Mid March 2021

Introduction

We subscribe to the San Juan Star, an English language newspaper here, in an attempt to keep up with local news. In this post, I’ll summarize some of the news piece that caught my attention. I’ll also put in some images that may or may not be related to the stories. That’s for you to figure out.

January 5

The new governor, Pedro Pierluisi, promised a new executive order that would ease the one in place. That order, imposed by the former governor, imposed a 10 pm to 5 am curfew, closed the beaches, and closed everything on Sunday but supermarkets, pharmacies, and hardware stores. Restaurants were open for take out only.

In addition, the governor asked to education department to plan for in-person schooling by March.

January 6

Several government agencies failed to pay interest on bond obligations. These included the Puerto Rico Public Buildings Authority, the Highways and Transportation Authority, and the Puerto Rico Electric Power Authority (PREPA). Insurers paid some of the money due; all this is in the context of ongoing attempts to restructure Puerto Rico’s debts.

Jaunary 7

The government announced that the November net income to the General Fund totaled $656.1 million, about $127.1 million (24%) above forecasts. Most of the money comes from sales taxes. The government did note that the authority that oversees sales taxes, the Puerto Rico Sales Tax Financing Corporation, had completely paid down its debt obligations in October. Thus all revenues went to the general fund.

I note in passing that we got here in early November, so we helped generate some of this revenue.

Pundits wondered how the Democratic majority in the US Senate would affect Puerto Rico. Statehood proponents think a Democratic majority in both the US House and Senate will help their cause.

The National Science Foundation announced that the crippled Arecibo Observatory will not be closing. Work will continue on analyzing archived data while funds are sought to rebuild and modernize the radio telescope facility.

January 8

Health Secretary Carlos Mellado Lopez stated that a March school opening did not mean schools could open on March 1. Schools could not re-open until certain vaccination goals were met. Spoiler alert: Some schools opened for the first time on March 11.

Jose Tirado, head of the Puerto Rican Firefighters Union, met with the governor and urged him to find the funds to pay for an authorized pay increase.

January 11

The Ambac Assurance Corporation, a major insurer of Puerto Rico’s bond debts, filed a motion in the U.S. District Court in Boston to seek information concerning government bank accounts. The government claims much of the $20 billion has restrictions as to its proper use; Ambac wants to review those restrictions.

The energy situation remains muddled. The island’s energy oversight agency (PERB – Puerto Rico Energy Bureau) met with PREPA and FEMA officials to review PREPA’s ten year plan. Meanwhile, LUMA, the company selected to privatize PREPA’s assets, and PREPA continue to be at odds. PREPA has refused to pay $32 million in variable expenses that LUMA has charged. PREPA has paid the fixed fees. Meanwhile, both the Puerto Rican House and Senate plan to investigate all aspects of the PREPA-LUMA contract.

January 12

Miguel Romero of the New Progressive Party was sworn in as mayor of San Juan. Outside, protestors called his victory “an attempt against democracy.” They were upset by various irregularities in the voting in San Juan.

LUMA Energy officials insisted their contract with PREPA was lawful and promised to go before the Legislature to make their case.

January 13

The investigation into a carjacking that left three police officers dead continued. The tragedy occurred on the Baldiorty de Castro Expressway in Santurce, San Juan. A body, later identified as Ponce resident David Emanuel Rivera Batiz, was found in the Llorens Torres public housing complex. The body held a note that said “I am responsible for the murder of the police. Here it is.” The police were gathering security camera footage and awaiting the results of an autopsy.

January 14

Governor Pedro Pierluisi announced he would travel to Washington to attend President Biden’s inauguration. While there, he would advance the issue of statehood, given that a clear majority voted for that option in a referendum conducted as part of the November general election.

The new mayor of San Juan announced that 154 tons of rubble and garbage had been collected the previous day. The announcement was met with great cheer and the odor of diesel fumes from the trucks used in the garbage offensive.

