MIAMI, Sept 2 (Reuters) – Puerto Rico’s governor on Thursday signed a law authorizing property-tax breaks and other government incentives to stimulate the U.S. commonwealth’s beleaguered real estate markets. Read the rest of this entry »

Bloomberg News

By Simone Baribeau

 Puerto Rico Governor Luis Fortuno

proposed tax breaks, bank incentives and other measures to boost

the commonwealth’s housing industry and rid the market of more

than 10,000 unsold new homes.

     The program, aimed at both local residents and U.S.

investors, would eliminate sales taxes on homes bought in its

initial nine months and drop levies on rental income and capital

gains. It also would provide insurance for 17 percent of a

mortgage’s principal.

     “There will be a boom,” Fortuno said in a telephone

interview Aug. 20 from San Juan, the capital. “The consumer

will see that this is a once-in-a-lifetime opportunity.” The

package will be considered in the legislature later this month,

where it’s supported by the leadership of both houses, he said.

     Fortuno took office in January 2009 as the first Republican

governor elected in 40 years. He promised spending cuts to

reduce what was a $3.2 billion budget deficit and policies to

help restore a credit rating lower than any state’s. He’s cut

23,000 government jobs so far and reduced expenses in next

year’s budget almost 20 percent from when he took office,

according to the Government Development Bank, Puerto Rico’s

financial agent.

     The housing measure is meant to reduce a glut of unsold

homes and stem price declines that followed a market collapse

two years ago. Puerto Rico home prices rose 51 percent from 2000

until the market peaked in the third quarter of 2008, according

to the Federal Housing Finance Agency. Prices fell 9 percent

from then to the end of 2009.

                          Vacant Homes

     About 10,500 finished or almost-finished homes are sitting

vacant, said Graham Castillo, president of Estudios Tecnicos, a

consultant in San Juan that works with banks and homebuilders.

     “If the program is effective, we will get rid of the

accumulated inventory in one year,” said Castillo. “How

effective it will be will depend on the actual situation with

the credit scores of those individuals wanting to purchase a

home.”

     Under the program, local and international investors could

buy property between Sept. 1 and June 30, 2011, the end of the

government’s current fiscal year, without paying transfer taxes,

property taxes for five years or capital gains taxes. Any rental

income from properties bought during the period would also be

tax exempt for 10 years.

     “There could be an interest in purchasing not just one

property, but actually a number of properties to be put into the

rental market,” said Fortuno.

                    Aid for Moderate Earners

     The measure would also expand the commonwealth’s current

program aimed at low-to-moderate-income Puerto Ricans, said

Gilberto Monzon, director of the mortgage lending division at

Banco Popular de Puerto Rico, the island’s largest bank.

     Under the new rules, a bank would be able to lend 105

percent of the value of the house, with the first 17 percent

being insured by the government program. The bank or an insurer

would be responsible for the next 88 percent of the losses.

     That may not be enough, said Sergio Marxuach, policy

director at the San Juan-based Center for the New Economy, a

researcher. Puerto Rico’s unemployment rate in July was 16.1

percent, compared with 9.5 percent in the U.S.

     “Banks would have to be willing to lend,” he said. “I

don’t think that’s going to happen.”

     The Federal Deposit Insurance Corp. took over three Puerto

Rico banks on April 30 holding about a quarter of the

commonwealth’s deposits, according to the FDIC and the U.S.

Federal Reserve.

     Monzon at Banco Popular said the housing program would

boost lending.

     “This creates a vehicle to get people who weren’t in the

market purchasing,” he said. Also, “you’ll be able to sell

some of the projects that are now in your inventory,” he said.

                    Lowest Investment Grade

     Puerto Rico’s general-obligation debt, tax-exempt in any

U.S. state, is rated BBB- by Standard and Poor’s, its lowest

investment grade. Moody’s Investors Service, which rates Puerto

Rico fourth-lowest investment grade, at A3, cut its outlook on

the commonwealth on Aug. 10 to negative from stable.

     Effectively cut off from credit markets, the government

borrows through the Development Bank, which issues bonds backed

by sales taxes. The debt, known as Cofina bonds for its Spanish

acronym, are rated A2 by Moody’s and AA- by S&P and A+ by Fitch

Ratings.

by The Puerto Rico Daily Sun staff  

Private Sector Coalition spokesman Francisco Rodríguez Castro said the organization entirely supports the Housing Department’s incentive and the Vía Verde project, as initiatives that comply with the Economic Development Plan presented by the Coalition.

Rodríguez Castro reported that these government initiatives were endorsed after considering an evaluation of the proposals made by the Puerto Rico Association of Engineers and the Home Builders Association, both members of the Coalition. The PSC is composed of 23 organizations which represent more than half a million private-sector workers.

