P.R. Laws tit. 22, § 1097
(a) Authorization to issue bonds; revitalization charges.— The Corporation is hereby authorized to from time to time, without review or approval by any other government entity, except as provided in this statute, to issue bonds up to the maximum amount of nine hundred (900) million dollars to fund the development of the Authority’s Capital Improvement Program, as provided in clauses (a), (b), (c), (e), (f), (g) and (h) of subsection (15) of § 1093 of this title. The difference between the nine hundred (900) million dollars of the Capital Improvement Program and the maximum that can be financed with the twenty (20) percent of the charges billed by the Authority as provided in subsection (16) of § 1096 of this title, may be used to finance other approved financing costs as provided in clause (d) of subsection (15) of § 1093 of this title, in accordance with the provisions of the authorized financing resolution that has been subject to final approval under the provisions of this section. In addition, in order to retire, cancel (defease) or refinance all or part of the debt issued by the Authority, it shall satisfy the conditions, if any, therefor set forth in any then existing trust agreement, as well as the following conditions:
(1) The value at which bonds may be redeemed, cancelled (defeased,) or refinanced shall not exceed eighty-five percent (85%) of its nominal or face value;
(2) the bonds to be issued for redemption, cancellation (defeasance), or refinancing shall not require the payment of principal for at least the first five (5) years from the date on which they were issued; and
(3) The interest rate of the bonds to be issued varies according to the rating given to such Bonds, consistent with the following table:
Interest Rate For Current Interest Bond Payments: For Convertible Capital Appreciation Bonds: · the weighted average interest rate across maturity (based on the yield curve) shall be set at specified rates, subject to a final investment grade rating as follows: · the weighted average interest rate/appreciation across maturity (based on the yield curve) be set at specified rates, subject to final investment grade rating as follows: AAA: 4.00% AAA: 4.50% AA+/AA/AA-: 4.25% AA+/AA/AA-: 4.75% A+/A/A-: 4.50% A+/A/A-: 5.25% BBB+/BBB/BBB- or less: 4.75% BBB+/BBB/BBB- or less: 5.50%
bond issues made by the Corporation shall be coordinated with PRFAFAA for the purpose of avoiding conflicts with other bond issues of the Commonwealth of Puerto Rico or its instrumentalities. In exercising this power, PRFAFAA shall act with reasonable promptness and ensure that any bond issue of the Corporation is not unreasonably delayed.
The authorization to issue bonds shall be subject to the conditions established in the corresponding financing resolution that has the final approval of PRFAFAA, in accordance with the provisions of this section.
The maximum sum or amount of bonds to be issued, up to nine hundred (900) million dollars, shall include every interim financing issued or incurred by the Authority in anticipation of the issuance of bonds or Bond Anticipation Notes (BANs) duly authorized in accordance with the provisions of this chapter. Once the maximum sum or amount of bonds to be issued has been exhausted, the Corporation and the Authority shall appear before the Legislative Assembly in order to inform the latter on the uses given to the bonds so issued, as well as on additional financing needs that the Authority may have, and if necessary, to request a new authorization to increase the maximum amount or number of bonds to be issued under this chapter.
(b) Approval process.—
(1) Notwithstanding any other provision of law to the contrary, on or before sixty (60) days after the date of approval of this act, the Corporation shall have submitted a financing resolution to the PRFAFAA for final approval. On or before the first fifteen (15) days of this term, the Corporation, in collaboration with the Authority and the financial advice of the PRFAFAA shall prepare and complete a proposed financing resolution which shall include the content required in accordance with this chapter. Moreover, it shall prepare during said term a detailed explanatory report of the grounds or circumstances that led to its decision, which report shall meet the criteria and principles to determine and allocate the revitalization charges among the customer class and to fix and adjust the revitalization charges that are mentioned hereafter. This proposed financing resolution shall be submitted to a public hearing and initial approval process provided in clause (4) of this subsection.
During the drafting period, the Corporation shall provide relevant information to PRFAFAA so that the latter is informed of the elements considered by the Corporation to establish the revitalization charges. In turn, PRFAFAA shall participate in the drafting process of the proposed financing resolution for the purpose of being informed of the details related to the drafting process and supporting criteria of the proposed financing resolution, as well as submitting specific recommendations on issues or aspects that shall be addressed or included in said document as part of the processes for its initial approval.
