from now. I won't attempt to give any facts or figures. They are before you in other documents. That is the message I wanted to leave. Thank you.

Mrs. ST. GEORGE. Thank you very much. It was excellent testimony. I think you would possibly agree with the statement we received from the Bureau of the Budget in which they say at the end, after analyzing the bill at some length:

The Bureau of the Budget would recommend that steps be taken at the same time to assure the preparation of a more systematic and adequate set of recommendations as a basis for a permanent policy to be applied upon expiration of the temporary measure.

Mr. SEEGMILLER. Yes. Indeed we would.

Mrs. ST. GEORGE. I think that also is your feeling, Mr. Hillelson. Mr. HILLELSON. That is right.

Mrs. ST. GEORGE. And that is why you introduced the bill in its present form.

Mr. HILLELSON. It was my honest hope that this proposed Committee on Intergovernmental Relations-I am not sure actually that the bill has passed-but it is my hope that they will include this problem and many others in their studies.

Mrs. ST. GEORGE. Yes; and you are giving them until 1955 to get it worked out.

Mr. HILLELSON. Yes. Which should be sufficient time for any commission.

Mr. SEEGMILLER. As members of the committee know, we have been supporting the other bill, which we hope will have more permanent and far-reaching effects, but from now to 1955 we are in desperate straits, and we need some help.

Mrs. ST. GEORGE. Yes. Thank you. Mr. Knott, would you care to testify at this time?

STATEMENT OF LAWSON B. KNOTT, JR., CORPS OF ENGINEERS, REPRESENTING THE DEPARTMENT OF DEFENSE

Mr. KNOTT. This is the situation, Madam Chairman.

Mrs. ST. GEORGE. If you have a fairly brief statement I think we could hear it.

Mr. KNOTT. I regret that the Department of Defense has been unable to supply you with the full report. I had high hopes, however, that during the course of the meeting this morning a letter which I understood had been prepared for signature, and was by way of an interim report, would be delivered.

Apparently that has not been done. Perhaps if you are going to continue hearings tomorrow we could wait until that time.

Mrs. ST. GEORGE. All right. I think that will be perfectly suitable. We are going to have hearings at 10 o'clock tomorrow morning and we will be able, probably, to have received the letter by then and discuss it at that time.

Mr. KNOTT. Yes.

Mayor DAUBNEY. May I have one point clarified? It is my understanding the second gentleman from the General Services Administration spoke and said that the leases under which these corporations are operating under Government ownership have in them a clause

which will provide the lessee, the private corporation is to pay any taxes that are assessed. So what obligation if any would the Federal Government assume by reason of the fact of the passage of this bill? In other words, wouldn't the private corporation assume these taxes; and what would the obligation be under the General Services Administration or any other governmental agency?

Mr. PEYTON. I will be glad to answer it, Madam Chairman. These plants came to War Assets and General Services Administration from RFC. Originally they were leased by RFC to wartime contractors with the provision in the leases that the lessees pay the taxes. We have 25 of those surplus plants still in our surplus inventory. Record title is still in RFC, never having been transferred to the Federal Government.

All of those leases provide that the lessees pay State and local taxes. Now, wherever a surplus plant has been transferred, that is, the title transferred out of RFC, to the Federal Government, and the property from that point on appears in the record name of the Federal Government, taxes have ceased since the Federal Government itself is not liable for real estate taxes to State and local governments.

Among the cases that have been mentioned here this morning-and I refer to the property known as the Bohn Aluminum & Brass Corp. plant at Adrian, Mich.-that property was permitted to the Department of Defense and, therefore, taxes ceased when we permitted the property to the Department of Defense and the Comptroller General ruled against payment.

There are a number of plants formerly in our surplus inventory where title was actually transferred to the United States of America out of RFC and jurisdiction taken by the Department of Defense. Mr. Reynolds touched on that this morning. I would prefer to let the Department of Defense furnish the committee with the number and last amount of taxes that was paid prior to the transfer of title from the RFC to the United States. That is the main category, really that is in question here.

It is the number of plants in the custody of the Department of Defense and the amount of annual taxes, where record title has actually been transferred to the United States of America.

There is no useful purpose to be gained by going back over merits of the Sedgwick County case, or going back over the Comptroller General's opinion. The point here is, if I may be permitted to say so, that we have to operate according to the existing law. It is not a question of what we would like to do, but what we can do.

We welcome a change as provided in this bill, as we have indicated. But at the same time, we want to say that, in the administration of our act, we have done everything we could to preserve the competitive position of lessees by charging taxes so that they would not get a windfall by comparison with their competitors.

I know of no instance where that has not been done, and where the taxes have not been paid up to the time the record title has been transferred to the United States.

Mrs. ST. GEORGE. Does that answer your question, Mayor Daubney? Mayor DAUBNEY. I believe so. One other question. If that is true-if your present rentals include what would amount to local taxes-then I take it you would have no obligation in this bill because

it would be a matter of transferring money from one pocket to the other, with the Federal Government taking money of the corporation to give to the local government.

Mr. PEYTON. Of the 25 surplus plants in the inventory, record title to which are in RFC, the lessees are paying the taxes directly. We are not paying sums in lieu of taxes.

