A Special Report on San Juan (June 1959)

June 1959

SPECIAL REPORT ON

SAN UUAN Capital of Puerto Rico

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COMMONWEALTH OF PUERTO RICO

Government Development Bank for Puerto Rico SAN JUAN, PUERTO RICO

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Allhough dominated by modern office buildings, almost all of San Juan's streets contain houses built in the I7th and ISth centuries. At the

point of the island in the background stands famed El Morro, a 400-year-old fortress.

-:p-.

Dona Felisa Rincon de Gautier is City Manager

of San Jiian. Her knowledge of municipal gov ernment and her administrative ability have won her wide acclaim. She ivoi- honored in 1954 as "Lady of the Americas."

SAN JUAN â&#x20AC;&#x201D; Capital of Puerto Rico Founded in 1521, San Juan, still possessed of old-world charm, is today one of the most modern and progressive cities in the western hemisphere. Known officially as the Capital of Puerto Rico, it is the industrial, educational and governmental hub of the Commonwealth.

The greater city includes old San Juan itself, Santurce and Rio Piedras and along with four suburban and adjoining communities (Bayamon, Carolina.

Catano and Guaynabo) its metropolitan area has a population of more than 550,000.

It is the oldest city within the United States of America.

In the past decade, the Commonwealth of Puerto Rico has, chiefly through far-sighted encouragement of United States private investment, made aston ishing gains in all areas of its economy. Hundreds of new industrial plants have been established and the majority of these have been located in the San Juan metropolitan area. The city has an excellent harbor; its airport is one of the finest in the \< c-\d. ' Government services f. 'ii a vital and flourishing -Nut of the activities of San Juan since it is the s -j f the Commonwp\ih. Federal Government

offices are also centered here, m -T-'iiion, a large military establishment is maintained by the armed forces of the United States.

Site of the principal campus of the University of Puerto Rico, San Juan

has many schools noted especially for studies of the tropical diseases of men. animals and plants. It is research headquarters for crop diversification and the improvement of sugar cane cultivation. Public education, in San Juan

as elsewhere throughout the Commonwealth, is accorded high priority. This is reflected in an increase in public school enrollment from 297,700 in 1940

to an estimated 565,000 in 1958.

-4 p,

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'hrrr i"ii" ff Tf f f f The Capitol of Puerto Rico, San Juan.

The Capital of Puerto Rico in the past few years not only has shared in

the general economic upswing of the United States but in some respects has outpaced the continental growth. Bank deposits have increased from $76

million in 1940, for example, to $446 million in 1958. New hotels have been built, chiefly centered in the San Juan metropolitan area, and tourism is now one of the major businesses of Puerto Rico. Another index of the vigor of

the economy is the fact that electric power consumption in the past fiscal year increased by 20.4 per cent to 1,299 million kilowatt hours for the entire Puerto Rico Water Resources Authority system.

Financial Administration

Many of the functions usually associated with municipal administration in the States are handled by the Commonwealth of Puerto Rico itself. Consequently, the actual expenditures of the Capital of Puerto Rico are relatively modest.

San Juan is empowered to levy a basic real and personal property tax for general purposes up to a maximum of 1 per cent of valuation. Certain special purposes are allowed up to an additional I per cent. Under the Municipal Borrowing Law (Title 21, Ch. 87), the ad valorem tax which must be levied for payment of all bonds issued is unlimited as to rate or amount.

All property tax collections and all debt service funds are administered directly by the Secretary of the Treasury of Puerto Rico, who retains in his custody from these collections the amounts appropriated for the payment of

principal and interest on outstanding obligations. The City relies for its rev enues mainly on the property tax. It derives some revenues from municipal licenses and fees on commercial and industrial establishments, and a percent

age of the cigarette tax and automobile license fees levied by the Common wealth Government are earmarked for the City. The Puerto Rico Water

Resources Authority pays to the City, in lieu of taxes, 6 per cent of its gross

revenues collected in the municipality. No direct payments are made by the Puerto Rico Aqueduct and Sewer Authority but, in lieu of this, additional

funds are paid to the City from General Fund appropriations of the Common wealth Government.

A program for a complete reassessment of taxable property was undertaken in 1949 and completed in 1952. This program, designed by independent experts, reassessed property valuations previously unchanged since 1917. New

valuations were based upon a detailed remapping of properties, soil classifica tion of rural parcels, a careful field inspection of all parcels and improvements and evaluation scales worked out and approved by committees composed of technically qualified members representing both government and private inter ests in the fields of real estate, agriculture and construction.

