Puerto Rico Water Resources Authority (apr. 1967)

April 1907

A SPECIAL

REPORT ON

AUTHORITY COMMONWEALTH OF PUERTO RICO

GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO SAN JUAN, PUERTO RICO

i

•Ki

,s

1

5 40'^-'

I .f'Wifr

I

I

rJf^ 7

1

f M

!• 3/

lb 313^

PUERTO RICO WATER RESOURCES AUTHORITY

1950 - Our Growth - 1966

Data for the twelve months ending Times

June 30, 1950

Sales of electricity (Kwh)

411,727,000

Revenues from sales

$11,170,000

Customers (number)

Average sales per customer (Kwh) Average revenue per customer

$

December 31, 1966

4,031,231,000 $

88,844,000

Increased

9.8 8.0

177,000

594,000

3.4

2,419 65.64

6,927 152.67

2.9 2.3

4,729,927,000 770,300 990,420

9.1 8.0 7.0

Generation requirements (Kwh) 519,014,000 Annual peak demand (Kw) 96,230 Generating capacity installed (nameplate Kw). .

140,560

$

Revenues (total)

$11,317,000

$

92,275,000

8.2

Current expenses

$ 5,390,000

$

48,957,000

9.1

Balance of revenues available for debt service . . $ 5,927,000

$

43,318,000

7.3

Contribution in lieu of taxes Other contractual obligations

$ 1,178,000 3,681,000

$

9,731,000 32,638,000

8.3 8.9

Contractual obligations (total)

$ 4,859,000

$

42,369,000

8.7

$ 462,613,000

8.3

59,593,000

2.3

Electrical plant in service (at cost) . . . . $55,572,000 Construction work in progress

25,371,000

Electric plant (at cost) $80,943,000 Long term debt and outstanding notes . . . . $60,545,000

$ 522,206,000 $ 363,189,000^^

6.5 6.0

Equity of the people of Puerto Rico

$ 117,736,000

4.7

$24,905,000

With the present balance of revenues for debt service, if expansion needs required, the Authority could issue

roughly $163,000,000 in additional revenue bonds within the limits established by the Trust Indenture securing these bonds.

ON THE COVER San Juan Steam Plant

— This plant is the largest of the System with a total capacity of 378,000 Kw.

Commonwealth of Puerto Rico

.b-

PUERTO RICO WATER RESOURCES AUTHORITY

o01

Governing Board

Officers

Chairman: HON. ROBERTO SANCHEZ VILELLA Governor of the Commonwealth of Puerto Rico

RENAN COLON

Chief Engineer FELIX CORDOVA DIAZ

Vice-chairman: HON. FRANCISCO LIZARDI

Secretary of Public Works Member: HON. MIGUEL HERNANDEZ AGOSTO

Secretary of Agriculture

General Manager — Services and Supply HAROLD TORO

General Manager — Irrigation Services JOSE VILA RUIZ General Counsel

CARLOS VELAZQUEZ TORO

Principal Officers

Head, Production and Transmission Division HUMBERTO CORDERO

RAFAEL V. URRUTIA

Head, Distribution and Sales Division

Executive Director

WALDEMIRO VELEZ DR. MODESTO IRIARTE

Head, Electrical Planning and Research Division

Assistant Executive Director — Electrical Planning, Constrtiction and Research

Head, Power Design and Construction Division

EDUARDO LUBE Assistant Executive Director -

JOSE A. MATOS

JOSE 1. DIAZ Finance

Controller

JULIO NEGRONI

LOUIS ROIG MARTINEZ

Assistant Executive Director - ■ Power Operations

Treasurer

FERNANDO TORRENT

JAVIER CUEVAS BENITEZ

Assistant Executive Director — Industrial Relations

Head, Purchasing Division RAFAEL VAZQUEZ COLON Head, Personnel Division

and Personnel

HECTOR M. MORALES

Consulting Staff

Head, Transportation and Services HERMANN MUNOZ

RAEAEL R. RAMIREZ Power Consultant PEDRO COLON PAGAN

Consultant — Engineering and Construction

Public Relations Officer

RAFAEL D. CHERVONI

Head, Safety Division Trustee

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

Consulting Engineers Jackson and Moreland Division

of United Engineers and Constructors Inc. Auditors Arthur Andersen & Co.

Bond Counsel

Mitchell, Pershing, Shetterly & Mitchell

Puerto Rico Water Resources

Authority The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto Rico Water Resources Authority, an autonomous public service corporation and instrumentality of the Government of the Commonwealth of Puerto Rico.

