Fiscal board urges transfer of Puerto Rico Public Broadcasting Corp. to a private nonprofit

The fiscal board’s executive director, Natalie Jaresko, and chairman, José Carrión (Jaime Rivera/CB)

SAN JUAN – Puerto Rico’s Financial Oversight and Management Board scolded the island’s government Monday for failing to submit certain budget reports and urged it to sell the Puerto Rico Public Broadcasting Corp. to a private nonprofit.

“The Oversight Board acknowledges and supports the Corporation’s effort to communicate and provide informative, cultural public interest programming for the people of Puerto Rico. But a transfer of ownership to a private non-profit entity can provide increased growth opportunities, enhance the programming offering provided to the people of Puerto Rico, and save the Government money,” José Carrión the fiscal oversight board’s chairman, wrote.

Already, he said, public broadcasting corporations across the United States are typically owned by foundations, membership groups or public universities and are funded federally and with private donations.

“The Corporation should similarly be independently owned and operated, while also shielded from political interests. The Oversight Board supports public broadcasting but the resources to finance the Corporation as a private non-profit can and should come from outside the Government so that the Government can prioritize its spending,” Carrión said.

The budget for PBC’s WIPR 940 AM station is currently funded by appropriations from the general fund, federal funds and other funding. However, most states provide limited or no funding to public broadcasting corporations. States that do provide funding to public broadcasting corporations, “provide a significantly lower percentage of the public broadcasting corporation’s total operating budget,” Carrión further added.

New Progressive Party Sen. Carmelo Ríos said in a radio report that WIPR is already on the block even though the government recently significantly invested to enhance its transmission capabilities. Reaction in social media included skepticism that WIPR could be sold unless profit could be made. Several performers said the station’s sale may result in fewer opportunities for local talent.

Gov. Ricardo Rosselló later told the media that his administration has had a plan since it began, adding that it has “reduced” government agencies by 31 percent. Regarding the board’s request for a response within 90 days, the governor said that “is the recommendation; we can comply or not. The answer is we are going to evaluate all the recommendations. The analysis is being done for WIPR.”

Meanwhile, the fiscal board’s chairwoman, Natalie Jaresko, said the government did not submit reports to her panel in December describing budget to actual spending for the preceding quarter for different entities. On Dec. 3, the board wrote to Rosselló about a number of ways in which the government had failed to comply with the Puerto Rico Oversight, Management and Economic Stability Act (Promesa).

“We observed that the Government did not submit complete Section 203(a) budget to actual reports for the Commonwealth, PREPA [Puerto Rico Electric Power Authority], PRASA [Puerto Rico Aqueducts and Sewer Authority], UPR [University of Puerto Rico], or HTA [Highways & Transportation Authority] for fiscal year 2018 and had not submitted complete Section 203(a) budget to actual reports for the Commonwealth, PREPA, PRASA, UPR, or HTA for first quarter of fiscal year 2019. We directed you to complete such reports for the Commonwealth, PREPA, PRASA, UPR, and HTA by December 21, 2018,” she reiterated.

On Dec. 21, however, the only complete budget to actual report the board had received was the commonwealth’s first quarter of fiscal 2019, but it has yet to receive budget to actual reports for the commonwealth for fiscal 2018 or for Prepa, Prasa, UPR and HTA for fiscal 2018 and the first quarter of fiscal 2019, she said.

She told the government to submit the reports by Jan. 18.

“Moreover, we remind you that the Section 203(a) budget to actual reports for second quarter of fiscal year 2019 are due (today) for the Commonwealth, PREPA, PRASA, UPR, and HTA,” she added.

Read the full text of the letters here:

Swain’s World: Balance of power on Puerto Rico fiscal board’s side

Editor’s note: The following article originally appeared in the April 26 issue of Caribbean Business.

In the showdown between the Financial Oversight & Management Board (FOMB) and government of Puerto Rico over the latter’s refusal to comply with certain aspects of the fiscal plans certified last week, the FOMB has all the tools at its disposal to prevail.

After the FOMB certified its own fiscal plans for the government and covered entities, namely the commonwealth, Highways & Transportation Authority, Aqueduct & Sewer Authority, Electric Power Authority, Government Development Bank and University of Puerto Rico (UPR), government officials said they were not going to comply with parts of the plans.

