Puerto Rico criticises Treasury’s ‘loan delay’

Bloomberg

Puerto Rico faces a “dangerous financial dilemma” because of the US Treasury Department’s delay in providing billions of dollars of disaster relief needed to help it recover from the wreckage caused by Hurricane Maria, the island’s governor said in a letter to Senate and House leaders.
Treasury’s “misguided delay and policy decisions contrary to Congressional intent” for the community disaster relief programme have created a risk that the island’s electric, water and sewage facilities could shut down in the near term, Puerto Rico Governor Ricardo Rossello said in a nine-page letter dated to Republican and Democratic leaders that was seen by Bloomberg News.
Treasury reduced the size of the loans available to Puerto Rico to $2.07 billion from $4.7 billion after imposing restrictions that are “seemingly designed to make it extremely difficult for Puerto Rico to access these funds when it needs federal assistance the most,” Rossello said. Contrary to the frequent practice, Treasury “indicated” that it does not plan to forgive the loan, said the letter.
About 90 to 95 percent of community disaster loans, or CDLs, are forgiven, according to former Treasury officials.
Puerto Rico has struggled to recover since Hurricane Maria slammed into the island in September, worsening the financial and economic strains on a government that was already in the midst of a record-setting bankruptcy, leaving it effectively unable to borrow on its own without potentially punitive conditions. Many residents are still without power and the government-owned electric company was faced with rationing electricity until Puerto Rico extended it a $300 million loan, which is supposed to tide the
utility over until the federal funds are released.
Puerto Rico officials have been negotiating with the Trump administration to access the community disaster loans since Congress in October approved $4.9 billion of CDLs for Puerto Rico, the US Virgin Islands and municipalities in Florida and Texas after hurricanes struck those areas in 2017. Puerto Rico was to receive $4.7 billion of the $4.9 billion allocation.
The Treasury Department said that it might provide a loan to Puerto Rico if the territory’s cash balance drops below $800 million. The terms of the loan would include “important steps” to be taken to protect taxpayer investments, “while ensuring financing is available quickly when needed,” the department said in a summary of a meeting with Puerto Rico’s oversight board.
Treasury said Puerto Rico could then “on-lend” money from the loan to public corporations, such as the territory’s bankrupt power utility, which is on the brink of rationing electricity. Federal officials told the commonwealth that it would distribute the loans when Puerto Rico’s funds fell below a certain level. The commonwealth had $1.6 billion cash, according to the island’s Fiscal Agency and Financial Advisory Authority.