OCTOBER
A SPECIAL REPORT ON
COMMONWBAI.TM Or PUBtlTO RICO
GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO •AN JUAN. PUKriTO NlOO
11 ^
e,A.i3^ l-f
1969
/• 3/ Ott-
PUERTO RICO WATER RESOURCES AUTHORITY
1950 - Our Growth - 1969
Data for the twelve months ended Times
June 30, 1950
June 30, 1969
Sales of electricity (Kwh) Revenues from sales Customers (number) Average sales per customer (Kwh)
411,727,000 $ 11,170,000 177,000 2,419
5,706,970,000 $ 118,883,000 665,000 8,756
Average revenue per customer
$
$
13.9 10.6 3.8 3.6
182.40
2.8
519,014,000 96,230 140,560
6,654,513,000 1,078,300 1,241,840
12.8 11.2 8.8
Revenues (total) $ 11,317,000 Current expenses $ 5,390,000 Balance of revenues available for debt service . . $ 5,927,000
$ 123,097,000 $ 66,445,000 $ 56,653,000
10.9 12.3 9.6
1,178,000 3,681.000
$
13,026,000 42,590,000
11.1 11.6
$ 4,859,000
$
55,616,000
11.4
Generation requirements (Kwh) Annual peak demand (Kw) Generating capacity installed (nameplate Kw). .
Contribution in lieu of taxes Other contractual obligations Contractual obligations (total)
$
65.64
Increased
Electrical plant in service (at cost) . . . . $ 55,572,000
$ 582,761,000
10.5
25,371,000
118,146,000
4.7
$ 80,943,000
$ 700,907,000
8.7
Long term debt and outstanding notes . . . . $ 60,545,000
$ 474,650,000
7.8
Equity of the people of Puerto Rico
$ 162,831,000
6.5
Construction work in progress Electric plant (at cost)
ON THE COVER
The San Juan Steam Plant —
Installed Capacity 578,000 Kw
$ 24,905,000
^ Commonwealth of Puerto Rico
^f PUERTO RICO WATER RESOURCES AUTHORITY
1 5^01
Governing Board Chairman: RAFAEL V. URRUTIA
Officers RENAN COLON
Chief Engineer Vice-Chairman: RAFAEL NEVARES Members: DR. ANTONIO SANTIAGO JORGE CAMUNAS
JAVIER CUEVAS BENITEZ
General Manager — Services and Supply RAEAEL REYES GARCIA
General Manager — Irrigation Services JOSE VILA RUIZ General Counsel
Principal Officers
ANTONIO BASCAGLIA
Head, Production and Transmission Division
FELIX CORDOVA DIAZ Executive Director
HUMBERTO CORDERO
JULIO NEGRONI Vice Executive Director
WILLIAM CANDELARIO
DR. MODESTO IRIARTE
JOSE A. MATOS
Assistant Executive Director — Electrical Planning,
Head, Power Design and Construction Division
Construction and Research
Head, Distribution and Sales Division Head, Electrical Planning and Research Division
JOSE B. CANDELAS
JOSE ISMAEL DIAZ
Controller
Assistant Executive Director — Finance
LOUIS ROIG
CARLOS VELAZQUEZ TORO
Treasurer
Assistant Executive Director — Power Operations
JULIO C. MUNIZ
RAEAEL VAZQUEZ COLON Assistant Executive Director — Industrial Relations
JUAN RAMOS VELILLA
and Personnel
Head, Purchasing Division Head, Personnel Division CARLOS E. LUBE
Head, Industrial Relations Division HECTOR M. MORALES
Consulting Staff
Head, Transportation and Services
Power Consultant
DAVID BRAVO, JR. Public Relations Officer
PEDRO COLON PAGAN
Trustee
Consultant — Engineering and Construction
First National City Bank, New York, N. Y.
RAFAEL R. RAMIREZ
Consulting Engineers Jackson and Moreland Division
of United Engineers and Constructors Inc. Auditors Arthur Andersen & Co.
Bond Counsel Mitchell, Petty & Shetterly
Felk Cordova Diaz 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 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
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 over 1,600 new factories, promoted under the economic development program, are in operation. Such rapid growth and profound change in the basic character of the econ
omy has created a continuous and rapid rise in the demand for energy.
