The Puerto Rico Financial Oversight and Management Board last evening wrote Governor Ricardo Rossello Nevares that the five-year, revised fiscal plans that his Administration proposed January 24th for the Government of Puerto Rico as a whole and its Electric Power and Aqueduct and Sewer Authorities (PREPA and PRASA, respectively) violate PROMESA and require extensive changes.
In separate letters for each plan, the Board detailed the many deficiencies that it found in each plan and point-by-point lists of corrections that need to be made. Fundamental revisions were required for each of the plans, and the list of changes for the plan of the Government as a whole was particularly lengthy.
The Rossello Administration was also given a one-week deadline (February 12th at 6 PM AST) for submitting compliant plans. The Board intends to adopt plans by February 23rd even though some of the information that it has said is needed – amounts of Federal assistance likely to be provided to help the islands recover from Hurricane Maria – are not expected to be much clearer by then.
Additionally, the Board directed that the plans cover the period through Puerto Rico Fiscal Year 2023 (June 30, 2023), rather than FY 2022, as it had previously advised.
Although the Board reduced the length of the required plans from 10 years to five, it called for the plans to outline specific, yearly debt capacity for 30 years in addition to the already provided ranges of debt service. The revised submissions are to include more specific analyses of their 30-year year debt sustainability projections and provide detailed assumptions of macroeconomic projections and pension costs.
The Board, further, directed the central government to save $650 million during the next five years in a reserve fund for emergencies, and $1.3 billion over 10 years.
The amount, nature, and depth of changes to the plans that the Board required was surprising in light of the relatively restrained response of the Board to the plans submitted by the Rossello Administration last year and the short time period that the Board gave the Administration to make changes.
Perhaps the biggest surprise to the Governor, however, will be the Board’s objection to the statements in the plan to the effect that Puerto Rico needs equality within the U.S. — statehood – to reach its fiscal potential and is the Rossello Administration’s pre-eminent goal. The Governor was elected on such a platform, it is territorial law, and it reflects the vote of plebiscites in the territory last year and five years before.
The Board, though, wrote that “it cannot certify a fiscal plan that includes positions on the political status of Puerto Rico.”