The origin of the Authority goes back to the opera tion of two government agencies which began the development of hydroelectric power in Puerto Rico — the Puerto Rico Irrigation Service, which built its first generating plant in 1915, and the Utilization of Water Resources of Puerto Rico, created in 1927. In

1941, the Authority was established by law to replace the Utilization of Water Resources and ensure a

growth in the supply of electricity which would be adequate for the future needs of Puerto Rico's eco nomic development. Subsequently, during the World War II fuel shortage, the two large private electric utilities on the Island were taken over by the United States Government as an emergency measure and their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and, at a later date, the electric facilities of various irri

gation services were integrated into the Authority's system.

When the Authority began operations in 1941, the Island's economy was primarily agricultural and heavily dependent on a single crop — sugar. In the latter half of that same decade, an industrialization

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

passed that from agriculture. Today close to 1,400 new factories, promoted under the economic develop ment program, are in operation. Such rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise in the demand for energy.

Throughout the twenty-five years elapsed since the Authority came into being its growth has been steady

Rafael V. Urrutia Executive Director

and most impressive. The comparative figures shown on the inside of the cover page speak for themselves.

From its inception the Authority has had to con stantly build new hydro and thermo-electric plants to keep up with, and anticipate, the mounting demand for electric power. New generating capacity has been added almost every year. Since 1944 total name plate rating of the Authority's generating plant has risen

from 64,440 Kw to the present capacity of 990,420 Kw. Annual capital construction programs in recent years have reached as high as $47,000,000.

The capital construction program for 1966-67 is estimated at $51 million. It includes work on three

100,000 Kw units for the San Juan Steam Plant.

One unit has already been completed. The others are scheduled for completion in August 1967, and March 1968 respectively. Other important projects are the installation of three 20,000 Kw and one 10,000 Kw

jet peaking units, throughout the system. This pro gram also includes general transmission and dis tribution facilities, rural electrification projects, the acquisition of land and the construction of build ings, and miscellaneous items. When current projects

are completed, total generating capacity will be 1,260,420 Kw.

The Authority has grown to become the second largest municipally owned, integrated electric utility in the United States as is indicated by the following tabulation: City of Los Anf^i'les Puerto Rico Department of Water Resources Water and Power

As of Dec. 31, 1966

Authority A uthority As of D ec. 31. 1966

City of Seattle

Department of

Lighting As of Dec. 31. 1966

.

$906,799,687

$426,879,065

$274,804,121

Electric Revenues

$170,308,420

$ 88,844,062

$ 46,217,929

Net Plant .

.

Number of

Customers .

.

1,055,238

Af! important commercial section in Santurce showing some of the htxtiry hotels.

Present Electric System The total installed generating capacity of the Author ity at the end of December 1966 had a name plate

rating of 990,420 Kw and maximum dependable ca pacity of 1,064,960 Kw. The physical plant presently consists of twenty-three generating stations, of which eighteen are hydroelectric, four are thermal-electric and one is nuclear. Thermal-electric facilities now

supply about 94 percent of the electric energy gen erated. The Authority's four thermal-electric generat ing stations have a total installed name plate rating of 866,000 Kw.

A desalination pilot plant has also been inaugurated, to provide 14,400 gallons a day of make-up water for the main unit boilers. The desalination process is new and uses waste heat from the turbine condenser

system to evaporate sea water in a vacuum.

The South Coast Steam Plant, near Ponce, has two

44,000 Kw, two 82,500 Kw steam-electric units and a 10,000 Kw jet peaking unit. One of the outstanding

features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil. This plant currently receives its fuel by direct pipe line from the nearby refinery of the Commonwealth Oil Refining Co.

The San Juan Steam Plant has an installed capacity Steam-Electric Stations

The Palo Seco Steam Plant, near San Juan, was

of 378,000 Kw in four 20,000 Kw, two 44,000 Kw and two 100,000 Kw steam-electric units and a

placed in service in 1960 and has two 82,500 Kw steam-electric units and one 10,000 Kw jet peaking unit powered by a kerosene-burning aviation-type jet motor. This unit is used for peaking and for emer

10,000 Kw jet peaking unit. Work on two other 100,000 Kw units, scheduled for completion in August 1967, and March 1968, is under way.

The Mayaguez Plant is equipped with two gas

gencies, being designed for automatic synchroniza

turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle

tion to the line from a cold start in only two minutes.

