1 2 Wednesday, August 26, 2015 Marine Diver Self-winding movement. Water-resistant to 300m. 18 ct rose gold case. Also available in stainless steel. U LY S S E - N A R D I N. C O M The San Juan Daily Star
2 GOOD MORNING The San Juan Daily Star, the only paper with 3 August 26, 2015 News Service in English in Puerto Rico, publishes 7 days a week, with a Monday, Tuesday, Wednesday and Thursday edi on, along with a Weekend Edi on to cover Friday, Saturday and Sunday. Today s Weather Fiscal Plan Urges Means-Based Tuition, Subsidy Cut, Downsizing at UPR DAY High 87ºF Precip 60% Partly Cloudy Early Wind: ENE at 15 mph Humidity: 78% UV Index: Extreme Sunrise: 6:10 AM Sunset: 6:45 PM Local Mainland Business Interna onal Viewpoint Entertainment INDEX Night Low 78ºF Precip 80% Scattered Thunderstorms No cias en Español Legal No ces Sports Games Horoscope Cartoons By EVA LLORENS VELEZ The University of Puerto Rico (UPR) may implement a means-based tuition for students but endure reductions in its number of campuses and subsidies under the fiscal adjustment plan proposed by the administration of Gov. Alejandro García Padilla. An outline of the five-year fiscal adjustment plan, leaked to several media outlets, contains many of the proposals for cuts at UPR proposed by economist Anne Krueger and a team of economists in a recent report on the fiscal state of the government. The outline proposes a means-test to determine tuition, a cut in subsidies, a cut in the number of campuses and health care expenses, cuts in Medicare spending and a series of cost-control measures. With a means-test tuition, students would pay according to their economic means. Even though UPR President Urayoan Walker publicly said on Aug. 10 at La Fortaleza that he opposes a reduction from the current 11 campuses and a subsidy cut, he appears in the plan as the person in charge of implementing the change. The STAR tried to get a reaction from Walker but he was not immediately available. At a recent press conference at La Fortaleza, Walker told reporters that UPR was going to continue to be an 11-campus system and that he will fight against a cut in the budget appropriation to the university. Currently, UPR receives money from the general fund based on a budget formula that ensures 9.6 percent of the revenues go to the university. That appropriation was eliminated through the fiscal emergency law by the previous central government administration, but has since been reinstated. Krueger is proposing to cut the subsidy again. I think the governor has been clear in his message that he sees the university as an investment and not an expenditure, Walker said. UPR has around 59,000 students at its 11 campuses.
3 4 Wednesday, August 26, 2015 The San Juan Daily Star PREPA Touts Savings from New Fuel Oil, Natural Gas Contracts By EVA LLORENS VELEZ The Puerto Rico Electric Power Authority (PREPA) announced Tuesday that it has entered into two new favorable contracts supplying fuel and natural gas to its power plants. PREPA s improved fuel management processes and cash flow forecasting -- which are among the process implementations under the current operational transformation at the utility -- allowed it to negotiate competitive commercial terms and implement substantial savings over current arrangements, officials said. PREPA has entered into a No. 6 fuel oil supply contract with Freepoint Commodities LLC and a natural gas supply contract with Natural Gas Fenosa for its Costa Sur Power Plant. It expects to begin receiving deliveries under both contracts on Oct. 1. Both the Freepoint contract and the natural gas contracts are important steps in PREPA s ongoing transformation, said PREPA Executive Director Dr. Javier Quintana-Méndez. These are direct results of PREPA s commitment to improving its operations by implementing processes and sound management practices that will benefit our clients. PREPA s fuel and procurement teams along with our advisers have worked diligently to secure contracts that provide better terms and conditions. These new contracts also provide PREPA with a secure supply of fuel for the duration of the contracts. Both fuel supply contracts will provide PREPA with improved financial terms and lower costs, and are the result of RFP processes conducted by PREPA as part of its ongoing transformation and operational overhaul. The new Freepoint fuel supply contract is forecasted to save PREPA $25 million in decreased fuel adder charges during its initial one-year term, and will improve PREPA s working capital position as a result of improved credit terms. The Fenosa natural gas contract has estimated savings of approximately $30 million in cost