A Special Report on Ponce (August 1962)

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August 1962

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COMMONWEAtTH OF PUERTO RICO

GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO SAN JUAN. PUERTO RICO

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Considerable indiisfrial deveiopnient has occurred on the soifíh cousl oj Puerto Rico in ihe past jew years. The inunicipaliiy of Poin e, seiond lar^esi in Puerto Rico, ñ the huh oj this industrial comple.x.

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Thc municipíility of Ponce. the second largcst city in Puerto Rico, was founded in 1692, and named

aftcr thc illustrious conquistador, Ponce de León. As Puerto Rico's -most Spanish of Cities"" it retalns an oíd world atmosphere and thc customs and tradition of a previous century whiie. at the

same time, serving as a center for agriculturc. commercc. industry. government and edLicati(.>n for a wide arca of Puerto Rico's rapidly developing south coast.

Industiy, which formerly had primarily consisted of sugar grinding and refining. ruin disíillation and cement production, has expanded and diversified substantially in the surrounding arca in recent years with the establishment of an oil refinery, an anhydrous ammonia-ammonium sulphate piant. an cthylene glycol piant. and numerous other new industrial enterprises.

Ponce lies on the Caribbean Sea, about mid-point. east to west. on thc island. Its population in the 1960 census was 145,586, compared with I26.810in 1950.

Central business section of Ponce

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PUERTO RICO

Puerto Rico, with an area of approximately 3,400 square miles and a population of 2,340,632 by the 1960 Federal censas, is located at the northeast border of the Caribbean Sea, about 1,600 miles southeast of New York City and 1,000 miles southeast of Miarai.

The Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs as do the fifty States over theirs. lí differs from them primarily in its relationship to the Federal Government. This relationship is defined through the médium of a compact entered into by Congress and the People of Puerto Rico and described below.

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Puerto Rico carne under United States sovereignty by the Treaty of París on December 10, 1898.

The Congress of the United States provided for a civil government for the ísland in 1900. The orig inal act was superseded in 1917 by the Organic Act of Puerto Rico, which granted United States citizenship to Puerto Ricans as well as unrestricted suífrage for local purposes.

In accordance with the wishes of the People of Puerto Rico, the Slst 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 fiscal relationship between Puerto Rico and the United States shall remain in full forcé and shall be thereafter known as the Puerto Rican Federal Relations

Act. It aiso authorized the people of Puerto Rico to drafí and approve their own constitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly approved 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.

The Commonwealth Government

The Constitution recognizes and assures a separation of powers among the executive, legislative, and judicial branches. Both the Governor and the bicameral legislature are subject to regular election every four years. The Legislature operates under standard parliamentary and legislative rules. The

judicial system, administered by a Supreme Court appointed for life, is composed of lower and intermedíale courts. 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

A Special Report on Portee

same manner and under the same terms and conditions as writs of error and appeals may be taken from other Federal and State courts.

Govemmental responsibilities assumed by the Commonwealth are greater than those normally assumed by a State government. Municipalities which combine both rural and urban areas are the

only local political subdivisions. The only units of government with the right to levy ad valorem taxes are the Commonwealth Government 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 govern-

ments in the continental United States. Among these are pólice and fire protection, education, all major street and highway construction, and public health programs. In addition, the Common wealth Government supervises municipal fiscal affairs to a very substantial extent.

Commonwealth and municipal governments are relieved of most of the responsibility for con-

s ructmg an financing electric, water and sewer, and harbor and airport systems by the Water esources uthority, the Aqueduct and Sewer Authority, and the Ports Authority. The bonded s o ese pu lie corporations are and will be supported entirely by revenues derived from their operations.

Expansión and Diversification of tlie Economy of Puerto Rico rapid. Commonwealth net income

of Puerto pZf °vr'T o-- 551%. The gross product mire ch^ i""®®an average annual increase of about 5.7% compounded.

