Late February 2022

Introduction

Puerto Rico has been through a tough time. Hurricanes Irma and especially Maria battered the island in the fall of 2017. Earthquakes caused damage in the southwest of the island in January 2019. And then the covid pandemic slowed the economy here to a crawl. The ongoing debt crisis has been a drain on everybody.

Perhaps I’m an optimist, but I see hopeful signs. I’ll mention some of them in this post. To break things up, I’ll include images that may or may not relate to the things I write about. I’ll leave that for you to figure out.

The Debt Crisis

The on-going debt crisis pretty much dominates the news. Briefly, President Obama signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) into law in 2016. The law created the Financial Oversight and Management Board (FOMB) which, with its seven presidentially-appointed members, can designate an entity (territory or territorial financial instrument) as a “covered entity”. Once so designated, the “covered entity” is subject to court supervised negotiations or a court-ordered process similar to a bankruptcy.

This past fall, the FOMB filed a proposed eighth amended Commonwealth Plan of Adjustment that, it claimed, would reduce Puerto Rico’s debt to $7.4 billion, down for $33 billion. That plan included freezes, but not cuts, to public service retirement benefits. Cases were heard in a Title III Bankruptcy court under the gavel of federal judge Laura Taylor Swain.

Much of the news this past fall has been about the Plan of Adjustment.

October 20, 2021

The Puerto Rico Sales Tax Financing Corporation confirmed that it had deposited $472.6 million with Bank of New York (Mellon). The payment, current for the third straight year, was in accordance with the entity’s Third Amended Title III Plan of Adjustment as managed by the U. S, District Court for the District of Puerto Rico.

October 25, 2021

Miguel Romero Lugo, Mayor of San Juan, announced $26 million street repaving program.

October 26, 2021

Judge Laura Taylor Swain of the Southern District on New York threatened to dismiss Puerto Rico’s 5 -year bankruptcy case if the parties could not come to an agreement. She ordered U.S. Bankruptcy Judge Barbara House to lead mediation efforts.

October 29, 2021

A new health clinic opened on Vieques, one of Puerto Rico’s two off-shore islands. The 9,000 residents there now have access to a modern facility. The clinic is funded by the US government under the Public Service Health Act.

November 2, 2021

A Puerto Rican senator introduced legislation to repeal Act 53-2021. That law, passed earlier this year, bans retiree pension cuts. The senator, Maria de Lourdes Santiago of the minority Puerto Rican Independence Party, claims Act 53 is merely an attempt to fool people.

November 3, 2021

Eight hundred people were arrested by Puerto Rican police working in conjunction with the Organized Crime Division of the Department of Justice. The anti-drug operation had lasted for over 45 days.

November 5, 2021

The FOMB filed a proposed eighth amended Commonwealth Plan of Adjustment (POA). In accordance with Act 53, the plan does not include pension cuts for active or retired government employees. However, as noted Victor Bonilla Sanchez, president of the Puerto Rico Teachers Association, the plan does not preclude pension freezes.

November 8, 2021

Judge Swain initiated confirmation hearings for the POA. The complex instrument includes compensation for creditors, a strategy to build reserves for pension funds, and contingencies if the Puerto Rican economy performs better than anticipated. If Puerto Rico has to borrow funds, they will be subject to the laws of New York, the court’s location.

November 9, 2021

The University of Puerto Rico received a grant worth nearly $1 million to train students in agricultural sustainability and resilience.

November 10, 2021

The U. S Supreme Court heard oral arguments in U.S. vs. Vaello-Madero, The plaintiff was a resident of New York City and while there collected SSI benefits. He later moved back to Puerto Rico. The U.S. sued to recover more than $20,000 in benefits he received while in Puerto Rico. SSI benefits are available to residents of the 50 states, Washington, D.C. and the Northern Mariana Islands, but not to residents of Puerto Rico, the U.S. Virgin Islands, or Guam. In February 2019, the First Circuit affirmed a lower court decision that excluding U.S. citizens from SSI was unconstitutional. The U.S. appealed that decision to the Supreme Court.

November 23, 2021

In their closing arguments, the FOMB claimed again that the proposed Plan Of Adjustment would not cut public pensions.

