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San Juan Officials Considering Measures To Stem Migration

Exodus of residents and businesses could affect city’s fiscal health


October 30, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

San Juan Mayor Jorge Santini will soon unveil a package of measures designed to stem the exodus of middle-class residents and small & midsize businesses to other townships, CARIBBEAN BUSINESS has learned.

The package, to be made public at the end of the year or in early 2004, will include tax incentives and other initiatives to make it easier for businesses to obtain government permits.

"This is something important that we must address," said Diego J. Robles, director of the San Juan Department of Economic Development, Tourism & Housing, three areas the agency oversees out of its brand-new headquarters at Stop 18 in Santurce.

The exodus has serious implications for the city, whose fiscal health depends on taxes (patentes) paid by commercial establishments and the finance sector. Fewer businesses means lower revenue for the city, unless there are other ways to make up for the shortfall.

Currently, there are 3,000 finance companies and 18,000 to 20,000 small or midsize companies on San Juan’s tax rolls. These firms contribute between $95 million and $100 million in annual revenue, or about 35% of the city’s general fund.

If the city government has yet to feel the pinch of the exodus, it is because of the finance sector. Robles said lower mortgage rates and the drop in the prime rate have boosted the fortunes of finance institutions through new mortgage business and refinancing. In a domino effect, this has resulted in greater business-tax collections for the municipality.

"This is what has saved the city of San Juan," said Robles, who was the city’s finance director until February, when he took over the umbrella department in charge of economic development, tourism, and housing.

People are being driven out of San Juan by the high cost of housing, said Robles. Middle-class residents are migrating to other townships that offer better and more economical housing, such as Guaynabo, Trujillo Alto, Bayamon, Caguas, Cidra, Cayey, and Gurabo.

As residents leave, businesses that depend on the purchasing power of the middle class follow on their heels. "The middle class represents the economic base of any city," said Robles.

While it mulls measures to reverse this trend, the city is taking other action. For example, it recently sent out requests for proposals for the development of middle-class housing on three city-owned plots. The first project is an apartment building on Canals Street whose units will cost about $150,000 each.

Robles recently contracted consulting firm Estudios Tecnicos Inc. to identify the most promising types of businesses now and in the future. The report, which is near completion, will enable the department to maximize its resources "so that we may invest them in the businesses that have the greatest chance of success," said Robles.

The biggest challenges facing businesses in San Juan, according to Robles, are inadequate operational capital and lack of legal and accounting expertise. Many have yet to make the jump to the 21st century and still use manual processes, he said.

The Department of Economic Development, Tourism & Housing assists businesses through its Center for Entrepreneurial Development. The center gives out grants and interest-free loans of between $30,000 and $50,000; in some cases, it also reimburses interest payments. The department’s training & employment office offers support by supplying trained talent culled from the city’s unemployed to businesses in need of workers.

Robles is especially enthusiastic about the pavilion his department will set up at ExpoCamara Internacional (Nov. 1 and 2), which will have individual spaces for entrepreneurs to do business with potential clients. Though free of cost, access to the space will be limited to three or four hours to allow more than 100 businesses to benefit, he said.

Microsoft personnel will be on hand to provide technical advice to interested businesses. In addition, the department has arranged for a series of conferences to be given by Della Clark, president of The Enterprise Center in Philadelphia.

This Caribbean Business article appears courtesy of Casiano Communications.
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