Elections? For a government for Puerto Rico? What for?

ELECTIONS?

FOR A GOVERNMENT FOR PUERTO RICO?

WHAT FOR?

The discussion of the takeover of the Government of Puerto Rico

by the Financial Oversight and Management Board continues

Maria de los Angeles Trigo

April 2016

Elections? For a government for Puerto Rico? What for?

1

AND THE

CONSTITUTION OF PUERTO RICO

IS SUSPENDED


2

This is the second of my two presentations discussing the takeover of the

Government of Puerto Rico by the Financial Oversight and Management

Board created by the Puerto Rico Oversight, Management, and Economic

Stability Act bill in the US Congress: the PROMESA.


3

The first presentation, “The PROMESA: a takeover is a takeover is a

takeover,” discussed the process for the approval of Fiscal Plans and

Budgets, as well as the reports the Governor must submit to the Board.

It also discussed the changes that the Board can make to almost every

aspect on life in Puerto Rico, and that can be implemented by the vote of

three of the Board’s members.

My comments refer to the draft issued on 29 March 2016. I may also refer

to the language used in the draft of 24 March 2016, depending on the

changes made from one draft to the other.


4

http://www.slideshare.net/mariatrigolegal/the-promesa-a-takeover-is-a-takeover-is-a-takeover?qid=ba73054b-a935-4a69-ac73-6e924fac3e9f&v=&b=&from_search=1

http://naturalresources.house.gov/uploadedfiles/puertorico_discussion_draft.pdf

Now for the subjugation


5

Laws

The Board must approve every single law approved by the Legislature

before it comes into effect.

Let me repeat that: the Board must approve every single law approved by the Legislature before it comes into effect.


6

The Board will review to see if it is consistent with the Fiscal Plan and the

Budget (that the Board has certified) before deciding whether the law will

be effective.

If the Board, always in its sole discretion, decides that the act is

“significantly inconsistent” with the Budget or the Fiscal Plan, the law “shall

be null and void.”

Although there is this: “to the extent the Oversight Board considers

appropriate, [it shall] provide the Legislature with recommendations for

modifications to the Act.”

Also, if the Board doesn’t act in 14 days, the law shall be deemed

approved by the Board.


7

Contracts and Leases

The same process applies to any contract or lease, no matter the amount:

the Board shall examine the transaction, and decide whether it is

consistent with the Fiscal Plan and the Budget.

Only then would the Puerto Rico government be authorized to enter into

the agreement. And for this review, the Board has no term within which to

answer.


8

If it is required, the Legislature must approve first any contract or lease

before it is submitted to the Board.

For example, the bill adds the requirement that the Governor must submit

to the Legislature for approval any contract of over $1,000,000.

If the Legislature approves the contract, it is submitted to the Board for

approval. And then, only if the Board approves it, can the Governor sign

the contract or lease.


9

Rules and Regulations

And this also applies to any rules and regulations proposed by any agency:

unless the Board authorizes it, no rules or regulations will enter into effect.

So, considering that the Legislature must report to the Board and follow its

orders, I presume the procedure when dealing with the approval of rules

and regulations is this: the agency follows the process established by the

Administrative Procedure Act, and after the law has been complied with,

the rule or regulation is submitted to the Board for approval.

And the agency has to wait until the Board approves, or not, the rule or

regulation, because the Board has no term within which to answer.


10

Governor’s Reports

The Governor even has to submit to the Board for review “any report submitted by the Governor for a fiscal year or any quarter,” and the Board will review each report and shall submit a report to the US Congress analyzing the completeness and accuracy of the Governor’s report.

This, I do not understand. Any report means any report submitted by the Governor to any person for any purpose. It would make more sense if it referred only to the quarterly reports that the Governor must submit to the Board (there is no requirement for the Governor to submit annual reports to the Board), but any report?

What does that mean? Because this section refers to “performance and financial accountability reports” that are not mentioned anywhere else in the bill.


11

ITS OWN RULES AND REGULATIONS

But that is not all. The Board is authorized to issue the orders, rules, or

regulations it considers appropriate to carry out the purposes of the bill, if

the Governor or the head of any department or agency could have issued

them.

