very carefully the plans and the estimates as well as the financial resources of the Authority. You and I know that we wouldn't want to invest any money-if I had any, I wouldn't want to invest any money-in a bond secured only by revenues of a public utility unless I felt sure that those bonds would pay out. Mr. CRAWFORD. That is what I am afraid of about this. Mr. CRAWFORD. Yes. Mr. SPECK. Has been brought forth that there would be in some indirect way responsibility on the part of the Insular GovernmentI think somebody even said on the part of the United States-for these bonds. That just can't be under the bill as it is now drawn even if the legislature wanted to, and this is what you would be doing by enacting this law. Even if the legislature wanted to assume the obligations of the Authority, I don't think it could. These bonds when they are issued by the corporation would be payable solely and exclusively and only out of the revenues of the Authority of the corporation, and there would be no property security behind them. There is a specific provision that the receiver, if the Authority were taken into court, cannot sell any of the assets of the Authority. They can't use them. Anybody who loses is going to be the investor. I think that is the extent of the control. Mr. CRAWFORD. I understand that technically, but practically the prospective investor can protect himself against all of that by saying, for illustration, "sure we will give you $80 on the $100 par.' There is his protection. Now, legally and technically there is no responsibility. There can be no transfer of the property. There can be no foreclosure. I agree with you on that. But the Insular Government and the Federal Government as we are now operating in Puerto Rico, and as this program plus the other side of the program proposes that we shall operate in Puerto Rico, ties the responsibility irrespective of the legal language in this bill-I am talking practically now and you are talking theoretically Mr. SPECK. It is hard to get together. Mr. CRAWFORD. So we don't disagree in that matter. Now, let us take up this thought you just expressed with reference to the approval of these projects. We go back and study these records and we find where what is recognized as the greatest experts in the United States and Puerto Rico, have approved these projects, but what is generally the approach. Now, this is practically speaking again. can. A proposition is theorized in Puerto Rico. They go as far as they They get into trouble. We say they get into trouble or they get to where they want an expert. We expedite an expert from Washington or from the West down there to look into something. He goes down and very quickly gives his stamp of approval and the project moves on into the field of the unknown. Three months or six months or a year and a half afterward financial difficulty has to be faced. You have got an entirely dissimilar situation operating in Puerto Rico as against operating on Boulder Dam, for instance. Mr. SPECK. Oh, certainly, it is more comparable to a State or 219245-40- -28 municipal undertaking. It isn't a Federal undertaking. I wonder if I might go on? Mr. CRAWFORD. Yes. Mr. SPECK. I think I would like to attempt to clear up in a word the necessity for this legislation Mr. ROBINSON. May I interfere there just a moment? The CHAIRMAN. Mr. Robinson. Mr. ROBINSON. I am afraid we cannot see the forest for the trees. I wanted to get the history briefly of this particular piece of legislation. Mr. SPECK. I think I got up to 1938. After the bill failed of passage in the Insular Legislature it was introduced up here late in the session and nothing happened. The next year it was introduced again and then for the first time the legislature started revising the draft as submitted by the Governor or in behalf of the Governor, quite drastically. That bill was passed and it was vetoed. I think it was a pocket veto the first time, by Governor Winship. The legislature adjourned and the bill was introduced again in the last session of this Congress. I think you are familiar with the rest of the history. It has recently been passed again and it is being taken up here. The CHAIRMAN. You mean passed by the legislature? Mr. SPECK. Yes, sir. And vetoed by the Governor. This time accompanied by a message stating his reasons for disapproval. At that point possibly I should say Mr. ROBINSON. That is all I wanted to know. Mr. SPECK. To clear up the procedure, several witnesses have indicated that the legislature could thereupon pass a bill over the Governor's veto. They can but when that is done the bill must under the Organic Act be submitted to the President for his approval. Mr. ROBINSON. In other words, you take the position that a bill, at least similar to the one or having the principles involved that are involved in this bill, has already been passed by the Puerto Rican Legislature. Mr. SPECK. In its major provisions that is quite true and in those provisions wherein the bill differs from our bill The CHAIRMAN. That is the bill now before the committee? Mr. SPECK. The provisions depart from the existing set-up in the island government. Now as I have