APPENDIX V. REPORT OF THE TREASURER. THE GOVERNOR OF PORTO RICO, San Juan, Porto Rico. DEPARTMENT OF FINANCE, OFFICE OF THE TREASURER, SIR: In compliance with your request of July 12, 1917, I have the honor to submit the following report for the fiscal year ended June 30, 1917: The outstanding feature of the work of the department of finance during the fiscal year just past has been the revision of the assessment of the real and personal property of the island subject to the property tax. A brief mention of the preliminary work of organization for this task was made in the report of the treasurer for the fiscal year 1915-16, as on the date of that report the newly augmented board of review and equalization had already met and formulated rules for the guidance of the assessors in carrying out this important duty, but the innumerable details of organization and of execution were yet to be considered and satisfactorily settled. When it is realized that the completed returns show a total number of 137,900 separate assessments, the great majority of which were of properties located in the interior of the island and remote from the main traveled roads and many of them on the precipitous mountain sides, where so many of the coffee properties are found, some idea can be gained of the magnitude of the work set out for performance by the department at the commencement of the fiscal year. As outlined in the preceding annual report, the corps of regular assessors was made the nucleus of the new and greatly increased force which was found necessary in order to complete the work thoroughly and within the time limit set of May 1, 1917, the date on which the completed assessments were to be placed in the hands of the board of review and equalization. Each of the experienced assessors was placed in charge of a squad made up of from six to eight of the newly appointed assessors and the groups so formed were arranged in pairs, so that work was started simultaneously in three widely separate parts of the island, each group working along the coast municipalities in the opposite direction from its companion group. In this way the comparatively level and accessible sugar lands of the coast, where the greatest increases in value had taken place since the last general revision of five or six years before, were given first attention, and this policy served in great measure to allay the apprehension, in so many cases unfounded, that the valuations of property were to be doubled or trebled, since the increases made in the valuations of the sugar properties, which were universally recognized as having increased tremendously in value, were generally admitted to be conservative and just. As has just been stated, the last general revision of the taxable property of the island was made during the period extending over the three years from the middle of 1909 until well into 1912 and resulted in an increase of approximately $45,000,000. Since that date the sugar industry has expanded enormously, increasing its production from a little over three hundred and fifty thousand tons to more than one-half million tons, and extending the cultivation of cane over an acreage more than 50 per cent greater than at the commencement of this period. It is interesting to note, by reference to the report of the treasurer for the fiscal year ended June 30, 1911, that the average value of $94.86 per acre of sugar land for a total area of 183,223 acres amounted to a total of $17,380,000, while during the same year the value of the product exported from Porto Rico reached the total of $24,479,000. It is true that the valuation of the land actually planted in cane does not reflect the true total of the investment in the sugar industry, but it affords at least a certain standard of comparison. In the report for the fiscal year 1915-16, made just one year ago, the assessed valuation of lands planted to cane had risen to $21,840,000 on an acreage which had increased in approximately the same proportion, the average value per acre throughout the whole island being $107.33, while the value of the product exported had increased to $45,809,000, or very nearly double the amount of five years before. That such a stupendous increase in the value of the crop should result in a proportionate increase in the value of the soil which produced it was recognized by the sugar men themselves, but it was difficult for many of them to grasp the real increase in values which changed conditions had brought about. At the preliminary session of the board of review and equalization, at which representatives of the sugar industry were present by invitation, one prominent sugar grower insisted that no cane land in the northeastern portion of the island was worth more than $75 per acre, but the general consensus of opinion of growers from that section was that an assessment of $150 per acre would not be inacceptable. In the more favored districts from Vega Alta to Arecibo it was generally admitted that a considerably higher valuation might be placed, while the land included within the governmental irrigation district, on the south coast, with its assurance of sufficient water throughout the year, and most especially at those times when most urgently required, was conceded by everyone to be the most valuable of all. In practice it has been found that the extreme range of values for cane land in Fajardo, with very rare if any exceptions, reached $200 per acre. The highest priced lands in the Vega Alta-Arecibo district are generally assessed at $300 per acre, and the south coast irrigation district of Arroyo, Guayama, Salinas, and Santa Isabel showed some assessments of as high as $350 and $400 per acre. It must be understood that the figures given are the maximum values assessed and therefore apply only to the exceptionally valuable and productive lands of the sections named, and comprise only a minor portion of the total acreage, other lands of the same section of less productive character or having less favorable situation as regards transportation, water rights, and the numberless other conditions which go to make up the exceptionally desirable cane land, appearing at considerably lower amounts. The mill properties were undoubtedly of a great deal more value to their owners on the 15th day of January, 1917, the assessment day on which the value of property is taken for the ensuing fiscal year, than they were on the corresponding date five years before, from which most if not all the assessments of the 47 or 48 principal mills of the island had been taken, considered either from the standpoint of replacement value, capitalization on the basis of net profits, or the actual market value for which such a property of this class might be bought or sold. Under the terms of the Porto Rican law, the last is the real test of assessment value, and is the test which the assessor was instructed to apply in preference to all others, yet, for purposes of corroboration and