April 1907
A SPECIAL
REPORT ON
AUTHORITY COMMONWEALTH OF PUERTO RICO
GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO SAN JUAN, PUERTO RICO
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PUERTO RICO WATER RESOURCES AUTHORITY
1950 - Our Growth - 1966
Data for the twelve months ending Times
June 30, 1950
Sales of electricity (Kwh)
411,727,000
Revenues from sales
$11,170,000
Customers (number)
Average sales per customer (Kwh) Average revenue per customer
$
December 31, 1966
4,031,231,000 $
88,844,000
Increased
9.8 8.0
177,000
594,000
3.4
2,419 65.64
6,927 152.67
2.9 2.3
4,729,927,000 770,300 990,420
9.1 8.0 7.0
Generation requirements (Kwh) 519,014,000 Annual peak demand (Kw) 96,230 Generating capacity installed (nameplate Kw). . 140,560
$
Revenues (total)
$11,317,000
$
92,275,000
8.2
Current expenses
$ 5,390,000
$
48,957,000
9.1
Balance of revenues available for debt service . . $ 5,927,000
$
43,318,000
7.3
Contribution in lieu of taxes Other contractual obligations
$ 1,178,000 3,681,000
$
9,731,000 32,638,000
8.3 8.9
Contractual obligations (total)
$ 4,859,000
$
42,369,000
8.7
$ 462,613,000
8.3
59,593,000
2.3
Electrical plant in service (at cost) . . . . $55,572,000 Construction work in progress
25,371,000
Electric plant (at cost) $80,943,000 Long term debt and outstanding notes . . . . $60,545,000
$ 522,206,000 $ 363,189,000^^
6.5 6.0
Equity of the people of Puerto Rico
$ 117,736,000
4.7
$24,905,000
With the present balance of revenues for debt service, if expansion needs required, the Authority could issue
roughly $163,000,000 in additional revenue bonds within the limits established by the Trust Indenture securing these bonds.
ON THE COVER San Juan Steam Plant
— This plant is the largest of the System with a total capacity of 378,000 Kw.
Commonwealth of Puerto Rico
.b-
PUERTO RICO WATER RESOURCES AUTHORITY
o01
Governing Board
Officers
Chairman: HON. ROBERTO SANCHEZ VILELLA Governor of the Commonwealth of Puerto Rico
RENAN COLON
Chief Engineer FELIX CORDOVA DIAZ
Vice-chairman: HON. FRANCISCO LIZARDI
Secretary of Public Works Member: HON. MIGUEL HERNANDEZ AGOSTO
Secretary of Agriculture
General Manager — Services and Supply HAROLD TORO
General Manager — Irrigation Services JOSE VILA RUIZ General Counsel
CARLOS VELAZQUEZ TORO
Principal Officers
Head, Production and Transmission Division HUMBERTO CORDERO
RAFAEL V. URRUTIA
Head, Distribution and Sales Division
Executive Director
WALDEMIRO VELEZ DR. MODESTO IRIARTE
Head, Electrical Planning and Research Division
Assistant Executive Director — Electrical Planning, Constrtiction and Research
Head, Power Design and Construction Division
EDUARDO LUBE Assistant Executive Director -
JOSE A. MATOS
JOSE 1. DIAZ Finance
Controller
JULIO NEGRONI
LOUIS ROIG MARTINEZ
Assistant Executive Director - ■ Power Operations
Treasurer
FERNANDO TORRENT
JAVIER CUEVAS BENITEZ
Assistant Executive Director — Industrial Relations
Head, Purchasing Division RAFAEL VAZQUEZ COLON Head, Personnel Division
and Personnel
HECTOR M. MORALES
Consulting Staff
Head, Transportation and Services HERMANN MUNOZ
RAEAEL R. RAMIREZ Power Consultant PEDRO COLON PAGAN
Consultant — Engineering and Construction
Public Relations Officer
RAFAEL D. CHERVONI
Head, Safety Division Trustee
First National City Bank, New York, N. Y.
Consulting Engineers Jackson and Moreland Division
of United Engineers and Constructors Inc. Auditors Arthur Andersen & Co.
