Puerto Rico gov’t wants to make sure disaster relief funds out of creditors’ reach

SAN JUAN — Upon the arrival of millions of dollars in federal funds for Puerto Rico’s recovery following the disaster left by Hurricane María, the commonwealth’s financial control board and the government want to make clear this money is out of the reach of island’s creditors.

On Sunday, both the government and the board asked federal Judge Laura Taylor Swain to issue an order clarifying that disaster relief funds aren’t subject to claims as part of Puerto Rico’s bankruptcy process under Title III of the federal Promesa law.

For her part, Judge Swain scheduled on Monday a hearing for Wednesday, Oct. 25, at 10 a.m., to address the request.

Judge Swain: Puerto Ricans face an even graver humanitarian crisis

Although the attorneys for the Fiscal Agency & Financial Advisory Authority (Fafaa) and the seven-member panel understand the commonwealth doesn’t need the court’s approval to dispose of these funds, some vendors and federal agencies have asked for “assurances” over the treatment that federal disaster relief money will receive under the island’s Title III cases.

In fact, it is the first time that the Federal Emergency Management Agency (FEMA) disburses funds to a jurisdiction in the midst of bankruptcy proceedings. According to the motion, the federal agency itself wants to ensure that the money it provides to the local government will be used in recovery efforts and won’t be subject to claims from creditors.

An order by Judge Swain —who oversees Puerto Rico’s Title III cases—would also give certainty to contractors who take part of the recovery work related to Hurricane María that they will be timely paid. It would, moreover, help the government to comply with monitoring and disclosure requirements under applicable federal laws.

Pursuant to an agreement struck Sept. 23 between Gov. Ricardo Rosselló and FEMA, the commonwealth government, and not the fiscal board, is the sole recipient of disaster relief funds provided by the federal agency. The central government is responsible for receiving these monies and transfer any funds earmarked  to public corporations, instrumentalities, municipalities and non-profit organizations.

According to the motion, both the central government and the instrumentalities that received these funds will open segregated accounts in which they will deposit disaster relief money coming from FEMA and other federal agencies .

So far, FEMA has disbursed $350 million to the commonwealth government. Of this amount, the Electric Power Authority and the Highways & Transportation Authority—both in Title III bankruptcy proceedings—have received $244 million and $43 million, respectively, according to a spokeswoman for FEMA.

Almost a month after Hurricane María made landfall in Puerto Rico, more than 80% of Puerto Rico remains without power, while aqueducts, sewers and telecommunications systems are still severely affected. Thousands of residents lost their homes, while countless communities still struggle to receive food and water amid landslides and obstructed roads. As of this writing, there are 48 deaths related to the atmospheric event.

Moción sobre fondos de recuperación del Gobierno (Text)

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