Machinery & Equipment) 2006 to 2015(2)

(20%)

($ millions)

57

134

164

135

57

Construction 

Permits

Overall 

Ranking

Registering 

Property

Paying Getting Electricity

Taxes

Puerto Rico’s 2016 Ease of Doing Business Ranks (Overall Ranking Out of 189 Countries)(3)

(1) By Final Demand Category. 

(2) GDB Statistical Appendix.

(3) World Bank Group Doing Business rankings.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 48 of 101
Enact 

Permit 

Reform

 Pass legislation to centralize and streamline 

permitting process 

 Consolidate Environmental Quality Board, Solid 

Waste Authority and Natural and Environmental 

Resources Department in order to simplify and 

streamline the environmental review process

9 Pass legislation to centralize and streamline 

permitting process 

 Centralize permit application processes in the 

Office of Management of Permits (“OGPe”), 

providing a single access point and electronic 

permit interface for all agencies and municipalities

 Provide for a 7-day agency response period for 

“Categorical Exclusions” (e.g., minor lot 

designation variations for low impact 

environmental construction works); applications 

deemed granted if agency has not ruled on permit 

during said period

 Require municipalities to adopt simplified uniform 

general permitting regulations (“Reglamento 

Conjunto”)

 Adopt a joint general construction permit and 

expedited application procedure for “low impact” 

construction projects

Initiative Highlights

47

Reduce Energy and Transportation Costs, Institute Pro-Growth Tax Regime and 

Streamline Permitting to Foster Investment and Ease of Doing of Business 

Puerto Rico has been losing competitiveness as measured by global reports produced by the World 

Economic Forum and the World Bank, where it currently ranks worse than over 50 countries. To jumpstart 

its economy, Puerto Rico must be equipped with a business-friendly environment that is conducive to 

sustained economic growth

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 49 of 101
48

Reduce Energy and Transportation Costs, Institute Pro-Growth Tax Regime and 

Streamline Permitting to Foster Investment and Ease of Doing of Business (cont.)

Initiative Highlights

Implement Pro 

Growth 

Corporate Tax 

Regime(1)

 Enact legislation to amend Puerto Rico’s Internal 

Revenue Code to implement flatter, lower-rate 

corporate tax regime for both new and existing 

companies

9 Reduce nominal corporate tax rates

9 Eliminate inefficient corporate deductions and tax 

credits; eliminate or reduce alternative minimum tax

9 Enact legislation, after dialogue with existing 

multinationals, to retain and attract foreign direct 

investment

Enact Reform 

to Stabilize 

Energy Rates 

 Develop a holistic island-wide energy strategy to 

reduce and control energy rates to increase Puerto 

Rico’s competitiveness and decrease the cost of 

doing business

9 Restructure PREPA’s debt and operations to produce 

cash flow relief to invest in necessary infrastructure 

and stabilize rates

9 Seek P3 opportunities to upgrade existing generation 

capacity and build new, efficient generation plants, 

allowing PREPA to transition into a transmission and 

distribution company

9 Depoliticize PREPA by attracting professional, 

external management and directors

Reduce 

Transportation 

Costs

 Ask U.S. Congress to repeal Jones Act’s 

application to the Commonwealth in order to 

reduce maritime transport costs to the island

 Review current ground transportation regulatory 

framework and associated costs

9 Insist upon temporary administrative waiver from US 

Government in energy related transports

(1) Impact of this measure is not incorporated in the model, as reform is being designed. But it presents another risk on the revenue projections of the Commonwealth.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 50 of 101
49

Puerto Rico Should Utilize the Savings from its Efficiency Measures to Fund 

Investment and Build a Liquidity Cushion to Promote Stability and Spark Growth

The Fiscal Plan includes measures to repay estimated outstanding third-party payables so that tax refunds 

are no longer delayed and payables remain outstanding for a maximum of 60 days

$431 

$645 

$859 

$1,073 

$1,286 

$1,500 

-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2017 2018 2019 2020 2021 2022

Projected Deposit Balance at Beginning of FY2017-

2022(3) ($ millions)

Paying local businesses for past services and paying tax 

refunds in a timely manner will both stimulate the economy 

and provide certainty that the Government will be able to 

continue providing essential services

The Fiscal Plan calls for the Commonwealth to build 

deposits in order to provide confidence to businesses and 

residents that it will have sufficient reserves to maintain 

uninterrupted essential services and respond to crises, 

and not disrupt private sector activities

(1) Data analyzed for Puerto Rico includes Golf Coast States, excluding Texas. 2014 and 2015 data represent actual figures, 2016 are estimated and 2017 are recommended. 

(2) Includes police back pay. 

(3) Starting FY 2017 deposit balance represents estimated starting balance of the TSA and certain entities included in the Fiscal Plan. 

 The Commonwealth’s liquidity crisis has been exacerbated by the Commonwealth’s lack of “TRANs” financing 

to cover intra-year working capital needs. Such needs have increased materially during the last decade due in 

part to the assignment to COFINA of the first revenues from the SUT

 The National Association of State Budget Officers produces semi-annual fiscal surveys, which indicate that cash 

balances as a percentage of expenditures were approximately 9% from FY 2014 through FY 2017(1)

($293)

($272) ($272) ($272) ($272) ($272)

($350)

($300)

($250)

($200)

($150)

($100)

($50)

–

2017 2018 2019 2020 2021 2022

Tax Refunds Change in Stock of Payables

Projected Change in Tax Refund Payables and Other 

Payables FY2017-FY2022(1) ($ millions)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 51 of 101
$283 

$400 $407 $415 $422 $429 $437 $445 $453 $462 

$141 

$528 

$397 

$273 

$103 $104 $106 $108 $110 $112 

-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Incremental Non-Growth Capital

Expenditures

Base Capital Expenditures

50

Capital Expenditures Must Be Adequate to Maintain the Existing Infrastructure 

Base

The Fiscal Plan includes spending on capital projects required to catch-up on deferred maintenance on 

roads, bridges, buildings and other critical infrastructure

Projected Necessary Base Capital Expenditures and Incremental Non-Growth Capital Expenditures, 2017-2026

($ millions)

 PREPA and PRASA are not included in the Fiscal Plan and incremental capital expenditures at those entities is also 

necessary

 Additionally, the amounts shown below are only for maintaining the Commonwealth’s current infrastructure and 

complying with current regulatory regimes; the totals shown do not include new infrastructure projects aimed at 

improving growth, which are discussed elsewhere

 The “Base Capital Expenditures” shown below in FY 2017 are based on the OMB budget after deducting estimated 

federal funding. FY2018-2026 in the Base Projections are based on a review of recent historical data, while spending 

on existing infrastructure in the measures is based on a set of specifically identified projects needed for maintenance 

and judgement related capital expenditures. The grey amounts correspond to the incremental total spending 

required for the specific projects over the Base Capital Expenditures

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 52 of 101
Puerto Rico’s economic growth will be driven by investing in significant infrastructure projects that improve 

and facilitate transportation (roads and highways), modernize airport and port facilities and boost strategic 

economic development sectors (e.g. life sciences, knowledge services, research, tourism)

51

Plan Must Also Invest in Strategic, Growth Enhancing Infrastructure

Complete large-scale strategic projects to improve accesses and competitiveness 

including the Northwest Corridor (PR-22 highway from Hatillo to 

Aguadilla), the redevelopment of Roosevelts Roads, and the Caguas 

Commuter Rail

To effectively compete in the world stage, strategic investments are needed in 

industrial parks and key economic sectors including Aerospace and Defense, 

Life Sciences, Knowledge Services, Agriculture and other sectors

Establish the UPR as a prominent scientific research center to provide a boost to the 

local economy (Molecular Science Complex, Mayaguez Campus, Medical 

Science Campus, Other)

Position Puerto Rico as one of the premiere travel destinations of the world for local, 

domestic and foreign travelers by supporting the financing of 9 hotel construction 

projects currently on hold

Attract economic development, private investment, and tourism by expanding the Port 

of the Americas value added zone, improving the Aguadilla airport, and 

expanding the Panamericano docks to attract Quantum-like mega cruise ships

408

2,57 2

1,406

235

Total

Transportation

Industrial

Ports/Airports

Tourism

Research/

Education

234

289

($ millions)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 53 of 101
Puerto Rico would need to invest $2.6 billion in these projects in addition to any potential federal or private 

funds

1,406

7

355

17

1,027

Roosevelt Total

Roads Parcel 3 

Improvements

Caguas 

Commuter Rail

PR-18 

Improvements

PR-22 

Expansion

(NW Corridor)

Transportation

234

27 14 4 42 80 66

Isla Grande Total

Airport

Port of the Tourism Pier 4

Americas

Panamericano 

Dock

Aguadilla Army Terminal

Airport

Ports/ Airports

408

5 7 5 101 96 131

Knowledge Aerospace Agriculture Other Total

Services

Life Sciences

289

7 62 59 41

120

Molecular 

Science 

Complex

Mayaguez 

Campus

Medical Science 

Campus

Research 

Laboratories

Aerospace 

Institute -

Aguadilla

Total

235

4

124 107

East Region North Region South Region Total

Industrial

Education

Tourism

52

# Hotels 2 6 1 9

Plan Identifies Strategic Projects Aimed at Promoting Growth

($ millions)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 54 of 101
PREPA and PRASA’s capital improvement programs are essential elements of the 

Commonwealth’s long-term growth and competitiveness

Note that the development of the AOGP, as well as other major capex projects, is subject to certain material risks, including obtainment of necessary permits and final approval by the 

Puerto Rico Energy Commission. 53

Commonwealth’s Investment Program Should Be Complemented by Strategic 

Investments in the Island’s Utilities That Support Long-Term Competitiveness

 Independent public enterprises not included in the Fiscal Plan, such as PREPA and PRASA, will separately 

undertake significant capex programs (either directly or through P3s):

 PREPA plans to invest more than $4.6 billion over the next ten years to upgrade existing infrastructure and invest 

in strategic projects such as the Aguirre Offshore Gas Port (“AOGP”) 

 PREPA’s capex includes projects for:

 Maintenance capex (transmission & distribution, generation & others) – $2.7 billion

 Investment capex 

 New Units /Repowering – $1.1 billion,

 “AOGP” – ~$470 million

 Investments in transmission & distribution – ~$300 million

 PRASA also contemplates finance approximately $3 billion in capex during the next ten-years

 PRASA’s capex includes projects for:

 Water/waste water infrastructure renewal and replacement – $1.4 billion

 Environmental compliance – $540 million

 Meter replacements, fleet renewal and technology – $500 million

 Water loss control, quality assurance and others – $620 million

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 55 of 101
Public Private Partnerships Should Be Leveraged to Improve Operations, Boost 

Private Sector Participation and Fund Necessary Capital Spending

 Concession remaining toll roads, including PR-20, PR-52 and PR-66 in consultation with U.S. Department of 

Transportation 

 Improve, intra-Island connectivity, road and bridge quality and safety 

 Continuous investment in roads’ maintenance would be mandatory as set forth in a Concession Agreement

 Concessions would help transform HTA into a contract administrator 

 Merge Public Building Authority and Office for the Improvements of Public Schools (“OMEP”) 

 Transform PBA into a more efficient and effective public corporation and outsource services

 Consider transferring the construction function to PRIFA to avoid duplicity of functions and gain efficiencies

 Concession maritime transport and bus system operations

 Complete ongoing procurement process for the operation and maintenance of the public maritime 

transportation services and the metropolitan bus system

 Evaluate potential concessions for ports and airport operations or facilities, and work with the Federal Aviation 

Administration (“FAA”) to consolidate underutilized or geographically unnecessary airports

LMM International Airport and other P3 transactions demonstrate that public private partnerships are a 

viable model and an effective tool to develop necessary infrastructure, reduce operational costs and 

improve services. Potential P3 projects are included below. Due to uncertainty regarding timing, financial 

impact, and economic viability, the effect of these P3s is not incorporated herein, implying there could be 

additional upside to the Fiscal Plan

54

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 56 of 101
Core Principles of the Fiscal Plan

5. Protect Vulnerable Stakeholders

55

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 57 of 101
56

(1) Puerto Rico Department of Health. https://medicaid.pr.gov/Statistics.aspx. Represents total eligible members under Medicaid, CHIP, Estatal, and Estatal (Otros). Total eligible members as of July 1 of each 

year shown. 

(2) Puerto Rico population data for FY 2016 not yet available as of the date of this presentation.

(3) Hospitales, Publicacion Oficial de la Asociacion de Hospitales de Puerto Rico, “Dos Logros Historicos en el Trato de Medicare a Puerto Rico,” 2016. http://hospitalespr.org/revista_pdf/revista_feb16.pdf.

According to a survey by the Puerto Rico Hospitals Association, 76% of hospitals have struggled to find and hire 

specialists(3)

1,642 

1,686 1,688 

1,666 

1,585 

45% 47% 48% 48% N/A

0%

10%

20%

30%

40%

50%

1,500

1,550

1,600

1,650

1,700

1,750

2012 2013 2014 2015 2016

Total Eligible Members % of PR Population

(2)

Puerto Rico Population Insured under Public Health Programs(1) (millions)

“We had 14,000 physicians in 2006. Now we have 9,000 physicians ... The salary in the United States is three to 

four times more” - Victor Ramos, president of the College of Physicians and Surgeons and Pediatricians(3)

As a Result of Elevated Poverty Levels, Nearly Half the Population Is Dependent 

on the State Healthcare System

Approximately 1.6 million Puerto Ricans, or just under half of the island’s population, are 

beneficiaries of the government’s healthcare plan. Outmigration appears to have recently 

lowered the number of residents dependent on the plan, but has also drastically reduced the 

number of available physicians 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 58 of 101
57

(1) “La percepción de la calidad y la satisfacción con los servicios médicos hospitalarios en Puerto Rico,” June 24, 2015. Pontifical Catholic University of Puerto Rico. 

https://gcu.universia.net/net/files/2015/6/24/hoja-de-datos-estudio-salud-final.pdf. 

(2) “Zika infections increasing rapidly in Puerto Rico,” July 29, 2016. Centers for Disease Control and Prevention. http://www.cdc.gov/media/releases/2016/p0729-zika-infections-puerto-rico.html. 

(3) Hospitales, Publicacion Oficial de la Asociacion de Hospitales de Puerto Rico, “Dos Logros Historicos en el Trato de Medicare a Puerto Rico,” 2016. http://hospitalespr.org/revista_pdf/revista_feb16.pdf. 

The Healthcare System Suffers the Burden of Inequitable Treatment Under U.S. 

