Puerto Rico Water Resources Authority (May 1964)

May 1964 A SPECIAL

St®#' Commonwealth of Puerto Rico

Government Development Bank for Puerto Rico San Juan, Puerto Rico

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?67 Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

"t" Officers PEDRO COLON PAGAN

Chief Engineer FELIX CORDOVA DIAZ

General Manager — Services and Supply HAROLD TORO

General Manager — Irrigation Services JOSE VILA RUIZ General Counsel

CARLOS VELAZQUEZ TORO Director of Production and Transmission HUMBERTO CORDERO Director of Distribution and Sales WALDEMIRO VELEZ

Director of Electrical Planning and Research JOSE A. MATOS

Director of Power Design and Construction JOSE 1. DIAZ Controller

LOUIS ROIG MARTINEZ Treasurer

Governing Board Chairman: HON. LUIS MUNOZ MARIN Governor of the Commonwealth of Puerto

JAVIER CUEVAS BENITEZ Director of Purchasing Rico

JUAN F. DOVAL

Director of Personnel

Vice-chairman; HON. FRANCISCO LIZARDI Secretary of Public Works

Member: HON. LUIS RIVERA SANTOS Secretary of Agriculture

HECTOR M. MORALES

Director of Transportation and Services HERMANN MUNOZ Public Relations Officer RAFAEL D. CHERVONI

Principal Officers

Safety Officer

RAFAEL V. URRUTIA

Trustee

Executive Director

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

Assistant Executive Director — Finance

Consulting Engineers

lULIO NEGRONI

Jackson and Moreland Division

Assistant Executive Director - Electrical Planning,

of United Engineers and Constructors Inc.

Construction and Research RAFAEL R. RAMIREZ Assistant Executive Director - Power Operations

FERNANDO TORRENT Assistant Executive Director Personnel Relations

Auditors Arthur Andersen & Co.

Bond Counsel Industrial and

Mitchell. Pershing, Shetterly & Mitchell

ON THE COVER: Souih Coast Steam Plant —

253,000 KW i/?ciudini^ a fourth unit of 82,500 KW placed in service in December 1963.

r/7^ l^h

Rafael V. Urriitia, Executive Director

Water Resources

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

Island's economy was primarily agricultural and heav

ily dependent on a single crop â&#x20AC;&#x201D; sugar. In the latter

Rico Water Resources Authority, an autonomous

half of that same decade, an industrialization program

public service corporation and instrumentality of the

for the Island was begun as part of "Operation Boot

Government of the Commonwealth of Puerto Rico.

strap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing surpassed

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

that from agriculture. Today approximately 850 new factories, established through the economic

1941, the Authority was established by law to replace

development program, are in operation with a total direct employment of over 64,000. Such rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise in

the Utilization of Water Resources and ensure a

the demand for energy.

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 11 fuel shortage, the two large private electric

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

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

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 hydroelectric plants of various irrigation services were integrated into the Authority's system.

When the Authority began operations in 1941, the

June 30: 1948

Net Utility Plant Electric Revenues No, of Customers

1953

1958

1963

$47,207,000 $99,300,000 $193,526,000 $323,145,000 $ 9,280,000 $16,115,000 $ 33,973,000 $ 57,520,000 144,000 212,000 363,000 488,000

In the past five years, the Kwh sales of the Author ity have increased at the average rate of 14 percent

compounded. The 1960-61 recession barely affected Puerto Rico or the Authority. In the twelve months

PUERTO

RICO

WATER

RESOURCES

AUTHORITY

ELECTRIC SYSTEM JANUARY 3l, 1964

BAif vtEW bayamon 60.000

66.000 KWl UNDER CONSTRUCno^J

PALO^SECO

20.000 KVA^^

RPAAOO?-c\

•CVA^^

^

DC TIERRA-

VIAOOCTO-J^OO

Alos LUKSNS TC»»«tS-XO»?

