The Puerto Rico Public Buildings Authority

Transcription

1 The Puerto Rico Public Buildings Authority Jesús F. Méndez Executive Director February 26, 2010

2 Disclaimer Today s presentation includes certain statements that are not historical in nature but reflect forecasts and forward-looking statements, for example, statements regarding anticipated future financial and operating performance and results, including estimates for growth. Actual results may differ materially from those expressed or implied by such forward-looking statements. These statements are based on the Puerto Rico Ports Authority s current beliefs regarding future events, and are based upon a number of estimates and assumptions that are subject to significant uncertainties, many of which are outside the control of the Puerto Rico Ports Authority, Government Development Bank for Puerto Rico, the Government of Puerto Rico and its agencies and instrumentalities. This presentation is not an Official Statement and does not constitute an offer to sell or to purchase bonds, nor a solicitation of an offer to sell or to purchase bonds in the Commonwealth of Puerto Rico, the United States, or in any jurisdiction where such offer, solicitation or sale may be unlawful. This presentation has been prepared solely for informational purposes, and should not be construed as a recommendation to buy or sell any security or to participate in any particular trading.

3 Agenda 1 About PBA 2 Major Projects 3 Situation Analysis 4 Fiscal Stabilization Plan 5 Fiscal Reconstruction Plan

4 About PBA The Authority was created on June 19, 1958 by the Enabling Act with the primary duties of designing, constructing and maintaining real estate projects for the Government of P.R. For more than 50 years, PBA has developed over 1,150 construction projects with a total cost of over 4.4 billion dollars including: Office Buildings Schools Courthouses Police Stations Presently, PBA manages over 602 properties. PR Cardiovascular Center San Juan District Court

5 About PBA Conservation and maintenance program provides facilities maintenance through nine major regional offices throughout the island. Design and development manages construction projects of new facilities with a comprehensive team of professionals including, architects, engineers, planners, design and inspection coordinators. Minillas Government Center PR Treasury Department

6 About PBA Members of the Board and Management The Enabling Act provides that the Authority shall be governed by a Governing Board composed of seven members. There are currently two vacancies on the Board. The Secretary of Education, the Secretary of Transportation and Public Works and the President of the Government Development Bank serve as ex officio members of the Board. Board Members Carlos M. García Rodríguez Odette Piñeiro Caballero Ph.D. Rubén Hernández Gregorat, P.E. Reinaldo Encarnación, P.E. Luis R. Ortiz Segura, Esq. President of the Government Development Bank for Puerto Rico Secretary of Education Secretary of Transportation and Public Works Private Sector Private Sector Financial Management Jesús F. Méndez Rodríguez, CPA Maritza Borges Delgado, P.E. Javier A. Hernández Scimeca, CPA Ivonne Jurado Dávila, CPA Carolina Guzmán Tejada, CPA-Esq. Executive Director Deputy Executive Director Executive Aide Comptroller Internal Auditor

7 About PBA 1. All Government Facilities Bonds are secured equally and ratably by a pledge of rentals of the Leased Facilities. 2. The Enabling Act provides that the good faith and credit of the Government of PR is pledged for the payment of rentals under any lease agreement. 3. The Enabling Act also provides that the good faith and credit for any municipality entering into a lease agreement with the Authority is pledged for the payments of the rentals. 4. The Bonds are further secured by the guaranty of the Government of PR. 5. Aggregate principal amount issued under Government s Guaranty cannot exceed $3.3 billion principal amount.

8 About PBA P.R. Central Government

9 About PBA PBA prepares rent estimate Clients who pay directly To Public Corporations, State Courts and Municipalities Estimate Distributed Payment through Treasury Department To Office of Management and Budget Payments made directly to PBA to fund operational expenses OMB assures proper appropriation of funds in Agency s budget Debt service is forwarded to bond holders Remaining funds forwarded to PBA When rent s due Treasury Dept. forwards funds to GDB GDB retains funds to assure debt service will be serviced ** There have been no defaults or delays in the payment of the principal of or interest on any indebtedness of the Authority

10 Agenda 1 About PBA 2 Major Projects 3 Situation Analysis 4 Fiscal Stabilization Plan 5 Fiscal Reconstruction Plan 6 Concluding Remarks

11 Major Projects Office Buildings Program School Buildings Program 16 Projects $15.8 MM 43 Projects $96.5 MM Police Department Facilities State Courts & Fire Department Program 4 Projects $4.1 MM 2 Projects $2.5 MM