In 1957-58 the relation of assessed valuations to market values was again reviewed, resulting in a further reappraisal as of January 1, 1958. The most recent assessed valuation of $743,267,580, as of January 1, 1959, is estimated

A typical high school in the Rio Piedras section

of the Capital of Puerto Rico

to average about 90% of 1957 market value.

The tax rate is exceptionally low in comparison with cities of similar size in the continental United States, being $2.13 per $100, of which 83?^ is levied for general Commonwealth purposes. Direct comparisons with continental cities are not possible because of differences of functions performed, but it is safe to say that the net City tax of $1.30 (equivalent to $1.17 per $100 appraisal) is unusually low.

The Capital of Puerto Rico is divided into two tax districts â&#x20AC;&#x201D; Rio Piedras with a rate of $2.09 and San Juan $2.13. The additional $.04 in the San

Juan rate is for the payment of outstanding debt prior to the consolidation of Rio Piedras and the Capital of Puerto Rico.

In June 1958 the Legislature enacted Public Law No. 67 which provided for an increase hereafter from 6% to 9% per annum in the interest rate

charged on delinquent taxes. Whereas no penalties were previously charged on delinquent taxes, other than interest, the Act provides that hereafter a penalty of 5% of the amount of the tax will be added after becoming 30 days delinquent, increasing to 10% after becoming 60 days delinquent.

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Another modern high school

I

in the Sanliirce section.

Aerial view of Llorens Torres Public Housing Project, Santurce.

The Economic Pattern The Commonwealth of Puerto Rico, on the northeastern border of the Carib

bean Sea, has an estimated population of 2,317,000 inhabiting an island about 100 miles long and 35 miles wide, with an area of 3,435 square miles. The

interior is mountainous with fertile valleys, surrounded by a coastal plain of varying width. The climate is comfortable, the mean winter temperature being 73.4 degrees and the mean summer temperature 78.9 degrees. The Capital of Puerto Rico is on the northeast coast.

Sugar cane is the principal agricultural product. Coffee, tobacco, and pine apples are produced in sizeable amounts, and a program of crop diversification

is increasing the output of fruits, fresh vegetables, and cattle. But much of the food and other requirements of the population must be imported. This com merce moves chiefly through San Juan Harbor, which is a port of call for some thirty steamship lines handling traffic between Puerto Rico and the mainland. South America and Europe.

Commercial aviation is growing rapidly and centers around the Capita! of Puerto Rico. The adjacent International Airport accommodates the largest planes now in service. Air traffic in 1958 exceeded 1,000,000 persons. Because of its location and modern facilities, the new airport is important for traffic

between North America and the eastern portion of South America, and between Europe and much of Latin America.

Industrial growth has been stimulated markedly by the long-range develop ment program of the Commonwealth Government, and the Capital of Puerto Rico has shared in the advance. Special tax advantages and the availability of an abundant labor force are elements of this program. On July 1. 1958, there were 521 industrial establishments in the Capital, manufacturing over 100 different products.

Tourists provide additional revenue in important amounts. Luxury hotels have been built and others are under construction to provide accommodations

for the rising tourist trade. Tourist expenditures in 1957-58 were estimated at $31.9 million.

While the Capital of Puerto Rico contains only about 1 8 per cent of Puerto Rico's population, as the dominant, commercial, industrial and financial cen ter it accounts for about 46 per cent of the total property tax valuation.

North Expressway,

one of the new arterial highways.

interrelations of Government,

Economics and Finance Puerto Rico came under United States sovereignty by the Treaty of Paris on

December 10, 1898. The Congress of the United States provided for a civil rule of the Island in 1900. The original act was superseded to a large extent in

1917 by the Organic Act of Puerto Rico, which granted United States citizen ship to Puerto Ricans. The judicial system of Puerto Rico is similar to and linked with the United States courts, with ultimate appeal available to the

Supreme Court of the United States. The currency and postal systems are the same as in the States.

Until 1949, the Governor of Puerto Rico had been appointed by the Presi dent of the United States. Selection of a Governor by popular vote superseded

this arrangement and on January 2, 1949, the first inauguration of an elective Governor took place for a four-year term. The Legislature is elected every four years and is bicameral. The Commonwealth Government has its own tax system, with revenues derived from income, excise and license imposts and various other sources.

