[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 
  EXAMINING CHALLENGES IN PUERTO RICO'S RECOVERY AND THE ROLE OF THE 
               FINANCIAL OVERSIGHT AND MANAGEMENT BOARD

=======================================================================

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                       Tuesday, November 7, 2017

                               __________

                           Serial No. 115-27

                               __________

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                     COMMITTEE ON NATURAL RESOURCES

                        ROB BISHOP, UT, Chairman
            RAUL M. GRIJALVA, AZ, Ranking Democratic Member

Don Young, AK                        Grace F. Napolitano, CA
  Chairman Emeritus                  Madeleine Z. Bordallo, GU
Louie Gohmert, TX                    Jim Costa, CA
  Vice Chairman                      Gregorio Kilili Camacho Sablan, 
Doug Lamborn, CO                         CNMI
Robert J. Wittman, VA                Niki Tsongas, MA
Tom McClintock, CA                   Jared Huffman, CA
Stevan Pearce, NM                      Vice Ranking Member
Glenn Thompson, PA                   Alan S. Lowenthal, CA
Paul A. Gosar, AZ                    Donald S. Beyer, Jr., VA
Raul R. Labrador, ID                 Norma J. Torres, CA
Scott R. Tipton, CO                  Ruben Gallego, AZ
Doug LaMalfa, CA                     Colleen Hanabusa, HI
Jeff Denham, CA                      Nanette Diaz Barragan, CA
Paul Cook, CA                        Darren Soto, FL
Bruce Westerman, AR                  A. Donald McEachin, VA
Garret Graves, LA                    Anthony G. Brown, MD
Jody B. Hice, GA                     Wm. Lacy Clay, MO
Aumua Amata Coleman Radewagen, AS    Jimmy Gomez, CA
Darin LaHood, IL
Daniel Webster, FL
Jack Bergman, MI
Liz Cheney, WY
Mike Johnson, LA
Jenniffer Gonzalez-Colon, PR
Greg Gianforte, MT

                      Cody Stewart, Chief of Staff
                      Lisa Pittman, Chief Counsel
                David Watkins, Democratic Staff Director
                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Tuesday, November 7, 2017........................     1

Statement of Members:
    Bishop, Hon. Rob, a Representative in Congress from the State 
      of Utah....................................................     1
        Prepared statement of....................................     4
    Grijalva, Hon. Raul M., a Representative in Congress from the 
      State of Arizona...........................................     5
        Prepared statement of....................................     6

Statement of Witnesses:
    Jaresko, Natalie, Executive Director, Financial Oversight and 
      Management Board for Puerto Rico, San Juan, Puerto Rico....     9
        Prepared statement of....................................    11
        Questions submitted for the record.......................    24
    Otero, Hon. Angel Perez, Mayor, City of Guaynabo, Puerto Rico    32
        Prepared statement of....................................    33
    Zamot, Noel, Revitalization Coordinator, Financial Oversight 
      and Management Board for Puerto Rico, San Juan, Puerto Rico    18
        Prepared statement of....................................    21
        Questions submitted for the record.......................    24

Additional Materials Submitted for the Record:
    List of documents submitted for the record retained in the 
      Committee's official files.................................    83
    Massachusetts Black and Latino Legislative Caucus, September 
      29, 2017 Letter to Rep. Tsongas............................    53
                                     



OVERSIGHT HEARING ON EXAMINING CHALLENGES IN PUERTO RICO'S RECOVERY AND 
        THE ROLE OF THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD

                              ----------                              


                       Tuesday, November 7, 2017

                     U.S. House of Representatives

                     Committee on Natural Resources

                             Washington, DC

                              ----------                              

    The Committee met, pursuant to notice, at 10:09 a.m., in 
room 1324, Longworth House Office Building, Hon. Rob Bishop 
[Chairman of the Committee] presiding.
    Present: Representatives Bishop, Gohmert, Lamborn, Wittman, 
McClintock, Pearce, Thompson, Labrador, Tipton, LaMalfa, 
Westerman, Graves, Hice, LaHood, Webster, Bergman, Cheney, 
Johnson, Gonzalez-Colon, Gianforte; Grijalva, Napolitano, 
Bordallo, Costa, Sablan, Tsongas, Lowenthal, Beyer, Torres, 
Gallego, Hanabusa, Barragan, Soto, McEachin, Brown, Clay, and 
Gomez.
    Also present: Representatives Serrano, Gutierrez, 
Velazquez, and Ruiz.
    The Chairman. The Committee on Natural Resources will come 
to order.
    I welcome you all here today. We are meeting to hear 
testimony on examining the challenges in Puerto Rico's recovery 
and the role of the Financial Oversight and Management Board.
    I ask unanimous consent that the gentleman from California, 
Mr. Ruiz; the gentleman from New York, Mr. Serrano; the 
gentleman from Illinois, Mr. Gutierrez; and the gentlewoman 
from New York, Ms. Velazquez, all be allowed to sit with the 
Committee and participate in the hearing. And I notice at least 
three of you are already here, thank you.
    Hearing no objections, that is so ordered.
    Under Committee Rule 4(f), any oral opening statements at 
the hearing are limited to the Chairman, the Ranking Minority 
Member, and the Vice Chair. This will allow us to hear from our 
witnesses sooner. I am asking unanimous consent that any other 
Member that has an opening statement, they will be made part of 
the hearing record if they are submitted to the Subcommittee 
Clerk by 5:00 p.m. today.
    Once again, without objection, that will be so ordered.
    First, I appreciate the witnesses being on the panel. Let's 
start with the opening statements first, and I will recognize 
myself for the original opening statement.

STATEMENT OF THE HON. ROB BISHOP, A REPRESENTATIVE IN CONGRESS 
                     FROM THE STATE OF UTAH

    The Chairman. We are here today to look at the hurricane-
impacted territories of Puerto Rico and the Virgin Islands. 
Next week, the governors from Puerto Rico and the Virgin 
Islands will be here with us also to testify.
    Before we start, I want it very clear that our thoughts and 
prayers are with those who are still suffering in the Virgin 
Islands and Puerto Rico, as well as in Florida and Texas who 
have suffered these hurricane damages. I also want to thank the 
emergency responders for all their hard work and kind efforts 
and what they have done.
    There is still a humanitarian crisis going on in Puerto 
Rico and the Virgin Islands, but today we are going to 
concentrate on Puerto Rico. The hurricanes may have gone, but 
now mudslides are threatening people. So, this is not over yet, 
and there is much work that still has to be done.
    Today, the Committee is going to examine the challenges to 
recovery in Puerto Rico and the role of the Financial Oversight 
and Management Board.
    The two hurricanes that hit may have been historic, but 
they exposed a state of affairs in Puerto Rico that existed 
well before any of the hurricanes made landfall. Decades of 
mismanagement led to a paralyzing debt burden. Last year, 
Congress stepped forward with a bipartisan PROMESA bill that 
was signed into law to try to rectify this particular problem.
    The Board has, so far, been focused on governance reform. 
But now, with this hurricane, there is also other work that the 
Board must be doing, and the Board's work has become even more 
complicated as we move forward.
    For example, we have to deal with the Puerto Rico Electric 
Power Authority, known as PREPA, which was already bankrupt, 
severely mismanaged, with a long history of inadequate 
maintenance and political cronyism.
    Recovering the power grid remains of paramount interest and 
importance to us. Energy is not only important to the people's 
lives in the emergency situation, but if Puerto Rico is to 
economically recover and become vibrant, it has to have 
reliable, abundant, and affordable energy. And that is really 
one of the key elements if we are going to do anything 
whatsoever with that.
    I appreciate the appointment of the Chief Transformation 
Officer of PREPA, and I appreciate the fact that the Board is 
now looking at contract review policies as part of the role of 
PROMESA. These are decisions that make it important, because we 
do not want another situation like Whitefish to happen again, 
which may have had some initial purpose to it, but the 
procedure was certainly suspect. And I appreciate that there 
has to be some kind of oversight for this going through there.
    What we are concerned with today is making sure that the 
Oversight and Management Board, the PROMESA board, has the 
tools they need to fulfill this responsibility and move 
forward, and also has cooperation. We have four entities down 
there on the island that are working on the recovery. There is 
the Commonwealth government, the Oversight Board, and there are 
also two Federal agencies, FEMA and the Army Corps of 
Engineers. All four of them have to work together. Otherwise, 
it is simply chaos. This cannot be an adversarial situation. 
And what we are going to do today is make sure that we have the 
tools necessary to see that go into fruition. The Board is not 
going to go away until their job happens to be finished at some 
particular time.
    So, in today's hearing we are not going to ascribe blame. I 
hope we don't try to play politics. Our goal is to fix the 
problems and help the people. The problems in Puerto Rico and 
the Virgin Islands are too serious for us to politicize and try 
to make headlines. We owe the citizens more than that.
    Last week, or yesterday, actually, Mr. Graves came back 
from Puerto Rico with Representative Gonzalez. Ten days ago, 
there were five of us that went down there: Mr. Denham, Mrs. 
Torres, Mr. Brown, myself, and Ms. Gonzalez, along with the 
Majority Leader and the Minority Whip, to see firsthand what is 
happening down there in both the Virgin Islands and in Puerto 
Rico. It is very clear from what we saw that the devastation 
and the suffering is sobering, and it is real.
    [Slide.]
    The Chairman. What was the positive aspect of this is, even 
though their homes are broken, their spirits are not. We went 
into the interior, not staying around San Juan, into this 
particular community. As you can see, there was a bridge that 
connected the one side of the valley with the other side of the 
valley where the stores and the roads and the community were. 
That bridge was washed out in the hurricane. That is all that 
is left.
    The ingenuity of those 22 families on the other side is 
brilliant, because they have jerry-rigged this contraption, 
which means it simply is a zip line with a supermarket cart 
attached to it, where they can take it from the one side, where 
the stores are, put the supplies in, and then manually bring it 
across to the other side, a very ingenious contraption.
    It is also one of those things in which we were able to, 
you notice there is a very wooden ladder going up, give me the 
next slide, if you would.
    [Slide.]
    The Chairman. And Tony here actually, Representative Brown, 
was the first one to go across the river bed, to go up that 
ladder, followed by the rest of us. I promise you OSHA did not 
actually certify that particular ladder.
    As we all walked to the other side to meet those 22 
families that are not there, give me the next one, if you 
could, and I think Mrs. Torres can verify this, going down was 
a lot slower than it was going up. Yes, that ladder.
    [Slide.]
    The Chairman. But this is what I found on the other side. 
The Governor and Representative Gonzalez are there, and I have 
to give kudos to Representative Gonzalez. No one works harder 
to try to help her constituents down there than Representative 
Gonzalez has. She is not only the first female Representative 
from Puerto Rico, she is also the youngest they have ever had. 
And that energy is shown every time she has gone with every 
single group that has gone down there, to show them exactly 
what is taking place in that time.
    But what I want to point out is the teenager that is 
standing with us right there. I had the opportunity of meeting 
that kid on the other side. He is one of the 22 families that 
are cut off from the rest of the village, using the zip line 
and the wooden ladder, just trying to get from side to side.
    But that kid was amazing. He was a fascinating kid, he was 
interested in what was going on, he was intellectual, he was 
fluent, and he wanted to become involved in the future. I was 
so excited talking to him, because that kid, that kid, is the 
future of Puerto Rico. That kid is why I know that Puerto Rico 
is not just going to recover, they are going to succeed. And 
the spirit that he had is the kind of spirit we saw in all of 
the citizens with whom we were talking that realize they were 
not after some kind of blame, they are simply after a way of 
making their lives better.
    What I want our Committee to do, which has general 
jurisdiction over there, is to make sure that we have the tools 
for the Board, and we have the tools for the government to make 
sure that the dreams that that kid has will be realized. That 
is Puerto Rico to me.

    [The prepared statement of Mr. Bishop follows:]
   Prepared Statement of the Hon. Rob Bishop, Chairman, Committee on 
                           Natural Resources
    Good morning. This meeting is a continuation of oversight of 
hurricane-impacted territories of Puerto Rico and the U.S. Virgin 
Islands. In addition to today's hearing, next week we will hear from 
the governors of Puerto Rico and the U.S. Virgin Islands.
    Let me begin with thoughts and prayers for these communities, and 
offer thanks to emergency responders and everyone involved for their 
bravery during hardship. In both territories, the detestation is 
overwhelming.
    Today, the Committee will examine recovery challenges in Puerto 
Rico and the role of the Financial Oversight and Management Board.
    Hurricane Maria, although historic in its severity, exposed the 
tragic state of affairs that existed on the island well before its 
landfall. Decades of mismanagement led to a paralyzing debt burden. The 
government and its municipalities, already constrained by the fiscal 
crisis, are now severely overwhelmed despite Federal support.
    Last year, Congress took a step forward to help Puerto Rico 
restructure and reform with the creation of a Federal Oversight Board 
under a law known as PROMESA that was signed into law on a bipartisan 
basis in July 2016. Since their appointment, the Board has focused on 
governance reform, the formulation of fiscal plans and budgets for the 
territory and the facilitation of debt restructuring. With the recent 
devastation, however, the Board's work has become even more difficult 
and complicated.
    For instance, the Puerto Rico Electric Power Authority, known as 
PREPA, was already bankrupt and severely mismanaged with a long history 
of inadequate maintenance and political cronyism. Restoring the power 
grid is paramount to immediate emergency needs. Long-term energy 
transformation is equally important. Transparent accountability at 
PREPA, now and moving forward, is essential for both to succeed. The 
Board will play a critical role ensuring all parts of this puzzle 
align.
    The Board's actions in this regard include the appointment of a 
Chief Transformation Officer of PREPA, Mr. Noel Zamot, and the 
implementation of a contract review policy in accordance with PROMESA. 
Both steps will add needed transparency, accountability and structure 
to the island's recovery.
    While there is no question the Board provides a critical nexus for 
Congress and the Administration to carry out a coordinated recovery 
effort, there are concerns whether the tools the Board possesses can 
meet the challenge and ensure long-term success. Transparent 
accountability at all levels is essential to a sustained recovery with 
the full support of Congress. With this imperative in my Committee, and 
strong cooperation between the Commonwealth, the Oversight Board and 
Federal partners--including FEMA and USACE--we can achieve a viable 
path forward for Puerto Rico.
    [Slideshow.]
    Ten days ago, a congressional delegation led by the House Majority 
and Minority Leader, visited both territories and Florida. In Puerto 
Rico, residents are still suffering. The infrastructure is demolished 
in many areas. Communities remain isolated.
    During our visit to the central mountainous region of Puerto Rico, 
we met with residents in the remote town of Utuado. A bridge connecting 
the main north-south road was entirely wiped out. The residents had 
built a pulley system overhanging the divide. Attaching a shopping cart 
to the line, the jerry-rigged contraption was their lifeline to food, 
water and supplies. We all walked across the river and up the stairs. 
We spoke with residents. The conversations were fascinating. While 
homes are broken and lives have been lost, spirits are not.
    In this context, the point today isn't to ascribe blame or browbeat 
or play politics. The goal isn't to shame for shame sake. The goal is 
to fix problems and help people. The problems in Puerto Rico are too 
serious for us to politicize or seek headlines. We owe these citizens 
more than that.
    I thank our witnesses for appearing today and look forward to 
today's testimony.

                                 ______
                                 

    The Chairman. With that, I apologize for going over, but I 
didn't care, I wanted you to see that kid.
    [Laughter.]
    The Chairman. I will yield to the Ranking Member.

  STATEMENT OF THE HON. RAUL M. GRIJALVA, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Grijalva. Thank you, Mr. Chairman. Yourself, and the 
Members that have gone to Puerto Rico, have been on the ground, 
and have firsthand experience and observations about the 
urgency and the need for this Congress to respond in a 
proactive and transparent way, and in a way that deals with the 
emergency and the urgency as it is now. As we go forward, how 
do we build sustainability, resilience for the long-term, both 
in the economy and the growth of the rebirth of the 
infrastructure on the island of Puerto Rico.
    If a man is drowning in the ocean, you don't stop to tell 
him he should take swimming lessons. If a woman is having a 
heart attack, you don't take time to preach to her about the 
value of a low-fat, gluten-free diet. Instead, you act 
immediately to save lives. Our American brothers and sisters 
living on the island of Puerto Rico are drowning in the ocean. 
Their water, sewer, transportation, electricity, health, and 
banking systems are in the midst of what we would consider 
grave danger, if not close to a fatal heart attack.
    Puerto Rico, quite frankly, does not need a lecture. They 
don't need advice. What Puerto Rico needs, at this juncture in 
time and in history, is help, our help.
    A month-and-a-half after Hurricane Maria hit the island 
with winds of 150 miles per hour, we still find two-thirds of 
the Puerto Rico households without electricity, and 20 percent 
are without potable, safe drinking water. The island continues 
to see landslides, the record flooding that occurred, hundreds 
of blocked roads, thousands of fallen trees, and damaged homes 
and buildings. Tens of thousands of people have left Puerto 
Rico, and thousands of businesses remain closed.
    Puerto Rico's government expects an estimated cash loss of 
$1.7 billion as a result of reduced collections, with an 
additional $1.18 billion loss in power and water income. Those 
two agencies are currently running on cash reserves.
    The American people in Puerto Rico are counting on us to 
help rebuild the island, starting with the basics. The disaster 
supplemental spending package we passed is a start, but we need 
to do much more, and we need to do it immediately.
    The decimated electrical grid and water and sewer systems 
must be restored, and no more sweetheart deals to fly-by-night 
companies. That needs to stop, and it needs to stop 
immediately, as well.
    FEMA was slow to arrive and slow to engage. Even the 
President's most recent amendment to the disaster declaration 
issued on November 2 requires a 10 percent cost match for 
certain assistance, while piling on extra requirements. These 
attempts to get more blood out of a stone also need to stop.
    Once the lights are back on, and the families have access 
to clean drinking water and medical care, then Congress can 
turn its attention to the future of the island and its economy. 
We should not be asked to look away from this Administration's 
embarrassing recovery effort, and respond to Puerto Rican 
families not with the help they need, but with the help that 
would please investors.
    To use this natural disaster as an excuse to give even more 
advantages to investors who bear much of the responsibility for 
the shameful fiscal crisis that Puerto Rico finds itself in is 
wrong. To use this natural disaster as an excuse to say that 
those living on the island no longer deserve flood prevention 
regulations or strong protections for clean air and clean 
water, or that they no longer deserve the chance to participate 
in transparent, public planning processes would be wrong.
    Title V of PROMESA already gives investors the dual gift of 
deregulation and privatization for no-bid infrastructure 
projects. If the Majority would like to use the hurricane 
devastation to ram these projects through even faster, then 
that would be a mistake. How is it in the interest of the 
people of Puerto Rico to get rid of the ability for the public 
to comment on these projects, or to remove the Energy 
Commission's authority to make sure that the project will work 
with long-term grid plans? The Oversight Board has enough power 
and doesn't really need more.
    Our response to human suffering has to be about food, 
shelter, and water first, not deregulation or politics. It is 
time to assess the damage, get a real relief package together 
as fast as possible, and start rebuilding in a sustainable way.
    I hope that all my colleagues will join me in getting 
resources to the people who need them most, and resist the urge 
to haggle over the price tag or insist on weakening 
environmental standards and public processes in exchange for 
aid needed to save lives and rebuild communities.

    [The prepared statement of Mr. Grijalva follows:]
   Prepared Statement of the Hon. Raul M. Grijalva, Ranking Member, 
                     Committee on Natural Resources
    Mr. Chairman, if you see a man drowning in the ocean, you don't 
stop to tell him he should take swimming lessons. If a woman is having 
a heart attack, you don't take time to preach to her about the value of 
a low-fat diet. Instead, you act immediately to save lives.
    Our American brothers and sisters living on the island of Puerto 
Rico are drowning in the ocean. Their water, sewer, transportation, 
electricity, and banking systems are in the midst of what could be a 
fatal heart attack.
    Puerto Rico does not need a lecture. They don't need advice. Puerto 
Rico needs our help!
    A month and a half after Hurricane Maria hit the island with winds 
of 150 miles per hour, more than two-thirds of Puerto Rico households 
are still without electricity and 20 percent are without drinking 
water. The island has seen landslides, record flooding, hundreds of 
blocked roads, thousands of fallen trees, and damaged homes and 
buildings. Tens of thousands of people have left Puerto Rico and 
thousands of businesses remain closed.
    Puerto Rico's government expects an estimated cash loss of $1.7 
billion as a result of reduced collections, with an additional 
estimated $1.18 billion loss in power and water income. Those two 
agencies are currently running on cash reserves.
    The American people in Puerto Rico are counting on us to help 
rebuild the island, starting with the basics. The disaster supplemental 
spending package we passed is a start, but we need to do much more and 
we need to do it now.
    The decimated electrical grid and water and sewer systems must be 
restored; no more sweetheart deals to fly by-night companies.
    FEMA was slow to arrive and slow to engage. Even the President's 
most recent amendment to the disaster declaration issued on November 2 
requires a 10 percent cost match for certain assistance while piling on 
extra requirements. These attempts to get more blood from this stone 
need to stop.
    Once the lights are back on and families have access to clean 
drinking water and medical care, then Congress can turn its attention 
to the future of the island and its economy. But now, we are being 
asked to look away from this Administration's embarrassing recovery 
effort and respond to Puerto Rico families, not with the help they 
need, but with the help that pleases investors.
    To use this natural disaster as an excuse to give even more 
advantages to the investors who bear much of the responsibility for the 
fiscal crisis would be shameful. To use this natural disaster as an 
excuse to say that those living on the island no longer deserve flood 
prevention regulations or strong protections for clean air and water, 
or that they no longer deserve the chance to participate in 
transparent, public planning processes would be wrong.
    Title V of PROMESA already gives investors the dual gift of 
deregulation and privatization for no-bid infrastructure projects. The 
Majority would like to use the hurricane devastation to ram those 
projects through faster.
    How is it in the interest of the people of Puerto Rico to get rid 
of the ability for the public to comment on these projects, or to 
remove the Energy Commission's authority to make sure the project will 
work with long-term grid plans? As if the Oversight Board didn't 
already have enough power.
    Our response to human suffering has to be about food, shelter and 
water first, not deregulation or politics. It's time to assess the 
damage, get a real relief package together as fast as possible and 
start rebuilding in a sustainable way. I hope my Republican colleagues 
will join me in getting resources to the people who need them most, and 
resist the urge to haggle over the price tag or insist on weakening 
environmental standards in exchange for aid needed to save lives and 
rebuild communities.

                                 ______
                                 

    Mr. Grijalva. With that, Mr. Chairman, I yield back.
    The Chairman. Thank you. I appreciate that. We will now 
recognize our witnesses who are here.
    I would first like to recognize, starting from my left: Ms. 
Natalie Jaresko, who is the Executive Director of the PROMESA 
Board; Mr. Noel Zamot, the Revitalization Coordinator of the 
Financial Oversight and Management Board for Puerto Rico; and 
also Mayor Perez Otero, who is here. I appreciate you getting 
here at the last moment. I realize it was a rush job to get 
here. Thank you for joining us.
    I speak German, I don't speak Spanish, so when you are 
recognized, you are going to tell us the name of your community 
and where it is, because otherwise no one will ever find it if 
I try to do that. So, thank you for being here.
    I also want to say I am a little bit chagrined. We were 
originally going to have a couple more panelists here. Last 
night, two of the witnesses decided not to be here. One was the 
PROMESA Director. He was here specifically to talk about 
Whitefish.
    [Laughter.]
    The Chairman. I am sorry, PREPA, the PREPA Director. He was 
going to be here to answer the questions about the Whitefish 
contract. I understand there are circumstances that require 
their efforts back on the island, but I am sad that it is going 
to be there.
    A couple of weeks ago we requested some documents. Those 
documents arrived very late last Friday. We have only looked 
through them very, very briefly. Already there are some other 
circumstances within those documents that add more questions, 
which means at some point I would like those to be answered, 
and someone needs to look at that perhaps next week.
    When the Governor is here with others, we can have somebody 
from PREPA go through that. So, I am very disappointed they are 
not here to answer our questions today, but that is the way it 
is, because, obviously, we will take them at their word that 
their work there on the island is significant, it is important, 
and it needs to be done here.
    Mr. Brown, you were not here originally when I showed the 
slides. I did show the slides of you going down the 
mountainside, going through the river, and up that ladder. I 
just want you to know that you still have your athleticism and 
dexterity, because you put mountain goats in Utah to shame with 
the way you went down and climbed back up again. And it is your 
fault, because you were the first one to go over, and you kind 
of shamed the rest of us into following you.
    [Laughter.]
    The Chairman. Do you want to respond?
    Mr. Brown. Mr. Chairman, as a point of personal privilege, 
I do want to, in all seriousness, thank you for ensuring that I 
was able to accompany you, Leader McCarthy, and Whip Hoyer on 
what I thought was an important and enlightening delegation to 
Puerto Rico, the U.S. Virgin Islands, and the Keys, and I hope 
later today to be able to share some of my observations. Thank 
you, Mr. Chairman.
    The Chairman. No, thank you. Thank you very much. And 
thanks to all the Members who actually have been down there. I 
mentioned to Representative Graves that you just came back from 
there yesterday.
    Eventually you will shave, right? Never mind, never mind.
    [Laughter.]
    Mr. Graves. You know, Mr. Chairman, I have been seeking to 
be more like you for some period of time now. And I was going 
to color my hair white, but I decided that my wife would not be 
happy about that. So, I decided to grow a beard and put little 
white speckles in there.
    The Chairman. If you are going to be like me, it is going 
to be more than just speckles.
    [Laughter.]
    The Chairman. All right. Now, to get on to significant 
stuff, let me turn to Ms. Jaresko from the Board for your 
testimony.
    I would like to coach all the witnesses that our Committee 
Rules give you 5 minutes for oral testimony. Your written 
testimony is already part of the record. Anything you want to 
add to it will be part of it. If you have not been here before, 
these are manual microphones, so you have to turn them on to 
speak. And please watch the clock in front of you.
    When the green light is on, that means everything is cool. 
When it hits yellow, that means, like in traffic in the United 
States, you have to speed up as fast as you can. When it goes 
to red, that is when I want you to stop. And don't make me have 
to cut you off. I do it with our Members with glee, but I don't 
want to do it with you guys.
    So, Ms. Jaresko, if you would, you are recognized for 5 
minutes.

  STATEMENT OF NATALIE JARESKO, EXECUTIVE DIRECTOR, FINANCIAL 
   OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, SAN JUAN, 
                          PUERTO RICO

    Ms. Jaresko. Thank you, Chairman Bishop, Ranking Member 
Grijalva, members of the Committee, and Mayor Perez. I am 
Natalie Jaresko, Executive Director of the Puerto Rico 
Financial Oversight and Management Board. Thank you for this 
opportunity to update the Committee on the work of the Board 
and the situation in Puerto Rico in light of the tragic damage 
done to the island and its people by Hurricane Maria and, to a 
lesser extent, Hurricane Irma.
    I have submitted written testimony for the record, and I 
look forward to the Committee's questions. I want to use my 
oral statement to make just a few points.
    First, I want to thank this Committee, Congress, the 
Administration, and the American people for the generous just-
passed emergency aid package. Likewise, we are deeply grateful 
for the extraordinary efforts of FEMA, the U.S. military, the 
Army Corps of Engineers, and all those involved in this 
historic relief effort.
    I also wish to acknowledge the tireless efforts of Governor 
Rossello, his administration, local mayors, and all those in 
Puerto Rico who are saving lives and supporting the recovery 
efforts.
    Having served as Minister of Finance of Ukraine in times of 
war and fiscal crisis, I understand the complicated and often 
difficult measures that are required in times like these. I 
lived through the painful process of determining how to use 
limited funds to ensure that government could effectively 
govern, despite the realities. And I know the importance of the 
need to restore confidence and build a recovery that inspires 
individuals and businesses to play their vital and valuable 
ongoing role in rebuilding Puerto Rico.
    As you well know, the Board was established by Congress to 
support the fiscal and economic turnaround of Puerto Rico, as 
well as to restructure the sizable debt obligations that the 
Commonwealth and a number of governmental entities have 
incurred over the years. The Board is fully authorized to deal 
with the fiscal and debt issues that Puerto Rico faced before 
Hurricane Maria.
    After the hurricane, it is even more critical that the 
Board be able to operate quickly and decisively. The Board, 
therefore, asks that Congress underscore the importance of this 
Board in this post-hurricane environment by clarifying that we 
have this critical role to play in any Federal funding that the 
Congress appropriates, which will, in large measure, define 
Puerto Rico's future, given the devastation to the economy and 
in any long-term liquidity mechanism.
    Clarification in these regards will provide us with more 
agility and certainty, avoid time-consuming and costly 
litigation, and reduce the risks to the overall fiscal and 
economic recovery of Puerto Rico.
    I would like to conclude by outlining four ways we have 
been pursuing our mission since the hurricane.
    First, disciplined liquidity assistance processes. In my 
written testimony, I have tried to summarize the hurricane-
caused liquidity needs as we best see them. In short, because 
of the damage to the ability to collect revenues, the 
disruption of the underlying economic activity, and storm 
recovery spending, the Commonwealth and its instrumentalities 
are facing billions of dollars in cash shortfalls, just to 
provide the basic functions of government.
    It is essential that the process of providing liquidity 
assistance does not become detached from the fiscal plan 
process that is the essence of our charge under PROMESA. The 
longer-term solution that Congress is contemplating in the next 
emergency supplemental should, in our view, have formalized 
mechanisms to tie liquidity relief to the fiscal plans.
    Second, revision of those fiscal plans. We are well aware 
that, just as you have stated, Mr. Chairman, we will have to 
revise the certified fiscal plans in light of the hurricane's 
devastation. This process will take several weeks. The Board 
will hold three listening sessions to which all stakeholders 
are invited to provide input to those fiscal plans, as part of 
the revision process. And we have also agreed with the Federal 
mediators to hold two additional sessions with creditor 
stakeholders.
    Our aim is to move deliberately to prepare and approve 
revised plans, and the deadline for the Commonwealth, PREPA, 
and PRASA to submit these draft fiscal plans to the Board is 
December 22, 2017, with review and revision ongoing through the 
certification date of February 2, 2018. Deadlines for other 
entities will follow closely on the heels of that.
    Third, a chief transformation officer for PREPA. As the 
Committee is aware, the Board has recently named Noel Zamot as 
Chief Transformation Officer of PREPA, with all the powers of a 
CEO, and reporting to the Board. We believe this is absolutely 
essential, both to restoring service as soon as possible, and 
to creating a sustainable, efficient, resilient, and fiscally 
accountable power system for the island.
    While the Board is confident that PROMESA, coupled with 
fundamental aspects of bankruptcy law, gives us the power and 
responsibility to do as we have done, some parties are 
vigorously contesting our authority and proceedings before the 
Title III judge. To avoid uncertainty and lengthy delays in 
litigation, congressional reaffirmation of our exercise of our 
authority is welcome.
    Fourth, contract review. We have also implemented a 
contract review policy as a tool to ensure transparency 
throughout the government for the benefit of the people of 
Puerto Rico and all stakeholders. The policy applies to all 
contracts in which the Commonwealth or any covered 
instrumentality is a counter-party, including those with the 
Federal Government, state governments, and private parties. The 
policy provides that all contracts of $10 million or more must 
be submitted to the Board for its approval before execution.
    In addition, the Board retains the authority to adopt other 
methods, such as random sampling of contracts below that $10 
million threshold, to assure that they promote market 
competition and are not inconsistent with the approved fiscal 
plan.
    Again, Mr. Chairman, Ranking Member, and members of the 
Committee, we deeply appreciate your concern for the American 
citizens who live in Puerto Rico. And on behalf of the Board, I 
pledge to continue to work with you to do all we can to meet 
the new challenges and to achieve PROMESA's goals. I look 
forward to your questions.