1941, the Authority was established by law to replace
Throughout the twenty-eight years elapsed since the Authority came into being its growth has been steady and most impressive. The comparative figures
the Utilization of Water Resources and ensure a
shown on the inside of the cover page speak for
growth in the supply of electricity which would be
themselves.
Water Resources of Puerto Rico, created in 1927. In
adequate for the future needs of Puerto Rico's eco nomic development. Subsequently, during the World
War 11 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,
From its inception the Authority has had to con
stantly add new capacity to keep up with, and antici pate, the mounting demand for electric power. New generating capacity has been added almost every
at a later date, the electric facilities of various irri
year. Since 1944 total name plate rating of the Au thority's generating plant has risen from 64,440 Kw to the present capacity of 1,241,840 Kw. Annual capital construction programs in recent years have
gation services were integrated into the Authority's
reached as high as $87.5 million.
system.
The capital construction program for 1969-70 is
When the Authority began operations in 1941, the Island's economy was primarily agricultural and heavily dependent on a single crop — sugar. In the
estimated at $107.2 million. It includes work on units 3 and 4 of 200,000 Kw each at the Palo Seco Steam Plant. These units are scheduled for completion in
latter half of that same decade, an industrialization
1969 and 1970 respectively. It also includes work
on the fifth and sixth units of the South Coast Plant
City of Los Angeles
which will have a capacity of 410,000 Kw each. Other important projects included in the program are Unit No. 1 of 450,000 Kw at a new steam plant to be constructed in the southeast and several jet peaking units throughout the system. This program also includes general transmission and distribution facilities, rural electrification proj ects, the acquisition of land and the construction of buildings, and other miscellaneous improvements. The Authority has grown to become the second largest municipally owned, integrated electric utility in the United States as is indicated by the following
Water and Power
tabulation:
f' j" ?
Palo Seco Steam Plant —
showing two aclclitional 200,000 Kw units under construction.
> .,r \
Department of As of Dec. 31, 1968
Electric
Revenues
Puerto Rico
City of Seattle
Water Resources Department of A uthority Lighting As of As of Dec. 31, 1968 Dec. 31, 1968
$1,004,797,278
$541,092,186
$306,629,401
189,078,839
111,107,850
48,993,949
Number of Customers . .
Present Electric System The total installed generating capacity of the Author ity at the end of June, 1969 had a name plate rating of 1,241,840 Kw and maximum dependable capacity of 1,333,320 Kw. The physical plant presently con sists of twenty-two generating stations, of which
PUERTO RICO WATER RESOURCES AUTHORITY
ELECTRICAL CZ]
SYSTEM
irr ro.(. we. u
â–Ą A
â–˛
fifteen are hydroelectric, four are thermal-electric, one is diesel and two are jet peaking units. Thermalelectric facilities now supply about 96 percent of the electric energy generated. The Authority's four main generating stations have a total installed name plate rating of 1,086,000 Kw.
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 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 gencies, being designed for automatic synchroniza tion to the line from a cold start in only two minutes.
structed, 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 at the Commonwealth Oil Refin ing Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 410,000 Kw units are being added to this plant.
In addition two 200,000 Kw units are in construction
The San Juan Steam Plant has an installed capacity of 598,000 Kw in four 20,000 Kw, two 44,000 Kw, four 100,000 Kw steam-electric units and two jet
which are expected to be completed in 1969 and 1970. A desalination pilot plant has also been con
Kw.
4
peaking units with a combined capacity of 30,000
The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was also installed increasing the capacity of this plant to a name plate rating of 50,000 Kw. Hydroelectric Stations There are 15 hydroelectric plants with a total in stalled capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of plant output by collecting and storing water inflows
El Monte — a recently completed apartment complex.
during the rainy season for utilization during the dry season, and the remaining four operate on run-of-
the-river flows. Ten of the hydroelectric plants are non-attended and fully automatic.
Transmission and Distribution Systems The Authority's transmission system consists of 1,588 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 132 substations and sectionalizer
stations, with a total name plate transformer capacity of 2,206,425/31,143,875 Kva located at suitable
points throughout the system to insure stability of
service and provide an adequate islandwide network. The transmission 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 Authority's system. Distribution
facilities
include
215
substations
owned by the Authority with a capacity of 1,069,990/ 1,501,196 Kva which, supplied from the transmis sion network, convert the electric power for distribution at 2,400/4,160 Y, 4,800/8,320 Y and 7,620/13,200 Y volts through distribution feeders which traverse all the Island. In addition, there are 196 privately owned distribution and interchange sub stations with a total capacity of 505,516/564,205 Kva to serve industrial customers, making a total installed capacity of 1,575,506/2,065,401 Kva.
