PathStone Corporation (PathStone) began full-time operations in Puerto Rico soon after Hurricane Georges came ashore in 1998. PathStone’s entry into Puerto Rico was a long wished for dream on the part of the Board of Directors which for many years wanted the organization to offer assistance to farmworkers on the Island. PathStone’s board had, from the beginning of the organization’s founding in 1966, included significant number of members from Puerto Rico and, in the early 70s, the organization had entered into contracts with the Commonwealth’s Department of Labor to serve Puerto Rican worker in the United States. Now, PathStone staff found themselves trying to organize aid to farmworkers who lived and worked in the coffee growing communities located in the central mountain region of the Island. Soon after the storm devastated much of the agriculture, the USDA had requested an aid package to farmers but not for workers. PathStone (then called Rural Opportunities, Inc.) took their pleas for help for farmworkers to both the Department and to Congress and, subsequently, received $600,000 for emergency home repairs. Soon after that, PathStone entered into a contract with USDA Rural Development whereupon the organization began to help various USDA offices on the Island market their Section 502 (direct) home mortgage product to local communities.
Fast forward to 2017, PathStone has 45 employees on the Island working out of 7 offices in 5 regions. Principle lines of business are Residential Real Estate Development, Homeownership Promotion, Small- and micro-Business Lending and Workforce Development.
To date, PathStone has developed five multi-family properties serving farmworkers, families and seniors all of whom are very low-income. These properties have been financed by USDA (Section 514-514), HUD (Section 202), HOME, Capital Magnet Fund, Federal Home Loan Bank of New York and the Low-income Housing Tax Credit and the Commonwealth of Puerto Rico. In addition, PathStone has completed one USDA-financed Mutual Self-help Housing Project.
PathStone Enterprise Center, Inc., an affiliate of PathStone Corporation is a certified CDFI and serves as an intermediary lender for USDA (IRP) and SBA (Microloan). Since 2013, the organization has originated 55 small business loans valued at $1.45 million. It currently has 47 active loans with an outstanding balance of $1 million. PathStone has utilized $100,000 in CDFI Technical Assistance funds in the past to build capacity in Puerto Rico.
The recent hurricane to come ashore on the Island, Maria, has done untold damage to housing, businesses, to community infrastructure and to people. Maria, as we know, followed soon after Hurricane Irma, totally devastating an Island already weakened by Irma.
The situation today is dire, particularly in the more remote agricultural mountain and coastal communities served by PathStone. 45% of the Commonwealth’s residents live in poverty-the highest of any state or territory with unemployment more than twice the US level. Unemployment in the mountain communities can reach as high as 22.5 (Villalba). Post-Maria, the situation has become significantly worse. Commonwealth estimates are that up to 60% of the population outside San Juan, Mayaguez, Ponce and Arecibo are currently unemployed. Many of the region’s structures, residential and commercial alike have been either seriously damaged or completely destroyed. The Puerto Rico Power Authority estimates that many of the communities located in the more remote regions of the Island will not have power for months. The communications infrastructure was almost completely destroyed. 90% of the cell towers were destroyed.
PathStone has launched a relief efforts aimed at helping the communities within its footprint to recover. In descending priority, PathStone is attempting to stabilize its staff, some which have lost their homes and most who have sustained damage to their homes and are without telephone service, electricity, food or water; stabilize PathStone’s offices, all which have no electricity or phone service; offer aid and comfort to PathStone’s clients and customers (tenants, homeowners, people starting new jobs and small business loan borrowers); bring aid to the general population in affected communities.
PathStone has sent satellite phones which have given key staff the ability to communicate with each other and with the central office in Rochester. PathStone is working with Metad, Inc., a US-based International Relief organization, that is helping to deploy solar array electric generation systems to each of its offices and to four of the multi-family complexes (two currently are receiving limited electricity through gas-powered generators).
Our staff has only been able to establish communications with one of our 47 active borrowers. Staff estimates that most of the businesses in the portfolio are now either closed or operating part-time. PathStone has given all borrowers an automatic 3 month forbearance on repayments. This will remain in place until staff can visit the places of business to determine their status.
PathStone has played a key role in meeting the credit needs of many of the businesses, mostly start-ups, in the rural areas of southwestern Puerto Rico and, at this time of need, can be a life-line to those same businesses. Access to credit and capital is extremely difficult in smaller remote communities. Many of the communities are characterized by some of the highest unemployment and poverty rates in Puerto Rico and the US. Even before Hurricane Maria, Island-wide, the lingering recession and dramatic increase in out-migration, particularly by the young and the professional class, has undermined the Island’s tax base and its ability to meet its basic obligations to its citizens. A financial crisis in Puerto Rico, highlighted by a current debt of $73 billion, is restricting access to credit and capital by entrepreneurs, developers, homebuyers and local governments. According to recent estimates, wealth lost to the fall of housing prices is estimated at $27 billion, while market capitalization of Puerto Rico’s financial institutions is estimated to have losses of approximately $11 billion. The rating agencies have downgraded Puerto Rico’s debt to speculative or non-investment grade. This is having the effect of essentially shutting down the Commonwealth’s access to capital markets, at least at reasonable rates.
The private banking sector is also finding it difficult to provide capital to the Island’s business and commerce sectors. In general, there is little competition to provide small business loans in the municipalities where PathStone operates. Banco Popular is the only bank with physical branches in many of the more rural communities. In 2015 the dollar amount of Banco Popular’s new small business loans was equal to 4.74% of its deposits in 5 of the most rural communities, not a large percentage by mainland US community banks standards.
PathStone is slowly stabilizing its operations on the Island and is prepared to deploy whatever assistance can be made available.