In order to determine and allocate the revitalization charges among customer classes and to fix and adjust the revitalization charges to be included in the proposed financing resolution the following criteria shall be met:
(A) The portion of the financing costs to be recovered from each customer class shall be calculated based on the water and/or sewer consumption history for each customer class, as such information is provided by the Authority, and as the Corporation determines, in a manner that is not arbitrary or capricious, that it may be best administered and would ensure full and timely payment of the bonds, in accordance with the terms thereof, and other ongoing financing costs;
(B) Once the financing costs to be recovered from each customer class are allocated, (i) the revitalization charges for customers (other than residential customers) shall be based on the water and/or sewer consumption history, and (ii) the revitalization charges for all residential customers shall be charged per customer (per capita), based on the water and/or sewer consumption history, as such information is provided by the Authority, and as the Corporation determines, in a manner that is not arbitrary or capricious, that it may be best administered and would ensure full and timely payment of the bonds, in accordance with the terms thereof, and other ongoing financing costs;
(C) Delinquency of any class of customers shall be added to the revenue requirement for the next periods and shall be allocated among all customer classes, as provided in paragraphs (A) and (B) of this clause. Likewise, any excess or surplus over the revenue estimate as a result of the prompt payment of any customer class shall be allocated and distributed among all customer classes for the next period or cycle of the charge.
(2) The report or the proposed financing resolution shall also include:
(A) A description of the ongoing financing costs;
(B) The determination of customer classes among which the ongoing financing costs shall be allocated and the allocation of the ongoing financing costs among customer classes;
(C) The calculation of revitalization charges for customers, by class;
(D) A provision that delinquencies of any customer class shall be allocated among all customer classes as provided in paragraph (B), (C), and (D) of this clause and shall be included in the adjustment mechanism. Likewise, any excess or surplus over the revenue estimate as a result of the prompt payment of any customer class shall be allocated and distributed among all customer classes for the next period or cycle of the charge.
(E) The Corporation’s determination on the following:
(i) The allocations of paragraphs (B), (C), and (D) of this clause are practical to administer and ensure full and timely payment of the ongoing financing costs, during the effective term of the bonds;
(ii) The consumption history data of each customer class that serves as the basis for the allocations set forth in paragraphs (B), (C), and (D) of this clause certified by an Authority’s officer.
(iii) That the proposed financing resolution meets the requirements established in clauses (1) and (2) of this subsection and other applicable requirements established in this chapter.
(3) Such report and proposed financing resolution shall be the basis to initiate the process described below in clauses (4) and (5) and, upon conclusion and determination of the Board of the Corporation, the financing resolution shall be deemed to be initially approved. The financing resolution thus approved within a term not to exceed one hundred (100) days from the approval of this act shall be forwarded to PRFAFAA for review and final approval or recommendation for modification in accordance with the provisions of clause (4) of this subsection. Once approved by PRFAFAA, the financing resolution shall be deemed to have the final approval for the commencement of the subsequent procedures, as required by this chapter.
(4) The public hearing and initial approval processes by the Corporation shall be as follows:
(A) The Authority and the Corporation shall publish on their websites, the proposed financing resolution on or before fifteen (15) days following the date of approval of the act, and the related report approved by the Corporation together with the notice of the holding of one or more public hearings at least ten (10) days prior to holding of such hearing, which notice shall include the matters to be discussed in the hearing, the place, date and time where the hearing or hearings are to be held. The notice shall also comply with the following: (i) said notice shall be published in two (2) newspapers of general circulation in the Commonwealth of Puerto Rico at least twice (2) during such ten (10)-day period, (ii) a copy of said notice shall be exhibited during such ten (10)-day period in the main offices of the Corporation and of the Authority, as well as in the commercial offices of the Authority, in a conspicuous place accessible to the public during regular business hours, and (iii) a copy of such notice along with copies of the form of the Corporation’s initial financing resolution, the report, and all supporting documents thereof required to be filed along with the request shall be posted on the websites of the Authority, the Corporation, and the Government Development Bank for Puerto Rico, safeguarding any confidential or privileged information included therein, if any. The hearing or hearings shall be held to gather the general opinions of the citizens on the compliance with the methodology for calculating the Corporation’s revitalization charges and adjustment mechanism with the established criteria. At least five (5) public hearings shall be held in accessible locations that promote the most comprehensive and effective citizen participation. The Corporation shall appoint an independent hearing officer to preside over the public hearing or hearings.
(B) The hearing officer for this special proceeding shall be granted a term not greater than twenty (20) days after the conclusion of the last public hearing to file a report with the Corporation which shall include an account of all objections, positions, opinions, documents, studies, recommendations and any other pertinent information furnished at the hearings, as well as his conclusions and recommendations, and a brief account of how the objections, proposals, opinions and recommendations furnished were addressed. The report shall be published on the websites of the Corporation, the Government Development Bank, and the Authority within forty-eight (48) hours after the filing thereof.
(C) The Corporation shall review the report of the hearing officer and any comments received on the report, and shall issue a resolution regarding the financing resolution, including the approval or revision of the methodology for calculating the Corporation’s revitalization charges and adjustment mechanism, which initial approval shall be published on the websites of the Corporation, the Authority, and the Government Development Bank together with an explanatory report on its determination regarding the suggestions and/or recommendations of the hearing officer.
