Puerto Rico’s Fiscal Decline and Recovery Effort: A Timeline

2020

December 15 — Antonio Medina Comas appointed as a board member of the FOMB: According to news articles, Medina Comas served as Executive Director to the Puerto Rico Industrial Development Company from 2012 to 2016. He spent 20 years at pharmaceutical company Merck Sharp & Dohme.

December 10 — Puerto Rico’s water utility PRASA issues $1.37 billion in refunding bonds: Executive Director Omar Marrero called the bond issuance one of the biggest financial achievements since the enactment of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), “as it demonstrates that PRASA has been able to regain market confidence and market access at reasonable rates.” Through the “successful pricing of the bond deal, PRASA achieves average debt service savings of almost $13 million per year, that will be used to reduce existing operating deficits or funding capital expenditures,” a PRASA official said.

December 8 — President Trump names three FOMB members: The President named former Utah and Michigan budget director John Nixon and New York educator Betty Rosa as board members of the FOMB. Additionally, Trump reappointed pension specialist Andrew Biggs to the FOMB, a position he has held since the FOMB was created in 2016.

December 2 — Governor elect Pierlusi announces cabinet picks: Puerto Rico Governor-elect Pedro Pierluisi announced he would retain the current directors of the Treasury Department and Fiscal Agency and Financial Advisory Authority. Omar Marrero will remain executive director of FAFAA. Francisco Parés will remain secretary of the Treasury. Pierluisi nominated Larry Seilhamer as secretary of State, Domingo Emanuelli to lead the Department of Justice, Manuel Cidre to head the Department of Economic Development and Commerce (DDEC by its Spanish initials), Domingo Emanuelli as Justice secretary and Elba Aponte as Education secretary.

November 18 — Puerto Rico government unveils $135M Aguadilla airport runway project: Puerto Rico government officials announced the $135 million construction project of a new runway at the Rafael Hernández International Airport in Aguadilla. The five-year project will be financed with federal grants and the Puerto Rico Ports Authority’s own funds, making it the largest infrastructure project in Puerto Rico and the Caribbean, Gov. Wanda Vázquez said.

November 7 — Pedro Pierluisi wins gubernatorial race in Puerto Rico: Pedro Pierluisi of Puerto Rico’s pro-statehood New Progressive Party won a majority of votes and is declared the winner of the governor’s race, according to official preliminary results.

November 3 — In the November 3rd referendum, statehood approved by voters: In the November 3rd referendum, Puerto Rico voters approved by a slim margin moving ahead with statehood.

October 22 — Puerto Rico government earmarks $400M to expand broadband to unserved areas: The Puerto Rico government announced that it would allocate $400 million during Fiscal 2021 to support expansion efforts in unserved and underserved areas and outside the metropolitan area through grants that fund a portion of broadband deployment costs in these communities.

October 7 — Justin Peterson appointed as a board member of the FOMB: President Trump appoints Justin Peterson to the FOMB, filling one of the positions left empty.

October 5 — FOMB Chairman José Carrión’s last day serving on the FOMB: Mr. Carrion is the third FOMB member to depart the FOMB, leaving only four serving members and Natalie Jaresko, the Executive Director. The four remaining serving members all serve on the FOMB’s Special Claims Committee, responsible for the FOMB’s debt “invalidation” attempts and lawsuits directed at bondholders, government suppliers and other individuals or entities.

September 29 — PRHFA and PHA refinance $300 million of bonds: The Puerto Rico Housing Financing Authority (PRHFA) and the Public Housing Administration (PHA) refinanced existing HFA bonds, generating approximately $43 million in debt service savings, according to the island’s Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym). Through accessing the capital markets, Aafaf Executive Director Omar J. Marrero Díaz explained in a news release that the outstanding bonds were refinanced through the issuance of $249.6 million in Capital Fund Modernization Program refunding bonds.

September 18 — President Trump announces the release of $13 billion in long-awaited federal disaster aid to Puerto Rico: According to reports, the aid includes $9.6 billion for PREPA to repair and rebuild the electrical grid and $2 billion for the Puerto Rico Department of Education to rehabilitate schools and other educational facilities. President Trump described the $13 billion as “the largest emergency relief award in history to rebuild Puerto Rico’s electrical grid and educational system.” He also said he would work to “rebuild” or otherwise augment the island’s pharmaceutical manufacturing industry.

September 4 – Using 2% of CDBG-DR funds shows Puerto Rico govt’s slow spending: Reports surface that of the Community Development Block Grant Disaster Recovery program (CDBG-DR) money available, the Puerto Rico government used only 2% of it as of June 30, the end of its 2020 fiscal year. Of the $20.2 billion recovery funds granted to Puerto Rico after Hurricane María through the CDBG-DR program, Puerto Rico had been approved to use 16% of those funds so far, or $3.2 billion (of which as of June 30 the Puerto Rico government had used 2%).

September 4 – New PREPA executive director nominated: Governor Wanda Vázquez nominated Efran Paredes Maisonet to be the new executive director of the Puerto Rico Electric Power Authority. The governor made the nomination to the authority’s board of directors, which normally approves the governor’s nomination. Paredes Maisonet has been serving as interim executive director since José Ortiz resigned as executive director.

September 1 – Government of Puerto Rico notifies Congress that it has not used $1 billion in available Medicaid funds: In a letter dated September 1, Governor Wanda Vázquez notified the leadership of Congress that at the end of the federal fiscal year on September 30, 2020, the government of Puerto Rico will not have used $1 billion in Medicaid funds dispersed to it, or about a third of the $2.9 billion it had been allocated.

