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AN ACT

VIEWS: 21 PAGES: 9

  • pg 1
									(H. B. 1527)


                                 (No. 146)

                            (October 11, 2001)


                                AN ACT
To authorize the Municipal Revenue Collection Center (MRCC) to obtain a
    loan to pay in advance the bond issue made for the transaction of the
    sale of the tax debts pending collection by the municipalities, and to
    provide so that, pursuant to certain order of payment, the point forty-
    eight (.48) percent that results from the increase in the General Fund
    subsidy to the municipalities, as provided in Section 16 of Act No. 80
    of August 30, 1991, as amended, plus the recoveries of the debts sold,
    be also appropriated to reduce the balance; to authorize the payment of
    any deficiency with municipal operational funds; and to provide that
    those municipalities that have obtained a loan under Act No. 42 of
    January 26, 2000, and which also avail themselves of the provisions of
    this Act, shall have the option to extend their term pursuant to what is
    established in this Act. The MRCC is also authorized to obtain another
    loan to refinance the payment of the debt contracted by said body in
    relation to the implantation and design of the cadastre digitalization
    project (Land Information Management System - LIMS). The loan
    authorized for these purposes by this Act shall be formalized for a
    minimum term of ten years and the payments to amortize said debt
    shall be made with the amounts withheld by the MRCC from municipal
    revenues for the payment of the contract for the LIMS Project, by
    adjusting said withholdings to the terms of the new loan.

