Puerto Rico's government is preparing to paralyze public transportation across the U.S. territory following a legislative impasse over a proposed oil tax increase meant to strengthen a debt-ridden transportation agency amid growing bankruptcy concerns.
Buses and trains that serve an estimated 75,000 people daily will cease operations Monday, Miguel Torres, secretary of the Department of Transportation and Public Works, announced at a news conference Tuesday.
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"We are being forced to make several decisions that unfortunately will have an impact on thousands of public workers," he said, adding that his agency previously took steps to reduce expenses. "Even then, it's not enough ... (We're) up against the wall."
Torres said that all public work projects also will be suspended and that the department will not have enough money to pay salaries starting Monday without the tax boost. Officials said agencies within the Department of Transportation and Public Works do not operate on a yearly budget but rather on quarterly spending plans because of their precarious fiscal situation.
U.S. bondholders have become increasingly worried about public corporations possibly declaring bankruptcy as credit rating agencies have downgraded the island's public debt. Gov. Alejandro Garcia Padilla approved a law earlier this year that would allow public corporations to restructure, but none has done so.
Economist Gustavo Velez questioned whether a tax boost would help the money-strapped Highway and Transportation Authority, which is part of the transportation department. "In the long run, or even now, what the agency needs is a complete restructuring," he said.
Garcia last week called a special legislative session and urged lawmakers to approve the oil tax measure, which would increase the excise tax on a barrel of crude oil from $9.25 to $15.50 and help generate $178 million a year. The measure 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 authority, which owes $2.2 billion to the island's Government Development Bank, about 21 percent of the bank's loan portfolio.
The House of Representatives met Monday for the first day of the session but did not reach an agreement on the tax and then called a recess until Monday. Several legislators affiliated with Garcia's party have said they would not support the tax boost.
Union leaders say they will organize a large march to the seaside capitol Monday to protest the impasse, which comes as Puerto Rico enters its eighth year in recession and struggles with $73 billion in public debt.