April 1965 A SPECIAL REPORT ON
Commonwealth of Puerto Rico
Government Development Bank for Puerto Rico San Juan. Puerto Rico
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J I Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY
Officers
Governing Board Chairman: HON. ROBERTO SANCHEZ VILELLA Governor of the Commonwealth of Puerto Rico Vice-chairman: HON. FRANCISCO LIZARDI
Secretary of Public Works
PEDRO COLON PAGAN
Chief Engineer FELIX CORDOVA DIAZ
General Manager — Services and Supply HAROLD TORO
Member: HON. MIGUEL HERNANDEZ AGOSTO Secretary of Agriculture
Principal Officers
General Manager — Irrigation Services JOSE VILA RUIZ General Counsel
CARLOS VELAZQUEZ TORO
RAFAEL V. URRUTIA
Director of Production and Transmission
Executive Director
HUMBERTO CORDERO
EDUARDO LUBE
Director of Distribution and Sales
Assistant Executive Director — Finance
WALDEMIRO VELEZ
JULIO NEGRONI
Assistant Executive Director — Electrical Planning, Construction and Research
Director of Electrical Planning and Research JOSE A. MATOS
Director of Power Design and Construction
RAFAEL R. RAMIREZ
JOSE 1. DIAZ
Assistant Executive Director — Power Operations
Controller
FERNANDO TORRENT
LOUIS ROIG MARTINEZ
Assistant Executive Director - Industrial and
Treasurer
Personnel Relations
JAVIER CUEVAS BENITEZ
Director of Purchasing JUAN E DOVAL Director of Personnel
HECTOR M. MORALES
Director of Transportation and Services HERMANN MUNOZ Public Relations Officer
RAFAEL D. CHERVONI
Safety Officer
Trustee
First National City Bank. New York. N. Y.
Consulting Engineers Jackson and Moreland Division
of United Engineers and Constructors Inc. ON THE COVER:
Auditors
San Juan Steam Plant —
Arthur Andersen & C o.
168,000 KW,a seventh and eifihth unit, of 100,000 KW each,
Bond Counsel
are now under construction.
Mitchell. Pershing. Shetterly & Mitchell
Rafael V. Urrutia, Executive Director
Puerto Rico Water Resources
Authority The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto
The growth of the Authority has been impressive, as shown by the following data for fiscal years end
Rico Water Resources Authority, an autonomous
ing June 30:
public service corporation and instrumentality of the 1949
Government of the Commonwealth of Puerto Rico.
The origin of the Authority goes back to the opera tion of two government agencies which began the development of hydroelectric power in Puerto Rico - the Puerto Rico Irrigation Service, which built its
1954
1959
1964
Net Utility Plant $ 44,334,000 $ 94,583,000 $ 185,306,000 $ 304,908,000 Kiiowatthours
„ „
-nn
Gen. & Purch. 478,700,000 853,200,000 1,733,800,000 3,403,200,000 Eloctric
Revenues . . $ 10,388,000 ? 17,825,000 $ 35,781,000 $ 65,866,000 No. of Custom-
ers
donnn
162,000
228,000
385,000
518,000
first generating plant in 1915, and the Utilization of Water Resources of Puerto Rico, created in 1927. In
In the past five years, the Kwh sales of the Author
1941, the Authority was established by law to replace
ity have increased at the average rate of 14.8 percent
the Utilization of Water Resources and ensure a
compounded. The 1960-61 recession barely affected
growth in the supply of electricity which would be adequate for the future needs of Puerto Rico's eco nomic development. Subsequently, during the World
Puerto Rico or the Authority. In the twelve months ending December 1964, 3,029,000,000 Kwh of en ergy were sold to 533,000 customers producing elec
War II fuel shortage, the two large private electric
tric revenues of $69,500,000.
utilities on the Island were taken over by the United States Government as an emergency measure and
From its inception the Authority has had to con stantly build new hydro and thermo-electric plants to
their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and, at a later date, the electric facilities of various irri
gation services were integrated into the Authority's system.