(5) The financing resolution initially approved by the Corporation shall be forwarded to PRFAFAA for review and final approval or recommendation of modifications. The PRFAFAA shall review and submit its determination of final approval or rejection together with its recommendations for modifications to the Resolution, in a term not to exceed ten (10) days as of the filing of the request for authorization by the Corporation of the initially approved financing resolution. In the event that the PRFAFAA does not recommend the approval of the financing resolution, the Corporation shall have ten (10) days from PRFAFAA’s notice to address the recommended modifications. Once the Corporation submits the financing resolution duly modified, PRFAFAA shall have ten (10) days from the receipt of the document to issue its final determination. In the discharge of its duties and responsibilities of reviewing the financing resolution, PRFAFAA may seek the collaboration and assistance of other government agencies or advisors with the required knowledge and expertise, including the Energy Commission created under Act No. 57-2014, as amended.
(A) In its assessment, the PRFAFAA shall consider the following factors:
(i) That the financing resolution fully meets the requirements of this chapter.
(ii) That the criteria and principles for determining and allocating the revitalization charges among customer classes, as well as fixing and adjusting revitalization charges, according to the provisions of this chapter were fully met.
(iii) That the determination of the revitalization charges and adjustment mechanism of such charges was not adopted in an arbitrary or capricious manner, and that they are fair and reasonable when compared to the parameters used by public utilities in other jurisdictions of the United States of America that have used similar financing mechanisms.
(iv) That the notice and public hearing process established in this chapter was thoroughly complied with, and that the objections, proposals, opinions, and recommendations presented were duly considered.
(v) That the proposed bond issue shall further the goals and objectives of the Capital Improvement Program of the Aqueduct and Sewer Authority and that such works are necessary for the economic development and welfare of the Island.
(B) The PRFAFAA may invoice and charge the Corporation or the Authority, and the latter may, in turn, bill the Corporation, for the procedures related to the financing resolution verification and review process up to a maximum of two hundred thousand dollars ($200,000). In order to streamline process of hiring experts and adequate resources for the verification and review of the financing resolution, the PRFAFAA may require the Authority or the Corporation to advance the necessary funds for such purposes.
(C) The PRFAFAA shall adopt the rules and regulations that may be necessary to govern the review process, without being subject to the provisions of §§ 2101 et seq. of Title 3, known as “Uniform Administrative Procedure Act”.
(6) Any court proceedings challenging a final financing resolution or the findings and determinations stated therein, including the methodology for calculating the revitalization charges and adjustment mechanism, shall only be brought in accordance with the procedures set forth in subsection (c) of this section, and the court shall review such findings and determinations on the basis of whether the Corporation acted in an arbitrary and capricious manner.
(7) The provisions of the Uniform Administrative Procedures Act, §§ 2101 et seq. of Title 3, shall not apply to the processes outlined in this subsection.
(8) Prior to any issue of a public debt of the Corporation, the Corporation shall notify PRFAFAA about any proposed issue within at least ten (10) days prior to the date of publication of the preliminary official statement (POS). PRFAFAA shall evaluate and approve the issue. Such approval shall be issued in writing no later than ten (10) days from the Corporation’s notification to PRFAFAA of the proposed issue. If such period has elapsed and PRFAFAA has failed to notify its approval or rejection to the proposed issue, the Corporation may continue with the bond issue process. The Legislative Assembly believes that PRFAFAA should not approve the proposed issue, if it determines that the average amount to be paid by the customers of the Authority and the Corporation, along with and at the time of issue, would be greater than the average billing to the Authority’s customers prior to the issue of securitization bonds. Provided, that for these purposes the Authority may grant credits or use other mechanisms that it deems appropriate.
(c) Validation of this chapter, final financing resolution and initial bond issue.—
Notice of Enactment of the Puerto Rico Aqueduct and Sewer Authority Revitalization Act Final Financing Resolution and Authorization to Issue Bonds
On [insert date], Act No. approved on, 2016 took effect (hereinafter the “Act”). On [_] Resolution number [_] was adopted authorizing the issuance by the Puerto Rico Aqueduct and Sewer Authority Revitalization Corporation (the “Corporation”) of [_] bonds in an amount of up to [$__]. In relation to such issuance, under the terms of the Financing Resolution, and pursuant to the authority granted to the Corporation under the Act, the Corporation shall impose a Revitalization Charge in the amount of [_] to the Customers of the Puerto Rico Aqueduct and Sewer Authority which shall take effect immediately after the bonds are issued. Any interested party may, on or before [_] [not later than [sixty (60)] days after the first publication of notice], appear and contest before the Court of First Instance, San Juan Part, the legality or validity of this Act, of the Final Financing Resolution, of the Revitalization Charges, the Bonds, any matter sought to be determined or any matter related thereto. No court shall have jurisdiction over any action related to the aforementioned Act, the Final Financing Resolution, of the Revitalization Charges, the Bonds, or any matter sought to be determined, if such action is filed after the specified date. No contest, except by the Corporation, of any issue or matter under the aforementioned Act, the Final Financing Resolution, of the Revitalization Charges, the Bonds, or any matter sought to be determined shall be made other than within the time and the manner herein specified.
