Puerto Rico’s municipal government finances deteriorated in fiscal year 2016 from a year earlier, according to a locally-created study.
After improving for two fiscal years, the situation backslid to a situation almost as bad as fiscal 2013, said Arnaldo Cruz, co-founder of the Center for Integrity and Public Policy, which conducted the study. Conditions in fiscal 2013 were “very bad” he said.
Fiscal year 2016 may have seen deterioration because it was an election year, Cruz said.
Of the commonwealth’s 78 municipalities, 68 provided the center with information about fiscal 2016. When the center checked which municipalities chose not to provide the information, it found that the center had given D’s and F’s as financial grades to them in past years, Cruz said.
The study found that 30 municipalities (44%) receive more than 40% of their general fund revenue from the central government. The Puerto Rico Oversight Board is planning to cut the central government subsidies to zero in the current and next two fiscal years, according to the board’s certified fiscal plan.
The central government gave the 68 municipalities more than $428 million in contributions and subsidies in fiscal year 2016.
It also found that 36 municipalities (53%) decreased their net assets in fiscal 2016. Additionally, 34 municipalities (50%) decreased their general fund balance.
Finally, the study found that 27 municipalities (40%) allocated more than 15% of their general fund income to debt repayment.
Of the eight municipalities that the study gave F grades to, Ponce had the most debt, with $314 million. Arecibo was second, with $88 million.
According to the March fiscal plan, Puerto Rico’s municipalities have $556 million in outstanding bond debt. They have an additional $1.1 billion in loans to private entities. Finally, they owe $2 billion to Puerto Rico government entities, mainly the Government Development Bank for Puerto Rico.
Cruz said an even bigger problem than the subsidies are the GDB loans, which the municipalities continued to receive in fiscal year 2016.
Toa Baja’s government shut down in November 2016 for lack of money. Police officers continued to work with receiving paychecks. Since then, it has struggled to provide basic services.
Cabo Roja has started to charge for trash pickup. Arecibo and other municipalities are looking into following suit, Cruz said.
In June the Puerto Rico Senate approved a bill that would allow the municipalities to declare an emergency and initiate a moratorium on the payment of their debt. However, the Puerto Rico House of Representatives didn’t act on the bill and the bill died when the legislature went on recess.
The same or a similar bill may be taken up when the legislature convenes in mid-August.
The center’s web site has extensive financial information available about each of the 68 municipalities on its web site, http://fiscal.cipp-pr.org/, in both English and Spanish versions. Information can be accessed through clicking on an interactive map of the commonwealth’s municipalities.