PUERTO

RICO

WATER

RESOURCES

AUTHORITY

ELECTRIC SYSTEM DECEMBER 31 cammk* -lorzHVk

(O.ooo

«Tension-

175.000

UNDER.^STHycTl6N

r I*" —^ VOOO

SABftJk Pl-AK^"ST 080 KW

CATAfio

7.500 KV

"lakts

COtCGtO-vmcmA

1\

\5,ooo«¥*

MAVA0UE7 30A00

' .y

MM UMENZO

CAYET

3,07ZKVA

CARITE

autNA v.su-T,500KVA

□ thermal plants

^ NUCLEAIR PLANT

(BONUS)

O hyoro-electhic plants

A transmission SUBSTATIONS A DISTRIBUTION

^I

— — SBKV SUBMARINE POWER CABLE sa*w CLtCTRlC transmission lines

Existing us kv electric transmission lines "

115 KV electric transmission lines lUndtt Contiruci'onl RESERVOIRS

SUBSTATIONS

peak loads. A 10,000 Kw jet peaking unit was in stalled recently.

Hydroelectric Stations There are 18 hydroelectric plants with a total installed

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

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

Nuclear Power Plant

A nuclear power plant with a rated capacity of 16,500 Kw and utilizing a new and advanced type of boiling water reactor and nuclear superheater, located on the western tip of Puerto Rico, was placed in ser vice in January 1966. It was constructed under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority has pro

vided the plant site and the conventional generating components; the AEC, the nuclear reactor. This proj ect is giving the Authority the necessary experience to undertake large scale generation by means of nuclear reactors when such generation becomes economically feasible.

Transmission and Distribution Systems

The Authority's transmission system consists of 1,534 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 125 substations and sectionalizer

stations, with a total name plate transformer capacity of 1,830,675 Kva located at suitable points through out the system to insure stability of service and pro vide an adequate islandwide network. The transmis sion system also includes a submarine cable 9.5

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

Distribution facilities include 196 substations owned

by the Authority with a capacity of 818,584 Kva

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946

Kilowatt

Customers

Load

Hours per

(June 30)

(Million Kwh)

Maximum Peak Load

Average

(Thousands of Dollars)

(End of Period)

(Kw)

(Kw)

1945-46

$ 5,764

258.6

124,959

63,000

1950-51

13,006

488.2

185,090

1955-56*

25,216 28,693 33,973 35,781 40,441 45,304 50,846 57,520 65,865 72,952 83,734 94,957

930.8

1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,465.6 2,858.4 3,186.3 3,771.7 4,270.0

314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 552,111 581,369 610,586

Sales f

Fiscal Year

1956-57* 1957-58* 1958-59* 1959-60* 1960-61*

1961-62* 1962-63* 1963-64* 1964-65*

1965-66*

1966-67t

Revenue per

Revenue

Customer

Kilowatt Hour

Customer

39,000

2,069

.0223

$ 46.13

109,000

69,000

2,638

.0266

70.27

210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 637,000 737,000 845,000

129,000 153,000 181,000 198,000 231,000 261,000 294,000

2,956 3,184 3,578 3,687 4,080 4,350 4,664 5,053 5,522 5,771 6,488 6,993

335,000 388,000 436,000 506,000 581,000

per

.0271

80.08

.0266

84.72

.0262

93.58

.0252

92.79

.0243

98.96

.0239

107.34

.0237

113.44

.0233

121.20

.0230

130.85

.0229

132.13

.0222

144.03

.0222

155.52

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

which, supplied from the transmission network, con vert the electric power for distribution at 2400/4160 Y, 4800/8320 Y and 7,620/13,200 Y volts

through distribution feeders which traverse 76 cities and towns and nearly all of the rural area. In addition, there are 163 privately owned distribution substations with a total capacity of 355,765 Kva to serve indus

By law, the Commonwealth Government contrib utes to the Authority the annual amounts required to guarantee that the Authority recovers the complete cost of service to customers served under the REA

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

trial customers, making a total installed capacity of

Financing System Growth

1,174,349 Kva.

Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for

Rural Electrification

its corporate purposes and to secure the payment of

Through successive amendments to an original loan

these bonds under a Trust Indenture. It also has full

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

authority to set and collect adequate rates and other charges for the use of its facilities, and has complete control and supervision over its properties and activi

tween the Authority and the Rural Electrification Administration of the United States, the Authority has borrowed to date $75,040,000 on bonds bearing interest at the rate of 2% under a loan contract now

totaling $76,040,000. These funds have been loaned

by REA for the construction of generation, trans mission and distribution facilities to serve rural customers.

ties. Properties may be acquired by the Authority by any lawful means, including the power of eminent domain.