Health Care Laws and Is Struggling to Provide Adequate Care

Puerto Rico’s Medicaid and other healthcare reimbursement amounts are capped annually 

even though no such cap is applicable to the states. Today the healthcare system is 

struggling to provide adequate care to Puerto Rico’s residents and faces increasing 

challenges due to the Zika epidemic 

According to a study conducted by the Catholic University of Puerto Rico on a 

sample of 600 people, many residents have experienced problems with long 

wait times in primary care facilities and hospital emergency rooms as 

well as with the lack of physician availability(1)

“Puerto Rico is in the midst of a Zika epidemic. The virus is silently and rapidly 

spreading in Puerto Rico... this could lead to hundreds of infants being born with 

microcephaly or other birth defects in the coming year. We must do all we can to protect 

pregnant women from Zika and to prepare to care for infants born with microcephaly”(2)

-Lyle R. Petersen, M.D., 

M.P.H, Incident Manager for CDC’s Zika Response and Director,

Division of Vector-Borne Diseases

According to a survey by the Puerto Rico Hospitals Association, 57% of 

hospitals have shut down entire floors, 36% have fired employees and 

66% have been forced to structure payment plans with 

suppliers(3)

The Fiscal Plan that Puerto Rico will not cut spending to the already struggling healthcare system 

even if Affordable Care Act funds are not replaced when they are depleted in FY 2018. A lack of 

adequate healthcare not only will lead to a humanitarian crisis, but also provides an incentive for 

additional residents to leave the island, further harming the economy 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 59 of 101
61%

44%

6%

7%

5%

5%

3%

10%

4%

14%

22% 20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US PR

Puerto Rico’s Education System Struggles in Part Due to Low Per Pupil Expenditures 

and the Need to Direct Funds Towards Food and Support Services 

In addition to spending less per student than in the U.S., Puerto Rico spends a greater 

percentage on non-instructional assistance, such as food and other support, due in part to 

the poverty of the student population. While the U.S. spends $6,543 on instruction per 

student, Puerto Rico is able to spend only $3,522 or less than 54% of that amount per student

58

Total Current Expenditure per Pupil per type of Expense (%)(1)

Instruction

Student Support 

Services

Instructional Staff 

Support

Administration 

and Operations

Other Support 

Services

Food services

$10,763 $7,981

In a message to Speaker of the House 

Paul Ryan, R-Wisc., Puerto Rico 

Education Secretary Rafael Roman 

Melendez:

“The programs I oversee are in distress as 

there is simply insufficient cash to address 

the needs of 379,818 children that attend 

public schools in Puerto Rico”...“children 

are paying the consequences as a result of 

the congressional inaction, such as 

payments for classroom services, 

transportation, breakfast and lunch food 

supplies, “which are often the only meals 

some children consume during the day”(2)

(1) The National Center for Education Statistics’ Revenue and Expenditures for Public Elementary and Secondary Education FY 2013.

(2) Latin Post article “Puerto Rico Education Secretary: Debt Crisis Rapidly Affecting Children's Health, Safety, Education Experience” published March 23, 2016.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 60 of 101
251

240 231

183

150

170

190

210

230

250

270

290

310

330

350

Mass. U.S. D.C. P.R.

150

170

190

210

230

250

270

290

310

330

350

Mass. U.S. D.C. P.R.

Lower Levels of Per Student Spending Have Contributed to Poor Educational 

Outcomes 

Puerto Rico’s students have shown significantly lower math assessment outcomes relative to 

the United States

59

297

281

263

222

150

170

190

210

230

250

270

290

310

330

350

1 2 3 4

150

170

190

210

230

250

270

290

310

330

350

Mass. U.S. D.C. P.R.

2015 Fourth Grade Public School Student Math Assessment(1)

Advanced

Basic

Proficient

2015 Eighth Grade Public School Student Math Assessment(1)

(out of 500)

(out of 500)

Advanced

Basic

Proficient

(Highest State)

(Highest State)

The Fiscal Plan recognizes 

that the Department of 

Education could deliver 

services in a more efficient 

manner that would result in 

cost savings. However, those 

savings must come from 

narrowly tailored policies 

that do not further harm the 

already struggling 

educational system, in 

particular given the reliance 

of impoverished students on 

non-instructional support 

spending. An educated 

populace is critical to 

retaining residents, 

boosting labor productivity 

and attracting private 

investment

(1) The Nation’s Report Card’s National Assessment of Educational Progress in Mathematics, 2015.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 61 of 101
Despite recent improvements, key crime statistics, such as homicide rates, remain higher 

than in any state

60

(1) Federal Bureau of Investigation, Uniform Crime Report.

(2) 2015 National Drug Threat Assessment Summary, November 4, 2015, U.S. Department of Justice, Drug Enforcement Administration. https://www.dea.gov/docs/2015%20NDTA%20Report.pdf.

“High unemployment rates, coupled with a strategic geographic location (mid-point between the United States and South America) make 

the islands attractive to illicit drug traffickers and money launderers”

-U.S. Department of Justice, Drug Enforcement Administration(2)

“Due to enforcement successes by Dominican authorities and interdiction efforts by the U.S. Coast Guard, traffickers have been forced to send multiton quantities of cocaine from Venezuela and Colombia directly into Puerto Rico, bypassing the Dominican Republic. This resulted 

in...increased smuggling movements directly to Puerto Rico”

-U.S. Department of Justice, Drug Enforcement Administration(2)

– 

 5

 10

 15

 20

 25

 30

 35

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Annual Homicide Rate (per 100,000 people)(1)

Puerto Rico

17 

United States

5

In the face of crime rates higher than the 50 states and police officer pay already well below the 

average of the 50 states, the Fiscal Plan does not include public safety spending cuts. Rising crime 

makes businesses less likely to invest in the island and makes individuals more likely to leave

Puerto Rico Residents Are Confronting Higher Crime Levels Than Any State

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 62 of 101
$14,112

$42,591

$32,900

$26,455

$0

$25,000

$50,000

Average Payment per Beneficiary

61

(1) State Employee Retirement System of Illinois. Teachers Retirement System of Illinois. Retirement System of the City of Detroit. Michigan Annual Report. Annual Survey of Public Pensions.

(2) Actuarial estimates as of July 30, 2014. November 2015 Commonwealth Operating Report. 

(3) Illustratively includes the reduction in the estimated portion of AUC as result of the exclusion of debt service, which is estimated to amount to approximately $80 million over the 10-year projection period.

The ability of the government pension fund to honor benefits to elderly retirees (the levels 

of which are far below those in the states) is threatened by rapidly diminishing plan assets

Average Pension Benefit Payments Per Beneficiary(1) Actuarial Valuations of Puerto Rico’s Retirement Systems(2) ($ billions)

30 

13 

0.4 

-

5

10

15

20

25

30

35

Employees Retirement

System

Teachers Retirement

System

Judiciary Retirement

System

$43.6 billion net pension liability

The Elderly Face the Risk of Losing Their Already Meager Pension Payments

 The large unfunded liability of the pension system threatens pensioners, who receive significantly less than the average 

pensioner in the 50 states. In fact, 30,000 pensioners receive only the minimum monthly pension payment of $500

 The Fiscal Plan includes a measures whereby the assets of the ERS Defined Benefit (“DB”) and Defined Contribution 

(“DC”) plans are separated prospectively, which protects future proprietary member contributions from potential 

insolvency and the unfunded liability growing rapidly in the future 

 While such a measure removes a source of financing for DB plan benefits and thus requires additional contributions to 

the system by the Commonwealth in the early years, this expense is offset in part by stretching the AUC payment period 

over a 30-year period (until 2043, as opposed to 20 years, or 2033, under current law)

Puerto Rico Illinois Michigan USA

(166) (166) 

(116) (116) (116) (116) (116) (116) (116) (116) 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Impact of Pension System Reform Measures vs. Base Projections(3) ($ mm)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 63 of 101
Source: Office of Management and Budget, Summary of General Fund Expenditures by Spending Area (FY 2017 Approved Budget). Note that debt service in the FY 2017 budget has been reduced. 

62

Health, Public Safety, Education and Pension Costs Are Expected to Make Up 

Approximately 71% of 2017 General Fund Expenditures

The challenges facing the healthcare, education and pension systems, combined with the 

need to continue providing adequate funds for public safety, illustrate the difficulty in finding 

areas for potential cost reduction as these areas are expected to account for approximately 

71% of the Commonwealth’s budget

$ thousands % of T otal

General Government 3.1%

Social Welfare 3.8%

Economic Development 1.3%

Infrastructure 2.7 %

Health 15.7 %

Public Safety 18.4%

Legislative Assembly 2.3%

Labor Affairs 0.2%

Education 28.4%

Culture and Recreation 0.9%

Legal 0.2%

Prosecutor's Office 5.0%

Election Process 0.4%

Debt 0.0%

Entity Deposit Funding 2.9%

Retirement Sy stem 8.8%

Budget and Emergency Fund 2.4%

Legal Responsibility Fund 1.3%

Utilities 1.9%

Debt 0.0%

TRANs 0.3%

T otal 100.0%

General Fund 2017 Approved Budget

Retirement systems account 

for 8.8% of all expenses in the 

2017 approved General Fund 

Budget. 

Note that other line items may 

fund payroll that results in 

further contributions to the 

retirement system not 

accounted for in the 71%

 Note that FY 2017 approved General Fund budget data is displayed below

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 64 of 101
 Approximately 116 Coops function as retail outlets for financial services for about one million consumers 

that retain accounts on island. As of March 2016, total insured “shares” and deposits in the Coops 

amounted to approximately $8.2 billion 

 Due to the recent defaults on GDB and GO debt, among others, the Coops are expected to sustain 

substantial losses in their investment portfolios and will likely suffer additional losses if, as expected, the 

Commonwealth ultimately executes a broader restructuring of its debt

 The consequences of an undercapitalized Coop system and the Coop failures that could result include:

 Loss of deposits for roughly 1/3 of Puerto Ricans

 Limited resources available to Coops to continue to lend and drive economic growth

 Loss of jobs for employees of Coops that fail

 Potential collapse of the Coop system as depositors move funds to FDIC-insured institutions

(1) Estimated system-wide holdings based on the G25 Group’s holdings of Commonwealth securities.

63

Cooperative Credit Unions, with Significant Exposure to the Commonwealth’s 

Debt, Must Be Protected in Any Restructuring

Puerto Rico’s cooperative credit unions (the “Coops”) hold deposits for roughly 1/3 of all 

Puerto Ricans and have investment portfolios that are approximately 75% invested in 

Commonwealth securities (with more than 46%(1) of the combined Coop government 

investment portfolio invested in GDB notes)

The Fiscal Plan must also protect credit union depositors, which are generally low-income, as 

well as the cooperative banking system more generally, conditioned on recapitalization plans 

and effective governance reforms. The cost of this protection is estimated at approximately $1.2 

billion, which is not included in the Fiscal Plan, but must be accounted for in any debt 

restructuring 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 65 of 101
Core Principles of the Fiscal Plan

6. Create a Sustainable Debt Level That Allows for Growth

64

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 66 of 101
43 

46 

53 

58 

62 64 

70 70 72 71 

68 

1.4 

$30

$40

$50

$60

$70

$80

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 7/2/2016

Defaulted Debt

(principal and

interest)

Public Sector

Debt

Nominal GNP

The Commonwealth Must Achieve a Sustainable Debt Stock

Puerto Rico Public Sector Debt(1)(2)

($ billions, as of June 30)

69

As the Commonwealth economy has contracted, its debt burden has grown by ~$26 billion since FY 2006, with the

result that the aggregate debt stock now exceeds the entire GNP of Puerto Rico

0%

10%

20%

30%

40%

50%

12/31/11 6/30/12 12/31/12 6/30/13 12/31/13 6/30/14 12/31/14 6/30/15 12/31/15 6/30/16

Yield to Worst of Illustrative GO, GDB non-Guaranteed, HTA ’98 Senior and COFINA Senior and Subordinate Bonds(3)

PROMESA signed on 6/30/16

As of end of FY13: YTW

5.2% GDB non-guaranteed ’26 6.4%

5.5% HTA Senior ’98 due ’25 5.9%

6.0% COFINA Subordinate ’42 5.7%

5.0% GO ’33 5.8%

5.25% COFINA Senior ’57 5.3%

As of 6/30/16: YTW

5.2% GDB non-guaranteed ’26 23.7%

5.5% HTA Senior ’98 due ’25 30.2%

5.0% GO ’33 9.1%

6.0% COFINA Subordinate ’42 13.3%

5.25% COFINA Senior ’57 8.1%

Rising debt and declining real GNP contributed to ratings downgrades and increases in debt yields, meaning any

refinancing had to be done at higher rates. Ultimately the debt burden became so high and the economic trend

became so negative that the Commonwealth lost market access

(1) Balances shown do not include the accreted value of capital appreciation bonds. Balances are on a Puerto Rico fiscal year basis (July to June) and sourced from Puerto Rico’s Public Debt Monthly Report 

(Tiered Operational Management Information System). Values exclude GDB and MFA bond issuance and include loans from these entities to other Commonwealth entities. 2016 balance as of July 2, 2016 

and calculated in a manner consistent with prior reporting per data provided by the Commonwealth. Default balance assumes no interest on unpaid amounts.

(2) Does not include unfunded pension liabilities. Based on valuation reports as of June 30, 2014, the Employees Retirement System, Teachers Retirement System and Judiciary Retirement System (“JRS”) net 

pension liabilities were $30 billion, $13 billion and $442 million, respectively. See the May 7, 2015 Commonwealth of Puerto Rico Quarterly Report for more details.

(3) Data as provided by Bloomberg. 

HTA Sr.

GO

GDB

COFINA Sr.

COFINA Sub.

65

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 67 of 101
Amount Amount Amount

Due Paid Not Paid Dates of Missed Payments

GO $1,125 $346 $779 July 1, 2016

GDB(4) 1,064 664 360 May 1, 2016

PBA 276 251 25 July 1, 2016

PFC 94 1 93 August 1, 2015 to July 1, 2016

PRIFA Rum 113 – 113 January 1, 2016 and July 1, 2016

HTA(5) 322 318 4 July 1, 2016

Total $2,995 $1,580 $1,375

The Commonwealth Must Achieve a Sustainable Debt Stock (cont’d)

Without access to capital markets to fund its deficits and refinance its maturing debt, the Treasury Single Account (“TSA”)(1) balance 

fell to approximately $244 million at the end of FY 2016, as compared to approximately $780 million(2) of direct General Obligation 

debt service due on July 1, 2016. The Commonwealth thus defaulted on GO debt as well as debt of certain other issuers, 

an event creditors had been specifically warned may occur (from the 2014 GO offering statement: “If the Commonwealth’s 

financial condition does not improve, it may need to implement emergency measures that may include a restructuring, 

moratorium or other actions affecting creditors’ rights”)

The default occurred despite the Commonwealth’s austerity measures and certain extraordinary liquidity measures, such as delaying 

payments to suppliers and critical infrastructure spending, all of which produced a drag on economic growth. It is only through a 

return of economic growth that creditor recoveries can be maximized while the Commonwealth can also continue to 

provide essential services to its residents. As such, a restructuring of outstanding debt to sustainable levels that allows the 

Commonwealth time to implement the fiscal and structural policies outlined herein and to invest in its economy is an essential 

principle of the Fiscal Plan

Total Debt Service Payments Missed in FY 2016 (including July 1, 2016 payments)(3) ($millions)

66

(1) The Treasury Single Account is the Commonwealth’s operational bank account in which it deposits receipts from governmental funds except for blended component units (COFINA, PBA, PRIFA, etc.). Approximately $780 million represents 

$1,125 million of total principal and interest due as of July 1, 2016.