Rural Electrification
Through successive amendments to an original loan contract for $6,376,000, entered into in 1952 be tween the Authority and the Rural Electrification
Administration of the United States, the Authority has borrowed to date $77,040,000 on bonds bearing interest at the rate of 2% under a loan contract now
totaling $79,040,000. These funds have been loaned
by REA for the construction of generation, trans mission and distribution facilities to serve rural customers.
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
GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946 Maximum
Sales
Average
Kilowatt
Customers
Load
Load
Hours per
(End of Period)
(Kw)
(Kw)
Customer
Revenue per Kilowatt Hour
^ Fiscal Year
(Thousands
(June 30)
of Dollars)
(Million Kwh)
Peak
Revenue per Customer
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
930.8
314,853
210,000
129,000
2,956
.0271
80.08
1956-57
28,693
1,078.4
338,685
249,000
153,000
3,184
.0266
84.72
1945-46
$
1957-58
33,973
1,298.8
363,032
272,000
181,000
3,578
.0262
93.58
1958-59
35,781
1,421.6
385,592
314,000
198,000
3,687
.0252
92.79
231,000
4,080
.0243
98.96
1959-60
40,441
1,667.4
408,671
355,000
1960-61
45,304
1,892.4
435,019
398,000
261,000
4,350
.0239
107.34
1961-62
50,846
2,145.4
459,995
439,000
294,000
4,664
.0237
113.44
1962-63
57,520
2,465.6
487,991
498,000
335,000
5,053
.0233
121.20
1963-64
65,865
2,858.4
517,682
560,000
388,000
5,522
.0230
130.85
1964-65
72,952
3,186.3
552,111
637,000
436,000
5,771
.0229
132.13 144.03
1965-66
83,734
3,771.7
581,369
737,000
506,000
6,488
.0222
1966-67
93,233
4,291.8
608,462
825,000
575,000
7,053
.0217
153.23
1967-68
104,271
4,894.8
635,155
939,000
657,000
7,706
.0213
164.17
1968-69
118,883
5,707.0
664,770
1,078,000
760,000
8,585
.0208
178.83
1969-70t
133,140
6,553.0
697,256
1,271,000
885,000
9,542
.0203
190.95
t Estimate.
NUMBER OF CUSTOMERS Thousands
SALES OF ELECTRICITY-KWH Miilions ol KWH
7.000
6.500 -
Commercial
Residential
300
1.500 -
100
1.000 -
500 -
Fiscal 61 Years
•64
65
Years Source P R V< R A financial Reporls
program, in the case that revenues do not provide an adequate contribution to fixed costs.
Financing System Growth
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 $432,652,000 as of June 30, 1969.
Under its enabling legislation, the Authority has the
In addition, a substantial amount of the Capital
power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of
Improvement Program has been financed directly from revenues of the Authority. In the period from
authority to set and collect adequate rates and other
May 1, 1947 to June 30, 1969, a total of $696,733,000 was invested in capital improvements. Of this
charges for the use of its facilities, and has complete
amount $502,884,000 has been provided from the
these bonds under a Trust Indenture. It also has full
control and supervision over its properties and activi
net proceeds of bond issues and bank borrowings, and
ties. Properties may be acquired by the Authority by
$193,849,000 had come mainly from net revenues of and contributions to the Authority. On June 30, 1969, total net assets amounted to $701,126,000,
any lawful means, including the power of eminent domain.
For many years the Authority has followed a policy
operating and appropriated reserves were $36,464,-
of initially financing the construction of facilities under its Capital Improvement Program with short
000, contributed capital and unappropriated net reve
term bank loans. From time to time, issues of revenue
$474,500,000. Total revenues for the twelve months ended June 30, 1969, were $123,092,000. Current expenses were
bonds are sold for the repayment of such loans and
for the continuance of construction. In this way the
nues were $128,884,000 and outstanding debt was
Las Americas â&#x20AC;&#x201D; the largest shopping center in Puerto Rico, in metropolitan San Juan, consisting of 79 stores, completely air conditioned.
