Notes from the Puerto Rico Oversight (Not Control) Board 34Th Pileggi Lecture

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2019

Notes from the Puerto Rico Oversight (Not Control) Board 34th Pileggi Lecture

David A. Skeel Jr. University of Pennsylvania Carey Law School

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Repository Citation Skeel, David A. Jr., "Notes from the Puerto Rico Oversight (Not Control) Board 34th Pileggi Lecture" (2019). Faculty Scholarship at Penn Law. 2108. https://scholarship.law.upenn.edu/faculty_scholarship/2108

This Article is brought to you for free and open access by Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship at Penn Law by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. NOTES FROM THE PUERTO RICO OVERSIGHT (NOT CONTROL)BOARD 34TH PILEGGI LECTURE

DAVID SKEEL*

PREFACE

Likeother bankruptcyscholars, Iamdrawntofinancial crises, where#er they occur.When *uerto )ico’sdistressdeepened andthe island passed itsown municipalbankruptcylaw back in 2014,Ididwhat comes naturally,shiftingmygazetothe Caribbean. Iwrote op-eds, an amicus brief, and ashort white paper,and Istarted research foralaw review article,ineachcasetellingcourtsand Congress how they should respondtothe loomingfinancial catastrophe.1 Iwas bold andconfident, as lawprofessors so oftenare.Sweeping proposals come easywhen you 1now youwon’t be one of thepeoplema1ingdecisions and wrestlingwith real worldcompromises.2 Then suddenly,Iwas.

After Congressenactedthe Puerto Rico Oversight,Management, and Economic Stability Act, or PROMESA,3 Ifound myself in themidst of an intensivevetting processthat landed me on theseven-member FinancialOversight and ManagementBoard forPuertoRicoonAugust 31, 2016. Ihad beenpluckedfromthe comfortable confines of academia and thrustintothe middle of *uerto )ico’seconomiccrisis. Isoon discovered arealitythatisobvious to everyone otherthanascholar: actually making decisions that haveanenormous impact on thelives of ordinary menand womenisalotharder than talkingabout them. Fortunately, theother Board members had decades of practical experience, includingstintsleadingthe Government Development Bank in *uerto )ico; actingas!alifornia’sstate budgetdirector; wor1inginthe

* S. Samuel ArshtProfessor of CorporateLaw,University of Pennsylvania.Iam grateful to Breana Barker,Colleen Degnan,Bruce Grohsgal, PaulRegan, andZacharyJ. Schnapp forhelpful commentsand assistance,and to thePileggi family fortheirhospitality. 1 See, e.g., DavidSkeel, 9i?ing *uerto )ico’sDebt 6ess,WALL ST.J., Jan. 5, 2016 (advocatingabankruptcyframework forPuerto Rico); BriefAmici CuriaofClayton P. Gillette &David A. Skeel,Jr., Puerto Rico v. Franklin Cal. Tax-Free Tr., (2016) (Nos.15-233,15-255) (urgingthe Supreme Courttoupholdthe RecoveryAct of 2014); ClaytonP.Gillette&DavidA.Skeel,Jr., ATwo-StepPlanfor Puerto Rico 6, 12 (Univ. of Pa. Inst.for L. andEcon.,Working PaperNo. 16-3,2016)https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2728466(callingfor Congress to enact restructuringprovisions andacontrolboard). 2 Theimpracticalityofscholarly writinghas oftenbeenpointed out,mostfamously by Judge Harry Edwards. Harry T. Edwards, The GrowingDisjunction BetweenLegal Education andthe Legal Profession,91MICH.L.REV.34, 35 (1992). 3 Puerto Rico Oversight,Management,and Economic StabilityAct (PROMESA), Public Law114-187,130 Stat.549 (2016) (codified at 48 U.S.C. §2101 (2016)).

529 530 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

Social Security Administration, running an insurance company, and servingasafederaljudge.4 My colleagues were and are aremarkable team.

This essay, whichbeginswhereanearlier essayconcluded,5 chroniclesthe Board’seffortstohelprestore “fiscalresponsibility and accesstothe capitalmar1ets” for *uerto )ico; as *)+6ES" instructsus to do.6 Ibegin with abrief s1etch of thedepth of *uerto )ico’s economic distress,which hadplagued PuertoRicofor adecadewhen Hurricanes Irma and Mariahit in 2017,and of theprincipal responsibilities vested in theOversight Board by PROMESA. Ithen surveythe majordecisions the Oversight Board hasmade3or in some cases, unsuccessfullytried to make3andthe challengesthat remain as thecurrent Board members near theend of our three-year term.

Needless to say, theOversight Board is only oneofmany participants in *uerto )ico’sreco#eryeffort.The Go#ernor;*uerto )ico lawmakers,disasterreliefworkers, ordinarycitizens, and others have takensometimesheroicmeasures to alleviatethe distress.Ifocusonthe Oversight Board becauseitisthe participant Iknowbest. Iwillbe ob2ecti#ewhere Ican and candidwhere Ican’t.

4 See PressRelease, PresidentObamaAnnounces theAppointment of SevenIndividuals to theFinancialOversightand Management Boardfor Puerto Rico (Aug. 31,2016), https://obamawhitehouse.archives.gov/the-press-office/2016/08/31/president-obama- announces-appointment-seven-individuals-financial (describingeachofthe Boardmembers). 5 DavidSkeel, Reflections on TwoYears of P.R.O.M.E.S.A.,87REVISTA JURIDICA UNIV.P.R.862 (2018). 6 48 U.S.C. §2141(b)(1)(2016). 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 531 (NOT CONTROL)BOARD

TABLE OF CONTENTS

I. PUERTO RICO4S DISTRESS:JUNE 30, 2016 ...... 532 II. THE OVERSIGHT BOARD4S POWERS AND RESPONSIBILITIES ...... 533 III. THE PROGRESSTODATE ...... 535 IV.THE CHALLENGESTHATHAVE EMERGED ...... 541 A. TheLimits of ourPower...... 542 B. TheDownside of EssentialFederal Disaster Relief ...... 544 C. TheAppointmentsClauseChallenge...... 546 V. LOOKING FORWARD ...... 548 532 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

I. PUERTO RICO4S DISTRESS:JUNE 30, 2016

By June 30, 2016, when PROMESA waspassed, PuertoRicowas in itstenth year of recession.7 Thecrisiscannotbeattributedtoany single factor,but aworkableshorthand is that from 1996 to 2006 Congress phased out atax breakthathad luredpharmaceutical companies and other light manucsfIHK`QbIO2HdKIO 0`fO$ sQe2HdKIO 0`fO4J]s9Rs^dKJ borrowedmoneyrather than decreased spending to fill thegap.8 Puerto Rico endedupwithmorethan$70 billionindebt and more than $50 billion of unfunded pension benefitsEalmost twiceits annual GNP.9

Thedistressisnot limitedtounsustainable debt; only40% of Puerto Ricans participate in theformaleconomy, as compared to roughly62% in theU.S. as awhole.10 Moreover, about 30%ofthose whodoparticipate `Q 2HdKIO0`fO4JcOKRs]dfOQOR7 9OK^ cor thegovernment.11 Therateof participation in theprivate workforceisthusconsiderablylower.

