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Puerto Rico’s Security Army

The private security business employs 60,000 guards and generates local investment of nearly $844 million a year, making it one of the island’s most important industries


March 18, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Industrial-strength security: Private, state, and municipal protection forces combined have grown to create an army of 86,000 and to represent an annual investment in Puerto Rico of $1.6 billion

They dot the island with their blues, greens, blacks, and other uniform colors, seeking to curb violence and safeguard lives and property. These private security forces have mushroomed to form a local protection force of 60,000.

It is no coincidence that protection services have gained in popularity in recent years, in part because of 9/11 and the rising crime rate in Puerto Rico. No doubt, the infamous act of terrorism prompted jurisdictions all over the world to dedicate more resources and efforts to protecting the lives and property of their people.

Puerto Rico’s steadily increasing crime rate over the years has justified the growth of a loosely coordinated private security force. Central and municipal governments have taken steps to improve public protection as many private citizens and public entities have resorted to protecting themselves and their property through private security companies.

Recent research indicates that this force of state police (with 21,000 officers), municipal police (4,750 officers), and private guards (60,000, only half of whom are licensed) is nearly 86,000 members strong.

Contribution to the economy

The unease over the level of safety in Puerto Rico has helped to create a multimillion-dollar private security industry driven by regular citizens. The island’s public / private security business generates an annual investment in Puerto Rico of more than $1.6 billion: $680 million by the state police, $114 million by the municipal police, and $844 million by private security firms.

This figure doesn’t include investments by the Puerto Rico National Guard or federal agencies. Nor does it include investments to maintain institutional private security forces, or penal guards, or the purchase of hardware, software, and electronic devices for private homes, industrial and commercial buildings, banking institutions, and other entities susceptible to threats.

Individuals are attempting to protect their homes and assets through access control, fences, electronic cameras, alarm systems, private guards, iron bars around windows and doors, insurance policies, and more. It would be difficult to put a price on this type of investment in security by Puerto Rico’s private sector.

On the U.S. mainland, the electronic security industry alone generates investments of some $30 billion a year. When added to investments in private guards, fences, ironwork, and more, this figure goes up to about $100 billion a year, according to the U.S. Security Industry Association.

Puerto Rico’s $1.6 billion investment in protection services is greater than the combined budgets of the local Corrections & Rehabilitation and Fire departments, Ports Authority, Metropolitan Bus Authority, Tourism Co., Agriculture and Health departments, and WIPR-TV / Radio.

"The state police alone is enjoying a fleet of mostly all-new air, sea, and land motorized vehicles and its numbers are expected to increase to 25,000. Added to what is happening in the municipal and private protection sectors, the total investment in security takes on considerable proportions," said Victor Rivera Gonzalez, former superintendent of the Puerto Rico Police Department.

Puerto Rico’s protection capability has been reduced because 500 police officers are on military duty in Iraq. Additionally, turnover from retirements (mandatory at age 55) and resignations is diminishing the force by approximately 800 members every year.

Currently, Puerto Rico has 487 state police officers for every 100,000 citizens. By comparison, Hong Kong, which has a population of six million, has 414 state police officers for every 100,000 citizens.

However, Puerto Rico is actively hiring and there could be 25,000 state police officers in the near future, an increase of 4,000. The Police Academy has been graduating new officers at a rate of 1,500 a year. This has been possible because it has condensed the primary training from 11 months to 14 weeks, during which cadets take courses in police procedure, regulations, and other core subjects. Following their graduation and over the next two years, officers take supplementary courses such as English and Spanish.

Municipal police are fewer in number (4,750) even though they are spread out over most of the island. Only five municipalities–Aguas Buenas, Barceloneta, Canovanas, Corozal, and Luquillo–don’t have police forces of their own. Barceloneta, however, is attempting to create one.

Municipal police forces vary in size. Those of Maricao and Vieques are among the smallest, with eight and 10 officers, respectively. The largest municipal forces are in San Juan (with 1,021 officers), Carolina (405), Ponce (365), Guaynabo (268), Caguas (193), and Toa Baja (161).

The number of municipal and state police combined (nearly 26,000) is less than the 30,000 licensed guards from the 293 private security companies on record, according to the police. Police and other industry sources are convinced that an unknown number of security companies employ another 30,000 guards who are unregistered.

"Experience has shown us that a reasonable estimate is that there is one unlicensed guard for every licensed one," said Lt. Cesar Rios, director of the Puerto Rico Police Department’s Private Guard Permit & Licensing Division. "Between only June and December 2003, our interventions saw 16 licenses revoked, 21 security companies closed down, and 14 licenses renewed thanks to additional enforcement resources given to us by Superintendent Rivera Gonzalez."

