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That is a pretty high figure, and I wondered if that was the prevailing cost in the Long Island area. If so, it would be higher than the prevailing cost elsewhere.
Mr. SILBERT. I was trying to draw this illustration. Let us take the series of 1985, which are 344 percent bonds, which are selling at 88, which is a yield of almost 4 percent.
It is quite obvious if you were a purchaser and were interested in buying a bond, it seems to me you would prefer to buy an indebtedness of the United States Government yielding 4 percent, rather than buy the indebtedness of the School District of Plainview, or the sewage disposal plant of Commack, which is going to yield 442 percent.
That is the point I was trying to make. I wasn't trying to quote existing rates.
Mr. WOLK. Could I make just one more suggestion in addition to what Mr. Silbert said, and that is this very practical problem that exists when a community borrows, either through bonds or through this Community Facilities program. Actually, the indebtedness bears interest from the day when the funds are made available.
Now, it is conceivable that a community could borrow money on May 1, that they would start paying interest and a certain amount towards amortization and retirement of the debt from that date.
However, the construction of the plant might not take place for possibly a year, or a year and a half. And that plant might not be reaching its peak of ability to serve for 4 or 5 years, possibly,
By that I mean, a water plant, the number of consumers hooked on might possibly take 4 or 5 years, and thought should be given to (1) extending the term of the loan, but more important, to creating a moratorium for payment of interest and retirement of debt for possibly the first 4 or 5 years of the loan, because those are the critical periods, when the plants are being built and distribution is being set up and the consumers are being tied into this particular plant.
That is when the income is going to be the least, and when the plant is being constructed.
I think that possibly consideration should be given to ease up on the payment of interest until the plant can begin to operate and get its income.
Mr. SPENCE. We have one more witness we would like to hear before we go to the floor.
Mr. WIDNALL. Mr. Chairman, I would just like to make this comment. I believe it is the usual practice to include the interest during construction in the cost of construction. So that actually, it is figured in, in advance, by the community.
You referred to Suffolk County, I believe. I think for the record it should show, too, that last year the Suffolk County Water Authority floated $134 million worth of bonds at 3.45 percent.
Mr. SPENCE. Thank you very much for your testimony, gentlemen. I am sure the committee will consider it.
We will now call Mr. William Lamkin, attorney and director for the Water Pollution Control Commission, State of Kentucky.
Mr. Lamkin, you speak not only for yourself but for the other officers of this very useful organization, which is performing splendid service in the State of Kentucky.
We are very glad to have you, Mr. Lamkin, and we thank you for your coming and giving us the benefit of your views.
STATEMENT OF WILLIAM A. LAMKIN, JR., ATTORNEY, WATER
POLLUTION CONTROL COMMISSION, STATE OF KENTUCKY Mr. LAMKIN. Thank you, Mr. Chairman. I appreciate those kind remarks, Mr. Chairman. I would like to add that today I bring with me a second statement, and it is a statement that was prepared by the Commissioner of Health for the State of Kentucky, Dr. Russell E. Teague, who couldn't be present.
It also represents the views of the Kentucky State Board of Health.
I think the reason I am serving in this dual capacity is that the administrative office of the Water Pollution Control Commission is located in the State health department, so actually we work together.
So, first, with your indulgence I would like to read the statement of the commissioner of health as it reflects his feeling, regarding H.R. 5944, and also the feeling of the Kentucky State Board of Health.
Mr. SPENCE. You may read them both.
STATEMENT OF DR. RUSSELL E. TEAGUE, COMMISSIONER OF
HEALTH, STATE OF KENTUCKY
Mr. Chairman, and members of the committee, on behalf of the State board of health, I want to express my appreciation for the opportunity of submitting this statement for this committee's consideraation with regards to H.R. 5944 as it pertains to the financing of the construction, repair or improvement of community water supplies and systems.
In many instances, municipalities and other political subdivisions of the State of Kentucky are unable to raise the necessary funds at a reasonable cost under the existing terms and conditions available to them for the construction of such facilities.
The construction, improvement, or repair of these needed community facilities would do much to improve the public health of the communities in Kentucky. Where such facilities have been made available to communities, in the past, a noticeable improvement has taken place in the incidence of disease and in the infant mortality rates and thus the general health and welfare of the region have been improved.
By far the greatest proportion of water supplies in need of improvement in Kentucky are those in the mountain region which is in severe economic distress due to the decline of the coal industry within the past few years.
In talking with the people throughout Kentucky it is evident that a more favorable financing plan must be found in order for these communities to provide the essential community water facilities which will provide a safe and satisfactory water and thereby insure the improvement of the public health of the community and subsequently of the entire population of the State.
The effects of the lack of such facilities are indeed measurable and each day that communities are without such approved facilities con
stitutes an ever-increasing danger to the individual, the community, the State, and the Nation,
With the above in mind and in consideration of providing a way for communities to accomplish that which they cannot now do, I would therefore urge that, you give serious consideration to the passing of this act as it applies to water supplies.
I am sure for this consideration that the people of Kentucky will be forever grateful.
STATEMENT OF WILLIAM A. LAMKIN, JR.—Resumed Mr. LAMKIN. Now, with the further indulgence of the committee, I read the statement prepared by the staff, after approval and consideration by the Kentucky Water Pollution Control Commission.
Mr. Chairman and members of the committee, the Kentucky Water Pollution Control Commission is grateful to the committee for the opportunity afforded to present this statement in connection with the committee's consideration of H.R. 5944, as it relates to the construction of sewers, water pollution control program, and conservation of our water resources.
The commission represents six different agencies interested in the water pollution control field. They are the department of health, department of conservation, department of fish and wildlife resources, division of strip mining and reclamation, department of mines and minerals, and the attorney general.