“After a careful assessment on behalf of the  associates of the Coalition, we want to express our support for these projects; they are tools that will enable us to move the housing inventory and lower energy costs for homes and for the industry,” said Rodríguez Castro.

The new Housing Department incentive brings  an important boost of confidence to this sector.  The spokesman explained that by significantly reducing the housing inventory in Puerto Rico, the banking industry will have the freedom to offer more loans to business persons, consumers, industrials, and other groups, leading Puerto Rico towards the desired economic growth.

“The energy reform has been a pillar for the Coalition’s Economic Development and Reactivation Plan. In the short term, natural gas is an option that enables the diversification of Puerto Rico’s energy sources, which is essential in order to acquire an energy supply that is cleaner and cheaper than petroleum,” said Rodríguez Castro.  Another supporter of employing natural gas as an energy source is Miguel Torres, president of the Puerto Rico Association of Engineers and Surveyors. Torres mentioned that the Engineers Joint Committee evaluated the Vía Verde plan and concluded that “natural gas is what Puerto Rico needs to make the transition to renewable energy sources, since it is a more inexpensive fuel and it causes less environmental damage.”

Torres explained that generating electricity with natural gas is a practice that has been proved and used all over the world.  “Fossil fuel is the least contaminating type. It is the safest, most inexpensive energy source, having one of the highest energy efficiency rates, “he said.

Torres argued that natural gas is safer than other types of gas, since it is light and evaporates quickly, existing naturally in our environment. He added that after analyzing and comparing security facts from the U.S., it was concluded that there is a minimal, almost non-existing proportion of deaths or accidents. “The security parameters for these gas systems are so high that, proportionally and statistically, it would represent a single accident with one death every 563 years and one accident every 341 years.  This would be if we compared the Puerto Rico system (which would measure 91 miles) with that of the United States, the U.S.’s, where there are about 300,000 miles of pipelines,” Torres assured.

Pedro Watlington, president of the Manufacturers Association, said  the reduction in energy costs promised by the Vía Verde Plan will help stabilize the manufacturing and services industries.

“We urgently need to reduce energy costs in order to acquire stability in the industry sector and avoid business desertions,” said Watlington. “The first step will be a decrease of at least 10 percent in the energy bill.  However, there must be consistency in order to keep Puerto Rico at a globally competitive level. Energy costs are one of the greatest difficulties industries and businesses have to face. This is one of the triggers that cause manufacturers to choose jurisdictions with lower operational costs over Puerto Rico,” he emphasized.

According to the governor, high energy costs have caused numerous industries, both native and multinational, to close down, resulting in more than 135,000 layoffs in the private sector since 2006. Meanwhile, concerning the housing incentives, Home Builders Association President Hans Moll said that “since 2004, about 60,000 jobs have been lost in the construction sector.”

 With the incentives program, the government aims to reduce the housing inventory from this September to June 2011 and encourage economic development, as well as to protect and create jobs.

These reliefs should facilitate the process of buying a house and encourage leasing of new and existing residential real estate to provide an alternative to those who cannot  afford to buy a home.

by Raul Colon / Puerto Rico Daily Sun  

With the housing market in critical state, Gov. Fortuño unveiled a comprehensive stimulus package aimed at reducing the large inventory of unsold new homes, estimated at 20, 000.

“We want to make buying a home a more plausible reality for all. That’s why we are submitting one of the most far reaching stimulus packages today. A home is one of the most important parts of the family structure and we want to solidify that,” said Fortuño in announcing his plan.

Currently, the government has the locally-based ‘COMBO’ package aimed at helping low-to-medium income families purchase their first home. As of Aug. 15, a total of 7,726 units had been sold through the program at a total value of $1,020 million. The average price of the units sold was $132,000.

To that program, the administration now adds the “En-Larger COMBO,” which includes all sectors of the market. Two main sub-programs comprise the new effort.

There’s a window of nine months, from Sept. 1 to June 30 2011, to take advantage of the incentives.

“Because we want to make a quick impact on the market, we placed a window of nine months for the people to act on several or all of the stimulus measures,” the governor said.

The first, known as Housing Stimulus 2011 Program, deals directly with the prices attached to buying a home. Unlike the original COMBO, which was primary aimed at low-to-medium income families, HS 2011 covered the entire financial spectrum.

The program is composed of seven incentive packages.

. A full exception on paying any Treasury Department financial stamps or payment receipts on new houses. On existing homes, the reduction is 50 percent. Currently a $300,000 home buyer pays on an average, $5,000.00 in stamps and receipts.

. Zero payment on Treasury cancelation stamps and receipts when selling an existing property.

. Zero property tax on any new home purchased up to 5 years after the sale.

