tried to prepare a list, and it goes on indefinitely. You can think of so many, when you once get started. Mr. WOLVERTON. Outside of the field of Government expenditures which might properly be considered chargeable, there are the charges that private companies must pay in the way of real-estate taxes to States or to localities, that the Federal Government-operated line does not have to pay. I remember last year this was brought to our attention by statements presented to the committee. It was rather considerable. Mr. SMITH. Yes, sir. Mr. WOLVERTON. And the comparison was rather striking when you saw what the private companies had to pay in the way of expenses which necessarily had to be considered in their rate charges, and which the Federal line does not pay. All of this made it rather difficult over the period of 10 or more years we have had this question before us in one way or another to understand why it is that the Governmentowned Inland Waterways with all of its advantages, from the standpoint of less expense, has not been able to show a profit, whereas the privately operated companies have shown a profit. Maybe it is due to this pioneering service that you speak of; I do not know. Many explanations have been made as to why it is, but on the over-all picture, it is difficult to understand. Mr. O'HARA. Mr. Chairman. Mr. BECKWORTH. Mr. O'Hara. Mr. O'HARA. I have just one question. You made reference to the sale, proposed sale, of the stock. Do you have in mind that that sale would be regulated in any way by the Securities and Exchange Commission or by State securities commissions? Mr. SMITH. No, sir. Mr. O'HARA. They would not be? Mr. SMITH. No, sir. Mr. O'HARA. It is true, is it not, that they would not be subject to those regulations in connection with the proposed sale of stock or issue of stock? Mr. SMITH. There is no sale contemplated here to the public. Mr. SMITH. That is right. Mr. O'HARA. That is all. Mr. ROGERS. Mr. Chairman. Mr. BECKWORTH. Mr. Rogers. Mr. ROGERS. Mr. Smith, as I understand, the deficit now is $14,000,000; is that true? Mr. SMITH. Yes, sir; approximately a little more than that. Mr. ROGERS. And their authorization was approximately $15,000,000. Mr. SMITH. Yes, sir. Mr. ROGERS. So that they are within a million dollars of being out of business? Mr. SMITH. That is right. Mr. ROGERS. Now, would you think that it is a good idea for the Government to get these services performed by some private enterprise instead of the Government continuing to run it? Mr. SMITH. That is a policy matter that my Office would not like to participate in. Mr. ROGERS. Thank you. Mr. BECKWORTH. We certainly do thank you, Mr. Smith, for your very fine contribution. Mr. SMITH. Thank you. Mr. BECKWORTH. Our next witness will be Mr. A. D. Strong, secretary, Upper Mississippi Waterway Association, 1034 Midland Bank Building, Minneapolis, Minn. STATEMENT OF A. D. STRONG, SECRETARY, UPPER MISSISSIPPI WATERWAY ASSOCIATION, MINNEAPOLIS, MINN. Mr. STRONG. Mr. Chairman and members of the committee, my name is A. D. Strong. I will be very brief, as brief as possible, and take just a few minutes, in which I would like to present my state ment. I am secretary of the Upper Mississippi Waterway Association, with principal offices at 1034 Midland Bank Building, Minneapolis, Minn. This association was organized nearly 25 years ago, and was chartered for the advancement of the commercial, agricultural, mercantile, and manufacturing interests of the upper Mississippi Valley through the development of an all-water transportation route via the Mississippi River to domestic and foreign markets. Its membership primarily embraces the States fronting on the upper Mississippi River Missouri, Illinois, Iowa, Wisconsin, and Minnesota. The Upper Mississippi Waterway Association is vitally interested in the continuance and development of water services on the Mississippi River system, and thus is much concerned with the present status of the Inland Waterways Corporation, operator of the Federal Barge Lines. Because of the importance of the subject, a committee of members of our association has long been studying in search of a feasible plan for the rehabilitation of the Federal Barge Lines. It is apparent that the Inland Waterways Corporation is confronted with the necessity of obtaining additional capital if the present worn-out equipment of the Federal Barge Lines is to be replaced or modernized and if its pioneering and development work is to be continued. At the same time, our members are conscious of the problems confronting the privately owned barge lines in their development, and are convinced that there is no need for the Federal Barge Lines to expand in competition with those privately owned and operated lines that now are serving the Mississippi, the Illinois, and the Ohio Rivers. After weighted consideration, the position of the association was stated in the form of a resolution adopted on January 19, 1949, as follows: The continued operation by the Inland Waterways Corporation of the Federal Barge Lines, as an agency of the Government, in pioneering and promotional activities on the Mississippi River system is essential to eventual full utilization of newly improved channels, to the development and expansion of a system of through rail-and-water and truck-and-water routes and rates, and to the provision of adequate carload and less-than-carload rates and service, in order that the benefits of water channels developed at public expense may be extended to the greatest number of producers and consumers in the midcontinent areas. To that end, we approve appropriations by Congress of such sums of money as are necessary for the Inland Waterways Corporation to: 1. Continue, develop, and expand the operation of its carload and less-thancarload services throughout the areas in which it presently is authorized to operate. 