Puerto Rico Water Resorces Authority (Apr. 1965)

April 1965 A SPECIAL REPORT ON

Commonwealth of Puerto Rico

Government Development Bank for Puerto Rico San Juan. Puerto Rico

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J I Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

Officers

Governing Board Chairman: HON. ROBERTO SANCHEZ VILELLA Governor of the Commonwealth of Puerto Rico Vice-chairman: HON. FRANCISCO LIZARDI

Secretary of Public Works

PEDRO COLON PAGAN

Chief Engineer FELIX CORDOVA DIAZ

General Manager — Services and Supply HAROLD TORO

Member: HON. MIGUEL HERNANDEZ AGOSTO Secretary of Agriculture

Principal Officers

General Manager — Irrigation Services JOSE VILA RUIZ General Counsel

CARLOS VELAZQUEZ TORO

RAFAEL V. URRUTIA

Director of Production and Transmission

Executive Director

HUMBERTO CORDERO

EDUARDO LUBE

Director of Distribution and Sales

Assistant Executive Director — Finance

WALDEMIRO VELEZ

JULIO NEGRONI

Assistant Executive Director — Electrical Planning, Construction and Research

Director of Electrical Planning and Research JOSE A. MATOS

Director of Power Design and Construction

RAFAEL R. RAMIREZ

JOSE 1. DIAZ

Assistant Executive Director — Power Operations

Controller

FERNANDO TORRENT

LOUIS ROIG MARTINEZ

Assistant Executive Director - Industrial and

Treasurer

Personnel Relations

JAVIER CUEVAS BENITEZ

Director of Purchasing JUAN E DOVAL Director of Personnel

HECTOR M. MORALES

Director of Transportation and Services HERMANN MUNOZ Public Relations Officer

RAFAEL D. CHERVONI

Safety Officer

Trustee

First National City Bank. New York. N. Y.

Consulting Engineers Jackson and Moreland Division

of United Engineers and Constructors Inc. ON THE COVER:

Auditors

San Juan Steam Plant —

Arthur Andersen & C o.

168,000 KW,a seventh and eifihth unit, of 100,000 KW each,

Bond Counsel

are now under construction.

Mitchell. Pershing. Shetterly & Mitchell

Rafael V. Urrutia, Executive Director

Puerto Rico Water Resources

Authority The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto

The growth of the Authority has been impressive, as shown by the following data for fiscal years end

Rico Water Resources Authority, an autonomous

ing June 30:

public service corporation and instrumentality of the 1949

Government of the Commonwealth of Puerto Rico.

The origin of the Authority goes back to the opera tion of two government agencies which began the development of hydroelectric power in Puerto Rico - the Puerto Rico Irrigation Service, which built its

1954

1959

1964

Net Utility Plant $ 44,334,000 $ 94,583,000 $ 185,306,000 $ 304,908,000 Kiiowatthours

„ „

-nn

Gen. & Purch. 478,700,000 853,200,000 1,733,800,000 3,403,200,000 Eloctric

Revenues . . $ 10,388,000 ? 17,825,000 $ 35,781,000 $ 65,866,000 No. of Custom-

ers

donnn

162,000

228,000

385,000

518,000

first generating plant in 1915, and the Utilization of Water Resources of Puerto Rico, created in 1927. In

In the past five years, the Kwh sales of the Author

1941, the Authority was established by law to replace

ity have increased at the average rate of 14.8 percent

the Utilization of Water Resources and ensure a

compounded. The 1960-61 recession barely affected

growth in the supply of electricity which would be adequate for the future needs of Puerto Rico's eco nomic development. Subsequently, during the World

Puerto Rico or the Authority. In the twelve months ending December 1964, 3,029,000,000 Kwh of en ergy were sold to 533,000 customers producing elec

War II fuel shortage, the two large private electric

tric revenues of $69,500,000.

utilities on the Island were taken over by the United States Government as an emergency measure and

From its inception the Authority has had to con stantly build new hydro and thermo-electric plants to

their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and, at a later date, the electric facilities of various irri

gation services were integrated into the Authority's system.

