Wednesday, October 16, 2019

NPP mayor proposes eliminating municipal revenue center

By on March 16, 2017

SAN JUAN – While the Puerto Rican government is evaluating how to offset the elimination of $350 million in municipal subsidies over two years as part of its fiscal plan, San Sebastián Mayor Javier Jiménez recommended Thursday getting ris of the Municipal Revenue Collections Center (CRIM by its Spanish acronym), arguing it isn’t efficient in collecting property taxes.

The Fiscal Oversight & Management Board recommended reappraising municipal property as the main alternative to make up for the $350 million in subsidies from the general fund that municipalities receive annually, an amount that is questioned because many mayors argue they end up investing in providing services the central government can’t offer.

Although he favors reducing and eventually eliminating central government subsidies to municipalities, the San Sebastián mayor explained it can’t be something “brash” because “51 municipalities depend on more than 40% of subsidies, and 45 out of those 51 depend on more than 50%.” This would affect public services, he stated.

Jiménez, a New Progressive Party (NPP) official, said an increase resulting from reappraising  property wouldn’t necessarily generate the expected revenue because in the past decade it has been proven that the tax on real estate “hasn’t moved significantly because it is very subject to evasion and very difficult to oversee.”

The CRIM must be dismantled. It is an entity that basically exists to serve municipalities but has proven to be totally inefficient. There is about $2.5 billion in real estate receivables and out of those $2.5 billion, as of June 30, 2015, $1.5 billion has been written off,” the mayor said, adding that the entity has reappraised fewer real estate over time.

As an alternative to substitute the central government subsidies, the mayor proposed Gov. Ricardo Rosselló “raise [municipal] fees, combined with the elimination of real estate taxes.”

The official said substitution is possible because “business owners generally complain that this tax penalizes having assets in your business because you pay taxes every year and you are penalized for having inventory.”

A screenshot of www.avp.pr.gov showing a Public Housing Administration map of Puerto Rico's municipalities.

A screenshot of www.avp.pr.gov showing a Public Housing Administration map of Puerto Rico’s municipalities.

As for the mayor’s proposal, Municipal Affairs (OCAM) Commissioner Omar Negrón said the decision about how to make up for the loss of municipal subsidies isn’t up to him, and an that the property reassessment is only one of the alternatives being evaluated.

“If [all property] taxes are raised, municipal revenue increases; it is understandable to believe that, but it certainly has some consequences on the economy… We are in the analysis stage. There are other [alternatives] being discussed and they haven’t been made public,” said Negrón, adding that, although they haven’t considered eliminating the CRIM, the possibility of municipalities performing the appraisals themselves is.

Comerío Mayor Josián Santiago, of the Popular Democratic Party (PDP), said that even if not eliminated, “CRIM can create the model for municipal consortia on property tax collection–that is one of the things being studied.”.

Both officials made their comments at Municipal Affairs Forum organized by the Puerto Rico CPA Societyin which a study of the island’s municipal structure was presented.

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