August 31 – José Ramón González and Carlos Garcia leave the Oversight Board: A search for replacements is underway as the Oversight Board starts September down two members and with a third member, Chairman Carrión, leaving on October 5th.

August 31 – Puerto Rico government releases financial audited statements for fiscal year 2017, several years overdue: The administration of Governor Wanda Vázquez releases the Commonwealth’s comprehensive annual financial report (CAFR) for fiscal year 2017. The FOMB has pointed out numerous times that best practices call for audited financial statements to be published no later than 180 days after the end of each fiscal year (the government published it nearly three years past the date when audited financial reports are generally expected to be released).

August 24 – Gubernatorial candidate Pedro Pierlusi calls statehood for Puerto Rico a top priority; calls for a finalization of the debt restructuring: Mr. Pierluisi, whose party is pro-statehood, states in his remarks “What we need from the government of Puerto Rico is for people to be able to improve their quality of life. And that’s what I’ll bring to the table. Our goal is to be treated equally as American citizens; my goal is to have a permanent relationship with the U.S., have an effective relationship with the federal government for the well-being of our people” adding “Something that I will be doing is encouraging the board to finalize the pending debt restructuring that we have at the central government level….PROMESA says that once the debt of the central government is restructured and once we show the government of Puerto Rico has been operating on a balanced budget basis for four years and we gain adequate access to the market, the board must leave our island.” A day later, two New York congresswomen introduce legislation concerning the statehood status of Puerto Rico.

August 16 – Voters conclude voting in the gubernatorial primaries; Wanda Vázquez loses to Pedro Pierluisi: The current Governor, Wanda Vázquez, loses decisively in her primary to Pedro Pierluisi. Mr. Pierluisi served as Secretary of Justice of Puerto Rico in the 1990s as well as Resident Commissioner of Puerto Rico between 2009–2017. Isabela Mayor Carlos Delgado won the Popular Democratic Party (PPD) candidacy for governor easily defeating Senator Eduardo Bhatia and San Juan Mayor Carmen Yulín Cruz.

August 9 — Primary voting is halted after ballots fail to reach polling places: A “botched” primary election day results in a flurry of lawsuits after officials are forced to partially suspend primary voting due to a lack of available voting ballots. The new voting date is set for August 16th.

August 5 — José Ortiz resigns as Executive Director of PREPA: Mr. Ortiz abruptly announced his resignation after a flap with the electricity union amid allegations that blackouts on the island had been the result of deliberate “sabotage”.

August 4 — FOMB Presents Report on Manufacturing Opportunities for Puerto Rico: The report, prepared by Boston Consulting Group, “represents a short and focused assessment of how Puerto Rico can best position itself to attract biopharmaceutical and medical device manufacturing companies in the face of COVID-19 and potential federal legislative action” (the BCG report, BCG presentation and FOMB Board Meeting are available here). Puerto Rico exported over $40 billion in biopharma products in 2019, including over $30 billion to the mainland U.S., more than twice the value of any foreign country or U.S. state. It exported about $3 billion in medical technology products.

August 4 — José Ramón González resigns from the FOMB effective August 31st, marking the third FOMB member to announce their resignation: In handing in his resignation, Mr. González remarked “Unfortunately, I have to say that the biggest obstacle in making Promesa work has in fact been the failure of Puerto Rico’s governments in the last four years to understand that this has to be a collaborative process, not a contentious, adversarial process” and also criticized the government’s “penchant for unnecessary litigation.” Mr. Gonzalez also added “You cannot have a serious discussion about fiscal equilibrium and sustainability if you don’t have audited financial statements for the commonwealth” calling this “a major unachieved objective,” which he stressed is “a requirement to leave Promesa” and allow Puerto Rico back into the capital markets for needed financing for key infrastructure projects.

July 20 — Puerto Rico governor, others face formal corruption probe: The U.S. territory’s Special Independent Prosecutor’s Panel agreed to probe the allegations against Gov. Wanda Vázquez and others following a referral from the island’s Department of Justice that ended with two justice secretaries stepping down earlier in July and led to calls for impeachment against the governor.

July 2 — Oversight Board Executive Director Natalie Jarekso calls on Puerto Rico government to produce Comprehensive Annual Financial Reports (“CAFRS”): In testimony before Congress, Ms. Jaresko stated “For years, the issuance of the Commonwealth of Puerto Rico’s audited financial statements, better known as the Comprehensive Annual Financial Reports or “CAFRs”, has been delayed. Most notably the FY2015 and FY2016 CAFRs were both issued and published over 1,000 days after each fiscal year ended. The FY2017, FY2018, and FY2019 CAFRs have yet to be issued as of this date. Despite best practices calling for audited financial statements to be published no later than 180 days after the end of each fiscal year, today is day 1097 for the FY17, day 732 for the FY18 and day 367 for the FY19… Completion of the Commonwealth of Puerto Rico’s audited financial statements is a top priority to FOMB and at the core of PROMESA’s objectives for the benefit of the people of Puerto Rico.”

July 1 — FOMB Chairman José Carrión and FOMB member Carlos Garcia jointly announce their resignations from the FOMB: Chairman Carrión announces that his resignation from the FOMB is effective October 5, 2020 and FOMB member Carlos Garcia announces his resignation is effective August 31, 2020. PROMESA calls for the White House and leadership in Congress to vet and appoint new members.

