The Puerto Rico Public Buildings Authority - Government ...

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

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.

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

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

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

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

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.

About PBA
P.R. Central Government

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

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

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

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 - 2010 Dec - 2011

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

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

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

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 523,805,215 542,844,227 (19,039,012)
Total assets 3,546,225,486 3,464,119,449 82,106,037
1
Current liabilities 443,994,775 256,280,998 187,713,777
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 120,166,565 120,743,953 (577,388)
Total liabilities and net assets $3,546,225,486 $3,464,119,449 $ 82,106,037
1
2
Increased in rental receivable balance
Increased in borrowings under GDB’s line of credit

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 378,767,624 321,461,453 57,306,171
Operating Expenses 213,623,138 195,918,320 17,704,818
Non-operating Expenses 165,721,874 140,634,460 25,087,414
2
3
Total Expenses 379,345,012 336,552,780 42,792,232
Changes in Net Assets $ (577,388) $ (15,091,327) $ 14,513,939
1
2
3
Increased due to the sale of Cordero Davila Building
Increased mainly due to total compensation expense
Increase due to changes in interest expense

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.

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.

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

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

$ in millions
Pairing of PBA’s budget to OMB
agencies appropriations
180
160
140
$156MM
$135MM
$146MM
120
100
$100MM
80
60
$63MM
$54MM
$49MM
40
20
0
FY 07 FY 08 FY 09 FY 10
Operational Expenses Assigned by OMB
Operational Expenses Incured PBA

Decrease in operational expenses
Entity
Debt Service
Payments
Operational
Expenses
Total
Education Department 146,833,697 63,807,267 210,640,964 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 230,082,939 100,000,000 330,082,939
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

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)

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

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 2010.
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 2008.
30%

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)

PBA revenue increase and Central
Government efficiencies:
Executive Order #2009-035 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

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

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.

PBA’s commitment
1
2
3
4
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

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.

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