Puerto Rico Water Resources Authority (oct. 1969)

OCTOBER

A SPECIAL REPORT ON

COMMONWBAI.TM Or PUBtlTO RICO

GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO •AN JUAN. PUKriTO NlOO

11 ^

e,A.i3^ l-f

1969

/• 3/ Ott-

PUERTO RICO WATER RESOURCES AUTHORITY

1950 - Our Growth - 1969

Data for the twelve months ended Times

June 30, 1950

June 30, 1969

Sales of electricity (Kwh) Revenues from sales Customers (number) Average sales per customer (Kwh)

411,727,000 $ 11,170,000 177,000 2,419

5,706,970,000 $ 118,883,000 665,000 8,756

Average revenue per customer

$

$

13.9 10.6 3.8 3.6

182.40

2.8

519,014,000 96,230 140,560

6,654,513,000 1,078,300 1,241,840

12.8 11.2 8.8

Revenues (total) $ 11,317,000 Current expenses $ 5,390,000 Balance of revenues available for debt service . . $ 5,927,000

$ 123,097,000 $ 66,445,000 $ 56,653,000

10.9 12.3 9.6

1,178,000 3,681.000

$

13,026,000 42,590,000

11.1 11.6

$ 4,859,000

$

55,616,000

11.4

Generation requirements (Kwh) Annual peak demand (Kw) Generating capacity installed (nameplate Kw). .

Contribution in lieu of taxes Other contractual obligations Contractual obligations (total)

$

65.64

Increased

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

$ 582,761,000

10.5

25,371,000

118,146,000

4.7

$ 80,943,000

$ 700,907,000

8.7

Long term debt and outstanding notes . . . . $ 60,545,000

$ 474,650,000

7.8

Equity of the people of Puerto Rico

$ 162,831,000

6.5

Construction work in progress Electric plant (at cost)

ON THE COVER

The San Juan Steam Plant —

Installed Capacity 578,000 Kw

$ 24,905,000

^ Commonwealth of Puerto Rico

^f PUERTO RICO WATER RESOURCES AUTHORITY

1 5^01

Governing Board Chairman: RAFAEL V. URRUTIA

Officers RENAN COLON

Chief Engineer Vice-Chairman: RAFAEL NEVARES Members: DR. ANTONIO SANTIAGO JORGE CAMUNAS

JAVIER CUEVAS BENITEZ

General Manager — Services and Supply RAEAEL REYES GARCIA

General Manager — Irrigation Services JOSE VILA RUIZ General Counsel

Principal Officers

ANTONIO BASCAGLIA

Head, Production and Transmission Division

FELIX CORDOVA DIAZ Executive Director

HUMBERTO CORDERO

JULIO NEGRONI Vice Executive Director

WILLIAM CANDELARIO

DR. MODESTO IRIARTE

JOSE A. MATOS

Assistant Executive Director — Electrical Planning,

Head, Power Design and Construction Division

Construction and Research

Head, Distribution and Sales Division Head, Electrical Planning and Research Division

JOSE B. CANDELAS

JOSE ISMAEL DIAZ

Controller

Assistant Executive Director — Finance

LOUIS ROIG

CARLOS VELAZQUEZ TORO

Treasurer

Assistant Executive Director — Power Operations

JULIO C. MUNIZ

RAEAEL VAZQUEZ COLON Assistant Executive Director — Industrial Relations

JUAN RAMOS VELILLA

and Personnel

Head, Purchasing Division Head, Personnel Division CARLOS E. LUBE

Head, Industrial Relations Division HECTOR M. MORALES

Consulting Staff

Head, Transportation and Services

Power Consultant

DAVID BRAVO, JR. Public Relations Officer

PEDRO COLON PAGAN

Trustee

Consultant — Engineering and Construction

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

RAFAEL R. RAMIREZ

Consulting Engineers Jackson and Moreland Division

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

Bond Counsel Mitchell, Petty & Shetterly

Felk Cordova Diaz Executive Director

Puerto Rico

Water Resources Authority The supply of electric energy in Puerto Rico's fast

growing economy is the responsibility of the Puerto 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

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 over 1,600 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.