When the Authority began operations in 1941, the

Island's economy was primarily agricultural and

keep up with, and anticipate, the mounting demand for electric power. New generating capacity has been added almost every year. Since 1944 total name plate

rating of the Authority's generating plant has risen from 64,440 Kw to the present capacity of 733,920 Kw. Annual capital construction programs in recent years have reached as high as $39,000,000.

sugar. In the

The capital construction program for 1965-66 is

latter half of that same decade, an industrialization

estimated at $45 million. It includes completion of two 100,000 Kw units for the San Juan Steam Plant, scheduled for testing in September 1965 and January

heavily dependent on a single crop

program for the Island was begun as part of Opera tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur

passed that from agriculture. Today approximately 957 new factories, promoted under the economic

1966 respectively, and a start on two more 100,000 Kw units at the same station, these due for comple

tion in January 1967 and June 1968. Other impor

profound change in the basic character of the econ

tant projects are the installation of four 10,000 Kw jet peaking units, one in each of the thermal plants.

This program also includes general transmission and

omy has created a continuous and rapid rise in the

distribution facilities, rural electrification projects,

development program, are in operation with a total direct employment of 69,000. Such rapid growth and demand for energy.

the acquisition of land and the construction of build-

T W V—-' —

ft

ir - -

Main Office Building, San Juan, is equipped with a rooftop heliport and a microwave communications system.

ings, and miscellaneous items. When current projects are completed, total generating capacity will be 1,190,420 Kw.

The Authority has grown to become the second

largest municipally owned, integrated electric utility

electric generating plants. Thermal-electric facilities now supply about 96 percent of the electric energy generated. The Authority's four thermal-electric gen erating stations have a total installed name plate rating of 626,000 Kw.

in the United States as is indicated by the following tabulation as of December 31, 1964; City of Los Angeles

Puerto Rico

City of Seattle

Department of

Water Resources

Department of

Water and Power*

Authority

Lighting

$363,508,000 $ 69,500,000

$230,284,000 $ 43,400,000

Net Plant . . . $777,163,000 Electric Revenues . $151,551,000 Number of

Customers

.

1,077,000

* As of June 30, 1964.

Present Electric System

The total installed generating capacity of the Author

ity at the end of December 1964 had a name plate rating of 733,920 Kw and maximum dependable ca pacity of 790,460 Kw. The physical plant presently

Steam-Electric Stations

The Palo Seco Steam Plant, near San Juan, was placed in service in 1960 and has two 82,500 Kw steam-electric units. Another unit, of 10,000 Kw and powered by a kerosene-burning aviation-type jet mo tor, will begin operation shortly. This unit will be used for peaking and for emergencies, being designed for automatic synchronization to the line from a cold start in only two minutes. A desalinization pilot plant

has also been inaugurated, to provide 14,400 gallons a day of make-up water for the main unit boilers.

consists of twenty-two generating stations, of which

The desalinization process is new and uses waste heat from the turbine condenser system to evaporate

eighteen are hydroelectric and four are thermal-

sea water in a vacuum.

bine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. An additional, 10,000 Kw, jet peaking unit will be installed in the present fiscal year. A 5,000 Kw steam-electric unit,formerly held in cold standby,

The South Coast Steam Plant, near Ponce, has two

44,000 Kw and two 82,500 Kw steam-electric units, the newest of which was placed in service in Decem ber 1963. One of the outstanding features of this plant is that it can burn either low cost refinery pitch or

Bunker C fuel oil. This plant currently receives its fuel by direct pipe line from the nearby refinery of the Commonwealth Oil Refining Co. A 10,000 Kw jet peaking unit will be added to this plant by the close

has been sold and dismantled.

Hydroelectric Stations

of the current fiscal year.

There are 18 hydroelectric plants with a total installed capacity of 107,920 Kw. Fourteen of these plants have reservoirs which permit regulation of plant out put by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-of-the-river flows.

Eleven of the hydroelectric plants are non-attended and fully automatic.

The San Juan Steam Plant has an installed capacity with a name plate rating of 168,000 Kw in four 20,000 Kw and two 44,000 Kw steam-electric units.

A seventh unit, of 100,000 Kw,is now being installed.

This unit is expected to be completed by September 1965. Work on another 100,000 Kw unit, scheduled

for completion in January 1966, is also under way.

Design work on two more such units, due to be ready

by January 1967 and June 1968 respectively, has already started. By the end of the current fiscal year this plant will also have a 10,000 Kw jet peaking unit.

The Mayaguez Plant is equipped with two gas tur

PUERTO

RICO

WATER

Nuclear Power Plant

A nuclear power plant with a rated capacity of

RESOURCES

AUTHORITY

ELECTRIC SYSTEM

P*LO^ SECO ■ 1*5,000 500 ICV«

, -HATILLO ^

- 5.000 "**S;^*RECiBO MO Z

dORAOO

5.Z00

Al05 ANCClCS-3,07?

u lasclomasa

5.000 KVA"

OS BOCAS

.000 in«.^MATO MtT A ^ 5000 «VA

IB.OOO

BONUSLJ

COROZAL JMV.