U

"ty A A-^—A

COROIAl

COMERiO PLANTS

CAONILLAS NO I V VANASCO

4.600 KVA

7.600

®

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- /

C0LEGJ0-]17!>0

. CACOAS

BARRANOUI

1 \\

\j.000 *

V COKE RIC

CAONILLAS;^,

MAYAGUE7

no2 4.ooo«w«

Vf)OOKVA

V

^ ClORA

TORO NEGRO NO.2m42&<^Hv* NEGRO NO X 320 HW ^LJ^OnOa.64o GARZAS RZAS\

CUATRO MERMANOS ^

NO I IZZ

VAUCO NO 2

I^GARZAS N0.2

aibonito CAtEV

C0A^o'-rO2.

5j;Caup

>8X100 * 3.200 KVA

carite

LEGEND □ STEAM plants (]

STEAM plants (UnOet Conilrucl.oi

38 KV ELECTRIC TRANSMISSION LINES

38 KV ELECTRIC TRANSMISSION LINIS (Un4rr Ce>r>wlion) » EXISTING 115 KV ELECTRIC TRANSMISSION LINES

O hydro-electric plants

115 KV ELECTRIC TRANSMISSION LINES (Und«r Conttioc

^ INTERCONNECTING SUBSTATIONS

RESERVOIRS

A SUBSTATIONS

ending March 1964, 2,765,674,000 Kwh of energy were sold to 510,000 customers producing electric revenues of $63,888,000.

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 733,920 Kw. Annual capital construction programs in recent years have reached as high as $31,000,000.

The capital construction program for 1963-64 is estimated at $36,900,000. It includes work on two 100,000 Kw units for the San Juan Steam Plant,

cation projects, the acquisition of land and the con struction of buildings, and miscellaneous items. When current projects are completed, total generating ca pacity will be 990,420 Kw. The Authority has grown to become one of the largest municipally owned integrated electric utilities in the United States as is indicated by the following tabulation as of December 31, 1963: Citv of Los Angeles Puerto Rico Department of Water Resources Water and Power

Authority

City of Seattle Department of Lighting

.

$742,257,852

$333,457,116

$218,099,292

Electric Revenues

$148,386,362

$ 61,792,109

$ 42,193,088

993,000

501,809

240,459

Net Plant

.

.

Number of Customers

scheduled for completion in 1965 and 1966 respec tively. Other important projects are to complete BONUS, the 16,500 Kw nuclear power plant being

Present Electric System

built on the west coast, and the installation of four

The total installed generating capacity of the Author

10,000 Kw jet peaking units, one in each of the thermal plants. This program also includes general transmission and distribution facilities, rural electrifi

ity at the end of March 1964 had a name plate rating of 733,920 Kw and dependable capacity of 790,460 Kw. The physical plant presently consists of

IS,

li

BONUS 16,500 KW Nuclear-electric plant at Riitcdii, Puerto Rico.

^

-iju,

twenty-two generating stations, of which eighteen are hydroelectric and four are thermal-electric generating plants. Thermal-electric facilities now supply about 91 percent of the electric energy generated. The

Authority's four thermal-electric generating stations have a total installed name plate rating of 626,000 Kw.

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.

The turbo-generator for a seventh unit, of 100,000 Kw, has been received. This unit is expected to be completed by June of 1965. Work on another 100,000 Kw unit, scheduled for completion in December 1965, is also under way.

The Mayaguez Plant is equipped with two gas tur

The Palo Seco Steam Plant, near San Juan, was placed in service in 1960 and has two 82,500 Kw

bine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 5,000 Kw steam-electric unit, formerly held in cold standby, has been sold and is being

steam-electric units.

dismantled.

The South Coast Steam Plant, near Ponce, has two 44,000 Kw and two 82,500 Kw steam-electric units,

installed at each of the four thermal plants during

Steam-Electric Stations

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 engine peaking unit will be calendar 1964.

Hydroelectric Stations

There are 18 hydroelectric plants with a total installed

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Aerial view of Monacillos Transmission Center showing

a|y«e.i?-i»dw'^TB

recently built distribution facilities in the background.

capacity of 107,920 Kw. Four hydroelectric plants operate on run of river flows, and the remaining four teen have reservoirs which permit regulation of plant output by collecting and storing water inflows during the rainy season for utilization during the dry season.