already outlined by requiring the Public Service Commission to regulate rates, taking that power from the executive council by requiring the approval of the legislature for detailed administrative acts as a matter of fact the legislature has not exercised a great deal of authority over it-over the U. W. R., except to authorize the issuance of bonds. They haven't attempted to interfere and I don't think would want to with respect to the necessity Mr. PAGÁN. You refer to the local bill providing the intervention of the Legislature in the appointment of personnel? Mr. SPECK. There is a provision to that effect in it subject to the approval by the legislature to appointing employees. Mr. PAGÁN. I think you are slightly mistaken. Our bill provided there that the personnel would be appointed in the same way as all the personnel in the Government of Puerto Rico-under the civilservice laws and rules. Mr. SPECK. Well, that is in the present bill now. Mr. PAGÁN. Also the legislature by joint resolution could put out the executive director-a provision exactly the same as that provided in the Tennessee Valley Authority. Mr. SPECK. Mr. Commissioner, that is a matter of record. I wonder if I may correct my remarks if I am mistaken. I would like to get on to the reasons for the fact that the Federal Government must enact some law. You are a good lawyer, I am sure, and you have given the opinion that the insular government could enact this law without any further action by the Congress. Mr. PAGÁN. I think so. Mr. SPECK. I don't have that opinion. I don't think the question is black and white. I don't think you could say categorically yes or categorically no, because of several provisions in the Organic Act, including that act to which you referred in your testimony, of August 13, 1935. It is quite doubtfu. that the Insular Government has power to authorize the issuance of revenue bonds to any other agency except the Federal agency. They couldn't market the bonds privately. Moreover it is quite doubtful whether the Insular Government has any authority to take away from the Commissioner of the Interior jurisdiction over the system of the Utilization of the Water Resources and confer that upon a corporation. Incidentally, in all the bills, that provision exists. That is in all the local bills. A corporation is set-up and the assets of the U. W. R. are transferred to that corporation. That is, I think, perhaps, the most important departure. The bond difficulties are questionable. Lawyers, good lawvers, will argue the other way, but they only argue that way if they have already bonds and have to validate them. If they have a chance to correct the difficulties in advance they will do it because bondholders don't like to buy a lawsuit. Mr. CRAWFORD. May I ask you this question? The CHAIRMAN. Mr. Crawford. Mr. CRAWFORD. You continue to indicate that the bill which the Legislature of Puerto Rico has enacted and has approved from time to time is very similar to this H. R. 8239. Now as one who is not trained in law, I want to ask you this simple question: Does H. R. 8239 in your opinion cut across the powers set forth in the two Organic Acts? Mr. SPECK. I am glad to answer that. The Department submitted a statement on that question. Summarizing it and trying to do so for a layman rather than a lawyer, it does take away from the control of the Legislature the operation of only the U. W. R. properties. Now that is one of our clarifying amendments. The bill as it now stands does not withdraw from the Legislature its power to legislate with respect to the irrigation system. We don't want it that way if there is any doubt. We want to clarify it. We have attempted by revising definitions and including another definition to do just that, but to the extent that these five plants are concerned, the powers would be exercised by the Authority. but there is nothing extraordinary in that. The U. W. R., has continued to exercise those powers. The Legislature hasn't found it necessary, except in an attempt to develop and expand the system through authorizing the issue of bonds and in acceptance of P. W. A. grants to expand that system, but we give those powers in here directly to the corporation. Mr. CRAWFORD. You have referred to the bill as related to the U. W. R. Do you understand H. R. 8239 takes in Isabela? Mr. SPECK. No; it does not. Mr. CRAWFORD. Neither do I, and an amendment clearly places that beyond any question and goes a little further. Perhaps I should add the authority is Mr. ROBINSON. Is there any chance of finishing today? The CHAIRMAN. The committee will try to finish. Mr. SPECK. It authorizes the Insular Legislature to permit the operation of the hydroelectric features of the Isabela system by the Authority Mr. CRAWFORD. But it does not embrace it in the provisions? Mr. CRAWFORD. Now, you said, I believe, that it does not take in the irrigation service of the island? Mr. SPECK. It does not take over its assets under the existing system. Mr. CRAWFORD. Now here is a very technical point. Mr. SPECK. It permits that operation by the Authority but it doesn't take over the assets. It couldn't pledge those assetscouldn't use