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Puerto Rico’s roads, ports, energy grid and other infrastructure scored an overall D-minus in the first report card issued for the U.S. commonwealth yesterday by an engineering group, which put a price tag of as much as $23 billion over 10 years on needed updates and repairs, Reuters reported. The near-failing grade from the American Society of Civil Engineers comes as the island is still trying to recover from devastating hurricanes that hit in 2017 and as its bankrupt government attempts to restructure about $120 billion of debt and pension obligations in federal court. Most of the island’s infrastructure is in “poor condition” and is exhibiting “significant deterioration,” according to the report. Puerto Rico would need to spend an additional $13 billion to $23 billion over 10 years “to update infrastructure in order to support economic growth and competitiveness,” the report said. It added that “when considering deferred maintenance and hurricane-related recovery projects, the investment gap is even larger.” So far, the U.S. government has sent the island $14.4 billion of the $43 billion in disaster funding that has been allocated.

Puerto Rico would place restrictions on its future debt sales under proposed legislation that won praise yesterday from the bankrupt U.S. commonwealth’s federally created financial oversight board, Reuters reported. Puerto Rico’s bankruptcy takes up the bulk of the island’s $120 billion of debt and pension obligations and analysts have raised questions about the island’s future market access due to the board’s attempt to void some outstanding bonds. Under legislation backed by Governor Wanda Vazquez Garced, the Puerto Rico Fiscal Agency and Financial Advisory Authority would be charged with developing a policy for the government and its public corporations that sets a limit on tax-backed debt. The agency would also have to approve any debt issuance, which would be limited to maturities of no more than 30 years with proceeds allocated for only capital improvements. Principal payments would be required to begin within two years of issuance. The board said it welcomed a policy to prevent a repetition of “irresponsible fiscal management and debt issuances” that led to the island’s financial crisis and subsequent 2017 bankruptcy filing. The bill now heads to the legislature, where support for the measure was unclear.

For Puerto Rican retirees living in Florida, the critical question of the long-term security of their pensions is a constant source of worry, according to a commentary in the Orlando Sentinel. On Wednesday, the House of Representatives’ Natural Resources Committee heard testimony from a cross-section of Puerto Ricans and other stakeholders as it considers amendments to PROMESA, the 2016 law that created a financial oversight board for Puerto Rico. As discussions swirl around the future of Puerto Rico’s pensions, retirees are looking to Congress to protect their much-needed income. In October, Puerto Rico’s legislature passed a resolution opposing the proposed plan of adjustment and warned they would vote down any legislation that could implement the proposed pension cuts of up to 8.5 percent as well as cuts to other essential services. But the resolution still needs to pass the Puerto Rican Senate to have any teeth to fight back against the plan to slash retiree payments.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The question of statehood for Puerto Rico would be put to voters of the U.S. commonwealth for a third time since 2012 under legislation introduced yesterday in Congress, Reuters reported. Proponents of the bill said that it would provide the island with the same path to statehood taken by Alaska and Hawaii, the last two states admitted to the union. Under the legislation, which has some bipartisan support, a federally authorized referendum would appear on the Nov. 3, 2020, ballot in Puerto Rico. Approval by a majority of the island’s voters would lead to a presidential proclamation within 30 months making Puerto Rico the 51st state. President Donald Trump has called Puerto Rico “one of the most corrupt places on earth,” making the bill’s future murky. The island’s non-voting congressional representative, Jenniffer Gonzalez-Colon, said the measure has 45 sponsors.

Puerto Rico’s undependable power network would be modernized and decentralized under a $20.3 billion, 10-year plan announced on Thursday by government officials of the bankrupt U.S. commonwealth, Reuters reported. The so-called GridMod plan, developed with federal, local and private sector input, targets repair and reconstruction measures designed to strengthen the network and ensure its resilience against natural disasters like the devastating hurricanes that struck Puerto Rico in 2017, according to a statement from Governor Wanda Vázquez Garced’s office. Puerto Rico and its electric power authority known as PREPA filed for bankruptcy in 2017 just months before hurricanes Irma and Maria devastated the power grid. Federal funding would cover about $13 billion of the plan, which also calls for private investment, according to the governor’s statement. The plan recommends a transformation to a decentralized electricity network, incorporating renewable energy and micro-networks to improve reliability and avoid blackouts during catastrophic events.