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

undertake large scale generation by means of nuclear reactors when such generation becomes economically

feasible. The plant is expected to be operating during the last quarter of 1964.

Transmission and Distribution Systems

The Authority's transmission system consists of 1,304 Nuclear Power Plant

structure miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 101 substations and sectionalizer

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, is being constructed on the western tip of Puerto Rico under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority is financ ing the cost of the plant site and the conventional generating components at an estimated cost of $5,600,000. The AEC is investing some $14,578,000 in the construction of the nuclear reactor. This project will give the Authority the necessary experience to

stations, with a total name plate capacity of 1,410,750 Kva located at suitable points throughout the system to insure stability of service and provide an adequate islandwide network. The transmission system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the island of Vieques to the Authority's system.

Distribution facilities include 13,401 structural

miles of lines and 181 substations owned by the Authority with a capacity of 552,767 Kva, which sup plied from the transmission network, convert the elec-

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1941

(Million Kwh)

Customers

Maximum Peak Load

(End of Period)

(Kw)

(Kw)

Customer

Sales

Fiscal Year

'^(Thousands

(June 30)

of Dollars)

Revenue

Average

Kilowatt

per

Revenue

Load

Hours per

Kilowatt Hour

Customer

per

1940-41

$ 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

1951-52

14,880 16,115 17,825 19,799 25,216 28,693 33,973 35,781 40,441 45,304 50,846 57,520 65,506

565.1

195,061 211,567 228,205 245,058 314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 513,000

122,000 140,000 155,000 178,000 210,000 249,000

77,000 87,000 97,000 109,000 129,000 153,000 181,000 198,000 231,000 261,000 294,000 335,000 386,000

2,897 2,955 3,067 3,162 2,956 3,184 3,578 3,687

.0263

76.28

.0258

76.17

1952-53*

1953-54* 1954-55* 1955-56* 1956-57*

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

1961-62* 1962-63*

1963-64t

625.3 699.9 774.9 930.8

1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,465.6 2,852.0

272,000

314,000 355,000 398,000 439,000 498,000 580,000

4,080 4,484 4,787 5,196 5,559

.0255

78.11

.0255

80.79

.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

127.69

*Includes amount recovered through Fuel Oil Adjustment.

t Estimate including Fuel Oil Adjustment.

trie power for distribution at 2400/4160 Y and 4800/8320 Y volts through distribution feeders which traverse 76 cities and towns and most of the rural

area. In addition, there are 128 privately owned dis tribution substations with a total capacity of 229,897 Kva to serve industrial customers making a total installed capacity of 782,664 Kva.

are now being served under this program which will be substantially completed by 1965.

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.

Rural Electrification

Financing System Growth Through successive amendments to an original loan contract for $6,376,000, entered into in 1952 be

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

tween the Authority and the Rural Electrification Administration of the United States, the Authority has borrowed to date $66,710,000 on bonds bearing interest at the rate of 2%, including a $6,225,000 issue placed on February 20, 1964, under a loan con tract now totaling $70,910,000. These funds have been loaned by REA for the construction of genera tion, transmission and distribution facilities to serve

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 customers. More than 115,000 rural families

domain.

these bonds under a Trust Indenture. It also has full

NUMBER OF CUSTOMERS

SALES OF ELECTRICITY-KWH

Thousands

Millions of KWH

600 1

3,000

500 t ::i Other

W-'/A Industrial i'-O-l Commercial Residential

2,000

300

1,500

200

100

Fiscal '55

'56

'57

'58

'59

Fiscal '55

'56

'57

'58

'59

60

'61

'62

'63

"64

. 05timaled

Source: P fi V/ R.A financial Reports.

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 $279,091,000 as of March 31, 1964.

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, 1964, a total of $371,782,000 was invested in capital improvements.