1941, the Authority was established by law to replace

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

the Utilization of Water Resources and ensure a

shown on the inside of the cover page speak for

growth in the supply of electricity which would be

themselves.

Water Resources of Puerto Rico, created in 1927. In

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 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,

From its inception the Authority has had to con

stantly add new capacity to keep up with, and antici pate, the mounting demand for electric power. New generating capacity has been added almost every

at a later date, the electric facilities of various irri

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 1,241,840 Kw. Annual capital construction programs in recent years have

gation services were integrated into the Authority's

reached as high as $87.5 million.

system.

The capital construction program for 1969-70 is

When the Authority began operations in 1941, the Island's economy was primarily agricultural and heavily dependent on a single crop — sugar. In the

estimated at $107.2 million. It includes work on units 3 and 4 of 200,000 Kw each at the Palo Seco Steam Plant. These units are scheduled for completion in

latter half of that same decade, an industrialization

1969 and 1970 respectively. It also includes work

on the fifth and sixth units of the South Coast Plant

City of Los Angeles

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

Other important projects included in the program are Unit No. 1 of 450,000 Kw at a new steam plant to be constructed in the southeast and several jet 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

Water and Power

tabulation:

f' j" ?

Palo Seco Steam Plant —

showing two aclclitional 200,000 Kw units under construction.

> .,r \

Department of As of Dec. 31, 1968

Electric

Revenues

Puerto Rico

City of Seattle

Water Resources Department of A uthority Lighting As of As of Dec. 31, 1968 Dec. 31, 1968

$1,004,797,278

$541,092,186

$306,629,401

189,078,839

111,107,850

48,993,949

Number of Customers . .

Present Electric System The total installed generating capacity of the Author ity at the end of June, 1969 had a name plate rating of 1,241,840 Kw and maximum dependable capacity of 1,333,320 Kw. The physical plant presently con sists of twenty-two generating stations, of which

PUERTO RICO WATER RESOURCES AUTHORITY

ELECTRICAL CZ]

SYSTEM

irr ro.(. we. u

â–Ą A

â–˛

fifteen are hydroelectric, four are thermal-electric, one is diesel and two are jet peaking units. Thermalelectric facilities now supply about 96 percent of the electric energy generated. The Authority's four main generating stations have a total installed name plate rating of 1,086,000 Kw.

Steam-Electric Stations

The Palo Seco Steam Plant, near San Juan, was

placed in service in 1960 and has two 82,500 Kw steam-electric units 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 gencies, being designed for automatic synchroniza tion to the line from a cold start in only two minutes.

structed, 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 at the Commonwealth Oil Refin ing Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 410,000 Kw units are being added to this plant.

In addition two 200,000 Kw units are in construction

The San Juan Steam Plant has an installed capacity of 598,000 Kw in four 20,000 Kw, two 44,000 Kw, four 100,000 Kw steam-electric units and two jet

which are expected to be completed in 1969 and 1970. A desalination pilot plant has also been con

Kw.

4

peaking units with a combined capacity of 30,000

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. Hydroelectric Stations 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

El Monte — a recently completed apartment complex.

during the rainy season for utilization during the dry season, and the remaining four operate on run-of-

the-river flows. Ten of the hydroelectric plants are non-attended and fully automatic.

Transmission and Distribution Systems The Authority's transmission system consists of 1,588 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 132 substations and sectionalizer

stations, with a total name plate transformer capacity of 2,206,425/31,143,875 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

215

substations

owned by the Authority with a capacity of 1,069,990/ 1,501,196 Kva which, supplied from the transmis sion 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 feeders which traverse all the Island. In addition, there are 196 privately owned distribution and interchange sub stations with a total capacity of 505,516/564,205 Kva to serve industrial customers, making a total installed capacity of 1,575,506/2,065,401 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

Administration of the United States, the Authority has borrowed to date $77,040,000 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 customers.

