Mr. ELSTON. Are they recorded? Mr. WINFREY. They are not required to be recorded under Tennessee law. Mr. ELSTON. I want to find out if they are recorded or not. Mr. WINFREY. I do not know of any that have been recorded to date. Mr. ELSTON. So you are in a different position than the average lessor and lessee. Lessee's long-term leases are generally recorded at the courthouse, so that anybody can tell what the terms and the conditions of the lease are. Mr. KILDAY. That is not true in my State. Mr. ELSTON. It is true in some States. Mr. HOLIFIELD. That is protection, I think, for the person making the lease, rather than the owner of the building, is it not? Mr. ELSTON. Where the Government is a party to a lease, it seems to me that any taxpayer has the right to know what the terms and conditions of the lease may be. Mr. WILLIAMS. I have had some experience in Government dealing. I was in the Army for a long time, about 13 years, doing contracting work on construction work, and for a while I was assigned to the Quartermaster Corps, and of course we purchased staples and items where you could put out specifications, get in a lot of bids, abstract them, have a public opening and number your bids, have the interested bidders who wanted to know the terms of the bids present at the opening, and the abstract was available if people wanted to see it, but only with the interested bidders did we discuss any of the bids. That was the general policy and still is through the Government, that you discussed with the interested bidders these contracts, but you do not discuss what the price of the bid was with any taxpayer that might want to drop in. You might have a great deal of confusion if you did so. That is not saying that the taxpayer or this Congress does not have the right to check into this, but it would create a great deal of confusion if all of our Government officers were subject to going over with any taxpayer that wanted to drop in at any bid that he wanted to look at. Mr. HOLIFIELD. You do not have every Government department operating cities like the Atomic Energy Commission. I do not know any other that operates a city, and performs all of the functions of a city. Mr. WILLIAMS. If I had my way, I would not be connected with the operation of a city, either. Mr. HOLIFIELD. If I had my way, they would not be operating a city either. Mr. WILLIAMS. The operation of this city, I would like to make clear, is one of the requirements in order to get our job done. If we can figure out any way to meet our objective, and you gentlemen are thoroughly familiar with the importance of getting this thing done, we will certainly get out of the town operation. We have devoted a great deal of study and a great deal of time to this problem. I have devoted more of my time to this particular study and to this particular problem of these town operations (I have both Hanford and Oak Ridge), trying to figure some way to get out of as much of the requirement on my time as possible. Mr. HOLIFIELD. Do you not think you would be better off out of it, that private industry could go in and operate the stores better than this way? Mr. WILLIAMS. If we could meet our objective of supplying homes and the accommodations for the people who are required to operate these very intricate plants that we have, and the type of people we have to have, if we could do that, I certainly would not go through this problem time after time in arguing about town operation. Mr. HOLIFIELD. Let me ask you a question right there. Have you in your books some set-up that you can tell us whether or not the Government makes a profit on this lease, or sustains a loss? Do you have them set up that way? I Mr. WILLIAMS. On any particular lease I feel that they can. would like for the manager to speak to that, because he has that. Mr. Cook. The contracts are set up so that we can determine that. Mr. HOLIFIELD. Does the Government make a profit on this lease or sustain a loss? Mr. Cook. I would have to check that. I am not familiar with that detail. Mr. HOLIFIELD. How about the over-all operation of Oak Ridge? Mr. Cook. The over-all operation? Mr. WILLIAMS. Including the schools. Mr. Cook. Including our community services, schools, bus, our deficit for our next fiscal year is about 31⁄2 million dollars. Mr. ELSTON. Three and one-half million? Mr. WINFREY. I would say that the commercial operations, if they could be taken separately, would show a handsome profit, if they could be taken separately, I repeat, and also if you could apply a normal tax rate against those properties, as against the cost and the rental return, they would show a very excellent profit. Mr. WILLIAMS. This is shown in our budget that we submit; we show the revenue. Mr. HOLIFIELD. We will have to move along. I would like to return to my specific question, please, if you will answer it, and that is, why the occupants of this store, the Taylor people, having an equity in certain vested interests in their operation there, and quite an investment, why they were