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Also, it seems reasonable to assume that of those obtaining grants-in-aid, a large percentage would have proceeded with their projects without the grant due to increased concentration of population and ability to finance.

The degree of success of the program is a highly debatable one and strong arguments could be made on either side as to the degree, but there is no question in our minds that in spite of any degree of success, it does not offer a total solution to the problems.

In a report submitted to the Federation of Sewerage and Industrial Wastes Association's annual convention in Boston on October 8, 1957, prepared by D. A. Poole, Curtiss M. Evarts, and David B. Lee, State sanitary engineers of Indiana, Oregon, and Florida, respectively, it was demonstrated that the distribution of the grants-in-aid to the States, in some cases, exceeds the amount that could be used by four times, while in other States the amounts distributed amounted to only one-quarter of the amount that could be used, all based on present formula of 30 percent of construction or not to exceed $250,000 per project.

The conclusions of the report bear out the reported needs and paragraph (a) of conclusion 3 is a supporting conclusion to the requests made herein.

We would urge Congress to take the following steps which we are firmly convinced will establish the background for a proper solution to facility construction and if they are adopted will start a strong public works program on a local level which will go far to solve the present problems of unemployment:

1. Abandon the theory of Federal grants for sewage treatment works as established under Public Law 660.

2. Increase the ability of the Housing and Home Finance Agency to make "public works planning advances” for sewage treatment works and water supply systems.

3. Establish an adequate Federal loan support program for sewage treatment works and water supply systems. As to grants-in-aid, we do not feel that the grants necessarily are a strong encouragement to construction. It must be admitted that in some cases where the amount of the grant was the difference in the ability of the unit to sell bonds for the project that it does encourage construction.

However, on the other hand, some units who could properly finance their own program might have a tendency to hold up the project in the hopes of obtaining a grant and if they did not receive one initially they might put the project off until the next year or a year thereafter in the hopes they eventually might obtain some "free” money.

In some cases grants have been given after projects are already under construction. The philosophy of the Government giving people something they have the ability to pay for themselves does not seem to be compatible with our beliefs.

As to public works planning advances, the Housing and Home Finance Agency should be provided with funds so that expansion of their advances for sewage treatment works and water supply systems could occur.

The Agency should be encouraged to place the applications for advances to be used for these two purposes at the top of the priority lists and advances should be sufficient to provide complete construction plans.

This might be placed on a formula of the advance being limited to 85 percent of the actual cost of the planning work with 15 percent being provided by the local unit so that only projects in which the unit has a sincere enough interest in the need for the work to raise funds of its own in the amount necessary to meet the suggested 15 percent would be eligible for the advance.

The balance of the report dealt with the third phase of establishing a Federal loan support program and we would like to take this opportunity to draw to the attention of the House Banking and Currency Committee, House bill 2733 which was introduced by the Honorable William S. Broomfield of Oakland County on January 19, 1959, for your serious consideration as a part of your deliberations on the bill now under study.

On March 26, 1958, we had the honor and the pleasure to appear before the Senate Banking and Currency Committee to testify in behalf of Senator Fulbright's bill No. 3497, which was a community facility bill which failed to pass Congress.

We raised some objections to this community facility bill, as proposed by Senator Fulbright, since it provided for loans for construction, repair and improvements of streets, sidewalks, highways, parkways, bridges, parking lots, airports and other transportation facilities, public parks and other public recreation facilities, public hospitals, rehabilitation and health centers, public refuse and garbage disposal facilities, water, sewerage and other sanitation and public utility facilities, public police and fire protection facilities, public schools, libraries, offices and other public buildings and public land, water and timber conservation facilities.

The bill proposed a $2 billion community facilities fund which, on the surface, appeared to be a tremendous figure, even to those of us who are involved in multimillion-dollar projects, yet in balancing this amount against the public works and public facilities which would be eligible under the act, we felt certain that either the amount must be considerably increased or some of the proposed eligible projects eliminated. Otherwise, the basic community facilities would be relegated to a minor position as they so often have in the past.

Certainly House bill No. 5944, as introduced by Congressman Spence, has taken care of this problem and lends credence to our belief that community facilities, as defined in the bill, are the basic needs of any community.

