Puerto Rico Gov. Luis Fortuño Embraces PPPs

Puerto Rico Governor Luis Fortuño recently sat down with Matt Welch of, where they discussed a wide range of topics. Gov. Fortuño explains in the interview that during his time in office he has:

  • Negotiated a six-month window to address Puerto Rico’s fiscal issues and avoid junk bond ratings;
  • Balanced a staggering budget deficit equal to 44% of the prior fiscal year budget;
  • Cut government spending by more than 20%;
  • Reduced unemployment from 17% to 14.5%;
  • Eliminated positions for 17,000 public employees;
  • Already lowered corporate taxes from 41% to 30%, with further reduction to 25% by 2014;
  • Lowered individual taxes by 25%, and enacted a progressive scale that will (assuming the budget remains balanced) reduce individual taxes by as much as 49% by 2015.

One especially interesting section of the interview is Gov. Fortuño’s discussion of public-private partnerships (PPPs) in Puerto Rico, he notably says, “It is obvious that our governments no longer have the kind of money we used to have to develop our basic infrastructure.”

A clip of the PPP discussion is available below, from 20:08-22:05.

Reason Foundation discussed Gov. Fortuño’s approach towards PPPs at length in the Annual Privatization Report 2010: State Government Privatization section. Below is an excerpt from that section:

The 2009 law (Act No. 29) authorizes any government agency to enter into PPPs with private firms for the design, construction, financing, maintenance or operation of public facilities. In return for upfront payments, the Commonwealth would grant investors long-term leases during which they could recoup user fees. Under the law, most PPP contracts are limited to 50-year leases, though legislators can approve an extension up to 25 additional years. The law also established a new Public Private Partnership Authority (PPPA), a unit within the Government Development Bank responsible for identifying, evaluating and selecting PPP projects and for monitoring and enforcing the terms of PPP contracts… Initiatives advanced by the PPPA thus far include:

  • In November 2010, the PPPA issued a request for proposals to four qualified firms for a long-term lease covering operations and improvements to toll PR-22 and PR-5, two existing toll roads currently owned and operated by the public sector. Bids are due in March 2011.
  • Puerto Rico is laying the groundwork to transfer the management of San Juan’s Luis Muñoz Marin Airport to a private operator in 2011 in order to modernize the airport without public funds and generate up to $1 billion in upfront proceeds for public coffers…
  • According to the PPPA, public schools in Puerto Rico face approximately $1.4 billion in renovation and facility modernization needs across their system of approximately 1,500 schools… the Fortuño administration and PPPA have launched the “Schools for a 21st Century” PPP program, under which Puerto Rico will enter into concessions with private operators to design, build and maintain approximately 100 schools across Puerto Rico…
  • In August, the PPPA and the Puerto Rico Aqueduct and Sewer Authority (PRASA) announced that they had received 13 statements of qualifications from consortia interested in bidding on a PPP to automate water meter reading. The project involves the design, development, financing and operation of advanced technology for automated water meter reading, the implementation of a geographic information registry of PRASA customers and the reduction of non-revenue water.

For more, download the full State Government Privatization section here, and see the entire Annual Privatization Report 2010 here.