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DEVELOPMENT OF MARKETING FACILITIES

THURSDAY, MAY 19, 1955

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HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,

Washington, D.C. The House Committee on Agriculture met, pursuant to call, at 10 a. m. in room 1310, House Office Building, Hon. Harold D. Cooley (chairman) presiding.

The Chairman. The committee will be in order, please.

We are meeting this morning to consider H. R. 4054, a bill to encourage the improvement and development of marketing facilities for handling perishable agricultural commodities.

In the 81st Congress I introduced a bill, which was H. R. 8320, which was superseded by bill H. R. 9141, and H. R. 9141 was reported to the House

on August 7, 1950, and the Rules Committee granted a rule to the House on August 15, 1950. The bill passed the House, I think, by a unanimous vote on August 22, 1950.

Thereafter, and in the 82d Congress in 1951, I introduced a bill, H. R. 39. Hearings were held on that bill on March 13, 1951, and the field investigations were approved by the committee.' Hearings in executive session were held on August 15, 1951. The committee voted to report the bill, H. R. 39, and it is my recollection that only one vote was cast against the bill at that time. The vote of the committee was 19–1.

H. R. 39 was reported to the House on September 1, 1951, and the Rules Committee reported a rule thereon on September 24, 1951, and on September 26, 1951, the bill, H. R. 39, was considered in the House. There was a motion to recommit the bill and a rollcall vote was requested. The vote to recommit was 180 to 162 and the bill was recommitted.

In the 83d Congress, in 1954, I introduced H. R. 8226, on March 4, 1954. No hearing was held and no action was taken on the bill.

At the present session I introduced the bill now being considered, H. R. 4054, and requested the Secretary of the Department of Agriculture for a report on this bill, H. R. 4054. On May 17, 1955, the chairman received a report from the Department and I would like to present for the record, without objection, this report from the Department, dated May 17, 1955, signed by True D. Morse, Acting Secretary. (The report and bill referred to are as follows:)

MAY 17, 1955. Hon. HAROLD D. COOLEY, Chairman, Committee on Agriculture,

House of Representatives. DEAR CONGRESSMAN COOLEY: This is in reply to your request of May 12, 1955, for a report on H. R. 4054, a bill to encourage the improvement and development of marketing facilities for handling perishable agricultural commodities.

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The bill seeks to aid the establishment of improved wholesale market facilities for perishable agricultural commodities in large market centers by making available, for a charge of one-half of 1 percent per year on the outstanding principal, mortgage insurance on not more than 85 percent of the total cost of the facilities, provided that they meet certain prescribed standards. The aggregate amount of principal obligations outstanding at any one time on all mortgages insured under this bill, and on all mortgages with respect to which commitments to insure have been made, could not exceed $100 million.

The stated general purpose of this bill is to facilitate, encourage, and assist “in the creation and development of modern and efficient public wholesale markets for the handling of perishable agricultural commodities in areas where markets are found to be needed * * to the end that unnecessary costs and burdens attendant with the marketing of perishable agricultural commodities caused by inadequate or obsolete facilities may be eliminated and that the spread between the amount received by producers and the amount paid by consumers may be reduced.” The Department has in recent years made extensive studies of existing market facilities for the wholesale handling of perishable farm products. Many of the large interstate markets have been found antiquated to such a degree that they are not efficiently performing their function. There has long been widespread interest in getting improved market facilities, and the research conducted by the Department consistent with the objectives of this bill has facilitated the building of a number of new markets in various parts of the Nation.

While the Department is in accord with the stated purpose of H. R. 4054, it cannot at this time recommend the passage of this bill. Experience shows that where plans for a market facility have been soundly developed, such ventures are self-liquidating and, hence, may be financed by private capital. It is recognized that the willingness of private capital to enter such a financing field at present seems to be somewhat limited. This, however, appears to be largely the result of a lack of familiarity with market facility projects on the part of financial interests and investors. In view of this, the Department believes that any consideration of insured loans for market facilities for perishable commodities should be withheld until a more thorough effort has been made to attract private capital for the purpose of financing such projects.

The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours,

TRUE D. MORSE, Acting Secretary.

[H. R. 4054, 84th Cong., 1st sess. ] A BILL To encourage the improvement and development of marketing facilities for

handling perishable agricultural commodities Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the “Marketing Facilities Improvement Act.”