Gov. Ricardo Rosselló reaffirmed his administration will not obey or implement the public policy measures the board certified by majority vote. Rosselló was referring to the reduction by half of private-sector vacation and sick-leave days, as well as elimination of the statutory Christmas bonus by 2019 and a controversial pension reform that would cut retirement checks by an average of 10 percent. UPR chairman Walter Alomar also said he was not going to comply with the UPR fiscal plan in areas involving tuition hikes and pensions.

“As we have always said, matters of a fiscal nature, in terms of what the numbers are, are the responsibility of the oversight board, but the public policy of Puerto Rico is established by the government of Puerto Rico,” Rosselló said.

Oversight Board Chairman José Carrión III has said that while he is willing to talk to the administration, the FOMB will have to consult with its lawyers on the matter. The government’s representative to the FOMB, Christian Sobrino, said that if the oversight board goes to court with a petition, the government will respond to it and “we will win” the dispute.

Attorney John Mudd, who often writes about the oversight board, says the governor’s power to veto the fiscal plans is irrelevant because Judge Laura Taylor Swain can order the government to comply with them or dismiss the Title III bankruptcy case.

The matter is unclear, however, because the P.R. Oversight, Management & Economic Stability Act (Promesa) does not say what is to occur should the government not comply with the fiscal plan.

–Read the rest of the story in CB’s epaper here.



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.

“This Urgent Motion seeks an Order to clarify that desperately needed Federal Disaster Relief Funds being provided to Puerto Rico will be used solely for their intended and required purposes, will be deposited into segregated and non-commingled accounts, and will not be subject to any existing creditor or third-party claims,” reads the motion filed jointly by the board and the government.

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)

Properties Expropriated by HTA Must Seek ‘Lift of Stay’ for Compensation

SAN JUAN — Thousands of owners of private properties being expropriated for public use are feeling the impact of the bankruptcy petition filed by the Highways & Transportation Authority (HTA) because the public corporation’s compensations are “stayed,” Caribbean Business learned.

On the HTA list of the 20 largest creditors that filed in the petition for Title III bankruptcy in May, the public corporation listed it owed $3.5 million to the San Juan Court secretary. Most of the debt is money owed to individuals or businesses whose properties have been expropriated, according to the Puerto Rico Fiscal Agency & Financial Advisory Authority.

The nature of the cases will not be known until the government presents its matrix list of creditors. However, John Mudd, a bankruptcy lawyer, says they are in the thousands.

The government can sue to expropriate a privately owned property to perform public works. The government deposits with the court what it believes is a fair price for the property.

“When the government filed for petition of bankruptcy, everything was stopped,” Mudd said.

As a result, property owners are not receiving any compensation because the properties are idly sitting there.

“The only recourse the property owner has is to get a ‘lift of the stay’ to receive payment,” Mudd said.

Far right, Carlos Aponte, secretary of the Transportation & Public Works Department. (CB Photo)

Caribbean Business spoke with Carlos Aponte, secretary of the Transportation & Public Works Department, or DACO by its Spanish acronym, to inquire about the problems involving expropriations.

“I cannot talk about the Title III process [of the government’s bankruptcy],” he told Caribbean Business several times during a recent Associated General Contractors activity.

In May, the HTA and Employees Retirement System (ERS) joined the central government—along with general obligations (GOs) and the Sales Tax Financing Corp., or Cofina by its Spanish acronym—as the only credits currently under Title III proceedings, which provide, among other things, for a stay on creditor lawsuits.

At the time, Gov. Ricardo Rosselló said he had requested the Financial Oversight & Management Board initiate Title III proceedings for the HTA and the ERS, which total more than $7 billion in outstanding debt. He said lawsuits filed against the HTA jeopardize its operations, while its creditors also oppose the government’s certified fiscal plan.

The government could not provide a specific list of suits involving expropriations. In the commonwealth financial report issued in December, the government said it was a defendant in some 5,192 lawsuits pertaining to matters incidental to the performance of its operations and debt default. As of June 30, 2016, the commonwealth had listed reported liabilities of about $2.2 billion for awarded and anticipated unfavorable judgments. The amounts claimed as of June 30, 2016 exceed $10.9 billion.