COMERK) PLANTS 5.000

.v.

iARASCO

CURAOO

-

CACUAS

✓ \j.OOOAVA

AOAP«J*S 2^5"toro negro no 2 R7aA carz »B7AS NO.2

PASTtULO

LEGEND □ steam plants

- 30KV ELECTRIC TRanSAIISSION LINES

() STEAM plants I OnO*' ConH'uf'O")

■ existing IIS kv Electric transmission lines

O mydro-electric plants

■ IISKV ELECTRIC transmission LINES (Undf Contl>ucl>on)

^ interconnecting substations ^ SUBSTATIONS

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X4..V/

caonillas<.

NO 2 A 000

reservoirs

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1941 Sales

(Million Kwh)

Customers

Maximum Peak Load

Load

Hours per

(End of Period)

(Kw)

(Kw)

Customer

$ 3,610

139.0

100,402

18,000

9,000

1,383

$.0260

$ 35.93

1945-46

5,764

258.6

124,959

63,000

39,000

2,069

.0223

46.13

1950-51

13,006

488.2

185,090

109,000

69,000

2,638

.0266

70.27

1955-56*

25,216 28,693

930.8

314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 550,000

210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 659,000

129,000 153,000 181,000 198,000 231,000 261,000 294,000 335,000 388,000 451,000

2,956 3,184

.0271

80.08

1,078.4

.0266

84.72

3,578 3,687

.0262

93.58

.0252

92.79

4,080

.0243

98.96

4,484 4,787 5,196 5,679 6,118

.0239

107.34

Fiscal Year

''(Thousands

(June 30)

of Dollars)

1940-41

1956-57* 1957-58*

33,973

1958-59*

35,781

1959-60*

40,441

1960-61*

45,304

1961-62*

50,846 57,520 65,865 74,307

1962-63* 1963-64* 1964-65t

1,298.8 1,421.6 1,667.4 1,892.4 2.145.4

2,465.6 2,858.4 3,266.0

Revenue

Average

Kilowatt

per

Revenue

Kilowatt Hour

Customer

per

.0237

113.44

.0233

121.20

.0230

130.85

.0227

138.83

* Includes amount recovered through Fuel Oil Adjustment, t Estimate including Fuel Oil Adjustment.

16,500 Kw and utilizing a new and advanced type of boiling water reactor and nuclear superheater is being tested on the western tip of Puerto Rico under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority has pro vided the plant site and the conventional generating

components; the ABC,the nuclear reactor. This proj ect is giving the Authority the necessary experience to undertake large scale generation by means of nuclear

reactors, when such generation becomes economically

Distribution facilities include 186 substations owned

by the Authority with a capacity of 604,475 Kva which, supplied from the transmission network, con vert the electric power for distribution at 2400/4160 Y and 4800/8320 Y volts through distribution feeders which traverse 76 cities and towns and nearly This especially designed ^'Marketeer" (ruck services gas, oil, water, and air to a fleet of nearly 225 motor vehicles at the Authority's Distribution Center in Monacillos.

feasible.

Transmission and Distribution Systems The Authority's transmission system consists of 1,418 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 101 substations and sectionalizer

stations, with a total name plate transformer capacity of 1,409,125 Kva located at suitable points through out the system to insure stability of service and pro vide an adequate islandwide network. The transmis sion system also includes a submarine cable 9.5

miles long which was placed in service during May 1963 to connect the island of Vieques to the Au thority's system.

...â&#x20AC;&#x201D;

â&#x20AC;&#x201D;

it M

* ii

all of the rural area. In addition, there are 139 pri vately owned distribution substations with a total ca pacity of 253,382 Kva to serve industrial customers, making a total installed capacity of 857,857 Kva.

cost of service to customers served under the REA

program, in the case that revenues do not provide an adequate contribution to fixed costs.

Financing System Growth

Through successive amendments to an original loan

Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of

contract for $6,376,000, entered into in 1952 be

these bonds under a Trust Indenture. It also has full

tween the Authority and the Rural Electrification Administration of the United States, the Authority

authority to set and collect adequate rates and other charges for the use of its facilities, and has complete control and supervision over its properties and activi ties. Properties may be acquired by the Authority by any lawful means, including the power of eminent

Rural Electrification

has borrowed to date $66,710,000 on bonds bearing interest at the rate of 2% under a loan contract now

totaling $74,040,000. These funds have been loaned

by REA for the construction of generation, transmis sion and distribution facilities to serve rural custom

ers. More than 132,000 rural families are now being served under this program.