A 2016 U.S. law that authorized federal oversight for Puerto Rico should not be amended to allow for the cancellation of unsecured debt, some of the island’s government officials said at a congressional hearing yesterday, Reuters reported. The House Natural Resources Committee, which oversees U.S. territories, is mulling changes to the PROMESA Act, which created a financial oversight board and a pathway for Puerto Rico’s 2017 bankruptcy filing. A discussion draft of amendments to the law included a proposal allowing Puerto Rico lawmakers to discharge debt not secured by collateral for repayment. Omar Marrero, Puerto Rico’s chief financial officer, said the move would increase future borrowing costs. “Instead of being able to fully access the bond market in the future, we will be limited to only the least-optimal mechanisms for funding future projects such as secured or high-interest bonds,” he said. Natalie Jaresko, the oversight board’s executive director, said that the debt-cancellation proposal “may make it harder and more expensive” for the board to restructure Puerto Rico’s existing debt through the ongoing bankruptcy process, leaving less money available for critical services for residents. In September, a proposal to restructure Puerto Rico’s core government debt, consisting of $35 billion of bonds and claims and more than $50 billion of pension liabilities, was filed in U.S. federal court by the board. Read more. 

To watch a replay of the hearing, review the discussion draft of the proposed legislation and access written testimony, please click here. 

Puerto Rico may receive less federal disaster money than expected, a potential drag on an island that was counting on post-Hurricane rebuilding to help it recover from a years-long recession, according to a report from the commonwealth’s financial oversight board, Bloomberg News reported. The federally appointed board last month released a multi-year fiscal plan to balance Puerto Rico’s budgets, reduce $35 billion of debt and other liabilities and address a broke pension system. It relies on federal disaster aid from Hurricane Maria to help grow the economy. Yet that plan has risks. Puerto Rico may only receive $39 billion from the Federal Emergency Management Agency and U.S. Department of Housing and Urban Development, rather than the anticipated $69 billion, according to a Sept. 17 report by the board and posted late Thursday night on the Municipal Securities Rulemaking Board’s website. “We are already seeing delays in disaster relief funding and have reason to question the duration of the ‘boost’ these funds are bringing to the economy,” according to the report. The release of the board’s risk report comes as it negotiates in bankruptcy proceedings with creditors on how to reduce $17.8 billion of debt backed by Puerto Rico’s central government. The board has reason to doubt the amount and pace of federal aid money. Acting White House Chief of Staff Mick Mulvaney on Thursday said that the administration was correct in thinking that Puerto Rico was corrupt, which he said figured into decisions about disbursing aid.

The Supreme Court heard oral argument yesterday in the case to decide whether the appointment of the members of the Financial Oversight and Management Board of Puerto Rico violated the Appointments Clause of the Constitution because they were not nominated by the President and confirmed by the Senate, according to an analysis of the oral argument by ABI Editor-at-Large Bill Rochelle. In the worst case, the nation’s high court could hand down a ruling that vaporizes three years of work toward restructuring Puerto Rico’s debt. However, the justices’ grasp of the practical aspects of the case suggest that they will at least give the Senate and the President a chance to resurrect the Oversight Board’s work. In the best case, the Supreme Court will reverse the First Circuit and hold that the Board members did not require Senate confirmation, thus validating the steps already taken to adjust the debt of the island commonwealth. In the 80 minutes of oral argument, the justices continually focused on the precedential effects of the opinion they would issue. They clearly understood that invaliding the Oversight Board could mean that the governments of territories and even the District of Columbia had been formed in contravention of the Constitution. Click here to read the RDW analysis 

For more on the case, including a full transcript of the oral argument, petitions, briefs and further insight from ABI Editor-at-Large Bill Rochelle, please click here.