Puerto Rico Water Resources Authority (june 1970)

June 1971

CAR#

A Special Report

COMMONWEALTH OF PUERTO RICO

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Government Development Bank for Puerto Rico SAN JUAN, PUERTO RICO

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PUERTO RICO WATER RESOURCES AUTHORITY

1950 - Our Growth - 1970 Data for the twelve months ended Times

June 30, 1950

Sales of electricity (Kwh) . . .

Revenues from sales Customers (number)

411,727,000

Generation requirements (Kwh)

$ 11,170,000 177,000

691,000

3.9

2,419

9,565

4.0

195.52

3.0

519,014,000

7,539,516,000

14.5

96,230

1,185,200

12.3

140,560

1,497,840

10.7

137.604.000

12.2

$

65.64

Annual peak demand (Kw) .

Generating capacity installed (nameplate Kw) Revenues (total) Current expenses

Balance of revenues available for debt service Contribution in lieu of taxes

Other contractual obligations

Contractual obligations (total) )

Electrical plant in service (at cost) Construction work in progress Electric plant (at cost)

Long term debt and outstanding notes Equity of the people of Puerto Rico .

Increased

6,495,315,000 $ 132,773,000

Average sales per customer (Kwh) Average revenue per customer . .

June 30, 1970

$ 11,317,000

$

$

15.8 11.9

$ 5,390,000 $ 5,927,000 $

1,178,000 3,681,000

$

4,859,000 DATE DUE

$ 55,572,000 25,371,000

621.3i:

Banco Gubennh-meiiiAl de

$ 80,943,000

B213S

$ 60,545,000

1971

Fbibento para P.B. k special report on P.R Water Resourses Autho

$ 24,905,000

rity.

ISSUED TO

DATE

/

ON THE COVER

621.3a,

Banco Gtlbemamental de

The demand for electric power rises continually in Puerto Rico.

B213S

Fomento para P,R.

Pictured on the cover, left to right, are: a control center of the Water Resources Authority, a new governmental

1971

structure in Hato Rey, night baseball at Hiram Bithorn Stadium,

A special report on P,RÂť Water Resources Authority.

and an area of the Miramar section of San Juan at dusk.

m 2: >

v/?/o

Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

I

Governing Board Chairman: DR. ANTONIO SANTIAGO VAZQUEZ Vice-chairman: RAFAEL NEVARES Governor Luis A. Ferre

Members: JORGE CAMUNAS RAFAEL MACHARGO DEL RIO RAFAEL MARTINEZ GIRALT

Principal Officers

Officers RENAN COLON

FELIX CORDOVA DIAZ Executive Director

Chief Engineer JAVIER CUEVAS BENITEZ General Manager — Services and Supply

JULIO NEGRONI

Vice Executive Director

RAFAEL REYES GARCIA

DR. MODESTO IRIARTE

Assistant Executive Director — Electrical Planning Construction and Research

JOSE ISMAEL DIAZ Assistant Executive Director

General Manager — Irrigation Services JOSE VILA RUIZ General Counsel

Finance

CARLOS VELAZQUEZ TORO Assistant Executive Director — Power Operations

.'\NT0N10 BUSCAGLIA Head, Production and Transmission Division

RAFAEL VAZQUEZ COLON

HUMBERTO CORDERO Head. Distribution and Sales Division

Assistant Executive Director — Industrial Relations

WILLIAM CANDELARIO

and Personnel

Head, Electrical Planning and Research Division JOSE A. MATOS

Head, Power Design and Construction Division Trustee

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

JOSE B. CANDELAS Controller LOUIS ROIG Treasurer

Consulting Engineers Jackson and Moreland Division of United Engineers and Constructors Inc.

JULIO C. MUNIZ

Head, Purchasing Division JUAN RAMOS VELILLA Head, Personnel Division

Auditors

Arthur Andersen & Co.

CARLOS E. LUBE

Head, Industrial Relations Division HECTOR M. MORALES

Head, Transportation and Services

Bond Counsel Mitchell, Petty & Shetterly

DAVID BRAVO, JR. Public Relations Officer

3 '

6.3'is

- '131

Puerto Rico

Felix Cordova Diaz Executive Director

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 â&#x20AC;˘â&#x20AC;&#x201D;the Puerto Rico Irrigation Service, which built its

tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur passed that from agriculture. Today over 1,800 new factories, promoted under the economic development

program, are in operation. Such rapid growth and profound change in the basic character of the econ omy has created a continuous and rapid rise in the demand for energy.

Water Resources of Puerto Rico, created in 1927. In

Throughout the thirty years elapsed since the Authority came into being its growth has been steady and most impressive. The comparative figures

first generating plant in 1915, and the Utilization of 1941, the Authority was established by law to replace

shown on the inside of the cover page speak for

the Utilization of Water Resources and ensure a

themselves.