Bond Counsel
Mitchell, Pershing, Shetterly & Mitchell
Puerto Rico Water Resources
Authority The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto Rico Water Resources Authority, an autonomous public service corporation and instrumentality of the 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 first generating plant in 1915, and the Utilization of Water Resources of Puerto Rico, created in 1927. In
1941, the Authority was established by law to replace the Utilization of Water Resources and ensure a
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 War II fuel shortage, the two large private electric utilities on the Island were taken over by the United States Government as an emergency measure and 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 heavily dependent on a single crop — sugar. In the latter half of that same decade, an industrialization
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 close to 1,400 new factories, promoted under the economic develop ment program, are in operation. Such rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise in the demand for energy. Throughout the twenty-five years elapsed since the Authority came into being its growth has been steady
Rafael V. Urrutia Executive Director
and most impressive. The comparative figures shown on the inside of the cover page speak for themselves. From its inception the Authority has had to con stantly build new hydro and thermo-electric plants to 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 990,420 Kw. Annual capital construction programs in recent years have reached as high as $47,000,000. The capital construction program for 1966-67 is estimated at $51 million. It includes work on three
100,000 Kw units for the San Juan Steam Plant.
One unit has already been completed. The others are scheduled for completion in August 1967, and March 1968 respectively. Other important projects are the installation of three 20,000 Kw and one 10,000 Kw
jet peaking units, throughout the system. This pro gram also includes general transmission and dis tribution facilities, rural electrification projects, the acquisition of land and the construction of build ings, and miscellaneous items. When current projects
are completed, total generating capacity will be 1,260,420 Kw.
The Authority has grown to become the second largest municipally owned, integrated electric utility in the United States as is indicated by the following tabulation: City of Los Anf^i'les Puerto Rico Department of Water Resources Water and Power
As of Dec. 31, 1966
Authority A uthority As of D ec. 31. 1966
City of Seattle
Department of
Lighting As of Dec. 31. 1966
.
$906,799,687
$426,879,065
$274,804,121
Electric Revenues
$170,308,420
$ 88,844,062
$ 46,217,929
Net Plant .
.
Number of
Customers .
.
1,055,238
Af! important commercial section in Santurce showing some of the htxtiry hotels.
Present Electric System The total installed generating capacity of the Author ity at the end of December 1966 had a name plate
rating of 990,420 Kw and maximum dependable ca pacity of 1,064,960 Kw. The physical plant presently consists of twenty-three generating stations, of which eighteen are hydroelectric, four are thermal-electric and one is nuclear. Thermal-electric facilities now
supply about 94 percent of the electric energy gen erated. The Authority's four thermal-electric generat ing stations have a total installed name plate rating of 866,000 Kw.
A desalination pilot plant has also been inaugurated, to provide 14,400 gallons a day of make-up water for the main unit boilers. The desalination process is new and uses waste heat from the turbine condenser
system to evaporate sea water in a vacuum. The South Coast Steam Plant, near Ponce, has two
44,000 Kw, two 82,500 Kw steam-electric units and a 10,000 Kw jet peaking unit. 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.
The San Juan Steam Plant has an installed capacity Steam-Electric Stations
The Palo Seco Steam Plant, near San Juan, was
of 378,000 Kw in four 20,000 Kw, two 44,000 Kw and two 100,000 Kw steam-electric units and a
placed in service in 1960 and has two 82,500 Kw steam-electric units and one 10,000 Kw jet peaking unit powered by a kerosene-burning aviation-type jet motor. This unit is used for peaking and for emer
10,000 Kw jet peaking unit. Work on two other 100,000 Kw units, scheduled for completion in August 1967, and March 1968, is under way. The Mayaguez Plant is equipped with two gas
gencies, being designed for automatic synchroniza
turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle
tion to the line from a cold start in only two minutes.
