Log In

Reset Password

The Truth About PROMESA (video)

The approval of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) will bring changes in different areas of government and strengthen congressional authority over Puerto Rico. PROMESA not only brings to life a Fiscal Oversight Board with sweeping powers over the Commonwealth's budget and government operations, it also provides a framework for debt restructuring and for execution of all sorts of infraestructure projects, especially energy-related projects.

We have summarized some of the main points of the PROMESA Act below and also provided videos with these summaries (in Spanish) following the links.


Changes in governanceEssentially, the current democratic process, where the last word rested on the three branches of the Commonwealth of Puerto Rico's government and, in extreme cases, a distant federal Congress, changes to one in which congressional authority is present daily through the operation of a Fiscal Oversight Board with power to revoke specific official acts by the local government.The Board becomes a Puerto Rico government agency that is not under the control of the government of Puerto Rico in any way. Here are some facts about the interactions of government powers under PROMESA:The Governor has a voice but not a vote on the Board, and can be left out of executive meetings.The Board may have access to all the information it requires, including direct access to public agencies' technology systems and databases.The Board can go directly to court to prevent public employees from going on strikes or disrupting services.Any person who violates an order of the Board may be criminally prosecuted and removed from public service.The Board may take steps to ensure the efficiency of the tax system through new technologies and processes.Except for constitutional matters, no court can issue orders against the Board and all legal actions against the Board have to go to the United States District Court for Puerto Rico.Neither the Governor nor the Legislature can monitor or influence the Board in any way.The Government of Puerto Rico must design a Fiscal Plan of not less than five years duration along with financial estimates, but both things can be done by the same Board if that body is not satisfied with what the Governor and Legislature produce.If an agency incurs in an 'inconsistency' with the budget and the Plan, the Board may make changes in any budget allocation, but not on allocations for debt payment, can freeze funds and may prohibit the signing of contracts.Every law, regulation, or executive order to be approved by the Legislature and the Governor may be reviewed by the Board and, if the Board deems it inconsistent with the Fiscal Plan, they can prohibit its enforcement.Public contracts may be reviewed by the Board to ensure that they foster competition and that they prioritize private sector contractors over public entities.There can be no reallocation of funds in an approved budget and Plan without authorization from the Board.No transaction related to new or old debt can be done without the authorization of the Board.B)

InfrastructurePROMESA installs a way of handling infrastructure projects which represents the second coming of the special procedures set up during the Fortuño Administration to handle projects with an 'emergency order.' In PROMESA's case, the process is now one set up to handle 'critical projects.'The nuts and bolts are:The Governor shall submit to the Board names for the appointment of a Revitalization Coordinator but, if the Board doesn't approve them, they can appoint another.These candidates must have experience in energy projects. The appointee must not have been an elected official nor a government contractor in the three years prior to the appointment.Any project, existing or proposed, may be subjected by a 'sponsor' to become a 'critical project.'These projects are required to have private capital attached, to show economic and environmental benefits, measure its impact on consumers, and have a cost summary.The Coordinator may prioritize projects related to energy with showings of how the project contributes to transitioning towards private power generation capacities in Puerto Rico.The Coordinator and the Governor have 20 days to identify the agencies that will be involved in each project and each agency must identify the expedited permitting process that will apply to the project.After 60 days, a report and a recommendation on whether the project should be considered 'critical' must be produced.With the report and recommendation, a 30-day period for public comments opens.After public comments, the project goes to the Board, which approves or disapproves it without possibility of appeal or further review.The project's file will be evaluated by an interagency Environmental Subcommittee.Having a project designated as 'critical' means that it is subjected to an expedited process in agencies and that its promoter may request the Board's intervention if dilation occurs at the agency level.Federal agency review of federal will also be expedited.C)

The Board's autonomous powersAlthough the PROMESA law aims to, in some ways, set up a consultative scheme bewteen the Fiscal Oversight Board and the Government of Puerto Rico, it also leaves some important spaces for the Board's autonomous action. The main ones are:To ensure the efficiency of the tax system through new technologies and processes.To submit recommendations to reorder government management, including agencies, collection services, human resources, and privatization of assets. If the government does not accept recommendations, it has to support its stand in writing before Congress and the President.Identify auditing standards.Enter any litigation in which the territory is a part.Oversee the finances of specific agencies.Certify and initiate cases of debt adjustment and restructuring.Decide on fiscal plans and annual government budgets.Determine whether pension plans are well funded and order an actuarial assessment.Appoint its Executive Director and Revitalization Coordinator.Deciding which laws, regulations or orders affect its operation, and annull them if they wish.Hold public hearings, demand information from any federal or state agency, issue subpoenas.Make changes to any budgetary item, freeze funds and prohibit signing of contracts.They have immunity in their actions to comply and execute PROMESA.Control its budget which has been estimated at some $62 million annually.D)

PROMESA's deadlinesThe most important deadline established by the PROMESA law is for the time when the Fiscal Oversight Board will cease to exist, and that is once Puerto Rico has a balanced budget for four consecutive years and gained access to financial markets.But the law also establishes other important deadlines for the Board, Congress, federal agencies and the Puerto Rico government.September 15, 2016 - The Congressional Task Force on Economic Development set up by the law shall submit a preliminary report on changes to federal legislation in order to promote the economic growth of Puerto Rico.September 15, 2016: deadline for appointment of members of the Board.30 days after each fiscal year - The Board shall submit a report covering progress, work performed and use of its funds to the President of the United States, Congress, the Governor and the Legislature of Puerto Rico.6 months after the establisment of the Board - The Governor shall submit to the Board a report detailing all tax incentives or credit agreements, and tax debt discharges.When feasible - The Board shall report about cash flow availability for debt repayment.Four years - the maximum period for employers to pay less than the federal minimum to employees under 25 years if the Governor agrees.February 15, 2017 or six months after the establishment of the Board - deadline for the stay of legal claims against the government.180 days after the enactment of the law: The General Accounting Office (GAO) shall issue a report on federal contracting in Puerto Rico and on obstacles for contracting.December 31, 2016 - Final Report of the Congressional Task Force.Undated - The Comptroller General shall submit a report on the conditions that led to the debt and propose recommendations so that the debt of states and territories do not threaten the United States.30 days - Maximum time to file a lawsuit challenging any action based on PROMESA.After four consecutive years of balanced budgets and market access: Board ceases to operate.Also:

Watch Judge Torruella's controversial speech on PROMESA (video)

Congressional Research Service report on PROMESA - NotiCel_21056

PROMESA Act - NotiCel_21057

(Josian Bruno Gómez / NotiCel)