At the request of the people of Puerto Rico, the 81st Congress enacted Public Law 600, approved July 3, 1950. The law became effective upon its acceptance by the voters of Puerto Rico. It provides that those sections of the Organic Act which define the political, economic and fiscal relationships between Puerto Rico and the United States shall remain in full force and shall be hereafter known as the Puerto Rican Federal Relations Act. It also author

ized the people of Puerto Rico to draft and approve their own constitution.

The Constitution was drafted by a freely elected constitutional convention and

was overwhelmingly approved by the voters in a special referendum on March 3, 1952. Congress approved a joint resolution adopting the Constitution, which received the President's signature on July 3, 1952, and became effective upon

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

The new Constitution does not in any way alter those provisions of the

Organic Act which deal with the issuance of governmental obligations, includ ing provisions imposing limitations on the amount of public indebtedness that may be incurred by Puerto Rico, its municipalities and other political sub divisions, which continue in full effect as part of the Puerto Rican Federal

4

Aerial view of La Concha Hoiel. uv,'.Uh

ofliini

A supermarket on the outskirts of the Capital of Puerto Rico.

One of the new highway projects of the Department of Public Works.

F W. Woolworih Company store in the Rio Piedras section.

Relations Act. The security and integrity of these obligations and their exemp tion from federal, state and local taxes are unchanged.

In 1958 the Legislature passed a Joint Resolution petitioning Congress to remove from the Federal Relations Act the limitations upon the debt-incurring

capacity of the Commonwealth and its municipalities, to become effective only Upon amendment to the Con.stitution of the Commonwealth, providing for satisfactory debt limitations, to be submitted to general referendum which the Commonwealtli plans to hold in I960.

It is proposed that such limitations shall provide for retention of the present 10% of assessed valuation limit for general purpose tax borrowing, but also

will provide an additional limit for borrowing for educational or for road, street or highway purposes of not more than 10%. Puerto Rico prefers to do future borrowing in this manner within the Commonwealth name to provide

for needed school and highway facilities, rather than to create special over lapping districts or authorities.

It is also proposed that the limitation on borrowing by municipalities shall be between 5% and 10% of assessed valuation, the exact percentage to be determined by Legislative action.

Puerto Rico is divided into 75 municipalities and the Capital of Puerto Rico

(legal designation for the City of San Juan). There are three basic differences

between municipal government in Puerto Rico and in the continental United States:

1. There are no overlapping local units of government. Municipalities may be rural or urban, or a combination of both. No other units of government

with the power to levy property taxes exist excepting the Commonwealth Government. Consequently, there is no overlapping in taxation, expenditures, or authority.

2. The Commonwealth Government to a very substantial extent supervises

municipal fiscal affairs and collects most of the taxes levied by the municipali ties. Revenues and expenditures are under strict control. Municipal debt must

be approved by the Commonwealth authorities.

3. The Commonwealth Government assumes responsibilities for many

functions usually performed by local governments on the mainland. These include police and fire protection, public schools, and public welfare. The main responsibilities of municipalities are local street construction and mainte nance, garbage and waste disposal, and municipal improvements.

The Puerto Rico Water Resources Authority provides electric service, the

Aqueduct and Sewer Authority provides water and sewage facilities, and the Ports Authority is responsible for harbors and airports throughout the Com monwealth.

Debt Safeguards Under the Federal Relations Act. the debt which the Commonwealth Govern

ment may incur is limited to 10 per cent of assessed valuation of taxable property, equivalent to $159,109,491 based upon the present valuation of $1,591,094,910. The outstanding gross debt of the Commonwealth Govern ment on March 31. 1959 was $ 105.332,000, and the net debt was $86,050,000

or 5.4 per cent of valuation. Per capita debt is only $37.14.

The debt limit of San Juan is set by law at 10 per cent of assessed valuation.

The bonded debt of the Capital of Puerto Rico is moderate. Gross debt,

including a new issue in the amount of $5,000,000, will be $16,864,000, and

Trailer van shipping at the Port of San Juan.

International Airport, adjacent to San Juan.

the net ^bt wj^ll^be $14,659,843 or only 1.97% of the assessed valuation, equal to'^Se69 per capita. The City has no overlapping debt other than that of the Commonwealth Government.

Unused debt margin is $63,266,915. Plans for improvements in the coming six years envision further bond issues of $27,100.000. During the same period, outstanding issues will be retired in the amount of $6,506,000, indicating a net increase in debt of about one-third the presently available margin.

