Some of the services and facilities extended to this plant and the local problems created by the plant, both directly and indirectly, to mention only a few that are most obvious, are outlined below:

1. The city of Adrian furnished this United States Government plant:

A. City fire protection, including a recently purchased 75-foot aerial ladder truck with high-pressure and fog-type apparatus specially acquired for fighting industrial fires. The subject plant is over 65 feet high in some locations and is the highest industrial plant in Adrian. One roof fire in the past could not have been put out without far greater loss without this special equipment. The fire department makes a complete fire inspection of the plant twice each year.

B. Cooperation of all facilities of the city law-enforcement agencies and the city police department, including special police detail at an earlier date during labor strikes and a near riot, traffic regulation and control in the area, traffic signal maintenance and upkeep.

C. All city police cars, fire equipment, and many public-works vehicles are equipped with two-way radios for fast emergency service in time of need.

D. The public improvement department provides for street maintenance, street cleaning, snow removal, storm sewers, sanitary sewers, and sewage-disposal facilities.

E. City water, fire hydrants, adequate street lighting, and every other customary municipal service is provided for this plant.

F. All of the above facilities and services have been provided this Government-owned plant at cost.

2. There has been an influx of migrant skilled and unskilled labor with the consequent added problems and expense always created by an increased population. This has affected all areas of the city. The most recent population growth reported, based on the 1950 national census, is 29 percent-far above the average of other Michigan cities. 3. It naturally follows and it is a fact that there is a marked increase in school attendance, with resulting additional school expense, both capital and operating. Most of the workers brought in have been young and middle-aged families with children already of school age. The school situation has become so acute that last April the people voted a bond issue of $989,000 to expand the school system.

4. Sewage-disposal demands have become so great that the city is presently under a court order to construct and is in the process of building an additional sewage-disposal plant addition and trunkline sewers that will cost in excess of $900,000.

5. Water demands have also increased and in 1951 the city constructed additional water facilities amounting to $580,000. Presently the water department is in the process of adding a 1 million-gallon elevated storage tank 120 feet high at a cost of from $100,000 to $125,000, to assure an emergency supply and pressure in the event of a bad industrial-plant fire. There has also been recently ordered 2,700 feet of 12-inch cast-iron water main to further supplement the water service to this industrial area. A large part of this water supply is to provide adequate service and fire protection to this plant and the addition to this Government plant that is now under construction.

6. The above necessary sewage-plant addition, water-plant expansions, and school facilities made necessary are responsible for an outstanding bonded indebtedness of over $2,500,000.

7. When the Detroit air regional office letter dated January 30, 1953, was received notifying the city that taxes would not be paid for the first time (1952) since the plant was built, that is to say, the taxes would not be paid in 1952-the following had already taken place:

A. January 1, 1952, tax roll including assessed value of Bohn plant as used in former years, approved by Government officials and certified to the State for the fiscal year 1952-53.

B. Budget adopted in June of 1952 and tax rate for fiscal year established on basis of budgeted need (including services to Bohn plant) and total city assessed value (including Bohn plant assessed value).

C. A large proportion of taxes collected prior to deadline for delinquent penalty, August 10, 1952.

D. Substantial amounts expended or encumbered by firm commitments; said amounts approved by the adoption of the 1952-53 fiscal year, July 1 to June 30, the budget appropriations. Therefore, the refusal to pay taxes or in lieu of taxes on January 30, 1953, after 6 months of the fiscal year had passed, in an amount almost 9 percent of the total tax, and from the United States Government-a source for which no reserve for delinquent tax is set up-created chaos, confusion and hardship that is impossible to describe adequately. A problem that did and still does involve the payment of merchandise bills for goods bought in good faith, the meeting of city payrolls, and bonded-debt retirement.

In view of the heavy demands imposed upon this community by the location of this defense plant, we feel it is only fair that the plant should pay its fair share of the expenses of the community. We do not ask that the United States Government pay any premium because of its plant located in Adrian, but only that it pay in like proportion to other property owners located in Adrian.

If the city were to raise the same amount of money as was raised in former years when the United States Government paid in lieu of taxes on this plant, the taxpayers must pay a higher tax rate, a severe penalty, for the privilege of having the Government plant in this

area.