DECLARATION OF POLICY

SEC. 2. It is found and declared that the marketing of perishable agricultural commodities effects the public welfare and is a matter of grave national concern; that vast quantities of fruits, vegetables, and other perishable agricultural commodities shipped from various producing areas located throughout the United States and foreign countries pass through and are handled in public marketing facilities located in large consuming areas which are in most instances inadequate and obsolete; that the handling of perishable agricultural commodities in such facilities is attendant with many uneconomic practices, greatly increasing costs and causing undue losses, excessive waste, spoilage, and deterioration, which result in producers receiving prices far below the reasonable value of their products, in unduly and arbitrarily enhancing costs of operations in such markets, and increasing the price of food to consumers; that the prices of all perishable farm commodities are directly affected by the prices made on these public markets and are adversely affected by the unduly burdensome costs resulting from obsolescent and inadequate facilities; that obsolete and antiquated facilities create such an undue restraint and unjust burden on interstate commerce as to make it imperative that appropriate measures be taken to free such commerce from such burdens and restraints and to protect producers and consumers against oppressive costs resulting from the use of such facilities; that modern facilities would make possible the saving of millions of dollars annually by removing the cause of many of the unnecessary costs and burdens; that in spite of the great need for improved facilities, efforts in the past have failed to bring about a satisfactory solution to the problem ; that this failure has been due largely to the inability of farmers, dealers, brokers, commission merchants, and others, individually or collectively, to obtain through regular financial channels the relatively large amounts of capital necessary for the construction of modern facilities. In consequence of the conditions referred to above, it is hereby declared to be the policy of Congress through the powers herein conferred upon the Secretary of Agriculture, to aid in the establishing of such public marketing facilities for the wholesale handling of fresh fruits and vegetables, poultry, eggs, dairy products, other perishable agricultural commodities and sea food as will be conducive to orderly and efficient distribution, increased consumption, and a reduction in the spread between prices paid by consumers and those received by farmers.

GENERAL PURPOSE

SEC. 3. It is the purpose of this Act to facilitate, encourage, and assist municipalities and political subdivisions of States, public agencies, and instrumentalities of one or more States or municipalities, public corporations and boards, and private enterprise in the creation and development of modern and efficient public wholesale markets for the handling of perishable agricultural commodities in areas where such markets are found to be needed and where Federal assistance is requested and authorized as prescribed in this Act, to the end that unnecessary costs and burdens attendant with the marketing of perishable agricultural commodities caused by inadequate or obsolete facilities may be eliminated and that the spread between the amount received by producers and the amount paid by consumers may be reduced.

DEFINITIONS

SEC. 4. For the purpose of this Act

(a) “Market facility” means all the facilities used in connection with the operation of a public wholesale market, including the land, buildings, fixtures, equipment, and other appurtenances necessary or incidental to the operation of a public wholesale market for perishable agricultural commodities constituting a single integrated market located in a substantially contiguous area, not including public cold-storage warehouses of more than ten thousand cubic feet capacity, or facilities for handling livestock.

(b) “Public wholesale market” means a place which serves as the major source of supply of perishable agricultural commodities consumed in a large consuming area and which is operated primarily for the purpose of selling or otherwise disposing of perishable agricultural commodities at wholesale for resale to others.

(c) “Perishable agricultural commodities” means agricultural commodities and products thereof, consisting principally of fresh fruits and vegetable, handled alone or in combination with poultry, eggs, ņeats, seafood, and dairy products.

(d) “Mortgage” means a first mortgage on real estate, in fee simple or on a leasehold under a lease for not less than ninety-nine years; and the term “first mortgage” means such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of, real estate under the laws of the State in which the real estate is located, together with the credit instruments, if any, secured thereby.

(e) “Mortgagee” means the original lender under a mortgage, and his successors and assigns approved by the Secretary.

(f) "Mortgagor" means the original borrower under a mortgage and his successors and assigns approved by the Secretary.

(g) "Maturity date” means the date on which the mortgage or loan indebtedness would be extinguished if paid in accordance with periodic payments provided for in the mortgage or credit instrument.

(h) “United States" includes the several States of the United States, the District of Columbia, Alaska, Hawaii, and Puerto Rico.

(i) “Secretary” means the Secretary of Agriculture.

(j) “Eligible borrower” means any municipality or political subdivision of a State, public agency, or instrumentality of one or more States or municipalities, public corporation or board, or private corporation engaging in, or which will engage in, the operation of a public wholesale market facility which meets the eligibility requirements of this Act.

MARKET RESEARCH AND ANALYSIS

Sec. 5. In order to effectuate the objectives of this Act and assist in the development of proper, adequate, and efficient marketing facilities in the United States, the Secretary under the authority of, and with funds made available pursuant to the Agricultural Marketing Act of 1946, shall undertake, and disseminate the results of, research relating to design, plans, location, methods of operation, materials, use, equipment, and other similar research and analysis, consistent with the needs for the improvement and development of proper, adequate, and efficient marketing facilities for handling perishable agricultural commodities.

REVOLVING FUND

SEC. 6. (a) There is hereby created a fund to be known as “the marketing facility mortgage insurance fund” (referred to in this Act as the "insurance fund”), which shall be used by the Secretary to make insurance payments under section 9 of this Act and to meet the expenses incurred in connection with the acquisition, operation, and disposal of market facilities acquired pursuant to the provisions of the insurance contracts in the event of default by the borrower, except that no part of such fund shall be used for administrative expenses incurred in carrying out this Act. There is authorized to be appropriated the sum of $25,000,000 to constitute such fund which sum shall remain available until expended.

(b) The money in the fund created under this section not needed for current operations shall be deposited with the Treasurer of the United States to the credit of the fund or invested in direct obligations of the United States or obligations guaranteed as to principal and interest by the United States.

