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Based upon a recommendation of our fruit and vegetable advisory committee, the American Farm Bureau Federation board of directors recommends one amendment of H. R. 4054. Section 8 (c) now provides that the mortgage period may not exceed 40 years. It is our belief that this should be reduced to 30 years. With the rapid technological changes taking place with respect to the marketing of perishable agricultural commodities, we believe that it would be much sounder to provide for the maturity of the mortgages over a shorter period of time. In some instances rapid obsolescence will outdate the facility before 40 years has elapsed.
The opportunity of presenting the viewpoint of the American Farm Bureau Federation with respect to H. R. 4054 is appreciated.
The CHAIRMAN. We thank you. I am inclined to agree with the recommendation to change the 40-year period to 30 years. It seems to me that we could well do, that.
At the bottom of page 1 you say that the independent retailers and small chains have a cost disadvantage because they are dependent upon the higher cost produce markets for their supplies of produce. Actually, the farmer himself would be involved in that very situation.
If the farmer has to sell into the inadequate market, naturally, the operators are not in position to pay him as well for his produce as they would be able to pay him if they could minimize their losses.
Mr. Triggs. That is correct. I think just as an article of faith we would
that any cost between the consumer and the farmer is shared by them. We do not know how the incidence would be shared, but in the long run it is paid for by both of them.
The CHAIRMAN. Thank you very much.
Mr. King. I would like to ask one question. We are proposing to give guaranteed financing to the terminal markets which are of vital interest to specific localities, and municipalities or combination of just 1 or 2.
The facility is of particular advantage to that community, let us say, rather than to a broad section of the country.
Do you believe that 15 percent of the obligation on their part is enough, that we should leave this at 85 percent, or should we reduce the percentage?
Mr. Triggs. Well, I am not able to answer your question, because to do so, I would have to state a personal view, because we do not have any official view on the point that you raised.
I think this is more than a local problem. It is a local problem, but also a national problem.
Certainly, farmers in California and Florida and Texas and Maine have an interest in the cost of marketing of produce that goes through the New York and Philadelphia and Chicago and Boston markets. They pay part of the cost of those markets.
I appreciate that I did not answer your question.
The CHAIRMAN. Our next witness is Mr. Gregory S. Prince, of the Association of American Railroads.
STATEMENT OF GREGORY S. PRINCE, GENERAL SOLICITOR,
ASSOCIATION OF AMERICAN RAILROADS Mr. PRINCE. Mr. Chairman and members of the committee, my name is Gregory S. Prince. I am general solicitor of the Association of American Railroads, with offices in Washington, D), C., and am appearing here in behalf of the member roads of that association, which include practically all of the class I railroads of the country. I appear in opposition to Ì. R. 4054.
When a similar bill, H. R. 8320, of the 81st Congress, was the subject of hearings before this committee in June 1950, a representative of this association appeared in opposition to that bill, to which I refer you for a more extensive statement of our position.
There has not been sufficient time since notice was received of this hearing to permit any elaborate preparation based upon detailed data. However, such is not necessary in order to make clear our position which is based upon the application of certain fundamental principles to facts that I think will be substantially undisputed.
The railroad members of this association have invested many millions of dollars to provide marketing facilities for handling perishable agricultural commodities. This program of the railroads has been a continuing one extending over many years so that naturally their facilities vary in age, utility, and efficiency. In the best traditions of the free-enterprise system they have built these facilities when and where it was determined that they were needed and would constitute a sound economic investment. We view this bill as a threat to the investment of the railroads in those facilities. We are sure it is not intended that this bill have such a result, especially by reason of its authorship, but notwithstanding we do view it with great concern.