saving per year by adding the Henry Hub index of 50 percent of the price formula with favorable terms and a reduction in the remaining 50 percent of the original formula based on fuel oil No. 6 which adds stability to the price fluctuation and can be used as a natural hedge. The new natural gas contract also provides greater flexibility to manage a potential reduction in energy demand in Puerto Rico by reducing the minimum volume PREPA agrees to buy annually by 10 percent. Unions Say They ll Fight Fiscal Plan if Austerity Measures Approved By EVA LLORENS VELEZ The government of Puerto Rico plans to extend Law 66, the Law of Fiscal & Organizational Sustainability, to 2025 as part of its fiscal adjustment plan. A draft of the plan calls for freezing formula-based transfers, such as those made to cities and municipalities, freezing labor costs, extending hiring freezes, consolidating or closing schools and reducing the number of teachers. Several labor unions are negotiating the final draft of the plan with the government. These include Alexis Rodríguez of the Teamsters Union, Manuel Perfecto of the General Workers Union, Andrés Lloret of the Central Workers Federation, Pedro Irene Maymí of the Puerto Rican Central Workers Union, Federico Torres Montalvo of the State Workers Coordinating Union, José Rodríguez Báez of the Workers Federation and Aida Díaz of the Teachers Association. Irene Maymí said that if the plan is finally implemented, the unions will mobilize themselves against the government. He said some 1,100 workers voted against the plan at a meeting over the weekend. We say that the government can not take the country out of a crisis by making workers sacrifice themselves as they have already done with Law 66, he said. We can not continue to carry the burden any longer. Irene Maymí noted that another report, the one done by KPMG, states that corporations should be made to pay more taxes but that the government refuses to do that. They are protecting corporations because they get political donations from them, he charged. Under Law 66, Puerto Rico government agencies last year renegotiated the conditions of existing contracts with suppliers and service providers from the private sector and cut benefits that were already established in collective bargaining agreements.
4 The San Juan Daily Star Wednesday, August 26, PREPA Board May Decide By Thursday on Executive Pensions By EVA LLORENS VELEZ Juan Alicea The Puerto Rico Electric Power Authority (PREPA) board will meet again on Thursday to discuss the fate of the huge retirement pensions awarded to former PREPA Executive Director Juan Alicea and other officials. The board met Tuesday to obtain a legal report on the legality of the pension given to Alicea and at least 14 other PREPA officials including former PRE- PA Executive Director Miguel Cordero. However, board president Harry Rodríguez said in a statement that no decision was taken because they requested more information. Alicea s $5,000 pension was raised to $9,000 after he retired for a second time this year from PREPA following his return in 2013 to become executive director. PREPA says the pension is legal and followed the requirements set forth in a resolution approved by the board a few years ago. La Fortaleza Chief of Staff Víctor Suárez delegated to PREPA s board the task of assessing whether the pension given to Alicea is justifiable. The transformation of the electrical energy system must include fundamental changes in all matters, Suárez said. That includes repealing all benefits that are extravagant and that can not be sustained by PREPA, which was created to serve the people. The Electrical and Irrigation Industry Workers Union (UTIER) said the board violated the Fiscal Sustainability Law (Law 66) because part of Alicea s pension is being paid out of PREPA s operational fund and not the utility s Employee Retirement System. If true, then based on that premise, the board has the responsibility to evaluate [the pension], Suárez said recently. PREPA is currently negotiating its $9 billion debt with bondholders to restructure it. The resolution that served as a basis for Alicea s pension violates Retirement System regulations stating that a member of PREPA who is receiving a pension will be considered a new employee if he re-enters PREPA as a worker, Suárez said. At the time of his or her second retirement, the PREPA worker will receive a pension equal to one he or she received prior to the re-entry into service plus the pension accrued as a new worker by the borrower after admission service. In any case, the pension can not be higher than $50,000. Alicea retired from PREPA in 2009 and returned in 2013 before retiring again this year. BRINGING the CARIBBEAN CLOSER with GREAT LOW FARES