(2) Net of the escrowed amounts and capitalized interest amounts. 

(3) Amounts not paid represents amounts not paid by the Commonwealth and has not been reduced by amounts paid by insurers, if any. Excludes PRASA Rural Development bonds (reached forbearance agreement ahead of its payment on July 1, 

2016) and GO Notes (line of credit from GDB to Treasury whose debt service on July 1, 2016 was not paid). 

(4) GDB unpaid debt service is net of $40 million of agreed upon maturity extension, which reduces the amount of unpaid debt service.

(5) Unpaid amounts for the HTA bonds reflect missed payment s on the 1998 Resolution Bonds, Series 1998 Subordinate Bonds.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 68 of 101
Debt of Entities Included in the Fiscal Plan

Per the Oversight Board, “the Commonwealth’s Fiscal Plan shall include all agencies, 

departments, offices, administrations, programs and functions that are part of the central 

government” as well as specifically enumerated bond issuer entities, as outlined below

67

Summary of Debt Outstanding for Plan and Non-Plan Entities(2) ($ millions)

 Inclusive of missed interest payments and accrued interest on capital appreciation bonds (“CABs”, e.g., zero 

coupon bonds), these entities have approximately $50 billion of bonds and third-party loans outstanding (i.e., 

excluding GDB or other intergovernmental loans(1))

In addition to 

these debt issuers, 

all of the 

Commonwealth’s 

retirement 

systems are also 

incorporated into 

the plan

Note: All debt balances shown are preliminary, unaudited estimates based on bonded debt outstanding as of July 2, 2016 and loan balances of June 30, 2016. 

(1) Note that balances also exclude MFA loans (though there are no MFA loans to entities included in the Fiscal Plan). Also note that in the Fiscal Plan bonds held by GDB are eliminated in consolidation. 

(2) See the appendix for footnotes. 

T otal Bonds Memo: Loans Memo:

Bond CAB Missed Bond Private and Private from GDB/MFA/ Total Entity

Principal(2) Accretion(3) Interest(4) Loans(5) Loans & CW Entities (6) Indebtedness

Issuers Specifically Identified By the Board

1. GO $12,47 0 $49 $353 $24 $12,896 $169 $13,066

2. COFINA 15,213 2,082 – – 17 ,294 – 17,294

3. HTA(7 ) 4,253 63 1 – 4,317 1,734 6,051

4. PBA 3,995 10 – – 4,005 182 4,187

5. GDB(8) 3,811 – – 204 4,015 – 4,015

6. ERS 2,948 193 – – 3,141 – 3,141

7 . PRIFA(9) 1,926 160 7 2 – 2,158 49 2,207

8. PFC 1,091 – 57 – 1,147 – 1,147

9. UPR(1 0) 496 – – 0 496 76 573

10. PRCCDA 386 – – – 386 145 532

11. PRIDCO 154 5 – – 159 78 237

Other Debt Issuers Prim arily Supported by Central Governm ent Revenues

12. AMA – – – 28 28 – 28

13. Other Central Gov't Entities(1 1 ) 226 – – 16 242 3,521 3,763

T otal Entities in Plan $46,969 $2,561 $483 $272 $50,286

Debt Issuers Not Incl. in the Plan

1. PREPA(1 2) 8,259 – – 696 8,955 37 8,992

2. PRASA(1 3) 3,948 28 – 4 3,981 590 4,571

3. Children's Trust 1,151 288 – – 1,439 – 1,439

4. HFA 496 – – – 496 85 581

5. PRIICO – – – 86 86 – 86

6. Municipality Related Debt(1 4) 632 – – 1,200 1,832 2,711 4,542

T otal Entities Outside of Plan $14,485 $316 – $1,986 $16,7 87

T otal $61,454 $2,87 7 $483 $2,259 $67 ,07 3

Memo: Bridge to Public Sector Debt

Less: CAB Accretion (2,87 7 )

Less: Missed Bond Interest (483)

Less: GDB Bonds (15) (3,7 66)

Less: MFA Bonds (618)

Plus: Loans From GDB/MFA/Other CW Entities 9,37 9

Public Sector Debt $68,7 07

Debt Issuers 

Included in the 

Fiscal Plan

Debt Issuers 

Excluded 

From the 

Fiscal Plan

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 69 of 101
Debt of Entities Included in the Fiscal Plan All Rely, Directly or Indirectly, on the 

Commonwealth’s Taxing Authority

 Certain entities that have issued debt backed by allocated tax revenues have revenues that are either explicitly 

“available revenues” that may be diverted to pay Commonwealth general obligations (HTA, PRCCDA, AMA, 

PRIFA) or have been alleged in litigation by general obligation debt holders to be an “available revenue” 

(COFINA)

All of the entities included in the Fiscal Plan rely on the Commonwealth central government’s taxing 

authority, either directly from tax revenues allocated by law or indirectly from appropriations included in the 

Commonwealth’s General Fund (the Commonwealth’s primary operational fund)

68

(1) Source: Conway MacKenzie PBA 5-Year Projections dated July 20, 2015. Percentage shown (93%) represents FY 2016 lease payments made by agencies in the General Fund (i.e., excluding agencies outside the General Fund and municipalities).

(2) Percentages shown per ERS and includes the AUC contributions for component units that are included in the Fiscal Plan and does not include municipalities. (67% to 70%) represent special law, AUC, and employer contributions from the General Fund as a 

percentage of total contributions, excluding investment income. 

(3) Source: Conway MacKenzie UPR projection included in FEGP dated January 18, 2016. Percentage shown (74%) represents FY 2016 Commonwealth appropriations and dedicated tax revenues including collections from slot machines (excluding federal transfers and 

Pell Grant funding) as a percentage of total cash inflows (excluding debt proceeds which are non-recurring). Excluding slot revenues, UPR receives 70% of revenue from General Fund appropriations. 

(4) While PRIDCO receives appropriations for portions of the non-resident withholdings tax and rum excise taxes, such revenues are not specifically dedicated to the payment of debt service. However, PRIDCO’s rent revenues are attributable to its ability to provide tax 

subsidies to private sector companies. 

Central Government Collected Revenues

General Obligation Debt

COFINA

HTA

PRIFA 

PRCCDA

AMA

General Fund Directly Pays Debt Service Reliant on General Fund Appropriations

PBA  93%(1) of revenues from the lease payments budgeted in the GF (also fully guaranteed by the CW)

GDB  Appropriations made to pay loans owed by CW entities to GDB, which GDB uses to pay its own debt

ERS  The Commonwealth is typically responsible for approximately 79%(2) of the total AUC contributions to ERS (of 

which the central government contributes approximately 62%) and nearly all of the contributions to TRS and JRS

PFC  Directly reliant on appropriations to pay debt service; does not have any other revenues

UPR  Receives ~74%(3) of annual revenues from General Fund appropriations and allocated tax revenues

PRIDCO(4)  Receives withholding and rum taxes; rental revenue dependent on ability to grant tax subsidies

Other  Consists of certain discretely presented non-major component units, including entities such as ADEA that receive 

transfers from the central government

Payable from Allocated Tax Revenues

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Exhibit L Page 70 of 101
Holdings ($)(1) Holdings (%)

Entity

Large Mutual 

Fund Holder #1

Large Mutual 

Fund Holder #2

Large Mutual 

Fund Holder #3 Total

Fiscal Plan Entities

GO $51 6 $1 ,045 $231 $1 ,7 93

GDB – < 1 – 0

PBA 172 702 1 8 891

PFC 134 417 – 551

COFINA 1,371 2,060 882 4,313

PRIFA 9 411 6 427

UPR(2) – 196 – 196

PRCCDA – 1 – 1

PRIDCO – – – –

HTA – 392 27 418

ERS 2 – – 2

MFA – 59 – 59

Fiscal Plan Entities Total $2,205 $5,283 $1,164 $8,652

PREPA 803 969 178 1,949

PRASA – 420 216 636

CTF 61 1,068 – 1,129

HFA 6 < 1 – 6

AFICA - Guaynabo – 6 – 6

Entities Excl. From Fiscal Plan Total $870 $2,463 $394 $3,726

Total $3,075 $7,746 $1,557 $12,378

There is Significant Cross-Ownership of Commonwealth Debt

In addition to the reliance of many Commonwealth entities on a single tax base, it is also important to note 

that there are many holders that individually own bonds of multiple Commonwealth entities

69

Estimated Holdings by Credit of Certain Large Funds(1) ($ millions)

(1) Information shown based on data provided by Bondholder Communications Group (“BondCom”). Balances as of September 28, 2016 and include CAB accretion as of June 30, 2016. Bondcom is in the midst of updating the 

registry to October 2016, and it is also expanding the registry’s coverage beyond the 68% portion included currently. As a result, these amounts are subject to change. Note that some of these holdings may be insured. 

(2) Includes bonds issued by AFICA – Desarrollos Universitarios, a component unit of the University of Puerto Rico.

 Puerto Rico has hired Bondholder Communications Group (“BondCom”) to develop a registry of ultimate beneficial 

owners (“UBOs”) of the Commonwealth’s bonds; to date over 350,000 UBOs have been identified, representing 68% of 

the Commonwealth’s total bonded debt

 Shown below is a select set of large mutual funds that own significant amounts of bonds of numerous Commonwealth 

issuers, illustrating the large number of crossholdings

BondCom’s work is ongoing. In 

addition to the three large mutual 

funds shown here, over 7,300 other 

retail and institutional investors 

have been identified that own bonds 

issued by five or more Puerto Rican 

issuers. In aggregate, these crosscredit investors are estimated to 

hold over $12.7 billion of debt issued 

by various Puerto Rico issuers (in 

addition to the holdings of the 

mutual funds shown)

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Exhibit L Page 71 of 101
Insurance Providers Also Have Exposure to Multiple Issuers

 Monolines insuring Commonwealth debt include:

 AMBAC Assurance Corporation (“AMBAC”)

 Assured Guaranty (“Assured”)

 Financial Guaranty Insurance Company (“FGIC”) 

 MBIA Inc./National Public Finance Guarantee Corporation (“MBIA”)/(“National”)

 Syncora Holdings (“Syncora”)

 Note that the total insured amounts as shown below are as listed in the most recently available insurer financial 

statements. Reporting methodology may vary materially across insurer

In addition to the cross-holdings of individual holders, certain monoline insurers also have 

significant exposure to multiple entities

70

Note: Insurer exposure shown herein based on 2Q 2016 company filings and/or investor presentations. Excludes CIFGNA, which is pending a merger with Assured as of March 31, 2016. 

(1) Values represent net par outstanding. Includes CABs that reflect gross par amount at time the policy was issued. 

(2) Values represent gross par outstanding. 

(3) Values represent net par in force.

(4) Data derived from Ambac Financial Group document titled "Puerto Rico Exposure Second Quarter 2016." Amounts shown based on a net par basis (net of reinsurance), including CABs which are reported at the part amount at the time of issuance of the insurance policy.

(5) Data derived from Syncora Guarantee Second Quarter 2016 Highlights Investor Presentation dated September 21, 2016. Includes reinsurance and bonds purchased for remediation (which are reported at GAAP carrying value for the insured bonds). Excludes total 

interest outstanding of $104.7 million as of June 30, 2016.

Estimated Select Insurer Exposure Summary ($ millions)

Entity Assured(1) MBIA(2) FGIC(3) AMBAC(4) Syncora(5) 

Commonwealth (GO) $1,615 $7 95 $27 9 $56 $218

HTA 1,27 9 715 437 47 2 7

COFINA 27 0 684 – 805 –

PRIFA 18 – 349 503 –

PBA 188 190 8 191 –

PRCCDA 164 – 97 137 –

UPR 1 89 – – –

PRIDCO – 7 – – –

T otal Exposure to Fiscal Plan Entities $3,535 $2,480 $1,169 $2,163 $225

PREPA 7 44 1,354 – – 241

PRASA 388 – – – –

MFA 387 – – – –

All Other – 26 – – 29

T otal Exposure $5,054 $3,860 $1,169 $2,163 $494

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 72 of 101
Puerto Rico Residents are Estimated to Hold at Least $6 Billion of 

Commonwealth Bonds and Have Additional Coops Exposure 

While due diligence into the exact amount of local holdings remains ongoing, based on 

BondCom’s work to date it is believed that a sizeable portion of Commonwealth debt is held 

on-Island, with holdings across the Commonwealth credits, but particularly concentrated in 

the bonds that are not triple-tax exempt issued by COFINA, ERS, GDB, and PFC

71

Current Estimate of Local Holdings as Identified by Bondcom(1)

(1) Information shown above based on data provided by Bondholder Communications Group (“BondCom”). Balances as of September 28, 2016 and include CAB accretion as of June 30, 2016. BondCom is currently working to update the 

bondwoner registrey to October 2016. 

(2) Excludes PRIFA BANs. 

(3) Include bonds issued by AFICA – Desarrollos Universitarios, a component unit of the University of Puerto Rico.