    [The prepared statement of Ms. Jaresko follows:]
 Prepared Statement of Natalie Jaresko, Executive Director, Financial 
             Oversight and Management Board for Puerto Rico
    Chairman Bishop, Ranking Member Grijalva and members of the 
Committee, I am Natalie Jaresko, Executive Director of the Puerto Rico 
Financial Oversight and Management Board (the ``Board''). Thank you for 
this opportunity to update the Committee on the work of the Board and 
the situation in Puerto Rico in light of the tragic damage done to the 
Island and its people by Hurricane Maria and to a lesser extent Irma. 
Puerto Rico and its residents were engaging in often heroic efforts to 
help those who suffered greatly from Irma when Maria unleashed its fury 
on us. My testimony will concentrate on the Maria-caused challenges.
    First, I want to thank this Committee, Congress, the Administration 
and the American people for the generous, recently-enacted emergency 
aid to the Island along with support for our fellow citizens in Texas, 
Florida, California and USVI. Likewise, we are deeply grateful for the 
efforts of FEMA, the U.S. military, the Army Corps of Engineers and all 
those involved in this historic relief effort. I also wish to 
acknowledge the efforts of Governor Rossello, local mayors, and all 
those in Puerto Rico who are saving lives and supporting the recovery 
efforts. Maria was the worst storm to hit Puerto Rico in the past 100 
years. The entire island was devastated.
    As you know, the Board was established by Congress to support the 
fiscal and economic turnaround of Puerto Rico, as well as restructure 
the sizable debt obligations that the Commonwealth and a number of 
additional governmental entities in Puerto Rico have incurred over the 
years. The terrible impact of Hurricane Maria makes these challenges 
both more difficult and more urgent. The Board and I have been working 
every day to make sure that we are providing the kind of support, 
leadership and oversight necessary to help the Island.
    The day after Hurricane Maria hit, the Board provided Governor 
Rossello with the authority to reallocate up to $1 billion of the 
Commonwealth's budget to give the government flexibility to respond to 
the most pressing needs presented by the first weeks of the crisis. 
Shortly thereafter, we focused on the need for emergency liquidity 
assistance to deal with the fact that the hurricane caused revenues to 
drop and expenditures to increase. We worked closely with the Governor 
and his staff to estimate the dimensions of the cash-flow shortfall 
caused by the hurricane's damage and disruption. We jointly presented 
the results of that work to the Administration and Congress. Again, we 
thank the Administration and Congress for including liquidity relief 
via the Community Disaster Loan Program with the other essential 
assistance provided in the emergency supplemental legislation. We know 
that longer term liquidity to keep the government functioning and to 
provide key basic services to the residents of the Island is a subject 
that we will need to continue to work to address with the Governor, 
Congress and the Administration.
    I served as Minister of Finance of Ukraine after the Revolution of 
Dignity and during the war in the east. I understand the complicated 
and often difficult measures that are required in times of crisis. I 
lived through the painful process of determining how to use limited 
funds in the Treasury to ensure the government could effectively govern 
despite the realities. I know the importance of the need to restore 
confidence and build a recovery that inspires individuals and 
businesses to play their valuable ongoing role in rebuilding Puerto 
Rico. The work of recovery and rebuilding will be long and taxing. In 
many ways it has barely begun. For these reasons, we will continue to 
do everything in our power to help the Governor and local authorities 
in the ongoing efforts.
    The hard truth is that the Island now needs help--emergency and 
restoration funds and assistance on an unprecedented scale. Before the 
hurricanes, the Board was determined that Puerto Rico and its 
instrumentalities could achieve balanced budgets, work its way through 
its debt problems, and develop a sustainable economy without Federal 
aid. That is simply no longer possible. Without unprecedented levels of 
help from the United States government, the recovery we were planning 
for will fail.
    More immediately, there are areas of pressing need--problem areas 
turned into full-blown emergencies by the hurricanes. These include 
energy, water, housing, and health care. While conditions have 
improved--for example, distribution of fuel has normalized and grocery 
store shelves have been restocked--the Island continues to lack 
electricity, which will not only frustrate economic recovery but 
impacts daily life, particularly for people who need access to 
refrigeration for their medicines. Thousands remain in shelters, 
including seniors, people with disabilities and the bedridden. Tens of 
thousands of houses do not have roofs, and the installation of 
temporary tarps will not be completed for months.
    In PROMESA, Congress charged us with guiding and overseeing the 
restoration of the Island to fiscal health via long-term fiscal 
planning and annual balanced budgeting, restoring its ability to access 
private capital via both debt restructuring and economic development, 
and, as part of that, helping the Island transition to a sustainable 
economic model that provides opportunities for our citizens.
    We are all too well aware, and as you, Mr. Chairman, and this 
Committee well knows, that Hurricanes Irma and Maria have made our job 
much more challenging. The hurricane-caused damage has added greatly--
and will add greatly--to the financial distress of the Commonwealth and 
its instrumentalities. In our view, while our job has become more 
difficult, it has also become ever more important.
    Every dollar of relief funds must be used to address the hurricane-
caused needs of those on the Island and to meet the extraordinary 
challenges of rebuilding a more resilient Puerto Rico with a 
revitalized economy. It would be tragic if the hurricane-recovery 
efforts were not integrated into the broader and lasting plan for 
economic recovery upon which the Board and the Government were focused 
prior to the hurricane.
    Central to avoiding such outcomes will be rethinking and adapting 
the Fiscal Plans created before the hurricanes in a way that is 
cognizant of the on-the-ground realities of a hurricane-devastated 
island but that does not lose sight of our charge to restore Puerto 
Rico to long-term financial health. I will describe in some detail in 
this testimony how we are approaching the dual challenges.
    Hurricane Maria and the infusion of Federal rebuilding funds it 
will involve likewise raise questions about how to apply PROMESA to the 
challenges ahead which were not part of the original thinking when 
PROMESA became law.
                           our work pre-maria
    The period after the passage of PROMESA and before Hurricanes Irma 
and Maria stretched a little more than a year. In that time, much had 
been done to fulfill our charge to work with the government of Puerto 
Rico to ensure Puerto Rico achieves fiscal balance, to provide a path 
for its return to the capital markets, and to restore economic growth 
and opportunity for the people of the Island.
    Consistent with its charge under PROMESA, the Board conducted an 
independent and comprehensive analysis of Puerto Rico's fiscal 
situation. Before the hurricanes, Puerto Rico had over $74 billion in 
debt, over $53 billion of unfunded pension liabilities, an economy that 
had contracted nearly 15 percent over the last decade, and a nearly 50 
percent poverty rate. In addition, Puerto Rico's structural budget 
deficits were projected to average 50 percent of recurring revenues. 
Severe liquidity challenges and persistent budget deficits have 
contributed to a perilous lack of investment in infrastructure.
    The certified Fiscal Plan for Puerto Rico and those for its covered 
instrumentalities charted a path for a turnaround without new Federal 
funding. The fiscal and structural reform measures--from transforming 
the energy sector and modernizing labor laws to reducing government 
spending by approximately 30 percent over 3 years--were ambitious and 
required unprecedented levels of effort by the government of Puerto 
Rico.
    The government of Puerto Rico was acutely aware of the difficult 
choices necessary to achieve fiscal balance and restore economic growth 
when it developed 10-year Fiscal Plans for Puerto Rico and its 
instrumentalities, as was the Board when it assessed, amended and 
certified them. The government of Puerto Rico had begun the hard work 
of implementing the changes required by the Fiscal Plans via the 
adoption and certification of the first fiscal year budget compliant 
with the Fiscal Plan, which included reducing subsidies, increasing tax 
compliance, taking on direct payment of pensions in the budget, and 
beginning a 3-year process of rightsizing the government. More medium-
term work had begun on deeper pension reform, as well as healthcare 
reform that would reduce forecast costs some 30 percent within 10 
years.
                       puerto rico's new reality
    Puerto Rico is faced with a unique set of circumstances--the 
largest public entity restructuring in the history of the United States 
combined with the greatest hurricane devastation to strike in 100 
years.
Liquidity
    Let me shed some light on Puerto Rico's liquidity situation. The 
devastation has destroyed critical infrastructure, making revenue 
collection extremely difficult. Moreover, Hurricane Maria has caused 
severe damages to the private sector. Many businesses were forced to 
shut down due to structural damage, while those able to continue 
operating will likely incur substantial losses due to the additional 
expenses they must make in order to stay open, such as purchasing and 
running generators for electricity. Puerto Rico's tax revenue 
collection will be severely impacted.
    At the same time, operating expenses during this period, such as 
paying for essential services, will remain generally the same, while 
disaster-related expenses will increase relative to the baseline, which 
had not contemplated a historic hurricane. In addition, there is a 
timing mismatch between when disaster-related expenses are incurred and 
when, if at all, FEMA reimburses the government for those expenses.
    Therefore, without support from the Federal Government, Puerto Rico 
would run out of cash by the end of this quarter. That means no money 
to make payroll for teachers, police, and first responders, or pay 
pensions and other liabilities. This puts the Commonwealth, with 
limited cash on hand, in a liquidity crisis.
    In the first weeks after the hurricane, the Board and the 
government jointly produced an estimate of the size of this liquidity 
crisis based on the best available data. The extent of the short-term 
impact of the hurricane on the capacity of the Commonwealth and its 
instrumentalities is illustrated by the work we did with the government 
in estimating its cash requirement through the end of this year to be 
approximately $5 billion. The government subsequently revised the 
estimate to $3.6 billion to account for the facts that the government 
has been able to receive FEMA advances to pay for expenditures and FEMA 
has been directly paying other Federal agencies, such as the U.S. Army 
Corps of Engineers. The original $5 billion estimate did not anticipate 
either of these developments.
    The liquidity analysis relied on many factors, some of which are 
difficult to forecast. For example, we know that Puerto Rico is 
experiencing a massive population exodus, but the exact amount of that 
exodus is unknowable. We used a figure of 5 percent, or 170,000 people 
through the end of the calendar year. The number is certainly alarming, 
but not far from reality. In fact, Florida Governor Rick Scott has said 
that since October 3, more than 90,000 Puerto Ricans have arrived in 
Florida through Miami, Orlando, and Port Everglades.
    Most of the revised liquidity shortfall estimate of $3.6 billion 
results from updates to disaster relief funding assumptions. In 
particular, the funding requirement has been reduced by approximately 
$1.5 billion to account for the fact that most disaster relief spending 
is presently being funded directly and wholly by FEMA, rather than 
being processed through Puerto Rico's Treasury Single Account with a 
reimbursement lag and a partial cost share. The estimate for recovery 
expenditures was based on the public portion of total reconstruction 
costs from Hurricane Katrina, scaled to the population and construction 
costs of Puerto Rico, and taking into account a timing lag of 
reimbursements which is typical in recovery situations. The forecast 
will continue to be updated to reflect official damage assessments and 
updated relief funding projections as that data becomes available.
    We have also worked with the government to provide a more medium-
term perspective. Our initial estimates of the Island's liquidity over 
the next seven quarters, including the present quarter, for which 
Congress has already provided liquidity assistance, are in the range of 
$13 to $21 billion, but they are currently being revised. This is the 
amount of money we, along with the government, project is necessary to 
ensure provision of the basic functions of government, keep on the job 
policemen, firemen, teachers, healthcare workers and all public service 
employees who are helping in the hurricane recovery efforts, and 
advance the funds required for recovery before FEMA reimburses.
    As Congress considers its support for Puerto Rico, it will be vital 
that any loans or grants provided to meet these needs be measured 
against the Fiscal Plans and integrated with them. The mechanisms of 
PROMESA and the full participation of the Board will be required. We 
have proposed legislative language to this end with regard to 
liquidity. It would require the Board to certify all requests for 
liquidity advances. This will assure that only hurricane-caused 
liquidity advances will be sought.
Fiscal Plan Revision
    We are well aware that--just as you have stated, Mr. Chairman--we 
will have to revise the certified Fiscal Plans in light of the 
hurricanes' devastation. Working closely with the government of Puerto 
Rico, it is essential to use the process of revising Fiscal Plans to 
return to the PROMESA goals of fiscal responsibility, access to private 
capital markets, and sustainable economic independence. The baseline of 
the existing certified Fiscal Plans and their associated budgets 
provides critical information against which to measure the changes 
caused by the hurricane. But the existing Fiscal Plans do not provide a 
map for the post-hurricane future and do not provide timely oversight. 
In this light, the process of thinking through the nature and scope of 
the changes to Puerto Rico's economy post-hurricane has already begun.
    Responding to the humanitarian crisis on the Island must be the 
government's first priority, and the Fiscal Plans must be revised to 
reflect that priority--just as they must be revised to reflect the 
economic-realities of hurricane devastation. Fiscal and structural 
reforms need to be reviewed in light of the new baseline that results 
from this disaster. A critical additional element in the Fiscal Plan 
process will be understanding the amount of Federal funding for 
rebuilding which we understand will be made available later this year 
once more detailed damage assessments can be provided. These Federal 
funds will be essential to understanding the economic assumptions, 
projections and capital expenditure plans that will drive much of the 
revised Fiscal Plan. Revisions to the Fiscal Plan are necessary due to 
four primary reasons:

     First, the Commonwealth's ability to collect revenues has 
            been significantly compromised as a result of the serious 
            negative effect of infrastructure damage and population 
            outflows on underlying economic activity.

     Second, recovery-related expenses are substantial, not all 
            will be reimbursed by Federal aid, especially if local 
            share requirements are not waived, and are not currently 
            accounted for in the existing fiscal plans.

     Third, many of the cost-saving measures built into the 
            budgets--the reduction in certain subsidies incorporated 
            into the certified budget, for example--must be looked at 
            with a fresh perspective given the demands of the recovery 
            process.

     Fourth, the ``Federal line'' will be significantly larger 
            than the existing Fiscal Plans. It is important to note 
            that the revised plans will reflect any and all capital 
            expenditures funded by FEMA or other Federal recovery 
            assistance. It will also involve any revisions to Medicaid 
            funding.

    The Board has outlined nine principles for the Government to guide 
the work on revised Fiscal Plans:

     Principle 1: The fiscal plan must reflect the current 
            demographic trends, economic challenges, hurricane damage 
            assessments, Federal funding commitments, and a government, 
            both the central government and local governments, sized to 
            this post-hurricane reality.

     Principle 2: The revised fiscal plan must cover 5 fiscal 
            years, the first fiscal year being FY 18 and concluding 
            with FY 22.

     Principle 3: To properly establish an accurate assessment 
            of the fiscal outlook, the base-case scenario within the 
            fiscal plan must assume no additional Federal support 
            beyond that which is already established by law. 
            Nevertheless, fiscal plans should be adjusted as additional 
            Federal funding is committed.

     Principle 4: The revised fiscal plan must provide 
            sufficient resources to ensure appropriate immediate 
            emergency response and recovery effort in anticipation of 
            Federal funds, including provision of public safety, health 
            care and education, in order to avoid increased 
            outmigration--particularly by working families and working 
            age populations. The fiscal plan must include metrics 
            focused on the improvement of living standards, e.g. 
            education, health care, job creation.

     Principle 5: Pension reform, corporate tax reform, and 
            other structural reforms necessary to improve the business 
            climate must remain priorities in the fiscal plan.

     Principle 6: Based on available and dedicated resources, 
            the capital expenditure plan must provide the basis for a 
            long-term economic recovery plan for Puerto Rico, focusing 
            on increased and expedited support for rebuilding critical 
            infrastructure such as energy, water, transportation and 
            housing.

     Principle 7: The fiscal plan must include the resources to 
            complete the FY 15 Commonwealth consolidated audited 
            financial statements by no later than December 31, 2017, 
            and FY 16 and FY 17 Commonwealth consolidated audited 
            financial statements by no later than June 30, 2018. 
            Thereafter, Commonwealth consolidated audited financial 
            statements should be issued no later than within 6 months 
            of the fiscal year-end.

     Principle 8: Structural balance should be achieved as soon 
            as possible, in any event by no later than FY 22, after 
            taking into account the period of time required for the 
            stabilization of Puerto Rico's humanitarian crisis.

     Principle 9: The fiscal plan must be accompanied by a 
            long-term debt sustainability analysis (DSA) and detailed 
            economic projections, reflecting a 30-year period.

    Finally, the Commonwealth's Fiscal Plan revision process is based 
on three key components:

     Revising macroeconomic driver effects on revenue and 
            expenses,

     Adapting fiscal and structural reform schedules based on 
            the recovery timeline and feasibility, and

     Integrating recovery funds and reimbursement timing with a 
            capital plan.

    This process will require us to make the best possible analytical 
projections on the basis of all data available. However, given the 
level of uncertainty, it is important to note that unlike the original 
fiscal plan which covered 10 years, the revised fiscal plan will cover 
5 years, as required by PROMESA, with the first fiscal year being FY 18 
and concluding with FY 22.
    In an effort to incorporate input from all stakeholders, the Board 
will hold three listening sessions to which all stakeholders are 
invited to provide input to the Fiscal Plans as part of the revision 
process. They each will be a full day in duration; two of them in 
Puerto Rico, and one in New York City. In addition, we have agreed with 
the court-appointed mediators to hold two additional sessions with 
creditor stakeholders. The government will participate in these 
sessions as well.
    Our aim is to move deliberately to prepare and approve revised 
Fiscal Plans. The reason is simple: a revised fiscal plan is key for 
the government to move forward in requesting Federal funds, outlining 
structural and fiscal reforms, implementing capital expenditure plans, 
and enabling proper oversight on a timely basis, as required by 
PROMESA. The deadline for the Commonwealth, PREPA, and PRASA to submit 
draft Fiscal Plans to the Board is December 22, 2017 with review and 
revision ongoing through the goal certification date of February 2, 
2018. The deadline for the University of Puerto Rico, HTA, GDB, and 
COSSEC to submit draft Fiscal Plans to the Board is February 9, 2018 
with review and revision ongoing through the goal certification date of 
March 16, 2018.
    In keeping with PROMESA's purposes, it will take great discipline, 
transparency and accountability to make the best use of Federal and 
Commonwealth rebuilding funds. To the full extent possible, the 
rebuilding of hurricane-damaged Puerto Rico should serve PROMESA's goal 
of a financially sustainable Puerto Rico enabled by a resilient and 
vibrant economy that makes sense for the Commonwealth.
Contracts Review Policy
    We have also taken other steps to fulfill our mandate under 
PROMESA. As we embark on the immense task of rebuilding Puerto Rico in 
the wake of Hurricanes Irma and Maria, we expect the government to 
enter into numerous large contracts. We have implemented a Contract 
Review Policy (``Policy'') as a tool to ensure transparency throughout 
the entire government for the benefit of the people of Puerto Rico and 
all stakeholders. The Policy is implemented pursuant to Section 
204(b)(2) of PROMESA to assure that contracts promote market 
competition and are not inconsistent with the approved fiscal plan. It 
also follows sections 204(b)(3) and 204(b)(5).
    In establishing the Policy, the Board is mindful of Section 
204(d)(2) of PROMESA and does not intend to impede the government's 
implementation of any Federal programs, particularly those related to 
disaster response and recovery. To the contrary, the Board established 
the Policy in large part to support the government's implementation of 
Federal programs, including, for example, to ensure that contracts are 
consistent with the requirements of Federal programs, particularly 
those related to funding and reimbursement for disaster aid spending. 
Non-compliance with Federal requirements could cause substantial fiscal 
costs to be borne by the Commonwealth, having a severely adverse fiscal 
effect on compliance with fiscal plans.
    The Policy applies to all contracts in which the Commonwealth or 
any covered instrumentality is a counterparty, including those with the 
Federal Government, state governments, private parties, and nonprofit 
organizations. The Policy provides that effective November 6, 2017, all 
contracts or series or related contracts, inclusive of any amendments 
or modifications, with an aggregate expected value of $10 million or 
more must be submitted to the Board for its approval before execution. 
In addition, the Board retains the authority to adopt other methods, 
such as random sampling of contracts below the $10 million threshold, 
to assure that they promote market competition and are not inconsistent 
with the approved fiscal plan.
    The Oversight Board is prepared to review contracts in a timely 
manner. As such, we have identified an internal working group to take 
the lead on the contract review process. We look forward to working 
hand-in-hand with the government of Puerto Rico to ensure the upmost 
transparent, fair, and competitive contracting processes.
Appointment of Chief Transformation Officer for PREPA
    PREPA is a case in point of an entity within the government that 
needs to be transformed. Past mismanagement has led to an outmoded, 
unstable, patch-work grid and an inefficient and unduly expensive power 
sector. Rebuilding efforts should be integrated into the planning that 
avoids reprising past mistakes. We should plan and build for a better 
power sector and one that can move rapidly toward attraction of private 
capital to ensure the most effective transformation of the power 
sector.
    As a critical step toward this, the Board has appointed Noel Zamot, 
the Board's current Revitalization Coordinator, as the Chief 
Transformation Officer of PREPA in accordance with its authority under 
Title III of PROMESA. The Title III court set a hearing for November 
13, 2017 to consider our motion. In bankruptcy proceedings, it is 
common practice for a debtor in possession to name a Chief 
Transformation Officer, sometimes also referred to as a chief 
restructuring officer, to help turn around organizations and manage 
them while in bankruptcy. This is no different, but certainly more 
urgent.
    Upon confirmation by the court, Noel's task will be to lead the 
transformation of PREPA and the rebuilding of the electricity sector 
following the devastation of Hurricane Maria. His immediate priority 
will be to fast-track reconstruction efforts on the Island in close 
coordination with the government of Puerto Rico, the Board, and the 
Federal Government. In addition, Noel will be fully committed to 
bringing the resources necessary to restore electricity to the people 
of Puerto Rico as quickly as possible, and to re-activate the economy 
and bring normalcy to the Island.
    The appointment of Noel is an essential step in achieving the goal 
of providing Puerto Rico residents and businesses reliable, resilient 
and reasonably priced electricity supply, which will also require 
attracting the private capital we need to revitalize the power sector. 
Our vision for the future of Puerto Rico's energy sector is simple: a 
more modern, efficient and resilient power sector to revitalize the 
economy and deliver a better future for the people of Puerto Rico.
Role of the Oversight Board
    PROMESA and its tools were not written for responding to or 
recovery from a catastrophic hurricane. The reality in which we 
operated prior to the devastation is much different than Puerto Rico's 
current reality. The tools to rebuild a more resilient and economically 
viable Puerto Rico now include significant Federal funds, and we see 
the Board having an active role in ensuring those monies are used in 
the best interest of the Island. For us, ensuring fiscal controls to 
deliver confidence in the government is key. The role we can play is 
clear, but we remain cognizant that in several occasions in which we 
have exercised our authority, there has been substantial opposition, 
often resulting in litigation.
                               questions
    I will now turn directly to the questions the Committee has posed 
to us:
1. What is the Board doing now to fulfill its oversight function, 
        specifically with respect to revision of Fiscal Plans?
    As indicated above, careful, principled and transparent revision of 
the Fiscal Plans is essential. We are actively engaged, along with the 
government, in the analytical work that underlies that process. The 
extent of Federal aid in the year-end disaster relief package Congress 
is planning is obviously a key variable. The ``Federal line'' will 
constitute a very significant change from the existing Fiscal Plans. As 
you know, the earlier plans were balanced without any Federal 
assistance. The revised plans will reflect any and all capital 
expenditures funded by FEMA or other Federal recovery assistance. It 
will also involve any revisions adopted to Medicaid funding. As soon as 
we know that and have had an opportunity to study its impact, we will 
have all we need to work with the government in finalizing revised 
Fiscal Plans. We aim to complete Board certification in the first week 
of February 2018 for the Commonwealth, PREPA, and PRASA.
    We are also reviewing and renewing all of the liquidity estimates 
we submitted to Treasury and Congress with the government over the last 
few weeks. The passage of a few months should give us a better idea of 
the extent of revenue losses, hurricane-caused net increase in 
expenditures, and delayed cost reductions. We will continue to monitor 
liquidity weekly, which is now being published publicly by the 
government.
    With respect to budgeting, we are updating our reporting blueprint 
to incorporate information on disbursements and use of Federal funds 
received by the government and its instrumentalities, as well as 
reallocation of budget items for emergency measures as we laid out in 
our letter to the Governor the day after Hurricane Maria hit. We also 
will receive a budget compliance report next week that will show how 
actual expenses and revenues compare to budgeted expenses and revenues 
for the first fiscal quarter, ending September 30, 2017.
    Moreover, pursuant to Section 103(d) of PROMESA, the Board is 
initiating formal requests to Federal department and agency heads to 
detail personnel of their respective department and agencies to the 
Board to assist it in carrying out its duties under the Act. We are 
certain that we will receive cooperation from our Federal counterparts 
in detailing subject matter experts to support the Board and the 
government of Puerto Rico.
2. What can the Board do to oversee the proper expenditure of Federal 
        Hurricane recovery funds?
    Through the process of working with the Governor to create and 
certify Fiscal Plans under Section 201 of PROMESA, we can make sure 
that hurricane recovery funds are properly accounted for and directed 
in a revised Fiscal Plan. We have similar authority with respect to 
making sure that the more detailed annual operating budgets developed 
by the Governor or covered instrumentalities conform with the certified 
Fiscal Plans.
    Once certified Fiscal Plans and budgets are in place, we have 
authority to ensure compliance with those Fiscal Plans and budgets. 
Section 203 requires the Governor to submit a report at the end of each 
fiscal quarter on actual receipts, expenditures and cash-flow. We are 
instructed to alert the Governor to any inconsistencies with the 
certified Fiscal Plan and budgets. If the Governor or a covered 
instrumentality fails to make corrections, the Board is empowered to 
make appropriate reductions in non-debt expenditures to ensure the 
quarterly budget aligns with the certified budget. Further clarity with 
regard to these authorities may prevent challenges that have previously 
resulted in litigation.
    With respect to the actual contracting process by the Commonwealth 
or covered instrumentalities, as just described, we can review 
contracts under our policy created under Section 204 to ensure they are 
consistent with the fiscal plan, promote market competition, and as 
applicable are consistent with Federal regulations pertaining to 
reimbursement and funding. Section 204(d) does state that the Board 
shall not impede the government's actions to implement Federal 
authorized or federally delegate programs, but our policy does not 
impede the implementation of Federal disaster relief programs--to the 
contrary, it should provide stakeholders with greater confidence in the 
process itself.
    With respect to debt, pursuant to Section 207 the Board must 
approve any new debt issuance or debt exchange or modification. Under 
the legislation you just passed to assist Puerto Rico with its 
liquidity challenges, the funds will be distributed via the Community 
Disaster Loan Program. Because these are loans, the Board must and will 
review each loan to ensure it is advisable that the borrower take out 
that specific loan with those specific terms.
3. What additional tools does the Board need to ensure that Federal 
        funds are properly expended and that they are expended as part 
        of a plan that makes sense for Puerto Rico's future?
    Mr. Chairman and members of the Committee, I understand the 
importance of this question and the imperative for this Committee to 
examine it. My general answer--and my answers to any particular 
questions posed to me today--will of course reflect the current 
limitations of the Board's ability to meet the great challenges that 
the hurricanes' devastation has caused Puerto Rico and the new 
challenges it presents to Congress and the PROMESA structure as well.
    I want to emphasize, though, that while the question is expressed 
in terms of ``need,'' the Board is not seeking additional 
responsibilities nor the tools to go with them. The Board is a creature 
of Congress, appointed on a voluntary, bipartisan basis, serving the 
American citizens of Puerto Rico. We have been exercising our authority 
under PROMESA.
    If Congress determines that additional Board responsibilities will 
enhance confidence and enable greater support for Puerto Rico after 
these devastating hurricanes, I believe the Board would be willing to 
accept additional responsibilities. Similarly, if Congress determines 
that clarification and reaffirmation of our existing authority in light 
of the new demands placed on all of us by the necessity of hurricane 
recovery will be useful to avoid litigation and the uncertainty, time, 
and cost it entails, we would of course welcome that. Like the people 
and government of Puerto Rico, Congress and the Administration, we know 
that the hurricanes have produced new realities we must deal with as 
wisely and faithfully as we can.
    I can give one example of where congressional clarification and 
ratification of our authority may well be critical--the appointment of 
the PREPA Chief Transformation Officer. We believe our authority--and 
responsibility--under PROMESA and basic bankruptcy tenets is clear. 
However, our authority is being vigorously opposed by some parties in 
the Title III proceeding. Even after an initial ruling, litigation and 
associated uncertainty may linger during appeals. Congressional 
clarification would resolve what otherwise is potentially very damaging 
litigation.
                               conclusion
    Again, Mr. Chairman and members of the Committee, we deeply 
appreciate your concern for the American citizens who live in Puerto 
Rico, and, on behalf of the Board, I pledge to continue to work with 
you to do all we can to meet the new challenges and to achieve 
PROMESA's goals. I look forward to your questions.

