The Puerto Rico House of Representatives is expected to approve a tax increase on imported oil Tuesday that would back a $2.9 billion bond issue and support the Puerto Rico Highways and Transportation Authority.
A source close to Puerto Rico Gov. Alejandro García Padilla and news accounts indicated that the oil tax hike had gained the necessary House votes for approval Tuesday afternoon.
The governor has been trying to get the Puerto Rico House and Senate to approve a tax increase on the commonwealth's imported oil. In late October members of his government announced that he intended to increase Puerto Rico's tax on imported oil to $15.50 a barrel from $9.25 a barrel.
Currently all of the $9.25 goes to the PRHTA. Of the new total, $6 per barrel would continue to flow to the PRHTA to support its operating costs and for repayment of its bonds. A further $8.25 would go to the Puerto Rico Infrastructure Finance Authority. A final $1.25 per barrel would go to the Integrated Transportation Authority, which operates Puerto Rico's public transportation systems.
The governor has proposed having PRIFA sell up to $2.9 billion in bonds. The bond sale would be supported by PRIFA's new oil tax income.
Proceeds would be primarily used to pay off the PRHTA's $2 billion debt to the Government Development Bank for Puerto Rico.
The House and Senate were called back into special session on Nov. 24, only to adjourn until Monday.
For most of the last week the governor's proposal has been one or two votes short in the House.
One of the members of the governor's party in the House who had been holding out, Luis R. Torres Cruz, has agreed to support it, the source near the governor said. According to news reports, Torres has negotiated a deal with the governor whereby the governor has agreed to add several measures to the tax increase bill.
The bill commits Puerto Rico to replacing the current sales and use tax with a value added tax. It commits the government to eliminate income taxes for individuals with incomes of less than $35,000 or families with incomes less than $70,000.
The government has been working on a major tax reform that was widely reported to include these measures. However the government hasn't completed the reform package. Adopting these measures now would commit the government to these central measures, while giving it time to finish honing the whole package.
The bill would also require the creation of a working group to look into possible PRHTA revenue sources. Finally, it would require the executive branch to submit a transformation plan for the PRHTA, the Metropolitan Bus Authority, and the public boat transportation service by March 1.
According to the El Vocero web site, House Representatives Carlos Vargas Ferrer and Luis Ortiz Lugo have indicated that they will shift from opposing to supporting the oil tax increase if it is attached to Torres' amendments. Like Torres, Vargas Ferrer and Ortiz Lugo are member of the Popular Democratic Party with García Padilla.
If the House approves the oil tax increase, the Puerto Rico Senate would debate the legislation and then approve, modify, or reject it.
The governor had said on Nov. 24 that San Juan's public transit would stop on Monday because of lack of funds to make payroll. But on Nov. 30 he said that the transit system would continue to operate.