June 29 — FOMB releases latest certified PREPA fiscal plan along with HTA, PRASA and other fiscal plans: In the latest certified PREPA fiscal plan, the FOMB states that “Puerto Rico’s aging, inefficient, and unreliable generation fleet must be urgently replaced and modernized in order to reduce outages and generation costs” while also maintaining that exiting Title III proceedings and debt restructuring are “imperative” if PREPA is to “begin building the infrastructure for a modern, resilient, and reliable energy system”. Moreover, the Oversight Board noted that “as long as PREPA remains in Title III [bankruptcy proceedings], the utility will not have effective access to capital markets to fund critical grid modernization and improvement plans.”

June 29 — FOMB releases “Infrastructure Fiscal Plan” in connection with its certification of the PREPA, PRASA and HTA Fiscal Plans: In its press release, the FOMB’s Executive Director is quoted as saying “Electricity, roads, and water are essential for every resident, and neglect of those essential elements has negatively affected everyday life in Puerto Rico for years, if not decades. All three elements require major improvements, all three areas need substantial new investments to reflect the needs of the people and businesses of Puerto Rico today, and all three authorities need to ensure that their finances are stable. To succeed in these goals, all three entities need to make major changes to the way they do business.”

June 28 — Three year anniversary of the FOMB rejection of the first PREPA Restructuring Agreement: The FOMB in a closed meeting back in June 2017 rejected the debt restructuring support agreement (RSA) for the Electric Power Authority (PREPA), which had been approved by the islands’ elected leaders. Rob Bishop (R-UT), then Chairman of the U.S. House of Representatives Committee on Natural Resources which has jurisdiction over PROMESA and other territory matters, argued in a letter that the PROMESA had approved the RSA, requiring the Board to treat it as a voluntary debt restructuring agreement under Title VI of the law.

June 22 — FOMB announces approved contract with LUMA Energy as operator of PREPA’s Transmission and Distribution System: In a FOMB press release, the FOMB states that LUMA Energy will “help the transformation of PREPA into a modern power company able to deliver reliable, clean, and more affordable electricity to Puerto Rico’s households and businesses” adding “This transformation is important to every individual, every business and every potential investor….Puerto Rico deserves manufacturing and the service industry jobs created by investors who don’t turn away because its electric power system is unreliable and antiquated.”

June 1 — U.S. Supreme Court settles controversy over the FOMB members’ appointments; attention now turns to the fact that their three-year terms ended in August 2019: The U.S. Supreme Court unanimously rules that members of the FOMB do not require U.S. Senate approval because the board’s handling of the island’s bankruptcy is limited to Puerto Rico’s fiscal issues and it only exercises local, territorial authority.

May 31 — The Puerto Rico Energy Bureau (PREB) approves a 19% decrease in electricity bills from the current 21.59 cents per kilowatt hour to 17.46 cents per kilowatt hour: The announcement by the Governor and PREB came at the official June 1st start of hurricane season and at a time when PREB’s energy transformation plan called for at least $20 billion in energy infrastructure investment over 10 years. By comparison, the new Puerto Rico electricity rates made its rates roughly half that of Hawaii’s and around the average rates paid in the state of New York.

May 3 — Three year anniversary of the Commonwealth of Puerto Rico declaring bankruptcy: The FOMB, whose members touted municipal bankruptcy as an efficient and prudent means of helping municipalities through difficult times, instead presided over a costly legal morass – to the tune of hundreds of millions of dollars in legal expenses borne by the taxpayers.

March 28 — FOMB asks court to pause PREPA Restructuring Support Agreement (RSA) hearings: The FOMB files a court motion to suspend all hearing and briefing deadlines for PREPA’s RSA, the agreement intended to resolve the electric utility’s debt. A agreement had been announced by the FOMB in mid-2019 and had garnered over 90% of support from the utility’s bondholders.

2019

August 7 — Wanda Vazquez Sworn in as Governor after Puerto Rico Supreme Court Unanimously Rules that Pedro Pierluisi Sworn in Unconstitutionally: Ms. Vazquez, the former secretary of justice, takes the oath as governor, making her the third governor of Puerto Rico in under a week.

August 2 — Ricardo Rosselló Resigns as Governor, Naming Pedro Pierluisi as His Successor.

July 10 — Federal Agents Arrest the Former Executive Director of the Health Insurance Administration (ASES), Ángela Ávila, Former Secretary of Education Julia Keleher and the President of the Accounting Firm BDO Puerto Rico, Fernando Scherrer: The FBI arrested the above individuals in connection with contracts awarded in the Department of Education, the Department of the Treasury and the Health Insurance Administration, among other charges.

July 2 — Puerto Rico Government Tops $14 Billion in its Bank Accounts: The Government of Puerto Rico reports that as of 5/31/19 it has $14.0 billion in its bank accounts.

July 1 — Fallout from the FOMB’s G.O. Bond Invalidation Attempts Continues Within the $3.8 Trillion U.S. Bond Market as Other Actors Develop Similar Tactics: A New York-based hedge fund, Warlander Asset Management LP, and John Tillman, the head of conservative think tank Illinois Policy Institute, sue the Governor of Illinois J.B. Pritzker and other government officials claiming $16 billion of Illinois general obligation debt is “unconstitutional and unenforceable”.

July 1 — The FOMB certifies the $27 Billion Fiscal Year 2020 Budget for the Commonwealth of Puerto Rico.