State police economics

The state police must be pleased. In addition to its $680 million budget, the department has received a $48 million appropriation to buy more boats, airplanes, helicopters, tech equipment, and more. The department has also been able to replace old vehicles with new ones and now boasts an up-to-date motor fleet.

Currently earning an average salary of only $1,875 a month, state police officers are expected to get a raise to $2,100 by October. Given that most recruits come from Puerto Rico’s west coast and that there is a two-year minimum commitment to work in the San Juan metro area, failure to make good on the promised raise is sure to breed discontent among police officers.

"Because of the size of the force, there will always be issues to resolve. There have always been equipment and compensation issues," said Carmen M. Rivera, the state police’s assistant superintendent for management services. "The important thing is that the officers have been supplied with new equipment such as bulletproof vests, cars, motorcycles, and other gear they need to perform their duties adequately."

Payroll and related expenses for the entire state police force total $597 million. Another $83 million (or 12%) goes to administration, supplies, equipment, and other support. The island’s budget for fiscal year 2004 (ending June 30) includes $18 million for supplies & materials, $12 million for equipment, $13 million for services, and $25 million for facilities (including utilities).

If Puerto Rico follows the trend on the U.S. mainland, its state police should expect budgetary increases. According to a Survey on Crime & Public Safety by the National Association of Police Organizations, 72% of the 800 American respondents said they would rather spend their tax dollars on law enforcement than on other areas such as education and transportation. The survey also indicates that the average annual salary for police officers on the U.S. mainland is $31,000.

Municipal police at a glance

Municipal police officers receive an average base salary of $1,500 a month; this increases to $1,750 when all other benefits and tax requirements are included. Thus, the annual payroll for the force of 4,750 municipal police officers is nearly $100 million. Using the state police’s ratio of payroll to operational expenses (88% to 12%), the municipal police spends some $14 million on administration, equipment, and services, for a total annual investment of $114 million.

"Municipal police officers are considered employees of the municipality doing the hiring," said Adalberto Mercado, security commissioner of the City of San Juan. "Many of the officers are hired directly, while others are brought in stages depending on available federal subsidies."

The Workforce Reinvestment & Adult Education Act is one of the programs that help municipalities replenish their police forces. It specifically provides for up to 12 months of training and work experience before entering the Police Academy. Through block grants, the federal government also subsidizes up to 75% of municipalities’ payroll expenses for each officer’s first three years on the job.

Private security economics

A typical guard in a private security company can expect to earn an average of $5.15 an hour (which is the federal minimum wage), with benefits and tax requirements raising the effective hourly wage to approximately $8. This figure doesn’t take into account a company’s overhead or profits, nor does it represent the armed guards, who command a higher wage. With their numbers decreasing, armed guards constitute no more than 10% of the private security force.

Based on a regular workweek of 40 hours and a yearly schedule of 50 weeks, the $8 hourly wage would yield a $16,000 annual salary per guard. Given that there are 30,000 licensed guards, that amounts to $480 million in payroll a year.

Industry sources said the calculation for unlicensed guards should be based solely on an hourly wage of $5.15. They noted that private guards operating underground typically don’t enjoy other payroll benefits such as vacation time, medical leave, and Christmas bonuses.

Under this scenario, an unlicensed guard working 2,000 hours a year at $5.15 an hour would earn an annual income of $10,300. The estimated 30,000 unlicensed guards would represent an annual payroll investment of $309 million.

The entire force of 60,000 licensed and unlicensed guards would generate wages (excluding additional benefits, tax requirements) of $618 million.

Security companies not in compliance are estimated to spend $37 million on equipment and supplies, for a total investment of $346 million a year. Companies in compliance are estimated to spend some $189 million on administration, support, and other overhead costs, for a total yearly investment of $498 million. Thus, the combined yearly expenditures by the private security sector are an estimated $844 million.

Policing the police

Perhaps more than any other kind of protection force, private guards have seen an upsurge in demand for their services in recent years. (Private detectives, who number 1,200 in Puerto Rico, are a class apart.) As noted above, there are 30,000 licensed and an estimated 30,000 unlicensed guards on the island, nearly three times the number of state police officers.

"Private security companies come in all sizes, ranging from five guards to 3,000 per company. A good number of them, however, never renew their licenses or simply cease operations. Statistics show that an average of two new private security companies are registered every month," said Lt. Rios.

