Last month, municipal bond expert Kristi Culpepper wrote a detailed piece on what a federal financial control board for Puerto Rico could look like. She also argues that allowing Puerto Rico’s municipalities and utilities to have access to Chapter 9 would not be a solution, because “the bonds issued by Puerto Rico’s public corporations are of a variety that other provisions in Chapter 9 protect from being impaired — that is, “special revenue” debt.”
She explains:
Basically, if H.R. 870 is enacted, Puerto Rico still wouldn’t be able to adjust its debts.
It should likewise be noted that proponents of H.R. 870 are not the only ones with weak arguments. One of the claims frequently made by opponents is that Congress cannot (or should not) pass legislation that would retroactively alter the terms of outstanding debt. This is absolutely possible and how Chapter 9 came into existence in the first place.
Given the current atmosphere where it seems concrete proposals are non-existent, this is a definite must-read, for its depth and clear arguments. Even if you do not agree with its statements, it is something to consider, especially if you happen to be a member of Congress and do not know what to do about Puerto Rico. Hint, hint.
