1 new commercial port, and the economic development plan, required and authorized by section 6 of Public Law 88-170.

It is significant, too, that beginning July 1 of this year, Guam will begin to repay with interest approximately $28 million of the $45 million funded by the Congress.

While the Government of Guam has benefited considerably from the funds appropriated by the Congress up to now, it has not reached the original goals presented to the Congress in 1963 as a justification for the Guam rehabilitation program.

There are two reasons for this failure. First, the original estimates of public facilities cost had to be made hurriedly during an emergency period just after the destructive typhoons noted above and without the benefit of detailed engineering assistance. Such assistance would have consumed too much time and would have required a substantial outlay of funds not then available to the government of Guam. Secondly, construction took place when spiralling costs took their toll, affecting adversely the amount of construction that could be completed with funds appropriated by the Congress.

Guam today is a much more livable community because of the foresight and generosity of the Congress. But it still has a considerable way to go before it has adequate community facilities and services.

The constant increase in both the Guam and military population makes inevitable the need for those services essential to today's typical American community, which Guam has become new and modern school plants, water and sewer systems, public utilities, and transportation terminal facilities, both air and water. Guam is on the threshold of a booming tourist program and this cannot thrive without the amenities of modern urban living.

The Governor of Guam, keenly aware of the pressing demands in his community, has projected certain essential public projects for which he will need the $30 million increase authorized in this bill. His projections for fiscal years 1970, 1971, and 1972 are attached to this report to illustrate the types of activities that could be considered for recommendation in future budget proposals.

Before seeking and now urging the enactment of this increased authorization, the Government of Guam researched extensively that territory's own resources to see whether these essential projects could be funded without recourse to additional Federal aid. We believe that there can be no question that Guam has searched diligently and has taken such steps as were available to it. The results, however, were not encouraging. Firstly, in July 1966, it imposed a number of local taxes which raised annual revenue receipts an estimated $3.5 million per year. Secondly, the Governor requested the assistance of two tax consultants from the U.S. Treasury Department who made an extensive study of the local tax system. Finally, Standard Research Consultants, Inc., a subsidiary of Standard and Poor, was hired to make a study on the ability of the Territory of Guam to sell general obligation bonds for the purpose of funding capital improvement projects.

The tax consultants concluded that local corporate and individual income taxes and inheritance and gift taxes, which Guam does not have, have the possibility of producing additional revenue and of improving the progressivity of the tax structure. They also found that tax rates on property, alcoholic beverages, liquid fuels, and tobacco

are very substantially below the rates that are common elsewhere in the United States. However, we note that an increase in taxes would increase the already very high cost of living in Guam. Tax changes to produce additional revenue are a possibility and the Department will urge their consideration by the Guam Government.

The bond consultants, in their recent report, concluded that the debt being incurred by Guam through operation of the rehabilitation act precludes the possibility that Guam can, in the reasonable future, acquire additional funds by a public sale of general obligation bonds. The consultants believe that in the eyes of a sophisticated investor. this repayment of the Guam rehabilitation loan would constitute a prior claim or a sort of first-mortgage-payable, ahead of his contemplated purchase of a Guam general obligation bond.

The bond consultants did, however, project a rising revenue picture which could enable the Guam Government over the next few years to fund some of the capital improvement needs. The bond consultants also judged that electric power revenue bonds could be marketed for the purchase of power facilities if electric power rates were raised.

The Bureau of the Budget has advised that there is no objection to the presentation of this report from the standpoint of the adminis tration's program.

Sincerely yours,

KENNETH HOLUM.
Acting Secretary of the Interior.

CHANGES IN EXISTING LAW

In compliance with clause 3 of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman):

ACT OF NOVEMBER 4, 1963 (77 Stat. 302)

The purpose of this Act is to provide for rehabilitation in connection with the damage caused in Guam by Typhoon Karen on November 11, 1962; to provide for the construction of necessary public works, including the acquisition of real property; to develop and stimulate trade and industry; and to provide facilities for community life through a program of useful public works and community development.

SEC. 2. There is authorized to be appropriated to the Secretary of the Interior not to exceed [$45,000,000 $75,000,000 to carry out the purposes of this Act, to be paid to the Government of Guam in such sums as may be requested by the Governor of Guam with the concurrence of the territorial legislature and approved by the Secretary of the Interior, and such moneys as may be appropriated shall be available until expended. No payment shall be made unless it is requested prior to June 30, [1973.] 1978. Funds appropriated pursuant to this Act and paid to the Government of Guam shall be available for administrative expenses necessary to carry out the purposes of this Act, including the employment of consultants, such as engineers, architects and other technical experts, personal services and rental in Guam and elsewhere, supplies and equipment, travel expenses, transfer of household goods and effects, purchase, repair, operation, and maintenance of vehicles, and such other expenses as may be necessary for carrying out the foregoing purposes. Funds appropriated pursuant to this Act shall also be available for use by the Government of Guam to permit Guam to qualify for participation in Federal programs.

SEC. 3. The Secretary of the Treasury shall withhold from sums collected pursuant to section 30 of the Organic Act of Guam (48) U.S.C. 1421h), before such sums are transferred to the Government of Guam, such amounts as the Secretary of the Interior estimates will reimburse the United States, with interest as set forth below, over a period of thirty years beginning June 30, 1968, for

(a) 100 per centum of such moneys as are paid under section 2 hereof for water projects, power projects, or telephone projects; (b) 100 per centum of such moneys as are paid under section 2 hereof for use by the Government of Guam to permit Guam to qualify for participation in Federal programs; and

(c) 50 per centum of all other moneys as are paid under section 2 hereof.

(9)