PUERTO
RICO
WATER
RESOURCES
AUTHORITY
ELECTRIC SYSTEM DECEMBER 31 cammk* -lorzHVk
(O.ooo
«Tension-
175.000
UNDER.^STHycTl6N
r I*" —^ VOOO
SABftJk Pl-AK^"ST 080 KW
CATAfio
7.500 KV
"lakts
COtCGtO-vmcmA
1\
\5,ooo«¥*
MAVA0UE7 30A00
' .y
MM UMENZO
CAYET
3,07ZKVA
CARITE
autNA v.su-T,500KVA
□ thermal plants
^ NUCLEAIR PLANT
(BONUS)
O hyoro-electhic plants
A transmission SUBSTATIONS A DISTRIBUTION
^I
— — SBKV SUBMARINE POWER CABLE sa*w CLtCTRlC transmission lines
Existing us kv electric transmission lines "
115 KV electric transmission lines lUndtt Contiruci'onl RESERVOIRS
SUBSTATIONS
peak loads. A 10,000 Kw jet peaking unit was in stalled recently. Hydroelectric Stations 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. Nuclear Power Plant
A nuclear power plant with a rated capacity of 16,500 Kw and utilizing a new and advanced type of boiling water reactor and nuclear superheater, located on the western tip of Puerto Rico, was placed in ser vice in January 1966. It was constructed 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 AEC, 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 feasible.
Transmission and Distribution Systems
The Authority's transmission system consists of 1,534 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 125 substations and sectionalizer
stations, with a total name plate transformer capacity of 1,830,675 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. Distribution facilities include 196 substations owned
by the Authority with a capacity of 818,584 Kva
GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946
Kilowatt
Customers
Load
Hours per
(June 30)
(Million Kwh)
Maximum Peak Load
Average
(Thousands of Dollars)
(End of Period)
(Kw)
(Kw)
1945-46
$ 5,764
258.6
124,959
63,000
1950-51
13,006
488.2
185,090
1955-56*
25,216 28,693 33,973 35,781 40,441 45,304 50,846 57,520 65,865 72,952 83,734 94,957
930.8
1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,465.6 2,858.4 3,186.3 3,771.7 4,270.0
314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 552,111 581,369 610,586
Sales f
Fiscal Year
1956-57* 1957-58* 1958-59* 1959-60* 1960-61*
1961-62* 1962-63* 1963-64* 1964-65*
1965-66*
1966-67t
Revenue per
Revenue
Customer
Kilowatt Hour
Customer
39,000
2,069
.0223
$ 46.13
109,000
69,000
2,638
.0266
70.27
210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 637,000 737,000 845,000
129,000 153,000 181,000 198,000 231,000 261,000 294,000
2,956 3,184 3,578 3,687 4,080 4,350 4,664 5,053 5,522 5,771 6,488 6,993
335,000 388,000 436,000 506,000 581,000
per
.0271
80.08
.0266
84.72
.0262
93.58
.0252
92.79
.0243
98.96
.0239
107.34
.0237
113.44
.0233
121.20
.0230
130.85
.0229
132.13
.0222
144.03
.0222
155.52
* Includes amount recovered through Fuel Oil Adjustment, t Estimate including Fuel Oil Adjustment.
which, supplied from the transmission network, con vert the electric power for distribution at 2400/4160 Y, 4800/8320 Y and 7,620/13,200 Y volts
through distribution feeders which traverse 76 cities and towns and nearly all of the rural area. In addition, there are 163 privately owned distribution substations with a total capacity of 355,765 Kva to serve indus
By law, the Commonwealth Government contrib utes to the Authority the annual amounts required to guarantee that the Authority recovers the complete cost of service to customers served under the REA
program, in the case that revenues do not provide an adequate contribution to fixed costs.
trial customers, making a total installed capacity of
Financing System Growth
1,174,349 Kva.
Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for
Rural Electrification
its corporate purposes and to secure the payment of
Through successive amendments to an original loan
these bonds under a Trust Indenture. It also has full
contract for $6,376,000, entered into in 1952 be
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
tween the Authority and the Rural Electrification Administration of the United States, the Authority has borrowed to date $75,040,000 on bonds bearing interest at the rate of 2% under a loan contract now
totaling $76,040,000. These funds have been loaned by REA for the construction of generation, trans mission and distribution facilities to serve rural customers.
