BOSTON -- Officials at the Government Development Bank of Puerto Rico laid out a plan this week to finance approximately $8.5 billion in infrastructure repairs for the island.

The bank said it will raise the money using pension fund contributions from both the United States mainland and Puerto Rico, and proceeds from several bond sales.

Implementation of the financing plan could save the life of several of the island's struggling municipal authorities.

While the sale of municipal bonds will almost surely be part of the plan, officials at the development bank said the plan will actually require Puerto Rico to sell less debt in the long run.

About 65% of the $8.5 billion will come from the Puerto Rico authorities themselves. Bond sales probably will provide a portion of the remaining $3 billion.

According to an article in last week's issue of Caribbean Business, a large chunk of the money for the program will come from stateside pension funds.

U.S. pension funds invest about 5% of their assets in similar programs that are sponsored in developing countries. To convince U.S. pension funds to invest, development bank officials are counting on Puerto Rican pension funds to invest in the plan.

The combined value of the Puerto Rican pension funds is around $3 billion. The Government Development Bank, which manages the funds, plans to ask them to contribute 10%, or $300 million, to the infrastructure program.

Although the final plan for the financing is still being formulated, the development bank is planning public sales of stock in the island's different authorities, with the profits to be used to finance some of the infrastructure improvements.

While this means that the government will have to relinquish its total control of the authorities, several sources familiar with island finance said less federal bureaucracy would lessen the burden on the authorities.

Two of the island's authorities -- the Puerto Rico Port Authority and the Puerto Rico Aqueduct and Sewer Authority -- are being operated under a state of emergency because of poor financial performance.

The financing plan is designed to improve the island's infrastructure by funneling in billions of dollars to the authorities.

The Aqueduct and Sewer Authority would receive $2 billion, the Electric Power Authority would receive $1.5 billion, the Port Authority would get $300 million, the Highway and Transportation Authority $1.5 billion, the Urban Train $1 billion, the Puerto Rico Telephone Co. $930 million, the Solid Waste Management Authority $620 million, and the Public Buildings Authority $630 million.

Development bank officials also said that to make the plan more attractive to U.S. pension funds, the bank plans to raise further funds by selling some stock in the authorities to bank employees as part of an employee stock option plan.

If all these means of raising funds are not sufficient, the development bank has said it will sell municipal bonds and transfer the proceeds from the bond sales directly to the pension funds for use in financing the infrastructure repair projects.

Proceeds from the bonds sales could also be used to plug the $4.3 billion unfunded liability in Puerto Rico's pension funds.

Two rating agencies have cited the island's unfunded portion of the pension fund as a concern. Puerto Rico is rated A by Standard & Poor's Corp. and Baal by Moody's Investor's Service. Fitch Investors Service does not rate the island.

The Government Development Bank acts as fiscal agent for the island's governmental authorities and the commonwealth itself. Almost all of the borrowing on the island is run through the bank.

The bank estimates that it will take at least another 18 months to complete the financing plan.

Gov. Pedro Rossello is expected to approve the plan. The head of the development bank, Marco Rodriguez-Ema, and the governor are close political allies, and Rossello has been looking for a way to improve the performance of the island's authorities.

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