For many years the Authority has followed a policy of initially financing the construction of facilities under its Capital Improvement Program with short

term bank loans. From time to time, issues of revenue

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

propriated net revenues were $90,482,000 and out standing debt was $363,189,000.

Total revenues for the twelve months ended De

facilities producing income for the support of long-

cember 31, 1966, were $92,275,000. Current ex

term obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $354,489,000 as of December 31, 1966.

In addition, a substantial amount of the Capital Improvement Program has been financed directly from revenues of the Authority. In the period from May 1, 1947 to December 31, 1966, a total of $506,620,156 was invested in capital improvements.

Of this amount $371,331,535 has been provided from the net proceeds of bond issues and bank bor rowings, and $135,288,621 had come mainly from net revenues of and contributions to the Authority. $513,026,000, operating and appropriated reserves

penses were $48,957,000, leaving a balance of $43,318,000 available for debt service requirements and other contractual obligations. The maximum debt service for any future year on outstanding issues was $17,862,000, indicating a coverage of 2.45 times on present debt. Accruals for contributions to the Commonwealth and municipal governments in lieu of taxes amounted to $9,731,000 during the same period.

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

were $30,626,000, contributed capital and unap

and contractual obligations.

On December 31, 1966, total net assets amounted to

- V-rf.

Ponce Cemen! Corporation

— One of the largest industrial customers of the Water Resources Authority.

I,: /A

A modern shopping center in Metropolitan San Jitan.

s

m.

SALES OF ELECTRICITY - KWH

NUMBER OF CUSTOMERS

other

Fiscal '58

'59

'60

"61

'62

i^oars

'63

'64

Fiscal

-58

'59

'60

'61

'62

Vears * Estimate

Source: P.R.W.R.A. Firtanclal Reports.

â– Estimalc

Source, P R.W.R.A Financial Reports

'63

'64

'65

'66

'67

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of December 31, 1966

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation

$522,206,446 95,327,381

Net utility plant

$426,879,065

OTHER PHYSICAL PROPERTY

188,345

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

16,858,569

CURRENT ASSETS:

Funds and working advances Accounts receivable — Less Reserve for uncollectible accounts Materials and supplies Prepayments, special deposits, etc

$ 20,894,218 19,696,791 14,594,467 771,785

55,957,261

DEFERRED DEBITS:

Debt discount and expense in process of amortization

$ 11,488,311

Other

1,654,274

TOTAL ASSETS

13,142,585

$513,025,825

LIABILITIES

CONTRIBUTED CAPITAL

$ 38,371,611

UNAPPROPRIATED NET REVENUES

52,109,953

LONG-TERM DEBT:

Electric revenue bonds Notes payable

$354,489,000 8,700,000

363,189,000

CURRENT LIABILITIES:

Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds

$ 9,600,569 3,904,104 5,789,952

Accrued contributions in lieu of taxes

5,070,376

Other

4,128,854

DEFERRED CREDITS

28,493,855

235,098

RESERVES:

Self-insurance

Injuries and damages Revenue stabilization

Appropriated sinking fund TOTAL LIABILITIES

$

6,163,351

3,371,398 1,467,856

19,623,703

30,626,308 $513,025,825

Puerto Rico Water Resources Authority

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

Twelve Months Ending REVENUES:

June 30

June 30

June 30

June 30

1963

1964

1965

1966

December 31

1966

Sales of electric energy . .

Other operating revenues . .

$57,519,700 1,409,175

$65,864,594 1,501,989

$72,952,446 1,644,048

$83,734,015 1,890,939

$88,844,062 2,039,586

Total operating revenues

$58,928,875

$67,366,583

$74,596,494

$85,624,954

742,361

970,985

1,182,929

1,369,968

$90,883,648 1,391,835

$59,671,236

$68,337,568

$75,779,423

$86,994,922

$92,275,483

$ 9,358,232 18,304,172

Other current expenses.

709,753

879,071

$10,709,138 19,894,285 9,339,608 750,520

$12,035,637

Maintenance . . . .