Janurary 18

Three parties asked U. S. District Court Judge Laura Taylor Swain to schedule oral arguments on issues deemed crucial by the Puerto Rico’s Employees Retirement System (ERS). The parties – the Committee for Unsecured Creditors, the Committee of Retired Employees of the Commonwealth of Puerto Rico, and the Financial and Management Oversight Board for Puerto Rico – wish to argue the status of $3 billion worth of bonds ERS issued in 2008. Some argue the bond issue was invalid as the ERS had no statutory authority to issue them.

January 15

More than two hundred Puerto Rico National Guard soldiers head to Washington, D.C. to help provide security during President Biden’s inauguration. They are members of the 92nd Brigade’s military police unit.

PREPA and PRASA, the water and sewer authority, announced the agency that runs the capitol, the Capitol Superintendency, owes about $2.5 million for energy usage and $830,000 for water and sewage fees. Both agencies said no payments had been made over the last four years. Rafael Hernandez Montanez, the Speaker of the House, promised that a payment plan was in place.

January 20

The Puerto Rico Funeral Organization charged that municipal cemeteries in Mayaguez have neither enough workers nor enough plots to meet the demand there. Spokeswoman Lynette Matos said this hurts poor families and creates a backlog of unburied corpses.

January 21

Jorge Haddock, the President of the University of Puerto Rico, announced that the university will receive $128.5 million from the federal government. The funds are from a program to help mitigate costs associated with covid.

Angel Figueroa Jaramillo, president of the union representing PREPA workers, predicted in a radio interview that the PREPA – LUMA agreement would further increase energy prices. He noted the current increase is because of an increase in oil prices; other increases will follow.

January 22

San Juan Superior Court Judge Anthony Cuevas Ramos ruled that the three minor parties – the Puerto Rican Independence Party, the Citizen Victory Movement, and the Dignity Project – could retain their election franchise. This means there will be five recognized parties going forward and will probably lead to the end of the historic domination by the two major parties. See my earlier post here.

Pete Buttigieg, President Biden’s designated secretary of transportation, said he supported the Jones Act. The US territories and Alaska and Hawaii believe the act artificially inflates the cost of shipping goods between US ports.

January 25

In a written statement, the Financial Oversight and Management Board for Puerto Rico (FOMB) justified the $858 million it has charged so far for legal fees. The board noted Puerto Rico’s debt is large and extraordinarily complex.

Resident Commissioner Jennifer Gonzalez Colon, Puerto Rico’s non-voting representative in the US Congress, sent a letter to President Biden outlining her goals. They included considering Puerto Rico as a site for domestic medical equipment manufacture, seeking equality under the Medicaid program, and statehood, among others.

January 25

The government announced that more then 200,000 Puerto Ricans had received their covid vaccinations. It claimed Puerto rico ranked sixth in the world in doses per 100 residents,

FEMA announced it had allocated $153 million to Puerto Rico to strengthen the island’s covid vaccine campaign.

January 26

In their first meeting, the Governor, Senate President Jose Luis Dalmau and House Speaker Rafael Hernandez Montanez disagreed on the matter of Puerto Rico’s political status. The representatives informed the governor that both houses were introducing legislation to repeal three pro-statehood laws, all passed under the last governor.

February 1

Governor Pierluisi said he is ready to submit his Fiscal Year 2022 plan for review by the Financial Oversight and Management Board (FOMB). He stated his plan is inconsistent with previous plans because he used updated data. FOMB Executive Director Natalie Jaresko noted that projections made by McKinsey & Co., the board’s consultant, differed from the government’s projections, in some cases by a billion dollars. FOMB has paid McKinsey & Co. a total of $130 million in fees.

February 2

The island’s ferry services began their transition to a contract service provider. The government runs three ferry routes: San Juan – Catano, Ceiba – Culebra, and Ceiba – Vieques, the latter two with both passenger only and vehicle only service. The residents of Culebra and Vieques had long complained of inefficient government services, with missed sailing and breakdowns. HMS Ferries, a company based in Bainbridge, Washington, will gradually take over operation of the three routes, starting with the San Juan – Catano route.

