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Mr. TAYLOR. A very small amount of the increase is for travel.

Senator BYRNES. You say the item consists of travel, and in the whole item you are asking an increase in engineering amounting to $44,523, and you do not consider the rest of it at all.

Mr. Taylor. That is true. We are asking for an increase, and that is largely for personnel.

Mr. ČARMODY. Yes, but it is field personnel.

Senator BYRNES. You did not mention that, you just said it was for travel, and the travel is a $1,400 increase, and the other increase is $44,000.

Mr. CARMODY. Yes, sir; I am sorry.
Senator BYRNES. Then there is this load building; what is that?

Mr. CARMODY. That is a misprint. It is a building loan on the land. That has already been allowed.

Senator BYRNES. What else is there besides this increase of personnel?

Mr. CARMODY. Then auditing, field auditing of the field accounts of the borrower.

Senator BYRNES. What are you asking for there; what increase? Mr. TAYLOR. We are asking for an increase of approximately $93,000 for the auditing of borrowers' accounts.

Senator BYRNES. How much did the House give you?
Mr. TAYLOR. They gave us about $50,000 increase.
Senator BYRNES. But you want it all?

Mr. TAYLOR. Yes, sir; we want all that the Bureau of the Budget estimated for.

Senator Adams. You have 400 projects?

Mr. TAYLOR. Yes, sir; we have 400 at the present time, and we will have more as time goes along.

Senator ADAMS. That is a pretty high cost per project, is it not, for auditing?

Mr. TAYLOR. Well, we do not think it is, Senator.

Senator Adams. You have for this current year how much for auditing?

Mr. TAYLOR. We have estimated for $162,000.

Senator Adams. I mean for this current year, for this current year?

Mr. TAYLOR. That is correct, Senator, $162,000.
Senator ADAMS. $162,000?
Mr. TAYLOR. Yes, sir.
Senator ADAMS. And you are asking for an increase?
Mr. TAYLOR. Yes sir; we are asking for $255,000 in all.
Senator ADAMS. You want an increase of $93,000?
Mr. TAYLOR. That is right.

Senator ADAMS. That is approximately a 50-percent increase, is it not?

Mr. TAYLOR. Yes; that is right.

Senator ADAMS. Do you expect to increase the number of projects by 50 percent during the next year?

Mr. TAYLOR. No, sir; that is not the situation, Senator.
Senator ADAMS. Nevertheless, you do not expect to do that?

Mr. Taylor. No, sir; we do not expect to increase the projects that much, but we do expect to increase the auditing work that much.

Senator ADAMS. What is the necessity for that increase?

Mr. TAYLOR. The auditing is one of the last things we do. That is not started; the auditing work is not started until much of the other work has been completed, and that will accumulate as time goes on.

Mr. CARMODY. This money is loaned for 20 years, and we would continue to audit the books regularly, and then have new auditing to do as new projects come on.

Senator BYRNES. What number of projects do you expect to put into operation this year?

Mr. CARMODY. I think 200 new projects.


Senator HALE. You receive $63,000 for printing and binding too, do you not?

Mr. CARMODY. Yes; I think so.
Senator HALE. That comes under a separate item?
Mr. CARMODY. Yes, sir.
Senator HALE. Why do you need so much advertising?
Mr. CARMODY. We do not advertise, Senator.
Senator HALE. Well, this is in the nature of advertising, is it not?

Mr. CARMODY. We do not undertake to develop new business. This publication, or these publications are used, as any business would use them, to build the load on the lines, to be sure that the income on the lines is built up as high as it can be and as early as it can be, to be sure that the loan is amortized and that the interest payments are met.

Senator HALE. Yes; but the number of copies of some of these publications is very large. For instance, 500,000 copies of this one. What is the necessity for that?

Mr. CARMODY. There will be 500,000 new users of electricity who never used it before who need some help with respect to its technical

Senator HALE. That has to do with encouraging new projects, and you have more projects than you can take care of now.

Mr. CARMODY. No, Senator. We are telling people who are using electricity for the first time how to use it effectively and economically.

Senator HALE. Do you not think a cut would be made in that $63,000?

Mr. CARMODY. I hope it will not be, because we are operating a large business. This is almost a $100,000,000 corporation now. I do not know much about what governments do to make a business successful, but in my 30 years in business, in private industry, it takes hard work to keep it successful once it is started.

Senator HALE. You have more than twice the number of applications you can take care of. You do not have to worry much about new business.

Mr. CARMODY. Our actual worry comes there because we do not have the money to allot to them, but we are putting our efforts toward helping people who are coming on these lines day after day, to help them to know how to use electricity and how to use it intelligently.



(For the information of the committee the following letter is included for the record:)


Washington, January 14, 1938. Hon. CARTER GLASS, Chairman, Appropriations Committee,

United States Senate, Washington, D. C. DEAR SENATOR Glass: Your letter of the 7th instant with respect to the Independent Offices Appropriation Act of 1939 has been received and we wish to offer the suggestion that the bill, as passed by the House, be amended by adding after the word "that” in line 14, page 63, the following words: “notwithstanding the provisions of section 5 hereof."