When the Authority began operations in 1941, the
Island's economy was primarily agricultural and
keep up with, and anticipate, the mounting demand for electric power. New generating capacity has been added almost every year. Since 1944 total name plate
rating of the Authority's generating plant has risen from 64,440 Kw to the present capacity of 733,920 Kw. Annual capital construction programs in recent years have reached as high as $39,000,000.
sugar. In the
The capital construction program for 1965-66 is
latter half of that same decade, an industrialization
estimated at $45 million. It includes completion of two 100,000 Kw units for the San Juan Steam Plant, scheduled for testing in September 1965 and January
heavily dependent on a single crop
program for the Island was begun as part of Opera tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur
passed that from agriculture. Today approximately 957 new factories, promoted under the economic
1966 respectively, and a start on two more 100,000 Kw units at the same station, these due for comple
tion in January 1967 and June 1968. Other impor
profound change in the basic character of the econ
tant projects are the installation of four 10,000 Kw jet peaking units, one in each of the thermal plants. This program also includes general transmission and
omy has created a continuous and rapid rise in the
distribution facilities, rural electrification projects,
development program, are in operation with a total direct employment of 69,000. Such rapid growth and demand for energy.
the acquisition of land and the construction of build-
T W V—-' —
ft
ir - -
Main Office Building, San Juan, is equipped with a rooftop heliport and a microwave communications system.
ings, and miscellaneous items. When current projects are completed, total generating capacity will be 1,190,420 Kw.
The Authority has grown to become the second
largest municipally owned, integrated electric utility
electric generating plants. Thermal-electric facilities now supply about 96 percent of the electric energy generated. The Authority's four thermal-electric gen erating stations have a total installed name plate rating of 626,000 Kw.
in the United States as is indicated by the following tabulation as of December 31, 1964; City of Los Angeles
Puerto Rico
City of Seattle
Department of
Water Resources
Department of
Water and Power*
Authority
Lighting
$363,508,000 $ 69,500,000
$230,284,000 $ 43,400,000
Net Plant . . . $777,163,000 Electric Revenues . $151,551,000 Number of
Customers
.
1,077,000
* As of June 30, 1964.
Present Electric System
The total installed generating capacity of the Author
ity at the end of December 1964 had a name plate rating of 733,920 Kw and maximum dependable ca pacity of 790,460 Kw. The physical plant presently
Steam-Electric Stations
The Palo Seco Steam Plant, near San Juan, was placed in service in 1960 and has two 82,500 Kw steam-electric units. Another unit, of 10,000 Kw and powered by a kerosene-burning aviation-type jet mo tor, will begin operation shortly. This unit will be used for peaking and for emergencies, being designed for automatic synchronization to the line from a cold start in only two minutes. A desalinization pilot plant
has also been inaugurated, to provide 14,400 gallons a day of make-up water for the main unit boilers.
consists of twenty-two generating stations, of which
The desalinization process is new and uses waste heat from the turbine condenser system to evaporate
eighteen are hydroelectric and four are thermal-
sea water in a vacuum.
bine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. An additional, 10,000 Kw, jet peaking unit will be installed in the present fiscal year. A 5,000 Kw steam-electric unit,formerly held in cold standby,
The South Coast Steam Plant, near Ponce, has two
44,000 Kw and two 82,500 Kw steam-electric units, the newest of which was placed in service in Decem ber 1963. One of the outstanding features of this plant is that it can burn either low cost refinery pitch or
Bunker C fuel oil. This plant currently receives its fuel by direct pipe line from the nearby refinery of the Commonwealth Oil Refining Co. A 10,000 Kw jet peaking unit will be added to this plant by the close
has been sold and dismantled.
Hydroelectric Stations
of the current fiscal year.
There are 18 hydroelectric plants with a total installed capacity of 107,920 Kw. Fourteen of these plants have reservoirs which permit regulation of plant out put by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-of-the-river flows. Eleven of the hydroelectric plants are non-attended and fully automatic.
The San Juan Steam Plant has an installed capacity with a name plate rating of 168,000 Kw in four 20,000 Kw and two 44,000 Kw steam-electric units.
A seventh unit, of 100,000 Kw,is now being installed. This unit is expected to be completed by September 1965. Work on another 100,000 Kw unit, scheduled
for completion in January 1966, is also under way. Design work on two more such units, due to be ready by January 1967 and June 1968 respectively, has already started. By the end of the current fiscal year this plant will also have a 10,000 Kw jet peaking unit. The Mayaguez Plant is equipped with two gas tur
PUERTO
RICO
WATER
Nuclear Power Plant
A nuclear power plant with a rated capacity of
RESOURCES
AUTHORITY
ELECTRIC SYSTEM
P*LO^ SECO ■ 1*5,000 500 ICV«
, -HATILLO ^
- 5.000 "**S;^*RECiBO MO Z
dORAOO
5.Z00
Al05 ANCClCS-3,07?
u lasclomasa
5.000 KVA"
OS BOCAS
.000 in«.^MATO MtT A ^ 5000 «VA
IB.OOO
BONUSLJ
COROZAL JMV.