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

From its inception the Authority has had to con stantly add new capacity to keep up with, and antici

War 11 fuel shortage, the two large private electric utilities on the Island were taken over by the United States Government as an emergency measure and

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

gation services were integrated into the Authority's

pate, the mounting demand for electric power. New generating capacity has been added almost every year. Since 1944 total name plate rating of the Au thority's generating plant has risen from 64,440 Kw to the present capacity of 1,497,840 Kw. Annual capital construction expenditures in recent years have reached as high as $100.7 million.

The capital construction program for 1970-71 is

system.

estimated at $128.0 million. It includes work on

When the Authority began operations in 1941, the Island's economy was primarily agricultural and

the fifth and sixth units of the South Coast Plant

heavily dependent on a single cropâ&#x20AC;&#x201D;sugar. In the

which will have a capacity of 410,000 Kw each.

Other important projects included in the program

latter half of that same decade, an industrialization

are Units No. 1 and 2 of 450,000 Kw each at a new

program for the Island was begun as part of "Opera

steam plant under construction in Aguirre in the

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southeast and several jet and gas turbine peaking units throughout the system.

This program also includes general transmission and distribution facilities, rural electrification proj ects, the acquisition of land and the construction of

buildings, and other miscellaneous improvements.

The Authority has grown to become the second

largest municipally owned, integrated electric utility in the United States as is indicated by the following

of 1,831,320 Kw. The physical plant presently consists of twenty-four generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is diesel and four are jet peaking units.

Thermal-electric facilities now supply about 97 per cent of the electric energy generated. The Author ity's four main generating stations had a total in stalled name plate rating of 1,538,000 Kw as of March 31, 1971.

tabulation: City of Los Angeles Puerto Rico City of Seattle Department of Water Resources Department of Water and Power

Authority

Lighting

As of Dec. 31,1969

As of Dec. 31,1970

As of Dec. 31,1969

$700,732,104 140,309,592

$314,969,888 52,626,909

702,889

260,340

Net Plant ?1,262,251,126 Electric Revenues . ...

200,439,769 Number of

Customers

1,090,704

Present Electric System

The total installed generating capacity of the Author ity at the end of March 1971 had a name plate

rating of 1,713,840 Kw and a dependable capacity

Thermal-electric Stations

The Palo Seco Steam Plant, near San Juan, was placed in service in 1960 and has an installed capacity of 627,000 Kw in two 216,000 Kw, two

82,500 Kw steam-electric units and two jet peaking units of 20,000 Kw and 10,000 Kw, respectively.

These units, which are powered by a keroseneburning aviation type jet motor, are used for peak ing and for emergencies, being designed for auto-

Union Carbide in Yabiicoa, part of the petrochemical complex in that area, is one of the largest industrial consumers.

â&#x2013; 'if'

PUERTO RICO WATER RESOURCES AUTHORITY

ELECTRICAL SYSTEM L"::.'

â&#x2013;Ą A

f matic synchronization to the line from a cold start in only two minutes.

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 out standing features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil.

This plant currently receives its fuel by direct pipe line from the nearby refinery at the Commonwealth Oil Refining Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 410,000 Kw thermal units are being added to this

plant and are expected to be in service by January and October 1972, respectively.

The San Juan Steam Plant has an installed ca

pacity of 598,000 Kw in four 20,000 Kw, two 44,000 Kw, four 100,000 Kw steam-electric units and two jet peaking units with a combined capacity of 30,000 Kw. 4

The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was also installed increasing the capacity of this plant to a name plate rating of 50,000 Kw. There is now under construction another steam

plant at Aguirre in the southeastern region of Puerto Rico. Initially, this plant will have two 450,000 Kw units which are scheduled to be placed

in service in January 1973 and January 1974, respectively.

The Authority has in operation, in addition to those jet power pack units located at plant sites, four jet power pack units throughout the system.

Five additional 40,000 Kw gas turbine generators

will be installed throughout the system as follows, two in 1971, two in 1972 and one in 1973.

There is a small 1,000 Kw diesel plant for emer

gency purposes on the island of Vieques.

Nuclear Power Station

Hydroelectric Stations

Construction of a nuclear power plant of 600,000 Kw started in 1971 at Aguirre in the municipality of Salinas at a cost of $140,000,000. The new plant,

There are 15 hydroelectric plants with a total in stalled capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of plant output by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-ofthe-river flows. Ten of the hydroelectric plants are non-attended and fully automatic.

which can operate continuously without refueling for periods of more than a year, will provide electric energy sufficient to serve more than 200,000 middle

income homes. It is expected that the plant will be in operation in 1976. The nuclear plant does not emit fumes and it is safe and clean in its op

erations. Thus, it contributes directly to the con

trol and limitation of air pollution. The Aguirre plant has a greater capacity than any other in op eration today and will be the largest in Latin America.

Transmission and Distribution Systems

The Authority's transmission system consists of 1,697 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 138 substations and

sectionalizer stations, with a total name plate trans-

Condominios Baliia, Anexo Housing Development in Santiirce for middle income families.