This bill affords absolutely no protection to the railroads against the possibility of total destruction of the value of their existing marketing facilities, whether they be old or modern. For instance, a railroad might have a new expensive, highly modern, and efficient terminal facility for marketing of perishable commodities, but if such a facility were not adequate to meet the needs of the entire community or provide access for the convenience and benefit of its competitors, the trucks, the Secretary of Agriculture might find that a new facility is needed. There are no standards to guide the Secretary in such a determination, and it rests solely with his discretion. If it is shown to the satisfaction of the Secretary of Agriculture that the facility is needed and other requirements of eligibility are met, the Secretary may insure up to 85 percent of the total cost of the market facility. He is not required to take into account the effect which the establishment of the new facility would have upon existing facilities, and we do not feel that it is right to have to rely upon the sole discretion of the Secretary of Agriculture for protection of our property rights. This bill affords absolutely no recourse in such a situation.
Next, we think the basic philosophy of this bill is unsound. It is a blow at the free-enterprise system. There are many facilities for marketing agricultural commodities throughout the country constructed entirely with private capital, in addition to those constructed by the railroads. The construction of marketing facilities with private capital furnishes certain assurances that the project is genuinely needed and is not the result of a promotional campaign by land specu
lators and a few individuals who stand to make a quick profit from the construction of the facility. It seems to us that where the risk is reduced to 15 percent, as would be the case under this bill, inevitably numerous unsound and uneconomic projects will be built. If that occurs, we then have default under the mortgages and a takeover of the facility by the Secretary of Agriculture, who is authorized not only to lease or resell the facility but also to operate it. Thus, it seems inevitable that the Federal Government will find itself in the business of operating many local marketing facilities for perishable commodities.
In brief, as we see the problem, if the project is economically sound and holds out a strong rikelihood of being genuinely profitable, private enterprise will step in and build the facility, which is the way it should be done. Furthermore, if the prospect of financial success is not great enough to attract private capital, but the authorities and residents of a given community feel that the financial risk and burden would probably not be too great whereas the collateral benefits of the project to the community would be substantial, there is the alternative available of a local governmental authority undertaking the project. Certainly,
а. if any level of government is to enter into an activity such as this, it should be the lowest feasible local level. Clearly this is a local problem, not a national problem. Every problem will be different and no single solution will be appropriate. And most important of all, the concept of “need” for such facilities will be much more realistic if they have to be paid for by the people of the community they are to serve than by means of a Federal handout. In our judgment the effect of this bill would be to bring about the construction of many facilities that could not be self-supporting and that are not truly needed in an economic sense.
This bill is clearly at variance with the objectives of the present administration. For instance, in the budget message of the President to the Congress on January 17 of this year, it is stated :
We are moving ahead in taking the Government out of business wherever this can properly be done.
In his state of the Union message to Congress on January 6, 1955, the President expressed his belief in the free-enterprise system in
The aspirations of most of our people can best be fulfilled through their own enterprise and initiative, without Government interference. This administration, therefore, follows two simple rules: first, the Federal Government should perform an essential task only when it cannot otherwise be adequately performed ; and second, in performing that task, our Government must not impair the self-respect, freedom and incentive of the individual. So long as these two 'rules are observed, the Government can fully meet its obligation without creating a dependent population or a domineering bureaucracy.
In an address last month, entitled "Business, Industry, and the Government,” the Director of the Bureau of the Budget dwelt upon this subject at length, saying in one part:
A combination of four concepts underlie the administration's determination to reduce the area of unwarranted Government competition with business.
The first stems from faith in individual initiative and free enterprise from a philosophy that the Federal Government should be as limited in its intrusion nto private, local, and State affairs as the national security and individual welfare will permit, thereby leaving the largest possible area open for the free interplay of economic forces and for individual initiative and aspiration.
While these expressions have been quoted from representatives of the administration, this is not a partisan concept, for many of the accomplishments in reducing the area of Government competition have been with the wholehearted cooperation of the party in control of ('ongress. Let us not by this bill introduce an entirely new area of Government regulation and Government competition.
One final consideration that makes us feel that this is not a sound bill is the fact that it is predicated upon the creation of a monopolistic facility. It is true that it is provided that the rentals and other charges for the use of the market facility are required to be established at reasonable levels approved by the Secretary of Agriculture, but in addition to that, they are to be designed to meet the obligations and defray the costs of maintaining and operating the market facility. Thus, with all competition effectively eliminated, if the project was not soundly conceived, the burdens imposed upon the users may greatly exceed those from which they were suffering before the construction of the new facility. In any event, it introduces Federal control into a new area of business, one that is strictly local and heretofore predominantly privately owned and controlled.