June 28 — Acting Treasury Secretary Francisco Parés releases statement on FOMB’s incorrect revenue projections: The Acting Treasury Secretary Francisco Parés releases a statement that if the Puerto Rico Government closes the fiscal year on June 30th with an anticipated $11.3 billion in net General Fund revenue, “this would represent $2.84 billion over the original budget projection made by the Board on June 29, 2018, and $593 million over” the FOMB’s May 9, 2019 Fiscal Plan projection.

June 28 — Puerto Rico Treasury Dept. collects $922 million in May, a New May Record: The $21 million year-over-year increase, which exceeded projections for the month by $153 million, was the third time in the first five months of 2019 that revenue has exceeded FOMB projections.

June 27 — FOMB Certifies the Latest PREPA Fiscal Plan, Calls for Execution of Restructuring Support Agreement (RSA): In its plan, the FOMB states, “Restructuring PREPA’s legacy debt obligations…will pave the way for a resilient, reliable, and affordable energy system” and the RSA PREPA negotiated with creditors would provide for “substantial savings in the recovery of legacy costs associated with the financing of Puerto Rico’s electric infrastructure.”

June 24 — A Wave of Sudden Personnel Departures From the Rosselló Administration Coincides with FBI Investigation: Treasury Secretary Raúl Maldonado Gautier and other top officials abruptly exit the Rosselló Administration, leading the FBI’s Puerto Rico office to publicly state “we have received extensive information about contracts that do not serve the people and probably serve the interests of other people” in reference to Puerto Rico government contracts that show a pattern of undue influence and money laundering.

June 20 — House Energy & Commerce Committee Hold Hearing on Medicaid Funding Cliff in the U.S. Territories: In Energy and Commerce Chairman Frank Pallone, Jr.’s opening remarks, he says that “the federal funding shortfall means most of the territories aren’t able to provide the full range of benefits that state Medicaid programs are required to cover” and that “the territories are on the verge of a financial and humanitarian crisis”.

June 19 — Questions Swirl Around the FOMB’s Accounting Methodology for Commonwealth Pension Obligations: In a statement about the planned support agreement for Commonwealth debt announced June 16th, the Executive Director of the FOMB referred to pension obligations as $55 billion, leading certain parties to seek full discovery in court as to the methodology and accounting behind that claim. The May 9th New Fiscal Plan certified by the FOMB listed pension liabilities at $50 billion.

June 18 — President Trump sends to the U.S. Senate his nominations for the existing FOMB members to finish out their terms ending in August 2019: Previously, FOMB appointments had not been confirmed by the U.S. Senate. The U.S. Supreme Court agreed to hear arguments scheduled for the fall of 2019 as to the validity of the current FOMB appointments and their actions.

June 5 — Air Travel to Puerto Rico Highest in 8 Years: Citing reports by hotel industry and lodging trackers, Discover Puerto Rico reports that January through April 2019 occupancy spending reached $374 million, the highest in the past 8 years, or a 12% increase when compared with pre-hurricane Maria levels in 2017.

June 5 — Puerto Rico’s Fee Examiner Calls for Increased Review and Curbing of the Commonwealth’s Litigation Spending: The fee examiner in the Puerto Rico debt restructuring, Brady Williamson, calls on the U.S. District Court to approve certain presumptive standards that would help curb the increasing spending on litigation related to the Commonwealth’s debt restructuring proceedings. The number of firms subject to review has grown to 50 firms and the total fees and expenses submitted for review has grown beyond $400 million.

June 3 — FOMB Allocates $411 Million to Legal Fees & Financial Advice Over 2 Year-Period: The FOMB submits a budget to the Legislative Assembly for the upcoming fiscal year (2020) that includes a $175 million package for legal and financial advisory expenses associated with the litigation of the Puerto Rico bankruptcy cases ($175 million is roughly what Detroit, Michigan spent during its entire 17-month bankruptcy and debt restructuring process). In total, the current fiscal year and forthcoming fiscal year will total $411 million in budgeted legal fees and financial advice.

June 3 — $175 Million in Legal and Financial Advisory Fees for FY 2020 Absorbs Over 10% of Puerto Rico’s Annual Tax Receipts: It is estimated that the $175 million legal and financial advisory fees for fiscal year 2020 (mostly going to the FOMB’s operations and advisory services) is equivalent to 10% of the annual revenue on income tax, 13% of the Sales & Use Tax (SUT) and approx. the amount that is annually received for the beer tax.

June 3 — $19.1 Billion Disaster Relief Act Passed: The U.S. Congress passes the $19.1 billion dollar Disaster Relief Act (later signed into law by the President), which includes $1.4 billion for Puerto Rico. The legislation includes more than $900 million for Puerto Rico’s recovery from 2017’s Hurricane Maria, including $600 million in emergency disaster food assistance. The package also expedites the release of $8.9 billion already approved by Congress for Puerto Rico disaster relief.

June — Federal Probe Announced of Puerto Rico’s Primary Electrical Grid Contractor: According to The Wall Street Journal, the Department of Homeland Security’s Inspector General and the Federal Bureau of Investigation (FBI) open an investigation into the work of Mammoth Energy Services that was granted $1.85 billion in contracts with the Puerto Rico Electric Power Authority to restore power.

May 31 — Report Shows Puerto Rico has Nearly $14 Billion in its Bank Accounts: The Government of Puerto Rico announces it has $13.7 billion in its bank accounts as of 4/30/19, 47% more than anticipated.

May 31 — Continued Fall-Out from First Circuit HTA Special Revenue Decision: Ratings agency Moody’s Investors Service downgrades Illinois State Toll Highway Authority to A1 due to the First Circuit Court of Appeals ruling in the Puerto Rico Highway & Transportation (HTA) case that special revenue debt service payments are optional rather than mandatory during the pendency of bankruptcy proceedings.

