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Municipal Autonomy Revisited

Mayors Rafael Cordero, William Miranda Marin, Hector O'Neill, and Ramon Luis Rivera argue that true autonomy is essential for the progress of Puerto Rico's beleaguered cities and towns.


April 25, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Is bureaucracy strangling our towns? Too much power in the hands of the central government keeps island towns from prospering, mayors agree

Ponce Mayor Rafael Cordero believes in government decentralization because empowering larger municipalities and grouping smaller towns can result in their citizens receiving more services from the local government.

His Popular Democratic Party colleague, Caguas Mayor William Miranda Marin goes even further. His experience as former executive director of the Puerto Rico Energy and Power Authority and former vice president of the Government Development Bank have provided him with an extensive overview of local government.

"The excessive centralized government power and the sheer gigantic proportions of it, coupled with our excessive obsession with corruption, is destructive to our country," said Miranda Marin. He said Puerto Rico is being left behind in a globalized economy, where agility and speed in the time to market is the key to success.

"It is very sad but we are not prepared," added Miranda Marin, who had just returned from a meeting at Microsoft headquarters in Seattle, Washington, where he heard leaders from Asia, Europe and the U.S. "All I kept thinking while listening to these people talk about their countries’ goals and achievements was why can’t Puerto Rico be there?"

While pushing for more municipal autonomy is a priority for Miranda Marin, he calls for a total restructuring of government, reducing the 130-plus government agencies to 50, at

most. "The money saved from such a nonproductive situation as having all those agencies, by government centralization, would be put to better use if it was spent on education and research & development (R&D)," Miranda Marin said.

"Education in Puerto Rico is a disaster because of the gigantic size of the government.

Puerto Rico has lost its focus, concentrating on incentives for economic development and forgetting the rest," Miranda Marin said.

His solution calls for educational regions, each under the charge of a deputy secretary of education. His vision calls for the secretary of education and representatives from different sectors of the community--a concept similar to the Board of Higher Learning which oversees higher education--to set up a basic curriculum for all the regions. This would give each region the freedom to design courses according to the needs of the area.

"Each deputy secretary should be evaluated on the substance of his curriculum so that there will be competition. That way, the Ponce region would concentrate on transshipment port-related needs, the Caguas region would develop a curriculum based on the East- Central Corridor needs for high technology, Mayaguez, on tourism, and so forth," Miranda Marin said.

Miranda Marin has already discussed an amendment to the Law of Autonomous Municipalities, but he has met with objections everywhere, including the Comptrollers Office.

"We [the mayors] want to develop our alliance for high tech, R&D development in the East-Central corridor, as a Fomento-type organization, but instead we have been told that the amendment will not go through because it could lead to corruption. Then we should close down the government and Puerto Rico, for fear of corruption," said Miranda Marin.

Miranda Marin agrees with his colleagues that the Law of Autonomous Municipalities needs to be revamped to give mayors the freedom to act, just as is done the world over. "I have studied the law of municipalities in Europe, Latin America, and the U.S. and I have seen examples of them. What we are asking for in Puerto Rico is what is being done in many countries," Miranda Marin. For practically every step a mayor wants to take he has to ask permission of the central government, he added.

"Do you know the many layers of bureaucracy one has to cross over before being able to get an allocation? If we eliminated all those layers, think of all the money saved and the flexibility we would have to provide better educational services or roads to benefit the people," he said. "Government agencies have become warehouses for people."

As part of the total restructuring of government, Miranda Marin recommends an overhaul of the tax law, lowering the cap on individual tax filings from 33% to 20%. "If 45% of our citizens are the productive ones, then let’s lower taxes for them and eliminate the 5% import tax. Instead let us place a sales tax, paid when the merchandise is purchased by the individual, just as is done in the States, Europe, and so much of Latin America. All we keep doing is putting band aids on the government structure and this country can’t stand any more band aids, let’s do a solid restructuring," Miranda Marin said.

Municipal Autonomy and going back to basics

"There cannot be real municipal autonomy without a profound decentralization of government through well-defined and strategically oriented regions and there cannot be regional decentralization without ample municipal autonomy," Cordero said.

To prove his point, Cordero refers to Puerto Rico’s 1897 Autonomy Charter, which set the island’s governing principles at the end of Spanish rule. It stated that 12 representatives should form the provincial government–six from the San Juan region and six from the Ponce region. Their duty was to decide over all matters pertaining to their municipalities.

"All legally established municipalities will have the faculty to oversee everything concerning public education, roads, rivers & maritime activity, local health, budget, and to hire or fire employees," reads Chapter Eight of the Autonomy Charter.

During the 1800s, the island’s economy changed so that coastal towns, such as Ponce and Mayaguez, received the inland agricultural products and exported them. By 1867, those towns had a population that was slightly more than half of San Juan’s. By 1899, San Juan had only increased its population to 3.3% of the island’s total population, 32,043 out of a total of 953,243 inhabitants. Ponce’s total population then was 27,952, or 2.9% of the total island population, and if the citizens from the Playa region were added, Ponce, the Pearl of the South, would have been larger than the capital. Mayaguez was the third largest town, with 15,187 residents.