as means of checking the accuracy of the assessment, both of the other tests have been considered as of some value. On the basis of replacement value, a superficial examination of the trade reports will demonstrate that the cost of equipment of this sort has increased to a tremendous extent within the last year or two, perhaps more during the period comprised in the fiscal year 1916-17 than during the preceding 23 months of the war, while the freight rates on imports of this class into Porto Rico have increased more than 50 per cent over those prevailing prior to the outbreak of the European war. Turning to a consideration of the second standard of estimated value, on the basis of capitalization of the net profits, it is estimated that the profits earned by the 39 principal mills grinding during the season of 1916-17 amounted to $12,600,000, while the total valuation for taxation purposes prior to the revision and reassessment, and as carried on the rolls in many cases without change for four or five years, of mills, machinery, buildings and improvements, railways lines and rolling stock, live stock, and in general all other property dedicated to the sugar business other than lands, and which included a number of other plants beside the 39 entering into the above calculation, was less than $25,000,000. As has been shown, the corresponding valuation of the land actually planted to cane was approximately $22,000,000, while if an allowance of approximately one-half of the land listed as pasture land is made as properly corresponding to the sugar industry on account of the additional acreage which it is well known is required by all large mills, the total values appearing in the previous assessment as pertaining to the sugar business will reach approximately $60,000,000. The net profits as given above, of course, apply only to the manufacturing earnings as distinguished from the agricultural profits, except on lands owned by the corporation owning and operating the mill. Each of the larger mills grinds for most of the growers in the surrounding section, paying for the cane delivered at the mill either on the basis of a fixed price per ton or at the rate of a certain percentage of sugar on the gross weight of the cane, and these profits of the independent grower are therefore not included in the calculation. Of the figures shown, therefore, it would appear that the mills necessarily represented considerably less than the total of the estimated valuation of $60,000,000, and a reference to the assessment schedules for 1915-16 gives the mills listed as assessed together with all other property belonging to the corporations or companies operating them as owners, in the gross amount of $28,650,804, of which the net profits represent therefore approximately 45 per cent. A comparison of the assessments for the new year of the sugar mills and machinery, as distinguished from the other real or personal property of the centrals, shows that the maximum increase has been but 25 per cent over the previous valuations, and the increases on the mill properties have been generally accepted by the owners as reasonable and just. After the completion of the assessment of the sugar properties lying along the coast, each of the assessing parties turned inland and directed its work toward a common meeting point in the center of the island. The character of the work required of the assessors, which had heretofore been uniform, now changed materially on account of the different class of products in the several sections of the island. The so-called military road extending from San Juan to Ponce, thus dividing the island from north to south in a diagonal line, seems to mark the easternmost limit of the coffee region, as very little or no coffee planting is found except on the west side of the road, commencing with Aguas Buenas and Cidra and extending through the rich districts of Ciales, Barros, and Juana Diaz, until the heart of the coffee country is reached in the mountainous region comprising the municipal districts of Utuado, Adjuntas, Yauco, Lares, Las Marias, and Maricao. On the other hand, the principal tobacco section lies east of the Arecibo-Ponce Road, which traverses the island from north to south, cutting off the corresponding western third of its area, and centers in the municipal districts of Aibonito, Cayey, Caguas, Comerio, and Gurabo. A very thorough consideration of the coffee situation had been made by the board of review and equalization during its early sessions, and it was particularly fortunate that the board numbered among its members some of the most prominent coffee growers of the island. Mr. Pablo Vilella Pol, of Lares, has devoted a lifetime to the coffee business and understands thoroughly the needs of the planter and the presentday value of his properties, and Mr. Carlos Toro, general manager of the Jayuya Development Co., is in active charge of one of the most successful plantations on the island. A clear understanding of the prevailing economic conditions affecting the value of the properties was given the assessors, and the large percentage of assessments which were accepted as just and equitable by the property owners, waiving their right of appeal to the board, seems to indicate that the work of the assessor was well and faithfully done. During the progress of the coffee assessment, the National Association of Coffee Growers, a local organization of which Mr. Xavier Mariani, of Ponce, is the head, appointed a committee to wait on the treasurer for the purpose of discussing with him the assessments which were then being made of the properties of some of the members of the association. It was urged that inasmuch as many of the smaller growers were unfamiliar with the assessment procedure, some of them might inadvertently fail to protect their rights or through error consent to and sign their acceptance of assessments with which they might not be in accord. It was proposed that certain representative members of the association be designated in each locality for the purpose of counseling and assisting the smaller property owners in their dealings with the assessors. This proposal was very gladly accepted, as it promised to aid very materially in avoiding errors in the assessment and remove in great measure some of misapprehension which undoubtedly existed as to the real purpose of the department in carrying out the assessment work. As far as information is available on this point, the plan was very successful wherever put into operation and undoubtedly relieved the board of review and equalization of a great deal of extra work in considering appeals which might otherwise have been made. In view of the physical difficulties incident to a personal inspection of each of the coffee properties assessed, which was insisted upon in every case, the result of the work performed must on the whole be considered as exceptionally satisfactory. The general range of coffee-land values has not