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I noticed on page 5 a problem, and I quote: In this bill 25 percent of the funds made available under this section shall be set aside and used exclusively to extend such systems with respect to the projects and communities having a population of 35,000 or less according to the most recent census.
What do you think about that?
sir. Mr. Brown. It simply says that 25 percent shall be reserved for cities of less than 35,000.
Mr. EGAN. I believe that is a matter for the committee to determine after the hearings have been conducted.
Mr. BROWN. I know that but
Mr. EGAN. And I certainly would be in favor of the proposals that you have outlined in the bill.
Mr. BROWN. That is all.
Mr. WIDNALL. Your city would have to vote the bonds, would they not?
Mr. Egan. No; the council could pass them, the revenue-producing bonds.
Mr. WIDNALL. If you were issuing bonds for the purpose of the $75 to $80 million water system, wouldn't your city have to vote on that?
Mr. EGAN. No, sir; the council by the Home Rule Act of the State of Michigan could provide for an increase in the water rates to pay for the revenue indebtedness and to pay for the paying off of the bonds and dismissal of the bonds.
Mr. WIDNALL. So actually there would be no public referendum on that at all?
Mr. Egan. No.
Mr. SPENCE. If there are no further questions, you may stand aside, Mr. Mayor. We are very glad to have you and the city solicitor.
Mr. EGAN. Thank you very much, Mr. Chairman.
Mr. SPENCE. Our next witness is Mr. Herbert J. Bingham, executive secretary, Tennessee Municipal League, Nashville, Tenn.
Mr. Bingham, we are glad to have your views, and we thank you for coming here and giving us what information you have on this very important subject. STATEMENT OF HERBERT J. BINGHAM, EXECUTIVE SECRETARY,
TENNESSEE MUNICIPAL LEAGUE, NASHVILLE, TENN. Mr. BINGHAM. Thank you.
Mr. Chairman and members of the committee, I am Herbert J. Bingham, executive secretary of the Tennessee Municipal League.
I am testifying for the league and also as a representative of the American Municipal Association, which through its affiliated State leagues and cities speaks for virtually all of the municipalities in the Nation.
I want to express my appreciation and that of the mayors and city officials from our own State for the splendid legislation which the chairman of this subcommittee and the full Banking and Currency Committee has developed and put through Congress in recent years. Had it not been for your bank renewal and other bills which this committee developed, I do not think the urban communities of this country would be in operation at this time.
The executive committee of the American Municipal Association has endorsed the principals incorporated in H.R. 5944 of expanding the Federal community facilities loan program. This position is predicated on the interest in the program on the part of many of the Nation's smaller communities. The bill recognizes the fact that many of the smaller communities are paying inordinately high interest rates for money needed to finance essential public facilities and that expansion of the HHFA community facilities loan program is the only method of making it possible for these small communities to secure loans at interest rates they can afford to pay.
The Tennessee Municipal League likewise strongly endorses H.R. 5944.
A statement adopted by the board of directors of the Tennessee Municipal League pointed out that, an enormous backlog of currently needed public works facilities and improve ments exceeding $500 million exists in the urban areas of Tennessee and are the direct obligations of our municipal governments.
The statement further pointed out:
Tennessee local governments do not have either the debt capacity or the tax resources to finance any substantial portion of these vitally needed public facilities. Outstanding municipal indebtedness is already dangerously high, with outstanding general obligation bonds exceeding $225 million and revenuebacked debts estimated at $340 million. Considering county government debt estimated at more than $210 million, the combined and overlapping local government debts in Tennessee now exceed $775 million.
Now, gentlemen, that is a tremendous piled up debt.
The provisions of this bill limit loans to projects involving the construction of water and sewage facilities, and to public hospitals and nursing homes, including hospitals owned by nonprofit agencies as well as State subdivisions.
Tennessee's accrued and unmet needs for public facilities in these three categories are substantial, indeed, and exemplary of the disgraceful deficit in these essential service installations in other areas of the country.
A survey conducted by the Tennessee Municipal League in 1958 produced conservative estimates of current needs as follows: Sewage disposal facilities and plants.
$24, 430, 000 Sewer service lines----
110, 000, 000 Water system im vements and extensions--
45, 000, 000 Total -
179, 430,000 Information supplied by the Tennessee Department of Public Health proves that a chronic and alarming deficit of hospital beds in all categories exists in Tennessee. The following estimate of needs is based upon criteria set out in the Hill-Burton Federal Aid Hospital Act.
The above requirements are a part of the "lost ground demand" for public works discussed in a 1957 report entitled "Planning for Public Works” prepared by the special assistant to the President for public works planning. The President's assistant stated :
The public works program to meet the lost ground demand alone would cost about $130 billion during the next decade. He went on to cite a need for construction during the next 10 years of $29 billion of public works for replacements, and a minimum of $45 billion to meet the growth in population. Thus, the President's assistant found a 10-year requirement of $204 billion, and I would emphasize tht this has to do exclusively with State and local government public works requirements. Yet, the report cited the fact that the 1954 rate of construction was only 42 percent of the amount required.
Now I wish the administration would look at its own figures and come to the Congress with program that would meet the needs of the country. But the assistant to the President proposed a mere $10,000 per State so there might be an investigation and study of public works needs in the communities and the States—a pittance. If this is the solution to the problem which was recognized, raised, and discussed, then the solution is to ignore it.
Narrowing down the data to the types of projects authorized in this bill, the public works report pointed out that the 10-year requirement for water and sewer facilities is $25.3 billion made up of the following component requirements: Current backlog, $10 billion; replacing facilities for obsolescence, $6.2 billion; facilities to meet growth, $9.1 billions. This is water and sewer facilities alone.
The rate of construction in 1954 in the water and sewerage field was only 41.7 percent of the annual requirement.