523%, and when adjusted for pnce ehanges. hhas shown from's92"miinl^°.°''Uia''^ countries during the same period have risen United States ha" ■

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purchases — nearly all from the continental

oec^es 1° «924 million. On a per capita basis, Puerto Rico occupies flrst nrst nTacr place among United States""'"o" customers. eeneratód^$^7o'^ilíon^ Conimonwealth s economy has been equally impressive. In 1940, agriculture S$27 mlü on or

Products little more than one-fourth.

establishments conslsted m°ostirof°small LTdkwmk'shr^'T Bv fiscnl iQfil

ot the ecolomvaZ of merchandise export"

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Processors of agricultural products.

l-^d grown to $200 million, this sector net income. Sugar constituted only 22%

tance'Tn agriculture inincome imporIUnder H 1k a , provided $320 million or 22%, of Puerto Rico's net the mdustr,a development program ini.iated in the late .940^s, PuIr.o Rico"ras :rA;¡l iirfs annlhnepc

ncing petroleum products, apparel, petrochemicals, electronic prod-

ra'""'"r" ' mainland companies, including such nther ManyElcctric piants aieé hrancr es or subsidiarles ot major lirnis it^nts. as General

Co., International Paper Co., Ltd., American Can Co., Consolidated Cigar Corp.,Sunbeam Corp., The

A Special Report on Ponce

Carborundum Co., Sperry Rand Corp., Unión Carbide Corp., Phelps Dodge Copper Producís Internatíonal Corp., American Motors Co., Parke, Davis & Co., Inc., A. G. Spalding & Bros. Inc., Van Raalte, Intemational Shoe Corp., Beaunit Milis Inc., Borden Co. and California Packing Corp.

One of the most significant developments in the economy has been the increasing rata of fixed investment in Puerto Rico, especially during the past eight years. Investment in fixed capital goods, such as new construction, machinery and equipment, has risen from an average of $137 million for 1950-53 to $367 million in 1961, or 21% of the gross product of the economy.

One of the principal factors (others being improved transportation facilities and an abundant labor supply) which has brought about the industrial growth in Puerto Rico in recent years has been the exemption granted from Commonwealth taxes for a ten-year period to "qualified" manu-

facturers of new producís. This has naturally raised the question of how permanent such industries, attracted originally in this manner, may be once the exemption period begins to terminate. A recent study of fifty-nine enterprises which are about to end their period of exemption and gradually start

paying Commonwealth taxes indicated that only eight would probably cióse; seven were undecided.

These plants were among the smallest of the plants studied, had the lowest wage scales and were among the least profitable. The remainder of the plants planned to continué operations.

This, and other surveys, indicates that the termination of tax exemption will have a limited impact on the industrial program. Most plants, although originally attracted by tax exemption, and able to expand rapidly by reinvesting tax free profits, have formed suflicient advantages during their first years to plan for continued operations eventually under the Puerto Rican corporate tax structure where rales are only slightly more than half of the usual 52% Federal corporate rale.

Incurrence and Paymenf of Municipal Debt

Municipalities may incur bonded debt only after receiving approval of the Governor of the Com monwealth. This is obtained only after recommendation of the Department of Justice, the Planning Board and the Department of the Treasury, and the bonds must be sold through the Government Development Bank as fiscal agent. The Governor is empowered to veto any municipal bond ordinance where legally available debt margin is not sufficient or where adequate revenues are not or cannot be committed to debt service. There is no limitation on the amount of taxes that may be

levied on property for the payment of public debt.

The Municipal Law in Section 1360 of Tille 21 of the Laws of Puerto Rico Annotated provides that interest on the public debt and amortization thereof constitutes a first budgetary charge on any and

all available municipal revenues. Property is assessed by the Secretary of the Treasury throughout Puerto Rico, and he collects directly all municipal and other taxes upon real and personal property.

From these collections, the amount allocated for the payment of principal and interest on outstanding obligations is retained for each municipality and deposited in redemption funds. Sums sufficient to meet payments on municipal debt as it becomes due are withdrawn and paid by the Secretary of

the Treasury of the Commonwealth from the appropriate municipal bond redemption fund.

The larger municipalities, including Ponce, are limited by law in the incurrence of bonded debt to 10% of assessed valuation. Assessed valúes are currently estimated to average about 85% of actual property valué.

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1& ^j.T-'-vrí Paiiorainic view of Ponce, second htrgest city of Puerto Rico

MUNICI

OF PONCE

As the second largest city in Puerto Rico, with a 1960 population of 145,586, Ponce is the canter of a regional distribution and trading area with an estimated population of 462,000.

The Market Area

The existing highway structure of southern Puerto Rico runs generally east-west and parallel te the coast, with spurs running northward into the central mountain area, thus making Ponce the most accessible and dominant trading center for some sixteen smaller municipalities. Five of these are about a half hour distant while the most remote is not farther than one hour's travel time. Some 2,335 wholesale, retail, and service enterprises of all sizes were operating in Ponce at the time of the 1958 Census of Business.