$66,445,000, leaving a balance of $56,653,000
the purpose of liquidating current bank borrowings
available for debt service requirements and other contractual obligations. The maximum debt service for any future year on outstanding issues was $23,734,000, indicating a coverage of 2.41 times on present debt. Accruals for contributions to the Com monwealth and municipal governments in lieu of taxes amounted to $13,026,000 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 continuing the Capital Improvement Program.
and contractual obligations. New Bond Issue
In October 1969, the Authority proposes to sell $50,000,000 par value Electric Revenue Bonds for
Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple
tion of the financing, will approximate $28,029,000 and will be covered about 2.00 times by net earnings for the twelve months ended July 31, 1969.
Looking Ahead
Continuous studies of power needs, constantly re
viewed and revised by the Authority and its consult ing engineers, now indicate that peak demand of the system will increase from 1,271,000 Kw in 1969-70 to 1,467,000 Kw in 1970-71, 1,677,000 Kw in 1971-72 and 1,906,000 Kw in 1972-73. It is ex
pected that about 30,000 new customers will be added yearly. To meet this demand, the Authority s gener
ating capacity will be raised to a name plate rating of 3,011,840 Kw by 1973.
During the period from July 1, 1969 through June 30, 1973, it is anticipated that the Authority will invest $446,538,000 in further capital improvements.
Of this amount, the sale of bonds will provide some $336,920,000. About $108,538,000 or 24% will be
derived principally from revenues of the Authority, compared with an average of 28% accrued from earnings and contributions during the last twentytwo years. The remainder of $1,080,000 will be avail able from previous bond issues.
It will be noted that the capital improvement pro gram shows a substantial increase over the next four
years. The reason for this is that the Authority has found it necessary to increase the size of the gener ating units scheduled for 1971 and 1972 to 410 MW to serve large metallurgical processors, thus exceed ing the normal growth of the system. The Economic Development Administration has been promoting the establishment of these plants. Since these plants are expected to be the core of industrial complexes which
will foster general economic development, the Au thority under special agreements with the Common wealth Government is willing to provide power at prices based on the incremental cost of power of the larger units. In order to make the construction of the larger units economically feasible for the Authority, the Legislature of Puerto Rico approved Law #82 of 1967 which guarantees to reimburse the Authority for any part of the annual charges on whatever portion of the extra capacity that remains unsold during the period 1971 to 1974 up to a limit of $3,250,000 during each of these four years. Such amounts would be deducted from the contribution in
lieu of taxes payable to the Commonwealth Govern ment.
The above four-year program compares with capi tal expenditures actually made during the past twentytwo years, distributed as follows: steam production plant $262,092,000, hydraulic production plant $36,277,000, gas turbine production plant $19,285,-
TOTAL REVENUES, BAUNCE AFTER CURRENT EXPENSES, REVENUES FROM SALES OF ELECTRICITY
AND DEBT SERVICE REQUIREMENTS Millions of Dollars
Millions of Dollars
140
140
130 -
120 Total Revenues 110 -
I 100 -
I Balance After Current Expenses
Residential
I Debt Service Requirements
Total
90 -
80 -
70 -
60 -
50 -
40 -
30 -
20 -
1u Fiscal Years
0 Fiscal Years
â&#x2013; 04
'SS
Puerto Rico Water Resources Authority
Condensed Balance Sheet As of June 30, 1969 ASSETS
NET UTILITY PLANT:
Gross utility plant
$700,907,072
Less accumulated provision for depreciation
117,077,483
Net utility plant
$583,829,589 477,503
OTHER PHYSICAL PROPERTY
14,900,123
BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS . CURRENT ASSETS:
Funds and working advances Accounts receivable â&#x20AC;&#x201D; Less Reserve for uncollectible accounts
Materials and supplies Prepayments, special deposits, etc
$ 32,411,063 28,892,227 24,120,077 1,851,388
87,274,755
DEFERRED DEBITS:
Debt discount and expense in process of amortization Other
$ 12,454,088 2,189,762
14,643,850
$701,125,820
TOTAL ASSETS
LIABILITIES
CONTRIBUTED CAPITAL
46,209,703
UNAPPROPRIATED NET REVENUES
82,674,263
LONG-TERM DEBT:
Electric revenue bonds Notes payable Lease-purchase obligation, less portion included in current liabilities
$432,652,000
39,600,000 2,288,317
474,540,317
CURRENT LIABILITIES:
Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes Other
$ 26,075,305
5,682,652 7,861,671 13,025,787 8,592,256
61,237,671
RESERVES:
Self-insurance
8,489,735
Injuries and damages . . . .