COMERK) PLANTS 5.000
.v.
iARASCO
CURAOO
-
CACUAS
✓ \j.OOOAVA
AOAP«J*S 2^5"toro negro no 2 R7aA carz »B7AS NO.2
PASTtULO
LEGEND □ steam plants
- 30KV ELECTRIC TRanSAIISSION LINES
() STEAM plants I OnO*' ConH'uf'O")
■ existing IIS kv Electric transmission lines
O mydro-electric plants
■ IISKV ELECTRIC transmission LINES (Undf Contl>ucl>on)
^ interconnecting substations ^ SUBSTATIONS
i
X4..V/
caonillas<. NO 2 A 000
reservoirs
GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1941 Sales
(Million Kwh)
Customers
Maximum Peak Load
Load
Hours per
(End of Period)
(Kw)
(Kw)
Customer
$ 3,610
139.0
100,402
18,000
9,000
1,383
$.0260
$ 35.93
1945-46
5,764
258.6
124,959
63,000
39,000
2,069
.0223
46.13
1950-51
13,006
488.2
185,090
109,000
69,000
2,638
.0266
70.27
1955-56*
25,216 28,693
930.8
314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 550,000
210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 659,000
129,000 153,000 181,000 198,000 231,000 261,000 294,000 335,000 388,000 451,000
2,956 3,184
.0271
80.08
1,078.4
.0266
84.72
3,578 3,687
.0262
93.58
.0252
92.79
4,080
.0243
98.96
4,484 4,787 5,196 5,679 6,118
.0239
107.34
Fiscal Year
''(Thousands
(June 30)
of Dollars)
1940-41
1956-57* 1957-58*
33,973
1958-59*
35,781
1959-60*
40,441
1960-61*
45,304
1961-62*
50,846 57,520 65,865 74,307
1962-63* 1963-64* 1964-65t
1,298.8 1,421.6 1,667.4 1,892.4 2.145.4
2,465.6 2,858.4 3,266.0
Revenue
Average
Kilowatt
per
Revenue
Kilowatt Hour
Customer
per
.0237
113.44
.0233
121.20
.0230
130.85
.0227
138.83
* Includes amount recovered through Fuel Oil Adjustment, t Estimate including Fuel Oil Adjustment.
16,500 Kw and utilizing a new and advanced type of boiling water reactor and nuclear superheater is being tested on the western tip of Puerto Rico under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority has pro vided the plant site and the conventional generating
components; the ABC,the nuclear reactor. This proj ect is giving the Authority the necessary experience to undertake large scale generation by means of nuclear
reactors, when such generation becomes economically
Distribution facilities include 186 substations owned
by the Authority with a capacity of 604,475 Kva which, supplied from the transmission network, con vert the electric power for distribution at 2400/4160 Y and 4800/8320 Y volts through distribution feeders which traverse 76 cities and towns and nearly This especially designed ^'Marketeer" (ruck services gas, oil, water, and air to a fleet of nearly 225 motor vehicles at the Authority's Distribution Center in Monacillos.
feasible.
Transmission and Distribution Systems The Authority's transmission system consists of 1,418 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 101 substations and sectionalizer
stations, with a total name plate transformer capacity of 1,409,125 Kva located at suitable points through out the system to insure stability of service and pro vide an adequate islandwide network. The transmis sion system also includes a submarine cable 9.5
miles long which was placed in service during May 1963 to connect the island of Vieques to the Au thority's system.
...â&#x20AC;&#x201D;
â&#x20AC;&#x201D;
it M
* ii
all of the rural area. In addition, there are 139 pri vately owned distribution substations with a total ca pacity of 253,382 Kva to serve industrial customers, making a total installed capacity of 857,857 Kva.
cost of service to customers served under the REA
program, in the case that revenues do not provide an adequate contribution to fixed costs. Financing System Growth
Through successive amendments to an original loan
Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of
contract for $6,376,000, entered into in 1952 be
these bonds under a Trust Indenture. It also has full
tween the Authority and the Rural Electrification Administration of the United States, the Authority
authority to set and collect adequate rates and other charges for the use of its facilities, and has complete control and supervision over its properties and activi ties. Properties may be acquired by the Authority by any lawful means, including the power of eminent
Rural Electrification
has borrowed to date $66,710,000 on bonds bearing interest at the rate of 2% under a loan contract now
totaling $74,040,000. These funds have been loaned by REA for the construction of generation, transmis sion and distribution facilities to serve rural custom
ers. More than 132,000 rural families are now being served under this program. By law, the Commonwealth Government contrib
utes to the Authority the annual amounts required to guarantee that the Authority recovers the complete
Public Uglumg. Baldorioly de Caslro Avenue, San Juan.
domain.