5 6 Wednesday, August 26, 2015 The San Juan Daily Star Local FBI Chief Pleased But Not Satisfied With Sharp Drop in Homicides By MARIA MIRANDA SIERRA FBI San Juan Division Special Agent in Charge Carlos Cases says that while encouraged by the drastic drop in homicides in Puerto Rico, he is not completely satisfied. Cases made his comments in an interview with EFE news agency Tuesday, in which he noted that murders in Puerto Rico have dropped by 40 percent since 2011 thanks to combined efforts between federal and local authorities. I feel pleased but not satisfied, Cases told EFE. The expectation is to get to zero and, although we haven t reached that, we re not going to stop working to halt violence. The top FBI official in Puerto Rico said the number of Type 1 crimes, specifically murders, started to see a reduction back in 2011 when the Puerto Rico Police Department (PRPD) joined efforts with the federal Caribbean Corridor Strike force, an initiative aimed at stopping South American-based drug trafficking organizations that move multikilogram loads in the Caribbean. Cases noted that the reduction in violence on the island during the past four years is also related to the arrests of powerful drug traffickers such as Elvin Torres Estrada, Ángel Ayala aka Angelo Millones and José Figueroa aka Junior Capsula. In 2009, about 900 homicides were recorded in Puerto Rico and, in 2010, that number increased to nearly 1,000. In 2011, there were 1,164 homicides, an average of over three a day and the most violent year in the island s CARPET WE ARE YOUR INDOOR ENVIRONMENTAL CLEANING SOLUTION RESIDENTIAL COMMERCIAL INDUSTRIES We Eliminate.. Bad Odors from Your Home (Like tabacco, cigarettes, smoke) Dust Mites is one of ASTHMA sufferers worst enemies!! We Steam Clean Your Matressess and Eliminate Dust Mites (AntiAllergen Treatment Available) We Steam Clean your Furniture and Draperys (Dry in 45 mins.) Carpet Cleaning (No Blower Needed) Carpet Sales, Repair and Installation Steam Clean your Oriental Rugs (No Buffer) Clean and Sanitize Your Air Conditioning Duct System Mold and Mildew (Remediation) Fire Restaurations Water Damage 10% Off Discount - Only in Cleaning Services (Until August 30, 2015) For More Information Call Us (787) (787) (787) history. In each year, Puerto Rico s homicide rate was four to six times the national average, and twice as high as any state. Most homicides on the island are linked to the drug trade. During that time, an average of three violent deaths per day occurred, 52 percent of them directly linked to drug trafficking, a situation that spurred then-gov. Luis Fortuño to ask for help from U.S. authorities. Last year, homicides in Puerto Rico went down to 680, the lowest homicide figure since 2000, according to PRPD statistics. So far this year, there have been 357 homicides registered by the PRPD, 90 fewer than by the same date last year, leading Cases to emphasize that the results have been dramatic. The focus of the FBI is to reduce violent crimes, not only murders. As far as I m concerned, just one death or life that s lost as a result of violent crime is sad because it could have been avoided, said Cases, who has been the FBI chief in Puerto Rico for the past two-and-a-half years. Cases explained in his interview with EFE that the drug trafficking activities begin in Colombia, which produces the largest amount of cocaine in the world, and then it is shipped by sea, land or air to Mexico and later to the U.S. It is also transported on speedboats from Venezuela to Puerto Rico and from Puerto Rico to the mainland U.S. He acknowledged that it s not easy to restrict drug trafficking in the Caribbean and, therefore, law enforcement agencies depend on the cooperation of the Coast Guard and other authorities. Since 2009, Resident Commissioner Pedro Pierluisi has worked successfully to persuade the federal government to allocate additional law enforcement resources to Puerto Rico, so that these resources are more proportionate with the serious threat of drug-related violence that confronts the U.S. territory. Through Operation Caribbean Resilience, U.S. Immigration and Customs Enforcement (ICE) temporarily surged 30 agents to Puerto Rico in 2013, leading to the arrest of about 900 violent criminals and the seizure of over 450 pounds of illegal narcotics and over 650 weapons. Starting in 2012, our message finally began to register, particularly at DHS [U.S. Department of Homeland Security], Pierluisi said. The agency created a task force charged with taking steps to reduce Puerto Rico s murder rate. DHS