12 Major Projects Project Investment Source of Funds Government Centers Retrofit $ 32,564,788 PBA - Equipment Replacement Reserve School Improvement Program $ 17,247,157 PBA - Equipment Replacement Reserve Energy Reduction Program at Minillas Government Center $ 15,000,000 "Performance Contract Police Headquarters Improvements $ 3,336,890 PBA - Equipment Replacement Reserve Total $ 68,148,835 Jan Dec

13 Major Projects Minillas Center retrofit To be awarded Bayamon Gov. Center retrofit Police Department Offices retrofit Mayaguez Gov. Center retrofit RFP in process Integrated Services Initiative - In design phase 15% Communications infrastructure VOiP - To be awarded In energy reduction

14 Major Projects Develop a master plan to enhance the school infrastructure throughout the island Consolidate existing schools in new, more efficient, modern equipped larger facilities 300 Students 300 Students 600 Students

15 Agenda 1 About PBA 2 Major Projects 3 Situation Analysis 4 Fiscal Stabilization Plan 5 Fiscal Reconstruction Plan 6 Concluding Remarks

16 Situation Analysis FY 09 FY 08 Difference Current assets $ 154,346,458 $ 79,307,892 $ 75,038,566 Capital assets 2,868,073,813 2,841,967,330 26,106,483 Other noncurrent assets 523,805, ,844,227 (19,039,012) Total assets 3,546,225,486 3,464,119,449 82,106,037 1 Current liabilities 443,994, ,280, ,713,777 Noncurrent liabilities 2,982,064,146 3,087,094,498 (105,030,352) Total liabilities 3,426,058,921 3,343,375,496 82,683,425 2 Total net assets 120,166, ,743,953 (577,388) Total liabilities and net assets $3,546,225,486 $3,464,119,449 $ 82,106, Increased in rental receivable balance Increased in borrowings under GDB s line of credit

17 Situation Analysis FY 09 FY 08 Difference Rental Revenue $ 326,119,053 $ 295,819,104 $ 30,299,949 Non-operating Revenues 52,648,571 25,642,349 27,006,222 1 Total Revenues 378,767, ,461,453 57,306,171 Operating Expenses 213,623, ,918,320 17,704,818 Non-operating Expenses 165,721, ,634,460 25,087, Total Expenses 379,345, ,552,780 42,792,232 Changes in Net Assets $ (577,388) $ (15,091,327) $ 14,513, Increased due to the sale of Cordero Davila Building Increased mainly due to total compensation expense Increase due to changes in interest expense

18 Situation Analysis PBA s budget did not paired with OMB appropriations to agencies. FY 07, 08 & 09 deficit was $93 MM, $81 MM & $97 MM respectively. Past due rentals exceeded $280 MM, representing 88% of receivables (as of Dec 08). Payables to vendors and suppliers exceeded $83 MM, including $45MM to PREPA (as of Dec 08). Employee compensation is approximately 64% above industry average. Fringe benefits account for 62 cents per dollar of base salary, when industry average is 29 cents. More than $81 MM in construction projects abandoned prior to completion. Budget deficiency was covered with non-recurring transactions and non-payment to suppliers.

19 Situation Analysis Construction costs are estimated 30% higher than industry average. PBA s assets were not adequately maintained, consequently facilities and structures are deteriorating rapidly. The reserve for equipment replacement was depleted. Estimated contingencies on legal claims against PBA could reach $7.2 MM. Approval of two collective bargaining agreements, included annual salary increases in excess of $5.5 MM. More than 300 ongoing legal proceedings from PBA s employees.

20 Situation Analysis Absence of adequate technology systems: Project management system Facilities management system Human resources management application Obsolete data and telecommunication infrastructure.

21 Agenda 1 About PBA 2 Major Projects 3 Situation Analysis 4 Fiscal Stabilization Plan 5 Fiscal Reconstruction Plan 6 Concluding Remarks

22 $ in millions Pairing of PBA s budget to OMB agencies appropriations $156MM $135MM $146MM $100MM $63MM $54MM $49MM FY 07 FY 08 FY 09 FY 10 Operational Expenses Assigned by OMB Operational Expenses Incured PBA

