Senate passes measure to provide $1 million to each Puerto Rico municipality
SAN JUAN — The Puerto Rico Senate passed Monday a measure to provide $1 million to each of the island’s 78 municipalities to help cover operational and administrative expenses amid their dwindling tax revenues after hurricanes Irma and Maria struck in September.
According to a statement, the decision comes about after Senate President Thomas Rivera Schatz announced last week that his chamber was preparing to make way for a substitute bill to S.B. 822, which was filed by the administration and established that municipalities could obtain loans of up to $5 million from a $100 million fund.
The legislation now goes to the House of Representatives for consideration, which the Senate said would vote in its favor. However, Sen. Juan Dalmau announced he would cast an explanatory vote against the bill.
The substitute bill establishes that the $1 million allocations will come from the Municipal Emergency Assistance Fund and be sourced from the Treasury Department’s Single Treasury Account. The Office of Management & Budget (OMB) and the fiscal oversight board must identify the corresponding budget account to comply with the fund. Rivera Schatz’s proposal would save the state $22 million compared with the proposal under the original bill.
According to the administration’s proposal, before the government provides access to the loans, the Treasury Department and OMB must certify they have given the municipalities all budget allocations assigned to the towns in the government budget. The fiscal board and OMB would be tasked with determining where the loan funds would come from.
The substitute bill’s report says that before the impact of the hurricanes, municipal coffers were severely affected by, among other things, the approval of measures that granted greater responsibilities to the municipalities without having revenue sources to pay for those costs.
In addition, a $350 million General Fund subsidy reduction was contemplated during the budget for fiscal year 2017. For the current budget, it amounted to $175 million and during July to December 2017, Electronic Lottery revenue was down $30.1 million.
According to the measure, as of Feb. 26 municipalities were experiencing revenue losses of about 60 percent, or a drop of more than $1 billion compared to projections, which, as of July, was more than $2 billion.
“Considering that the current fiscal year ends in the next three months, it is not estimated as viable that the municipalities achieve recovering the revenue they stopped receiving, making it a…challenging closure of the fiscal year,” the legislation reads.
OMB told the Federal, Political & Economic Relations Committee that, according to reports provided by the Government Development Bank (GDB), the total municipal public debt for the current budget amounts to $3,956,501. The number does not include other debts from loans granted to municipalities by private banks.
Mayors Association President Rolando Ortiz (Popular Democratic Party) and Mayors Federation President Carlos Molina (New Progressive Party) agreed with the Senate president in a public hearing held last week that the funds should not be distributed as loans–that the factors to consider should be population, poverty level and the hurricanes’ impact on municipalities.
The towns with the greatest debt are:
San Juan: $81,140,331