Poverty also is devastatingly widespreadinPuertoRico. In theU.S. as awhole, roughly13% of thepopulationlives in poverty (which obviouslyisway toohigh).12 Butthisisnothing by comparison to Puerto Rico, where thepoverty rate is 43.5%.13

7 Eshe Nelson, *uerto )ico’seye-popping economicsituation,incharts, QUARTZ (Sept. 30, 2017), https://qz.com/1091341/puerto-ricos-eye-popping-economic-situation-in-charts/. 8 See, e.g., DianeLourdes Dick, U.S. TaxImperialism in Puerto Rico,65AM U. L. REV.1,76F78 (2015) (describingrepealofsection936). 9 See, e.g., FIN.OVERSIGHT AND MGMT.BD. FOR P.R., NewFiscal Plan forPuerto Rico,13(Oct. 23, 2018), https://drive.google.com/file/d/17ca0ALe7vpYn0jEzTz3RfykpsFSM0ujK/view(hereinafter NewFiscal Plan). 10 See, e.g.,JoseB.Carrión &Andrew G. Biggs, Don’tblame *uerto )ico’spoor economyonhurricanes,WASH.POST (Dec.172018), https://www.washingtonpost.com/opinions/dont-blame-puerto-ricos-poor-economy-on- hurricanes/2018/12/17/206a5734-f181-11e8-9240- e8028a62c722_story.html?utm_term=.b246ec610713. 11 See, e.g.,COMMONWEALTH OF P.R.,DEPT. OF LABOR AND HUMAN RES., Puerto Rico Economic Analysis Report 2015-2016 at 20 (statinggovernment is 25.6%ofnon-farm employment,with educationand health services listed separately). 12 See, e.g.,KAYLA FONTENOT,JESSICA SEMEGA &MELISSA KOLLAR, Income and Povertyinthe United States:2017,U.S.CENSUS BUREAU (Sept. 2018), https://www.census.gov/content/dam/Census/library/publications/2018/demo/p60-263.pdf. 13 See, e.g.,DATA USA: PUERTO RICO &UNITED STATES, https://datausa.io/profile/geo/puerto-rico/?compare=united-states(last visitedMar.26, 2019) (comparing Puerto Rico andthe U.S. as awhole). 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 533 (NOT CONTROL)BOARD

Giventhesestatistics, andthe fact that allisneededtotake up residence in OrlandoorNew York is aone-way plane ticket,itisnot surprisingthatsomany Puerto Ricans areleaving Puerto Rico. Puerto Rico haslost 10%ofits populationsince 2007,and our demographer predicts 10%morewillleave in thenextfiveyears.14 Thesedepartures include many critically important doctors andnurses, as well as a disproportionate percentage of theyounger PuertoRicansthatthe island needs to providethe foundationfor thenextgeneration.15

2dON]d9aO asGdQ4IcO]]O9deIadJd edGd]ONRdQIJf]OJd]7 OcIdQ assumethe crisis was caused by HurricanesIrmaand MariainSeptember p!qj# -a`J `JQ4IIad fsJd sI s]]# -adaHKK`fsQdJJRsJade `QIO sQ `J]sQe IasI alreadywas in deepdistress, magnifying themisery.

II. THE OVERSIGHT BOARD4S POWERS AND RESPONSIBILITIES

Under PROMESA,Congress gave theOversight Boardtwo major tasks$fdKI`c7`Qbsc`Jfs] N]sQ sQe KdJIKHfIHK`Qb2HdKIO 0`fO4JedrI# Nearly everything we do flowsfromone or bothoftheseresponsibilities.16

Start with thefiscalplan. The fiscal plan is thekey leverPROMESA intends forthe OversightBoardtouse to spur governance reform in Puerto Rico.17 It is premised on theviewthatlarge publicentitieslikecities, states,orterritories that fall into deep financial distress invariablysuffer fromdysfunctionalgovernance.18 If theordinarypolitical processeswere workingsmoothly, thecity, state, or territorycouldadjustits revenues or expenses,and manage thecrisis.

Thefiscalplaniscreated throughaniterative processwiththe Governor of Puerto Rico.19 Once theOversight Boardestablishes a schedule forthe fiscal plan process,the Governor is givenanopportunity to propose afiscalplan.20 Afterthe Governor submits hisproposedplan,

14 See,e.g., NewFiscalPlan, supra note9,at7. 15 Susan Milligan, TheSkilled Worker Exodus,U.S.NEWS &WORLD REPORT (May 11, 2018,6:00AM),https://www.usnews.com/news/the-report/articles/2018-05-11/skilled- workers-are-leaving-puerto-rico-in-droves. 16 For amoredetaileddescription of theseroles,see Skeel, supra note5,at870F74. 17 Id. at 871. 18 Id. at 865. 19 Id. at 872. 20 Id. at 871. 534 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

theOversight Boarddetermines whether theplanmeets aset of 14 requirementsinPROMESA.21 Theplanmust providefor estimatesof revenuesand expenses, forinstance, eliminatestructuraldeficits, and develop adebt sustainability analysis.22 If theBoarddetermines the NKONOJde c`Jfs] N]sQ eOdJQOI JsI`Jc7203

Once thefiscalplaniscertified,itservesasthe touchstone forall of 2HdKIO 0`fO4Jc`QsQfdJ#Ac2HdKIO 0`fO NsJJdJ srHebdI IasI `J `QfOQJ`JIdQI with thefiscalplan, we can make reductionstoeliminatethe inconsistency.24 We also have theauthority to disallow contractsand executive ordersthat violatethe fiscal plan.25 To protectthe fiscal plan and thereforms it callsfor,PROMESA forbidscourts fromeven fOQJèdK`Qbfas]]dQbdJ IO IadYOsKe4JfdKI`c`fsIÒQedf`JÒQJ#26

-adYOsKe4J othermajor responsibility is restructuringPuerto 0`fO4JedrI# -ad]db`J]sI`OQ NKOG`edJ I9Oe`ccdKdQI KdJIKHfIHK`Qb mechanisms. The simplerofthe twoisinTitle VI of PROMESA.27 For those whoare familiar withsovereign debt,Title VI is alot likethe collectiveactionprovisionsusedininternationalfinance.Ifasufficient majority of thecreditors in each classofbonds votestoapprove a restructuring, Title VI makesthe restructuringbinding on allbondholders, including thedissenters.28 It does not,however,haveany of theother features of atraditionalbankruptcy law, such as astayoncollectionorthe power to avoidpreferentialtransfers.

