Governor: Property tax system must be changed to lower rates

By John McPhaul

jpmcphaul@gmail.com

Gov. Pedro Pierluisi Urrutia said Monday that the way in which the Municipal Revenue Collections Center (CRIM by its Spanish acronym) rates properties must be amended, but to lower property taxes and not raise them.

“As for changing the system so that it works based on appraisals based on the current value of the properties, that can be achieved. But it has to substantially lower the rate that is applied to that value, something that does not lead to an increase,” the governor said at a press conference, referring to House Bill (HB) 827, which would change the process for determining residential property values and thus tax payments. “The tax system must be brought into the 21st century. Because that current system … works based on a formula, which practically nobody understands, with property prices from 1957. It must be updated, but it should not be penalizing taxpayers.”

“It is a mathematical exercise that must be done,” he added. “It is basically calculating how much the average increase in properties would be and then establishing a much lower rate than the current one. Because the current one is based on that value system of 1957 and they try to bring them to current value, but it is a very strange formula … and has been criticized by various entities, among others, by the Federal Reserve,” he added.”If the [House Bill] leads to a tax increase for real estate, it will not have my support.”

Earlier in the day, Puerto Rico Mayors Federation President Gabriel Hernández Rodríguez expressed his opposition to House HB 827.

“The change from tax assessment to market value must be carefully studied to know its impact on municipal collections and must be done responsibly,” Hernández Rodríguez said in a written statement. “In 2020, the [Financial] Oversight [and Management] Board asked the CRIM for an impact analysis on contributions in the face of a change in the tax paradigm from real estate to market value and this will be rendered by the beginning of the next fiscal year, so we believe that it is premature to file this type of measure.”

“The Federation supports the modernization of the CRIM systems and what we need is for this agency to streamline its debt collection methods,” he added. “And above all, [we urge them to] listen to us and give us an important place at the table in the discussion of this matter that has a direct impact on our taxpayers.”

CRIM Executive Director Reinaldo Paniagua Látimer meanwhile expressed his own concern with the language and methodology proposed in HB 827.

“Among other things, the approval of this measure, which could translate into an increase in taxes on real estate, would also cause an increase in mortgage payments and rents, affecting the family budget and in many cases, the ability to meet mortgage responsibilities and responsibilities with landlords,” Paniagua Látimer said.

The governor pointed out that if the tax rate is lowered, it does not necessarily lower collections.

“If you are assigning a higher value to the property, then the [tax] rate may be lower and you will recover the same anyway,” he said.

“I have always supported the modernization and reform of the CRIM and, by the way, that is ongoing,” Pierluisi said. “The purpose of this modernization and reform is, for example, to expand the number of properties that we have in [CRIM’s] mapping system -- that is happening. Also, identifying properties that have improper exemptions, or improperly obtained them, that’s ongoing. And finding a way to improve our collections, and that is also ongoing.”