Given that caveat, I believe that the Board would have to follow the

Administrative Procedure Act, since the Governor or any agency would

have had to follow it.

The difference is that the Board must notify the US President and the US

Congress if it issues any such orders, rules, or regulations.

Another important difference: the orders, rules, or regulations issued by

the Board will not be subject to judicial review.


12

However, if I read this expansive language “issue such orders, rules, or

regulations it considers appropriate to carry out the purposes of this Act”

along with the authorization to “ensure the purposes of this Act are met”

by cracking down on any attempt from government employees to

organize a strike or a lockout,

we may very well see an order declaring a state of emergency — issued by

the Board.


13

THE SQUEEZE CONTINUES

Any borrowing by the Puerto Rico government must be approved by the

Board.

I wonder if that includes capital leases of equipment and machinery, since

the bill doesn’t provide for any exception.

If the Governor wants to reprogram any amount provided in a Budget, it

must receive the approval of the Board before submitting it to the

Legislature.

Note that this is not a new expense; it is transferring funds from one

purpose to another. There is no effect in the total budget, and no increase

in expenses.


14

But even this minimizes the severe control of the Board over public policy

in Puerto Rico, and that will not do.

So, even the reprogramming of funds within a Budget are subject to “an

analysis” by the Board.

The Constitution of Puerto Rico is indeed suspended.


15

And now for the missing party: the Judiciary. The bill doesn’t mention

Puerto Rico’s Judiciary at all. It apparently doesn’t exist.

Anything related to the bill will be argued before the District Court of the

District of Columbia and appealed to the Circuit Court of the District of

Columbia.

The subpoenas and any restructuring will be litigated before the federal

court in Puerto Rico.


16

Our Judiciary? Nowhere to be found, except to clarify that the Board’s

power to issue subpoenas does not extend to “judicial officers or

employees of the Puerto Rico courts.”

I sure hope the term “judicial officers” includes the judges.

The Constitution of Puerto Rico goes poof.


17

EXTRA POWERS

The Board must approve any discretionary tax waivers granted by the

Puerto Rico government.

I understand this to mean that tax incentives laws are now under the direct

supervision of the Board. “Discretionary tax waivers” would include tax

incentive contracts, since the Puerto Rico government has always reserved

the right to grant them.

The Board is explicitly granted the authorization to take cooperative

efforts with Puerto Rico, including recommending changes to Federal laws,

or recommending actions of the Federal Government, that would help

Puerto Rico in complying with the Fiscal Plan and Budgets.

Who knows whether this includes changes in the Federal laws that impose

constraints on Puerto Rico’s economic development.


18

The Board is explicitly granted the authorization to take cooperative

efforts with Puerto Rico, including recommending changes to Federal laws,

or recommending actions of the Federal Government, that would help

Puerto Rico in complying with the Fiscal Plan and Budgets.

Who knows whether this includes changes in the Federal laws that impose

constraints on Puerto Rico’s economic development.


19

AND WHEN DOES THIS START?

Any of these six events would start an “oversight period”:

1. the failure by the central government, any agency or any public

corporation to provide sufficient revenue to a debt service

reserve fund

2. a default on any form of borrowing

3. failure of the Puerto Rico government to meet its payroll

4. the existence of a cash deficit at the end of any quarter

5. failure to make required payments related to pensions and

benefits

6. failure to make payments to any entity established under an

interstate compact


20

The “oversight period” ends when the Board certifies that both:

1. Puerto Rico has adequate access to short-term and long-term

credit at reasonable interest rates

2. for five consecutive fiscal years the expenditures made during

each year did not exceed the revenues

However, the events that signal the start of an oversight period are not

immediately important, since the bill deems that an oversight period exists

right now.


21

ETERNALLY WATCHFUL

But the Board’s work is never done.

Even if there is no oversight period, the Governor must keep submitting

the government Budget to the Board, forever, so the Board can prepare a

report to the US President and the US Congress.

The Board shall also keep monitoring the “financial status” of Puerto Rico

(whatever that means, and whatever that implies).