The región centered around Ponce is one of Puerto Rico's most important industrial and agricultural areas. Net meóme generated as a result of all economic activity within the Ponce región has been estimated to have been about $218 million for fiscal year 1959-1960.

Manuffacturing

marked industrial1 frotíh®;™; growth. Includmg those within the Municipality, some 106 new manufacturina firms ""nicipalities, has experienced have been promoted under the Industrial Development Prosram Tndn.tri.i manutacturinghrms

wealth Oil Refining Co., Caribe Niirogen Corp., a subsidiary ot W °r' Safe 7cT ^oZcin"»

ammoniun,sultate, and the ethylene glycol plant of a Unión Carbide subsidia^v P™ducmg Manufacturing activity is carried on within the Municipalitv of Ponn^ h t r n .ypes and sizes, as reported in the 1958 Census of Manutbcrtes B^Zeh ,'<f' moted as a result of the Industrial Development Program fot dlS'48 ^r T Zn ,r"T f .T" the Ponce-dominated región, with a number of others in thZroees; of T nr r, x' u'

and heavy mdustry. The area ,s served with electric power by the South Coast Steam Piam of The Water Resources Authonty.

A Special Repon on Ponce

Close-up vtew of the Ponce Cement Plant ••"¡Vi r^"

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The petro-chemical plant of Unión Corbide Caribe, Inc. (foreground) ai Peñiu'las. near Ponce, is adjacent lo the refinery of Ohc o/ ?/je growing niimber of industrial plañís in Ponce

Conunonn eallh Oil Refining Company, Inc. (backgroiind)

Cloth drying eqidpment at the Indian Head Milis /i.tí

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A Special Report on Ronce

This plant, near the city of Ponce, has two 44,000 kw and one 82,500 kw steam-electric units. The adjoining Commonwealth Oil Refinery supplies the fuel for its operation. One of the outstanding features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil. A fourth unit also of 82,500 kw is under construction and is scheduled for completion in August 1963.

Agriculture and Agriculturally Based Industry

Agricultural activity in the Ponce región includes the growing of sugar cañe, coífee culture, dairying, and the raising of beef cattle and vegetables.

Ponce is located in a fertile irrigated coastal plain, called the Ponce-Patillas Alluvial Plain, which

runs eastward through most of the Ponce-dominated región, The inland central mountains provide ampie water for privately and publicly owned irrigation works. The result of ideal growing weather, ñat fertile lands, and adequate water supply has been that about 20 per cent of Puerto Rico's sugar cañe is produced on the 15 per cent of Puerto Rico's cañe land which occupies the Ponce-Patillas Plain. Six sugar milis, including one in Ponce, grind cañe grown in the area. Three additional milis grind cañe grown to the west of Ponce in Lajas and Tallaboa Valley and nearby areas. The nine milis in the Ponce región together grind about 35 per cent of all cañe ground on the island.

The sugar mili within the Municipality grinds cañe for both Ponce and a wide surrounding area.

A sugar refinery operates in conjunction with the mili as does one of the island's largest rum distilleries, Destileriá Serrallés, maker of Don Q rum, Ponce's pasteurizing facilities handle the milk production of a large part of the entire southern coastal región, A large farmer's cooperative, based

in Ponce, handles the financing, warehousing, and marketing of an important part of Puerto Rico's coffee crop,

Otiier Important Features

The Centro del Sur shopping center located five minutes from downtown Ponce was recently opened.

This $2,5 million development is considered to be the most modern in the Caribbean, Covering MVi acres, the center has 18 stores and shops and includes such firms as Thom McAn, Kresge, Grand Unión Supermarkets. This marks the latter firm's first Puerto Rican store outside the San Juan area.

The port of Ponce, the second largest in Puerto Rico, serves the shipping needs of the entire región.

Ponce's airport handles frequent daily ñights connecting with San Juan International Airport, Hotel accommodations have been enlarged to meet commercial needs and Puerto Rico's rapidly growing tourist flow. The 170-room El Ponceño Hotel, constructed at a cost of about $4 million.

operated by International Hotels Corp,, a Pan American Airways subsidiary, was opened in 1960, while Ponce's oldest established hosterly, the Hotel Meliá, recently completed an expansión and modernization program, The home offices of the second and third largest Puerto Rican chartered commercial banks have

been located in the city since the times of Spanish rule. The rapidly growing University of Santa María is also located in Ponce with an enrollment of over 2,300. Many of the departments and agencies of the Commonwealth Government maintain regional offices in Ponce to serve the southern area of the island.