(c) The Secretary shall make an annual report which shall include a complete statement with respect to the status of the insurance fund.

INSURANCE LIMIT

SEC. 7. The amount of any insurance contract which may be made under this Act shall not exceed an amount equivalent to 85 per centum of the total cost of the market facility as determined by the Secretary: Provided, That in no case shall the borrower invest less than $45,000 of the total cost : And provided further, That the investment by the borrower shall always be a claim subordinate to the claim of the United States arising out of an insurance contract under the authority of this Act.

INSURANCE OF MORTGAGES

SEC. 8. (a) The Secretary is authorized, upon application of a prospective mortgagor or mortgagee under a first mortgage eligible for insurance under this Act on a market facility, to insure such mortgage and to make commitments for the insurance of any such mortgage prior to the date of its execution.

(b) The aggregate amount of principal obligations outstanding at any one time on all mortgages insured under this Act, and on all mortgages with respect to which commitments to insure have been made, shall not exceed $100,000,000. (c) In order for mortgage on a market facility to be eligible under this Act,

(1) the person obligated to pay thereunder shall be an eligible borrower;

(2) the market facility mortgage shall be one which is determined by the Secretary to be eligible for mortgage insurance;

(3) the mortgage shall be made to and be held by a mortgagee approved by the Secretary as responsible and able to service the mortgage properly;

(4) the principal obligation (and fees and other charges chargeable under subsection (d) of this section) shall be in such amounts not in excess of the amounts specified in section 7 of this Act as may be necessary to enable the borrower to establish the market facility;

(5) the mortgage shall have a maturity satisfactory to the Secretary but not to exceed forty years from the date the mortgage is insured ;

(6) the mortgage shall bear interest at not to exceed 4 per centum per annum on the amount of the principal obligation outstanding at any one time; and

(7) the mortgage instruments shall-

(A) provide for the repayment of the principal obligation, together with interest thereon, in installments in accordance with amortization schedule prescribed by the Secretary; and

(B) contain such provisions with respect to insurance, repairs, alterations, payment of taxes, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary

liens, and other matters as the Secretary may prescribe. (d) The Secretary shall require the payment by the mortgagor or mortgagee of such initial fees for inspection, appraisal, and other similar charges as he finds necessary and such amounts may be included in the principal obligation of the mortgage. The proceeds of such fees and charges shall be deposited in the insurance fund (created by section 6 (a)).

(e) For insurance granted pursuant to this Act the Secretary shall collect from the mortgagee, upon insurance of the mortgage, an initial charge of onehalf of 1 per centum of the principal obligation of the mortgage and annually thereafter a charge of one-half of 1 per centum of the principal obligation remaining unpaid at the time the charge becomes due, without taking into account delinquent payments or prepayments. The proceeds of such charges shall be deposited in the insurance fund.

(f) Any contract of insurance executed by the Secretary under this section shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or misrepresentation of which such mortgagee has actual knowledge.

(g) The mortgagee may, with the approval of the Secretary, assign any mortgage insured under this Act, together with the accompanying note and contract of insurance, and the assignee thereof shall thereupon become entitled to all the benefits of such contract of insurance.

PAYMENT OF INSURANCE

SEC. 9. (a) If the mortgagor under a mortgage insured under section 8 is in default for more than twelve months and the mortgagee, in accordance with regulations prescribed by the Secretary, (1) forecloses or with the Secretary's consent otherwise acquires the property from the mortgagor after default, (2) conveys title and gives possession of the property to the Secretary, and (3) assigns all his claims against the mortgagor or others arising out of the mortgage transaction or foreclosure proceedings (except claims released with the Secretary's consent) to the Secretary, the Secretary shall pay to the mortgagee, in cash, the value of the mortgage. The Secretary shall make such payments within one year after the date the mortgagee makes the conveyance required in the first sentence or the date he makes the assignments required in the first sentence, whichever is the later date.

(b) For the purposes of this section, the value of the mortgage shall be determined, in accordance with rules and regulations prescribed by the Secretary by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of default, the amount of all unpaid interest; the amount of all payments which have been made by the mortgagee for taxes, special assessments, water rates, and other payments in discharge of liens which are prior to the mortgage, and insurance on the property mortgaged ; and a reasonable amount for necessary expenses incurred by the mortgagee in acquiring title to the property and conveying it to the Secretary; and by deducting from such total amount any amount received on account of the mortgage indebtedness after such default.

(c) If there should not be sufficient money in the insurance fund to enable the Secretary to make payments to mortgagees as provided in subsection (a) of this section, the Secretary may make and issue notes to the Secretary of the Treasury to obtain funds to make such payments. Such notes shall be signed by the Secretary or by his duly authorized representatives and shall be negotiable. Such notes shall bear interest, payable semiannually, at a rate equal to the average rate of interest, computed to the end of the calendar month next preceding the date of issue, borne by all interest-bearing obligations of the United States then forming a part of the public debt, and shall have such maturities as the Secretary may determine with the approval of the Secretary of the Treasury. (d) The Secretary of the Treasury is authorized and directed to purchase any

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