Afar more comprehensive restructuringframework canbefoundin TitleIII of PROMESA.Title III borrows many of thekey provisions of Chapter 9Ethemunicipalrestructuring laws that Detroit, Stockton,

21 Therequirementsare setforth in PROMESA,48U.S.C.§2141(b)(1) (2016). 22 Id. 23 48 U.S.C. §2141(b)(3)(B)(2016). 24 48 U.S.C. §2143(d)(2016). 25 48 U.S.C. §2144(b)(2016). 26 48 U.S.C. §2126(e) (2016). 27 In conceptand effect,atleast, TitleVIissimple. The details areoddlycomplex, in NsKI rdfsHJd`I`QIKOeHfdJ IdKRJ'JHfa sJ “ZeR`Q`JIKsI`Gd .HNdKG`JOK” sQe “1Hs]`c7`Qb ppoq's&'q& P's&'qo& (2016). 28 48 U.S.C§2231(m)(1)(2016). 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 535 (NOT CONTROL)BOARD

California,and other cities haveusedtorestructuretheir debt.29 It looks and acts like abankruptcy law, althoughCongress went to greatlengthsto avoidcalling TitleIII bankruptcy.Itisbankruptcy-like, imposing astay on collectionand incorporatingmany of theother keyfeaturesofU.S. bankruptcy law.

Themost dramatic innovationofTitle IIIisits scope.Not only can 2HdKIO 0`fO4JRHQicipal entitiesinvokeTitle III, as withmunicipal bankruptcy;Title III also is availabletoPuerto Rico itself.Prior to PROMESA,Puerto Rico didnot have any bankruptcy option, sinceits municipalitiesare excluded frommunicipalbankruptcy andthe Supreme Courtstruck downarestructuringlaw PuertoRicoenacted to fill thegap.30 PROMESA more than remedied this problembygivingthe Oversight Boardthe authority to file TitleIII proceedingsnot only forPuerto Rico4J municipal entities, butalsofor Puerto Rico itself.

PROMESA thus gave theBoardtwo really bigtools: theauthority bothtocertify afiscalplanthatwouldserve as ablueprint forPuerto 0`fO4Jc`QsQfdJ$ sQe IO c`]d rsQ^KHNIf7-likeTitle IIIproceedings on behalf of PuertoRicoorits municipalities.

III. THE PROGRESSTODATE

*adQIad JdGdQOcHJ9dKdsNNO`QIde OQ ZHbHJI oq$p!qk$ 9d e`eQ4I know each other,wehad no advisorsorstaff, andwehad no idea what 2HdKIO 0`fO4J KdGdQHdJsQe d8NdQJdJ9dKd# DOK IadQd8IJ`8 ROQIaJ$ 9d and our advisors scrambledtodetermine PuertoRifO4J KdGdQHdJsQe expenses as preciselyaswecould, so that we could certifythe fiscal plan

29 Section301(a)(codified at 48 U.S.C. §2161(a) (2016))incorporatesnumerous bankruptcyprovisions,many fromChapter 9and Chapter 11.For an overview of Detroit, <`fa`bsQ4JsQe .IOf^IOQ$ Xs]`cOKQ`s4J RHQ`f`Nslrestructuring laws,see generally Nick Brown, !hapter , ban1ruptcy puts Detroitindri#er’s seat of its restructuring; REUTERS (Jul. 18,2013, 8:30 PM), https://www.reuters.com/article/us-usa-detroit- chapter9/chapter-9-bankruptcy-puts-detroit-in-drivers-seat-of-its-restructuring- idUSBRE96I01A20130719; seealso Hilary Russ, Analysis:Stockton, California new paradigm forstrugglingcities, REUTERS (Jul. 1, 2012,8:06AM) https://www.reuters.com/article/us- stockton-bankruptcy-filing/analysis-stockton-california-new-paradigm-for-struggling-cities- idUSBRE86007T20120701. 30 See Puerto Rico v. Franklin Cal. Tax-Free Tr., 136S.Ct. 1938,1946F49 (2016). 536 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

IasI 9OH]eJdKGd sJ IadrsJ`J cOK2HdKIO0`fO4JrHebdIJsQe Iad restructuringofits debt.31

3QdOcIad bKdsIr]dJJ`QbJ Oc Iad2KdJ`edQI4JsQe XOQbKdJJ`OQs] leadeKJ4faO`fdOcYOsKeRdRrdKJ 9sJEand isEthat we have awide rangeofexpertise. Several Boardmembersare bankers, one wasastate budget director,one is apension expert,one runs an insurance company, and twoofusare bankruptcy experts.32 This enabled us to specialize to someextent, devotingparticular attentiontoour areasofexpertise.

By early2017, we made significantprogressand hadgone back and forthwithGovernorRossellóand hisadministrationonthe termsofthe firstmulti-yearfiscalplan.33 Afteraflurry of last-minutenegotiations, we reached agreement on theCommonwealth fiscal plan.Wecertified the N]sQ$ IObdIadK 9`Ia I9O “sRdQeRdQIJ$” OQ

Then hurricanes Irma and Mariahit.Eventhose whowerenot on theisland canget someideahow awfulthe hurricaneswerefromphotos of thedestruction. Although themountains in theeastusually deflect hurricanes offtothe southornorth,Hurricane Mariasmashed straight through, pummeling theentireisland.According to someestimates,the hurricaneinflicted more than $100 billionofdamageonPuerto Rico.38

31 Theeventsinthisparagraph andthe next threeare describedmorefully in Skeel, supra note5,at874F80.Asuccinctsummary is provided herefor context. 32 Carlos Garcia andJoseGonzález were each heads of theGovernment Development Bank andare rsQ^dKJ\ZQs

Thousandsofhousesweredemolished, and electricitywas notrestoredto someparts of theisland until thefollowing spring, many months later. For along time thedeath toll waslistedas64; we now know amoreaccurate number wouldbeatleast 2,000, and possibly 3,000 or more.39

Giventhe destructioncausedbythe hurricanes, and itsdire `RN]`fsIÒQJ cOK2HdKIO 0`fO4Js]Kdse7 IKOHr]dedfOQOR7$9dOrGÒHJ]7 had to throwout ouroriginalfiscalplanand startoveronanew plan that IOO^ sffOHQIOc2HdKIO 0`fO4JQd9 Kds]Ì`dJ.Inthe months afterthe hurricanes,wenegotiatedintensively with Governor Rosselló and his advisorsoverthe termsofanew fiscal plan. We hadanexcellent working relationship on thewhole. In theend,wereachedagreement on nearly everything,withtwo majorexceptions.