If the proposed legislation is enacted into law, it would go a long way in solving our present critical problems and could serve to properly solve problems which will be critical in a short time. As to known unsolved problems of financing where the proposed legislation would be the salvation, we would like to point to a specific problem in our county:

The Clinton River Basin in Oakland County is an area encompassing approximately 250 square miles lying directly in the path of the approaching army of increased population and its resultant demands on the water supply system and sewage disposal facilities.

The units of government in the area are aware of the need for facilities and have petitioned the board of supervisors of the county to develop a master plan of sewers and sewage treatment facilities for the Clinton River Basin. The board of supervisors recognize that the only economical and sound solution for the individual units is on an area basis, and as a result of this have, by resolution, established the Clinton River sewage disposal system under the county department of public works.

The department is now preparing construction plans for this project with the aid of a planning advance through the Housing and Home Finance Agency. From a planning and engineering viewpoint, the answer to the problem is the construction of interceptor sewers to transport all of the sewage to a central treatment plant located on the lower portion of the Clinton River to abate pollution.

The southerly or downriver portion of the area is now at the danger point and needs immediate relief and the interceptors need to be of such a size as to accommodate the present and ultimate populations of the upriver areas.

The sewage treatment plant site must be acquired in such a size as to adequately permit expansion at later periods to accommodate future populations. The initial treatment plant must be constructed with


some built-in features for the ultimate population and others constructed in such a manner so as to be expanded.

While there is a strong desire to do the project right and to have the burden of the costs assumed by the area, it is apparent that a bond issue could not be sold at a rate of interest which would make the project financially sound.

There has been a known need in the area to supplement or replace the ground-water supply with a potable and adequate water supply from Lake Huron for many years, and each year sees a serious lowering of the water table for ground-water sources and inadequate supplies from other sources, and yet we are unable to guarantee that there will be the required supply before it is too late.

Oakland and Macomb Counties have joined together and have spent $116,000 for an engineering report on the proposed project and it could be constructed in short order if financing problems were

The ultimate ability for the system to meet its obligations under a bond issue with realistic water rates is not a question. The only problem is in the first 5 years if a realistic interest rate is not obtained, and here is where the proposed community facilities bill, as introduced by Congressman Spence, and/or the loan support bill, as introduced by Congressman Broomfield, would make it possible to provide for an adequate, safe, and potable supply of water for present and future population.

These examples could be repeated over and over again for specific projects in the region and we are sure throughout the Nation. Such à program we feel, while not bringing us to a state of utopia, will solve our major problems in relation to sewage disposal and water supply and in addition will spark an immediate construction program which will go far in relieving the present unemployment problem in metropolitan areas.

We suggest the adoption of such a program as being basic to the principles upon which our forefathers founded our form of Government in which the Federal Government assists to perform those functions which the State and local governments are unable to perform by themselves.

It is further suggested that if such a program is adopted that adequate safeguards be provided so that only projects which clearly evidence eventual ability to pay any advancements under the program are certified.

This does not mean that vision should not be used since this will be necessary. If such a program is handled through the Housing and Home Finance Agency, it will probably mean that their planning and financial division may have to be strengthened to properly review applications from areas where reliable regional planning commissions are not in existence and where units have not employed r-cognized financial consultants in connection with their applications.

We would further suggest that consideration be given for providing that sewage, sewage treatment, and sewer facilities be certified as eligible, under the act, by the Department of Health, Education, and Welfare after review by the State agency charged with water pollution control.

In the proposed act under declaration of policy, section 201, it is stated that it has been the policy of Congress to assist lower levels of government in providing facilities essential to the health and welfare of its people where they are financially unable to provide same.

We believe sanitary sewers, drains, and water facilities are essential to the health and walfare of all our people, and certainly an immediate public works program would serve to provide these much-needed facilities and at the same time relieve unemployment, not to mention the stimulus it would create in the many allied businesses, including the housing industry, which we have previously attempted to outline.

The opportunity to appear before this committee to present the views of the National Association of County Officials and Oakland County, Mich., is greatly appreciated.

If the members of the committee have any questions, I would be most happy to attempt to answer same.

Thank you.

