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Mr. SCHONE. Only to this extent, that the legislature has passed legislation permitting the establishment of authorities, or the action to be taken on the part of the county, and it is provided that the full faith of the country as a whole can be pledged to these projects, and when such a project is developed, the money required to meet the local units of government's obligations to either the authority or the county, shall be outside of any charter or statutory limitation.
They have given them the tools to work with, but as to finances, no.
Mrs. DWYER. Have municipalities and county governments gone to the State legislature for help, financial help, on this problem?
Mr. SCHONE. Well, we have occasionally discussed it with the State legislature, but I understand that the State of Michigan has had some financing problems in the last couple of years, and any action to get appropriations out of the State legislature would fail, so we haven't wanted to walk up a blind alley.
Mrs. DWYER. Thank you.
Mr. Chairman, Moody's Bond Survey of April 13, 1959, carried a brief description of 12,660,000 sewage disposal bonds which were scheduled to be sold by Oakland County, Mich., on April 21. That is today.
Last Thursday this sale was indefinitely postponed. However, I think it would be helpful and of interest to have this description of the proposed bond issue inserted in the record at this point.
In accordance with this descriptive matter, the proposed bonds were rated “A” by Moody's.
Mr. SCHONE. That is correct.
OAKLAND COUNTY, Mich. Receives bids on April 21 for $12,667,000 sewage disposal system bonds, $6,919,000 for the Evergreen system and $5,748,000 for the Farmington system. Quality and rating
By virtue of Oakland County's pledge, the bonds will be of medium grade quality, rated provisional A. Call feature
Callable as a whole on any interest payment date beginning May 1, 1974, at a premium of $30 through April 30, 1976, the premium decreasing by $5 each succeeding 2 years through April 30, 1984; at $5 thereafter. Purpose
Proceeds will finance construction of sanitary interceptor sewers comprising the two systems: The Evergreen system will serve the cities of Birmingham, Bloomfield Hills, Lathrup Village, Southfield, and Troy, the village of Westwood, and townships of Bloomfield and Pontiac. The Farmington system will serve the townships of Farmington and West Bloomfield and the cities of Southfield and Keego Harbor.
The interceptors of both these systems will connect with a county trunkline which will deliver sewage to Detroit for treatment under a 50-year contract. Oakland County does not intend to go into the treatment business; it anticipates that the existing arrangement will serve all population demands through 2000. Security
This financing is the first under act No. 185, Public Acts of 1957, whereby counties may contract with their subdivisions up to 40 years for the financing of acquisition or improvement of water supply or sewage disposal systems.
The bonds are secured by (1) the pledge of full faith and credit of each participating municipality to the prompt payment of its proportional contractual share of the bond issue. The total amount to be paid by each municipality will be divided into 30 annual installments, the first coming due April 1, 1960, (2) Oakland County's pledge of full faith and credit to the prompt payment of debt service.
Should a municipality fail to meet its contractual payment, the county treasurer shall deduct in any one year up to 25 percent of the amount delinquent from any moneys in his possession due the delinquent municipality and not pledged to the payment of debts. Comment
The issues are in the first instance the composite obligation of 11 outlying suburbs. The five cities operating under their own charters may discharge their obligation to the county from general property taxes legally unlimited as to rate. The other municipalities, operating under constitutional tax-rate limitations, will meet their contractual commitments through service and connection charges or special assessments against benefited properties. Regardless of the mode of payment, debt service on these bonds is a general operating expense chargeable against general fund.
Oakland is one of Michigan's fastest growing counties, second both in population and underlying debt. True to the pattern of the State's county governments, Oakland has no direct tax-supported indebtedness. And, with the exception of $62,665, this issue will be the county's only contingent liability, equivalent to $19 per capita and 0.7 percent of assessed values. With all municipal and school debts added, the overall debt statistics are $180 per capita and 6.4 percent of values.
Mr. SPENCE. Mr. Rains, do you have any questions?
Mr. SPENCE. Thank you very much, Mr. Schone, for your excellent statement. I am sure the committee will give your recommendations full consideration.
