Services Administration as excess property for disposal. We believe disposing of this property subject to recapture in the event of emergency is not advisable because experience has shown the Government will obtain a greater return if the property is disposed of without restriction. Apparently the dollar mark is controlling, rather than national defense. Mr. PRICE. We place great store on standby installations for mobilization purposes for Army encampments. I do not know of any facilities more important in time of war, overseas at least, than port facilities and certainly you cannot go out and construct them or grab them overnight. They have to be available. I cannot conceive of any section of the Defense Establishment not understanding the peril of submarine warfare in the next war of any magnitude. Certainly Philadelphia would be a more protected port from this type of warfare than some of the other ports on the actual coastline. Mr. SILVER. It being one of the major ports of the country, of course you would have to place initial major reliance on it if the facilities were available. Mr. PRICE. I have no doubt if we got into a national emergency they would cry for port facilities at Philadelphia. Mr. SILVER. I would think so. Mr. DURHAM. Are there further questions? Thank you very much. Is anybody else in the room who cares to make a statement or file a statement? It is evidence we will not be able to get to the Army. We will meet in the morning at 10 o'clock to hear the Army. Does Mr. Frazier want his statement filed? We will file it. (The statement of Mr. John H. Frazier follows:) STATEMENT BY JOHN H. FRAZIER, ASSISTANT DIRECTOR, PORT DEVELOPMENT DEPARTMENT, DELAWARE RIVER PORT AUTHORITY The Delaware River Port Authority is a self-sustaining public corporate instru mentality of the Commonwealth of Pennsylvania and the State of New Jersey, created by a compact between the two States, with the consent of Congress (Public Resolution 26, 72d Cong., S. J. Res. 41). The port district over which the authority has jurisdiction includes the counties of Delaware and Philadelphia in Pennsylvania, and the counties of Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean, and Salem in New Jersey. The purposes of the authority include the development and improvement of the port district; the promotion of the Delaware River as a highway of commerce; cooperation with all other bodies interested in, or affected by the promotion, development, or use of the Delaware River and the port district. The Delaware River Port Authority by official resolution at its regular meeting of August 17, 1955, noted the importance of continuing operation of piers 96, 98, and 100 south (Philadelphia Army Supply Base) as a public marine terminal. Again, by official resolution on July 16, 1958, the authority reaffirmed its position and stated: "Such operation (of piers 96, 98, and 100 as a public marine terminal is not only vital to the maintenance of healthful port commerce, which would be adversely affected were said piers to be disposed of at public sale for nonport purposes, but also of substantial value as a facility for the national security." The position of the authority was further clarified in a communication from Joseph K. Costello, executive director of the authority, to Hon. John Stennis, chairman, Subcommittee on Real Estate and Military Construction, Committee on Armed Services, United States Senate, under date of October 6, 1955. In this letter Mr. Costello stated: "The continued operation of these piers as a public marine terminal, in our opinion, is of utmost importance not only to the shipping interests in the Philadelphia port area but also to the defense of the United States in the event of a national emergency and to the development of the American merchant marine. In a report on this property furnished to us by the Corps of Engineers, United States Army, it is noted that it was recommended by the Trans portation Corps, Department of the Army, that the property remain under Army control to meet mobilization requirements in the event of a national emergency." This same communication further states: "It is our carefully considered opinion that the disposal of this property to a private company or individual will result in it being used for purposes other than a marine terminal, thus severely handicapping and working a hardship on the industries, shippers, and steamship interests in the Philadelphia port area, and in the event of a national emergency these facilities will no longer be readily available to meet mobilization requirements." Your attention is also directed to the position taken by the Interagency Committee on Port Utilization as reflected in a letter from Owen Clarke, member of the Interstate Commerce Commission and Chairman of the Interagency Committee on Port Utilization, to the Honorable Richard B. Russell, chairman of the Armed Services Committee of the United States Senate, under date of December 14, 1955. The closing paragraph of this letter reads as follows: "Having in mind the important role played by the Philadelphia Army Supply Base in World War I, World War II, and the Korean emergency, and the probability that, should there be another world war, the capacity of the United States ports would be affected by enemy action, it is the recommendation of the Interagency Committee that your committee be advised that, in the opinion of the Interagency Committee, the facilities of the Philadelphia Army Supply Base would be necessary for national defense in any future war emergency that might occur, and for that reason the Interagency Committee urges that, if disposal of this property is