not immediately given the information as to why they were not the successful bidder. Mr. WINFREY. They were given that information, with the exception that when Mr. Cook talked to Mr. Roth, we did not quote the percentage given. Then we obtained permission to do that, and Mr. Cook informed him then that we would review with him the proposals received and the basis of the award to Loveman's. The point I wanted to bring out, if I may, sir, at this time, is quite a lengthy, rather vehement statement made by Mr. Levitt as to his contact with Mr. Moore of Loveman's, and to the fact that I had begged him to take the operation and I believe further stated that he could have it on his own terms. We have in the file here from Loveman's a letter addressed to the Roane-Anderson, attention Mr. Winfrey: It has come to my attention that one Mr. Stanley Levitt has gone out of his way to prevaricate and entirely distort a conversation he had in our offices the latter part of December. Mr. Levitt walked into our office unsolicited and told us that he understood we were being favorably considered and being granted the privilege of leasing the store now being operated by Taylor's in Oak Ridge at the expiration of their lease. This was the first news that we had had to this effect. And it is my understanding that he stated this week that when he was here, we told him that we definitely had the lease, which of course was not true. In fact, we have in our files a letter from Mr. Levitt dated January 11 congratulating us on being awarded the lease and asking for permission to sublease the book department in the Taylor store. We understood that Mr. Levitt also made other statements that were without any foundation, and which we do not even feel are worthy of refuting. We did say to Mr. Levitt that if we were awarded the contract that it was our intention to give to the people of Oak Ridge a first-class department store with charge accounts, delivery facilities, and many other services, to which we felt they were entitled, and which have not been made available to them in the past. We feel that you know also that we are not interested in any short-term gains, but want to become a part and grow with the community of Oak Ridge. We feel that our operation of this one store will justify an enlargement of our operation in the event of any new shopping centers being opened. We might add at this time that we are in possession of several hundred congratulatory letters, wires, and telephone calls, etc., welcoming us to Oak Ridge, and that we in turn are enthusiastically looking forward to becoming a part of the Oak Ridge community with a hope that it will result in a mutual benefit of all. With kindest personal regards, JAMES L. MOORE, Vice President. Mr. ELSTON. What is the date of that? Mr. WINFREY. January 22, 1950. Mr. ELSTON. Is that unsolicited? Mr. WINFREY. Unsolicited. It was in the newspaper as to the visit here. Mr. HOLIFIELD. Do either one of you gentlemen have any additional questions of this group? Mr. KILDAY. How many departments did Darling Stores operate in Taylor's? Mr. WINFREY. Only one. Mr. KILDAY. What was that? Mr. WINFREY. The ladies' ready-to-wear, I think, the ladies' and misses' ready-to-wear. Mr. KILDAY. The other departments were all leased? Mr. WINFREY. Yes. Mr. KILDAY. Were they leased to Tennessee people or New York people? Mr. WINFREY. Mostly to Tennessee people, I would say. They were small concessionaires to whom they gave space. Mr. HOLIFIELD. Their operation then is not that of a unified department store. Mr. WINFREY.. Not in any way; no, sir. Mr. HOLIFIELD. It was more of a subleasing arrangement with how many concessionaries? Mr. WINFREY. I think 14, sir. Mr. HOLIFIELD. Fourteen? Mr. WINFREY. It varied from time to time. They were constantly changing. Mr. KILDAY. How about Loveman's operation in Chattanooga? Is it essentially that? Mr. WINFREY. Essentially a wholly operated department store. The only thing I think they have under sublease at all, which is customary in most department stores, is the beauty shop, and I believe their shoe department is also subleased. I think that is true in the case of Miller's at Knoxville, and a customary practice. Mr. HOLIFIELD. One more question I wanted to ask before you leave the stand and that is, in regard to the proposition No. 2 of the Taylor people, with $44,000 minimum, 4 percent on the first $800,000 gross sales, 3 percent on the second $800,000, and 21⁄2 percent on the remainder; the testimony that was given us by Mr. Roth was that this was a better deal for the Government up to 14 million dollars in gross sales. Do you disagree with that, or agree with it? Mr. WINFREY. I disagree to this extent. There is nothing in there that states that there will be 14 million dollars of gross sales, and in our opinion the $44,000 Mr. HOLIFIELD. Wait a minute. There is nothing in Mr. Loveman's proposal that says that that guarantees that his sales will be a million and a quarter, either, is there? Mr. WINFREY. No, but I would