Thu 01/27/2022 14:56 PM
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Puerto Rico Post-Restructuring Mission:

After certifying an updated fiscal plan for the commonwealth during its 32nd public meeting today, most PROMESA oversight board members and Executive Director Natalie Jaresko said additional fiscal management actions are needed at the central government level before the oversight board can end its mandate while ensuring the Puerto Rico government does not backslide into a second bankruptcy. Member Justin Peterson, however, called for Congress to revisit PROMESA to potentially shorten the lifetime of the oversight board, which establishes four straight years of balanced budgets and restored access to capital markets at reasonable rates as conditions for the mandate to conclude.

During a press conference following the public meeting, Jaresko also reiterated the oversight board’s intention to meet the March 15 deadline for the commonwealth plan of adjustment to go effective, allowing the commonwealth to formally emerge from Title III bankruptcy. Pending steps on that front include providing the government with a new budget estimate in the coming days to guide the process of amending the fiscal 2022 budget to cover debt service and a wide range of other payments contemplated in the plan of adjustment. Legislative leaders have indicated an aim to complete the budget amendment process by mid-February, a move that would mark the first of four balanced budgets required by PROMESA.

Jaresko also reiterated the oversight board’s aim to complete Title III restructurings of both the Puerto Rico Electric Power Authority and Highways and Transportation Authority before the end of the current calendar year. Completing the PREPA and HTA restructurings “this year is very possible,” Jaresko said, stating that the public corporations have the “capacity” and the oversight board has the “responsibility” to meet that target. “That is the goal, and it is doable,” she said, highlighting the need for “everyone’s collaboration.”

Asked about the cloudy prospects for passage of legislation contemplated in the PREPA restructuring support agreement, Jaresko said the oversight board looks forward to “getting the legislative answer” within the first half of the year, or before the end of the current legislative session on June 30. She added that no legislation is needed to move forward on an HTA plan of adjustment that is due to be filed in the Title III court in the coming days under the terms of plan support agreements with creditors.

Peterson reiterated his pledge that PREPA’s Title III case would be concluded by year’s end either with or without the Legislature’s support. He said, “We don’t need the legislation to get PREPA done, and we are going to do it.”

In a separate press conference following the meeting, Gov. Pedro Pierluisi said that PROMESA establishes certain conditions for the oversight board to complete its work and terminate its existence, but he added that the U.S. Congress can always change these conditions. He pointed to Peterson's comments in saying that even among oversight board members there is a debate about whether it should end its work after completing the PREPA debt restructuring.

Asked whether he would support calls to Congress to end the oversight board's mission, Pierluisi said, “Right now, the goal for the oversight board and the government has to be the [PREPA] restructuring. I don't want to affect or delay that more than it has already been delayed. Leaving PREPA's bankruptcy behind us is too important,” the governor said.

Once the PREPA restructuring is complete, however, “I don’t discard joining the chorus of voices that are calling on the board to end its mission and cease to exist," the governor added.

Pierluisi also said he wished the oversight board would have “more deference” toward the local government when establishing spending priorities but acknowledged that the development of this fiscal plan “was an act of collaboration” between his administration and the oversight board.

“It’s up to Congress to say when the board is done, not the board,” Peterson said in calling for a restoration of the Puerto Rico government’s “sovereignty.” He said members of Congress should ask themselves whether they want the oversight board around in another five or 10 years. “This is America. We don't have control boards or politburos,” he said. Although PROMESA's purpose was to restructure debt and facilitate reforms, Peterson said, very little in terms of structural reforms has been accomplished, and this points to the “limitations of the board's actual statutory authority."

Fellow board members echoed the importance of ceding control back to the commonwealth, but they said Puerto Rico’s financial controls structure needs to be further shored up before that can happen.

Member Andrew Biggs said he would call for the oversight board to be dissolved now if he believed that the government would address the “serious problems” that led to passage of PROMESA. “I don’t,” he said, adding that the probability that the government would take the needed steps toward fiscal responsibility on its own is “very low if the board doesn't push the point.”

Reiterating that confirmation of the plan of adjustment is “not the end of the game,” member John Nixon said that “absent” additional fiscal controls “Puerto Rico is going to be right back in bankruptcy.” He said some of the local legislation proposed during his tenure that the oversight board moved to enjoin “is troubling” in terms of spending controls, adding that he is concerned by potential thinking along the lines that with federal funds flowing in and the economy doing well, “what do we need to worry about?”

Nixon called for the executive branch and Legislature to “step up” and ensure that “real changes” that are still needed will happen. “If they do, I agree the board should be dissolved. But a lot needs to happen before our work is done,” he said.

Nixon stressed that he is not suggesting new provisions for the oversight board to be wound down, stating that PROMESA was well thought out to begin with. “But we need to see quite a bit of fiscal responsibility actions,” he said, adding that he is not prepared to push for early exit.

Member Antonio Medina noted that PROMESA provides “very specific” metrics to end the oversight board’s mandate and noted that there are still some “big-ticket items” to complete, including the PREPA and HTA restructurings. He called future efforts Congress might make to change the law “speculation” and emphasized that the oversight board needs to conform to existing law.

Chairman David Skeel said he “fully shares” the views of Biggs, Nixon and Medina on the issue of the oversight board’s exit.

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