23 Decrease in operational expenses Entity Debt Service Payments Operational Expenses Total Education Department 146,833,697 63,807, ,640,964 64% Health Department 17,093,057 7,427,868 24,520,925 7% Correction Department 15,593,381 6,776,176 22,369,557 7% Courts Administration 10,682,330 4,642,056 15,324,386 5% Police Department 9,881,511 4,294,057 14,175,568 4% Other Agencies 29,998,963 13,052,576 43,051,539 13% Total 230,082, ,000, ,082,939 Lease Agreements - Projected Rental Revenue ($ millions) $400 $350 $300 $250 $200 $150 $100 $50 $0 Operational Expenses Equipment Replacement Reserve Debt Service $361 $330 $374 $376 $367 $217 $230 $256 $258 $249 $18 $18 $18 $144 $100 $100 $100 $100 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

24 15% reduction in head count Involuntary layoff plan for the termination of transitory, nonpermanent and regular employees. Voluntary resignation program to management employees. Head Count 15% 1,534 1,355 1,305 11% Jul-09 Dec-09 Mar-10 Base Salary Reduction ($6 MM)

25 65% expense reduction in security services Re-negotiating security services contracts Efficient deployment of security personnel contracted Acquisition of security surveillance technology $9.5 MM Projected Savings Increase surveillance 24 hrs 7 days

26 Collection of rent in arrears Adoption of a five-year plan for the repayment of accumulated debt. On September 18, 2009 PBA received the initial $51 MM payment for FY OMB has agreed to continue requesting annual General Fund appropriations to continue with payment plan. Strong and aggressive collection efforts including legal action. As of December 31, 2009, past due rentals were approximately $204 MM as compared to $284 MM on %

27 20% Reduction in operational expenses YTD December 2009 versus 2010 YTD Dec 08 YTD Dec 09 Difference Total Compensation $46,020,105 $42,119,294 ($3,900,811) Utilities & Services 10,215,611 9,714,340 (501,271) Security Services 7,049,535 1,099,424 (5,950,111) Rent & Insurance 4,078,664 4,124,589 45,926 Repairs & Maintenance 5,052,415 2,012,025 (3,040,390) G&A Expenses 2,566,187 1,273,838 (1,292,349) Operational Expenses 28,962,411 18,224,216 (10,738,195) 20% Total Expenses $74,982,516 $60,343,510 ($14,639,006)

28 PBA revenue increase and Central Government efficiencies: Executive Order # requires all agencies and public corporations of the Government of PR to consider available properties at PBA before formalizing or renewing any rental agreement. PBA s will generate efficiencies to Central Government through the optimization of space utilization. PBA s estimates there is inefficient space utilization of about 15% to 20%. Case Studies: Sq Ft s Rent Expense Reduction Location 5,000 44% Bayamon 15,000 61% Minillas San Juan 15,000 57% Minillas San Juan 6,000 69% Ponce & Caguas 5

29 Agenda 1 About PBA 2 Major Projects 3 Situation Analysis 4 Fiscal Stabilization Plan 5 Fiscal Reconstruction Plan 6 Concluding Remarks

30 Fiscal Reconstruction Objectives Transform PBA operating and construction costs according to industry s standards: Reduce operational expenses by an additional 20% in the next two years. Reduce construction costs by 30% in the next two years. Retain and attract customers by enhancing and upgrading our infrastructure and services. Enhance performance standards, establish metrics and demand operational and service accountability.

31 PBA s commitment Continue to work towards the reduction of rental expense to the Central Government Achieve excellence service levels at industry s cost standards Maintain fiscal discipline and strive to meet our obligations with vendors and others PROTECT TAXPAYER S MONEY

32 Disclaimer Today s presentation includes certain statements that are not historical in nature but reflect forecasts and forward-looking statements, for example, statements regarding anticipated future financial and operating performance and results, including estimates for growth. Actual results may differ materially from those expressed or implied by such forward-looking statements. These statements are based on the Puerto Rico Ports Authority s current beliefs regarding future events, and are based upon a number of estimates and assumptions that are subject to significant uncertainties, many of which are outside the control of the Puerto Rico Ports Authority, Government Development Bank for Puerto Rico, the Government of Puerto Rico and its agencies and instrumentalities. This presentation is not an Official Statement and does not constitute an offer to sell or to purchase bonds, nor a solicitation of an offer to sell or to purchase bonds in the Commonwealth of Puerto Rico, the United States, or in any jurisdiction where such offer, solicitation or sale may be unlawful. This presentation has been prepared solely for informational purposes, and should not be construed as a recommendation to buy or sell any security or to participate in any particular trading.

33 The Puerto Rico Public Buildings Authority Jesús F. Méndez Executive Director

34