By law, the Commonwealth Government contrib

utes to the Authority the annual amounts required to guarantee that the Authority recovers the complete

Public Uglumg.

Baldorioly de Caslro Avenue, San Juan.

domain.

For many years the Authority has followed a policy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of revenue

bonds are sold for the repayment of such loans and for the continuance of construction. In this way the

facilities producing income for the support of longterm obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $297,-

service requirements and other contractual obliga tions. The maximum debt service for any future year on outstanding issues was $14,566,000, indicat ing a coverage of 2.24 times on present debt. Accruals

240,000 as of December 31, 1964.

for contributions to the Commonwealth and munici

In addition, a substantial amount of the Capital Improvement Program has been financed directly from revenues of the Authority. In the period from May 1, 1947 to December 31, 1964, a total of $407,-

811,000 was invested in capital improvements. Of this amount $309,330,000 had been provided from the proceeds of bond issues and bank borrowings, and $98,481,000 had come mainly from net revenues of and contributions to the Authority. On January 31, 1965, total net assets amounted to $433,488,037, operating and appropriated reserves were $24,779,155, contributed capital and unappropriated net rev enues were $74,989,000 and outstanding debt was

pal governments in lieu of taxes amounted to $7,662,000 during the same period.

The rapid expansion in facilities and improvement of service over the past decade has been carried out without raising the Authority's rates. Constant in creases in demand have consistently resulted in a yearly growth in revenues and in substantial reserves

adequate to meet the Authority's operating expense and contractual obligations.

New Bond Issue

In April 1965, the Authority proposes to sell

$312,722,000.

$90,000,000 par value Electric Revenue Bonds

Total revenues for the twelve months ended January 31, 1965, were $72,511,000. Current expenses were $39,816,000, leaving $32,695,000 to meet debt

(Refunding and Improvements) for the purposes of

NUMBER OF CUSTOMERS

SALES OF ELECTRICITY - KWH

redeeming outstanding bonds of the 1958, 1959 and

1960 series; liquidation of current bank borrowings;

Thousands

Millions of KWH

6001

3,500

[333 Other Industrial

Commercial Residential

Fiscal -56 Years

'57

'58

'59

'60

'61

'62

'63

'64

'65'

Fiscal '56

'57

'58

'59

'60

Years â&#x20AC;˘ Estimated Source P R W R A. Financial Reports

'61

'62

'63

'64

'65*

This hosiery mill at Cidra is one o} many industrial companies which are important consumers of electric power produced by the Heater Resources Authority.

and continuation of the Capital Improvement Pro gram.

Preliminary calculations indicate that the Au thority's maximum annual debt service, upon the completion of the financing, will approximate $15,-

invest $176,364,000 in further capital improvements.

Of this amount, the sale of bonds will provide some $100,818,000. About $71,024,000 or 40% will be derived principally from revenues of the Authority,

compared with an average of 24% accrued from

600,000 and will be covered over 2.10 times by net

earnings and contributions during the last seventeen

earnings for the twelve months ending February 28,

years. The remainder of $4,522,000 will be available

1965.

from previous bond issues.

The above four-year program compares with cap ital expenditures actually made during the past seventeen years, distributed as follows: steam pro duction plant $142,252,000, nuclear production plant

Looking Ahead

Continuous studies of power needs, constantly re

viewed and revised by the Authority and its consulting engineers, now indicate that peak demand of the system will increase from 659,000 Kw in 1964-65 to 751,000 Kw in 1965-66, 856,000 Kw in 1966-67 and 965,000 Kw in 1967-68. It is expected that over 27,000 new customers will be added yearly. To meet

this demand, the Authority's generating capacity will be raised to a name plate rating of 1,190,420

$5,486,000, hydraulic production plant $36,104,000, gas turbine production plant $8,660,000, transmis sion plant $54,634,000, distribution plant $117,279,000, and other facilities $43,396,000 for a total of $407,811,000.

Security for the Bonds

Kw by June 1968.