$ 8,542,762 15,353,872 7,160,923

22,518,518 10,717,943 1,045,519

$12,582,034 23,864,715 11,505,506 1,005,009

$31,767,310

$37,412,758

$40,693,551

$46,317,617

$48,957,264

penses (per Trust Indenture) . . $27,903,926

$30,924,810

$35,085,872

$40,677,305

$43,318,219

$ 7,718,486

$ 8,162,797

$ 8,426,525

$ 9,061,921

$ 9,448,090

3,837,000

4,299,656

4,631,960

5,992,000

6,110,000

1,343,538

1,466,002

220,116

207,304

Total sinking fund payments . . . $12,899,024 $13,928,455

$15,261,225 $25,416,080

$15,527,479 $27,790,740

12,397,814

$ 730,902 14,617,510

$ 780,985 16,329,135

Other income

CURRENT EXPENSES:

Operation —

8,871,283

Balance of revenues after current ex

SINKING FUND PAYMENTS:

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

ment of Puerto Rico)

Bond redemption account (exclusive of reimbursement

from

the

Common

wealth Government of Puerto Rico) .

Reserve account

$15,004,902

$16,996,355

$13,278,601 $21,807,271

$

$

$

(30,611)

TRANSFERS TO:

General reserve fund — provision for selfinsurance Total transfers

678,078

7,680,380

640,668 8,384,582

$ 8,278,565

$ 9,025,250

$13,075,892

$15,348,412

$17,110,120

$ 6,726,337

$ 7,971,105

$ 8,731,379

$10,067,668

$10,680,620

Renewal and replacement fund . . . .

598,185

Balance available for contributions in

lieu of taxes, etc PROVISIONS FOR CONTRIBUTIONS IN LIEU OF TAXES Balance

6,298,353

7,989,345

7,212,100

9,731,410

9,172,130

$

427,984

$

759,005

$

742,034

$

895,538

$

949,210

$

213,992

$

379,503

$

371,017

$

447,769

$

474,605

$

213,992

$

379,502

$

371,017

$

447,769

$

474.605

PROVISION FOR:

Balance transferred to unappropri ated net revenues

TOTAL REVENUES, BALANCE AVAILABLE FOR REVENUE FROM SALES OF ELECTRICITY

DEBT SERVICE AND DEBT SERVICE REQUIREMENTS Millions of Dollars

Millions of Dollars

100

100

Total Revenues

Total

□ Balance After Current Expenses -

Residential

Debt Service Requirements

60 •

50 •

II ^il i|il i|il l|il l|il l| h- I il ii ■I ■!

0 —

Fiscal

'58

'59

'60

'61

'62

'63

Years

• Estimate - Including Fuel Oil Adjustment.

Source: P.R.W.R.A. Financial Reports.

New Bond Issue

In April 1967, the Authority proposes to sell $25,000,000 par value Electric Revenue Bonds for the purpose of liquidating current bank borrowings and continuing the Capital Improvement Program.

Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple tion of the financing, will approximate $19,351,000 and will be covered over 2.26 times by net earnings for the twelve months ending December 31, 1966.

Looking Ahead

Continuous studies of power needs, constandy re viewed and revised by the Authority and its consulting

engineers, now indicate that peak demand of the system will increase from 845,000 Kw in 1966-67 to 961,000 Kw in 1967-68, 1,079,000 Kw in 1968-69 and 1,226,000 Kw in 1969-70. It is expected that over 30,000 new customers will be added yearly. To meet this demand, the Authority's generating capacity 10

Fiscal Years

II 1 11 11 11 11 11 11 11 * Estimate - Including Fuel Oil Adjustment.

Source: P.R.W.R.A. Financial Reports.

will be raised to a name plate rating of 1,730,420 Kw

by June 1970.

During the period from July 1, 1966 through June 30, 1970, it is anticipated that the Authority will invest $220,362,000 in further capital improvements.

Of this amount, the sale of bonds will provide some $129,668,000. About $88,034,000 or 40% wUl be derived principally from revenues of the Authority, compared with an average of 27% accrued from earnings and contributions during the last nineteen years. The remainder of $2,660,000 will be available from previous bond issues.

The above four - year program compares with capital expenditures actually made during the past nineteen years, distributed as follows: steam pro

duction plant $178,763,000, nuclear production plant $6,022,000, hydraulic production plant $36,220,000, gas turbine production plant $11,583,000, transmission plant $65,658,000, distribution plant $149,863,000 and other facilities $58,511,000 for a total of $506,620,000.

Security for the Bonds Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund. The Authority has covenanted to deposit in this fund a sufficient amount of its revenues, after expenses for main tenance and operation of its electric properties, to pay the principal of and the interest on all bonds issued as they become due, as well as to create reserves for such purposes.