The Government Development Bank for Puerto Rico, the Secretary of Justice, the Secretary of the Treasury, and certain other officials report to the Governor on the propriety of the incurrence of all municipal debt, and no debt may be contracted by a municipality until the ordinance authorizing it has been approved by the Governor of Puerto Rico.

The record of San Juan is clear of default or delinquency in the payment

of principal or interest due on any obligations, both direct and indirect. There has never been any forced or "managed" refunding of maturing bonds to avoid default. A similar debt record exists for the central government and all munici

palities and instrumentalities of Puerto Rico.

COMMONWEALTH OF PUERTO RICO

GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO pMENT

FISCAL. AGENT OF THE

37 WAUL STREET NEW YORK 5. N. Y.

COMMONWEALTH OF PUERTO RICO

SAN JUAN, PUERTO RICO

ERRATUM

This is with reference to the Special Report on San Juan, Capital of Puerto Rico, sent to you recently.

On the inside back cover, in the table on Trend of Bonded Indebtedness, a footnote should have been appended after gross Debt of $13,264,000 and after Net Debt of $11,059>843, as of March 31,1959,reading as follows:

"Including Bond Anticipation Notes in the amount of $1,400,000

which will be refunded from the proceeds of the forthcoming $5,000,000 bond issue."

On page 8, please change the figure of per capita net debt on line two to read $3X24.

It will be appreciated if this information is included in the booklet.

A-*-'

International Airport, adjacent to San Juan.

the net ^bt w^ll^be $14,659,843 or only 1.97% of the assessed valuation, equal to 5=59 per capita. The City has no overlapping debt other than that of the Commonwealth Government.

Unused debt margin is $63,266,915. Plans for improvements in the coming six years envision further bond issues of $27,100,000. During the same period, outstanding issues will be retired in the amount of $6,506,000, indicating a net increase in debt of about one-third the presently available margin.

The Government Development Bank for Puerto Rico, the Secretary of Justice, the Secretary of the Treasury, and certain other officials report to the Governor on the propriety of the incurrence of all municipal debt, and no debt may be contracted by a municipality until the ordinance authorizing it has been approved by the Governor of Puerto Rico.

The record of San Juan is clear of default or delinquency in the payment

of principal or interest due on any obligations, both direct and indirect. There has never been any forced or "managed" refunding of maturing bonds to avoid default. A similar debt record exists for the central government and all munici

palities and instrumentalities of Puerto Rico.

58-59

* As a result of an Island-wide reassessment program by the Secretary of the Treasury, real property, beginning in 1951-52, was assessed at approximately 70% of appraised values.

** Further reassessment in 1958-59 results in real property now being assessed at approximately 90% of 1957 market value.

t Net debt, 1949-50 to 1958-59.

See inside cover for financial tables on Property Tax Collections,

Operating Receipts and Expenditures, and Trend of Bonded Indebtedness.

SAN JUAN—Capital of Puerto Rico Property Tax Collections FISCAL

ASSESSED

TAX RATE

TOTAL

YEAR

VALUATION

PER $1,000

LEVY

CURRENT YEAR

, $129,319,280

$29.70

140,925,060

29.70

163,146,880

33.10 33.10 21.00 21.00

: 3,667,853 4,238,823 5,379,068

$2,994,310 2,992,626 4,048,808 4,441,187 316,121

1947-48 1948-49 1949-50

. . . . . .

1950-51

.

222,396,140 298,476,900

.

1951-52* . , 1952-53* . .

1953-54 . ,

.

334,521,000

.

1954-55 1955-56 1956-57 1957-58

. .

358,617,020 391,729,690 418,830,660 451,645,450

.

521,067,120

23.90 25.10 25.10 25.10

.

720,590,060

21.30

1959-60t - . .

743,267,580

21.30

. . . . . . . .

1958-59**

21.00

5,528,338 6,937,280 6,871,070

644,802

7,479,891 9,175,927 10,292,682

4,925,340 6,317,998 6,941,097

11,094,552 11,838,941

6,923,244

15,216,196 15,694,193

3,936,950

7,053,283

-Current tax collections in 1951-52 and 1952-53 were not representative as a consequence of the reassessment program begun in 1949. During those years the issuance of tax bills was delayed, and Legislative action granted nonpenalty periods after tax due dates to provide time for hearing of protests against certain individual reassessments.

