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Mr. WIDNALL. I am particularly interested because I think this will clearly show whether or not the current program is failing to measure up to the intent of the Congress at the time it was created.
You have also given a list of cities, mostly smaller municipalities in Kentucky, that are unable to meet their needs at the present time.
Can you tell us how many of those municipalities have applied to the HHFA for assistance ?
Mr. LAMKIN. I should have that information available and I can get it, but I can only give you two or three from my personal knowledge.
Mr. WIDNALL. Mr. Chairman, I would like to have that furnished for the record, the date on which the municipality requested or applied to the HHFA for assistance.
Mr. LAMKIN. I will be glad to get that for you. It would be easy to get.
Mr. SPENCE. Without objection, that may be placed in the record. (The information requested above is as follows:) KENTUCKY WATER POLLUTION CONTROL COMMISSION,
Louisville, Ky., May 4, 1959. Hon. BRENT SPENCE, House of Representatives, Washington, D.C.
DEAR SIR: This is a further statement and information which I submit to your office for transmission to the records of your hearing, which was held regarding H.R. 5944 and should be added to my testimony given before the committee on the morning of April 27, 1959.
The following cities have applied to the Housing and Home Finance Agency for a loan, either for a municipal water supply or sewage treatment facilities, in the following amounts :
93, 675 333, 000 317,000
186, 000 1, 335, 00
128, 000 410, 000 248, 668
85,000 271,000 240,000
76,000 253, 460
120,000 1, 223, 000
112, 000 355, 000 208,000 1 145, 000
The foregoing cities are those which have actually applied to the Housing .and Home Finance Agency for financing either a public water supply or public sewage treatment facilities. It can be easily seen that some of these cities are a fairly good size city and yet, are unable to finance these public improve ments by the sale of revenue or general obligation bonds on the open market. Before these applications could be considered by the Housing and Home Finance Agency, each city was required to submit to the Housing and Home Finance Agency a letter, and in most cases three letters, from private bonding houses, indicating that the bonds were not sellable on the open market.
The above facts can be verified and substantiated from the official files of the Housing and Home Finance Agency in the office at Louisville, Ky., or at Atlanta, Ga., where the permanent regional files of these applications are processed.
The following cities have submitted inquiries to the Louisville office of the Housing and Home Finance Agency and requested to use public financing from the Housing and Home Finance Agency in building a public water supply or public sewage treatment facilities. However, they have not made formal appli
cation to the Housing and Home Finance Agency for these funds, but each city has good reason to believe that they will have difficulty in selling any more bonds on the public loan for these facilities and desire to use the Housing and Home Finance Agency for the sale of their bonds for these public improvements.
The cities are as follows:
Nicholasville Water Whitley City Dover
Park Hills Elkton
Parksville Water District These facts may be substantiated by the facts contained in the files of the Housing and Home Finance Agency at the Louisville office or the Housing and Home Finance Agency, Federal Building, 6th and Broadway, Louisville, Ky.
We are enclosing herewith a Verifax letter from Hon. B. M. Fast, mayor of the city of Brandenburg, Ky., in which he enclosed a letter from the Charles A. Hinsch & Co., Inc., of Cincinnati, Ohio, which clearly indicates that the city of Brandenburg will not be able to sell its bonds on the open market for the amount required to build a city sewer system and sewage treatment facilities.
They are enclosed herewith and marked for identification purposes as exhibits A and B.
We submit this actual correspondence between the mayor of the city and this bonding house, because it illustrates clearly the need for financing directly through the facilities of the Housing and Home Finance Agency, and from practical experience, the smaller cities under population of 5,000 will, in most cases, require this type of financing, if they are to have adequate public water supplies and sewage treatment facilities.
Due to the time element involved, I have been unable to secure this information from more of the cities in Kentucky, but there are many in the same situation that could submit such a statement, if they had time to secure it.
Also, in order to project this subject a little further, we submit herewith letters concerning the financing of the public water supply for the city of Tompkinsville, Ky. These letters are submitted by Frank S. Parrigin, civil engineer, who is the engineer in charge of this project and also assisting the city in applying to the Housing and Home Finance Agency for a loan for these funds.
These clearly indicate the problem facing these small cities in Kentucky, and I hope they will be acceptable as factual information, which applies to many other cities in Kentucky of the same population class.
These exhibits are submitted herewith and marked for identification purposes as exhibits C, D, E, and F.
Also, I have a letter which I have enclosed herewith from Hon. Tom F. Underwood, Jr., attorney at law, Lexington, Ky., who represents several small cities in the State of Kentucky, which are set out in the letter. Mr. Underwood indicates that the facts we have stated regarding the inability of small cities and towns to finance public water supplies and sewage facilities are true, and he further substantiates this by his letter and enclosures,
Since his letters and statements from investment houses are self-explanatory, we include them herewith and mark them for identification purposes "Exhibits G, H, and I.”.