Cordero points out that when Puerto Rico began to be ruled by the U.S., municipalities lost their power and became subject to the legislature. The federal Foraker and Jones Acts empowered the legislature to create, consolidate, and reorganize municipalities. The Commonwealth Constitution follows the same line of the Foraker and Jones laws.

To readdress the inefficiencies of these laws, the Law of Municipal Autonomy was passed in 1991. Its purpose was to once again empower municipalities to deal with pressing issues within the communities.

Cordero cites the shortcomings of the current Municipal Autonomy law emphasizing the need to revamp it. The new law has not prevented adjoining municipalities from establishing public policies that are incompatible with their neighbors’, nor has it eased the way for small towns to obtain human and financial resources that meet the sophisticated needs of modern municipal development, Cordero said.

The Law of Municipal Autonomy had other intentions

Guaynabo Mayor Hector O’Neill, who is also president of the Federation of Municipalities, which includes all New Progressive Party mayors, agrees wholeheartedly with his Popular Democratic Party colleagues. O’Neill was a senator at the time the Law of Municipal Autonomy was passed and assured CARIBBEAN BUSINESS that the law as it exists today is not what was intended.

In fact, he is part of the group of mayors and agency heads sitting on a committee appointed by Gov. Sila Maria Calderon to readdress the woes affecting municipalities. The group is handing in its report this week. "We have some excellent proposals. Let’s see if the governor and the legislature take action," O’Neill said.

O’Neill said that to understand what is happening today, it’s important to go back to the origins of the Law of Municipal Autonomy. "The goal was that municipalities would have power over their economic and commercial growth. From day one, we knew that about 35 towns could become autonomous and the rest would need subsidizing to phase in the changes and to develop new sources of revenue to finance new services," O’Neill said.

Instead, there was strong opposition to the law in the legislature and once it passed, there was resistance from the regulatory agencies, such as the Planning Board, the Puerto Rico Regulations and Permit Administration (ARPE), and Natural Resources, to allocate the technical human resources to the municipalities.

"We all needed help, in terms of experts in the field and the data, which were in the hands of these agencies, to develop our territorial expansion plan and all the other new services we were supposed to give," O’Neill said. As a result, only the larger cities, which had the financial resources, were able to prepare the necessary studies to become autonomous.

In fact, O’Neill blames the almost unanimous opposition to the law as one of the main reasons for the financial debacle now facing many municipalities. The opposition and lack of technical support for the municipalities caused delays in their progress toward autonomy. When the six to seven year subsidy term came to an end, practically none of the smaller towns were ready to become autonomous municipalities and with no future subsidies allocated, they were doomed, he said.

Compounding municipal ills were the new laws passed by the legislature without consulting the mayors. O’Neill pointed to the increase in the Christmas bonus, the fact that excess vacations, both regular and sick leave, had to be paid annually, that incentives waiving municipal excise fees were given to farmers and manufacturers, and the crowning blow, the government health card.

"Imagine a small town like Maricao--with an annual budget of under $2 million--got rapped with a $350,000 municipal fee waiver in incentives given to coffee farmers. What can mayors do? They have to continue offering services but they are forced to limit them if their resources are drained by the central government--without even asking their opinion," O’Neill said.

Bayamon Mayor Ramon Luis Rivera confirms the current fears many mayors have, that the cuts made by the Commonwealth government in its financing of the health reform will ultimately be passed to the municipal governments. "I had to pay $8 million for Bayamon’s health-reform patients and this year that has been increased by $700,000," Rivera said.

Mission impossible

Cordero also points out that municipalities are still subjugated to the fiscal-financial structure of the central government. An example of this is the Municipalities Collection and Revenue Center (CRIM by its Spanish acronym).

To prove the impossibility of CRIM’s mission, Cordero said that in 1996, he hired a private firm that discovered 1,000 residential units in Ponce with invalid tax exemptions, a job that is supposed to be done by CRIM. Notices went out asking owners to pay and today, 82% of those properties are paying their property tax.

Another example was 300 new houses that CRIM had been unable to assess. The municipal government undertook the job and 90% of these now pay property taxes. Cordero blasted CRIM saying $14 million in Ponce’s back property taxes has not been collected. An additional $2 million in property tax funds belonging to Ponce has been attributed to other towns.

Cordero said that the monthly advance money allocated by CRIM to municipalities is based on the town’s potential real estate and personal property taxes to be collected. But since CRIM’s assessment is not up to date, municipalities are not getting their fair share.

Most mayors, including Cordero, see CRIM–the entity created to decentralize property tax collection that had been in the hands of the Commonwealth Treasury Department–as strangling municipal finances.

