In the picture economist Martha Quiñones. (horizontal-x3)
In the picture economist Martha Quiñones. (GFR Media)

Since the last quarter of 2017, municipalities have seen their revenues consistently undermined, and, according to the most recent estimates, that includes a reduction of $ 56 million that will be reflected this fiscal year regarding the payment of movable and immovable property taxes.

Businesses clousures, mass exodus of Puerto Ricans, decrees approved

and municipal and state exemptions, as well as an increase in operational expenses due to Hurricane Maria that were not contemplated in their budgets, emphasize the economic blow that some municipalities have already been suffering for a long time.

The global decline due to the impact on the collection of movable and immmovable property taxes between September, October, November and December, added to the decrease in lottery sales, reaches $ 55,632,485, confirmed to El Nuevo Dia, Javier Carrasquillo, President of the Governing Board of the Municipal Revenue Collection Center (CRIM, Spanish acronym).

"This figure includes the $ 30 million loss from the lottery and about $ 25 million on revenues decrease," said the mayor of Cidra.

CRIM estimated revenues for this fiscal year - which ends on June 30 - was $ 827,148,824 once discounted the municipal Special Additional Contributions (CAE, Spanish acronym) funds for the repayment of municipalities debt and the 5 percent for CRIM operational expenses.

For some municipalities, the cut in their remittances after Hurricane Maria has an impact of up to $ 6 million, as is the case of San Juan. However, in percentage terms, the most affected are Guayanilla and Manatí, with a reduction of 11.7 percent and 11.4 percent, respectively. "That implies that they have to make adjustments at a time when expenses have been increasing", said Carrasquillo.

In January, Carrasquillo had already warned that there would be $ 30 million reduction from lotteries and that they projected that collections between July and December would have been reduced by 15 percent.

But the economic blow of the hurricane over municipalities goes much further. Besides the $ 56 million, municipalities will have to deduct the money they have stopped receiving due to the elimination of the Sales and Use Tax (SUT) on processed foods approved by the government after Hurricane Maria and which was in force until last January 7. In addition, the exemption of the SUT collection for small businesses, with sales volumes for less than a million dollars, which was applied between November 20 and December 31.

Usually, that 1 percent of SUT goes to municipalities is used for essential services, such as garbage collection.

Carrasquillo said that the impact of the SUT exemption will not be measurable until they receive the Municipal Finance Corporation (Cofim, Spanish acronym) report, nor will be the reduction that municipalities will have in their public coffers from the licenses payment.

"Businesses file the license form once the economic activity year passed, so that will not be defined until January 2019. We can only speculate now", said Carrasquillo, who –four months after the hurricane- has seen 123 business closures in his municipality.

In Caguas, Mayor William Miranda Torres has taken measures to ensure the municipal operation this year, despite having projected a $ 16.4 million reduction in income which includes the $ 920,805.74 of the decrease in CRIM remittances.

"Regarding licenses we are considering a 40 percent adjustment ($ 1.2 million) which is particularly the impact of October, when there was almost no economic activity," said the mayor.

On the other hand, he estimated, that Caguas stopped receiving about $ 3.6 million from SUT.

The current budget of Caguas -$ 92 million- will also reflect a reduction of $ 26,000 that the municipality stopped accruing for renting municipal spaces, as well as about $ 8 million that they expected from a municipal initiative imposed to businesses that generated more than $ 3 million, to contribute 0.35 cents per $ 100 earned. The proposal was challenged in Court and could not be implemented.

Among the measures to reduce the impact, Miranda Torres highlighted the approval of an ordinance that grants a 50 percent reduction on construction taxes to any entrepreneur who builds or makes improvements between now and June 30.

"It may be an activity that was not intended, people will be motivated to do it and will generate income or that we will not receive what we have budgeted", said the mayor of the Popular Democratic Party (PPD).