The payment of taxes ad valorem or in lieu thereof has been made regularly on this big war plant since it was built during World War II. This Government plant expects and needs all the municipal services-sewers, water, fire and police protection, etc.-as do other industries. The city of Adrian has geared its ability to furnish these services in accord with the need and demand of its requirements at a considerable expense annually and by long-term bonded obligations. Certainly the Government does not desire to enjoy all these advantages without paying its fair share of the tax required to furnish the services. We cannot believe the Government wishes to "sponge" off the taxpayers of Adrian. We cannot believe the Government wishes the taxpayers of Adrian to pay higher taxes than they ordinarily would, because of a defense activity that helps provide security for the entire Nation.

This plant turns out products for the benefit of all the people, surely, but not every community has a Government plant. A comparatively few communities are asked to shoulder the taxload that should be assumed by all the people.

The Governent has always before recognized a certain moral obligation to pay existing tax rates because the plant, while Government owned, is engaged in manufacturing and general business, and is in more or less competition with privately owned plants of similar nature. In the consideration of profits for stockholders of the Bohn Aluminum & Brass Corp. as revealed in the company's financial news report in the March 13, 1953, issue of the Wall Street Journal, said report reads in part as follows:

Earnings were also reduced by the expense entailed in building up supervisory staffs at the Greensburg, Ind., bearing plant and the Government-owned extrusion and forging mill at Adrian, Mich.

Still another fundamental issue is involved. The Bohn Government plant in Adrian and Government plants in other areas are in direct competition with private industry. Private industry, paying their full share of local taxes for the support of police and fire departments, water systems, disposal systems, schools, etc., produce the same products that come out of the Government plants.

All other factors being equal, the Government plants, by escaping taxes, could undersell private industry. With enough plants the Government, by compelling hundreds of local communities to shoulder all local tax responsibilities, could put private industry out of business. It presents a danger at the very roots of our free-enterprise system of democratic government that should be discouraged, that should be fought every inch of the way by every local community with a Government industrial plant within its borders.

H. R. 5605 has been drafted, introduced, referred to the Committee on Government Operations, and is now being examined by your subcommittee with the hope of many people to eliminate the above inequities to local municipalities and to curb the threat to the democratic system which we cherish.

We pray that you unanimously recommend legislation for adoption that will eliminate the inequalities described above and which will in this case provide for payments in lieu of taxes to the city of Adrian for the fiscal year 1952-53 and all future years.

This is respectfully submitted to your committee, Madam Chairman, by myself, Claude E. Porter, mayor of the city of Adrian.

Mrs. ST. GEORGE. Thank you very much, Mr. Mayor. I think this is a very fine and very comprehensive statement. I quite agree with you that it is a very severe hardship for any city suddenly to be faced with this kind of a tax raise, because that is exactly what it means, I

presume.

These taxes have to be made up somewhere and, therefore, they have to be made up by the local people, who are certainly carrying enough of a load already.

There is only one thing I do not quite understand in your situation. That is, when did this corporation suddenly, and for what reason, decide that they were no longer liable to pay taxes, after they had been doing so, I gather, for some little time?

Mayor PORTER. Madam Chairman, I would like to read to you from the letter of the Detroit Air Regional Office, Central Air Procurement District, West Warren Avenue and Lonyo Boulevard, Detroit, Mich. This letter is dated January 30, 1953, and reads as follows:

TREASURER, CITY OF ADRIAN,

City Hall Building, Adrian, Mich.

(Attention of Mrs. Hawkins.)

DEAR MRS. HAWKINS: This will confirm information which you are believed to possess as the result of conversations with Maj. Rex Hall, contracting officer, or from Bohn Aluminum & Brass Corp. personnel, with respect to taxes assessed against the property listed as 1450 East Beecher Street, Adrian, Mich.

You are notified hereby that information has been received from higher authority stating "that no State or local ad valorem taxes are properly assessable against the property and none should be paid."

The Bohn Aluminum & Brass Corp. has been notified with respect to the above. Very truly yours,

J. E. WILLIAMS,
Contracting Officer.

Mrs. ST. GEORGE. That seems to be a rather sudden and curt way of terminating such a situation.

