Ruling unlikely to end Puerto Rico Oversight Board struggle with local government

Source: Robert Slavin, Bond Buyer, July 24, 2018 (Subscription Required)

Puerto Rico bankruptcy judge Laura Taylor Swain’s anticipated ruling on the relative powers of the Oversight Board and the local government is unlikely to end the battle for authority over the debt-burdened U.S. territory. Swain will hear oral arguments Wednesday on an adversary complaint filed earlier this month in the Title II bankruptcy case by Gov. Ricardo Rosselló, in which he argued the local government can’t be forced to follow parts of the board’s fiscal plan that deal with policy. Governance issues are likely to remain whatever her ruling, observers said. … Other Puerto Rico government sectors have followed the government in filing adversary complaints challenging the board’s power. On July 9 Puerto Rico Senate President Thomas Rivera Schatz and Puerto Rico House President Carlos Méndez Núñez filed a complaint similar to the governor’s. On Tuesday the biggest minority party in Puerto Rico, the Popular Democratic Party, said it planned to submit an adversary complaint on different grounds on the same day. …


Puerto Rico governor names new utility head after board members quit
Source: Reuters, July 18, 2018
Puerto Rico’s governor on Wednesday named a new executive director of the bankrupt Puerto Rico Electric Power Authority (PREPA), following the resignation of its former head and four of the utility’s seven-member board last week.  Jose Ortiz will replace Rafael Diaz-Granados, who quit a day after being named executive director, leaving the utility with no leadership amid a massive restructuring effort following devastation wrought by Hurricane Maria last September.  Diaz-Granados and the four other board members resigned after Puerto Rico Governor Ricardo Rosello blasted them for agreeing to pay Diaz-Granados an annual salary of $750,000. The PREPA board unanimously elected Ortiz, an engineer, to the post on Wednesday, Rosello’s office said in a tweet. Ortiz, the fifth PREPA executive director named since the hurricane devastated the island and its electric grid last September, is due to take office on July 23. …

Puerto Rico Bondholders Win Ruling Against U.S.
Source: Andrew Scurria, Wall Street Journal, July 16, 2018
A federal judge has refused to absolve the U.S. government of liability for investors’ losses on Puerto Rico bonds, a potential blow to efforts to write down the U.S. territory’s $73 billion debt load.  The ruling issued Friday by Judge Susan G. Braden of the U.S. Court of Federal Claims is an incremental victory for hedge funds fighting to get repaid on the $3 billion in Puerto Rico pension bonds These creditors have targeted the U.S. directly, saying the federal government should make them whole for enacting a 2016 law that set them up for losses.  The lawsuit strikes at the heart of the rescue law, known as Promesa, designed to tackle the U.S. territory’s fiscal crisis. Promesa was designed to avoid a taxpayer bailout of Puerto Rico, creating a court-supervised process for wringing debt reductions from creditors instead. …

Salary controversies, resignations churn turmoil at Puerto Rico power company
Source: Suzanne Gamboa, Nicole Acevedo and Associated Press, NBC News, July 12, 2018

There is turmoil anew at the indebted and hobbled Puerto Rico public power company after the company’s CEO resigned and then his appointed replacement resigned along with several board members as a controversy over executive salaries erupted. The resignations come as Puerto Rico is trying to privatize the power company, known as PREPA, that is $9 billion in debt and has seen a turnover of leaders since Category 4 Hurricane Maria hit the U.S. territory last September. The U.S. territory has yet to complete work to create a stable energy grid, and some residents have been without power since the vicious storm. Walter Higgins, who was named CEO in late March, resigned late Wednesday, just months after he was chosen to oversee the bankrupt power company’s privatization. On Thursday, Higgins’ appointed replacement, Rafael Díaz Granados, a member of the power company’s board who was to take over Higgins’ duties July 15, also resigned along with fellow independent members of PREPA’s governing board. Puerto Rico Gov. Ricardo Rosselló appointed two new board members shortly after the resignations took place. …

Puerto Rico utility says privatization push trumps solar contract
Source: Jim Christie, Reuters, June 25, 2018

Puerto Rico’s beleaguered electric utility has called for a court order to block a solar power company’s bid in the island’s restructuring to enforce a power-purchasing agreement, arguing its planned privatization should determine the contract’s fate. The Puerto Rico Electric Power Authority (PREPA) on Friday said in court papers filed in U.S. District Court in Puerto Rico that a motion by M Solar Generating LLC to lift the stay in the island’s restructuring case in order to implement the agreement should be denied. …

Puerto Rico’s new law moves to privatize power grid nine months after Hurricane Maria
Source: Nicole Acevedo, NBC News, June 20, 2018

Puerto Rico is officially moving to privatize and upgrade its outdated power grid exactly 9 months after it was flattened by Hurricane Maria. At a press conference on Wednesday, Governor Ricardo Rosselló signed into law the approved legislation that allows parts of the Puerto Rico Electric Power Authority – known as PREPA in English and by the acronym AEE in Spanish – to be sold to private entities. …

Opinion: How Puerto Rico misses the mark in latest attempt to privatize broken power authority
Source: Cathy Kunkel and Tom Sanzillo, The Hill, June 19, 2018
In its version of a bill to privatize the Puerto Rico Electric Power Authority, the Puerto Rico legislature has improved some on Gov. Ricardo Rosselló’s original proposal, but lawmakers are ultimately failing the Puerto Rican people every bit as badly as Rosselló has. We’ve criticized the governor’s original privatization proposal for essentially aiming to set up a process that would enable the implementation of politically driven contracts devoid of regulatory oversight. The amended legislation contains some improvements, but — crucially — it does not say how privatization would solve the two fundamental problems of Puerto Rico’s electrical system: its over-reliance on imported fossil fuels and its crippling debt. …

Bill to privatize Puerto Rico power utility doesn’t factor in its bankruptcy
Source: Eva Llorens Velez, Caribbean Business, June 13, 2018
The bill passed to privatize the Puerto Rico Electric Power Authority (Prepa) does not address the utility’s fate under the bankruptcy process and would create a public energy measure separate from the utility’s proposed integrated resource plan (IRP) that is due in October.  As a matter of fact, Siemens, the company hired to create the IRP, which is Prepa’s blueprint for the use of resources for the coming years, began hearings and meetings to receive feedback on the document, which some stakeholders described as a trampled and confusing process because they were not provided any background or information on which to base their opinions. …

Puerto Rico bondholders balk at deal to divide sales taxes
Source: Bond Buyer, June 12, 2018 (Subscription required)
Major Puerto Rico bondholders are balking at a tentative agreement that would steer to owners of sales-tax-backed debt a large chunk of the revenue they’ve been pledged, threatening to prolong a fight over one of the biggest issues in the island’s record-setting bankruptcy.  The so-called ad hoc group of general-obligation bondholders told a U.S. court it has objections to the potential deal that court-appointed agents for the commonwealth and the entity that sold Puerto Rico’s sales-tax debt, called Cofinas, released last week. The deal triggered a rally in the price of the Cofina bonds, which would be repaid first and receive more than half of the sales-tax receipts that were dedicated to repaying the securities. …

Judge orders information for possible independent Puerto Rico bond investigation
Source: Robert Slavin, Bond Buyer, June 7, 2018 (Subscription required)
Title III bankruptcy Magistrate Judge Judith Dein ordered the Puerto Rico oversight board and government to provide more information for a possible independent investigation into the territory’s debt.  The Official Committee of Unsecured Creditors, led by attorney Luc Despins, asked in mid-May to be allowed to conduct its own investigation, which would start no later than Aug. 15. The committee said an existing investigation, being conducted by Kobre & Kim under a Sept. 1, 2017, contract, is undermined by the potential bias of three board members who have present or past connections to Puerto Rico’s municipal finance industry. It fails to look into “identifying bad actors or potential causes of action” against existing debt, the committee argued. …