includes the U.S. Coast Guard, U.S. Customs and Border Protection (CBP), ICE, and the Transportation Security Administration, all of which are critical in the effort to address drug trafficking and violent crime. As part of Operation Caribbean Resilience, between 2009 and 2013, the Coast Guard tripled the number of days its vessels conducted counter-drug operations in the waters off Puerto Rico, and increased the number of flight hours for its aircraft from 150 in 2011 to approximately 1,000 in Finally, CBP, once it assumed control of the counter-drug tethered aerostat radar program earlier this year, moved quickly to repair the radar in Lajas that had been destroyed during bad weather in Last March, Pierluisi announced that the Fiscal Year 2015 Department of Homeland Security Appropriations Act, which was approved by the House Appropriations Committee, contained multiple provisions directing the DHS to increase the level of resources it assigns to Puerto Rico to reduce drug trafficking and related violence. These provisions will help DHS build on the law enforcement success it has had in Puerto Rico since 2012, after years of the agency paying insufficient attention to the territory. The language is the most recent product of Pierluisi s efforts to improve the federal response to the public safety crisis in Puerto Rico. In 2011, at the height of the public safety crisis in Puerto Rico, CBP closed an important boat unit in San Juan because of a lack of available funding, even though that unit had seized over 7,000 pounds of drugs the previous year, Pierluisi said. The bill this year ensures this scenario will not be repeated. I intend to urge CBP to reopen the boat unit it closed and to otherwise increase the level of personnel and resources it assigns to Puerto Rico.
6 The San Juan Daily Star Wednesday, August 26,
7 8 Wednesday, August 26, 2015 The San Juan Daily Star Danny s Remnants Bring Rain to PR as Tropical Storm Erika Gathers Strength By MARIA MIRANDA SIERRA Rain was expected to continue falling into the night Tuesday in the areas of the island most affected by extreme drought conditions, National Weather Service meteorologist Félix Castro said earlier Tuesday. After the remnants of Hurricane Danny passed through Puerto Rico on Monday night and Tuesday, the island is expected to receive even more rain by Thursday after Tropical Storm Erika formed late Monday night in the mid-atlantic and on Tuesday was about 840 miles east of the Leeward Islands. Erika as of Tuesday was a strong, well defined storm, expected to pass 40 miles north of San Juan, bringing with it intense rainfall activity, Castro said. It has sustained winds of 45 miles per hour (mph). Meanwhile, the remnants of Danny did bring some much needed water to the Carraízo and La Plata reservoirs. However, on Tuesday, it was still too early for the Puerto Rico Aqueduct and Sewer Authority (PRASA) to say how much. Authorities said that information should be available by today. In the wee hours Tuesday, Castro said, a significant amount of rain fell on the municipalities of Gurabo, Juncos, Las Piedras and Caguas, whose rivers connect with Lake Carraízo in Trujillo Alto. The U.S. Geological Service (USGS) reported Tuesday that in a four-hour period a quarter-inch of rain fell on all the Carraízo tributaries. La Plata didn t receive much rain, however, but some downpours from the Caribbean Sea could move later tonight [Tuesday] to the La Plata basin, Castro said. In general, Danny s remnants left about half an inch of rain in Puerto Rico, Castro said, while in isolated areas -- mainly in the eastern part of the island -- between two and four inches of rain fell. Meanwhile, Tropical Storm Erika formed and could pass by the northern part of island sometime Thursday. Tropical storm watches were posted Tuesday morning for parts of the Leeward Islands, and additional watches and or warnings may be required soon, as the storm is moving fast. Erika is expected to remain a tropical storm and gather strength as it moves quickly to the west, the NWS posted on its website. The northern Leeward Islands may feel tropical storm-force winds by late Wednesday night into early Thursday. The Weather Channel noted that Erika may bring more rain to droughtstricken Puerto Rico and the U.S. Virgin Islands. Erika s future track and intensity beyond Puerto Rico and the Virgin Islands is highly uncertain, the Weather Channel added. It is moving westward at about 20 mph. For the next couple of days, Erika will be moving through an environment characterized by a moist air mass, low vertical wind shear and warm water. This should allow some strengthening, the Weather