March 29, 2019
Good Morning! In this morning’s eBlog, we consider Detroit’s acquisition of nearly 15 acres from the Great Lakes Water Authority in order to significantly expand space for the manufacture of Fiat Chrysler automobiles—an expansion which could cap the city’s remarkable turnaround from chapter 9 municipal bankruptcy, before reflecting on the President’s growing opposition to any further fiscal and disaster relief assistance to the U.S. territory of Puerto Rico, amid increasing legal questions with regard to the status of the appointed, but un-elected PROMESA Board.
Driving to a non-Chapter 9 Future. The City of Detroit will acquire 14.45 acres of leased land from the Great Lakes Water Authority in its effort to deliver 200 acres to Fiat Chrysler Automobiles NV for its $2.5 billion plant expansion on the city’s east side. According to a purchase agreement, the Detroit Brownfield Redevelopment Authority will purchase for $1 million the property at 11900 Freud and 11900 Jefferson: here the agreement includes an easement for the regional water system to have access to operate the Conner Creek combined sewer overflow facility. The Authority’s Board Wednesday afternoon finalized the purchase. Due to a regional sewage disposal system lease agreement, the Great Lakes Water Authority has the right to sell and receive proceeds from the sale of the property if it is no longer needed. Under the agreement, the Detroit Water and Sewerage Department also stands to receive at least 40 percent of the proceeds since it still owns the property, but leases the facility, according to spokesman Bryan Peckinpaugh: the funds are slated to go toward the sewerage department’s general fund and help its infrastructure and sewer improvements.
The Authority approved the sale at its March 13th board meeting—after an inspection within the next 180 days. The property is near the Fiat Chrysler’s Jefferson North Assembly Plant. In maybe a hint of the city’s return to being an epicenter of the U.S. auto industry, Fiat plans to invest $2.5 million in expanding its Mack Avenue facilities and $900 million investment in the Jefferson North Assembly Plant on Conner Street. The moves come after, last fall, the Detroit Brownfield Redevelopment Authority Board approved initial steps in the city’s request for assistance in assembling land to establish market-ready industrial sites in the city. The Redevelopment Authority received $10 million in initial funds from the city from its chapter 9 plan of debt adjustment funds to acquire properties and conduct environmental testing. As of Wednesday, Detroit had one month left, until April 27th, to acquire 200 acres of land and secure City Council approval for the development.
Too Many Fiscal Chefs in the Kitchen? A delegation from the U.S. House of Representatives Natural Resource Committee is concluding its visit and sessions with a meeting with the PROMESA Oversight Board—where one of the issues to be discussed relates to obtaining information with regard to former Revitalization Coordinator Noel Zamot’s allegations regarding the U.S. Territory’s alleged boycott of his efforts. Yesterday, Puerto Rico’s 20th Resident Commissioner and non-voting Member of Congress, Jenniffer González, acknowledged that the meeting with the PROMESA Board was an opportunity to find out what the members of the Board understood with regard to Coordinator Zamot’s allegations. She noted that House Committee on Natural Resources has not only jurisdiction with regard to the allegations, because of its oversight responsibilities, but also because of its concern with regard to how the federal statute’s Title V, the title governing the tasks of the Revitalization Coordinator, have worked.
However, González said that Coordinator Zamot’s priority should be to immediately take the evidence he may have with regard to illegal actions from government officials regarding infrastructure investment projects to the Federal Bureau of Investigation. Natural Resources Committee Chair Raúl Grijalva (D-Az.) told El Nuevo Día that his advisors had commenced discussions with Mr. Zamot, who believes that there were possibilities to launch projects for about $ 3 billion; however, by the time he left his position, only one project had been designated critical with a $25 million investment—or, as Congresswoman Nydia Velázquez (D-NY), the first Puerto Rican woman to be elected to Congress, noted: “These are serious allegations.” She indicated that if the Committee finds evidence of corruption, Mr. Zamot must take “it to the Department of Justice and the FBI.”
The Congressional delegation was scheduled to meet with Gov. Ricardo Rosselló Nevares this morning, where Rep. Rubén Gallego (D-Az.) said he would ask the PROMESA Board about what they will do to ensure that “the funds we are allocating (from Congress) move faster” for Puerto Rico’s recovery and “what their plan to contribute to economic development is,” as he noted: “They are treating the island and its elected representatives as if they were children, rather than a government elected by the people.” Indeed, the Congressional visitor emerged from their sessions with agreement they will support efforts in Congress to review the powers of the PROMESA Board—or, as Rep. Gallego noted, Puerto Rico’s elected government should have “more power” over the future of the U.S. territory, even if it is not feasible to eliminate the Board.
