U.S. Tells Puerto Rico It's Not Broke Enough to Get Loans

(Bloomberg) -- Puerto Rico may have too much cash to get a loan.

That’s the view of the federal government. The storm-ravaged U.S. territory, where many residents are still without electricity almost four months after Hurricane Maria, is at risk of not receiving federal community disaster loans because its cash balances may be too high, officials at the Federal Emergency Management Agency wrote to Puerto Rico in a letter dated Jan. 9.

Puerto Rico had $1.7 billion of available cash as of Dec. 29, despite earlier predictions by local officials that the government would run out of money in late October because of the economic toll of the calamity. By the end of November, it still had billions in other accounts, though some of it was earmarked for specific uses and couldn’t be used to keep the government running.

Because such money was available, the federal government will distribute the loans when Puerto Rico’s funds fall below a certain level, which will be determined by federal officials, according to the letter.

“Under this cash balance policy, funds will be provided through the CDL program when the commonwealth’s central cash balance decreases to a certain level,” FEMA officials wrote in the letter to Gerardo Portela, executive director of Puerto Rico’s Fiscal Agency and Financial Advisory Authority, called AAFAF by its Spanish acronym.

The federal government authorized $4.9 billion of community disaster loans for Puerto Rico, the U.S. Virgin Islands and municipalities in Florida and Texas after hurricanes struck those areas last year.

Portela Wednesday said that because of the delay in federal loans, Puerto Rico’s central government will begin procedures to allow it to lend money to the island’s public electricity and water utilities. He urged the federal government to distribute the loans.

“AAFAF has complied with all the demands of federal agencies,” Portela said in a statement. “However, despite our continuous efforts, to date, the Treasury Department and FEMA have not provided the final terms and conditions under which they will disburse the funds granted by the Congress.”

Damage from Hurricane Maria could total as much as $100 billion. Governor Ricardo Rossello this month warned that the island’s electric utility may be unable to continue recovery work in February due to lack of funds.

Hurricane Maria slammed into Puerto Rico on Sept. 20, dealing a devastating financial blow to a government that already filed a record-setting bankruptcy in May. The storm halted the island’s economy and destroyed its electrical grid. About 45 percent of Puerto Rico Electric Power Authority customers are still without power.

--With assistance from Yalixa Rivera

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net.

To contact the editors responsible for this story: James Crombie at jcrombie8@bloomberg.net, William Selway, Michael B. Marois

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