Democrats call for 9/11-style commission to investigate Trump Puerto Rico response
Source: Frank Dale, ThinkProgress, June 6, 2018
Members of the Congressional Hispanic Caucus are calling for an independent commission to investigate the Trump administration’s response to Hurricane Maria and the storm’s aftermath in Puerto Rico.  During a news conference on Wednesday, Rep. Nydia Velazquez (D-NY) requested an investigation “similar to what we had in 9/11 to examine the death toll, the federal response and how federal agencies such as FEMA may have responded sluggishly based on artificially low numbers.” Velazquez vowed to introduce legislation that would lead to the creation of an independent commission — though passing it in the current Republican-controlled Congress will be a challenge. … 

The Bankruptcy Case That Could Make or Break Puerto Rico
Source: WNYC, June 4, 2018
U.S. District Court Judge Laura Taylor Swain is presiding over the biggest and possibly nastiest public bankruptcy ever filed in the United States.  Puerto Rico has  a whopping $72 billion in debt. Only California has more bonds outstanding. On top of that, Puerto Rico owes its public employees more than $50 billion in pensions. … Much of the burden of paying the debt back will fall on Puerto Ricans, many of whom, like artist Sarabel Santos, said they find the amount the government owes unfathomable. “How can we pay that? It’s completely insane. The people that are paying for that is us, it’s not the richest man. It’s not fair,” she said.  The case is as complex as it is unprecedented. On Judge Swain’s court docket are five separate but interlocking bankruptcies, including the Commonwealth itself, the highway authority, and PREPA, the island’s struggling power company. …

Puerto Rico grid ‘teetering’ despite $3.8 billion repair job
Source: Michael Weissenstein, Associated Press, June 1, 2018
After an eight-month, $3.8 billion federal effort to try to end the longest blackout in United States history, officials say Puerto Rico’s public electrical authority, the nation’s largest, is almost certain to collapse again when the next hurricane hits this island of 3.3 million people.  “It’s a highly fragile and vulnerable system that really could suffer worse damage than it suffered with Maria in the face of another natural catastrophe,” Puerto Rican Gov. Ricardo Rossello said.  Another weather disaster is increasingly likely as warmer seas turbocharge the strongest hurricanes into even more powerful and wetter storms. Federal forecasters say there’s a 75 percent likelihood that the 2018 Atlantic hurricane season, which begins Friday, will produce between five and nine hurricanes. And there’s a 70 percent chance that as many as four of those could be major Category 3, 4, or 5 hurricanes, with winds of 111 mph (179 kph) or higher. …

Oversight board recertifies fiscal plan for Puerto Rico, including pension reforms
Source: Hazel Bradford, Pensions & Investments, May 31, 2018
The Financial Oversight and Management Board for Puerto Rico on Thursday recertified a fiscal plan for the commonwealth after reaching an understanding with Gov. Ricardo Rossello.  Pension reforms sought by the oversight board remain in the fiscal plan, despite the governor’s objections. The plan calls for freezing pension benefit accruals by July 1, 2019, and enrolling all employees in defined contribution plans, as well as Social Security. Benefits would be reduced progressively to an average cut of 10%, with no cuts for participants whose combined pension and Social Security benefits are below the poverty level of $1,000 per month. The pension reforms are expected to be included in a plan of adjustment to be confirmed by the court overseeing Puerto Rico’s bankruptcy proceedings.  Mr. Rossello did agree to labor reforms in the fiscal plan, including making Puerto Rico an “at-will employment” jurisdiction for current and new employees. Those changes will require action by the Puerto Rico Legislature. …

Puerto Rico bondholders may have to wait two more years
Source: Robert Slavin, Bond Buyer, May 30, 2018 (Subscription required)
Nearly two years after passage of the Puerto Rico Oversight, Management, and Economic Stability Act, bondholders may face two or more additional years before bond payments resume. At a Dec. 20, 2017 Title III bankruptcy hearing chief mediator Barbara Houser said that her goal was “confirmable plans of adjustment in 2018.” However, on May 23 Oversight Board Executive Director Natalie Jaresko said she expected that it would take 12 to 18 months before the board submitted a plan of adjustment. …

Puerto Rico bankruptcy judge says she, not local court, will decide COFINA legality (Subscription required)
Source: Robert Slavin, Bond Buyer, May 25, 2018
Puerto Rico Title III bankruptcy Judge Laura Taylor Swain said she will decide the legality of the Puerto Rico Sales Tax Financing Corp. (COFINA) without a ruling from Puerto Rico’s Supreme Court. On Feb. 26 the agent for COFINA, Bettina Whyte, filed a motion and memorandum of law in one of the Title III adversary proceedings. Whyte wanted the local court to rule on whether the sales and uses taxes apparently pledged by COFINA to secure the debt were property of Puerto Rico’s government or COFINA. … “Because federal law issues are … necessarily bound up in the antecedent question of ownership, the Commonwealth-COFINA Dispute presents a mixed question of federal and Puerto Rico law that is inappropriate for certification” to the Puerto Rico Supreme Court, Swain said Thursday in a memorandum order. Swain quoted from a Puerto Rico Supreme Court case that stated that it normally doesn’t accept cases that include both federal and Puerto Rico law. …

Puerto Rico governor presents zero debt payment budget under cloud of uncertainty
Source: Robert Slavin, Bond Buyer, May 23, 2018 (Subscription required)
Puerto Rico Oversight Board director Natalie Jaresko said Gov. Ricardo Rosselló’s budget will have to be revised and may be rejected if the local government doesn’t follow through on a labor reform agreement. The governor released the $8.73 billion general fund budget on Friday and promoted it in a speech to Puerto Rico’s legislature Tuesday night. On Sunday night the governor and the board announced an agreement on a compromise on reforming labor practices as well as agreeing to other changes in the board-certified fiscal plan. In exchange for the board waiving its demands for the abolition of the Christmas bonus and reduction of the island’s mandatory 27 days of vacation and sick leave, the governor agreed to bring at-will employment to the island by repealing Law 80 from 1976. Jaresko, in a teleconference with reporters Wednesday, described this agreement as an “accommodation.” …

Puerto Rico Oversight Board, Gov. Rosselló reach partial compromise
Source: Robert Slavin, Bond Buyer, May 21, 2018 (Subscription required)
The Puerto Rico Oversight Board and Gov. Ricardo Rosselló reached a partial compromise in their policy struggle over the fiscal plan for the debt-laden territory. The board said the proposed revisions are “a result of the commitment by the governor and legislature to approve labor reform before the end of this fiscal year, thus considerably reducing implementation risks of the fiscal plan and avoiding costly litigation.” Gov. Rosselló said the new fiscal plan “is not perfect, but it offers concrete results in benefits for our people, and allows us to enter the next phase with more certainty and less conflict. I am convinced that this is the way forward.” …

Puerto Rico’s rocky recovery is distracting from its pre-existing struggles, residents say
Source: E.A. Crunden, ThinkProgress, May 21, 2018
When Hurricane Maria slammed into Puerto Rico last September, the island was already struggling. Cash-strapped and massively in debt, the U.S. territory has faced budget deficits for years. Before the hurricane, Puerto Rico already owed $74 billion in debt, with more than $53 billion outstanding in unfunded pensions. Fifty percent of Puerto Ricans live below the poverty line and the island never recovered from the Great Recession the way the mainland did; more than 20 percent of Puerto Rican jobs have dried up since 2007. Mainland sympathy was always hard to come by. In 2006, Congress did away with tax breaks that helped Puerto Rico, while continuing legislation like the Jones Act. That World War I-era law mandates that only U.S. ships may transport U.S. goods domestically between ports, hurting islands like Puerto Rico in the process. According to a 2012 report, between 1990 and 2010, the Jones Act alone cost Puerto Rico $17 billion. Amid a struggling economy and little relief, more than 10 percent of the island’s population had left over the course of the last decade before Maria even made landfall. …

San Juan mayor’s desperate plea: We’re not ready for hurricane season
Source: Associated Press, New York Post, May 18, 2018
The mayor of San Juan, Puerto Rico, said Thursday that the island remains in desperate need of help eight months after Hurricane Maria and isn’t ready for the hurricane season that begins in June. … The mayor told the audience that more than 1,000 people have died in Puerto Rico and that people are still dying as a result of the September storm that destroyed two-thirds of Puerto Rico’s power grid and caused damage that is estimated at over $100 billion. Cruz has been an outspoken critic of the federal government’s response to the storm and again blasted the Federal Emergency Management Agency and the White House for delays in getting supplies and money to the island. She said Puerto Rico was devastated once by Hurricane Maria and again by “Hurricane Trump,” with hundreds of thousands of people seeking food, water and other basic supplies for weeks after the storm. …

