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Two Democratic lawmakers yesterday said they will actively work to significantly change or sink a House bill to give Puerto Rico debt restructuring tools, MorningConsult.com reported. Sen. Robert Menendez of New Jersey and Rep. Luis Gutiérrez of Illinois said that the current legislation, H.R. 5278, does not provide for an orderly debt restructuring process and places too much power in the hands of a fiscal oversight board whose members are still unknown. That type of action continues neo-colonialist behavior that Gutiérrez said has been all too common throughout the mainland United States’ relationship with Puerto Rico. Gutiérrez said that he will “actively work” to defeat the current language in the bill, adding that he has met with officials such as Sen. Dick Durbin (Ill.), the second-ranking Senate Democrat, to muster opposition to the House legislation. Menendez also said that a number of unnamed Democratic senators appeared interested in his reasons for opposing the bill. Menendez said that there is no hurry to help passage of a bill in a short time, including before a July 1 payment is due. He believes that deadline is “about paying bondholders” nearly $1 billion. “I don’t believe in being jammed for a bad bill,” he said. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

The New Jersey legislature yesterday approved a rescue package to lift Atlantic City out of its fiscal distress and give the struggling gambling hub more time to craft a recovery plan before facing a possible state takeover, Reuters reported. The compromise came after weeks of rancor between lawmakers, local officials and Governor Chris Christie (R) over the magnitude of state control. A Christie spokesman did not reply to a request for comment on whether the governor would sign the legislation. Christie told a local radio show on Wednesday night that he believed the measures give him "all of the authority I would need" and that he would decide quickly. Increased gambling competition in neighboring states has cut into Atlantic City's main source of tax revenue, and the decline in casino property values since 2010 has lowered the tax base a whopping 70 percent. Four of the city's 12 casinos closed in 2014 and remain shuttered. The latest bills retain key measures from previous legislation, but they give the seaside resort town more time — 150 days — to craft a balanced budget and five-year recovery plan before facing state takeover. The bills call for casinos to make $120 million of combined payments annually in lieu of property taxes for 10 years. Casinos are also to make additional lump-sum payments totaling as much as $110 million through 2023. Some alternative casino taxes would also be redirected to pay city debt service. In addition, the city could offer incentives for early retirement and delay for another year any repayment plan for its deferred pension and health benefit payments to the state.

While heading into the last week of their regular legislative session, Illinois lawmakers remain mired in the longest such standoff in its history, Bloomberg News reported yesterday. After leaving the government since June without a plan for what to spend and how, the Democrat-led legislature and Republican Governor Bruce Rauner have until May 31 to approve one by a majority vote. Prospects for an agreement between the two sides appear dim. House Speaker Michael Madigan (D) said that he told Rauner that the governor and “his agents are not being persuasive” in the groups working on a compromise and he plans to advance an appropriations bill. That proposal — which would run through June 2017 — is as much as $7 billion out of balance, according to the Governor’s Office of Management and Budget. If no deal is struck, the consequences will become more dire: Prisons may run out of food, schools may not open on time, and the state’s credit rating — already the lowest in the U.S. — is at risk of falling even further as the government’s deficit continues to grow. Wary of Illinois’s finances, investors demand yields of 3.4 percent on its 10-year bonds, about 1.8 percentage points more than top-rated debt, according to data compiled Bloomberg. That gap is up from as little as 1.1 percentage point two years ago.

U.S. lawmakers yesterday backed a plan to help Puerto Rico escape crippling debt and expand the economy, a move that could put a rescue before the House of Representatives within days, Reuters reported. The House Natural Resources Committee endorsed the plan by a 29-10 vote and left intact most provisions endorsed by House Speaker Paul Ryan. The plan would empower a federal oversight board to negotiate with investors and decide what they would recover from the roughly $70 billion they lent the island. Taxpayer money will not be spent in the rescue which would prevent a bailout, Ryan's office said in a statement yesterday. Puerto Rico's Governor, Alejandro García Padilla praised the bill for elements to help address insolvency, protect essential services and grow the economy. However, he reiterated reservations about the broad power of the oversight board. Under the plan, investors may not sue Puerto Rico while the oversight board does its work, and all the island's creditors could face a loss despite recent lobbying from Wall Street interest groups. With the House and Senate set to begin a week-long Memorial Day holiday break at the end of this week, debate of the bill by the full House is not expected until sometime in June. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Atlantic City, N.J., is in the midst of a financial crisis that has been in the making for years as increased competition and a host of unfortunate spending and hiring decisions have led to a state of affairs that currently features the nation’s highest home foreclosure rate, junk bond credit status and an alarmingly large budget deficit, according to a commentary in today’s Wall Street Journal. More recently, public officials have fought over whether schools should be funded at the expense of shutting down city government, or vice versa, as if either would be an acceptable outcome. How to fix Atlantic City is the question now being bitterly debated at all levels of government in an unusual combination of bipartisanship and acrimony that pits the Republican governor and the Democratic senate president against the Republican mayor and the Democratic assembly speaker, according to the commentary. Gov. Chris Christie proposes a state takeover of nearly all of the city’s operations, including the right to deal directly with municipal employee labor unions, dissolve city agencies and sell off the city’s assets. The mayor, who earlier supported a similar version of the governor’s plan, now opposes it and prefers an alternate plan from the assembly speaker that would allow the city to retain control, at least for now.

