Rebuilding the most costly and essential infrastructure projects — including those related to water supply, power service, education and recreation — which were affected after Hurricane María slammed into Puerto Rico in 2017, could take several more years to get off the ground.
So far, the Federal Emergency Management Agency has obligated money to only four of the 10 most expensive recovery projects requiring federal funds, the Center for Investigative Journalism (CPI, in Spanish) found.
The remaining six are in the project formulation stage before the federal agency, which is only the first of 19 evaluation steps when claiming funds for a structure that has been affected by an emergency. That first step includes filling out project worksheets (PW), in which the entity that claims losses to FEMA details the costs of the work and the breakdown of any applicable insurance reimbursement. Completing the entire evaluation could take months and even years, several local and federal government officials interviewed by the CPI confirmed.
These ten projects that lead — given their cost — the list of 5,207 claims that the government of Puerto Rico has submitted so far through the FEMA Public Assistance program in the permanent works categories, require an evaluation based on Section 428 of the Stafford Act. This alternate evaluation process seeks to reduce the expenses for the U.S. coffers associated with rebuilding public infrastructure.
To implement this procedure, FEMA develops project estimates based on fixed costs in collaboration with the government of Puerto Rico and with the requesting entities, which may be agencies, nonprofit organizations or municipalities. All claims under Section 428 are eligible for a 90% federal subsidy.
The project that leads the list of infrastructure works under Section 428 is a set of Puerto Rico Electric Power Authority (PREPA) assets — which includes substations, transmission and distribution lines, buildings and reservoirs, among others — which were consolidated in a single project of more than $10 billion. FEMA obligated $9.4 billion for this project in September 2020.
Fernando Padilla, executive director of Projects and Physical Affairs at PREPA, said the decision to consolidate all the affected assets in a single project responds to the fact that they could be “executed in a more resilient and more reliable manner, guaranteeing code and security standards, to comply with mitigation processes and with Section 428’s mitigation strategy.”
Before grouping the projects, PREPA’s claim for some of the affected assets had been submitted to FEMA individually, some since 2018. Padilla ruled out that the consolidation would entail further delays. However, he acknowledged that the reconstruction projects could take up to 10 years.
“Any program is basically exposed to the same liability risks. PREPA is now required to submit a 10-year plan under regulation (428), which is what we’re working on now. We hope to deliver it in early December,” he said.
Although four projects have money that FEMA allocated — one of them since 2018 and the other three this year — this does not ensure that the agencies will receive the disbursement of these funds before the end of 2020. Once FEMA obligates funds for a project, the Puerto Rico Central Office of Recovery, Reconstruction and Resiliency, known as COR3, is in charge of disbursing the money after the construction project is completed and compliance assessments and inspections are carried out.
In response to questions from the CPI, FEMA did not specify when all of the projects under Section 428 will complete their cost estimates, nor when will they get a funding obligation, and limited itself to answering that it works with the government of Puerto Rico “to meet the 428 fixed cost estimate deadline,” which is December 31, 2020.
Meanwhile, José Baquero Tirado, the new federal Recovery Coordinator for Puerto Rico and the U.S. Virgin Islands, told the CPI in September that FEMA’s goal is to obligate 60% of the funds by December 2020 for all projects that it is evaluating — including those under Section 428. He estimated that 100% of the obligations for all projects claimed would be completed in 2021.
COR3 Executive Director Ottmar Chávez Piñero, offered a more conservative projection, arguing that the obligation for all projects would only reach 50% before the end of the year. Even so, he agreed with Baquero Tirado that all the obligations would be assigned in 2021, specifically in the summer. In an interview in September, Chávez Piñero told the CPI that nearly 3,000 permanent construction projects had already been obligated. Of those, about 2,021 were small projects and about 960 were large projects.
The evaluation process under Section 428, far from speeding up the disbursement of funds, has resulted in delays and a lag in starting the bigger projects, as the government of Puerto Rico has said several times, including when testifying on the status of the recovery process before Congress.
In 2018, then-Governor Ricardo Rosselló Neváres stated before the main adviser on National Security in the White House, Douglas Fears, and the head of resilience and member of the Security Council, Mark Harvey, the “need to amend Section 428 of the Stafford Act to make the use of allocated federal funds more flexible.”
