State Recovery Fund Created To Speed Up Small-Scale Reconstruction Projects
Acknowledging the exceedingly slow pace of post-hurricane reconstruction efforts, Gov. Wanda Vázquez Garced announced Thursday the creation of a $100 million State Recovery Fund (SRF) with the aim of providing cash advances starting early next year to Puerto Rico’s municipalities and nonprofit organizations to complete more than 3,500 smaller post-hurricane permanent reconstruction projects that do not exceed cost estimates of $123,100 each.
The fund was created with reassigned monies from the commonwealth general fund budget that were authorized by the Financial Oversight & Management Board (FOMB) after talks with administration officials, the governor said. The Central Office of Recovery, Reconstruction & Resiliency (COR3) will supervise the fund “to provide sustainable and continuous liquidity” to these small projects in lieu of anticipated but delayed federal post-hurricane reconstruction funding, she said.
“It’s imperative that the government establishes and implements strategies and initiatives that provide appropriate liquidity, as necessary, to guarantee that recovery projects are developed and begin on time,” the governor said alongside COR3 Executive Director Ottmar Chávez during a press conference at the La Fortaleza governor’s mansion in which she announced the initiative.
“The small projects that will be carried out with the help of the SRF account are not only essential for the reconstruction of Puerto Rico, but also provide an opportunity to [have an] impact on the economic success of the island in the future,” she said, claiming this would be the “most important” post-hurricane reconstruction initiative since hurricanes Irma and Maria struck the island in 2017.
COR3 has identified 3,516 small projects that do not exceed cost estimates of $123,100, according to standards set by the Federal Emergency Management Agency (FEMA), which have been targeted for SFR cash advances, Chávez said. The SFR would function as a revolving fund, he said, given that it would be replenished with FEMA reimbursements these projects should gradually receive as they are completed.
The first 1,316 projects with estimated costs of $54 million should receive funding in three to five months, the COR3 chief said, adding that these projects have already cleared the first stages of the joint COR3-FEMA project eligibility process involving site inspections and damage estimates and qualify for funding. Most of these projects – 1,228 – involve infrastructure and properties under the jurisdiction of 71 municipalities, while another 87 projects involve reconstruction of damaged properties belonging to nonprofit organizations.
One commonwealth entity, the University of Puerto Rico, also qualifies for initial cash advances from SRF, he said.
SRF would initially provide cash advances to 579 projects involving repairs to hurricane-damaged roads and bridges, Gov. Vázquez said, adding that these involve 453 streets and roads and 64 bridges. Some 365 projects involving parks and recreational facilities would also receive initial funding, including 60 utilities projects and three water control facilities. Another 309 projects involve repairs to buildings and equipment, the governor said, noting that many of these projects consist of reconstruction work on churches, Head Start Centers and community centers.
Utuado has 102 of these projects within its jurisdiction – the most of any municipality, while Ponce has 48 projects and San Juan has 26. While seven municipalities – Ceiba, Fajardo, Barceloneta, Manatí, Villalba, Vega Baja and Río Grande — will not get any initial SRF funding in this first phase of the program because they lack projects with finalized damage and cost estimates, these towns could be included in the second phase involving another 2,200 projects whose cost estimates and work scope have yet to be completed, Chávez said, adding that these projects would be covered with the remaining $45 million in the fund.
“This fund is geared toward all municipalities,” the governor said, adding that she was planning to meet in coming days with representatives of both the New Progressive Party-backed Puerto Rico Mayors Federation and the Popular Democratic Party-backed Puerto Rico Mayors Association to discuss the participation of mayors in workshops planned for next month on how to apply for SRF grants.
“This is not going to be complicated,” Chávez said, adding that fund recipients will sign a contract with the state agreeing to FEMA reimbursements being deposited in SRF. “They will get cash advances based on [project] costs. They don’t have to put up anything more than following compliance rules. This was designed to quickly fund small projects.”
More than two years after hurricanes Irma and Maria dealt devastating blows to Puerto Rico in September 2017, only 117 permanent work and resiliency projects have been cleared for FEMA funding, said Chávez, noting that the SRF seeks to focus on easier, smaller projects to speed up reconstruction project approvals. Between 300 and 400 larger permanent work projects should be approved for funding by February, he said.
Nevertheless, Chávez acknowledged that FOMB conditioned approval of the reassigned funds on a series of measures to ensure their proper use, including the submission of periodic progress reports from grantees and intervention of third-party entities to monitor spending. COR3 has set up a compliance team with participation of commonwealth Comptroller’s Office officials and certified public accountants to monitor disbursement of these funds to towns and nonprofits, he said.
“For FEMA reimbursements to nourish the fund, [we] will monitor the submission of documents to COR3 for their disbursement,” he said, adding that this program will not require municipalities to employ more accounting personnel. “Municipalities already have their internal controls and we, at COR3, have the machinery to deal with that.”
Project funding to municipalities and nonprofit organizations will be promptly cut off if they don’t comply with these rules, the governor said.
SRF funds had been previously earmarked to cover the 10 percent of state matching funds to be paired with the 90 percent of federal recovery and reconstruction monies allocated under FEMA’s Public Assistance Program and Federal Community Development Block Grant-Disaster Recovery (CDBG-DR) grants, Chávez said. In contrast to other U.S. jurisdictions, Puerto Rico, which is undergoing a debt restructuring process, lacks access to capital market and other financing sources to cover project cash advances during the reimbursement process, he said.
COR3 is also evaluating 70 projects under the commonwealth Transportation and Public Works Department that also qualify for SRF funding, Chávez said.