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Executives of the Oversight Board visited the town of Cidra yesterday, which is part of the pilot project in which nine other municipalities participate. (GFR Media)
Executives of the Oversight Board visited the town of Cidra yesterday, which is part of the pilot project in which nine other municipalities participate. (GFR Media)

Cidra – Five months after the Oversight Board decided to challenge the law that reduces certain administrative burden on municipalities in federal court, the entity is in talks with the government, but does not contemplate reaching a final agreement until the court decides the controversy.  

“We are in court right now. That is the first step. We need a court decision,” said the Board’s Executive Director Natalie Jaresko, who stressed that they are having conversations with the government.

"We need to know the court’s decision first, so nothing can happen until then," added Jaresko, whom yesterday visited Cidra, one of the 10 municipalities in a Board´s pilot program which requests municipalities to submit fiscal plans.

Jaresko said, however, to be "sure and confident" that they will find a solution.

Act 29-2019 exempts municipalities from contributing to the government's health plan and the “PayGo” retirement system. The Board sued the government for understanding that the law is inconsistant with the certified fiscal plan and that funds were not allocated to finance those provisions.

The fiscal situation in the municipalities worsens

For Javier Carrasquillo, mayor of Cidra, the longer it takes to decide on Act 29, the more difficult the fiscal situation for municipalities gets.

He recalled that the Municipal Revenue Collection Center (CRIM, Spanish acronym), he chairs the CRIM Governing Board, used Act 29 to send remittances from the 78 municipalities.

He warned that if Act 29 were repealed, CRIM would have to recover the $ 320 million it distributed to all municipalities in July, when the fiscal year began.

"Those municipalities whose property contribution income depends substantially on the contribution or on the Municipalities Equalization Fund would be seriously affected and “would fall into red.”  They cannot operate. It's not that they can't provide services, it's that they can't operate,” warned the mayor.

Carrasquillo estimated that more than 30 municipalities would not be able to operate. “The state should address this matter and identify the resources to cover those obligations within the certified budget. That is the alternative that hasbeen offered. But that hasn’t happened so far,” he acknowledged.

He added that he recently received a letter from the Health Insurance Administration (PRHIA), which administers the government's health plan, demanding the November contribution. “I sent them a letter telling them to recognize the rule of law. The rule of law is Act 29, and it does not require us to make any contribution,” the mayor said.

Governor Wanda Vázquez said that she is in communication with the Board about this issue.

Given the situation municipalities are facing, Jaresko said yesterday that once the Federal Court decides on the case, the Board will work with mayors and the government in two directions. She stressed the Board will "support those small municipalities that have the big challenge of balancing their finances." And as for large municipalities, she added, they will collaborate with CRIM to increase revenue collection.

CRIM is working on the final details of the fiscal plan the Board required. "I hope it will be certified before the end of this year," Jaresko said.

The Board has visited eight of the 10 municipalities in the pilot program. They only haven´t been to Villalba and San Sebastián. The fiscal entity has reportedly not certified any of the fiscal plans of these municipalities as they are also waiting also for a decision on Act 29.

"The Oversight Board is listening to the communities," Jaresko said. "What we hear from them is invaluable for our decision-making process."

As an example, the Board’s Executive Director said the agency has intervened so that the government releases Industrial Development Company building in disuse that municipalities have long required to develop businesses or boost economic activity. In other municipalities, they have identified that the main problem is access to more federal funds, investment or economic development projects.

When asked about the next step, Jaresko said they will look for "more solutions” and added that the only solution Puerto Rico has to become a more prosperous place and create more jobs “is to expand the economy.”