Deborah Kobes: “Out of Control? Local Democracy Failure and Fiscal Control Boards”

Puerto Rico is facing enormous fiscal and political challenges. The Commonwealth has almost $70 billion in debts and has been unable to work effectively with its creditors. The U.S. Congress appears to be ready to impose a control board on Puerto Rico to assist with fiscal and debt restructuring challenges. What shape and powers this board would have is being debated now.

Deborah Kobes wrote her dissertation on control boards in the United States  The work–which she completed in 2009 as part of obtaining her PhD from the Massachusetts Institute of Technology– is titled “Out of Control? Local Democracy Failure and Fiscal Control Boards.”

Some of the topics Deborah, Cate and I discuss in this extended interview are:

    1. The events that precipitate the need for a control board. How do situations reach a level of crisis that requires such an intervention?
      1. Sometimes the problem is “simple”; there are relatively straightforward things that need to happen to get the entity stabilized.
      2. More often, however, there are a complex set of political, social, economic, and historical circumstances that led to the crisis point
    2. In most cases, a control board is only one part of the solution. A control board’s role should generally be limited to the fiscal aspects. Local, democratically elected leaders should work with internal and external experts to address other areas.
    3. The two most important lessons when designing a control board:
      1. Include local members on the board; and
      2. Don’t overstep with scope of powers
    4. Important and relevant lessons for Puerto Rico in 2016 come from:
      1. Miami Financial Control Board in the mid 1990s.
      2. Control board for Washington DC in the late 1990s
    5. The relationship between ailing entities and the financial markets can and generally does improve when a financial control board is in place.
    6. Chapter 9 bankruptcy is usually just a short-term fix.

In the coming days I will be posting out-takes from the conversation that didn’t make the final edit for the show, but which offer valuable insight into Puerto Rico’s situations. Topics include:

  • comparison of DC’s Home Rule and the statehood movement in Puerto Rico.
  • how control boards can help in addressing outdated power structures
  • importance of fair taxes, and fair, consistent tax collection  
  • role of technical assistance and expertise on a temporary and permanent basis.

***  contacts:
Cate Long: @cate_long
Gil Hall: @gillamhall

Guest contact:
Deborah Kobes:


About Gil Hall

Currently writing book on PR crises. Working title: "Los Pertrechos: the Story of an Economy". Polyglot prone to prolixity in English, German &, Spanish. Based between San Juan and North Carolina. MBA/MHA.