Oversight Board certifies fiscal plans for PRIDCO, COSSEC, 10 towns
The Financial Oversight and Management Board for Puerto Rico announced that it certified the Fiscal Plans for the Puerto Rico Industrial Development Company (PRIDCO, in Spanish) the Public Corporation for Supervision and Insurance of Cooperatives (COSSEC, in Spanish) and 10 towns.
“Both institutions are important contributors to Puerto Rico’s recovery and economic development,” said the Oversight Board’s Executive Director Natalie Jaresko. “The Fiscal Plans outline specific improvements to strengthen the two institution’s financial strength and operations to better serve their respective mandates of managing government properties and regulating a sizable share of Puerto Rico’s financial market.”
PRIDCO owns and manages a large number of industrial properties, with 1,513 units and 648 undeveloped lots located throughout Puerto Rico which are key component of the economic development policy of the Island. The Government utilizes these properties to attract investors and ease their entry into the marketplace.
“Unfortunately, PRIDCO has a history of underinvesting in the properties it manages. Deferred capital expenditures and the deterioration of its facilities resulted in falling revenue. Vacant properties are not adequately marketed to spur Puerto Rico’s economic development,” the Board said.
This is critically important now as the opportunity arises to attract pharmaceutical and medical device manufacturers seeking to secure their supply chain manufacturing in the United States, it added.
To remedy this underinvestment with adequate funding amounts, facilitate the well-being of PRIDCO’s tenants, and stabilize revenue and occupancy, the Fiscal Plan requires the agency to establish a capital reserve fund to invest in currently occupied or temporarily vacant buildings, and invest to redevelop or sell select properties.
The Capex Reserve Fund will also be funded with a one-time contribution of $8.4 million to address urgent demolition needs that may raise safety issues.
In addition, the PRIDCO Fiscal Plan requires PRIDCO to produce:
- A feasibility study to determine whether outsourcing PRIDCO’s real estate portfolio to a third-party asset manager is worthwhile, profitable, and economically reasonable;
- A feasibility study to determine if PRIDCO should be privatized; and,
- A plan to sell about 1.4 million square feet of real estate in various states of disrepair and require significant investment to be leasable.
Meanwhile, COSSEC — the regulator for Puerto Rico’s credit and savings unions, and non-financial co-op, and that also protects cooperative members from losses caused by a failing co-op — must implement reforms to protect the about 1 million residents of Puerto Rico who depend on cooperatives for access to financial services.
The COSSEC Fiscal Plan requires COSSEC:
- To improve its governance by establishing an independent board of directors comprised of five members not affiliated to a cooperative and with appropriate academic and experience credentials;
- To improve its accounting practices, and the way it supervises financial cooperatives, including assessing their risk and stability, and how to resolve failing cooperatives;
- To pursue legislative changes that would transfer the regulatory power over non- financial cooperatives to the Co-op Development Commission.
“Resources within COSSEC would be better employed, and only co-ops that contribute to the insurance fund would be regulated by it. Under the current structure, COSSEC regulates 113 financial and about 50 certain non-financial co-ops,” the Oversight Board noted.
The COSSEC Fiscal Plan also includes about $400,000 in funds for hiring additional examiners that will be released subject to the completion of these required milestones.
Municipal fiscal plans also approved
The Oversight Board also confirmed it has certified the Fiscal Plans for the 10 municipalities that are part of its pilot program to increase revenues and drive efficiencies.
Orocovis, Aibonito, Barranquitas, Cidra, Comerío, Villalba, Camuy, Isabela, Quebradillas, and San Sebastián were required to include in their Fiscal Plans spending efficiency measures, such as inter-municipal shared services arrangements, programs to improve and optimize local revenue collection, and economic development efforts.
The Fiscal Plans’ key measures include:
- Coordinate and cooperate with the Municipal Revenue Collection Center (CRIM, in Spanish) to improve property tax collection;
- Consolidate or share municipal services with neighboring municipalities in areas such as: public works and infrastructure, public safety, family services, education, housing, road maintenance, and solid waste management;
- Partner with the private sector, non-governmental organizations and Federal programs to increase grants and other revenue streams to improve sustainability of Municipal programs and events;
- Secure an effectively invest disaster recovery funds;
- Attract long-term private sector investment, partnering with Invest Puerto Rico, Discover Puerto Rico, and PRIDCO, and maximizing the value of available federal workforce development funding; and,
- Evaluate and right-size personnel costs.