Puerto Rico's governor said late Sunday that lawmakers have reached a last-minute agreement on a proposed oil tax increase and that public transportation will not be paralyzed as previously planned.
The announcement, made in a televised address, followed a flurry of meetings with legislators this weekend regarding a bill that would increase the excise tax on a barrel of crude oil from $9.25 to $15.50 and help generate $178 million a year.
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Garcia has said the increase is needed to boost a debt-ridden transportation agency amid bankruptcy concerns.
"It's the least burdensome solution of all," he said.
The measure also aims to help the government sell up to $2.9 billion in bonds and refinance at least $1 billion in loans made to the Highway and Transportation Authority, which owes $2.2 billion to the island's Government Development Bank, about 21 percent of the bank's loan portfolio.
Prior to Garcia's announcement, Puerto Ricans had been bracing for what officials warned would be an indefinite suspension of buses and trains that serve an estimated 75,000 people. Officials had said that public work projects would be suspended and that the Department of Transportation did not have enough money to pay salaries with the tax boost.
Some agencies within that department operate on quarterly spending plans instead of a yearly budget because of their precarious fiscal situation.
"It's time to face our problems," Garcia said. "We have to tighten the belt on all public corporations without layoffs."
The tax boost is not expected to affect power bills in Puerto Rico, which on average are more than twice those on the U.S. mainland. However, consumers will see an increase in other areas because the private sector will pass along that cost, said economist Gustavo Velez.
The tax increase comes as the island of 3.67 million people struggles through a nearly decade-long economic slump.
Velez said his biggest concern is that the government plans to issue more bonds soon with help from the new tax.
"We cannot keep going further into debt, and we cannot keep approving taxes to artificially maintain corporations alive," he said.