2. Continue pioneering and experimental efforts in the development of modern and efficient terminals, including rehabilitation and modernization of existing terminals, for speedy and economical handling of water-borne traffic, and interchange between water and land transportation agencies. 3. Continue efforts for the publication of joint tariffs with rail and motor carriers in a way that will make generally available the privileges and economies of joint land and water transportation upon terms fair to railroad, motor, and water carriers. 4. Continue pioneering work in bargeload and carload service on the Missouri River. We do not favor the Government, through the Federal Barge Lines, operating in competition with private industry in trades or services where privately owned barge lines and terminals are ready, willing, and able to provide adequate service, and we urge that the Congress enact such amendments to existing law as will insure that the future activities of the Inland Waterways Corporation and Federal Barge Lines will be primarily in the fields of pioneering and research, and that their operations will be confined to those in which private industry is not yet able to provide the services required by the public interest; with the provision that the present equipment of Federal Barge Lines employed in bargeload traffic shall continue to be so employed either by privately owned carriers or by Federal Barge Lines, until the privately owned carriers are in a position to and do provide the needed services. A very important factor concerning the Federal Barge Lines, as it relates to the Mississippi River from St. Louis to Minneapolis, is the fact that many of the communities along the river, such as Burlington, Dubuque, Clinton, Muscatine, Rock Island, St. Paul, Minneapolis, and others, constructed municipally owned river terminals fronting on the Mississippi River for the handling of water commerce and to provide or promote adequate docks, railroad and terminal facilities, open to all upon reasonable and equal terms for the handling, storage, care, and shipment of freight from and through these important ports on the upper Mississippi. In the early 1920's there was widespread agitation among the businessmen in all river communities on the upper Mississippi to restore commercial navigation on the river. This interest gradually crystallized and culminated in the organization of the Upper Mississippi Barge Line Co. with paid-in capital sufficient in amount to contract for the construction of 2 towboats and 10 steel dry-cargo barges. Shortly afterward the Secretary of War certified that there was a navigable river north of St. Louis to St. Paul and Minneapolis. This then opened the way for negotiations with the Inland Waterways Corporation which was operating from New Orleans to St. Louis, to extend its operations to the Twin Cities. These negotiations, as we all know, were carried to a successful conclusion, including the acquisition by the Inland Waterways Corporation of the towboats and barges then owned by the Upper Mississippi Barge Line Co. As was to be expected, the pledge of the Federal Corporation to operate on the upper Mississippi River was conditional-the condition being that adequate terminals be provided by these municipalities or other local interests at these principal ports. This problem was promptly and vigorously tackled by the municipal authorities and businessmen in these important river communities and in each of these cities municipal terminals were built which met the specifications of the Inland Waterways Corporation. The improvements of these municipal terminals cost the communities and private interests in excess of $2,000,000. Taking as example, the city of St. Paul constructed a barge terminal which cost in excess of $400,000. Subsequent additions, mostly for larger open dock area and trackage dur ing the PWA days, materially increased this amount and it is conservative to state that the terminal at St. Paul has a value in excess of $1,000,000. A similar situation exists in the other communities where the improvements by the building of these terminals were carried out. These upper Mississippi River municipalities proceeded with a feeling of security, to finance their river terminals, largely because of certain congressional acts and declarations of policy. Section 500 of the Transportation Act of 1920 says that it shall— be the policy of Congress to promote, encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States and to foster and preserve in full vigor both rail and water transportation. As previously stated, these terminals were designed by the then consulting engineer of the Inland Waterways Corporation. These terminals were designed and built to handle all kinds of packaged and bulk freight, in any quantity lots, for interchange with connecting land carriers, as well as the same kinds and quantities of freight having local origin or destination. To briefly describe one of these municipal terminals, they are comprised of a wharf-barge, which is connected with a warehouse of substantial dimensions