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Pipe Dreams

Will AFI be "the mouse that roars"? Born again agency heads efforts to rescue island from water woes

by Florencio Marina

March 1, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

The little-known, $2 billion Puerto Rico Infrastructure Financing Authority is taking on Puerto Rico's water supply problem. Its mission is to fix the infrastructure to help the island's water utility deliver reliable service into all our homes and businesses--and avoid further damage to our ability to market the island as a solid investment destination.

It commands a $2 billion budget and has been charged with fixing some of Puerto Rico's most serious infrastructure problems, starting with the island's "comatose" water supply system. But ask the man on the street what the Infrastructure Financing Authority (AFI by its Spanish acronym) is, and you'll probably get a blank stare.

AFI was created in 1988 as a subsidiary of the Government Development Bank for Puerto Rico (GDB), but it was not used until 1998. That year, Gov. Pedro Rossello signed an executive order reactivating the entity and named Carlos Pesquera as AFI's executive director. Pesquera turned the reborn agency into a fast response financial and management team to oversee the development and maintenance of infrastructure. Because of its critical condition, most of AFI's current projects pertain to the island's water system.

"We are what I call the government's trauma centerfor agencies in trouble," Carlos Vivoni, AFI's second Executive Director told

CARIBBEAN BUSINESS in an interview last December, shortly before leaving this position. "We stabilize the patient and eventually move on to others in need, once the crisis is overcome and he can fare for himself. For now the comatose patient has been the water utility infrastructure.

Tomorrow it could be something else."

People tend to confuse AFI with the Puerto Rico Aqueducts and Sewer Authority (Prasa), according to Miguel Cordero, who was named Executive Director of AFI in January of this year. He explained in a recent exclusive interview with CARIBBEAN BUSINESS that AFI acts as massive infrastructure and development support to Prasa, which remains responsible for supplying water service to 99% of Puerto Rico's residents.

In 1995, Prasa partially privatized the management of its operations through a contract with the Puerto Rico Water Company (PRWC). In 1999, the contract was expanded to give PRWC a more complete control of the water utility's operation. PRWC is the offspring of the French enterprise Vivendi, a company with extensive experience in infrastructure management in Europe (it runs 20% of the British railway system, for example). Early reports indicate that PRWC is making substantial progress in improving water service on the island. At a forum last week, Vivendi Operations Director Guy Jacques Barlett said that water service complaints to the Ombudsman had been slashed in only one year from 1,500 in January, 1999 to only 750 a year later.

Interestingly, AFI is not directly involved in the North Coast.

Superaqueduct, the most visible and controversial water infrastructure project to have been developed by the Rossello administration. The superaqueduct, which will bring water from the Dos Bocas Lake in Utuado to the San Juan metro area, is the sole responsibility of Prasa (See sidebar).

For average folk across the island who have suffered the woes of unpredictable or non-existent water supplies. AFI may mean that there is hope for water at the end of the pipe after all.

"I think our greatest accomplishment so far is giving the people a sense of hope and salvation. I feel their trust regarding the functioning of our infrastructure," said Cordero, who also continues to serve as Executive Director of the Puerto Rico Electrical Power Authority (Prepa).

Not water alone

Although AFI is currently busy developing and improving the island's water service infrastructure, its legal mandate is broad enough to handle other kinds of infrastructure problems. In fact, it is also lending the local Department of Housing a much needed hand with many victims of hurricane Georges by helping the agency build new homes for them based on the most rigorous safety standards. The project is called Nuevo Hogar Seguro (Safe New Home).

AFI manages $2 billion in capital improvement programs. Of that, $1 billion was funded with the proceeds from the 1998 sale of the Puerto Rico Telephone Company to the GTE/Banco Popular consortium. Another $800 million will come from island government-backed financial obligation bonds issued by the GDB. The remaining $200 million will come from various other sources, including Puerto Rico legislature appropriations and federal funds.

There are enough funds to finance the AFI-Prasa initiative until at least the year 2001, said former AFI Executive Director Carlos Vivoni. Cordero stresses, however, that as AFI completes the water infrastructure projects now under its care and winds down its day-to-day involvement with the water infrastructure system, provisions must be made to ensure that Prasa has enough funds and resources to handle the development and maintenance of future infrastructure projects and to solve possible emergencies.

Cordero's vision

Freshly installed at AFI's helm replacing Vivoni, Cordero feels the most essential challenge for the entity is, like with any other, to define its vision in terms of the problem at hand and work diligently toward successfully completing the mission. "The important thing is the desire to get things done and work on it with anticipation," Cordero said.

That is precisely what he did in 1993 when he took over Prepa and eventually reduced the frequent power outages that had become commonplace in previous years.

Cordero is confident that by the year 2003 or 2004, most island residents will have experienced a dramatic difference from the water supply inadequacies they have endured for years. He predicts that about 75% of those affected by water shortages today will see definite solutions. "I believe the important thing is for people to feel the impact of what you do, because you can plan and work a lot but that means nothing if there are no concrete results backing it up," he said.

Action plan

AFI groups more than 600 projects under five major categories, four of them aiming to improve our water supply and one helping the Department of Housing to develop housing for the people displaced by the ravages of Hurricane Georges in 1999 under the Safe New Home program. At a AFI forum last week, Cordero said that, following his experience in Prepa, he intends to accelerate the bidding and contracting processes underway in the next six months to prevent electoral year politics bogging down the agency's ambitious agenda.

