U.S. Markets

Puerto Rico governor ups revenue forecast in revised fiscal plan

Governor Ricardo Rossello (L) talks with reporters after a speech in San Juan, Puerto Rico, March 9, 2017. REUTERS/Nick Brown

(Reuters) - Puerto Rico’s governor said on Saturday he has delivered a revised fiscal turnaround plan to the U.S. territory’s financial oversight board that includes $262 million in additional revenue and changes to healthcare funding.

Governor Ricardo Rossello’s initial plan, presented on Feb. 28, was rejected by the board, which said it relied on overly optimistic baseline revenue and economic growth forecasts.

The board must approve a turnaround blueprint for the island under the federal Puerto Rico rescue law known as PROMESA. It has said it plans to do by March 15.

Francisco Cimadevilla, a spokesman for the board, said the seven-member panel is still evaluating the new proposal and will not have any comment before a public hearing in New York on Monday.

Rossello’s office issued a statement on Saturday announcing the revamped plan, but gave little detail. It said the plan would continue to try to protect Puerto Rico’s most vulnerable citizens. “Our administration’s plan remains the same: to avoid affecting the most vulnerable and to operate a fiscally responsible government,” Rossello said in the statement.

Puerto Rico, plagued by a 45 percent poverty rate and shrinking population, is trying to restructure $70 billion in debt. The fiscal plan will serve as the baseline for restructuring talks with wide-ranging bondholder groups.

Rossello’s earlier draft set aside $1.2 billion a year to service debt, just 30 percent of what it owes next fiscal year. It proposed cuts to healthcare spending and pension benefits, and projected creating $33.8 billion over 10 years through myriad spending cuts and $12.9 billion in new revenue.

The board on Thursday announced it would not approve Rossello’s plan as constructed, saying it used “overly optimistic” forecasts for economic growth rates and for a return to nominal economic growth.

It also said the projections failed “to reflect near-certain declines in baseline revenues associated with corporate taxes and non-resident withholding taxes.”

Reporting by Nick Brown in New York; Editing by Franklin Paul and Matthew Lewis