Dr. MORGAN. That is not a proper statement. I would say that our purpose is this, to aid further in the proper use, conservation, and development of the natural resources of the Tennessee River Drainage Basin and such adjoining tributaries as may be related to or materially affected by the development of the Tennessee Valley Authority's activity.

Senator DICKINSON. Well, let me ask right there. Your people are going to school, are they not?

Dr. MORGAN. I beg your pardon.

Senator DICKINSON. Many of your people are going to school at the Norris Dam, as you have suggested.

Dr. MORGAN. Yes, they are taking informal courses after working hours.

Senator DICKINSON. They have a school system in Tennessee, do they not?

Dr. MORGAN. Nothing for adults at work on construction jobs. Senator DICKINSON. Is there anything that prevents an adult from going to school in Tennessee if he wants to?

Dr. MORGAN. Yes, under such circumstances.

Senator DICKINSON. Now, is your statement an indictment of the Tennessee school system, of the State of Tennessee?

Dr. MORGAN. Not at all.

Senator DICKINSON. Now, you have been talking about educating the farmers. Do they not have a State agricultural school or college in Tennessee, a land-grant college?

Dr. MORGAN. We are cooperating with that institution. Dr. Morgan was

Senator DICKINSON (interposing). You mean to tell us that they have been derelict in their duties heretofore and not contemplated this problem?

Dr. MORGAN. Dr. Morgan who, for a good many years was the head of the State experiment station, University of Tennessee, later president of the University of Tennessee, is a member of this board, and for 40 years he has been trying to work out these problems and we are cooperating to the fullest extent with the experiment station and supplementing the work they are doing to a laige degree. What we are doing is with the approval of the State University and Dr. Morgan is most anxious that there shall be no duplication of work.

Senator DICKINSON. Well now, let me suggest there is no difference in the situation in Tennessee from what you will find in Kentucky and many other States of the Union, is there?

Dr. MORGAN. The Tennessee Valley is composed of parts of seven States, so it includes part of Kentucky and part of Tennessee and part of Alabama, but the Tennessee Valley Authority Act is an effort to take a limited area and to try there to work out policies and principles applicable, methods for integrating the life of a community so that a community in economic distress as a result of where timber has been cut off and managers left, and coal mines exhausted and people left starving, their life can be reorganized. The fact that they often have been left in that distress and poverty is an answer to your question.

Senator DICKINSON. Well, were you ever out at Cripple Creek, Colo.? Dr. MORGAN. I was.

Senator ADAMS. What was that question?

Senator DICKINSON. I asked the Doctor if he were ever out at Cripple Creek, Colo.

Senator ADAMS. He has been near there.

Dr. MORGAN. Yes; I am at home out in that country.

Senator DICKINSON. Well, is there not exactly the same situation there; will you not find exactly the same situation there, with the mines closed or abandoned?

Dr. MORGAN. But, it is the idea of the President that we ought to see further than we have been seeing in Cripple Creek, Colo., or Central City, Colo. That is, in a period of transition, when industry begins to fade away, that some regard for the human element in the situation is not out of place, and if we can take these communities that are broken down through the passing of industry, such as did lumber and mining towns-we can explore ways in which the resources left there can be used so that those people can be self-sustaining citizens, we have made a contribution, if we can learn how the same principles would apply in other parts of the country. As the President said in his message recommending the establishment of the Tennessee Valley Authority, this is a laboratory and a case for the development of methods that can be used elsewhere when they are developed here.

Senator DICKINSON. And, if it takes $300,000,000 to put in or make this experiment on behalf of the citizens involved here, might I inquire if you would state what you would think it would take from the public treasury and the taxpayers of the United States to help the people in the rest of the United States under a similar program?