Local Local T otal Local 

Issuer Coop Holdings Non-Coop Holdings Holdings

GO 92 307 399

COFINA 181 2,642 2,823

HTA 3 54 57

PBA 39 242 281

GDB 369 986 1,356

ERS 4 1,224 1,228

PRIFA(2) 4 16 19

PFC 63 204 267

UPR(3) – 2 2

CCDA < 1 11 11

PRIDCO 15 7 2 86

PREPA 55 305 360

PRASA 52 216 268

CTF – < 1 < 1 

MFA – 3 3

HFA < 1 91 91

T otal $876 $6,37 6 $7 ,252

In addition to the Coops, it is 

currently estimated that at 

least $6 billion of 

Commonwealth debt is held 

locally, illustrating the need to 

promote economic growth so 

as to maximize recovery for 

these creditors. A 

restructuring that provides 

minimal recovery to local 

bondholders is effectively an 

austerity measure

Market information indicates that the Coop systems have exposure 

of approximately $1.1 billion of Puerto Rico debt; the numbers above 

represent only those CUSIPs identified by BondCom to date

($ millions)

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Exhibit L Page 73 of 101
While including a specific debt restructuring proposal as part of the Fiscal Plan would be 

premature at this time, there are a number of key principles that are necessary as part of any 

debt restructuring proposal that aims for a sustainable level of debt service

In Light of the Characteristics of the Commonwealth’s Outstanding Debt, Certain 

Key Principles Must Guide Any Restructuring Offer

72

Principles Considerations

Holistic 

Solution 

 A holistic solution is required to produce a sustainable debt level given the general reliance on the 

Commonwealth’s taxing authority for debt service and the fact that single bondholders and insurers have exposure 

to multiple credits 

 Actions by creditors to date have already proven the need for a holistic solution

 GO bondholders have instituted litigation alleging that the COFINA revenues are “available revenues” to pay 

the GO and Commonwealth guaranteed indebtedness (e.g., PBA)

 Insurers have instituted litigation challenging the “clawback” of certain revenues, which in turn could 

influence the available revenues to pay the GO holders and Commonwealth guaranteed holders

 Large mutual funds have challenged the efficacy and rationale of a public restructuring proposal made by 

holders of COFINA senior bonds 

 A holistic solution is essential in order to permanently solve these intercreditor disputes so that the 

Commonwealth is not bogged down in years of litigation that delay its ability to regain market access

 To the extent possible, a debt restructuring should simplify the Commonwealth capital structure and rely on a 

restructuring currency that is both free from embedded intercreditor conflicts and available to all creditors 

 PROMESA envisions an iterative process with the Oversight Board, specifically requiring that the final Fiscal 

Plan include the recommendations of the Board and providing explicitly for a process for the Commonwealth to 

submit multiple versions of the Fiscal Plan 

 Without having received the recommendations of the Oversight Board, it would be premature to propose a 

specific debt restructuring proposal at this time

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Exhibit L Page 74 of 101
73

Principles Considerations

Time and Capacity to 

Invest in the Economy 

and Implement Plan

 The Commonwealth must be given a breathing space to invest in its economy and implement the reforms 

outlined previously so as to spur economic growth

 The early years of the Fiscal Plan are especially critical so as to stem the tide of outmigration from the island 

and make the island attractive for private investment

 Consequently, the debt service levels set should have lower or minimal cash debt service during the early years 

of the Fiscal Plan (“payment-in-kind” or other such non-cash interest elements could be considered to protect 

creditors)

Reasonable Maximum 

Annual Mandatory Debt 

Service

 The final debt service level cannot exceed the projected surplus before debt service in the final Fiscal Plan

 Reasonable growth projections must be used for purposes of setting the offer size, though contingent payment 

amounts tied to growth levels in excess of expectations could also be used to make creditors partners in trying 

to promote economic growth 

 Debt service levels should be based on objective criteria consistent with those used by credit rating agencies so 

as to facilitate, over time, a return to an investment grade credit rating

Creditors Become 

Partners in Growth

 In return for being given breathing space to implement the Plan, creditors should share in the potential upside 

if the benefits of the plan are realized or exceeded 

 A contingent value right or growth bond that pays creditors in the event growth targets set in the plan are 

exceeded should therefore be considered as part of any debt restructuring

Consideration Given to 

the Impact on Local 

Holders

 Given significant local holdings of Commonwealth debt, consideration must be given to the impact any 

restructuring proposal will have on the economy

 In particular, the coops must be given sufficient recovery, either through new debt or otherwise, to ensure that 

they are adequately capitalized

Restrictions on New 

Indebtedness

 The final restructuring offer must also include restrictions on how new indebtedness may be issued

 Such restrictions must take into account all Commonwealth debt supported by tax revenues so that the debt 

service burden on the Commonwealth economy as a whole is never again allowed to grow to extreme levels and 

the Commonwealth can only issue debt commensurate with its ability to pay

In Light of the Characteristics of the Commonwealth’s Outstanding Debt, Certain 

Key Principles Must Guide Any Restructuring Offer (cont’d)

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Exhibit L Page 75 of 101
Core Principles of the Fiscal Plan

7. Partner with the Federal Government to Generate Growth

74

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Exhibit L Page 76 of 101
161 156 151 146 144 139

123 118 119 118 112 108 103 97 89 86 85 78 76 75 73

0

20

40

60

80

100

120

140

160

180

Puerto Rico’s Economic Decline was Precipitated in Part by U.S. Policy 

Decisions in the Mid-90s

The phase out of Section 936 of the U.S. tax code combined with expanded U.S. free trade 

agreements may have contributed to the disappearance of over half of Puerto Rico 

manufacturing jobs

75

Decline in Puerto Rico Manufacturing Payrolls(1)

The impact of the Section 936 

phase-out demonstrates how U.S. 

tax policy decisions can have a 

significant impact on the 

Commonwealth

 As a result of Section 936’s tax benefits, the manufacturing sector in Puerto Rico had grown significantly, in 

particular for firms, such as pharmaceutical companies, that could transfer patents to Puerto Rico and then 

source income generated by those patents to Puerto Rico in order to receive tax credits under Section 936

 Manufacturing sector growth took place in spite of Puerto Rico’s comparatively higher labor costs relative to 

other, non-U.S. mainland manufacturing centers due to the applicability of U.S. minimum wage laws

 In 1996, the U.S. enacted legislation to phase out Section 936 over a ten-year period, removing a key competitive 

advantage Puerto Rico had in attracting business and foreign investment to the island

 Manufacturing jobs immediately began to decline following the Section 936 phase out

 Additionally, NAFTA which expanded the right to provide duty free imports to the U.S. (a right that had already 

been enjoyed by Puerto Rico), had been signed two years prior, potentially contributing to the loss

(seasonally adjusted, all employees, in thousands)

(1) Bureau of Labor Statistics State and Area Employment, Hours, and Earnings - January totals.

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Exhibit L Page 77 of 101
76

Today, Puerto Rico Faces a Fiscal Cliff That Federal Government Action 

Could Help Resolve and Ensure a Virtuous Cycle

 ACA funds provided to Puerto Rico are currently projected to be exhausted by FY 2018. After the 

expiration of those funds, the Commonwealth would still receive healthcare funding from the U.S. 

Federal Government, but at a much lower rate than the 50 states. 

 In addition, the Commonwealth’s Medicare Advantage match is lower than 41 states and the 

Commonwealth is subject to a federal spending cap on Medicaid dollars of approximately $300 

million (excluding $150 million for the Children’s Health Insurance Program (“CHIP”)) - there is 

no cap for U.S. states

A replacement for ACA funding (potentially through providing Puerto Rico with 

Medicare/Medicaid funding equivalent to that of the 50 states) is a critical element of 

stabilizing Puerto Rico’s fiscal position

Impact of ACA Funding Loss(1) ($ millions)

– 

(865) 

(1,517) (1,583) (1,681) (1,835) (1,954) (2,070) (2,253) (2,384) 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

(1) ASES projections for FY 2017 through FY 2026. 

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Exhibit L Page 78 of 101
77

Additional Federal Government Action Would Help Spur Growth 

A replacement for ACA funding merely maintains the current level of support the U.S. 

Government provides Puerto Rico. Additional actions by the U.S. government, such as those 

outlined below, could spur new growth on the island

Action Type Request

Equitable 

Treatment 

Under U.S. 

Healthcare Law

 Include PR in the Medicaid/Medicare disproportionate share hospital (“DSH”) program and ensure PR is

treated fairly under the Medicare DSH program

Medicaid

 Remove statutory limits on Medicaid funding. In FY 2018, Medicaid funding granted under the Affordable

Care Act will be depleted Avert incoming fiscal cliff in ACA

− Medicaid funding level is capped at less than $350 million and the Federal Medical Assistance Percentage

(“FMAP”) rate set at 55%, which equals an effective rate of 15% to 20%, whereas according to Puerto

Rico’s income levels the FMAP should be set at 83%

Medicare

 Automatically enroll in Medicare Part B individuals enrolled in Medicare Part A, and develop a mechanism to

reduce or eliminate penalties to seniors that enrolled late in Part B

 Provide Puerto Rico doctors fair treatment under the Practice Expense, Physician Work, and Malpractice

Geographic Practice Cost Index (“GPCI”) payment formula

 Ensure adequate PMPM payments to Medicare Advantage plans in Puerto Rico

 Exempt Puerto Rico health insurers from the Health Insurance Providers Fee

 Authorize Puerto Rico to participate in Medicare Part D Low-Income Subsidy (“LIS”) program

Stimulate

Employment 

and Labor 

Participation

 Pro employment requests with respect to NAP and public housing programs

 Extend the EITC, the Child Tax Credit and Supplemental Security Income to Puerto Rico residents to increase

labor participation in the formal economy and help stimulate economic growth

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Exhibit L Page 79 of 101
78

Additional Federal Government Action Would Help Spur Growth (cont’d)

Action Type Request

Implement ProGrowth 

Corporate Tax 

Regime

 Provide Puerto Rico with a tax treatment that encourages investment and job creation, such as modifications

to Section 245a of the U.S. Internal Revenue Code and extension of Section 1031

 The 245a proposal would incentivize companies that invest in Puerto Rico to repatriate income back to

the mainland U.S. by reducing the cost of repatriation

 Importantly, the proposal would also reduce taxes paid over other foreign tax jurisdictions if Congress

enacts broader international tax reform. This provides a critical incentive to keep jobs in Puerto Rico

instead of companies moving overseas

 To reduce the fiscal impact on the U.S. Treasury and ensure the proposal does not allow companies to

manipulate it to reduce taxes on income earned outside of Puerto Rico, the proposal will establish

limits on the use of foreign tax credits

 Maintain Act 154 excise tax creditability during a transition period in order not to impact the multinationals

on the island nor the Commonwealth's revenue base

Assistance in P3 

Efforts and 

Infrastructure 

Spending

 Executive approval or Congressional authorization to sell accumulated Federal Highway toll credits

 DOE financing for the Aguirre Offshore Gas Port and finalize remaining federal permits related to the project

 Maximize use of financing opportunities available through the USDA Rural Utilities Service

 Provide funding to the U.S. Department of Energy to complete the electric rates study authorized by the 

Consolidated and Further Appropriations Act of 2015

Reduce 

Operating Costs

and Improve 

Fiscal DecisionMaking

 Exemption from Jones Act application to reduce transportation costs and increase competitiveness

 Provide appropriate funding to include Puerto Rico in the 2017 U.S. Census of Governments, the National 

Agricultural Statistical Service surveys, and the Current Population Survey; have OMB and other appropriate 

federal agencies conduct a comprehensive federal review of Puerto Rico’s exclusion from other critical 

national datasets, such as the Job Opening Labor Turnover Survey, the American Time Use Survey, and the 

National Health Interview Survey

 Coordinate technical assistance and education efforts by BEA, Census Bureau, BLS, EDA, MBDA, SBA, and 

other federal agencies on processes to improve Puerto Rico’s statistical forecasting capacity and federal grant 

opportunities

 Encourage World Economic Forum to include Puerto Rico in its Global Competitiveness Report

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 80 of 101
Fiscal Plan Projections

79

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Exhibit L Page 81 of 101
80

Given that the entities included in the Fiscal Plan generally mirror those that were included in the FEGP 

developed by the Working Group for the Fiscal and Economic Recovery of Puerto Rico (the “Working 

Group”), the Fiscal Plan adopts a similar approach to the FEGP

 Projections for revenues and expenses are developed on a consolidated basis given the need for a 

holistic solution 

 This implies that certain intragovernmental transactions are effectively eliminated from the projections, as they have 

no impact on the Commonwealth’s ultimate fiscal position; for example, a loan payment from HTA to the GDB would 

simply move assets from one entity included in the Plan to another entity included in the Plan without changing the 

Commonwealth’s overall financing needs, and is therefore excluded

 The fiscal projections are presented in two parts: first, the “Base Projections,” followed by projections 

that reflect the impact of measures consistent with the principles previously outlined

 The Base Projections illustrate the financing needs of the Commonwealth in the status quo and assume that current 

laws remain unchanged 

 Illustratively, the Base Projections include all contractual debt service owed during the period of the projections, 

which demonstrates the shortfall the Commonwealth would have to fill with measures and/or new financing if it 

were to pay its existing debt in full

 The Base Projections are then adjusted to account for the impact of the measures associated with the principles 

outlined previously insofar as such measures are in the Commonwealth’s control to implement

 The Measures include the projected benefits of improved growth in the Commonwealth economy

 Illustratively all debt service is removed in this scenario to show what could be paid to creditors; a specific 

allocation of any surplus between credits has not been made at this time, pending further discussions with the 

Oversight Board

 U.S. Federal Government action, while a critical component of returning the island to growth, is not 

assumed under either the “Base Projections” or in the measures

 For reference, however, the potential benefits of certain U.S. federal government actions, in particular continued 

programmatic support for the Commonwealth’s healthcare system at current levels are shown for illustrative 

purposes in the following section 

Overview of the Fiscal Plan Projection Approach(1) 

(1) The economic forecasts presented rely on the existing fiscal reporting systems in the Commonwealth of Puerto Rico and reflect existing economic uncertainty as well as any limitations stemming from 

reporting systems, the data extract transform and load processes, as well as the inherent uncertainty of developing forward projections in this context. Although DevTech Systems takes all possible care to 

ensure the accuracy of the information reported, no warranty can be accepted regarding the correctness, precision, timeliness, reliability and completeness of the content of this information. DevTech has 

obtained the information provided from sources that should be considered reliable, but cannot guarantee its accuracy or completeness. The information provided is purely of an indicative nature and is subject 

to change without notice at any time. DevTech does not accept any liability arising from any information provided or for the consequences of any actions taken in reliance on of this projection.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 82 of 101
81

The following provides an overview of the key macroeconomic assumptions used in the 

development of the Commonwealth’s Base Projections

Key Macroeconomic Assumptions Used in the Base Projection

 The growth and inflation assumptions used in the Base Projections were developed by Dr. Rafael Romeu, a former IMF 

economist hired by AAFAF who is the President and CEO of DevTech Systems, Inc. (“DevTech”), an international 

economic consulting firm founded in 1984 that has provided advisory services in over 100 countries

 Understanding the “Base” Projections:

 The Base Projection is intended to reflect a starting point for calculating the tradeoffs of potential future policies. With 

limitations on certain financial data and a lack of knowledge of the outcome of critical future decisions of not only Puerto 

Rico, but also the Oversight Board and the U.S. Government, the Base Projections are the best available starting point for 

analysis of future policy changes 

 The Base Projection serves only as a tool for costing measures and informing policy tradeoffs for the Commonwealth. The 

Base Projection is not a viable economic scenario because it does not incorporate any package of measures, policies 

and/or financing that would resolve the inconsistency of persistent deficits combined with a lack of market access

 Methodology:

 Against this backdrop, DevTech developed a set of growth and inflation projections for the Base Projection using factors 

exogenous to Puerto Rico’s fiscal position, as summarized below

 Growth(1) – The forecast of real growth is a function of the following variables:

 U.S. real GDP variables published in the International Monetary Fund (IMF)’s Spring 2016 World Economic 

Outlook (WEO)

 Working age population forecasts for Puerto Rico(2)

 Food and fuel price indices per the IMF

 Inflation – modeling inflation follows a simple Phillips curve specification, where inflation is a function of:

 Food and fuel price indices, reflecting pass-through from international prices

 The output gap (in lieu of unemployment) and past inflation

(1) The departure point for understanding DevTech’s approach to projecting real growth was identifying macroeconomic drivers of growth that are not necessarily endogenous to economic policies.

