The Commonwealth of Puerto Rico has the highest debt per capita of any U.S. state or territory at $15,637 per person; more than 10 times higher than the average debt per capita of the 50 states. Add to the debt burden the obstacles of high power and labor costs and a declining, economically disadvantaged population, these conditions make operating the island-wide water and wastewater provider, the Puerto Rico Aqueduct and Sewer Authority (PRASA), extremely challenging.
PRASA has made considerable progress becoming more efficient in the last 10 years: reducing its workforce from over 7,000 to now roughly 5,000 employees, eliminating over a dozen treatment facilities, and increasing productivity by more than 10 percent. Despite these positive changes, PRASA still deals with many challenges that are outside of its control and, therefore, it has been difficult for PRASA to access money in the financial markets.
PRASA obtained the expertise of Raftelis to conduct an independent assessment of the utility’s operations, management, and financial position, to help show customers and other stakeholders, including prospective buyers of PRASA bonds and commercial debt, that the utility’s management and operational practices are strong and worthy of investment.
The comprehensive assessment validated recent actions and provided additional recommended cost reductions and revenue enhancements. These enhancements were specifically focused on operations, capital planning, non-revenue water initiatives, and customer service activities. Raftelis built a financial planning model that shows the impact of the cost reductions and revenue enhancements on customers, debt service obligations, etc.
While the Raftelis study resulted in a strong independent operational and financial road map, the overarching Commonwealth challenges dominated the financial landscape and prevented PRASA from accessing the capital markets. The expectation is that, as the Commonwealth rebounds, the Raftelis study will provide a springboard for debt restructuring, raising new capital, and jump-starting the PRASA capital plan.