[Detailed summary; additional information]
Puerto Rico Aqueduct and Sewer Authority Revitalization Corporation
(1) After final approval of the financing resolution and before the award of the initial bond issue, the Corporation or PRFAFAA shall publish a notice in the manner provided in clause (2) of this subsection notifying the interested parties that they shall have a statute of repose of sixty (60) days after the publication of the notice as provided in clause (2) of this subsection to bring an action before the San Juan Part of the Court of First Instance of the Commonwealth of Puerto Rico (the “Court”), to determine, among other things:
(A) The validity of this chapter;
(B) That any provision of this chapter, including the imposition of revitalization charges, neither results in the breach or impairment of any contract or agreement executed between the Commonwealth of Puerto Rico or the Authority and the holders of the bonds or other creditors of the Authority, nor in the taking of property by the Commonwealth of Puerto Rico without just compensation;
(C) That the money to be received from revitalization charges by or on behalf of the Corporation or any servicer constitute revenues and income of the Corporation and not of the Authority or any other person, and shall not constitute available resources of the Commonwealth of Puerto Rico; and that revitalization charge shall constitute a tax or levy, and that the right of the Corporation to impose and collect revitalization charges may not be revoked or terminated;
(D) That the revitalization charge revenues are not subject to any lien or charge whatsoever by holders of the bonds or other creditors of the Authority or any other person other than the lien or levy of the applicable trust agreement to be entered into in connection with the issuance of the applicable bonds;
(E) That neither the issuance of the bonds nor the amount of the revitalization charge results in the breach of any contract or agreement executed between the Commonwealth of Puerto Rico or the Authority and the bondholders or other creditors of the Authority, any fraudulent conveyance or any taking of property by the Commonwealth of Puerto Rico without just compensation or is otherwise subject to annulment or rescission; and
(F) Any matters relating to the foregoing including those pertaining to the Constitution of the United States or of the Commonwealth of Puerto Rico.
(G) The validity of the financing resolution and approval of the Bonds by the Corporation, including provisions for the payment of such bonds, the validity of such bonds, the creation of financing property, and the validity of the formula or formulas used to establish the amount of such revitalization charges for each customer class, including the allocation of financing costs among customer classes and all procedures of the Corporation related thereto; and
(H) That the validity and applicability of the revitalization charges and the adjustment mechanism and the right of the Corporation to impose and collect revitalization charges may not be revoked or terminated.
For purposes of paragraphs (G) and (H) above, as provided in subsection (b)(5) of this section, any legal proceedings challenging the matters covered by these provisions shall be submitted under the procedures established in this subsection.
For the purposes of this section, the bonds and revitalization charges shall be considered as existing from the time of their authorization, and the bonds and revitalization charges shall be understood to be authorized from the date on which the financing resolution is validated by the PRFAFAA by means of the approval of said final resolution.
(2) The Corporation or the PRFAFAA, acting on behalf of the Corporation, shall notify all interested persons of the opportunity to challenge their validity of the act, its implementation, the final financing resolution, or any other matter to be determined, through a notice for such purposes to be published once (1) a week for three (3) consecutive weeks in a newspaper of general circulation in the Commonwealth of Puerto Rico and in a newspaper of general circulation or a financial journal published or circulated in the City of New York. In addition, (i) the Corporation, the PRFAFAA and the Authority shall post a copy of the notice on their websites not later than five (5) days after the first publication thereof; (ii) the Corporation or the PRFAFAA acting on behalf of the Corporation shall (A) deliver, or cause to be delivered, a copy of the notice to those interested persons (to the extent known by the Corporation or the PRFAFAA) listed in clauses (a) through (e) of the definition of “interested person” provided in § 1093 of this title, and (B) file or cause the Authority to file a copy of the notice with the Electronic Municipal Market Access maintained by the Municipal Securities Rulemaking Board (or its equivalent); (iii) the Authority shall deliver a copy of the Corporation’s notice referred to above to all customers by means of (A) a direct mailing of such notice to such Customers not later than ten (10) days after the first publication of the notice in a newspaper of general circulation in the Commonwealth of Puerto Rico and in a newspaper of general circulation or a financial journal published or circulated in the City of New York, or (B) an insert included in the next billing statement sent by the Authority to its customers after the first of such publication is made and to all interested persons listed in clause (g) of said definition; and (iv) not later than fifteen (15) days after the first such publication, the Corporation or the Authority shall deliver a copy of the notice to any interested person listed in clause (h) of the definition of “interested person”, and, to the extent known by the Authority, in clause (i) of the definition of such term provided in § 1093 of this title.