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

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946 Maximum

Sales

Average

Kilowatt

Customers

Load

Load

Hours per

(End of Period)

(Kw)

(Kw)

Customer

Revenue per Kilowatt Hour

^ Fiscal Year

(Thousands

(June 30)

of Dollars)

(Million Kwh)

Peak

Revenue per Customer

5,764

258.6

124,959

63,000

39,000

2,069

.0223

$ 46.13

1950-51

13,006

488.2

185,090

109,000

69,000

2,638

.0266

70.27

1955-56

25,216

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

1945-46

$

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

231,000

4,080

.0243

98.96

1959-60

40,441

1,667.4

408,671

355,000

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

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

132.13 144.03

1965-66

83,734

3,771.7

581,369

737,000

506,000

6,488

.0222

1966-67

93,233

4,291.8

608,462

825,000

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

1969-70t

133,140

6,553.0

697,256

1,271,000

885,000

9,542

.0203

190.95

t Estimate.

NUMBER OF CUSTOMERS Thousands

SALES OF ELECTRICITY-KWH Miilions ol KWH

7.000

6.500 -

Commercial

Residential

300

1.500 -

100

1.000 -

500 -

Fiscal 61 Years

•64

65

Years Source P R V< R A financial Reporls

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

Financing System Growth

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 $432,652,000 as of June 30, 1969.

Under its enabling legislation, the Authority has the

In addition, a substantial amount of the Capital

power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of

Improvement Program has been financed directly from revenues of the Authority. In the period from

authority to set and collect adequate rates and other

May 1, 1947 to June 30, 1969, a total of $696,733,000 was invested in capital improvements. Of this

charges for the use of its facilities, and has complete

amount $502,884,000 has been provided from the

these bonds under a Trust Indenture. It also has full

control and supervision over its properties and activi

net proceeds of bond issues and bank borrowings, and

ties. Properties may be acquired by the Authority by

$193,849,000 had come mainly from net revenues of and contributions to the Authority. On June 30, 1969, total net assets amounted to $701,126,000,

any lawful means, including the power of eminent domain.

For many years the Authority has followed a policy

operating and appropriated reserves were $36,464,-

of initially financing the construction of facilities under its Capital Improvement Program with short

000, contributed capital and unappropriated net reve

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

$474,500,000.

Total revenues for the twelve months ended June 30, 1969, were $123,092,000. Current expenses were

bonds are sold for the repayment of such loans and

for the continuance of construction. In this way the

nues were $128,884,000 and outstanding debt was

Las Americas â&#x20AC;&#x201D; the largest shopping center in Puerto Rico, in metropolitan San Juan, consisting of 79 stores, completely air conditioned.

$66,445,000, leaving a balance of $56,653,000

the purpose of liquidating current bank borrowings

available for debt service requirements and other contractual obligations. The maximum debt service for any future year on outstanding issues was $23,734,000, indicating a coverage of 2.41 times on present debt. Accruals for contributions to the Com monwealth and municipal governments in lieu of taxes amounted to $13,026,000 during the same period.

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

and continuing the Capital Improvement Program.

and contractual obligations.

New Bond Issue

In October 1969, the Authority proposes to sell $50,000,000 par value Electric Revenue Bonds for

Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple

tion of the financing, will approximate $28,029,000 and will be covered about 2.00 times by net earnings for the twelve months ended July 31, 1969.

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 of the system will increase from 1,271,000 Kw in 1969-70 to 1,467,000 Kw in 1970-71, 1,677,000 Kw in 1971-72 and 1,906,000 Kw in 1972-73. It is ex

pected that about 30,000 new customers will be added yearly. To meet this demand, the Authority s gener

ating capacity will be raised to a name plate rating of 3,011,840 Kw by 1973.

During the period from July 1, 1969 through June 30, 1973, it is anticipated that the Authority will invest $446,538,000 in further capital improvements.

Of this amount, the sale of bonds will provide some $336,920,000. About $108,538,000 or 24% will be

derived principally from revenues of the Authority, compared with an average of 28% accrued from earnings and contributions during the last twentytwo years. The remainder of $1,080,000 will be avail able 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 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 1971 to 1974 up to a limit of $3,250,000 during each of these four years. Such amounts would be deducted from the contribution in

lieu of taxes payable to the Commonwealth Govern ment.