November 24, 2001

Judge Swain took the issue of confirming the POA under advisement. This was after hearing arguments since November 8. The case is the largest bankruptcy ever in the history of municipal markets.

November 25, 2021

Judge Swain heard arguments by the FOMB as to how to restructure the bond debts of the Puerto Rico Infrastructure Financing Authority ($1.9 billion) and the Convention Center District Authority ($383 million). The restructuring is under Title VI of PROMESA which means it is a mediated and not court based process.

December 2, 2021

Puerto Rico Secretary of State Omar Marrero Diaz announced he will lead a trade mission to the Dominican Republic.

December 3, 2021

Minnesota health officials confirmed the second covid case with the omicron variant in the U.S.

December 9, 2021

Governor Pierluisi announced that Unit 6 at the Costa Sur power plant will return to service by December 30. A blade in the turbine failed last August. The unit had to be shipped to New York-based Mechanical Dynamics and Analysis for repairs, which cost $2.8 million.. When Unit 6, rated at 400 megawatts capacity, comes back on line, less efficient units in San Juan and Catano can be shut down.

December 14, 2021

San Juan Mayor Miguel Romero Lugo announced a three year, $209.5 million program to improve the city’s infrastructure. The work will include improvements to parks, bus stations and stops, and the connector walkway between Miramar and Condado. The funding is from various federal grant programs.

December 15, 2021

Judge Swain told the FOMB that their proposed Plan of Adjustment was “problematic” and needed modifications to address her concerns. The FOMB had wanted to displace various Puerto Rico laws, mostly having to do with public sector retirement benefits, to execute the POA. Judge Swain found that matter “problematic”.

December 17, 2021

Jobs in the tourism sector rebounded to near pre-pandemic levels, as indicated by October job statistics. Data from the U.S. Bureau of Labor Statistics showed 79,200 jobs in that sector, slightly below the 80,500 jobs pre-pandemic.

December 20, 2021

The U.S. Senate passed a bipartisan bill to prevent conflicts of interest by persons arguing PROMEAS bankruptcy cases under Title III. Previously, bankruptcy advisors and consultants did not have to make disclosures that may have shown conflicts of interest.

A new Executive Order requires proof of vaccination to attend mass events. The Order was issued in response to rapidly rising number of covid infections caused by the omicron variant.

December 21, 2021

The New Years Eve Party is Old San Juan was cancelled, as were live performances scheduled for the San Sebastian Festival, scheduled for the third weekend in January. The artisan shows at the Festival will be held as scheduled.

December 22, 2021

The FOMB sued Governor Pedro Pierluisi Urrutia and various government agencies. The FOMB claims certain Puerto Rico laws, mostly dealing with retirement benefits, are unsustainable and “will reinstate the fiscal mismanagement that existed before PROMESA . . .”

Meanwhile, the Governor announced that retired police officers can participate, for free, in the island’s Vital health insurance plan, starting January 1, 2022

December 24, 2021

The FOMB called Governor plan for retired police officers “fiscally irresponsible.”

December 27, 2021

A law suit between several unions and the FOMB and the Puerto Rico government will be heard by the U.S. Supreme Court. In essence, the plaintiffs argue they suffered harm because the FOMB preempts local laws.

December 29, 2021

The government and the FOMB reached an agreement on retirement benefits. The government will repeal certain laws guaranteeing such benefits. In return, the FOMB agreed to, within 60 days, provide enhanced retirement benefits for police officers, and, within 120 days, for teachers, all consistent with the proposed Plan of Adjustment.

December 30, 2021

All face-to-face activities at the Juana Diaz Three Kings Festival, scheduled for January 6, 2022, are cancelled.

January 5, 2022

The San Sebastian Festival, scheduled for the third weekend in January, was cancelled.

January 7, 2022

Judge Swain dismissed a lawsuit brought by six Puerto Rican credit unions against the government. The plaintiffs argued they were coerced into buying government bonds even though the government knew the bonds could not be paid back.

January 13, 2022

The Federal Aviation Agency announced grants worth $8 million for capital improvements at the island’s airports. The funding is part of the Biden administration’s infrastructure package.

January 14, 2022

Governor Pierluisi Urrutia announced a $3.8 million grant to upgrade Calle Fortalezza, a main street in Old San Juan.