(3) Upon the first publication of the notice in a newspaper of general circulation in the Commonwealth of Puerto Rico and in a newspaper of general circulation or a financial journal published or circulated in the City of New York, all Interested Persons shall be deemed to know or have reason to know of the approval of this act and of the financing resolution, and of any alleged injuries or claims related to this chapter or the implementation thereof, the final financing resolution, or the issuance of the bonds and any related matter. A sixty (60)-day statute of repose to challenge this chapter and the final financing resolution as set forth in clause (2) of this subsection shall begin on the date of the first publication of the notice in a newspaper of general circulation in the Commonwealth of Puerto Rico and in a newspaper of general circulation or a financial journal published or circulated in the City of New York (and if not first published on the same date, the later date of the two publication dates shall be used for this purpose). The notice shall provide a detailed summary of the matter the Corporation seeks to validate. The notice shall be substantially similar to the following:
(4) Only the court shall have jurisdiction over any action related to the matters addressed in this subsection, and only if such action or contest is timely filed within the sixty (60)-day statute of repose. Any interested person may, within said sixty (60)-day period, appear and contest the legality or validity of any matter sought to be determined. No other court shall have jurisdiction over any action related to any of the matters addressed in this subsection. The court shall lack jurisdiction if such action is filed after such sixty (60)-day period.
(5) Consolidation of actions: liberal joinder and cross-claim rules.— If more than one action is pending concerning similar contests that may be brought under this subsection, such actions shall be consolidated and the court may issue such order as may be necessary or proper to effect the consolidation as may tend to avoid unnecessary costs or delays. Such orders shall not be appealable to or reviewable by any court, except on appeal of the final judgment as provided in clause (7) of this subsection. Actions brought pursuant to this subsection shall be entitled to liberal joinder and cross-claim rules and given preference over all other civil actions before the court in the matter of setting the same for motions, pleadings, hearing, or trial, and in order for the actions brought in accordance with the provisions of this subsection to be speedily heard and determined. (6) No contest except by the Corporation to any issue or matter under this subsection shall be made other than within the time and the manner specified in this subsection. Nothing in this subsection shall preclude the use by the Corporation of any other remedy to determine the validity of any other issue or matter.
(7) An appeal from the final judgment of the court may only be taken directly to the Supreme Court of Puerto Rico, in the manner described in subsection (e)(2).
(d) Actions to be consolidated; liberal joinder and cross-claim rules, etc.— If more than one action is pending concerning similar contests which may be brought under this chapter, they shall to the extent practicable be consolidated for trial, and the court may make such orders as may be necessary or proper to effect consolidation and as may tend to avoid unnecessary costs or delays. Such orders shall not be appealable to or reviewable by any court, except that they may be questioned on appeal of the final judgment as prescribed in this section. Actions brought pursuant to this chapter shall be entitled to liberal joinder and cross-claim rules and given preference over all other civil actions before the court in the matter of setting the same for motions, pleadings, hearing or trial, and in hearing the same, to the end that such actions shall be speedily heard and determined.
(e) Nature of judgment; appeals.—
(1) Any final judgment of the court entered pursuant to this chapter, if no appeal is taken, or if taken and the final judgment is affirmed, shall notwithstanding any other provision of law thereupon become and thereafter be forever binding and conclusive, as to all matters therein adjudicated or which at that time could have been adjudicated, against the Corporation and against all other persons, including the Commonwealth of Puerto Rico, the servicer, and the Authority and the final and binding judgment shall permanently prevent any person from bringing any action or proceeding related to any issue as to which the judgment is binding and conclusive. Furthermore, in the case of any final and binding judgment issued pursuant to subsection (c) of this section, it shall be irrefutably presumed that the approval for the issuance of bonds has been duly adopted by the Corporation pursuant to this chapter and any other applicable law. Following any final and binding judgment entered pursuant to subsections (b) or (c) of this section, the validity of this chapter, the approval of the final financing resolution and the aforementioned bond issue or any of the provisions of this Chapter, including the provisions for and the payment of the bonds to which such approval relates wherever contained, and the validity of said bonds authorized thereby, shall not be questioned by any person, regardless of any provision to the contrary in this chapter or any other act or regulation, and no action, suit, or proceeding questioning any issue which was litigated or which could have been litigated, including, the validity of the outstanding debt of the Authority that is refinanced, retired, or cancelled (defeased) through such bonds, whether the money received by or on behalf of the Corporation or any servicer constitutes revenue or income of the Corporation or of the Authority or constitutes available resources of the Commonwealth of Puerto Rico, or constitute a tax or levy, or whether the imposition or collection of the revitalization charges may be revoked or rescinded or whether the revitalization charge revenues are subject to any lien or charge from the holders of the bonds or other creditors of the Authority, or whether the approval of this chapter or the issuance of the bonds results in the breach of any contract or covenant made by the Commonwealth of Puerto Rico and the holders of the bonds or other creditors of the Authority, or in any taking of property by the Commonwealth of Puerto Rico without just compensation, or in any fraudulent conveyance, or is otherwise subject to avoidance or rescission or any other constitutional matter of United States of America or of the Commonwealth of Puerto Rico whether or not related to the foregoing, shall thereafter be heard by any court.
