Slow arrival of Maria aid to Puerto Rico bodes ill for coronavirus support

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Even as House Speaker Nancy Pelosi is proposing $20 billion for U.S. territorial governments, Puerto Ricans are still waiting for the bulk of federally promised Hurricane Maria aid to arrive.

Maria, which hit in September 2017, was the most damaging hurricane on the island in nearly 90 years. Only a fraction of the federally approved Maria recovery money has been spent on the island.

In March, two-and-a-half years after the storm, blue tarps still cover many homes damaged by Hurricane Maria in San Juan, Puerto Rico.

Pelosi’s HEROES Act, H.R. 6800, would allocate $20 billion for territorial fiscal relief.

The $3 billion package is expected to clear the Democrat-controlled House Friday. Its prospects in the GOP-controlled Senate are doubtful.

Since Puerto Rico is by far the largest U.S. territory by population, it would likely get the bulk of the territorial relief.

The bill also calls for the U.S. Treasury to make a contribution to the territories’ earned income tax credit programs. Puerto Rico’s EITC pays out far more modest sums than does the U.S. program. The expansion would increase the payout, costing the U.S. Treasury $612 million annually.

The HEROES Act “appears to be an opening negotiating bid by the Democrats," said Evercore Director of Municipal Credit Research Howard Cure. "I assume that they are particularly serious about getting aid to state and local governments, which compromises about $875 billion of the $3 trillion. I don’t know if they will equally push for monies for tribal nations and territories — another $20 billion each. For the territories, this is where they are disadvantaged since they do not have direct voting representation in Washington to fight for their interests. Consequently, these monies may be sacrificed, to some extent, to help fund other priorities.”

The territory's experience after Maria is not an encouraging precedent.

According to the Puerto Rico Office of Recovery, Reconstruction, and Resilience, the federal government has “allocated” $49 billion in Hurricane Maria and Hurricane Irma aid to the island. Of this, only $15.3 billion has been “disbursed” to the island. In federal lingo “disbursed” means made available to the island. Even that smaller amount is not actually available because of Puerto Rico-specific federally mandated requirements that the government must go through before actually drawing the money.

“The fact that we are approaching the third anniversary of a natural disaster of historic proportions and the Trump administration has still not allowed the government of Puerto Rico to access all of the appropriated disaster funding is striking, but not surprising," Sen. Bob Menendez, D-N.J., told The Bond Buyer. “The funds allocated by Congress should have been disbursed months ago. Instead they are kept behind a wall of red tape from American citizens in Puerto Rico who are still recovering from the hurricane and are now facing the challenges of continuing earthquakes and the COVID-19 pandemic.”

The April 2019 fiscal plan from the Puerto Rico Oversight Board presumed that the federal disaster aid would stimulate the local economy. This was due to the large size of the spending relative to the economy and because the resulting improved capital stock would aid economic growth.

The board’s April 2019 fiscal plan projected that various federal programs would give the island government, authorities, and its residents $75 billion in hurricane aid through fiscal year 2032.

The failure to disburse federally promised Maria aid is just one issue layered on top of many for Puerto Rico, said Rosanna Torres, director of the Washington, D.C. office of the Center for a New Economy. Torres said that the island has had multiple crises: earthquakes, the 2017 hurricanes, leadership crises, electricity crises, its debt crisis, and the current coronavirus crisis.

All of these come at the tail end of 14 years of economic decline.

Sen. Robert Menendez, D-N.J., assailed the Trump administration for not releasing Hurricane Maria aid nearly three years after the storm.

Because the island has already been hit by these prior problems and is in a fragile position, it will suffer more from the current COVID-19 spread and virus-related lockdown of the economy, Torres said.

Whereas after the September 2017 hurricanes, national attention was on the island, during the COVID-19 pandemic the island’s voice is just one among many, she said.

In January the federal government set up an additional set of hurdles for Puerto Rico's government to overcome before it gets some of this money that has been formally “disbursed.” The Trump administration said it set up the conditions to avoid the misuse of funds.

While Torres said transparency is good, she said the new terms were “onerous” and more “punitive” then “effective.”

“Congress should attain to accelerate the spending of past and future dedications to Puerto Rico, but, just as importantly, to ensure that the money is spent on and by Puerto Ricans and Puerto Rican companies," said Municipal Market Analytics Partner Matt Fabian. "Paying mainland companies to work in Puerto Rico minimizes the economic value of federal dollars.”

Puerto Rico Office of Recovery, Reconstruction, and Resilience Executive Director Ottmar Chávez said the pace of approval of projects for permanent improvements has increased. In the first 18 months after Maria less than 100 permanent projects were approved. By comparison, the federal government approved in March 346 permanent projects and in April 490 permanent projects.

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Puerto Rico Commonwealth of Puerto Rico Puerto Rico Electric Power Authority Puerto Rico Highway & Transportation Authority Puerto Rico Sales Tax Financing Corp (COFINA) Puerto Rico Public Buildings Authority Puerto Rico Aqueduct & Sewer Authority PROMESA Coronavirus
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