(2) Population is a critical determinant for the growth of any economy, and given PR status as a U.S. territory, the ability to migrate into or away from the island makes this variable an even greater anchor on growth. The 

population of the island has declined every year in the last decade. The United Nations publishes population projections for Puerto Rico through the year 2100.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 83 of 101
82

The following provides an overview of the real GDP growth and inflation assumptions that 

result from the methodology outline previously

Key Macroeconomic Assumptions Used in the Base Projection (cont’d)

 The revised Base Projection reflects the trend deterioration in economic activity since the early 2000’s

 The Commonwealth has contracted 9 of the past 10 years from 2006-2015

 The population of the Commonwealth has declined every year during that period

 Puerto Rico’s position in the broader U.S. economy (given it is not a state) complicates the interpretation of a 

consistently declining real GDP

 The decline in Commonwealth income is not reflected directly in per capita measures as population declines

 Conversely, the Commonwealth could grow very quickly by reversing the migration flows and increasing labor 

participation rates (currently below 40%)

 The Base Nominal growth rate is used to grow most revenue items included in the Commonwealth Fiscal Plan beyond FY 

2017, with certain exceptions where revenues are either capped by statute or where the Commonwealth believes that the 

revenues are unlikely to correlate with Puerto Rico GDP growth

 The base inflation rate is used to drive many of the expenses included in the Fiscal Plan past FY 2017

 The following pages summarize the revenues and expenses in the Base Projections based on the 

approach, measures and macroeconomic assumptions detailed previously

Fiscal Plan Base Growth and Inflation Projections(1)

(1) Note that FY 2017 is not shown as it is based largely on budgetary numbers. 

Gross domestic 

product

Consumer prices 

(period average)

2006-15 (0.9%) 2.3%

(annual 

percent 

change)

2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P

Rea l GDP (1 .54%) (1 .7 9%) (1 .7 8%) (1 .7 9%) (1 .7 8%) (1 .7 7 %) (1 .7 5%) (1 .7 1 %) (1 .67 %)

In fla tion 1.89% 1.84% 1.7 9% 1.7 7 % 1.7 7 % 1.7 8% 1.80% 1.83% 1.89%

Nom inal GDP 0.35% 0.05% 0.01% (0.02%) (0.01%) 0.01% 0.05% 0.12% 0.22%

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 84 of 101
$6.5

The Base Projection Building Blocks - FY ‘17 to FY ‘26

General Fund (“GF”) 

Revenues

Additional Sales and 

Use Tax (“SUT”)

Other Tax Revenues

$81.1

$9.9

$14.0

Includes additional SUT collections 

historically allocated to entities outside 

the GF (the GF revenues include a portion 

of SUT); projected based on actual FY 

2017 GF revenue projections grown at the 

Base Nominal Rate

Other Tax Revenues recorded outside of 

the GF, including those assigned to 

component units. The largest single 

amounts in this group are Petroleum 

Products and Gas taxes ($ 6.5 bn), 

Cigarette Taxes ($ 0.7 bn, and Casino Slot 

Revenues ($1.5 bn)

BASE PROJECTION INFLOW BUILD ($ billions)

GF Expenses 

(Ex. Debt, AUC/AAC)

AAC/AUC (“Incr. 

Retirement System 

Funding”)

Estimated Run-Rate 

Capex

Special Revenue

Funds, Enterprise 

Funds and 

Component Units

Includes expenses to fund the primary 

functions of the central government, such as 

healthcare, public safety and education; 

projection based on FY 2017 budget 

generally grown by inflation; excludes debt 

service and shown after a reduction of debt 

service for entities largely funded by 

appropriations, such as PBA and UPR

$88.4

$11.0

$4.2

Represents estimates, developed in 

conjunction with actuarial work done by 

Milliman, of the legally required AUC and 

AAC, as well as “catch-up” payments from 

previous years, required to adequately fund 

ERS, TRS and JRS retirement systems

FY 2017 based on OMB Budget and FY 

2018-2026 based on a review of recent 

historical data

$12.1

Includes the net result of blended and nonblended component units other than entities 

such as PREPA and PRASA, which are 

excluded from the plan; also includes 

projections of Special Revenue(2) and 

Enterprise Funds

BASE PROJECTION OUTFLOW BUILD ($ billions)

$111.5 $118.8 Base “Adjusted” 

Revenues 

Base “Adjusted” 

Expenses

Other Non-Tax 

Revenues (Excl. 

Fed. Grants and 

GDB revenues)(1)

Largest single amounts of non-tax 

revenues relate to charges for services, 

such as tuition and fees at UPR ($1.8 bn), 

net lottery revenues ($0.5 bn), HTA 

revenues such as road and train tolls 

($2.6 bn)(1)

Cigarette, Rum, SUT 

and Lotto 

Disbursements to 

Entities Outside Plan

$3.1

Includes tax and other revenues (such as 

cigarette excise tax, rum excise tax and 

lottery related outflows) to entities outside 

of the model (such as to the rum producers 

and municipalities)(3)

GF includes majority of taxes, such as 

income, withholding and the GF portion 

of the sales and use tax; projection based 

on FY 2017 budget, generally grown at 

Base Nominal Rate; note that the effect of 

the expiration of the 154 excise tax is 

included herein (reduces revenues by 

$8.2 bn)

Note: Revenues shown already reflect the economic contraction referenced on page 5. Base Adjusted Expenses include retirement system “catch-up” payments. 

(1) Note that Federal Grants and GDB revenues are included in the Fiscal Plan, but they are excluded from “Base Adjusted Revenues.” Base Adjusted Revenues are developed as a metric that is meant to be comparable to state revenue collections 

apart from Federal Funding as a proxy for the discretionary revenues a state has available. Federal Grant revenues are provided for specific purposes and generally could not be repurposed for something such as debt service (unless specifically 

provided for debt service) which is only a very small portion of Federal Grants). GDB loan revenues have been excluded as they are not expected to be recurring since GDB is currently not extending new lines of credit. 

(2) Special Revenue Funds shown on a net operating deficit basis, excluding tax revenues which are shown separately under revenues. The revenues and expenses embedded in the cumulative ten-year $1.6bn net deficit related to Special Revenue 

Funds include $4.7bn and $6.3bn, respectively. The Special Revenue Funds consist mostly of charges for services for public corporations and Commonwealth agencies

(3) Includes, among others, estimated outflows of $1.3bn and $500mm to private rum producers and municipalities for rum and lottery related outflows, respectively. Other outflows include outflows related to cigarette excise taxes and other rum 

excise tax outflows to other entities.

83

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 85 of 101
Base Projection Building Blocks - FY ‘17 to FY ’26 (cont’d)

BASE PROJECTION INFLOW BUILD ($ billions) BASE PROJECTION OUTFLOW BUILD ($ billions*)

$111.5 $118.8 Adjusted 

Revenues

Adjusted 

Expenses

GDB Inflows(1)

Federal Transfers 

Before Loss of ACA 

Funding 

$2.0

$75.1

Represents transfers from the Federal 

Government that are applied to specific 

required expenditures and therefore are 

set equal to the transfers out, resulting in 

a net zero impact on the financing gap Federal Transfers 

Before Loss of ACA 

Funding

$ 75.1

Represents transfers from the Federal 

Government that are applied to specific 

required expenditures and therefore are set 

equal to the transfers out, resulting in a net 

zero impact on the financing gap

GDB Outflows $1.9

Loss of ACA Funding

Represents the estimated impact from 

the depletion of ACA funding, estimated 

to occur in FY 2018; the total size of the 

impact grows over time based on the 

assumed increase in healthcare expenses

$16.1

Total Inflows $172.5 $196.2 Outflows Excl. 

Debt Service

Oversight Board 

Costs

$370

mm

Represents GDB net loan and deposit 

inflows from entities excluded from the 

Fiscal Plan; excludes intra-governmental 

transfers from entities included in the 

Fiscal Plan 

Represents GDB net loan and deposit 

outflows to entities excluded from the 

Fiscal Plan; excludes intra-governmental 

transfers to entities included in the Fiscal 

Plan 

Based on Congressional Budget Office June 

3, 2016 Cost Estimate of H.R. 5278 

(PROMESA), as ordered by the House 

Committee on Natural Resources

Note that the impact of the ACA funding loss is illustratively shown as a 

reduction of revenues. Federal Transfer associated expenses are not shown as 

reduced, though in reality the Federal Transfer expenses would be reduced 

and in its place the Commonwealth would have to expend more of its own 

resources in order to continue operating its current healthcare system

84

*Except where otherwise noted.

(1) Note GDB inflows include certain inflows related to TDF, though TDF payments on account of guarantees are included in debt service.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 86 of 101
Total Inflows $172.5 Outflows Excl. 

Debt Service $196.2

Debt Service

Includes bonded debt service of entities 

included in the Fiscal Plan, including GO 

(including GSA loans), GDB, PBA, PFC, PRIFA 

(Bonds and BANs), UPR, PRCCDA, PRIDCO, 

HTA, ERS, and COFINA; Note that missed debt 

service payments from FY 2016 and 2017 are 

assumed to be paid in FY 2017(1)

$35.0

Base Projection Building Blocks - FY ‘17 to FY ‘26

A Base Financing Surplus/(Gap) ex. Debt Service ($23.7)

Total Base Financing Surplus/(Gap) ($58.7)

BASE PROJECTION INFLOW BUILD ($ billions) BASE PROJECTION OUTFLOW BUILD ($ billions)

Total Inflows Less Total Outflows Excl. Debt Service Results In....

85

(1) Note that for illustrative purposes, debt service excludes debt held by GDB and certain guaranteed debt including guaranteed debt of PRASA. Debt service is shown net of existing reserves. 

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 87 of 101
86

The following presents the Base Projections outlined on the previous pages, on an annual 

basis 

 As shown below, the financing needs of the Commonwealth under the Base Projections are highest in the early 

years of the projections as the Commonwealth attempts to reinvest in its economy and pay back suppliers, many 

of whom are local businesses

Summary of Annual Base Projections

(1) Assumes that the Commonwealth directly offsets the loss of ACA funding with local spend.

(2) Includes AUC catch-up payments.

(3) Includes principal and interest payments that may have been missed in FY 2016 and FY 2017. Debt service shown net of existing reserved used to pay debt service. Note that for illustrative purposes, debt service excludes debt held by GDB 

and certain guaranteed debt including guaranteed debt of PRASA. Debt service is shown net of existing reserves.

Annual Summary of Financing Gap in the Base Projections from FY 2017 to FY 2026 ($ millions)

Total

2017P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

Adjusted Revenues

GF Revs. after Act 154 / Foreign Company Tax Losses $9,045 $8,564 $8,056 $8,024 $7,989 $7,954 $7,918 $7,884 $7,853 $7,825 $41,678 $81,111

Additional Sales and Use Tax ("SUT") 844 873 904 935 967 1,001 1,036 1,073 1,111 1,151 4,523 9,897

Other Tax Revenues 1,342 1,404 1,407 1,413 1,416 1,412 1,407 1,403 1,400 1,398 6,982 14,002

Other Non-Tax Revenues 598 612 623 633 661 663 665 667 670 680 3,128 6,474

Total Adjusted Revenues $11,829 $11,454 $10,990 $11,005 $11,033 $11,029 $11,027 $11,028 $11,034 $11,055 $56,312 $111,484

Federal Transfers 7,000 7,114 7,226 7,337 7,448 7,561 7,676 7,794 7,917 8,046 36,124 75,118

GDB Net Inflows 236 233 233 211 186 183 181 181 178 176 1,098 1,998

Total Revenues pre-ACA Funding Loss $19,065 $18,801 $18,448 $18,553 $18,667 $18,773 $18,884 $19,003 $19,128 $19,276 $93,534 $188,599

Loss of ACA Funding(1) – (865) (1,517) (1,583) (1,681) (1,835) (1,954) (2,070) (2,253) (2,384) (5,646) (16,141)

Total Revenues post-ACA Funding Loss $19,065 $17,935 $16,931 $16,970 $16,986 $16,939 $16,930 $16,933 $16,876 $16,893 $87,888 $172,458

Adjusted Expenses

General Fund Expenses (ex. Debt Serv. and AUC/AAC) ($8,102) ($8,456) ($8,597) ($8,694) ($8,888) ($8,887) ($8,971) ($9,128) ($9,355) ($9,354) ($42,737) ($88,432)

AAC/AUC(2) (1,046) (572) (1,172) (1,172) (1,172) (1,172) (1,172) (1,172) (1,172) (1,172) (5,134) (10,993)

Maintenance Capital Expenditures (283) (400) (407) (415) (422) (429) (437) (445) (453) (462) (1,928) (4,154)

Spec. Rev. Funds, Enterprise Funds and Comp. Units (855) (781) (845) (984) (1,092) (1,234) (1,365) (1,494) (1,664) (1,793) (4,557) (12,107)

Disbursement of Tax Revs. to Entities Outside Plan (330) (300) (304) (307) (313) (314) (315) (316) (317) (325) (1,553) (3,139)

Total Adjusted Expenses ($10,616) ($10,508) ($11,326) ($11,571) ($11,887) ($12,036) ($12,260) ($12,554) ($12,960) ($13,105) ($55,908) ($118,824)

Federal Programs (7,000) (7,114) (7,226) (7,337) (7,448) (7,561) (7,676) (7,794) (7,917) (8,046) (36,124) (75,118)

GDB Net Outflows (236) (277) (315) (308) (186) (113) (114) (115) (115) (116) (1,322) (1,895)

Oversight Board Costs (200) (150) (5) (5) (5) (5) – – – – (365) (370)

Total Expenses ($18,052) ($18,049) ($18,872) ($19,221) ($19,526) ($19,715) ($20,049) ($20,463) ($20,992) ($21,267) ($93,720) ($196,206)

Total Fin. Gap Pre-Measures before Debt Serv. $1,013 ($114) ($1,941) ($2,251) ($2,540) ($2,777) ($3,120) ($3,530) ($4,116) ($4,374) ($5,832) ($23,748)

Less: Debt Service(3) (4,618) (3,294) (3,872) (3,493) (3,438) (3,197) (3,138) (3,554) (3,055) (3,308) (18,715) (34,967)

Total Fin. Gap Pre-Measures after Debt Serv. ($3,605) ($3,408) ($5,813) ($5,744) ($5,978) ($5,974) ($6,258) ($7,084) ($7,171) ($7,682) ($24,547) ($58,716)

Memo: Embedded Impact of Act 154 / Foreign Company Tax Losses

GF Revs. before Act 154 / Foreign Company Tax Losses $9,045 $9,045 $9,018 $8,986 $8,951 $8,916 $8,880 $8,846 $8,815 $8,787 $45,045 $89,288

Act 154 / Foreign Company Tax Losses – (481) (962) (962) (962) (962) (962) (962) (962) (962) (3,367) (8,177)

GF Revs. after Act 154 / Foreign Company Tax Losses $9,045 $8,564 $8,056 $8,024 $7,989 $7,954 $7,918 $7,884 $7,853 $7,825 $41,678 $81,111

Memo: Macroeconomic Assumptions

Real Revenue Growth N/A (1.5%) (1.8%) (1.8%) (1.8%) (1.8%) (1.8%) (1.7%) (1.7%) (1.7%)

Inflation N/A 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.9%

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 88 of 101
87

As illustrated below, the measures resulting from the principles outlined previously would be 

expected, before the benefit of a change in the trajectory of the Commonwealth economy, to 

reduce the Base Financing Gap by $10 billion

Estimated Impact of Financial Measures

Annual Summary of Measures ($ millions)

T otal

2017 P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

Meas. Aimed at Impr. Budg. Controls and Fiscal & Econ. Dec.-Making

Adopt Institute of Statistics / Planning Board Five-Y ear Plan ($3) ($3) ($3) ($3) ($3) ($3) ($3) ($3) ($3) ($3) ($15) ($30)

Install New Accounting and Financial Sy stems (30) – – – – – – – – – (30) (30)

Im prove Budg. Controls and Fiscal & Econ. Dec.-Making (33) (3) (3) (3) (3) (3) (3) (3) (3) (3) (45) (60)

Meas. Aimed at Rationalizing Exps. and Tax Policy to Promote Effic.

