García Padilla on Compliance with Promesa
SAN JUAN — Gov. Alejandro García Padilla detailed how his administration is already taking steps to ensure compliance with the Puerto Rico Oversight, Management & Economic Stability Act (Promesa), as the island is on “the right path to regaining economic stability.”
The governor said his administration is “committed to interact proactively with the board,” as it is the best way to ensure it stays only for a short time on the island, while keeping any “undemocratic intrusion” in check. He believes the already implemented measures have “placed us in a position to hit the ground running in complying with Promesa.”
García Padilla stressed the importance of the island’s long-term fiscal plan required by Promesa, which will be delivered “shortly after the board is appointed and operational.”
As for the federal law’s budget requirements, the governor said he has instructed the Office of Management & Budget (OMB) to develop internal processes that guarantee that the government’s “budgetary development and approval process is handled seamlessly and in coordination with the board.”
Promesa also calls for assessing the fiscal impact of local legislation and whether it complies with the fiscal plan to be approved by the board. García Padilla ordered the OMB, Treasury Department and the Fiscal Agency & Financial Advisory Authority (FAFAA) to establish a task force to achieve compliance, he further said Tuesday.
However, he stressed the need for “unprecedented cooperation” between La Fortaleza and the island’s Legislature, in a bid to conduct the fiscal impact analyses “during, and not after, the legislative process.”
As for tax incentives granted in Puerto Rico, the governor said he has tasked the local Treasury Department to deliver a tax expenditure budget report, which details all existing tax relief agreements, as required by Promesa. The document must be submitted to the board within six months of its establishment, according to the federal law.
García Padilla acknowledged tax incentives have been handed out “indiscriminately and without proper cost-benefit analyses,” fostering evasion and an eroded tax base.
On the financial disclosure front, the governor has called for factoring into the fiscal plan the costs associated to new information technology infrastructure. Moreover, monthly reporting packages based on dashboard and performance indicators will be developed monthly by the island government’s fiscal team, García Padilla noted.
The governor made his statements during a day-long conference titled, “What’s Next for Puerto Rico,” which took place Tuesday at the City University of New York (CUNY) and organized by the Ravitch Fiscal Reporting Program at CUNY Graduate School of Journalism.
Panelists included Millstein & Co.’s Jim Millstein and Cleary Gottlieb’s Richard Cooper, both lead restructuring advisers for the Puerto Rico government. The event delved into Promesa, debt restructuring, the island’s economy and the political implications of the fiscal control board.