Channel noted. However, just like Danny, Erika will eventually have to battle wind shear and some dry air as it nears the Caribbean. This complicates both the intensity and track forecasts. Due to this fast movement, Erika is already expected to arrive in the northern Leeward islands Wednesday night or early Thursday with tropical storm-force winds and heavy rain, prompting tropical storm watches to be issued early Tuesday morning for Montserrat, Antigua, Barbuda, St. Kitts and Nevis, Aguilla, Saba, St. Eustatius and St. Maarten, the NWS reported. This is the second time in less than three days that watches have been issued in the Leeward Islands, done so this past weekend ahead of then-tropical Storm Danny. Additional watches may be required in Puerto Rico and the Virgin Islands, as Erika may spread rain and wind into those areas Thursday into early Friday. A stronger Erika may get pulled farther northwest, while a weaker Erika would track farther west and south, the NWS said. Boaters Urged to Take Caution The U.S. Coast Guard cautioned mariners, recreational boaters, swimmers, surfers and the general public in the U.S. Virgin Islands and Puerto Rico on Tuesday to exercise good judgment and prepare for tropical storm conditions due to the anticipated passing of Tropical Storm Erika. Recreational boaters and anyone conducting water-related activities should avoid areas of high surf and stay away from shoreline rocks, levees and river beds until the tropical storm passes and weather and surf conditions normalize throughout the area, said Capt. Robert Warren, Sector San Juan commander and Captain of the Port. Monitoring the weather and understanding the dangers associated with the high sea conditions and tropical storm force winds forecasted before, during, and after the storm could save your life and property. Vessels and facility operators, recreational boaters, swimmers and people conducting activities in the ocean, should pay close attention and monitor this situation through updated National Weather Service advisories and take appropriate action to minimize the risks associated with these predicted conditions. More information can be found at their respective websites and Here are a few tips to help mariners protect themselves, their families and their vessels: do not go out to sea in a recreational boat if you know a tropical storm is approaching; contact local marinas to ask for advice about securing your vessel. Marina operators are knowledgeable and can advise you on the best methods for securing your boat. In addition, the Coast Guard asked mariners and their families to take action now as the effects of a tropical storm can be felt well in advance of the storm itself and can prevent the safe completion of preparations.
8 The San Juan Daily Star Wednesday, August 26,
9 10 Wednesday, August 26, 2015 The San Juan Daily Star Financial Uncertainty, Island Drought Impair PRASA Bond Sale By MARIA MIRANDA SIERRA Puerto Rico Aqueduct and Sewer Authority (PRA- SA) President Alberto Lázaro said Tuesday that a $750 bond issue has not gone to the market because there is great uncertainty due to the island s fiscal crisis. There is also great uncertainty in the world, for example on Monday the Dow Jones slumped more than 1,000 points in just a few hours. causing certain insecurity, Lázaro said. And the time to go to the market is at a precise moment, and going to the market now is very difficult. Height Securities analyst Daniel Hanson issued a commentary Monday on PRASA s planned $750 million bond sale, noting that it appears that the public corporation is setting up the bond issue for failure. Hanson, an analyst at Height Securities -- a Washington, D.C.-based investment firm that advises clients with financial interests in Puerto Rico -- noted that PRASA has raised rates sharply and reduced expenses, but it still cannot generate enough cash to cover its balance sheet needs. The markets are functionally closed to the utility, and debt service eats up about a third of revenue every year. Simply re-profiling the debt and offering creditors some medium-term compensatory interest could be mutually beneficial, Hanson noted. PRASA could find the relief to fund its capital commitments while simultaneously lowering (or at least holding steady) rates for consumers, and bondholders -- many of whom bought PRASA [notes] at a substantial discount -- could be given a new security that trades higher. Unfortunately, PRASA is not eligible for Chapter 11, so the beneficial relief that would normally apply is not available to the public corporation, Hanson noted. Therefore, if PRASA fails to fulfill any of the needed requirements