Expense Measures

Reduce Operating Costs – 397 528 7 23 807 7 98 7 90 7 81 773 7 66 2,455 6,364

Right-Size Department of Education – 42 7 1 99 127 129 131 134 136 139 339 1,008

Control Healthcare Costs (4) 65 93 93 93 95 96 98 100 102 340 830

Cut Governmental Subsidies – 47 96 145 244 343 342 341 340 339 532 2,237

Total Expense Measures (4) 551 788 1,059 1,271 1,365 1,359 1,354 1,349 1,346 3,665 10,439

Revenue Measures

Improve Tax Enforcement and Administration 10 121 151 171 169 167 163 161 158 156 622 1,428

Address Upcoming Act 154 Revenue Cliff – 481 962 962 962 962 962 962 962 962 3,367 8,17 7

Total Revenue Measures 10 602 1,113 1,133 1,131 1,129 1,125 1,123 1,120 1,118 3,989 9,605

T otal Rationalizing Exps. and T ax Policy 6 1,153 1,901 2,192 2,403 2,494 2,485 2,47 7 2,47 0 2,464 7 ,655 20,044

Meas. Aimed at Enacting Structural Reform and Growth

Establish a Local EITC Program – (150) (150) (150) (150) (150) (150) (150) (150) (150) (600) (1,350)

Pay Local Businesses for Past Services and Pay Tax Refunds (565) (27 2) (27 2) (27 2) (27 2) – – – – – (1,653) (1,653)

Build Deposits to Provide Confidence (214) (214) (214) (214) (214) – – – – – (1,069) (1,069)

Invest in Incr. Main. Capex over Run-Rate (141) (528) (397 ) (27 3) (103) (104) (106) (108) (110) (112) (1,442) (1,983)

Invest in Economic Growth Projects (54) (400) (466) (47 6) (353) (316) (187 ) (113) (103) (103) (1,7 49) (2,57 2)

T otal Enacting Struct. Reform and Growth (974) (1,564) (1,499) (1,385) (1,091) (570) (443) (37 1) (363) (366) (6,514) (8,627 )

Meas. Aimed at Protecting Vuln. Stakeholders

Implement Pension Sy stem Reform(1 ) (166) (166) (116) (116) (116) (116) (116) (116) (116) (116) (681) (1,263)

T otal Protecting Vulnerable Stakeholders (166) (166) (116) (116) (116) (116) (116) (116) (116) (116) (681) (1,263)

T otal Measures Im pact ($1,167 ) ($581) $283 $687 $1,193 $1,804 $1,922 $1,987 $1,987 $1,97 9 $415 $10,094

Memo: Estimated Impact on Economic Growth

Change in Economic Trajectory – 202 340 501 718 939 1,185 1,427 1,612 1,782 1,761 8,707

Total Measures incl. Change in Economic Trajectory ($1,167) ($378) $623 $1,188 $1,910 $2,743 $3,108 $3,414 $3,599 $3,761 $2,176 $18,801

Memo: Macroeconomic Assumptions

Real Revenue Growth N/A 0.6% (0.3%) (0.1%) 0.2% 0.2% 0.4% 0.3% (0.0%) (0.2%)

Inflation N/A 2.1% 2.0% 1.9% 1.9% 1.9% 2.0% 2.1% 2.0% 1.9%

(1) Illustratively includes the reduction in the estimated portion of AUC as result of the exclusion of debt service, which amounts to approximately $80 million over the 10-year projection period.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 89 of 101
88

The Fiscal Plan is not intended to be an austerity plan, but rather largely redirects spending 

from inefficient uses towards uses more likely to produce economic growth

 As illustrated below, excluding (1) certain measures aimed at maintaining current revenues and spending (such 

as reforms to the corporate tax code to replace Act 154 revenues and an extension of Act 66) and (2) the build in 

deposits, the Commonwealth’s revenue reforms and expenditure cuts largely fund the incremental spending the 

Commonwealth projects to stimulate growth in the economy

 The spending is highest in the early years so as to jumpstart growth and stop outmigration as the Commonwealth 

implements structural reforms 

Incremental Saving / (Spend) from Measures

Annual Summary of Incremental Savings / (Spend) from Measures ($ millions)

T otal

2017P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

T otal Measures Im pact ($1,167 ) ($581) $283 $687 $1,193 $1,804 $1,922 $1,987 $1,987 $1,97 9 $415 $10,094

Less: Measures Aimed at Maintaining Current Revs./Exps.

Address Upcoming Act 154 Revenue Cliff – (481) (962) (962) (962) (962) (962) (962) (962) (962) (3,367 ) (8,17 7 )

Extend Law 66 / Implement Long-Term Budg. Reform – (17 8) (257 ) (336) (416) (400) (384) (368) (353) (338) (1,187 ) (3,030)

Measures Aimed at Maintaining Current Revs./Exps. – ($659) ($1,219) ($1,298) ($1,37 8) ($1,362) ($1,346) ($1,330) ($1,315) ($1,300) (4,554) (11,207 )

Plus: Deposit Build $214 $214 $214 $214 $214 – – – – – $1,069 $1,069

T otal Increm ental Savings / (Spend) from Measures ($953) ($1,026) ($723) ($397) $28 $443 $576 $656 $672 $679 ($3,07 1) ($44)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 90 of 101
89

The following provides an overview of the post-measures scenario

Macroeconomic Projections for the Post-Measures Scenario

 The starting point is the Base Projections, reflecting current policies projected from FY 2017 - FY 2026

 The post-measures scenario shows the projected impact of fiscal and growth measures over the period, 

including:

 The improvement in the fiscal position resulting from the measures

 The improvement in long-term (potential) growth from growth enhancing measures, including Earned 

Income Tax Credit, capital expenditure, better public financial management and repaying overstretched 

suppliers

 The cyclical impact of measures, which reduce (expand) short-term real GDP growth when policies 

increase (cut) fiscal revenues (expenditures)

 The cyclical impact is captured by the fiscal multiplier of 1.3 (Nakamura and Steinsson: Fiscal Stimulus 

in a Monetary Union, American Economic Review, 2014)

 As the economy contracts (expands), output falls below potential real GDP, creating slack in the economy, 

lowering wages and prices

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 91 of 101
90

The following provides an overview of the post-measures scenario

Macroeconomic Projections for the Post-Measures Scenario (cont’d)

 Eventually, low wages and prices create attractive investment opportunities

 This is the primary mechanism to close the output gap and undo the cyclical impact of measures

 This adjustment can be slow, as the Commonwealth (and U.S. States) cannot devalue its currency relative to other U.S. States (unlike countries) to quickly and easily make labor and investment 

more attractive

 This again underscores the need to enhance growth measures, and take structural reforms to 

make markets more efficient and adjust as quickly and painlessly as possible

 Growth enhancing measures create opportunities and investment to ensure potential GDP growth does not remain negative because people move to the U.S. mainland

 The resulting nominal GDP feeds revenues and produces a new primary fiscal deficit

 Puerto Rico is assumed to self-finance this fiscal reform package since there is no new financing available. Hence, the package of measures is adjusted to close the primary deficit, which feeds 

back to real GDP, the output gap, inflation and nominal GDP

 This feedback loop continues until it converges on a stable fiscal deficit, growth and nominal GDP growth path; the output gap assumed to slowly close at the end of the ten-year projection period

 It is critical to underscore that the macro-fiscal scenarios focus on self-financing the primary deficit. Existing interest and amortization schedules are assumed to be financed at 0% so as to arrive at a 

reasonable estimate of size of the fiscal and growth problem going forward, apart from the legacy of past decisions and growth challenges, as reflected in the existing debt service schedule

Fiscal Plan Post-Measures Growth and Inflation Projections 

2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P

Rea l GDP 0.58% (0.27 %) (0.1 1 %) 0.20% 0.19% 0.36% 0.26% (0.02%) (0.1 8%)

In fla tion 2.06% 2.05% 1.94% 1.92% 1.92% 2.00% 2.07 % 2.03% 1.89%

Nom inal GDP 2.64% 1.77% 1.84% 2.11% 2.11% 2.36% 2.33% 2.02% 1.72%

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 92 of 101
T otal

2017P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

Fin. Gap Pre-Measures after Debt Serv. ($3,605) ($3,408) ($5,813) ($5,7 44) ($5,97 8) ($5,97 4) ($6,258) ($7 ,084) ($7 ,17 1) ($7 ,682) ($24,547 ) ($58,7 16)

Plus: Debt Service(1 ) 3,909 3,294 3,87 2 3,493 3,438 3,197 3,138 3,554 3,055 3,308 18,007 34,258

Fin. Gap Pre-Measures before Debt Serv. $304 ($114) ($1,941) ($2,251) ($2,540) ($2,7 7 7 ) ($3,120) ($3,530) ($4,116) ($4,37 4) ($6,541) ($24,457 )

Measures Impact

Impr. Budg. Controls & Fiscal and Econ. Dec.-Making (33) (3) (3) (3) (3) (3) (3) (3) (3) (3) (45) (60)

Rationalize Exp. and Tax Policy to Promote Effic. 6 1,153 1,901 2,192 2,403 2,494 2,485 2,47 7 2,47 0 2,464 7 ,655 20,044

Enact Struct. & Econ. Measures and Invest in Growth (97 4) (1,564) (1,499) (1,385) (1,091) (57 0) (443) (37 1) (363) (366) (6,514) (8,627 )

Protect Vulnerable Stakeholders(2) (166) (166) (116) (116) (116) (116) (116) (116) (116) (116) (681) (1,263)

Total Measures Impact (1,167) (581) 283 687 1,193 1,804 1,922 1,987 1,987 1,979 415 10,094

Fin. Gap Post-Meas. ex. Debt Serv. & Econ. Im pact ($863) ($694) ($1,658) ($1,563) ($1,347 ) ($972) ($1,197 ) ($1,543) ($2,129) ($2,395) ($6,126) ($14,363) – –

Est. Incr. Inc. from Econ. Dev. and Struct. Reforms – 202 340 501 718 939 1,185 1,427 1,612 1,7 82 1,7 61 8,7 07

Fin. Gap Post-Meas. incl. Growth ex. Debt Serv. ($863) ($492) ($1,318) ($1,063) ($629) ($34) ($12) ($116) ($517 ) ($613) ($4,365) ($5,656)

Memo: Macroeconomic Assumptions

Real Revenue Growth N/A 0.6% (0.3%) (0.1%) 0.2% 0.2% 0.4% 0.3% (0.0%) (0.2%)

Inflation N/A 2.1% 2.0% 1.9% 1.9% 1.9% 2.0% 2.1% 2.0% 1.9%

91

The following shows the annual projected financing surplus/(gap) after incorporating the 

measures outlined previously

 As shown below, in all years of the plan a deficit remains even after excluding all debt service and after incorporating the potential 

benefits of economic growth

 The larger deficits in the early years are driven by the large capital expenditures made during the period as well as the payments of 

past-due payables 

 Note that the growth rate is estimated only based on the potential surplus available to fund these spending amounts (i.e., 

Puerto Rico is assumed only be able to spend up to the amount until the surplus goes to zero); no external financing is assumed 

to fund the deficits shown and further financing could increase future deficits due to associated debt service costs

 Assuming average real GDP growth that averages 0.1% between FY 2018 and FY 2026 as compared to negative 1.7% in the base,

there is still projected to be a deficit of $5.7 billion over ten years

Annual Projections Including Measures

Annual Summary of Financing Gap in the Post-Measures Projections from FY 2017 to FY 2026 ($ millions)

(1) Includes principal and interest payments that may have been missed in FY 2016 and FY 2017. Debt service shown net of existing reserves used to pay debt service. Note that for illustrative purposes, debt service excludes debt held by GDB and 

excludes revenues otherwise allocated to COFINA FY 2017 debt service.

