Puerto Rico mayors back bill to access financing for municipal works
SAN JUAN – Budget cuts at the central government and the Government Development Bank (GDB) debacle continue to loom over Puerto Rico’s 78 municipalities as a grim reminder of the local economy’s fragility.
However, a bill presented by the former mayor of Yauco, Sen. Abel Nazario, promises to provide financial relief to municipalities, because it will make it possible to continue public works that a lack of liquidity has kept on hold.
Senate Bill 535, authored by Nazario, seeks to amend the Puerto Rico Municipal Financing Act of 1996 to allow towns to request loans from credit unions, guaranteeing said obligations with the Redemption Fund without the need to require or obtain prior authorization from the GDB.
“The bill makes it easier for municipalities to have access to secured loans, because those loans are guaranteed by the Special Additional Contribution Fund [CAE by its Spanish initials] of the Municipal Revenue Collection Center [CRIM by its Spanish acronym], which is the part municipalities use for financing municipal public works,” Nazario explained in an interview with Caribbean Business. The legislator stressed that the measure seeks to remove the GDB as intermediary for municipalities to access private bank financing.
“This bill now allows municipalities not to have to go to the GDB, but the CRIM itself certifies and allows that whether at a private bank, with Rural Development or, now, with this bill, with cooperatives, municipalities can continue to have a credit line to continue carrying out public works,” he added while regretting that the entire municipal infrastructure work in the island’s towns is almost completely stopped.
Although the bill was presented by a New Progressive Party (NPP) majority senator, it has been met with bipartisan support from the island’s mayors.
Rolando Ortiz, the president of the Puerto Rico Mayors Association, which is made up of Popular Democratic Party officials, praised Nazario’s initiative and said the measure was appropriate at a time when the scenario seems to worsen for municipalities amid budget cuts imposed by the fiscal control board.
“Cooperatives are the institutions of financial services that are the closest to the citizenry, especially in smaller towns. The municipalities are the institution of service and social response closest to citizens [thus] the union is intended as support to deal with the crisis,” Ortiz said in a written statement.
“As a co-op member and mayor, I certainly think the measure is very appropriate, provided that it is accompanied by the maximum control measures that ensure the capital of the cooperatives and their members,” he added.
Likewise, Arecibo Mayor Carlos Molina, who presides the Puerto Rico Mayors Federation (PRMF), which groups the NPP officials, expressed his support to S.B. 535, calling it a prudent mechanism for the economic future of the island’s municipalities.
“Our support not only responds to the opinion that the bill proposes a favorable measure for the economic future of the municipalities, but also that of the thousands of cooperatives in Puerto Rico and its members,” Molina said.
The PRMF president stressed that municipalities’ loan portfolio is the only one that has never incurred a default since, he said, in addition to proper administration, the legal structure that regulates loans for municipalities has protected their debt service.
“Currently, the law uses CRIM resources, sends them to a trust and it is from that instrument that payments are issued. If this measure materializes, the payments corresponding to those debts would benefit equally from that legal structure. The federation’s mayors rely on the approval of S.B. 535 as part of a large number of legislative and administrative measures that should put our cities in a position to face the future for the benefit of all Puerto Ricans,” he concluded.
S.B. 535 was referred to the Municipal Affairs Commission and the Senate Treasury Committee for evaluation.