ties. Properties may be acquired by the Authority by any lawful means, including the power of eminent 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
propriated net revenues were $90,482,000 and out standing debt was $363,189,000. Total revenues for the twelve months ended De
facilities producing income for the support of long-
cember 31, 1966, were $92,275,000. Current ex
term obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $354,489,000 as of December 31, 1966. 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, 1966, a total of $506,620,156 was invested in capital improvements. Of this amount $371,331,535 has been provided from the net proceeds of bond issues and bank bor rowings, and $135,288,621 had come mainly from net revenues of and contributions to the Authority. $513,026,000, operating and appropriated reserves
penses were $48,957,000, leaving a balance of $43,318,000 available for debt service requirements and other contractual obligations. The maximum debt service for any future year on outstanding issues was $17,862,000, indicating a coverage of 2.45 times on present debt. Accruals for contributions to the Commonwealth and municipal governments in lieu of taxes amounted to $9,731,000 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
were $30,626,000, contributed capital and unap
and contractual obligations.
On December 31, 1966, total net assets amounted to
- V-rf.
Ponce Cemen! Corporation
— One of the largest industrial customers of the Water Resources Authority.
I,: /A
A modern shopping center in Metropolitan San Jitan.
s
m.
SALES OF ELECTRICITY - KWH
NUMBER OF CUSTOMERS
other
Fiscal '58
'59
'60
"61
'62
i^oars
'63
'64
Fiscal
-58
'59
'60
'61
'62
Vears * Estimate
Source: P.R.W.R.A. Firtanclal Reports.
â– Estimalc
Source, P R.W.R.A Financial Reports
'63
'64
'65
'66
'67
Puerto Rico Water Resources Authority
Condensed Balance Sheet As of December 31, 1966
ASSETS
NET UTILITY PLANT:
Gross utility plant Less accumulated provision for depreciation
$522,206,446 95,327,381
Net utility plant
$426,879,065
OTHER PHYSICAL PROPERTY
188,345
BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS
16,858,569
CURRENT ASSETS:
Funds and working advances Accounts receivable — Less Reserve for uncollectible accounts Materials and supplies Prepayments, special deposits, etc
$ 20,894,218 19,696,791 14,594,467 771,785
55,957,261
DEFERRED DEBITS:
Debt discount and expense in process of amortization
$ 11,488,311
Other
1,654,274
TOTAL ASSETS
13,142,585
$513,025,825
LIABILITIES
CONTRIBUTED CAPITAL
$ 38,371,611
UNAPPROPRIATED NET REVENUES
52,109,953
LONG-TERM DEBT:
Electric revenue bonds Notes payable
$354,489,000 8,700,000
363,189,000
CURRENT LIABILITIES:
Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds
$ 9,600,569 3,904,104 5,789,952
Accrued contributions in lieu of taxes
5,070,376
Other
4,128,854
DEFERRED CREDITS
28,493,855
235,098
RESERVES:
Self-insurance
Injuries and damages Revenue stabilization
Appropriated sinking fund TOTAL LIABILITIES
$
6,163,351
3,371,398 1,467,856
19,623,703
30,626,308 $513,025,825
Puerto Rico Water Resources Authority
Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture)
Twelve Months Ending REVENUES:
June 30
June 30
June 30
June 30
1963
1964
1965
1966
December 31
1966
Sales of electric energy . . Other operating revenues . .
$57,519,700 1,409,175
$65,864,594 1,501,989
$72,952,446 1,644,048
$83,734,015 1,890,939
$88,844,062 2,039,586
Total operating revenues
$58,928,875
$67,366,583
$74,596,494
$85,624,954
742,361
970,985
1,182,929
1,369,968
$90,883,648 1,391,835
$59,671,236
$68,337,568
$75,779,423
$86,994,922
$92,275,483
$ 9,358,232 18,304,172
Other current expenses.
709,753
879,071
$10,709,138 19,894,285 9,339,608 750,520
$12,035,637
Maintenance . . . .
