U.S. government warns Puerto Rico of funding loss if transit shuts

The U.S. Department of Transport warned Puerto Rico that it could jeopardize future funding if it goes ahead with a planned shutdown of its public transit network on Monday, as a local union leader urged bus drivers to show up for work as normal.

In what would be a major escalation of Puerto Rico's debt crisis, the local government is planning to shut down its bus and suburban train service after lawmakers were unable to agree to hike its oil tax by 68 percent, to back a vital bond sale of up to $2.9 billion. Buses and the suburban Tren Urbano serve 75,000 people daily.

The U.S. government pays billions of dollars annually to Puerto Rico for items such as grants for transport projects, healthcare and social security. The warnings apply to transport-related financing.

Two letters from the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) warned Miguel Torres, Puerto Rico's transport secretary, that the shutdown could breach commitments to maintain a basic level of operations needed to carry out safety and security duties.

"Failure to fulfill these capacity obligations or your responsibility to properly protect federal assets could jeopardize future federal funding or potentially result in a debt to the federal government," the FTA said in a letter dated Wednesday, Nov. 26.

The letters were posted on local news website Noticel. The FHWA and the FTA could not immediately be reached for comment.

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For links to the letters:

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here

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Adding to potential confusion on the scheduled day of shutdown, the president of the United Workers Metropolitan Bus (TUAMA) Authority, Antonio Diaz Lopez, urged employees to report to work on Monday, according to local press reports. He said workers could be paid retroactively if authorities did not have funds to pay salaries in mid-December.

Governor Garcia Padilla has said that the Metropolitan Bus Authority and the Tren Urbano will stop Dec. 1 because there is no money to pay salaries on Dec. 15. The Highway and Transportation Authority is also planning to cease operations on Monday, according to the FHWA letter.

The FHWA warned that the federal government would not meet any claims resulting from contracts canceled due to the shutdown and said it was "deeply concerned that if PRHTA (Puerto Rico Highways and Transportation Authority) ceases operations, it may be unable to meet these federal requirements."

Puerto Rico is struggling with over $70 billion in debt and its economy has been in or near recession for the last eight years. It is in the process of restructuring its electric power authority PREPA, which could lead to a writedown to over $9 billion in debt.

(Reporting by Reuters; Writing by Edward Krudy; editing by Megan Davies and Bernard Orr)

U.S. government warns Puerto Rico of funding loss if transit shuts