and at the same time assist in liquidating the cost of such developments through appreciated values thus created; Amendment of the National Road Act to allow extension of Federal road grants direct to cities of over 2,000,000 and modification of deadline limitations to allow a period longer than 2 years for the completion of large public-works projects financed in whole or in part with Federal funds. Such assistance, if granted, will go a long way to make it possible for Chicago and other metropolitan centers to avoid unemployment chaos during the post-war period. Mr. RowAN. I should like to have Mr. Harrington elaborate a little, if he will, on the statement on page 8 about the reduction of income tax where people are engaged in this very favorable civic enterprise. He just touched upon that slightly. Mr. HARRINGTON. I think the chairman mentioned a moment ago something that is somewhat on the same principle, where taxes are paid only on the land of the housing project and not on the income from the improvements. The CHAIRMAN. That was Stuyvesant Town, as contemplated in New York. That is under the New York State law. Mr. HARRINGTON. The thought is to generate an incentive to private capital to invest its money in projects of a civil nature, with some special provision. I do not have any formula. Mr. ROWAN. Would there be any limitation of time? Mr. HARRINGTON. Legislation could very well provide limitation on the time. It could provide for relief in whole or in part of the sum so invested, and certainly no relief from any tax obligation unless the project were certified by some governmental agency to fall within a category related to the adjustment program. Mr. CAPOZZOLI. Would you not recommend along with that the fact that the rent should be limited? Mr. HARRINGTON. I would think you should. I do not have any real, thought-out formula on it myself this morning. I presented it for your consideration and development. Mr. CAPOZZOLI. Do you not think that the recommendation should really be addressed to your own legislature rather than to Congress? Mr. HARRINGTON. No; I do not. You are talking now about the income tax on earnings. Mr. CAPOZZOLI. But do you not think it would be better addressed to your own State, to have it give some exemption on the matter of taxes and assessed valuation, rather than as income-tax relief addressed to the Federal Government? Mr. HARRINGTON. I think both, perhaps. Mr. CAPOZZOLI. I understand the recommendation which is made by the witness. The CHAIRMAN. The recommendation, as I understand it, was made for cases where a corporation invested its funds in some slum clearance projects. Mr. CAPOZZOLI. They should be relieved from paying income tax. The CHAIRMAN. He did not say they should be relieved from paying income tax; he said they should be able to charge that back, as a shipbuilder does when he puts a new ship on the ways. Mr. CAPOZZOLI. That is right; therefore, I ask the witness whether he does not think it is better to go into the State legislature and get a plan-for example, some such plan as New York State has-rather than to put the Federal Government into the picture again. Mr. HARRINGTON. I do not think it is better, but I think it is proper and logical to do that and, as well, to ask the Federal Government to contribute by a reduction of taxes. Mr. ROWAN. This is just for the post-war period and is to reduce unemployment? Mr. HARRINGTON. That is right; and it would have to be shown that it would definitely contribute to reducing unemployment. Mr. Chairman, I shall also leave with the reporter a letter dated February 7, 1944, addressed to Mayor Edward J. Kelly by the Postwar Economic Advisory Council of Chicago, setting forth in a little more detail the ideas of that council with respect to this program and with particular stress upon the program for speedy conversion of war plants upon termination of contracts. The CHAIRMAN. That will be incorporated in the record at this point. (The letter is as follows:) POST-WAR ECONOMIC ADVISORY COUNCIL OF CHICAGO, Mayor EDWARD J. KELLY, City Hall, Chicago, Ill. February 7, 1944. DEAR MAYOR KELLY: The Post-war Economic Advisory Council at its meeting February 7, 1944, gave full consideration to the statement to be presented before the Committee on Public Buildings and Grounds of the House of Representatives at Washington introduced by Mr. Philip Harrington, member of the Chicago Plan Commission and commissioner of subways and superhighways. We cannot emphasize too strongly the need of Federal action to encourage and to aid industry in all proper Federal matters in converting to post-war conditions. The fact that the present industrial and commercial structure of the Nation is geared to the national wartime need and is necessarily under Government control makes it impossible for industry unaided to resume peacetime pursuits. The post-war employment level necessary to stabilize conditions must in the main be supported by industry, and depends upon full employment to provide the purchasing power to maintain markets. Public works can furnish only a fraction of the total employment, but are doubtless needed particularly in the transition period from war to peace. The use of local public funds, however, must be limited to avoid tax increases which tend to discourage local investment. Federal aid in planning to reinstate conditions disrupted by the war in land acquisition and in construction seems therefore desirable, particularly on partially or wholly self-liquidating projects and on projects of a national significance such as highways and airports. This analysis leads us to the conclusion that since industry must lead the way toward stabilized post-war conditions, and must provide by far the greater proportion of employment, the aid which the Federal Government can properly give to industry becomes of paramount importance. We, therefore, strongly urge action by the Federal Government as contained in the following summary The dislocation of industrial workers presents a major post-war problem in all large centers and particularly in the Chicago metropolitan area. Renewed and new civilian enterprises both public and private must absorb at least 600,000 workers in Chicago. This is partially a national responsibility, since the condition is created by the national emergency and since Chicago's production, being largely producers goods, will affect the entire Nation. The post-war employment load must be borne roughly nine-tenths by private enterprise and one-tenth by public works. Federal aid is needed and the following suggestions are therefore made: For private industry: Prompt and substantially complete payments on terminated war contracts to allow quick reinvestment and conversion to civilian manufacture. Announcement of policy on disposal of Government-owned plants and stocks of goods to permit private planning. Exemption from payment of full income taxes on earnings devoted by private industry to enterprises of general public significance. For public works: Direct action between the National Government and large metropolitan areas to recognize special problems of industrial centers and to expedite results. Grants to match local funds for complete planning of projects of a Federal nature without commitments as to ultimate source of construction funds. Acquisition