COMMONWEALTH OF PUERTO RICO Financial Information and Operating Data Report November 6, 2015 00307188; 1 00306980; 1 00301024; 1 00300085; 1 TABLE OF CONTENTS Page INTRODUCTION ....................................................................................................................................................... 1 Report Does Not Cover Public Corporations ...................................................................................................... 1 Forward-Looking Statements .............................................................................................................................. 1 BASIC FACTS ABOUT THE COMMONWEALTH .............................................................................................. 3 Location and Population ..................................................................................................................................... 3 Relationship with the United States .................................................................................................................... 3 Official Languages .............................................................................................................................................. 3 Government ........................................................................................................................................................ 4 Fiscal Year .......................................................................................................................................................... 4 General Fund....................................................................................................................................................... 4 Principal Officers Responsible for Fiscal Matters .............................................................................................. 4 RECENT EVENTS...................................................................................................................................................... 7 RISK FACTORS ....................................................................................................................................................... 34 FISCAL CONDITION .............................................................................................................................................. 51 Overview; Creation of Working Group for the Economic Recovery of Puerto Rico; Release of Fiscal and Economic Growth Plan; Filing of Legislation ................................................................................... 51 Prior Actions Taken by Current Administration to Achieve Fiscal Stabilization and Economic Growth ........ 51 Other Fiscal Measures Taken by Commonwealth ............................................................................................ 53 Preliminary General Fund Budgetary Revenues and Expenditures for Fiscal Year 2015; Projected Budget Deficit for Fiscal Year 2015 .......................................................................................................... 53 Preliminary General Fund Budgetary Revenues and Expenditures for Fiscal Year 2014................................. 55 Fiscal Year 2016 Budget ................................................................................................................................... 57 GDB Funding and Liquidity ............................................................................................................................. 58 Historical General Fund Budget Deficits .......................................................................................................... 62 Financial Condition of Selected Component Units ........................................................................................... 66 Condition of the Retirement Systems ............................................................................................................... 73 Liquidity Analysis of the Commonwealth by Conway MacKenzie .................................................................. 77 Enactment of Fiscal Sustainability Act ............................................................................................................. 78 Enactment of Puerto Rico Public Corporations Debt Enforcement and Recovery Act .................................... 79 United States Bankruptcy Code Amendment Initiative .................................................................................... 82 THE ECONOMY ...................................................................................................................................................... 83 Overview ........................................................................................................................................................... 83 Economic Forecast for Fiscal Years 2015 and 2016 ......................................................................................... 87 Fiscal Year 2014 ............................................................................................................................................... 87 Fiscal Year 2013 ............................................................................................................................................... 88 Employment and Unemployment ..................................................................................................................... 88 Economic Performance by Sector ..................................................................................................................... 90 Higher Education ............................................................................................................................................ 103 Tax and Other Economic Development Initiatives ......................................................................................... 104 DEBT ........................................................................................................................................................................ 117 Public Sector Debt .......................................................................................................................................... 117 Variable Rate Bonds and Mandatory Tender Bonds ....................................................................................... 122 Interest Rate Exchange Agreements ............................................................................................................... 122 Commonwealth Guaranteed Debt ................................................................................................................... 124 00307188; 1 00306980; 1 i Trends of Public Sector Debt .......................................................................................................................... 125 Debt of the Public Corporations...................................................................................................................... 126 RATINGS ................................................................................................................................................................. 128 COMMONWEALTH TAXES, OTHER REVENUES, AND EXPENDITURES .............................................. 129 Overview ......................................................................................................................................................... 129 Preliminary General Fund Budgetary Revenues and Expenditures for Fiscal Year 2015 Compared to Fiscal Year 2014 ...................................................................................................................................... 132 Preliminary General Fund Budgetary Revenues and Expenditures for Fiscal Year 2014 Compared to Fiscal Year 2013 ...................................................................................................................................... 133 General Fund Budgetary Revenues and Expenditures for Fiscal Year 2013 Compared to Fiscal Year 2012 ......................................................................................................................................................... 134 General Fund Budgetary Revenues and Expenditures for Fiscal Year 2012 Compared to Fiscal Year 2011 ......................................................................................................................................................... 134 Income Taxes .................................................................................................................................................. 135 Pass-Through Entities ..................................................................................................................................... 140 Special Excise Tax (Act 154).......................................................................................................................... 140 Sales and Use Taxes........................................................................................................................................ 142 Excise Taxes ................................................................................................................................................... 144 Property Taxes ................................................................................................................................................ 145 Other Taxes and Revenues .............................................................................................................................