Yesterday, the House Natural Resources Committee held a hearing titled «Examining Challenges in Puerto Rico’s Recovery and the Role of the Financial Oversight and Management Board.»
Testifying:
Ms. Natalie Jaresko, Executive Director of the Puerto Rico Financial Oversight and Management Board («the Board») testified before the Committee
Mr. Angel Pérez, mayor of Guaynabo
Mr. Noel Zamot, currently the Revitalization Coordinator for the Board, and who has been nominated by the Board to serve as «Chief Transformation Officer (CTO)» of Puerto Rico’s electric utility «PREPA,» a position calling for CEO-type powers and reporting to the Board. Governor Roselló has rejected this appointment as overreach by the Board and the matter is to be adjudicated by the PROMESA court on Nov. 13.
PREPA’s Executive Director Ricardo Ramos was originally scheduled to appear but did not attend, citing ongoing work needs on the ground. Rep. Bishop, the committee’s Chairman, and various other members noted their frustration at being unable to address their questions to him.
The Puerto Rican Women’s Council has identified 3 core themes to the issues discussed in this hearing:
- Leadership and liquidity issues
- PREPA next steps and questions
- Jones Act repeal or partial repeal for energy imports
The PR Fiscal Oversight Board identified itself as a central player in disaster relief efforts by (a) requesting that emergency disaster relief funds awarded to PR be formally tied to the Board’s fiscal review work, (b) appointing a Chief Transformation Officer for PREPA to act in the capacity of CEO and reporting to the Board. In this capacity, the Board nominated current Board member Mr. Zamot who also testified, (c) requesting that Congress reaffirm its authority to supervise the administration of disaster relief funds and appoint Mr. Zamot in order to «avoid costly litigation» due to opposition of the Board’s efforts before the PROMESA judge.
The mayor of Guaynabo, the Hon. Mr. Pérez, noted that there were coordination difficulties on the ground immediately after the storm due to a loss of telecommunications networks & because FEMA was housed only in San Juan, and requested that PR’s mayors be included in the conversation for disaster relief as they are the ones closest to the people. He noted that FEMA’s $30,000 cap per home on repairs to damaged housing was a key obstacle he faced and that he needed additional support in terms of funding long-term repair rather than «patches.»
Several members requested better preparedness planning and coordination structures/initiatives in future, noting that items like poles for power lines can be stocked in advance and that FEMA did not have an immediate point of contact on the ground upon arriving
Per the PR Fiscal Oversight Board (“the Board”), Puerto Rico is facing an immediate liquidity crisis that will persist for the next 1-2 years. By all accounts Congress will need to prop up government operations. The Board requested that the Congress continue to provide supplemental aid in order to keep basic government services operational. Ranking Member Grijalva indicated that PR has experienced a cash loss of $1.7 billion as a result of reduced revenue collections and $1.18 billion on lost power and water income. PR’s power and water utilities are running on cash reserves.
Congress passed a supplemental aid package that included a $4.9 billion loan package for Puerto Rico. During the hearing, Rep Grijalva, Mayor Perez, Ms. Jaresko and others agreed that further aid will be needed. Chairman Bishop indicated that the situation in PR remains a humanitarian crisis and “is not over.” Mr. Grijalva called the supplemental aid package “a start” but indicated that “we need to do more and do it immediately.” Several reps asked about the cash need and how much liquidity would be needed and the Board indicated that they’re still waiting on a FEMA and army corps assessment to know how much money will be required in the coming weeks and months. Current awards from FEMA have been paid into the PR government’s joint account and FEMA has also picked up expenses that the government would otherwise have had to take on and thus, in the short term, the government has been able to continue to operate on this basis.
Per the Board and Rep. Tsongas, who has a large Puerto Rican constituency, the total damage to Puerto Rico is around $100 billion. According to Ms. Jaresko, some portion of this damage will be covered by insurance and another portion is private sector damage.
According to Rep. Velazquez and with the agreement of the Board, it will take up to 50 years for Puerto Rico’s bond investors to be repaid, given the extent of the damage to the Island. Pre-Maria, the debt restructuring called for a 30% cut in government size, services and health care and a relief restructuring of 70% of the debt obligation.
The Board is implementing a contract review process for contracts over $10 million and a random sample-based testing of contracts under $1 million as a means to ensure that contracts are fiscally sound and comply with federal guidelines. Ms. Jaresko is also claiming the authority to certify requests for hurricane relief funding as hurricane disaster requests as they are submitted to give certainty that requests comply with federal guidelines. Contracts must be reimbursable and comply with federal law in order to not have a material fiscal effect on the commonwealth.
Ms. Jaresko indicated that the Board was not consulted by the governor in proposing a state tax waiver post-Maria. She indicated that such a waiver can have a direct adverse effect on the fiscal plan. She also explained that if the government of PR certifies that a law is in compliance with the fiscal plan, the Board may not have power to reverse such a decision.
In terms of Pre-Maria debt, the total debt burden is approximately 73 billion, with 9 billion belonging to PREPA. Mr. Grijalva and several other members asked about eliminating or reducing the debt and how a new utility could be built in the face of the Island’s debt obligation. Mr. Zamot pointed to the “plan of adjustment” mechanism under PROMESA as a way to reduce the debt and said he would submit to the committee in writing the precise number needed to rebuild the power grid.
Many asked what can Congress do to assist Puerto Rico further, and they specifically mentioned if Jones Act would be helpful. Congressman Graves stands very opposed to any exemption, even temporary, to the Jones Act mentioning that this will not make a difference. He mentioned that while the temporary 10 day exemption was in place only one vessel took advantage of this. Unfortunately, Ms Jaresko was unable to respond but we have to take into consideration that they weren’t prepared for a 10 day exemption and by the time the government even intended to get organized the 10 day period was over. There is a currently a House bill to present a five year waiver to the Jones Act for Puerto Rico.
Escrito por Puerto Rican Women’s Council
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