During the period from July 1, 1964 through June

Bonds issued by the Authority under the Trust

30, 1968, it is anticipated that the Authority will

Indenture are payable from the Puerto Rico Water

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of January 31, 1965

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation

$433,795,323 68,655,020

Net utility plant

$365,140,303

OTHER PHYSICAL PROPERTY

199,990

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

19,169,686

CURRENT ASSETS:

Funds and working advances Accounts receivable â&#x20AC;&#x201D; Less Reserve for uncollectible accounts Materials and supplies Prepayments, special deposits, etc

$ 13,168,001 14,012,347 12,143,254 1,180,711

40,504,313

$ 7,416,823 1,056,922

8,473,745

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other TOTAL ASSETS

$433,488,037

LIABILITIES

CONTRIBUTED

$ 34,940,493

CAPITAL

UNAPPROPRIATED NET REVENUES

43,048,751

LONG-TERM DEBT: Electric revenue bonds

Notes payable

$294,422,000 18,300,000

312,722,000

6,157,364 2,863,767 796,299 4,600,647 2,432,782

16,850,859

CURRENT LIABILITIES:

Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes . .

Other

DEFERRED

CREDITS

1,146,779

RESERVES: Self-insurance

Hydro-production equalization Injuries and damages Revenue stabilization

Appropriated sinking fund TOTAL LIABILITIES

4,716,138 1,646,259 2,966,623 416,344 15,033,791

24,779,155

$433,488,037

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture)

Twelve Months Ending June 30 1961

June 30 1962

June 30 1963

June 30 1964

January 31

$45,303,522 1,110,660

$50,845,979 1,284,837

$57,519,700

$65,864,594

$69,968,128

1,409,175

1,501,989

1,465,865

$46,414,182

$52,130,816

$58,928,875

731,477

675,433

742,361

$67,366,583 970,985

$71,433,993 1,076,547

$47,145,659

$52,806,249

$59,671,236

$68,337,568

$72,510,540

$ 6,885,447

$ 7,360,603

$ 8,542,762 $ 9,358,232

$10,270,867

13,381,840

14,104,870 6,104,009

REVENUES:

Sales of electric energy Other operating revenues Total operating revenues Other income Total revenues

1965

CURRENT EXPENSES:

Operation â&#x20AC;&#x201D; Fuel

529,768

15,353,872 7,160,923 709,753

18,304,172 8,871,283 879,071

19,522,779 9,164,883 857,603

$25,273,608

$28,099,250

$31,767,310

$37,412,758

$39,816,132

$21,872,051

$24,706,999

$27,903,926

$30,924,810

$32,694,408

$ 6,024,656

$ 6,867,883

$ 7,718,486

$ 8,162,797

$ 8,369,331

2,930,621 1,003,767

3,373,776 1,179,206

3,837,000 1,343,538

4,299,656 1,466,002

4,471,124

Total sinking fund payments

$ 9,959,044

$11,420,865

$12,899,024

$13,928,455

$13,649,027

Balance

$11,913,007

$13,286,134

$15,004,902

$16,996,355

$19,045,381

479,696 6,008,704

542,178 6,882,337

598,185 7,680,380

640,668 8,384,582

$ 6,488,400

$ 7,424,515

$ 8,278,565

$ 9,025,250

Other operating expenses

4,495,076 511,245

Maintenance

Other current expenses Total current expenses Balance of revenues after current ex

penses (per Trust Indenture) . .

SINKING FUND PAYMENTS:

Interest account (exclusive of interest charged to construction and reimburse ment from the Commonwealth Govern

ment of Puerto Rico)

Bond redemption account (exclusive of reimbursement from the Comrnon-

wealth Government of Puerto Rico) Reserve account

808,572

TRANSFERS TO:

General reserve fund â&#x20AC;&#x201D; provision for selfinsurance

Renewal and replacement fund Total

transfers

>

666,814 10,257,072

$10,923,886

Balance available for contributions in

lieu of taxes, etc.

$ 5,424,607 $ 5,861,619 $ 6,726,337 $ 7,971,105 $ 8,121,495

PROVISION FOR CONTRIBUTIONS IN 4,957,439

5,563,099

$

467,168

298,520

Transfer to sinking fund reserve account $ Total ^

149,260

$

213,992

$

379,503

$

229,638

233,584

$

149,260

$

213,992

$

379,502

$

229,638

233,584

$

149,260

$

213,992

$

379,502

LIEU OF TAXES Balance

$

6,298,353

7,212,100

427,984

759,005

7,662,219 $

459,276

PROVISION FOR:

233,584

Balance transferred to unappropri ated net revenues

$

229,638

TOTAL REVENUES, BALANCE AVAILABLE FOR

DEBT SERVICE AND DEBT SERVICE REQUIREMENTS

REVENUE FROM SALES OF ELECTRICITY

Millions of Dollars

Millions of Dollars 80

■ Total Revenues

^ Residential

□ Balance After Current Expenses ^ Debt Service Requirements

■ Total

"

-

10 —

Fiscal

'56

'57

'58

■62

'63

'64

'65*

Years

Fiscal

'56

"57

'58

'59

'60

'61

'62

'63

'64

*65*

Years

issued as they become due, as well as to create

properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds have been retired, this percentage will be

reserves for such purposes.

reduced to 140.