11. t i

former capacity of 2,416,425/3,514,875 Kva lo cated at suitable points throughout the system to insure stability of service and provide an adequate island-wide network. The transmission system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the electric system of the island of Vieques to the Authority's system.

Distribution

facilities

include

227

substations

owned by the Authority with a capacity of 1,194,162/1,691,514 Kva which, supplied from the transmission network, convert the electric power for distribution at 2,400/4,160 Y; 4,800/8,320 Y; and 7,620/13,200 Y volts through distribution

Administration of the United States, the Authority has borrowed to date $78,040,000 on bonds bearing interest at the rate of 2% under a loan contract now

totaling $79,040,000. These funds have been loaned

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

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.

feeders which traverse all the island. In addition,

Financing System Growth

there are 225 privately-owned distribution and in terchange substations with a total capacity of 581,295/658,266 Kva to serve industrial custom ers, making a total installed capacity of 1,775,457/

Under its enabling legislation, the Authority has the

2,349,780 Kva. Rural Electrification

Through successive amendments to an original loan contract for $6,376,000, entered into in 1952 be tween the Authority and the Rural Electrification

power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of these bonds under a Trust Indenture. It also has full

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 domain.

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946 Revenue

Maximum Peak

Average

Kilowatt

per

Fiscal Year

(Thousands

(Million

Customers

Load

Load

Hours per

Kilowatt

per

(June 30)

of Dollars)

Kwh)

(End of Period)

(Kw)

(Kw)

Customer

Hour

Customer

$ 46.13

Sales

5,764

258.6

124,959

63,000

39,000

2,069

$.0223

1950-51

13,006

488.2

185,090

109,000

69,000

2,638

.0266

70.27

1955-56

25,216

930.8

314,853

210,000

129,000

2,956

.0271

80.08

1956-57

28,693

1,078.4

338,685

249,000

153,000

3,184

.0266

84.72

1957-58

33,973

1,298.8

363,032

272,000

181,000

3,578

.0262

93.58

1958-59

35,781

1,421.6

385,592

314,000

198,000

3,687

.0252

92.79

1959-60

40,441

1,667.4

408,671

355,000

231,000

4,080

.0243

98.96

1960-61

45,304

1,892.4

435,019

398,000

261,000

4,350

.0239

107.34

1961-62

50,846

2,145.4

459,995

439,000

294,000

4,664

.0237

113.44

1945-46

$

Revenue

1962-63

57,520

2,465.6

487,991

498,000

335,000

5,053

.0233

121.20

1963-64

65,865

2,858.4

517,682

560,000

388,000

5,522

.0230

130.85

1964-65

72,952

3,186.3

552,111

637,000

436,000

5,771

.0229

132.13

1965-66

83,734

3,771.7

581,369

737,000

506,000

6,488

.0222

144.03

1966-67

93,233

4,291.8

608,462

575,000

7,053

.0217

153.23

1967-68

104,271

4,894.8

635,155

939,000

657,000

7,706

.0213

164.17

1968-69

118,883

5,707.0

664,770

1,078,000

760,000

8,585

.0208

178.83

1969-70

132,773

6,495.3

690,725

1,185,000

861,000

9,565

.0204

195.52

825,000

SALES OF ELECTRICITY â&#x20AC;˘ KIH Millions of KWH

NUMBER OF CUSTOMERS

8.000

Thousands 875

I i I Other Industrial

Cooinierdal Residential

'Estimated

Source; p.R.W.R.A. Financial Reports

For many years the Authority has followed a pol

icy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of reve

nue 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 long-term obligations are to a large extent already in operation by the time such obligations are issued.

Bonds outstanding, including the REA issues, totaled $575,614,000 as of March 31, 1971.

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 March 31, 1971, a total of $893,388,000 was invested in capital improvements.

Of this amount $656,627,000 has been provided

from the net proceeds of bond issues and bank bor rowings, and $236,761,000 had come mainly from

Total revenues for the

twelve

months ended

March 31, 1971, were $149,656,000. Currrent ex

penses were $87,501,000, leaving a balance of $62,155,000 available for debt service requirements and other contractual obligations. The maximum

debt service for any future year on outstanding issues was $35,713,000, indicating a coverage of 1.74 times on present debt. Accruals for contributions to the Commonwealth and municipal governments in lieu of taxes amounted to $15,824,000 during the same period.