say that the bulk of, the preponderance of the evidence is this, that Loveman's was doing $6,000,000 a year, and in no single store anywhere are they approaching that kind of volume. I would say that the store operated in Oak Ridge, so far as volume is concerned, in Taylor's of Darling Stores, is probably one of their largest outlets. Mr. Cook. The only proposal submitted by Taylor's that we considered competitive with the Loveman's proposal was their proposal No. 3. Mr. HOLIFIELD. Why did you eliminate the No. 2 which did have the highest minimum guaranty, and the highest, next to the highest range of percentages? Did you eliminate that because in your opinion the Taylor's proposal which enumerated the seven additional services did not apply to one and two; was that your thinking? Mr. Cook. No, sir. The way Taylor's proposal reads is part of the following program varying from the minimum in proposal 1 to the maximum in proposal 3, under which proposal we would give Oak Ridge, subject to the limitations imposed by the size of the community, a real community department store. We felt that the proposal No. 3 that offered those services was the only proposal that was responsive to the type of operation that we desired and competitive with the Loveman's proposal. Mr. HOLIFIELD. In other words, they said themselves that their maximum offer was in proposal No. 3. Mr. Cook. No, sir. Mr. HOLIFIELD. Did they not? Mr. Cook. No, sir. Mr. HOLIFIELD. That is the way I read that. Mr. Cook. They say the following program varying from the minimum in proposal No. 1 and the maximum in No. 3 is the seven items they have listed. Mr. HOLIFIELD. You considered that applies only to No. 3? Mr. Cook. No, sir. We consider that only in No. 3 will all of them apply to the extent that we will have a first-class department store, and a proposal which was competitive with proposal submitted by Loveman's. If we had been looking for the maximum guaranteed return, we would have accepted Wender's proposal that had the highest minimum guaranty and 6 percent of the gross. But we did not consider that the type of store that was proposed by Wender was a first-class department store. Mr. WINFREY. May I add that this was developed in the Federalcourt trial, that they brought as a witness Mr. James Lee Clark, who operates and is vice president of Miller's, Inc., doing an annual volume of ten to eleven million dollars, one of the outstanding stores in the South, and he testified that to the best of his knowledge he felt the store was capable of doing at least a minimum of a million and a half, and more, that their experience with that store had indicated that clearly to him, and that a minimum figure acceptable in the department-store trade was based on approximately $50 to $65 a square foot per annum of selling space. We felt and the Loveman's felt that they would do that kind of a volume without any question, or they would not have been interested in coming to Oak Ridge. They are doing $6,000,000 where they are. On the basis of square footage and return on that, on a percentage basis, the present operator is doing approximately $26 a square foot in his total operation. For that reason we felt that monetarywise the opportunity of return to the Government was greater by far in the Loveman's proposal and we had every reason to believe from past experience that the minimum suggested in Taylor's second proposal was also the maximum. Mr. HOLIFIELD. If there are no further questions at this time, I would like to place in the record a telegram from quite a number of business stores in Oak Ridge, approving the decision of the Atomic Energy Commission, and their agent in the selection of the Loveman's lease, and also one from Mr. Don J. McKay, publisher of the Oak Ridge newspaper, to the same effect. (The telegrams referred to are as follow:) Representative CHESTER HOLIFIELD, Chairman, Subcommittee of Joint Atomic Energy Commission, House Office Building, Washington, D. C.: As citizens and businessmen of Oak Ridge, we want to go on record as upholdang the decision of the Atomic Energy Commission and their agent in recently warding the local department-store bid. We feel that their decision was vitally mportant to the commercial life and well-being of our community. cessful bidder, we believe, will perform the function so necessary in the operation of the progressive department store. The suc Carl M. Harmon, Owner, Williams Drug Store; C. C. Brill, Manager, Hon. CHET HOLIFIELD, House Office Building: Appreciate your obligations to investigate recent Tayior-Loveman departmentstore deal. However, most emphatically feel agent acted in best interest of both Government and people in concluding with Loveman's. Taylor did not provide services required, did not have good will of people, had negative effect on retail business in Oak Ridge. Firmly feel Loveman's will do right job here for entire community. Their policies should result in greatly increased return to Government. DON J. MCKAY, Publisher, The Oak Ridger. |