of rights-of-way-later to be granted to local governments— for construction of such projects. Loans to local governments for partially or wholly self-liquidating projects such as highways and airports. Extension of time limit on Federal-aid projects to permit construction of major improvements. Sincerely yours, JAMES S. KNOWLSON, Chairman. POST-WAR ECONOMIC ADVISORY COUNCIL OF CHICAGO, The Honorable EDWARD J. KELLY, Mayor, Chicago, Ill. DEAR MAYOR KELLY: Initial studies by your Post-war Economic Advisory Council of the problems attending stabilization of employment after the war indicate conclusively that one of the most important, and certainly one of the first, problems that must receive adequate consideration centers about the procedure to be followed and the treatment to be accorded industrial concerns in the cancelation of war contracts. Few persons realize what total war such as we are fighting at present actually means in terms of manufacturers and their products. The manufacture of most civilian goods has ceased entirely, so that with the cessation of war work, industries and manufacturers must start from scratch to rebuild their civilian markets. And in order that there may be the least possible dislocation in the reemployment situation, the orderly adjustment of contract cancelations is more than ever important. At a recent hearing of the council there appeared representatives of the Illinois Manufacturers' Association and the Chicago Association of Commerce, who made a full presentation of work being done by those organizations along this line. In addition, the council conducted an independent study to discover what plans and procedures have been or are being formulated by various governmental agencies having to do with the termination of war contracts. A copy of the council's report on this subject is herewith enclosed. According to available figures, there are at the present time more than 300,000 war contracts outstanding, with money involved totaling more than $75,000.000,000. Of these, many thousands have been placed and are now on the books of industrial concerns in Chicago. The tremendous amount of capital involved in these contracts, even ignoring other factors, is in itself a situation that demands the most careful handling. There are countless cases, for instance, where the present warmaterial inventories of manufacturing plants have mounted to many times the total of working capital of those concerns, and this does not take into consideration contract commitments on orders on the books but not yet started. Obviously, the cancelation of these contracts must include some plan of immediate reimbursement for war material, both finished and in process, as otherwise many of the manufacturers thus involved will automatically be thrown into bankruptcy or forced to close down entirely, thus bringing about inevitable widespread unemployment. It is apparent from a close study of the plans and procedures for contract. cancelations so far contemplated by Government agencies that the safeguards which they offer are entirely inadequate. Under the procedure laid down recently in Army Ordnance Procurement Regulation No. 15, payment would be made on canceled contracts through a negotiation process. While this is pending, manufacturers would have recourse to a form of V loan, the amount of which, still to be definitely determined, would be anywhere from 75 to 90 percent of the total due manufacturers on work completed or in process. Time is a most important consideration, and it is apparent that successful and speedy termination of such negotiation would depend almost entirely upon the individual personalities and cooperation--or lack of it-of those entrusted with such negotiation. In this connection it is significant to note that in negotiation on contracts in the last war some of these negotiations were finally completed 20 years later. In the opinion of the members of your council, delays from such procedure are potentially disastrous, not only endangering the life of manufacturers in the Chicago area but threatening the entire economic structure of the Nation, It is the considered opinion of the members of your council that: (1) It would not only be unfair to all manufacturers to require them to borrow money through their banks to finance Government obligations, but it is feared that the smaller companies at least might have almost as much difficulty in this procedure as they experienced in their initial efforts to get into war production. Such procedure would force them to enter the post-war period under an unnecessary handicap that would also indirectly affect labor and employment unsatisfactorily. (2) Any settlement dependent on negotiation procedure with its attendant delays would be unsatisfactory and would entail possible serious financial losses to manufacturers operating under war contracts, unless it provided for immediate payment by the Government of the highest possible percentage of amounts due on work completed and in process on such contracts. (3) It is therefore essential that the Government establish a standard praetice which will apply to all war contracts, with a program of immediate reimbursement. (4) Such practice or procedure, which would protect the best interests of manufacturers holding war contracts, should be provided by congressional action rather than by independent determination by separate governmental war agencies. (5) It is strongly urged that such procedure provide for the retention of able keymen with an intimate knowledge of the war contract and general economic situation, in order to avoid the possibility that these settlements so important to post-war progress be entrusted to individuals who would be untrained and inexperienced in this field. (6) As a substitute for negotiation procedures it is suggested as a logical solution that a procedure be set up similar to that employed by the Internal Revenue Department in the filing of income tax returns. Realizing that the Government, however, must be accorded protection as to accuracy and honesty on the part of manufacturers petitioning for payment on canceled contracts, the procedure formulated by Congress could very well set up penalties for falsification sufficiently stringent to insure adequate safeguards to the public interest. Determination of this problem so vital to the continued successful operation of our national economy is looked upon by your Post-war Economic Advisory Council as of paramount importance; in fact should it not be satisfactorily resolved the result would be to render futile any comprehensive program for post-war progress seeking to stabilize employment. Immediate consideration of this matter is therefore urgently recommended, with the view to such action as you may think proper or advisable. Respectfully submitted. mate. 10 percen 74, 000, 000 Preliminary estimate. 28, 650, 000 30 percent. Increase sewer capacity, Beverly-Calumet dis- Increase sewer capacity, Paulina, 61st to 87th. Increase sewer discharge, area bounded by Clark, 131⁄2 miles sewer, Wellington to Palmer to Har- 11 miles sewer, Wellington, to Grace to Harlem Sewer, North Shore channel to Rosehill Ceme- 7, 100, 000 Complete. Do. Do. 50 percent. 784, 000 60 percent. 15 percent. Do. 4,750,000 10 percent. 5, 500,000 50 percent. 2,760,000 Do. 75 percent |