The above four-year program compares with capi tal expenditures actually made during the past twentytwo years, distributed as follows: steam production plant $262,092,000, hydraulic production plant $36,277,000, gas turbine production plant $19,285,-

TOTAL REVENUES, BAUNCE AFTER CURRENT EXPENSES, REVENUES FROM SALES OF ELECTRICITY

AND DEBT SERVICE REQUIREMENTS Millions of Dollars

Millions of Dollars

140

140

130 -

120 Total Revenues 110 -

I 100 -

I Balance After Current Expenses

Residential

I Debt Service Requirements

Total

90 -

80 -

70 -

60 -

50 -

40 -

30 -

20 -

1u Fiscal Years

0 Fiscal Years

â&#x2013; 04

'SS

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of June 30, 1969 ASSETS

NET UTILITY PLANT:

Gross utility plant

$700,907,072

Less accumulated provision for depreciation

117,077,483

Net utility plant

$583,829,589 477,503

OTHER PHYSICAL PROPERTY

14,900,123

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS .

CURRENT ASSETS:

Funds and working advances Accounts receivable â&#x20AC;&#x201D; Less Reserve for uncollectible accounts

Materials and supplies Prepayments, special deposits, etc

$ 32,411,063 28,892,227 24,120,077 1,851,388

87,274,755

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other

$ 12,454,088 2,189,762

14,643,850

$701,125,820

TOTAL ASSETS

LIABILITIES

CONTRIBUTED CAPITAL

46,209,703

UNAPPROPRIATED NET REVENUES

82,674,263

LONG-TERM DEBT:

Electric revenue bonds Notes payable Lease-purchase obligation, less portion included in current liabilities

$432,652,000

39,600,000 2,288,317

474,540,317

CURRENT LIABILITIES:

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

$ 26,075,305

5,682,652 7,861,671 13,025,787 8,592,256

61,237,671

RESERVES:

Self-insurance

8,489,735

Injuries and damages . . . .

2,516,940

Revenue stabilization .

.

2,284,698

Appropriated sinking fund . .

.

.

23,067,443

Plant improvements . . . .

105,050

TOTAL LIABILITIES

10

36,463,866

$701,125,820

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 196S

June 30 1967

1966

June 30 1969

REVENUES:

Sales of electric energy Other operating revenues Total operating revenues

$118,883,451

$83,734,015

$93,232,606

$104,270,618

1,890,939

2,085,113

2,111,965

2,206,614

$85,624,954

$95,317,719

$106,382,583

$121,090,065

Other income

1,369,968

1,420,789

1,781,295

2,007,086

$86,994,922

$96,738,508

$108,163,878

$123,097,151

$12,035,637

$13,671,019

$ 15,434,275

$ 15,570,387

22,518,518

25,011,077

28,348,610

33,913,682

10,717,943

11,840,030

14,263,000

15,974,592

1,045,519

1,010,175

937,572

$46,317,617

$51,532,301

$ 58,983,457

985,983 $ 66,444,644

$40,677,305

$45,206,207

$ 49,180,421

$ 56,652,507

$ 9,061,921

$ 9,555,562

$ 11,166,209

$ 12,655,428

5,992,000 207,304

5,710,000 207,304

6,685,000 787,908

7,342,799

Total sinking fund payments

$15,261,225

$15,472,866

$ 18,639,117

$ 21,173,332

Balance

$25,416,080

$29,733,341

$ 30,541,304

$ 35,479,175

$

$

$

$

Total revenues

CURRENT EXPENSES:

Operation -Fuel

Other operating expenses Maintenance

Other current expenses Total current expenses Balance of revenues after current expenses (per Trust Indenture)

SINKING FUND PAYMENTS:

Interest account (exclusive of interest charged to construction and reimbursement from the Com

monwealth Government of Puerto Rico) . . .

Bond redemption account (exclusive of reimburse ment from the Commonwealth of Puerto Rico) .

