House To Vote On New Relief Legislation

House Democrats have just unveiled the next phase of COVID-19 relief legislation, appropriately titled, “the Health and Economic Recovery Omnibus Emergency Solutions Act” (HEROES), and coming in at 1,815 pages with a price tag of about $3 trillion. It wasn't too long ago when Congress passed its $2.3 trillion CARES ACT which provided $150 billion for state and local governments and additional funding for healthcare providers, airports, colleges and universities, and mass transit authorities. Let’s not get lulled into a false sense of security that Congress will be providing endless funding, and we must point out that Senate Republicans are in strong opposition to the HEROES Act. Nevertheless, HEROES does provide needed relief for municipal issuers.

The legislation allocates $500 billion to the states, $375 billion to local governments, and $20 billion to U.S. Territories. Puerto Rico can certainly benefit from any Federal support given that the Commonwealth continues on its restructuring path, with a current focus on all Island Central Government debt. While Puerto Rico officials are not saying that the U.S. government is not extending assistance to its Territories, they are, however, on a renewed campaign to possibly push for greater bondholder concessions given the economic damage and budgetary displacement brought on by COVID-19.

HEROES also provides $100 billion in additional school district/higher education support, $30 billion in grants for highways and transit, and $100 billion in grant money for health care providers. The proposed legislation will also earmark funding for testing and tracing as well as provide assistance to certain individuals in the form of extended unemployment insurance benefits, a new round of direct impact cash payments, and relief for student loan borrowers. The legislation also contains a two-year suspension (2020 and 2021) of the $10,000 SALT deductibility cap for all taxpayers, an item of much significance in our view that will be at the heart of the political divide. Again, HEROES does not appear to have bi-partisan support. While we do think that there will be an eventual fiscal relief package, we are skeptical that it will be in the same form as HEROES.

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