While representing the government of Puerto Rico during a public hearing in Congress in 2019, Omar Marrero, executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority, acknowledged that the implementation of Section 428 had delayed the post-hurricane recovery process.
“A series of decisions by Federal agencies have slowed our post-disaster recovery, compared to the post-disaster recovery in other jurisdictions stateside. These actions threaten the timely and successful execution of our Recovery Plan. Among these are: inconsistencies in FEMA guidance with respect to the implementation of Section 428 Alternative Procedures for permanent work Public Assistance,” Marrero told the Subcommittee on Environment of the House Committee on Oversight and Reform.
Section 428 would apply to all permanent work projects under the Public Assistance program whose cost exceeds $123,100. Marrero said the main problem with applying this alternate evaluation process is that “it had never been used before” as a whole to address a disaster in any jurisdiction or territory of the United States.
“We continue to work with FEMA as it implements this new program  on the island to understand how FEMA will adjust the program to account for the current ‘FEMA-State’ agreement and look forward to FEMA’s response to our request to amend the ‘FEMA-State’ agreement to account for the implementation of this new program. Most critically, we look forward to ensuring Puerto Rico leads its own recovery — just as every other state in the union is able to do, such as the ability to decide whether traditional PA or the 428 process is best for each individual recovery project,” he said in his testimony in 2019.
But it was not until January 2020 that FEMA made changes to the application of Section 428 in Puerto Rico’s recovery process. The federal agency said that from that moment on, the reconstruction of municipal structures and some infrastructure projects described as “non-critical” — such as highways — would be channeled through Section 406. Unlike 428, projects considered under Section 406 don’t require that the federal government and the recovery funds applicant agree or pre-determine an estimate on the cost of the proposed project .
In contrast, Section 428 requires FEMA, COR3, and the agency, municipality, or nonprofit organization requesting the money, to agree on the total cost of the project. Projects evaluated under Section 406 are exempt from meeting the condition that their cost estimate exceed $123,100, as Section 428 requires.
The Puerto Rico Aqueduct and Sewer Authority’s (PRASA) $4 billion funding request under 428 follows PREPA’s consolidated projects on the list of the 10 most expensive works. Like PREPA, PRASA’s project was prepared under FEMA’s Accelerated Obligation Strategy (known as FAAST), but has received no funding obligations so far.
PRASA has four other projects listed in the top 10 list. Of this group, only one has received an obligation of funds. It is a design and architecture project for permanent works that received a $180 million obligation from FEMA in 2018.
The Department of Education’s proposal to repair schools and other buildings is the third-largest project under Section 428, for which FEMA has allocated about $2 billion.
Other projects among those top 10 are from the University of Puerto Rico, for its Medical Sciences and Bayamón campuses, for which $66.2 million and $56.8 million are being sought, respectively. None of these projects have received funding obligations, according to data that COR3 provided.
A consolidated claim to repair recreational facilities that the Department of Sports and Recreation (DRD, in Spanish) submitted is also included in that top 10 list. Although this project is one of four that has already received a funding obligation of $88 million, the fact that some municipalities requested funds for the same facilities caused a problem of duplication of claims, as the DRD revealed in August.
This situation has delayed the bidding processes, and consequently, repairing the recreational areas in 20 municipalities. In October, the DRD announced it had only reached agreements with seven of the 20 municipalities involved in this impasse over the doubled claims.
The delay in the funding obligation for projects under Section 428 could be broader if considering that there are projects that are still in the formulation stage at FEMA and are not yet under evaluation to, eventually, receive a funding obligation.
COR3 Deputy Executive Director Roberto Méndez said the list that the agency provides is constantly changing, “since there are projects in the formulation stages (insurance adjustments, etc.), review and obligations under the FAAST initiative, which will change these lists.”
At the moment, the 5,207 projects already included in that list of works requiring an evaluation under Section 428 total $23.7 billion in FEMA funds claims.
Víctor Rodríguez Velázquez and Rafael R. Díaz Torres are members of Report for America