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Municipal incinerator

One of the rnodern schools, Dr. Pila High School, named after an emineiit physician and humanitarian wlw iived in Ponce

Mercedita Airporí, two miles from the center nf Ponce,

is admim.stered by the Puerto Rico París Authority

Filtration plañí of the Puerto Rico Aqueduct and Sewer Authority

A Special Report on Ponce

FInancial Statement

On August 8, 1962, the municipality of Ponce will offer for sale a bond issue in the amount of $2,300,000, maturing July 1, 1963 through 1980.

Assessed valuation of taxable property in Ponce in 1961-62 was $140,829,190, on which a levy of $23.80 per $1,000 was made. This levy consisted of $10.30 for Commonwealth purposes and the balance for municipal purposes, of which $8.50 was for the general fund and $5.00 for bond redemption funds.

Although the levy for the general fund was $8.50, the effective rate charged to the taxpayer was only $6.50. Act No. 16, approved May 31, 1960, directs the Secretary of the Treasury not to coUect $2.00, granted as a reduction, and for the Treasury to compĂŠnsate the municipality in an amount equivalent to this reduction.

Collection of the current levy of $3,007,045 in this year up to June 30 amounted to $2,045,794 or 68.0%. Total collections of $2,323,505 in 1961-62 were 77.3% of the amount levied.

ASSESSED VALUATION AND PROPERTY TAX COLLECTIONS Fiscal Year

1950-51 1951-52 1952-53 1953-54 1954-55 1955-56 1956-57 1957-58

1958-59 1959-60 1960-61 11961-62 1962-63

Assessed Valuation

$ 42,988,155 56,243,790* 63,752,790 77,780,750 78,878,020 81,798,070 85,770,410 90,618,270 119,722,660* 127,546,330 137,370,000 140,829,190 148,826,770

Tax Rate

Total

per $1,000

Levy**

$30.90

$1,328,334 1,373,509 1,474,199

19.50 21.20

Total Collections Per Cent of

Total Collections

Current Levy

$1,384,090 537,957 1,220,789 1,800,707 1,751,041 1,756,940 1,781,979 1,848,868 2,220,646

104.2% 39,2

82.8

20.90

1,645,373

22.90

18.40

1,806,307 1,873,176 1,992,253 2,079,623 2,111,467

18.40

2,020,298

2,143,999

106.1

18.40

2,300,583

2,313,809

100.6

21.80

3.007,045

2,323,505

77.3

22.90

22.90 22.90

109.4 96.9

93.8 89.4 88.9

105.2

21.80

* lacrease resulting partially from reassessment programs. t Preliminary figures.

** The gross figure of taxes levied was reduced by discounts for prompt payment as follows: Gross Levy

Discount

Net Levy

1961-62

$3.203,320

$196,275

$3,007,045

1960-61

2,470,707

170.124

2,300,583

1959-60

2,174,082

153,784

2,020.298

The record of municipal receipts and expenditures given below indicates maintenance of comfort-

able cash balances. Receipts in 1961-62 of $4,710,681 were comprlsed of $1,352,155 from property taxes, $615,830 from local imposts, $390,808 from in lieu of tax payments from government authorities, licenses and other sources, $571,360 from Commonwealth advances against subsequent tax collections, $780,528 from other non-budgetary sources, and $1,000,000 from the sale of bond anticipation notes which will be retired from the proceeds of the current bond issue.

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A Special Report on Ponce

OPERATING RECEIPTS AND EXPENDITURES Cash Balance

Cash Balance

Beginning of Year

Total Receipls

Total Expenditures

At Year End

1950-51

$1,569,158

$1,802,427

$1,719,728

1951-52

$1,651,857 1,400,279

1955-56

2,023,076

1,463,334 3,584,230 2,364,013 2,675,987 2,129,832

1,714,912 2,309,993 2,485,317

1954-55

1,651,857 1,400,279 2,674,517 2,553,213

1952-53 1953-54 .

...