Resources Authority Sinking Fund. The Authority has covenanted to deposit in this fund a sufficient amount of its revenues, after expenses for main

tenance and operation of its electric properties, to pay the principal of and the interest on all bonds The Authority has also covenanted that it will at

The bonds and the income therefrom are, under

all times fix and collect reasonable rates and charges

provisions of Acts of Congress now in force, exempt

sufficient for the payment of maintenance and oper

from Federal and State taxation. These bonds are

ating expenses and bond principal and interest, and

also legal investments for savings banks and trust

to create certain reserves. Rates must also provide

funds in the states of New York and California and

for the making of deposits required by the Trust

are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance companies to qualify them to do business in Puerto Rico. The bonds are rated "A" by Moody's Investment Service and by Standard and Poor's.

In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub

Indenture to the credit of the General Reserve Fund

and the Renewal and Replacement Fund, and for

payments in lieu of taxes to the Commonwealth and the municipalities it serves.

In order for the Authority to issue additional bonds under the Trust Indenture, the average annual bal

ance of revenues from its electric properties for the

divisions, there is no known record of default or

preceding twenty-four months, after deducting the

delinquency in the payment of principal of or interest on any obligation, nor has there been any forced or

cost of maintaining, repairing and operating these 10

"managed" refunding of maturing bonds to avoid

collected from Puerto Riean residents on income

default.

earned in Puerto Rico, and Federal excise taxes col

The Commonwealth of Puerto Rico

Puerto Rico is the fourth largest of the islands in the Caribbean area. It is about 100 miles long and 35 miles wide, having an area of 3,423 square miles and a population estimated at 2,572,000.

Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, following the same general procedures, as do the fifty federated

States over theirs. It differs from the States primarily in its relationship to the Federal Government. In brief, residents of Puerto Rico do not vote in the

lected on exported Puerto Riean products, such as rum and tobacco, are returned to the Commonwealth Treasury. This relationship with the Federal Govern ment is defined through the medium of the compact

entered into by Congress and the People of Puerto Rico, and is further described hereafter.

Government History

Puerto Rico came under United States sovereignty by

the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil govern ment for the Island in 1900 including a Governor,

Cabinet, Senate and Supreme Court, all appointed by

national elections. They are represented in Congress by a Resident Commissioner who has a voice but no

the President of the United States. Only a House of

vote in the House of Representatives. Federal taxes do not apply in Puerto Rico except by mutual con sent, as is the case with social security taxes and unemployment insurance. No Federal income tax is

Delegates was elected by the People of Puerto Rico.

Over succeeding years strong feeling developed for a less colonial form of government and in favor of United States citizenship. As a result, the original law

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South Coasi Steam Plant â&#x20AC;&#x201D;

253,000 KW including a fourth unit of 82,500 KW placed in service in December 1963.

was superseded in 1917 by the Organic Act or Jones Act, which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local purposes. Both Senate and House were elected by the people, but the Executive and Judicial branches remained under control of Washington through ap pointment by the President.

No further change occurred until 1946 when the

States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations Act.

This Act also authorized the People of Puerto Rico to draft and approve their own constitution.

Such a constitution, similar to those of the various

President for the first time appointed a Puerto Rican

states, was drafted by a freely elected constitutional convention in Puerto Rico, overwhelmingly approved in a special referendum, and approved by Congress

as Governor. In 1947 the Jones Act was amended to

of the United States and the President. It became

permit Puerto Ricans to elect their own Governor,

effective upon proclamation by the Governor of

who in turn was empowered to appoint his Cabinet and the members of the Supreme Court.

The next advance toward complete local govern

Puerto Rico on July 25, 1952.

ment occurred in 1950 when, in accordance with the

The Commonwealth Government

wishes of the People of Puerto Rico, the 81st Con gress enacted Public Law 600, approved July 3, 1950.

This law, which is "in the nature of a compact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of the

those of the States. Both the Governor and the bicam

Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United

four years.

The Constitution recognizes and assures a separation of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and in

eral legislature are subject to regular election every

Governmental responsibilities assumed by the Com monwealth are greater than those normally assumed by the State government. Municipalities, which com bine both rural and urban areas, are the only local

these public corporations is supported entirely by revenues derived from their operations.

Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly

political subdivisions and are comparable to counties

demonstrated in Puerto Rico. Only a declining and

in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Gov ernment and the municipalities. There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government carries out a number of important functions usually performed by local governments in the continental United States. Among these are police and fire pro tection, education, all major street and highway

now insignificant minority party favors independence.

construction, and public health programs. In addition, the Commonwealth Government supervises munici pal fiscal affairs to a very substantial extent.

Commonwealth and municipal governments are relieved of most of the responsibility for constructing and financing electric, water and sewer systems by the Water Resources Authority and the Aqueduct and Sewer Authority. Air and seaport facilities are admin istered by the Ports Authority. The bonded debt of

Both major political parties, the Popular Democratic Party and the Statehood Republican Party, hold maintenance of permanent ties with the United States as a basic principle, and differ only as to the form which that future political relationship should take.

Improved Commonwealth Status and Plebiscite

Since 1952, when Congress authorized and Puerto Rico accepted the present commonwealth form of government, it has been recognized that this concept of political status, being a new legal entity within the framework of the government of the United States, could in due course be subject to improvement. No significant changes were proposed until 1961 when, through direct vote by Puerto Ricans, and with ap proval by Congress, the U. S. Congress provided for

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removal of control of the Commonwealth debt limit

House of Representatives, and was passed by the

from the Federal Relations Act at such time as it was

House on October 23, 1963 and by the Senate on

incorporated by referendum in the Puerto Rican Constitution, and authorized appeal of decisions of the Supreme Court of Puerto Rico directly to the U. S. Supreme Court, instead of through the U. S.

February 18, 1964. The Resolution provides for the

First Circuit Court of Appeals.

establishment of a "United States-Puerto Rico Com mission on the Status of Puerto Rico" which is to

study all factors which may have a bearing on the present and future relationship between the United

On July 25, 1962, the 10th Anniversary of the

States and Puerto Rico. The membership of the

Commonwealth, the Governor of Puerto Rico stated sufficient time had elapsed, and enough experience had been gained, to consider improvement and refine ment of the commonwealth concept. Once this was

Commission consist of three persons appointed by

to be defined, measures could then be taken to hold

Rico. The Commission is to render its report to the

a plebiscite in which the people could express their preference for a perfected commonwealth status, or

President and the Congress of the United States and to the Governor and the Legislative Assembly of Puerto Rico not later than January 1966.

It is expected that this study will result in the basis of a clarification and perfection of common

for the classical forms of government of statehood or

independence. The Legislature of Puerto Rico, by almost unanimous vote, adopted a Resolution peti tioning Congress to provide the basis for such plebis cite.

In response to this, a Resolution (HR 5945) was introduced on April 30, 1963, in the United States

the President of the United States, plus two each

selected by the Senate and the House of Represen tatives, and six appointed by the Governor of Puerto

wealth status in such a manner that a subsequent

plebiscite can express the basic preference and choice of the voters of Puerto Rico as to their future political status.

Rapid Economic Progress

For over two decades, economic growth in Puerto Rico has been rapid and continuous. Commonwealth gross product has increased nearly eightfold, from $287 million in 1940 to $2,532 million in 1964. The

net income of Puerto Rico has more than kept pace.

During the same period it rose from $225 million to $2,097 million, registering a 10% increase in 1964.

Especially significant, net income per capita after adjustment for price changes has shown an average annual increase for the last twenty-four years of about 5% compounded. In fact, the rate of increase has been accelerating, from 4.2% in the decade 1941-50,

The first of four 10,000 KW jet powered peaking units, this one at the Palo Seco Steam Plant.

to 5.2% in the decade 1951-60, 6.5% in 1961-63,

and 6.5% in 1964, making the Commonwealth's economy one of the fastest growing in the world.

Equally impressive has been the transformation

of the Commonwealth's economy from over-depend ence on sugar to a high degree of industrialization and diversification. While net income from agricul ture has expanded from $71 million in 1940 to $205 million in 1964, that from manufacturing has multi plied eighteen times, from $27 million in 1940 to $486 million in 1964, and now provides 23% of Commonwealth net income. Whereas in 1940, sugar products accounted for nearly two thirds of exports,

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in 1964 they provided less than a seventh. Nowadays more than two thirds of manufacturing income is

generated by the production of new types of goods, principally for shipment to the continental United States. Such shipments have jumped from $23 million

New desalination

plant at the

in 1949 to $567 million in 1964.

Palo Seco Steam Plant.

