Water & Ancient Municipal Taxation & Finance

January 5, 2017

Good Morning! In today’s Blog, we consider the ongoing physical and fiscal challenges in Puerto Rico, and we reflect on an ancient form of taxation from Luxor.

Restoring Power? More than one hundred after Hurricane Maria savaged the U.S. territory of Puerto Rico, Governor Ricardo Rossello yesterday announced he will be convening the territory’s Mayors to assess how they can collaborate with the Electric Power Authority (AEE) to restore the electrical system, with the Governor stating: “They are going to be quoting the Mayors to see what will be the mechanism of collaboration they can provide and how it can be carried out, but remember it has to be done in a coordinated manner.” Those sessions are scheduled to begin Monday. The task—delayed with such devastating health and fiscal consequences, especially compared to the responses in Houston and Floridacame after several mayors pressed for clearer information and questioned how the coordination with the U.S. Army Corps of Engineers would work—leading the Governor to stress that hos designated Single Point of Contact (SPOC), Carlos Torres, would be the individual as the person in charge of “this recovery process.” (Mr. Torres is the coordinator of restoration of the electrical system.)

The Governor’s announcement came in the wake of Bayamón Mayor Ramón Luis Rivera Cruz’s demand yesterday for the head of Puerto Rico’s Electric Power Authority provide “clear and precise” information with regard to when the electric service will be restored in his municipality.  Mayor or Alcalde Cruz indicated that, at the moment, only 44% of the structures in Bayamón have electricity, according to the census carried out by the municipality itself. The entire southern half of the town is in darkness, with the exception of a small sector in the Buena Vista neighborhood. The failure to restore power, he noted, have already generated losses to the municipality of about $5 million—with that figure only reflecting what the municipal administration has failed to receive in licenses, permits, and the municipal sales and use tax (IVU), Mayor Cruz said, warning that the figure will probably increase when municipal patents payments come in in April and when there is an expected reduction in remittances received by municipalities from the Municipal Tax Collection Center (CRIM). He added that he shared the “frustration” with respect to the thousands of PREPA subscribers who still do not have electricity, but then turned his anger to the Corps for its alleged lack of “Visibility” regarding the materials that have been delivered to Puerto Rico to repair the electricity network.

Ancient Municipal Taxation. In one of the world’s most ancient regions, Egypt, one of the earliest forms of municipal taxation was, mayhap unsurprisingly, based upon the most vital resource: the Nile River. Prior to the modern construction of the Aswan Dam, high water and low water years, after all, defined wealth—or poverty—for residents in a country which is largely a desert. Thus, last week, near Aswan, we visited what is called a nilometer—a construct nearly 2500 years old—and a fiscal tool to calculate the water level of the river during the annual flooding of the Nile. Fewer than two dozen of the devices are known to exist. Prior to the completion of the Aswan Dam, financed by the U.S.S. R., in 1970, the Nile flooded the surrounding plains each year in late July or August. As the waters receded in September and October, they left behind a blanket of fertile silt that was essential for growing crops such as barley and wheat. But, there were dry years and wet years—meaning the amount of water was critical to the local economy: the hope was always for enough—but not so much that flooding would devastate homes and crops. It has been estimated that the flooding was either inadequate or excessive roughly once every five years during the Pharaonic period.

Thus, the Egyptians were looking for a means to determine how to levy taxes. Thus, fashioned out of large limestone blocks, they created a Nilometer, which, as we observed last week in a temple, was a circular well roughly eight feet (2.4 meters) in diameter with a staircase leading down into its interior. Either a channel would have connected the well to the river, or it would have simply measured the water table as a proxy for the strength of the river. Seven cubits—roughly 10 feet (3.04 meters)—was the optimum height for prosperity. Thus, during the time of the Pharaohs, the nilometer was used to compute the levy of taxes: if the water level indicated there would be a strong harvest, municipal taxes would be higher.

Interestingly, a list of names carved in Greek was inscribed on a limestone block in the Nilometer: each name is followed by a number, which suggests the individuals recorded were beneficiaries who contributed funds to build the structure. (In the third century B.C., Egypt was ruled by the Ptolemies, a line of Greek royalty who assumed power there after the death of Alexander the Great.) The sites, as observed, were parts of sacred temple complexes where priests used the structure to predict the seasonal floods, and farmers left offerings in hopes of winning the river god’s favor.