Why a court’s Puerto Rico decision could cost issuers billions
Source: Kyle Glazier, Bond Buyer, May 17, 2018 (Subscription required)
Municipal Analysts are asking a federal appellate court to overturn a district court decision on Puerto Rico that they feel could cause “significant disruption” to the municipal marketplace by undermining investor confidence in revenue bond pledges and cost issuers billions of dollars. The National Federation of Municipal Analysts filed its friend-of-the-court brief Wednesday, telling the Court of Appeals for the First Circuit in Boston that it should overturn a January 2018 decision of the U.S. District Court for the District of Puerto Rico that allowed revenues backing Puerto Rico Highway and Transportation Authority (HTA) bonds to be diverted for other uses during the debt restructuring process. That treatment of the revenue bonds flies in the face of the way investors thought revenue bonds were treated in bankruptcy proceedings and has grave implications, the NFMA said. …

Puerto Rico Oversight Board rejects governor’s budget, certifies GDB plan
Source: Brian Tumulty and Robert Slavin, Bond Buyer, May 11, 2018 (Subscription required)
The Puerto Rico Oversight Board rejected Gov. Ricardo Rosselló’s proposed budget and certified a consensual agreement for the island’s Government Development Bank, as bondholders battled for position in the biggest municipal debt restructuring. The Oversight Board, using its authority over the budget process to enforce austerity measures that include a reduction in private and public sector labor benefits and public sector pensions, sent the budget back for revisions by Tuesday. The governor, who is resisting the Oversight Board’s plan, had submitted a budget for fiscal 2019 with zero debt payment. The Oversight Board on Friday certified the Government Development Bank’s amended Restructuring Support Agreement under its Title VI authority. The GDB had $4.2 billion in bond debt outstanding …

How Congress could help Puerto Rico avoid another crisis
Source: Robert Slavin, Bond Buyer, May 9, 2018 (Subscription required)

The U.S. Government Accountability Office said Congress could stave off another Puerto Rico debt crisis by expanding investor protections for those living in the territory and by giving the Securities and Exchange Commission authority to impose penalties for nondisclosure. GAO also said Congress should look at modifying Puerto Rico’s triple tax-exempt status. In its report the office said it is “not making recommendations based on the federal actions identified because policymakers would need to consider challenges and tradeoffs related to implementation.” …

How Storms, Missteps and an Ailing Grid Left Puerto Rico in the Dark
Source: James Glanz and France Robles, New York Times, May 6, 2018
After Maria and the hurricane that preceded it, called Irma, Puerto Rico all but slipped from the modern era. Even now, while officials say the $2.5 billion reconstruction effort has restored power to 98 percent of the grid’s customers, swaths of hilly country across the island are still pitch black after dark, punctuated by lights run on private generators. … On the mainland, much of the coverage of the recovery has focused on the struggles of the island’s beleaguered power authority and its politically disastrous hiring of Whitefish Energy Holdings, a tiny and inexperienced Montana contractor linked to the Trump administration’s interior secretary. … But an examination of the power grid’s reconstruction — based on a review of hundreds of documents and interviews with dozens of public officials, utility experts and citizens across the island — shows how a series of decisions by federal and Puerto Rican authorities together sent the effort reeling on a course that would take months to correct. The human and economic damage wrought by all that time without power may be irreparable. …

Puerto Rico Enters a New Age of Austerity
Source: Vann R. Newkirk II, The Atlantic, May 5, 2018
On Tuesday, thousands of people poured into the streets of San Juan, protesting both sweeping new cutbacks to the island’s spending and a painfully slow hurricane recovery. In a clash with riot police, protesters were met with tear gas and pepper spray. Though the demonstrations were ultimately disbanded, they could signal a deeper reckoning about the future of Puerto Rico and the limits of the ongoing austerity program. … It was the oversight board’s new fiscal plan for Puerto Rico that set the stage for the violent clashes. In mid-April, the board approved the regime, which is supposed to help the island get out from under billions of dollars in debt; satisfy municipal creditors; stabilize the power infrastructure; and handle the ongoing recovery from Hurricane Maria, which made landfall last September. …

In a National May Day Strike, Puerto Rican Marchers Face Down Tear Gas To Protest Privatization
Source: Kate Aronoff, In These Times, May 2, 2018
In a May Day event largely overlooked by mainland U.S. media, strikers representing various unions, opposition parties, and social movements all converged on San Juan’s banking district, known as “Milla De Ora” (the Golden Mile) for a national strike. Pushing back against a slew of austerity measures being unveiled by the Washington-appointed Fiscal Oversight and Management Board (FOMB) and Puerto Rico’s ruling New Progressive Party, strikers took the opportunity to bring their fights to their opponents’ doorsteps, rallying throughout the day at their offices in locations scattered throughout the city. By the end of the day, police were firing off several rounds of tear gas and wrestling students to the ground. …

Editorial: Puerto Rico plunges too easily into darkness. Its citizens deserve better.
Source: Washington Post, April 27, 2018
Last week’s island-wide outage came as the Puerto Rico Electric Power Authority (PREPA) was touting the news that it had nearly completed restoring power to residents who have spent months living in the dark after the power grid was decimated by Hurricane Maria on Sept. 20. Fewer than 3 percent of customers were without power, officials said, boasting that Puerto Rico was once again open for business. Hours later, the blackout occurred. … Coming up with the billions that will be needed to do this work is the critical challenge facing the island. Federal funds are available, but the Trump administration is insisting on a formula that could place the bankrupt island on the hook for more of the costs. Gov. Ricardo Rosselló wants to privatize PREPA and attract private investment to the rebuilding effort. How realistic that is remains to be seen. … Imagine going without power for three months. Imagine knowing it’s only a question of when — not if — your lights will go out again. Imagine what would happen if these conditions existed in any other city, town or state in the United States. You would expect — no, demand — your government take action. The American citizens who live in Puerto Rico deserve the same. …

San Juan mayor warns of the ‘disaster economics’ devastating Puerto Rico
Source: Stephanie Griffith, Think Progress, April 25, 2018
… As she wages her fight for more generous support post-Maria, Cruz said she is also trying to prevent the wholesale adoption on the island of what she calls “disaster economics” — the bid to privatize reconstruction, and much of the social fabric on the island as well….. Those currently in charge of post-hurricane rebuilding have come out in favor of the privatization of some essential services, including schools and energy in some areas. That is an outcome Cruz told Think Progress she is determined to fight. “Disaster economics needs someone who is complacent and complicit,” she said….

Governor’s opposition to Puerto Rico fiscal plan could end up in court
Source: Brian Tumulty and Andrew Coen, Bond Buyer, April 20, 2018 (Subscription Required)
The latest fiscal turnaround plan for Puerto Rico could be headed for a court showdown after Gov. Ricardo Rossello vowed he won’t implement key parts of the proposed austerity measures. The Financial Oversight and Management Board for Puerto Rico approved the plan by a 6-1 vote Thursday after negotiations with the commonwealth’s government failed. “The Oversight Board expects the Governor to fully implement the certified fiscal plans,” Jaime El Khoury, the Board’s general counsel, said in an email. “Should the Oversight Board have to resort to litigation to carry out its mandate under [the Puerto Rico Oversight, Management, and Economic Stability Act], the matter would be before Judge [Laura] Swain in the Title III court.” The controversy centers over whether the oversight board overreached the authority given to it by Congress for addressing the commonwealth’s debt problems. …

AFSCME President Lee Saunders Slams Puerto Rico Oversight Board Plan
Source: AFSCME Press Release, April 20, 2018
The following statement was issued by AFSCME President Lee Saunders following the release of the federally-appointed Puerto Rico fiscal oversight board’s financial plan: “The Fiscal Plan issued by the Oversight Board is a betrayal of the people of Puerto Rico. By issuing a plan that relies upon unrealistic projections of economic growth, the Board is condemning Puerto Rico to economic decline for years to come. Ironically, the Board is engaging in the same fantastical thinking regarding Puerto Rico’s economic growth that created the current situation. We call on the Board to reconsider this disastrous decision and develop a plan in the interests of the people.” …