We also enclose herewith a letter from Hon. W. E. Sparks, mayor of the city of Greenville, Ky., in which he states that it was necessary for the city of Greenville to apply to the Housing and Home Finance Agency for a Federal grant in order to finance the city water system and sewage treatment facilities We have marked this letter for identification purposes as “Exhibit J.”
We are also enclosing correspondence which we have received from the city of Olive Hill, Ky., which urgently needs a sewage disposal plant and also the city of Radcliffe, Ky. These are marked for identification purposes as “Exhibits K and L.”
Also, we wish to state that in a few rare instances where small cities have been able to finance a public water supply, the financing has been so tremendously costly and high that it has been too expensive to use public financing. As an example of this, I want to state as follows: The city of Radcliffe, which is located in Hardin County, Ky., east of Fort Knox, financed a water system by the sale of revenue bonds on the open market. Because of the full risk involved in the sale of these bonds, it was necessary for the city to pay 5 percent interest, 5 percent fiscal agent fee, and the bonds were discounted 5 percent. This made the total cost for the sale of these bonds 15 percent.
For verification of this, the committee may acquire these specific facts from the mayor of the city of Radcliffe, Hardin County, Ky., or the fiscal agent and bonding house that represented the city.
Not only do we have the problem of being unable to sell revenue bonds on the open market by the smaller cities, but we also have the problem of tremendous and unreasonable interest rates, fiscal agent charges, and discount rates, which intelligent people refuse to pay. This is indeed another great reason why the smaller communities cannot, and will not, pay this tremendous cost to borrow the money to finance these projects. Therefore, because of the unreasonableness of the interest rates and other incidental costs, these small communities cannot obtain the required amount of funds at a reasonable rate of interest or cost.
From years of experience and giving financial advice to these small communities throughout the State of Kentucky, I wish to reiterate and restate that if we are to have a successful water pollution control program and if these smaller communities are to have acceptable public water supplies and sewage treatment facilities, there must be more money made available to them at a reasonable rate of interest and other financing costs.
In the first paragraphs of this letter, we have enumerated the amount of funds applied for by these cities. If you would multiply the number of cities in Kentucky that have actually applied for a grant and the cities that have made inquiry concerning the terms of the loan from the Housing and Home Finance Agency, it would conclusively indicate the need for these funds in the State of Kentucky. When the other cities below 5,000 are added to the list, it will be easily seen that the amount of money required in Kentucky alone would be tremendous. When this amount is added, which I am sure is average for the States throughout the United States, it can be seen that additional Federal funds will be urgently needed to support the requirements of these various small communities throughout the United States.
If the funds needed in Kentucky could be multiplied by the requirements of all States in the United States, it will be readily apparent that the requests and amounts set forth in H.R. 5944 are badly needed and in the long run, will have to be increased as the years pass, if these needs are going to be met. If they are not met by the Federal Government through the Housing and Home Finance Agency or some such similar agency, these smaller cities and communities will never have adequate and approved water supplies or sewage treatment facilities.
I request that this information be added to my statement made before your committee on April 27, 1959.
If further information would be helpful and if there would be time for me to acquire it, I will be glad to supply all the information obtainable.
I deeply regret that I have not had sufficient time to obtain actual statements from the responsible city officials of many small communities in Kentucky that need these funds in order that you might have firsthand information.
I wish to advise also that the city of Beechwood Village has applied to the Housing and Home Finance Agency for a loan and along with the application, they submitted to the Housing and Home Finance Agency three letters from three different bonding houses, in which each bonding house stated that in their opinion, the bonds. of Beechwood Village could not be sold on the open market.
These letters are in the official files of the Housing and Home Finance Agency at Atlanta, Ga., and the committee may acquire these letters from the Housing and Home Finance Agency through Commissioner Hazeltine, or the director of the regional office at Atlanta, Ga. Most respectfully yours,
WILLIAM A. LAMKIN, Jr., Attorney, Water Pollution Control Commission.
CITY OF BRANDENBURG,
Brandenburg, Ky., April 30, 1959. KENTUCKY WATER POLLUTION COMMISSION. (Attention of Attorney William A. Lamkin.)
DEAR SIR: At your request I am enclosing a letter from Robert R. Meyer, of Charles A. Hinsch & Co., dated June 17, 1958. This was in reply to our inquiry about financing a sanitary sewer system for the city of Brandenburg.
While I have several later letters from Mr. Meyer they all feel that we should do the financing through the Housing and Home Finance Agency if possible. Yours truly,
B. M. FAST, Mayor.
CHARLES A. HINSCH & Co., INC.,
Cincinnati, Ohio, June 17, 1958. Mr. B. M. FAST, Mayor, City of Brandenburg, Brandenburg, Ky.