Of this amount $285,796,000 had been provided

from the proceeds of bond issues and bank borrow ings, and $85,986,000 or about 23 percent, had come mainly from net revenues of and contributions to the Authority. On March 31, 1964, total net assets amounted to $408,992,000. operating and appropri

ated reserves were $22,956,000, contributed capital and unappropriated net revenues were $72,604,000 and outstanding debt was $295,591,000.

Total revenues for the twelve months ended March

31, 1964, were $66,387,000. Current expenses were $36,051,000 leaving $30,336,000 to meet debt serv ice requirements and other contractual obligations.

The maximum debt service for any future year on outstanding issues was $13,701,000, indicating a

coverage of 2.23 times on present debt. Accruals for contributions to the Commonwealth and municipal governments in lieu of taxes amounted to $6,996,000 during the same period.

Despite the rapid expansion of facilities and im provement of service over the past decade, the Authority's rates have not been raised. 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 expenses and contractual obligations.

In May 1964, the Authority will sell $20,000,000 par value Electric Revenue Bonds, from which

[ ~wn

f

^

I .„Qq

V(,t,|.f,*;f.|

mLr' SSI £ •* .

i®## --. •«' i/ji/ ^• m» i iiraBi

Partial view of the control panels at BONUS — 16,500 KW Nuclear Plant at Rincon.

$16,500,000 of current bank borrowings will be retired and about $3,500,000 made available for new construction.

Looking Ahead

Continuous studies of power needs, constantly re viewed and revised by the Authority and its consult ing engineers, now indicate that peak demand on the system will increase from 580,000 Kw in 1963-64 to 667,000 Kw in 1964-65, 761,000 Kw in 1965-66 and 867,000 Kw in 1966-67. It is expected that over 25,000 new customers will be added yearly. To meet this demand, the name plate rating generating capac

ments. Of this amount, the sale of bonds will pro vide some $93,500,000. About $52,700,000 or 34% will be derived principally from revenues of

the Authority, compared with an average of 23% accrued from earnings and contributions during the last seventeen years. The remainder of $10,000,000 will be available 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 $127,526,000, nuclear production

plant $5,128,000, hydraulic production plant $36,079,000, gas turbine production plant $8,318,000, transmission plant $50,409,000, distribution plant $106,494,000, and other facilities $37,827,000 for a total of $371,782,000,

ity of the Authority will be raised to 990,420 Kw by June 1966.

During the period from July 1, 1963 through June 30, 1967, it is anticipated that the Authority

Security for the Bonds

will invest $156,200,000 in further capital improve

Bonds issued by the Authority under the Trust

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of March 31, 1964

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation

$400,795,513 61,376,937

Net utility plant

$339,418,576

OTHER PHYSICAL PROPERTY

640,640

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

22,085,191

CURRENT ASSETS:

Funds and working advances

$ 13,327,809

Accounts receivable â&#x20AC;&#x201D; Less Reserve for uncollectible accounts

11,282,091

Materials and supplies

11,943,664

Prepayments, special deposits and other

2,072,190

38,625,754

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other

$ 7,199,555 1,021,935

TOTAL ASSETS

8,221,490

$408,991,651

LIABILITIES

CONTRIBUTED CAPITAL

$ 33,898,827

UNAPPROPRIATED NET REVENUES

38,704,691

LONG-TERM DEBT:

Electric revenue bonds

Notes payable

$279,091,000

16,500,000

295,591,000

CURRENT LIABILITIES:

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

$ 4,645,163 2,539,806 2,224,638 5,352,043 2,478,775

DEFERRED CREDITS

17,240,425

600,590

RESERVES:

Self-insurance

Hydro-production equalization Injuries and damages Revenue stabilization

Appropriated sinking fund TOTAL LIABILITIES

$ 4,192,398

1,396,259 1,879,804 581,174

14,906,483

22,956,118 $408,991,651

Puerto Rico Water Resources Authority

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

Twelve Months Ending June 30 1960

June 30 1961

June 30 1962

June 30 1963

March 31

$40,440,678 994,844

$45,303,522 1,110,660

$50,845,979 1,284,837

$57,519,700 1,409,175

$63,887,730

$41,435,522 638,016

$46,414,182

$52,130,816 675,433

$58,928,875

$65,495,225

731,477

742,361

891,398

$42,073,538

$47,145,659

$52,806,249

$59,671,236

$66,386,623

$ 6,364,024

$ 6,885,447

$ 7,360,603

$ 8,542,762

12,135,940

13,381,840 4,495,076

14,104,870 6,104,009

$ 9,005,727 17,516,485

511,245

529,768

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

$22,836,920

$25,273,608

$28,099,250

$31,767,310

$36,051,019

$19,236,618

$21,872,051

$24,706,999

$27,903,926

$30,335,604

$ 5,226,952 $ 6,024,656

$ 6,867,883

$ 7,718,486

$ 8,048,030

2,549,700 856,675

2,930,621 1,003,767

3,373,776 1,179,206

3,837,000 1,343,538

4,215,867 1,487,497

Total sinking fund payments . . .

$ 8,633,327

$ 9,959,044

$11,420,865

$12,899,024

$13,751,394

Balance

$10,603,291

$11,913,007

$13,286,134

$15,004,902

$16,584,210

$

$

$

$

$

REVENUES:

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

1964

1,607,495

CURRENT EXPENSES:

Operation â&#x20AC;&#x201D; Fuel

Other operating expenses

3,913,749 423,207

Maintenance

Other current expenses Total current expenses

8,580,989

947,818

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 re imbursement from the Commonwealth

Government of Puerto Rico) . . . .

Reserve account

TRANSFERS TO:

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

Total transfers

397,119 4,831,232

479,696 6,008,704

$ 5,228,351

$ 6,488,400

$ 5,374,940

$ 5,424,607

4,429,208

4,957,439

Renewal and replacement fund . . . .

542,178 6,882,337

598,185 7,680,380

627,036 8,091,152

$ 7,424,515

$ 8,278,565

$ 8,718,188

$ 5,861,619

$ 6,726,337

$ 7,866,022

Balance available for contributions in

lieu of taxes, etc.

PROVISION FOR CONTRIBUTIONS IN LIEU OF TAXES Balance

5,563,099

6,298,353

$

945,732

$

467,168

$

298,520

$

$

472,866

$

233,584

$

149,260

$

472,866

$

233,584

$

149,260

$

472,866

$

233,584

$

149,260

6,996,500

427,984

$

$

213,992

$

434,761

$

213,992

$

434,761

$

213,992

$

434,761

869,522

PROVISION FOR:

Transfer to sinking fund reserve account Total

Balance transferred to unappropri ated net revenues

9

tesS*'Ss>''-s.i

i/^. '-^r--

r y,Ji

iaJr"

'• Vs:''

■'>

h \\\\\A*

v\\\'®

San Juan Steam Plant —

\ V n \ I

168,000 KW, a seventh and eighth unit

Hfliv

of 100,000 KW each, are now under construction.

=-i

fj

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^1 , -J

Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund. The Authority has covenanted to deposit in this fund a sufihcient 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.

cost of maintaining, repairing and operating these properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds, including the proposed issue.

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

The Authority has also covenanted that it will at

also legal investments for Savings Banks and Trust

all times fix and collect reasonable rates and charges

Funds in the states of New York and California and

sufficient for the payment of maintenance and oper

ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide for the making of deposits required by the Trust Indenture to the credit of the General Reserve Fund and the Renewal and Replacement Fund, and for

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

In order for the Authority to issue additional bonds under the Trust Indenture, the average annual bal ance of revenues from its electric properties for the

preceding twenty-four months, after deducting the

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 divisions, there is no known record of default or

delinquency in the payment of principal of or interest on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid default.

