The Puerto Rico legislators, journalists and others are raising concerns about a lack of transparency at the federal Oversight Board appointed in August to address the island's debt crisis.
The board has made decisions on such matters as budget deadlines and revenue adjustments outside of public meetings, without following guidelines for disclosure in the Puerto Rico Oversight, Management and Economic Stability Act. The board has control over the territory's government and is demanding deep cuts in spending and steep increases in taxes to restore fiscal stability.
"The Puerto Rico Association of Journalists is aware that the fiscal control board has been going around the fact that they must make their meetings public in order to keep the public from knowing what is going on in those meetings," the association's president, Juan Hernández, said in a statement.
On Friday or Monday a resolution will be introduced in the Puerto Rico House of Representatives and Senate condemning the board's lack of transparency in its meeting practices, said Puerto Rico House Minority Leader Rafael Hernández Montañez.
In response to a question about the board's meeting practices, National Lawyers Guild president Natasha Lycia Ora Bannon wrote in an email, "It's important that they be held accountable for their lack of transparency!"
CONDITIONS FOR SECRECY
PROMESA has a section that authorizes the board to hold "executive sessions." These are private meetings.
This section (Title I, sec. 101 (h)(4)) lays out conditions for the meetings that include a public vote to hold the executive session and a statement in the vote indicating what topics will be discussed. The board first voted this way at its fourth meeting, held on Jan. 28.
In the more than six months of the board's existence, it has had four public meetings.
At every one of the board's public meetings, the board has voted unanimously on actions with minimal discussion, a sign that the board has discussed issues prior to meeting and come to a consensus as to actions to be taken.
The board met with officials from the U.S. Treasury prior to its first meeting on Sept. 30, according to multiple sources. At its Nov. 18 meeting the board announced that it would have two "work sessions" and an additional meeting in late November and early December. At the Nov. 18 meeting the board voted to hold these meetings. However, these meetings were not identified as private meetings or "executive sessions." And the particular topic or topics requiring one or more private meetings weren't publicly stated.
Then ex-officio board member David Ravitch said this winter that the board had met at least for one of these meetings. The one, two or more meetings in late November and early December were not open to the public. The board didn't invite Ravitch.
It is unclear how board members generally communicate between public meetings – in person, by teleconference, email discussions, or a combination of these methods.
It is clear that the board has made essentially all its decisions in these private contexts, thereby cloaking the decision-making process, critics say.
Not only has the board made decisions privately, but the board has acted on those decisions before any public vote to authorize action.
For example, after its public meeting on Nov. 18 the board didn't meet again publicly until late January. In the meantime, the board made the crucial decision that Puerto Rico should adopt a structurally balanced budget by fiscal year 2019. Accordingly, it decided to seek cuts and spending increases equal to 46% of Puerto Rico's annual General Fund budget.
In mid-January the board sent a letter to Puerto Rico Gov. Ricardo Rossell- telling him that $4.5 billion of annual cuts and/or revenue increases would have to be made by the start of fiscal year 2019 and that Puerto Rico would have to have a structurally balanced budget for fiscal year 2019.
POLITICAL REACTION
Though more than six months have passed since the board was founded, only in recent days have groups started to organize themselves to seek more openness.
Rep. Hernández Montañez said he hoped both of Puerto Rico's major political parties will support the bill for board meeting transparency, to be introduced Friday or Monday.
The bill will call for the United States Congress to at least hold a hearing on the board's failure to make decisions in public forums.
While the board superficially makes some decisions at public meetings, the reality is that all of the decisions have been made before the meetings, Hernández Montañez said. At the public meetings, "everything is staged… everything is arranged," he said. It is like they are performing from a libretto – the text of an opera, he said.
The problem is that nobody knows what is going on or why, Hernández Montañez said. Transparency of decision-making is the best thing for all affected by the board's decisions, including bondholders.
The board is "fighting with everybody with their decisions," Hernández Montañez continued. They will lose credibility unless they show transparency.
The Journalists Association's Juan Hernández said its demands are not just to benefit journalists but also the Puerto Rico people, so that they can make educated decisions about the Puerto Rican and United States governments.
