The Financial Oversight and Management Board for Puerto Rico on Friday approved and certified the fiscal plans of four covered territorial agencies: the Government Development Bank; Puerto Rico Highways and Transportation Authority; Puerto Rico Aqueduct and Sewer Authority; and Puerto Rico Electric Power Authority, with amendments.
With its fiscal plan, the GDB will be liquidated through a “gradual and orderly disbursement that mitigates the impact to its stakeholders and supports their ability to continue delivering essential services and promote economic growth.”
Separately from the fiscal plan, the Board noted that Puerto Rico’s Fiscal Agency and Financial Advisory Authority (FAFAA) should provide a certification regarding the anticipated impact that reduced GDB distributions to depositors and other potential exposures might have on other government entities with fiscal plans and/or budgets.
The Oversight Board amended the PRHTA’s fiscal plan to ensure that it demonstrates the sustainability of each of its assets — its highway and transit systems — before and after the implementation of fiscal measures.
Specifically, the Board requested that the financials and measures of the highway and transit systems be represented separately within the plan. Furthermore, the Board suggested more aggressive revenue enhancement measures to address projected operating costs.
Additional amendments to the plan called for analyzing the cost-benefit of different options for corporatization, the proposed separation of the Urban Train from PRHTA, the impact of toll credit monetization to increase highway revenues, and improving the corporation’s board selection process to ensure it is apolitical.
The PRHTA plan, it was noted, aspires to deliver transportation services efficiently and support infrastructure development critical for economic growth.
Water rate hike approved
The Oversight Board requested that PRASA’s plan include the adoption and implementation of a moderate but broad-based, multi-year rate increase schedule, with appropriate measures to protect lower-income residential customers, to cover the corporation’s operating and capital expenditures while avoiding sporadic, large, and onerous one-time rate hikes which tend to have a larger impact on consumers.
The Board called for the plan to detail the impact of such a rate increase on all customers, to describe a process for rate review lead by PRASA’s board, and to confirm that the proposed schedule enables PRASA to achieve structural balance when combined with the other measures identified in the Authority’s amended and certified plan.
Other PRASA-related amendments included mandates to further optimize the authority’s operating structure and to adopt measures to control non-payroll expenses to promote long-term cost controls, such as a proposed collaboration in hydroelectric generation that will be developed in conjunction with PREPA. It was noted that the objective of PRASA’s fiscal plan is to support the utility’s mission to provide safe and affordable water and wastewater services under a cost-efficient model.
PREPA to lower electricity costs
With respect to PREPA, the Oversight Board requested that its plan be amended to ensure delivery of affordable and reliable power to ratepayers by achieving lower costs of generation and capturing other efficiency gains.
The Board directed PREPA to develop these savings through an expeditious capital improvement program that rapidly transitions the generation mix to low cost power sources, and other initiatives including an increase in operational efficiency and detailed governance and implementation proposals to be further developed.
With its Fiscal Plan, PREPA aims to deliver lower cost, reliable power that can support economic growth on the Island.
“My fellow Board members, executive team and advisors have devoted considerable time and effort in reviewing these proposed fiscal plans. We welcome the significant progress these entities have made,” said José B. Carrión, Chairman of the Oversight Board.
“The amended fiscal plans that we are certifying today meet the requirements of PROMESA: they are based on real savings and revenue projections, instead of hopes and predictions that some proposed changes will lead to income generation and progress sometime in the future,” he said, referring to the Puerto Rico Oversight, Management and Economic Stability Act approved in Congress last year, and which created the Board.
“The plans certified today provide the right balance of financial measures and structural reforms that will give certainty and vision to the future of these entities. By taking the hard steps necessary to right the path of Puerto Rico’s government and its instrumentalities, we set forth towards fiscal health, restoring the island’s economy, and ensuring basic services to the Puerto Rican people,” said Natalie Jaresko, executive director for the Oversight Board.
“Progress is being achieved for Puerto Rico. The Oversight Board and the government will continue working hand in hand to maintain this high level of cooperation and meet all the milestones ahead, which include the upcoming certification of the budget and immediate implementation of the Fiscal Plan,” she said.
“There’s no other option. We must keep at it without respite to restore economic growth and opportunity for the people of Puerto Rico as soon as possible,” she added.
The board’s austerity measures are being met with a massive work stoppage scheduled for today that is being backed by dozens of public, private and labor groups that are expected to take to the streets to protest.