$ 8,542,762 15,353,872 7,160,923
22,518,518 10,717,943 1,045,519
$12,582,034 23,864,715 11,505,506 1,005,009
$31,767,310
$37,412,758
$40,693,551
$46,317,617
$48,957,264
penses (per Trust Indenture) . . $27,903,926
$30,924,810
$35,085,872
$40,677,305
$43,318,219
$ 7,718,486
$ 8,162,797
$ 8,426,525
$ 9,061,921
$ 9,448,090
3,837,000
4,299,656
4,631,960
5,992,000
6,110,000
1,343,538
1,466,002
220,116
207,304
Total sinking fund payments . . . $12,899,024 $13,928,455
$15,261,225 $25,416,080
$15,527,479 $27,790,740
12,397,814
$ 730,902 14,617,510
$ 780,985 16,329,135
Other income
CURRENT EXPENSES:
Operation —
8,871,283
Balance of revenues after current ex
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
Common
wealth Government of Puerto Rico) . Reserve account
$15,004,902
$16,996,355
$13,278,601 $21,807,271
$
$
$
(30,611)
TRANSFERS TO:
General reserve fund — provision for selfinsurance Total transfers
678,078
7,680,380
640,668 8,384,582
$ 8,278,565
$ 9,025,250
$13,075,892
$15,348,412
$17,110,120
$ 6,726,337
$ 7,971,105
$ 8,731,379
$10,067,668
$10,680,620
Renewal and replacement fund . . . .
598,185
Balance available for contributions in
lieu of taxes, etc PROVISIONS FOR CONTRIBUTIONS IN LIEU OF TAXES Balance
6,298,353
7,989,345
7,212,100
9,731,410
9,172,130
$
427,984
$
759,005
$
742,034
$
895,538
$
949,210
$
213,992
$
379,503
$
371,017
$
447,769
$
474,605
$
213,992
$
379,502
$
371,017
$
447,769
$
474.605
PROVISION FOR:
Balance transferred to unappropri ated net revenues
TOTAL REVENUES, BALANCE AVAILABLE FOR REVENUE FROM SALES OF ELECTRICITY
DEBT SERVICE AND DEBT SERVICE REQUIREMENTS Millions of Dollars
Millions of Dollars
100
100
Total Revenues
Total
□ Balance After Current Expenses -
Residential
Debt Service Requirements
60 •
50 •
II ^il i|il i|il l|il l|il l| h- I il ii ■I ■! 0 —
Fiscal
'58
'59
'60
'61
'62
'63
Years
• Estimate - Including Fuel Oil Adjustment. Source: P.R.W.R.A. Financial Reports.
New Bond Issue
In April 1967, the Authority proposes to sell $25,000,000 par value Electric Revenue Bonds for the purpose of liquidating current bank borrowings and continuing the Capital Improvement Program. Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple tion of the financing, will approximate $19,351,000 and will be covered over 2.26 times by net earnings for the twelve months ending December 31, 1966. Looking Ahead
Continuous studies of power needs, constandy re viewed and revised by the Authority and its consulting
engineers, now indicate that peak demand of the system will increase from 845,000 Kw in 1966-67 to 961,000 Kw in 1967-68, 1,079,000 Kw in 1968-69 and 1,226,000 Kw in 1969-70. It is expected that over 30,000 new customers will be added yearly. To meet this demand, the Authority's generating capacity 10
Fiscal Years
II 1 11 11 11 11 11 11 11 * Estimate - Including Fuel Oil Adjustment. Source: P.R.W.R.A. Financial Reports.
will be raised to a name plate rating of 1,730,420 Kw by June 1970. During the period from July 1, 1966 through June 30, 1970, it is anticipated that the Authority will invest $220,362,000 in further capital improvements. Of this amount, the sale of bonds will provide some $129,668,000. About $88,034,000 or 40% wUl be derived principally from revenues of the Authority, compared with an average of 27% accrued from earnings and contributions during the last nineteen years. The remainder of $2,660,000 will be available from previous bond issues. The above four - year program compares with capital expenditures actually made during the past nineteen years, distributed as follows: steam pro
duction plant $178,763,000, nuclear production plant $6,022,000, hydraulic production plant $36,220,000, gas turbine production plant $11,583,000, transmission plant $65,658,000, distribution plant $149,863,000 and other facilities $58,511,000 for a total of $506,620,000.