-adc`KJId8fdNIÒQ 9sJNdQJÒQJ# *d rd]`dGdÌ4JdJJdQI`s]IasIIadKd rd ROedJIfHIJIO2HdKIO0`fO4JNdQJÒQJ# C`GdQIad edNIaOcIad fK`J`J$ everyconstituencyneeds to shareinthe sacrificePuerto Rico must bear to restorefiscalbalance onceagain.For pensions, ourcurrent fiscal plan JIsIdJ IasI s “q!SsGdKsbd KdeHfIÒQ `Q NdQJÒQJ `J sNNKONK`sId sQe QdfdJJsK7#”40 Moreover,the courtmight be reluctant to confirma restructuringplanthatmadesignificant cuts to othercreditors,but left the pensions entirelyintact. Thepensionshortfallisenormous with more than $50 billioninliabilities and almost no assets.41 Aproposaltoleave these Or]`bsIÒQJ HQIOHfade9OH]e “HQcs`K]7 e`JfK`R`QsId” sbs`QJIfKdeÌOKJ whose claims were subjecttorestructuring.42 -O NHI2HdKIO0`fO4J pensions on amorestablefooting, they needtobeshifted from adefined benefitplantodefined contribution. This hasalready commenced with thelargest of thepensions, and will be donewiththe otherpensions as well.43 To assure that thepensionadjustmentsdonot harm themost

39 See RaySanchez, HowPuertoRico'sdeathtollclimbed from 64 to 2,975 in HurricaneMaria,CNN.COM (Aug. 29,2018,2:59PM), https://www.cnn.com/2018/08/29/us/puerto-rico-growing-death-toll/index.html. 40 NewFiscalPlan, supra note9,at123.Asthisessay goes to press, theBoard is on theverge of certifyinganew fiveyearfiscalplan. Thenew fiscalplanisnot likely to differ dramatically fromthe current plan,but therewill be significantadjustmentsinsomeareas. 41 Id. 42 Theprohibition of unfairdiscrimination, whichcan be found in section1129(b)(1) (incorporated in TitleIII under section301(a)),precludes aplanfromgivingsignificantly better treatment to oneclass of unsecured creditors than to another class. In theDetroit bankruptcy, thecourtappliedasubjectivetestinconstruingthe requirement. In re City of Detroit, 524B.R. 147, 255-57 (Bankr.E.D.Mich. 2014). 43 -ad ERN]O7ddJ40dI`KdRdQI .7JIdRasJ pnm$!!!rdQdc`f`sK`dJsQe fdsJdeedc`Qde rdQdc`I sffKHs]J JIsKI`Qb `Q p!qo#-ad -dsfadKJ4 0dI`KdRdQI .7JIdRsQe @He`f`s] 0dI`KdRdQI 538 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

vulnerable workers, ourfiscalplanusesameanstest: thecutswillonly affect retirees with themost generous benefits; those whose total retirement benefits arebelow thepoverty levelwillbefully protected.44

-adJdfOQe d8fdNI`OQ9sJ ]srOK ]s9KdcOKR# 2HdKIO 0`fO4J]srOK laws providelavishbenefits and substantialprotectionfromworkers being laid off.45 Thebenefits areaboon forcurrent employees, whoare understandably reluctanttotrimthem,but thecost to employers discouragesbusinessesfromhiringnew employees.46 2HdKIO 0`fO4J ]srOK regulation is radicallyout of line with labor rulesinthe fifty states,forty- nine of whichprovide forat-will employment.47 Oureconomistprojected IasI KdcOKR`Qb2HdKIO 0`fO4J ]s9J$ sQe Rs^`Qb IadR ROKd ]`^dIad KH]dJ d]Jd9adKd`QIad ,#.#$ 9OH]esee qS Oc bKO9Ia s7dsKIO2HdKIO0`fO4J economy, or roughly$42 billionoverthe next 30 years.48

Unlike with pension restructuring, whichwecan achievethrough theTitle III process,the Boarddoesnot have thepower to enact legislation. Sincethe principal laborbenefits areensconcedinPuertoRico law, they canbechanged onlybyGovernor Rosselló and PuertoRico lawmakers.49 In June, 2018,therewas abrief period when significant laborreformseemedpossible.Byoffering to letGovernor Rosselló invest severalbillion dollarsofthe expected growth in thepeopleofPuertoRico, we were able to persuade himtosupportrepealofLaw 80,where the NK`Qf`Ns]NKOIdfIÒQJ sKdaOHJde# ZcIdK`QIdQJd edrsId `Q 2HdKIO0`fO4J House andSenate, thereforms were killed.50 “,QcOKIHQsId]7$” sJ OHKROJI KdfdQI c`Jfs] N]sQ NHIÌ$ “IadKd9sJ QO NO]Ì`fs]9`]]IOdQsfIIad ]srOK reform proposaloutlinedinthe April19, 2018 versionofthe NewFiscal

System, whichhavenot yet made afulltransition, have 80,000 and860 beneficiaries, respectively. NewFiscal Plan, supra note9,at119F23. 44 Id. at 123 (statingnocutstobeneficiaries whosebenefitsare belowthe poverty level). 45 Id. at 43. 46 Id. 47 Id. 48 Id. at 46. 49 To hiscredit, Governor Rossellóand Puerto Rico lawmakers didenact legislation reducingthe number of paid vacation days forpublicemployees to fifteen, whichiscloserto mainland norms,and adjustingother public employeebenefits. Id. at 74 (describingthe effect of Act26-2017). 50 Carrión&Biggs, supra QOIdq!'QOI`QbIad 2HdKIO 0`fsQ ]db`J]sIHKd4JKd_dfI`OQOcs reform effort). 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 539 (NOT CONTROL)BOARD