May 28 — FOMB Fiscal Plan Projects $1.5 Billion General Fund Surplus for Fiscal Year 2020: The FOMB holds a press conference in which it says that the Puerto Rico Government’s $9.1 billion budget contains spending levels that would allow the government to resume paying debt service. However, the FOMB’s certified Fiscal Plan did not contain any allocation for debt service payments.

May 20 — FOMB Sues to Claw Back $392 Million in ERS Payments: The FOMB files a lawsuit to claw back $392 million in Employees Retirement System bond payments (interest and principal) from bondholders who own at least $2.5 million in bonds, arguing that the Puerto Rico Government shouldn’t have to pay for what the board purports are “illegally issued bonds.”

May 9 — The FOMB Certifies the Latest Fiscal Plan for the Commonwealth; 3rd in 2 years: The FOMB’s 2019 Fiscal Plan shows nearly a $14 billion surplus by 2024 and economic growth of 4% for Fiscal Year 2019.

May 2 — FOMB’s Executive Director Testifies to Congress It’s Not FOMB’s Job to Define Essential Services: In testimony before the U.S. House of Representatives Natural Resources Committee, the Executive Director of the FOMB when asked about PROMESA’s key tenet of ensuring the funding of essential public services refused to define such essential services, citing that the FOMB’s lawyers’ interpretation of PROMESA indicates that it isn’t a requirement to do so.

May — FOMB Seeks to Recover $4.2 Billion Paid to Government Contractors Pre-Hurricane Maria: FOMB’s Special Claims Committee, together with the Official Committee of Unsecured Creditors (UCC), files claims against approx. 250 vendors to recover $4.2 billion in payments made by the Commonwealth of Puerto Rico, the HTA and the Employees Retirement System, citing as a reason contract invalidity or mismatching payments.

May — FOMB Sues to Claw Back Bond Payments and Fees: Ahead of a looming May 2nd deadline, the FOMB filed suits against hundreds of investors and public finance firms to claw back more than $1 billion in payments and fees on bonds issued since as early as 2004, making a variety of legal arguments for the clawbacks, some connected with its claim that the Puerto Rico Government exceeded its constitutional debt limit in sales of general obligation and Public Building Authority bonds. Some experts from the municipal bond industry warn that efforts to claw back bond payments sets a bad precedent.

April 1 — Report Shows Puerto Rico has Nearly $12 billion in its Bank Accounts: The Government of Puerto Rico’s “Summary of Bank Account Balances for the Government of Puerto Rico and its Instrumentalities” is published, in which it shows that the Government has an account balance of $11.8 billion dollars.

March 28 — U.S. Congress Considers Puerto Rico Statehood Admission Act: U.S. Rep. Darren Soto (D-Fla.) and U.S. Rep Jenniffer González (R-PR) introduced the Puerto Rico Admission Act bill, which seeks granting the island statehood. U.S. lawmakers from both parties attended the press conference to reveal the measure. Democratic Reps. Ruben Gallego, (D-Ariz.) and Don Young (R-Alaska) joined Soto, González and Gov. Ricardo Rosselló.

March 26 — First Circuit Court of Appeals Rejects Notion that Municipalities are Required to Make Payments on Debt Secured by Special Revenues During Bankruptcy: The First Circuit Court of Appeals determined that municipalities are not required to make payments on debt secured by special revenues during bankruptcy proceedings, although they can voluntarily decide to do so. Fitch Ratings announced that if the ruling stands, it could negatively affect ratings on certain bonds secured by utility, transportation and tax revenue.

March 1 — Community-Development Block Grant-Disaster Recovery Funds Approved for Release to Puerto Rico: The U.S. Department of Housing and Urban Development (HUD) announces approval for the use of $8.2 billion in Community-Development Block Grant-Disaster Recovery (CDBG-DR) funds in Puerto Rico, stating that the approval carries strict fiscal controls given fiscal irregularities in the past, and monitoring of expenditures to ensure the island’s government uses the funds prudently and in accordance with the law. On February 2, 2019, HUD had authorized the disbursement of $1.5 billion approved through a first Action Plan of the CDBG-DR program funds.

February 15 — FOMB Members’ Appointments Ruled Unconstitutional by the First Circuit Court of Appeals: The First Circuit Court of Appeals rules that the FOMB members’ appointments are unconstitutional, and a deadline of May 16th imposed for the seven voting members to be reappointed or replaced. The Oversight Board responds that it plans to appeal that decision to the U.S. Supreme Court.

February 13 — Noel Zamot, Revitalization Coordinator, Tenders his Resignation: Noel Zamot, who had been appointed as Revitalization Coordinator, submitted his resignation, effective March 15. According to Zamot, Puerto Rico lost out on a least $3 billion in infrastructure projects when the FOMB put out new guidelines changing the rules for bidders midstream.

February 12 — COFINA Restructuring Deal: The Puerto Rico Sales Tax Financing Corp. (COFINA) swapped new bonds for previously issued ones in the biggest municipal debt restructuring in U.S. history. The ~$17.6 billion in COFINA bond par value became about $12 billion in new COFINA bond value, saving the Puerto Government billions.

January 14 — FOMB Seeks to Declare $6 Billion of Puerto Rico General Obligation Debt Null and Void: The FOMB and the Official Committee of Unsecured Creditors seek to “annul” $6 billion in general-obligation (GO) debt from 2012 and 2014 because it allegedly violates constitutional debt limits, even though, in the offering documents at the time the bonds were issued the Commonwealth represented the bonds were in compliance with the debt limit.