been materially increased, and due to the unfortunate market conditions prevailing at the present time on account of the Furopean war most if not all of the properties are listed considerably below what would be their true value in normal times. The closing of the German and Austrian markets together with the withdrawal of the German ships from their customary schedules at the commencement of the war was a very serious setback to the industry, but later, when the scarcity of shipping reduced and finally stopped almost entirely the regular trips of the French boats and intermittent visits of other foreign vessels, the European markets were almost entirely closed to the Porto Rican crop, and the only means of transportation remaining was the Spanish liners. These vessels not only carried coffee to Spanish ports but also took large quantities to Cuba, which soon assumed the position of Porto Rico's best customer. The uncertainty as to the continuance of this service and the unsettled economic conditions in both Spain and Cuba makes the outlook for the coffee grower far from rosy. The valuations of coffee properties have, therefore, been fixed with a full knowledge of these obstacles, and difficulties with which the industry has to contend, and the maximum of $150 per acre for the best class of coffee land in full production, which has been rarely if ever exceeded, is generally admitted to be conservative and fair. Land of diminished production, either due to the destruction of the shade trees which are such an essential part of a well-developed plantation or to necessary replacement of some of the coffee trees themselves, has generally been assessed at $100 per acre, while a great deal of inferior coffee land in the most remote districts where transportation costs are excessive, has been accepted at a valuation of from $60 to $75 per acre and in many cases as low as $50 per acre. The tobacco growers enjoyed one of the most prosperous years in the history of the industry, the finer qualities of leaf having sold on an average for as much as 80 cents per pound. The poorer grades and culls, commonly known in Porto Rico as "boliche," more than doubled in value, and this, coupled with the greatly increased acreage devoted to tobacco planting, will make the total value of the last crop much larger than ever before in the history of Porto Rico. This buoyant condition was naturally reflected to some extent in the assessments of lands devoted to tobacco cultivation, yet it is interesting to note that few if any of the tobacco growers appealed to the board of review and equalization for reduction in their assessments. The fruit interests, however, were not so well favored, as a great many of the unfortunate conditions prevailing last year and mentioned in the last annual report continued throughout the present year, while the transportation problem became much more acute on account of the scarcity of shipping. A delegation of fruit growers appeared before the board during the latter part of its sessions, and presented a careful analysis of the cost of production of the various classes of citrus fruits and pineapples exported from Porto Rico, together with an estimate of the profits under present conditions and the probable situation of the industry under the changed conditions which increased transportation costs threaten to bring about, all of which tended to demonstrate that the generally accepted range of values for fruit properties was greatly exaggerated. Although this matter was taken up by the fruit growers not only after the assessments had been made, but so late in the sessions of the board that many of the properties had already been reviewed, due consideration was given to the statements submitted and an earnest effort was made to equalize as far as possible the valuations placed on fruit properties. The work of the board of review and equalization has therefore been more arduous and more important during the year just past than ever before in its history. As noted in the report for last year, a change in the law increased the number of members from five to nine, by the addition of two members from the house of delegates and two members from the executive council. Messrs. Giorgetti and Rossy were selected from the house membership of the economy commission, while Messrs. Barbosa and Barceló were the representatives from the council. These gentlemen, together with the three ex officio members, viz, the treasurer, who is, according to the terms of the statute, ex officio the chairman of the board; the commissioner of the interior, Hon. Manuel V. Domenech; and the executive secretary, Hon. Ramón Siaca Pacheco, who under the terms of the new organic act assumed the place formerly occupied by the secretary of Porto Rico; and the two citizen members provided by the original law, Messrs. Pablo Vilella Pol and Carlos Toro, both of whom were reappointed by the governor for the new term, comprised the membership of the board for the review of the assessments made during the course of the year. The board met early in the month of May and continued in almost uninterrupted sessions for over eight weeks, during which time 3,733 appeals were heard and decided. Under the terms of the statute the property owner is required to fill out a schedule, under oath, in which he states the valuation which he places upon his property. This is to be returned to the assessor properly executed within 10 days after its receipt, under penalty of law, upon which the assessor is required to examine the property, and if the valuation placed upon it by the owner is found to be in accordance with the assessor's judgment, it is marked "Accepted" and forwarded to the central office. Otherwise the valuation fixed by the assessor is placed in the adjoining column and a notice in duplicate is given the property owner, in which the valuation fixed by him, or, in those cases where the owner could not be found, the valuation of the preceding assessment, is noted, and the valuation, as fixed by the assessor, is given in a parallel column. Together with this notice of changed assessment a blank form for making an appeal to the board of review and equalization is supplied to the property owner, so that every facility is afforded him for appealing from the assessor's valuation. From the 137,900 separate assessments made during the year, only 3,733 appeals were taken to the board, or approximately 2 per cent of the total. Of the appeals filed on the blanks supplied by the assessors upon making any change in the valuations fixed by the property owner, only 298 were represented either by the owner or some person delegated by him when the cases were called by the board. It would thus appear that over 90 per cent of the appeals were made through the mute suggestion of the blank form which made appeal so easy, and were not considered of sufficient importance to warrant taking the time to appear before the board. Nevertheless the |