When nearly the entire power grid of Puerto Rico was knocked out by a pair of ferocious hurricanes last year, utility companies from across the United States sent crews and equipment to help.
It was a power emergency on a scale rarely seen before, and companies spent tens of millions of dollars to mobilize. The utility in Sacramento, Calif., sent 30 workers and a dozen trucks. Ameren, which serves over two million customers in Missouri and Illinois, sent 225 workers. New York dispatched workers on at least five deployments to repair power lines and assess damaged substations. Florida Power & Light sent more than 100 trucks, several tons of equipment and 800 employees, many of whom spent Thanksgiving and the winter holidays working 16-hour days.
Though their costs are expected to be reimbursed by the federal government, the companies were not earning a profit. So it was with astonishment that, over the summer, some of the utility companies that had sent aid crews opened letters from the towns where they had worked in Puerto Rico: bills demanding millions of dollars in license and construction taxes.
Florida Power & Light was given five days to pay the first $2 million, and 30 days for $333,000 more in taxes, fees, penalties and interest. Ameren and the Sacramento Municipal Utility District received bills for nearly $3 million.
“The honor and humanity of your city’s people stands in striking contrast to the inappropriate monetary demands,” the Florida utility’s chief executive, Eric Silagy, wrote in a letter to the mayor of Bayamón.
The Florida executive was not alone in his chagrin. The utilities “each fronted tens of millions of dollars for personnel, equipment, and materials to help restore power in Puerto Rico on a not-for-profit basis,” said Emily Fisher, vice president for law at the Edison Electric Institute, a utility trade group which helped coordinate the agreements under which power companies joined the emergency response. “And the thanks we got from some mayors came in the form of municipal tax bills and punitive fines.”
So far, about eight cities have forwarded tax notices, including the municipalities of Bayamón, Río Grande and Carolina, near the capital of San Juan. City officials said such assessments are a normal part of doing business in Puerto Rico. In most cases, however, they are charged to companies engaged in profit-making business activity, not utilities making emergency repairs after a natural disaster.
Such taxes are seldom levied on the mainland after an emergency. When the issue came up in New York for companies that provided relief after Hurricane Sandy, the state waived the taxes.
“During Hurricanes Harvey, Irma, Nate and Florence, no other local jurisdiction sought to impose local taxes and fees directly on the workers and crews who traveled to make emergency repairs to the grid,” Ms. Fisher said. “It just doesn’t normally happen.”
The Federal Emergency Management Agency is expected to reimburse mainland power companies for their work in Puerto Rico. Donald Caetano, a spokesman for the agency, said that companies that were “savvy enough” to include the taxes in their original contract language could also have the tax bills reimbursed by FEMA by submitting those expenses to Puerto Rico’s public utility, Prepa.
But that would leave federal taxpayers responsible for millions of dollars flowing into municipal coffers in Puerto Rico beyond the repair costs the federal government is already paying.
“The short answer is yes, FEMA could pay that municipal tax,” Mr. Caetano said.
Companies that did not make provisions in their contracts could be “on the hook” for paying the taxes themselves, Mr. Caetano said.
Prepa’s chief financial officer, Nelson Morales, said that further bills could be on the way from any of the 78 municipalities in Puerto Rico.
“It’s possible that a great amount of them will be requesting payment of taxes,” Mr. Morales said. “They are entitled to taxes for services or constructions performed in their jurisdictions.”
Randall Hakes, a senior lawyer at the Sacramento utility, whose crews were in Puerto Rico from January to March, said the work was intended to render aid to millions of Puerto Ricans who in many cases spent months without electricity after Hurricanes Irma and Maria struck in September 2017. “We are happy we were able to help, and loved seeing their joy when power was restored,” he said. “It’s unbelievable how they now seek to take advantage of our willingness to lend a hand.”
Both Prepa and FEMA were criticized for waiting more than a month after the hurricanes hit before requesting help from the utilities. Such mutual aid agreements had been struck as a matter of course after recent hurricanes on the mainland, including Harvey, Florence and Sandy.
Adding to their frustration with the taxes, a number of the utilities have not been reimbursed by FEMA for sending their workers and equipment to Puerto Rico in the first place. That will only take place once a careful review of the invoices is concluded, officials said. Mr. Caetano said that about $940 million of $1.8 billion invoiced for the electrical work has been reimbursed so far.
Some analysts with long experience in the substantial economic, legal and cultural differences between Puerto Rico and the mainland said the tax laws on the island should not be taken as an affront, and that negotiations may yield positive results.
The 15-year recession in Puerto Rico has left municipalities eager to collect taxes, said Tómas J. Torres, executive director of the Institute for Competitiveness and Sustainable Economy, a nonprofit in San Juan. He said that linemen from the mainland making much more than their Prepa counterparts could not help but produce an impression that the utilities could easily pay the tax — whether they made profits in Puerto Rico or not.
“They should not be mad,” Mr. Torres said. “This is an issue of communication and understanding Puerto Rican law more than anything else.” He added, “It’s a matter of sitting down at the table and sorting out any argument that they have.”
Omar J. Marrero Díaz, Puerto Rico’s chief recovery officer, appointed by Gov. Ricardo Rosselló, said he knew of “seven or eight” municipalities that had sent tax bills. Part of the reason they are desperate for money, he said, is that like the utilities themselves, they are still waiting for FEMA to disburse funds — in this case, most of the $3.7 billion allocated for disaster relief.
“We have been trying to serve as a mediator between the companies and the municipalities,” said Mr. Marrero, adding that some mayors have indicated a willingness to compromise or waive the taxes. “That’s the way we feel, even though we have been complying with the overly bureaucratic process” at FEMA, he said.
On the time frame for payments, Mr. Caetano said, “We trust but verify. The speed of disbursement is driven in a large part by the quickness by which we receive accurate and required paperwork from our partners.”
The New York Times posed queries to several of the cities that sent tax bills and received widely varying responses. The mayor of Carolina was either unavailable or simply refused to comment on the matter. Asked whether the municipality was denying a request for an interview with the mayor, Lourdes Vázquez, the media chief in Carolina, said, “You can phrase it however you want.”
Mayor Ramón Luis Rivera of Bayamón, though, abruptly released a statement with good news for Florida Power & Light. The municipality had determined that companies operating on a nonprofit basis were not subject to the tax, the statement said.
“That’s the case of Florida Power, which is why we’re sending them a notification indicating they should send a copy of the signed contract,” the statement said. “That will automatically exempt them from the payment.”
Ángel B. González Damudt, mayor of Río Grande, said he believes the Sacramento utility profited from its emergency work and was still liable for taxes — an assertion the company’s lawyer, Mr. Hakes, rejected immediately.
“This is ridiculous that they continue to assert we’ve profited in any way by their misfortune,” he said. “We were there to help, and now they’re trying to make a ton of money off our assistance.”
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