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Puerto Rico gov’t loses $8.6M in partnerships that never materialized

By on August 16, 2017

SAN JUAN – The Puerto Rico Government invested $8.6 million in four public-private partnership (P3) projects that were never completed and currently represent accounts receivable for the Public Private Partnerships Authority (PPPA) with little likelihood of being recovered. One of the projects is the Caguas commuter train to San Juan, which cost about $6.4 million.

This was revealed in a public hearing of the Joint Commission for the P3s, chaired by Sen. Larry Seilhamer. The other three incomplete projects are the conversion of Puerto Rico Electric Power Authority’s (Prepa) north region plants to natural gas, the concession of PR-52 and PR-20 and the development of correctional facilities.

The chairman of the Joint Commission for the P3s, Sen. Larry Seilhamer, held a public hearing Tuesday in which it transpired that in the past four years $8.6 million was invested in in P3s that were never completed. (Courtesy)

“The multimillion-dollar spending during the past four years in projects for which interagency agreements were not even signed, which is the document that allows the PPPA to recover from the line of credit the investment in the various technical and financial studies is, without a doubt, a lack of sound administration,” Seilhamer declared in writing.

The also vice president of the Senate explained that in the case of the Caguas train, for which “there was an interagency agreement, they continued with the hiring of consultants even though they became aware that the project was not economically viable.”

The legislator stressed that the development of the aforementioned train required an investment of $400 million with operating expenses of $12.8 million annually, although ticket sales would only recover $7.9 million annually. For this reason, the Desirability and Convenience study indicated that the government should subsidize the project for at least 10 years at a cost of $20 million per year.

Puerto Rico public-private partnerships law amended

In the case of the development of the correctional institutions, P3A Executive Director Omar Marrero indicated that $1.5 million was invested but there was no interagency agreement or feasibility study conducted before its cancellation in June 2015.

“None of the initiatives for public-private partnership of the past administration were completed, they only reached the initial process of technical studies and / or desirability and convenience,” Marrero said.

Dispute over cancellation of the project

When the information transpired, Rep. José Varela of the Popular Democratic Party (PDP) criticized Seilhamer for allegedly ruling out the completion of the Caguas light-rail project when it has been studied for several years.

“Rejecting the project without having analyzed all the elements does not bode well for the central-eastern zone of the country, because a project of this scale would boost the economic development of the region. Not all development has to be for the metropolitan area,” the legislator said.

However, in another written submission, Seilhamer clarified it was the former administration itself that stopped the project out of need for funds amid the crisis.

“This is stated in a letter the P3A sent to the Municipality of Caguas, the Department of Transportation and Public Works, and the Highways Authority, dated September 13, 2016. I want to make it clear to the representative that it was his own administration that decided not to continue with the project,” the New Progressive Party senator said.

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