Plan, or to repeal Law80[thesourceofthe benefits]aswas requiredby Iad

Thecurrent fiscal planEcertifiedonOctober 23,2018E takes account of this resistancetoreform.52 Thankstoanexpected$82 billion of federal and privatedisasteraid,our projections show significantnear- term surpluses.Absent themassive boost that laborreformwouldprovide, however,the economyislikelytoreverttodeficitsinfiscalyear2034. This trajectory canbeseeninone of thekey graphs in thefiscalplan, 9a`faOQd Oc IadCOGdKQOK4J seG`JOKJ KdcdKJ IO sJ s “Jdd-saw#” 53

A4Gd Ns`QIde sr]ds^ N`fIHKdOc9adKdIa`QbJsKd `Q PuertoRico, but therehavebeenpositivedevelopmentsaswell. Governor Rosselló is committedtotruly transforming PREPA,the electricity company,which `J srJO]HId]7dJJdQI`s]IO2HdKIO 0`fO4J cHIHKd#*d4Kd 9OK^`Qb9Ìa Iad Governor to shiftPREPA awayfrom its heavy reliance on diesel oilto generate electricity, toward cheaperand cleanergeneration. The COGdKQOK4J bOs] `J cOK20E2Z IO dQIdK `QIO s]OQb-termconcession sbKddRdQI cOKIad RsQsbdRdQI Oc 20E2Z4JIKsQJR`JJÒQsQe e`JIK`rHIÒQ facilities,and to privatizemuch of thegeneration. This processiswell underway, with an ongoing auction forthe management contract and

51 NewFiscalPlan, supra note9,at46(emphasis removed). 52 Id. at 14. 53 Id.at11. 540 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

strong interest from privatesuppliers of solarenergyand other renewables.54

TheGovernoralsohas effected avoluntaryrestructuring of the COGdKQRdQI WdGd]ONRdQI YsQ^ '“CWY”&HQedK-`I]d +A Oc 203

Theother majorrestructuring development is theconfirmationof -Ì]d AAA4J N]sQ Oc se_HJIRdQI cOK2HdKIO0`fO4JJs]dJ Is8rOQeJEknownas COFINA.56 Theplanwillprovide roughly$17.5 billionofsavings for Puerto Rico over thenextforty years, and it is an important building block forthe larger and more complex TitleIII case of Puerto Rico as awhole.57 Somehaveargued that we shouldhaveheldout forevengreater savings `Q IadX3DA:ZfsJd$ cOKIad rdQdcÌOc2HdKIO0`fO4JfKdeÌOKJ sQeOIadK stakeholders. Butasmycolleague Arthur González pointedout in an op- ed, therewas averyrealriskthat thesales taxcreditors wouldhavewon this litigation, andevenlessofthe revenues wouldhavebeenavailablefor 2HdKIO 0`fO4J -Ì]dAAA fsJd#58

TheBoard itself hasalsomade considerable progressEand has maturedEover thepastthree years. TheBoard is an unusualcreaturefrom agovernanceperspective. Unlike acorporateboard of directors, which provides outsideoversight of thecorporation, theseven of us are

54 For agood overview of theseinitiatives, see P.R. Fiscal Agencyand Fin. Advisory Auth., AGovernmentPerspective:Energy Policy andRegulatory Reform in Puerto Rico (Jan. 18, 2019)(preparedfor 45th PURC/World Bank InternationalTrainingProgram on Utility Regulationand Strategy). 55 TheTitle VI restructuringand wind-downare described in GOVERNMENT OF PUERTO RICO, GovernmentDevelopmentBankfor PuertoRico: NewFiscal Plan 10F14 (Apr. 12, 2018). 56 Fin. Oversight andMgmt. Bd.for P.R., UnanimousWrittenConsent Approvingand Issuing Certifications Pursuant to Sections 104and 206ofPROMESAfor thePuertoRicoSales TaxFinancing Corporation(COFINA),(May9,2017), https://cases.primeclerk.com/puertorico/Home-DownloadPDF?id1=NjE3ODQx&id2=0 57 Id. 58 Arthur J. Gonzalez, Lawful )estructuring !ompromises "re 7ey to *uerto )ico’s Future,MORNING CONSULT (Nov.20, 2019), https://morningconsult.com/opinions/lawful- restructuring-compromises-are-key-to-puerto-ricos-future/. 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 541 (NOT CONTROL)BOARD principals.Weare likeagovernmental agencyinthisregardEand in fact, IadYOsKe 9sJd8NKdJJ]7fKdsIde sJ sQ “dQI`I7” 9`Ia`Q IadbOGdKQRdQI Oc Puerto Rico.59 In thebeginning,the Boardwas little more than theseven of us and afew advisers. TheBoardlooks quite different now. Since comingonasExecutiveDirectorinJune2017, afteroverseeingthe KdJIKHfIHK`QbOc,^Ks`Qd4J edrI sQe JdKG`QbsJ<`Q`JIdKOcD`QsQfd$:sIs]`d Jareskohas assembledafine staffofmorethantwentyemployees,nearly allofwhom arePuerto Ricanand live on theisland.60 Althoughour outside advisorscontinue to play an essentialrole, we nowhavesignificant internal capacity,including expertiseonissuesranging from media outreach to accounting andthe electricityindustry.The Executive Director runs things on aday-to-day basis and is theprincipal pointof contactfor ouradvisorsand formost outsiders, including Puerto Rico agencyheads and lawmakers.She is not technically amember of the Board, but in practice sheisinmany respects,eventhe less pleasant ones: her nameoften appears on thecaption with theseven of us when theBoard is sued by acreditorordisgruntledPuerto Rico lawmaker.