Higher costs, including increased fuel oil prices and higher interest rates on bond issues have all had an adverse effect on the financial position of the Au

thority. The Executive Director recommended to the Governing Board inclusion in the Authority's rate structure of adjustment clauses to compensate for in crease in fuel oil prices and the cost of money over

net revenues of and contributions to the Authority.

the 1969 averages, and to insure a balance in the Revenue Stabilization Reserve equivalent to 3% of

On March 31, 1971, total net assets amounted to $887,300,000, operating and appropriated reserves were $38,868,000, contributed capital and unappro

to act as Hearing Officers to hold public hearings

priated net revenues were $154,801,000 and out standing debt was $628,909,000.

the Authority's annual gross revenues. On March 27, 1971 the Governing Board appointed three persons and make recommendations on the rate adjustments

proposed by the Executive Director. The Hearing

New Caguas District Hospital, which provides medical services to that city and nearby towns.

Officers after holding public hearings on April 28, 29 and May 12, informed the Board that they were not yet in a position to make their final recommend ations on the rate adjustments but recommended that a temporary increase of 11% applicable to all rates now in force be made effective June 1, 1971.

The Executive Director has informed the Govern

New Bond Issue

In June, 1971, the Authority proposes to sell $60,000,000 Electric Revenue Bonds for the purpose

of liquidating a portion of 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 $39,695,000 and will be covered about 1.57 times by net earnings

ing Board that it is imperative that the present rates be increased and the Governing Board, at meetings held on May 26, 1971 and June 14, 1971, author ized an 11% increase to be applied to all bills for electric energy consumed on and after June 1,

for the twelve months ended March 31, 1971.

1971. As a result of this 11% rate increase, it is

Looking Ahead

estimated that 1971-72 revenues will be increased

Continuous studies of power needs, constantly re

by $20,406,000. The projected revenue increases for the following two years have been calculated to

produce somewhat less than an 11% increase

viewed and revised by the Authority and its consult ing engineers, now indicate that peak demand of the system will increase from 1,185,000 Kw in 1969-70

($17,052,000 for 1972-73 and $20,278,000 for

to 1,393,000 Kw in 1970-71, 1,679,000 Kw in

1973-74) to provide for the possibility of future

1971-72, 2,021,000 Kw in 1972-73 and 2,259,000

revision in the rate structure based on the formula

in 1973-74. It is expected that about 30,000 new

of adjustments to rates as originally proposed by the

customers will be added yearly. To meet this de mand, the Authority's generating capacity will be

Authority.

raised to a name plate rating of approximately 3,000,000 Kw by 1973.

During the period from July 1, 1970 through June 30, 1974, it is anticipated that the Authority will invest $524,968,000 in further capital improve ments. Of this amount, the sale of bonds will pro vide some $395,865,000. About $122,327,000 or 23% will be derived principally from revenues of the Authority. The remainder of $3,123,000 will be available from previous bond issues.

It will be noted that the capital improvement pro gram shows a substantial increase over the next four

years. The reason for this is that the Authority has found it necessary to increase the size of the gener ating units scheduled for 1971 and 1972 to 410 MW to serve large metallurgical processors, thus exceed ing the normal growth of the system. The Economic Development Administration has been promoting the establishment of these plants. Since these plants are expected to be the core of industrial complexes which will foster general economic development, the Au thority under special agreements with the Common wealth Government is willing to provide power at prices based on the incremental cost of power of the larger units. In order to make the construction

of the larger units economically feasible for the

Authority, the Legislature of Puerto Rico approved Law #82 of 1967, as amended by Law 140 of 1968, which guarantees to reimburse the Authority for any part of the annual charges on whatever portion of the extra capacity that remains unsold during the period of 1971 to 1974 up to a limit of $3,250,000 during each of these four years.

It also guarantees the reimbursement, (effective after 1974, and for a period of not more than six years), of the resulting difference between the cost of the fuel used to generate the power sold to said industries computed on the average price of the fuel used in our system and that resulting if com puted on the basis of a unitary price of 24 cents per 1,000,000 BTU up to a limit of $3,000,000 during any year of the period. Such amounts would be

deducted from the contribution in lieu of taxes pay able to the Commonwealth Government.

The above four-year program compares with capital expenditures actually made during the past twenty-three years, distributed as follows: steam production plant $305,000,000, hydraulic production plant $36,483,000, gas turbine production plant $21,347,000, transmission plant $96,289,000, dis tribution plant $227,059,000 and other facilities $111,263,000, for a total of $797,441,000.

Millions of Dollars

REVENUES FROM SALES OF ELECTRICITY

TOTAL REVENUES, BALANCE AFTER CURRENT EXPENSES, AND DEBT SERVICE REQUIREMENTS

Millions of Dollars

I Total Revenues V////\ Residential

I Balance After Current Expenses

Total

.V////X Debt Service Requirements

Fiscal

Years

'Estimated Source; P R.W R A Financial Reports

Fiscal

Years

'Estimated

Source P R Ifl R A Financial Reports

Puerto Rico Water Resources Authority

Condensed Balance Sheet June 30, 1970

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation Net utility plant

$786,118,285 130,553,658

$655,564,627

OTHER PHYSICAL PROPERTY

527,487

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS . . . .

22,854,669

CURRENT ASSETS:

Funds and working advances

$ 38,375,228

Accounts receivableâ&#x20AC;&#x201D;Less Reserve for uncollectible accounts

33,320,148

Materials and supplies Prepayments, special deposits, etc

30,936,856 1,529,516

104,161,748

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other

$ 15,502,462 3,274,711

TOTAL ASSETS

18,777,173

$801,885,704

LIABILITIES

CONTRIBUTED CAPITAL

$ 49,423,185

UNAPPROPRIATED NET REVENUES

94,427,509

LONG-TERM DEBT:

Electric revenue bonds Notes payable

Lease-purchase obligation, less portion included in current liabilities . . . .

$524,840,000 31,600,000

2,760,739

559,200,739

$ 16,800,500 6,512,240 11,112,222 14,551,153 9,285,936

58,262,051

CURRENT LIABILITIES:

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

Self-insurance Injuries and damages Revenue stabilization

Appropriated sinking fund Plant improvements

TOTAL LIABILITIES 10

$ 9,596,661 2,205,252 2,284,698

26,372,251 113,358

40,572,220

$801,885,704

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending June 30

June 30

1968

1969

$104,270,618 2,111,965

$118,883,451

$132,772,966

2,206,614

2,247,954

1,420,789

$106,382,583 1,781,295

$121,090,065 2,007,086

$135,020,920 2,583,051

$96,738,508

$108,163,878

$123,097,151

$137,603,971

$13,671,019

1,010,175 $51,532,301

$ 15,434,275 28,348,610 14,263,000 937,572

$ 15,570,387 33,913,682 15,974,592 985,983

$ 18,948,372 38,434,344 17,748,857 852,709

$ 58,983,457

$ 66,444,644

$ 75,984,282

$45,206,207

$ 49,180,421

$ 56,652,507

$ 61,619,689

$ 9,555,562

$ 11,166,209

$ 12,655,428

$ 14,446,737

5,710,000 207,304

6,685,000 787,908

7,342,799 1,175,105

8,412,885 1,999,072

Total sinking fund payments . . . .

$15,472,866

$ 18,639,117

$ 21,173,332

$ 24,858,694

Balance

$29,733,341

$ 30,541,304

$ 35,479,175

$ 36,760,995

$

$

$

$

June 30 1967

June 30 1970

REVENUES:

Sales of electric energy

$93,232,606

Other operating revenues

Total operating revenues

2,085,113

$95,317,719

Other income

Total revenues CURRENT EXPENSES:

Operationâ&#x20AC;&#x201D; Fuel

Other operating expenses

25,011,077

Maintenance

Other current expenses Total current expenses

11,840,030

Balance of revenues after current

expenses (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 Commonwealth

of Puerto Rico) Reserve account

TRANSFERS TO:

General reserve fundâ&#x20AC;&#x201D;provision for selfinsurance

12,393,200 5,160,000

909,838 13,671,744 3,516,925

$18,378,126

5,250,886

1,096,720 16,662,370 3,678,358

$ 18,098,507

$ 21,417,109

$ 21,437,448

$11,355,215

$ 12,442,797

$ 14,062,066

$ 15,323,547

10,213,261

11,423,274

13,025,787

14,551,153

Renewal and replacement fund Reserve for improvements Total transfers

824,926

1,002,087

15,164,136

Balance available for contributions in

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

$ 1,141,954

$

1,019,523

$

1,036,279

$

772,394

Transfer to sinking fund reserve account .

$

570,977

$

509,762

$

518,140

$

386,197

Balance transferred to unappropriated net revenues

$

570,977

$

509,761

$

518,139

$

386,197

Balance PROVISION FOR:

11

San Juan Steam Plant Switchyard, one of the largest plants of the electric system.

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 sufiBcient 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

properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds issued prior to 1965 have been retired, this

reserves for such purposes.

provisions of Acts of Congress now in force, exempt

percentage will be reduced to 140, The bonds and the income therefrom are, under

The Authority has also covenanted that it wUl at

from Federal and State taxation. These bonds are

all times fix and collect reasonable rates and charges

also legal investments for savings banks and trust funds in the state of New York and for savings banks

sufficient for the payment of maintenance and oper ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide

in California and are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance

for the making of deposits required by the Trust

companies to qualify them to do business in Puerto

Indenture to the credit of the General Reserve Fund

Rico. The bonds are rated "A" by Moody's Investors

and the Renewal and Replacement Fund, and for

Service and by Standard and Poor's.

payments in lieu of taxes to the Commonwealth and

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

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 de

linquency in the payment of principal of or interest

preceding twenty-four months, after deducting the

on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid

cost of maintaining, repairing and operating these

default.

THE COMMONWEALTH OF PUERTO RICO Genera!