These new products cover a wide range such as apparel, petroleum derivatives, and electronic prod ucts. Large, heavily capitalized manufacturing opera tions have shown a significant increase in recent

years as compared to those labor-intensive operations promoted during the early part of the industrialization program. These include the Union Carbide & Chem ical Corp., which operates a $28 million glycol plant and has under construction a $22 million plant to

produce alcohol intermediates. Petroleum refineries are operated by Caribbean Refining Co., which recently completed an expansion program, and the Commonwealth Oil Refining Co., which is currently adding a $33 million investment in petrochemical

Palo Seco Steam Plant.

Water Resources Authority's helicopter lifting an aliiniinum V, guyed transmission line structure.

plant, producing cake for the growing cattle and dairy industry and oil for the domestic market and

for the tuna canneries, commenced operations re cently. A subsidiary of Libby, McNeill and Libby has established a plant for the canning of tomato sauce and juice produced from local crops.

Further, many of the plants are branches or sub sidiaries set up by such firms as General Electric, Consolidated Cigar, U. S. Rubber, American Can, Phelps Dodge, Sperry Rand, Daystrom, Carborun dum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B. V D., Bell & Howell, International Shoe, and W. R. Grace. One

significant addition to Puerto Rico's blue chip roster is Ford Motor Co.'s $15 million ball bearing plant, one of the most modern facilities of its kind in the world.

Helping to bring about such extraordinary changes

in Puerto Rico's economy has been the Common operations. An addition to Puerto Rico's petro

wealth Government's comprehensive development

chemical complex will be Puerto Rico Chemical Co., which has under construction a $6 million anhydrous benzene bicarboxylic plant. Negotiations are now being completed with Phillips Petroleum Co. for the establishment of another petrochemical complex on

program, especially those phases directed at encour aging manufacturers in the continental United States

the south coast with a total investment of almost

$600 million, creating direct employment of 33,000.

During calendar year 1964 some 175 new factories were established on the island as a result of Puerto

Rico's industrial development program. Over 1,100

plants promoted or otherwise established under this program are now in existence in Puerto Rico.

Food processing has also been a significant growth area in recent years. Two rice mills and a large flour and feed mill supply an important share of Puerto Rico's food requirements. Four large tuna canneries are now in operation; and, with two addi

to expand and locate their new plants in Puerto Rico.

As a result of this program, the annual inflow of capital from the continental United States for fixed investment in the Commonwealth has risen from $31 million in 1947 to $309 million in 1964. Annual fixed investment from all sources has risen from $62

million to $581 million during the same period and has equalled 20 percent or more of gross product since 1957, reaching 23% in 1964.

The Puerto Rican people have benefited greatly from the economic expansion achieved since 1940.

Life expectancy has increased from 46 years to 70 years, and the death rate has declined from 18.4 per

thousand to 6.8 per thousand. Personal income per

tional plants under construction, the island has be

family has risen from $611 to $3,827. Public and private day school enrollment has increased from

come one of the leading suppliers of canned fish in

297,000 to 670,000. University and college enroll

the United States market. A soya bean processing

ment has grown from 5,000 to 33,000.

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Fiscal Years

An Expanding Economy: Gross Product — $ Millions Net Income — $ Millions

Personal Income Per Family — $

.

% Increase

1940

1964(1)

or (Decrease)

287 225 611

2,532 2,097 3,827

782

73

1,417

17

282

312

2,239

618

5,300 1,950

832

526

Banks:

Debits — $ Millions

Private Savings Accounts — $ Millions Assessed Value of Taxable Property — $ Millions Income Tax Collections — $ Millions .

Power Generation — Millions of KWH .

2

108

166

3,403

1,869,000 39.0 18.4 46 286,000 5,000

2,572,000 30.9 6.8 70 608,000 33,000

1,841 1,559

A Healthier, Better Educated Population: Population Birth Rate — Per Thousand Death Rate —Per Thousand Life Expectancy — Years Public Day School Enrollment University and College Enrollment

A More Balanced Economic Life:

37 (21) (63) 52 113 560

Percentage Points

Per cent of Net Income from:

Manufacturing Agriculture

Commonwealth and Municipal Government

Change

12

23

11

31

10

(21)

8

13

5

Trade

12

18

6

Other

37

36

(1)

Per cent of Exports from: Exports by New Factories'^'

63

63

Sugars (Raw and Refined)

62

14

Other

38

23

(48) (15)

< 1' Preliminary figures.

(2) Promoted by the Economic Development Administration.

Does not include exports of other new factories.

Source: Puerto Rico Planning Board.

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