by an escalator for the lowering of cargo in transfer operations. There are railroad tracks for the spotting of cars alongside the warehouse for loading and unloading, as well as facilities for the transfer of freight to and from trucks. These terminals also have ample open dock space for the transfer of bulk and heavy cargo by the use of traveling cranes. It is important to lay particular emphasis on the fact that the officials of the Inland Waterways Corporation and the consulting engineer had a very influential part-not only in the selection of the site but also in the designing of these terminals, and that the design and the equipment provided were for the handling of all kinds of packaged as well as bulk commodities. Twenty-five years ago when these terminals were erected, it is very certain that if the Inland Waterways Corporation had approached these river communities and business. interests of the upper Mississippi river with a proposal to limit the service to the transportation of barge load quantities, or to minimum lots of 400 tons, our people would have flatly refused to invest the public funds which were invested to provide these public river terminal facilities. It was on the definite assurance that the Inland Waterways Corporation would provide adequate service for the movement of less than bargeload as well as for barge load traffic that the people of these upper Mississippi River communities authorized the expenditure of their public funds to build these terminals. Most of these terminals were built in the 5-year period beginning in 1927. The first tow of the Federal Barge Lines arrived in the Twin Cities on October 28, 1927, and regular service between the Twin Cities and St. Louis was inaugurated with the opening of the navigation season in 1928. That was 20 years ago last spring, and during all those years the same kind of service was advertised by the Corporation. It is also pertinent and clearly indicates compliance with the intent of the Congress as to the kind of service to be performed, that through these 20 years the Inland Waterways Corporation has operated most of these upper Mississippi River terminals. The lease arrangement between the Inland Waterways Corporation and these various com munities provides that the Corporation shall pay rent on an actual tonnage-handled basis, approximately 15 cents per ton on packaged freight and 5 cents per ton on bulk freight handled over the open dock. As this committee is aware, the Inland Waterways Corporation placed an embargo last year, and since that embargo was placed, there has been practically no freight handled through the warehouses of these river terminals so that this income was practically entirely cut off. I am sure that this committee fully appreciates, therefore, the seriousness on the part of the river communities of the upper Midwest that there be adequate provision for the continuance of its barge load, carload, and less-than-carload service, and of its service on the Missouri River, and of its program of establishing, maintaining, and expanding its joint rates with rail and motor carriers, in order to spread the benefits of water transportation to the greatest number of shippers possible. The communities on the upper Mississippi River, as a result of the rehabilitation of river transportation, are now enjoying a large and beneficial industrial development. There has been expended by private capital a large sum of money for industrial development such as factories, river terminals, petroleum tank farms, installation of many electrical power plants, chemical plants for the manufacture of fertilizer for farm use using phosphate ingredients, which are shipped by river barge from the Gulf States, and coal terminals for the stock piling of large supplies of solid fuel needed in this vast consuming area so far removed from the source of fuel. I would like to just speak without reading for a minute to state to this committee the perfectly tremendous investment by private capital that has taken place on the river north of St. Louis to the Twin Cities. The 9-foot channel cost for construction, $153,000,000. Take the du Pont plant at Clinton; take the John Deere Co.'s plant, Dubuque, Iowa, where they bought 400 acres and spent some $35,000,000 for their plant; take the Aluminum Co. of America at Davenport, where they built 40 acres under roof and have spent some $65,000,000. It has been safely stated and by many that the capital by investment by private capital has exceeded the cost to the Federal Government of the 9-foot channel. The members of the Upper Mississippi Waterway Association are aware that the private operators are not yet in a position to furnish the complete service required, and the Federal Barge Lines services must be continued until that time arrives. The whole freight rate structure of the upper Midwest is largely predicated on less-thanbarge-load rates and there is.no present prospect of a permanent less than barge-load water rate in the absence of a Government-operated water carrier. It has been stated by very serious economists that the entire economic structure, as far east as the Alleghenies and as far west as the Rockies in this great Midwest valley of ours, would be affected if these rates are destroyed and if the Federal Barge Lines, as we might say, should die on the vine. The members of our association firmly believe that the bill, H. R. 4978, introduced in the Eighty-first Congress, first session, by Mr. Boggs |