The Puerto Rico Financial Oversight and Management Board today asked U.S. District Court for Puerto Rico Judge Francisco Besosa to reconsider his denial yesterday of the panel’s request to intervene in three consolidated cases challenging uses of revenue by the administration of Governor Alejandro Garcia Padilla (Popular Democratic Party/PDP).
The Board, like the Garcia Padilla Administration, wants the stay on actions to force payment of debts in the Federal PROMESA law applied to the cases.
Besosa denied its motion to intervene, contending a failure to comply with judicial procedural rules. The Board disputed his finding.
The more than 30 investment funds and a bond insurer that filed the cases contend that the PROMESA stay does not apply to their claims. Cases seek to have government employee retirement fund contributions deposited into an account to ensure debt payments and challenge the diversion of Highways and Transportation Authority revenue away from debt payments. Most contend that an April territorial law authorizing the governor to withhold bond payments violates PROMESA.
The Board’s filing today stated that, “In accordance with express Congressional intent, the Oversight Board sought to intervene in the actions on behalf of the Commonwealth to protect the Oversight Board’s and the Commonwealth’s right to the breathing spell provided by the PROMESA stay so that it can concentrate on fiscal plans and capital market strategy instead of on multiple litigations.”
Besosa will hold a hearing on the cases tomorrow.
The cases are among some 19 suits that have been filed on Puerto Rico government debt claims.
Governor Presses for Criticized Fiscal Plan
Meanwhile, Gov. Garcia Padilla argued for the Board to approve his fiscal adjustment plan “as soon as possible.”
He asserted that the PROMESA stay should not be extended from February 15th until May — which the Board can do — because the panel should agree with and implement his approach to insular government finances before the initial deadline.
Two individuals who have said that they do not agree are the leading candidate to replace Garcia Padilla in next Tuesday’s election, Ricardo Rossello of the New Progressive Party, and the PDP candidate, David Bernier, who had been Garcia’s Secretary of State.
The Governor also rejected criticism of his plan last Thursday from three leading economic figures: the most noted private economist in the islands, Joaquin Villamil; a prominent former president of the association of CPAs in the territory, Kenneth Rivera; and the head of the Samuel A. Ramirez investment firm, Fernando Vinas-Miranda.
The plan’s economic assumptions were held to be incorrect and its proposals insufficient.
Garcia declared, “I do not accept the criticisms . . . They do not seem responsible.” The critics, he claimed, “do not understand” the plan.
Garcia: Government Bank Not Closing
The Garcia Administration late yesterday sought to tamp down concerns that it had created about the future of the islands’ Government Development Bank (GDB).
The concerns had arisen earlier in the day when it was revealed that Treasury Secretary Juan Zaragoza had advised government corporations and municipalities to assume for accounting purposes that payments due from the GDB this year would not be received. Additionally, he wrote, “the amount of recovery” of deposits “is uncertain” because there is not enough cash to honor all accounts.
Later, Gov. Garcia Padilla stated that his Administration does not intend to liquidate the bank. He added that it is needed for economic development purposes because it could make loans for commercial ventures that commercial banks would not make, recalling that as an original purpose of the GDB.
GDB head Alberto Baco Bague said from Cuba that the bank is “maintaining a balance between liquidity and high priority disbursements.”
He and the Governor contended that the banks future depends upon eliminating territorial government debt.
The GDB substantially restricted the outflow of deposits in April when the insular debt payment moratorium law was enacted and Garcia Padilla directed that debt payments not be made as $400 million in bonds matured. Disbursements from the bank have been limited to $10 million per week.
Zaragoza noted that the government agencies most affected by the GDB’s lack of cash are the department that he heads, which has deposited about $500 million in the bank, and the University of Puerto Rico and a trust for projects in very distressed communities, which each have accounts of approximately $100 million.