. No capital gains tax on residential homes sold now. Commercial property receives the extension upwards of $3 million.

. No capital gains tax on future residential sales. Existing homes pay only half of their capital gain taxation.

. An increase from $1,000 to $5,000 in the mitigation loss cushion.

. Zero tax payment on rental properties for 10 years starting January 2011.

When adding these measures to the original stimulus package, the prospective buyer could in theory buy a home with as little investment as $2,000, on an average, for a home priced at $300,000 or less.

“With this package, we want to make buying a home an easy and more importantly, affordable, experience. Now, a family could afford to buy a home without investing most of its capital,” the governor said.

Supplementing HS 2011 are two additional measures.

The program known as My Security Mortgage will serve as the primary financing source. The mortgage institution selected for the transaction could lend up to 105 percent of the cost of the new home with an insurance coverage of 17 percent.

The most attractive part of the program is that if qualified, a buyer will not have to dispense any money at the moment the purchase is completed.

The third leg of the program is named My New Home. It would grant discount checks from $5,000 to $10,000 for new home buyers. Funding for this program comes from unclaimed funds totaling $50 million.

All seven measures need approval by the Senate. The governor stated that the bill, which includes all seven, is already crafted and will be submitted today.

Positive feedback

Gilberto Monzón, Executive Vice-President of Popular Mortgage, was thrilled, calling the stimulus packages a “home run” and “a sure winner.”

“This is the most comprehensive financial package ever assembled by our government. It hits all aspects, from property and capital-gains taxes to rental allocations. This will allow us to move the inventory quickly and expeditiously,” he said.

San Juan Mayor Jorge Santini did not have sufficient time to read the entire package. Still, he offered a passive support to “any measure that allows banks to lend more.”

“I will examine the governor’s suggestion very carefully and if I think it will stimulate the banking sector in order to approve more loans so people in San Juan can buy a home, I will be for it,” Santini  said.

San Juan has the largest inventory of unsold new houses on the island, with approximately 9,000 available units. 

Hans Moll Stubbe, President of the Puerto Rico Home Builders Association, couldn’t contain his enthusiasm for the new project.

 “This is an unprecedented effort by the administration to stimulate the construction sector. His [Fortuño] pronouncement not only goes to the new home sector but helps the rental area as well, which will increase opportunities for the buyers,” he said.

New Progressive Party Sen. Larry Seilhamer, chairman of the Urbanism and Infrastructure Committee, said he will act immediately to enact the legislation the administration plans to submit.

“This as an important piece of legislation and as such, we will consider it in an expeditious manner. I believe we could have a bill ready for the governor to sign in two weeks,” the Ponce district senator said. 

His counterpart in the House of Representatives, Pedro Cintrón, concurred with the need to fast-track the measure. “The state of the market badly needs a piece of legislation as strong as this one. Because of this we need to act immediately,” he said.

Fortuño said that even if the bill is not signed by Sept. 1, he will make it retroactive to that date.

By George F. Will

WASHINGTON — A Republican governor — a very Republican governor — has an idea for solving one of his party’s conundrums. The party should listen to Luis Fortuno, the Reaganite who resides in Puerto Rico’s executive mansion. Read the rest of this entry »

The governor is expanding a partnership between the Puerto Rico Police Department and the NYPD as part of his administration’s efforts to battle crime on the island.

Gov. Fortuño participated in the annual NGA meeting where governors discussed a range of topics, including the implementation of federal health care reform, child nutrition issues, progress of the economic recovery, national security and strategies to tackle the federal budget deficit. At the meeting, the Governor was named to the Board of Directors for the Center for Best Practices, an arm of the NGA dedicated to identifying and sharing innovative ideas and solutions in public policy.

The Washington Times

KEATING: Are Hispanics lost to Republicans?

By Frank Keating

ANALYSIS/OPINION:

The lights went out on the Republican renaissance when the Arizona Legislature criminalized the presence of illegal immigrants in their state. Or, at least that is popular wisdom.

Hispanics constitute the fastest-growing segment of the population. They are rooting in cities and towns across America, transforming the religious and cultural landscape. Homogenized by the reach of Univision and Telemundo Spanish-language TV networks, Hispanics have mobilized to become a visible and frequently noisy player in the nation’s rallies, street protests and political debate. Their leadership is largely Democratic.

The anti-profiling and civil-justice debates are rich fare for Democratic operatives. The plucked Republican chicken soon will be in every Democratic pot, and the sun is setting for Republican governance as future generations of Hispanics will reliably vote Democrat, the story goes. Democratic dominance is assured as a combination of Hispanic solidarity and black solidity will make Republican officeholders as rare as roses in winter.

But before our friends on the left break out their vuvuzelas, they need to take a look at Puerto Rico.

Read the rest of this entry »