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Puerto Rico's top financial officials will be in New York next week for a meeting with Puerto Rico's creditors. The U.S. territory is more than $70 billion in debt, a debt Puerto Rico's governor says the island can't pay. While those negotiations move forward, Puerto Rico also wants help from Washington. It's asking Congress to allow it to seek protection from creditors through bankruptcy. NPR's Greg Allen reports that some key Republicans are reluctant.
GREG ALLEN, BYLINE: Under U.S. law, states can't declare bankruptcy, but municipalities and publicly-owned corporations can and do. Detroit sought court protection through Chapter 9 two years ago, when it defaulted on its $18 billion debt. A few years earlier, Jefferson County, Ala. went into bankruptcy. Before that, it was Orange County and Stockton, Calif. The list goes on, and it includes many public corporations - things like hospital districts, water and municipal waste authorities. Puerto Rico isn't a U.S. state. As a territory, it's often treated as one, but not in regards to bankruptcy.
RICHARD BLUMENTHAL: And Chapter 9 applies to every other municipal or public corporation entity throughout the United States except in Puerto Rico.
ALLEN: Senator Richard Blumenthal from Connecticut is one of the Democrats in Congress working to fix what many believe is an oversight. In 1984, when Congress changed the bankruptcy code, it left Puerto Rico out of the bill. Blumenthal says his bill and a similar one in the House would remedy that.
BLUMENTHAL: This bill would essentially enable a town or city or a public corporation, like the electric utility, to use in Chapter 9 in an orderly workout of debt.
ALLEN: It sounds like a simple fix, but it's run into strong opposition in Washington. The 60 Plus Association, a seniors' advocacy group that bills itself as a conservative alternative to AARP, has run ads calling the bill a bailout. Senator Blumenthal says that's just not true.
BLUMENTHAL: There's no bailouts, no federal money, no federal cost involved.
ALLEN: Some of the most serious opposition to the bill, though, comes from a group of investment firms. Michael Lipsky is with MatlinPatterson Global Advisers, a firm with holdings in Puerto Rico's public corporations. A problem with the bill, he says, is that it seeks to change the rules in the middle of the game.
MICHAEL LIPSKY: This debt was issued and was bought by investors knowing that it could never be eligible for Chapter 9 - that it was exempt from Chapter 9 - and now you want to retroactively change the contract on investors.
ALLEN: In the House, the bill extending Chapter 9 to Puerto Rico is on hold. Yesterday after a meeting on the bill, Judiciary Committee chairman Bob Goodlatte said, giving Puerto Rico access to Chapter 9 would not by itself solve the island's financial problems. On that point, there's wide agreement. Puerto Rico Governor Alejandro Garcia Padilla's administration recently pushed through a big sales-tax increase, and he's told island residents they would be called on to make more sacrifices. But in an interview over the weekend, on the Spanish language network, Telemundo, Garcia called on Puerto Ricans living on the mainland to exert their political clout.
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ALEJANDRO GARCIA PADILLA: (Foreign language spoken).
ALLEN: "Puerto Ricans should put pressure on Democrats and Republicans running for president," Garcia said, "especially in Florida, an important battleground state." A few days later, Democrat Hillary Clinton came out in support of the bankruptcy bill, a position already taken by a leader in Republican presidential polls - Florida's former Governor Jeb Bush. Greg Allen, NPR News, Miami. Transcript provided by NPR, Copyright NPR.