to avoid a restructuring, the public corporation could find itself facing a bitter and unpleasant restructuring process as it cannot receive bankruptcy protection. PRASA has $90 million in debt, mostly due to local banks, that comes due at the end of this month. As a result, the incentive to complete a restructuring in a timely fashion is high, since PRASA does not have the cash to make the payment, Hanson said. This back-against-the-wall reality underscores the folly of the bond issue; PRASA is using the money to pay for things from years past rather than investing in the future. Alberto Lázaro Capital expenditures are compatible over time Hanson said, but in reality, PRASA plans to use the majority of its bond proceeds to replenish its cash balances to reimburse itself for costs incurred over the past three fiscal years, to repay on-island debt, to make timely debt payments over the coming quarters, and to pay issuance costs on the transaction. In other words, PRASA is scooping-and-tossing at higher interest rates to avoid adjusting its debts. This strategy might work if the utility succeeds in all its machinations, but it is a high-risk bet for bondholders seeking a more sustainable corporate entity, he added. According to Hanson s analysis, while PRASA argues that it is using the bond issue to finance a portion of its five-year Capital improvement Plan (CIP), it fails to clear up how much of that plan is meant to be financed through the bonds. It seems unlikely that market conditions improve in a material way between now and [fiscal year] 2019 such that PRASA can re-access the market without considerably increasing its cost of financing, especially considering the trouble the utility has had with this plan and the coming restructuring on other commonwealth securities, Hanson noted. Hanson also asserts in his analysis that Puerto Rico s drought is a serious humanitarian issue. It has been ongoing, in several degrees of severity, since 2014, but has been an earnest problem for more than 415,000 [PRASA] customers since early summer/ late spring, he said. The drought affects PRASA s cash flow presently by $13 million per month because of lower consumption and higher delivery costs, he said. That figure is likely to rise with time if the drought remains ongoing, and we believe the drought is likely to persist for far longer than PRASA predicts, Hanson said. Although PRASA has indicated that it expects the drought to end by October 2015 [some PRASA s heads have told the STAR it could persist until December], Hanson said that no major drought forecasting service in the U.S. agrees with that assessment. The National Weather Service s Climate Prediction Center believes the drought in Puerto Rico is likely to intensify in both its short-term (through November) and long-term (through November 2016) forecasts, he said. The National Drought Mitigation Center at the University of Nebraska-Lincoln has Puerto Rico in a case of extreme drought through at least the next 18 months. While the National Oceanic and Atmospheric Administration s (NOAA) groundwater forecast for the next 18 months shows persistent drought in the island, Princeton s Hydrological Forecasting model projects it to be extremely likely that extreme drought persists for 9 more months (the longest time horizon in the model) in Puerto Rico, Hanson said. The North American Land Data Assimilation System (NLDAS) Environmental Modeling Center also predicts extreme drought through the end of its forecast period (January 2017) in its base, optimistic, and pessimistic simulations, the analyst noted. The U.S. Geological Service s (USGS) WaterWatch program puts available water resources in parts of the island at 51-year lows, and July (the heart of the rainy season) was the fourth-worst month in terms of rainfall in the island since The El Niño Southern Oscillation (ENSO) program at the International Research Institute for Climate and Society at Columbia University, meanwhile, forecasts in 28 different models that the underlying weather trend creating the present drought in Puerto Rico will persist for at least 15 months. The University Corporation for Atmospheric Research has at least 14 models that imply the drought in Puerto Rico will last for more than 18 months at a minimum. Basically, Hanson added, the drought in Puerto Rico is going to drag on. Since Puerto Rico has already floated the idea of four-day water rations (on for one, off for three) and has cut back school days because schools do not have enough fresh water to safely and hygienically service students, the drought situation should be addressed more seriously by PRASA s management team, he said.