Reserve account

1,175,105

TRANSFERS TO:

General reserve fund â&#x20AC;&#x201D;provision for self-insurance .

Renewal and replacement fund Reserve for improvements Total transfers

730,902

824,926

909,838

1,002,087

12,393,200

13,671,744

5,160,000

3,516,925

5,250,886

$15,348,412

$18,378,126

$ 18,098,507

$ 21,417,109

$10,067,668

$11,355,215

$ 12,442,797

$ 14,062,066

14,617,510 â&#x20AC;&#x201D;

15,164,136

Balance available for contributions in lieu of taxes, etc

PROVISIONS FOR CONTRIBUTIONS IN LIEU OF TAXES . . . . .

Balance

9,172,130

10,213,261

$

895,538

$ 1,141,954

$

1,019,523

$

1,036,279

$

447,769

$

570,977

$

509,762

$

518,140

$

447,769

$

570,977

$

509,761

$

518,139

13,025,787

11,423,274

PROVISION FOR:

Transfer to sinking fund reserve account . . . .

Balance transferred to unappropriated net revenues

11

000, transmission plant $85,595,000, distribution plant $202,580,000 and other facilities $90,904,000, for a total of $696,733,000.

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 will 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 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 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. 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 in the state of New York and for savings banks in California and 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

4t<|V.

mwTd Work crew busy keeping lines free

of undesirable branches which can cause power failures.

A section of downtown Santiirce at night.

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

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

superseded in 1917 by the Organic Act or Jones Act, which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local pur

poses. It also provided that members of both Senate

divisions, there is no known record of default or de

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

linquency 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

trol of Washington through appointment by the

Executive and Judicial branches remained under con President.

default.

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

Government History

as Governor. In 1947 the Jones Act was amended to

Puerto Rico came under United States sovereignty by

permit Puerto Ricans to elect their own Governor,

the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil gov ernment 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.

who in turn was empowered to appoint his Cabinet

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

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,

Switchyard, San Juan Steam Plant.

A 10,000 Kw turbo-jet "Power Pack" for peaking and emergency service appears in the foreground.

economic and fiscal relationship between Puerto Rico

cial branches as in the Federal Constitution, and as in

and the United States shall remain in full force and shall be thereafter known as the Puerto Rican

those of the States. Both the Governor and the bi

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.

cameral 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

The Commonwealth Government

manner and under the same terms and conditions as

The Constitution recognizes and assures a separation

writs of error and appeals may be taken from other

of powers among the executive, legislative, and judi

Federal and State courts.

Governmental responsibilities assumed by the Commonwealth are greater than those normally as sumed by a State government. Municipalities which combine 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

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 are supported by a portion of the gasoline tax.

Political Background

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

lishing the present Commonwealth political relation ship.

Since 1948 there have been two major political thrusts in political life in Puerto Rico towards close association with the United States and a minor and

almost negligible one in favor of independence. The trends are illustrated in the following data on election

results by parties in recent years.

1952

1956

1960

1964

1968

Commonwealth

Popular Democratic Party .. 64.8% 62.5% 62.4% 59.4% 41.8% Peoples Party — — — — 10.0%

An important commercial section in Santurce showing some luxury hotels.

Statehood

Statehood Republican Party . 12.9% 25.0% 34.3% 34.6% "•2% New Progressive Party — — — — 45.0% Socialist Party

Independence Party Christian Action Party

3.3%

—

19.0% 12.5% — —

—

—

3.3% —

2.7% 3-3%

3.0%

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

Governor Luis A. Ferre, a prominent and highly 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. Politi cal status did not receive emphasis as an immediate issue. He received 45.0% of the vote in the 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.

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 $100 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

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 United States. Of the over 700,000 ballots cast (66.3 percent of all registered votes) 99.4 percent were for either Commonwealth or Statehood and only 0.6 percent for Independence. A tabulation of the actual results of the plebiscite is shown below: 425,132 (60.4%) 274,312 (39.0%) 4,248 ( 0.6%)

Commonwealth Statehood

Independence

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

minority parties.