TOTAL REVENUES, BALANCE AVAILABLE FOR REVENUE FROM SALES OF ELECTRICITY

DEBT SERVICE AND DEBT SERVICE REQUIREMENTS Millions of Dollars

Millions of Dollars

70

70

60 -

■ Total Revenues

^ Residential

□ Balance After Current Expenses S Debt Service Requirements 50 ■

40 -

30 -

20

Fiscal Years

*55

■58

'59

'60

'61

'62

'63

* Estimate - Including Fuel Oil Adjustment.

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

nil Fiscal Years

'55

'56

II

'61

'62

'63

The Commonwealth of Puerto Rico

rum and tobacco, are returned to the Commonwealth

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 2,534,000 as of June 30,

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.

1963.

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

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

brief, residents of Puerto Rico do not vote in the

ment for the Island in 1900 including a Governor,

national elections. They are represented in Congress

Cabinet, Senate and Supreme Court, 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 less colonial form of government and in favor of United States citizenship. As a result, the original law 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

by a Resident Commissioner who has a voice but no 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 collected from Puerto Rican residents on income

earned in Puerto Rico, and Federal excise taxes col

lected on exported Puerto Rican products, such as

11

INA&UA ROm

Above- Laying of submarine cable connecting Vieques

mm.

Island to the Authority's System.

Right: Authority's helicopter lifting an aluminum V, guyed transmission line structure.

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 President for the first time appointed a Puerto Rican as Governor. In 1947 the Jones Act was amended to

permit Puerto Ricans to elect their own Governor, who in turn was empowered to appoint his Cabinet

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

states, was drafted by a freely elected constitutional convention in Puerto Rico, overwhelmingly approved in a special referendum, and approved by Congress of the United States and the President. It became

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

and the 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 compact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of the

Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations Act.

The Commonwealth Government

The Constitution recognizes and assures a separation of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and in those of the States. Both the Governor and the bicam

eral legislature are subject to regular election every four years.

Governmental responsibilities assumed by the Com monwealth are greater than those normally assumed by the State government. Municipalities, which com-

/4 pre.slressed concrete pole being tested to its breaking point by the Authority's Technical Research Department.

.m.;'

\ A bine both rural and urban areas, are the only local political subdivisions and are comparable to counties in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Gov ernment and the municipalities. There is, therefore,

no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government

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 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 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 demonstrated in Puerto Rico. Only a declining and now insignificant minority party favors independence.

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.

Prospective 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

^

Mai/i Office Building,

Plj San Juan, is equipped with H

f r 'u jfeh '.

a rooftop heliport and a

U

microwave communications

I

system.

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. First Circuit Court of Appeals.

On July 25, 1962, the 10th Anniversary 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

February 18, 1964. The Resolution provides for the 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 States and Puerto Rico. The membership of the Commission consist of three persons appointed by 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

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

Rico. The Commission is to render its report to the President and the Congress of the United States and to the Governor and the Legislative Assembly of

for the classical forms of government of statehood or

Puerto Rico not later than January 1966.

to be defined, measures could then be taken to hold

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

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

Eleclronic data processing equipment used /or hilling, accounting, inventory controls and other purposes.

General

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 $2,233 million in 1963.

The net income of Puerto Rico has more than kept pace, rising from $225 million to $1,811 million

during the same period. Especially significant, net income per capita after adjustment for price changes has shown an average annual increase for the last

tiplied sixteen times, from $27 million in 1940 to $432 million in 1963, and now provides 24% of Commonwealth net income. Whereas in 1940 sugar

products accounted for nearly two thirds of exports, in 1963 they provided less than a sixth. Nowadays more than half 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 in 1949 to $531 million in 1963.

twenty-three years of over 4.8% compounded. In fact, the rate of increase has been accelerating, from 4.1% in the decade 1941-50, to 5.1% in the decade 1951-60, 6.1% in 1961-62, and 7.2% in 1963,

These new products cover a wide range of items such as apparel, petroleum derivatives, and electronic products. Large, heavily capitalized manufacturing operations have shown a significant increase in re

making the Commonwealth's economy one of the

cent years as compared to those labor-intensive operations promoted during the early part of the industrialization program. These include the Union Carbide & Chemical Corp., which operates a $28 million glycol plant and is constructing a $22 mil

fastest growing in the world.