authorized, it be done under conditions which would insure that in any future national emergency the property would be available for marine terminal purposes." That the continued operation of this facility as a public marine terminal is vital to the commerce of the port of Philadelphia is well illustrated by reference to and a study of the attached schedule of sailings, port of Philadelphia, August 1958. This listing shows 225 general cargo ships scheduled to sail from the port of Philadelphia during August 1958, to foreign ports all over the world. (These are exclusive of coastwise, intercoastal, and bulk carrier sailings.) Of the 225 regular line sailings, 74 vessels, or 33 percent of the total number, are scheduled to depart from piers 96 and 98 south (Philadelphia Army Supply Base). It thus can be readily seen that the loss to the port of any facility which handles such a large portion of the port's scheduled departures would be a very serious blow indeed. In summary, it appears that the continued operation of the Philadelphia Army Supply Base as a public marine terminal, open to all on equal terms, and the maintenance of this terminal in efficient operating condition, is essential-in fact, vital-not only to the continued prosperity of the port of Philadelphia, but in the interest of national security, to the Government of the United States. It further appears that there is little likelihood that the sale of this facility to the highest bidder could be effected on terms which would secure such continued use as a marine terminal in the interests of the continued growth of the port of Philadelphia, or the recapture by the Federal Government, in the case of a national emergency, of an efficiently maintained facility capable of immediate use. The Delaware River Port Authority supports any procedure or arrangement whereby the interests of the national security may be protected as well as the interests of the port of Philadelphia. Mr. DURHAM. Does Congressman Barrett want to file a statement? Mr. BARRETT. I think the gentlemen from Philadelphia have done a fine job. Mr. DURHAM. Is the Army here this morning? Mr. KELLEHER. Yes, sir. Mr. DURHAM. Would it be convenient to hear you in the morning? Mr. PEARL. Yes, Mr. Chairman. Mr. DURHAM. We will meet in the morning at 10 o'clock to hear the Army. Mr. BRADLEY. Would it be the desire of the committee that anyone from Philadelphia be present tomorrow? Mr. DURHAM. It will be an open meeting. Mr. BRADLEY. The committee will not require them here for rebuttal? Mr. DURHAM. No. You made a good case this morning. Mr. GREEN. It might be advisable to have somebody here, though. (Thereupon, a 12 noon, the committee adjourned.) HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE No. 3, Washington, D. C., Wednesday, August 6, 1958. The subcommittee met, at 10 a. m., Hon. Carl T. Durham (chairman of the subcommittee) presiding. Mr. DURHAM. The subcommittee will come to order. This is a continuation of the hearing on H. R. 12640. This morning we will hear from the Army. I mean the Department of Defense. Who is here for the Defense Department? Mr. KELLEHER. Mr. Pearl is here, Mr. Chairman. Mr. DURHAM. We would be glad to hear you, Mr. Pearl, on H. R. 12640. You may proceed. Mr. PEARL. Mr. Chairman, I have no prepared statement. I believe the departmental report on the bill, which was referred to in the meeting yesterday, signed by Secretary Brucker, sets forth quite clearly the Department's position on the bill, namely, that the Department is not opposed to the acquisition of these facilities by the city of Philadelphia, but the Department thinks it should be at fair value. I think I might be of some service, though, if I could just for the benefit of the committee go through a very fast chronological history of the facilities and the actions which are culminated here today. Mr. KELLEHER. And would you also, Mr. Pearl, please indicate the method of appraisal whereby you arrived at the $4.5 million figure. Mr. PEARL. Surely, Mr. Kelleher, I will be glad to. In 1921, the facilities involved were completed. They had been started as part of a chain of port improvements on the Atlantic coast for the shipment of troops in World War I. Facilities weren't actually completed until after the close of the war. In 1921, when the facilities were completed, they were turned over to the United States Shipping Board and the United States Shipping Board in 1921 leased the entire facility to private industry. In July 1946, the Maritime Administration of the Department of Commerce, which was the successor to the Shipping Board, leased the facilities, including the piers, to the Philadelphia Piers, Inc., which is the lessee referred to yesterday, who is still in possession, and that lease was July 1, 1948, for a 10-year term to June 30, 1958. Under this lease the Government was required to maintain the piers out of Government appropriations, and the lessee was not required to maintain the piers. In 1954, the Maritime Administration advised the Department of the Army that it no longer would be able to get appropriations or make provision for the repair of the piers, that since the piers had been under lease continuously to private enterprise, the Maritime Administration had no longer any use for the facilities and they were going to return them to the Department of the Army. Technically the situation was that there was a permit from the Department of the Army to the Maritime Administration. The Maritime Administration was terminating the permit, and returning the property to the Department of the Army. That was in 1954. Between 1921 and 1954, the property had never been under the