Security for the Bonds Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water 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 issued as they become due, as well as to create reserves for such purposes. The Authority has also covenanted that it wiU at all times fix and collect reasonable rates and charges sufficient for the payment of maintenance and oper ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide for the making of deposits required by the Trust
imder the Trust Indenture, the average annual bal ance of revenues from its electric properties for the
preceding twenty-four months, after deducting the cost of maintaining, repairing and operating these properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on aU bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds issued prior to 1965 have been retired, this percentage will be reduced to 140. The bonds and the income therefrom are, under
provisions of Acts of Congress now in force, exempt from Federal and State taxation. These bonds are also
legal investments for savings banks and trust funds
Indenture to the credit of the General Reserve Fund
in the state of New York and for savings banks in California and are eligible for deposit by banks in
and the Renewal and Replacement Fund, and for
Puerto Rico to secure public funds, and by insurance
payments in lieu of taxes to the Commonwealth and
companies to qualify them to do business in Puerto
the municipalities it serves.
Rico. The bonds are rated "A" by Moody's Invest ment Service and by Standard and Poor's.
In order for the Authority to issue additional bonds
I
|..
1 Jardines de Monte Hatillo — A new public housing development.
I*-! i
In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub divisions, there is no known record of default or de
which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local pur poses. It also provided that members of both Senate
linquency in the payment of principal of or interest on any obligation, nor has there been any forced or
and House were to be elected by the people, but the
"managed" refunding of maturing bonds to avoid
control of Washington through appointment by the
default.
President.
Government History
President for the first time appointed a Puerto Rican
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
permit Puerto Ricans to elect their own Governor,
Executive and Judicial branches remained under
No further change occurred until 1946 when the
ment for the Island in 1900. It provided for a Gov ernor, a Cabinet, a Senate and a Supreme Court Judiciary, all appointed by the President of the United States; only a House of Delegates was elected by the People of Puerto Rico. Over succeeding years strong feeling developed for a more autonomous form of government and in favor of United States citizenship. The original Act was
superseded in 1917 by the Organic Act or Jones Act,
El Monte, in Hato Rey,
one of the most modern apartment buildings.
as Governor. In 1947 the Jones Act was amended to
who in turn was empowered to appoint his Cabinet and members of the Supreme Court. The next advance toward complete local govern ment occurred in 1950 when, in accordance with the wishes of the People of Puerto Rico, the 81st Congress
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
Organic Act which define the political, economic and
tT r,-T*- •
y
■
Caribbean Gulf| Refining Corporation ■ A large industrial ctistomer.
ss~
'-t.
fiscal relationship between Puerto Rico and the United States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations
taken to the United States Court of Appeals for the First Circuit and to the Supreme Court of the United States and writs of error and appeals from judgments
Act. It also authorized the People of Puerto Rico to draft and approve their own constitution. The Con stitution was drafted by a freely elected constitutional
of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same
convention, overwhelmingly approved in a special
writs of error and appeals may be taken from other
referendum, and approved by Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on July 25, 1952.
Federal and State courts.
manner and under the same terms and conditions as
Governmental responsibilities assumed by the Commonwealth are greater than those normally as
sumed by a State government. Municipalities which The Commonwealth Government
combine both rural and urban areas are the only local
The Constitution recognizes and assures a separation
political subdivisions and are comparable to counties in scope. The only units of government with the right
of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and as in
to levy ad valorem taxes are the Commonwealth Gov ernment and the municipalities. There is, therefore, no
those of the States. Both the Governor and the bi cameral legislature are subject to regular election every four years. The Legislature operates under
other overlapping taxation or bonded indebtedness
standard parliamentary and legislative rules. Writs of error and appeals from judgments of the District
Court of the United States for Puerto Rico may be
payable from taxes. The Commonwealth Government assumes responsibility for a number of important functions normally performed by local governments in the Continental United States. Among these are
police and fire protection, education, all major street
construction, and public health programs. In addi tion, the Commonwealth Government supervises municipal 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 sea port facilities are administered by the Ports Authority, and major highway construction is financed by the Highway Authority. The bonded debts of these public corpora tions, with the exception of the Highway Authority, are supported entirely by revenues derived from their operations. Bonds issued by the Highway Authority will be supported by a portion of the gasoline tax.
