Puerto Rico gov’t: Disbursement of Community Disaster Loans ‘very close’
SAN JUAN — The government of Puerto Rico is “very close” to receiving much-needed cash through a federal loan program that would help the commonwealth cover the operating expenses of agencies, public corporations and municipalities, Carlos Mercader, head of the Puerto Rico Federal Affairs Administration (PRFAA), said Wednesday.
During the past few weeks, the administration of Gov. Ricardo Rosselló Nevares and federal government officials, including from the Treasury and the Federal Emergency Management Agency (FEMA), have been exchanging information and negotiating the terms and conditions of the Community Disaster Loans (CDLs) that the commonwealth stands to receive. The loan program is available to U.S. jurisdictions that sustain substantial loss in revenues following a disaster.
When asked by Caribbean Business whether an agreement had been reached with the federal government over how, when and what commonwealth entities will obtain the CDLs, Mercader said that “if we are not 100% in agreement [as of today], we are at 99%.”
While Puerto Rico has yet to hash out the final details to obtain the CDLs, other jurisdictions such as the U.S. Virgin Islands are much further along the process. For instance, the USVI has already agreed to the terms and conditions of their CDL and stands to immediately receive roughly $370 million.
“It is just a matter of some last minute tweaks on how it’s going to be spread out. I believe that we are very close to the moment in which those monies are disbursed to Puerto Rico,” Mercader added.
For his part, the director of the Financial Advisory & Fiscal Agency Authority (Aafaf), Gerardo Portela, told Caribbean Business that “progress is being made in the process” and that the commonwealth expects to receive the latest terms and conditions from Treasury at some point before the end of next week.
In October, Congress approved an allocation of up to $4.9 billion for the CDL program, which Puerto Rico and other U.S. jurisdictions recently affected by natural disasters have access to, subject to certain conditions. The loans operate through FEMA and can only be used to meet cash needs related to basic government operations, including payroll.
Portela warned it is important to access the CDLs “as soon as possible,” particularly to deal with dwindling cash reserves at the Electric Power Authority (Prepa) and the Aqueduct & Sewer Authority (Prasa). He noted that while the liquidity situation at the island’s water utility improved slightly due to recently obtained FEMA funds and some of its insurance policies, the case of Prepa “is much more dire.”
The head of Aafaf added that the central government is working on several emergency measures to address the liquidity situation at Prepa, until the public corporation receives funds through the CDLs. These include that the central government and other public corporations pay Prepa some of their outstanding debts with the utility. In all, the latter would have a short-term positive impact of about $40 million on Prepa’s liquidity position, Portela said.
As for the central government’s revenues, Public Affairs Secretary Ramón Rosario said Wednesday that “they have been improving.” He added that in the immediate future, the commonwealth ‘s central government wouldn’t face insolvency.
“So far we are not facing an immediate emergency in which we are going to run out of cash flow, but we certainly have to get that money [CDLs] because in the medium and long term, it will be a real problem,” Rosario told reporters at La Fortaleza during a briefing.
Despite the comments made by the public affairs secretary, both the Rosselló administration and the commonwealth’s financial control board have repeatedly warned that the central government and certain public corporations, including Prepa and Prasa, could run out of liquidity at some point in the fiscal year largely due to a significant loss of revenue following Hurricane María.
In the case of Prepa and Prasa, the last liquidity report presented by the government’s fiscal team in early December indicated that both entities would be insolvent on or before the end of the year. When asked, Portela said that although both public corporations have managed to maintain some liquidity as the year comes to an end, their cash flow situation continues to be delicate as both can siphon through their reserves as early as next month.