10 The San Juan Daily Star Wednesday, August 26, Puerto Rico Statehooders See Opportunity as Woes Deepen By DANICA COTO Revelers arrived in cars sporting the American flag and wore clothes in red, white and blue as they celebrated the anniversary of Puerto Rico s pro-statehood political party with deafening salsa music and speeches. Like many others worried about the U.S. territory s future, those rallying late last week in the coastal town of Manati believe that statehood can help pull it out of a nearly a decade of economic stagnation. Puerto Rico has to become a state, insisted 63-year-old celebrant Norma Candelario. With unemployment at 12 percent, and the public debt reaching $72 billion, advocates for making the Caribbean island the 51st state say the economic woes are strengthening their arguments. As a state, Puerto Rico s municipalities and public utilities would no longer be prohibited from restructuring their debts through bankruptcy. It would also receive more of certain kinds of federal funding that other states get. The crisis has made us more visible worldwide, said Carlos Pesquera, a former Puerto Rico transportation secretary who attended the rally. I would have preferred that the crisis not happen, but we re going to take this as an opportunity to define our status, to see it as a solution. Puerto Ricans have been divided over their relationship to the U.S. mainland for decades. Since 1967, most voters in three referendums have favored remaining a semi-autonomous territory, which advocates say preserves the island s cultural identity and provides more local control. Statehood was a close second place in all three votes, with independence coming in a distant third. But support for joining the union rose in each referendum and appears to be gaining. In the most recent election, in November 2012, for the first time more than half of voters said they favored a change from the territory s current status and a plurality said they supported statehood. Backers of the status quo said the ballot was flawed and rejected the outcome. A recent poll by local research firm In this Aug. 20 photo, a supporter of the New Progressive Party waves a pro-statehood flag at a rally marking the party s 48th anniversary in Manati. Credit: Ricardo Arduengo Gaither International found 40 percent of Puerto Ricans favored statehood, with 27 percent opposed and 33 percent expressing no opinion. Among those with an opinion, 60 percent favored statehood, compared with 56 percent in a similar poll conducted five years ago. Puerto Rico needs statehood at some point because of the economic crisis, said Nel Balseiro, 43, a funeral home owner and former mayor who until two years ago supported the status quo. We need that to have a real chance at progressing. The gains for statehood reflect the dismal times on the island, said Gilberto Castro de Armas, managing director at Gaither International. An estimated 144,000 people left the territory between 2010 and 2013 in the largest exodus in decades and about a third of all people born in Puerto Rico now live in the U.S. mainland. So many businesses and schools have closed and so many people have left the island that some neighborhoods resemble ghost towns. Political changes occur during times of economic and social stress, said Castro de Armas. You don t have to be a fortune teller. People are abandoning the ship because they think it s sinking. Statehood proponents say the exodus is the best proof of growing support for their cause. Judith Colon, 44, who manages social media accounts for Puerto Rico s pro-statehood party, said moving to the U.S. is among the few options available to Puerto Ricans struggling economically. She and other statehood supporters say joining the union would provide the kind of needed economic benefits Puerto Ricans get when they move to the mainland. The local government receives lower Medicaid and Medicare reimbursements, forcing it to spend more than $1 billion a year in Medicaid alone than if it were a U.S. state, said island congressional representative Pedro Pierluisi, who is running for governor next year. Puerto Rico also faces limited child tax credits and is barred from accessing other tax credits including one meant to promote labor participation, and there is no supplemental Social Security income for disabled people, he said. In addition, there s a cap on a nutritional assistance program in which the island is shortchanged by roughly $1 billion a year, he said. The current crisis has brought to light the limits of Puerto Rico s current territorial status, said Pierluisi, who promises to hold a referendum on whether the island should become a state if he s elected. From an economic standpoint, there s no question that billions of additional dollars would be flowing into Puerto Rico s economy if we were treated equally and fairly... The disparities we have in the way federal programs apply in Puerto Rico are atrocious. Statehood supporters also say joining the union would end their perceived second-class status. Even though Puerto Rico residents are U.S. citizens, they cannot vote in the presidential election and have only one representative in Congress who has limited voting power. But the island s Gov. Alejandro Garcia Padilla, whose party supports the current commonwealth status, has said statehood would turn Puerto Rico into a ghetto. Others, like Jorge Colberg, secretary of Garcia s Popular Democratic Party, say Puerto Rico s economic problems are a result of poor public administration, not its status. Spending more than what you have has nothing to do with political status, Colberg said. He said that holding a plebiscite now would create uncertainty for investors as the island tries to restructure its debt and warned that statehood would eliminate certain tax breaks and increase other taxes. Puerto Rico statehood would require approval from Congress, where it would face a tough fight because the territory is considered to lean Democratic and it would have two senators and five representatives if it became a state. But it could be hard for Congress to block it if a strong majority of Puerto Ricans demonstrated support for joining the union. President Barack Obama has said he supports statehood if Puerto Ricans clearly back it, and Republican presidential candidate Jeb Bush has said he believes statehood is the best option. Many on the island think Puerto Rico is nearing that day. This is the best inheritance we can leave our children, said Candelario, who moved back to the island from the Bronx to help out a struggling daughter. I have grandchildren, and I would like to leave them something special. It would be good if they could study here and work here.