Mayor PORTER. Madam Chairman, appreciate the position that we are in with one-half of our fiscal year already expired when this terse notification came that it would not be paid. This was the first official communication that the city had had that the taxes would not be paid. We had reason to believe that the delinquency in making the payment of taxes may have resulted as they did in an earlier year due to a shortage of funds, or otherwise, in the Government. Because there was a time when the tax, I am informed-and this is before my time as mayor-when the tax was paid delinquent some months to the city treasurer and the check was then returned stating that there was a penalty due because of delinquent taxes. Later a second check, including the penalty, was sent to the city treasurer.

As happens every place when a budget is made up in June, many things are included that have for a long time been postponed. You receive your operating taxes or a large share of them prior to the 10th of August, or prior to a month later. Therefore, all of this pent-up desire is expended for things needed that have been postponed. In this case, as it is in every year, this was true. We had received our major share of tax money and many things were purchased which would have been curtailed had we known that we were not going to receive taxes on the Bohn plant, because it was such a substantial sum. During the second half we had to continue to purchase necessary materials and to meet labor payrolls and carry on with essential services, which embarrassed the city financially in a terrific manner.

Mrs. ST. GEORGE. I can well see where it could wreck a city organization and administration.

Mr. Hillelson, have you any questions?

Mr. HILLELSON. No; I have no questions.

Mrs. ST. GEORGE. We thank you again, Mr. Porter, very much. Mr. Wallace, have you anything to add to the mayor's testimony?

STATEMENT OF ARCHIE 0. WALLACE, MADISON AGRICULTURAL SCHOOL, ADRIAN, MICH.

Mr. WALLACE. Madam Chairman and members of the committee, I apologize if what I am about to say would seem to be a repetition of some of the remarks that Mayor Porter has made. Through circumstances that we had no control over there was no opportunity for us to get together to present our statements.

36642-53- -3

The Madison Agricultural School is a consolidation of three rural school districts adjoining the city of Adrian, Mich. In 1940 about 100 students attended these 3 rural schools. Growth during the war years and inability of the districts to construct new buildings necessitated half-day sessions from 1941 to 1948. This fall the district anticipates 800 students and a survey made in conjunction with the Michigan State Department of Public Instruction indicates that if the past trends of growth continue the enrollment will exceed 1,600 students by 1960. Of that figure there are 1,100 students in the picture now, based on the 1953 school census.

May I interpose 1 statement as an explanation of that 1,100 as against the 800 figure there. There are students that are not of school age at the present time.

On the basis of these enrollment figures it is imperative that our present bonded indebtedness be reduced as fast as possible since the districts's capacity to meet its additional building needs by 1960 shows a deficit of more than $400,000, even when limits for bonded indebtedness set by the Michigan State Municipal Finance Commission have been reached.

The following information will show why the board of education of Madison Agricultural School desires legislation of the type embodied in H. R. 5605. On August 15, 1952-and this date was secured at the Federal Security Agency office through an attorney there who checks the ownership of Federal properties and their transfers-the Bohn aluminum plant No. 24, lying within the city of Adrian and Madison Township, was declared a Federal property, and as such not subject to tax. The valuation of this property in Madison Township and the Madison Agricultural School District was $1,261,600. The school district tax against this property was 16 mills; 8 mills for operational expenses and 8 mills for debt retirement.

Loss of taxes for the school year 1952-53 amount to $20,184. The debt-retirement income was reduced from the expected taxes by more than 26 percent. The operational income from local taxes was also reduced by more than 26 percent, and from all sources by about 8 percent. This would seem to be a low figure and not too serious. However, the budget had been closely figured even to the balance to be carried over to the next year for financing school operations until State revenues were available. A balance of 25 percent of the year's anticipated expenditures is highly desirable to maintain the district's credit, and at this time the district has on hand only about 14 percent of the funds for anticipated expenditures for the coming year.

As to the revenue lost from the debt retirement funds; Bohn aluminum plant No. 24 was a portion of the district's valuation on which a bond issue was sold in 1950. The district's valuation at that time was $3,911,235. The removal of $1,261,500 worth of property, or 32 percent of the district's 1950 valuation, poses very serious problems to the district. Not only has the district lost taxes this year as well as facing future losses, but it is losing tax on the increasing value of an expanding plant which was bonded the same as any other property in the district, and on which, we feel, there should be the same liability insofar as discharge of bonded debt obligations.

On July 13, 1953, a vote on a proposition to increase the tax rate by 4 mills to make up for this loss was defeated in the district.