January 19, 2022

Judge Swain entered an order to implement the Plan of Adjustment. The order ends five years of bankruptcy, reduces the debt burden of the central government from $33 billion to about $7 billion, and will restructure some $50 billion in unfunded pension debt.

January 20, 2022

The U. S. Army Corps of Engineers announced that it had allocated $163 million to restore the Martin Pena channel. The channel connects the San Juan Bay with the San Jose Lagoon, near the airport. Once a broad channel, it has filled in with sediment and debris to the extent it is less then a meter wide in some areas.

January 21, 2022

The visitor center at the El Yungue National Forest reopened. The center, rebuilt with $20 million allocated to the U.S. Forest Service, had been closed since Hurricane Maria.

A group of investors bought the Normandie Hotel, located near the Caribe Hilton on Isletta de San Juan. The investors promise to return the hotel to its former glory.

January 22, 2022

King Felipe VI of Spain arrived for a two day state visit.

January 23, 2022

FEMA approved $554 million to rebuild and repair damages in 275 public housing complexes. The damages were caused by Hurricane Maria which struck the island in September 2017.

January 24, 2022

The FOMB held a public board meeting during which it officially certified the Plan of Adjustment. During their announcement, the Board revealed they estimated the PR government won’t face a budget deficit until 2048 both because of an improving economy and federal assistance.

February 4, 2022

Architect Fernando Pabon Rico, in testimony before a Puerto Rico Senate committee, told senators the sea level would rise by about 10 feet by the end of the century. This will endanger shore line homes and businesses as well as freshwater aquifers, the latter from salt water intrusion.

February 7, 2022

A stationary low pressure system dumped record rainfall on the island over the weekend. The San Juan area received between six and ten inches of rain. Low lying areas experienced flash floods; no loss of life was reported.

February 9, 2022

The governor issued an executive ordering declaring a state of emergency in 15 towns hit by record rains. Most of the towns were in the greater San Juan area.

February 10, 2022

Teachers from around the island walked off their jobs and demonstrated in front of the Capitol. They demanded salary justice and the opportunity for a dignified retirement.

February 11, 2022

FEMA announced an allocation of $1.9 million for repairs to Family Service Centers in Hato Rey, a San Juan neighborhood and Arecibo. The sites suffered damage during Hurricane Maria.

February 14, 2022

San Juan Mayor Miguel Romero Lugo announced a $63 million program to improve parks and public spaces in San Juan. The efforts will include repair of baseball fields and recreational areas, fence and sidewalk repairs, lighting improvements, and repainting as necessary.

February 17, 2022

Tourism data for January showed that hotel reservations for the upcoming high travel season were 17% higher than the pre-covid January 2020 figures. In addition, current short term rentals were up 329% compared to the pre-covid figures. Discover Puerto Rico CEO Brad Dean said the figures showed Puerto Rico to be a resilient travel destination.

February 22, 2022

A 12 year old boy drowned after being swept to sea by a rip tide. This occurred on the beach along Condado, the main tourist area is San Juan.

February 24, 2022

The FOMB approved the updated fiscal plan put forth by the Puerto Rico Highway Authority. The plan calls for toll increases of 8.3% a year. In addition, the Urban Train will be transferred to another entity. The FOMB said the plan will stabilize the authority’s finances and will allow it to exit from bankruptcy.

February 25, 2022

The governor said he will do what he can to mitigate or cancel the toll increases in the FOMB plan announced yesterday.

President Biden announced Puerto Rico will get $900 million in federal aid for highway and bridge repair. The funds, from the administration’s infrastructure plan, will be spread over five years.

Conclusions

So there you have a brief description of some of the news that we’ve read about while here this winter. As you can see, federal monies are flowing to the island, the economy has rebounded, and a debt management plan is in effect. While no one is entirely happy with the plan, most agree it is a better alternative than the others, i.e., unmanaged bankruptcy.

Notes and Sources

We subscribe to the San Juan Star, the English language newspaper. I used that source for my items.

With the exception of the image of Judge Swain, all the images are mine. I edit them with Adobe Lightroom and/or Photoshop. I downloaded the image of Judge Swain from the web.