Mayor DAUBNEY. I am referring to the ones that would be affected by this bill.

Mr. REYNOLDS. Could I answer that?

Mrs. ST. GEORGE. Certainly, Mr. Reynolds.

Mr. REYNOLDS. In those cases where GSA holds plants in the name of the United States the amount of the lease that we give includes what a private entrepreneur would have to pay for a plant that was owned by another private entrepreneur. That includes an amount for taxes which is not transferred to the local government. It comes to the Federal Government. And we do not object, and welcome the authority to make the payment of that portion of the lease that we segregated in the lease to us-to make that payment to the local taxing bodies. Does that answer your question?

Mayor DAUBNEY. Well, no. Not to this extent. I cannot determine how you intend to make that payment. In other words, are you going to let the local assessors determine the valuation and make an assessment and then you will make that payment directly as a tax, or do you wish to preserve this power of arbitration, and negotiation, and what not.

Mr. REYNOLDS. I would like to speak to that question again because it is really fundamental and I know there has been a great deal of argument over the years since payment in lieu of taxes goes back to the Lanham Act, and other acts of Congress.

The recommendation I made this morning is the recommendation usually arrived at by people who are tax experts and who have studied the question.

It is our job here in the Federal Government to protect the taxpayers of the United States to the extent we can. We can well see in the group of war plants, and that is what we are talking about here this morning, that there may come a time when there will be no use for them as war plants. We hope they can be sold and gotten out of the way.

In the event they are not sold they will be standing idle. In that case I can well understand how a city could probably get a windfall of say $100,000, and provide no service whatsoever. Should my sister, who is the wife of a farmer in Iowa, have to help pay that $100,000? That is the point I am trying to get across.

So I think there must be some consideration in legislation, when it is bearing upon a particular type of operation such as we are talking about here, that there will be some freedom of discussion as to the amount to be paid.

We are not talking about whether the fire department is an efficient one; and no one proposes to go in and check the books as indicated this morning, and all that sort of thing. That is not the point. The fundamental question is, Shall the Government, regardless of the use of the plant itself, whether it is idle, whether it is half in use, or fully in use, pay exactly the same amount each year that it would if the plant were in full use.

My testimony this morning was that we would sit down and talk the thing out as to how much the payment should be. Your position is that there be no discussion whatever, that the local taxing people would tell the Federal Government what it would pay.

Mr. HILLELSON. Is that meant to be on the basis of what other people are paying? The regular tax assessment?

Mrs. ST. GEORGE. Mr. Reynolds, the average citizen after all has to pay on his assessed valuation made by the local people, and can go no further.

Mr. REYNOLDS. He has a run for his money, though.

Mrs. ST. GEORGE. Very little.

Mr. HAMILTON. In regard to your sister's tax status, there are two bodies of taxpayers, local and Federal.

Mr. REYNOLDS. She has to help pay the local taxes and the Federal income taxes. We are interested in all of the taxpayers. We are not interested in the taxpayers of a local community except that we believe where the Federal Government is causing an additional expense to the local community it should be paying for. I don't think there is any question about that.

Mrs. ST. GEORGE. I think we all mean to be fair, and I think all of the testimony points to that too. But the question is, after all you have to determine who is going to pay what the local community needs in the way of taxes to run these facilities. It seems to me that the local boards and local assessors who do it for everyone else are also the ones who should do it for the Federal Government.

I would not feel very comfortable myself if I found in my community there was a plant being assessed by some Federal agency when I myself am being assessed by the local assessor and am paying a different rate. You come into all sorts of complications if you are going to do that.

Of course, again, as we all know the Federal Government is beyond any redress. There is nothing you can do. You have to take it and like it.

Mr. REYNOLDS. We are opening up a very broad field of discussion here.

Mrs. ST. GEORGE. Of course we are.

Mr. REYNOLDS. What I am discussing here is some of the things that the groups that have been working on this major bill have been trying to resolve, and we are touching the high spots here and getting a bit emotional about it.

Mrs. ST. GEORGE. As a matter of fact, as we told you before, this is only a temporary measure, and you know that also.

Mr. REYNOLDS. Yes.

Mrs. ST. GEORGE. And it is probably not going far enough in any direction.

Mr. REYNOLDS. No. We would prefer to have it go much further, because we have all types of properties and are getting involved in all types of problems in connection with them. Of course, we have the post offices and the courthouses, and others.

Mrs. ST. GEORGE. And the military installations, and schools.
Mr. REYNOLDS. Yes.

Mr. HILLELSON. It was never my intention to include post offices, or anything of that nature.

Mr. REYNOLDS. No. I understand that. This is off the record. (Discussion off the record.)

Mrs. ST. GEORGE. We hope that will be done by 1955.

Mr. REYNOLDS. I hope you can before that. I don't know why we should wait that long.

Mrs. ST. GEORGE. I think we will adjourn until tomorrow at 10 o'clock. Thank you all very much for being here.

(Whereupon, at 12:30 p. m., the subcommittee adjourned until 10 a. m. the following day, Tuesday, July 21, 1953.)