The Puerto Rico Aqueduct and Sewer Authority, seeking to fund safe drinking water projects amid the debt crisis, is trying to regain control of $188 million that's frozen at the island's Government Development Bank.
The money came in the form of low interest loans from the U.S. Environmental Protection Agency, with the Puerto Rico Environmental Quality Board and the Puerto Rico Department of Health acting as intermediaries. The EPA provides the loans through its Clean Water State Revolving Fund and Drinking Water State Revolving Fund.
The Puerto Rico Infrastructure Finance Authority is the fiscal agent for the board and department. PRIFA deposited the money at the Government Development Bank for Puerto Rico, according to EPA spokesman John Martin.
Over the last few months Puerto Rico's government generally and the GDB specifically have descended into a financial crisis. This summer Puerto Rico's government passed restrictions on withdrawals from the GDB. Withdrawals were only supposed to be allowed for funding essential services, as certified by the Puerto Rico Treasury and Office of Management and Budget.
In recent weeks the GDB has refused to release the money, which PRASA had planned to use for capital projects.
In mid-September there was a meeting at the Puerto Rico Governor's offices to discuss the matter, a government official told The Bond Buyer. In attendance were representatives of Gov. Alejandro García Padilla, the GDB, EPA, and Puerto Rico government agencies. Puerto Rico government officials explained Puerto Rico's and the GDB's liquidity problems, saying that all the GDB-held money is subject to the bank's withdrawal restrictions.
PRASA is seeking to have the $188 million released to it. In addition, it is seeking to have an EPA loan of $95 million, which the EPA has promised, disbursed. In the last year or two, the authority has postponed capital projects due to its inability to sell bonds.
In other PRASA financial news, the authority is seeking to securitize some or all of its $3.4 billion in debt, according to the El Vocero news website.
In July García Padilla signed into law a bill allowing the authority to set up a Corporation for the Revitalization of PRASA. PRASA expects the corporation to sell new debt to refund existing PRASA debt.
PRASA is taking steps to hold public hearings about a new charge on customer bills to pay off the securitized debts.
PRASA increased its water rates by 60% in the second half of 2013 with an aim to covering operating expenses, debt service, and providing reserves through June 30, 2017. At the time PRASA assumed it would be able to sell a bond to cover capital improvement expenses.
Because of Puerto Rico's financial troubles and, more recently, defaults, PRASA has been unable to sell a bond.
According to the El Vocero news website, PRASA intends to increase its water rates. A PRASA official and a spokeswoman didn't get back to The Bond Buyer to confirm or deny the report.
According to El Nuevo Día, on Tuesday PRASA president Alberto Lázaro attended the Puerto Rico federal court hearing concerning those accused of participating in a corruption scheme. Prosecutors claim that former Popular Democratic Party fundraiser Anaudi Hernández masterminded the scheme. According to prosecutors it involved at least nine others, including PRASA's former vice-president and her sister. The governor and a majority of legislators in both the Puerto Rico House and Senate are members of the PDP.
El Nuevo Día reported that Lázaro is expected to testify in the trial.