Hurricane Aid Has Eased Puerto Rico’s Finances. It May Not Be Enough. 
Source: Mary Williams Walsh, New York Times, April 19, 2018

Billions of dollars of disaster aid flowing into Puerto Rico since last fall’s devastating hurricane have boosted the bankrupt island’s finances, but the island’s federal overseers said Thursday that it would take still more austerity to translate those temporary gains into a lasting recovery. At a meeting in San Juan of the territory’s federal oversight board, members called on Puerto Rico to reform its labor laws and fix its insolvent government pension system quickly, while it still had the benefit of both the disaster money and court protection from creditors under a special new bankruptcy law for United States territories. Retired government workers would see their pensions, already less than $25,000 a year for many workers, cut by an average of 10 percent; current government workers would be shifted into a 401(k) plan; and workers in Puerto Rico’s private sector would lose mandatory perks like a holiday bonus, usually $300 to $600 a year. …

Contractor involved in island-wide Puerto Rico blackout canned
Source: CBS News, April 19, 2018

An island-wide blackout hit Puerto Rico on Wednesday after an excavator accidentally downed a transmission line, officials said, as the U.S. territory struggles to repair an increasingly unstable power grid nearly seven months after Hurricane Maria. More than 1.4 million homes and businesses lost power as outrage grew across the island about the state of Puerto Rico’s Electric Power Authority. It was the second major outage in less than a week, with the previous one affecting some 840,000 customers. … Authorities said the same contractor was involved in the two latest big power failures and had been fired. … Government officials said a company hired by Cobra Energy known as Dgrimm was involved in both incidents that led to the power outages. Dgrimm had been asked to change its security protocols after the first incident, and it has since been terminated, said William Rios, power generation director. …

Puerto Rico back in darkness after island-wide blackout
Source: Arelis R. Hernandez, Washington Post, April 18, 2018
An island-wide blackout struck Puerto Rico on Wednesday, plunging the U.S. territory of more than 3 million citizens back into darkness, more than seven months after Hurricane Maria demolished its fragile power grid. The Puerto Rico Electric Power Authority said the blackout, which began at about 11:30 a.m., could last from 24 to 36 hours. At about 5 p.m., the local utility said more than 51,000 customers had power. In a statement Wednesday evening, Gov. Ricardo Roselló said the outage was caused by a subcontractor for energy company Cobra when workers damaged a major distribution line while moving a collapsed tower. PREPA said that the distribution line connects a major generating station in the south of the island to substations in the north, where most of the population lives. …

Roselló’s ‘Out of State Program’ Will Increase Puerto Rico Deficit
Source: AFSCME Press Release, April 13, 2018

The American Federation of State, County and Municipal Employees (AFSCME) and its Puerto Rico affiliate, Servidores Públicos Unidos de Puerto Rico, sent a letter to the PROMESA oversight board on April 12, outlining several distortions and critical omissions in Puerto Rico Gov. Ricardo Rosselló’s April 5 justification of the so-called “Out of State Program.” The plan would hurt Puerto Rico’s struggling economy by offshoring jobs, lead to lower tax collections, and ultimately balloon the commonwealth’s substantial operating deficit. The Puerto Rico Department of Corrections has made clear that it does not intend to wait for the Oversight Board to certify the governor’s plan. A Request For Proposal has been sent out to bidders. The department has announced that on April 24, it will hold a mandatory meeting for private prison company bidders. … “We are frustrated and outraged that Governor Rosselló continues to make bogus claims that his privatization scheme will actually save Puerto Rico money,” said Steven Kreisberg, AFSCME’s director of research and collective bargaining, and a signatory of the letter. “Whose interests are being served by issuing a contract that will damage Puerto Rico’s fragile economy, increase costs to the government and create hardship for prisoners and their families?”

The Puerto Rico Senate votes to end funding for Oversight Board
Source: Bond Buyer, April 4, 2018 (Subscription Required)
The Puerto Rico Senate voted 25-0 Wednesday to end the territorial government’s funding of the Puerto Rico Oversight Board. The Puerto Rico Oversight, Management, and Economic Stability Act defines the board as part of the Puerto Rico’s government and specifies that Puerto Rico’s government revenues are to be used for its funding. Over the past week Puerto Rico Gov. Ricardo Rosselló has defended his independent power relative to that of the Oversight Board and denounced a letter from U.S. Rep. Rob Bishop’s (R-Utah) to the board as aimed at squelching his rightful power as the elected leader of the territory. …

Puerto Rico governor goes into detail on his resistance to the Oversight Board
Source: Robert Slavin, Bond Buyer, April 2, 2018 (Subscription Required)
Puerto Rico Gov. Ricardo Rosselló specified Sunday where he would refuse to comply with Oversight Board demands as other Puerto Rico government officials joined him in saying they would resist further austerity. As part of the Puerto Rico Oversight, Management, and Economic Stability Act, the board is required to create fiscal plans governing taxes, revenues, expenditures, and other policies for at least a five-year period. The act says the judge in the Title III bankruptcy case must accept the fiscal plans, including their allotment for debt. …

Puerto Rico governor to revise fiscal plan, but won’t budge on austerity
Source: Nick Brown and David Henry, Reuters, April 1, 2018
Puerto Rico’s governor said on Sunday he would submit a revised fiscal turnaround plan on Thursday to the island’s federally appointed oversight board, but the plan would not include labor reforms and pension cuts the board demanded. Governor Ricardo Rossello also said the government of the bankrupt and hurricane-ravaged island would not allow the oversight board to usurp its legislative powers. “The Government will not allow the takeover of these powers, and therefore cannot be compelled to implement many of the suggested revisions,” Rossello told the board in an April 2 letter made public with a press release. The revised plan will exclude layoffs of public employees, the release said. …

Puerto Rico oversight board not doing enough for fiscal recovery, debt resolution, Bishop says
Source: Hazel Bradford, Pensions & Investments, March 30, 2018
The Puerto Rico oversight board needs to engage with debt holders and move more aggressively to implement reforms that include funding public pensions, House Natural Resources Committee Chairman Rob Bishop, R-Utah, said in a letter Thursday to Jose Carrion, chairman of the federal Financial Oversight and Management Board. Mr. Bishop oversaw legislation in 2016 creating the oversight process, which gives the board exclusive authority to enact and enforce fiscal plans and reforms, with the overall goal of improving access to capital markets. His committee has oversight authority on the board. “I remain frustrated with the oversight board’s inability and unwillingness to reach consensual restructuring agreements with holders of Puerto Rico’s debt,” Mr. Bishop said in the letter. The committee has been unsatisfied with the implementation of the Puerto Rico Oversight, Management and Economic Stability Act, and as the June 30 two-year anniversary approaches, a hearing “likely will be merited,” he said. …

Puerto Rico board demands 10% pension cut and 20 cent per kilowatt-hour electricity
Source: Robert Slavin, Bond Buyer, March 28, 2018 (Subscription Required)
The Puerto Rico Oversight Board has rejected fiscal plans presented by Gov. Ricardo Rosselló and two public authorities and has demanded, among other things, 10% pension cuts and 20 cents per kilowatt-hour electricity. On Wednesday the board sent out three letters outlining its demands for changes in fiscal plans submitted this month by the central government, Puerto Rico Electric Power Authority, and Puerto Rico Aqueduct and Sewer Authority. As part of the Puerto Rico Oversight, Management, and Economic Stability Act, the board is required to create fiscal plans governing taxes, revenues, expenditures, and other policies for at least a five-year period. The act says the judge in the Title III bankruptcy case must accept the fiscal plans, including their allotments for debt.