Cordero emphasizes that government decentralization goes hand in hand with regional centralization for certain processes, such as those currently conducted by CRIM.

He proposes that the professional planning, specialized professional services, and repetitive bureaucratic services conducted by CRIM be done by regional municipal government entities.

The functions of assessing properties, reviewing & updating property taxes, looking for deficiencies, and collecting taxes, as well as the budget needed to carry out these duties, should be managed by municipalities. On the other hand, the regional boards should be in charge of the bureaucratic aspects of devising strategies to solve regional problems and preparing technicians to implement planning strategies, according to Cordero.

Power to the regions

Another issue that highlights the need for municipal empowerment is that all utilities, roads, and telecommunications are planned by the central government with little or no input from mayors or municipal governments.

"Municipalities must be ensured effective political power to plan for the infrastructure needs of the island’s towns and cities," Cordero said. "This way, we will be able to overcome the existing inequality of the regions in relation to San Juan."

Like his colleagues, Rivera insists that municipal governments, because they are so much closer to the people and have leaner administrative structures than the central government, should be offering many more services.

"We can do it better and cheaper. Whereas the central government spends 60% of its revenue on payroll, Bayamon only spends 35%, if not the lowest, it is definitely among the lowest in the island," Rivera said. He wants education, public housing, road construction & maintenance, and Family Department services pertaining to child abuse and domestic violence in the hands of municipalities, as it is in most states. In the case of the small towns, they should group together to offer these services.

Rivera is quick to quote specific examples of how Bayamon is addressing the needs of its people. The city has 66 public schools and the municipal government voluntarily allocates $2.50 for every $1 that the Education Department pays for school transportation for children from distant areas.

Until last year, the municipality undertook maintenance of all the schools that were not under the jurisdiction of the Public Buildings Authority, about 35. "Since these duties have now been taken over by the current administration, bureaucracy has enthroned itself again and repairs are not being done as quickly," Rivera said. He said it is not the fault of the Secretary of Education, nor is it a case of the New Progressive Party versus the Popular Democratic Party, but just pure bureaucracy. The municipality is still in charge of managing all 66 school’s garbage collection, with an allocation from the Education Department.

Bayamon’s Housing Department runs 3,000 units under the federal Section 8 program, receiving a 94% ranking in effectiveness from the federal housing department. For several years now, at the request of the federal government, Bayamon has been running its own Head Start program as well as those in Comerio and Naranjito, serving 2,835 children. "The Feds considered us more efficient than the central government and asked us to manage the two neighboring towns as well," Rivera said.

Everyone agrees that smaller municipalities should group together and offer common services. O’Neill suggests a common human resources office, municipal police, garbage collection, excise tax collection, and internal audit division.

Both Rivera and O’Neill think that having municipal insurances lumped together with all of the government’s insurances, negotiated by the Treasury Department, is not fair to municipalities, which could buy individually or in groups.

"Bayamon’s insurance premiums will increase this year by $800,000. That’s unfair because if the municipality has a good record, why should it be penalized because the central government or another town had a lot of accidents which raised everyone’s premiums," Rivera said.

O’Neill does not believe in individualizing insurance policies but rather putting it all in the hands of the Municipal Affairs Office (OCAM, by its Spanish acronym). "My needs are not the same as Arroyo’s and having insurance policies in OCAM’s hands would guarantee that each municipality’s interest would be safeguarded, and by buying in volume, premiums are cheaper," O’Neill said.

The grouping of municipalities is not well received by all mayors, especially when the neighboring towns belong to different political parties. "In a place which is as politicized as Puerto Rico, politics is likely to interfere but we have to concentrate on providing services to the people," O’Neill said. What good is a mayor who cannot offer services to his constituents for lack of money, he asked.

Concerning the possibility of eliminating municipalities, O’Neill said that culturally, Puerto Ricans identify with their towns. But there are precedents where municipalities were eliminated. Rio Piedras was once a municipality and Guaynabo belonged to it. Guaynabo also to belonged Bayamon at one time. At the same time Rio Piedras became part of San Juan, Guaynabo became a municipality.

A new economy

Cordero also believes a new economic model is in order. For decades a large number of local families have depended on government handouts for subsistence, while the island’s economy has depended almost totally on the U.S. market and on attracting U.S. investors to establish manufacturing operations here, he said. Thus, he sees the local economic model as being outdated.

He envisions a model that attacks the root of unemployment and significantly lowers the number of families on welfare.

"That is why I believe the Port of the Americas will bring new opportunities that we cannot pass by, to open up to new markets and establish commercial relationships that will cut our unilateral dependence on the U.S. market," Cordero said.

"If Singapore, Hong Kong, and Rotterdam could do it, why can’t we?" Cordero asked, referring to the world’s largest transshipment ports and the economic benefits these ports have brought their respective countries and regions.

This Caribbean Business article appears courtesy of Casiano Communications.
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