For many years the Authority has followed a policy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of revenue
bonds are sold for the repayment of such loans and for the continuance of construction. In this way the
facilities producing income for the support of longterm obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $297,-
service requirements and other contractual obliga tions. The maximum debt service for any future year on outstanding issues was $14,566,000, indicat ing a coverage of 2.24 times on present debt. Accruals
240,000 as of December 31, 1964.
for contributions to the Commonwealth and munici
In addition, a substantial amount of the Capital Improvement Program has been financed directly from revenues of the Authority. In the period from May 1, 1947 to December 31, 1964, a total of $407,-
811,000 was invested in capital improvements. Of this amount $309,330,000 had been provided from the proceeds of bond issues and bank borrowings, and $98,481,000 had come mainly from net revenues of and contributions to the Authority. On January 31, 1965, total net assets amounted to $433,488,037, operating and appropriated reserves were $24,779,155, contributed capital and unappropriated net rev enues were $74,989,000 and outstanding debt was
pal governments in lieu of taxes amounted to $7,662,000 during the same period. The rapid expansion in facilities and improvement of service over the past decade has been carried out without raising the Authority's rates. Constant in creases in demand have consistently resulted in a yearly growth in revenues and in substantial reserves
adequate to meet the Authority's operating expense and contractual obligations.
New Bond Issue
In April 1965, the Authority proposes to sell
$312,722,000.
$90,000,000 par value Electric Revenue Bonds
Total revenues for the twelve months ended January 31, 1965, were $72,511,000. Current expenses were $39,816,000, leaving $32,695,000 to meet debt
(Refunding and Improvements) for the purposes of
NUMBER OF CUSTOMERS
SALES OF ELECTRICITY - KWH
redeeming outstanding bonds of the 1958, 1959 and
1960 series; liquidation of current bank borrowings;
Thousands
Millions of KWH
6001
3,500
[333 Other Industrial
Commercial Residential
Fiscal -56 Years
'57
'58
'59
'60
'61
'62
'63
'64
'65'
Fiscal '56
'57
'58
'59
'60
Years â&#x20AC;˘ Estimated Source P R W R A. Financial Reports
'61
'62
'63
'64
'65*
This hosiery mill at Cidra is one o} many industrial companies which are important consumers of electric power produced by the Heater Resources Authority.
and continuation of the Capital Improvement Pro gram.
Preliminary calculations indicate that the Au thority's maximum annual debt service, upon the completion of the financing, will approximate $15,-
invest $176,364,000 in further capital improvements. Of this amount, the sale of bonds will provide some $100,818,000. About $71,024,000 or 40% will be derived principally from revenues of the Authority,
compared with an average of 24% accrued from
600,000 and will be covered over 2.10 times by net
earnings and contributions during the last seventeen
earnings for the twelve months ending February 28,
years. The remainder of $4,522,000 will be available
1965.
from previous bond issues. The above four-year program compares with cap ital expenditures actually made during the past seventeen years, distributed as follows: steam pro duction plant $142,252,000, nuclear production plant
Looking Ahead
Continuous studies of power needs, constantly re
viewed and revised by the Authority and its consulting engineers, now indicate that peak demand of the system will increase from 659,000 Kw in 1964-65 to 751,000 Kw in 1965-66, 856,000 Kw in 1966-67 and 965,000 Kw in 1967-68. It is expected that over 27,000 new customers will be added yearly. To meet
this demand, the Authority's generating capacity will be raised to a name plate rating of 1,190,420
$5,486,000, hydraulic production plant $36,104,000, gas turbine production plant $8,660,000, transmis sion plant $54,634,000, distribution plant $117,279,000, and other facilities $43,396,000 for a total of $407,811,000.
Security for the Bonds
Kw by June 1968.