To sum up our views in a few words, we do not think this bill is consonant with the philosophy of the free-enterprise system, we do not believe any public need has been demonstrated of such a nature as to call for a departure from that system, particularly by intervention at the Federal level, and we think the bill would unquestionably in many instances result in irreparable damage to the railroads and other owners of existing marketing facilities.
Accordingly, we are opposed to the passage of H. R. 4054.
The CHAIRMAN. Mr. Prince, you are interested, of course, in the marketing facilities which are now owned by the railroads of the country, whether those facilities are adequate or obsolete.
In your statement you say that even though your facilities are obsolete, antiquated, inadequate, inefficient, you still do not think that anybody should do anything about it, is that right, that you should just leave it alone?
Mr. PRINCE. No, sir; I would not say that.
Mr. PRINCE. I would not say that is a fair interpretation of the statement, Mr. Chairman.
The CHAIRMAN. Let me read it to you.
This bill affords absolutely no protection to the railroads against the possibility of total destruction of the value of their existing marketing facilities whether they are old or modern.
Mr. PRINCE. That is correct.
Mr. PRINCE. In other words, I was pointing out that we might have a very modern, up-to-date. efficient facility.
The CHAIRMAN. All right, but assume that you have a modern, upto-date, adequate, sufficient facility, what causes you to believe that anybody in that city where you have those facilities, or anybody in the Department of Agriculture would want to go in and build another one?
Mr. Prince. Perhaps I did not make myself entirely clear.
Mr. PRINCE. I admit that there are possibilities where we may have a modern, up-to-date facility, but it may not be adequate to meet the entire needs of the community. It may not be considered adequate by the Department of Agriculture, because it does not afford access to trucks. And many more goods are now moving by trucks. So that it might not, under this standard, be deemed adequate, and the Department of Agriculture might therefore find a need for a new facility.
That facility, being designed as the one facility to serve that area, might result in the destruction of the value of our facility. We do not think that it should come about in that way, that we should be dependent upon the exercise of that discretionary judgment by the Secretary of Agriculture and the Federal Government. If it is needed, we feel that it will be built. We feel that it will be built by the community and the interests it has to serve.
The CHAIRMAN. You sat here this morning and heard the witness from the Department say that the Washington Street market in New York is now like it was 100 years ago, and the railroad companies have never done anything about that. You have never done anything about the Dock Street market in Philadelphia or in Boston. Do you operate one in Raleigh, N. C.?
Mr. PRINCE. I do not know.
The CHAIRMAN. You just know that years have gone by, or in recent years the railroad companies had some money invested, and you are taking exactly the same position with reference to your property as the owners of these ratholes of Washington Street take with regard to their properties. You are not concerned, apparently, with the adequacy or inadequacy of the facility. You just want to be left alone.
Mr. PRINCE. Mr. Chairman, I do not want to quarrel over this. Perhaps we look at it somewhat differently.
The CHAIRMAN. I do not want to quarrel.
Mr. PRINCE. Let me say this, I think it would be recognized that the railroads are not in the business as a utility to serve communities by providing marketing facilities.
In other words, it is not our duty to provide the marketing facilities adequate to meet the needs of the entire community. We are a transportation agency. We have an obligation to provide adequate transportation and adequate facilities in connection with the transportation that we provide. We do not have an obligation to provide the necessary, total market facilities for a community.
The CHAIRMAN. No one is trying to charge you with that responsibility. You are taking the position that whether your market is inadequate or adequate, you want to be left alone-you do not want the Federal Government to do anything about it. You are taking the same position that the people who own the rental property took when we started out on Federal housing; when we started out with public housing.
You commend the administration in office because of a few statements made recently regarding the policies of the Government, and yet this administration is just as much in favor of public housing and