2,516,940
Revenue stabilization .
.
2,284,698
Appropriated sinking fund . .
.
.
23,067,443
Plant improvements . . . .
105,050
TOTAL LIABILITIES
10
36,463,866
$701,125,820
Puerto Rico Water Resources Authority
Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending June 30
June 30 196S
June 30 1967
1966
June 30 1969
REVENUES:
Sales of electric energy Other operating revenues Total operating revenues
$118,883,451
$83,734,015
$93,232,606
$104,270,618
1,890,939
2,085,113
2,111,965
2,206,614
$85,624,954
$95,317,719
$106,382,583
$121,090,065
Other income
1,369,968
1,420,789
1,781,295
2,007,086
$86,994,922
$96,738,508
$108,163,878
$123,097,151
$12,035,637
$13,671,019
$ 15,434,275
$ 15,570,387
22,518,518
25,011,077
28,348,610
33,913,682
10,717,943
11,840,030
14,263,000
15,974,592
1,045,519
1,010,175
937,572
$46,317,617
$51,532,301
$ 58,983,457
985,983 $ 66,444,644
$40,677,305
$45,206,207
$ 49,180,421
$ 56,652,507
$ 9,061,921
$ 9,555,562
$ 11,166,209
$ 12,655,428
5,992,000 207,304
5,710,000 207,304
6,685,000 787,908
7,342,799
Total sinking fund payments
$15,261,225
$15,472,866
$ 18,639,117
$ 21,173,332
Balance
$25,416,080
$29,733,341
$ 30,541,304
$ 35,479,175
$
$
$
$
Total revenues
CURRENT EXPENSES:
Operation -Fuel
Other operating expenses Maintenance
Other current expenses Total current expenses Balance of revenues after current expenses (per Trust Indenture)
SINKING FUND PAYMENTS:
Interest account (exclusive of interest charged to construction and reimbursement from the Com
monwealth Government of Puerto Rico) . . .
Bond redemption account (exclusive of reimburse ment from the Commonwealth of Puerto Rico) . Reserve account
1,175,105
TRANSFERS TO:
General reserve fund â&#x20AC;&#x201D;provision for self-insurance . Renewal and replacement fund Reserve for improvements Total transfers
730,902
824,926
909,838
1,002,087
12,393,200
13,671,744
5,160,000
3,516,925
5,250,886
$15,348,412
$18,378,126
$ 18,098,507
$ 21,417,109
$10,067,668
$11,355,215
$ 12,442,797
$ 14,062,066
14,617,510 â&#x20AC;&#x201D;
15,164,136
Balance available for contributions in lieu of taxes, etc
PROVISIONS FOR CONTRIBUTIONS IN LIEU OF TAXES . . . . . Balance
9,172,130
10,213,261
$
895,538
$ 1,141,954
$
1,019,523
$
1,036,279
$
447,769
$
570,977
$
509,762
$
518,140
$
447,769
$
570,977
$
509,761
$
518,139
13,025,787
11,423,274
PROVISION FOR:
Transfer to sinking fund reserve account . . . . Balance transferred to unappropriated net revenues
11
000, transmission plant $85,595,000, distribution plant $202,580,000 and other facilities $90,904,000, for a total of $696,733,000.
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 will 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 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 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 all 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 in the state of New York and for savings banks in California and 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
4t<|V.
mwTd Work crew busy keeping lines free
of undesirable branches which can cause power failures.
A section of downtown Santiirce at night.
Rico. The bonds are rated "A" by Moody's Investors Service and by Standard and Poor's.
In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other pohtical sub
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 pur
poses. It also provided that members of both Senate
divisions, there is no known record of default or de
and House were to be elected by the people, but the
linquency in the payment of principal of or interest on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid
trol of Washington through appointment by the
Executive and Judicial branches remained under con President.
default.