                                 ______
                                 

  Questions Submitted for the Record to Ms. Jaresko and Mr. Zamot are 
                  combined and can be found on page 24

                                 ______
                                 

    The Chairman. Thank you.
    Mr. Zamot, 5 minutes. Welcome.

STATEMENT OF NOEL ZAMOT, REVITALIZATION COORDINATOR, FINANCIAL 
   OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, SAN JUAN, 
                          PUERTO RICO

    Mr. Zamot. Chairman Bishop, Ranking Member Grijalva, and 
members of the Committee, I am Noel Zamot. It is an honor for 
me to appear before this Committee. I currently serve as the 
Revitalization Coordinator for the Puerto Rico Financial 
Oversight and Management Board.
    I have also been named by the Oversight Board to serve as 
the Chief Transformation Officer for the Puerto Rico Electric 
Power Authority, or PREPA. A motion seeking confirmation of 
that appointment is before the court overseeing the 
restructuring of PREPA's debt under Title III of PROMESA. My 
written testimony briefly describes my current role and my 
conception of the PREPA CTO role. I will use my limited time in 
this oral statement to outline some of the key aspects of the 
CTO role and my plans for it.
    As mentioned, my appointment as CTO is pending approval by 
the Title III court. I do not want in any way to appear to be 
presumptuous about the outcome, but I also understand the 
Committee's need for information about my plans for this role. 
I believe the court will understand that my testimony is 
provisional. That is, it represents my plans if I am confirmed.
    The role of CTO is essential, both to deal with the short-
term crisis and the long-term transformation of PREPA. We need 
dramatic action to create a fast-moving, de-politicized entity 
driven by a vision of an efficient, durable, sustainable, and 
affordable power sector for the island.
    I have three principal objectives for my role of Chief 
Transformation Officer: first, bring all available resources to 
bear to restore power to Puerto Rico as quickly as possible; 
second, develop and implement the transformation plan for 
PREPA, ensuring that the near-term recovery activity is 
consistent with the long-term vision; and third, ensure the 
utility exits PROMESA's Title III via the implementation of a 
plan of adjustment.
    The overall objective is a utility that provides stable, 
reliable, and cost-effective power to Puerto Rico, and becomes 
an engine of sustained economic growth.
    The first objective requires us to leverage all available 
resources for Puerto Rico. Much has already been done, but 
there is much more to do. Based on my interactions to date, I 
am encouraged that the Army Corps of Engineers, the Department 
of Energy, and FEMA can provide us even greater and better 
coordinated resources. Similarly, we can do much more to 
involve industry groups such as APPA and the Edison Electric 
Institute.
    During this first phase, organizational structure will be 
of critical importance. I will employ an approach that I have 
used with success when I had to lead organizational 
transformation in the middle of chaotic and uncertain 
environments. I have followed this approach in the military, 
where, as a colonel, I led organizations in peace time and 
during emergencies, and in the private sector, where I had to 
transform an organization in the middle of difficult economic 
and market conditions.
    I believe in establishing a straightforward, clear chain of 
authority, with well-defined roles and responsibilities that 
track with the overall objective and with strategic priorities. 
I will retain key leaders on my staff to enable speed and 
effectiveness in our decision making.
    I would like to highlight two key roles.
    The Chief Operations Officer will be responsible for day-
to-day operations of the utility. This will initially be a 
senior leader from within PREPA, but will be augmented by an 
industry executive identified in conjunction with input that we 
are receiving from the Edison Electric Institute.
    The Storm Boss will liaise directly with FEMA, the 
government of Puerto Rico, local mayors, the Corps of 
Engineers, as well as other stakeholders. This person will be 
responsible for identifying, onboarding, and integrating all 
help, as required, as well as acting as a primary stakeholder 
to ensure that short-term recovery actions are consistent with 
a long-range plan. I expect to coordinate with a Storm Boss 
frequently, likely several times per day.
    I have also identified key executives to serve on a Board 
of Advisors. These are CEOs from public and private utilities 
who have generously volunteered to bring their considerable 
expertise to help with this task. I will also rely on an 
internal group of world-class actors from multi-national 
utilities, the energy sector, academia, and more.
    The second objective is to transform PREPA under the fiscal 
plan, which is developed by the Oversight Board, in conjunction 
with the government of Puerto Rico and PREPA. This plan 
reflects a transformation of PREPA in broad agreement with 
Puerto Rico's energy strategy and the Governor's energy 
priorities.
    The end state is to provide stable, reliable, and cost-
effective power via a grid that incorporates best practices and 
that acts as a catalyst for sustained economic growth. Puerto 
Rico's energy strategy calls for 50 percent renewables by 2040, 
with a balance of natural and LP gas mix, regional grids with 
generation close to demand, physical hardening and control 
systems to provide resiliency, and widespread distributed 
generation, all wrapped by an empowered and accountable energy 
regulator.
    PROMESA is clear in its guidance to attract private capital 
to achieve this end state. We need to do just that, not only 
for generation, but to attract innovative capital solutions 
from the private sector for transmission and distribution, as 
well.
    We will update the existing PREPA fiscal plan, based on 
post-Maria reality. PREPA's asset base has been decimated, and 
we will have to rebuild the infrastructure with virtually no 
revenues and minimal liquidity. Fortunately, Congress and the 
Administration created a Community Disaster Loan Program in 
their recently passed supplemental appropriations bill and made 
PREPA an eligible borrower.
    Our FEMA and DOE colleagues have worked with us closely to 
identify the proper Federal programs to rebuild the asset base, 
and generously offered their considerable expertise. We will 
work closely with the Governor, PREPA officials, professional 
and industry groups, as well as thought leaders from the 
private sector to amend the plan.
    We are integrating outside stakeholders into our process, 
with recurring milestone meetings every 10 days to 2 weeks. We 
will have an additional draft of the revised plan by mid-
December, and a more polished version by mid-January. The 
January product should include sufficient detail to be crafting 
actionable engineering requirements to begin execution during 
the second quarter of 2018.
    Finally, the binding actionable implementation of the 
amended transformative fiscal plan is via the plan of 
adjustment. This is the legally enforceable outcome of the 
Title III court proceeding. This plan assures the 
transformation of a utility far beyond the termination of my 
tenure, which will occur upon approval of this plan of 
adjustment.
    The court process associated with plan construction 
approval also assures the input of creditors and the 
recognition of their legal rights, as provided for in PROMESA. 
I look forward to answering your questions.

    [The prepared statement of Mr. Zamot follows:]
Prepared Statement of Noel Zamot, Revitalization Coordinator, Financial 
             Oversight and Management Board for Puerto Rico
    Chairman Bishop, Ranking Member Grijalva and members of the 
Committee, I am Noel Zamot, Revitalization Coordinator for the Puerto 
Rico Financial Oversight and Management Board (the ``Board''). I have 
also been named by the Oversight Board to serve as the Chief 
Transformation Officer (``CTO'') for the Puerto Rico Electric Power 
Authority (``PREPA''). A motion seeking confirmation of that 
appointment by the Court overseeing the restructuring of PREPA's debt 
under Title III of the Puerto Rico Oversight, Management and Stability 
Act (``PROMESA'') is pending.
    It is an honor for me to appear before the Committee. I will first 
briefly describe my current role, next outline my conception of the 
PREPA CTO role, and then stand ready to answer the Committee's 
questions to the best of my ability.
                       revitalization coordinator
    As the Committee well knows, the Revitalization Coordinator, like 
the Board itself, owes its existence to Congress. Section 502 of 
PROMESA established the position of Revitalization Coordinator, under 
the Board. My role is part of Title V of PROMESA--Puerto Rico 
Infrastructure Revitalization. My job, in a nutshell, is to accelerate 
the Island's economic recovery by bringing private capital to address 
infrastructure challenges, in order to create jobs and set the 
conditions for growth.
    This has become all the more important in the aftermath of 
Hurricanes Irma and Maria. I am just back from the Island, where I have 
been coordinating with the government of Puerto Rico, the U.S. Army 
Corps of Engineers, military personnel generally, FEMA personnel and 
others to address the immediate aspects of the Island's infrastructure 
devastation in as coordinated and efficient a manner as possible. I 
myself have a military background, having retired from the U.S. Air 
Force in the rank of colonel. I have also been trained in and have led 
emergency responses to crises.
    I can assure you that the troops on the ground in Puerto Rico are 
acting heroically. I can also assure you it is a daunting effort in 
which they are engaged.
    Our Executive Director, Natalie Jaresko, has delivered the Board 
testimony in chief. For this portion of my testimony, I want to very 
briefly discuss the great promise of private investment in Puerto Rico 
as catalyzed by PROMESA, and, as the Committee has asked us to do, 
briefly address some of the challenges presented by our limited role.
    The good news is that even though Puerto Rico's ability to borrow 
is compromised, it does have access to private capital--through 
projects identified by the Board under PROMESA's Critical Project 
provisions. The central mechanism of Title V is identification of 
``Critical Projects.'' Once identified, these projects benefit from 
provisions designed to expedite their realization. We have identified 
to date $3.3 billion in private capital that seeks to invest in Puerto 
Rico infrastructure projects.
    One example is a waste-to-energy project sought by a New York-based 
firm called Energy Answers. This project would involve an $800 
million--fully private--investment to create a plant to convert waste 
into electricity. It has a dual objective and many advantages. It would 
not only generate electricity that would be contributed to the grid, 
but also alleviate some of the pressure on a full and leaking landfill.
    In recommending this project and approving it for the expedited 
permitting provided for Critical Projects, we apply the statutory 
PROMESA criteria. These include the ``impact it will have on an 
emergency''; the availability of immediate private capital; the cost of 
the project, if any, to Puerto Rico; and its jobs impact. With respect 
to energy projects, the criteria also include whether the project will 
reduce reliance on oil for energy generation, improve energy 
infrastructure and overall energy efficiency, expedite conversion of 
fuel sources to natural gas and renewables, contribute to transitioning 
to private generation capacity, and support the Energy Commission of 
Puerto Rico in achievement of its goal of reducing energy costs.
    Private capital is an essential ingredient of restoration of the 
Island's infrastructure, and the Critical Projects process has shown it 
can be a valuable tool to help privately financed projects succeed.
    The Committee has also asked what else is required for successful 
rebuilding of Puerto Rico's infrastructure and what limitations I see 
in Title V as a tool for aiding the rebuilding. That is an important 
topic, and I look forward to discussing it in response to your 
questions today.
    As a general matter, I would emphasize that as useful as I think 
Title V is, it is quite narrow. Beyond identifying and expediting 
discrete Critical Projects, Title V offers few tools to the 
Revitalization Coordinator to realize broader economic development in 
Puerto Rico. The Revitalization Coordinator also does not have the 
formal power to reform the management, operations, or contracting of 
instrumentalities, such as PREPA--a void that has become much more 
consequential after Hurricanes Irma and Maria.
                   prepa chief transformation officer
    I would now like to share my thoughts on PREPA and the decision by 
the Board to appoint a Chief Transformation Officer. My appointment as 
CTO, as I have indicated, is pending approval by the Title III court. I 
do not want in any way to appear to be presumptuous about the outcome, 
but I also understand the Committee's need for information on my 
understanding of and plans for the CTO role. I believe the Court will 
understand that my testimony is provisional--that is, what I plan to do 
assuming I am confirmed.
    The decision to name a CTO was the Board's, not mine. Suffice it to 
say that from my perspective of months on the ground in Puerto Rico, 
and regardless of who fills the role, it is absolutely essential. Both 
to deal with the short-term crisis and the long-term transformation of 
PREPA, we need dramatic action that creates a fast-moving, 
depoliticized entity driven by a compelling vision of an efficient, 
durable, sustainable and affordable power sector for the island.
    I have three principal objectives for my role as Chief 
Transformation Officer. First, bring all available resources to bear to 
restore power to Puerto Rico as quickly as possible. Second, develop 
and implement the transformation plan for PREPA, ensuring that the 
near-term recovery activity is consistent with the long-term vision. 
And, third, ensure the utility exits PROMESA's Title III via the 
implementation of a plan of adjustment as a system that can provide 
stable, reliable, and cost-effective power to Puerto Rico's inhabitants 
and institutions.
Restoring Power--and Early Organizational Steps
    The first objective requires us to leverage all available resources 
for Puerto Rico. Much has already been done, but there is much more to 
do. Based on my interactions with them to date, I am greatly encouraged 
that the Army Corps of Engineers, the Department of Energy and FEMA can 
provide us even greater, and better coordinated, resources. Similarly, 
we can do much more to involve industry groups such as the American 
Public Power Association to a greater degree.
    During this first phase, the organizational structure will be of 
critical importance. I will employ an approach that I have used with 
success in previous times when we had to transform organizations in the 
middle of chaotic and uncertain environments. I have found success by 
establishing a straightforward, clear chain of authority, with well-
defined roles and responsibilities that track with the overall 
objective and with strategic priorities. Especially during this initial 
phase, we must prioritize speed--with discipline, transparency and 
integrity--over endless analysis. The people of Puerto Rico deserve no 
less. We will keep our objectives--recovery and transformation--front 
and center throughout every action we take.
    I plan to have five key direct reports on my staff. They will 
enable me both to act fast and effectively in the first phase and to 
integrate our actions with our long-term transformation plan and to 
ensure that I have advisors with the right expertise helping me achieve 
our goals. These are a: Chief Operations Officer (``COO''), Storm Boss, 
VP for Transition, Chief Financial Officer (``CFO''), and General 
Counsel (``GC'').
    The Chief Operations Officer will be responsible for day-to-day 
operations of the utility. This will initially be a senior leader from 
PREPA, but will be augmented by an industry executive, identified in 
conjunction with input we are receiving from the Edison Electric 
Institute.
    The Storm Boss will liaise directly and freely with FEMA, the 
government of Puerto Rico, the Army Corps of Engineers, as well as 
other members of the team. This person will be responsible for 
identifying, onboarding, and integrating all help as required, as well 
as acting as the primary stakeholder to ensure that short-term recovery 
actions under Stafford Act Category B are consistent with the long-term 
plan for the island. I expect to coordinate with the Storm Boss 
frequently--likely several times per day.
    The VP for Transition will lead the mechanics of developing the 
transformation plan, as embodied in the revised Fiscal Plan for PREPA, 
ensuring that we remain on the timeline and that all stakeholders are 
represented and contribute appropriately. This person will further 
insure that the various working groups are integrated with the outside 
and internal stakeholders, and that the evolving vision is shared with 
the COO and Storm Boss to ensure continuity of effort and consistency 
between near-term recovery and the transformation vision.
    The CFO will have traditional financial responsibilities. The CFO 
will develop an improved, open and transparent procurement process, 
fully compliant with all Federal requirements, such as FEMA's. In my 
experience, much of the challenge with problematic contracts has less 
to do with the substance of the contract--which can be reviewed and 
amended--than with the RFP process and selection criteria. Without 
sound controls and protocols for those two, you could end up with a 
perfectly executed contract that was awarded inappropriately.
    Finally, we will have a General Counsel. As a three-time military 
commander and industry executive, my experience is that the roles and 
responsibilities of management and GC are and must be clear. Leadership 
establishes vision and executes strategy; the GC ensures that those 
objectives are accomplished in an ethical and legal manner.
    I have been engaging in informal conversations with potential 
candidates for all these positions so that they can be hired and join 
the team as soon as I am confirmed to the role by the Court.
    Outside of the organization, I have already identified key 
executives to serve on a Board of Advisors. These are Chief Executive 
Officers from public and private utilities, who have generously 
volunteered to bring their considerable expertise to help with the 
task. I will also rely on professional, engineering, and sector 
insights from seasoned experts in the field. This is my ``deep bench,'' 
and it includes former executives from multi-national utilities, energy 
experts, economists and more. These will include experts from McKinsey 
& Company and Ernst & Young, who currently serve as outside consultants 
to the Board, as well as economists from MIT's Sloan School, my alma 
mater. My intent is to reach out to them on a regular, scheduled basis. 
I have already asked this team to identify key process and 
organizational efforts in the first critical days of transition.
The Fiscal Plan and Its Transformative Character
    The Board, in conjunction with the government of Puerto Rico and 
PREPA, has developed a Fiscal Plan that reflects a transformation of 
PREPA that is in broad agreement with Puerto Rico's energy strategy and 
the Governor's energy priorities. Our goal or ``end state'' is to 
provide stable, reliable, and cost-effective power via a grid that 
incorporates best practices, in order to act as a catalyst for 
sustainable economic growth. Puerto Rico's energy strategy calls for: 
50 percent renewables by 2040, with the balance a natural/LP gas mix; 
regional grids with generation close to demand; physical hardening and 
control schemes to provide resiliency; and widespread distributed 
generation, all wrapped by an empowered, accountable energy regulator.
    PROMESA is clear in its guidance to attract private capital to 
achieve this end state. We intend to do just that, not only for 
generation, but to attract innovative capital solutions from the 
private sector for transmission and distribution as well.
    To be sure, we must update the existing PREPA Fiscal Plan based on 
the post-Maria reality. Not only has the asset base been decimated, but 
now we have to rebuild the infrastructure with virtually no revenues 
and minimal liquidity. Fortunately, Congress and the Administration 
created a Community Disaster Loan Program in the recently passed 
supplemental appropriations bill and made PREPA an eligible borrower. 
Moreover, our FEMA and DOE colleagues have worked closely with us to 
identify the proper Federal programs to rebuild the asset base and to 
give us the benefit of their expertise. We will work closely with the 
Governor and existing PREPA officials with expert knowledge of the 
Fiscal Plan and its transformative role, and the process for amending 
the Plan will also include professional and industry groups and thought 
leaders.
    We will begin integrating outside stakeholders into our process by 
mid-November, with recurring milestone meetings every 10 days to 2 
weeks. We will have an initial draft of the revised Plan by mid-
December, and a more polished version by mid-January. The January 
product should include sufficient detail to begin crafting actionable 
engineering and policy requirements to begin execution during the 
second quarter of 2018.
Plan of Adjustment
    The binding, actionable implementation of the resulting, amended 
transformative Fiscal Plan is via the Plan of Adjustment, the legally 
enforceable outcome of the Title III court proceeding. This Plan 
ensures the transformation of the utility far beyond the termination of 
my tenure, which will occur upon approval of the Plan. The court 
process associated with Plan construction and approval also assures the 
input of creditors and the recognition of their legal rights, as 
provided for in PROMESA.
    I look forward to answering your questions.

                                 ______
                                 

   Questions Submitted for the Record to Natalie Jaresko, Executive 
    Director, and Noel Zamot, Revitalization Coordinator, Financial 
             Oversight and Management Board for Puerto Rico

                  Oral Questions Posed at the Hearing

    Question 1. What is the latest damage assessment for Puerto Rico, 
and in particular, for the energy sector?

    Answer. The FOMB has not completed a damage assessment for Puerto 
Rico and does not plan to. The only damage assessments that the FOMB is 
aware of at this time are informal Federal Government agency estimates 
of $5-$12 billion and the one released on November 13, 2017 by the 
government of Puerto Rico, state of New York, Open Society Foundations, 
Ford Foundation, and Rockefeller Foundation. That damage assessment 
estimated a total of $94.4 billion in damage, of which the power grid 
was responsible for $17.8 billion.

    Question 2. What are the salaries for all executive staff and 
deputies?

    Answer. The FOMB has attached a table that shows the position, 
compensation, and starting date for all executive staff and deputies.

    [The information follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
    
    Question 3. When was the last time the trash incinerator was 
tested for lead, arsenic, and other contaminants?

    Answer. Since the waste-to-energy facility has not yet been built, 
no emissions testing has been completed. However, the FOMB understands 
that a similar facility of the same design has been operating 
consistent with local and Federal regulations for several years in 
Massachusetts.

    Question 4. Why would Puerto Rico use the most expensive form of 
energy, renewables, to comprise a portion of restoring its power?

    Answer. The FOMB's energy plan for Puerto Rico envisions long term 
a mix of renewables and natural gas. The FOMB's understanding is that 
most of the work to restore power is being done on the transmission and 
distribution portions of the grid, not the generation, so Puerto Rico 
is not materially changing the existing energy mix as it restores 
power.

    Question 5. What are the interim and long-term costs to Puerto Rico 
from the FOMB?

    Answer. At the time PROMESA was passed, the Congressional Budget 
Office projected that the FOMB would cost $370 million over 10 years. 
Actual audited expenditures of the FOMB for Fiscal Year 2017 were 
approximately $30 million. The FOMB's budget for Fiscal Year 2018 is 
approximately $60 million.

    Question 6. How will Noel Zamot as the CTO for PREPA be different 
from existing PREPA management?

    Answer. In light of the Title III court's ruling regarding the 
FOMB's appointment of Noel Zamot as the Chief Transformation Officer 
(``CTO'') for PREPA, the FOMB respectfully submits that this question 
is now moot.

    Question 7. What can the Federal Government do to restore 
prosperity in Puerto Rico?

    Answer. The FOMB has attached a separate letter describing actions 
that the Federal Government can take, particularly with respect to tax 
reform, recovery and rebuilding assistance, and economic development 
that would catalyze economic growth in Puerto Rico.

    [The information follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    

                                              November 22, 2017

Dear Chairman Bishop, Ranking Member Grijalva, and Members of the 
Committee:

In the course of the Oversight Hearing, ``Examining Challenges in 
Puerto Rico's Recovery and the Role of the Financial Oversight and 
Management Board,'' on November 7, 2017, our Executive Director, 
Natalie Jaresko, received numerous inquiries about various proposals to 
aid Puerto Rico in light of the devastation caused by Hurricanes Maria 
and Irma. In the same vein, many Oversight Board members and staff in 
their interactions with Congress and the Administration have been asked 
for their recommendations on what the Federal Government can and should 
do to help.

We greatly appreciate the depth and breadth of concern expressed by 
Congress and the Administration for the plight of the people of Puerto 
Rico. We know that these questions are part of an ongoing and difficult 
effort to put together a comprehensive plan to deal with the Island's 
current distress as well as its long-term wellbeing.

Likewise, we acknowledge that, in light of the hurricanes, such 
inquiries are deeply connected to our mission under PROMESA. As you 
know, before the hurricanes we were dedicated to achieving fiscal and 
economic health for Puerto Rico and its instrumentalities without 
additional federal aid. After the hurricanes, of course, continued 
generous and well directed federal aid is essential.

Accordingly, without in any way presuming to be experts in all the 
areas affected or to be the final word on any of them, we want to be as 
responsive as we can. This letter focuses on a few areas where we see 
particular need.

Hurricanes Maria and Irma have fundamentally altered Puerto Rico's 
fiscal and economic reality, worsening the Island's already deeply 
troubled fiscal situation and destroying much of its infrastructure. 
Tax reform legislation, if approved in its current form, would further 
devastate the Island's economy. Achieving fiscal balance, providing a 
path for the Island's return to capital markets, and restoring economic 
growth and opportunity for the people of Puerto Rico, as required by 
PROMESA, remains a critical priority. Achieving PROMESA's goals will 
require significant investments in recovery efforts and in rebuilding 
and transforming the Island's infrastructure, as well as tax reform 
legislation that does not adversely impact businesses operating on the 
Island. It will also require a new economic model bolstered by expanded 
economic tools and increased labor force participation.

World-class pharmaceutical manufacturing plants and other multinational 
corporations manufacturing and otherwise doing business in Puerto Rico 
are a cornerstone of Puerto Rico's economy and a key source of income. 
In fact, manufacturing exports account for roughly 30 percent of Puerto 
Rico's general revenues. If not remedied, current federal tax reform 
provisions that consider businesses operating in Puerto Rico as doing 
work in a foreign jurisdiction could destroy the Island's manufacturing 
base, causing critical tax revenues to evaporate. Puerto Rico's economy 
was already in decline before the hurricanes. Tax changes that make 
Puerto Rico's economy even less competitive with foreign jurisdictions 
would be crushing and would frustrate efforts to restore growth. We 
urge you to modify the current tax reform legislation to encourage 
companies to remain in Puerto Rico and to increase their presence in 
Puerto Rico instead of moving to truly foreign jurisdictions.

Puerto Rico's infrastructure, particularly its energy sector, water and 
sewer systems, and roads need to be rebuilt and transformed in the 
aftermath of Hurricanes Irma and Maria. Schools, hospitals and housing 
have also suffered extensive damages and need substantial support for 
repairs and replacement. Prior to the hurricanes, the Oversight Board 
had certified fiscal plans that included well over $10 billion in 
capital needs incorporating approximately $7 billion for energy 
generation and for transmission and distribution of electricity, as 
well as $2 billion for water systems. Extensive hurricane damages have 
substantially increased the Island's infrastructure needs and 
accelerated the timeline under which reconstruction efforts must occur. 
Initial damage assessments estimate tens of billions in damages. It is 
imperative that the federal government expeditiously complete its 
assessments of the impacts of the hurricanes on Puerto Rico's 
infrastructure and that Congress commit needed resources to support 
rebuilding a stronger, more resilient Puerto Rico. Reconstruction funds 
must be subject to effective oversight, spent judiciously and used to 
support transformation efforts reflected in revised and improved Fiscal 
Plans under PROMESA. Without rebuilding and transforming its 
infrastructure, Puerto Rico will not be able to address its dire fiscal 
and economic challenges, or restore growth and opportunity.

We are hopeful that Hurricanes Irma and Maria can be a catalyst for 
change. Puerto Rico's fiscal, economic and demographic crisis preceded 
the hurricanes. The challenges of limited economic tools, sub-state 
funding levels for various critical programs, different eligibility 
rules for Puerto Ricans living on the Island than U.S. citizens living 
in the mainland, as well as multiple self-inflicted wounds already made 
achieving the goals of PROMESA very difficult. The hurricanes have made 
the job of restoring economic growth infinitely more so. However, in 
crisis there is opportunity.

Puerto Rico needs a new economic model--a specific, attainable, 
transformational economic plan. It needs to increase its labor force 
participation. It needs to improve service delivery and fiscal 
accountability. The Financial Oversight and Management Board will work 
with the Government of Puerto Rico to accomplish these important goals. 
However, to be successful in restoring opportunity for the people of 
Puerto Rico, it is critical that tax reform legislation not further 
cripple its economy and that Puerto Rico have the necessary resources 
to recover from Hurricanes Irma and Maria and rebuild and transform its 
infrastructure.

            Sincerely,

                                           Jose B. Carrion,
                                                             Chair.

                                 ______
                                 

     Written Questions Submitted for the Record to Natalie Jaresko

                  Questions Submitted by Rep. Grijalva

    Question 1. You indicate in your statement that the Oversight Board 
has proposed legislative language to ensure that congressional support 
to help Puerto Rico address its liquidity problems is consistent with 
the Fiscal Plans. Said language would require the Board to certify all 
requests for liquidity advances. Have you shared this language with the 
Committee? Is such a degree of micromanagement of the Puerto Rican 
government really necessary? Aren't Puerto Rico's current liquidity 
problems the result of the hurricane?

    Answer. Yes, the current liquidity problems are indeed a result of 
the hurricane, which is the reason the FOMB believes it should certify 
all liquidity advances. The FOMB, through the pre-hurricane fiscal 
plans, can verify that the liquidity problems are in fact caused by the 
hurricane. To the extent that liquidity support from the Federal 
Government comes in the form of loans, such as Community Disaster 
Loans, the FOMB has the responsibility to approve any such loans under 
PROMESA. Yes, this language has been shared with the Committee.

    Question 2. You point out that several areas of the island can be 
classified as ``immediate or pressing needs.'' These include energy, 
water, housing and health care. Besides installing the Title V 
Revitalization Coordinator as the Chief Transformation Officer for 
PREPA, what else is the Oversight Board doing to address these pressing 
needs?

    Answer. The FOMB acknowledges that the government of Puerto Rico 
and the relevant Federal agencies are the proper entities for 
addressing Puerto Rico's pressing needs. What the FOMB has done is 
provide the Governor with the authority to reallocate up to $1 billion 
of the budget to give the government of Puerto Rico flexibility to 
respond to the disaster, worked with the government of Puerto Rico to 
determine its short-term liquidity needs, and advocated in Washington 
that Puerto Rico be given emergency liquidity assistance and 
unprecedented Federal disaster assistance.

    Question 3. What is the basis for the Board claiming that any money 
from the Federal Government for disaster relief will fall under board's 
purview? Aren't these funds to be used for specific purposes, such as 
rebuilding damaged schools and hospitals and covered by various 
agencies audit and other authorities to ensure they are used as 
intended? Why is there a need for the Board to intervene is how 
disaster funds are spent?

    Answer. The FOMB and government of Puerto Rico are in the process 
of developing revised fiscal plans, which include all capital 
expenditures. After Hurricane Maria, the bulk of these capital 
expenditures will be funded with Federal disaster funds. In addition, 
the eventual fiscal plans for the Commonwealth and certain of its 
instrumentalities that the FOMB certifies will contain reforms and 
measures that should be consistent with how the disaster funds are 
intended to be spent. The FOMB also believes that it can provide 
effective oversight of the significant amount of Federal disaster funds 
that will be spent in Puerto Rico, which in turn will create increased 
confidence for all stakeholders.

    Question 4. Congress recently approved a $4.9 billion loan in the 
disaster relief package to ease the government of Puerto Rico's 
liquidity crisis. You mentioned in your statement that additional 
liquidity assistance will be necessary. Can you elaborate on what it 
will mean if Puerto Rico runs out of cash due to the devastation caused 
by the storm?

    Answer. If Puerto Rico does not get liquidity assistance before it 
runs out of cash, the government of Puerto Rico will not have 
sufficient money to fund governance, and will have to choose among 
making payroll for teachers, police, and first responders, paying 
pensions, and honoring other liabilities.

    Question 5. We have reports, both from humanitarian organizations 
such as Oxfam who are on the ground, as well as through media coverage, 
that supplies such as tarps, food, and water, are being shipped to 
Puerto Rico are not reaching the highland and rural areas. Challenges 
in road clearances, lack of telephone coverage or electricity 
exacerbate these backlogs. Can you describe how the FOMB can help to 
ensure that those difficult-to-reach areas are able to receive critical 
supplies?