*Immediate Action Program

Within this category there are 490 AFI projects of various sizes and levels of complexity with a common denominator: positive immediate impact to affected communities.

At an average cost of $350 thousand per project, AFI has earmarked a total of $173.9 million for projects under this program, which seek to bring immediate relief to rural and marginal locations where water is barely available.

Projects in this category range from a $34,700 rehabilitation of a water pump station to benefit 4,000 residents of the Jagueyes Sector of Aguas Buenas to the construction of a $3.5 million, 3.0 million gallon-per-day Mavilla River water treatment plant, which will benefit 60,000 people in several communities in Corozal, Naranjito, and Toa Alta.

There is also a $5.5 million investment in a new raw water pump station and an 11-mile pipeline for Humacao's Central Roig. This project will supply much needed water to Las Piedras, Yabucoa, and Humacao.

Another example is the Santa Rosa de Lima community in Mayaguez, which is enjoying water for the first time in its 15-year existence since fall of 1999 thanks to an IAP project.

Of 490 projects in the IAP roster, 157 are located in the island's northern region at $56.1 million, 95 in the San Juan area for $27.3 million, 79 at $30.3 million in the southwest and 159 for $60.2 million in the east. As of January 31, 2000, aggregate value of completed construction stood at $39.9 millions, or approximately 23% of the total.

*Strategic Projects

These are the big-ticket items. Their purpose is to add significant capacity to the island's overall water supply. At a total aggregate investment of $1.5 billion, these projects will directly benefit a total of 2,515,000 people.

There are 11 strategic projects: Villalba's regional aqueduct, the northwest regional aqueduct, northeast aqueduct, east-central regional aqueduct, Cidra's water filtration plant, Guayama's regional aqueduct, Canovanas' water filtration plant, the northern coast interconnection to the Superaqueduct, Dorado's regional waste water treatment system, Fajardo's regional waste water treatment system, and Mayaguez' new waste water treatment plant (See chart).

The Dorado and Mayaguez projects disinfect sewer water for release into the sea, while the Fajardo project does the same in the Fajardo River.

*Special Projects

AFI is investing $77.4 million to replace the Carraizo dam's six water pumps and its eight gates with newer, more effective ones (see sidebar).

The Martin Peña pump and the Puerto Nuevo incinerator will also be renewed.

*Environmental Compliance

AFI is working to make sure Puerto Rico's six primary water treatment plants (in Arecibo, Aguadilla, Bayamon, Puerto Nuevo, Carolina, and Ponce) comply with EPA regulations. The 301(h) section of the Clean Water Act allows the release into the ocean of water disinfected under Biological Oxygen Demand and Total Suspended Salts parameters, among other criteria. The purpose of AFI's involvement is to ensure the adequate infrastructure is in place to assist Prasa in complying with these requirements.

*Safe New Home

Construction of 592 new homes for victims of Hurricane Georges has already begun in Toa Baja, Ponce, and Canovanas in coordination with the Department of Housing. They are being built in strict compliance with FEMA's guidelines. Another 539 units will be developed in Toa Alta, Cabo Rojo, Guaynabo, and Coamo.

Priorities and a small team

Cordero says one of his priorities is to coordinate and integrate the work plans of both AFI and Prasa to ensure regular infrastructure improvements are accomplished within a certain time frame and that these are kept functioning well. He emphasizes the importance of maintaining good communication with customers to stay in touch with their needs. "I believe a good information network is key in keeping people informed of the work being done. I did this in Prepa through written communication and I feel I can help Prasa reach its clients," he notes.

The director also explains that delegation of decisions to lower levels is key in preventing unnecessary bureaucratization that would otherwise slow things down. This is a key element of the entity's efficiency. Cordero's team in this venture is small: Deputy Director Perfecto Ocasio, Financial Administrator Jose Perez, Ana M. Gregorio, in charge of communications; attorneys William Rios and Hilda Quiñones in charge of legal affairs, and two secretaries.

How can an 11-person agency manage a $2 billion budget to develop 600 infrastructure projects? The answer is to be found in AFI's structural model--itself an innovation in Puerto Rico. The agency relies on scores of private design consultants, contractors, and inspection consultants under the centralized management of a private consortium hired by AFI.

The consortium is composed of CSA Group Inc. and CH2M Hill, two planning companies specializing in construction, engineering, and architecture. In coordination with their client--AFI--the consortium evaluates projects, directs the bidding processes, and chooses the companies they understand will work best at the most reasonable cost.

For example, for the IAP program alone, the consortium, under AFI's direction, coordinates and manages the work of 21 design consultant firms, 32 contractors and 6 inspection consultants firms.

Cordero, however, believes more can be delegated to the lower levels to improve the quality of services even more and believes Prasa/PRWC should aim to make the necessary reforms in that direction. He mentions the example of Prepa, whose personnel, he says, was prepared for the changes that took place in the first half of the 1990's. The implemented method of decentralization and its information systems have made that agency one of the most highly regarded by public opinion today.

Timing is highly important to Cordero. "If you tell someone you are going to fully restore their water service in, say, two months, they are going to time you, so you better get going," he says "And that is exactly what we do. AFI's structure accomplishes a lot in little time and cost efficiently."

AFI's future

Cordero believes it may take AFI up to 5 more years of continued dedication to the water system infrastructure before Prasa and the PRWC can regain full control of those operations. After that, he envisions AFI turning its attention to housing, an area in which it is already working, and education.

This Caribbean Business article appears courtesy of Casiano Communications.
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