During the period from July 1, 1964 through June
Bonds issued by the Authority under the Trust
30, 1968, it is anticipated that the Authority will
Indenture are payable from the Puerto Rico Water
Puerto Rico Water Resources Authority
Condensed Balance Sheet As of January 31, 1965
ASSETS
NET UTILITY PLANT:
Gross utility plant Less accumulated provision for depreciation
$433,795,323 68,655,020
Net utility plant
$365,140,303
OTHER PHYSICAL PROPERTY
199,990
BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS
19,169,686
CURRENT ASSETS:
Funds and working advances Accounts receivable â&#x20AC;&#x201D; Less Reserve for uncollectible accounts Materials and supplies Prepayments, special deposits, etc
$ 13,168,001 14,012,347 12,143,254 1,180,711
40,504,313
$ 7,416,823 1,056,922
8,473,745
DEFERRED DEBITS:
Debt discount and expense in process of amortization Other TOTAL ASSETS
$433,488,037
LIABILITIES
CONTRIBUTED
$ 34,940,493
CAPITAL
UNAPPROPRIATED NET REVENUES
43,048,751
LONG-TERM DEBT: Electric revenue bonds
Notes payable
$294,422,000 18,300,000
312,722,000
6,157,364 2,863,767 796,299 4,600,647 2,432,782
16,850,859
CURRENT LIABILITIES:
Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes . . Other
DEFERRED
CREDITS
1,146,779
RESERVES: Self-insurance
Hydro-production equalization Injuries and damages Revenue stabilization
Appropriated sinking fund TOTAL LIABILITIES
4,716,138 1,646,259 2,966,623 416,344 15,033,791
24,779,155
$433,488,037
Puerto Rico Water Resources Authority
Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture)
Twelve Months Ending June 30 1961
June 30 1962
June 30 1963
June 30 1964
January 31
$45,303,522 1,110,660
$50,845,979 1,284,837
$57,519,700
$65,864,594
$69,968,128
1,409,175
1,501,989
1,465,865
$46,414,182
$52,130,816
$58,928,875
731,477
675,433
742,361
$67,366,583 970,985
$71,433,993 1,076,547
$47,145,659
$52,806,249
$59,671,236
$68,337,568
$72,510,540
$ 6,885,447
$ 7,360,603
$ 8,542,762 $ 9,358,232
$10,270,867
13,381,840
14,104,870 6,104,009
REVENUES:
Sales of electric energy Other operating revenues Total operating revenues Other income Total revenues
1965
CURRENT EXPENSES:
Operation â&#x20AC;&#x201D; Fuel
529,768
15,353,872 7,160,923 709,753
18,304,172 8,871,283 879,071
19,522,779 9,164,883 857,603
$25,273,608
$28,099,250
$31,767,310
$37,412,758
$39,816,132
$21,872,051
$24,706,999
$27,903,926
$30,924,810
$32,694,408
$ 6,024,656
$ 6,867,883
$ 7,718,486
$ 8,162,797
$ 8,369,331
2,930,621 1,003,767
3,373,776 1,179,206
3,837,000 1,343,538
4,299,656 1,466,002
4,471,124
Total sinking fund payments
$ 9,959,044
$11,420,865
$12,899,024
$13,928,455
$13,649,027
Balance
$11,913,007
$13,286,134
$15,004,902
$16,996,355
$19,045,381
479,696 6,008,704
542,178 6,882,337
598,185 7,680,380
640,668 8,384,582
$ 6,488,400
$ 7,424,515
$ 8,278,565
$ 9,025,250
Other operating expenses
4,495,076 511,245
Maintenance
Other current expenses Total current expenses Balance of revenues after current ex
penses (per Trust Indenture) . . SINKING FUND PAYMENTS:
Interest account (exclusive of interest charged to construction and reimburse ment from the Commonwealth Govern
ment of Puerto Rico)
Bond redemption account (exclusive of reimbursement from the Comrnon-
wealth Government of Puerto Rico) Reserve account
808,572
TRANSFERS TO:
General reserve fund â&#x20AC;&#x201D; provision for selfinsurance
Renewal and replacement fund Total
transfers
>
666,814 10,257,072
$10,923,886
Balance available for contributions in
lieu of taxes, etc.
$ 5,424,607 $ 5,861,619 $ 6,726,337 $ 7,971,105 $ 8,121,495
PROVISION FOR CONTRIBUTIONS IN 4,957,439
5,563,099
$
467,168
298,520
Transfer to sinking fund reserve account $ Total ^
149,260
$
213,992
$
379,503
$
229,638
233,584
$
149,260
$
213,992
$
379,502
$
229,638
233,584
$
149,260
$
213,992
$
379,502
LIEU OF TAXES Balance
$
6,298,353
7,212,100
427,984
759,005
7,662,219 $
459,276
PROVISION FOR:
233,584
Balance transferred to unappropri ated net revenues
$
229,638
TOTAL REVENUES, BALANCE AVAILABLE FOR
DEBT SERVICE AND DEBT SERVICE REQUIREMENTS
REVENUE FROM SALES OF ELECTRICITY
Millions of Dollars
Millions of Dollars 80
■ Total Revenues
^ Residential
□ Balance After Current Expenses ^ Debt Service Requirements
■ Total
"
-
10 —
Fiscal
'56
'57
'58
■62
'63
'64
'65*
Years
Fiscal
'56
"57
'58
'59
'60
'61
'62
'63
'64
*65*
Years
issued as they become due, as well as to create
properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds have been retired, this percentage will be
reserves for such purposes.
reduced to 140.
