Using Mun-Ease for debt management in Puerto Rico.

• Author: Kucera, Sharon
• Position: Municipal bond manager software from Government Finance Officers Association

In public finance circles, Puerto Rico is known as one of the largest and most sophisticated tax-exempt bond issuers in the country. To manage the indebtedness of the Commonwealth and other entities of the central government, the Government Development Bank of Puerto Rico (GDB) uses the Government Finance Officers Association software product Mun-Ease, Municipal Bond Manager. This article will highlight how the finance officials there have adopted Mun-Ease to their unique requirements.

Puerto Rico has been a Commonwealth of the United States since 1952, and it shares the same markets and currency. Its people are citizens of the United States. The Commonwealth government performs comparable functions to state governments in the U.S.

The GDB plays a key role in the development activities of the public and private sector of the island. It acts as a fiscal agent and financial advisor to the Commonwealth and its agencies, municipalities and public corporations. GDB is the principal depository and investor for public funds. It also oversees the finances of municipalities, provides interim financing to those entities, and helps structure and package their bonds to U.S. investors.

Among the authorities and public corporations for which GDB has oversight responsibilities are the Puerto Rico Aqueduct and Sewer Authority, Puerto Rico Electric Power Authority, Puerto Rico Highway Authority, and the Puerto Rico Ports Authority. These and other agencies of Puerto Rico have combined indebtedness of $19.7 billion. In 1992, Puerto Rico was the fourth largest U.S. issuer of municipal bonds, issuing more than $5 billion in debt.

Bonds of the Commonwealth, its agencies, authorities, and public corporations are attractive to U.S. investors because interest is exempt from individual income taxes in all 50 states. Only a few other government entities in the U.S. have the same triple tax-exempt status. Because of this special status, a tax-exempt mutual fund that would normally only purchase bonds of a particular state will often own bonds of one or more Puerto Rican agencies.

Implementation and Customization

The responsibility for complying with arbitrage regulations was given to the Puerto Rico Arbitrage Compliance Corporation (PRACC), a subsidiary of the GDB formed in 1991. After defining its business requirements and assessing competing software products, PRACC selected Mun-Ease. The initial implementation efforts focused on the creation of a database of all...