DEAR MAYOR FAST: We understand the city of Brandenburg desires to construct a sewer system to serve the people of the city and based on present estimates of your engineer, the cost will be somewhere between $275,000 and $300,000.
You have requested that we, as the fiscal agent for the city of Brandenburg, advise you regarding the possibilities of financing this project on a revenue basis whereby a sewer charge would be made, the proceeds of which would be used to pay principal and interest on any bonds issued to finance the project. We have given this matter careful consideration in order to advise you as to the action we think you should take in order to secure a sewer system to serve the city of Brandenburg.
In order for the city to sell bonds in a sufficient amount to finance this project, we believe it would be necessary to combine the sewer system with the waterworks system into a joint operation whereby water and sewer charges would be combined on the same statement, thereby providing a better security for the purchasers of the bonds issued to construct the sewers.
The city has outstanding an issue of waterworks revenue bonds and in order to finance the proposed project it would be necessary to either redeem the outstanding bonds or purchase them from the present owners or otherwise the proposed issue of bonds would be second-lien bonds. The outstanding bonds are not redeemable until July 1964, so consequently, that method of securing the outstanding bonds could not be used. Therefore, the only method possible would be to purchase the bonds from the present owners and this not only would be difficult but possibly expensive.
We have not been furnished a copy of the engineering report on your sewer project and without first reviewing the report we would not be in a position to give you a definite decision regarding the financing, but we believe it would be difficult, if not impossible, to finance this project through the sale of bonds unless the waterworks system was combined with the sewer system and the presently outstanding bonds were refunded into the new issue so that all the outstanding bonds would be first-lien bonds. If, however, you wish to proceed on this basis we, as fiscal agent, will be happy to proceed with the necessary work and will endeavor to sell the bonds for you at public sale.
We understand that you have discussed the financing with the Housing and Home Finance Agency with the thought that perhaps that agency would arrange to loan you the necessary funds for your sewer project. It would be our recommendation and suggestion that you make application to the Housing and Home Finance Agency to borrow the necessary funds to construct your sewer system. While we think the loan would be a good one and adequately secured, which after all is the main consideration of the Housing and Home Finance Agency, with us it is a question not only of security but the possibility of marketing the bonds.
Should you make application to the Housing and Home Finance Agency for a loan to construct your sewer system and in the event such application is refused, we suggest you let us know and we will endeavor to develop a method whereby this project can be financed. We believe, however, that the borrowing of the money from the Housing and Home Finance Agency would be more practical and certainly would be less expensive not only in interest charges but in overall financing costs to the city.
We will appreciate your keeping us advised concerning your project and we wish to emphasize that in the event you cannot secure a loan from the Housing and Home Finance Agency we, as your fiscal agent, will do everything we possibly can to assist you in the issuance and sale of the bonds so that you might ultimately construct your sewer project.
We will appreciate your advising us your final decision and we suggest you keep us advised regarding future developments. Thanking you and with kindest regards, we remain, Very truly yours,
ROBERT R. MEYER.
TOMPKINSVILLE, Ky., July 29, 1958. Mr. RALPH C. PICKARD, Director of Environmental Health, Louisville, Ky.
DEAR MR. PICKARD: I am forwarding you, under separate cover, three copies of plans and specifications of a proposed water supply system for Gamaliel, Ky., which we trust will receive early approval of your office.
In the event any exception is taken to anything let me have the information by letter, without marking the documents sent you. Addendum can be added to the documents if need is found for changes.
The city is applying for a bond purchase loan with which to do this project.
FRANK S. PARRIGIN,
TOMPKINSVILLE, KY., October 14, 1958. Mr. RALPH C. PICKARD, Director, Environmental Health, State Board of Health, Louisville, Ky.
MY DEAR SIR: I am forwarding you three sets of specifications and the plan sheets (No. 8), of Gamaliel waterworks, in keeping with letter for your Mr. Nick Johnson covering a standpipe which it seems would be more desirable than an elevated tank for the little city of Gamaliel. It is believed you will find these very good and complete, and your approval is requested.
It is not known yet whether the Federal Government will finance the project (the application has been in the agency's hands for 2 months) but if it is financed this will save some time. Yours very truly,
F. S. PARRIGIN,
TOMPKINSVILLE, KY., October 17, 1958. Mr. RALPH C. PICKARD, Director, Environmental Health, Louisville, Ky. (Attention: Nick Johnson.)
DEAR SIR: This will supply the information requested in your phone conversation of this date relative to elevations for standpipe at Gamaliel, Ky.
The standpipe located on the spot shown for the elevated storage tank will have at its base elevation of 865—there are only two small spots in the town that have an elevation of $60—one of these is just across the street from the tank location and can be reached by hose lines from the 8-inch main. Most of town will be at elevation 820 to 840, the exceptions being the business district which is on backbone, or ridge.