The Financial Oversight and Management Board has declared in violation the fiscal plan for the Municipal Revenue Collections Center (CRIM by its Spanish acronym), which is in charge of collecting property taxes, stressing the need to hike property taxes in order for municipalities to operate.
“As part of the long road to recovery post-bankruptcy,Puerto Rico needs to continue to modernize its tax system and, more over, improve tax compliance and collections,” the oversight board said in a recent letter. “All 78 municipal governments need the financial flexibility to serve their communities today and invest in them for the future. Funding from local property taxes is the largest component of municipal budgets. CRIM plays a critical role on behalf of the municipalities to service the property tax base by maintaining a real-time digital cadaster with an up-to-date tax roll and to invoice and collect taxes owed promptly and accurately.”
Property taxes on residential properties in Puerto Rico are managed by the CRIM, with tax rates varying between municipalities, generally ranging from 8.03% to 11.83%. The rates are applied to the property’s value as it was hypothetically appraised back in 1957, although adjustments can be made to more accurately reflect the current fair market value (FMV), typically representing about 40%-50% of the property’s acquisition cost. Property taxes are due twice a year, at the end of June and again at the year’s end.
The oversight board called for updates in the Property TaxRegistry.
“The constraints from inaccurate data and lack of resources have led to delays in all process steps, including invoicing and collecting revenue. These continued delays have led to repeated downward revisions to the amount and timing of achieving prior Fiscal Plan measures,” the board said.“However, it is imperative that the CRIM continues its efforts and reinstitutes a timeline for completion of measures in the Proposed Plan. These additions must include revised milestones, revised revenue forecasts, and a dedicated resource plan to eliminate the virtual validation backlog of 190k new properties and 510k home improvements missing from the property registry.”
While the oversight board said the CRIM’s proposed plan recognizes the challenges in the current environment to achieve structural reforms to modernize the tax system, the plan must provide for CRIM’s continued efforts to conduct the prerequisite due diligence needed to better analyze the necessary structural reforms to real property and personal property taxes.
“Therefore, CRIM must include the timelines to complete the initiatives and analyses on transitioning to a market-informed tax system with appropriate statutory tax rates that effectively generate sufficient revenues for the municipalities, in spite of the challenges faced in the current environment,” the board said. “Completing these analyses will serve to understand the impact a change to the market-informed tax system would have and the legislation required, if any.”
Regarding the collection of delinquent property taxes, the proposed fiscal plan includes CRIM’s plan to analyze collectability of delinquent accounts receivable. CRIM describes hiring account analysts to complete the processes under revised regulations to charge-offs. The oversight board said CRIM must provide measurable milestones or deadlines to complete the analysis of the past due portfolio, and gave the CRIM until Tuesday to submit a revised plan.
Source: The San Juan Daily Star
