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SAN JUAN, Puerto Rico (AP) — Puerto Rico's governor signed a bill late Friday that allows certain public agencies to buy up to $400 million in tax and revenue anticipation notes as the government of the U.S. territory seeks more cash amid a worsening economic crisis.
The bill aims in part to help boost the liquidity of the U.S. territory's Treasury Department, Gov. Alejandro Garcia Padilla said.
"This measure is needed given the absence of the government's usual liquidity sources," he said.
Some of the new agencies now authorized to buy such notes are government insurance companies that are flush with cash, said Puerto Rico-based economist Vicente Feliciano.
Banking institutions usually buy tax and revenue anticipation notes — or TRANs — but the governor's move shows that investors may have been spooked by the island's economic crisis, he said in a phone interview.
"It's a sign of how critical the government's situation is," Feliciano said. "The central government is looking for spare change underneath the rug to see what it can find."
The announcement comes just days after Garcia said the island's $72 billion public debt is unpayable given the current level of economic growth, and that he would seek a payment moratorium from bondholders.
Tax and revenue anticipation notes are usually repaid with upcoming tax collections, but Feliciano noted that investors likely wonder whether there'll be enough money this time as the island struggles to emerge from a nearly decade-long economic slump.
Last fiscal year, the island's government issued $1.2 billion worth of TRANs, with $900 billion placed with banking institutions, according to statistics with Puerto Rico's Government Development Bank. The newly approved bill states the bank will be responsible for overseeing a new fund that will collect certain government revenue that the government can access if the Treasury Department's monthly revenue forecasts exceed collections.
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