Mr. SCHONE. Thank you.
Mr. Newman, identify your self and for whom you speak, and proceed with your statement.
STATEMENT OF ERNEST H. NEWMAN, JR., BRANCH MANAGER OF
THE W. S. DICKEY CLAY MANUFACTURING CO., KANSAS CITY, MO.
Mr. NEWMAN. My name is Ernest H. Newman, Jr., of Chattanooga, Tenn., where I am branch manager of the W. S. Dickey Clay Manufacturing Co., whose headquarters are in Kansas City, Mo. We are the largest manufacturer of vitrified clay sewer pipe in the Nation.
By request, I am here to speak for H.R. 5944, the Community Facilities Act of 1959. Along with others in the manufacture of clay sewer pipe, I am in wholehearted accord with what this proposed legislation intends to do as a practical solution to an urgent national problem.
Gentlemen, a very real, a very serious problem exists. As manufacturers of clay sewer pipe, we are thoroughly familiar with the growing needs of growing communities, and we are a distinct part of the problem each of them faces for today and the immediate tomorrow.
In the course of my work, every single day in the office or out in the field, I am constantly reminded of the mounting pressures created
by the urgent needs of our communities for all manner of public facilities.
In this, the greatest nation on earth, the small political or geographical subdivisions face a serious threat to actual survival. There are critical shortages of schools, hospitals, and water distribution systems, to mention only those most often widely publicized.
There are many other grave needs that, perhaps unfortunately, do not get the banner headlines. One example of the latter is the matter of water pollution control which accentuates the need for adequate sanitary sewer systems and sewage treatment facilities. There is nothing glamorous about a sewerline or a sewage treatment plant.
I might add that as a manufacturer of clay pipe, and calling daily upon towns who do not have, as a matter of course, permanent financial advice, we do encourage and advise them on the methods at their disposal for building sanitary sewer systems.
It is in this manner that we are thoroughly familiar with the problems they are now facing.
But no matter what the difficulty, every alert city father or town councilman is most decidedly aware of the existence of these needs. These people are often abused, maligned, and certainly badgered to distraction by aroused citizens demanding something be done at once.
Well, hospitals and schools and sewers are not built overnight. Something more than an awareness of such needs, something more than desire and determination to provide for them is necessary before the hoped-for stage can be passed. Adequate planning and construction funds must be readily available.
Cities and towns across the land are unable to finance these vital public projects. Their financial resources are too limited, their sources of long-term credit are too restricted, and yet populations keep growing and their service needs continue to increase.
Under this bill some of this pressure can be eased if not entirely eliminated.
More and more our communities are faced with the problem of trying to meet the urgent demand for only the very minimum of basic public facilities at a time when their revenue sources are sorely taxed to meet day-to-day operating expenses.
Often, long-term financing through municipal bond sale cannot be had due to the statutory debt limitations, or, if such financing is available, excessive interest rates make it impractical.
Couple this with the factor of the large initial investment required for the construction of major community facilities, and you have the best reason for the abuses that have grown out of all proportion.
Our communities have had to resort to unrealistic, unhealthy, and uneconomical approaches toward a solution of these demands. For example, the most economical sequence of construction of the three major community facilities—water, sewers and streets—is to install water and sewer systems prior to paving streets.
In actual practice, however, streets are generally paved first, to make an active community more attractive, enabling it to grow and prosper.
The second step is usually the installation of water facilities, which often means the newly paved streets are torn up, the waterlines put in, and the streets repaved.
You can't really say that money spent in this fashion is spent needlessly, for it does fill the existing need. But surely you can't claim it is being spent economically. The same uneconomical operation is repeated when sewerlines are finally put in under existing pavements.
It is not that our city fathers are unaware of the wastefulness of this construction sequence; rather it is the result of having to make do with inadequate capital for major public improvements.
Although not always the most desirable method, city streets can be constructed little by little, a few blocks at a time, as money for public construction becomes available—a little at a time.