Our reason for requesting this change is that our agency is a corporation created by act of Congress with a capital stock of $500,000,000 appropriated by Congress. The management of the Corporation is vested by the act in a board of seven directors, not more than four of which shall be members of any one political party. The directors are charged with the responsibility not only of making loans, but of administering them, and should not be hampered by restrictions that might interfere with the proper administration of the Corporation.

We are not an expense to the Federal Treasury. We pay the Treasury interest for money we borrow to lend, more interest than the money costs the Treasury.

We have authorized loans and investments aggregating approximately $9,290,000,000, of which amount $6,780,000,000 has been disbursed and $4,860,000,000 repaid. This is in addition to the moneys allocated by Congress through the Reconstruction Finance Corporation to other governmental agencies and for relief aggregating $2,830,000,000.

We have held the operating and administrative expenses of the Corporation, including our 32 agencies, to three-fourths of 1 percent of the actual dollars disbursed and, in addition to paying interest for the money we have borrowed to lend and paying our operating expenses, we have accumulated an operating surplus of more than $150,000,000.

Notwithstanding the fact that we will have some losses on individual loans, it is the opinion of our board that our operating surplus will be more than sufficient to cover any losses that may develop.

We make monthly and quarterly reports to Congress and our accounts are audited once a year by nationally known public accountants. These audits are available to Congress or anyone else interested in examining them. The firms which have made these audits are Haskins & Sells for the years 1932, 1935, and 1936, and Arthur Anderson & Co. for the years 1933 and 1934.

If there is any question in the minds of your committee about the modification suggested, I would appreciate the opportunity of appearing before the committee. Sincerely yours,

JESSE H. JONES, Chairman.


(For the information of the committee the following letter is included for the record:)


Knoxville, Tenn., January 14, 1938. Hon. CARTER GLASS, Chairman, Subcommittee in Charge of Independent Offices, Appropriation Bill,

United States Senate, Washington, D. C. DEAR SEANTOR Glass: In reply to your letter of January 7, 1938, the Board of Directors of the Authority has authorized me to indicate the changes in the independent offices appropriation bill, as reported to the House, which we deem absolutely necessary. These changes are as follows:

1. Page 45, lines 8 and 9, referring to the phrase, “and for construction of a dam at or near Gilbertsville, Ky." the bill as reported to the House was satisfactory. On the floor of the House, however, this phrase was stricken out. We wish to urge restoration of this phrase for the reasons set out hereafter.

2. Page 45, line 23, strike out“$37,087,000” and insert in lieu there $40,000,000.” This amount was increased on the floor of the House to $37,237,000. As reported

by the House committee, the $2,913,000 reduction was based on deferring beginning of preliminary construction on Gilbertsville Dam and a reduction of $300,000 under the fertilizer and soil conservation program. On the floor of the House, one-half, or $150,000, of the reduction under the fertilizer and soil conservation program was restored.

Our reasons for urging the restoration of the estimate of $40,000,000, as submitted by the Bureau of the Budget, are set forth in detail in the two statements submitted with this letter. The first statement outlines the importance of beginning construction on Gilbertsville Dam in the fiscal year 1939, and also sets forth the serious consequences of delaying this work for another year. The second statement presents our reasons for requesting the restoration of the full amount requested under the fertilizer and soil conservation program.

We wish to respectfully urge that your committee give careful consideration to these statements. The estimates originally submitted to Congress represent a minimum amount to effectively conduct the program of the Authority.

The Board of Directors has particularly authorized me to state that there is complete agreement as to the desirability of proceeding as outlined in the original estimates with respect to the Gilbertsville project. The board is thoroughly convinced, as a result of the investigations already made, that the program of construction as contemplated by those estimates is not only feasible, but highly desirable.

If your committee should question the desirability of making the changes we have proposed, we would be glad to send representatives of the Authority to appear before your committee to supplement the attached statements with reference to Gilbertsville Dam and the fertilizer and soil conservation program. Very truly yours,


General Manager.



In reducing the estimate for the Gilbertsville project $2,613,000, leaving only $285,000 for planning for the fiscal year 1939, the members of the House Committee on Appropriations for independent office shave indicated that their reason for making this curtailment was not because they were opposed to the project itself, but because they felt that the delay of a year in starting construction would not be material, and that they thought the project should be postponed because of differences of opinion with regard to the location and plans for this project. In particular it was stated on the floor of the House that the United States Army engineers had a difference of opinion with regard to the Gilbertsville Dam. As a matter of fact, as far back as 1930 in their report to Congress on the Tennessee River the United States engineers proposed a high dam for the lower Tennessee River at Aurora Landing, which would have created a reservoir very similar to the Gilbertsville project. Leading officers of the United States Army Corps of Engineers are agreed that a high-dam project is preferable to a series of low dams. The only difference in the present project of the Tennessee Valley Authority from the original Army proposal of the Aurora project is that the Authority, with an opportunity for further study, has been able to find a much superior location where foundation conditions are better and where there is a great additional amount of flood storage.