Dr. MORGAN. Most of that $300,000,000 is for power development, and will be gradually repaid out of revenues. I think it will cost the taxpayers of America altogether less than it is now costing in the rest of the United States. For instance, in Knoxville, the people now are paying a certain rate for electric power. We believe that we can cut that rate decidedly and yet that the people can pay for their entire installation in 10 years out of the rest. That is, the rates they are paying now are so excessive, the taxes they are paying, in the form of electric rates now are so excessive that we can cut that 30 percent and yet out of the rest of it that they can pay the whole thing back in 10 years.

Senator DICKINSON. It seems to me that is a tremendous indictment of all of the authorities that have had anything to do with the supervision of electric rates in any of the localities or States where you happen to be distributing power.

Dr. MORGAN. I am not commenting on that statement.

Senator DICKINSON. That is all.

Senator HAYDEN. I want to ask you one question, Senator Dickinson, with respect to the memoranda you have there. Where did it come from?

Senator DICKINSON. Where did it come from?

Senator HAYDEN. Yes.

Senator DICKINSON. It is my own gathering.

Senator HAYDEN. You gathered it up yourself?

Senator DICKINSON. My office did.

Senator HAYDEN. I think it is a very remarkable document..

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Senator DICKINSON. It is a very remarkable document. I think that we have got the best evidence there that we are just going socialistic, that I have ever seen in my life.

Senator ADAMS. Mr. Sherwood L. Reeder, assistant director, United States Conference of Mayors, and Mr. H. C. Delzell, national representative, American Waterworks Association are present and want to put this statement in the record. Without objection, it will in.

go

The statement is as follows:)

Hon. CARTER GLASS,

UNITED STATES CONFERENCE OF MAYORS,

United States Senate, Washington, D.C.

Chicago, June 12, 1934.

DEAR SENATOR GLASS: We respectfully urge your careful consideration of the proposed amendment offered by Senator Logan, which appears on page 11280 of the Congressional Record of Saturday, June 9, 1934, and is as follows:

Mr. Logan submitted an amendment intended to be proposed by him to House bill 9830, the first deficiency and emergency appropriation bill, which was referred to the Committee on Appropriations and ordered to be printed as follows: On page 63, after line 24, insert the following proviso: Provided, however, That no funds appropriated by this title shall be loaned, granted, or donated, either directly or indirectly, to any commission, board, or instrumentality created by Congress or any other public authority, for the sole purpose of bringing into being or carrying into execution, any self-liquidating project, unless the obligations of such commission, board, or other instrumentality shall be guaranteed as to payment of interest and principal by a State, county, municipality, or a political subdivision of a State, county, or municipality, or unless such obligations are otherwise adequately secured; and the income from such self-liquidating projects shall not be accepted as adequate; and this proviso shall apply to any appropriation heretofore made and unexpended for like purposes as those mentioned in title II of this act."

Under the provisions of the original Emergency Relief and Construction Act the only type of public works projects eligible for Federal loans were those that were self-liquidating or self-supporting in character.

According to the provisions of the act:

"A project shall be deemed self-liquidating if such a project will be made selfsupporting and financially sound and if the construction cost thereof will be returned within a reasonable period by means of tolls, fees, rents, or other charges or by such means (other than by taxation) as may be prescribed by the statutes which provide for the project.

This provision in the Energency Relief and Construction Act made it necessary for most States to pass revenue bond acts before their municipalities could properly qualify for Federal loans. Accordingly, revenue bond acts were adopted by 28 States during the past 2 years. Practically all public-works projects financed by the Reconstruction Finance Corporation were secured by. revenue bonds. Municipalities and other political subdivisions in many States, unable to issue additional general tax obligation bonds because of constitutional debt limitations, were able, after the enactment of revenue bond laws, to issue such bonds and initiate the construction of much needed water works and sewage projects as unemployment relief measures.

Municipalities in their attempts to reduce governmental expenditures and property taxes lowered their assessed property valuation to a point where no further bonding could be undertaken without exceeding their constitutional debt limit. Such communities continued to be good credit risks but were simply prevented from issuing general tax-obligation bonds due to these constitutional imitations. Municipalities in many States could not finance public works projects except by issuing revenue bonds.