2018

November — First Restructuring of Puerto Rico Debt Post-Bankruptcy Filing (Government Development Bank Debt Restructuring): Puerto Rico’s Government Development Bank (GDB) announces the exchange of its bonds for $2.6 billion of new securities, after restructuring about $4 billion of GDB debt. The debt swap is a first for the island after its 2017 bankruptcy filing.

October 23 — In Latest Certified Fiscal Plan, FOMB Projects Large Puerto Rico Government Surpluses: In the 10/23/19 FOMB certified Fiscal Plan for the Commonwealth of Puerto Rico, the plan projects a $6.33 billion government surplus available from fiscal year 2018 to fiscal year 2019 even after paying debt service. The plan projects that the government will have a surplus of $17 billion through 2023. The plan unrealistically forecasts 10% of Medicaid funding for the island in the second half of the fiscal plan period based on the argument that the U.S. Congress has yet to approve funding for those later years.

August — Puerto Rico’s Economy Continues to Recover; Better-Than-Expected Sales-Tax Revenues Reported: Puerto Rico’s economic recovery continued to gain steam, with seven straight months of improvement in the Government Development Bank’s (GDB) Economic Activity Index (EAI) as well as better-than-expected sales-tax revenues.

August 8 — U.S. Appeals Court Rules that Creditors of PREPA Are Not Barred From Seeking Stay Relief: The U.S. Court of Appeals for the First Circuit vacated a lower court ruling denying a request for relief from the automatic stay, upholding Puerto Rico Electric Power Authority (PREPA) bondholders and bond insurers’ rights to obtain relief from the bankruptcy stay, so that they can seek placement of the utility into receivership.

August 7 — Title III Court Rules That the Oversight Board Can Make Binding Policy Choices through Fiscal Plans and Budgets: Judge Laura Taylor Swain, overseeing the Commonwealth’s Title III bankruptcy case, rules that PROMESA allows the Oversight Board to make binding policy choices for the Commonwealth through its powers relating to fiscal plans and budgets, notwithstanding the objections of the island’s government.

July 5 — External Auditors Unable to Verify PR Financial Statements: The Puerto Rico government submitted its consolidated fiscal year 2014-2015 financial statement years past deadline. External auditors could not verify that the information provided in the document was reliable.

May 31 — Emergency Aid Approved: The Federal Transit Administration announces plans to allocate $223.5 million of emergency relief funds to Puerto Rico public transportation systems. Separately, FEMA awards nearly $220 million in grants to the Puerto Rico government and municipalities, out of $2.2 billion its Public Assistance program has obligated to the island.

May 30 — $6.1b Surplus Estimated: FOMB certifies another revised six-year fiscal plan that reduces the projected pre-debt surplus to $6.1 billion.

May 23 — Fiscal Plan Challenged in Court: Complaint challenging legality of the fiscal plan, re-filed by Assured Guaranty, cites violations of PROMESA and the U.S. Constitution, including failure to distinguish essential and nonessential expenses, disrespecting lawful debt priorities and liens, allowing agency funds to be diverted to other agencies or the Commonwealth, and failing to comply with the U.S. Constitution’s contracts, takings, and due process clauses.

May 20 — FOMB Waives Labor Provisions in Fiscal Plan: FOMB agrees to waive the provisions in the certified Fiscal Plan, calling for the abolition of the government-mandated, year-end bonus and reduction of the island’s mandatory 27 days of vacation and sick leave, provided that Puerto Rico repeals its law prohibiting employers from laying off employees without cause.

May 16 — Cash Projection Up 7%: Puerto Rico discloses cash position 7% ahead of projections made before Hurricane Maria.

May 13 — FOMB Rejects GO/COFINA Bondholders Agreement: Groups representing holders of general obligation and COFINA bonds agree on division of sales tax revenue and submit plan to FOMB, which rejects it immediately.

May 11 — FOMB Rejects Proposed Budget: FOMB rejects Commonwealth’s proposed budget as inconsistent with fiscal plan. The budget provides nothing for debt service despite $6.7 billion of debt payment ability in the certified fiscal plan through 2023; the budget also includes expenditures not authorized in the fiscal plan, reflecting the Governor’s refusal to implement pension and labor reforms required by the FOMB.

May 9 — History of Systemic “Financial Malpractice” Identified: GAO releases report that Chairman Bishop praises for “identifying the systematic financial malpractice of the Puerto Rico government over the past half century”.

April 30 — Disaster Aid Approved: U.S. Department of Education announces disaster assistance, including $589 million for Puerto Rico schools.

April 19 — FOMB Fiscal Plan Approved, Gives Billions to Litigation: FOMB imposes and approves its own Revised Fiscal Plan, under which the Commonwealth is projected to have a surplus after six years and sufficient cash flow to pay for essential public services and constitutionally guaranteed debt payment; in spite of this, the plan allocates billions for litigation to defend debt extinguishment instead of negotiating with creditors for a consensual restructuring.

April 5 — Commonwealth Disregards FOMB Requests: The Puerto Rican government submits another revised Fiscal Plan, which disregards FOMB requests for pension and labor reforms.

March 29 — Chairman Bishop Frustrated with FOMB Failures: In letter to FOMB, Chairman Bishop, whose House Natural Resources Committee developed PROMESA, reiterates his frustration with the board’s lack of creditor engagement and failure to mandate reforms to achieve PROMESA’s dual purpose of establishing fiscal responsibility and restoring capital market access.

