HUD Officials Admit Agency Intentionally Missed Deadline Regarding Funds for Puerto Rico

Speaking at a House hearing last week, two top officials for the Department of Housing and Urban Development (HUD), Irv Dennis, the agency’s CFO, and David Woll, HUD’s deputy assistant secretary for community planning and development, admitted that the agency knowingly missed the congressionally-mandated deadline for issuing notice of funds, which would have made billions in emergency funds appropriated for Puerto Rico available for use. Although HUD issued the proper notices for all the other states and territories by the September 4 deadline, it did not do so with regard to Puerto Rico. 

HUD funds make up the bulk of the emergency funding assigned to Puerto Rico in the aftermath of Hurricane Maria. Of the $43 billion in total assigned funds, Puerto Rico has only received one-third of that amount. Lawmakers were highly critical of HUD for its failure to meet the deadline. In delaying the notice for Puerto Rico, “HUD [has failed] to comply with the law,” declared Rep. David Price (D-NC). Both Dennis and Woll defended HUD’s delay in the distribution of funds, citing alleged concerns about Puerto Rico’s ability to properly manage those funds in the wake of its fiscal crisis, the recent corruption scandals, and the resignation of its former governor Ricardo Rosselló. Even so, Woll admitted that HUD had “no statutory authority” to miss the September 4 deadline.

PROMESA Congressional Hearing Today

The House Natural Resource Committee is set to discuss PROMESA this morning, with a long list of witnesses scheduled to appear, including a representative of Governor Wanda Vázquez Garced’s adminsitration, Omar Marrero, the director of the Puerto Rico Fiscal Agency and Financial Advisory Authority; Natalie Jaresko, executive director of the Financial Oversight and Management Board (FOMB); Senator Eduardo Bhatia, and other legislative leaders.

Speaking separately with El Nuevo Día, Rep. Raul Grijalva (D-AZ) and Rep. Nydia Velázquez (D-NY) elaborated on their hopes for amending PROMESA. A bill making key changes to the law was drafted in July and, if approved as is, would define essential services protected from funding cuts, protect pensions, restore the University of Puerto Rico’s previous budget, order an audit of the debt, cancel uninsured debt, and force the U.S. Treasury Department to pay for expenses associated with the FOMB. The draft also includes the appointment of a federal coordinator to oversee the Island’s reconstruction after Hurricane Maria, as well as a revitalization official who would oversee the modifications to the Island’s power grid. 

PROMESA has been in effect since June 30, 2016. Rep. Grijalva was among the lawmakers who voted for the bill, with the understanding that it represented Puerto Rico’s only hope for restructuring its public debt, a position he still stands by, despite his opposition to elements of the law.

FOMB’s Constitutionality Arguments Heard at the Supreme Court

The U.S. Supreme Court heard arguments last week on the ongoing litigation regarding the Financial Oversight and Management Board for Puerto Rico (FOMB)’s constitutionality.

According to some court observers, including former federal bankruptcy judge Gerardo Carlo Altieri, the Court’s conservative majority is likely to rule in favor of the Board’s constitutionality. Indications that this may be the case include a question asked of Theodore B. Olson (representing one of the plaintiffs) by Justice Samuel A. Alito, who asked him if the plaintiffs’ attempts to invalidate the Board were essentially about money. 

The dispute over the FOMB’s constitutionality was brought to court by the firm Aurelius Investment LLC, the municipal insurer Assured Guaranty, and the Electrical Industry and Irrigation Workers Union (UTIER, in Spanish). They argued that the FOMB’s members were federal employees subject to Senate confirmation under the Constitution’s Appointments Clause. Before the case moved on to the Supreme Court, the 1st Circuit Court of Appeals ruled in favor of the plaintiffs, agreeing that the FOMB’s members had indeed been appointed unconstitutionally; however, it also ruled that the work the Board had performed was nevertheless legal.