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Fiscal board expects Puerto Rico transportation authority’s revised fiscal plan Thursday

By on April 4, 2018

SAN JUAN – The Puerto Rico Highways and Transportation Authority (HTA) has to submit by Thursday a new fiscal plan that contains road-tolling optimizations, significant job cuts and outsourcing, as well as strategies to reduce traffic congestion.

Last week, the island’s Financial Oversight and Management Board said the proposed fiscal plan of March 9 left no funding for strategic projects, even after accounting for the impact of all fiscal measures.

The fiscal board said it also “rests on several questionable assumptions” for its baseline; reflects a “deterioration in both the impact and the timing” of the fiscal measures from the plan certified in April 2017; “fails to include clear structural reforms to drive additional revenues and reduce operating expenses and capital expenses”; and does not include “details of a congestion-reduction plan” required to “help Puerto Rico meet structural reform targets” in the commonwealth’s fiscal plan.

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The fiscal board warned that it was not going to certify the proposed fiscal plan until it leaves additional funds for strategic projects. Furthermore, the panel noted that, in violation of the Promesa federal law, HTA “failed to include a credible liquidity plan,” as well as a debt sustainability analysis hat “creates a plausible path” for the public corporation to exit the law’s Title III bankruptcy process.

The fiscal board said the plan must justify tying toll, transit and other revenue to the gross national product (GNP) “despite historic trends,” as well as explain why toll-fine revenue jumped from about $11 million a year in the current plan to about $29 million a year in the proposed plan.

As for spending, the board noted that the proposed fiscal plan’s litigation reserve must be adjusted to reflect an increase in projected capital expenditures. It also must explain why there is no Federal Highway Administration Emergency Relief (FHWA-ER) cost-share represented for the years it would be available.

“The Board also needs clarification on FTA funding flows in the plan; in particular, why the $20 million in annual funding that HTA claims it is eligible for is not included as a funding source in the baseline,” the board said.

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Since 2013, HTA capital spending has been about $200 million a year, yet construction expenses in the proposed plan are projected to climb to $872 million in fiscal year 2019, before dropping to an average of about $400 million starting in fiscal 2022.

“HTA must demonstrate that it has the institutional capacity to successfully implement this large, sustained increase in capital spending,” the board stressed, adding that the department must also outsource and reduce its workforce.

Regarding toll optimization, the plan must break down both the expenses and potential “opportunities” for this measure, broken down by each toll road, with a description of where the open road tolling gantries, or similar devices, would be installed.

“The Proposed Plan must provide a detailed evaluation of the opportunity, socioeconomic impact, and go-forward plan for both raising tolls on existing tolled roads, as well as instituting tolls on currently un-tolled roads,” the board specified.

The plan must also include a description of how the Bus Rapid Transit (BRT) implementation will affect Urban Train ridership and revenue.

“Further detail is required on how the ridership assumptions were reached, and the assumptions that support the proposed BRT line achieving a farebox recovery ratio of 75%. HTA must also explain how the initiative relates to the unsolicited bid to the P3 [Public-Private Partnerships] Authority to create and operate a BRT along a similar route, and whether this measure overlaps with that effort,” the board wrote.

When addressing the traffic congestion issue, the board said HTA’s proposed plan must include a detailed management plan that specifies capital and operating improvements the department will make to its road and transit assets to reduce congestion.

“This decrease in congestion must be measurable, and tied directly to the GNP outcomes in the Commonwealth Fiscal Plan, producing an increase in the growth rate of GNP by 0.25% per year beginning in Fiscal Year 2021,” the board said.

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