February 3

Governor Pierluisi announced that Puerto Rico will receive $6.2 billion in funding from the US Department and Urban Development. The money will be used to develop disaster-proof infrastructure.

February 5

Hotel registrations (down 61.1%), gasoline consumption(15.6%) and payroll consumption (8.0%) were all lower in the third quarter of Fiscal Year 2020 as compared to the previous year’s third quarter. Revenues from corporate income taxes went down by 39.8%. Somewhat inexplicably, revenues from sales taxes increased by 31.5%.

The governor revealed his Fiscal 2022 budget for $10.7 billion. This is $700 million more than FOMB’s budget proposal.

February 5

San Juan Mayor Miguel Romero Lugo issued an executive order to curb noise pollution in the city. He cited vehicles modified to be noisy as one target. The mayor said no new laws were needed; his order renewed emphasis on this problem.

February 8

Caguas Mayor William Miranda Torres once again urged the government to fix the state highways in his town.

Professors at the University of Puerto Rico School of Law demanded the University administration add three teaching positions. The professors said the law school’s accreditation is in jeopardy.

February 9

The education department announced their plan for school reopening. It will start at selected schools with kindergarten through third grade, twelfth grade, and special education.

The Health Department announced it is expecting an additional 16,000 corona vaccine doses per week, bringing the weekly total to 57,450 doses per week.

February 10

As expected, U. S. Attorney for the District of Puerto Rico W. Stephen Muldrow tendered his resignation, effective February 28. President Trump appointed Muldrow.

February 11

Francisco Pares Alicea, Puerto Rico Treasury Secretary, asked the U. S. Treasury to exempt Puerto Rico from proposed Federal Tax Credit regulations. Apparently, Puerto Rico, in certain tax situations, is considered a foreign jurisdiction. Alicea claims the proposed regulations would prevent companies from here from claiming their Puerto Rico excise taxes as a credit on their federal taxes as they do now. The proposed rules are aimed at foreign jurisdictions.

February 12

The education department announced that each private school on the island will be able to decide when and how to reopen.

February 15

PREPA, the island’s public power authority, submitted a list pf projects it said could generate up to 150 megawatts of renewable energy. Laws passed in 2019 require PREPA to reach a goal of 40% renewable energy by 2025; it is currently at 3%. Last year, the FOMB required PREPA to put most of the projects on hold.

February 16

The Puerto Rico Court of Appeals overturned a lower court ruling and reinstated a challenge in the San Juan mayoral election. The election commission certified that Miguel Romero Lugo won by 3,165 votes; challenger Manuel Natal Albelo claims at least 6,593 votes from one specific ward are suspect. The case now goes to the Puerto Rico Supreme Court.

February 17

The government confirmed the fist covid case with the UK coronavirus variant B.1.1.7. The patient arrived from Europe on a stopover flight. She is hospitalized and said to be responding to treatment.

February 18

The maritime terminal operator Luis Ayala Colon Sucrs, Inc. announced it is raising its cargo-handling fees on March 1. This will likely cause consumer prices to increase.

February 19

Severe winter storms in the US disrupted the supply of covid vaccines, delaying some appointments until early March.

February 22

Tote Maritime, one of the four Jones Act US – Puerto Rico shipping companies, announced it is raising its shipping fees. By some estimates, Tote, with its affiliate Luis Ayala Colon Sucrs, Inc., controls over half of the business in the Port of San Juan. The El Faro, a Tote ship, sank with all hands when it encountered Hurricane Joaquin on a Jacksonville – San Juan run. Read about it here.

February 23

The FOMB threatened to take the island government to court if it enacts House Bill 120, the so-called Dignified Retirement Act. The bill would eliminate all pension reforms proposed by the FOMB, including pension cuts. The FOMB claimed the bill would be annulled by the Title III Bankruptcy Court.

February 24

After months of US District Court sponsored mediation, the FOMB announced an agreement with some creditors that would reduce a portion of the island’s debt from $18.8 billion to $7.4 billion. The agreement relates to some government General Obligation bonds, as well as some bonds issued by the Public Buildings Authority.