Puerto Rico governor withdraws labor reform proposal
Source: Nick Brown, Reuters, March 28, 2018
Puerto Rico’s governor on Wednesday withdrew his labor reform proposal after the island’s oversight board demanded additional measures, deepening a divide in the parties’ efforts to reach a consensual turnaround plan for the bankrupt, storm-ravaged island. Governor Ricardo Rossello said demands made by the federally appointed board earlier on Wednesday would have made his labor reform plan “impossible.” “The board pretends to dictate the public policy of the government, and that, aside from being illegal, is unacceptable,” Rossello said in a statement on Wednesday evening. Puerto Rico is navigating both the biggest bankruptcy in U.S. government history, with $120 billion in combined bond and pension debt, and its worst natural disaster in 90 years caused by September’s Hurricane Maria.
Puerto Rico’s governor presses power utility privatization
Source: Luis J. Valentin Ortiz, Reuters, March 5, 2018
Puerto Rico’s Governor Ricardo Rossello on Monday pressed proposals for privatizing the U.S. commonwealth’s shattered electrical grid as part of its painstaking recovery from devastating September hurricanes. Rossello used his State of the State speech to say that he had introduced an energy reform bill on Monday, while outlining ideas for cutting taxes, increasing police pay and introducing education reforms. …

Contractors Are Leaving Puerto Rico, Where Many Still Lack Power
Source: Frances Robles, New York Times, February 26, 2018

Though hundreds of thousands of Puerto Ricans remain in the dark five months after a devastating hurricane trampled the island’s power grid, the federal government has begun to scale back the number of contractors it has working to get the lights back on. The United States Army Corps of Engineers is in charge of the federal effort to repair the power grid on the island, where a Category 4 storm last fall knocked out electricity to every home and business. The corps gave major contracts to two companies, Fluor Corporation and PowerSecure, and coordinates their work with the efforts of the island’s government-run power utility, which has also hired contractors and brought in crews from mainland utilities. At one point, there were a total of 6,200 workers repairing transmission and distribution lines across the island, about half of them working for the corps. Now that power has been restored to more than 1.1 million people, by the utility’s count — about 86 percent of the island’s customers — the corps said it would begin a “responsible drawdown” of its work force. …

Why privatizing Puerto Rico’s power grid won’t solve its energy problems
Source: Associated Press, February 7, 2018
A major barrier to restoring power is Puerto Rico’s public power utility, known as PREPA. Bankrupt, its infrastructure dilapidated, PREPA has been unable to repair the island’s devastated grid. It is also seen as corrupt. In January, some customers left in the dark for months received bills for “services rendered.” Thousands more were slapped with overcharges. … Welcoming private energy companies to the island didn’t just weaken PREPA – it also damaged the environment. As revealed in a 2017 investigative reporting series by Puerto Rico’s Centro de Periodismo Investigativo, the multinational AES badly mismanaged the ash byproduct from a coal plant in Guayama, Puerto Rico, to brutal results. …

Opinion: Privatizing Puerto Rico’s energy utility could be Whitefish 2.0
Source: Ramón Luis Nieves, The Hill, February 5, 2018
Hurricane María was a total catastrophe for the people of Puerto Rico. But “Hurricane PREPA”, a man-made disaster, left 3.4 million American citizens without power, and without hope. The Puerto Rico Electric Power Authority (PREPA) and the government of Puerto Rico are not just financially broke — their credibility is also long gone. … Now, with its credibility gone and 30 percent of the island still in the dark, the government of Puerto Rico is proposing to privatize PREPA. At the same time, the government filed several bills to dissolve the Puerto Rico Energy Commission: the only entity that provides oversight over the bankrupt utility and the energy sector. …

Privatization concerns grow as PREPA seeks $1.3B loan
Source: Canadian Press, January 30, 2018
Government officials on Monday denied claims they plan to eliminate the Energy Commission that regulates Puerto Rico’s power company amid plans to privatize the utility, which they have warned will run out of funds by mid-February.  The denial came a day after a federal control board overseeing the island’s finances requested that a judge authorize a loan of up to $1.3 billion to Puerto Rico’s Electric Power Authority so it can keep operating. The board said the power company could see an estimated $1.2 billion loss in revenue in the first six months after Hurricane Maria.  Jose Roman, president of the Energy Commission, urged the administration of Gov. Ricardo Rossello to keep the body or create a new regulatory entity, saying strong oversight will be needed if the utility is privatized. …

Judge in Puerto Rico case strikes down two bondholder challenges
Source: Robert Slavin, Bond Buyer, January 31, 2018 (Subscription Required)
Puerto Rico Title III bankruptcy Judge Laura Taylor Swain has dismissed two major bondholder and bond insurer challenges.  In an order released Tuesday afternoon, Swain rejected the argument that the Puerto Rico Highways and Transportation Authority, Convention Center District Authority and Infrastructure Financing Authority were required to continue to pay their bonds because bonds were secured by liens on pledged special revenue streams. She also rejected the insurers’ argument that the funds in the reserve account were the property of the bondholders and thus should be released to them.

Puerto Rico legislature approves loans for PREPA and PRASA
Source: Robert Slavin, Bond Buyer, January 29, 2018 (Subscription Required)

The Puerto Rico legislature has passed a bill authorizing the central government to loan money to the Puerto Rico Electric Power Authority and the Puerto Rico Aqueduct and Sewer Authority to handle imminent cash shortfalls. On Jan. 22 Gov. Ricardo Rosselló said that PREPA was in danger of running out of money by early February. This could cause a power outage across the island since PREPA is the sole electricity provider. The Puerto Rico Senate first approved the measure. Then on Friday the Puerto Rico House approved it with 43 in voting in favor, four voting against, and four absent. The governor is expected to sign the measure.

The Peril of Privatizing Prepa
Source: Vann R. Newkirk II, The Atlantic, January 24, 2018

The plan for the Puerto Rico Electric Power Authority (Prepa) has been contested hotly for months now, in a power struggle that started even before Hurricane Maria plunged the island into darkness for months. But the ultimate fate for the commonwealth-owned power company has always trended in one direction: privatization. On Monday, Governor Ricardo Rosselló formalized that fate, announcing that over the next year-and-a-half, the Puerto Rican government will pursue a plan to sell the decrepit power utility, ending an effective territorial monopoly on electricity that has existed for almost 80 years, ever since President Franklin Roosevelt’s New Deal. …

Hurricane-Torn Puerto Rico Says It Can’t Pay Any of Its Debts for 5 Years
Source: Patricia Mazzei and Mary Williams Walsh, New York Times, January 24, 2018

Hurricane Maria made Puerto Rico’s already grave financial situation so much worse, the island’s leaders acknowledged late Wednesday, that they will not be able to pay down any portion of their more than $70 billion debt over the next five years. Just before the hurricane, Puerto Rico had made plans to pay creditors a total of $3.6 billion through 2022. That was just a fraction of the amount due, had the island, a United States commonwealth, not gone into default. Now, Puerto Rico expects its budget to be $2 billion to $3 billion in the red, Gov. Ricardo A. Rosselló told reporters at a briefing on Wednesday — a deficit that will take five years to shrink. By then, he said, the cumulative effect of tough economic austerity measures will help the island’s government achieve a balanced budget, as required by the federal oversight board that controls Puerto Rico’s troubled finances. …

How a Hedge Fund Could Derail Puerto Rico’s Debt Negotiations
Source: Brendan O’Boyle, Americas Quarterly, January 24, 2018

Puerto Rico’s $73 billion debt restructuring may soon come grinding to a halt as a judge weighs legal challenges to the entity Congress created to manage the island’s finances. Although many Puerto Ricans have criticized the Fiscal Oversight and Management Board as undemocratic and lacking in transparency, the lawsuit isn’t coming from anyone on the island, but from a New York-based hedge fund that could stand to profit if a new board were created under President Donald Trump. On Jan. 10, Aurelius Capital Management LP asked U.S. Federal Court Judge Laura Taylor Swain to dismiss the restructuring process that the oversight board initiated last May as part of PROMESA, a legislative package designed to rescue Puerto Rico from insolvency by handing its fiscal management to a board of technocrats assembled by Congress in 2016. Aurelius, which holds nearly half a billion dollars of Puerto Rico’s debt, claims that the board is unconstitutional, arguing that the confirmation process for its members violated the rules on how officers with such responsibilities should be appointed.