"The association could consider demanding in court that the board meet its responsibility of making its meetings public," he said.
NO SUNSHINE
In 1976 the U.S. federal government passed the Government in the Sunshine Act, which required certain government agency meetings be open to the public. The act had several exceptions, with one of them being for territorial governments. PROMESA defines the board as being part of Puerto Rico's government.
So the Sunshine Act seems to not bar the board's meeting practices. However, PROMESA seems to do so.
At the board's first public meeting, board member Arthur Gonzalez said, "We are acutely aware of the importance of transparency and of consensus in actions in establishing the credibility of this board."
After the meeting The Bond Buyer asked board chairman José Carríon III how this quest for transparency jibed with a meeting where all the decisions had clearly been made before the meeting. Carríon responded that the board had met in technical meetings with U.S. Treasury officials and that certain "practical" decisions had been made. He said the board would try to be as transparent as possible going forward.
At the Jan. 28 meeting The Bond Buyer again asked about the board's meeting practices, noting that most government committees and commissions are required by law to have their meetings in public. Carríon responded that the board's legal counsel had advised the board that it was following proper meeting practice.
At the Jan. 28 meeting board member Andrew Biggs made a motion to allow the board to consider "administrative, retention, contract and related matters" in executive sessions prior to the next public meeting. In the motion, Biggs said that board could only pass resolutions on those matters by unanimous written consent, including consent by email.
Asked on Feb. 23 about the board's longstanding practice of holding meetings and making decisions outside of public meetings, a spokesman for the board provided the following statement: "In compliance with PROMESA, at the Oversight Board's last public meeting held January 28, 2017 in Puerto Rico, the Oversight Board passed a resolution authorizing it to handle in executive session matters that arise prior to the next public meeting."
Commenting on the board's behavior, AllianceBernstein director of municipal credit research Joseph Rosenblum said, "My opinion is that the more transparency there is, the more comfortable traditional muni buyers will feel about the issues under discussion and the process. I do appreciate that there are some issues that need to be addressed in more privacy."
Chapman Strategic Advisors James Spiotto said, "You want the process to be transparent because you are trying to bring people together at the end of the day." If different parties are fighting against each other, things won't get things done, he continued.
"We just feel the meetings and the meeting practices just show a disregard about the right of the public to know about the future of its country," said Julio L-pez Varona, spokesman for Hedge Clippers on Puerto Rico. At the end of the day Puerto Rico is a democracy, he added.
The Puerto Rican people should be part of the meeting decision-making, through comments, and not just spectators, as has been the case, L-pez Varona said. The meetings have been in New York City or at a fancy resort in a corner of Puerto Rico, he said, isolated from the people affected by the decisions.
THE D.C. MODEL
The PROMESA board was modeled on the Washington, D.C., control board that oversaw the capital's city government from 1995 to 2001. The experience of the Washington board provides a practical comparison but not a legal comparison because different open meeting laws cover the Puerto Rico and Washington boards.
When the Washington board was founded it usually met more than once a week in public meetings, said board member Daniel Rezneck. It met much more in private meetings and put in well more than 40 hours a week in its early months in private or public meetings. The board met nearly every day, he said.
The board made sure that whenever it took an action, the action was taken at a public meeting, Rezneck said.
The board was defined as outside of the Washington government, Rezneck said.
Alice Rivlin, who joined the Washington board three years after its founding, said, "at least under my chairmanship [the board] tried very hard to get public input and to keep in touch with communities in all parts of the city. I held town hall-style meetings in all eight wards when I first took over."
Rivlin said the board's statute required that certain kinds of decisions be made in public meetings. "The decision process actually took place in private…. Restoring fiscal responsibility involves hard decisions that affect stakeholders in the community. Those kinds of decisions cannot be made in the public eye."
The Puerto Rico board adopted bylaws allowing it to act through unanimous written consent outside of meetings. PROMESA doesn't mention this approach.
According to the board bylaws, the written communications associated with these decisions are supposed to be posted with minutes of the meetings. As of March 9 the only meeting minutes posted on the board's website were those for the first meeting, held on Sept. 30. These minutes didn't include any of the board members' written communications that had taken place between prior to the meeting.