1967 Plebiscite

In 1962 the Legislature of Puerto Rico petitioned

the Congress of the United States requesting a plebiscite by the voters of Puerto Rico through which an expression of preference could be demonstrated for either a continuation of the existing common wealth relationship with the United States, or the attainment of Federated Statehood in the United

States, or the establishment of Puerto Rico as an

independent country.

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

Helicopter lifting aluminum tower for 115 KV transmission line.

An 82,500 Kw unit at the South Coast Steam Plant.

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

Net income of the economy has increased from a level of $614 million in 1950 to $3,076 million m 1968. Income, measured in current prices, has shown

demonstrated in Puerto Rico. Only a declining minor ity party favors independence. Both major parties 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

ious year. Per capita net income is now $1,129 con

take.

pared to $279 in 1950.

an average increase during the last five years of about 10.0% compounded annually and m the year ende June 30, 1968 it increased by 10.7% over the prev The Commonwealth Government's program ot in dustrialization has aided the economy to shift from

Expansion and Diversification of

the Economy of Puerto Rico

one principally agricultural to one much better diver sified between industry and agriculture. Concurrent y

Economic growth in Puerto Rico since 1950 has been

with the expansion in net agricultural income from

very rapid. Gross product of the Commonwealth has

$149 million in 1949-50 to about $187 million in

increased more than 4 times over its 1950 level and

1967-68, manufacturing income increased from $89

has more than doubled during the past eight years ($3,740 million in 1968 vs $1,847 million in 1961).

In the year ended June 30, 1968 gross product totalled an estimated $3,740 million, representing an increase of 11.4% over the prior year.

million to $753 million in 1967-68, substantially surpassing 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

I

Workers installing high pressure shell for the new 230,000 KW turbo-generator at Palo Seco Steam Plant.

35% of manufacturing income. By 1966-67 about 4.5% of manufacturing income resulted from this industry. Manufacturing income is now generally derived from the production of new types of manu factured products, principally for shipment to the United States. Such shipments amounted to only $33 million in 1949-50. By 1967-68 they had reached a

tion program. These include the Union Carbide &

total of about $1,012 million.

casings. Food casings are used by meat processors in producing sausage and other processed meats.

The new plant is due to be in operation by 1970.

Union Carbide Caribe, Inc., another subsidiary of Union Carbide, began petrochemical operations on

These new products cover a wide range such as

apparel, petroleum derivatives and electronic prod ucts. Large, heavily capitalized manufacturing opera tions have shown a significant increase in recent years as compared to those labor-intensive operations promoted during the early part of the industrializa

Chemical Corp., which operates a $53 million plant and has recently constructed a $22 million plant to produce alcohol intermediates. Union Carbide Food Products Incorporated, a subsidiary of Union Carbide Corporation, will build a $15 million plant at Barceloneta, Puerto Rico for tbe production of food

the Island in 1959.

Caribbean Gulf Refining Co. which recently com-

pleted an expansion program, operates a petroleum refinery.

Petrochemicals are of greatly increasing importance

The Phillips refinery will constitute the nucleus of a complex of satellite plants producing raw materials, intermediates, and consumer goods using petroleum

to the economy of the Commonwealth, a recent de

derivatives.

velopment being the addition of a $41 million aromatics plant to Commonwealth Oil Refining Com pany's $105 million refinery. Corco has invested

Food processing has also been a significant growth area in recent years. Three rice mills and a large

$180 million in Puerto Rico in the past ten years

and the present plans call for increasing the Com

pany's investments to approximately $300 million by 1970. It is anticipated that joint venture petro

chemical projects will probably add another $75 mil lion by 1970.

Another addition to Puerto Rico's petrochemical

complex involves the Puerto Rico Chemical Com

pany which has constructed a $6 million phthalic anhydride plant.

Phillips Puerto Rico Core, Inc. has already in augurated its Guayama plant at a cost of $58 million.