Puerto Rico to Start Privatizing Embattled Energy Company
Source:Jonathan Levin, Yalixa Rivera, and Michelle Kaske, Bloomberg, January 22, 2018
Puerto Rico Governor Ricardo Rossello said he’s moving to privatize the assets of the island’s electric company, a utility so badly damaged by Hurricane Maria that millions have been left in the dark for months.  Selling the insolvent Puerto Rico Electric Power Authority, the largest U.S. public power utility by customers and revenue, could take 18 months, Rossello said. It will start with legislation to establish a legal framework before the government entertains purchase proposals.  The move could be a major development in the fate of an agency at the center of the ravaged U.S. commonwealth’s recovery. Lack of power is the central obstacle to resuming normal life. But left unanswered is who might be interested in purchasing a badly damaged system and what a sale would mean for creditors and residents. …

Economists urge massive federal aid to revive Puerto Rico’s economy
Source: Brian Tumulty, Bond Buyer, January 22, 2018
A group of 26 prominent economists is urging the Trump administration to support a massive infusion of federal aid to rebuild Puerto Rico’s economy. “Puerto Rico now has a once-in-a-generation chance to rebuild its infrastructure and economic foundations” because of the severe damage caused by Hurricane Maria in September, the economists said in an open letter released Friday.  The group includes top economic policy advisory advisers from the Clinton and Obama administrations, including Nobel Prize winning economist Joseph Stiglitz, a professor at Columbia University who chaired the White House Council of Economic Advisers during the Clinton administration.

Puerto Rico Governor Asks DOJ To Investigate Island’s Public Power Utility
Source: Adrian Florido and Marisa Penaloza, NPR, January 11, 2018

Puerto Rico Gov. Ricardo Rosselló has asked the Justice Department to investigate the island’s public electric utility after federal agents said they found large quantities of critical rebuilding materials stored in a warehouse owned by the public company. On Saturday, employees of the Federal Emergency Management Agency and the U.S. Army Corps of Engineers entered the warehouse near San Juan, took possession of the materials and began distributing them to contractors working to rebuild the island’s flattened power grid, according to a statement from the Army Corps. Details of the operation were first reported by The Intercept. Among the materials found were transformers and metal sleeves that have been in short supply since Hurricane Maria devastated the island and its electrical grid in September.

Puerto Rico board picks four energy projects as infrastructure priorities
Source: Robert Slavin, Bond Buyer, January 8, 2018

The Puerto Rico Oversight Board said it was focusing on four key energy projects for expedited permitting as the island looks to restore its economy and infrastructure. …. The four projects would involve $1.47 billion in investment, nearly all from the private sector. The board estimates that the projects would create more than 8,200 direct and indirect jobs. ….

The GOP’s Tax Bill Kicks Puerto Rico When It’s Down
Source: Jennifer Bendery, HuffPost, December 19, 2017

The hits just keep coming for Puerto Rico. As the U.S. island struggles to climb out of a $70 billion debt crisis and recover from the devastation of Hurricane Maria, House Republicans voted Tuesday to impose a 12.5 percent tax on intellectual property income made by U.S. companies operating on the island and a minimum 10 percent tax on their profits in Puerto Rico.

Puerto Rico Still Waits for $4.9 Billion From U.S. Treasury
Source: Rebecca Spalding, Bloomberg, December 8, 2017
Over two months after Hurricane Maria devastated Puerto Rico, the island’s government still hasn’t received any of the $4.9 billion of short-term loans promised in the storm aid package Congress passed at the end of October.  Christian Sobrino, the governor’s representative on the island’s federal oversight board, confirmed Friday that no Puerto Rican entity has received any portion of the funds, which were requested for basic functions like making payroll. This week, the Puerto Rican government told the fiscal control board that the electric company, Prepa, and water utility, Prasa, would run out of money in December.  Sobrino said Friday that the island’s fiscal agency was in talks with the U.S. Treasury and Department of Homeland Security about the money and how it would be disbursed. …

U.S. counters hedge fund’s attack on Puerto Rico oversight board (Abstract)
Source: Jim Christie, Reuters, December 7, 2017
The U.S. government defended on Wednesday the federal board overseeing Puerto Rico’s restructuring, countering a bid by a hedge fund that sought to get the U.S. territory’s bankruptcy-like case dismissed by attacking the board’s legality.  The restructuring is taking place under a special federal law known as the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) that provides for proceedings in U.S. District Court akin to those under Chapter 9 municipal bankruptcy. …

Bernie Sanders to unveil a $146 billion ‘Marshall Plan’ for Puerto Rico
Source: Jeff Stein, Washington Post, November 28, 2017

Hurricane Maria destroyed Puerto Rico’s decades-old electrical grid when it made landfall on Sept. 20, rendering millions of island inhabitants without power.  On Tuesday, Sen. Bernie Sanders (I-Vt.) will unveil an ambitious $146 billion Puerto Rico recovery plan he says will allow renewable power sources such as solar and wind to provide about 70 percent of the island’s energy needs within the decade.  The bill, which has the backing of San Juan Mayor Carmen Yulín Cruz, also calls on Congress to consider retiring Puerto Rico’s debt and would give the island billions in additional federal funding for transportation, health care and education in the hopes of stemming a feared mass exodus to the mainland. It would also allocate funds to the Virgin Islands, which were similarly devastated by Hurricane Maria. …

Union, hedge fund trades blows over Puerto Rico oversight board (Abstract)
Source: Jim Christie, Reuters, November 6, 2017

A hedge fund’s Constitutional challenge to the creation of the federal board overseeing Puerto Rico’s finances is a ploy to protect investments in the insolvent island’s debt, a union for government workers said in court papers filed on Friday. The court should reject a bid by Aurelius Capital Management to get Puerto Rico’s case dismissed by challenging how the board was established, the American Federation of State, County and Municipal Employees added in its papers. …

Trump boosts disaster aid for Puerto Rico rebuild
Source: Roberta Rampton, Reuters, November 2, 2017
U.S. President Donald Trump on Thursday agreed to expand the use of disaster aid to help rebuild Puerto Rico’s power grid and other infrastructure wrecked by Hurricane Maria, the White House said. In a unique agreement recognizing both the massive devastation on the island and its dire financial problems, aid from the Federal Emergency Management Agency (FEMA) for infrastructure projects will be released in a faster, more flexible way than is typical after disasters, a senior White House official told Reuters.  The plan, agreed to with Puerto Rico Governor Ricardo Rossello, will also provide for third-party advisers to estimate how much money is requires for big-ticket projects, and how it is spent – a provision aimed at protecting taxpayer dollars in what is expected to be a massive, long-term effort to rebuild the island. …

Puerto Rico Lays Out Energy Future With Tesla, Privatization
Source: Jonathan Levin, Bloomberg, October 22, 2017

A Puerto Rican official who has been in talks with Tesla Inc. said the island is serious about transforming its energy infrastructure after it was leveled by Category 4 Hurricane Maria, despite questions about how such an overhaul would be funded.  Speaking in a telephone interview Sunday, Department of Economic Development and Commerce Secretary Manuel Laboy said Puerto Rico’s government understands its skeptics: The island’s finances are shot and its electricity system is in tatters. But he said the U.S. territory has a historic opportunity to use federal funds to modernize an aging and weak power grid.  At the core of the argument is the government’s belief that funding related to the Federal Emergency Management Agency, or FEMA, can be used to build a new system, not just repair the old one, so that it won’t be susceptible to collapse when the next storm hits. Laboy said Governor Ricardo Rossello’s government is prepared to make its case. …

Puerto Rico taps public private partnerships to boost economy
Source: Robert Slavin, Bond Buyer, October 19 2017

…The island government said Monday that it’s working on six public private partnership projects that would lead to $300 million to $400 million of investment in projects ranging from a hydroelectric dam to student housing.  Puerto Rico will seek requests for qualifications for three of the projects and it is already working with companies on the other three. If the projects go forward, they would boost an economy that has been struggling with long-term economic decline compounded by the impacts of two major hurricanes in the last two months….

