By The Star Staff
The Financial Oversight and Management Board for Puerto Rico is allowing the Puerto Rico Aqueduct and Sewer Authority (PRASA) and the island Department of Natural and Environmental Resources (DNER) to borrow $24.9 million from the Clean Water State Revolving Fund Program administered by the U.S. Environmental Protection Agency (EPA).
The agreement’s structure breaks down the funding into a $22.5 million interest-bearing (1%) senior loan with a 30-year repayment period and a $2.4 million non-interest bearing and principal forgiveness loan.
In 2021, PRASA borrowed some $32 million from the EPA for investments as part of a financial assistance agreement to invest in new water infrastructure.
The current deal arises from an operating agreement between the EPA and the DNER signed on July 25, 2018, which enables PRASA to apply for additional loans and grants under the program.
The loan provides for cost-effective capital investments in PRASA’s wastewater treatment facilities, which are critical for PRASA to continue providing safe and clean wastewater services.
“Therefore, the agreement is consistent with the 2022 Certified Fiscal Plan for PRASA, as it mitigates PRASA’s need to use its own operating revenues to comply with capital investment projections,” the oversight board said in a letter written by its general counsel, Jaime A. El Koury, to Fiscal Agency and Financial Advisory Authority Executive Director Omar Marrero Díaz.
However, the board said, PRASA must continue to deploy capital investments while aiming to maximize the multiple sources of assigned and obligated federal funding.
“Particularly, PRASA should prioritize the capital deployment efforts of the federal funds awarded for recovery and reconstruction projects stemming from the 2017 hurricanes,” the letter said. “As such, the Oversight Board reiterates the importance of using the multiple sources of federal funding available to PRASA for the deployment of capital investments.”
In August 2019, PRASA and the central government reached an agreement with the EPA and the U.S. Department of Agriculture on a consensual modification of about $1 billion in outstanding loans under Section 20 of the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA. The deal lowered PRASA’s debt service payments on the U.S. government program loans by about $380 million over the next 10 years. It also eliminated some $1 billion in claims against the Puerto Rico government and provided PRASA with access to $400 million in new federal funding.