If the Board believes there is a risk that an oversight period may start, it

can submit a report to the US President and the US Congress.


22

The bill doesn’t clarify what “a risk exists that an oversight period may be

initiated” means.

Next fiscal year? Within five years? Possible? Probable?

Since the Board’s oversight is perpetual, I guess they will consider a sliver

of risk as enough to recommend the start of an oversight period.


23

DISTRUST

Now, my favorite section of the bill.

If the Fiscal Plan and Budget are prepared by consensus among the Board,

the Governor, and the Legislature, the Board must certify that the Budget

and the Fiscal Plan reflect a consensus…

…and must send copy to the US President and the US Congress.


24

If the Board certifies the Fiscal Plan or the Budget under the process of

submit, review, reject, revise, approve, and certify, the Board is not

required to send a copy to either the US President or the US Congress.

But if the Fiscal Plan and Budget are prepared by consensus? It must send

a copy to the US President and the US Congress.

So they can make sure the Board is as controlling as it can be?


25

OH, IT DIED

Humpty Dumpty sat on a wall,Humpty Dumpty had a great fall; All the king’s horses and all the king’s men Couldn’t put Humpty together again. —Mother Goose

The Commonwealth of Puerto Rico, as a constitutional body, lies

pulverized.

We wish it peace in the afterlife.


26

ELECTIONS AND SELF-GOVERNANCE

There is no need to celebrate elections in Puerto Rico this November. An

election to install a government that is, for all intents and purposes, an

employee of this Board?

This bill does away with the Constitution of Puerto Rico.

The setting of public policy, the control over budget, infrastructure

expenditure, restructuring of its debt, the policies and legal framework

that reflect Puerto Ricans’ social priorities, are all hijacked by a Board

appointed by the US President, and for whom we Puerto Ricans do not

vote.


27

The Committee tries to make us believe that the Board will exercise its

control in “the most efficient and equitable manner that is respectful of

the rule of law, self-governance…”

That is impossible.


28

A Board that controls every single aspect of the Puerto Rico government

and Puerto Ricans’ life does not respect self-governance.

When just three people named by the US President with no input

whatsoever from Puerto Ricans can make changes to our government, our

laws, our policies, our resources, and our assets, there is no self-

governance.

That has many names; self-governance is not one of them.


29

So, elections? In Puerto Rico? In November? What for?

To elect an inefficacious government whose members will be nothing

more than subordinates of this Board?

I look forward to reading the reports to be filed by the US before the

Decolonization Committee of the United Nations, again, considering this

bill annihilates the Constitution of Puerto Rico.


30

FORAKER 21

It is clear, though, that the Congressional dilly-dallying is over.

November is close, Puerto Ricans do not vote but creditors do, and

politicians believe, above all, in self-preservation.

Even so, it flabbergasts me that the US Congress would draft something

like this.


31

Reading the bill I thought of what Prof T. Alexander Aleinikoff called “the

imperialistic fires burning in the nation.”

See the pains Congress takes to make clear that “Nothing in this Act may

be construed … to limit the authority of Congress to exercise ultimate

legislative authority over Puerto Rico.”


32

http://isim.georgetown.edu/t-alexander-aleinikoff

Yep, the US Supreme Court has everyone very, very nervous. Goodness,

what if it held that the approval of the Constitution of Puerto Rico placed

Puerto Rico outside of the territorial clause? Oh no no no.

Since with this bill Congress has shown how willing it is to suspend, even

annul, the Constitution of Puerto Rico (always under the let-us-use-it-

now-maybe-soon-will-die territorial clause), a more appropriate name for

this bill would be “The Foraker Act for the New Century,” especially since

the Foraker Act of 1900 is the spiritual parent of this PROMESA. Its short

name could be “Foraker 21”.


33

http://www.legisworks.org/congress/56/session-1/chap-191.pdf

The coveted control over budgets, expenses, government structure,

legislation, contracts, assets, and life in general is still possible — just like it

was 116 years ago.

Another advantage? There is no need for acronyms.

Back to the future indeed.


