Federal loans announced for Puerto Rico municipalities
SAN JUAN – After indicating that the 78 municipalities that make up Puerto Rico were the first line of disaster response during the emergency left by Hurricane María, Gov. Ricardo Rosselló announced Monday that the U.S. Treasury Department has begun the process to grant Community Disaster Loans (CDLs), which are expected to provide relief for the economic situation that island towns face.
Municipalities will be able to participate in a program that provides loans of up to $5 million for operational expenses, at an about 2.25% interest rate.
“Municipalities were the first line of response for citizens after the emergency caused by Hurricane María. Municipal coffers were affected by unforeseen expenses and the closure of businesses devastated by this atmospheric phenomenon,” the governor said in a press release.
“Our administration will continue to work tirelessly to ensure that American citizens living in Puerto Rico are treated fairly and equally to those of other jurisdictions in the United States amid this emergency,” Rosselló Nevares said.
The loans will be in the form of a line of credit from which mayors can withdraw the full amount granted or withdraw funds according to their needs for a period of five years, the governor explained.
Likewise, he indicated that each municipality will have to start paying the loan after five years, although this term could be revised depending on a municipality’s finances.
According to the U.S. Congressional Research Service (CRS), the Federal Emergency Management Agency (FEMA) has previously forgiven 92% of the amount granted through this program to jurisdictions affected by disasters.
FEMA will decide the eligibility of municipalities, determine the terms of the loan and assign accountants to review the damage assessments made by the municipalities after Maria.
The analysis could take at least three weeks and it is estimated that municipalities may begin to receive loan approvals during the first weeks of March.
Carlos Mercader, executive director of the Puerto Rico Federal Affairs Administration (PRFAA) in Washington, D.C., said FEMA and U.S. Treasury representatives will visit the island to offer guidance to mayors, and FEMA accountants will then meet individually with each municipal executive.
“This allocation follows the request made by Governor Ricardo Rosselló Nevares to the administration [of President Donald] Trump and Congress to address the fiscal crisis after the onslaught of Hurricane María,” Mercader said.
“In our collaboration with federal agencies, we will ensure that municipalities can address their fiscal challenges by accessing these funds as soon as possible,” the official said in a statement from Washington.
The executive director of the PRFAA added that the meetings with mayors will begin after Jan. 15.
Each municipal legislature must approve the loan application and identify collateral, such as potential future revenue that is not already spoken for in their budgets.