The House Committee on Natural Resources will continue its hearing today at 10 a.m. ET today to markup H.R. 5278, the “Puerto Rico Oversight, Management, and Economic Stability Act” (PROMESA). For a live webcast of the hearing, please click here.

For more news and analysis of Puerto Rico's financial crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Chicago Mayor Rahm Emanuel reached an agreement with unions on a way to shore up the smallest of the city’s struggling pension funds, saying it would create a “path to solvency” after a previous overhaul was struck down by the Illinois Supreme Court, Bloomberg News reported yesterday. The city and two unions reached a pact that — if finalized — would aid a pension that’s set to run out of money by 2029. The deal would require an increase in contributions from employees who want to retire as early as 65 and boost Chicago’s payments into the Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund by no less than 30 percent a year over five years, beginning with the contribution due in 2018. The fund serves some 8,000 employees, retirees and beneficiaries.

The agreement on May 19 between House Speaker Paul D. Ryan (R-Wis.) and the Obama administration on a measure to help Puerto Rico out of its debt crisis presents an obvious and urgently needed plan for the territory, according to a Washington Post editorial on Friday. Neither House Speaker Paul Ryan nor the Treasury Department ever contemplated using federal taxpayer funds to pay off debts incurred by the island’s government, which has been justly accused of taking a bad economy and making it worse through mismanagement and, in some cases, corruption, according to the editorial. Creditors may be bought out at a discount, giving Puerto Rico financial breathing room, in return for which the island will have to make structural reforms so it can meet reduced obligations and restart growth. Legislation to make this possible has been crafted pursuant to Congress’s constitutional authority to make laws for the territories, thus debunking another of the opponents’ claims: that a bill would set a debt-escape precedent for fiscally irresponsible states. The bill would also put a temporary halt to lawsuits by creditors and put an oversight board, appointed on a bipartisan basis by Congress and the president, in charge of Puerto Rico’s finances.

Puerto Rico Governor Alejandro García Padilla presented a $9.1 billion spending plan for the fiscal year starting July 1 that allocates just $209 million for bond interest payments, reiterating his stand that the commonwealth plans to skip most debt obligations, Bloomberg News reported yesterday. “Paying the debt in its totality would have meant taking health benefits away from more than a million people, or having to fire countless police officers and closing the Centro Medico” health facility, García Padilla said during a televised address. Or, he said, “going without school transportation and garbage collection.” Island lawmakers have until June 30 to approve a budget for fiscal 2017 or the government uses the current year’s spending plan as a framework. The budget proposal doesn’t rely on borrowing to fill a deficit and doesn’t include any tax increases, the governor said. It is $192 million less than the revised $9.3 billion fiscal 2016 budget. This is García Padilla’s final budget as he is not seeking re-election. Island officials anticipate Puerto Rico’s economy will shrink by 2 percent in fiscal 2017, for the fifth straight year of economic contraction. The administration is working on reducing the island’s $70 billion debt burden by asking investors to accept losses on their securities. The commonwealth and its agencies owe $2 billion on July 1, including $805 million for general obligations which García Padilla has said multiple times that the government doesn’t have the money to pay.

After months of political gridlock, New Jersey lawmakers reached agreement on an Atlantic City rescue plan that would give the troubled gambling hub until the end of the year to fix its finances and avoid a state takeover, Bloomberg News reported today. An assembly committee yesterday approved a measure to extend bridge loans and grants to Atlantic City, but the bill stipulated that the city would have to come up with an acceptable five-year plan or be put under state control. Mayor Don Guardian said that  he supports the bill. The full Assembly and the Senate may vote on the legislation on Thursday. "Atlantic City will now have time to take care of their own house," Assembly Speaker Vincent Prieto said before the Judiciary committee voted to move the bills forward. He said that he’s confident Republican Governor Chris Christie will support the package. Christie and the Democrat-led legislature this year have been at loggerheads over how to prevent the financial collapse of the 39,000-resident seaside town, whose gambling industry has been battered by competition from neighboring states. Christie has refused to extend aid to the city unless lawmakers approve giving the state unprecedented control over its operations and the ability to change labor contracts.