On Puerto Rico, House Republicans May Need Help From Democrats

  • Control board provisions could be weakened to secure votes
  • Negotiations continue as hearing set for next week on measure

Puerto Rico Authorizes Govt. to Halt Debt Payments

House Republicans concede they will likely need Democratic help to pass a Puerto Rico bill to address the territory’s $70 billion debt, and party leaders are trying to figure out which concessions will be needed to get it over the top.

This vote-counting process so far has been informal -- largely by telephone -- and part of a process of revising a draft version released last week by Republicans on the House Natural Resources Committee. Democrats are focusing their efforts in particular on weakening the authority of a proposed financial control board.

A hearing on the draft bill is scheduled for April 13, and the latest version is not expected to be released before Monday. Major snags and opposition persist, with many conservatives firmly opposed to provisions that would allow forced debt restructuring, according to several aides and officials with knowledge of the discussions. The bill is emerging as one of the first major legislative tests for Paul Ryan as speaker.

"As with most significant legislation brought to the floor under this Republican Congress, I expect that Republican leaders will need Democratic votes and I hope that we can reach consensus on a bill that House Democrats can support," the No. 2 House Democrat, Steny Hoyer of Maryland, said in a statement Thursday. 

A second senior Democratic official with knowledge of the negotiations confirmed that Ryan will need additional votes to get a bill passed. More than anything, this official said, that’s because House conservatives remain staunchly opposed to any debt restructuring plan for the island that would use the courts to force investors to accept losses.

Puerto Rico upped the pressure on Congress Wednesday by giving the island’s governor the power to declare a debt moratorium, ahead of a May 1 deadline when millions of dollars in bond payments come due.

Democratic Demands

In return for Democrats’ help to get the bill passed on the floor, Minority Leader Nancy Pelosi and her negotiators are insisting on several changes from the draft measure.

Primarily, Democrats object to the amount of power the draft bill would give a control board to oversee management of the island’s finances. She and others complained last week that the board would exert undemocratic authority over Puerto Rico’s government and residents.

The senior Democratic official and a Democratic aide with knowledge of the talks say negotiators are now working to soften some of the language in provisions dealing with the extent of the board’s powers and how long it would stay in place. The official declined to provide more specifics.

Natural Resources Committee

Negotiations have been complicated because the House is still away from Washington on its spring recess until next week.

The Natural Resources Committee plans to try to move the bill quickly next week, potentially aiming to have a solution in place before a $422 million debt payment by Puerto Rico’s Government Developmental Bank comes due on May 1. Another $2 billion of debt comes due on July 1.

Puerto Rico Governor Alejandro Garcia Padilla and other island officials have been pushing for something that goes beyond Chapter 9 protection under the U.S. Bankruptcy Code. Puerto Rico isn’t eligible for federal bankruptcy protection, and many congressional Republicans oppose granting it.

‘Cram-Down’ Opposed

But after the initial draft of the House bill was released last week, the chairman of the 170-member Republican Study Committee, Bill Flores of Texas, issued a statement blasting its "cram-down" language that would permit court-ordered restructuring of debt, even if Chapter 9 protection was not, technically, in the bill. 

Flores urged the chairman of the Natural Resources Committee, Rob Bishop of Utah, and House leaders to prevent any "bankruptcy-style involuntary restructuring." The RSC’s members represent the broadly conservative wing of the party.

A restructuring of Puerto Rico’s $70 billion in debt would be the biggest ever in the $3.7 trillion dollar municipal market, which state and local governments depend on for financing.

A Natural Resources Committee spokesman on Thursday didn’t respond to whether Bishop has managed to resolve the concerns within his own party. An RSC spokeswoman also didn’t return a request for comment. However, a Republican leadership aide confirmed the debt restructuring language remains a point of contention.

The Republican aide predicted Ryan will be able to put a bill on the House floor for a vote with the blessing of "a majority of the majority" of the chamber’s 246 Republicans. That would keep faith with the so-called Hastert Rule -- named for former Speaker Dennis Hastert -- requiring such a threshold of internal party support.

Vieques Complication

On another issue, House Democrats are seeking to remove language in the draft bill being pushed by Puerto Rico’s non-voting delegate Pedro Pierluisi. That provision would authorize the conveyance from the Department of Interior, without cost, of about 3,100 acres in Vieques, an island municipality, from Interior to the Puerto Rican government. Democrats are concerned the provision will result in the land being developed.

They note the language states that the purpose would be for "permitting the government of Puerto Rico, in consultation with the Municipality of Vieques, to use or further convey the property for the benefit of the Municipality of Vieques and its residents.”

Pierluisi’s office declined to comment.

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