No further change occurred until 1946 when the President for the first time appointed a Puerto Rican
Government History
as Governor. In 1947 the Jones Act was amended to
Puerto Rico came under United States sovereignty by
permit Puerto Ricans to elect their own Governor,
the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil gov ernment for the Island in 1900. It provided for a Governor, 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.
who in turn was empowered to appoint his Cabinet
Over succeeding years strong feeling developed for a more autonomous form of government and in favor of United States citizenship. The original Act was
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 Con gress enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a com
pact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sec
tions of the Organic Act which define the political,
Switchyard, San Juan Steam Plant. A 10,000 Kw turbo-jet "Power Pack" for peaking and emergency service appears in the foreground.
economic and fiscal relationship between Puerto Rico
cial branches as in the Federal Constitution, and as in
and the United States shall remain in full force and shall be thereafter known as the Puerto Rican
those of the States. Both the Governor and the bi
Federal Relations Act. It also authorized the People of Puerto Rico to draft and approve their own con stitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly ap
proved in a special referendum and approved by Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on July 25, 1952.
cameral legislature are subject to regular election every four years. The Legislature operates under 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 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
of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same
The Commonwealth Government
manner and under the same terms and conditions as
The Constitution recognizes and assures a separation
writs of error and appeals may be taken from other
of powers among the executive, legislative, and judi
Federal and State courts.
Governmental responsibilities assumed by the Commonwealth are greater than those normally as sumed by a State government. Municipalities which combine both rural and urban areas are the only local political subdivisions and are comparable to counties 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
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 are supported by a portion of the gasoline tax.
Political Background
In 1938 a political party emerged in Puerto Rico which was to emphasize economic development to
improve the welfare of the people. From 1940 until the elections in November, 1968, as the Popular
Democratic Party, it was in control of the govern ment of Puerto Rico, and was instrumental in estab
lishing the present Commonwealth political relation ship. Since 1948 there have been two major political thrusts in political life in Puerto Rico towards close association with the United States and a minor and
almost negligible one in favor of independence. The trends are illustrated in the following data on election
results by parties in recent years. 1952
1956
1960
1964
1968
Commonwealth
Popular Democratic Party .. 64.8% 62.5% 62.4% 59.4% 41.8% Peoples Party — — — — 10.0%
An important commercial section in Santurce showing some luxury hotels.
Statehood
Statehood Republican Party . 12.9% 25.0% 34.3% 34.6% "•2% New Progressive Party — — — — 45.0% Socialist Party
Independence Party Christian Action Party
3.3%
—
19.0% 12.5% — —
—
—
3.3% —
2.7% 3-3%
3.0%
As a general comment, it is obvious that desire for close and permanent ties with the United States has become an inherent ingredient.
Governor Luis A. Ferre, a prominent and highly successful industrialist, as well as a leading philan
thropist, was the candidate in 1968 of the New Progressive Party which he organized in 1967 after leaving the Statehood Republican Party. He cam paigned on the basis of a need for change and for more
effective government through new leadership. Politi cal status did not receive emphasis as an immediate issue. He received 45.0% of the vote in the recent
election, compared with 41.8% of the vote received by the candidate of the Popular Democratic Party.
In the Legislature, the New Progressive Party also gained control of the House of Representatives,
although the Popular Democratic Party retained con trol of the Senate, thus definitely establishing a two party system of Government. Three factors pertaining to elections in Puerto Rico are worthy of mention. There is strong public interest in government affairs and a high degree of voter participation in elections. In the 1968 elections, 79.3% of those registered actually voted.
Second, in order to reduce pressure from special interests, Puerto Rican law limits political contribu tions from any one person or corporation to $300 in any one election year and $100 annually in other
years. Yet, recognizing the need for funds to bring issues to the attention of, and to inform the voters, each recognized political party receives from the Commonwealth Treasury a contribution of funds to carry out its political campaign. This contribution is according to a formula based primarily on the party's percentage of votes cast in the most recent
commission consisted of three persons appointed by the President of the United States, two each selected
by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission concluded that the people of Puerto Rico should be consulted with regard to the status they preferred and, in December, 1966, the Puerto
Rican Legislature passed an act providing for the holding of the plebiscite. This plebiscite, held July 23, 1967, strongly re affirmed the overwhelming desire of the Puerto Rican
people to maintain permanent and close ties with the United States. Of the over 700,000 ballots cast (66.3 percent of all registered votes) 99.4 percent were for either Commonwealth or Statehood and only 0.6 percent for Independence. A tabulation of the actual results of the plebiscite is shown below: 425,132 (60.4%) 274,312 (39.0%) 4,248 ( 0.6%)
Commonwealth Statehood
Independence
election.