Resources Authority Sinking Fund. The Authority has covenanted to deposit in this fund a sufficient amount of its revenues, after expenses for main
tenance and operation of its electric properties, to pay the principal of and the interest on all bonds The Authority has also covenanted that it will at
The bonds and the income therefrom are, under
all times fix and collect reasonable rates and charges
provisions of Acts of Congress now in force, exempt
sufficient for the payment of maintenance and oper
from Federal and State taxation. These bonds are
ating expenses and bond principal and interest, and
also legal investments for savings banks and trust
to create certain reserves. Rates must also provide
funds in the states of New York and California and
for the making of deposits required by the Trust
are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance companies to qualify them to do business in Puerto Rico. The bonds are rated "A" by Moody's Investment Service and by Standard and Poor's. In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub
Indenture to the credit of the General Reserve Fund
and the Renewal and Replacement Fund, and for
payments in lieu of taxes to the Commonwealth and the municipalities it serves. In order for the Authority to issue additional bonds under the Trust Indenture, the average annual bal
ance of revenues from its electric properties for the
divisions, there is no known record of default or
preceding twenty-four months, after deducting the
delinquency in the payment of principal of or interest on any obligation, nor has there been any forced or
cost of maintaining, repairing and operating these 10
"managed" refunding of maturing bonds to avoid
collected from Puerto Riean residents on income
default.
earned in Puerto Rico, and Federal excise taxes col
The Commonwealth of Puerto Rico
Puerto Rico is the fourth largest of the islands in the Caribbean area. It is about 100 miles long and 35 miles wide, having an area of 3,423 square miles and a population estimated at 2,572,000. Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, following the same general procedures, as do the fifty federated
States over theirs. It differs from the States primarily in its relationship to the Federal Government. In brief, residents of Puerto Rico do not vote in the
lected on exported Puerto Riean products, such as rum and tobacco, are returned to the Commonwealth Treasury. This relationship with the Federal Govern ment is defined through the medium of the compact
entered into by Congress and the People of Puerto Rico, and is further described hereafter.
Government History
Puerto Rico came under United States sovereignty by
the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil govern ment for the Island in 1900 including a Governor,
Cabinet, Senate and Supreme Court, all appointed by
national elections. They are represented in Congress by a Resident Commissioner who has a voice but no
the President of the United States. Only a House of
vote in the House of Representatives. Federal taxes do not apply in Puerto Rico except by mutual con sent, as is the case with social security taxes and unemployment insurance. No Federal income tax is
Delegates was elected by the People of Puerto Rico. Over succeeding years strong feeling developed for a less colonial form of government and in favor of United States citizenship. As a result, the original law
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South Coasi Steam Plant â&#x20AC;&#x201D;
253,000 KW including a fourth unit of 82,500 KW placed in service in December 1963.
was superseded in 1917 by the Organic Act or Jones Act, which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local purposes. Both Senate and House were elected by the people, but the Executive and Judicial branches remained under control of Washington through ap pointment by the President. No further change occurred until 1946 when the
States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations Act.
This Act also authorized the People of Puerto Rico to draft and approve their own constitution. Such a constitution, similar to those of the various
President for the first time appointed a Puerto Rican
states, was drafted by a freely elected constitutional convention in Puerto Rico, overwhelmingly approved in a special referendum, and approved by Congress
as Governor. In 1947 the Jones Act was amended to
of the United States and the President. It became
permit Puerto Ricans to elect their own Governor,
effective upon proclamation by the Governor of
who in turn was empowered to appoint his Cabinet and the members of the Supreme Court. The next advance toward complete local govern
Puerto Rico on July 25, 1952.
ment occurred in 1950 when, in accordance with the
The Commonwealth Government
wishes of the People of Puerto Rico, the 81st Con gress enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a compact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of the
those of the States. Both the Governor and the bicam
Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United
four years.