The commission's experience has shown that it is the smaller communities where the need for financial assistance is greatest.
Most of these small Kentucky municipalities with inadequate or no sewer systems and sewage treatment facilities have questionable or marginal financial ability to undertake construction of these facilities, even in those cases where a grant of 30 percent of the cost is available under Public Law 660.
We have estimated from studies of communities throughout the State that there are some 92 communities needing sewer extensions and sewage treatment facilities in the following population groups: Over 50,000.10,000 to 20,0005,000 to 10,000Under 5,000__
It is obvious that the greatest need for sewage treatment facilities is in the population group of 5,000 and under.
In Kentucky, sewer systems and sewage treatment plants are financed almost entirely by the issuance of revenue bonds retired by a service charge.
Of course, it is possible to use general obligation bonds, but low constitutional debt limitation and the use of this bonding capacity for other needed facilities in the past, practically eliminates this method of financing.
Therefore, the smaller communities, in many cases, cannot finance, even under the most favorable conditions, the large expenditure necessary to build these facilities.
In addition, as the very small communities expand, many other communities not listed above will need sewer systems and sewage
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treatment plants to protect the public health and to provide an environment necessary to attract needed industries to the State.
In addition to the small communities, the cost of treatment in the region of the eastern Kentucky coal field is considerably higher than the average cost, due to the type of terrain and space limitation.
Because of the condition of the coal industry at this time, these areas can be considered as economically depressed areas of the State and are the areas that need sewer facilities the most and have the least chance of financing under existing methods and laws.
The larger cities also have the problem of financing needed trunk and interceptor sewers to serve the expanding fringe areas.
There are now existing areas where inadequately functioning septic tanks are causing health problems and to continue to expand without trunk sewers conveying the sewage to a centrally located and well operated plant, requires in the long run a greater expenditure of money by the people than the cost of constructing and operating trunk sewers in the first place.
It is proper that these people should pay for the facilities, and if a method of Iong-term financing is available, they can.
Due to a lack of financing ability, it is an economical waste to continue to develop areas and then try to correct the unsatisfactory condition at a later date, at greater expense to the citizens.
It is estimated that some 40 communities in Kentucky have taken advantage of existing programs now administered by the Housing and Home Finance Agency.
The Advance Planning Act has been of very great benefit to our program. Even the large municipalities do not have the funds available to pay the cost of engineering construction plans and specifications. The advance loan makes it possible for them to prepare these plans and pay for them out of the bond issue.
A number of towns have also made use of public facility loans, Public Law 345, where they otherwise could not finance the project. The towns currently utilizing this program to construct sewers are the cities of Greenville, Beechwood Village, and Muldraugh.
While Kentucky has utilized these programs, it has been our experience that not enough money is currently available or the program is being administered in such a manner that enough municipalities cannot participate in it.
It is proper that these communities should pay the cost of building, operating, and maintaining the necessary sewers and sewage treatment plants, but under present methods of financing in Kentucky, many of them do not have the opportunity as the projects simply cannot be financed except with long-term loans, which are not available by private financing, even under the most favorable bond market.
It is not difficult to dramatize the effects of the lack of these facilities, as they are related to the programs of public health, water pollution control, and conservation, as well as to the health and well-being of the State and the Nation.
Therefore, we urge that you give every consideration to the passing of this act, particularly as it relates to necessary sewer and sewage treatment plant construction.
Sir, that completes the two statements that I have brought with me today from these agencies.
Mr. SPENCE. There is no area in Kentucky that is more in need of these facilities than the eastern district of Kentucky, the coal mining district, where great unemployment exists; isn't that correct?
Mr. LAMKIN. I think that is true, sir, although, as I named a city or two there, it is also needed throughout Kentucky, in the western end, but your statement that it is needed the most in eastern Kentucky is certainly correct.
Mr. SPENCE. Don't you think that if there was an adequate water supply, proper sewage treatment works, in many of those towns, that the character of the towns would change, that industries might come there to supplant the loss of the coal mining industry?
Mr. LAMKIN. Yes, sir, that is certainly true. And I know of some instances where that has actually happened.
Now, this is in central Kentucky, which is not the mountain area, but the city of Cynthiana, for example, after much prodding by the commission, which has the job of enforcing the water pollution control laws of the State, it did decide to try to build its sewage treatment plant, and before it got through with it, an industry decided to locate there, because these facilities would be available for treating the increased amount of sewage which would come from the city by the increased homes, as well as the industrial waste that would come from the industrial processing of the new plant.
Mr. SPENCE. The employment conditions in eastern Kentucky are terrible, are they not?
Mr. LAMKIN. Yes, sir, it is pathetic at this time, sir. They are bringing in food and donations from other regions to feed the people.
Mr. SPENCE. And the Government is helping to feed the people.
Mr. LAMKIN. No, sir. I think there is one thing that is absolutely a fact, Mr. Chairman, that while, of course, there are a few exceptions, the septic tank does not serve the purpose any more as a community method of treating sewage.
Usually, in the subdivisions in the cities, and even the fringe areas, that are developed by individual developers, two, three, or sometimes four houses are placed on an acre of land, and it is impossible to have sufficient drainage area to absorb the waste from the septic tanks.
Another thing that we have found that goes along with this is the increased usage of automatic washing machines, and that sort of thing. The average household is using more water. The detergents and other things that go into the average household septic tank is becoming more difficult to treat from the standpoint of chemical characteristics, as well as volume.
We have areas, such as Beechwood Village, which is a subdivision of the city of Louisville—and that is no exception, there are other places in the State-where sewage actually runs out and runs down the streets.
And I might add that is one of the better subdivisions around the city of Louisville, and I want to state further that they are planning to build their sewers and are making application to the Housing and Home Finance Agency for the money, because their bonding representative says they cannot sell their bonds on the open market.