A year ago, during consideration of the 1938 budget, the Authority's engineers stated that they were practically ready to begin construction of the Gilbertsville project, and it was at that time that the Senate inserted an amendment authorizing construction of the project. Since then investigations and studies have proceeded continuously, and, after thorough investigations of foundation conditions and other circumstances influencing the location and design, a final location and plan have been adopted by the board of directors. This plan has also been submitted to as many as eight consulting engineers of national reputation, such as L. F. Harza, consulting engineer to the Corps of Engineers on the Bonneville Dam, and John L. Savage, chief designing engineer, United States Bureau of Reclammation, who have given their unanimous approval to the Authority's present location and plan for the dam.

The great value of the Gilbertsville project is for flood control, and studies made by the Authority and consultants have disclosed the fact that this reservoir is the most valuable site available anywhere for control of floods on the lower Mississippi and lower Ohio Rivers. Natural reservoir sites with large storage capacity located so strategically near the point where control is badly needed are very rare—so rate that the Gilbertsville site in this respect is a unique natural


The Gilbertsville Reservoir as presently planned will have a total reservoir volume of approximately 6,150,000 acre-feet, and flood-control storage of approximately 4,600,000 acre-feet, and being located only about 22 miles above the mouth of the Tennessee, its effect on the Ohio River can be estimated very closely, the time of flood crest travel from the dam site to the Ohio River being less than a day. For these reasons the Gilbertsville Reservoir will reduce the peak flow of major floods in the lower Ohio and Mississippi River and especially at Cairo by about 200,000 cubic feet per second, which at peak stages corresponds to a reduction in excess of 2 feet on the Cairo gage. This reduction is urgently needed at and below Cairo. The United States Army engineers estimate that a future flood with a flow of 2,600,000 cubic feet per second at and below Cairo is probable, while the levee system is designed to carry only 2,250,000 cubic feet per second, so that 350,000 cubic feet per second are still unprovided for. The Army engineers have recommended a comprehensive flood-control plan including a total of 45 reservoirs on the Ohio River system, in addition to projects already authorized, at an estimated cost of $246,000,000, which they say would reduce the flow at Cairo about 2 feet. It is evident that the Gilbertsville Reservoir will reduce this flow by a greater amount for a much less expenditure. Although the 45 reservoirs recommended by the Army engineers would provide local benefits as well as a reduction at Cairo, no site as valuable, effective, and cheap as Gilbertsville for flood control on the Mississippi has been found and proven anywhere in the Mississippi Valley.

This project is also important for obtaining an adequate 9-foot navigable channel from the Ohio River to Knoxville, which has been authorized by Congress. It is the last link in this channel from Paducah to above Chattanooga, and all other work necessary to provide this channel above the Gilbertsville Reservoir will be finished by the fiscal year 1942. Even under present plans, the Gilbertsville Dam will not be finished so as finally to complete this channel from Pickwick Dam to the Ohio River until 1945, and any delay in the Gilbertsville Dam construction postpones just that much longer the benefits that will accrue from the final completion of the 9-foot channel as authorized in the Tennessee Valley Authority Act.

There have been, it is true, some statements to the effect that it would be more economical to construct a series of four low dams than one high dam, and it is true that this cost would be less. However, it would throw away the entire benefit for flood control, and in addition would not provide as efficient navigation as the one high dam. This is true because of the saving in time of lockage through four dams instead of one, and also because one large reservoir creates greater navigation depths than the four small reservoirs. Experience shows that naviga. tion is always facilitated where acequate depths prevail, and the upper end of each small reservoir where the depths become more shallow is always less efficient for navigation than the open reservoir where greater depths obtain.

Another reason why it is inadvisable to postpone the work at Gilbertsville for another year is that the cessation of work on this project will disrupt the orderly procedure of dam planning, design, and construction, introduce inefficiency and waste, and not only necessitate the expenditure of a considerably greater amount of money later on, but will also make impossible the benefits which are dependent upon a well-planned and evenly running program.

To illustrate how serious will be the effect on the organization if the appropriation for Gilbertsville is left as reduced by the House, it is estimated that it will be necessary to lay off a total of approximately 290 highly trained men. This reduction in personnel consists of the following groups:

1. Fifty survey men and map makers especially trained in the special methods of land surveys used by the Authority.

2. Fifteen hydraulicians, hydraulic engineers, and geologists, all versed in the Authority's methods and familiar with the Gilbertsville project.

3. Fifty technical men specially trained in highway and railroad relocation work.

4. Fifty designing engineers-structural, electrical, and mechanical-experienced in dam design.

5. Forty-five construction men trained by the Authority in dam and camp construction, many of them specialists in construction plant design.

6. Eighty other employees-regional planners, land appraisers, and others familiar with the work of the Authority and difficult to replace.

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