The Authority has also covenanted that it wiU at all times fix and collect reasonable rates and charges sufficient for the payment of maintenance and oper ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide for the making of deposits required by the Trust

imder the Trust Indenture, the average annual bal ance of revenues from its electric properties for the

preceding twenty-four months, after deducting the cost of maintaining, repairing and operating these properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on aU bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds issued prior to 1965 have been retired, this percentage will be reduced to 140.

The bonds and the income therefrom are, under

provisions of Acts of Congress now in force, exempt from Federal and State taxation. These bonds are also

legal investments for savings banks and trust funds

Indenture to the credit of the General Reserve Fund

in the state of New York and for savings banks in California and are eligible for deposit by banks in

and the Renewal and Replacement Fund, and for

Puerto Rico to secure public funds, and by insurance

payments in lieu of taxes to the Commonwealth and

companies to qualify them to do business in Puerto

the municipalities it serves.

Rico. The bonds are rated "A" by Moody's Invest ment Service and by Standard and Poor's.

In order for the Authority to issue additional bonds

I

|..

1 Jardines de Monte Hatillo — A new public housing development.

I*-! i

In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub divisions, there is no known record of default or de

which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local pur poses. It also provided that members of both Senate

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

and House were to be elected by the people, but the

"managed" refunding of maturing bonds to avoid

control of Washington through appointment by the

default.

President.

Government History

President for the first time appointed a Puerto Rican

Puerto Rico came under United States sovereignty by the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil govern

permit Puerto Ricans to elect their own Governor,

Executive and Judicial branches remained under

No further change occurred until 1946 when the

ment for the Island in 1900. It provided for a Gov ernor, a Cabinet, a Senate and a Supreme Court Judiciary, all appointed by the President of the United States; only a House of Delegates was elected by the People of Puerto Rico.

Over succeeding years strong feeling developed for a more autonomous form of government and in favor of United States citizenship. The original Act was

superseded in 1917 by the Organic Act or Jones Act,

El Monte, in Hato Rey,

one of the most modern apartment buildings.

as Governor. In 1947 the Jones Act was amended to

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

The next advance toward complete local govern ment occurred in 1950 when, in accordance with the wishes of the People of Puerto Rico, the 81st Congress

enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a compact," became

effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of the

Organic Act which define the political, economic and

tT r,-T*- •

y

■

Caribbean Gulf| Refining Corporation ■ A large industrial ctistomer.

ss~

'-t.

fiscal relationship between Puerto Rico and the United States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations

taken to the United States Court of Appeals for the First Circuit and to the Supreme Court of the United States and writs of error and appeals from judgments

Act. It also authorized the People of Puerto Rico to draft and approve their own constitution. The Con stitution was drafted by a freely elected constitutional

of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same

convention, overwhelmingly approved in a special

writs of error and appeals may be taken from other

referendum, and approved by Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on July 25, 1952.

Federal and State courts.

manner and under the same terms and conditions as

Governmental responsibilities assumed by the Commonwealth are greater than those normally as

sumed by a State government. Municipalities which The Commonwealth Government

combine both rural and urban areas are the only local

The Constitution recognizes and assures a separation

political subdivisions and are comparable to counties in scope. The only units of government with the right

of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and as in

to levy ad valorem taxes are the Commonwealth Gov ernment and the municipalities. There is, therefore, no

those of the States. Both the Governor and the bi cameral legislature are subject to regular election every four years. The Legislature operates under

other overlapping taxation or bonded indebtedness

standard parliamentary and legislative rules. Writs of error and appeals from judgments of the District

Court of the United States for Puerto Rico may be

payable from taxes. The Commonwealth Government assumes responsibility for a number of important functions normally performed by local governments in the Continental United States. Among these are

police and fire protection, education, all major street

construction, and public health programs. In addi tion, the Commonwealth Government supervises municipal fiscal affairs to a very substantial extent.

Commonwealth and municipal governments are relieved of most of the responsibility for constructing and financing electric, water, and sewer systems by the Water Resources Authority and the Aqueduct and Sewer Authority. Air and sea port facilities are administered by the Ports Authority, and major highway construction is financed by the Highway Authority. The bonded debts of these public corpora tions, with the exception of the Highway Authority, are supported entirely by revenues derived from their operations. Bonds issued by the Highway Authority will be supported by a portion of the gasoline tax.

the establishment of a United States-Puerto Rico

Commission on the status of Puerto Rico to study all

factors which might have a bearing on the present

and future relationship between the United States and Puerto Rico. The membership of the Commission

consisted of three persons appointed by the President of the United States, plus two each selected by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico.