^crease in Assessed Valuation caused mostly by a property revaluation program of the Secretary of the

Treasury. Current year tax collection subsequently affected because tax receipts were issued late in December,

Operating Receipts and Expenditures FISCAL

CASH BALANCE

TOTAL

TOTAL

CASH BALANCE

YEAR

BEGINNING OF YEAR

RECEIPTS

EXPENDITURES

AT YEAR END

$ 6,189,069

$2,227,435

7,966,155 9,425,452 12,212,559 11,723,411

1,732,851 8,776,424

1950-51

,

. -

1951-52

.

.

.

2,227,435

1952-53

.

. .

1,732,851

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

. . . .

. .

8,776,424

. .

7,426,424

$ 6,923,011 7,471,571 16,469,025 10,862,559 10,618,899

.

6,321,912 5,973,789 6,604,145

. .

5,440,694

11,311,974 15,327,373 13,676,348

11,660,097

1957-58

. . . . . .

11,510,498

11,510,498

1958-59*

$1,493,493

7,426,424 6,321,912 5,973,789 6,604,145 5,440,694

14,697,017 14,839,799

—

* Estimate.

Trend of Bonded Indebtedness GROSS BONDED DEBT PER CENT OF

GROSS BONDED

AS OF

.JULY 1 1940 1945 1950 1951 1952 1953

1954 1955 1956 1957 1958

DEBT

. .

,

. . $ 6,852,532 4,952,400

3,443,000 4,274,000 5,193,000

10,761,000 9,988,000 9,253,000

10.766,000 12,915,000

11,884,000

^ 1959 (March 31) ^^13,264,000

REDEMPTION FUNDS

NET DEBT AS

ASSESSED

AS OF JULY 1

OF JULY I

VALUATION

PER CAPITA

Not Available Not Available

Not Available Not Available

$28.80

$1,170,448 1,553,863

$ 2,272,552 2,720,137

5.0 4.6 2.1 1.2

2,142,062

3,050,938 8,803,404 7,161,299 6,786,828 8,237,151 10,453,761 9,364,160 * 11,059,843

1,957,596

2,826,701 2,466,172 2,528,849 2,461,239

2,519,840 2,204,157

1.6 3.0

20.80 9.30 11.10 14.10

29.25 27.15

2.5 2.2

25.08

2.4 2.5 1.6 1.8

29.18 35.00 28.57 31.88

72. ^

'm

COLLECTIONS UNCOLLECTED OF

PREVIOUS

CURRENT COLLECTIONS

TOTAL COLLECTIONS

RESPECTIVE LEVIES

PER CENT OF

PER CENT OF

YEARS

TOTAL

ON 6-30-58

CURRENT LEVY

CURRENT LEVY

$ 631,301 503,335

$ 3,625,611

$ 136,980 165,287

1,151,291

5,200,099 5,340,448 789,920

179,198

81.6 70.6 75.3

98.8

3,495,961

80.3

96.6 11.4 84.5 142.7 94.5 92.3 85.7 90.8

899,261 473,799

5,164,531 5,745,105 2,357,789

5,809,333 10,670,445

2,562,155

2,589,838

9,503,252 9,513,082

242,014 642,796 564,356 602,361 714,735 1,153,146 2,016,669

3,696,309

10,749,592

4,785,657

8,675,787

3,580,462

7,517,412$

82.5

96.7

4.6 9.4 65.8 68.9 67.4 62.4 59.6

—

—

—

and Legislative action granted nonpenalty periods after tax due dates to provide lime for hearing of protests against certain individual reassessments.

t Assessed valuations and levy for 1959-60 are official estimates.

? Tax collection figures for 1958-59 fiscal year are as of March 31, 1959, compared with June 30 for previous years.

Bond Maturities Next Five Years I960

1961

1962

1963

1964

Outstanding

March 31, 1959 $1,072,000 $1,133,000 $1,112,000 $1,067,000 $1,058,000 New Issue Total

150,000

150,000

150,000

150,000

200,000

$1,222,000 $1,283,000 $1,262,000 $1,217,000 $1,258,000

Breakdown of Property Tax Rate SAN JUAN

rIo piedras

Municipal

General Funds

$ .52

$ .52

.50

.50

Loans (Capital)

24

.24

Loans (San Juan)

04

Sanitation Purposes

Total Municipal Commonwealth Total

.

1.30

1.26

83

.83

$2.13

$2.09

o^AENT q

ASTRA