Weekly Review – June 4, 2020

Published on June 4, 2020 / Leer en español

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Weekly Review

Dear Readers:

This week our eyes turn first to our brothers and sisters (literally for some us) in the mainland, where the COVID-19 pandemic, economic stress, and racial unrest have combined to create a crisis without modern precedent.

Our Insights and Analysis section then brings us back to Puerto Rico. First, we present a brief analysis of the important U.S. Supreme Court decision in the case of the Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, LLC, which found that the appointment of the members of the Oversight Board did not violate the Appointments Clause of the U.S. Constitution.

Second, given that hurricane season is upon us, we announce the publication of a useful hurricane preparedness guide developed by ReImagina Puerto Rico, Habitat for Humanity, Enterprise Community Partners, and the Puerto Rico Builders Association.

We conclude with a look at the Puerto Rico Electric Power Authority (PREPA) and its claims that the island’s electric system is in better shape now than it was for the 2017 hurricanes. Given our prior experience with PREPA, we are skeptical, to say the least, as we enter the 2020 hurricane season. Please pardon our unwillingness to suspend disbelief.

Until next week and keep safe,

Sergio M. Marxuach, Editor-in-Chief

On Our Radar...

Disease, Unemployment, and Social Unrest: America in Crisis – The Washington Post provides a good analysis of the current crisis. In the words of the authors, “America’s persistent political dysfunction and racial inequality were laid bare this week, as the coronavirus death toll hit a tragic new milestone and as the country was served yet another reminder of how black people are killed by law enforcement in disproportionately high numbers. Together, the events present a grim tableau of a nation in crisis — one seared by violence against its citizens, plagued by a deadly disease that remains uncontained and rattled by a devastating blow to its economy.”

CBO: It Could Take Nearly 10 Years for the Economy to Fully Recover – The Congressional Budget Office in a recently published analysis “projects that over the 2020–2030 period, cumulative nominal output will be $15.7 trillion less than what the agency projected in January. That difference constitutes 5.3 percent of the value for cumulative nominal GDP for that period that the agency projected in January.” In terms of real output (adjusted for inflation), the “ CBO projects that over the 11-year horizon, cumulative real output (in 2019 dollars) will be $7.9 trillion, or 3.0 percent of cumulative real GDP, less than what the agency projected in January.”

Is 2020 the Worst Year in Modern American History? – James Fallows, writing for the Atlantic, compares the current turmoil with the events of 1968, perhaps the most traumatic year in American history since the Great Depression. According to Fallows, the “comparison provides little comfort.”

Insights + Analysis from CNE

9 justices U.S. Supreme Court
The nine justices of the U.S. Supreme Court

Financial Oversight and Management Board (FOMB) for Puerto Rico v. Aurelius Investment, LLC

The U.S. Supreme Court ruled that the appointment of the members of the FOMB did not violate the Appointments Clause of the U.S. Constitution. The Appointments Clause states that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States . . .” (Art. II, §2, cl. 2). The members of the FOMB were appointed pursuant to a complicated process that did not require the advice and consent of the Senate.

The majority opinion, written by Justice Breyer, held that (1) the Appointments Clause applies to “all Officers of the United States, even when those officers exercise power in or related to Puerto Rico”; (2) members of the FOMB were not “Officers of the United States” because; (3) they are “local officers” vested by Congress with “primarily local duties” (in contrast with “national or federal duties”) under Article IV.

Justice Thomas wrote a concurrent opinion but stressing that the relevant test to determine who is an “Officer of the United States” should not be based on whether the “officer” is in charge of primarily “national” or “local” duties; but rather on the distinction of whether the “officer” exercises “national or territorial powers”, which in his opinion was the intention of the members of the First Congress when determining the applicability of the Appointments Clause.

Justice Sotomayor wrote a strange concurring opinion that at times reads like a full blown dissent. According to Justice Sotomayor, Congress “relinquished” certain powers over Puerto Rico when it granted the island “home rule” pursuant to a “compact” between the people of Puerto Rico and Congress in 1952. In her view then, there are “serious questions about when, if ever, the Federal Government may constitutionally exercise authority to establish territorial officers in a Territory like Puerto Rico, where Congress seemingly ceded that authority long ago to Puerto Rico itself.”