The National Industrial Recovery Act removed the mandatory self-liquidating provisions of the Emergency Relief and Construction Act. With these restrictions removed, the Public Works Administration has accepted revenue bonds as "adequate security" as defined in the act. In fact, the Public Works Administration has recommended that States pass legislation to enable municipalities and other political subdivisions of the State to issue revenue bonds. This statement is borne The following excerpt taken from a release (Release, 209)

from the Public Works Administration of the Department of the Interior under date of October 19, 1933, which is as follows:

"States and local legislation differing in all sections of the country have affected the Federal Public Works program in various sections.

"While no exhaustive review of all the questions thus arising is possible because legislation in all States is different, E. H. Foley, Jr., assistant general counsel of the Federal Public Works Administration, has prepared a general report on the legislative requirements. Mr. Foley's report, pointing out possibilities but urging no action, is as follows:

"The greatest obstacles with which the Public Works program has met are the restrictions and limitations placed upon States and municipalities by the provisions of State constitutions and State statutes. Where the restrictions are constitutional, it is of course necessary to go through the cumbersome process of constitutional amendment, a process which in most instances is equivalent to a denial of aid. In such situations we see once more the inevitable result that follows when fallible minds try to formulate an infallible mold for the future. And in such a case the Public Works Administration is helpless, because the much discussed section 203 (d) does not give the President blanket power to override State constitutions, nor does it authorize the Public Works Administration to make loans on inadequate security or to make any grants in excess of 30 percent of the cost of the labor and material on a given project.

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'Where, however, restrictions are purely statutory, a forceful executive and legislature willing to cooperate can make the benefits of the act available to their constituents. There are several means available in such a case: First, it is desirable, where such a law does not already exist, to pass a revenue bond act. Under a revenue bond act the security in back of the bonds is the revenue from the particular project involved, which is thus made to pay its own way without any additional burden to the taxpayer.'

Certainly no one will contend that the Public Works Administration has not been conservative in its interpretation of the terms of the act which require adequate security for Federal loans.

We are well acquainted with the history of public-utility bonds. Millions of dollars of private capital have been invested in this class of security. Such bonds are secured by a mortgage on the works so acquired or constructed from the funds derived from sale of bonds and further secured by a first lien on the earnings of the enterprises. The revenue bond acts merely provide that municipalities may issue this same type of security, such security being a mortgage on the works and a first call on the revenue and does not involve pledging the faith and credit of the municipality or property taxes as security for the loan.

There are approximately $660,000,000 in applications for needed water works and sewer projects now on file with the P.W.A. in Washington and it is contemplated that a large portion of these loans will be secured by revenue bonds. Projects of this character in the opinion of State health officials are necessary to the proper protection of community health, welfare, and fire protection. In addition to waterworks and sewage there are many other types of self-liquidating public-works projects that would be affected by the adoption of the Logan amendment.

While the Logan amendment at first blush may appear to be in the best interests of financing, we believe that the effect would be to invalidate all revenue bond legislation recently adopted in the 28 States, insofar as Federal loans are concerned, and make it impossible for many municipalities to continue public works as an unemployment or relief measure. In other words, the provisions of this amendment are wholly impracticable and unworkable.

In our opinion there is no need for additional security on self-liquidating public works projects financed under the revenue-bond laws of the several States. Revenue bonds issued under these acts have been acceptable to the Reconstruction Finance Corporation and Public Works Administration as indicated by the many loans granted by both organizations, and any effort to make more rigid the requirements on such security will substantially nullify the efforts of the Administration to stimulate recovery through a public works program. Very respectfully yours,

SHERWOOD L. Reeder, Assistant Director, United States Conference of Mayors. H. C. DELZELL,

National Representative, American Waterworks Association. (Thereupon the hearings were concluded at 12:10 p.m.)