(2) Notwithstanding any other provision of law to the contrary and any rule or regulation of courts, no appeal shall be allowed from any judgment entered pursuant to this chapter unless it is filed with the Supreme Court of Puerto Rico within thirty (30) days after the notice of entry of the judgment of the court, and failure to file such appeal within the specified period shall thereafter bar any appeals court from exercising jurisdiction over the matters which could have been so appealed.
(f) Agreement to issue bonds.— The Corporation may issue bonds, in one or more series, pursuant to an agreement to issue [sic] in accordance with the approved financing resolution. Bonds may be sold for cash or delivered to any person for such consideration as the Board of the Corporation may deem adequate. Not later than the third business day after the pricing of said bonds in accordance with any such agreement, the Corporation shall direct the servicer to calculate, and cause any calculation agent hired by the Corporation to verify the calculation of the initial revitalization charges, which shall be effective from the date specified in the financing resolution, without any further action by the Corporation, or any other person.
(g) Irrevocability.— Upon the issuance of the bonds, the financing resolution corresponding thereto, the related revitalization charges, including their mandatory nature and Non-bypassability, and the procedures for the applicable adjustment mechanism, as provided in a financing resolution, trust agreement, or other security document related thereto, shall be irrevocable, non-bypassable, final, non-discretionary, and effective without further action by the Corporation or any other person.
(h) Revitalization charges mandatory and non-bypassable; payment to depository.— As long as the bonds are outstanding, and the approved restructuring [sic] costs have not been paid in full (including any payments that have or may become due under ancillary agreements), the revitalization charges authorized and imposed by this chapter shall be non-bypassable and mandatory and shall apply to all customers.
Without limiting any authority elsewhere conferred, the Authority is hereby authorized to enter into a servicing agreement and discharge such duties of the servicer as may be required or permitted by this chapter, to provide further assurances to the Corporation, other financing entities or the owner (if different) of all or a portion of the financing property with respect to the financing property and the collection of the revitalization charges, and to take any actions as are necessary or desirable to achieve the purposes of this chapter. The Authority, at the request of the servicer, shall interrupt or suspend the service to delinquent customers on the same basis that the Authority is allowed to interrupt or suspend service for nonpayment of water and/or sewer service or other rates. Neither the Corporation, other holder of the financing property, or the trustee may directly suspend or interrupt water and/or sewer service to any customer.
The Corporation, the Authority, and the servicer (if different from the Authority) shall have the following duties:
(1) To impose and adjust, bill and collect any revitalization charges applicable to all customers, and shall include in each such bill the applicable revitalization charge as a separate line item;
(2) To allocate customers” partial payments on a pro rata basis between the Corporation and the Authority as provided in paragraph (k)(1) of this subsection;
(3) To take all other actions permitted by law to collect unpaid bills;
(4) To exercise all collection enforcement rights of the holder or pledgee of the financing property for the benefit of such holder or pledgee; and
(5) To remit any revitalization charge revenue to the holder or pledgee of the financing property.
The corresponding trust agreement may provide that the calculation of all revitalization charges and adjustments thereto shall be confirmed by a third-party calculation agent unrelated to the Government of Puerto Rico or the Authority (which may be the servicer if the Authority is no longer the servicer) designated by the Corporation or the trustee.
The servicer shall, except as otherwise specified in a financing resolution, be entitled to reasonable compensation, which in the case of the Authority shall not be less than the estimated incremental cost of imposing and billing the revitalization charges and collecting the revitalization charge revenues, preparing servicing reports, and performing customary servicing services required by any servicing agreement in connection with the bonds. The Corporation (or the trustee in accordance with the terms of the applicable trust agreement) shall be authorized to replace the servicer in the event of default.