the establishment of a United States-Puerto Rico
Commission on the status of Puerto Rico to study all
factors which might have a bearing on the present
and future relationship between the United States and Puerto Rico. The membership of the Commission
consisted of three persons appointed by the President of the United States, plus two each selected by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission rendered its report to the Presi
dent and the Congress of the United States and to the Governor and the Legislative Assembly of Puerto Rico. The report, a comprehensive study of the po litical, economic and sociocultural relations between Puerto Rico and the United States, analyzes the effect
of the present Commonwealth status and points out the remarkable achievements of the Island under this
Status and Plebiscite
In 1962, in order to resolve a long standing discus sion, the Legislature of Puerto Rico approved a resolution petitioning Congress for the prompt settle ment of the future political status of Puerto Rico, in a democratic manner, and proposing the submis sion to the vote of the people the following three status formulas: Commonwealth, Statehood
and
Independence. In response to this petition Congress approved, on February 18, 1964, H. R. 5945, providing for
Modern computer operation at the Water Resources Authority.
status. The report also states that in the Commis sion's opinion if the rate of economic and social ad vance experienced under Commonwealth can be
maintained at the present rate, either Statehood or independence could perhaps become feasible at some future indeterminate date. The report makes no recommendation as to which of the three alternatives
is preferable, concluding that the people of Puerto Rico should decide which status they prefer.
In December 1966, the Governor of Puerto Rico called a special session of the Legislature to con
sider the approval of legislation implementing the holding of a plebiscite. On December 23, the Gov ernor signed a bill (Act No. 1) approved by the Legislature, providing for a plebiscite to be held on July 23, 1967, for the people to express their pref erence for Independence, Statehood or Common wealth.
While it should be understood that voting on a
plebiscite may vary materially from an election in volving candidates, reference should be made to
the percentages of the 1964 vote obtained by the parties supporting the three forms of status. The Popular Democratic Party which supports Com monwealth (59.5%) and the Republican State
hood Party (34.7%) received the bulk of the ballots cast while the Christian Action Party (3.1 %)
and the Independence Party (2.7%) received only insignificant support.
Expansion and Diversification of
the Economy of Puerto Rico Economic growth in Puerto Rico since 1940 has been very rapid. Gross product of the Commonwealth has increased more than 10 times over its 1940 level
and has more than doubled during the past eight years. In the year ended June 30, 1966 gross product totalled an estimated $3,038 million, representing an increase of almost 11.7% over the prior year. Net income of the economy has increased from a level of $225 million in 1940 to $2,525 million
in 1966. Income, measured in terms of 1954 prices, has shown an average increase during the last five years of about 9.2% compounded annually and in
the year ended June 30, 1966 it increased by 8.3%. Per capita net income is now $955 compared to $121 in 1940.
The Commonwealth Government's program of industrialization has aided the economy to shift from one principally agricultural to one much better diversified between industry and agriculture. Con currently with the expansion in net agricultural in
Caparra by-pass showing its well-equipped lighting system.
come from $71 million in 1939-40 to about $184
million in 1965-66, manufacturing income increased from $27 million to $612 million, substantially sur passing agriculture as a source of income.
Puerto Rican manufacturing has been increasingly
diversified during the last two decades. In 1939-40 the manufacture of sugar products accounted for 35% of manufacturing income. By 1965-66 about 4.9% of manufacturing income resulted from this
industry. Manufacturing income is now generally derived from the production of new types of manu factured commodities, principally for shipment to the United States. Such shipments amounted to only $23 million in 1948-49. By 1965-66 they had reached a total of about $804 million.
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
plant to produce alcohol intermediates. Petroleum refineries are operated by Caribbean Gulf Refining Co. which recently completed an expansion program. Petrochemicals are of greatly increasing impor
tance to the economy of the Commonwealth, a
recent development being the addition of a $41 million aromatic plant to Commonwealth OU Re fining Company's $105 million refinery. Another such addition to Puerto Rico's petrochemical com
plex involves the Puerto Rico Chemical Company which has constructed a $6 million phthalic anhydride
plant. Phillips Petroleum has broken ground for a $58 million refinery which will produce basic feed stocks for a series of additional chemical plants
using petroleum derivatives. The first such plant to be announced is a raw nylon plant to be built jointly by Phillips and Rhone-Poulenc S.A. of France at a
years as compared to those labor-intensive operations promoted during the early part of the industrializa
cost of approximately $80 million.