If you want to discuss deficits and balancing any budget, I would like someone to discuss this one which has to do with the health, safety, and prosperity of tens of thousands of communities, about 17,000 communities in this country.
What are the causes of this sorry, deplorable record of furnishing the bare minimum of such essential facilities for health and economic activity as water and sewerage service? Why is a Federal low interest loan program necessary and justified?
Our board of directors has summarized one of the chief difficulties as follows:
The preemption of available national resources and governmental revenues by the Federal Government and limitations on municipal powers imposed by the State have caused a condition of chronic financial incapacity in municipal gov. ernment and resulted in disastrously inadequate public facilities in the rapidly growing urban communities of Tennessee and the Nation. These public service deficiencies are impairing the efficiency of urban communities and reducing the productive capacity of the Nation.
Another chief block on local government action, which will be specifically cured by this bill, is the surge upward in interest rates of more than 50 percent during the last 6 years. And I might add due to Federal monetary policy:
Smaller municipalities in my States are paying 4 to 442 percent interest on general obligation bond issues, and from 5 to 534 percent interest on revenue bond issues. I will cite one concrete example. Think of the problem confronting the town of Oneida, Tenn., a splendid community of 3,000 population which is struggling to provide facilities needed to accommodate new industry and industrial population. To carry out the $1 million improvement in its water and sewerage facilities, recommended by an engineering study to overcome a 20-year backlog of needs, its officials find that interest rates of 5 to 512 percent must be paid. How can this comunity produce the revenues from an annual debt amortization charge of $55,000 for interest and more than $30,000 for retirement of principal?
I would like to cite one other example: The city of Nashvillee, Tenn., is a city of 350,000 population. It has a suburban fringe of 160,000 people without sewers. They have struggled with the problem now for some 12 years. They have had thorough engineering studies made but cannot find a means of raising the $40 million necessary to sewer this vast area. They have just built a $121/2 million sewage disposal plant but even such a large prosperous city cannot through its financial apparatus provide an additional $40 million.
I think it is time now to take note of the gross and crippling discrimination against smaller local governments involved in the higher interest rates imposed upon them due to the large scale organization and operation of investment banking in this country.
Irrespective of the individual soundness of a municipal government's financial operations, the smaller jurisdiction with a smaller bond issue inevitably is forced to pay much higher interest rates, and must often enter a bond market which is restricted essentially without competition among various investment houses. Thus, those communities least able to pay are forced to pay much more. This is one of the chief factors which is destroying the very place and function of the smaller and nonmetropolitan communities in our society and its economy. For this reason alone, the Congress should enact this legislation in order to equalize the cost of money for the smaller communities in order that they can continue to exist, and the small hometowns will not be pushed off the American scene due to their inability to compete.
There are those in the Congress who will accept the fact of these deficits in water, sewerage, and hospital facilities, and yet whose policy will be: Let thé have-nots do without. To that policy, I would respond by citing the additional consideration that water, sewage, and hospital services and facilities are essential not merely for the health, safety, and welfare of our people, but are essential to maintain the productivity of our industrial economy which is concentrated in the urban areas of the Nation. This was the specific conclusion of an intensive 18 months study conducted in Tennessee by our State department of conservation and commerce, and the Tennessee Municipal
These findings were incorporated in a handbook which sets out in detailed standards the more important facilities and services which a
community must provide to accommodate and foster industry and manufacturing operations. I have appended to my testimony these detailed standards for water, sewage, and health services, and hope that they might appear in the record of the hearings.
Mr. SPENCE. Without objection they will be inserted in the record. (The data referred to is as follows:)
Adequate water is one of the most important community assets for the attraction of new industry. A dependable supply and good distribution system are necessary for industrial use, fire fighting, and the personal needs of people.
STANDARDS AND ACTION PROGRAMS
I. Adequacy of source
Standard.—The capacity of the source of water supply should at all times substantially exceed the maximum daily withdrawal.
Action.—If a city's present supply of water is inadequate, or is likely to become so in the foreseeable future, consulting engineers should be engaged to develop plans for increasing the supply. The State may assist in locating new underground sources and flow of streams-information on such assistance available may be obtained from MTAS. II. Water plant
Standard.—The daily capacity of the water plant should at all times substantially exceed the daily demand for water.
Action. If the capacity of the waterplant does not meet present demand or will not meet anticipated future demands, consulting engineers should be engaged to develop plans for enlarging its capacity, or replacing with a modern plant. III. Adequate mains
Standard.—Water mains throughout the city should meet the standards of the Tennessee Inspection Bureau.
Action.—Competent engineers should be employed to prepare plans for improvements in the distribution system where deficiencies exist. If these are not extensive, the water system may make piecemeal improvements from current revenues. Substantial improvements probably would require bonds, contractors, etc. IV. Fire rating
Standard.—The city should reduce as much as possible the deficiency points against its water system on ratings by the Tennessee Inspection Bureau.
Action.-In rating the fire protective capacities of a city the Inspection Bureau gives more weight to the water system than to any other factor. Up to 1700 deficiency points may be charged against the water system. A city should find out what specific deficiencies have been noted and should systematically set about to eliminate them as rapidly as economically possible. V. Health rating
Standard.—The water system should be approved by the Tennessee State Department of Public Health.
Action.—Water systems are rated by the department on a percentage basis. A system rating 90 percent or better is “approved.” Action should be taken to overcome any deficiencies pointed out by the department. A State-licensed
erator of the waterworks is essential for an approved system. VI. Water meters
Standard.—Service to all customers should be through meters regularly inspected for accuracy and properly maintained.
Action.—Meters for all customers should be purchased, installed, and maintained by the city. A program of periodic testing should be followed to assure the accuracy of all meters, and any defects should be promptly repaired.