The Commission rendered its report to the Presi

dent and the Congress of the United States and to the Governor and the Legislative Assembly of Puerto Rico. The report, a comprehensive study of the po litical, economic and sociocultural relations between Puerto Rico and the United States, analyzes the effect

of the present Commonwealth status and points out the remarkable achievements of the Island under this

Status and Plebiscite

In 1962, in order to resolve a long standing discus sion, the Legislature of Puerto Rico approved a resolution petitioning Congress for the prompt settle ment of the future political status of Puerto Rico, in a democratic manner, and proposing the submis sion to the vote of the people the following three status formulas: Commonwealth, Statehood

and

Independence.

In response to this petition Congress approved, on February 18, 1964, H. R. 5945, providing for

Modern computer operation at the Water Resources Authority.

status. The report also states that in the Commis sion's opinion if the rate of economic and social ad vance experienced under Commonwealth can be

maintained at the present rate, either Statehood or independence could perhaps become feasible at some future indeterminate date. The report makes no recommendation as to which of the three alternatives

is preferable, concluding that the people of Puerto Rico should decide which status they prefer.

In December 1966, the Governor of Puerto Rico called a special session of the Legislature to con

sider the approval of legislation implementing the holding of a plebiscite. On December 23, the Gov ernor signed a bill (Act No. 1) approved by the Legislature, providing for a plebiscite to be held on July 23, 1967, for the people to express their pref erence for Independence, Statehood or Common wealth.

While it should be understood that voting on a

plebiscite may vary materially from an election in volving candidates, reference should be made to

the percentages of the 1964 vote obtained by the parties supporting the three forms of status. The Popular Democratic Party which supports Com monwealth (59.5%) and the Republican State

hood Party (34.7%) received the bulk of the ballots cast while the Christian Action Party (3.1 %)

and the Independence Party (2.7%) received only insignificant support.

Expansion and Diversification of

the Economy of Puerto Rico Economic growth in Puerto Rico since 1940 has been very rapid. Gross product of the Commonwealth has increased more than 10 times over its 1940 level

and has more than doubled during the past eight years. In the year ended June 30, 1966 gross product totalled an estimated $3,038 million, representing an increase of almost 11.7% over the prior year.

Net income of the economy has increased from a level of $225 million in 1940 to $2,525 million

in 1966. Income, measured in terms of 1954 prices, has shown an average increase during the last five years of about 9.2% compounded annually and in

the year ended June 30, 1966 it increased by 8.3%.

Per capita net income is now $955 compared to $121 in 1940.

The Commonwealth Government's program of industrialization has aided the economy to shift from one principally agricultural to one much better diversified between industry and agriculture. Con currently with the expansion in net agricultural in

Caparra by-pass showing its well-equipped lighting system.

come from $71 million in 1939-40 to about $184

million in 1965-66, manufacturing income increased from $27 million to $612 million, substantially sur passing agriculture as a source of income.

Puerto Rican manufacturing has been increasingly

diversified during the last two decades. In 1939-40 the manufacture of sugar products accounted for 35% of manufacturing income. By 1965-66 about 4.9% of manufacturing income resulted from this

industry. Manufacturing income is now generally derived from the production of new types of manu factured commodities, principally for shipment to the United States. Such shipments amounted to only $23 million in 1948-49. By 1965-66 they had reached a total of about $804 million.

These new products cover a wide range such as apparel, petroleum derivatives, and electronic prod ucts. Large, heavily capitalized manufacturing opera

tions have shown a significant increase in recent

plant to produce alcohol intermediates. Petroleum refineries are operated by Caribbean Gulf Refining Co. which recently completed an expansion program.

Petrochemicals are of greatly increasing impor

tance to the economy of the Commonwealth, a

recent development being the addition of a $41 million aromatic plant to Commonwealth OU Re fining Company's $105 million refinery. Another such addition to Puerto Rico's petrochemical com

plex involves the Puerto Rico Chemical Company which has constructed a $6 million phthalic anhydride

plant. Phillips Petroleum has broken ground for a $58 million refinery which will produce basic feed stocks for a series of additional chemical plants

using petroleum derivatives. The first such plant to be announced is a raw nylon plant to be built jointly

by Phillips and Rhone-Poulenc S.A. of France at a

years as compared to those labor-intensive operations promoted during the early part of the industrializa

cost of approximately $80 million.