Equally impressive has been the transformation

of the Commonwealth's economy from dependence on sugar to a high degree of industrialization and

diversification. While net income from agriculture has expanded from $70 million in 1940 to $220

million in 1963, that from manufacturing has mul

lion plant to produce alcohol intermediates. Petro leum refineries are operated by Caribbean Refining Co., which recently completed an expansion pro-

gram, and the Commonwealth Oil Refining Co., which is currently enlarging its operations. An addi tion to Puerto Rico's petrochemical complex will be Puerto Rico Chemical Co., which announced plans to establish a $6 million anhydrous benzene bicar-

boxylic plant. In calendar 1963, a record 302 new factories began operation on the Island, bringing t e total U. S. affiliated plants in Puerto Rico to 950.

Food processing has also been a sipificant growt area in recent years. Three rice mills an a arge flour and feed mill supply an important part ot Puerto Rico's food requirements. Four large tuna canneries are now in operation and, wit one a i

tional plant recently promoted, the Is an ÂŽ come one of the leading suppliers of canned fish m United States markets. The forthcommg es a

feed for the growing cattle and daij'mg mdust^, tuna

canneries. A subsidiary of Libby, McNeill & Libby has recently set up a plant for the canning o

"^MaoToitL p.an.s are branch, or anb.aiari.

set up by such firms as General Electnc, Consohdated Cigar Corporation, Sunbeam Corporation, American Can Company,Phelps Dodge ^orporahon, Sperry Rand Corporation, Daystrom Inc., CarborLum Corp., Sprague Electric, Van Camp Sea

16

Company. One significant addition to Puerto Rico's blue chip roster is the $15 million ball bearing plant now being constructed by Ford Motor Co., to be the most modern facility of its kind in the world.

Helping to bring about such extraordinary changes in Puerto Rico's economy has been the Common

wealth Government's comprehensive development

program, especially those phases directed at encour aging manufacturers in the continental United States 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 $30 million in 1947 to $212 million in 1963. Annual fixed investment from all sources has risen from $62 mil

lion to $487 million during the same period and has

ment of a soya bean processing plant wi P^°

and oil for the domestic market and to

Food, Van Raalte, B.V D. Corp., and W. R. Grace

equalled 21 percent or more of gross product for the last four consecutive fiscal years 1960 through 1963.

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 18.2 per thousand to 6.8 per thousand. Personal income for

the average family has risen from $611 to $3,488.

Public and private day school enrollment has in creased from 297,000 to 659,000. University and college enrollment has grown from 5,000 to 30,900.

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Fiscal Years

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

% Increase

1940

1963(1)

287

2,233

225

1,811

Personal Income Per Family — $

or (Decrease)

678 705

471

Banks:

Debits — $ Millions

Private Savings Accounts — $ Millions Assessed Value of Taxable Property —

73

1,170

17

260

1,502 1,429 609

312

2,211

Income Tax Collections — $ Millions . .

2

90

309

Power Generation — Millions of KWH. .

166

2,935

1,668

1,869,000

2,534,000

$ Millions

A Healthier, Better Educated Population: Population Birth Rate — Per Thousand .

39.0

28.9

Death Rate — Per Thousand

18.2

6.8

Life Expectancy — Years . .

Public Day School Enrollment University and College Enrollment

36

(26) (63)

46

70

52

286,000

598,000 30,900

109

5,000

518

A More Balanced Economic Life:

Percentage

Per cent of Net Income from:

Change

Points

Manufacturing

12

24

12

Agriculture

31

12

(19)

8

13

5

12

16

4

37

35

(2)

Commonwealth and Municipal Government Trade Other

Per cent of Exports from: Exports by New Factories'-' Sugars (Raw and Refined) Other

II I Preliminary figures.

Promoted by the Economic Development Administration.

Does not include exports of other new factories.

Source: Puerto Rico Planning Board.

60

60

62

17

38

23

(45) (15)

'

•

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