jurisdiction of the Department of the Army. The property had continuously been under lease to private enterprise. Mr. DURHAM. By whom? Mr. PEARL. From the Maritime Administration to private enterprise. Now, it is true, in the hands of private enterprise, these piers were used for the shipments of war materiel, cargo and personnel, during both World War II and the Korean war, but they were never physically turned over to the Government. Mr. GREEN. Virtually, they were turned over? The operation was all Mr. PEARL. No, sir; the operation was by lessee, by private enterprise. Mr. GREEN. I am talking about lease. Mr. PEARL. By the private lessee. Mr. KELLEHER. Was it exclusively for war purposes? Mr. PEARL. That I couldn't say. I have no indication as to whether it was exclusively, but in all probability it was. Mr. DURHAM. There ought to be a record somewhere whether we lost money from 1921 to 1954 or whether we made money. Mr. PEARL. I can go through the list of revenues and expenses that was furnished to us by the Maritime Administration. We made money. The Maritime Administration made money. Mr. DURHAM. In 33 years, the Federal Government made some money out of it, is that correct? Mr. PEARL. Yes, sir. Mr. DURHAM. How much? Mr. PEARL. Up to and including June 30, 1954, there were total revenues of $10,245,471, against which the Maritime Administration cost-accounted expenses of $3,295,361, or a net profit to the Government of $7 million over that period of time. Mr. DURHAM. That is 33 years of operation? Mr. PEARL. Yes, sir. The difference between the revenues collected by the Maritime Administration and the expenses of the Maritime Administration. Mr. LANKFORD. Do the expenses charged by the Maritime Administration take in maintenance, upkeep, and repairs? Mr. PEARL. Yes. That was the main purpose. Yes, that was the main item of expenses. That would be the big item they would have. Mr. DURHAM. What has happened since 1954 since the Army took over. Mr. PEARL. I would be glad to continue that, Mr. Chairman. Before getting into the fiscal picture since 1954, though, in early 1954 in anticipation of the return of these piers from the Maritime Administration to the Department of the Army, the Department of the Army made a survey to find out what condition these piers were in and what would be required to put them in good shape, and it was found we would have to spend approximately $1.25 million to fix the piers up, to put them in good shape. Now, obviously, budgetary restrictions being what they are, and since the Army had no then current need for the property, we could not include an item in our budget for $1.25 million for the Army to fix the property up. So we came into the Armed Services Committees with what was identified as "disposal project 26," in accordance with title VI, Public Law 155, asking agreement of the Armed Services Committees for a modification of the lease that had been entered into by the Maritime Administration, that still had some 4 years to run, and for us to reduce the rental that would be paid to us in cash by Philadelphia Piers. Mr. DURHAM. Is that a binding lease now? Mr. PEARL. That specific lease has terminated and has been extended for a year and still runs until next May. Disposal project 26 proposed that we would shift the responsibility for complete operation, maintenance, and repair to the lessee, Philadelphia Piers. The House Armed Services Committee indicated its agreement in that project, subject to being advised at a later date of the specific negotiations and agreements reached. This was after a hearing by the Real Estate and Construction Subcommittee. That project was submitted, as I say, in 1954, and the Senate committee as a condition of its agreement to the project required the Department of the Army to obtain the approval of the Director of the Bureau of the Budget. That was submitted to the Director of the Bureau of the Budget and after a review by the Bureau of the Budget, it was determined that the Department should report the property as excess to its requirements to GSA for disposal, subject to any restrictions of future use that might be necessary. The Bureau of the Budget pointing out in its letter to the Department of Defense that it had not been necessary to obtain ownership of the property through either World War II or the Korean war and that it would be possible, in the opinion of the Bureau of the Budget, that if there was any future need for the property, for us to obtain the use of it through negotiations or condemnation, if and when that time arose. After a further review by the Assistant Secretary of Defense for Properties and Installations, who at that time was Mr. Floete, Mr Floete wrote a letter to the Director of the Bureau of the Budget and advised him that upon review by the Department of Defense it was determined it would be in the best interests of all concerned and feasible, to report the property as excess to General Services Administration without any restrictions on the property, and indicating as was quoted here yesterday from the report of the Department that the only thing that really would be accomplished by imposing these restrictions was to reduce the amount of money that the Government could get on a sale of the property. We then screened the property, as we call it, with the other military services. This amounts to going to the Navy and the Air Force and asking them whether they have any use for it, and since there was no current requirement for the property by any of the three military services, we came up to the Armed Services Committees again with disposal project 56, this time asking agreement in the report of the |