tion program. These include the Union Carbide & Chemical Corp., which operates a $53 million glycol plant and has recently constructed a $22 million

area in recent years. Three rice mills and a large flour and feed mill supply an important share of Puerto Rico's food requirements. Four large tuna

Food processing has also been a significant growth

HH-HH ^j^j

Hato Rey —

The new financial center of Puerto Rico.

canneries are now in operation, and with one addi

tional plant under construction the Island has become one of the leading suppliers of canned fish in the United States market. A soybean processing plant

producing cake for the growing cattle and dairy in dustry, and oil for the domestic market and for the tuna canneries commenced operations recently. A

subsidiary of Libby, McNeill and Libby, has estab lished a plant for the canning of tomato sauce and

juice produced from local crops and Standard Brands, through one of its subsidiaries, has established a plant for the manufacturing of dessert preparations and baking powder.

Further, many of the plants are branches or sub sidiaries set up by such firms as General Electric, Consolidated Cigar, General Cigar, American Can,

Phelps Dodge, Daystrom, Carborundum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B. V. D., Bell & Howell, International Shoe, National Cash Register, Hercules

Powder, Stanley Works, Pepsico and W. R. Grace.

One significant recent addition to Puerto Rico's Blue

Chip roster is Ford Motor Co.'s $16 million ball bearing plant, one of the most modern facilities of its kind in the world.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in invest ment. Gross fixed investment during the last six consecutive fiscal years, 1961-1966, ran at the high

rate of 23% of gross product. Inflowing long-term U. S. capital rose from $31 million in postwar 1947 to an estimated $419 million in 1966.

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

Life expectancy has increased from 46 years to 70 years and the death rate has deelined from 18.4 per thousand to 6.5 per thousand at present, which is now about the same as the U. S. average. The birth

rate has declined from 39.0 per thousand in 1940 to 29.7 per thousand in 1966. The people are better educated, with literacy increased from 68.5% to 86% at present. Public and private day school en rollment has increased from 286,000 to 717,000.

School enrollment is now over 87% of school age population. Institutions of higher learning have also expanded rapidly. The University of Puerto Rico, which had only 5,000 enrolled in 1940, now has 28,194 students.

It is significant that the Commonwealth Govern ment has in recent years directed approximately 43% of its expenditures to education and health.

The Commonwealth Government has set goals for

further improvement of living standards with the aim of attaining by 1970 a total of 2,820 factories and a per capita income of $1,070. Thus, the outlook is

for increasing activity in all sectors of the Common wealth economy to meet the demands of growth immediately ahead.

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Approximate Times Increased or

(Decreased)

An Expanding Economy:

1950

1966

287

755

3,038

4.0

Net Income — $ Millions

225

614

2,525

4.1

Personal Income Per Family — $

611

1,500

4,494

3.0

73

319

1,893

5.9

17

51

304

6.0

312

459

2,828

6.2

2

28

141

5.0

1940

Gross Product — $ Millions

Over 1950

Banks:

Debits — $ Millions

Private Savings Accounts — $ Millions .

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

Percentage

A More Balanced Economic Life:

Points

Change

Per cent of Net Income from:

Manufacturing Agriculture Commonwealth and Municipal Government ,

12

14.5

24.2

31

24.3

7.3

8

11.4

13.5

2.1

Trade

12

16.6

17.8

1.2

Other

37

33.2

37.2

4.0

14.0

69.6

55.6

9.7

(17.0)

Per Cent of Exports from:

Exports by New Factories*

—

Sugars (Raw and Refined)

62

Other

38

51.1

8.4

(42.7)

34.9

22.0

(12.9) Per Cent

A Healthier, Better Educated Population: Population

Change

1,869,000

2,211,000

2,700,000

Birth Rate — Per Thousand

39.0

40.9

30.6

(25.2)

Death Rate — Per Thousand

18.4

22.1

10.5

6.5

(38.1)

Life Expectancy — Years Public Day School Enrollment . . . .

46

47.1

70.0

48.6

286,000

408,000

641,000

57.1

University and College Enrollment . . .

5,000

12,497

39,000

212.0

* Promoted by the Economic Development Administration.

Does not include exports of other new factories.

Source: Puerto Rico Planning Board.

, s>: ''f ''f«' * V."'

n "•■ ->■

/-

\ I'K-.i

< '

111 .

;M'

.-

.

-J::

^,'

.V

;^:a.,' .gj Ml

7 1

. s^

■j

.

• ■•

wmate'

^VAcNT

aO ASTRA PER

Sfi'Ov ' ]"i'

--4 . y