(2) Illustratively includes the reduction in the estimated portion of AUC as result of the exclusion of debt service, which amounts to approximately $80 million over the 10-year projection period.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 93 of 101
92

Given a financing gap remains even after Puerto Rico implements the measures in its control, 

it is essential that the U.S. Government become a partner in promoting economic growth in 

Puerto Rico through items such as equitable healthcare treatment to replace ACA funding

 Shown below is the illustrative impact of the U.S. Government providing the Commonwealth with more equitable 

healthcare treatment, which is assumed to at least replace the loss of ACA funding

 Even with actions of the U.S. Federal Government, there are still negative cash flows in the early years of the 

projections driven by large capital expenditures and past-due payable payments that may potentially require 

either delay or new, interim financing (for illustrative purposes no incremental financing cost is assumed)

 By FY 2018, however, these actions combined with the measures outlined previously and the potential benefit of 

incremental economic growth that would result from the elimination of the deficits that existed prior to ACA 

funding could remove structural deficits and would produce a ten year financing surplus before debt service of 

$18.9 billion

 Note that this growth would not be possible without ACA type funding and that, even if ACA funding were 

received, it may not be advisable to use as a level for setting fixed (vs. contingent) debt service given it would 

be such a drastic turnaround for the Commonwealth economy 

A Replacement for ACA Funding Could Materially Improve Puerto Rico’s Fiscal 

Position

Annual Summary of Financing Gap After Select Federal Actions ($ millions)

T otal

2017P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

Fin. Gap Before U.S. Gov't Action ($863) ($492) ($1,318) ($1,063) ($629) ($34) ($12) ($116) ($517 ) ($613) ($4,365) ($5,656) – –

Replacement of ACA Funding – 865 1,517 1,583 1,681 1,835 1,954 2,07 0 2,253 2,384 5,646 16,141

Fin. Gap After U.S. Gov't Action ($863) $374 $199 $520 $1,052 $1,801 $1,942 $1,954 $1,7 36 $1,7 7 1 $1,281 $10,485

Change in Economic Trajectory – 67 312 602 849 1,001 1,130 1,27 7 1,460 1,682 1,830 8,37 8

Fin. Gap After U.S. Gov't Action & Econ. Im p. ($863) $441 $512 $1,122 $1,901 $2,802 $3,07 2 $3,231 $3,195 $3,452 $3,112 $18,863

Memo: Financing Gap After Debt Service

Inclusion of Debt Service (1) (3,909) (3,294) (3,872) (3,493) (3,438) (3,197) (3,138) (3,554) (3,055) (3,308) (18,007) (34,258)

Fin. Gap Incl. Debt Serv. After U.S. Gov't Action ($4,772) ($2,853) ($3,361) ($2,371) ($1,538) ($396) ($66) ($323) $141 $144 ($14,895) ($15,395)

Memo: Macroeconomic Assumptions

Real Revenue Growth N/A 1.3% 1.9% 1.9% 1.6% 1.1% 1.2% 1.3% 1.2% 1.2%

Inflation N/A 2.2% 2.7% 3.1% 3.1% 2.9% 2.6% 2.3% 2.0% 1.6%

(1) Includes principal and interest payments that may have been missed in FY 2016 and FY 2017. Debt service shown net of existing reserves used to pay debt service. Note that for illustrative purposes, debt service excludes debt held by GDB and 

excludes revenues otherwise allocated to COFINA FY 2017 debt service.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 94 of 101
Fiscal Plan Macroeconomic Assumptions

The following tables summarize the projected real and nominal GDP growth rates used in the 

Base Projections, as well as the growth rates assumed post-measures including and 

excluding U.S. government assistance in the form of ACA type funding, illustrating the 

potential positive impacts of actions by the U.S. government

93

Base Projections

Post-Measures, Without U.S. Government Action Projections

Post-Measures, With U.S. Government Action Projections

2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P

Rea l GDP (1 .54%) (1 .7 9%) (1 .7 8%) (1 .7 9%) (1 .7 8%) (1 .7 7 %) (1 .7 5%) (1 .7 1 %) (1 .67 %)

In fla tion 1.89% 1.84% 1.7 9% 1.7 7 % 1.7 7 % 1.7 8% 1.80% 1.83% 1.89%

Nom inal GDP 0.35% 0.05% 0.01% (0.02%) (0.01%) 0.01% 0.05% 0.12% 0.22%

2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P

Rea l GDP 0.58% (0.27 %) (0.1 1 %) 0.20% 0.19% 0.36% 0.26% (0.02%) (0.1 8%)

In fla tion 2.06% 2.05% 1.94% 1.92% 1.92% 2.00% 2.07 % 2.03% 1.89%

Nom inal GDP 2.64% 1.77% 1.84% 2.11% 2.11% 2.36% 2.33% 2.02% 1.72%

2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P

Rea l GDP 1.34% 1.90% 1.88% 1.63% 1.15% 1.21% 1.31% 1.19% 1.22%

In fla tion 2.15% 2.69% 3.06% 3.15% 2.93% 2.63% 2.32% 1.97 % 1.61%

Nom inal GDP 3.49% 4.59% 4.94% 4.78% 4.08% 3.84% 3.63% 3.16% 2.83%

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 95 of 101
Footnotes

94

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 96 of 101
95

Footnotes to “Debt of Entities Included in the Fiscal Plan”

The following footnotes provide additional detail to page 67

2. Please note that all figures are subject to ongoing diligence and numbers may change materially. All bonds are included as of July 2, 2016; loans as of June 

30, 2016 and do not include unpaid interest, if any, and do not include payments made by insurers, where applicable. 

3. Excludes estimated CAB accretion, which is shown separately as of July 2, 2016. Capital Appreciation Bonds (“CAB”) are zero coupon bonds that accrete in 

value until maturity instead of making regularly scheduled interest payments. This accretion is treated in reporting as ‘interest’ rather than principal and is 

broken out separately from initial par values.

4. Missed interest is for FY 2016 and as of July 2, 2016.

5. Private loan figures are representative of loans at non-government entities. Figures include non-bank municipal loans.

6. Includes operational loans from GDB to the PR Treasury Department, including $102 million of loans from other CW entities representing Trade and Export 

Company ($14 million), GDB loans to various minor CW entities, and operational loans payable from GDB to PR Treasury representing long-term credit 

facilities of $100 million from the SIF and $2 million from the Automobile Accidents Compensation Administration ("AACA"). 

7. HTA includes Teodoro Moscoso bonds and VRDOs held by GDB. 

8. GDB bonds include $110mm of CW-guaranteed bonds issued to the SIF. Where there are TDF guaranteed bonds and loans that TDF is paying out on, they 

have been reflected in the GDB bonds and loans.

9. Includes PRIFA Rum bonds, PRIFA Petroleum Products Excise Tax BANs, PRIFA Ports Authority bonds and PRIFA ASSMCA bonds. 

10. Includes the AFICA - Desarrollos Universitarios University Plaza Project bonds. Desarrollos Universitarios, a component unit of UPR, although legally 

separate, is reported as if it was part of the primary government because its debt is expected to be repaid entirely, or almost entirely, with resources of UPR 

(via lease payments from UPR to Desarrollos Universitarios).

11. APLA is excluded as the debt is owned by GDB and thus debt service is intragovernmental. See footnote 6. Additional diligence is required to determine if 

entities are included in or excluded from the plan but it is believed that most are Fiscal Plan entities.

12. Includes Series 2016 A, B, C, D and E Bonds.

13. PRASA includes CW-guaranteed debt of (i) $521 million in Loans from Other CW Entities representing the CWSRF and DWSRF, (ii) $285 million in bonds 

representing the 2008 Sub. Refunding bonds, and (iii) $394 million in bonds representing the Rural Development bonds.

14. Note that Municipality Related Debt includes MFA, CAE, IVU, and other municipal debt. Loans from other CW entities includes $570 million in loans from 

MFA to be repaid by the CAE tax. Also includes municipalities general fund resources, the AFICA Guaynabo Municipal Gov. Center ($8.3 million) and the 

AFICA - Guaynabo Warehouse for Emergencies ($6.7 million) bonds. 

15. Excludes TDF guaranteed bonds and loans that TDF is paying out on to third parties.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 97 of 101
Additional Detail on Fiscal Plan Projections

96

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 98 of 101
Summary Page - Revenues

The following table presents a detailed summary of revenues included in the Fiscal Plan Base 

Projections

97

(1) Excludes Federal Grants.

(2) Represents the net income estimates of entities without bonded debt that have historically provided a surplus. Net numbers are shown as these entities generally receive independent revenues that would not be generated 

absent the associated expenses. Note that numbers are shown excluding capital expenditures, which are shown elsewhere and forward estimates are based on a review of historical results. 

T otal

2017 P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

Revenues before Measures

General Fund Revenues (incl. Act 154 / Excise Tax Losses)

1 Individual Income Taxes $1,966 $1,97 2 $1,97 3 $1,97 2 $1,97 1 $1,97 0 $1,97 0 $1,97 0 $1,97 2 $1,97 5 $9,854 $19,7 11

2 Corporate Income Taxes 1,525 1,565 1,565 1,565 1,564 1,563 1,563 1,563 1,565 1,568 7 ,7 84 15,606

3 Non-Resident Withholdings 7 63 7 63 7 63 7 63 7 63 7 63 7 63 7 63 7 63 7 63 3,815 7 ,630

4 Act 154 / Excise Tax Revenues 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 9,620 19,240

5 Estimated Loss of Act 154 / Foreign Company Tax Revenues – (481) (962) (962) (962) (962) (962) (962) (962) (962) (3,367 ) (8,17 7 )

6 Excise Taxes on Alcoholic Beverages 27 2 27 3 27 3 27 3 27 3 27 3 27 3 27 3 27 3 27 3 1,363 2,7 27

7 Motor Vehicle Excise Taxes 293 294 294 294 294 294 294 294 294 294 1,469 2,938

8 Excise Taxes on Off-Shore Shipments Rum 206 168 170 171 172 174 175 176 178 179 887 1,7 69

9 General Fund Portion of 11.5% SUT 1,608 1,586 1,557 1,525 1,491 1,456 1,420 1,384 1,348 1,310 7 ,7 67 14,685

10 Cigarette Excise Taxes 117 117 117 117 117 117 117 117 117 118 586 1,17 3

11 Casino Slot Revenues 18 18 18 18 18 18 18 18 18 18 90 180

12 Lotteries 65 80 80 80 80 80 80 80 80 80 386 7 87

13 Other General Fund Tax Revenues 117 112 112 112 112 112 112 112 112 113 566 1,128

14 Other General Fund Non-Tax Revenues 171 172 172 172 171 171 171 171 171 172 857 1,7 14

15 General Fund Revenues (incl. Act 154 / Excise Tax Losses) 9,045 8,564 8,056 8,024 7,989 7,954 7,918 7,884 7,853 7,825 41,678 81,111

Additional Sales and Use Tax ("SUT")

16 COFINA Portion of 6% SUT 7 24 753 7 83 815 847 881 916 953 991 1,031 3,922 8,694

17 Portion of 11.5% SUT - FAM 117 117 117 117 117 117 117 117 117 117 585 1,17 1

18 Portion of 11.5% SUT - Cine 3 3 3 3 3 3 3 3 3 3 16 32

19 Additional Sales and Use Tax ("SUT") 844 873 904 935 967 1,001 1,036 1,073 1,111 1,151 4,523 9,897

Other Tax Revenues

20 Non-Resident Withholdings (Special Revenue Fund) 59 59 59 59 59 59 59 59 59 59 295 590

21 Excise Taxes on Off-Shore Shipments Rum (Special Revenue Fund) 174 136 137 138 139 140 141 142 143 144 7 24 1,436

22 Room Taxes 7 7 81 85 88 88 88 88 88 88 88 419 858

23 Cigarette Excise Taxes (Special Revenue Fund) 67 67 67 67 67 67 67 67 67 67 337 67 4

24 Petroleum Products (Crudita) Excise Tax 411 510 510 510 510 510 510 510 510 510 2,451 5,001

25 Gas Oil and Diesel Excise Taxes 13 13 13 13 13 12 12 11 11 11 63 119

26 Gasoline Excise Tax Revenue 151 146 145 146 148 143 139 134 129 126 7 36 1,407

27 Vehicle License Fees 93 93 93 93 93 93 93 93 93 93 463 927

28 Other Special Revenue Fund Tax Revenues 53 53 53 53 53 53 53 53 53 53 263 527

29 Casino Slot Revenues 140 142 142 142 142 142 142 142 142 143 709 1,420

30 CRIM Property Tax Inflows 104 104 104 104 104 104 104 104 104 104 521 1,042

31 Other Tax Revenues 1,342 1,404 1,407 1,413 1,416 1,412 1,407 1,403 1,400 1,398 6,982 14,002

Other Non-Tax Revenues

32 Lotteries - Munis & Other 38 46 48 50 56 56 55 55 55 62 239 522

33 HTA Non-Tax Revenues (ex. Teodoro Moscoso) 240 245 249 252 252 252 252 252 252 253 1,238 2,500

34 Teodoro Moscoso Bridge Revenues – – – – 20 20 20 20 20 20 20 120

35 PRIDCO Rent and Other Non-Tax Revenues 67 67 69 7 1 7 1 7 1 7 1 7 1 7 1 7 1 344 699

36 UPR Tuition, Fees and Other Non-Tax Revenues(1 ) 169 171 174 176 178 180 183 185 188 190 868 1,7 95

37 PRCCDA Rent and Other Non-Tax Revenues 4 4 4 4 4 4 4 4 4 4 20 40

38 Net Income of Select Component Units(2) 80 80 80 80 80 80 80 80 80 80 399 7 99

39 Other Non-Tax Revenues 598 612 623 633 661 663 665 667 670 680 3,128 6,474

40 T otal Adjusted Revenue before Measures pre-ACA Funding Loss $11,829 $11,454 $10,990 $11,005 $11,033 $11,029 $11,027 $11,028 $11,034 $11,055 $56,312 $111,484

41 GDB Loan Inflows 236 233 233 211 186 183 181 181 178 176 1,098 1,998

42 Federal Transfers 7 ,000 7 ,114 7 ,226 7 ,337 7 ,448 7 ,561 7 ,67 6 7 ,7 94 7 ,917 8,046 36,124 7 5,118

43 T otal Revenues before Measures pre-ACA Funding Loss $19,065 $18,801 $18,448 $18,553 $18,667 $18,7 7 3 $18,884 $19,003 $19,128 $19,27 6 $93,534 $188,599

44 Loss of Affordable Care Act ("ACA") Funding – (865) (1,517 ) (1,583) (1,681) (1,835) (1,954) (2,07 0) (2,253) (2,384) (5,646) (16,141)

45 T otal Revenues before Measures post-ACA Funding Loss $19,065 $17 ,935 $16,931 $16,97 0 $16,986 $16,939 $16,930 $16,933 $16,87 6 $16,893 $87 ,888 $17 2,458

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 99 of 101
Summary Page - Expenses

The following table presents a detailed summary of non-interest expenditures included in the 

Fiscal Plan Base Projections

98

T otal

2017 P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

Non-Debt Expenditure before Measures

General Fund Expenses (ex. AUC /AAC and Debt Service)

44 Direct Pay roll ($3,27 1) ($3,333) ($3,394) ($3,455) ($3,516) ($3,57 8) ($3,642) ($3,7 07 ) ($3,7 7 5) ($3,847 ) ($16,969) ($35,519)

45 Direct Operational Expenses (907 ) (924) (941) (958) (97 5) (992) (1,010) (1,028) (1,047 ) (1,066) (4,7 05) (9,848)

46 Utilities (260) (332) (352) (360) (37 4) (37 3) (37 0) (37 5) (388) (396) (1,67 8) (3,580)

47 Special Appropriations - UPR Formula (7 91) (836) (836) (836) (836) (836) (836) (836) (836) (848) (4,136) (8,329)

48 Special Appropriations - Judicial Formula (324) (366) (366) (366) (366) (366) (366) (366) (366) (366) (1,7 89) (3,619)