IV.THE CHALLENGESTHATHAVE EMERGED

This year is critical forthe OversightBoard and forPuerto Rico. Thepost-Mariarecoveryeffortisfar enoughalong that keyfeatures, such as theextentoffederal disaster relief,are slowly comingintofocus. It has beennearlythree yearssince PROMESAwas enacted and Puerto Rico suspended payment on nearlyall of itsdebt, andtwo years sincethe fORRdQfdRdQI Oc 2HdKIO0`fO4J-`I]d AAA fsJd#,QfdKIs`QI7 KdRs`QJ$ rHI it no longer precludesthe restructuringPuerto Rico needs.For theseven current Boardmembers, theAugust31, 2019, expirationdateofour three- year termsgiveusfurther incentivetocompletethe restructuringthis year.61

59 See 48 U.S.C. §2121(c)(1)(2016). 60 PROMESA expressly provides foranExecutiveDirector andappearstocontemplate that theExecutiveDirector functionlikeapowerfulchief of staff. 48 U.S.C. §2123(a)(2016). 61 Becausethe sevenofuscan remain in place until we arereplaced, it is possible that some or allofuswillserve beyondAugust 31, 2019.The Boarditselfwill continue until Puerto RifO asJ “sedLHsId sffdJJ IO JaOKI-termand long-IdKR fKdeÌRsK^dIJ” sQecOHK fOQJdfHI`Gd c`Jfs]7dsKJ `Q 9a`faKdGdQHdJ sKdsI]dsJIsJa`basJd8NdQeÌHKdJ$ “sJ edIdKR`Qde `Q sffOKesQfd 9Ìa ROe`c`de sffKHs] sffOHQI`QbJIsQesKeJ#” ni ,#.#X# >pqnh'q& P (2)(2016). 542 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

As we presstocompletethe firstwaveofreforms and to propose 9asI 9d aONd 9`]]rds“OQfd sQeeOQd” KdJIKHcturingplan, theBoard has encounteredavariety of new challenges.Three complications areof particularnote.

A. TheLimits of OurPower ThePuertoRicoBoardwas modeled on theWashingtonD.C. fOQIKO]rOsKe '“WX XOQIKO]YOsKe”&OcIad Rèqhh!J$ 9a`faaad enormous power over theWashingtonD.C.government.62 Thelegislation that createdthe DC ControlBoardput anew ChiefFinancialOfficer in N]sfd$ 9ÌasHIaOKÌ7OGdKs]] Oc *sJa`QbIOQ4JKdGdQHdJ sQe sQJ9dKsr]d primarilytothe DC ControlBoard.63 In 1997, twoyears afterthe DC ControlBoard wascreated,Congress expanded itspowers, giving it controlofnearlyevery agencyand department.64 TheDCControlBoard had awiderangeofadditionalpowersaswell.65 We havelearned, somewhat to our dismay,that thePuertoRicoBoard doesnot havequite sJ RHfa NO9dK#-ad WX XOQIKO]YOsKe9sJ sIKHd “fOQIKO]” rOsKe$ whereasthe sevenofusare an oversightboardEan oversightboard with significantpower,but an oversight board,nonetheless.

We firstcameface-to-facewith this realityshortlyafterHurricane Maria. It had quickly becomeclear that PREPA, theelectricity company, whichwas deeply troubled even beforethe hurricanes,wouldnot be able to restoreelectricity to theislandfor months.66 PREPAalsohad entered into alarge,highlycontroversial contractwithacompany called Whitefish, whichappearedtohaverelativelylittlecapacityand whose ownerswerefromthe Montana district of theSecretary of theInterior.67 We proposedtobring in aChiec-KsQJcOKRsI`OQ3cc`fdK '“X-3”&IOrdb`Q theprocess of transforming PREPAintoautilitythat canprovide reliable,

62 For an excellent overview of theD.C.ControlBoard andits actions,see DeborahI. Kobes, OutofControl?Local DemocracyFailure andFiscalControlBoards 185, 186(2009) (unpublished dissertation, Mass. Inst. of Tech.), availableathttp://hdl.handle.net/1721.1/55132. 63 Id. at 205F06. 64 See id. at 206F07. 65 Id. 66 FrancesRobles&PatriciaMazzei, *arts of *uerto )icoWon’t Ha#e *ower for - 6onths. What’s theHoldup? N. Y. TIMES (Dec.23, 2017), https://www.nytimes.com/2017/12/23/us/puerto-rico-power-outage.html. 67 See, e.g.,Christopher Helman, Is That $300 MillionPuerto Rico PowerContract (Whitefishgate’ +r 8usta)ed Herring,FORBES,Nov.3,2017. 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 543 (NOT CONTROL)BOARD affordable electricity.68 TheCTO wouldfunction very much likethe chief restructuringofficersappointed in many corporatereorganization cases, althoughwith somewhat broaderpowers.69 Iwas pretty surewecoulddo this.70

Unfortunately,Iam not thejudge. JudgeLaura Taylor Swaindenied our CTOrequest. Afterexplicitly contrastingour authority to thebroader powersgiven to theDCCOQIKO]YOsKe$ Jad ad]e IasI 2HdKIO0`fO4J OversightBoard can controlPREPA budgetsand require approval of 20E2Z fOQIKsfIJ$ rHI9dfsQQOI Is^d OGdK 20E2Z4J es7-to-day operations.71 TheCTO wouldhaveoperationalcontrol of PREPAand thus is beyond our authorityunder PROMESA,she ruled.72 Sheconcludedthe opinion withastrong call forthe OversightBoardand theGovernorto work together.73

Last summerbrought another disagreement aboutthe scope of our authority.Perhaps emboldenedbythe PREPACTO decision, Governor Rosselló argued that anythinginthe fiscal plan that touchesinany wayon policycan only ever be arecommendation.74 It cannotbindthe Governor. This timeJudgeSwain sidedwith theBoard. 75 “-adNO9dK rdJIO9deOQ theOversight BosKe” r7 IadNKOG`JÒQ bOGdKQ`QbKdfORRdQesIÒQJ$ Jad fOQf]Hede$ “s]]O9J Iad3GdKJ`baI YOsKeIORs^dr`Qe`Qb NO]`f7faO`fdJ cOKIad XORROQ9ds]Ia$QOI9ÌaJIsQe`Qb IadCOGdKQOK4J Kd_dfIÒQ” Oc Iad YOsKe4JfaO`fdJ#76 -adYOsKe4J NO9dK IO `RNOJd NO]`f7 `J QOIHnlimited, however. 77 It does notgiveusthe authority to enactlaws.78 “-aHJ$” @Hebd .9s`QfOQf]Hede$ “9Ìa KdJNdfIIONO]`f7RdsJHKdJ IasI 9OH]eKdLH`KdIad adoptionofnew legislationorthe repeal or modification of existing

