Puerto Ricos Reconstruction Stalled Despite Access to Billions in Federal Funds

Puerto Ricos reconstruction efforts face challenges, with less than 10% of $23 billion in federal funds utilized. Permanent projects remain pending, costs escalate, and the process risks stalling.

Puerto Rico, still reeling from the devastation of two major hurricanes and a series of earthquakes, has made slow progress in its reconstruction efforts, with less than 10% of the available $23 billion in federal funds utilized, according to a recent US government report.

Challenges Hinder Reconstruction

The US Government Accountability Office (GAO) audit revealed that Puerto Rico faces significant challenges in completing permanent projects, as costs continue to rise, threatening to halt the rebuilding process. More than six years after Hurricanes Irma and Maria, the island's recovery remains ongoing, compounded by the earthquakes that struck in late 2019 and early 2020, causing further damage.

Unaccessed Federal Funds

The report highlighted that over $11 billion of the $23.4 billion awarded by the Federal Emergency Management Agency (FEMA) following the hurricanes and earthquakes remains inaccessible to Puerto Rico's government, awaiting the agency's approval before it can be utilized. The reasons for this delay are unclear, as the Office for Recovery, Reconstruction, and Resiliency, responsible for receiving and awarding federal grant funds, did not immediately respond to requests for comment.

Priority Projects and Rising Costs

The federal funds are intended to finance over 9,300 permanent projects, with a significant portion allocated to public utilities and public buildings and equipment. However, rising costs have emerged as a major obstacle, with the GAO audit citing examples of project cost overruns. For instance, the cost of a water treatment plant exceeded its initial estimate by over 40%, while the cost of parts for a power plant increased from $9 million to $12 million. These escalating costs pose a significant concern due to their cumulative impact, potentially limiting the completion of planned projects.

Delays and Supply Chain Issues

The audit also identified other factors contributing to the delays in reconstruction. Interruptions in the global supply chain have extended the delivery time for construction materials, with the power company experiencing delays of up to three years for essential components. Additionally, the island continues to grapple with chronic power outages, exacerbating the challenges faced by the reconstruction efforts.

Workforce Shortages and Funding Flexibility

The report further highlighted the shortage of skilled workers, ranging from architects to construction contractors, as a significant impediment to recovery efforts. In response to the audit's findings, Puerto Rico's government has requested more funding flexibility and acknowledged the impact of labour shortages in the local construction industry. The government also cited reduced insurance coverage for several projects and lengthy litigation between fund recipients and insurance companies, which limits the ability to prioritize projects until insurance settlements are reached.

Ongoing Fiscal Crisis and Natural Disasters

Puerto Rico's reconstruction efforts are further complicated by the island's ongoing fiscal and economic crisis, having recently emerged from the largest US municipal bankruptcy in history. The audit recommended that FEMA develop a risk management plan to address these challenges, which the agency intends to implement this month. While FEMA's monitoring of Puerto Rico's use of public funds has shown improvement from 2018 to 2020, more recent reviews are still pending.

Puerto Rico's reconstruction journey remains arduous, with numerous challenges hindering progress. The island's government and federal agencies must work together to address rising costs, supply chain disruptions, workforce shortages, and funding constraints to accelerate the rebuilding process and ensure the island's long-term recovery.