In Caguas, 25 percent of the nearly 5,000 shops of the city remain closed. "All this causes more anxiety and anguish in the population ... I can not guarantee essential services for the population if the funds we need do not come," he said.

He assured that he has made the necessary adjustments - which included a professional services reduction - not to affect working hours. "Smaller municipalities are even more affected because they do not have a significant income in licenses, SUT or other sources... They virtually live from CRIM", he noted.

The president of the Mayors Federation, Carlos Molina, estimated the direct impact in his municipality, Arecibo, in $ 5 million, including the 20 percent in CRIM reduction. “It will be a multi-milliondollar real impact, but we will see the exact amount in two or three years", he said.

The PNP mayor said that municipalities have to reduce operational expenses and establish consortiums to provide services to achieve lower costs. "We have to be realistic about how the island lives today, but we have to look for options and not wait for a miracle to happen", he said.

Ramón Hernández Torres, Mayor of Juana Díaz, estimated the income loss, according to the municipal budget amounting to $ 12.8 million, in $ 1.3 million. This figure includes a decrease in licenses of $ 200,000, $ 300,000 from the IVU and business closures, among other items.

Meanwhile, there are over $ 1.1 million in the line of unbudgeted income not received from the State for this fiscal year. These cuts, he said, caused furloughs implemented on July 3, 2017. The municipality has 173 regular employees, 30 contract and 59 temporary employees.

"Things changed after Maria. For this fiscal year, we have been very active in federal funds, "said Hernández Torres.

The blow in Guaynabo Municipality, due to the drop in CRIM remittance until June 30, exceeds $ 2 million, said its mayor, Ángel Pérez.

"I can think that the figure will increase because we are not seeing the effect of the people that are leaving Puerto Rico yet... We are aggressively looking for companies that want to establish here", Pérez said.

"With the renewal of the licenses in April, I'm going to see the effect of the businesses that closed," he added.

Will there be a way out?

According to Rolando Ortiz, mayor of Cayey, the urgency of the municipalities is no longer limited to furloughs but to shutdowns closing.

"There is no way out because the municipal institution is misunderstood by the governor. They see how effective we were before, during and after the hurricane, but now, when apparently that crisis has already passed and we say 'we want to help', they do not let us", Ortiz said.

In the case of Cayey, the CRIM reduction reaches $ 700,000. The scenario is complicated due to the elimination of $ 175 million in subsidies to the municipalities included in the original fiscal plan.

"When they reduce money for municipalities, they are taking money from the most needy people of the island. Poverty is increasing, "said the president of the Mayors Association, an organization that brings together popular municipal executives.

In addition to claiming to the Executive to postpone the reduction in the so-called subsidies, mayors focus their hopes on the federal Community Disaster Loans (CDL) program. With this initiative, municipalities could obtain up to $ 5 million loans for operational expenses at an approximate interest of 2.25 percent.

Meanwhile the Executive announced they will submit of a new bill after the Fiscal Oversight Board did not certify Senate Bill 774 that would create a $ 100 million Municipal Recovery Fund.

Searching for other sources

Economist Martha Quiñones said that the current conditions are favorable for the mayors to evaluate the development of private or quasi-public companies to fill the gap left by the closure of some mega-stores.

However, she acknowledged that it is not done overnight. "It requires an analysis of strengths and weaknesses and the offers they receive in order to be able to get something different", Quiñones said.

"With the loss of large stores, they have the opportunity to stimulate small and medium businesses with the same offer and that can generatemore jobs", noted the professor.

According to studies carried out separately by economists José Caraballo Cueto and José Alameda, she said that each job generated in a small company leaves more to the municipality than those of large companies.

"There is potential, we have to learn to have more confidence in ourselves and stop asuming that the big ones are those who benefit us," Quinones said.

"It is part of this dynamic of how to understand the new municipalities operation, the importance of decentralization, that they receive the funds they need and that they will be the ones to articulate the projects they need for each of their citizens", she concluded.

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