them. Mr. CRAWFORD. I understand-nor the income. Mr. SPECK. That is right. Mr. CRAWFORD. If I am correct in this, H. R. 8239 does not take over the assets; it does not gather in the income of the Irrigation Service of the island. By specific provision it eliminates Isabela. Am I correct? Mr. SPECK. That is correct. Mr. CRAWFORD. Now the Governor vetoes the bill S. 166 because S. 166 does not bring in those two operations, namely, the South Coast irrigation and the Isabela. Mr. SPECK. S. B. 166 went further. It divorced-it separated the operation as under existing law U. W. R. now operates the hydroelectric portion of the South Coast system and the Commissioner of the Interior now operates the irrigation features. We have tried to continue the existing arrangement in the relationship between the respective systems for management purposes. Why the systems were divorced in management, I don't know. That is what the Governor meant. He made it clear there were sound fiscal and other reasons for not consolidating them financially. More than that there are constitutional difficulties. You cannot impair rights of outstanding bondholders. Mr. CRAWFORD. Do you know of any way at all H. R. 8239 could be amended so as to remove this conflict with reference to the Organic Act provisions and still have a bill that is acceptable to the Department of the Interior? Mr. SPECK. I don't think it is possible, consistent with the purpose of a corporation authorized to issue revenue bonds on the basis of its income, its earnings, to be placed under the control, continuing control of the Insular Legislature. Mr. CRAWFORD. So then as pointed out in point No. 1, which the Governor recites in his veto message, we have here an absolute conflict between the conception which says: "Let us create an Authority to sell revenue bonds," and the present provisions of the Organic Act? Mr. SPECK. Oh there is no doubt in my mind that some action by Congress is necessary. I think any grant of authority which the Insular Government does not now have under the Organic Act involves a change in the act, and certain changes are necessary. I am answering you honestly when I say as I construe your question, some power which the Insular Legislature now has would be separated. There is a point which probably has escaped the attention of a number of people. The legislature under section 6 (s) is empowered to legislate with respect to the Authority but obviously only to the extent that it doesn't conflict with specific grants made by this bill I have a number of other amendments The CHAIRMAN. Do you want to insert the amendments in the record? Mr. SPECK. Yes; I will be glad to. And I would like also to insert in the record, if possible, newspaper excerpts indicating that by and large the people of Puerto Rico are in favor of this legislation. So far as we know there is only one newspaper which has come out against it and that is El Pais, which was an excerpt which was read in the record yesterday and again today. Mr. CRAWFORD. How many newspapers have you down there? The CHAIRMAN. How many? Mr. LUCCHETTI. Seven. Mr. CRAWFORD. Are these editorials submitted? How many daily papers have you got in the island? Are these from daily papers? Mr. LUCCHETTI. Yes. Mr. CRAWFORD. What papers? Mr. LUCCHETTI. El Mundo, El Dia, La Correnpodencia, and El Imparcial. Mr. CRAWFORD. Editorials from four different papers? Mr. SPECK. Yes, sir. The CHAIRMAN. Any objection to inserting them in the record? There is no objection. Any other questions? (The editorials referred to are as follows:) MARCH 1, 1940. [Translation from ElImparcial, February 20, 1940] THERE IS NO EXCUSE FOR NOT PASSING THE BILL TO CREATE THE WATER RESOURCES AUTHORITY OF PUERTO RICO There is now before Congress the bill creating the Water Resources Authority for Puerto Rico. The advantages which passage of this measure would bring our people are obvious, and therefore, except for the natural objections of special interests which see their privileges in danger, all classes of opinion, big industries and the enormous group of middle class workers, all clamor for approval of the bill which would create the Water Resources Authority, better known as the "little T. V. A." The tactics of those who fight the bill, in order to maintain with an appearance of logic and reason their objection to this beneficial measure, are based on the proposition of autonomy which should be recognized in the people of Puerto Rico, through action of their own representatives in the Insular Legislature, which should act with regard to the measure and which should not come as a mandate imposed by the Congress of the United States. We do not deny that from the standpoint of political ethics, assuming the existence of good faith of those who invoke such democratic principles, this would be a good argument. But it should be doubly objectionable that devious intentions and illegitimate purposes should use such respective principles to hide the true motives which influence them. The matter is now at issue. The Federal administration and the thunderous voice of the Puerto Rican representatives of most legitimate interests cry out for |