Popular and new progressive (parties) mayors warned yesterday that the liquidation of the Government Development Bank (GDB) and the elimination of the elimination of the Contribution in Lieu of Taxes (CELI, by its Spanish acronym) in the Puerto Rico Electric Power Authority (PREPA) could represent hard blows to the finances of municipalities with the loss of hundreds of millions of dollars.
According to reports Friday, the GDB liquidation plan contemplates that the money obtained from the sale of its assets would be destined to pay bondholders and to satisfy, to the extent possible, the Bank’s deposits. And municipalities have over $300 million in frozen deposits with the GDB, said Bayamón mayor, Ramón Luis Rivera Cruz. Most of this money is the product of surpluses from the Special Additional Contribution, a fund used to repay municipal debts. “This is added on top of the loans the GDB collects from municipalities that are yet to make any disbursements," said the mayor of Isabela, Carlos Delgado Altieri.
Municipalities currently pay for these transactions which were never completed because, given the lack of cash, the Bank stopped making disbursements for municipalities’ projects.
The mayor of Isabela said that in his case, he has spent a year paying for a loan he took out to finance the renovation of Playa Jobos in that municipality. However, the money to develop the works was never disbursed by the GDB.
“Add to that the special laws for pensions’ systems and the transfers to municipalities. Just for pensions alone, in Isabela we had to increase the contribution from $179,000 to $1.4 million. This is untenable. There is no way to keep municipalities afloat with these burdens, regardless of whatever mayors may do. The decline in infrastructure from July forward is going to be terrible,” Delgado Altieri says in reference to the start of the next fiscal year.
“There are municipalities such as Mayagüez and Ponce that are facing serious fiscal problems. And, if on top of that, the government of (US president, Donald) Trump, wants to eliminate the CDBG (Community Development Block Grant) funds, which are the funds used to pave (roads) and undertake projects in the communities, well, forget the whole thing,” added the Isabela mayor.
Rivera Cruz and the president of the Mayors’ Association, Rolando Ortiz, said that this scenario should be used to create a new bank that tends exclusively to fiscal matters of the municipalities.
“Municipalities have the capability of asking and paying for a loan. Municipalities have always been current. That is not the reason for the crisis. Municipalities are not those who’ve created the crisis,” said Ortiz.
The new progressive (party) of San Sebastián, Javier Jiménez, warned that, if CELI is eliminated, municipalities will proceed to collect any taxes that may apply from PREPA operations in their towns. Rivera Cruz expressed himself in similar terms, and recalled that the most recent estimates establish that PREPA would have to lay out some $300 million more than what it costs it to provide electricity to the city halls.
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