But, gentlemen, there is no way to start from scratch and build a sewer system one block at a time. Initial construction of a sewer system requires an integrated and well planned system of collector lines, trunklines, and final discharge lines, including sewage treatment facilities.
There is no way to construct a sewer line that doesn't go anywhere. It must be a part of a system that ultimately discharges its contents into a suitable and sanitary disposal system.
So what we are encountering more and more is the situation that a sewer system, which entails one of the largest municipal capital expenditures, is being made even more expensive as our cities are finding it difficult if not impossible to secure adequate financing.
And yet, you gentlemen agree that adequate sewer systems are both necessary and desirable. You have proven this again and again by strengthening our public health laws, and there you have an impasse.
The Federal and State Governments rightfully are placing greater stress on the problem of pollution. There are instances where complete halting of home and commercial construction has been threatened unless adequate sewerage systems are provided.
That, of course, means stagnating and stunting a town's growth potentials. Any town threatened with extinction and legal bars to further construction finds itself cornered. Bond capital is virtually exhausted as the credit is used up to build streets and other improvements.
Thus, when the law steps in demanding something be done about wastes, it is imperative that the town find new sources of financing. This bill make an attempt to relieve that problem. It is an extremely difficult thing to accept how many full-grown cities do not yet have a sewer system or adequate facilities for coping with wastes.
Yet when the city fathers become sorely pressed and must start thinking about building something adequate for at least their present needs, without thought of any probable expansion, the cost often staggers them, particularly when there are no financial prospects in sight to pay for these vital projects. But, if they are not built, that town's growth stops by the very laws you have passed and must insist on enforcing
There has been some criticism of spending the amount of money proposed. But I fail to see any reference in this bill to where any community is to obtain any sort of facility as an outright gift. You aren't making presents of hospitals, water, or sewer systems.
It is my understanding that you are hoping to save the smaller communities from serious threats to their health, welfare, and public safety. The larger towns will have equal access to funds from which they may borrow to cover the costs of similar construction.
Those who carp and criticize you for spending are often the most vocal when it comes to demanding increased facilities. But, gentlemen, a loan is scarcely the same as a grant or a gift.
All you propose here is a fund from which money may be borrowed.
In appearing before this committee today, I have not tried to suggest that you wave a magic wand for anyone. Instead, I want to emphasize what I believe you intend to accomplish with this bill.
As good citizens, as the elected Representatives of good citizens, you seek here to enact enabling legislation to help village, town, and city to help itself.
As a manufacturer of clay sewer pipe, that is also my interest. You want to replace the privies, the cesspools, the septic tanks. And this must be done. You want your children and mine, and their children, to have a safe, a sanitary place to live and to grow in good health.
What will happen if you make these funds available at an interest rate any community can pay? For one thing, you can insure and assure proper planning for most economical building and growth.
Building a sewage treatment plant, for example, is something rarely considered in advance of building a town and striving to make it grow. The days when waste could be dumped into the nearest stream or river are gone-fortunately for ours and future generations. Yet, after you have built a treatment plant, you must still lay the pipe to bring the sewage to it.
This bill will make that possible from one coast to the other, from Mexico to Canada, within these United States. This is an economic assistance program, if you will, gentlemen, that begins and ends at home your home and mine.
On the one hand you insist that communities clean up the messthey know that inadequate sanitary facilities are a menace to public health-now you are giving them the means whereby they can economically, honestly, and practically comply with the laws passed by you in their interest.
Mr. SPENCE. Mr. Newman, is your association a member of the U.S. Chamber of Commerce?
Mr. NEWMAN. To my knowledge, they are; yes, sir.
Mr. NEWMAN. We operate in a number of States, and I would not be sure of the State chambers in each State.
Mr. SPENCE. Are you also a member of the National Association of Manufacturers?
Mr. NEWMAN. We are a member of the National Association of Manufacturers; yes, sir.
Mr. SPENCE. Are there any questions? Mrs. DWYER. Mr. Chairman. Mr. SPENCE. Mrs. Dwyer. Mrs. DWYER. I note that you say here you are a manufacturer, and of course a businessman. You say on page 5 of your prepared testi