    Answer. The FOMB does not have a direct role in carrying out the 
disaster response efforts--that is the responsibility of the government 
of Puerto Rico along with relevant Federal agencies. The FOMB is doing 
what it can to support the government of Puerto Rico in Washington to 
obtain the Federal assistance that it needs so that it the recovery 
effort in difficult to reach areas is as effective as possible.

    Question 6. One of the purposes of this hearing is to determine 
whether and how to expand the jurisdiction of the Fiscal Oversight and 
Management Board to shepherd the recovery efforts in Puerto Rico. We 
know that local first responders, civil society organizations, and 
citizens are working day-in and day-out to address acute needs. They 
have the firsthand knowledge and relationships to know and adapt to 
what communities most need. If the FOMB does acquire greater fiscal 
control over recovery funds, what mechanisms will be in place to ensure 
that these groups on the ground have a meaningful role in determining 
how best to use the funds? Will there be any accountability to assure 
that the money is targeting the most vulnerable individuals? What 
mechanisms will be put into place to allow for civil society groups to 
serve as watchdogs of funds?

    Answer. Like it does with the development of fiscal plans, the FOMB 
will solicit and welcome all input from all stakeholders, especially 
local Puerto Ricans who are most effected by the FOMB's decisions. The 
FOMB will seek out best practices from entities that have performed a 
similar function for past natural disasters, like Hurricanes Katrina 
and Sandy, and model its approach off those.

    Question 7. As you are well aware, Puerto Rico is in a dire 
financial state, with $74 billion in debt. It literally cannot cost-
share on the many desperately needed Federal programs that are 
essential for it to rebuild. Some of these cost-sharing requirements 
have been waived, but what other agencies require cost-shares and what 
can be done to waive these requirements? What would happen if Puerto 
Rico's local cost sharing requirements are not waived? What will happen 
if Puerto Rico's local cost sharing requirements are not waived?

    Answer. The FOMB is concerned about the government of Puerto Rico's 
liquidity situation and supports the waiver of local cash sharing 
requirements. Failure to waive local cost sharing requirements will 
lead the government of Puerto Rico to require additional liquidity 
assistance from the Federal Government, or reduce the amount of its 
efforts to rebuild until such liquidity is made available.

    Question 8. Nearly 60 percent of Puerto Rican children live below 
the poverty line. Overall poverty is at nearly 50 percent. Families are 
extremely vulnerable. How can we ensure that funding, including 
reconstruction funds are supporting the need of these vulnerable 
Americans?

    Answer. The most vulnerable among the Puerto Rican population must 
receive all the support they need in this dire situation. The FOMB 
urges Congress to appropriate the necessary funds to the relevant 
agencies that can provide the most effective assistance to those below 
the poverty line.

                   Questions Submitted by Rep. Pearce

    Question 1. What is the FOMB doing to ensure that disaster funds 
are not used to fix pre-disaster problems?

    Answer. Currently, the FOMB does not have a role in determining on 
what projects the disaster funds are used and so the FOMB cannot ensure 
that disaster funds are not used to fix pre-disaster problems.

    Question 2. Do you believe the FOMB's new Contract Review Policy 
will slow down disaster recovery?

    Answer. No. The FOMB has committed to review and respond to all 
contracts within 7 business days and is committed to working with the 
government of Puerto Rico to make the review as fast as possible 
without compromising the integrity of the process.

                                 *****

        Written Questions Submitted for the Record to Noel Zamot

                  Questions Submitted by Rep. Grijalva

Title V

    Question 1. Mr. Zamot, I want to ask you about the dual approach of 
Title V of PROMESA--privatization and deregulation. Under Puerto Rico's 
Act 76, which was the model for Title V, a former governor tried to 
rush through 2,200 megawatts of renewable energy projects starting in 
2010. But because the process was rushed--as it would be under Title 
V--someone missed that the grid could not handle it. The project 
negotiations had to start from scratch. That was the most relevant 
deregulation precedent for the approach taken in Title V. And it failed 
because deregulation removed the protections that are in place to make 
sure these kinds of projects actually work, and that they don't do more 
harm than good. You are proposing to double down on that process by 
expanding Title V authority before we have seen any proof it can work. 
What protections have you put in place to make sure this precedent is 
not repeated?
    Answer. Title V specifies an evaluation process for projects, which 
includes analyzing the project for job creation, economic impact, and 
environmental safeguards. Only projects that meet these criteria can be 
considered as candidates as Critical Projects. The FOMB closely follows 
this process.

    Question 2. Like PREPA, PRASA has suffered for a long time from an 
old distribution system, lack of funds, and poor management. Title V of 
PROMESA proposes to address the water infrastructure problem by 
privatizing it. But that approach was tried twice in Puerto Rico. It 
failed both times, according to an in depth study from the University 
of Iowa. The relief promised by the companies who took over never came 
to pass. The contracts had to be terminated. Same question; what 
protections have you put in place to make sure this precedent is not 
repeated? Why will this time be different?

    Answer. Privatization of water infrastructure is one of many 
options that may be considered under Title V. This Critical Projects 
process includes evaluations to ensure job creation and economic growth 
without compromising environmental protection.

    Question 3. While much attention has been focused on getting the 
lights back on, there is equal urgency around the water distribution 
system. PRASA has a dilapidated infrastructure that requires major 
work. Puerto Rico had the higest rates of Safe Drinking Water Act 
violations of any state in the Nation. Businesses and economic recovery 
depend on clean water. It is likely that there are waterborne outbreaks 
happening under the radar because we cannot detect them--we cannot even 
assess the damage to the infrastructure. What are the FOMB's plans for 
revitalizing PRASA and getting people clean, reliable drinking water?

    Answer. The PRASA transformation plan currently in development will 
address a number of initiatives to provide clean, reliable water to the 
people of Puerto Rico. Among these are improved metering, 
organizational and governance changes, and capital investments.

    Question 4. You hold up the proposed Arecibo trash incinerator as a 
model project for the island. You testified that Arecibo is a privately 
financed project. But it appears to depend on a loan or loan guarantee 
from the USDA. In fact, the project's sponsors, Energy Answers, went 
through an entire Environmental Impact Statement to get the loan. The 
USDA is now saying they no longer want to issue the loan. Energy 
Answers appears to be searching for funding in case they cannot get the 
USDA to change their mind. How do you reconcile the project's need for 
Federal financing with your testimony that says it is a fully privately 
funded project?

    Answer. Projects submitted through Title V are considered a 
privately funded project if the majority of their capital structure 
comes from private capital rather than from the government of Puerto 
Rico. Many of the projects under the Title V process rely in part on a 
variety of Federal funds, including grants and loans, that make the 
overall capital structure more attractive to investors and less risky 
for the population they will ultimately serve.

    Question 5. The proposed incinerator is in a flood plain. It needs 
at least two permits or waivers as a result. The site flooded after the 
recent hurricanes. Designation of this project as a critical project 
could allow it to bypass flood prevention regulations. Since those 
safeguards would not be there, how would you ensure the project would 
prevent waste ash and trash from migrating off-site into neighborhoods 
in the event of a flood if there is no permitting process to do that?

    Answer. The Energy Answers project had already received EPA and 
local permits that addressed these issues in detail. Designation as a 
Critical Project does not exempt projects from applicable Federal or 
local regulations. To the contrary, Critical Projects must meet these 
regulations.

    Question 6. The island is already struggling with a massive coal 
ash disposal problem. There's just no where to put it. It accumulates 
in mounds across the island, creating health hazards for families 
living downwind or downstream. According to the Environmental Impact 
Statement, the proposed incinerator in Arecibo would generate 420 tons 
of toxic ash per day. The plan is to put it in landfills, most of which 
are already either full, out of compliance, or not equipped to handle 
hazardous waste. How would you make sure Puerto Rico families are not 
exposed to that ash?

    Answer. The Energy Answers project had already received EPA and 
local permits that addressed these issues in detail. Designation as a 
Critical Project does not exempt projects from applicable Federal or 
local regulations. To the contrary, Critical Projects must meet these 
regulations.
    Question 7. As you know, the mayors of areas surrounding the 
proposed incinerator oppose it. If they refuse to send their trash 
because they would lose tipping fees and instead would have to pay to 
have the trash burned, and as a result there is not enough trash to 
operate the plant, how will Energy Answers pay back the loan from 
USDA's Rural Utility Service?

    Answer. Puerto Rico is suffering from a severe shortage of landfill 
capacity and the government of Puerto Rico, upon receipt of permits and 
assuming Energy Answers demonstrates compliance with Federal and local 
regulation, the FOMB considers the Energy Answers project a possible 
tool to address the imminent business and environmental crises due to 
the overuse of non-compliant landfills elsewhere on the Island.

PREPA

    Question 8. Mr. Zamot, you have said that a strong regulator is 
needed to oversee the PREPA or whatever its successor might be. The 
Puerto Rico Energy Commission has more expertise in electric utility 
regulation than you and the rest of the Oversight Board. How do you 
think the Commission and the Oversight Board can work together to 
ensure the rebuilding of a more sustainable grid?

    Answer. The Energy Commission and the FOMB share the government of 
Puerto Rico's vision of a sustainable, resilient grid. The FOMB is 
already working closely with the Energy Commission to incorporate them 
into the PREPA transformation process. As an example, we are 
coordinating on the conceptual design of regional grids that will 
provide greater resiliency for future hurricanes. The FOMB welcomes a 
truly independent and professional energy regulator to assure all stake 
holders of a fair rate policy and provide potential private sector 
investors with confidence in the marketplace.

    Question 9. As you know, Governor Rossello has weakened the Energy 
Commission by installing his own appointees into positions, among other 
actions. Will you fight to make the Energy Commission more independent 
of the Governor and the Oversight Board? If so, how?

    Answer. We support an independent, empowered, accountable Energy 
Commission. Such an energy regulator is essential to Puerto Rico's 
energy future and is essential for proper use of Federal and private 
funds to rebuild the grid.

    Question 10. What authorities do you or the Oversight Board believe 
the Board has to take over the Energy Commission if the Board so 
desired?

    Answer. None. The FOMB cannot and has no desire or intent to take 
over the Energy Commission. The FOMB supports a strong, independent 
energy regulator.

    Question 11. Mr. Zamot, do you think there needs to be a clear 
vision of what the new grid will look like before we determine what the 
management structure will look like, as has been suggested by experts 
at the Institute for Energy Economics and Financial Analysis?

    Answer. Regardless of the vision for the new grid, the future of 
Puerto Rico's energy utility must incorporate organizational best 
practices into its management structure. Among these are transparent, 
documented procurement processes, organizational efficiency via clear 
management structure, a quality management and process improvement 
system, and a depoliticized workforce.

    Question 12. When asked about implementing renewable energy on the 
island during the hearing, you referenced a few times the island's 
self-imposed renewable energy standards. As you know, those were made 
before the hurricane. At the time, there was a limitation on renewables 
that were implementable because of funds/credit and because the grid 
was too old to handle it. Both limitations are expected to change 
dramatically now. If the island is ever going to be more self-
sufficient with its energy supply and wean from imported fuel like 
natural gas, now is the time to aim much higher than the modest pre-
hurricane goals and move toward more forward-looking energy plans for 
island economies like those of Hawaii who has a 100 percent renewable 
portfolio standard. As the potential CTO of PREPA, do you see any 
reasons that Hawaii can do it but Puerto Rico cannot? As CTO of PREPA, 
will you fight for that 100 percent renewable energy for Puerto Rico?

    Answer. In light of the Title III court's ruling regarding the 
FOMB's appointment of Noel Zamot as the CTO for PREPA, the FOMB 
respectfully submits that this question is now moot.

    Question 13. Electric sales in Puerto Rico are expected to decline 
more than 23 percent over the next decade. The private utility business 
model does not function effectively in an environment of declining 
load. Why do you believe the private utility business model is 
appropriate in this scenario?

    Answer. Puerto Rico's electric sales are declining in part because 
of high electricity prices, which leads to widespread grid defection. A 
cost-effective, reliable, and stable electric utility would also have a 
significant positive impact on Puerto Rico's economic growth, driving 
up demand.

                  Question Submitted by Rep. Hanabusa

    Question 1. After the devastation of hurricanes Irma and Maria in 
September of this year, Puerto Rico Electric Power Authority (PREPA) 
reported losing approximately 80 percent of its electrical 
infrastructure. This left millions of Puerto Ricans without power, and 
left hospitals unable to care for patients or store lifesaving 
medicine. Currently, urban centers in Puerto Rico are being powered 
primarily through generators, which can only serve as a temporary 
solution to the crisis. There are also still many Puerto Ricans 
sweltering without power in areas outside of urban centers.

    Mr. Zamot, as Chief Transformation Officer your duties include 
leading the development of a power restoration plan, and overseeing the 
application process for Federal funds. You mentioned in your testimony 
that you are currently coordinating with the Army Corps of Engineers, 
the Department of Energy, and Federal Emergency Management Agency for 
financial support and resources. However, their support has not been 
sufficient to address the ultimate goal of repairing and updating 
Puerto Rico's energy infrastructure for the long term.

    You also mentioned in your testimony that exiting the $9 billion in 
debt that belongs to PREPA is not the solution to enable PREPA to 
restore electricity as soon as possible. We discussed during the 
hearing that restoring electricity is the top priority, as it will 
facilitate other disaster recovery efforts. With that goal in mind, 
what are the necessary steps to restoring electricity in Puerto Rico? 
How much money will it take to achieve this?

    Answer. In light of the Title III court's ruling regarding the 
FOMB's appointment of Noel Zamot as the CTO for PREPA, the FOMB 
respectfully submits that this first question is now moot. The FOMB has 
not completed a damage assessment for Puerto Rico and does not plan to. 
The only damage assessments that the FOMB is aware of at this time are 
informal Federal Government agency estimates of $5-$12 billion and the 
one released on November 13, 2017 by the government of Puerto Rico, 
state of New York, Open Society Foundations, Ford Foundation, and 
Rockefeller Foundation. That damage assessment estimated a total of 
$94.4 billion in damage, of which the power grid was responsible for 
$17.8 billion.

                   Questions Submitted by Rep. Pearce

    Question 1. Do you have an accurate damage assessment for the 
island's energy infrastructure? If so, please provide.

    Answer. The FOMB has not completed a damage assessment for Puerto 
Rico and does not plan to. The only damage assessments that the FOMB is 
aware of at this time are informal Federal Government agency estimates 
of $5-$12 billion and the one released on November 13, 2017 by the 
government of Puerto Rico, state of New York, Open Society Foundations, 
Ford Foundation, and Rockefeller Foundation. That damage assessment 
estimated a total of $94.4 billion in damage, of which the power grid 
was responsible for $17.8 billion.

    Question 2. What actions do you plan on taking to ensure that PREPA 
will not run into the same problems it faced before the storm and the 
FOMB's creation?

    Answer. In light of the Title III court's ruling regarding the 
FOMB's appointment of Noel Zamot as the CTO for PREPA, the FOMB 
respectfully submits that this question is now moot.

                                 ______
                                 

    The Chairman. Thank you. And finally, Mayor Perez, we 
welcome you here. You are recognized for 5 minutes.

    STATEMENT OF THE HON. ANGEL PEREZ OTERO, MAYOR, CITY OF 
                     GUAYNABO, PUERTO RICO

    Mr. Perez. Thank you, Chairman Bishop, Ranking Member 
Grijalva, and all members of the Committee, for having convened 
this hearing, and allowing us to share our experiences with the 
aftermath of Hurricanes Irma and Maria. I especially recognize 
our Resident Commissioner, who faced the hurricane right there, 
and now is our advocate for recovery.
    I come to you as Mayor of Guaynabo since August 18. As you 
see, I received a very special welcome to my office.
    My municipality is diverse. We do have upper-income 
neighborhoods, art centers, industries, shopping, a military 
post, but also working-class neighborhoods, public housing 
projects, economically distressed communities, and hard-to-
reach rural areas.
    In Guaynabo, like in all Puerto Rico, there was damage to 
every aspect of infrastructure and the economy in the immediate 
aftermath, besides the collapse of power and communications. 
And today we still have from 75 to 80 percent of our families 
without electricity.
    Our municipality also suffered these major damages: three 
bridges washed out, and another four compromised, resulting in 
over 15 to 20 families having no vehicle access to their homes; 
several partial roads collapsed; most of our rural areas 
lacking water service, due to pumps being offline; and 3,000 
families lost their homes or had them severely damaged.
    It was a challenge to respond, but we stepped forward. From 
the joint efforts of Puerto Rico and Federal Government 
agencies, over 30,000 families have received food and water 
supplies, but this has not always been reliable. The city has 
received 10,000 gallons of diesel fuel, but we use 3,000 every 
day. And we are being assisted with final debris disposal by 
the Corps of Engineers.
    So, work is being done, and we are grateful for the 
response from the Administration and Congress. But more is 
needed.
    For instance, municipalities are the first responders, and 
continue responding, being closest to the people. But with most 
of our businesses closed due to no power, water, or fuel, how 
do we pay our workers and expenses? We have lost a lot of 
revenue.
    Recently, Congress passed legislation that provides up to 
$4.9 billion for support to Puerto Rico, precisely due to the 
need to keep basic public services functioning in the face of 
loss of a tax base. The government of Puerto Rico had been 
granted almost an equivalent of 20 percent of its budget to 
relieve its liquidity needs. The municipality needs, in a 
future legislation, the same benefits to continue providing 
essential services that our people need.
    Another need is a disaster housing support benefit that can 
extend for at least 1 or 2 years. Currently available housing 
vouchers are too few and too low, compared with the number of 
families who lost their homes and are living with family or 
with a neighbor.
    Another is easing FEMA caps on housing rehabilitation, so 
families may rebuild with greater resiliency. Similarly, an 
expansion and flexibilization of CDBG and Section 108 funds, so 
that municipalities can better direct them to the community 
needs. In a situation like this, it is important that funds for 
the relief are guarded and used effectively, when the 
temptation is to think ``it is an emergency'' justifies waste, 
or worse. But this cannot end in more bureaucracy.
    I believe God put me in this trying time at the head of a 
city of 100,000 people, to do them justice and make a 
difference. You, too, are called upon to do justice and make a 
difference for the 3.4 million U.S. citizens in Puerto Rico. It 
is not a time just to put on patches, but to make permanent 
fixes looking toward the future. We cannot move the island away 
from the Caribbean, so Congress and the Administration must 
move to help our people.
    Members of this Committee, Federal help has aided Puerto 
Rico to survive and start a recovery. But more is needed, and I 
encourage you to listen to our Governor and our Resident 
Commissioner, our voice in this city, as she brings forward 
what are our further needs. Thank you.

    [The prepared statement of Mr. Perez follows:]
 Prepared Statement of Mayor Angel Perez, City of Guaynabo, Puerto Rico
    Thank you, Chairman Bishop, Ranking Member Grijalva and all members 
of the Committee for having convened this hearing and allowing us to 
share our experiences with the aftermath of Hurricanes Irma and Maria. 
I specially recognize our Resident Commissioner who faced the hurricane 
right there and now is our advocate for recovery.
    I come to you as the Mayor of Guaynabo, Puerto Rico, since August 
18. As you can see I received a very special welcome to the office.
    My municipality is diverse. We do have upper income neighborhoods, 
arts centers, industry, shopping, a military post, BUT also working 
class neighborhoods, public housing projects, economically distressed 
communities and hard to reach rural areas.
    In Guaynabo like in all Puerto Rico there was damage to every 
aspect of infrastructure and the economy. In the immediate aftermath, 
besides the collapse of power and communications--and today we still 
have 80 percent of our families without electricity--our municipality 
also suffered these major damages:

     Three bridges washed out and another four compromised, 
            resulting in over 15 families having no vehicular access to 
            their homes.

     Several partial road collapses.

     Most of our rural areas lacking water service due to pumps 
            being off line.

     Three thousand families lost their home or had it severely 
            damaged.

    It was a challenge to respond, but we stepped forward.

    From the joint efforts of the Puerto Rico and Federal governments, 
over 30,000 families have received food and water supplies (but this 
has not been always reliable), the city has received 10,000 gallons of 
diesel fuel (but we use over 3,000 per day), and we are being assisted 
with final debris disposal by the Corps of Engineers. So, work is being 
done, and we are grateful for the response from the Administration and 
Congress.

    But more is needed.

    For instance, municipalities are first responders and continuing 
responders, being closest to the people. But with most of our 
businesses closed due to no power or water or fuel, how do we pay our 
workers and expenses?
    Recently Congress passed legislation that provides up to $4.9 
billion for liquidity support for Puerto Rico, precisely due to the 
need to keep basic public services functioning in the face of loss of 
tax base.
    The government of Puerto Rico has been granted almost the 
equivalent of 20 percent of its budget to relieve its liquidity needs: 
the municipalities need in a future legislation the same benefit to 
continue providing essential services the people need.
    Another need is for a disaster housing support benefit that can 
extend for up to 2 years. Currently available housing vouchers are too 
few and too low compared with the number of families who lost their 
homes.
    Another is the easing of FEMA caps on housing rehabilitation, so 
families may rebuild with greater resiliency. Similarly, an expansion 
and flexibilization of the CDBG and Section 108 funds so that 
municipalities can better direct them to the community needs.
    In a situation like this, it is important that funds for the relief 
be guarded and used effectively, when the temptation is to think ``it's 
an emergency'' justifies waste, or worse. But this cannot end with more 
bureaucracy.
    I believe God put me in this trying time, at the head of a city of 
100,000 people, to do them justice and make a difference. You, too, are 
called upon to do justice and make a difference for the 3.4 million 
U.S. citizens in Puerto Rico. It is not a time to just put on patches 
but to make permanent fixes looking toward the future. We cannot move 
the island away from the Caribbean, so Congress and the Administration 
must move to help our people.
    Members of the Committee, Federal help has aided Puerto Rico to 
survive and start a recovery. But more is needed, and I encourage you 
to listen to our Resident Commissioner, our voice in this city, as she 
brings forward what are our further needs.

    Thank you.

