of improvement provided for in that act. Works of improvement are defined to include any undertaking for "the conservation, development, utilization, and disposal of water." Local organizations which are eligible for such loans are defined to include any State, political subdivision thereof, soil or water conservation district, flood prevention or utility district or combination thereof, or any other agency having authority under State law to carry out, maintain, and operate the works of improvement. (c) The present Federal community facilities program adopted in the Housing Amendments of 1955 authorized $100 million of Federal loans to States, municipalities, and other political subdivisions, public agencies and instrumentalities to finance public projects. That program specifically provides that priority shall be given to applications of smaller municipalities for assistance in the construction of basic public works, including works for the storage, treatment, purification, or distribution of water; sewage treatment, and sewer facilities for which there is an urgent and vital public need. On March 31, 1959, when this program had been in effect over 3 years, about $58 million had been committed from the authorized $100 million. (d) S. 722, to provide the Area Redevelopment Act, which passed the Senate on March 23, 1959, and was referred to the House Committee on Banking and Currency, would authorize, subject to specified limitations, $100 million in a revolving fund for Federal loans to any State or political subdivision thereof, or private or public organization or association representing any redevelopment area or part thereof, to finance the construction, expansion, or improvement of public facilities within any redevelopment area. Among the conditions for such loans would be a requirement that the project would tend to improve the opportunities in such area for the successful establishment or expansion of industrial or commercial plants or facilities. No loan could be made for an amount in excess of 65 percent of the aggregate cost of the project. This bill would also authorize appropriation of $75 million for Federal grants, subject to specified conditions, to any State or political subdivision thereof, or private or public organization or association representing any redevelopment area for the construction, expansion or improvement of public facilities within a redevelopment area. (e) The Federal Hospital Survey and Construction Act of 1946, as amended, widely known as the Hill-Burton Act authorizes the appropriation of $150 million in Federal grants in each fiscal year through June 30, 1964 to assist in the construction of public and other nonprofit hospitals. The 1954 amendments authorized appropriation of an additional $60 million in Federal grants each year to assist in the construction of nursing homes, diagnostic and treatment centers, rehabilitation facilities and chronic disease hospitals. Public Law 85-589 adopted in 1958 authorized Federal loans under this program for construction of hospitals and other facilities. (f) The Federal college housing program authorizes loans to any hospital operating a school of nursing beyond the level of high school approved by the appropriate State authority, or any hospital approved for internships by recognized authority if such hospital is either a public hospital or a private hospital no part of the net earn ings of which inures to the benefit of any private shareholder or individual. The amount presently authorized for loans for student nursing and intern housing facilities is $25 million, but the proposed Housing Act of 1959 (S. 57) reported by the House Committee on Banking and Currency on February 27, 1959, would increase that authorization to $65 million. In view of this wide variety of Federal programs of grant and loan assistance for water facilities, sewer facilities and hospital facilities, it seems apparent that the program proposed in H.R. 5944 would provide a wasteful and unnecessary overlapping with the numerous existing Federal programs providing similar assistance. (4) Small municipalities can obtain financing at reasonable rates without assistance from the Federal Government and at rates as low as those obtained by large municipalities. It has been contended, in support of H.R. 5944, that large municipalities (with large issues of bonds) obtain financing at such low rates that they would not be eligible for Federal loans under the proposed program and that small municipalities must pay higher rates than large municipalities to obtain financing and are unable to obtain financing at reasonable rates. Those general contentions are simply not supported by the facts. First, in reply to the contention that most large municipalities obtain interest rates so favorable that they would not be eligible for assistance under the proposed program, there should be noted the following 17 issues of water or sewer bonds sold during the 14-month period from January 1, 1958, through February, 1959 (all included in addendixes C and D). I might add that these were picked at random from the appendices. There are other examples in the appendices of this same thing. The significant point is that the 17 issues listed above by large municipalities for water or sewer facilities aggregated over $214 million, and all of them would have been eligible for Federal loans under the proposed program if it had been in effect since January 1, 1958. It should be emphasized in passing that all of the municipalities listed above obtained very favorable and reasonable interest rates in their financing; but they would have been eligible for Federal loans under the proposed program. Secondly, small municipalities can obtain rates just as favorable as those obtained by large municipalities. Since some of the scheduled witnesses before this subcommittee have been from Michigan and Tennessee, we have selected a few illustrations from those States. The following issues during the 14-month period from January 1, 1958, through February 1959 (all included in appendixes C and D) by issuers with a population of less than 25,000 obtained interest rates in the same range as the large issues listed above, and those issues marked by an asterisk were at levels which would not have been eligible for Federal loans if the proposed program had been in effect: Amount Percent Tennessee: Morristown water works. Clarksville water revenue. Springfield sewer.. Shelbyville sewer.. Tullahoma water and sewer.. Michigan: Midland sewer. Lapeer sewer. Mason sewer. Grandville water. Port Huron sewer. Walker Township water. Buchanan sewer. Traverse City sewer revenue. Grand Rapids Township sewer. Harrison Township water. Redford Township sewer.. Midland sewer.. Mr. BROWN. Will you pardon me there? Mr. SPENCE. Let's wait until he gets through with his statement. Mr. BROWN. This is in connection with this table. Mr. SPENCE. All right. Mr. BROWN. Would you mind listing for the record the average cost of interest on issues for water and sewer for towns of a population of 35,000 and less, for the year 1958? Mr. CALVERT. Mr. Brown, our statistical information is set up with population breaks at certain points. One of them is at 25,000, another is at 50,000. Would either of those suffice for your purposes? I don't think we could make it at the 35,000 population break. Mr. BROWN. Well, make it at 25,000. Mr. CALVERT. Thank you, sir. The foregoing facts demonstrate that small municipalities can obtain rates as favorable as those for large municipalities and that the size of the issuing municipality is not a primary factor in the interest rate which the municipality must pay to obtain financing. (5) The proposed program would be contrary to the basic economic and political concepts of our system of government. Our system of government is based on the belief that the Federal Government should not take over functions of private business that can be performed at reasonable rates by private business; and the facts summarized above demonstrate that the desired financing for water, sewer, and hospital facilities is being provided at reasonable rates without the proposed programs. 39807-59-10 Equally important is the fact that the proposed Federal financial assistance to local governmental units would necessarily create a dependence on the Federal Government, with a resulting lessening of responsibility of the local governmental units, which would effect a gradual erosion of the independence of the local government. We strongly believe that the need is to encourage local governmental units to finance needed public facilities without reliance on the Federal Government for assistance in the forms of grants or loans, in order to assure the preservation of the responsibility and independence of the local governmental units. CONCLUSIONS 1. Municipalities are obtaining the financing for growing programs of construction of water, sewer and hospital facilities without the Federal assistance proposed in H.R. 5944. 2. H.R. 5944 would not provide any appreciable amount of additional construction of water, sewer or hospital facilities but would merely substitute Federal financing for private financing. 3. H.R. 5944 would provide a wasteful and inefficient overlapping of present Federal programs providing similar assistance. 4. Small municipalities can obtain financing at reasonable rates without assistance from the Federal Government and at rates as low as those obtained by large municipalities. 5. The proposed program would be contrary to the basic economic and political concepts of our system of government. Consequently, we submit that there is no need for adoption of H.R. 5944, and that it would be unwise policy to commit $1 billion of Federal funds to a program which would simply substitute Federal financing for private financing. We appreciate the opportunity to submit these facts and conclusions to the committee. Mr. Chairman, without going into the four appendixes, A through D, may I respectfully request that they be included in the printed record? I will not go into them here. Mr. SPENCE. They may be included. |