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Fiscal board asked to give municipalities greater participation

By on February 16, 2017

SAN JUAN – Popular Democratic Party Rep. Jesús Manuel Ortiz warned the fiscal control board about not including municipalities in the preparation of the various fiscal plans the administration of Ricardo Rosselló will present it, and requested that municipalities be given access to the debt restructuring tools provided by Promesa.

In a letter sent Thursday to the board’s members, the legislator also raised a red flag about the negative effects that implementing some of the recommendations made by the governing body would have on municipalities, such as reducing the subsidies offered by the central government and increasing real estate taxes.

“Just like the central government and several public entities, municipalities need to benefit from Promesa’s tools to ease their financial burden and reduce their debts. I hope the board will take into account the critical situation of municipal finances and help municipalities to improve the essential services they offer without having to raise taxes,” Ortiz told Caribbean Business.

Municipalities have also seen a decrease in their revenue collections and a loss of access to external financing. In addition, these have a public debt of more than $3.8 billion, including about $2 billion to the Government Development Bank (GDB), and the imminent risk of having to pay pensioners directly, or “pay-as-you-go,” the former Press and Public Affairs secretary under the previous administration explained.

PDP Rep. Jesús Manuel Ortiz (CB file photo)

PDP Rep. Jesús Manuel Ortiz (CB file photo)

In the letter, Ortiz asks the board how it will handle the debt of the municipalities, which the representative believes must be restructured, and suggested that these should have access to Promesa’s debt-restructuring mechanisms, including Title III.

Ortiz also emphasized the importance of including input from the municipalities in the preparation of the various fiscal plans the government is working on, particularly with regard to the GDB, Employees Retirement System, Municipal Financing Authority, Municipal Revenue Collections Center (CRIM by its Spanish acronym) and the central government itself.

“If the government achieves savings and cuts to the debt of these entities but does not pass those savings and reductions on to municipalities, the municipalities would be bearing the weight of the central government’s debts. If municipalities do not also benefit from a significant reduction in their debts they will not be able to continue to provide essential services,” Ortiz explained.

The legislator’s request add to remarks made Thursday by the president of the Puerto Rico Mayors Association, Cayey Mayor Rolando Ortiz Velázquez, who criticized the lack of communication between the administration and municipal leaders in the preparation and delivery of the government’s fiscal plan. The leader of the PDP mayors also warned of consequences if “the fiscal reality” of municipalities is not taken into account.

For his part, the lawmaker indicates in his letter to the oversight board that he will be meeting with mayors to urge them to seek legal counsel that puts them in a better position to request from the board access to the various restructuring tools under Promesa. He will also request the Legislature to study alternative funding mechanisms for municipalities.

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