Elon Musk Is Not the Hero Puerto Rico Needs
Source: Kate Aronoff, In These Times, October 11, 2017

… According to a tweet from the governor late last week, the two are now in talks about bringing renewable energy from Musk’s Tesla and SolarCity operations to the island, whose long-embattled public utility—the Puerto Rico Electric Power Authority (PREPA)—was decimated by Hurricane Maria. … On the one hand, the talks can be seen as a positive development: More than 80 percent of the island remains without power, and the storm could be a once-in-a-lifetime opportunity for Puerto Rico to get back online and become a leader in the transition away from fossil fuels. But the budding friendship between Rossello and Musk is also taking place in the context of a massive attempt to privatize Puerto Rico’s electric utility. Musk’s companies could deliver tangible improvements to Puerto Rico’s grid, but they could also prime the pump for a corporate takeover of the United States’ largest public power provider, putting decisions like who gets power and how much it costs into the hands of corporate shareholders. …

Puerto Rico Faces Restart on Financial Plan After Maria
Source: Heather Gillers and Andrew Scurria, Wall Street Journal, September 26, 2017

It took months to put together a financial overhaul plan for Puerto Rico. Now officials may have to start over following Hurricane Maria. The federal board supervising Puerto Rico’s bankruptcy plans to meet Friday and is likely to discuss possible changes to a commonwealth fiscal plan it approved in March, according to a person familiar with the matter. The conversations could affect the severity of write downs on Puerto Rico’s $73 billion in debt.

… Reconstructing Puerto Rico’s power grid may prove particularly costly because of financial difficulties at its struggling electric utility. … Congress is starting to debate how best to rebuild Prepa. Setting up a reliable power system will require expensive modernization using federal dollars. Prepa is a flashpoint in Puerto Rico’s financial crisis because power rates are a drag on family incomes and company budgets. The oversight board has said it wants to privatize power generation to lower costs and transition Prepa to a regulated utility model. Creditors are skeptical of privatization, concerned that by selling off assets Prepa would lose the revenue streams backing its debt. But raising power rates to repay creditors is politically toxic in Puerto Rico, where the cost of importing fuel from oil tankers has driven power prices higher than in any U.S. state but Hawaii. …

Puerto Rico’s bondholders worried after Hurricane Maria turns out lights
Source: Francine McKenna, MarketWatch, September 21, 2017

If Puerto Rico is without power for months after Hurricane Maria, as authorities now warn, many investors in the $9 billion of Puerto Rico’s outstanding electric utility bonds risk never seeing their money. … The plight of Prepa bondholders—Prepa is Puerto Rico’s main supplier of electricity—was grim even before Irma. … Prepa’s bonds, $9 billion worth, are revenue bonds whose funding stream is based on collecting customer fees. Even before Hurricane Maria knocked power out for good, bondholders were worried that Prepa would deliberately force some plants offline, jeopardizing the collateral, creating justification for a privatization plan that could leave current bondholders high and dry. Proponents argue that a brand new electric authority, free of debt, would be a huge boon to the Puerto Rican economy. …

Hurricane Irma Unleashes the Forces of Privatization in Puerto Rico
Source: Kate Aronoff, Angel Manuel Soto, and Averie Timm, The Intercept, September 12, 2017

For struggling governments around the world, privatizing utilities has come to be seen as a kind of get-rich-quick scheme, offering an upfront infusion of cash to underfunded municipalities. Given Prepa’s size and that of its debt — $9 billion — it has been a long-standing target for privatizers, even before Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act last year to help rein in Puerto Rico’s mounting debt crisis. The blackout following Irma just added fuel to the fire. Days before Irma hit, Rosselló emphasized that privatization is firmly on the table, telling the New York Times that Irma “can become an opportunity or another liability.” …

Irma Grazes Puerto Rico but Lays Bare an Infrastructure Problem
Source: Luis Ferré-Sadurní, New York Times, September 10, 2017

As government workers cleared roads obstructed by uprooted trees and repaired toppled electricity lines, residents of Puerto Rico felt some relief that the eye wall of Hurricane Irma had skirted the island on its recent rampage through the Caribbean.  But while the commonwealth had largely been spared the 185-mile-an-hour gusts that had flattened its smaller island neighbors, hundreds of residents still lost their homes, at least three people died and almost 70 percent of households were plunged into darkness. The storm knocked out Puerto Rico’s fragile power grid, exposing the island’s decrepit infrastructure and raising questions about its future viability amid a worsening economic crisis.

… How a commonwealth going through a decade-long recession will be able to pay for much-needed upgrades is the key question. One option is to turn to the private sector, local economists say. Private investments, Mr. Rosselló said, could be accelerated under a provision of a contentious new law called Promesa, which placed the island’s finances under the oversight of a federal board. The provision could expedite and facilitate the process for private investment in electric, highway and water projects. … But the idea of privatizing public utilities is a divisive one on the island. The electrical workers’ union fears that the government purposely let Prepa deteriorate over time to justify privatizing it. …

Puerto Rico wasn’t ready for Hurricane Irma. We couldn’t possibly be.
Source: Carla Minet, Washington Post, September 7, 2017

On the surface, Puerto Rico was as ready as it could be for Hurricane Irma. Government agencies and Gov. Ricardo Rosselló have been taking a proactive, hands-on approach. President Trump has declared a state of emergency, which will generate emergency funds from the federal government. Refugees from the northeastern corner of the island, where Irma’s Category 5 winds already reached Wednesday afternoon, were arriving in shelters. … But Irma — a storm the likes of which we haven’t seen here in decades — is heading for an island whose resources to truly prepare for an emergency are already in grave doubt. … Now Irma may be used as a new rationale for the strategy of privatizing the public service by the Fiscal Control Board, whose members have publicly declared support for selling off the utility. The agency announced that 44 percent of the population — 692,350 clients — were already without electricity service by Wednesday afternoon. …

Government labor strife is latest test for fractured Puerto Rico
Source: Nick Brown, Reuters, August 30, 2017

Puerto Rico’s already frail economy faces a fresh test this week, as the bankrupt U.S. territory’s financial overseers try to force a defiant governor to furlough public workers, the single biggest block of employees on the island. An escalating power struggle between the democratically elected Governor Ricardo Rossello and the federally appointed oversight panel culminated on Monday when the board sued Rossello, saying he had no authority to reject pension cuts and furloughs ordered by the board. The measures are set to begin Sept 1. A competing lawsuit from the American Federation of State, County and Municipal Employees (AFSCME), which represents 12,000 Puerto Rican workers, argues the exact opposite – that the measures violate the U.S. Constitution, and should be halted. At least six unions are staging protests on Wednesday to oppose the austerity, featuring a midday march to the board’s San Juan offices. … Noting a Rossello initiative to privatize some public assets, Eiler said “the unions’ cooperation is imperative” for public-private partnerships. …

Hedge Fund Sues to Have Puerto Rico’s Bankruptcy Case Thrown Out
Source: Mary Williams Walsh, New York Times, August 7, 2017

A hedge fund sued on Monday to have Puerto Rico’s bankruptcy case thrown out, arguing that the federal oversight board guiding the island’s financial affairs was unconstitutionally established.  In a lawsuit filed in United States District Court in San Juan, the hedge fund, Aurelius Capital, cited the “appointments clause” of the United States Constitution, which calls for all principal officers of the federal government to be appointed by the president, and then confirmed by the Senate.  That did not happen when the seven members of the Financial Oversight and Management Board for Puerto Rico were selected, Aurelius said in its motion to dismiss the bankruptcy-like proceedings. …

Puerto Rico Teachers’ Union-AFT Join Forces Amid Debt Woes
Source: Jaclyn Diaz, Daily Labor Report, August 4, 2017 (subscription required)

The economic devastation in Puerto Rico has pushed the American Federation of Teachers to lend a hand to the island’s educators. Asociación de Maestros de Puerto Rico will continue to represent the 40,000 plus Puerto Rican educators. It signed a three-year affiliation agreement with the 1.6 million-member AFT to help it combat the island’s economic challenges, the two unions announced Aug. 3. … AFT and AMPR will work together to fight austerity measures and privatization on the island, Randi Weingarten, AFT president, told Bloomberg BNA Aug. 4. AFT will lend resources to help AMPR train teachers for the future and to bring in legal assistance to fight the fiscal plan adopted by the Puerto Rican government, she said. …

Is Congress’ plan to save Puerto Rico working?
Source: Edwin Melendez, San Francisco Chronicle, July 31, 2017

A year ago, Congress cobbled together a plan to try to save Puerto Rico from its US$123 billion debt and pension crisis without costing American taxpayers a penny.  The law, signed by former President Barack Obama on June 30, 2016, effectively steered Puerto Rico into bankruptcy-like proceedings in federal court to prevent a massive default, while saddling the commmonwealth with an oversight board to ensure it put its fiscal house in order.  Though the vote was bipartisan, critics called it a “Band-Aid” that would do little to solve Puerto Rico’s core problems: unsustainable debt that has kept the country mired in recession for almost a dozen years. …

For Sale: Puerto Rico
Source: Heather Gillers, Wall Street Journal, June 26, 2017

Puerto Rico has no cash and can’t borrow money anymore. So it is looking to sell itself off in parts. The troubled U.S. territory is preparing to seek bids in coming months from private companies willing to operate or improve seaports, regional airports, water meters, student housing, traffic-fine collections, parking spaces and a passenger ferry, according to a government presentation reviewed by The Wall Street Journal.