January 22 — Governor Proposes PREPA Privatization: Governor Rosselló announces intention to privatize PREPA.

January 9 — Cash Balances Delay FEMA Funds: Citing significant cash balances in Puerto Rico accounts, FEMA says it will delay release of emergency funds.

January 6 — Feds Seize PREPA Equipment: FEMA and armed federal agents discover and seize critical equipment which PREPA was warehousing rather than making it available for power restoration.

2017

December 20, 2017 – March 28, 2018 — Six Versions of Fiscal Plan Omit Debt Payments: The Commonwealth submits six iterations of a fiscal plan, each rejected by the FOMB; each iteration indicates the availability of greater resources for paying the debts but makes no allocation for making debt payments.

December 22 — 12.5% Foreign Import Tax Imposed: Federal tax law enacted, imposing on Puerto Rico companies a 12.5% “foreign import” tax on intangible asset income, a critical source of income for the pharmaceutical and medical device sectors.

December 18 — $5 Billion in Extra Cash Leads to Transparency Questions: Puerto Rico discloses $5 billion more in cash than it had disclosed three weeks earlier, furthering evidence of inadequate financial controls and transparency.

November 20 — Commonwealth Employees to Get Bonuses Amid Insolvency Claims: Puerto Rico announces it will pay year-end government employee bonuses despite claims of insolvency and over objections of FOMB.

October 30 — Infamous Whitefish Contract Cancelled: PREPA cancels infamous Whitefish power restoration contract, emblematic of mismanagement and corruption at PREPA, and throughout island government.

October 26 — Disaster Relief in Billions to Aid PR: President Trump approves $36.5 billion in disaster relief funding, including up to $5 billion to assist Puerto Rico’s central government and municipalities.

October 13 — AG Voluntarily Withdraws PREPA Complaints In Face of Hurricane: In response to the humanitarian circumstances following Hurricane Maria, Assured Guaranty voluntarily withdraws complaints against PREPA and the Commonwealth’s Fiscal Plan, urging the FOMB to use the opportunity to work with creditors toward a new, and lawful, fiscal plan.

September 20 — Hurricane Maria Makes Landfall: Hurricane Maria makes landfall in Puerto Rico, causing significant damage and power outages across the island.

September 14 — PREPA Receivership Request Denied: Judge Swain rejects creditors’ plea to exercise their statutory and contractual rights to request appointment of a receiver to manage PREPA; in her decision, she said that appointing a receivership was “facially inconsistent” with the terms of Puerto Rico’s federal rescue package.

July 13 — Court-Ordered Mediation Begins

June 15 – July 7 — Chairman Bishop Demands FOMB Approve PREPA RSA; FOMB Rejects It: Chairman Bishop writes to the FOMB that its failure to approve the PREPA RSA that was approved by the utility, its creditors, and the Commonwealth violates PROMESA, which contained specific language to grandfather the deal. Creditors sue to compel FOMB to approve the RSA, but FOMB nevertheless rejects it, forcing PREPA into Title III.

June 14 — Senator Cotton Rebukes FOMB: Tom Cotton writes to FOMB demanding it comply with PROMESA by enforcing lawful debt payment priorities and liens and notes that the board’s failure to do so could cause retail mutual fund investors to lose $5.4 billion.

June 5 — Assured Guaranty Files Adversary Complaint: Assured Guaranty files adversary complaint, challenging the diversion of PRHTA debt payments, as it violates well-established treatment of special revenues during bankruptcy proceedings.

May 31 — Budget Fails to Prioritize Debt Payment: Puerto Rico releases budget elevating payment priority of all operating and pension expenses above constitutionally guaranteed general obligation debt, indicating zero dollars for debt service.

May 30 — COFINA to Freeze Payments: Judge Swain orders COFINA trustee to freeze payments to sales-tax bondholders.

May 17 — Hearing Over Sales Tax Revenue Dispute Held: Judge Swain holds first hearing in Title III cases of the Commonwealth and COFINA, which dispute how sales-tax revenue should be distributed.

May 4 — First Lawsuit Filed by Assured Guaranty: First lawsuit challenging the fiscal plan is filed by Assured Guaranty.

May 3 – 22 — FOMB Runs Around PROMESA Requirements: Circumventing the PROMESA requirement to conduct out-of-court negotiations before employing Title III, FOMB seeks Title III protection for the Commonwealth, COFINA, the Highways and Transportation Authority, and the Employees Retirement System.

May 1 — Medicaid Funding of $295 Million Secured: Puerto Rico secures $295 million in Medicaid funding.

April 29 — Governor Signs Acts, Neglects Debt Repayment: Rosselló signs the “Fiscal Plan Compliance Act,” which lacks provisions for debt repayment.

April 7 — Senators Call Out FOMB Failures: U.S. Senators Tom Cotton and Thom Tillis write letter to FOMB pointing out that Puerto Rico’s fiscal plan does not comply with PROMESA.

April 6 — PREPA RSA Finds Support in Governor: Gov. Rosselló supports PREPA RSA after negotiating modifications with PREPA and its creditors.

March 1 – 13 — Fiscal Plan Rejected, Revised, Accepted: Governor Rosselló releases a new fiscal plan, which FOMB rejects, and then — after a revision — accepts.

January 2 — Rosselló Win Comes With Fiscal Emergency Declaration: Rosselló succeeds Padilla as Puerto Rico’s governor, declares fiscal emergency and demands 10% spending cut across all agencies.