Their visit to Puerto Rico comes as a bipartisan group of Members of Congress has introduced a bill that would make Puerto Rico the 51st U.S. state—a proposal opposed by President Trump, and comes as a fight over aid for Puerto Rico is threatening to derail a disaster relief bill in Congress, where the Senate is working its way through a package to provide recovery assistance for a recent spate of hurricanes, storms, and wildfires—forcing hard balancing questions, as Congress and the White House are debating when, if, or how much aid Congress and the administration will be able to agree upon. Moreover, the discussion came as the President has sparked a political firestorm for his criticism of Puerto Rico’s handling of previous disaster funds during a private lunch this week with GOP senators. Senate Appropriations Chairman Richard Shelby (R-Ala.) was blunt when asked about the President’s comments: “Let me tell you what, Puerto Rico doesn’t have a sterling record, and a lot of states don’t either, but Puerto Rico has not a good record on handling a lot of money … and that’s what the President is raising.” The President has repeatedly criticized Puerto Rico, which was devastated by back-to-back hurricanes in 2017. Governor Ricardo Rosselló called his latest comments from the GOP lunch “irresponsible, regrettable and, above all, unjustified.”
With the Senate not in session today, Senate Democrats next week thus may opt to block legislation proposed by their Republican counterparts that would allocate billions of dollars for disaster recovery across the country, but an amount they consider insufficient with regard to more aid to Puerto Rico’s slow efforts to recover from a pair of devastating hurricanes more than a year ago. The impasse ahead of votes early next week appears to have emphasized the governance twilight zone in which Puerto Rico falls: it is neither a state, not a municipality: it cannot file for chapter 9 municipal bankruptcy. Thus the Congressional debate, and seeming inequitable treatment for Puerto Rico—appears to reviving efforts in Puerto Rico to become a state—indeed, yesterday, lawmakers introduced a measure to make Puerto Rico the 51st state.
The stormy back and forth appears to have contributed to increasing demands by Democrats for changes to the Senate GOP disaster aid funding bill: they are threatening to block it from getting the 60 votes needed to invoke cloture to overcome a filibuster, with a senior Senate Democratic aide noting there were three options that would allow the disaster aid bill to receive the requisite 60 votes needed to pass the Senate in the wake of the President’s: pass the House-passed emergency supplemental, amend the GOP proposal to include priorities from Democrats, or pass a shell bill to allow for the House and Senate to kick the issue to a House-Senate conference committee. Sen. Deputy Minority Leader Dick Durbin (D-Ill.) described the Puerto Rico provisions as a “sticking point” on the negotiations over the broader disaster relief bill; asked if Democrats would vote against the legislation if the amount of aid for Puerto Rico is reduced compared to the House bill, Sen. Durbin responded, “Many of us will.”
Whatever the Senate agrees to will go to conference with the House, which passed a disaster recovery bill earlier this year. The Senate version includes $600 million for food stamp aid in Puerto Rico, a level which Democrats argue is insufficient: Ranking Senate Appropriations Committee Member Patrick Leahy (D-Vt.) introduced an amendment to the Chairman’s proposal to include a handful of additional provisions, including requiring the Department of Housing and Urban Development to release block-grant funding and funding to help Puerto Rico repair damaged water systems; however, in his statement on the Senate floor, he told his colleagues: “Unfortunately, it appears that the President will not accept even this reasonable offer. Instead, he will endanger the entire disaster package, because he wants to pick winners and losers. He wants to decide who gets assistance in the wake of disasters based on his own arbitrary standards and political grudges. This is unacceptable.”
Whatever happens, tempus fugit, as the Romans would say: time is flying, with Congress poised to depart at the end of next week for its two-week Easter recess.
Who’s in Charge of Governance? Are There Too Many Fiscal Chefs in the Kitchen? While the PROMESA statute took some of its bearings from chapter 9 municipal bankruptcy, because Puerto Rico is neither a state nor a municipality; that law led to the appointment of the PROMESA Oversight Board, but without the clear authority described in various state laws with regard to plan of debt adjustment quasi-commander—the role, for instance, which Kevyn Orr played in Detroit, where he effectively suspended the authority of the Mayor and City Council until a U.S. Bankruptcy Court approved a plan of debt adjustment. Thus, in Puerto Rico, we have a Governor, legislature, a court, and a Congressionally-appointed Board—where a U.S. Court of Appeals has now ruled that a Puerto Rico bankruptcy judge’s decision that payment of special revenue bonds in municipal bankruptcies is voluntary rather than mandatory, and where the U.S. First Circuit Court of Appeals has affirmed two major U.S. District court decisions that found creditors of Puerto Rico cannot force the U.S. territory’s government and agencies to set aside funds or make payments on special revenue bonds during its landmark restructuring.