The Constitution recognizes and assures a separation of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and in
eral legislature are subject to regular election every
Governmental responsibilities assumed by the Com monwealth are greater than those normally assumed by the State government. Municipalities, which com bine both rural and urban areas, are the only local
these public corporations is supported entirely by revenues derived from their operations. Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly
political subdivisions and are comparable to counties
demonstrated in Puerto Rico. Only a declining and
in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Gov ernment and the municipalities. There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government carries out a number of important functions usually performed by local governments in the continental United States. Among these are police and fire pro tection, education, all major street and highway
now insignificant minority party favors independence.
construction, and public health programs. In addition, the Commonwealth Government supervises munici pal fiscal affairs to a very substantial extent. Commonwealth and municipal governments are relieved of most of the responsibility for constructing and financing electric, water and sewer systems by the Water Resources Authority and the Aqueduct and Sewer Authority. Air and seaport facilities are admin istered by the Ports Authority. The bonded debt of
Both major political parties, the Popular Democratic Party and the Statehood Republican Party, hold maintenance of permanent ties with the United States as a basic principle, and differ only as to the form which that future political relationship should take. Improved Commonwealth Status and Plebiscite
Since 1952, when Congress authorized and Puerto Rico accepted the present commonwealth form of government, it has been recognized that this concept of political status, being a new legal entity within the framework of the government of the United States, could in due course be subject to improvement. No significant changes were proposed until 1961 when, through direct vote by Puerto Ricans, and with ap proval by Congress, the U. S. Congress provided for
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removal of control of the Commonwealth debt limit
House of Representatives, and was passed by the
from the Federal Relations Act at such time as it was
House on October 23, 1963 and by the Senate on
incorporated by referendum in the Puerto Rican Constitution, and authorized appeal of decisions of the Supreme Court of Puerto Rico directly to the U. S. Supreme Court, instead of through the U. S.
February 18, 1964. The Resolution provides for the
First Circuit Court of Appeals.
establishment of a "United States-Puerto Rico Com mission on the Status of Puerto Rico" which is to
study all factors which may have a bearing on the present and future relationship between the United
On July 25, 1962, the 10th Anniversary of the
States and Puerto Rico. The membership of the
Commonwealth, the Governor of Puerto Rico stated sufficient time had elapsed, and enough experience had been gained, to consider improvement and refine ment of the commonwealth concept. Once this was
Commission consist of three persons appointed by
to be defined, measures could then be taken to hold
Rico. The Commission is to render its report to the
a plebiscite in which the people could express their preference for a perfected commonwealth status, or
President and the Congress of the United States and to the Governor and the Legislative Assembly of Puerto Rico not later than January 1966. It is expected that this study will result in the basis of a clarification and perfection of common
for the classical forms of government of statehood or
independence. The Legislature of Puerto Rico, by almost unanimous vote, adopted a Resolution peti tioning Congress to provide the basis for such plebis cite.
In response to this, a Resolution (HR 5945) was introduced on April 30, 1963, in the United States
the President of the United States, plus two each
selected by the Senate and the House of Represen tatives, and six appointed by the Governor of Puerto
wealth status in such a manner that a subsequent
plebiscite can express the basic preference and choice of the voters of Puerto Rico as to their future political status.
Rapid Economic Progress
For over two decades, economic growth in Puerto Rico has been rapid and continuous. Commonwealth gross product has increased nearly eightfold, from $287 million in 1940 to $2,532 million in 1964. The
net income of Puerto Rico has more than kept pace. During the same period it rose from $225 million to $2,097 million, registering a 10% increase in 1964. Especially significant, net income per capita after adjustment for price changes has shown an average annual increase for the last twenty-four years of about 5% compounded. In fact, the rate of increase has been accelerating, from 4.2% in the decade 1941-50,
The first of four 10,000 KW jet powered peaking units, this one at the Palo Seco Steam Plant.
to 5.2% in the decade 1951-60, 6.5% in 1961-63,
and 6.5% in 1964, making the Commonwealth's economy one of the fastest growing in the world. Equally impressive has been the transformation
of the Commonwealth's economy from over-depend ence on sugar to a high degree of industrialization and diversification. While net income from agricul ture has expanded from $71 million in 1940 to $205 million in 1964, that from manufacturing has multi plied eighteen times, from $27 million in 1940 to $486 million in 1964, and now provides 23% of Commonwealth net income. Whereas in 1940, sugar products accounted for nearly two thirds of exports,
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in 1964 they provided less than a seventh. Nowadays more than two thirds of manufacturing income is
generated by the production of new types of goods, principally for shipment to the continental United States. Such shipments have jumped from $23 million
New desalination
plant at the
in 1949 to $567 million in 1964.
Palo Seco Steam Plant.