49 Special Appropriations - Municipalities Formula (361) (37 1) (37 1) (37 1) (37 1) (37 1) (37 1) (37 1) (37 1) (37 1) (1,845) (3,7 01)

50 Special Appropriations - Retirement Sy stems (37 1) (424) (480) (536) (543) (535) (529) (595) (593) (587 ) (2,354) (5,193)

51 Special Appropriations - Health Insurance (885) (885) (885) (885) (885) (885) (885) (885) (885) (885) (4,425) (8,850)

52 Special Appropriations - Other (932) (984) (97 2) (926) (1,021) (950) (962) (964) (1,093) (987 ) (4,836) (9,7 92)

53 General Fund Expenses (ex. AUC/AAC and Debt Service) (8,102) (8,456) (8,597) (8,694) (8,888) (8,887) (8,971) (9,128) (9,355) (9,354) (42,737) (88,432)

AAC/AUC

54 AUC and AAC ex. Catch-Up Pay ments(1 ) (642) (57 2) (1,17 2) (1,17 2) (1,17 2) (1,17 2) (1,17 2) (1,17 2) (1,17 2) (1,17 2) (4,7 29) (10,588)

55 AAC/AUC (642) (572) (1,172) (1,172) (1,172) (1,172) (1,172) (1,172) (1,172) (1,172) (4,729) (10,588)

Maintenance Capital Expenditures

56 Run-Rate Capital Expenditures (excl. growth Capex) (283) (400) (407 ) (415) (422) (429) (437 ) (445) (453) (462) (1,928) (4,154)

57 Maintenance Capital Expenditures (283) (400) (407) (415) (422) (429) (437) (445) (453) (462) (1,928) (4,154)

Component Units, Non-GF Funds and Enterprise Funds

58 Net Deficit of Special Revenue Funds ex. Tax Revenues(2) (109) (118) (129) (140) (151) (162) (17 4) (185) (197 ) (209) (648) (1,57 5)

59 PRCCDA Expenses (5) (5) (5) (5) (5) (5) (5) (5) (5) (5) (24) (49)

60 PRIDCO Expenses (104) (105) (106) (106) (107 ) (108) (109) (110) (111) (112) (528) (1,07 9)

61 UPR Expenses (17 5) (137 ) (143) (151) (17 3) (195) (218) (242) (266) (280) (7 7 9) (1,980)

62 Net Op. Deficit of Other Independently Projected Component Units ex. Tax Revs.(3) (204) (17 1) (213) (331) (402) (504) (595) (683) (811) (908) (1,320) (4,820)

63 Net Deficit of Select Component Units ex. Tax Revenues(4) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (13) (26)

64 Net Deficit of Enterprise Funds(5) (6) (6) (7 ) (7 ) (7 ) (8) (8) (8) (9) (9) (34) (7 6)

65 HTA Operational Expenses (excl. Debt Service, T. Moscoso and Capex) (246) (234) (236) (238) (237 ) (241) (246) (250) (255) (259) (1,191) (2,442)

66 Teodoro Moscoso Expenses (excl. Debt Service and Capex) – – – – (4) (4) (4) (4) (5) (5) (4) (26)

67 Allocation of SUT to Cine (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (16) (32)

68 Component Units, Non-GF Funds and Enterprise Funds (855) (781) (845) (984) (1,092) (1,234) (1,365) (1,494) (1,664) (1,793) (4,557) (12,107)

Disbursements of Tax Revenues to Entities Outside Plan

69 Cigarette and Rum Shipment Excise Tax Related Outflows (17 5) (137 ) (138) (139) (140) (141) (142) (143) (144) (145) (7 29) (1,446)

7 0 Lotteries Related Outflows - Munis & Other (38) (46) (48) (50) (56) (56) (55) (55) (55) (62) (239) (522)

7 1 Allocation of SUT to FAM (117 ) (117 ) (117 ) (117 ) (117 ) (117 ) (117 ) (117 ) (117 ) (117 ) (585) (1,17 1)

7 2 Disbursements of Tax Revenues to Entities Outside Plan (330) (300) (304) (307) (313) (314) (315) (316) (317) (325) (1,553) (3,139)

7 3 Adjusted Expenses ($10,212) ($10,508) ($11,326) ($11,57 1) ($11,887 ) ($12,036) ($12,260) ($12,554) ($12,960) ($13,105) ($55,504) ($118,419)

7 4 GDB Loan and Net Deposit Outflows (236) (27 7 ) (315) (308) (186) (113) (114) (115) (115) (116) (1,322) (1,895)

7 5 Federal Programs (7 ,000) (7 ,114) (7 ,226) (7 ,337 ) (7 ,448) (7 ,561) (7 ,67 6) (7 ,7 94) (7 ,917 ) (8,046) (36,124) (7 5,118)

7 6 Federal Oversight Board Implemented by PROMESA (200) (150) (5) (5) (5) (5) – – – – (365) (37 0)

7 7 AUC Catch-Up Pay ments(6) (405) – – – – – – – – – (405) (405)

7 8 T otal Noninterest Expenditures ($18,052) ($18,049) ($18,87 2) ($19,221) ($19,526) ($19,7 15) ($20,049) ($20,463) ($20,992) ($21,267 ) ($93,7 20) ($196,206)

(1) Incremental contributions represent the Annual Additional Contributions (“AAC”) required to be paid to the Teachers and Judicial Retirement Systems and the Additional Uniform Contribution (“AUC”) required to be paid to the Employees 

Retirement System based on estimates provided by the Commonwealth’s actuaries incorporating updated assumptions regarding items such as changes in the size of the active membership and future payroll assumptions consistent with the 

Fiscal Plan. 

(2) Deficit for Special Revenue Funds calculated after removing tax revenues, which are shown separately.

(3) Certain component unit projections were developed by consulting with management including: ASEM, ASES, ADEA, Cardiovascular Center, PBA, PRITA, Ports Authority and Tourism Company. 

(4) Represents the net income estimates of entities without bonded debt that have historically resulted in a deficit. Note that numbers are shown excluding capital expenditures, which are shown elsewhere. Forward estimated based on review of 

historical results.

(5) Includes Unemployment Insurance and 9-1-1 Services Governing Board. Excludes Drivers Insurance and Disability Insurance, which are restricted funds.

(6) Catch-up payments are AUC or AAC payments due in 2014, 2015 and/or 2016 that were not paid by the General Fund but are assumed to be paid in 2017.

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 100 of 101
Summary Page – Financing Gap

The following table presents a detailed summary of the Base Financing Gap after debt service 

and the financing gap after the measures identified in the Fiscal Plan

99

(1) The debt service payment schedule is based in part on publicly available information from the GDB website and Bloomberg as well as information provided by Hacienda and GDB. All parties should consult the relevant 

governing debt documents to determine their own views as to the debt service obligations for the debt shown below. Note that, as in the Krueger Report, the following debt service payment schedule only summarizes bonded 

debt service for the entities included in the Fiscal Plan (with the exception of the 2013B GDB notes and GSA lines, both of which are private lending arrangements). Other debt service for private bank lines may be embedded in 

the projections for certain component units and public corporations. Such amounts are not material.

(2) Includes debt service of certain TDF guaranteed bonds and loans.

 Note that no U.S. government action related to equitable healthcare treatment is assumed below

 The incremental income from economic development below includes the potential benefits of a change in the Commonwealth’s real economic trajectory in the Base Projections 

from negative 1.7% to an average of 0.1% growth, driven in part by $10 billion in new spending to promote stability and growth

T otal

2017 P 2018P 2019P 2020P 2021P 2022P 2023P 2024P 2025P 2026P 5 Yr 10 Yr

7 9 Financing Gap Pre-Debt Service, Pre-Measures 1,013 ($114) ($1,941) ($2,251) ($2,540) ($2,7 7 7 ) ($3,120) ($3,530) ($4,116) ($4,37 4) ($5,832) ($23,7 48)

Debt Service Net of Existing Reserves(1)

80 Consolidated Interest (2,37 3) (2,319) (2,239) (2,169) (2,118) (2,062) (2,025) (1,97 4) (1,97 2) (1,910) (11,217 ) (21,160)

81 Consolidated Principal (1,094) (957 ) (1,628) (1,299) (1,315) (1,130) (1,109) (1,57 5) (1,07 8) (1,394) (6,294) (12,57 9)

82 Missed Principal and Interest Pay ments (1,37 5) – – – – – – – – – (1,37 5) (1,37 5)

83 TDF Guaranteed Debt Service(2) (155) (37 ) (6) (25) (5) (5) (5) (5) (5) (5) (227 ) (251)

84 Use of Existing Debt Service Reserves 37 9 19 – – – – – – – – 398 398

85 T otal Debt Service Net of Existing Reserves (4,618) (3,294) (3,87 2) (3,493) (3,438) (3,197 ) (3,138) (3,554) (3,055) (3,308) (18,7 15) (34,967 )

86 T otal Estim ated Financing Gap before Measures (3,605) (3,408) (5,813) (5,7 44) (5,97 8) (5,97 4) (6,258) (7 ,084) (7 ,17 1) (7 ,682) (24,547 ) (58,7 16)

Im prove Budgetary Controls and Fiscal and Econom ic Decision-Making

87 Adopt Institute of Statistics / Planning Board Five-Y ear Plan (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (15) (30)

88 Install New Accounting and Financial Sy stems (30) – – – – – – – – – (30) (30)

89 T otal Meas. Aim ed at Im prove Budg. Controls and Decision-Making (33) (3) (3) (3) (3) (3) (3) (3) (3) (3) (45) (60)

Rationalize Expenditures and T ax Policy to Prom ote Efficiency

Expense Measures

Reduce Operating Costs

90 Achieve Operational Efficiencies – 28 36 41 42 43 44 45 45 46 148 37 1

91 Establish Centralized Procurement Sy stem – 60 80 120 120 122 124 127 129 131 380 1,013

92 Employ ee Attrition (incl. Department of Education) – 131 155 225 229 233 237 242 246 251 7 40 1,949

93 Extend Law 66 / Implement Long-Term Budgetary Reform – 178 257 336 416 400 384 368 353 338 1,187 3,030

94 Reduce Operating Costs – 397 528 723 807 798 790 781 773 766 2,455 6,364

Right-Size Department of Education

95 Execute School Consolidation Plan – 28 57 85 113 115 117 119 121 123 283 87 8

96 Overhaul School-Based Management and Operations – 14 14 14 14 14 15 15 15 15 56 130

97 Right-Size Department of Education – 42 71 99 127 129 131 134 136 139 339 1,008

Control Healthcare Costs

98 Implement Functional P3s at State Hospitals (2) 12 24 24 24 24 25 25 26 26 82 209

99 Integrate Government Hospitals into Single Organization (2) 10 19 19 19 19 20 20 20 21 65 165

100 Implement STAR Ratings Sy stem and Scale Pay ments – 8 15 15 15 15 16 16 16 16 53 132

101 Standardize Health Protocols and Impose Uniform Fee Schedules – 30 30 30 30 31 31 32 32 33 120 27 8

102 Reduce Number of 330s as IPAs Under Mi Salud – 5 5 5 5 5 5 5 5 5 20 46

103 Control Healthcare Costs (4) 65 93 93 93 95 96 98 100 102 340 830

Cut Governmental Subsidies

104 Reduce Subsidies to Municipalities – – 50 100 200 300 300 300 300 300 350 1,850

105 Modify Special Laws Benefits – 47 46 45 44 43 42 41 40 39 182 387

106 Cut Governmental Subsidies – 47 96 145 244 343 342 341 340 339 532 2,237

Revenues Measures

106 Implement and Enforce Tax Policy

107 Leverage Tech and Training to Incr. Capture Rates and Improve Tax Admin 10 41 56 65 67 67 67 67 67 67 239 574

108 Restrict Use of Tax Amnesties and Closings – 25 25 25 25 25 25 25 25 25 100 225

109 Implement and Enforce Tax on Video Lottery Games – 55 7 0 81 7 7 7 5 7 2 69 66 64 283 629

110 Address Upcoming Act 154 Revenue Cliff – 481 962 962 962 962 962 962 962 962 3,367 8,17 7

111 Implement and Enforce Tax Policy 10 602 1,113 1,133 1,131 1,129 1,125 1,123 1,120 1,118 3,989 9,605

111 T otal Measures Aim ed at Rationalizing Expenditures and T ax Policy 6 1,153 1,901 2,192 2,403 2,494 2,485 2,47 7 2,47 0 2,464 7 ,655 20,044

Enact Stuctural Econom ic Measures and Invest in Growth

112 Establish a Local EITC Program – (150) (150) (150) (150) (150) (150) (150) (150) (150) (600) (1,350)

113 Pay Local Businesses for Past Services and Pay Tax Refunds (565) (27 2) (27 2) (27 2) (27 2) – – – – – (1,653) (1,653)

114 Build Deposits to Provide Confidence (214) (214) (214) (214) (214) – – – – – (1,069) (1,069)

115 Invest in Incremental Maintenance Capex over Run-Rate (141) (528) (397 ) (27 3) (103) (104) (106) (108) (110) (112) (1,442) (1,983)

116 Invest in Economic Growth Projects (54) (400) (466) (47 6) (353) (316) (187 ) (113) (103) (103) (1,7 49) (2,57 2)

117 T otal Measures Aim ed at Enacting Structural Reform and Growth (974) (1,564) (1,499) (1,385) (1,091) (570) (443) (37 1) (363) (366) (6,514) (8,627 )

Protect Vulnerable Stakeholders

118 Implement Pension Sy stem Reform (166) (166) (116) (116) (116) (116) (116) (116) (116) (116) (681) (1,263)

119 T otal Measures Aim ed at Protecting Vulnerable Stakeholders (166) (166) (116) (116) (116) (116) (116) (116) (116) (116) (681) (1,263)

120 T otal Measures Im pact ($1,167 ) ($581) $283 $687 $1,193 $1,804 $1,922 $1,987 $1,987 $1,97 9 $415 $10,094

121 Residual Est. Financing Gap after Measures ex. Growth ($4,7 7 2) ($3,988) ($5,530) ($5,056) ($4,7 85) ($4,169) ($4,335) ($5,097 ) ($5,184) ($5,7 03) ($24,132) ($48,621)

122 Est. Incremental Income from Econ. Dev. and Structural Reforms – 202 340 501 718 939 1,185 1,427 1,612 1,7 82 1,7 61 8,7 07

123 Residual Est. Financing Gap after Measures incl. Growth ($4,7 7 2) ($3,7 86) ($5,190) ($4,556) ($4,068) ($3,231) ($3,150) ($3,67 0) ($3,57 2) ($3,921) ($22,37 1) ($39,914)

Case:17-03283-LTS Doc#:3734-12 Filed:08/03/18 Entered:08/03/18 13:49:22 Desc:

Exhibit L Page 101 of 101