As soon as possible after receipt thereof, all revitalization charge revenues and the Authority’s charges shall be paid or deposited in a special collection account with a bank incorporated under and subject to the laws of the United States of America or any state thereof, (and licensed to operate in the Commonwealth of Puerto Rico), selected by the Corporation and not related to the Authority or the Commonwealth of Puerto Rico, or under the control of the Authority. Such amounts shall be allocated and remitted to the Corporation or its assignees or creditors and to the Authority or its assignees or creditors on a daily basis in accordance with their respective interests. Any servicing agreement and depository agreement shall include the foregoing deposit and allocation requirements.
Under no circumstances shall any revitalization charges imposed or financing property created by the Corporation to secure any bonds shall be or be deemed to be collected on account of taxes, be or be deemed to be for any purpose revenues of the Authority or the Commonwealth of Puerto Rico, or be deemed to be for any purpose received as a result of the Authority’s ownership or operation of the System Assets, nor shall any bonds be or be deemed to be a debt or other obligation of the Authority or the Commonwealth of Puerto Rico or any of its political subdivisions. The Authority shall, in servicing and collecting any revitalization charges, be deemed to be acting solely as an agent of the Corporation and not as principal, and shall only receive such charges to be held in trust for the exclusive benefit of the Corporation, the holders of the bonds, and persons entitled to receive payment therefrom for any financing costs (such revitalization charges shall not lose their character as revitalization charges by virtue of any possession by the Authority) and the Authority shall immediately transfer any such revitalization charges received to the special collection account referred to in the first sentence of the preceding paragraph.
(i) Financing property.—
(1) Financing property shall constitute an existing, present, and continuing property right for all purposes, including agreements securing the bonds, whether or not the revenues and proceeds arising with respect thereto have been earned, and notwithstanding the fact that the imposition and collection of revitalization charges shall depend on further acts that have not yet occurred, including: (A) the rendering of services by the Authority, (B) a servicer performing servicing functions related to the billing and collection of revitalization charges, and (C) the level of future consumption (or non-consumption) of such services. financing property shall exist whether or not revitalization charges have been imposed, billed, earned, or collected and notwithstanding the fact that the value or amount of the financing property is dependent on the future provision of services to customers. Subject to applicable law and regulations, the timely payment of all revitalization charges shall be a condition to receive service from the Authority.
(2) All financing property shall continue to exist until the corresponding bonds and all ongoing financing costs related to the bonds have been fully paid.
(3) If the servicer fails to fulfill the obligations provided in this chapter or in any agreement related to the remittance of revitalization charge revenues, the Corporation, the trustee, or the owners or pledgees of the financing property may request any court to order the sequestration and payment of the revitalization charge revenues, or any other applicable remedy. If the court determines that such noncompliance occurred, it shall grant such request for sequestration and payment. The order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to a servicer, the Corporation, the Authority or any other person.
(j) No set-off regarding financing property, and others; statutory lien.—
(1) Financing property, revitalization charges, revitalization charge revenues, and the interests of a holder of bonds, financing entity, or any other person in financing property or in revitalization charge revenues shall not be subject to set-off, counterclaim, surcharge, or defense by a servicer, customer, the Corporation, the Authority, holders of any other debt issued by the Authority (or any other creditors of the Authority) or any other person, or in connection with any default, bankruptcy, reorganization or other insolvency proceeding of any of said persons. To the extent that a customer makes a partial payment of a bill including both revitalization charges and any other charges, for purposes of its allocation, such payment shall be allocated on a pro rata basis between the revitalization charges and the other charges.
(2) Bonds and obligations of the Corporation under ancillary agreements shall be secured by a statutory lien on the financing property in favor of the holders or beneficial owners of bonds and parties to such ancillary agreements. The lien shall be automatically constituted upon issuance of the applicable bonds without the need for any action or authorization by the Corporation or the Board. The lien shall be valid and binding from the time the bonds or ancillary agreements, as applicable, are executed. The financing property shall be immediately subject to the lien, and the lien shall immediately attach to the financing property and shall be effective, binding, and enforceable against the Authority, its creditors and their successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those persons have notice of the lien and without the need for any physical delivery, recordation, filing, or further action. The lien is created by this chapter and not by any security agreement or issuance, but may be enforceable by a trustee or other fiduciary for the holders or beneficial owners of bonds.
This statutory lien shall be deemed to be a continuously perfected security interest and shall have priority over any other lien, created by operation of law or otherwise, that may subsequently attach to that financing property or any proceeds thereof, unless the holders or beneficial owners of bonds have agreed otherwise in writing as specified in the applicable trust agreement. This statutory lien is a lien on revitalization charges and all revitalization charge revenues that are deposited in any deposit account or other type of account of the servicer or other person where revitalization charge revenues or other proceeds have been commingled with other funds. Without limiting the effectiveness of the statutory lien created by this chapter, any other lien that may apply to the revitalization charge revenues or other proceeds shall be terminated when such revenues or proceeds are transferred to a segregated account for an assignee or a financing entity. No application of the adjustment mechanism shall affect the validity, perfection, or priority of the statutory lien created by this chapter. Any revitalization charge revenues commingled with other funds subject to any lien shall be administered in a manner that allows for the identification of the revitalization charge revenues and such other funds.