These new products cover a wide range such as apparel, petroleum derivatives, and electronic prod ucts. Large, heavily capitalized manufacturing opera tions have shown a significant increase in recent
years as compared to those labor-intensive operations promoted during the early part of the industrialization program. These include the Union Carbide & Chem ical Corp., which operates a $28 million glycol plant and has under construction a $22 million plant to
produce alcohol intermediates. Petroleum refineries are operated by Caribbean Refining Co., which recently completed an expansion program, and the Commonwealth Oil Refining Co., which is currently adding a $33 million investment in petrochemical
Palo Seco Steam Plant.
Water Resources Authority's helicopter lifting an aliiniinum V, guyed transmission line structure.
plant, producing cake for the growing cattle and dairy industry and oil for the domestic market and
for the tuna canneries, commenced operations re cently. A subsidiary of Libby, McNeill and Libby has established a plant for the canning of tomato sauce and juice produced from local crops. Further, many of the plants are branches or sub sidiaries set up by such firms as General Electric, Consolidated Cigar, U. S. Rubber, American Can, Phelps Dodge, Sperry Rand, Daystrom, Carborun dum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B. V D., Bell & Howell, International Shoe, and W. R. Grace. One
significant addition to Puerto Rico's blue chip roster is Ford Motor Co.'s $15 million ball bearing plant, one of the most modern facilities of its kind in the world.
Helping to bring about such extraordinary changes
in Puerto Rico's economy has been the Common operations. An addition to Puerto Rico's petro
wealth Government's comprehensive development
chemical complex will be Puerto Rico Chemical Co., which has under construction a $6 million anhydrous benzene bicarboxylic plant. Negotiations are now being completed with Phillips Petroleum Co. for the establishment of another petrochemical complex on
program, especially those phases directed at encour aging manufacturers in the continental United States
the south coast with a total investment of almost
$600 million, creating direct employment of 33,000. During calendar year 1964 some 175 new factories were established on the island as a result of Puerto
Rico's industrial development program. Over 1,100
plants promoted or otherwise established under this program are now in existence in Puerto Rico. Food processing has also been a significant growth area in recent years. Two rice mills and a large flour and feed mill supply an important share of Puerto Rico's food requirements. Four large tuna canneries are now in operation; and, with two addi
to expand and locate their new plants in Puerto Rico. As a result of this program, the annual inflow of capital from the continental United States for fixed investment in the Commonwealth has risen from $31 million in 1947 to $309 million in 1964. Annual fixed investment from all sources has risen from $62
million to $581 million during the same period and has equalled 20 percent or more of gross product since 1957, reaching 23% in 1964. The Puerto Rican people have benefited greatly from the economic expansion achieved since 1940. Life expectancy has increased from 46 years to 70 years, and the death rate has declined from 18.4 per
thousand to 6.8 per thousand. Personal income per
tional plants under construction, the island has be
family has risen from $611 to $3,827. Public and private day school enrollment has increased from
come one of the leading suppliers of canned fish in
297,000 to 670,000. University and college enroll
the United States market. A soya bean processing
ment has grown from 5,000 to 33,000.
PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico
The Community We Serve Fiscal Years
An Expanding Economy: Gross Product — $ Millions Net Income — $ Millions
Personal Income Per Family — $
.
% Increase
1940
1964(1)
or (Decrease)
287 225 611
2,532 2,097 3,827
782
73
1,417
17
282
312
2,239
618
5,300 1,950
832
526
Banks:
Debits — $ Millions
Private Savings Accounts — $ Millions Assessed Value of Taxable Property — $ Millions Income Tax Collections — $ Millions . Power Generation — Millions of KWH .
2
108
166
3,403
1,869,000 39.0 18.4 46 286,000 5,000
2,572,000 30.9 6.8 70 608,000 33,000
1,841 1,559
A Healthier, Better Educated Population: Population Birth Rate — Per Thousand Death Rate —Per Thousand Life Expectancy — Years Public Day School Enrollment University and College Enrollment
A More Balanced Economic Life:
37 (21) (63) 52 113 560
Percentage Points
Per cent of Net Income from:
Manufacturing Agriculture
Commonwealth and Municipal Government
Change
12
23
11
31
10
(21)
8
13
5
Trade
12
18
6
Other
37
36
(1)
Per cent of Exports from: Exports by New Factories'^'
63
63
Sugars (Raw and Refined)
62
14
Other
38
23
(48) (15)
< 1' Preliminary figures. (2) Promoted by the Economic Development Administration. Does not include exports of other new factories. Source: Puerto Rico Planning Board.
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