Physical & Fiscal Plans of Municipal Debt Adjustment


August 10, 2018

Good Morning! In this morning’s eBlog, we consider the fiscal, physical, and governing challenges confronting Puerto Rico’s municipalities or municipios in the wake of both Hurricane Maria and Puerto Rico’s virtual chapter 9 municipal bankruptcy.

Forty employees of the Department of Public Works of one of the Nation’s and Puerto Rico’s oldest municipalities, Toa Alta, a municipio founded in Puerto Rico in 1751, yesterday became early beneficiaries of Puerto Rico’s quasi plan of debt adjustment when they were told they would no longer be mandated to reduced working hours. The municipio derived its name from the Taino word for valley, “Thoa,” albeit it has also been called the “Granja de los Reyes Catolicos,” (the farm of the Catholic monarchs), because it is an important center for agriculture. At the same time, the municipio has also been known as the Cuna de los Poetashe agricultural economy, the town was also known as the “Granja de los Reyes Católicos” (the Farm of the Catholic Monarchs). The town is also called “Ciudad del Josco”. The town is commonly known by its nickname “La Cuna de los Poetas,” or Cradle of Poets,’ because of the numerous Spanish-language poets who were born there.

So it was yesterday that Toa Alta Mayor Clemente “Chito” Agosto announced the municipio will no longer be subject to reduced their working hours, stressing in a city hall press release that the savings achieved by the municipio will enable the municipality to end the cut in working hours which had commenced in January of 2017—with the Mayor noting that the city had achieved savings of 55% in administrative costs, 27% in legal services, 70% in donations, 67% in non-professional services, 15% in building rentals, 58% in festivities, and 30% in the trust payroll—or, as he put it: “We made our decisions with responsibility, focused on having the necessary resources to give good governance to Toa Alta for many years.”

Despite the fiscal recovery, the city will retain 74 employees, or nearly one-third of the city’s work force, on reduced hours. Toa Alto, was among a dozen municipios forced to reduce employee working hours—even as some municipios, such as Cidra, had to take more drastic measures: the closure of a Pepsi plan forced Cidra to lay off municipal employees—or, as the Mayor put it:We take difficult measures, and complicated for the good of the people, and thinking more than now, in the future, in the work that we will do for many in our town.”

For Whom the Bells Tolls. The government of Puerto Rico yesterday in a new report, “Transformation and Innovation in the Wake of Devastation,” noted that it appears that more than 1,400 Americans likely died on the island because of the storm, or some roughly 20 times the previous number it had reported. The new report outlines Puerto Rico’s response to the storm and what it intends to do to strengthen its economy and infrastructure moving forward. In the reports death toll estimate, the report notes: “Although the official death count from the Puerto Rico Department of Public Safety was initially 64, the toll appears to be much higher…According to initial reports, 64 lives were lost. That estimate was later revised to 1,427,” albeit making clear that even this revised number is unofficial, but “realistic,” advising the New York Times: “We don’t want to say it out loud or publicize it as an official number…The official number will come, and it could be close. But until we see the study, and have the accuracy, we won’t be able to recognize the number as official.” It appears the spokesperson was referencing a George Washington University study, which was commissioned earlier this year to examine the death toll.  In its new report, Puerto Rico pledged to invest $118 billion in upgrades to infrastructure, housing, health programs, and education—investments critical, as the report noted, because the “hurricane’s devastating effects on people’s health and safety cannot be overstated.”