                                 ______
                                 

    The Chairman. I thank all three witnesses for your oral 
testimony, as well as your written testimony. We will now start 
the questioning process.
    Members, since we were originally going to have two panels, 
and now we just have one, I gave our witnesses some extra time 
to make their statements. I appreciate them being here. I 
especially appreciate, Mr. Mayor, your being here as a 
representative, who is on the ground working with the American 
citizens who actually live in Puerto Rico. Thank you for the 
specifics you gave us.
    I am just going to warn Members that you are not going to 
be as nicely treated. You have 5 minutes. If you are going to 
ask a question, give at least 30 seconds to answer it or don't 
ask it in the first place, and we will move on from there.
    I am going to actually break tradition and go first, if I 
could, for my 5 minutes, so you are responsible for me. If I go 
over 5 minutes, you have to shut me up, OK?
    [Laughter.]
    The Chairman. You said that too willingly.
    Ms. Jaresko, if I could start with you. In August, there 
were some in the creditor community that had a Title III case 
about PREPA to appoint a receiver done by the court system. The 
Oversight Board appears to actually have embraced that 
particular idea with an independent oversight of PREPA that is 
needed with the Board's recent urgent motion to appoint Mr. 
Zamot as the Chief Transformation Officer.
    Why did the Oversight Board reject the request to appoint a 
receiver, and why from the courts? And why do you believe the 
Oversight Board has the authority to appoint a Chief 
Transformation Officer?
    Ms. Jaresko. Thank you, Mr. Chairman. You are correct. At 
that time, in very different circumstances, the Board did not 
agree with the creditors' request. However, we see the 
situation today as completely different, requiring a new set of 
skills, resources, and additional focus.
    The situation is different, simply because we no longer are 
going through solely a Title III process. We are now, as well, 
responding to this devastation. And for 40 years, for decades, 
PREPA has not served the people of Puerto Rico well.
    Our goal today is, with the appointment of Mr. Zamot, to 
ensure that these short-term efforts to immediately and quickly 
restore electricity are united with the medium- and long-term 
requirements of making electricity not the Achilles heel of a 
damaged economy, but instead, the solution to a new revitalized 
economy.
    The Chairman. Thank you.
    Then, with that, Mr. Zamot, let me turn to you. Title V was 
supposed to be in there to help expedite the process without 
any kind of arbitrary roadblocks. Do you see roadblocks in 
there prohibiting the construction or pending approval of 
critical projects that we could address in some way?
    Mr. Zamot. Mr. Chairman, thank you for the opportunity to 
answer. Title V is a great tool for economic recovery, but it 
is incomplete, in many of our opinions, and we would appreciate 
some clarity on the powers that Title V actually gives to the 
Revitalization Coordinator.
    There are a number of issues that I have shared with your 
staff, for example, the ability to actually follow some of the 
permitting processes and actually ensure that they are executed 
properly, and the ability to actually ensure that Title V 
projects submitted through the critical projects process are 
actually compatible with the rest of the covered entities' 
transformation plans.
    And finally, how do you actually incentivize additional 
investments in areas that are critical to Puerto Rico's 
economy, but not necessarily a critical infrastructure project?
    The Chairman. Do you think that these require statute 
changes in order to give you that authority to simply expedite 
the issue and get to work?
    Mr. Zamot. Sir, I will defer to the Committee on what the 
solutions would be, but a clarification on what the powers of 
the Revitalization Coordinator and the Board would be in those 
cases would be appropriate.
    The Chairman. That is a fair answer.
    Mayor Perez, can you just share with the Committee your 
experiences working with FEMA in the immediate aftermath of the 
storm?
    Mr. Perez. I think at the beginning it was hard, because no 
communications were at the 78 municipalities. So, we just had 
FEMA at San Juan, and it was very hard for the rest of our 
mayors to communicate and to receive some help.
    After that, they assigned, and I think it was the best 
thing, they assigned some people to each mayor, to each 
municipality, and the help is getting better, and the water, 
the food, and all the help from FEMA and from the Corps of 
Engineering, it is getting to our municipalities.
    But at the beginning it was very hard, because we were 
expecting that maybe some municipalities, some areas, will be 
good. But no, the 78 municipalities, their communication were 
down, roads were blocked, so it was very hard at the beginning.
    The Chairman. I have 56 seconds. Can you communicate the 
challenges that you are still going to face, going forward, 
with both the state, the Board, as well as the Federal agencies 
in reaching long-term goals in your community?
    Mr. Perez. Right now, it is how they are going to respond 
to give the benefits to the families, because we have thousands 
of families living with their families or with a neighbor, but 
that is not permanent. So, we don't know right now. There is a 
cap of $30,000 to rebuild their houses. If we are going to 
rebuild and make them the same as they were, we are going to be 
here maybe next year, maybe next week, maybe, I don't know, in 
a month. So, that is a challenge for us.
    The Chairman. Thank you. And in the 9 seconds that remain, 
before Mr. Grijalva shows me up by pronouncing your community's 
name, pronounce your community for me.
    Mr. Perez. Guaynabo. It is near San Juan. Guaynabo.
    The Chairman. Oh, you can all say it----
    Mr. Perez. We call it Guaynabo City.
    [Laughter.]
    The Chairman. Thank you very much. I recognize Mr. 
Grijalva.
    Mr. Grijalva. Thank you, Mr. Chairman, and I also want to 
thank all the witnesses for their attendance and for being here 
to give us some more information and answer our questions.
    Ms. Jaresko, as you know, the fiscal plan approved by the 
Board last year contemplated reducing Puerto Rico's annual debt 
payments by 79 percent. In the wake of Hurricane Maria, 
advocates in Puerto Rico and for Puerto Rico are making the 
case that that devastation means that the 79 percent should be 
taken up all the way to possibly full debt cancellation.
    Should we anticipate that the Board will be considering 
further debt reduction in the revised fiscal plan currently 
under development?
    Ms. Jaresko. Thank you. It is very difficult for anyone in 
Puerto Rico to see the future at this stage. So much depends on 
you, the Congress, the Administration, and how much funding 
will be appropriated for Puerto Rico at this time.
    We will begin this fiscal process to determine exactly what 
you have asked, to determine how the island can manage 
governance, ensure governance, whether or not there are funds 
available for a variety of needs on the island, including, of 
course, repayment of the debt.
    What I can tell you is that, faced with the liquidity 
crisis we have today and the requirements that you have already 
adopted, we will require longer-term liquidity funding. In the 
short term, there is no question that this will be very 
difficult for creditors. I think, in terms of the future, much 
depends on your response.
    Mr. Grijalva. OK. And another question, if I may. Do you or 
the Board hold the view that, relative to Title V, waiving or 
eliminating additional Federal environmental safeguards like 
NEPA or regulations will accelerate the recovery in Puerto 
Rico?
    Ms. Jaresko, if you, and then Mr. Zamot, if you don't mind, 
as well, answering the question.
    Ms. Jaresko. I certainly believe that further expeditious 
permitting is a requirement. I am not an expert on the 
individual sets of permitting, but I want to underline that it 
is both Federal, Commonwealth, and municipality permitting at 
all levels that needs to be expedited for any private-sector 
investment to become a quick recovery.
    Mr. Grijalva. Mr. Zamot, do you think that is needed?
    Mr. Zamot. Thank you, sir. My view is that economic growth 
and fast-tracking projects is not inconsistent with being good 
stewards of the environment, and we have a very robust process 
within Title V and within the working group that we have set 
with the government to ensure that we, the residents of Puerto 
Rico, are very----
    Mr. Grijalva. Well, if I may, sir, let me just follow up 
with you. You cite the proposed trash incinerator as an example 
of a project, Title V, that could come to fruition. But I see 
an example of why Title V, in this instance, does not work. 
Public comments about the project are overwhelming in 
opposition. It is opposed by both mayors' groups representing 
all the mayors on the island. It was stalled in part because it 
could not get a permit to drain 2.1 million gallons from a 
protected wetland. Farmers and residents are concerned about 
the effects on their health, that it could undermine recycling 
programs that are in place.
    [Slide.]
    Mr. Grijalva. It flooded during the hurricane. We have a 
before and after situation that is up on the screen. It flooded 
and released hundreds of tons of toxic ash that could release, 
in the future, toxins into the surrounding neighborhoods. And 
it requires a major loan from the Federal Government to go 
forward, even though it is fully privately funded for 67 
megawatts of power.
    Is that what we can expect, in terms of Title V critical 
projects?
    Mr. Zamot. Sir, there are many voices that, obviously, in a 
democratic process, voice their concern with such a project. 
But there are an equal number of voices on the positive side. 
We don't look at this project in Arecibo necessarily as even a 
power project. It is really a waste management project.
    Puerto Rico has a crisis in waste management and landfill 
use that has been identified by the EPA, and that is why the 
EPA has actually been supportive of this program.
    I currently live in Massachusetts, and we have a very 
similar plant.
    Mr. Grijalva. Well, the processes in place right now under 
law are to assess risk factor, and under Title V we waive the 
process of risk factoring. How would you contemplate assessing 
risk?
    The Chairman. In 5 seconds or less.
    Mr. Zamot. When this process was submitted through Title V, 
it already came with its permitting in place.
    The Chairman. Thank you.
    Mr. Grijalva. No, that is not the answer.
    The Chairman. Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman, and thank you for 
having this important hearing. I appreciate your commitment to 
making Puerto Rico more successful. No one should question your 
commitment to that. And I share your disappointment that all 
the invited witnesses were not here today.
    Mr. Zamot, I would like to ask you some questions about 
electricity generation. And I know you are provisional so far, 
but still hopefully you can help us on these questions.
    Is it safe in assuming that pretty much 100 percent of the 
electricity generated in Puerto Rico today is from burning fuel 
oil?
    Mr. Zamot. I would say it is 96 percent. There is 
approximately 4 percent that is renewables in Puerto Rico right 
now.
    Mr. Lamborn. And as we know, fuel oil is very expensive and 
very dirty.
    Mr. Zamot. That is correct, sir.
    Mr. Lamborn. I like the plan. I think you said by 2040, 50 
percent renewables, 50 percent natural gas through liquefied 
form.
    Mr. Zamot. That is correct.
    Mr. Lamborn. Have you identified investors who are willing 
to make that huge investment in a LNG terminal?
    Mr. Zamot. Sir, there are a number of investors that are 
actually very bullish on Puerto Rico's long-term prospects, and 
we in the Board, and specifically in my role as Revitalization 
Coordinator, we received a lot of proposals, a lot of questions 
about how people can bring innovative capital solutions using 
private capital to benefit the reconstruction of the grid and 
the people of Puerto Rico.
    Mr. Lamborn. Well, I would really urge you to keep pushing 
in that direction, because I don't think nuclear or coal is 
going to be a solution. Renewables are great, but to provide 
that much electricity in that short a time is unrealistic. So, 
I welcome the discussion about LNG.
    Another issue with LNG possibly, and maybe enlighten us, is 
the Jones Act. I want to commend one of our Representatives who 
is here today, Representative Velazquez, for speaking out on 
this issue. I think it is a problem for Puerto Rico, and I 
would like to find a solution to the Jones Act problem in 
general. But does that affect LNG imports?
    Mr. Zamot. Sir, in general, what we are looking at is a 
fuel mix that really provides a predictable cost curve in the 
out years for that fuel. And we believe that a proper gas mix, 
in conjunction with renewables, offers that opportunity for 
Puerto Rico.
    Our goal right now is to get that price at the meter below 
a certain point to drive increased demand, and that is going to 
act as an engine of economic growth.
    Mr. Lamborn. Would the Jones Act come into play for 
liquefied natural gas imports? Because it can be a real 
restriction on shipping.
    Mr. Zamot. Sure. Without going into specifics, we believe 
that any measures that the Congress takes to ensure that the 
cost of shipping fuels to Puerto Rico is reduced is a positive 
step toward rebuilding the economy.
    Mr. Lamborn. I, for one, would be willing to look at that, 
and I think we should look at that. Congress should look at 
that. Maybe just a very narrow exception to the Jones Act, 
possibly, just as we need to look at environmental regulation 
waivers. Everyone is not going to be happy about either one of 
those things, but if we want to see Puerto Rico succeed and 
thrive, as the Chairman was saying, I think those are the kinds 
of hard decisions we have to be willing to make.
    And the last thing I want to ask you about is that $800 
million project, the Ranking Member referred to it, burning 
waste to create electricity. My understanding is that it would 
be privately funded and would not need government subsidies of 
any kind?
    Mr. Zamot. That is correct, sir. It is privately funded. 
Some of the capital structure includes some Federal loans, but 
there is no money from Puerto Rico, and it relies on relatively 
new technology that is really respectful of emissions.
    Mr. Lamborn. Thank you for your great answers, and if 
either of the other witnesses want to weigh in on the things we 
have just talked about, please do so in the last 45 seconds.
    Ms. Jaresko. I wish to support your effort to relook at the 
Jones Act. As the congressional task force has already 
outlined, it is an additional cost for the island.
    Mr. Lamborn. Mr. Mayor?
    Mr. Perez. Yes, I think some changes have to be made, 
amendments to the Jones law and other laws for the recovery of 
Puerto Rico.
    Mr. Lamborn. Thank you all for being here. I appreciate 
what you are doing.
    Mr. Chairman, I yield back.
    The Chairman. Thank you.
    Mrs. Napolitano.
    Mrs. Napolitano. Mr. Chair, thank you.
    Mr. Zamot, this is dovetailing on the Ranking Member's 
questions that the incinerator would be built in an area 
previously contaminated by a battery recycling plant, and it 
was flooded during the hurricanes. Has the area been tested for 
lead, arsenic, and other contaminants?
    Mr. Zamot. Ma'am, I do not have specific details on what 
work has been accomplished to date, but we do know that the 
company that is planning that work has done extensive 
mitigation pre-work----
    Mrs. Napolitano. How long has the plant been there, that it 
has not been tested?
    Mr. Zamot. Ma'am, I do not have that information.
    Mrs. Napolitano. Would you mind sending the answers to this 
Committee, so we can understand that?
    Mr. Zamot. Yes, ma'am, we will.
    Mrs. Napolitano. And how does the Energy Answers Arecibo 
LLC plan to prevent their landfill from being flooded by future 
hurricanes?
    Mr. Zamot. Ma'am, could you repeat the question?
    Mrs. Napolitano. How do you prevent the landfill from being 
flooded by hurricanes?
    Mr. Zamot. That is an engineering question that I am not 
prepared to answer right now. I would imagine that that has 
been looked at in the permitting that the company has received 
to date.
    Mrs. Napolitano. OK. When and how does the company plan to 
bury the toxic ashes generated by the incinerator?
    Mr. Zamot. That is being currently discussed with the 
current Puerto Rico administration.
    Mrs. Napolitano. How many Puerto Rico municipalities 
refused to send trash to the plant incinerator?
    Mr. Zamot. I think the answer to that is many, because that 
represents a threat to current waste management in Puerto Rico, 
which the EPA has identified as a critical need to address.
    Mrs. Napolitano. How many hospitals in Puerto Rico have 
seen their power restored?
    Mr. Zamot. Have seen their----
    Mrs. Napolitano. How many hospitals had their power 
restored?
    Mr. Zamot. In Puerto Rico, ma'am, I don't know the answer 
to that, but it is not a lot right now. I think we still have 
several hospitals that are operating on generator power.
    Mrs. Napolitano. The Mayor mentioned the percentages, 75 to 
80 percent without restored power. How much longer do you think 
this is going to take?
    Mr. Zamot. Ma'am, we don't really have an answer to that 
question. If confirmed by the court, I plan to work very 
closely with the Corps of Engineers, with FEMA, and with other 
assets on the ground to get a much better idea.
    Mrs. Napolitano. Do they have an estimate on the time?
    Mr. Zamot. We do not have an estimate at this time.
    Mrs. Napolitano. The other question I have has to do with 
the additional wave of people who are leaving Puerto Rico to 
other states, and they will strain the state, local, and social 
services funding. Has the Oversight Board taken this into 
consideration?
    Ms. Jaresko. Yes, madam. Of course, one of the efforts in 
the fiscal plan development is to create an environment where 
people will be able to stay, receive the social support they 
need as families, whether that is a proper education, access to 
health care, or living conditions.
    So, every effort is being made in the fiscal plan to ensure 
that the environment is such that people wish to stay at home 
and have the ability to stay at home, as well as businesses 
staying to generate jobs, which are----
    Mrs. Napolitano. But so far they haven't been, because they 
still don't have power.
    Ms. Jaresko. Well, that certainly is the absolute, Number 
one critical problem for both people and businesses today.
    Mrs. Napolitano. OK. Then another question has to do with 
the documented deaths. What assistance is the Federal 
Government providing Puerto Rico mayors to provide a more 
accurate count of the deaths?
    [Pause.]
    Mr. Perez. For example, in Guaynabo, we don't have any 
deaths. But the government is the one that is giving the 
numbers. Right now there are over 50 deaths. Not during the 
hurricane. After the hurricanes. Now it is over 50.
    Mrs. Napolitano. But the mayors have been reporting them?
    Mr. Perez. Yes, the mayors have been reporting them. But 
through the hospitals and through forensic science.
    Mrs. Napolitano. Also, there are reports that residents 
obtained drinking water from wells at hazardous waste superfund 
sites in Puerto Rico. Have water testing efforts begun?
    Ms. Jaresko. Madam, those are questions that really the 
government would need to answer. I apologize, but that is not 
information that we have access to.
    Mrs. Napolitano. Why not? You are the mayors.
    Ms. Jaresko. No, I am the head of the Oversight Board.
    Mrs. Napolitano. Oh, the head of the Oversight Board. But 
it is important for us to be able to narrow all these answers. 
Thank you, Mr. Chair.
    The Chairman. Mr. Wittman, and congratulations for being a 
voter.
    [Laughter.]
    Dr. Wittman. Thank you, Mr. Chairman. I would like to thank 
our witnesses for joining us today, and we want you to please 
express to the people of Puerto Rico our thoughts and prayers. 
I know it is a very challenging time. We appreciate what you 
are doing here today to give us a perspective.
    Mr. Zamot, I wanted to kind of follow up. You laid out the 
framework on where you see things going with the restoration of 
power. There are really two elements of that, I think, short-
term and long-term. Give us perspective, because there are a 
lot of areas here that are either existing on generator power 
with intermittent fuel there, sometimes they are up and down. 
Give me a perspective on where things are, in your estimation.
    But then also, in the longer term, there is generation, 
capacity generation plants, and then the electrical 
distribution system. We all know prior to the hurricane the 
electrical distribution system was somewhat antiquated.
    Give me your perspective on where is the generation 
capacity. Is that reliable and up to speed now? Is it just a 
matter of modernizing and building the distribution system?
    So, if you can, give me those two layers: where are we 
right now in getting that interim, until we can get the 
distribution system rebuilt; and where is generation capacity 
in a time frame where the distribution system is being rebuilt, 
and when it becomes functional.
    Mr. Zamot. Thank you, sir. As far as your first question, 
the Corps of Engineers and FEMA are currently doing the damage 
assessment right now, so that will be accomplished, we expect, 
in the next 2 weeks.
    I can broadly tell you that the big issue right now is that 
distribution took a massive hit on the island. We know that 
transmission lines were really affected, some of the long-haul 
transmission lines from the south to the north, four major 
ones, three of them had significant damage. But the real issue 
is on a very, very vast distribution network. What we are 
finding is the last mile problem is pretty significant. 
Actually getting folks power from community substations and the 
like.
    As far as your second question, what about the generation, 
one of the issues we have in Puerto Rico is that, historically, 
we have had generation in the southwest, but demand is 
predominantly in the northeast. So, we have a mismatch between 
where the generation is and where the population is.
    New technology allows us to actually do that in a better 
way, while being respectful of the environment, emissions, 
noise, and any of those things, and those are the solutions 
that we are seeking with FEMA, the Department of Energy, and 
private capital.
    Dr. Wittman. In your estimation, how long do you think it 
will take for that to occur? In other words, for it to be done 
to completion, generation capacity, distribution capacity, in 
your best judgment. I understand you said earlier that there 
was not a definitive date, but in your professional judgment, 
how long do you think that would be? And give us an idea of the 
phasing of that. Obviously, it will be built in phases, or at 
least generation and distribution, but give us your perspective 
on that.
    Mr. Zamot. Sir, it would be difficult for me to actually 
give you a date. But what I will tell you is this, that it is 
absolutely critical to start incorporating and integrating 
near-term recovery activities with that long-term plan.
    What we need to do is essentially start not just bringing 
some of the distribution and wires up to code, which alone 
would be an improvement in Puerto Rico, but now start making 
the trade-offs, the cost benefit analyses in tactical 
situations.
    I will give you a quick example. The hurricane committee 
from the southeast, an area named Yabucoa, has a big 
transmission line going to the north. It is possible that 
repairing that transmission line will actually be costlier than 
actually having generation both close to that town and in the 
metro area. And those are the decisions that we would seek.
    Dr. Wittman. These are all critical-path decisions. And, 
obviously, timeliness is key here to get that system back up as 
quickly as we can. Obviously, it is food, water, shelter. 
Electricity is part of the shelter element there, so the 
timeliness of this is key. I think making sure that there is an 
emphasis there, and the urgency of what needs to happen with 
this, and maybe, like happens in the military realm, you can 
pre-purchase some of that stuff.
    It seems to me, you ought to be able to buy supplies 
beforehand. Power poles is one of those things that we know we 
are going to need. We know we are going to need wires. Is there 
a way that you can pre-purchase that, get that to the island, 
so when you have the plan, you are ready to go and you don't 
have to wait for mobilization?
    Mr. Zamot. Sir, that is a long-term fix, and you are 
absolutely right. In my view, we need to have a better approach 
to preparing the island. Resiliency is not just by building and 
technology, it is also by preparation to make sure that we can 
actually quickly recover from these types of events.
    Dr. Wittman. I want to quickly go to Mayor Otero. I want to 
get your perspective, because I think your role is absolutely 
critical. Having been in your shoes, I know that is where the 
rubber hits the road. Give me your perspective. What do we need 
to do here to help the citizens of Puerto Rico get back to the 
basic elements of food, water, shelter as quickly as we can?
    Mr. Perez. First of all, we have both problems, 
distribution and generation. For example, in Guaynabo they have 
told me PREPA is--you have a lot of places ready, but now we 
don't have generation. So, if generation comes to the 
metropolitan area, we will have maybe 10, 15, 20 percent more 
of our families in their places.
    But as I told you, there is a cap in FEMA. There are some 
laws that have to be amended for the help, for the families, 
and they could go back to their homes. But if we keep on 
putting patches, we are going to be here next week, as I told 
you, or next year. Because we are in the Caribbean, so we need 
to do permanent things there in Puerto Rico.
    The Chairman. OK, thank you.
    Dr. Wittman. Thank you, Mr. Chairman.
    The Chairman. Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Mr. Zamot, my questions are for you, first. I want to thank 
you for your service as an Air Force officer.
    Many territories like Puerto Rico and Guam, given limited 
resources on the island, are forced to make do with outdated 
infrastructure and legacy systems, including substandard 
electric grids, transmission lines, and power plants. What I 
want to know from you, Mr. Zamot, is can you please speak to 
the challenges that this presents?
    Where are you today, that you weren't directly after the 
hurricane? Are you, say, 5 percent better, 10 percent better?
    Mr. Zamot. Ma'am, it would be very difficult to answer that 
question. I think there is incremental improvement, as far as 
understanding the magnitude of the damage. I will give you an 
example.
    Initial reports were that the transmission sector of the 
grid actually took greater damage than distribution. We are 
now, based on the very hard work of FEMA and the Corps of 
Engineers, finding out that, actually, the distribution side, 
especially the last mile, was really where the majority of the 
damage was.
    Ms. Bordallo. The power is absolutely the top essential, 
yes.
    Another question I have has to do with rebuilding better 
and hardening our infrastructure for natural resources. I think 
some of my colleagues have mentioned that. All U.S. territories 
are prone to hurricanes, typhoons, and cyclones. Guam is 
certainly no stranger. We have gone through typhoons at 200 
miles per hour. When rebuilding after natural disasters, we 
must always seek to rebuild better.
    Mr. Zamot. Correct.
    Ms. Bordallo. That is what has happened on Guam. We don't 
have people in shelters now after typhoons. We call typhoons a 
blessing, because we build better. No longer in wood and tin 
roof, but we build in concrete.
    So, can you give me some idea? Is FEMA giving funds to 
rebuild as was, or are you going to be able to seek funds to 
build better, so you can have concrete structures?
    Mr. Zamot. Ma'am, the second case. We have a situation 
right now where we are rebuilding to code under category B of 
the Stafford Act, 100 percent reimbursables, and we are working 
extremely closely with FEMA, the Department of Energy, and 
other agencies to make sure that we can use a variety of public 
assistance grants to actually build resiliency into the system 
when we build it better.
    It is clear that that is going to be a mix of Federal and 
private funding at some point. We are working on a 
transformation plan to do exactly that right now. We have a 
meeting with our team this week, and we hope to have the 
initial transformation plan by the middle of December.
    Ms. Bordallo. And this is not just for San Juan, but for 
all outlying districts. You are taking that into consideration?
    Mr. Zamot. Yes, ma'am. It actually is a wholesale 
reimagining, if you will, of the grid. A number of the best 
practices that we have from industry tied in with the Puerto 
Rico energy strategy, which has already been developed and, at 
least as of 2 weeks ago, what the Governor personally sent as 
his priorities for rebuilding.
    Ms. Bordallo. Well, good. I am glad to hear that.
    Can any of you give me an estimate of how many people have 
left Puerto Rico and are now living in New York, or some other 
state, the mainland?
    Ms. Jaresko. The estimates are up to 100,000 at this point.
    Ms. Bordallo. One hundred thousand? All right.
    I want to close, Mr. Chairman, by saying that I strongly 
support efforts to secure additional Federal resources for both 
Puerto Rico and the Virgin Islands, as they rebuild from recent 
hurricanes. I know, I have been through many of them.
    And I also want to say that the residents of Puerto Rico 
and the Virgin Islands are American citizens. I think this is 
one point we forget about. They deserve nothing less than our 
full support in this Committee and in the full Congress.
    I yield back, Mr. Chairman.
    The Chairman. Thank you.
    Mr. McClintock.
    Mr. McClintock. Thank you, Mr. Chairman. All of us have 
been appalled by the devastation in Puerto Rico, and the 
stories have been heart-rendering. Your Resident Commissioner 
has kept us focused on that these past few weeks. And we do 
recognize a very important responsibility to respond to the 
cost of the natural disaster. That is our social contract as a 
Federal union.
    But in dealing with the natural disaster, we are also 
confronting the fact that there was a pre-existing fiscal 
condition of the Commonwealth that was not due to act of God, 
but rather acts of government, a lot of very, very bad 
decisions by the elected government officials of Puerto Rico, 
and also perhaps a lot of bad decisions made by the Federal 
Government over the years. The Jones Act was just mentioned as 
one example.
    The Federal Government is responsible for the acts of God 
and the acts of the Federal Government, but it is not 
responsible for the acts of the Puerto Rico government. Can you 
offer us some guidance on how we separate these two 
responsibilities?
    Ms. Jaresko. Yes, sir. When we were charged, initially, 
with implementing PROMESA, we adopted a fiscal plan for 10 
years that brought the Commonwealth back to structural balance 
without any additional Federal funding. That required, on the 
part of Puerto Rico, extraordinary measures. It required a 
rightsizing of the government by 30 percent, cutting 30 percent 
of cost. It required over 10 years reducing healthcare costs by 
30 percent. And we were on that path prior to this devastation.
    I think that if we look at the original fiscal plan, for 
example, the budget of this year that implemented that fiscal 
plan, you have that baseline, what it looked like and what it 
could have been, prior to the hurricane. Unfortunately, this 
devastation makes some of those measures today impossible. And 
it creates a situation where the uncertainty makes it hard for 
us to determine exactly what type of measures we need to get 
back to that structural balance.
    That is why we have asked you, and you have graciously 
given us a short-term liquidity window through the community 
disaster loans. And we look forward to you doing the same for a 
longer period of time, given the population outflow, and given 
the fact that businesses continue to be closed because of lack 
of electricity. Some have had their workers leave. Others are 
looking to Federal tax reform and waiting for a solution on how 
Puerto Rico will be treated in the Federal tax reform.
    Mr. McClintock. I understand the liquidity concerns. But 
again, we have to recognize part of those were pre-existing, 
and the result of bad decisions by the Puerto Rican government.
    Ms. Jaresko. Yes, sir.
    Mr. McClintock. During the hearings on PROMESA, we just 
heard that 100,000 have fled the island since the disaster. But 
the fact is many were fleeing from it before. And during the 
hearings on PROMESA, I pointed out Puerto Rico is a cruise ship 
destination. It should be the gem of the Caribbean. People 
should be flocking to it, not fleeing from it. Again, not acts 
of God, but acts of government.
    What can the Federal Government do, long term, in terms of 
its overall policies? Again, the Jones Act has been mentioned. 
What other suggestions could you have on Federal changes that 
could restore the prosperity that Puerto Rico should naturally 
enjoy?
    Ms. Jaresko. First and foremost, it will be the response to 
the devastation. I think the extent to which you help rebuild 
the public sector, the extent to which FEMA and HUD and other 
agencies are charged with coming in and helping with the 
devastation will define Puerto Rico's future to a great extent.
    But there are other things, indeed. I think with regard to 
tax reform, you need to design something that encourages U.S. 
companies to stay and even grow their manufacturing operations 
in Puerto Rico. Puerto Rico should not be penalized in that 
respect.
    Mr. McClintock. My time is fleeting, but I very much want 
to get the full answer to the question, not only from you, but 
from our other witnesses. Could I ask that you respond to that 
in writing? Give us your suggestions on what the Federal 
Government can be doing to restore the natural prosperity that 
the island should enjoy.
    The final question I wanted to ask was to Mr. Zamot. You 
mentioned electricity generation and a heavy reliance on 
renewables. I assume that means solar and wind. My experience 
has been those are the most expensive forms of electricity 
generation, and in part because of the relatively low output, 
but also because of the intermittent nature of them that 
requires ready reserve power to back up.
    Why, in a combined power and economic crisis, would you 
insist on the most expensive and least productive electricity 
sources?
    The Chairman. You have 4 seconds to do it.
    [Laughter.]
    [Pause.]
    The Chairman. You did it.
    Mr. McClintock. Could I get that answer in writing?
    Mr. Zamot. Yes, sir.
    The Chairman. You get that in writing, too, yes. Thank you.
    Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman, I think the 
witnesses here get a sense that there is a lot of concern about 
not only the devastation and the lives that have been lost in 
Puerto Rico, but also the response from the Federal Government, 
which I, for one, feel has been lacking in terms of the 
coordination.
    We all know that natural disasters are devastating to the 
communities that they impact, whether they are the hurricanes 
in the Caribbean, or tornadoes, or earthquakes, or fires that 
we have had in California. The response, though, on behalf of 
the Federal Government, where we have a responsibility, I 
think, should always be the same, which is that we should do 
the best that we can do on behalf of American citizens.
    And I think that is why this oversight hearing today and 
future efforts are critical, because Members of Congress need 
to understand that we, in fact, are doing our best. And if we 
are not doing our best, then what is it going to take, in fact, 
to provide that support necessary on behalf of people, Puerto 
Rico, and the U.S. Virgin Islands.
    I have spent a bit of time in that part of the world, and 
those islands are beautiful. The people have always been a part 
of the fabric of this country, so my thoughts and prayers are 
with those families.
    But, Mayor, I would like to ask you, and you are not, I 
think, unfamiliar with these hurricanes that occur regularly in 
the Caribbean. What has made this so different than previous 
examples that you may be familiar with in Puerto Rico?
    Mr. Perez. Well, the thing is that before you go, there are 
some parts of the island, the communications, they were good, 
partially good, and some places on the island were working 
without a problem.
    Right now we have the 78 municipalities devastated----
    Mr. Costa. It took out the whole island, and that had never 
happened before.
    Mr. Perez. It took out the whole island. Different from----
    Mr. Costa. So, Puerto Rico has been unable to provide the 
response it would be able to provide in previous disasters.
    Mr. Perez. Because of that, because this is the first 
time----
    Mr. Costa. The same with local government. As a mayor, you 
have been just limited.
    Mr. Perez. Yes, but I used to be an administrator, and----
    Mr. Costa. What would you ask us to do in the short term 
and the long term, realizing that we do triage in the short 
term, but in the longer term we have to be smart about our 
ability to get Puerto Rico back on its feet along with the U.S. 
Virgins.
    Mr. Perez. Sure, in the longer term, we have to work with 
our infrastructure, and don't put patches. As was said before, 
if we rebuild in concrete, we won't have this problem. If we 
just do the same thing, we are going to be here next week, 
maybe next year. We have the solution. All we have to do is 
work with it.
    Mr. Costa. Mr. Zamot, as the Revitalization Coordinator, I 
can understand you may not have some of the answers to the 
questions that have been asked at hand. But I would hope at 
this point in time, given the responsibility that you are going 
to have, that you begin to develop an interim and a long-term 
plan, and how you will implement that interim and long-term 
plan. Could you give us some detail?
    Mr. Zamot. Yes, sir. Initially, what we want to ensure is 
that we have clarity of purpose between the agencies that are 
responsive for immediate----
    Mr. Costa. OK, you are working on that now. Have you begun 
to develop a price tag in terms of what you think this is going 
to cost? Because at the end of the day, to the Mayor's point, 
if we are going to do some sound investments, we have to be 
clear about how much money it is going to cost, and do you have 
the resources.
    Mr. Zamot. We are looking at that right now, working with 
the Corps of Engineers, FEMA, and the Department of Energy to 
get a proper, ground-up estimate of----
    Mr. Costa. And how long do you think that is going to take?
    Mr. Zamot. My understanding is at least 2 more weeks.
    Mr. Costa. All right. Will you be able to provide this 
Committee in 2 more weeks, or in a month, what you think the 
costs are going to be in the interim and the long term to do 
the kind of things the Mayor is suggesting we need to be doing 
if we are going to get Puerto Rico and the U.S. Virgins back on 
their feet?
    Mr. Zamot. We should be able to do that, sir.
    Mr. Costa. OK. I think that is very important for members 
of this Committee to understand, because there is going to be a 
supplemental, and we are going to have to figure out, as we 
deal with the situation in Texas and Louisiana, that we do the 
same for the people in Puerto Rico and the U.S. Virgins.
    Mr. Zamot. Yes, sir.
    Mr. Costa. Thank you very much, Mr. Chairman.
    The Chairman. Virgin Islands.
    Mr. Pearce.
    Mr. Costa. U.S. Virgin Islands, yes.
    Ms. Bordallo. You said ``the virgins.''
    Mr. Costa. Well, because those of us who sail in the U.S. 
Virgin Islands refer to it as a pretty part of the world.
    The Chairman. I am not touching that line.
    [Laughter.]
    The Chairman. Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman, and thanks to each one 
of you for being here. And know that I think each member of the 
Committee has expressed their concerns for the situation and 
our united desire to help restore power and to restore the 
conditions that are just basic to human life.
    Mr. Zamot, you kind of ran over time. I am going to call an 
overtime period here and let you answer Tom's question, if you 
could.
    Mr. Zamot. Sir, the question, if I recall, is what are we 
doing about integrating renewables into the energy mix of----
    Mr. Pearce. Raise your microphone up just a bit.
    Mr. Zamot. Yes, sir. Can you hear me now?
    Mr. Pearce. Yes, thanks.
    Mr. Zamot. The question, if I remember correctly, is how do 
we integrate renewables, and why are we integrating renewables 
at this point and for the energy strategy.
    First off, that energy strategy is actually Puerto Rico's 
own developed energy strategy. They developed this for 2040, 
that renewables/gas mix.
    Renewables, frankly, is a big private investment effort. 
So, these are actually vendors from private industry who bring 
their own capital to the table and can actually provide power 
at competitive rates to the grid. And the issue is how do you 
integrate that and have that to be a very resilient mix with 
what we see, and the government sees, as predominantly gas for 
the remainder of the----
    Mr. Pearce. Those private funds, do they receive some sort 
of tax credit or anything?
    Mr. Zamot. Sir, I would imagine that some of them may, but 
I do not have any specific detail on that.
    Mr. Pearce. I am talking about from the Puerto Rican 
government.
    Mr. Zamot. I do not have that information, sir.
    Mr. Pearce. OK. Ms. Jaresko, the utility is the absolute 
important thing to get restored. In other words, if you are 
going to pump water, it takes power, it takes electrical power, 
just every basic service depends on that.
    I understand that the power company had filed bankruptcy 
prior to the storms. What is the status of the underlying 
economic state of the company, or the agency?
    Ms. Jaresko. PREPA had $9 billion of bonded debt prior to 
the hurricane devastation, and that debt was why we ended up 
filing Title III.
    The fiscal plan process that I described that we will 
follow for the Commonwealth, we will do the same for PREPA, and 
we should have a sense of what this looks like, going forward, 
by the middle of December. I can't say right now what their 
financial capacity will be after this.
    Mr. Pearce. OK, prior to the hurricane, they were not 
paying their obligations. They had filed for bankruptcy, is 
that correct?
    Ms. Jaresko. That is correct. Yes, sir.
    Mr. Pearce. One of the problems that I see, just as a 
former business owner taking a look at it, one of the reasons 
that residents had to pay such a high rate is that certain 
entities did not have to pay for the electrical power. One of 
those would be the hotels. Are they still exempt from paying 
their power?
    Ms. Jaresko. Each of the economic development plans that 
Puerto Rico implemented over the years had individual tax 
agreements with different businesses and energy--------
    Mr. Pearce. I am just asking about the hotels. Are they 
still exempt, or are they not exempt?
    Ms. Jaresko. Some of them are, yes.
    Mr. Pearce. Some of them are exempt?
    Ms. Jaresko. That is correct.
    Mr. Pearce. Cities were also exempt. And city governments 
were exempt prior, according to what I have read.
    Mr. Zamot. That is correct, sir.
    Mr. Pearce. Yes. So, Mr. Otero, is your community paying 
for electrical power, or is that something that you have an 
exemption for?
    Mr. Perez. We have an exemption, but PREPA does not pay us 
for taxes and everything for their----
    Mr. Pearce. I understand. But the exemption ends up lying 
on the backs of the consumers, which brings their----
    Mr. Perez. They don't pay us, we don't pay them.
    Mr. Pearce. So again, looking at it from this end, we will 
do what we have to do to help you out, but at some point the 
system has to work inside itself.
    Ms. Jaresko, do you have an idea of how much it is going to 
cost to fix the system, just the electrical system. How much, 
if you could just tell us what the check should be today, what 
would that be?
    Ms. Jaresko. [No response.]
    Mr. Pearce. Mr. Zamot? I don't know, either one.
    Ms. Jaresko. I can't tell you. I, myself, am waiting for 
the assessments of damage from FEMA, so I can't give you an 
assessment.
    Mr. Pearce. One of the problems that I saw, also being 
faced by the utility company, is the evacuation of experienced 
personnel. They were just retiring and moving on, and were not 
able to hire experienced people.
    What is the status of the human capital? Do you have the 
resources, internally, to fix and run the system, if we get it 
back operational?
    Mr. Zamot. Sir, we need all hands on deck to actually 
recover the system, and from my initial assessment----
    Mr. Pearce. But my question is, are you finding the 
experienced people to hire inside the system?
    Mr. Zamot. Yes, we will need additional people, experienced 
people, to actually do the work to repair the system.
    Mr. Pearce. So, I would interpret that as kind of a 
hesitant no, that you are not finding--anyway, just significant 
problems. Again, our heart goes out to you.
    I yield back, Mr. Chairman. Thank you.
    The Chairman. Thank you.
    Mr. Sablan.
    Mr. Sablan. Yes, thank you very much, Mr. Chairman. Thank 
you for having this hearing.
    Two things. My district is known as typhoon alley. I 
represent an island that is about 400 miles in distance from 
the northernmost part to the southernmost part. That is like 
from San Diego to San Jose, California, almost.
    I am very interested in the suggestions of the gentleman 
from California, Mr. McClintock, on what the government can do 
to help Puerto Rico and the rest of the territories pick 
themselves up and move on. And one of the things we need to do 
is look at Medicaid.
    But having said that, because this is examining challenges 
of the Puerto Rico recovery and the role of the Financial 
Oversight and Management Board, my heart goes out to the people 
of Puerto Rico and the destruction. I have seen typhoons like 
that.
    I would like to yield my time to a daughter of Puerto Rico 
also, Ms. Velazquez from New York.
    Ms. Velazquez. Thank you so much, Mr. Sablan. And let me 
take this opportunity, Mr. Chairman and the Ranking Member, to 
thank you for giving us the courtesy to participate in this 
important hearing.
    Ms. Jaresko, last week, former Senator Ramon Ruiz Nieves 
testified before the Energy Subcommittee of the House Committee 
on Energy and Commerce. In his very insightful remarks he 
indicated, and I quote, ``As most Puerto Ricans sadly 
understood after Hurricane Maria, the lack of a strong, 
resilient, and smart energy system has the potential of killing 
people and destroying the economy.'' And we know that is real.
    So, to that point, I want to highlight some troublesome 
statistics. Thirty-five percent of small businesses in Puerto 
Rico have still not resumed operations, due to power outages. 
Ten percent of Puerto Rico's small businesses are expected to 
close their doors entirely. A hundred thousand people have left 
the island since September 20.
    My question is, how are you going to continue funding the 
island as more and more businesses close and people continue to 
leave?
    Ms. Jaresko. Initially, it will require liquidity support 
under the Community Disaster Loan Program. Over time, we will 
have to determine how many of those people who have left have 
left for good, how many will be returning. We will have to 
determine and estimate how many of those businesses that have 
closed can reopen. Or can new businesses reopen with the 
support of SBA, for example?
    So, our work, the work that we have ahead of us in our 
fiscal plan, is to exactly look at those estimates and try to 
rebuild an economy that can be balanced.
    Ms. Velazquez. OK.
    Ms. Jaresko. That is the charge of PROMESA.
    Ms. Velazquez. So, to the question of the bondholders, how 
do you foresee bondholders getting repaid?
    Ms. Jaresko. I don't have a vision right now of how much, 
or at what period of time. That will be defined by a longer 
debt sustainability analysis that we need to complete, looking 
at 30 years, beyond the 5 years of just the fiscal plan itself.
    Ms. Velazquez. So, are you telling me, what do you say, 30 
years?
    Ms. Jaresko. We have to do a 30-year debt sustainability 
analysis before the end of December with the government.
    Ms. Velazquez. And the way things are done today, it might 
take over 50 years for the bondholders to expect to be repaid, 
because there is not going to be a tax base left in Puerto 
Rico.
    Ms. Jaresko. As you know, prior to the hurricane it 
appeared impossible, and that is why we were in Title III, to 
repay the creditors. Today, the situation is gravely worse.
    Ms. Velazquez. Thank you.
    Mr. Zamot, you have expressed in the past your preference 
to privatize the electric power authority. And while I 
understand that it is in the best interest of consumers and 
businesses alike to depoliticize the public corporation, I am 
not fully convinced that the only way to do so is by selling 
off the grid to the highest bidder.
    Can you explain the Board's vision for Puerto Rico's energy 
future?
    Mr. Zamot. Yes, ma'am. What we are trying to do is, the 
Board is trying to consider all options for the future of 
Puerto Rico's grid. Privatization may be one of those. But 
clearly, attracting innovative capital solutions is a large 
part of doing this, so that the Federal Government does not 
have to rely on footing the bill.
    Ms. Velazquez. And in that energy future, do you foresee 
renewable energy playing an important role?
    Mr. Zamot. Yes, ma'am. In accordance with Puerto Rico's own 
energy strategy, it is a large part.
    Ms. Velazquez. Thank you. I yield back.
    The Chairman. Thank you.
    Mr. Thompson.
    Mr. Thompson. Chairman, thank you. Thank you to the panel. 
I really appreciate the opportunity to talk about important 
issues that impact all those American citizens in the short-
term or long-term Puerto Rico.
    Ms. Jaresko, Governor Rossello has expressed his desire to 
use microgrids in the rebuild of the island, and the use of 
microgrids would allow the island to build back a stronger, 
more resilient electrical system, since there would be fewer 
points of failure if another hurricane were to hit.
    Today, in Puerto Rico, most of the generation is on the 
south side of the island and the load is on the north of the 
island, with the two sides connected by transmission lines. 
Locating generation closer to load, utilizing microgrids, would 
alleviate some of the vulnerability that the transmission lines 
pose to the current system.
    What do we need to do to ensure that, at the very least, we 
are building back critical infrastructure, like hospitals, 
ports, emergency shelters, with more resilient technologies 
like microgrids?
    Ms. Jaresko. I think I will yield to Noel.
    Mr. Thompson. Sir?
    Mr. Zamot. We are working right now with FEMA, the 
Department of Energy, and other Federal agencies to examine 
exactly that question: What are the best solutions, best 
practices out there, so that we can actually build in 
resiliency, and actually leverage some Federal programs that 
allow us to do just that, so that we don't incur this 
tremendous cost the next time another hurricane hits Puerto 
Rico?
    Mr. Thompson. Thank you. Mayor, in the wake of these 
devastating hurricanes, Congress is surely interested in 
working with you and with other officials on the ground to 
provide relief, again, short-term, looking long-term, in terms 
of sustainability to Puerto Rico.
    My office specifically worked with constituents who have 
family in Puerto Rico to convey what Congress, FEMA, and the 
National Guard are doing to provide relief to those who were 
hit the hardest. Moving forward, what can we do to ensure that 
relief efforts are being used in the most efficient and 
impactful methods?
    Mr. Perez. You have 78 mayors, and we are the first 
responders. If you give us more participation and decision 
making, we are the first face the people see and the first 
responders for the emergency. All we are asking is to be there 
and to receive the help, because everything that comes through 
FEMA, through the Corps of Engineers goes through the 
municipalities and from us to the people. So, you have 78 
mayors and they are willing to help FEMA, the Congress, and the 
Administration do the job.
    Mr. Thompson. Thank you.
    Mr. Zamot, through your experience as a Revitalization 
Coordinator, you mentioned the successes of privately-funded 
infrastructure improvement projects. You also mentioned that 
your ability to provide broader economic development is 
limited. How can Congress expand your abilities and help you 
provide stable, reliable, and cost-effective power to the 
people of Puerto Rico?
    Mr. Zamot. Sir, I think I would defer any specific 
statutory language to the Committee. But greater clarity on 
what the authorities of the Revitalization Coordinator, and 
broadly, PROMESA and the Board, would actually be very welcome.
    Mr. Thompson. Just one additional question for you. 
Certainly the devastating effects of Hurricane Maria have left 
thousands without access to power and water. With equipment 
that is, on the average, 44 years old, and based on technology 
that is even older, Maria gives us the opportunity to bring 
Puerto Rico's infrastructure into the 21st century.
    How can innovative energy technology such as fuel cells 
that utilize our Nation's resource of clean-burning natural gas 
be used to revitalize the Puerto Rico energy grid?
    Mr. Zamot. Sir, we would be excited to bring all those 
solutions to the table, and incorporate any of those good 
ideas, any of those fantastic ideas, into our transformation 
plan that we are developing right now. We are working very 
closely with the government of Puerto Rico, with PREPA, who 
actually has provided a lot of technical insight into this 
transformation plan.
    But our focus is on actually achieving the goals that 
Puerto Rico has set for itself in their energy strategy, and 
that type of new technology is clearly a part of the future.
    Mr. Thompson. Thank you, Chairman. I yield back.
    The Chairman. Thank you.
    Ms. Tsongas.
    Ms. Tsongas. Thank you, Mr. Chairman, and thank you to our 
witnesses.
    I think it is important to remember that we are having this 
hearing today because it has been 47 days since the landfall of 
Hurricane Maria, and yet our fellow Americans in Puerto Rico 
are still enduring a humanitarian crisis. The electricity 
blackout is now the worst in our Nation's history. Many still 
do not have safe drinking water. And constituents tell my 
office that communication is extremely limited. Some people are 
still having difficulty contacting family members in remote 
parts of the island.
    And I have to say that in my district about a week-and-a-
half ago we had a serious storm which left many of our 
constituents without electricity for a day or two, and so many 
said, ``I can't stand it after a day or two. What on earth is 
it like in Puerto Rico,'' especially if you compound with that 
the access to safe drinking water.
    One in five of my constituents identify as Hispanic or 
Latino, and 40 percent of them are from Puerto Rico. So, their 
interest in the health, safety, and long-term economic 
prosperity of the island is acute. And that is shared by many 
of my constituents, who watch with dismay as our Federal 
Government has taken so long to respond.
    To address that, since the hurricane struck, I have seen a 
tremendous response to help our fellow citizens. Volunteers in 
the city of Lawrence organized a major donation drive for 
clothing, bottled water, toiletries, and other necessary 
supplies to be shipped to Puerto Rico. They just wanted to do 
whatever they could to help.
    A bipartisan group of elected leaders created the 
Massachusetts United for Puerto Rico Fund, which is collecting 
donations and distributing money to relief organizations 
working directly on the island. So far they have raised over $2 
million from over 1,500 individuals.
    And the private sector has responded to the crisis, as 
well. For example, a solar company in my district donated an 
off-grid solar power system and batteries to a family medical 
clinic that has been without electricity or clean water.
    All wonderful actions, but really designed to try to offset 
our Federal Government's slow response.
    I received a letter from the Massachusetts Black and Latino 
Legislative Caucus, urging Congress to support increased relief 
efforts for Puerto Rico. With your permission, Mr. Chairman, I 
ask that this letter be entered into the hearing record.