As of March 2004, there were 243 private security companies registered in Puerto Rico, plus 50 companies whose licenses had expired. Law 30 of May 29, 1986 (an amendment to Law 108 of May 29, 1965, known as the Private Security Guard & Private Detectives Law) establishes that in order to be certified by the Labor Department, private security companies in Puerto Rico must have a liability insurance policy and must pay a bond for each guard employed. Typically, the payment is equal to 10% of a company’s gross payroll.

Given that there are 30,000 licensed guards, on average each of the 243 registered companies would have to pay bonds for 123 employees. Yet, some companies claim to have one or no employees.

At a Feb. 27, 2004 legislative hearing, Labor Secretary Frank Zorrilla said that in the previous fiscal year, the agency issued certifications to 218 private security companies, which paid nearly $14 million in bonds. That sum, he said, was sufficient to cover 11,567 security workers. If there are 30,000 licensed guards, what of the remaining 18,433?

Could this be a case of labor exploitation and unfair labor practices to shortchange the Department of the Treasury? Or could it be that some companies have fallen through the enforcement gap between the state police and the Labor Department?

"Payroll nonreporting is common to avoid paying for the bonds, insurance, and many other line items that increase a business’ overhead. It is unfair to all the security companies that comply with labor and state regulations," said Hector Rivera, vice president of Saint James Security Services.

"This situation is frustrating," said Juan Alvarado Gutierrez, president of Metro Guard Services. "It is nearly impossible to compete for regular condominium, construction, or housing community contracts because of price undercutting by unqualified companies with hardly any overhead. The government, as one of the principal security customers, should be more emphatic about correcting this situation."

"We are a large industry; you could say we are the right hand of the state police," said Luis Maldonado Trinidad, president of Saint James Security Services. "This has gotten to the point where a trade organization has been organized to deliver the right message about the issues facing the security business. Unqualified people are being put to work, and this is hurting the security business."

The number of complaints against private security companies has increased substantially in the past nearly two decades. In a 1987 report in El Reportero, the Labor Department said it was alarmed because it had received 254 complaints against security companies, mostly related to nonpayment of wages or bonuses and unjustified firings.

In this fiscal year, there have been nearly 5,000 complaints registered, according to the Labor Department. The state police’s Private Guard Permit & Licensing Division has received another 1,200 complaints, 60% of which were lodged by rival security companies claiming unfair business practices. Security guards and others have complained of violations of Law 108, which is a misdemeanor charge carrying a maximum penalty of a $500 fine and six months’ jail time.

Lt. Rios noted there is a high rate of bankruptcy among private security companies because of management issues. Many continue to operate under Chapter 11 bankruptcy protection; others re-emerge with new corporate identities. The biggest difficulty, said Lt. Rios, is that the government lacks the resources (human and equipment) to enforce Law 108.

Some in the private security business are applauding the good intentions of the enforcement agencies. Many, however, remain concerned about the fairness of the ground rules, which can restrict their growth and even diminish their chances of survival.

Fair play is possible only with the adequate enforcement of Laws 108 and 30. This would not only guarantee the rights of private security companies and their employees but would also increase their contribution to the Treasury Department’s coffers. All of Puerto Rico would be the beneficiary of a greater and stable investment by the private security industry.

Vigilantes excels in niche market for industrial protection

Edgar Pedrosa looks like a chemistry professor. With an academic background in chemistry and business administration, the Kansas State University graduate could have gone into the chemistry field upon his return to Puerto Rico.

Instead, he entered the family business and became president of Vigilantes, which was founded by his father, Angel. Sister Milagros is the company’s chief financial officer.

"We had a military upbringing and learned to be highly disciplined. We also have a close-knit family and throughout our childhood were encouraged to pursue excellence. Maybe that’s why we remain at the forefront of our industry," said Pedrosa.

Another reason Vigilantes has thrived in the demanding security business is that it caters to manufacturing facilities. The company initially focused on federal government agencies such as the U.S. Marshals Service, the Drug Enforcement Administration, and the Federal Aviation Administration before targeting industrial clients. Today, Vigilantes protects more than 70 manufacturing facilities around the island, many of them pharmaceutical plants.

"We are more pleased than ever that we dedicated ourselves to the industrial sector," said Pedrosa. "Our clients are top-notch, and the value of our contracts allows us to compensate our guards adequately and limit employee turnover."

Despite its success over the past 33 years, Vigilantes has to be vigilant because of the growing numbers of dubious, unregistered private security companies in the local market. The Puerto Rico Police Department says there are 30,000 licensed guards employed by 243 registered security companies; an estimated 30,000 unlicensed guards are employed by an unknown number of unregistered businesses.

