Carolina Sues GDB Over Restrictions On Cash Outflows
SAN JUAN — On Wednesday, the municipality of Carolina sued the Government Development Bank (GDB) in a bid to protect and regain control of roughly $7.6 million deposited in the troubled bank, according to a statement.
“The municipality of Carolina is demanding the immediate disbursement of $7.6 million in municipal funds we hold in the GDB, because that institution froze the money under the [recently enacted] moratorium law. Our legal action is nothing more than a legitimate claim to respect the integrity of municipal funds that are already committed,” stated Carolina Mayor José Aponte, from the governor’s Popular Democratic Party.
Among its dispositions, the Puerto Rico Emergency Moratorium & Financial Rehabilitation Act allows Gov. Alejandro García Padilla — as he did days later with through an executive order — to impose restrictions on cash disbursements at the cash-strapped government bank, in a bid to stabilize its dismal liquidity levels and avoid a receivership process.
“Due to their inability to reorganize its finances, the central government seized the funds that belong, not to [the Carolina municipal government], but to the thousands of citizens who elected us to lead the reins of this municipality,” stated Aponte, who noted that the lawsuit only challenges the moratorium law’s effects on municipalities, and not the entire statute.
The municipality of Carolina argues that the $7.6 million in dispute don’t belong to the GDB nor to its creditors, and is challenging the moratorium law’s dispositions that is affecting the island’s towns. Aponte stressed these funds were already committed under legal contracts that remain in place between the municipality and suppliers, which could result in Carolina failing to meet its obligations, while paralyzing important infrastructure projects in the city.
For the Carolina mayor, “the consequences would be of such magnitude that it would affect contractors, suppliers and especially the thousands of Carolina residents who would benefit once these projects are completed.”