    The Chairman. Without objection.

    [The information follows:]

               The Commonwealth of Massachusetts,  
 Massachusetts Black and Latino Legislative Caucus,
                                      Boston, Massachusetts

                                                 September 29, 2017

Hon. Niki Tsongas,
1714 Longworth House Office Building,
Washington, DC 20515.

    Dear Congresswoman Tsongas:

    United States citizens are in need of your support, please consider 
the plea of approximately 300,000 Puerto Ricans who call Massachusetts 
their home. The Massachusetts Black and Latino Legislative Caucus 
(MBLLC) would like your immediate support. We respectfully ask for you 
to advocate to Congress to play a stronger role in the hurricane relief 
efforts in Puerto Rico.

    Latino and Black residents in Massachusetts are urging for your 
leadership in supporting emergency assistance relief to the residents 
of Puerto Rico. Our fathers, mothers, sisters, brothers, friends, and 
loved ones are suffering following the devastating category 5 Hurricane 
Maria that crossed the Island. Communities throughout Massachusetts 
including Boston, Springfield, Lawrence, Holyoke, Westfield and others 
are currently gathering items and donations to assist those in Puerto 
Rico. We know that these efforts are not enough. The devastation caused 
by Hurricane Maria is extensive and will require significant funding 
and labor.

    In this dire time, the MBLLC asks you to support Puerto Rico relief 
efforts by advocating for the following:

     Jones Act Suspension: Yesterday, we were relieved by the 
            Trump Administration's announcement to temporarily suspend 
            the Jones Act regulations for the next ten days. We believe 
            that this decision will help to allow for the transporting 
            of critically-needed cargo and personnel supports to the 
            region. However, we strongly believe that Congress should 
            use this natural tragedy to repeal the Jones Act as it 
            applies to Puerto Rico and any island United States 
            territories.
     Federal Disaster Relief Package: We understand that 
            Congress has allocated $15.2 billion in Federal Emergency 
            Management Agency (FEMA) funding directed relief efforts in 
            Houston, Florida, and other states following Hurricanes 
            Harvey and Irma. We ask you to urge Congress to include 
            Puerto Rico to this disaster relief package to provide the 
            necessary funding stream to support the relief and 
            reconstruction activities on the Island.

     Medicaid Parity Modification: Before Hurricane Maria, 
            residents of Puerto Rico were faced with higher Medicaid 
            costs in comparison to U.S. mainland residents. Currently, 
            Island residents receive a 55% reimbursement of all 
            Medicaid-related programs, including health care coverage 
            for the low-income; meanwhile mainland residents are 
            allocated a minimum of 83% of Medicaid expenses.\1\ 
            Moreover, as soon as December 2017, Puerto Rico will face 
            the Medicaid Funding Cliff, when money allotted under the 
            Affordable Care Act (ACA) to finance the Medicaid is 
            projected to run out.\2\ For these reasons, Medicaid 
            mediation is urgently needed to enable Island residents to 
            access affordable health care while the region works to 
            rebuild. We ask you to urge Congress to pass Medicaid 
            parity for Puerto Rican residents.
---------------------------------------------------------------------------
    \1\ Aponte-Hernandez, Jose. The Hill. http://thehill.com/blogs/
congress-blog/healthcare/348959-the-white-house-congress-must-move-on-
parity-in-medicaid-funds
    \2\ Levis, Maria and Neoh, Karen. ACTION REQUIRED: How underfunding 
Puerto Rico's health system costs federal and state governments more 
money than it saves. Impactivo. http://www.impactivo.com/action-
reguired-how-underfunding-puerto-ricos-health-system-costs-federal-and-
state-governments-more-money-than-it-saves/

    Your support for Puerto Rico is most crucial in helping to avoid a 
humanitarian crisis. Many U.S. citizens in Puerto Rico are already 
facing an economic crisis and now without an ability to work are 
considering leaving the Island which will extremely impact the 
Northeast, including Massachusetts. New York, Connecticut, Pennsylvania 
and others have already mobilized for Puerto Rico. We hope our 
---------------------------------------------------------------------------
Massachusetts federal delegation will do the same.

            Sincerely,

                                Representative Frank Moran,
                                                             Chair.