68 SeeInreFin. Oversight &Mgmt. Bd.for P.R.,583 B.R. at 629. 69 Id. at 630. 70 -adCOGdKQOK sQea`J seG`JOKJ JddR IO asGd rddQ fOQcèdQI 9d fOH]eQ4I# XaK`JI`sQ .OrK`QO$ adseOc2HdKIO 0`fO4J c`Jfs] sbdQf7sQe IadCOGdKQOK4J d8-official member on the Oversight BOsKe$ ]dsQde OGdK IO Rd sI sRddI`Qbscd9ROQIaJ ]sIdKsQe Jsè$ “wOHeèQ4I JdKÒHJ]7 Ia`Q^7OH fOH]e9`Q IadX-3 fsJd$eè 7OH[” 71 In re Fin. Oversight &Mgmt. Bd.for P.R.,583 B.R. at 626. 72 Id. at 635F36. 73 Id. at 637. 74 In re FinancialOversight andManagementBoard forPuerto Rico,327 F. Supp3d okn$ oj!'W#2#0# p!qi&$ scc4e$ hqkD#oehi'qst Cir2019). 75 In re Fin. Oversight &Mgmt. Bd.for P.R.,327 F.Supp.3dat372.The case is currently on appeal. 76 Seeid. at 373. 77 Seeid. 78 Seeid. 544 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

Commonwealthlaw, theOversight Boardhas onlybudgetarytoolsand negotiations to use to elicit any necessary buy-infrom theelected officials sQe ]db`J]sIOKJ#”79

,Q]`^d IadWXXOQIKO]YOsKe OK WdIKO`I4J ERdKbdQf7

B. The Downside of EssentialFederal DisasterRelief Theawkwardness of ourpartnership withGovernor Rosselló has beenmagnified by therollout of federal disaster relief in theaftermath of Hurricane Maria. In one respect, we havebeenclosely aligned with Governor Rosselló.Westrongly supportedthe COGdKQOK4J dccOKIJIOs]dKI Washington to theextentofdevastation wrought by thehurricanesand his pleasfor federalhelp. We also shared someofhis concerns aboutthe recovery effort and whetherthe fundingwouldbereleasedinasufficiently timelyfashion.Itwas clearfrom thebeginning that Puerto Rico hadlittle hope of recoveryabsentgenerous federalaid.

Along with theflowerofhope provided by thefederaldisasteraid, thereisalso, unfortunately,adangerous weed.The flush of newfunding createsthe illusion of coming prosperity.The fiscal plan projects significantnear-term surplusesuntil fiscalyear2034.83 Thesenear-term

79 Id. at 373. 80 See Skeel, supra note5,at865; seealsoFactbox-*uerto )ico #sDetroit: What’s different? REUTERS (May 3, 2017,5:43PM),https://www.reuters.com/article/us-puertorico- debt-bankruptcy-detroit-fa/factbox-puerto-rico- vs-detroit-whats-different-idUSKBN17Z2LT. 81 Judge Juan Torruella is one of thebest-^QO9QfHKKdQI fK`I`fJOc2HdKIO 0`fO4J JIsIHJ# See, e.g.,JuanR.Torruella, WhyPuertoRicoDoesNot Need FurtherExperimentationwithits 9uture: ")eply to the 5otionof“Territorial 9ederalism;” 135HARV.L.REV.FORUM 65 (2018). 82 In re Fin. Oversight andMgmt. Bd.for P.R.,583 B.R. at 636. 83 NewFiscalPlan, supra note9,at11. 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 545 (NOT CONTROL)BOARD

JHKN]HJdJfKdsIdsJIKOQb e`J`QfdQI`GdcOK 2HdKIO0`fO4Jd]dfIde Occ`f`s]JIO implement governmental reform.The reluctanceisentirely understandable;the reformsare difficultand unlikely to be popularwith thevoterswhosesupportanelected official depends on. With federal funding comingin, theneedfor reform no longer seemsobvious. The problem is that thesurpluses aretemporaryEthefiscalequivalentofa sugar high.IfPuerto Rico does not reform thedysfunctionalfeaturesof its governance, itseconomywill revert to long-termdeficitswhen the temporarystimulusoffederal disaster relief wearsoff.

ThedraftersofPROMESAcannot have envisioned these conditions. Puerto Rico wasdesperatelylow on liquidity when 203

Idonot want to overstatethischallengeortosuggest no reformsare being made.Governor Rosselló hasmade significantreforms in some areasEmost visibly, in educationEand theBoardretains very important

84 48 U.S.C. §2194(2016). TheBoard extended theinitialstayfor an additional75 days,asauthorized by this section. It expiredonMay 1, 2017. 85 48 U.S.C. §2161(a) (2016) (incorporatingthe automaticstayinsection 362ofthe BankruptcyCode). 86 Much of this moneyislikelytoberestricted, andthus not directly availabletothe Commonwealth.The Boardhired Duff &Phelps to conductanextensiveinvestigationofthe bankaccounts. HannahCartwright, Duff &Phelps AppointedtoConduct aForensicAnalysis of *uerto )ico’s 9inances; PASQUINES (Feb.28, 2018),https://pasquines.us/2018/02/28/duff- phelps-appointed-conduct-forensic-analysis-puerto-ricos-finances/.Duff&Phelps completed theinvestigationinMarch,2019. SeeFiscalboard releases report detailing bank balances, CARIBBEAN BUS.,March 15,2019, https://caribbeanbusiness.com/fiscal-board-releases- report-detailing-puerto-ricos-bank-balances/. 546 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

powersthroughthe fiscal plan andbudgetaryprocess.But we do not have quite as much leverage as we originally assumed.

C. The Appointments Clause Challenge TheOversight Boardalsofaces an existentialchallenge. In 2017, hedgefund called Aurelius hiredTed OlsonEthesuperlawyer who representedthe Republicans in Bushv.GoreEto suethe OversightBoard, alleging thecurrent membersofthe Boardwerenot constitutionally appointed.87 AccordingtoAurelius, we should have beenappointed throughnominationbythe Presidentand adviceand consent of theSenate, rather than throughthe similaryet somewhat different process permitted by PROMESA.88 If theBoard wasnot constitutionally appointed, we did QOI asGdIad sHIaOKÌ7IOc`]d2HdKIO0`fO4J-Ì]d AAAfsJdsQe IadfsJd shouldbedismissed.89 Aurelius andanother objectorare betting, as the Washington Post KdfdQI]7 NHI Ì$ “IasI IadOGdKIaKO9 Oc Iad2KORdJsrOsKe 9`]] dQsr]dIadR IO edRsQe srdIIdKNs7OHI#”90

