Puerto Rico Board struggles with uncooperative local, federal governments

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With their authorization running out in seven weeks, the Puerto Rico Oversight Board’s members may feel they're caught between a rock and a hard place as they battle both the local and federal governments to move forward with their mission.

The board, formed under the Puerto Rico Oversight, Management, and Economic Stability Act, was wrangling on Monday with the territorial government over a fiscal 2020 budget draft that was due Friday and the appointment of a revitalization coordinator.

At the same time, they were operating under a deadline of May 16 to be reappointed or replaced, after a decision last month by the 1st Circuit Court for Appeals that their appointments were unconstitutional.

The court allowed the current board’s actions to stay under the de facto officer doctrine and the board members to continue to exercise their power until May 16. Six weeks after the decision, the Trump administration hasn’t made nominations to the board. The U.S. Treasury Department didn’t respond to a request for comment.

If President Donald Trump were to nominate a set of board members, the Senate Energy and Natural Resources Committee, chaired by Sen. Lisa Murkowski, R-Alaska, would consider them.

“Senator Murkowski is concerned about the implications of the ruling and as you may know, raised the issue during an Energy and Natural Resources Committee hearing back in February,” Murkowski spokeswoman Karina Borger said Friday. “Senator Murkowski looks forward to hearing from the administration on this issue.”

For its part, the board responded to a Bond Buyer inquiry by saying it would soon ask the U.S. Supreme Court to review the appeals court decision and ask for a stay of the 1st Circuit’s order.

Two litigants in the case, Aurelius Capital Management and Unión de Trabajadores de la Industria Eléctrica y Riego, made filings in the case on Thursday saying that they believe the court’s declaration that the board can operate as the board for 90 days is illegal.

“There is no longer any doubt that all actions undertaken by the invalid board after Feb. 15, 2019 are at risk of being invalidated,” Aurelius stated. “The board proceeds in this period at its peril, and so do those who rely on its actions.”

In mid-March Rep. Raúl Grijalva, D-Ariz., chairman of the U.S. House Natural Resources Committee, said he hoped to change PROMESA. The board hasn’t taken a position on this effort.

While the board hasn’t made any open moves regarding the impending federal government and court actions on it, it has been actively struggling with the local government.

The board had told Gov. Ricardo Rosselló he had until Friday to submit a revised fiscal plan and proposed fiscal year 2020 budget. He missed the deadline.

On Monday the board released a letter to the governor and Puerto Rico legislative leaders in which the board extended the deadlines for these things to 9 a.m. Wednesday. The board sent the letter on Friday, in response to a request by Treasury Secretary Raúl Maldonado Gautier for the extensions.

“The Oversight Board has already agreed to two extensions to the fiscal plan and budget timeline,” board Executive Director Natalie Jaresko wrote. “We must reiterate the limited flexibility that remains in the fiscal plan and budget timeline in order to ensure a certified commonwealth budget by June 20, 2019.”

The board is also wrangling with the Rosselló administration over the now-vacant position of revitalization coordinator, found in Title V of PROMESA. The previous holder of this position, Noel Zamot, left the position on March 15.

The board declared that Jaresko would continue in the position on an interim basis while it searched for job candidates. On Monday morning, Puerto Rico Fiscal Agency and Financial Advisory Authority Christian Sobrino Vega released a letter that said, “PROMESA does not contemplate nor allow for interim revitalization coordinators. Therefore, our position is that such designation of Ms. Jaresko has no authority, no consequence, and no validity of any kind whatsoever.”

On Monday afternoon the board released a statement: “The Oversight Board’s Executive Director Natalie Jaresko serves as interim revitalization coordinator so the work to encourage investors to participate in the Title V process does not stop.”

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