                                 ______
                                 

    Ms. Tsongas. With that, Ms. Jaresko, in your written 
testimony, you go so far as to state that, ``Without 
unprecedented levels of help from the U.S. Government, the 
recovery we were planning for will fail.'' And you have said in 
your testimony this morning just what is at stake and how 
important it is that we respond in a way that helps move Puerto 
Rico forward.
    Can you give me a realistic sense of the support you would 
need from the U.S. Government to help Puerto Rico recover in a 
way that does put it in a better place, going forward, not to 
just take care of the near-term tragedy and crisis, but helps 
position it for the future?
    Ms. Jaresko. Are you asking with regard to what the Board 
requires, or Puerto Rico?
    Ms. Tsongas. Well, I think as the Board would assess it.
    Ms. Jaresko. Right now, the estimates that we have seen are 
up to $100 billion of damages. Some portion of that, of course, 
will be covered by insurance funds, and some portion of that is 
private sector.
    But the portion that is public sector needs to be rebuilt, 
as we have described, and we need to rebuild it in a more 
resilient fashion. The key is electricity. That is why the 
Board has, first and foremost, made the appointment of Mr. 
Zamot as a chief transformation officer a priority. Everything 
else will fall from the quick and efficient restoration of 
electricity. Above and beyond that, the Board believes that it 
has the authority to continue to implement those fiscal 
controls that are required to bring back structural balance. 
But to the extent that the Congress can provide clarity, we 
believe that we could avoid much lengthy legal litigation and 
costly litigation when there are differences of opinion with 
regard to our authority. And we think that will help ensure a 
quicker and more efficient recovery, as things move forward. 
So, that is one.
    The second is on liquidity assistance. The Congress has 
approved a short-term, we are looking forward in the 
supplemental to long-term support for liquidity, long-term 
meaning more than the next year, as we have described the 
reasons for the revenues collapsing and our expenditures 
remaining, relatively speaking, the same.
    And third, I would just add that I believe that the Board 
has a very important role in the long-term funding that 
Congress will appropriate, to assure that it is aligned with 
the fiscal plans, going forward.
    Ms. Tsongas. Thank you. I yield back.
    The Chairman. Thank you.
    Mr. Gohmert.
    Mr. Gohmert. Thank you. I appreciate the witnesses being 
here.
    Ms. Jaresko, if I understood you correctly, you said that 
returning Puerto Rico, basically, to normal depended on quick 
and efficient return of electricity. But isn't it too late for 
it to have been considered quick and efficient?
    I mean, I would have thought we were way past the quick 
part of returning electricity. Do you still have hope it is 
going to be quick?
    Ms. Jaresko. As quick as is possible. I myself have no 
electricity where I live with my daughter. We have a generator 
for 12 hours in the evening, so I, myself, am looking forward 
to being reconnected to electricity.
    My point is the longer it lasts, the harder it is going to 
be for everyone.
    Mr. Gohmert. How long have you been without electricity?
    Ms. Jaresko. Since day one.
    Mr. Gohmert. OK. And how many days?
    Ms. Jaresko. Well, we are a little past 50.
    Mr. Gohmert. Yes. I would just suggest perhaps if your idea 
of quick is somewhere beyond that, that ought to be 
readdressed.
    I understand that the Governor has been resistant to the 
idea of privatizing the Puerto Rico Electric Power Authority. 
But when I look at how long it is taking to return power, it 
kind of looks like PREPA is Puerto Rico's, or it is to 
electricity what the VA is to quick and efficient health care 
for veterans. I cannot imagine it being worse if it were 
privatized.
    What are your feelings about privatization? I would like to 
hear from you, Ms. Jaresko, and then from Mr. Zamot.
    Ms. Jaresko. The Board certainly considers privatization as 
one of the options, going forward. There is a question that 
remains open to see whether it is privatization of the entire 
power sector, meaning generation, transmission, and 
distribution, or some select part, or whether it just means 
bringing in private sector to compete and bring down the cost 
and bring up the efficiency of electricity. We are looking at 
all of those as we define this fiscal plan for PREPA.
    Mr. Gohmert. I have said in the past and still believe, 
Puerto Rico has the potential of being the Hong Kong of the 
United States, where businesses would flood in there. But even 
though Puerto Rico pays no Federal income tax, obviously the 
local taxes are even higher than Federal income tax.
    So, it has just been quite an anomaly. You have great 
people, hardworking people, and one of the most beautiful 
places in the world, and yet the people are desperate for help. 
Can you put your finger on specifically what you think would 
return electricity the quickest? Is all your faith in a small 
repair company from Montana?
    Mr. Zamot. Sir, rebuilding the grid will take coordination 
of effort and clarity of purpose and a unified management and 
leadership structure. We currently do not have that, and that 
is why the Board has asked to name a Chief Transformation 
Officer that would have exactly those authorities.
    Mr. Gohmert. How far away are you from naming that 
authority?
    Mr. Zamot. Sir, I have been named as the Chief 
Transformation Officer. It is pending approval from the court 
on the 13th of----
    Mr. Gohmert. OK, so have you been able to assume any of 
those duties, or are you waiting for that formal authority?
    Mr. Zamot. Sir, I am waiting for the court.
    Mr. Gohmert. OK. Do you have any idea how long before that 
would happen? Because it seems that if it is that important to 
getting power restored more quickly, then it should not take 
that long to have a meeting, grill you, if they have to, all 
day, and then come to a decision. How long are you looking at 
before you get that authority, if you get it?
    Mr. Zamot. Sir, I don't know, but I know that upon 
approval, I am ready to work immediately toward marshaling all 
those efforts.
    Mr. Gohmert. Well, I figured that. But the question is when 
do you get that opportunity.
    Ms. Jaresko. The court hearing is the 13th. The judge may 
or may not decide that day. She may postpone. There could be 
appeals, based on whatever the decision is. That is why, in our 
testimony, we saw that if Congress agrees----
    Mr. Gohmert. Is that totally up to the judge to set that 
date?
    Ms. Jaresko. She has set the date of the 13th, and it is up 
to her to decide what----
    Mr. Gohmert. And nobody else has any authority to move 
things along more quickly?
    Ms. Jaresko. No, but we believe if you, the Congress, agree 
with this power that PROMESA has under Title III, that it would 
be helpful and we would welcome clarification and ratification 
by Congress of that power.
    Mr. Gohmert. Is her caseload that overwhelming that she 
cannot possibly get to it before the 13th?
    Ms. Jaresko. I can't answer that question, sir.
    Mr. Gohmert. Pitiful.
    The Chairman. Mr. Lowenthal.
    Dr. Lowenthal. Thank you, Mr. Chair, and thank you to all 
the witnesses for being here and helping us to better 
understand how to accelerate the ongoing recovery of Puerto 
Rico.
    One of the things that really stands out is how sad this is 
for the residents of Puerto Rico, how things in terms of their 
perspective have moved slowly, all the 70 percent of people 
that are still without electricity, and how the restoration is 
going to take a long time, and how much of the population lacks 
clean drinking water, and hospitals still don't have power. It 
is quite a picture you lay out for us.
    Something that has really struck me, and two of my 
colleagues have raised the issue, is that maybe some of the 
problem is that we need to either have exemptions or really get 
rid of the Jones Act. I am not sure I believe any of that, that 
the Jones Act is really a problem.
    I would like to know. Before Hurricane Maria and the other 
hurricane, was there any concern about the Jones Act?
    Ms. Jaresko. Yes, there was, and it was as well in the 
congressional task force report. There have been studies on it. 
It does add a level of cost to the island, which we could do 
without the additional cost.
    I can't say that the moment that the hurricane struck that 
this was a critical issue, because the ports were limited in 
how much capacity they could intake. But as a long-term----
    Dr. Lowenthal. Yes, that is what we had heard. Let me go on 
that the real issue was not so much the Jones Act, but the 
issue was getting goods from the ports out, because there was 
not a transportation system or an infrastructure that could 
handle it. And there was really isolation of getting from the 
ports to the communities. Can you comment on that?
    Ms. Jaresko. What I can comment on is that I have never 
seen, when I lived in Ukraine during war, during revolutions, I 
have never seen a situation with a more complete total 
breakdown of all communications and the structure of the 
business environment. You could not function. There were 3 days 
where I could not make a phone call to let anyone know that we 
were safe. The roads were blocked and flooded. There was no 
telephone communication, there was no electricity, no Internet. 
And that was right near San Juan, where I live. I cannot even 
imagine Utuado, Yabucoa, or other areas that were directly hit 
on the incoming.
    This is a situation that I think no one could have prepared 
for. And it raises just extraordinary questions about how to 
deal with an island that completely collapsed. Communications, 
electricity, water, completely collapsed. People could not 
communicate, even to bring bus drivers, truck drivers to the 
ports to help bring the product out of the ports. It is an 
incredibly difficult situation.
    Dr. Lowenthal. Thank you. Mr. Zamot, I want to change the 
topic a little bit, and talk about the trash incinerator 
project. Could you tell us right now, prior to the hurricanes, 
were there any issues in Puerto Rico about a coal ash problem, 
and what to do with the coal ash, and where it was being 
stored?
    Mr. Zamot. Sir, that is an issue that the government of 
Puerto Rico is currently addressing, and the Board was not 
involved.
    Dr. Lowenthal. So, you don't know whether there were any 
problems with coal ash? Does anyone here know? Have there been 
any problems with coal--they were able to utilize the existing 
kind of landfills to do coal, or to get rid of some of this 
toxic coal ash?
    Ms. Jaresko. I am aware of the problem. I am also aware of 
the environmental protesters and the issues that they have 
raised.
    Dr. Lowenthal. So, there was a problem before all of this 
about coal ash.
    Ms. Jaresko. Yes, sir.
    Dr. Lowenthal. So, you understand that, and now we are 
going to increase the amount of potentially toxic coal ash. 
Where is it going to go? What are we going to do with the toxic 
coal ash, if there were not landfills before to deal with the 
coal ash? By increasing that problem, how do we deal with it? 
How do we solve that, the public health----
    Mr. Zamot. The particular vendor that has proposed this 
project has been coordinating with the government of Puerto 
Rico for a number of years now. And it is their assessment, and 
the government of Puerto Rico actually agreed in some written 
documentation, that this would actually decrease some of the 
outcome of some of this waste management.
    Therefore, the government of Puerto Rico had actually given 
their support to this effort, if they met some of the required 
Federal permitting guidelines, which it is our understanding 
they did.
    Dr. Lowenthal. Well, I am not quite sure. It seems like, in 
trying to solve one problem about trash to energy, you are 
creating another problem, a huge problem in terms of how to get 
rid of the toxic coal ash that already existed on the island. 
With that, I will yield back.
    But I am not sure this is a resolution. Or rather, it may 
solve one problem, but it may create other problems.
    The Chairman. Thank you.
    Mr. Labrador.
    Mr. Labrador. Thank you, Mr. Chairman. Thank you all for 
being here. I appreciate it. Having been born and raised in 
Puerto Rico, this has been something that has devastated my 
family, has devastated the people that I love. And I thank you 
for your efforts.
    There is an effort by some of my friends on the other side 
to say that the Federal Government's response has been 
inadequate. Would you say that the Federal Government's 
response has been inadequate?
    Ms. Jaresko. I think everyone would agree that they wish 
that things were better today in Puerto Rico, and faster. But I 
don't think I am a judge as to what could have been done 
differently.
    Mr. Labrador. Correct. So, we all wish that things were 
better, and no one expected, I think you said in your testimony 
that there was a complete breakdown of communications like we 
have never seen before. No one could have prepared for this. 
That is different than saying that the response was inadequate.
    In fact, Colonel Michael Valle, an Air Force officer who 
was born and raised in Puerto Rico, and who has been in charge 
of some of the efforts in Puerto Rico, he said that any claim 
that the response is inadequate is just not true. In fact, he 
told the Huffington Post, and I want to make sure that this was 
not a conservative publication, he told the Huffington Post 
that, ``As a Puerto Rican, I can tell you that the problem has 
nothing to do with the U.S. military, FEMA, or DoD. The aid is 
getting to Puerto Rico. The problem is distribution.''
    That is one of the problems that we have had from the 
beginning, that there was a complete breakdown of the things 
that were happening in Puerto Rico that no one could have 
foreseen. You wanted to respond to that?
    Ms. Jaresko. I want to add that part of it is also just 
standard operating procedure. So, if you take your standard 
operating procedures from a land mass like the mainland, and 
you apply them on the island, where communications have failed, 
it does not always work.
    I don't think that right now my job is to assign blame, but 
instead to just do what we all can do together to make this 
recovery faster.
    Mr. Labrador. I appreciate it, which is what we should be 
doing.
    Ms. Jaresko, how do you view the Oversight Board's role in 
the recovery efforts?
    Ms. Jaresko. I believe the Oversight Board's role is very 
important in the recovery efforts. It can make it more speedy, 
it can create greater confidence for all the taxpayers who are 
funding that recovery effort by: (1) integrating it with the 
fiscal plans; (2) integrating with the plans of adjustment in 
the Title III cases; and (3) providing the oversight role that 
PROMESA gave us, both with contracting and in other areas.
    Mr. Labrador. OK. I am trying to read between the lines of 
your testimony. I am hearing a call for more tools and 
authority, while at the same time you are not calling for more 
tools and authorities. So, I want you to be really specific. I 
need you to be straight with us, because you have a very 
important role.
    You stated that prior to the hurricane, the Board possessed 
the authority to execute its mission and deliver on the 
underlying mandate Congress set with PROMESA, but with the 
devastation, you allude that those tools may be inadequate. So, 
please tell us, does the Board currently have the tools 
necessary to facilitate efficient and effective recovery?
    Ms. Jaresko. I will try to be clear. I believe the Board 
has the tools, and PROMESA gives us the tools. That said, when 
there are disagreements, the use of those tools ends up in 
costly and time-consuming litigation.
    Today, more than ever, that time and that cost is not 
helping Puerto Rico. So, we ask for clarity of the tools that 
we have, whether it is in the appointment of a CTO through 
Title III, whether it is in the implementation of our contract 
policy review, or whether or not it is the implementation of 
the fiscal plans in full, when certified.
    Mr. Labrador. What else do you need to be successful? Is 
there anything else that we need to give you to be successful?
    Ms. Jaresko. I think we would appreciate a legislative 
affirmation of those and/or conditioning of appropriations on 
those powers, as you see fit.
    Mr. Labrador. OK. Mr. Zamot, in the October 26 filing, the 
Oversight Board sought to give you significant authority to 
oversee the power restoration plan and modernize PREPA. What 
are your immediate short-term goals for PREPA?
    Mr. Zamot. My immediate short-term goals are to actually 
integrate a lot of the resources that we have on the ground, 
and ensure that we actually reach out, both to all available 
resources outside of the island, and integrate those in a 
coherent manner.
    We clearly need a better strategy to prioritize the areas, 
regions, sectors, and clusters that we need to revitalize, to 
repower, to grow, and give electric power to the people. And we 
also need to ensure that we are very open and are reaching out 
to the APPA, EEI, and other agencies to bring in broad support, 
not just targeted support, to----
    Mr. Labrador. Do you have any long-term goals for PREPA?
    Mr. Zamot. Yes, sir. The transformation of PREPA is in 
accordance with the Puerto Rico energy strategy, which is 50 
percent renewables/50 percent gas, renewable, or regional 
grids, and a lot of resiliency.
    Mr. Labrador. Mayor Perez Otero, I am sorry I did not have 
time to ask you any questions, but thank you for what you are 
doing for the island, and for the people of Puerto Rico. Thank 
you very much. I yield back.
    The Chairman. Thank you.
    Mrs. Torres.
    Mrs. Torres. Thank you, Mr. Chairman. I also want to thank 
you for the opportunity to travel with you to Puerto Rico. It 
was certainly an eye-opening experience to hear not just from 
your elected commissioner and be briefed on what is happening, 
but to see for myself.
    I am extremely disappointed at how much, as a Federal 
Government, we have, I think, neglected just basic 
infrastructure oversight within the territory of Puerto Rico.
    The amount of rebuilding that will be necessary to restore 
Puerto Rico is staggering. My visit reinforced my serious 
concerns that we may be rebuilding to outdated standards that 
will not sustain a storm in the strength of Hurricane Maria 
Category 5.
    Ms. Jaresko, it is my understanding that Puerto Rico has 
not adopted updated building code standards since 2011, when 
they adopted 2009 building standards, according to the 
International Code Council. A lot of the buildings built before 
2011 were built long before these codes came into 
implementation, and were simply grandfathered in, so what do we 
expect to happen when they are hit with a Category 5?
    Ms. Jaresko, the scientific community agrees that storms 
like Maria, a Category 5 storm, are likely to become more 
common. This is the new normal for Puerto Rico and the Virgin 
Islands. For Puerto Rico's economy to recover and grow, 
Congress will need to step up and assist the island much more 
than it has in the past.
    If Puerto Rico were a state, it would rank last among all 
states in support from the Federal Government in the way of 
competitive Federal grants, last in healthcare spending, and 
last in transportation.
    Mayor Perez Otero, I was a former mayor. I also worked in 
the city of Los Angeles. One of the very basic responsibilities 
as a mayor and as an employee was to practice an emergency 
plan. Everybody coordinated: the police department, the fire 
department, City Hall, the lawyers who needed to write the 
Federal FEMA grants--everybody coordinated. We coordinated with 
ourselves, we coordinated with the county, we coordinated with 
the state, southern and northern regions.
    You did not have a way to communicate what you needed 
because cell phone towers were down, so FEMA provided you with 
a satellite phone. Now we have----
    Mr. Perez. It did not work.
    Mrs. Torres. OK. Well, today, I am finding out that the 
satellite phone that you were provided did not work.
    Mr. Bishop, I think that we need to have a real 
conversation, and maybe we need to take some people to task. 
Maybe a public, televised meeting is not the proper place, 
because we don't want to be accused of politicizing the issues 
that we have in Puerto Rico. But the bottom line is the 
leadership is not there.
    When FEMA arrived, they had no one to coordinate with, not 
from the Governor's office, not from the regional offices. So, 
they had to build an infrastructure. Now we have three-star 
General Buchanan there. And I looked at the maps we drew up 
with him, spent several hours in the back of a van with him. I 
saw the maps. All of the roads have been cleared.
    The problem is that every day that it rains, there are hill 
landslides. The next day after a good storm, you have to go 
back and clear those same roads, so they are having to redo 
things that they have done over and over and over again.
    Who ordered the light poles that you need in order to bring 
back the infrastructure? And when was that ordered? Was that 
ordered, did Texas get ahead? Did Florida get ahead? Did the 
Virgin Islands get ahead of Puerto Rico? It seems like you have 
been last in line at every single step of the way.
    So, what do we expect from having you appointed in this 
position, Mr. Zamot? And you have 20 seconds to answer.
    [Laughter.]
    Mr. Zamot. Thanks. You expect all of my energies to 
integrate all of the resources toward a common vision----
    Mrs. Torres. How is that going to be different than what we 
have had before from the Governor's office and from everyone 
else?
    Mr. Zamot. I will need more than 6 seconds to answer that 
question, ma'am, respectfully.
    Mrs. Torres. Well, maybe you can do it in writing.
    Mr. Zamot. Yes, ma'am.
    The Chairman. Thank you. Actually, I appreciate Mrs. 
Torres' questions there, because I think something we need to 
realize is that we have another round of hearings with the 
Governor's office coming next week. Some of those should be 
directed to them.
    I do appreciate the fact that what the Board is doing has 
some specifics especially on oversight, and maybe even contract 
issues. And contract oversights we have not talked about 
before, but you hit on one of the basics, which is why I wish 
there had been a couple more witnesses that would have been 
here today.
    Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman, and thank the panel. 
And I would concur. We certainly need to be having some 
conversations in terms of some of the leadership that was on 
the ground, in terms of pre-planning. Obviously, not a new 
issue coming to Puerto Rico or the U.S. Virgin Islands down in 
the area.
    But I would like to start out with Ms. Jaresko first.
    In your testimony, you talked about the challenges created 
from the timing mismatch, when disaster-related expenses are 
incurred and when FEMA reimburses the government for those 
expenses. You have gone on to be able to talk about FEMA's 
direct payments, which had not been considered in the original 
estimate of the territory's liquidity crisis.
    I would like to be able to get a little more clarity, if I 
may, on that issue. How are the reimbursements working now?
    Ms. Jaresko. At this time, for the short term, we were 
pleasantly surprised by the fact that FEMA was advancing funds, 
the last number I heard was over $350 million, to the 
Commonwealth, PREPA, and PRASA. That meant that that did not 
affect the liquidity of the Commonwealth, PREPA, and PRASA in 
the way that we initially expected, so that was part of it.
    The second part of the change in our liquidity estimates 
had to do with the fact that the FEMA authority was in fact 
directly contracting, for example, with the Army Corps of 
Engineers, and that expense did not run through the liquidity, 
the TSA, the Treasury Single Account of the Commonwealth. So, 
those differences in the short term were important, and that 
explains why, to a large extent, the cash on hand in the 
Commonwealth is higher than what was forecast in the beginning.
    Going forward, I would expect there to be, though, in 
categories C through G, which now have been authorized, there 
is both a local share that remains, 10 percent, unless you deem 
it possible to waive that local share of 10 percent, and there 
is a necessity for the Commonwealth to front the money and 
reimbursements to be made later.
    Mr. Tipton. OK. Great. And just in terms of some of the 
accountability, not transfers from FEMA to the Corps of 
Engineers, but over to the Commonwealth. Are there protocols in 
place to make sure that those resources are going where they 
need to be going?
    Ms. Jaresko. I believe that the power of the Board through 
its contract policy review to ensure that contracts are both 
ensuring both market promotion, as written in the law, as well 
as compliant with the fiscal plans. The key element there is 
that contracts have to be compliant with Federal regulations 
and be properly reimbursable to not have a major adverse fiscal 
effect on the Commonwealth. And that is where our contract 
policy review will help in that process.
    Mr. Tipton. So, that was what you had spoke to in your 
testimony on contracts--a million or above with random sampling 
below those levels. Is that right?
    Ms. Jaresko. That is correct, sir.
    Mr. Tipton. OK, good. Are there other steps that you see 
that the Federal Government needs to be able to take to ensure 
that your board can estimate accurately the cash the territory 
will need to be able to avoid a liquidity crisis?
    Ms. Jaresko. I think having as much knowledge as possible 
about the intention of Congress and the Federal Government, in 
terms of longer-term liquidity funding, that we can then apply 
that in the fiscal plans and then measure against it, as well 
as the longer-term supplemental for emergency assistance.
    We will not be able to measure against it if we don't know 
what we are getting, so that knowledge is important for us.
    Mr. Tipton. Again, just one final question to you. You also 
wrote that the Board has proposed legislative language that 
would require the Board certify all requests for liquidity 
advances to ensure that only hurricane-caused liquidity 
advances will be sought.
    Why does the Board think that certifying these requests is 
important?
    Ms. Jaresko. I believe that it gives confidence to everyone 
that, in fact, the liquidity that you are funding with taxpayer 
dollars is, in fact, a result of hurricane disaster, and not a 
result of not implementing other economic policies or fiscal 
reforms that need to be implemented in any case.
    So, I think it provides a baseline and a guideline, if the 
Board is certifying those requests.
    Mr. Tipton. Thank you. And Mr. Zamot, the whole set-up in 
terms of the electrical grid, I think, is obviously very 
important to the people of Puerto Rico. But I am also a little 
curious for some of us that have a different set-up within our 
communities, where the government effectively owns it--you 
know, listening to the mayor, they don't charge, they don't 
pay, kind of a unique structure.
    Mr. Zamot. Yes, sir.
    Mr. Tipton. Are there any legislative, any regulatory 
limitations to be able to maybe seek private-sector solutions 
to be able to expedite this, and to be able to actually get 
something that is going to be sustainable?
    Mr. Zamot. The fiscal plan that PREPA is currently in, it 
is in Title III, and we are developing a fiscal plan for it 
that includes a transformation. We will address a lot of those 
regulatory options, and it also addresses attracting private 
capital for a number of potential solutions to the challenge.
    We see the transformation plan as being not just the wires 
and the asset base, but also the very structure of the 
organization, anything from management, governance, economic 
impact, and beyond.
    Mr. Tipton. Thank you.
    The Chairman. Thank you.
    Mr. Gallego.
    Mr. Gallego. Thank you.
    Mr. Perez, thank you for being here. I have been lucky 
enough to go and visit your town a couple of times to visit 
friends and for a wedding. It is a lovely, lovely city, not 
town.
    I am a veteran, a marine, and a member of the Armed 
Services Committee. As you know, FEMA is often supported by 
military efforts that provide critical capabilities, including 
transportation support.
    With that in mind, I would like to highlight some of the 
differences that occurred between the U.S. response to the 
Haiti earthquake, not part of the United States, in 2010, and 
the Puerto Rico response following Hurricane Maria just this 
year.
    In Haiti, the United States provided overnight military 
unit deployment. After Maria hit Puerto Rico, it was 5 days 
before the first Federal official arrived on the island.
    In Haiti, 8,000 troops were present within 2 days. In 
Puerto Rico, military support did not reach this level for more 
than 10 days. A week after the storm, a Member of Congress 
finally encouraged the Pentagon to conduct a coordinated 
military effort.
    For a side note, I actually got on the phone with NORTHCOM 
about 5 days later, and they still had not put on the necessary 
assets, and had still not coordinated with FEMA the lists of 
what they needed to be done. And that was just 5 days after the 
hurricane.
    In Haiti, within 2 weeks of the disaster, we had 22,000 
troops on-site. But in Puerto Rico, at the 2-week mark, we only 
saw about 9,000 military personnel on the island.
    All this notwithstanding the fact that hurricanes, unlike 
earthquakes, allow for much greater advance planning effort. We 
did not see that.
    Mayor, wouldn't you have preferred that the Administration 
provide the most robust effort possible to attend to the 
widespread destruction and suffering of many Puerto Ricans, 
like we saw in Haiti?
    Mr. Perez. Well, for most mayors, we like to see it faster. 
That is what we said from the beginning. The help is coming 
through. We would like to see it faster.
    I think this is the first time FEMA, and the government of 
Puerto Rico, and all of our mayors have faced this disaster and 
this devastation over here. So, yes, we would like to see it 
faster. That is what every mayor has been saying.
    Mr. Gallego. What specifically, in your experience, could 
be done to improve the coordination between civilian 
authorities and our military after a disaster like this?
    Mr. Perez. I think the most difficult for us, it was the 
whole devastation in the island, the communications. If they 
would come and, right now they establish, they assign some from 
the military and from FEMA to each municipality.
    I think we are all learning from this experience----
    Mr. Gallego. How long did it take for that to occur?
    Mr. Perez. It took, I don't know, maybe like 3 weeks 
after----
    Mr. Gallego. What is the distance between San Juan and 
Guaynabo?
    Mr. Perez. It is maybe, like 10, 15 minutes.
    Mr. Gallego. By helicopter?
    Mr. Perez. We are in the metropolitan area. For me it was 
not a problem to move from Guaynabo to San Juan.
    Mr. Gallego. No, but----
    Mr. Perez. But I know, for most of the mayors it was very 
hard.
    Mr. Gallego. Yes, it was a problem for our military and 
FEMA response people. It took 3 weeks to get to you. I have 
been to Guaynabo. I drove to Guaynabo from San Juan. If I 
remember correctly, I think the drive on a good day is an hour-
and-a-half, especially because I speed.
    But now, in a helicopter, if this has been a priority for 
the United States, considering that this is an American 
municipality, it takes 10 to 15 minutes to put a coordinator in 
there, and it took 3 weeks to get somebody to your city. Is 
that what you are telling me?
    Mr. Perez. No, not to my city, but to other cities.
    Mr. Gallego. Yes.
    Mr. Perez. It took a long time.
    Mr. Gallego. For example, in terms of the Caguas 
neighborhood, how long had they been separated?
    Mr. Perez. Caguas is maybe 20, 25 minutes from San Juan. 
But that is the importance of the mayors and the 
municipalities, because we are the first responders. As soon as 
the hurricane hits, and it ends, our people were opening the 
roads and everything----
    Mr. Gallego. Let me make this clear, Mayor. I am not 
actually accusing you or the mayors of Puerto Rico of being 
derelict in your duty. I am accusing the Federal Government, 
FEMA, and our DoD for not responding quickly enough to the 
needs of the local municipalities. So, if there is any illusion 
on this somehow, that what occurred in Puerto Rico is normal, 
or it was sufficient, they are deadly wrong. People died 
because of this inaction from this Administration.
    And the fact that anyone thinks it is acceptable is just 
disgusting. If this had occurred on the mainland, if this had 
occurred in, well, it did occur in Texas, and we had done this 
type of inaction, we would have generals that had been stripped 
of their stars. You would have FEMA administrators that had 
been fired.
    The idea that it took that long for some of our FEMA 
coordinators to be able to coordinate with our municipalities 
is absolutely ridiculous. I yield back my time.
    The Chairman. The time is expired.
    Mr. Gallego. Thank you.
    The Chairman. Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman, I appreciate it. Mr. 
Chairman, earlier there was discussion about the Jones Act. I 
serve on the Transportation Committee, and I want to echo some 
of the comments that Mr. Lowenthal made earlier.
    This has been fascinating, listening to people talk about 
the Jones Act. Do any of you know how many vessels actually 
took advantage of the waiver for Hurricane Maria to allow non-
Jones-Act-compliant vessels to serve Puerto Rico?
    [No response.]
    Mr. Graves. I can answer that question for you. One. One 
vessel. The vessel actually required more time to deliver goods 
to Puerto Rico than domestic Jones Act-compliant vessels. This 
entire thing is a farce.
    Mr. Chairman, right now do you know the prices in Miami are 
23 percent higher than they are in San Juan? Twenty-three 
percent higher in Miami than in San Juan. This is such a 
disservice, because we can continue to sit here and make up 
solutions in search of problems, or we can focus on real things 
that are needed, real solutions that are needed.
    I also want to remind you that GAO did a study, and it 
could not determine that the Jones Act caused increased cost of 
prices in Puerto Rico or otherwise. So, I am going to try to 
stay focused on things that are real solutions.
    I want to ask you a question. I just got back from Puerto 
Rico last night and had a fantastic visit, learned a lot. Mr. 
Mayor, it was great to meet with you yesterday. Can either of 
you discuss your thoughts on the state of Puerto Rico, its 
infrastructure, its economy prior to the hurricane, and how 
that has exacerbated recovery?
    Ms. Jaresko. Yes. I think, in terms of the electricity, it 
is very, very clear that it had been neglected for decades, 
that the maintenance had not been done, and that the investment 
had not been made. I think, beyond that, we have a clear sense 
of the same with regard to wastewater treatment and waste 
treatment on the island.
    In terms of the infrastructure more broadly, in terms of 
governance, that is why PROMESA was put in place. In terms of 
fiscal controls and in terms of moving to a structural balance, 
I believe that is why the Congress put PROMESA here, to try to 
work on those problems prior to the hurricane.
    Mr. Graves. Thank you. After Hurricane Sandy, 95 percent of 
electricity was restored 11 days after in New York, I believe 
it was 23 days after Hurricane Katrina, 140 mile-per-hour 
winds--as I recall, Maria was 155 mile-per-hour winds--we had 
75 percent of electricity restored in New Orleans and south 
Louisiana area. The disparity here is significant. We had 263 
substations, 3,000 miles of lines that were destroyed, 
affecting ultimately 28,000 miles of transmission lines in 
Louisiana.
    I want to totally change gears. The Governor recently 
proposed a law to address emergencies and disasters. Part of 
that law would allow basically eliminating or waiving sales tax 
in Puerto Rico. Is that proposal on your radar screen? Were you 
consulted?
    Ms. Jaresko. No, we were not consulted, and I am aware that 
there has been a problem because of the lack of electricity and 
the collections of the sales and use tax. However, as 
electricity comes back, the collection process should also 
return.
    Mr. Graves. So, you were not consulted, you were not aware 
on the front end. If ultimately the Governor certifies that 
this is in compliance with the fiscal plan, and you determine 
otherwise, what happens then? How does that play out?
    Ms. Jaresko. Well, I would hope that they would consult 
prior to putting that policy in place, because it is something 
that can have a direct adverse fiscal effect, and it could be 
not in compliance with the fiscal plan. If they certify that it 
is, as you described, then we have a situation which could 
potentially, again, lead to difference of opinion in terms of 
what our role is in PROMESA. And it is very difficult for us, 
once it is certified by the government as being in compliance, 
if we disagree to reverse that.
    Mr. Graves. I am sorry. Could you say that last part again, 
quick, quick----
    Ms. Jaresko. If the government certifies that the executive 
order or law is in compliance with the fiscal plan, it is 
difficult for us----
    Mr. Graves. Your hands are effectively tied. Do you think 
Congress should revisit that in terms of something that you 
believe causes economic harm, or undermines the objectives of 
the fiscal plan, but you don't have the ability to actually 
help reset that?
    Ms. Jaresko. I think it should be very clear that the 
intent of PROMESA was for us to be able to stop things that 
were having an adverse effect on the fiscal plan, yes.
    Mr. Graves. Thank you.
    Mr. Chairman, in closing, I want to jump back over to the 
Jones Act. The Jones Act is a national security issue, it is a 
homeland security issue. That is why President Obama, that is 
why President Clinton, both the President Bushes and 
Secretaries of Defense, Joint Chiefs of Staff, the Commandant 
of the Coast Guard and many, many other of our military and 
national security leaders continue to support and defend the 
importance of that law.
    With that, I yield back.
    The Chairman. Thank you.
    Ms. Hanabusa.
    Ms. Hanabusa. Thank you, Mr. Chair, and thank you to the 
witnesses who are here today.
    Director Jaresko, I want to understand the backdrop by 
which we are dealing with here. And of course it is about 
PROMESA. PROMESA was not intended to address the hurricane, 
clearly. It was to address the economic turnaround of Puerto 
Rico. And that was, of course, passed last year in the 
Congress.
    You said that the PROMESA tools are fine. What you would 
like to see is basically the Congress put appropriations behind 
some of the legislative mandates that we may have in there. 
Yet, Mr. Zamot, who is really entrusted with doing the part 
that you found to be so critical, because you also said that if 
the electricity falls into place, then everything else will 
sort of, I guess the domino effect would be that things would 
get better.
    But Mr. Zamot has said in his written testimony that he 
feels that there is not enough teeth, I guess, for lack of a 
better description, in PROMESA. He has three steps in his 
testimony on page 3, and he says, ``first, bring all available 
resources to bear to restore power to Puerto Rico as quickly as 
possible; second, develop and implement the transformation plan 
for PREPA, ensuring that the near-term recovery activity is 
consistent with the long-term vision; and third, ensure the 
utility exits PROMESA's Title III.'' Title III is the debt.
    So, we have come full circle. Your debt is about $74 
billion, right? And that is just the outstanding bond debt and 
so forth. How are we going to do all of this, when one of the 
major priorities of the recovery of the electrical grid--and 
Mr. Zamot can, because this is his testimony--how are you going 
to do that when $74 billion is not going to go away?
    Ms. Jaresko. I think, first of all, we need to clarify. 
PREPA, with regard to Mr. Zamot, has about $9 billion of that 
$74 billion. The rest is the Commonwealth and other 
instrumentalities.
    Ms. Hanabusa. Right.
    Ms. Jaresko. And I think the reason that the Board named 
and decided at this very difficult time to appoint Mr. Zamot is 
to bring all these processes together, because they can no 
longer be looked at in separate silos. We cannot deal with the 
bankruptcy and the Title III separate from the transformation 
of the energy sector, because how we deal with private-sector 
investment or not has to be in that plan of adjustment, and it 
also has to be in the fiscal plan.
    And then we have all this Federal funding hopefully coming 
to PREPA to rebuild quickly, and the electricity, that now has 
to be brought together----
    Ms. Hanabusa. So, do you want $74 billion--I am just trying 
to understand. You have $74 billion. I understand $9 billion is 
PREPA.
    Ms. Jaresko. Yes.
    Ms. Hanabusa. But you are saying that the electrical 
restoration is the most important.
    Ms. Jaresko. Yes.
    Ms. Hanabusa. Mr. Zamot, when you talk about exiting 
``Title III,'' which is the debt, are you talking about exiting 
$9 billion, or are you talking about the whole $74 billion?
    Mr. Zamot. No, ma'am. We are talking about a transformation 
plan that will address PREPA as a covered entity under Title 
III, and exiting Title III via the plan of adjustment means 
that we now have a legally enforceable way forward to transform 
the electric utility. And part of that is actually the 
renegotiation of that debt.
    Ms. Jaresko. And it is the $9 billion, ma'am.
    Ms. Hanabusa. But the Title III is about the whole debt. 
Title V is what gives you your authority under PROMESA to come 
up with these innovative plans. Isn't that correct?
    Mr. Zamot. You are correct, Title III is, in large part, 
having to do with the bankruptcy, the debt piece. But it also 
provides the Board with a tool, this fiscal plan to actually 
transform each of these covered entities. We incorporate the 
economic development aspects of Title V into that.
    Ms. Hanabusa. OK, so that we are clear, if we were looking 
at how to get the electricity back as quickly as possible, it 
would be to exit that $9 billion debt. That would be one of the 
first things we would have to do, and then all your different 
plans under Title V can take place. Is that a correct 
statement, Mr. Zamot?
    Mr. Zamot. Not exactly, ma'am. To exit and to get the power 
back on, we need to take a number of tactical actions on the 
ground through FEMA money, through grants, whatever it may be. 
But there is a separate, related but separate, process in 
renegotiating that, and coming up with a plan to do that under 
Title III, and that is called a plan of adjustment.
