Puerto Rico House approves bill that would create emergency fund for municipalities
SAN JUAN – The Puerto Rico House of Representatives on Sunday approved, with amendments, a bill that would create the Municipal Recovery Fund to increase to $500 million from $100 million the amount assigned to address municipal revenue decreases in the aftermath of hurricanes Irma and María.
The lower chamber also altered the original measure to establish that the Fiscal Agency and Financial Advisory Authority’s (Aafaf by its Spanish acronym) board send its recommendation to the Legislative Assembly, which in turn will “provide the distribution of funds through legislation, using the recommendations of Aafaf as a guide. Once approved, the distribution of funds by the Legislative Assembly, the Department of Treasury will disburse the money directly to the municipalities.”
The version of Bill 774 approved in the Senate indicated that, after the request presented by a municipality is evaluated, Aafaf had to send its recommendation to the Office of Management and Budget (OMB), which would then authorize the Treasury Department to make the disbursement.
According to the explanatory introduction of the bill, which will now go to a conference committee, preliminary damages in Puerto Rico following the September hurricanes could exceed $100 billion, and represents a devastating impact on the bankrupt government, which has a more than $7 billion deficit.
“With this law, we seek to give additional support and relief to the municipalities at a time when they need it so much. The Municipal Support Program, created in this law, will allow the central government to assist and advise the municipalities on how to replenish the funds they anticipated. The Fiscal Agency and Financial Advisory Authority of Puerto Rico, in its role as fiscal agent of the Government, will evaluate the budgeted income gap and the actual revenues of these to administer the program,” the bill reads.
Puerto Rico’s central gov’t seeks to inject emergency liquidity into municipalities
Last week, Gov. Ricardo Rosselló announced the intention of the measure after holding a meeting with the Federation and Association of mayors in which both organizations expressed their support for the legislation.
On that occasion, the governor also explained that there will be no cap to the amount of money that may be requested by municipalities and stressed that the disbursements will operate in the form of a grant so municipalities will not have to repay the money. The funds can only be used for expenses directly related to the operation of the municipality.
Rosselló also indicated that he asked the government representative to the island’s fiscal oversight board, Christian Sobrino, to communicate the intention of the measure to the panel since, due to its fiscal impact, it will require the endorsement of the entity established by the federal Promesa law.
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