Oversight board finds COFINA proposed fiscal plan lacking
By The Star Staff
The Financial Oversight and Management Board criticized the Puerto Rico Sale Tax Financing Corp.’s (COFINA by its Spanish acronym) proposed 2022 fiscal plan, dated March 25, 2022, in part because it proposes a salary increase for COFINA board members.
The entity exited bankruptcy in 2019 so the oversight board questioned the need for a pay hike.
Oversight board chairman David Skeel told Gov. Pedro Pierluisi Urrutia in a letter that COFINA plays a critical role in managing the sales and use tax-related bond payments incurred as part of the confirmed and consummated COFINA plan of adjustment.
“After reviewing the baseline economic and fiscal assumptions, and the measures in the Proposed Plan, the Oversight Board has determined that the Proposed Plan does not meet the certification requirements of Section 201 of PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act],” Skeel said as he informed the governor that the letter was a notice of violation.
Skeel said the fiscal plan increases COFINA’s operating expenses by 29%, from $1.4 million per year to $1.8 million per year. However, COFINA has a run rate spending of significantly less than the fiscal year (FY) 2022 budget of $1.4 million and has historically never spent the entire budgeted amount, he said.
The plan also reduces the costs of the overall operating budget to $1.4 million to be consistent with the 2021 COFINA Fiscal Plan, but an item called “other professional services” expense is increasing from $10,000 to $95,000 in FY 2023. The oversight board asked for a breakdown of the funds.
“If no services are contemplated at this time, reduce the budget to be a maximum of 10% of the total other professional services budget,” Skeel said.
The plan also contains a pay increase for members of the COFINA board of directors but provides no justification. “The Proposed Plan includes an increase in the compensation for each of the members of the board of directors from $50k/annum to $70k/annum,” Skeel noted. “Besides benchmarking the board of directors’ pay to other component units in the Commonwealth, please provide additional justification that increases the directors’ time commitment to COFINA since the restructuring in 2019.”
Skeel asked for the reasons the proposed plan increases the D&O insurance coverage from a FY 2022 budgeted amount of $290,000 to $840,000 in FY 2023. The amount grows to over $974,000 in FY 2026 in the proposed plan, he pointed out.
“Similar to the Board of Directors compensation, please benchmark the coverage to other component units in the Commonwealth identifying the differences in coverage,” the oversight board chairman said. “Please provide a list of alternatives to the current coverage.”
Skeel also requested information that the oversight board had previously requested in February but was not provided.