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US suspends emergency hurricane loan requested by Puerto Rico

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SAN JUAN, Puerto Rico — A billion-dollar emergency loan approved by Congress to help Puerto Rico deal with the effects of Hurricane Maria has been temporarily suspended by federal officials who say the U.S. territory will not does not face a shortage of cash as he has repeatedly warned. These last months.

Federal Emergency Management Agency and Treasury Department officials said in a letter to the island’s tax agency director that Puerto Rico had a central cash balance of more than $1.5 billion as of in the nearly four months since the Category 4 storm. Federal officials also noted that the local government released documents in late December showing it had nearly $7 billion in cash. The letter was first published on Wednesday by the newspaper El Nuevo Dia.

Federal officials said the US government will create a cash balance policy to determine when funds will be released through the Community Disaster Loan Program. They said in the letter that the level of the cash balance would be decided by the federal government in consultation with Puerto Rico officials and a federal board of control overseeing the island’s finances. Once the central cash balance reaches that level, funds will be released, officials said.

Governor Ricardo Rossello of Puerto Rico and Gerardo Portela, director of the island’s tax agency and financial advisory authority.David Villafane/GDA via AP Images File

They added that Puerto Rico’s 78 municipalities can apply for loans separately.

The announcement came just weeks after the review board rejected legislation that would have created a $100 million emergency fund for municipalities dealing with the aftermath of the hurricane.

Local authorities have warned that Puerto Rico’s electricity, water and sewage companies will run out of money this month. The two companies say their funds have shrunk since the storm caused up to $95 billion in damage, knocking out power across the island. Nearly 40% of electricity customers remain in the dark.

Related: In remote areas of hurricane-ravaged Puerto Rico, volunteers are a lifeline

On Wednesday, Governor Ricardo Rossello announced he had signed a measure banning the power company from charging customers for electricity produced by private generators. A growing number of Puerto Ricans have complained about receiving such bills.

Gerardo Portela, director of the island’s Tax Agency and Financial Advisory Authority, said in a statement Wednesday that he had urged federal officials to finalize the terms under which they would distribute federal funds already approved by the American legislators. He said the delay forced local officials to initiate a process in which the central government would lend money to Puerto Rico’s electricity, water and sewage companies.

“These state-owned companies are facing serious liquidity issues that threaten essential services to the people of Puerto Rico if their operations are interrupted without immediate action,” he said.

Puerto Rico Representative Luis Vega Ramos called the federal authorities’ decision to withhold money a “hooligan move.” He said that while lack of transparency and other issues within Rossello’s administration led to the situation, it remained unacceptable.

“President Donald Trump’s administration, through FEMA, is extorting the people of Puerto Rico and our government into further submission to the federal board of control and new austerity measures.” he declared.

Image: People hold signs during a protest demanding authorities fix the power grid that was largely destroyed after hurricanes Irma and Maria hit the island in September, in San Juan
People hold signs reading ‘Electricity for Caguas’ during a protest demanding authorities repair the power grid that was largely destroyed after hurricanes Irma and Maria hit the island in September, in San Juan, Puerto Rico, January 15, 2018.Alvin Baez/Reuters

A spokeswoman for Rossello did not return a message for comment.

The 32BJ SEIU union, which represents workers in the real estate services, called the withholding of funds the decision “cruel and arrogant”.

“It is unconscionable that FEMA and the Treasury Department are withholding disaster relief funding approved three months ago for Puerto Rico,” he said. “Despite being unable to perform many vital functions, Puerto Rico is considered by these federal agencies not to be poor enough to qualify for emergency loans.”

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On Wednesday, the Federal Board of Control said it would hold a public hearing on Friday into why nearly $7 billion is being held in local government accounts, where that money is coming from and how it will be used.

Puerto Rico is seeking emergency hurricane loans as it struggles to restructure some of its $73 billion public debt and strike deals with some creditors more than two years after the government said the was unable to pay his debts.

A study released Tuesday by economists including Nobel laureate Joseph Stiglitz found in part that before the hurricane, Puerto Rico needed to cancel 50-80% of its debt to regain economic stability.

“Debt restructuring will not be a sufficient condition but just a necessary condition for economic recovery,” the study said. “Puerto Rico needs more than just restoring debt sustainability: it needs a new economic growth strategy that replaces the old one that has clearly failed.”