2016

December 21 — Congressional Task Force Makes Key Recommendations: The Congressional Task Force on Economic Growth in Puerto Rico releases its final report, recommending, among other things, increased federal Medicaid funding tied to better financial controls; congressional consideration of more competitive tax treatment of companies that generate economic activity and employment on the island; and inclusion of Puerto Rico in federal statistical programs.

November 23 — FOMB Fiscal Plan Criteria Set: FOMB requests Fiscal Plan revisions, including debt sustainability analysis, and sets 14 criteria the plans must meet.

October 14 — Padilla Files Proposed Fiscal Plan: Gov. Padilla files a proposed fiscal plan with the FOMB.

September 30 — FOMB Meets For The First Time

August 31 — President Obama Names FOMB Members

July 1 — Puerto Rico Skips $800 Million of G.O. Debt Payments: Puerto Rico defaults on approximately $800 million of general obligation debt, the first of the defaults on its constitutionally guaranteed debt.

June 30 — President Obama Signs PROMESA Into Law: The bill establishes the FOMB to ensure Puerto Rico’s fiscal responsibility and access to capital markets; PROMESA also establishes a Congressional Task Force on Economic Growth in Puerto Rico. Title III of PROMESA creates a bankruptcy-like procedure to adjust debt, and Title VI encourages and provides a legal framework for consensual restructurings. Full text.

June 13 — SCOTUS Upholds 2014 Recovery Act: The U.S. Supreme Court upholds a decision in a 5-2 vote invalidating the 2014 Recovery Act, which intended to allow the island’s public entities to restructure debt.

May 2 — $400 Million GDB Debt Defaults: GDB defaults on approximately $400 million in debt payments due.

April 6 — Law Imposes Moratorium on Debt Payments: Governor Padilla signs a law allowing him to impose a moratorium on debt payments.

February 15 — Commonwealth Passes Revitalization Act: Puerto Rico’s House of Representatives passes the Revitalization Act, which contains reforms to facilitate the PREPA RSA.

January 7 — Constitutionality of the Clawback Order Challenged: Assured Guaranty files suit challenging the constitutionality of the Clawback Order.

January 4 — $37 Million Default and $174 Million Clawback: Puerto Rico defaults on $37 million and claws back $174 million of public corporation debt payments, while paying all $329 million of principal and interest due to general obligation bondholders.

2015

December 1 — Puerto Rico Narrowly Avoids Default By Clawback: The Commonwealth avoids defaulting on $354 million of debt payments on general obligation and Commonwealth-guaranteed bonds, partly by clawing back revenue from public corporations. The island’s governor announces Commonwealth will continue to redirect revenue designated for future debt payments to pay for government services.

November 30 — Governor Issues Unlawful Clawback Order: Gov. Padilla issues the Clawback Order, allowing unlawful diversion of pledged special revenues (such as those of PRHTA and other public corporations) to pay Commonwealth operating expenses.

August 3 — Puerto Rico Defaults on Debt Payment for First Time: Puerto Rico defaults for first time in its history, paying just $628,000 of a $58 million Public Finance Corporation debt payment.

July 26 — Economists See Way Out For Puerto Rico Without Default: A group of economists led by former IMF official Claudio Loser releases a report arguing Puerto Rico can resolve its debt crisis without defaulting on Commonwealth debt.

July 1 — PREPA Reaches Deal With Creditors: PREPA makes a deal with its creditors, under which bond insurers provide liquidity to PREPA to avert default. The deal allows time to conclude a consensual Restructuring Support Agreement (the PREPA RSA).

June 29 — Krueger Report Recommends Reforms and Assistance: The “Krueger Report,” commissioned by GDB and written by a team of former IMF officials led by Anne Krueger, is released. It recommends structural and fiscal reforms; it also calls for federal assistance, such as establishing bankruptcy eligibility and rescinding the Jones Act, which increases costs on the island by preventing non-U.S. ships from carrying goods to and from the U.S. mainland.

June 28 — Debt “Unpayable,” According to Padilla: Governor Padilla declares the island’s debt “unpayable”.

February 6 — Commonwealth’s Recovery Act Judged in Violation of U.S. Bankruptcy Law: A U.S. District Judge strikes down Puerto Rico’s 2014 “Recovery Act,” aimed at allowing its public entities to restructure their debts in Puerto Rico courts, saying the act violates U.S. bankruptcy law.

2014

June 28 — Commonwealth Enacts Law to Restructure Debt Despite Ineligibility: Puerto Rico enacts the “Recovery Act,” allowing public corporations to restructure their debt despite ineligibility for Chapter 9 bankruptcy protection.

February 4 – 11 — The Island’s Bonds Are Downgraded: Three rating agencies downgrade Puerto Rico’s bonds to “junk” status.

2006 – 2014

Commonwealth Issues Bonds That Violate Sound Fiscal Practices: Puerto Rico continues to issue bonds throughout the United States, often to fund day-to-day operations rather than infrastructure investments. Despite some economic deterioration on the island, the bonds are attractive to investors because the Puerto Rico constitution prioritizes debt; the bonds are triple-tax exempt, and U.S. bankruptcy law explicitly excludes Puerto Rico from Chapter 9 relief.

2006

U.S. Phases Out Key Tax Code Incentives: U.S. government starts phase-out of Section 936 of U.S. tax code, which had provided tax incentives for U.S. corporations to operate in Puerto Rico.

The island’s long economic slide begins.