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

Puerto Rico is the fourth largest of the islands in the Caribbean area. It is about 100 miles long and 35

local purposes. It also provided that members of

miles wide, having an area of 3,423 square miles and a population of 2,690,000 according to 1970 census figures. The topography is characterized by a fertile coastal plain rising to interior mountains which run mostly from east to west. San Juan,

people, but the Executive and Judicial branches re mained under control of Washington through ap pointment by the President.

both Senate and House were to be elected by the

No further change occurred until 1946 when the President for the first time appointed a Puerto Rican

capital of Puerto Rico, lies some 1,690 miles south

as Governor. In 1947 the Jones Act was amended

east of New York, 3V4 hours by jet plane, and 1,000 miles southeast of Miami, IVa hours by jet

to permit Puerto Ricans to elect their own Governor,

plane.

Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, and with

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 national elections and are represented in Congress

only by a Resident Commissioner who has a voice but no vote in the Honse of Representatives. On the other hand. Federal taxes do not apply in Puerto

Rico except by mutual consent, such as social secu

rity taxes. No Federal income tax is collected from Puerto Rican residents on income earned in Puerto Rico and Federal excise taxes collected on exported

Puerto Rican products, such as rum and tobacco, are returned to the Commonwealth Treasury. This rela tionship with the Federal Government is defined

through the medium of the compact entered into by

Congress and the People of Puerto Rico, and is

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

pact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sec tions of the Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United States shall remain in full force and shall be thereafter known as the Puerto Rican Federal Relations Act. It also authorized the people of Puerto Rico to draft and approve their own con stitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly ap

proved in a special referendum, and approved by Congress and the President. It became effective upon

proclamation of the Governor of Puerto Rico on July 25, 1952.

further described hereinafter.

A 20,000 Kw Jet power peaking unit and

Government History

switchyard in Giiayama to provide continuous service to the petrochemical

Puerto Rico came under United States sovereignty

complex in the area.

by the Treaty of Paris on December 10, 1898. The Congress of the United States provided for a civil

government for the Island in 1900. It provided for a Governor, a Cabinet, a Senate and a Supreme

Court Judiciary, all appointed by the President of the United States; only a House of Delegates was

elected by the People of Puerto Rico.

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

i-'Wr

..

Linemen working on transmission lines.

The Commonwealth Government

The Constitution recognizes and assures a separa

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

tion of powers among the executive, legislative, and judicial branches as in the Federal Constitution, and

sumed by a State Government. Municipalities which

as in those of the States. Both the Governor and the

local political subdivisions and are comparable to counties in scope. The only units of government with the right to levy ad valorem taxes are the

bicameral legislature are subject to regular election every four years. The Legislature operates under standard parliamentary and legislative rules. Writs of error and appeals from judgments of the District Court of the United States for Puerto Rico may be taken to the United States Court of Appeals for the First Circuit and to the Supreme Court of the United States and writs of error and appeals from judgments

of the Supreme Court of Puerto Rico may be taken

to the Supreme Court of the United States, in the same manner and under the same terms and condi

tions as writs of error and appeals may be taken from other Federal and State courts.

combine both rural and urban areas are the only

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 per

formed by local governments in the Continental United States. Among these are police and fire pro tection, education, all major street construction, and public health and welfare programs. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substantial extent.

Administration of Government

The operation of the executive branch of the gov ernment is similar to that in state governments in general, with separate departments responsible for major activities, each headed by a secretary who as a group form the Governor's cabinet and who are appointed by the Governor subject to Senate ap proval. In addition, Puerto Rico has made substantial

use of public corporations or agencies which are largely autonomous in their operations in providing specific services. Each is headed by an executive director or president who reports to a board of directors which in turn is appointed by the Governor.

Among the departments is the Department of

Among the public corporations are the Water Re sources Authority which provides essentially all elec

tric power on the island, the Aqueduct and Sewer Authority which provides all water and sewage ser vices, the Ports Authority responsible for seaport and airport facilities and the Highway Authority which is charged with building all major road and highway constructions, all of whose borrowings are secured by revenues produced by the entities, or by gasoline taxes in the case of the Highway Authority.

The Government Development Bank and the Indus trial Development Company likewise are autonomous agencies which, after receiving substantial capital contributions from the Treasury originally, have subsequently augmented their funds by borrowing on

State, whose Secretary becomes acting Governor or

their own credit.

succeeds to the governorship in the absence or death

Social Services. All activities of the departments are financed out of the General Fund of the Com

Among other public corporations are the Urban Renewal and Housing Corporation and the Public Buildings Authority, which provide housing facilities for persons of low and medium incomes and office space for government departments and agencies, respectively. Bonds of each are guaranteed by the

monwealth Treasury, in accordance with an annual

Commonwealth government but they are self-sup

budget prepared under the direction of the Governor

porting in the first instances through receipts of mortgage payments or rentals in the case of low and

of the elected Governor. Other departments include those of Treasury, Justice, Education, Public Works, Public Health, Commerce, Labor, Agriculture and

and approved by the Legislature. The staff agencies of the Office of the Governor comprise the Bureau

middle income housing, and from lease payments

of the Budget, the Planning Board and the Office of

from government departments or agencies in the

Personnel.

latter case.