tion program. These include the Union Carbide & Chemical Corp., which operates a $53 million glycol plant and has recently constructed a $22 million
area in recent years. Three rice mills and a large flour and feed mill supply an important share of Puerto Rico's food requirements. Four large tuna
Food processing has also been a significant growth
HH-HH ^j^j
Hato Rey —
The new financial center of Puerto Rico.
canneries are now in operation, and with one addi
tional plant under construction the Island has become one of the leading suppliers of canned fish in the United States market. A soybean processing plant
producing cake for the growing cattle and dairy in dustry, and oil for the domestic market and for the tuna canneries commenced operations recently. A
subsidiary of Libby, McNeill and Libby, has estab lished a plant for the canning of tomato sauce and
juice produced from local crops and Standard Brands, through one of its subsidiaries, has established a plant for the manufacturing of dessert preparations and baking powder.
Further, many of the plants are branches or sub sidiaries set up by such firms as General Electric, Consolidated Cigar, General Cigar, American Can,
Phelps Dodge, Daystrom, Carborundum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B. V. D., Bell & Howell, International Shoe, National Cash Register, Hercules
Powder, Stanley Works, Pepsico and W. R. Grace.
One significant recent addition to Puerto Rico's Blue
Chip roster is Ford Motor Co.'s $16 million ball bearing plant, one of the most modern facilities of its kind in the world.
Underlying Puerto Rico's growing and changing economy there has been a steady expansion in invest ment. Gross fixed investment during the last six consecutive fiscal years, 1961-1966, ran at the high
rate of 23% of gross product. Inflowing long-term U. S. capital rose from $31 million in postwar 1947 to an estimated $419 million in 1966.
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 deelined from 18.4 per thousand to 6.5 per thousand at present, which is now about the same as the U. S. average. The birth
rate has declined from 39.0 per thousand in 1940 to 29.7 per thousand in 1966. The people are better educated, with literacy increased from 68.5% to 86% at present. Public and private day school en rollment has increased from 286,000 to 717,000. School enrollment is now over 87% of school age population. Institutions of higher learning have also expanded rapidly. The University of Puerto Rico, which had only 5,000 enrolled in 1940, now has 28,194 students.
It is significant that the Commonwealth Govern ment has in recent years directed approximately 43% of its expenditures to education and health. The Commonwealth Government has set goals for
further improvement of living standards with the aim of attaining by 1970 a total of 2,820 factories and a per capita income of $1,070. Thus, the outlook is
for increasing activity in all sectors of the Common wealth economy to meet the demands of growth immediately ahead.
PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico
The Community We Serve Approximate Times Increased or
(Decreased)
An Expanding Economy:
1950
1966
287
755
3,038
4.0
Net Income — $ Millions
225
614
2,525
4.1
Personal Income Per Family — $
611
1,500
4,494
3.0
73
319
1,893
5.9
17
51
304
6.0
312
459
2,828
6.2
2
28
141
5.0
1940
Gross Product — $ Millions
Over 1950
Banks:
Debits — $ Millions
Private Savings Accounts — $ Millions . Assessed Value of Taxable Property — $ Millions Income Tax Collections — $ Millions . .
Percentage
A More Balanced Economic Life:
Points
Change
Per cent of Net Income from:
Manufacturing Agriculture Commonwealth and Municipal Government ,
12
14.5
24.2
31
24.3
7.3
8
11.4
13.5
2.1
Trade
12
16.6
17.8
1.2
Other
37
33.2
37.2
4.0
14.0
69.6
55.6
9.7
(17.0)
Per Cent of Exports from:
Exports by New Factories*
—
Sugars (Raw and Refined)
62
Other
38
51.1
8.4
(42.7)
34.9
22.0
(12.9) Per Cent
A Healthier, Better Educated Population: Population
Change
1,869,000
2,211,000
2,700,000
Birth Rate — Per Thousand
39.0
40.9
30.6
(25.2)
Death Rate — Per Thousand
18.4
22.1
10.5
6.5
(38.1)
Life Expectancy — Years Public Day School Enrollment . . . .
46
47.1
70.0
48.6
286,000
408,000
641,000
57.1
University and College Enrollment . . .
5,000
12,497
39,000
212.0
* Promoted by the Economic Development Administration. Does not include exports of other new factories. Source: Puerto Rico Planning Board.
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