1956-57

2,030,165

1957-58

2,408,936 2,277,339 1,968,405

1958-59 1959-60

1960-61 1961-62

2,418,579 2,826,964

3,024,232 2,777,215 2,746,502 3,770,563 4,442,573 4,710,681

3,206,124 2,122,743 2,645,461

2,674,517 2,553,213 2,023,076 2,030,165

3,055,436

2,408,936 2,277,339 1,968,405

3,320,389 4,034,188

2,418,579 2,826,964

5,264,626

2,273,020

2,908,812

Bonded debt as shown below has remained modérate over the past twelve years, although there has been a more than threefold increase ¡n assessed valuation. Gross debt of $5,092,000 as of July 1,

1962 was offset by bond redemption funds of $703,557, leaving a net debt of $4,388,443. Of this amount $950,000 represents bond anticipation notes to be paid off from the proceeds of the $2,300,000 bond issue now being sold, making a net debt after the sale of $5,738,443. This will be

3.86% of the 1962-63 assessed valuation, and a per capita net debt of $39.42.

Ponce is responsible for 7.51% of the Commonwealth net debt of $178,770,664, or $13,423,732,

the only overlapping tax supported debt burden. This will result in a net direct and overlapping debt of $19,162,175, after the sale of this issue, or 12.88% of assessed valuation, and $132 per capita.

Disírict Hospital, Ponce

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A Spedal Report on Ponce

TREND OF BONDED INDEBTEDNESS

July 1

Gross Bonded Debt

Redemption Funds

Net Debt

$2.549,000 2,263,000 2,033,000 3,786,000 3,712,000 3,735,000 3,652,000 4,258,000 3,859,000 3,450,000 4,045,000 4,589,000 5,092,000

$571,718 583,018 545,484 666,862 807,735

$1,977,282 1,679,982 1,487,516 3,119,138 2,904,265

747,665 737,193 673,727 660,159 706,178 837,766 778,450 703,557

2,987,335 2,914,807 3,584,273 3,198,841 2,743,822 3,207,234 3,810,550 4,388,443

1950 . . . .

1951

1952 1953 1954 . . . .

1955

1956 1957 1958

1959

1960 1961 1962

BOND MATURTTIES NEXT FIVE YEARS

July 1, 1962 New Issue Total

1963

1964

1965

1966

1967

$473,000 50,000

$425,000 50,000

$423,000 50,000

$504,000 50,000

$530,000 50,000

$523,000

$475,000

$473,000

$554,000

$580.000

The current issue of $2,300,000 of bonds represents the unsold balance of a total issue of $4,380,000 authorized in 1959.

Act Number 24 of June 8, 1962, grants complete property tax forgiveness on the first $15,000 of assessed valuation on all residences occupied by their owners, starting in the 1962-63 fiscal year.

Such properties will remain on the tax rolls, and to receive the benefit of the tax forgiveness, the taxpayer must file a certifĂ­cate with the Secretary of Treasury to the effect that he is the owner and occupant of the residence so affected.

The Act further provides for an appropriation from the general fund of the Treasury to be made each year to the municipalities in the amount of the total of the taxes forgiven on assessed valuations of owner-occupied homes up to $15,000. The municipalities thereby would receive the full amount levied, the only difference being that the Commonwealth Treasury instead of the property tax payer becomes the source of payments in the case of owner-occupied residences up to this amount.

And, finally, the Act provides that such tax forgiveness will be suspended if in any year no appro priation from the general fund of the Treasury is made and the available income of the Municipality is not sufficient to pay principal and interest on bonded debt.

The Act does not modify or lessen the pledge of the full faith, credit and taxing power of this

Municipality. The obligation remains unchanged to levy a special tax on all taxable property. includHH

A Special Report on Ponce

ing the first $15,000 of assessed valuation of owner-occupied bornes, if tax forgivencss shall be suspended in the circumstances mentioned above, in an amount sufíicient, with any other available funds, for the payment of debt service on their outstanding bonds.

The debt paying record of Ponce is clear of default or delinquency. There has never been any forced or "managed" refunding of maturing bonds to avoid default. A similar debt record exists for the central government and all municipalities and instrumentalities of Puerto Rico.

Under the provisión of the Acts of Congress and the Constitution and Laws of Puerto Rico now in forcé, the bonds and income therefrom are, in the opinión of Bond Counsel, exempt from Federal, State and Commonwealth of Puerto Rico taxation.

The bonds are legal investments for Savings Banks and Trust Funds in the State of New York.

They are also eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance companies to qualify them as required by law to do business in Puerto Rico.

Open-air rheatre in a Pom e park

Parlial r/ctv of ihe iiuiin plaza in Ponce

and rhe Caíhedral of Our Lady of Guadalupe sitiialed in ¡he cenier of the city

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