Fibers International Corporation, part of the Phillips petrochemical complex in Cuayama.

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Free-form designs celebrating the flora of the A ntilles are on one side of the new Caribe Budding for offices located in San Juan.

Political Background

Governor Luis A. Ferre, a prominent and highly

lishing the present Commonwealth political relation

successful industrialist, as well as a leading philan thropist, was the candidate in 1968 of the New Progressive Party which he organized in 1967 after leaving the Statehood Republican Party. He cam paigned on the basis of a need for change and for more effective government through new leadership.

Political status did not receive emphasis as an imme

ship.

diate issue. He received 45.0% of the vote in the

In 1938 a political party emerged in Puerto Rico which was to emphasize economic development to improve the welfare of the people. From 1940 until the elections in November, 1968, as the Popular Democratic Party, it was in control of the govern ment of Puerto Rico, and was instrumental in estab

Since 1948 there have been two major thrusts in

political life in Puerto Rico towards close association with the United States and a minor one in favor

of independence. The trends are illustrated in the following data on election results by parties in recent years.

recent election, compared with 41.8% of the vote received by the candidate of the Popular Democratic Party. In the Legislature, the New Progressive Party

also gained control of the House of Representatives, although the Popular Democratic Party retained con trol of the Senate, thus definitely establishing a two party system of Government.

Commonwealth

Popular Democratic Party Peoples Party

64.8%

62.5%

62.4°/

59.4%

41.8%

—

—

—

—

10.0%

12.9%

25.0%

34.3%

34.6%

0.2%

19.0%

12.5%

Statehood

Statehood Republican Party Nevi Progressive Party Socialist Party

Independence Party Christian Action Party

As a general comment, it is obvious that desire for close and permanent ties with the United States has become an inherent ingredient.

Three factors pertaining to elections in Puerto Rico are worthy of mention. There is strong public interest in government affairs and a high degree of voter participation in elections. In the 1968 elections, 79.3% of those registered actually voted.

Second, in order to reduce pressure from special interests, Puerto Rican law limits political contribu

tions from any one person or corporation to $300 in any one election year and SI00 annually in other

years. Yet, recognizing the need for funds to bring issues to the attention of, and to inform the voters,

each recognized political party receives from the Commonwealth Treasury a contribution of funds to

carry out its political campaign. This contribution is according to a formula based primarily on the party's percentage of votes cast in the most recent election.

And third, Puerto Rican law provides that if a

minority party receives a substantial vote, but fails to elect candidates to the Legislature, then, under certain circumstances that body is increased in size

by formula to assure minority representation. The Municipal Law (Act No. 142, approved July 21, 1960) also assures minority representation in the

Municipal Assemblies since at least three members of each of these bodies have to be elected from the

In response to the petition, the Congress ap proved a bill in 1964 providing for the establishment of a United States-Puerto Rico commission to study all the factors involved. The membership of this commission consisted of three persons appointed by the President of the United States, two each selected by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission concluded that the people of Puerto Rico should be consulted with regard to the status they preferred and, in December, 1966, the Puerto Rican Legislature passed an act providing for the holding of the plebiscite.

This plebiscite, held July 23, 1967, strongly re affirmed the overwhelming desire of the Puerto Rican people to maintain permanent and close ties with the

minority parties.

United States. Of the over 700,000 ballots cast (66.3 percent of all registered votes) 99.4 percent were

1967 Plebiscite

for either Commonwealth or Statehood and only 0.6 percent for Independence.

In 1962 the Legislature of Puerto Rico petitioned

the Congress of the United States requesting a

Political stability, one of the prime requisites of a

plebiscite by the voters of Puerto Rico through which an expression of preference could be demonstrated

sound, attractive investment climate, is outstandingly demonstrated in Puerto Rico.Only a declining minor

for either a continuation of the existing common

ity party favors independence. Both major parties

wealth relationship with the United States, or the

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

attainment of Federated Statehood in the United

States, or the establishment of Puerto Rico as an independent country.

take.

The new coliseum, a recreational facility in

Hato Rey, near the modern municipal stadium.

Expansion and Diversification of the Economy of Puerto Rico

Economic growth in Puerto Rico has been very rapid. Gross product has increased more than 6 times over its 1950 level and has nearly tripled

during the past ten years. In the year ended June 30, 1970 gross product totalled $4,607 million representing an increase of 11.7% over the prior year.

Net income has increased from $1,355 million in

1960 to $3,821 million in 1970. Income, measured in current prices, has shown an average increase during the last five years of about 10.6% com pounded annually. Per capita net income is now $1,427 compared to $582 in 1960.

