Oversight board certifies fiscal plans of 5 gov’t instrumentalities
By The Star Staff
The Financial Oversight and Management Board has certified the fiscal plans for the Puerto Rico Aqueduct and Sewer Authority (PRASA), the Puerto Rico Industrial Co. (PRIDCO), the Municipal Revenues Collection Center (CRIM), the Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico (COSSEC), and the Puerto Rico Sales Tax Financing Corp. (COFINA).
The members of the oversight board certified the five fiscal plans late last week as roadmaps to fiscal responsibility and economic growth. The fiscal plans provide an estimate of each instrumentality’s revenues and expenditures over five years as mandated under the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, to establish funding for the core services each instrumentality provides, outline efficiencies, establish priorities, eliminate wasteful spending, and provide for capital expenditures and investments.
“Secure revenue, prudent investment decisions, and detailed planning are essential for Puerto Rico’s economic growth and the Fiscal Plans outline the way to get to those goals,” oversight board chairman David Skeel said Friday. “The Fiscal Plans we certified today, when fully implemented, will ensure access to clean water, maximize Puerto Rico’s attractiveness for investment, create well-paying jobs, and provide municipalities with the fiscal stability they need to provide the quality services their residents deserve.”
PRASA’s fiscal plan calls for replacing old mechanical meters with smart meter technology, allowing the utility to measure water consumption more accurately, identify commercial water losses and increase billed revenues. PRASA’s financial condition has gradually improved due to modest rate increases, improved collections and debt reprofiling, but the authority has high water losses.
PRASA’s existing mechanical meters have an error margin of as high as 14%, which hinders the utility from billing customers correctly and, most importantly, assessing the scale of water losses. The utility has identified $300 million in federal funds to address those issues. The positive net impact of PRASA’s fiscal plan will be $75.9 million over the plan period of five years, the oversight board said.
PRASA’s expenditures are expected to grow over the next few years, which underscores the need to continue implementing both revenue enhancing and operational improvement measures, the board noted. The PRASA fiscal plan includes a 4.95% adjustment to the base charge for fiscal year (FY) 2023 only, and at least a 2% adjustment to water consumption charges between FYs 2023 and 2027 to enable an improvement in PRASA’s services, infrastructure and financial stability.
The PRIDCO fiscal plan calls for a transition to a third-party manager of PRIDCO’s properties. It also requires an increase in occupancy rates, a reduction in delinquency rates, and a strategy to renew expiring lease agreements at incrementally higher rates to produce more than $133 million in surpluses over the next 30 years.
The PRIDCO fiscal plan calls for the completion of a divestment study that recommends the sale of certain PRIDCO properties, the evaluation of PRIDCO’s rental rate card, which was last updated in 2003, better intergovernmental coordination, and IT systems upgrades.
The plan states that a study concluded there is a critical and time-sensitive need to invest $392 million in neglected capital expenditures at 94% of PRIDCO’s buildings. In addition, another $53 million is needed to support the demolition of certain properties that may be a public hazard.
The CRIM fiscal plan outlines 11 measures to maximize property tax collections without increasing the tax rate and to ensure the effective distribution of those funds to municipalities by achieving operational efficiencies, integrating IT systems and improving compliance to ensure all property owners pay their fair share of taxes, the oversight board said.
“Improving property tax collections is vital for strengthening local municipal economies and will facilitate local investment, economic growth, and access to better services,” the oversight board said. “Once fully implemented, the measures would add $331.2 million in collections for a total of $1.6 billion in total revenues. The collection of current year real property tax billings will improve from 67.7% to 75% by the end of the CRIM Fiscal Plan period of five years.”
The members of the oversight board also certified the fiscal plan for COSSEC, which details steps necessary to modernize governance and management of financial risks in the cooperative system to the benefit of the approximately 1 million residents of Puerto Rico who depend on cooperatives for access to financial services, and for COFINA, projecting sustainable sales and use tax collections to service debt obligations.