And third, Puerto Rican law provides that if a minority party receives a substantial vote, but fails to elect candidates to the Legislature, then, under certain circumstances that body is increased in size by formula to assure minority representation. The
Municipal Law (Act No. 142, approved July 21, 1960) also assures minority representation in the Municipal Assemblies since at least three members of each of these bodies have to be elected from the
minority parties. 1967 Plebiscite
In 1962 the Legislature of Puerto Rico petitioned
the Congress of the United States requesting a plebiscite by the voters of Puerto Rico through which an expression of preference could be demonstrated for either a continuation of the existing common wealth relationship with the United States, or the attainment of Federated Statehood in the United
States, or the establishment of Puerto Rico as an
independent country.
In response to the petition, the Congress ap proved a bill in 1964 providing for the establishment of a United States-Puerto Rico commission to study all the factors involved. The membership of this
Helicopter lifting aluminum tower for 115 KV transmission line.
An 82,500 Kw unit at the South Coast Steam Plant.
Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly
Net income of the economy has increased from a level of $614 million in 1950 to $3,076 million m 1968. Income, measured in current prices, has shown
demonstrated in Puerto Rico. Only a declining minor ity party favors independence. Both major parties 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
ious year. Per capita net income is now $1,129 con
take.
pared to $279 in 1950.
an average increase during the last five years of about 10.0% compounded annually and m the year ende June 30, 1968 it increased by 10.7% over the prev The Commonwealth Government's program ot in dustrialization has aided the economy to shift from
Expansion and Diversification of
the Economy of Puerto Rico
one principally agricultural to one much better diver sified between industry and agriculture. Concurrent y
Economic growth in Puerto Rico since 1950 has been
with the expansion in net agricultural income from
very rapid. Gross product of the Commonwealth has
$149 million in 1949-50 to about $187 million in
increased more than 4 times over its 1950 level and
1967-68, manufacturing income increased from $89
has more than doubled during the past eight years ($3,740 million in 1968 vs $1,847 million in 1961). In the year ended June 30, 1968 gross product totalled an estimated $3,740 million, representing an increase of 11.4% over the prior year.
million to $753 million in 1967-68, substantially surpassing 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
I
Workers installing high pressure shell for the new 230,000 KW turbo-generator at Palo Seco Steam Plant.
35% of manufacturing income. By 1966-67 about 4.5% of manufacturing income resulted from this industry. Manufacturing income is now generally derived from the production of new types of manu factured products, principally for shipment to the United States. Such shipments amounted to only $33 million in 1949-50. By 1967-68 they had reached a
tion program. These include the Union Carbide &
total of about $1,012 million.
casings. Food casings are used by meat processors in producing sausage and other processed meats. The new plant is due to be in operation by 1970. Union Carbide Caribe, Inc., another subsidiary of Union Carbide, began petrochemical operations on
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 industrializa
Chemical Corp., which operates a $53 million plant and has recently constructed a $22 million plant to produce alcohol intermediates. Union Carbide Food Products Incorporated, a subsidiary of Union Carbide Corporation, will build a $15 million plant at Barceloneta, Puerto Rico for tbe production of food
the Island in 1959.
Caribbean Gulf Refining Co. which recently com-
pleted an expansion program, operates a petroleum refinery.
Petrochemicals are of greatly increasing importance
The Phillips refinery will constitute the nucleus of a complex of satellite plants producing raw materials, intermediates, and consumer goods using petroleum
to the economy of the Commonwealth, a recent de
derivatives.
velopment being the addition of a $41 million aromatics plant to Commonwealth Oil Refining Com pany's $105 million refinery. Corco has invested
Food processing has also been a significant growth area in recent years. Three rice mills and a large
$180 million in Puerto Rico in the past ten years
and the present plans call for increasing the Com
pany's investments to approximately $300 million by 1970. It is anticipated that joint venture petro
chemical projects will probably add another $75 mil lion by 1970.
Another addition to Puerto Rico's petrochemical
complex involves the Puerto Rico Chemical Com
pany which has constructed a $6 million phthalic anhydride plant.
