Puerto Rico’s Revenue Below Forecast in Year That Just Ended

  • Tax receipts for the year are $117 million below budget
  • Personal and business tax revenue came in below projections

Puerto Rico collected $9.7 billion of general-fund revenue in fiscal 2016, $117 million less than estimated in the island’s budget, as individual and corporate tax receipts were below projections.

The commonwealth brought in $2 billion of personal-income tax revenue in the 12 months ended June 30, making up the largest share of the budget, Treasury Secretary Juan Zaragoza said in a statement late Thursday. Puerto Rico collected about $1.7 billion of corporate tax receipts. Individual and business revenue was $51 million below revised budgeted estimates.

Puerto Rico on July 1 defaulted on nearly $1 billion of debt principal and interest payments, the largest such failure in the $3.7 trillion municipal-bond market. Governor Alejandro Garcia Padilla said he needed the funds to maintain essential services. President Barack Obama on June 30 enacted a law to create a federal control board to manage any debt restructuring and end the island’s chronic budget shortfalls.

Investors trade commonwealth securities anticipating they won’t be paid in full. Puerto Rico general obligations with an 8 percent coupon and maturing July 2035, the most-actively traded commonwealth bonds in the past three months, changed hands Thursday at an average price of 65.5 cents on the dollar, down from 73.5 cents at the start of 2016, data compiled by Bloomberg show.

Tax receipts on foreign manufacturers totaled $1.86 billion, the general fund’s second-largest revenue stream. It was about $16 million below estimates.

The general fund received $1.56 billion of sales-tax receipts, about $27 million more than projected. The island collected a total of $2.4 billion of sales-tax revenue in fiscal 2016, including $696 million that went to repay debt, called Cofina bonds, that are backed by the revenue stream.

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