"With so many questionable security companies, it is an uphill battle for legitimate companies to compete against those paying wages of $5.15 an hour with no overhead," said Pedrosa.

"I am all for competition, but there is a lot of unfair competition, which can shake the backbone of the security industry if not addressed quickly," he added. "If only a few of us [security companies] comply with government requirements, including mandatory training for guards, then the companies that don’t comply have the upper hand in securing contracts. Compliance should level the playing field."

Ranger American is island’s top private cop

Private security company Ranger American of Puerto Rico Inc. has earned a reputation for excellence in delivering protection services.

Like many successful businesses, Ranger American struggled for years. Since 1982, founder and President & CEO Juan F. Bravo has toiled with several family members to build a security business that now employs more than 2,000 people.

Today, that business is threatened by unregistered security companies. The Puerto Rico Police Department says there are 30,000 licensed guards employed by 243 registered security companies; another 30,000 unlicensed guards are believed to be employed by an unknown number of unregistered businesses.

"The law is clear," said Bravo. "First, a CEO of a security company must have a detective’s license and must be active in the business. Then, the company is required, among other things, to place a liability insurance deposit and a payment bond with the Labor Department. Finally, each guard must undertake training and must obtain a license from the Police Department to function as a security officer.

"In reality," added Bravo, "many fail to comply with this process, leaving only a few legitimate security companies to carry the load. It is certainly unfair business competition."

In December 2003, the police revoked Loomis Wells Fargo’s private security license after an investigation revealed the company had submitted the detective’s license of one of its truck drivers to satisfy the registration requirements.

"The private security sector is highly contaminated," said Bravo. "If we are to see a dramatic improvement, the time to start making corrections is now. How can legitimate security companies be expected to compete against companies with no overhead or compliance?"

Bravo and others are worried about the harm these unregistered companies can cause to legitimate businesses. However, they are also concerned about the harm to innocent people in housing communities, condo buildings, shopping malls, at construction sites, and elsewhere.

"Although they may not be aware of it, people who hire an unregistered security company will probably transfer any liability claim against the company to themselves. The contractor could be seen as an accomplice," said Bravo.

"The security issues are clear, and they are in the law, so enforcement becomes the guiding rule. Also, what about all the tax revenue that the government is losing [from these unregistered companies]?" said Bravo.

Q&A with former Police Superintendent Victor Rivera Gonzalez

Do you believe the state police has everything it needs to be effective?

The state police is in its best moment. It has been assigned 2,000 new cars in fiscal year 2004, plus 1,400 new recruits recently graduated from the academy. As a consequence, we should see a decrease in violent crime, particularly in the San Juan metro area, since most of the newly graduated police officers will be assigned there.

How has the creation of new municipal police forces affected security in Puerto Rico?

Positively. Municipal police officers go through an extensive preparation course at the academy before they are assigned to duty in towns and cities around the island. Their presence adds to the state police’s efforts and, in particular, to the enforcement of the new public order codes in Puerto Rico.

Has there been coordination between the state police, the municipal police, and private security companies?

Although it has been tried, coordination has been difficult. Full integration of municipal forces with the state police has failed because political differences have tended to disrupt the process. Private guards, on the other hand, probably could integrate with the state and municipal police and improve their performances if they received better training in dealing with crime; sending them to the academy might be an option. Access-control sites and pubs are two places where trained guards could integrate well with police efforts.

Are there different considerations for individuals and businesses interested in hiring a private security company?

The difference has more to do with the service than with who is paying for the service. Someone who needs a security escort, for example, would need to conduct a physical and morality check of the candidate. That is because even if the applicant appears to be mentally healthy, he or she may not qualify on physical grounds. More conventional assignments would demand less strict evaluations.

How do you recommend that public and private security forces band together for increased efficiency to the benefit of all in Puerto Rico?

The state and municipal police forces are beginning to reach out to one another. The leadership on both sides should promote ongoing joint participation in police and other activities to build morale and promote a sense of a common purpose. Although there are many of them, private security forces are still far from becoming a security factor. We are losing a great opportunity by not having them properly trained and integrated into state and municipal police efforts.

What else does Puerto Rico need in the fight against crime?

A proactive community. Rather than antagonizing police forces, civilians should attempt to create a union with them. Community members voicing support for protection officers will create a new crime-fighting element: a united front.

This Caribbean Business article appears courtesy of Casiano Communications.
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