Fiscal board designates Puerto Rico towns as covered instrumentalities under Promesa
To ‘secure their long-term fiscal viability’; requests fiscal plans from CRIM, and first municipalities in pilot program to ‘increase revenues’
SAN JUAN – The Financial Oversight and Management Board for Puerto Rico announced Thursday that it will designate the island’s 78 municipalities as covered instrumentalities under the Puerto Rico Oversight, Management and Economic Stability Act of 2016 (Promesa) with the aim of “securing their long-term fiscal viability.”
The board will also require a five-year fiscal plan from the Municipal Revenue Collection Center (CRIM by its Spanish acronym). The initiatives were announced during the board’s 16th public meeting, during which it certified the 2019 Fiscal Plan for Puerto Rico.
The board said it will initially work with 10 geographically aligned towns to develop fiscal plans and budgets to be certified by the end of the current fiscal year.
“We have listened to the mayors,” Chairman José Carrión said. “This is a pro-active approach to help municipalities avoid insolvency, find a path towards financial stability and economic development, and do what they do best: service the needs of their residents.”
The municipalities selected from the central and northern regions are Orocovis, Aibonito, Barranquitas, Cidra, Comerío, Villalba, Camuy, Isabela, Quebradillas, and San Sebastián.
“They reflect a mix of political representation, size, and financial strength. Each will be required to include in their fiscal plans spending reduction and efficiency measures, such as inter-municipal shared services arrangements, programs to improve and optimize local revenue collection, economic development guidelines, and decentralization proposals,” a release issued by the board reads.
The commonwealth’s fiscal plan contemplates the “full elimination of central government subsidies by 2024,” the board added.
“We are confident that the development and implementation of fiscal plans and compliant budgets will transform municipalities,” Carrión said. “Adopting financial and budgetary best practices while moving away from their dependency on the Commonwealth’s budget will put municipalities on a better footing.”
The goals for the CRIM fiscal plan, the board said, include strategies to “update the property registry, revise the classification and valuation of registered properties, review administrative guidance regarding exemptions and exonerations, and improve enforcement and collection efforts,” adding that by “working together to improve CRIM’s performance, the Government of Puerto Rico will be in a better position to eliminate other tax burdens, such as the ‘inventory tax,’ which can hinder business and economic development.”Carrion further said that although CRIM “remains one of the main revenues sources for municipalities, it currently has over $2 billion in overdue receivables, a 62% collection rate for property taxes, and is missing some 300,000 plus properties from its registry,” and that in the board’s “preliminary analysis we identified the need for an additional 150 appraisers. We will benchmark against other jurisdictions and work with the mayors and CRIM’s management to bring the system into the 21st century.”