With $8 Billion in the Bank, New Loans Not in Sight

The Puerto Rico Fiscal Agency and Financial Advisory Authority reported yesterday that the territorial Treasury’s main account had grown to $2.095 billion as of April 13th and that deposits in all government accounts had increased to $7.946 billion as of March 31st.

The U.S. Treasury Secretary Steven Mnuchin has said that Federal Emergency Management Agency (FEMA) Community Disaster Loans would not be made to Puerto Rico’s territorial government as long as it had financial resources that it could use for any purpose in excess of $1.1 billion. Other U.S. Treasury Department officials had put eligibility for a loan at $800 million.

$4.9 billion was appropriated by a Federal law last October for disaster loans to Puerto Rico’s territorial and municipal governments, the territorial government of the U.S. Virgin Islands, and local governments in Florida and Texas. All suffered serious damages from Hurricanes Harvey, Irma, or Maria last September.

By law, Community Disaster Loans are made to replace local revenue lost due to a disaster, make up for expenses for which a government had not budgeted, or to prevent a government from running out of money entirely.

Shortly after Hurricane Maria, the Government of Puerto Rico estimated losses eligible for a disaster loan of $500 million a week for at least eight weeks and running out of cash by the end of October. The PROMESA Financial Oversight and Management Board made similar estimates. $4.9 billion was proposed by the Trump Administration and appropriated by the Congress based on these estimates. Puerto Rico was expected to get more than $4.6 billion of the appropriation.

As it turned out, however, Puerto Rico’s territorial government’s losses were much less than it and the PROMESA Board projected and the territorial Treasury has never been close to running out of cash. The Government of Puerto Rico’s cash resources that would be considered in a disaster loan would include the cash in its main Treasury account and an as yet undetermined amount of funds in other insular government accounts.

Community Disaster Loans to municipal governments can be up to $5 million. FEMA has already approved loans for a dozen of Puerto Rico’s 78 municipal governments and is expected to make loans to most if not all.

FEMA has also approved loans for the Government of the U.S. Virgin Islands of $371 million.

U.S. Treasury officials have lowered the estimates for a possible loan to the Government of Puerto Rico because of its financial resources to $2.065 billion.

 

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