Phillips Puerto Rico Core, Inc. has already in augurated its Guayama plant at a cost of $58 million. The company has announced its plans of investing $600 million in petrochemicals over a ten-year pe
riod. In May, 1968 a joint venture with RhonePoulenc for manufacturing nylon began operations.
flour and feed mill supply an important share of Puerto Rico's requirements. Four large tuna can neries are now in operation, and with one additional 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 industry, and oil for the domestic market and for the tuna can
neries was also established. A subsidiary of Libby,
McNeill and Libby has established 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 manu facturing of dessert preparations and baking powder. Further, many of the plants promoted by the Economic Development Administration are branches or subsidiaries set up by such firms as General
Operator checking data from the economic load.
computer at Monacillos transmission and distrwut
u
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Electric, Consolidated Cigar, General Cigar, Ameri
thousand to 6.6 per thousand at present, which is
can Can, Phelps Dodge, Daystrom, Carborundum, Sprague Electric, Van Camp Sea Food, General
rate has declined from 39.6 per thousand in 1950
Foods, Van Raalte, Hooker Chemical, B.V.D., Bell & Howell, International Shoe, National Cash Register, Hercules Powder, Stanley Works, Pepsico, W. R. Grace, Ford Motor Co., Phillips Petroleum, Babcock and Wilcox, Cutler-Hammer, Endicott Johnson, Jon athan Logan, Motorola, RCA and Westinghouse. Underlying Puerto Rico's growing and changing economy there has been a steady expansion in in vestment. Average gross fixed domestic investment during the last five consecutive fiscal years, 1964-68, ran at a rate of 25% of gross product. It has in creased from $112 million in 1950 to $973 million in
now about the same as the U. S. average. The birth
to 25.9 per thousand in 1968. The people are better
educated, with literacy increased from 75% to about 86% in 1967. Institutions of higher learning have also expanded rapidly. University and college enroll ment which was only 13,000 in 1950, now has 48,000 students. It is significant that the Commonwealth Govern
ment has in the last three years directed approxi mately 47% of its expenditures to education and health.
The Commonwealth Government will continue to provide a climate inducive to further economic de
1968. Inflowing long-term U. S. capital rose from $31 million in postwar 1947 to an estimated $581
years ahead a sustained rate of economic growth can
million in 1968.
be maintained. Present projections indicate that gross
The Puerto Rican people have benefited greatly from the economic expansion achieved since 1950. Life expectancy has increased from 61 years to 70 years and the death rate has declined from 10.5 per
RCA Spectra 70/45 Inquiry System recently installed to expedite inquiries from customers in the San Juan metropolitan area.
velopment and growth. Thus it is expected that in the product in terms of current prices should reach $7,391 million in 1975. This will mean a personal
income per capita of approximately $1,790.
PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico
The Community We Serve Approximate Times Increased or
(Decreased)
An Expanding Economy:
1940
1950
1968
Over 1950
287
755
3,740
5.0
Net Income — $ Millions
225
614
3,076
5.0
Personal Income Per Family — $ . . .
611
1,500
5,178
3.5
73
319
1,715
5.4
407
8.0
Gross Product — $ Millions
. . . .
Banks:
Debits — $ Millions
Private Savings Accounts — $ Millions
17
51 '
Assessed Value of Taxable Property — $ Millions Income Tax Collections — $ Millions .
312
459
3,149
6.9
2
28
186
6.6
A More Balanced Economic Life:
Percentage Points
Change
Per cent of Net Income from: 24.5
10.0
Manufacturing
12
14.5
Agriculture Commonwealth and Municipal Government
31
24.3
6.1
8
11.4
14.0
Trade
12
16.6
17.8
1.2
33.2
37.6
4.4
14.0
69.8
Other
37
(18.2) 2.6
Per Cent of Exports from:
Exports by New Factories* Sugar (Raw and Refined) Other
62 38
51.1
5.7
34.9
24.4
(10.5) Per Cent Change
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 . . . . * Promoted by the Economic Development Administration. Does not include exports of other new factories. Source: Puerto Rico Planning Board,
t May, 1968.
55.8
(45.4)
1,869,000
2,206,414
2,739,000
24.1
39.0 18.4
39.6
25.9
10.5
6.1
(34.6) (42.0)
46 286,000 5,000
61
70.0
14.8
408,000 13,000
670,000t 48,000
64.2 269.2
jr
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1311 I'onco do I.c6n Avenue, Suit Juiiii, I'ueito KIco (MWOH / 41 Wall Stfeel, New Ycuk, N.Y. U1005