The problem with Sotomayor’s approach, as she herself admits, is that no party addresses these issues nor the questions that arise from them. Therefore, she does not resolve those issues but “nevertheless write[s] to explain why these unexplored issues may well call into doubt the Court’s conclusion that the members of the Financial Oversight and Management Board for Puerto Rico are territorial officers not subject to the ‘significant structural safeguards’ embodied in the Appointments Clause.” In sum, she appears to be writing a roadmap for a future constitutional challenge to the FOMB.

Finally, Justice Breyer’s opinion contains an unfortunate statement that will surely provoke much argument in the near future. Towards the end of section III of his opinion, Breyer states that “in short, the Board possesses considerable power—including the authority to substitute its own judgment for the considered judgment of the Governor and other elected officials.”

This is an example of what lawyers call “obiter dictum”, a statement or remark by a judge that is not necessary or required to sustain the court’s legal conclusion. In the case at hand, the issue was whether the appointment of the members of the FOMB violated the Appointments Clause. To determine that issue, the Court did not have to analyze the scope and breadth of the FOMB’s statutory powers. Yet, by making this remark in passing, Breyer may unwittingly have provided ammunition to those who argue in favor of an expansive construction of the Board’s power, an interpretation that exceeds Congressional intent and the text of the law.

We can expect, therefore, the Board to quote this dictum to justify arbitrary or capricious policies and as it wrangles with opposition from the duly elected government of Puerto Rico as it seeks to preserve its sphere of operation.

Hurricane Preparedness

By Malu Blázquez

The 2020 hurricane season began June 1 amid the pandemic and the forecast is for it to be an above-average season with approximately 13-19 storms and 6-9 hurricanes. Puerto Ricans suffered greatly from the devastation caused by Hurricane Maria and the road to recovery has been difficult, but we learned some lessons that will help us to be better prepared for future emergencies. For example, preparing an emergency plan to help us minimize hurricane-related risks and their effects. Importantly, during these COVID-19 times, businesses and households will have to incorporate into their emergency plans (1) the storage of masks, gloves and cleaners and other items and equipment necessary to maintain a clean area; and (2) measures to maintain physical distance while sheltering from the storm.

Excerpt from Quick Guide to Hurricane Preparedness

Imagen de la Guía rápida para la preparación de viviendas ante huracanes

Habitat for Humanity, in collaboration with ReImagina Puerto Rico, Enterprise Community Partners, and the Puerto Rico Builders Association, has developed a Guide to Increase the Resilience of Homes Against Hurricanes. This Spanish-language guide, which is intended to serve as a resource for construction professionals as well as the general public, explains in simple terms important solutions to mitigate the impact of hurricanes and build resilience in Puerto Rico’s housing systems. The recommendations and practical advice presented are useful for new constructions, as well as for the repair and reinforcement of existing ones. This document also includes a section that functions as a Quick Guide to Hurricane Preparedness that sets forth the basic preparations our citizens must take to protect their homes and build resilience in their homes.

Is Puerto Rico’s Energy System Ready for Another Hurricane?

By Francis G. Torres

As we prepare for this year’s hurricane season, the state of Puerto Rico’s embattled energy grid is on everyone’s mind. Would a storm cause the kind of months-long blackout we experienced after Hurricane María? According to José Ortiz, executive director of the Puerto Rico Electric Power Authority (PREPA), Puerto Rico would lose power for “only” around two and a half months in the event of a large hurricane. He also assured that the system is more prepared now than it was for the historic 2017 hurricanes.

However, these claims invite ample skepticism in light of PREPA’s recent track record. In a hearing of the U.S. House of Representatives Committee on Natural Resources on April 9, 2019, we listed some of our ongoing concerns with Puerto Rico’s power authority:

“PREPA has repeatedly lied to its clients; has willfully and recklessly violated both federal and Puerto Rican environmental laws and regulations; has traditionally operated with little transparency and even less accountability; has been a focus of political and governmental corruption; its high and arbitrary rates and unreliable service have been a massive dead weight on the island’s economy; and it is currently bankrupt.”

In our view, very little has changed for the better since then.