Puerto Rico’s cash position was within 1% of budget two months after Hurricane Maria hammered the island.
Through Nov. 17 the government’s primary account was $8.8 million, or 0.74%, shy of the fiscal 2018 approved budget’s projection, according to a release from Puerto Rico’s Fiscal Agency and Financial Advisory Authority. Total cash position in the Treasury Single Account was $1.81 billion.
“It is not as bad as you would expect,” said Bond Buyer contributing editor John Hallacy.
Inflows were down 11.8% and expenditures were down 11.7% through Nov. 17, leaving the cash balance nearly at the budgeted level.
Puerto Rico has defaulted on most of more than $50 billion of debt, and its economy has contracted in 10 of the last 11 years. Its fiscal year started July 1. Hurricane Irma hit Sept. 6 and Maria hit Sept. 20, casting further doubt on its ability to repay bondholders
In email to The Bond Buyer, FAFAA attributed the minimal impact to its cash position to three factors.
First, prior to Maria the Act 154 levy on the profits of non-Puerto Rico companies operating in Puerto Rico and other corporate tax collections were higher than projected. Second, vendor disbursements have been lower than expected since the hurricane. “This variance is largely temporary and is primarily due to post-Maria operational constraints in posting and paying invoices,” the fiscal agency said.
Third, “Disaster related spending has been largely funded through Federal Emergency Management Agency advances and is primarily occurring at [the] Puerto Rico Electric Power Authority, Puerto Rico Aqueduct and Sewer Authority, and municipalities, outside of the scope of the [Puerto Rico government’s central] Treasury Single Account.”
Hallacy said one should be circumspect about the government’s cash flow numbers. Over time they may worsen due to the storms’ impacts.
So far Puerto Rico is postponing posting a $197 million “reconciliation adjustment” to its expenses. If it had been posted, the commonwealth’s cash position would be 11.3% worse than budget.
The reconciliation adjustment was supposed to be a reserve, according to the FAFAA release.
The adjustment is “a budgeted amount to account for potentially unrecorded expenditures,” FAFAA said in its email. “In the liquidity forecast it is spread evenly over the fiscal year. The potential utilization will be on a more irregular basis and will be the result of continued analysis of expenditures and disbursements.”