The Commonwealth Government's program of industrialization has aided the economy to shift

Medium-size industrial complex on Puerto Rico's eastern coast, near Humacao, which houses a number of well-known corporations.

from a base that was principally agricultural to greater diversification between industry and agricul ture. Concurrently, with the expansion in net agri cultural income from $149 million in fiscal 1950 to $184 million in fiscal 1970, manufacturing income increased from $89 million to $953 million in 1970.

Puerto Rican manufacturing has become increas

ingly diversified during the last two decades. In fiscal 1940 the manufacture of sugar products accounted for 35% of manufacturing income, while in 1967 only 4.5% of manufacturing income re sulted from this industry. Manufacturing income is now generally derived from the production of new types of manufactured products, principally for shipment to the United States. Such shipments amounted to only $33 million in 1950. By 1970 they had reached a total of $1,215 million.

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General Foods, Inc., in Cagiuis, represents industrial growth in Puerto Rico.

Underlying Puerto Rico's growing and changing

achieved over the years Great progress Uoc has been b . . „f uicrber learn-

economy there has been a steady expansion in in

• educalion .• m

vestment. Average gross fixed domestic investment

ing have expanded rap >

during the last fi ve consecutive fiscal years, 1966-70, ran at a rate of 27% of gross product. It has

increased from $112 million in 1950 to $1,404 million in 1970. Inflowing long-term U. S. capital rose from $31 million in postwar 1947 to an

t all levels. Institutions ot higner team , university and college

enrollment, which

reached

'"geant that the

57,000 students m 1970. it is si„

Commonwealth Government has m recent years

directed approximately 50% of its expenditures to education and health.

estimated $774 million in 1970.

The Puerto Rican people have benefited greatly from the economic expansion achieved since 1950.

Life expectancy has increased from 61 to 70 years and the death rate has declined from 10.5 per thou

sand to 6.5 per thousand at present, which is now about the same as the U. S. average. The birth rate has declined from 39.5 per thousand in 1950 to 2 per thousand in 1970.

Credit History

The debt paying record of Puerto Rico is clear of

default or delinquency. There has never been any forced or "managed" refunding to avoid default.

A similar debt record exists for all municipalities and instrumentalities of Puerto Rico.

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In the background is the Caribe Hilton Hotel with recently constructed ndv facilities at left. A new tower addition is now underway. In the foreground is Fort San Cristobal, one of the historic monuments, legacy of the Spanish Colonization.

Las Americas Shopping Center in Hato Rey,

one of the largest in Puerto Rico.

STATISTICAL DATA CONCERNING THE ECONOMY OF THE COMMONWEALTH OF PUERTO RICO

Fiscal Years Ending June 30

1950

1955

1960

1965

1966

1967

1968

1969

1970

Population 2,200,000 2,240,000 2,340,000 2,552,000 2,568,000 2,573,000 2,600,000 2,664,000 2,690,000 Gross product—$ millions 755 1,142 1,681 2,748 3,039 3,354 3,738 4,124 4,607 Net income—$ millions ..

614 960 1,355 2,314 2,542 2,789 3,092 3,422 3,821 Exports—$ millions 235 353 622 974 1,155 1,321 1,449 1,606 1,736 Exports by new factoriest

—$ millions Bank debits—$ millions ..

Bank loans—$ millions ....

Bank deposits (including governmental)—$

33 319 128

132 418 217

380 835 450

643 1,661 1,010

804 1,893 1,210

926 1,841 1,220

1,014 1,715 1,362

1,156 2,123 1,670

1,210 2,548 2,041

270

323

562

1,207

1,349

1,556

1,830

2,216

2,561

51

77

152

298

304

346

407

486

553

28

32

63

127

141

162

186

220

250

14

21

32

40

44

48

49

53

58

mil

lions Private savings accounts— $ millions

Income tax collections—$ millions Property tax collectionst

—$ millions

Assessed valuation* (real & personal property)— $ millions

459

982

1,643

2,503

2,828

3,150

3,448

3,851

4,066

Average family income—$ Motor vehicles—number..

1,500 61,000

2,194 105,000

2,864 180,000

4,292 319,000

4,662 380,000

4,908 421,000

5,254 470,000

5,590 538,000

5,848 614,000

431,000

529,000

567,000

618,000

631,000

652,000

659,000

669,000

672,000

36

55

132

226

240

228

262

294

322

199 340

253 710

200 1,822

163 3,656

238 4,192

194 4,847

127 5,644

258 6,397

220 7,320

Enrollment in public day

schools Estimated value of building permits issued —$

millions

Electricity generated! — millions of kilowatthours

Hydro Thermal

♦ As of January 1 of preceding fiscal year.

t Promoted by the Economic Development Administration. Does not include exports of other new factories. $ Commonwealth and Municipal.

§ Includes purchased power.

Note: Figures shown above are subject to revision from year to year.

Source: Puerto Rico Planning Board.

1311 Ponce de Leon Avenue, San Juan, Puerto Rico 00908 / 45 Wall Street, New York, N. Y. 10005