February 25

The governor says he has to review the Dignified Retirement Act and would not commit to signing it.

February 26

PREPA started a request for proposals process for renewable energy projects of 1,000 MW and battery energy storage projects of 2,000 MW hours.

March 1

Resentment against the FOMB boiled over. Rafael Hernandez Montanez, speaker of the Puerto Rico House, announced he and other members of the lower chamber filed a petition with the United States District Court. They claim the FOMB is overriding decisions of both the executive and legislative branches which undermines democracy here. The petition, while recognizing FOMB’s powers, argues the federal entity cannot file legislation that deviates from the fiscal plan budget.

March 2

The U. S. Supreme Court agreed to hear arguments in the United States versus Jose Luis Vaello Madero. Madero received SSI disability payments in New York and continued to receive them for three years after moving to Puerto Rico in 2013. The U. S. sued for $28,801, arguing that, once he moved to Puerto Rico, he was no longer eligible for the benefits. Both the U. S. District and First Circuit Courts found in Madero’s favor, stating that excluding Puerto Rico residents from the SSI benefit is “not rationally related to a legitimate government interest.” By the way, Puerto Ricans do pay Social Security taxes.

Meanwhile, the Puerto Rican Justice Department sued the Texas Armoring Corporation for $224,100 with interest and legal expenses. Tne government paid for an armored SUV that was never delivered.

March 5

The PR Supreme Court declined, by a 6 -2 vote, to overturn a suit brought by a San Juan mayoral candidate. Manuel Natal Albelo, of the citizen Victory Movement party, can now take his claims of election fraud to the Superior Court, where Judge Anthony Cuevas Ramos will review the case on its merits.

March 5

The U. S. District Court will hear arguments regarding $3 billion in bonds issued by the Employees Retirement System. If the court finds the ERS did not have the authority to issue the bonds, the entire debt would be wiped out and the bonds would be worthless.

March 8

LUMA Energy refused to turn over documents detailing expenses related to transitioning PREPA’s assets to private ownership. PERB asked for the documents. LUMA argued that they answer to the Public Private Partnership (P3), which administers the contract, and not PERB.

March 9

Governor Pierluisi announced he could see no reason to delay LUMA’s work. LUMA is scheduled to take control of PREPA’s transmission and delivery system on June 1. PREPA’s board noted that the hurricane season begins on June 1 and LUMA has no employees. LUMA has not yet made any job offers to PREPA employees.

March 10

Angel Figueroa Jaramillo, president of the union representing PREPA workers, demanded that the island House of Representatives nullify LUMA’s contract. The demand came in the midst of a 24 hour work stoppage by union members.

March 11

Governor Pierluisi said he will not be intimated by union promises to contest the LUMA contract.

March 12

San Juan Mayor Miguel Romero Lugo announced that his garbage initiative had picked up 7.500 tons of garbage through the city, from parks, clandestine landfills, and by removal of abandoned vehicles.

March 15

Mara Perez resigned as director of the Maritime Transportation Authority. This came after difficulties in delivering gasoline to Vieques. The government chartered the deck barge Marilin H to carry supplies to Vieques, including four tank trucks, each with 10,000 gallons of gasoline. However, the ship’s deck was higher than the dock and the gasoline trucks could not disembark safely. Dock workers constructed a temporary dirt and stone ramp; the gasoline tankers rolled off the Marilin H on Sunday, ending the gasoline shortage on the island, at least for now.

Conclusions

Puerto Rico is facing two large, interrelated issues – the debt crisis and the privatization of the energy system. Both are multi-billion dollar issues, and both are scrutinized by a variety of parties from a variety of perspectives.

One might think the Puerto Rican people are despondent. They are not. Based on my admittedly limited interactions with my Puerto Rican friends, they remain politically astute, informed, and passionate. All that mixed with a tinge of cynicism. A healthy mix, I’d say.

Note and Sources

I got the pictures of Governor Pierluisi and Judge Swain from the web. I took all the others during various jaunts around the island.