In theDistrictCourt, thecasefeaturedthree former solicitor generals:Olson;Don Verrilli,whom we hiredtodefendus; and Walter Dellinger, representingGovernorRosselló, whosided with theBoard (as didthe United States,one of thelargest groups of creditors,and Puerto 0`fO4JKdI`KddJ#&91 TheDistrictCourtconcluded that theOversight Board is aterritorial bodyEsQ dQI`I7 9`Ia`Q2HdKIO0`fO4JbOGdKQRdQIEand its membersare PuertoRicoofficers,not federalofficers subjecttothe AppointmentsClause.92 -adfOHKI IadKdcOKdKd_dfIdeZHKd]`HJ4 challenge.93

87 Nick Brown, Puerto Rico creditor Aurelius asks U.S. judge to throwout bankruptcy, REUTERS (Jan.10, 2018,5:04PM),https://www.reuters.com/article/us-puertorico-debt- bankruptcy/puerto-rico-creditor-aurelius-asks-u-s-judge-to-throw-out-bankruptcy- idUSKBN1EZ2UR. 88 Id. 89 Id. 90 Editorial, Aman-madedisasterloomsoverPuertoRico,WASH.POST (Mar. 3, 2019), https://www.washingtonpost.com/opinions/a-man-made-disaster-looms-over-puertorico/2019/03/03/b810c00a-3b9b-11e9-aaae- 69364b2ed137_story.html?utm_term=.31ae234e65ce. 91 In re Fin. Oversight &Mgmt. Bd.for P.R.,CaseNo. 17 BK 3283-LTS,at*1F2 (D.P.R.July 13, 2018). 92 Id. at *34. 93 Id. at *35. 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 547 (NOT CONTROL)BOARD

TheFirst Circuitreversed.94 In an opinion written by JudgeJuan -OKKHd]]s$Iad fOHKIKd_dfIde203

Thecourtdid not,however,invalidatethe actions takenbythe Board to date.Applyingthe de factoofficer doctrine, whichprotectsactions takenbyofficerswho appeartohaveproper authority, thecourt held that our actions to dateare fully enforceable.98 Thecourt also delayed `RN]dRdQIsIÒQOcÌJ KH]`Qb cOKh!es7J$ “JO sJ IO s]]O9Iad 2KdJèdQI sQe theSenatetovalidatethe currently defective appointmentsorreconstitute IadYOsKe `Q sffOKesQfd9Ìa IadZNNO`QIRdQIJX]sHJd#”99 Thecourt Rsed f]dsKIasI “uetHK`Qb Iadh!-day stay period, theBoardmay continue IO ONdKsId sJ HQI`]QO9#”100

TheFirst Circuitdecisionleftustwo possibleoptions forprotecting IadYOsKe4J sHIaOK`I7sQe IadKdJIKHfIHK`QbNKOfdJJ#-ad 2KdJ`edQI sQe Senatecould remove anydoubt by goingthrough theadviceand consent process,asthe opinioninvites them to do. As of this writing, thePresident has announcedhis intentiontonominatethe sevenofus, and to send our names to theSenatefor possible confirmation. It is not yetclear whether or when theconfirmation will take place.

Thesecond alternativeEwhichdoes not preclude thefirstEis appealingthe FirstCircuit ruling to theSupreme Court. We have now takenthisstep, asking theSupremeCourttotakecertiorari and review the First Circuitdecision. We also haveasked forastay of theFirst Circuit ruling whilethe SupremeCourt considersthe certiorari petition.

94 AureliusInvestment,LLC,et. al.v.Commonwealth of Puerto Rico,et. al., Case No. 18-1671, at 54 (1st Cir. Feb.15, 2019). 95 Id. at 46. 96 Id. at 40. 97 Id. at 49. 98 Id. at 53. 99 Id. at 54. 100 Id. 548 DELAWARE JOURNAL OF CORPORATE LAW VOL.43

Somehaveinsinuatedthatour primarymotiveinresponding to the First Circuitdecisionisself-aggrandizementE9d4Kd IK7`Qb IO NKOIdfIOHK positions. Thecontentionissomewhat odd giventhatthe sevenofusserve on theBoard withoutpay.Italsoismistaken. Whatmatters is the authority of theBoard as an entity, not whether anyofusisonthe Board. Only if avalid Boardisinplace canitcertify fiscal plansand budgetsthat restorefiscalbalance and access to thecapital markets. Andonlyavalid YOsKefsQ HJd-`I]d AAAOc203

DOKIHQsId]7$ IadYOsKe4J sHIaOK`I7 `J JdfHKdcOK sI ]dsJIh!es7J$ sQe thereafter if implementationofthe FirstCircuitrulingremains on hold whilethe SupremeCourtdecides whether to take certiorari.Itisuncertain whetherthe Courtwillindeedtakethe case,orwhether it willeventually HNaO]e203

IV.LOOKING FORWARD

Having emphasized thecurrentchallenges,Ishouldreiterate that therehas beenimportant progress as well.Asmentionedearlier,the court has approved twomajor restructuringplans,one forthe GDB and theother cOKX3DA:Z# AQ see`I`OQ$ 9a`]d 2HdKIO 0`fO4Jc`QsQfdJsKd JI`]]csK cKOR transparent,there has been improvement hereaswell. TheBoard now requires weekly public reportingofthe amount of cashinthe Treasury Single Account, andmonthlyfinancial reportsfromPuerto Rico and relatedentities. TheBoard also hasbecomeespeciallyvigilant about pushing forimplementationofthe reformsinthe fiscal plan andbudgets.

As thethree-yeartermofthe initialBoard memberswinds down, we expect to proposeEand hopefully seeconfirmedEaplanofadjustment cOK2HdKIO 0`fO#Ac20E2Z4JIKsQJcOKRsI`Onstays on track, thefoundation shouldbefully in placethisyear. Each of thesesteps is essential. Puerto 0`fO `J JI`]]s]OQb 9s7cKORJHffdJJ$sQe A4RQOI LH`Id sJ ONI`R`JI`fsJA wasatthe outset of my owninvolvement,but this could be theyearthat

101 Ourbriefinthe First Circuitchroniclesthe history.Brieffor Appelleethe Fin. Oversight andMgmt. Bd.for P.R. and theP.R.Fiscal Agencyand Fin. Advisory Auth., Aurelius Inv.,LLC, et al.,v.Puerto Rico,CaseNo. 18-1671(Oct. 1, 2018). 2019 NOTES FROMTHE PUERTO RICO OVERSIGHT 549 (NOT CONTROL)BOARD theoutlinesofanew, more economically vibrantPuerto Rico finallystart comingintofocus.

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