The company has announced its plans of investing $600 million in petrochemicals over a ten-year pe

riod. In May, 1968 a joint venture with RhonePoulenc for manufacturing nylon began operations.

flour and feed mill supply an important share of Puerto Rico's requirements. Four large tuna can neries are now in operation, and with one additional 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 industry, and oil for the domestic market and for the tuna can

neries was also established. A subsidiary of Libby,

McNeill and Libby has established 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 manu facturing of dessert preparations and baking powder.

Further, many of the plants promoted by the Economic Development Administration are branches or subsidiaries set up by such firms as General

Operator checking data from the economic load.

computer at Monacillos transmission and distrwut

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Electric, Consolidated Cigar, General Cigar, Ameri

thousand to 6.6 per thousand at present, which is

can Can, Phelps Dodge, Daystrom, Carborundum, Sprague Electric, Van Camp Sea Food, General

rate has declined from 39.6 per thousand in 1950

Foods, Van Raalte, Hooker Chemical, B.V.D., Bell & Howell, International Shoe, National Cash Register, Hercules Powder, Stanley Works, Pepsico, W. R. Grace, Ford Motor Co., Phillips Petroleum, Babcock and Wilcox, Cutler-Hammer, Endicott Johnson, Jon athan Logan, Motorola, RCA and Westinghouse.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in in vestment. Average gross fixed domestic investment during the last five consecutive fiscal years, 1964-68, ran at a rate of 25% of gross product. It has in creased from $112 million in 1950 to $973 million in

now about the same as the U. S. average. The birth

to 25.9 per thousand in 1968. The people are better

educated, with literacy increased from 75% to about 86% in 1967. Institutions of higher learning have also expanded rapidly. University and college enroll ment which was only 13,000 in 1950, now has 48,000 students.

It is significant that the Commonwealth Govern

ment has in the last three years directed approxi mately 47% of its expenditures to education and health.

The Commonwealth Government will continue to provide a climate inducive to further economic de

1968. Inflowing long-term U. S. capital rose from $31 million in postwar 1947 to an estimated $581

years ahead a sustained rate of economic growth can

million in 1968.

be maintained. Present projections indicate that gross

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

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

RCA Spectra 70/45 Inquiry System recently installed to expedite inquiries from customers in the San Juan metropolitan area.

velopment and growth. Thus it is expected that in the product in terms of current prices should reach $7,391 million in 1975. This will mean a personal

income per capita of approximately $1,790.

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Approximate Times Increased or

(Decreased)

An Expanding Economy:

1940

1950

1968

Over 1950

287

755

3,740

5.0

Net Income — $ Millions

225

614

3,076

5.0

Personal Income Per Family — $ . . .

611

1,500

5,178

3.5

73

319

1,715

5.4

407

8.0

Gross Product — $ Millions

. . . .

Banks:

Debits — $ Millions

Private Savings Accounts — $ Millions

17

51 '

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

312

459

3,149

6.9

2

28

186

6.6

A More Balanced Economic Life:

Percentage Points

Change

Per cent of Net Income from: 24.5

10.0

Manufacturing

12

14.5

Agriculture Commonwealth and Municipal Government

31

24.3

6.1

8

11.4

14.0

Trade

12

16.6

17.8

1.2

33.2

37.6

4.4

14.0

69.8

Other

37

(18.2) 2.6

Per Cent of Exports from:

Exports by New Factories* Sugar (Raw and Refined) Other

62 38

51.1

5.7

34.9

24.4

(10.5) Per Cent Change

A Healthier, Better Educated Population:

Population Birth Rate — Per Thousand Death Rate — Per Thousand

Life Expectancy — Years Public Day School Enrollment University and College Enrollment . . . . * Promoted by the Economic Development Administration.

Does not include exports of other new factories.

Source: Puerto Rico Planning Board,

t May, 1968.

55.8

(45.4)

1,869,000

2,206,414

2,739,000

24.1

39.0 18.4

39.6

25.9

10.5

6.1

(34.6) (42.0)

46 286,000 5,000

61

70.0

14.8

408,000 13,000

670,000t 48,000

64.2 269.2

jr

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1311 I'onco do I.c6n Avenue, Suit Juiiii, I'ueito KIco (MWOH / 41 Wall Stfeel, New Ycuk, N.Y. U1005