                      STATEMENT OF MOTIVES
     Act No. 21 of June 26, 1997, as amended, authorized the sale by the
Municipal Revenue Collection Center (the MRCC) of the tax debts
corresponding to fiscal years 1974-75 and thereafter. To facilitate the sale,
the Public Financing Corporation, a subsidiary of the Government
Development Bank for Puerto Rico, bought the delinquent debts from the
MRCC and paid the purchase price with a bond issue. Said delinquent debts
serve as collateral for the bonds. The MRCC assumed the obligation of
substituting those debts that are defective by surrendering one or various
valid debts or with cash in an amount equal to the delinquent debt plus
interest. The defective debt accumulated totals a very high amount, the
substitution of which would be burdensome for the municipalities.
     The Public Financing Corporation intends to pay in advance the bond
debt with a line of credit issued by the Government Development Bank in
favor of the MRCC.        This line of credit shall be paid by the Central
Government and the debtor municipalities in proportion to the balance owed
by each one and thus, they shall cancel the delinquent debt sale transaction
and its service contract, and pay for incidental expenses.
      As part of the efforts conducted by the MRCC administration during
the past eight (8) years preceding the change in Government occurred in
Puerto Rico after the elections of November 2000, a contract was formalized
for the sum of fifty-six million dollars ($56 million) for the digitalization
and implementation of the cadastre. This decision was made without taking
into account and without having obtained the approval of the municipalities
despite the fact that these are the ones responsible for paying the cost of the
abovementioned contract.       The MRCC withholds from the municipal
revenues the sum necessary to pay for the debt contracted on account
thereof, whose present term is seven (7) years. The loan authorized by this
Act is convenient for the municipalities, because the term would be extended
for up to ten (10) years and at an interest rate lower than that settled on in the
agreements in effect, which in turn benefits the flow of funds and the
municipal financial operations.
     This Act responds to the petition of Mayors to solve the problem that
the sale of delinquent debts has brought about to each municipality and has
the purpose of allowing the MRCC to incur a debt for the line of credit to be
provided by the Bank to pay in advance the bond debt and incidental
expenses, and to provide the mechanism of payment for debtor
municipalities.
BE IT ENACTED BY THE LEGISLATURE OF PUERTO RICO:
     Section 1.—The Municipal Revenue Collection Center (MRCC) is
hereby empowered to procure and obtain, in representation of the
municipalities that so accept pursuant to the provisions of this Act, a special
loan in the form of a line of credit (the loan) with the Government
Development Bank for Puerto Rico (the Bank) to pay in advance the amount
necessary to cancel the bond issue made to transact the sale of the tax debts
pending collection by the municipalities. The point forty-eight (.48) percent
increase that results from the net increase in the General Fund subsidy to
municipalities, as provided for in Section 16 of Act No. 80 of August 30,
1991, as amended, shall be appropriated for the payment of interest on this
loan for the first five (5) years by those municipalities participating in the
financing, at the end of which term the balance owed on leveled payments of
principal and interest for twenty-five (25) years until paid up in full;
provided, that any deficiency that may arise shall be paid from the
operational funds of each municipality and the appropriation of the net
increment in the General Fund subsidy shall take into account the
appropriations made by the municipalities to pay the loan authorized by Act
No. 42 of January 26, 2000. Those municipalities that do not participate as
debtors in the loans referred to shall benefit from the raise in subsidy
pursuant to the provisions of Act No. 80, supra. Provided also, that during
the first five (5) years of the loan, the recoveries of the tax debts related with
the transaction of the cancelled debt, shall be applied to the principal of the
loan to reduce the responsibility of each encumbered municipality.
       Section 2.—The amount to be financed as finally determined shall be
presented by the MRCC Executive Director for the consideration and
approval of the MRCC Governing Board. Said presentation shall include
the pertinent information in terms of the proportion from the total loan that
corresponds to each municipality affected by the obligation of paying in
advance the balance of the debt incurred in the bond issue for the transaction
of the sale of tax debts, pursuant to the provisions of Section 1 of this Act.
       Section 3.—During the first twenty (20) work days following the date
of approval of the loan by the MRCC Governing Board, the MRCC
Executive Director shall notify the Mayor of each municipality the
proportion of the loan of the corresponding proportion to be paid, pursuant
to the provisions of Section 2. The Mayor and the Municipal Assembly of
each municipality thus affected shall have twenty (20) days as of the date of
receipt of the notice issued by the MRCC Executive Director, to accept and
approve by Resolution its participation in the financing authorized by this
Act.    Upon approval of the financing, the Mayor shall formalize the
financing according to the terms and conditions authorized by this Act. In
those cases in which the Mayor and the Municipal Assembly do not accept
to participate in the loan, the obligations of the municipality incurred as a
result of the sale of delinquent debts.
       Section 4.—The MRCC Governing Board is hereby authorized to
negotiate and formalize the loan contract with the Bank authorized by this
Act on those grounds relative to Act No. 21 of June 26, 1997, which
authorized the sale by the MRCC of tax debts and Act No. 42 of January 26,
2000, under the following terms and conditions:
     (a)       The loan term shall not exceed thirty (30) years, divided as
               stated in Section 1 of this Act; provided, that said term could
               be granted for a lesser period if the fiscal situation of the
               municipalities so allow or in those cases in which the eligible
               municipalities with sufficient payment capacity so request.
     (b)       The payments of principal and interest for amortizing the
               loan, pursuant to the provided structures, up to its final
               payment, are the responsibility of the affected municipalities
               that have agreed to avail themselves to the loan provided for
               in this Act.   Said payments shall be proportional to the
               amount of the loan corresponding to each municipality.
     (c)       The interest rate yielded by the loan shall be determined by
               the Bank pursuant to its fiscal criteria and attune with this
               Act.
     (d)       The debenture to be subscribed shall be formalized between
               the MRCC Executive Director and the President of the
               Government Development Bank, with the attachments whose
               formalization is necessary, to evince the debt financed,
               accepted and approve by each municipality.
     Section 5.—The MRCC Governing Board is hereby empowered,
through its Executive Director, to negotiate a loan contract with a financing
entity, authorized under the following terms and conditions:
     (a)       The loan’s principal shall not exceed the sum of sixty-nine
               (69) dollars and its yield shall be used to pay for the balance
               of the debt contracted by the MRCC and to return to the
               municipalities any amounts unduly withheld during the last
               three and a half (3 ½).
     (b)       The loan shall have a minimum term of ten (10) years.
     (c)       The payments of principal and interest to amortize the loan
               up to its final payment are the responsibility of the
               municipalities. The portion corresponding each municipality
               in terms of payment shall be determined by the MRCC
               Executive Director by following the basic criteria governing
               the loan in effect.
     (d)       The interest rate to be yielded by the loan shall be
               determined by the financial entity, subject to its fiscal criteria
               and pursuant to this Act.
     (e)       The debenture to be subscribed shall be formalized between
               the MRCC Executive Director and a duly authorized official
               of the financial entity with any attachments whose
               formalization is necessary to evince the financed, accepted
               and approved debt.
     Section 6.—The guarantee of payment contracted by the MRCC
pursuant to what is established above shall constitute a legal obligation of
this body with the Bank and shall be guaranteed with the payment flow
agreed to with the corresponding municipalities. Thus shall it be recorded
on the financing documents to be formalized in order for the loan to be
granted.
     Section 7.—Payments for the loan to be granted under this Act shall not
be taken into account when calculating the five (5)-percent maximum for
servicing of debt established in subsection (c) of Section 16 of Act No. 64 of
July 3, 1996, as amended, known as the “Puerto Rico Municipal Financing
Act.” In the event that a municipality that avails itself of the terms of this
Act has also obtained a loan under the terms of Act No. 42 of January 26,
2000, the latter may be restructured along with the current debt at the term
provided for in subsection (a) of Section 4.
     Section 8.—The MRCC Executive Director is hereby authorized to
deduct from the monthly transfers to the corresponding municipalities, an
amount equal to the payment of principal and interest of the debt authorized
by this Act and to remit it to the Government Development Bank. He/she is
also authorized to withhold from the monthly transfers the amount owed
resulting from the sale of delinquent debts to those municipalities that do not
avail themselves of the financing provided for in this Act.
     Section 9.—The Government Development Bank is hereby authorized
to negotiate, sell, post as guarantee or pledge the loan authorized by this Act.
     Section 10.—This Act shall begin to take effect immediately after its
approval.
                                    CERTIFICATION



I hereby certify to the Secretary of State that the following Act No. 146 (H.B. 1527) of
the 1st Session of the 14th Legislature of Puerto Rico:


AN ACT to authorize the Municipal Revenue Collection Center (MRCC) to obtain a loan
        to pay in advance the bond issue made for the transaction of the sale of the tax
        debts pending collection by the municipalities, and to provide so that,
        pursuant to certain order of payment, the point forty-eight (.48) percent that
        results from the increase in the General Fund subsidy to the municipalities, as
        provided in Section 16 of Act No. 80 of August 30, 1991, as amended, plus
        the recoveries of the debts sold, be also appropriated to reduce the balance; to
        authorize the payment of any deficiency with municipal operational funds;
        and to provide that those municipalities that have obtained a loan under Act
        No. 42 of January 26, 2000, and which also avail themselves of the provisions
        of this Act, shall have the option to extend their term pursuant to what is
        established in this Act, etc.,

has been translated from Spanish to English and that the English version is correct.


In San Juan, Puerto Rico, today 20th of January of 2005.




                                     Marialma Alfau-Alemán
                                       Acting Director

								
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