(3) The statutory lien shall not be adversely affected or impair by, among other things, the commingling of revitalization charge revenues or other proceeds from revitalization charges with other amounts regardless of the person holding such amounts. Any revitalization charge revenues commingled with other funds subject to any lien shall be administered in a manner that allows for the identification of the revitalization charge revenues and such other funds.
(k) Successors bound.— The Authority, any successor or assignee of the Authority or any other person with any operational control of any portion of the System Assets, whether as owner, lessee, franchisee, or otherwise, and any successor servicer shall be bound by the requirements of this chapter and shall meet and satisfy all obligations imposed herein in the same manner and to the same extent as their predecessor, including the obligation to bill, adjust, and demand the payment of revitalization charges.
(l) Authorization to pledge financing property.— All or any portion of financing property may be pledged to secure the payment of bonds, the amounts payable to financing entities, and other ongoing financing costs. So long as the financing property remains pledged to secure any such payments, the revenues from the collection of revitalization charges shall be applied solely to the payment of ongoing financing costs.
(m) Legality for investment.— Bonds are hereby made securities in which all public officials and agencies of the Commonwealth of Puerto Rico and all public corporations, municipalities, municipal subdivisions, all insurance companies and associations and other persons engaged in the insurance business, all banks, bankers, third party asset managers, savings banks and savings associations, including savings and loan associations, building and loan associations, investment companies and other persons engaged in the banking business, all administrators, conservators, guardians, executors, trustees, and other fiduciaries, and all other persons now or hereafter authorized to invest in bonds or in other obligations of the Commonwealth of Puerto Rico, may properly and legally invest funds, including capital, in their control or belonging to them and the bonds may be deposited with and may be received by any public official and entities of the Commonwealth of Puerto Rico and all municipalities and public corporations for any purpose for which the deposit of bonds or other obligations of the Commonwealth of Puerto Rico is now or may hereafter be authorized.
(n) Tax exemption.—
(1) This chapter and the effects of its enforcement are in all respects for the benefit of the people of the Commonwealth of Puerto Rico and for a public purpose. Accordingly, the Corporation shall be regarded as performing an essential government function in the exercise of the powers conferred thereupon by this chapter and shall not be required to pay, and the financing property, including revitalization charges and revitalization charge revenues, regardless of whether the Corporation is the owner of the financing property, shall not be subject to any fees, taxes, special ad valorem levies, or assessments of any kind, including income taxes, franchise taxes, sales taxes, or other taxes, or payments or contributions in lieu of taxes.
(2) The Commonwealth of Puerto Rico hereby covenants with the purchasers and with all subsequent holders and transferees of bonds, in consideration of the acceptance of and payment of the bonds, that the bonds and the income therefrom and all revenues, money, and other property pledged to pay or to secure the payment of such bonds, shall be exempt from taxation at all times; and this covenant may be included in the bonds.
(o) Bonds negotiable instruments.— Whether or not the bonds are of such form and character as to be negotiable instruments in accordance with the “Puerto Rico Commercial Transactions Act”, the bonds, by virtue of this chapter shall be deemed to be negotiable instruments within the meaning and for all purposes of the “Commercial Transactions Act” and of any other applicable laws of the Commonwealth of Puerto Rico, subject only to the provisions of the bonds for registration.
(p) No personal or corporate liability on bonds.— Without impairment to any rights granted under the provisions of §§ 3077 et seq. of Title 32, known as the “Act on Claims and Suits Against the Commonwealth”, no present or future member of the Board, official, agent, or employee of the Corporation shall be held liable for any action taken in good faith in the discharge of his duties and responsibilities under this chapter; unless it is established, that he engaged in conduct constituting an offense, and shall be indemnified for any costs incurred in connection with any claim for which they enjoy immunity as provided herein. The Board and its individual directors, and the officials, agents, or employees of the Corporation shall also be indemnified for any civil liability adjudicated under the laws of the United States of America, unless it is established that he/she engaged in conduct constituting an offense, breach of fiduciary duty, or gross negligence. However, nothing provided in this Chapter I will release the Authority or any of its agents or representatives or third-parties from any responsibility or cause of action arising from or related to the illegality or nullity of the outstanding debt of the Authority that is refinanced, retired or cancelled (defeased) through said bonds. The bonds shall not constitute a debt of the Commonwealth of Puerto Rico, nor shall they be payable from any funds other than those of the Corporation; and such Bonds shall bear on the face thereof a statement to that effect.
History —July 12, 2016, No. 68, § 2.7.