Municipal governments should urgently start reviewing financing and operating models so that they fall in line with their own fiscal reality and that of the government of Puerto Rico.
Municipal reorganization programs should be thoroughly evaluated before a scenario of budgetary deficits in most municipalities and a reduction in government funds. Adjustments in public finances have aggravated the fiscal situation in many municipalities.
Underlying problems, like a $260 million municipal deficit, have revived the discussion on the best options to restructure financing and operating models in municipalities.
One of the proposals, consolidating municipalities into bigger structures, has been vehemently rejected by mayors from both parties. They are concerned that consolidation would eliminate municipalities. Puerto Rico has 78 municipalities.
Some argue that restructuring through consolidation would translate into unequal treatment to residents of the small towns that would be consolidated.
Another proposal points to merge municipal operations under the concept of regions. This model would enable to combine resources to offer services without changing the structure of a municipality, which is a political, self-governing unit.
Several consortiums operate under this model for the granting of permits and roads maintenance.
Since many municipalities face difficulties to perform essential functions without government´s help, Governor Ricardo Rosselló Nevares proposes the creation of fiscal independent counties like those in the United States.
An argument in favor of the reorganization through counties is that it would result in savings for municipalities and in improvements to services, through regionalization. In addition, counties would have higher levels of autonomy and tools to generate their own income.
Municipal coffers have seen the loss of $300 million after the elimination of the government subsidy for two years and not counting on the Government Developing Bank has further shrunk their fiscal situation.
Municipal solvency has also been impacted by adjustment measures provided in the certified fiscal plan which seeks to balance public finances as part of the efforts to reach fiscal stability.
One of them is that municipalities will have to contribute to pension payments as provided by law. In addition, it is anticipated that the source of income represented by the tax on inventories may disappear in the near future.
Mayors as well as the government face the challenge to promote reforms clearly intended to straighten out municipal finances. That would bring quality in services for the people, which is a core task in the municipal structure.
It is up to mayors to present viable proposals consistent with the island´s reality. The changes they decide would require a new legal framework which in turn would also require complete legislative collaboration.
Fiscal adjustments should give way to agile, cost-effective and transparent municipal structures. That´s why deficit budgets and operations that lack solid sources of income should be left behind. In that sense, it was wise of the governor to warn mayors that municipalities would not be able to operate within five years if they don´t act now.
Time demands transformation, which requires vision, political will and generosity.