Puerto Rico transit crisis averted, oil tax hike beckons

SAN JUAN (Reuters) - Puerto Rico's commuters escaped a chaotic transport shutdown after authorities on Sunday reached an eleventh-hour deal to hike a controversial oil tax and averted an escalation of the island's debt crisis. The local government had been planning to shut its bus and city train service after the island's Governor Alejandro Garcia Padilla was unable to convince enough members of his party to agree to raise the tax on crude oil by 68 percent. "It will not be necessary to cease operations of any public dependency tomorrow because we have the 26 votes to approve the measure and later the tax reform," Garcia Padilla said in a televised address on Sunday night, hours before the shutdown was due to start. The shutdown would have affected around 75,000 people who use the government's Metropolitan Bus Authority, the privately run MetroBus, the Tren Urbano commuter train service as well as a bus rapid transport (BRT) that brings commuters from west of San Juan. "I depend on the bus for everything," said Mercedes Ortiz, 84, waiting at a bus stop in downtown San Juan earlier on Sunday to travel to a pharmacy to buy prescription medicine. "I'm against raising the oil tax because it will be a big blow to a lot of people, but I hope the governor does not stop the buses." The shutdown would have impacted 2,800 workers employed by the Highway & Transportation Authority (HTA) as well as private companies contracted to service the private bus line, commuter train and BRT system. It would also have affected road repairs across the island and halted work about to begin on major highways in San Juan and on the island's west and east coast. "After many months of study, my administration has selected the solution less onerous for everyone," the governor said. Garcia Padilla said the oil tax increase would cost a typical Puerto Rican family $1.17 a week, while a planned tax reform expected to be introduced early next year would deliver "savings that will compensate taxpayers by much more with reduced income taxes". The tax hike was to back a bond sale of up to $2.9 billion, which would repay a $2.2 billion loan to the island's government development bank (GDB) from the HTA, as well as support mass transit operations. That issue has been pushed back from November into early 2015. Garcia Padilla said on Sunday that high borrowing by the HTA in past years threatened its operations. During 2009 to 2011, the HTA borrowed more than $2 billion without the means to repay it, pushing up the debt from $80 million to more than $2 billion, he said. ELEVENTH HOUR The deal came after the legislature failed to approve the oil tax measure during its regular session, and following the governor convening a special session last week. Senate Finance Committee Chairman Jose Nadal Power told Reuters earlier in the day that negotiations between the House leadership and Garcia Padilla's office were continuing Sunday. House Speaker Jaime Perello and administration officials had been discussing different versions of amended legislation through Sunday. House lawmakers wanted more certainty regarding tax reform. Senators were also pushing for guarantees that the HTA will make the operational changes required to become self-sufficient. While the transit links are centered in the San Juan metropolitan area and only serve a small proportion of Puerto Rico's 3.6 million population, a closure would have been the first shutdown of a major public service as a direct result of the government's fiscal crisis. Mayors of San Juan, Bayamon, Carolina and Catano were earlier making contingency plans for municipal buses and trolleys to provide service for some major routes. Private public cars would have also been allowed to pick up passengers on established bus routes. "This is a service that has been provided for years, and many students, maids, working people and the poor depend on it," said Jose Velez, a 69-year-old security guard. (Reporting by Reuters in Puerto Rico; Editing by Megan Davies, Bernard Orr and Ryan Woo)