Mr. SPENCE. Thank you, Mr. Schone, for your excellent statement.
Are there any questions?
Mr. Brown. Mr. Chairman, I have a question.
Mr. SPENCE. Mr. Brown.

Mr. Brown. Mr. Schone, isn't it true that many smaller communities simply can't find financing for sewer and water facilities in the private market?

Mr. SCHONE. That is correct, sir.
Mr. BROWN. Why is this?

Mr. SCHONE. Well, it is basically because they do not have the tax base, and the population which will support a bond issue.

The normal procedure of private banking institutions is assess existing conditions in the area, and not predicate their purchases on the basis of some future development in the area.

Without the sewer and water, these areas will never develop to provide the tax base which would permit them to sell bonds. Either they are not able to sell them, or the interest rate is prohibitive at the present time.

Mr. Brown. That is all, Mr. Chairman.

Mr. SPENCE. Mr. Schone, it is true, too, that in many States there is a constitutional limitation on indebtedness, on the tax rate, or the expenditures of municipalities, and many impose limits on all three. Some of these smaller municipalities have reached the limit of indebtedness and are unable to sell direct obligations; isn't that correct?

Mr. SCHONE. That is true, sir.

Mr. SPENCE. These cities have to resort to revenue bonds, which are not included in the indebtedness. The revenue bond necessarily must bear a higher interest rate than the direct obligation bond.

Mr. SCHONE. That is certainly true. At least in some cases, as much as 1 percent difference.

Mr. SPENCE. I am glad to hear you say that the basic need of municipalities and industries is water and sewage facilities. That is the first thing that industry looks for, is it not?

Mr. SCHONE. That is correct, sir. That has been our belief for a good many years.

Mr. SPENCE. I am glad to hear you state the impact the enactment of this bill into law would have upon the unemployment situation. Mr. SCHONE. It certainly will in the Detroit metropolitan region, sir.

Mr. SPENCE. It will develop growth of cities and be an argument for industries to locate in many of the smaller cities. Isn't that true?

Mr. SCHONE. That is true. A number of industries desire to locate in the area I represent, but there is not an adequate water supply, nor adequate sewer facilities.

We have estimated that in our country alone, over the next 15 years, we should spend something over $200 million for sewage facilities and water supply, in order to keep up with anticipated growth.

Mr. SPENCE. It will assist in meeting the water pollution control problem, which otherwise I don't think can be entirely solved, because a chain is just as strong as its weakest link. While the larger cities may be able to install proper sewage treatment plants, the smaller cities have no capacity to do that without assistance, and unless there is complete control, it is no control at all.

Mr. SCHONE. That is correct.

Mr. SPENCE. Although you might control the disposition of sewage in some of the larger towns, the smaller towns along the river, if they continue to dump their sewage into the river, will keep it polluted, and it is a menace to the health of our people, it is a deterrent to industry, and it is a danger not only to that particular section but to the whole Nation, because epidemics spread.

Mr. SCHONE. That is the whole reason for the existence of our county department of public works, which was created a year and a half ago by the State legislature. The fact that, in one specific area, there were eight small cities, three villages, and two townships, all of whom were cited for pollution of the streams by the water resources commission of the State, and were taken into circuit court, and a court decree issued ordering them to abate pollution.

They as individual units of government could not solve that problem themselves. The solution was not in a single plant for each individual city or village. So the answer to it, as far as we were concerned, was to have these problems taken care of by the county, on a larger area.

I am happy to say that we have completed construction plans, and will in the matter of about 30 days be selling $12,667,000 in bonds to solve that problem. It could not have been done by the local units of government.

Mr. SPENCE. I think in most States, sanitation districts are being organized for that very purpose, which proves the interest of many cities which are unable to take care of the problem by themselves. This sanitary district has the power to levy taxes and the essential governmental powers.

Mr. SCHONE. I am sure the situation varies throughout the country, but I am almost sure that in every State there is pro ision for approaching this problem, either by an authority on a sanitary district or on a county basis. At least on an area basis.

Mr. SPENCE. Are there further questions?
Mrs. DWYER. Mr. Chairman-
Mr. SPENCE. Mrs. Dwyer.

Mrs. DWYER. Mr. Schone, has your State legislature help financially with problems of the municipalities as they concern sewage disposal plants?

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