    Ms. Hanabusa. So, how much money is that? That is why you 
are here. How much money is that?
    Mr. Zamot. How much money is it to actually----
    Ms. Hanabusa. Right.
    Mr. Zamot. Ma'am, we could provide you some details very 
soon as we work that.
    Ms. Hanabusa. Please, thank you. And I yield back.
    The Chairman. Mr. Hice.
    Dr. Hice. Thank you, Mr. Chairman.
    Ms. Jaresko, it looked like you had something you were 
wanting to say. I wanted to give you an opportunity.
    Ms. Jaresko. I just want to add that completing that Title 
III process, having the court affirm a plan of adjustment, 
which is, in essence, a business plan going forward, gives the 
private sector, the new private sector, new investment, some 
sense of stability and certainty, as they make new investments 
into the electricity sector.
    Dr. Hice. Thank you. As I look at all of this, it kind of 
comes down to two key issues that are important to all of us, 
and one is, first of all, to make sure our fellow Americans in 
Puerto Rico are receiving the emergency care that they need at 
such a time like this and, second, to make sure that we are 
good stewards of the Federal resources that are going there, 
and that kind of provides the umbrella for everything within 
this discussion.
    And I guess within that context, Ms. Jaresko, let me ask 
you this, and thank you, each of you, for being here today. I 
know the tasks that are currently facing Puerto Rico--and by 
extension you, the Board, and those around you at this time--
are drastically different than they were before the hurricane. 
And, of course, when Congress put forth PROMESA, there was no 
way we could foresee a hurricane like this, either.
    So, with all of that, should this Committee right now be 
comfortable with PROMESA, with Board membership, with you, the 
associate advisors, all of that put together, those that have 
been hired, in light of the new task that you are dealing with 
now?
    Ms. Jaresko. I think we are blessed, in fact, with the 
quality of the Board that was appointed. The expertise on the 
Board that varies from dealing with other municipal 
restructurings to dealing with running municipalities, running 
municipal governments, dealing with complex situations, and 
very, very difficult disasters.
    I think both the staff and the Board have the group of 
characteristics, experience, and dedication that you would need 
and is required for the situation. And I think, in terms of our 
hiring, we have had to hire additional staff, for example, in 
order to meet the contracting policy needs. We don't want to 
get in the way of government doing its business, we want to do 
it in a quick and efficient fashion, so we have had to add 
expertise in the areas where contracts are going to be written.
    But I think we are capable of doing that, and we are on top 
of it.
    Dr. Hice. All right, so you would say, from a transparency 
perspective to this Committee, that we should feel comfortable 
with where things stand right now, in terms of leadership?
    Ms. Jaresko. I believe so, yes, sir.
    Dr. Hice. OK. Based on a Committee hearing we had here in 
March, a significant complaint that came forward of the 
creditors was the failure of the Board to meet with them and 
understand the technical challenges of PREPA. It is my 
understanding that the creditors actually offered PREPA a 5-
year debt holiday, debt forgiveness, and these types of things, 
but the Board chose rather to go with bankruptcy.
    Considering the hurricane and where we stand now, do you 
still think that was the best decision?
    Ms. Jaresko. I think that the RSA that you are describing, 
in terms of what was negotiated between the Commonwealth and 
the creditors, was one where reasonable people could differ.
    I think today the Board and all of us should be very happy 
that we did not enter into that agreement because, given the 
situation, the cost of that agreement as written would have 
been an unbearable burden for the electricity, those who use 
electricity.
    I think that we have established, to your first point, a 
new dialogue with those creditors post that RSA decision and 
the decision to take PREPA into Title III, and I think we were 
on the way to finding something that would both serve Puerto 
Rico and answer their concerns that they rightfully have. I 
think we continue to have that dialogue and will continue to 
have it, both in the mediation format--we have five Federal 
mediators that work with us--as well as directly.
    Dr. Hice. So, you stand by that decision and still feel 
like it was the right decision to make?
    Ms. Jaresko. Yes, sir.
    Dr. Hice. OK. Can you tell me something about Mr. Armando 
Silva, at this point? I have not been able to find much 
information on him. He is a debt restructuring director, is 
that correct?
    Ms. Jaresko. Yes, sir.
    Dr. Hice. OK. A little bit of his background, who is he?
    Ms. Jaresko. He is a Puerto Rican financial expert. He has 
worked for city, as well as for a few other investment banks. 
He has both municipal banking and private banking experience. 
He is working as my deputy in this area, because we have, as 
you noted, an enormous amount of work.
    Dr. Hice. Can you share with this Committee how much he is 
being paid?
    Ms. Jaresko. I can't. Off the top of my head, I can't tell 
you. But I will give it to you in writing, sir.
    Dr. Hice. OK. Thank you for that.
    Thank you, Mr. Chairman, I yield.
    The Chairman. Thank you.
    Ms. Barragan.
    Ms. Barragan. Thank you, Mr. Chairman. First, I actually 
happen to sit on Homeland Security Committee, and we were 
supposed to have hearings on the Federal response and FEMA 
response, and it has been canceled three times. It has been 
completely unacceptable that that has happened. I am glad to 
hear that we are at least having a hearing here today on this, 
so thank you, Mr. Chairman.
    I wanted to echo my colleague's concerns about the 
difference in response between the Haiti earthquake and in 
Puerto Rico. There have been several articles, the facts are 
there. You can't miss them. I mean, the fact that you had over 
300 military helicopters within 2 weeks in Haiti, and only 40 
within 8 days in Puerto Rico I think is just one of many 
statistics out there that show the differences, which is why I 
want to make sure to ask questions about why this has been 
happening.
    I think there has been a huge disparity, I think the 
response has been inadequate, and that we need to continue to 
not just be loud on this voice, but to continue to make sure we 
are looking at all of the options to help Puerto Rico recovery.
    I want to just highlight, and I know some people have 
talked about this already, what is happening with the water 
situation down there. We have heard instances where towns have 
been so desperate that they have found these hazardous sites 
where there has been water, and people have been drinking from 
them. And for me, I don't understand why we are not talking 
about this in this Committee, where we deal with water and 
power. I get that the power thing is very important and that we 
need to focus on that, but, Mr. Mayor, do you think that the 20 
percent of people without clean drinking water believe the 
Federal Government's response has been adequate?
    Mr. Perez. Well, if you ask those people, they will say no. 
As I told you, this Committee, if you ask the mayors, we would 
like a faster response. For example, in Guaynabo----
    Ms. Barragan. Sir, I am sorry, I don't want to cut you off, 
I just want to make sure to get through some of my questions. 
That was the answer I thought you would say.
    You mentioned in your testimony, as well, that 80 percent 
of families in your district are without electricity, and most 
in rural areas also lack water. Are you satisfied with the rate 
of progress in getting electricity and water out in your areas? 
And a yes or no.
    Mr. Perez. No, with the electricity, not at all.
    Ms. Barragan. Thank you. With that, I want to go ahead and 
yield the remaining time to my colleague, Mr. Gutierrez.
    Mr. Gutierrez. I thank the gentlelady and I thank the 
Chairman for allowing us to participate.
    I want to go to Mr. Zamot. Coal ash, toxic coal ash, you 
don't know about any controversy in Puerto Rico about toxic 
coal ash?
    Mr. Zamot. Sir, we have seen reports in the press.
    Mr. Gutierrez. You have seen reports in the press? Well, 
you would have to be pretty blind not to know that there is a 
huge controversy already in Puerto Rico when it comes to toxic 
coal and the opposition of people to it. And I hope, although 
your Board does impose over the people of Puerto Rico a 
supremacy, that you would not use that supremacy to continue to 
use toxic coal ash.
    Arecibo incinerator, Mr. Zamot, I would hope you would talk 
to Secretary Vilsack, because you seem to have a different 
perspective than he does, since the loan from the USDA is 
through the rural utility services. In other words, the money 
is not in order to do something with waste management. The 
money is to create energy.
    But you said to us earlier, and correct me if I am wrong, 
if I misunderstood, that the purpose is for, basically, garbage 
disposal, and not for energy. How do you see it? Is it garbage 
disposal or energy? What is the primary purpose of it?
    Mr. Zamot. Sure. The government of Puerto Rico has a letter 
out, and they consider that plant in Arecibo to be both a 
provider of energy----
    Mr. Gutierrez. But when you said primarily, you said 
primarily.
    Mr. Zamot. The plant at Arecibo, about 2 percent of the 
aggregate electrical demand----
    Mr. Gutierrez. OK, so primarily, I heard you, and we can go 
back to the record, you said that it was primarily, yet they 
are asking for a loan between half-a-million and $750 million.
    And let me just assure you and everybody here--given the 
fact that the government of Puerto Rico already owes over $2 
billion, unless Ms. Jaresko is going to use some of her skills 
to eliminate that debt, I don't see how we are going to do 
that.
    In the last 25 seconds, because I want to focus on this 
issue with you, do you believe that the control board has such 
power that you do not have to take into consideration the 
concerns of the duly elected mayors of the cities that will be 
affected by the incinerator, or do you feel you need to consult 
with them before you make a decision, going forward?
    Mr. Zamot. Sir, in 9 seconds, the statute provides for a 
public comment period that----
    Mr. Gutierrez. So, you don't believe, you do believe that 
you are a supreme, you are kind of a dictator over everything?
    [Pause.]
    The Chairman. Miss Gonzalez.
    Miss Gonzalez-Colon. Thank you, Mr. Chairman, and thank 
you, all of you, for being here, the panel.
    First of all, I want to thank the Chairman and all members 
of this Committee that have been traveling to the island during 
the last month-and-a-half. I think it is important for Congress 
and all Members from the House and the Senate to actually go 
there. It is totally different when you receive a report and 
actually look at the people there.
    People say that the roads are clear. They are not. I was 
there yesterday in Barranquitas, and we have more than 18 
bridges that were washed away by the rivers. We still have a 
lot of roads that have collapsed, and others that are still 
closed because of the debris that is still on the roads. So, we 
still face a lot of challenges.
    First of all, at this time, 67 percent of our people are 
still without power. I mean I think that is unacceptable. More 
than 20 percent of the island is without running water. A lot 
of issues regarding communications, as the Mayor established in 
his testimony. But how do we actually make things change on the 
island?
    One of the issues regarding this oversight is, what 
challenges does Puerto Rico have in the recovery process? And I 
may say the first challenge is how the Stafford Act actually 
permits FEMA and the government of Puerto Rico to work with the 
rebuilding process.
    And for that I want to thank Congressman Jose Serrano for 
allowing me to join him in filing a bill last Friday that would 
make direct amendments to the Stafford Act, in the area of 
allowing not just repair, or to get back to the 1950s or 1960s 
infrastructure that we have on the island, but actually going 
into this century, in terms of technology, in terms of making a 
rebuild of the island, not a repair. I think the people of 
Puerto Rico can have that.
    And for that reason, I am also disappointed that I am not 
seeing here I think one of the star witnesses to this 
Committee, the PREPA Executive Director. I think this Committee 
and the rest of the people in Congress need to know what 
happened, in terms of the maintenance, in terms of the efforts 
from PREPA on the connection of the grid. And if you ask 
somebody from the island what is their main concern at this 
time, it is that they don't have access to power, to the power 
grid.
    And we can continue to see more than 100,000 people leaving 
the island every day, 1,000 a day, a doctor per day or more. If 
we don't have connection to power, we are going to continue to 
suffer in our hospitals. There are 19 of them still working on 
generators. That is unacceptable.
    If we don't have access to electricity, we may lose our 
manufacturing industry, our pharmaceutical industry, our 
medical device industry. And that represents more than 32 
percent of our GDP.
    So, for the last month we are going to be with zero 
revenue, and we are not tackling those problems. So, not having 
the PREPA Director here means--I mean, what is happening there, 
what happened about the contract, the transparency, in terms of 
negotiation with the contracts regarding the recovery process.
    And in that regard, I will directly ask the Board Executive 
Director in terms of--you say that the Board has the power to 
name a Chief Transformation Officer to take over the management 
of PREPA. And at the same time, I know that state governments, 
state legislators, the Governor, are against that. And you 
filed a motion in the court to allow that to happen.
    Do you have the power, or don't you, to actually name the 
coordinator board?
    Ms. Jaresko. Thank you. We believe we do have that power, 
and that is why we filed that petition in court. We believe we 
have that power under Title III, as any representative of a 
debtor. And the Board is named the representative of the debtor 
in the Title III in the law, in PROMESA, to name a chief 
restructuring officer, a receiver, a chief transformation 
officer, as we call it----
    Miss Gonzalez-Colon. Sorry to interrupt you, but then you 
don't need any change in the PROMESA law? You don't need any 
power to make that happen? Because that is the question this 
Committee is doing.
    What do you need, in terms of helping the people of Puerto 
Rico to recover power? I think that is the main question. If we 
were a state, we would not have you. If we were a state, we 
would have full funding in all Federal programs. And that is a 
problem all territories have.
    Ms. Jaresko. The Board believes that appointing a CTO will 
help us move more quickly to restoration of power. That is the 
only reason the Board took this position, and it took it at 
this time.
    In terms of what we need, the judge can make a decision on 
our own. But again, the reaffirmation of the Congress and/or 
conditioning of further appropriations on this would be 
helpful.
    Miss Gonzalez-Colon. Thank you, Mr. Chairman. And I have 
plenty of questions that 5 minutes will not make it, so I will 
submit them in writing. I yield back.
    The Chairman. I want to thank Representative Gonzalez for 
being on all of these CODELs that have gone down there to see 
firsthand, especially the one I was on.
    We will also tolerate a second round. I can yield you some 
more time when I get there, but we have a couple of speakers 
who have not asked any questions yet. We have to go through 
that first.
    Mr. Soto, you are recognized.
    Mr. Soto. Thank you, Mr. Chairman. I represent the Orlando, 
Florida area, and we have hosted over 90,000 of our fellow 
Puerto Ricans in Florida and care deeply about the recovery.
    I know I don't have to convince the people of Puerto Rico 
that FEMA's response has been wholly inaccurate. They are 
already living that nightmare. However, PREPA is part of the 
problem. We all know it has been a vehicle of political 
patronage for decades. It has exhibited gross incompetence by 
overseeing a declining grid, approved a no-bid, insider 
Whitefish contract, and has been mired in debt. PREPA is 
failing the Puerto Rican people.
    As we look to the rebuild, Mr. Chairman, I encourage this 
Committee, along with Governor Rossello and the Puerto Rico 
legislature, to embrace three principles: (1) to embrace 
renewables; (2) to rebuild with resiliency; and (3) to enact 
critical reforms.
    As to embracing renewables, we must continue on this path 
of having 50 percent of our energy by renewable energy, and I 
think we take up the task of innovators like Elon Musk and 
others to look at solar and wind, and look at biofuels, since 
we have an all-season-long, year-long growing cycle in Puerto 
Rico. And this can be an energy model for the 21st century if 
we invest right.
    In addition, we must rebuild with resiliency. By building 
an infrastructure that is going to withstand future hurricanes, 
that is putting power lines underground, where appropriate and, 
in other places, using cement poles rather than frail wooden 
ones. And last, we need to enact reform. I encourage Governor 
Rossello, the Puerto Rican legislature, to work along with 
PROMESA to break up PREPA's failing monopoly.
    Florida has investor-owned utilities. We have rural 
cooperatives. We also have municipal energy associations that 
work together to create our system in Florida. And this is 
common throughout the United States. I encourage you all to set 
up regions to be bid out and allow utilities, both our cities, 
rural cooperatives, and investor-owned utilities, to be able to 
bid. And if they bid, they have to pay for the rebuild, or at 
least part of it, and they should be meeting these renewables 
standards.
    And the recently created Public Service Commission should 
be overseeing rates, because I worry that the Federal 
Government, along with the Puerto Rico Commonwealth Government 
is not going to be able to pay for this on its own.
    So, Mr. Zamot, what is the total cost of the rebuild of the 
grid right now?
    Mr. Zamot. Sir, we are looking at that right now. We don't 
have a final estimate. The estimates are broad.
    Mr. Soto. Would it be north of $50 billion?
    Mr. Zamot. For the island, in total? I think there are some 
estimates that suggest that.
    Mr. Soto. So, is it reasonable to think that the Federal 
Government, along with the Commonwealth Government, is not 
going to be able to pay that on its own?
    Mr. Zamot. Sir, speaking to the electric utility in 
particular, I think it is only reasonable to have a mix of 
Federal and private dollars for that recovery.
    Mr. Soto. Mr. Perez Otero, Mayor, do you think that mayors 
such as yourself and other municipalities would be interested 
in bidding as municipalities to have a utility?
    Mr. Perez. Well, the thing is, right now there is a fiscal 
problem in the municipalities, and that is why I am saying you 
took care of the liquidity of the state government, now you 
have to see the municipalities, because we have lost revenues, 
we have lost our businesses, and we have a lot of problems. And 
we are the first responders.
    Mr. Soto. Sure, but a possibility in the future of being 
interested in that, is that correct?
    Mr. Perez. It will be a possibility in the future.
    Mr. Soto. And Ms. Jaresko, do you think that this would 
necessarily have to be part of that vision, if we are going to 
be able to rebuild a more resilient, a more renewable-based 
grid in Puerto Rico?
    Ms. Jaresko. Yes, sir.
    Mr. Soto. And why?
    Ms. Jaresko. I think that is the only solution for Puerto 
Rico right now. The past has shown us that the past, in terms 
of a single monopoly, a state-owned monopoly, does not work. 
And we also have a responsibility to the taxpayers who are 
helping to rebuild, hopefully, very quickly, to make this as 
efficient and as resilient as you have described.
    Mr. Soto. Thank you, Ms. Jaresko.
    Chairman, I encourage this Committee to work with our 
Governor Rossello, the Puerto Rican legislature, and the 
PROMESA board to embrace renewables, to rebuild with 
resiliency, and to enact these well-needed reforms by embracing 
competition. And I yield back.
    The Chairman. Thank you. We are coming close to the 
witching hour when we have to go, but I want to make sure that 
everyone who has not yet addressed or asked a question has a 
chance to do so, and then we will see where we are at that 
stage of the game.
    Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. Two weeks ago I had the 
privilege of joining with you, as I mentioned earlier, and a 
number of our colleagues to visit Puerto Rico and the U.S. 
Virgin Islands, as well as the Florida Keys. I do want to take 
the time to thank Ms. Jaresko and Mr. Zamot for your role in 
addressing the financial stability of Puerto Rico.
    And Mayor Otero, I want to thank you for your leadership, 
particularly in this very trying time for the residents of the 
town that I know you hold dear in your heart.
    When we were on the ground in Puerto Rico, I witnessed the 
challenges that Puerto Ricans face every day, and what it will 
take to rebuild a stronger Puerto Rico in the aftermath of 
these storms. We visited Utuado, a town in the interior of the 
island, where homes and infrastructure were extensively 
damaged, and ongoing landslides and rain make progress 
extremely difficult. Many residents struggle without power or 
access to clean drinking water, food, or medication. But they 
do all they can to support one another and simply survive.
    It has been a month-and-a-half since Hurricane Maria hit. 
And, as we have heard, more than 60 percent of Puerto Ricans 
are still without power, more than 20 percent of the population 
does not have access to a source of clean drinking water, close 
to 5,000 continue to live in temporary shelters, and 21 of 51 
sewage treatment plants are down. People are suffering from 
mold on their skin, and sepsis in their water. And this simply 
cannot be tolerated.
    The Puerto Rican people are resilient, but they feel 
isolated and forgotten. And I cannot even begin to describe in 
words that frightening, eerie feeling that I got, even knowing 
that I was going to be leaving Utuado in minutes, when the sun 
set and darkness descended and completely encompassed this 
small town in darkness. It is frightening. It is no wonder 
people feel isolated and forgotten.
    Congress' Number one priority must be the ongoing short-
term relief and recovery efforts that will allow Puerto Ricans 
to get back on their feet and return to a sense of normalcy to 
their everyday lives. Then, and only then, after ensuring the 
immediate needs are met, should we turn to the longer-term 
recovery and rebuild effort that must focus on establishing a 
safer and more resilient infrastructure and a financially 
stable Puerto Rico.
    I get that it is overlapping, but I would hope that our 
discussion today, whether it is PROMESA and its authorities, 
procedures, oversight, and roles and responsibilities; whether 
it is NEPA and its requirements, and whether they should be 
waived or exempted; or the Jones Act--that should not eclipse 
the more immediate concern that we need to address and not 
forget regarding Puerto Rico.
    The Stafford will require the reconstruction of Puerto 
Rico's power grid, not only rebuilding it in the way that it 
was before, but doing it in a new and better way; a focus on 
building resilient and sustainable infrastructure moving 
forward, especially outside of San Juan; a requirement that 
building codes that are designed to minimize the loss of homes 
and commercial buildings are actually enforced. And I know that 
that is an issue, as well.
    But our focus today should be on the dire situation on the 
ground and providing Puerto Ricans with every Federal resource 
that they need. Better coordination between FEMA, the Army 
Corps of Engineers, the Oversight Board, local NGOs, and the 
government, and avoiding controversial and unaccountable 
contracts like that with Whitefish. You cannot turn this around 
overnight, but we have to remain focused on the immediate, 
tangible needs to our fellow Americans in Puerto Rico.
    And Mr. Chairman, with that, I will yield to Mr. Gutierrez 
the balance of my time.
    Mr. Gutierrez. I thank the gentleman. Mayor, thank you very 
much for being here with us. Could you tell us your annual 
salary?
    Mr. Perez. Mine?
    Mr. Gutierrez. Yes.
    Mr. Perez. $96,000.
    Mr. Gutierrez. $96,000. Mr. Zamot, what is your annual 
salary?
    Mr. Zamot. Sir, that is a matter of public record.
    Mr. Gutierrez. How much is it?
    Mr. Zamot. I think it is in the record, sir.
    Mr. Gutierrez. Can't you just tell us how much it is? You 
know how much you are getting paid. Why are you so reluctant to 
give it to us, this is a committee, I just want to know how 
much you are getting paid. The Mayor was very forthcoming.
    Mr. Zamot. The Board found a competitive compensation of 
$315,000.
    Mr. Gutierrez. $315,000. Well, my time is up. I would have 
asked----
    The Chairman. Thank you. Once again, we are running really 
short on time here, but Mr. Serrano, Mr. Ruiz, you have not had 
a chance to say anything. Let me make sure we give you the 5 
minutes, and then we will see where we are from there.
    Mr. Serrano.
    And by the way, I like your bill. Next time you write it, 
give it so I get some jurisdiction over that as well, it 
doesn't always go to a different committee.
    Mr. Serrano, you are recognized.
    Mr. Serrano. Thank you for inviting us today, and for all 
your work. I thank my colleague, Jenniffer, for all her work.
    Ms. Jaresko, do you believe the Financial Oversight and 
Management Board for Puerto Rico is subject to the oversight 
power of the Congress? Do you believe the Board is accountable 
to Congress?
    Ms. Jaresko. Yes, sir. We are a creature of Congress.
    Mr. Serrano. Then I have to tell you that I am very 
disappointed that a letter that my sister and friend, Ms. 
Velazquez, and I wrote on August 22, expressing our concerns 
over the lack of transparency and independent supervision over 
the spending decisions made by the Board, has not been 
answered.
    Ms. Jaresko. Yes, sir. We had an answer for you, we were 
waiting to complete our audit, and the hurricane hit. That 
response should be received within 24 hours because we have now 
completed our audit, which we wanted to attach to the response.
    Mr. Serrano. OK. Well, I appreciate as things get somewhat 
to normal, that we could get a response.
    Ms. Jaresko. Absolutely, sir.
    Mr. Serrano. As a result of Hurricane Maria, will the Board 
change its austerity-based plan on the island? And how does it 
plan to improve the finances of the government of Puerto Rico 
at a time in which the government is having very little, if 
any, revenues?
    Ms. Jaresko. First and foremost, the Board immediately 
withdrew its petition to fully enforce the fiscal plan, which 
included those furloughs, and made the statement that it will 
not look at reinstating those furloughs at least within the 
first year.
    In terms of how we look at improving the revenues, the 
Number one issue we will keep returning to is, obviously, 
electricity. So, Number one, the focus of the Board is in the 
appointment of the CTO and getting the electricity back for all 
the reasons you have described, but not less, as well, the 
ability to actually have a revenue generation on the island 
which can provide tax revenue for the running of the 
government.
    Beyond that, we will continue to look at all measures over 
the next few months, in terms of improving compliance, the 
kinds of things we looked at before, in terms of reducing 
expenditures wherever possible.
    In the end, we will have to be looking at the population in 
Puerto Rico and how we can ensure that we can provide the 
government services necessary for that population with the 
revenues that we have, and the support of the Federal 
Government and Congress in the interim to provide the liquidity 
that we cannot generate.
    Mr. Serrano. Thank you.
    Mr. Zamot, you were appointed coordinator by the Board and 
you have two titles with the Board. And while I supported your 
appointment, and I did, as CTO, I do have some concerns about 
you and the Board upholding collective bargaining agreements.
    What are your goals and what do you hope to accomplish in 
this new role? Do you plan to privatize PREPA or open the 
electricity market up for competition? And how do you plan to 
make PREPA more efficient, effective, and honest?
    Mr. Zamot. Sir, we are developing a transformation plan for 
PREPA. The exit or the approval of that plan under the plan of 
adjustment will be a legally binding document. Among the 
options in there are a number of uses of private capital for 
that.
    With regards to your question to collective bargaining, we 
see any of those options as compatible with current labor 
practices.
    Mr. Serrano. Well, I hope that you keep us informed as to 
my first question. We don't want to micromanage, and the 
Chairman doesn't want to micromanage, but keeping us informed 
is very important, because eventually we get asked questions, 
too, back home in our districts and throughout the Nation and 
from Puerto Rico.
    Mr. Zamot. Yes, sir. We will keep you informed.
    Mr. Serrano. Social media has a wonderful way of asking you 
questions, even if you are not there.
    Mr. Zamot. Yes, sir.
    Mr. Serrano. Mr. Mayor, thank you for all you do. I can't 
imagine being a mayor of Puerto Rico at this time. I can't 
imagine being the governor at this time.
    Mr. Perez. Absolutely.
    Mr. Serrano. I know that there was a feeling that you were 
prepared, both the mayor and the central government. Looking 
back now, and this is not about criticizing anybody, is there 
something you, as mayor, could have done to be more prepared, 
and the central government could have done to be more prepared? 
Or was this so devastating that you never saw it coming?
    Mr. Perez. This is the first time. I think we are all going 
to learn from this. And after this we have to sit down and 
establish a new form to receive these storms.
    This is why we are asking you for the help, and doing 
things different. If we want different results, we have to do 
things different. So----
    The Chairman. I hate to cut you off, Mr. Mayor, especially 
at the end of this, but we have to move on. I have one last 
person who has not had any questions at all.
    Mr. Ruiz.
    Dr. Ruiz. Thank you, Mr. Chairman. It is good to be here 
again. Thank you for calling this hearing today.
    By way of background, I just want everybody to know I am 
coming to this with someone who has experience and training in 
humanitarian disaster relief. I am a graduate of Harvard School 
of Public Health, focusing on humanitarian disaster aid, with 
training with the Harvard Humanitarian Initiative, the 
International Committee of the Red Cross. I was one of the 
first responders in Haiti, and was the medical director for the 
largest internally displaced camp in all of Port au Prince, it 
was about 60,000, 70,000 individuals living under sheets and 
sticks.
    So, I have seen firsthand the challenges that arise in the 
middle of a humanitarian crisis, and the importance of having 
clear leadership, coordination, and a plan, the importance of 
making sure that everybody is participating.
    I also understand that there are two phases, the initial, 
most important, most urgent phase of humanitarian disaster 
response in order to prevent loss of life, and then also what 
you are involved in, which is the longer-term infrastructure 
development, so that we can have economic revitalization and 
keep the population in Puerto Rico.
    The topic of this hearing, obviously, is important. I am 
glad to hear that you are thinking long-term in ways that will 
help rebuild Puerto Rico and make it less vulnerable for the 
next Category 5 hurricane that we know is going to come at some 
point in the future.
    But let me tell you what I found 2 weeks ago when I flew 
down to Puerto Rico to see the conditions for myself and to do 
a needs assessment based on my training and experience and to 
give some recommendations.
    First, the people in Puerto Rico are very hardworking, 
humble, appreciative individuals who, despite the living 
conditions that they are in, are looking out for one another 
and helping one another with everything that they have left in 
order to help each other. OK?
    Two, the men and women in DMAT, FEMA, HHS, Army Corps of 
Engineers, DoD are doing an exceptional, good job within their 
own departments. And I am very proud of the work that they are 
doing.
    But let me ask you a question to stress a point. Mayor, who 
is in charge? Name me the organization that is in charge of 
overseeing the entire coordination.
    Mr. Perez. Well, it is from the government and FEMA----
    Dr. Ruiz. Which government?
    Mr. Perez. Rossello and FEMA. They are the ones that----
    Dr. Ruiz. OK, so government and FEMA.
    Mr. Perez. Yes.
    Dr. Ruiz. Who is in charge?
    Mr. Zamot. Sir, I would submit that, for many areas, it is 
still unclear.
    Dr. Ruiz. That is my point. What I found is that there is a 
lack of clarity in leadership. FEMA officials say that the 
Puerto Rico government is in charge, and the high levels in the 
Puerto Rican government say FEMA is in charge, they are running 
the show. I also found that, while there are countless men and 
women on the ground doing meaningful and effective work, that 
work is largely being done in silos, OK?
    So, right now, the central command model, a hub-and-spoke 
model, is not effective for the type of crisis in Puerto Rico. 
Everybody is concentrated in San Juan in a convention center, 
air conditioned, food, et cetera, and comfortable. But the 
people on the ground, as you said, Mayor, the first responders, 
the communities at the local level, are dealing with problems 
that keep arising with electricity, food needs, shelter, 
everybody is moving from one place to another.
    What we need is to change that structure to have field 
command posts with everybody who is involved, and the 
stakeholders holding each other accountable, having less 
bureaucracy, more flexibility, more decision-making control, so 
that when there is a new challenge, you can respond in a rapid 
manner to deal with that crisis.
    Having said that, Mayor, what do you think about that idea 
of having field command posts with briefings and collaboration 
out in the community, rather than all of it being done in 
central command?
    Mr. Perez. That is what I said. When they changed that and 
they assigned some people to----
    Dr. Ruiz. So, you would participate in that?
    Mr. Perez. Yes.
    Dr. Ruiz. You think that is a good idea?
    Mr. Perez. Yes, I have----
    Dr. Ruiz. Mr. Zamot, would----
    Mr. Zamot. Sir, based on my military background, we had a 
saying: centralized control, decentralized execution. So, if 
that is consistent with what you are saying, I think that is 
one of the best ways to actually bring resources to bear.
    Dr. Ruiz. Absolutely. You know what? I saw that with the 
82nd Airborne when I was in Haiti. I worked side by side with 
the 82nd Airborne. And they had all the stakeholders together 
around the table, and we were able to address immediate needs 
as they arose. And we worked together in a collaborative method 
to save lives and to move resources into the community. And I 
see that is lacking in Puerto Rico.
    That can easily be resolved if we change the coordination--
--
    The Chairman. All right, we have several things that need 
to go on here today in the room.
    Let me break the rules and give Ms. Velazquez and Mr. 
Gutierrez 1 more minute to ask their last questions. And maybe 
also Ms. Gonzalez to actually get 1 more minute.
    So, Mr. Gutierrez, let's go with you first, just 1 last 
minute.
    Mr. Gutierrez. Thank you. I will ask Ms. Jaresko. I did not 
get to ask you. What is your annual salary?
    Ms. Jaresko. $625,000.
    Mr. Gutierrez. $625,000. What is the total cost to the 
taxpayers of Puerto Rico for the imposition of the Jones Act? 
What is the total cost, do you know?
    Ms. Jaresko. No, I do not, sir.
    Mr. Gutierrez. At $625,000, you make three times what the 
Chairperson of the Federal Reserve Board makes, and you don't 
know the cost?
    Ms. Jaresko. That is correct, sir.
    Mr. Gutierrez. How can you plan for the future of Puerto 
Rico if you don't know a fundamental cost that has such a huge 
impact on the economy of Puerto Rico?
    Do you know when the Jones Act was imposed on Puerto Rico?
    Ms. Jaresko. Yes, sir, and I did look at the cost, sir----
    Mr. Gutierrez. I am sorry, do you know when the Jones, I am 
very limited in time----
    Ms. Jaresko. The year? No, I don't know off the top----
    Mr. Gutierrez. You don't, so you neither know when the 
Jones Act was imposed on Puerto Rico in 1920, nor do you know 
the cost.
    Ms. Jaresko. That is correct.
    Mr. Gutierrez. But many economists have suggested that the 
cost is between $350 to $400 million a year. And if you 
multiply that over the time the Jones Act has been imposed, you 
can see how minuscule the $74 billion would be. I would hope, 
could you please provide us with the total salaries of your 
deputies and all----
    The Chairman. Thank you. She can do that. She can do that 
in writing, too.
    Mr. Gutierrez. Sure, I just wanted to make sure we got it 
in writing. Also, how many people are assigned as bodyguards to 
each member of the Board.
    Ms. Jaresko. Yes, sir.
    Mr. Gutierrez. Thank you.
    The Chairman. Ms. Velazquez, please.
    Ms. Velazquez. Thank you, Mr. Chairman. I was just in 
Puerto Rico last weekend. For the first time I was able to go 
and see my family in Yabucoa, where the hurricane made 
landfall. It looked like someone dropped a bomb. And still they 
are waiting for people to show up.
    My brother, who got surgery on his shoulder, was cutting 
trees with a saw, and the debris is still there on the side of 
the roads, on the side of the streets.
    This is going to be a very painful and long recovery. And 
people are not even discussing the emotional stress and toll 
that it is taking on the people of Puerto Rico. People are 
leaving because they feel that they have no other option. 
People are leaving the island, coming to Florida, Ohio, 
Pennsylvania, New York, because there is no hope.
    And there will be no hope if we don't have accountability. 
Whitefish was not discussed. I hope that you do your job and 
make sure that the taxpayers' money is protected and that we 
use that money to rebuild Puerto Rico.
    The Chairman. Ms. Velazquez, thank you.
    Ms. Velazquez. Thank you.
    The Chairman. And you are right, we should have had a 
witness, we had a witness who bailed on us last minute who 
could have been answering those Whitefish questions, you are 
right.
    Ms. Hanabusa, do you have a motion?
    Ms. Hanabusa. Yes. Mr. Chair, I would like to move that the 
following letters be added to the record by unanimous consent: 
one from the National Hispanic Leadership Agenda; one from 
Earthjustice; one from the Hispanic Federation; and the last 
from VOCES.
    The Chairman. Ms. Gonzalez, I said, as you are a 
representative of this island, I will give you 1 minute also to 
conclude here.
    Miss Gonzalez-Colon. Thank you, Mr. Chairman. I think the 
greatest heroes working this project are the people of Puerto 
Rico. They are the ones doing all they can to surpass this 
difficult time. We never before experienced this kind of 
catastrophe. And I want to thank all the personnel that are 
still working there, all the municipalities, the government of 
Puerto Rico, doing all they can to recover.
    But we need, as Congress, to make many changes in a lot of 
Federal laws to provide for those services to the island. Of 
course, I do think that because of our condition as a territory 
we are not receiving the same amount of funds, the same amount 
of attention in many areas, and we do need the tools.
    My question to you will be to submit in writing all your 
proposals for the tax reform, all your proposals for healthcare 
reform, all your proposals for infrastructure reform. And I 
need that all in writing, because we cannot continue to discuss 
things in the air without having a written position from the 
Board.
    Thank you, Chairman.
    The Chairman. No, thank you. I thank you all for being 
here. I thank our guests for joining us in this Committee. I do 
thank the three witnesses for being here very much. Mayor, 
thank you for coming all the way up here. The Board, as well as 
Mr. Zamot, thank you for being here.
    I think we have heard very clearly the importance of a 
congressional reaffirmation to go forward. Ms. Velazquez was 
actually right. Whitefish was not discussed here, but I look at 
the Board, in looking at that in the future, because there is a 
procedure that needs to be reviewed.
    As we have said at the very beginning, to solve this 
problem it must be done with coordination, and not in an 
adversarial concept for all the players, including the 
government of Puerto Rico, the Oversight and Management Board, 
as well as FEMA, and the Army Corps of Engineers going 
together.
    And, look, the Board is not going to go away until your job 
is finished. We have to recognize that. We want to make sure 
that you have the tools necessary to make sure it is 
efficiently and effectively done. And let's face it, the grid 
is the future of Puerto Rico. That has to be the first thing, 
as everyone has been saying here.
    So, under Committee Rule 3(o), Committee members have up to 
3 days to submit any other questions to you all. You get the 
joy of answering those questions, and you have 10 days to do it 
before our record is actually closed. Nothing personal, but 
that is life.
    [Laughter.]
    The Chairman. With that, I want to thank everyone for being 
here. This has generated a great deal of attention. We will 
still have another sequel to this next week. The Governor and 
some of his staff are also up here to answer the same kinds of 
questions.

    With that, thank you for your participation; we are 
adjourned.

    [Whereupon, at 1:10 p.m., the Committee was adjourned.]

[LIST OF DOCUMENTS SUBMITTED FOR THE RECORD RETAINED IN THE COMMITTEE'S 
                            OFFICIAL FILES]

Rep. Hanabusa Submissions

    --Letter addressed to Chairman Bishop and Ranking Member 
            Grijalva from Earthjustice dated November 7, 2017.

    --Letter addressed to Chairman Bishop and Ranking Member 
            Grijalva from the Hispanic Federation dated 
            November 5, 2017.

    --Letter addressed to President Trump from the National 
            Hispanic Leadership Agenda dated October 1, 2017.

    --Statement for the Record from VOCES Leadership in Action, 
            titled ``Congress must act now to respond to the 
            crisis in Puerto Rico and the USVI''