34

EVER PRESENT

How much of this aggressive pursuit of the crude implementation of the

plenary power of the territorial clause is because of the escalation of

hostilities with the ones “over there far away” is for the people in the five-

sided building to know.

And for us in Puerto Rico to never ignore.

Food for thought.

My next article, “The PROMESA for an ordered, fair debt restructuring” will

discuss bondholders as members of the Board, the stay on claims, and the

bill’s proposed process for the adjustment of debt.


35

EXTRAS

Semblances of Sovereignty: The Constitution, the State, and American

Citizenship, T. Alexander Aleinikoff, Harvard University Press, 2002, at page

81.

“The Board is here; and now what?,” Aníbal Acevedo Vilá, 29 March 2016

“Puerto Rico Governor Seeking Four Changes in U.S. Rescue Bill,” Robert

Slavin, The Bond Buyer, 31 March 2016. Behind a paywall. (Oh yes, because

having our Constitution go up in smoke is a rescue.)


36

http://www.hup.harvard.edu/catalog.php?isbn=9780674007451

http://acevedovila.net/es/?v=item&id=125

http://www.bondbuyer.com/news/regionalnews/puerto-rico-governor-seeking-four-changes-in-us-rescue-bill-1100248-1.html

EXTRAS

War Against All Puerto Ricans: Revolution and Terror in America’s Colony,

Nelson A. Denis, Public Affairs Books, 2015

The Supreme Court and Puerto Rico: The Doctrine of Separate and

Unequal, Juan R. Torruella, Editorial de la Universidad de Puerto Rico, 1985

“The Insular Cases: The Establishment of a Regime of Political Apartheid,”

Juan R. Torruella, University of Pennsylvania Journal of International Law,

2007

“Free Puerto Rico, America’s Colony,” Nelson A. Denis, The New York

Times, 6 August 2015


37

http://www.publicaffairsbooks.com/book/hardcover/war-against-all-puerto-ricans/9781568585017

http://www.amazon.com/Supreme-Court-Puerto-Tribunal-Supremo/dp/0847730190/ref=asap_bc?ie=UTF8

https://www.law.upenn.edu/journals/jil/articles/volume29/issue2/Torruella29U.Pa.J.Int'lL.283(2007).pdf

http://www.nytimes.com/2015/08/06/opinion/free-puerto-rico-americas-colony.html

RELATED ARTICLES

In SlideShare

The Congressional PROMESA to put the uppity Commonwealth in its place

The PROMESA: a takeover is a takeover is a takeover

In LinkedIn

The Congressional PROMESA to put the uppity Commonwealth in its place

The PROMESA: a takeover is a takeover is a takeover

A PROMESA for an ordered, fair debt restructuring


38

http://www.slideshare.net/mariatrigolegal/the-congressional-promesa-to-put-the-uppity-commonwealth-in-its-place-60514934?qid=7b6d8973-ee60-418a-9596-6a36d7327532&v=&b=&from_search=8

http://www.slideshare.net/mariatrigolegal/the-promesa-a-takeover-is-a-takeover-is-a-takeover?qid=7b6d8973-ee60-418a-9596-6a36d7327532&v=&b=&from_search=1

https://www.linkedin.com/pulse/congressional-promesa-put-uppity-commonwealth-its-place-trigo

https://www.linkedin.com/pulse/takeover-maria-de-los-angeles-trigo

https://www.linkedin.com/pulse/promesa-ordered-fair-debt-restructuring-maria-de-los-angeles-trigo

Originally published in LinkedIn


2 April 2016

This presentation was edited from the original article.

An attorney and CPA, I help clients understand Puerto Rico’s public finance market and its legal and regulatory framework. I aim to provide you with insights and information rooted in Puerto Rico’s history, and legal and political status, so you can better understand Puerto Rico’s fiscal and legal structures.

If you found the article helpful, please share it with those who might find it interesting. If you would like to read future articles, just click the follow button, here in SlideShare and in LinkedIn.


39

http://www.slideshare.net/mariatrigolegal

https://www.linkedin.com/today/author/413525974?trk=prof-sm