The Bankers Behind Puerto Rico’s Debt Crisis
Source: Michelle Chen, The Nation, June 8, 2017

Puerto Rico’s economic crisis has now washed the burden of its colonial legacy onto Washington’s doorstep. Congress has been trying to contain the island’s ballooning debt under the hardline austerity program of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). But since the program is governed by a control board run by the same financiers responsible for driving the debt crisis in the first place, the island continues to sink into poverty while its creditors feast on the spoils.  To underscore how Puerto Rico’s revolving door of big finance and politics is underwriting the debt crisis, a report by the AFL-CIO and the community-labor coalition Committee for Better Banks (CBB) traces the career of the head of PROMESA, Carlos M. García, from his role as a head banker of Santander to his current political post overseeing the privatization and pillage of Puerto Rico’s anemic public assets.

Puerto Rico strikes second restructuring deal with bondholders
Source: Hazel Bradford, Pensions & Investments, May 15, 2017

Puerto Rico reached a restructuring agreement with bondholders invested in the commonwealth’s Government Development Bank, officials announced Monday in San Juan. … Puerto Rico’s Federal Affairs Administration said in that statement that GDB creditors “have agreed to substantial discounts to the principal,” but did not provide further details on the agreement, which calls for bondholders to exchange claims for one of three tranches of bonds issued by a new municipal entity. The new bonds will have varying principal amounts, interest rates, collateral priority, and other payment terms.  It is the second agreement reached with bondholders and Gov. Ricardo Rosello, following one announced April 6 with holders of bonds issued by the Puerto Rico Electric Power Authority. The PREPA agreement restructures $9 billion in debt by offering them 85 cents on the dollar, and giving PREPA more time to begin making payments. …

Puerto Rico board extends budget deadline by two weeks
Source: Robert Slavin, Bond Buyer, May 9, 2017 (Subscription Required)

The Puerto Rico Oversight Board extended the deadline for Puerto Rico Gov. Ricardo Rosselló to submit a fiscal year 2018 budget by two weeks.  Board chairman José Carrión III told Rosselló that the board had originally set May 8 as the deadline for either the board approving the governor’s budget or notifying the governor of violations and providing a description of corrective actions. “We have received a working draft of the proposed budget and are reviewing the submission and its completeness,” Carrión wrote Monday. “The board will provide the governor an additional 14 days to amend and improve the submission before it approves it or identifies violations.” …

Puerto Rico unveils energy PPPs amid economic turmoil
Source: David Casallas, BNamericas, May 5, 2017

Puerto Rico’s embattled government released a list of priority project proposals for this year, among them energy sector initiatives that would be carried out through public-private partnerships (PPP). The projects envision natural gas use at power utility AEE’s residual fuel oil fired-plants Costa Sur (990MW) and Palo Seco (602MW) which would cost US$150mn-265mn and US$200mn-360mn, respectively. Information from the Puerto Rico Public-Private Partnerships Authority also reveals that AEE seeks partners to develop renewable energy projects, including photovoltaic and wind, for between US$100mn and US$700mn. …

Puerto Rico Declares a Form of Bankruptcy
Source: Mary Williams Walsh, New York Times, May 3, 2017

With its creditors at its heels and its coffers depleted, Puerto Rico sought what is essentially bankruptcy relief in federal court on Wednesday, the first time in history that an American state or territory had taken the extraordinary measure.  The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, to uncharted ground.  While the court proceedings could eventually make the island solvent for the first time in decades, the more immediate repercussions will likely be grim: Government workers will forgo pension money, public health and infrastructure projects will go wanting, and the “brain drain” the island has been suffering as professionals move to the mainland could intensify. …

Puerto Rico faces bank closure, privatizations
Source: Danica Coto, Associated Press, April 28, 2017

Puerto Ricans will be facing a water rate increase, privatization of government operations and the closure of a bank that once oversaw the island’s debt transactions, officials said Friday as they worked on measures to offset an economic crisis.  Some of the changes were outlined in new fiscal plans presented to a federal control board overseeing the island’s finances. The plans for four heavily indebted Puerto Rico agencies will be amended in upcoming weeks, although officials noted that the water rate increase will start in January and that the Government Development Bank will be liquidated within a decade.  The board recently approved an overall fiscal plan for the central government that contains several austerity measures. …

Puerto Rico pushes to privatize operation of public services
Source: Danica Coto, Associated Press, April 20, 2017

Puerto Rico is ready to sign dozens of new deals to privatize the operation of public services as government funds dwindle amid a decade-long recession, the island’s governor told some 800 investors attending a two-day financial summit Thursday.  Gov. Ricardo Rossello said public-private partnerships could create up to 100,000 new jobs and generate some $5 billion in the next three years for a U.S. territory mired in economic crisis and its government facing a $70 billion public debt load that it is struggling to restructure.

AFSCME Pres. Lee Saunders on Puerto Rico Fiscal Plan
Source: AFSCME Press Release, March 13, 2017

AFSCME Pres. Lee Saunders issued the following statement on the oversight board’s approval of a fiscal plan for Puerto Rico:  “The plan approved by the Oversight Board will have devastating consequences for the people of Puerto Rico, especially its most vulnerable citizens. The plan adopts an austerity approach that will slash services, cut pensions and create yet more economic hardship for Puerto Ricans. The winners are wealthy investors who stand to gain from the mass privatization of the services that remain. These actions are the foreseeable result of an anti-democratic law adopted by the last Congress. The people of Puerto Rico have been forgotten; we call on the federal government to act quickly to restore services and pensions.”

Board to Puerto Rico: Cut Pension System, Impose Furloughs
Source: Danica Coto, Associated Press, March 13, 2017

A federal control board on Monday said Puerto Rico’s government needs to cut its public pension system by 10 percent, furlough tens of thousands of its workers and eliminate Christmas bonuses if it cannot generate other types of savings amid a nearly decade-long recession. The seven-member board created by Congress last year to oversee the U.S. territory’s finances voted unanimously to add those measures to a 10-year fiscal plan presented by the island’s governor that the panel approved Monday. The measures will be implemented if the government fails to find other ways to cut spending and increase revenue. Board members said the spending cuts will be necessary so the government will have enough funds to pay for essential services such as education, health and public safety. … The plan drafted by the government and approved by the board also will cap some Medicaid benefits, effectively raise property taxes and scrap some infrastructure projects while possibly turning ferries, ports and parking lots over to private companies. It will freeze salaries until 2020, seeks to privatize the generation of power and increase motor vehicle license fees by 10 percent. …

Puerto Rico governor wants fewer austerity measures
Source: Danica Coto, Associated Press, March 1, 2017

Puerto Rico’s governor submitted an austerity plan made public on Wednesday that would cut deeply into the U.S. territory’s budget while avoiding some of the most painful measures recommended by a federal control board that is overseeing the island’s effort to confront a debt crisis that has led to repeated defaults. Gov. Ricardo Rossello’s plan would cap some Medicaid benefits, effectively raise property taxes and collect a tax on internet purchases. It would also scrap some infrastructure projects and could turn ferries, ports and parking lots over to private companies. But it would fall short of the board’s recommendation of a 30 percent cut in payroll costs and 10 percent reduction in the government pension system, which is on track to run out of money next year. …