Puerto Rico’s recovery funds are supposed to rebuild the island — not bankroll local governments. Yet municipalities across the island are taking a cut from federally funded disaster recovery projects through construction taxes, raising costs, and slowing the Trump administration’s efforts to Make Puerto Rico Great Again.
Frontiers of Freedom is calling on the Inspectors General of DHS, HUD, and DOE to investigate whether municipalities are unlawfully siphoning federal recovery dollars away from project sites and into local coffers.
What’s Happening: Federal recovery dollars sent to Puerto Rico are intended to rebuild the island’s power grid, water systems, housing, public facilities, and energy infrastructure. But in many municipalities, five to ten percent of that federal money never reaches the project site. The reason? Municipalities are using local construction excise taxes, license fees, and penalties to target federally funded recovery projects and the contractors carrying them out. In Humacao and Guayama, for example, those taxes are being pursued against contractors that performed federally funded work years ago — raising serious questions about whether federal taxpayer dollars are being diverted into municipal budgets.
Why it Matters: Puerto Rico remains under federal fiscal oversight, and the Financial Oversight and Management Board for Puerto Rico (FOMB) has warned that these taxes are inconsistent with PROMESA and violate Puerto Rico’s certified Fiscal Plan. The concern is clear and widespread: These taxes raise the cost of rebuilding, slow recovery efforts, and redirect taxpayer funds away from their intended purpose.
The Bottom Line: Frontiers of Freedom is calling on the Inspectors General of the Departments of Homeland Security, Housing and Urban Development, and Energy to investigate whether municipalities are unlawfully siphoning federal recovery dollars away from project sites and into local coffers. Every dollar diverted through this scheme is a dollar taken away from Puerto Rico’s recovery and placed on the backs of American taxpayers.
Read the full letter below:
