capital stock of the Corporation in the same amount. It is clear that the Congress has complete control on a continuing and yearly basis as to the expenditures and the operation policy of the Corporation. Such control should be sufficient assurance to all concerned that the Corporation will continue to operate in the public interest. Accordingly, in view of the lack of need for these amendments, and the possibility of future misinterpretation, we feel that it would be desirable to omit them. Section 4 proposes to amend section 4 (a) of the act creating the Inland Waterways Corporation by diversifying the representation and increasing (from 6 to 9) the number of members of the advisory board. The Department is in complete agreement with the purpose of giving appropriate representation on the advisory board to privately owned carriers and shippers on the Mississippi River System. However, we believe that discretion should be left to the Secretary to appoint members to the advisory board who will serve in the best interests of all concerned consistent with the declared policy of the Congress. A step in this direction has already been made with the recent appointment of a representative of a privately owned carrier to membership on the advisory board. Representatives of shippers and the public have been on the advisory board over a long period of time. Accordingly, the Department is not in favor of the specific limitations contained in section 4 as to the proposed required representation on the advisory board. In addition to the foregoing amendment introduced by Senator Wherry, there was also introduced in the Senate by Senator Hill and others an amendment to the bill, S. 211, authorizing the Corporation to operate on the Tennessee and Cumberland Rivers and on the Ohio River up to the confluence of the Ohio and Cumberland Rivers. If the amendment were enacted a survey would be undertaken to determine whether or not there is need for common carrier service on these rivers. In the event it is determined that such a need exists, an application would then be made to the Interstate Commerce Commission for operating rights on these rivers. The Department offers no objection to the amendment. Hon. EDWIN C. JOHNSON, Chairman, Committee on Interstate and Foreign Commerce, United States Senate, Washington, D. C. MAY 12, 1949. MY DEAR MR. CHAIRMAN: The attention of this Department has been called to S. 211, a bill to amend the act entitled "An act to create the Inland Waterways Corporation for the purpose of carrying out the mandate and purpose of Congress as expressed in section 201 and 500 of the Transportation Act, and for other purposes," approved June 3, 1924, as amended, on which a subcommittee of your committee has held hearings. It is noted that this proposed legislation, which would provide for the purchase of additional capital stock of the Inland Waterways Corporation by the United States, makes no provision for the reimbursement to the Treasury for the amount of the capital stock so purchased. This Department believes that corporations, the stock of which is subscribed for by the United States and paid for by the Secretary of the Treasury, should make an annual payment to the Treasury on such capital stock at a rate to be determined by the Secretary of the Treasury, taking into consideration the average rate of interest on marketable obligations of the United States. Accordingly, it is recommended that there be added at the end of the bill, as part of the proposed amended section 2 of the act approved June 3, 1934, the following language: "Hereafter the corporation shall pay interest annually to the United States Treasury on the amount of its capital stock. This interest shall be computed on the basis of the average daily balances of the capital funds invested by the Treasury in such stock and shall be at a rate determined by the Secretary of the Treasury, taking into consideration the average interest rate on outstanding marketable obligations of the United States." The Department was advised by the Bureau of the Budget that there was no objection to the submission to the House Committee on Interstate and Foreign Commerce of a report similar to this report relative to H. R. 328, a bill identical to S. 211. Very truly yours, JOHN W. SNYDER, Secretary of the Treasury. Hon. EDWIN C. JOHNSON, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Committee on Interstate and Foreign Commerce, United States Senate. MY DEAR MR. CHAIRMAN: Further reference is made to Mr. Jarrett's letter of January 14, 1949, acknowledged January 17, transmitting a copy of S. 211, Eightyfirst Congress, a bill to amend the act entitled "An act to create the Inland Waterways Corporation for the purpose of carrying out the mandate and purpose of Congress as expressed in sections 201 and 500 of the Transportation Act, and for other purposes," approved June 3, 1924, as amended-and requesting any comment I may desire to make concerning the said bill. The bill is identical to sections 1 and 2 of H. R. 429, Eighty-first Congress, entitled "A bill to increase the capital stock of the Inland Waterways Corporation and to extend the service of such Corporation to the Tennessee and Cumberland Rivers," as to which a report is being made today to the chairman, Committee on Interstate and Foreign Commerce, House of Representatives. The Inland Waterways Corporation, a wholly owned Government corporation, was created by the act of June 3, 1924 (43 Stat. 360) (49 U. S. C. 151), for the purpose of carrying on the operations of the Government-owned inland, canal, and coastwise waterways system to the point where the system can be transferred to private operation to the best advantage of the Government, etc. This Office has heretofore reviewed the affairs of the Corporation for the two fiscal years ended June 30, 1946, in reports on audits conducted in accordance with the requirements of section 5 of the act of February 24, 1945 (59 Stat. 6), which have been printed as House Documents Nos. 234 and 414, Eightieth Congress. As stated in section 3 of the summary to the 1946 audit report (page 2), the Corporation and its subsidiary (the Warrior River Terminal Co.) at June 30, 1946, had incurred a deficit from operations of $1,813,138; and an adequate provision for depreciation on floating equipment and railroad property, if one were made (section 6 (e) of the enabling legislation specifies the value to be entered on the Corporation's books), would have increased that amount to approximately $7,500,000. It was observed that, while annual subsidies for operating expenses had not been required because revenues had been more than adequate to cover operating expenses, excluding depreciation, a large portion of its equipment and property had become obsolete or worn out, necessitating replacement in order to continue operations on an effective basis, and that the working capital available to the Corporation probably was not sufficient for the purpose. The deficit has increased greatly in the last 2 years, and estimates in the budget for 1950 (pp. 1303-1305) show that it will be more than $18,000,000 at June 30, 1950. The making of capital improvements thus definitely will be dependent upon the appropriation of additional funds. The provisions of S. 211 increasing the capital stock of the Corporation from $15,000,000 to $33,000,000 do not disclose whether the additional funds are for the purpose of (a) rehabilitation of existing facilities and equipment, (b) purchase of modern equipment and other facilities, or (c) financing of operating losses. It is believed that the general purposes, at least, for which any additional capital is to be used should be determined by the Congress and specified in the legislation. Particular attention is invited to recommendations at pages 4 and 5 of the 1946 audit report that the Corporation be thoroughly and critically examined in the light of the policies stated in the organic act to determine its future course. Also, it was suggested that, in the event its operations were continued, certain changes designed to bring about organizational and management improvements be adopted. However, while the audit studies indicated a need for reconsideration of the entire program, they were undertaken impartially and with a view, to presenting to the Congress objective facts useful in determining future policies; and whether or not the Corporation's functions be continued or extended, as proposed in S. 211, is a matter for determination by the Congress concerning which I have no comment to make. Sincerely yours, LINDSAY C. WARREN, Comptroller General of the United States. STATEMENT OF THE GENERAL ACCOUNTING OFFICE, ON S. 211, EIGHTY-FIRST CONGRESS, RELATING TO INLAND WATERWAYS COPORATION, SUBMITTED AT THE REQUEST OF THE SENATE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE 1. Whether or not the functions of the Inland Waterways Corporation are to be continued or extended, as is proposed in S. 211 and the amendments thereto, is a matter for determination by the Congress concerning which the General Accounting Office has no occasion to take a position. That of course is a policy question. And we wish now specifically to disclaim responsibility for the statement that "The General Accounting Office also has recommended that the Government withdraw from the [Inland Waterways] business," appearing at page 64 of the Report on Federal Business Enterprises submitted to the Congress March 31, 1949, by the Commission on Organization of the Executive Branch of the Government: The General Accounting Office audit reports on Inland Waterways Corporation for the fiscal year 1946 commented that the Corporation was at a crucial point in its existence. That is even more true now. Equipment is antiquated and much of it must be replaced if the Corporation is to operate with reasonable efficiency and economy. Damage claims have increased due to leaky and otherwise defective barges. Operating losses have been financed at the expense of depreciation reserves. Replacements, if any, have been negligible. Audits by the General Accounting Office of financial transactions of the Corporation have disclosed deficiencies in accounting practices and serious impairment of its capital. In view of these conditions, it would appear timely for the Congress to examine thoroughly and critically the operations of the Corporation, in the light of the policies stated in the organic law, and determine the course of its future policy. As pointed out in report of the Comptroller General on S. 211, sent to the committee February 10, 1949, the audit studies of the General Accounting Office were undertaken impartially and with the view of presenting to the Congress facts useful in its determination of future policy. 2. The provisions of S. 211 increasing the capital stock of the corporation from $15,000,000 to $33,000,000 do not disclose whether the additional funds are for the purpose of (a) rehabilitation of existing facilities and equipment, (b) purchase of modern equipment and other facilities, or (c) financing of operating losses. It appears evident that the general purposes, at least, for which any additional capital is to be used should be determined by the Congress and specified in the legislation. That determination is implicit in the most fundamental of the legis lative functions, namely, the power of the purse. It is assumed that the corporation will justify its request for increased capital by submitting a complete and specific plan of rehabilitation-within the framework of the general purposes set forth by the Congress-covering future operations and the replacement, modernization and financing of facilities and equipment. Adequate budgetary and financial control depends on this being done. 3. Section 4 of the proposed amendment to S. 211, introduced March 23, 1949, would increase and diversify the membership of the advisory board which was established under the organic law to advise the Secretary of Commerce. However, reliance upon an advisory board, which has no power to direct and enforce policies in the affairs of the corporation, appears entirely inadequate. The General Accounting Office strongly recommends that the Corporation be headed by a vigorous and responsible board of directors, clothed with the authority and duty effectively to direct its affairs. The lack of such a board of directors is regarded as perhaps the greatest weakness in the present organization. 4. Section 3 of the amendment would regulate certain pioneering activities of the Corporation. In this connection, the Corporation apparently concedes that its operations now fall into two classes-commercial and pioneering. The advantages, from an accounting and budgeting viewpoint, of recognizing this division to the maximum extent practicable are believed to be obvious. Whether the development of the rivers and related facilities be treated as a whole project, or as divisible, an accurate appraisal of the results of operations at any given time must depend upon the availability of financial data permitting ready evaluation on the basis of progress so far made. The costs of new development and the benefits of completed development, when segregated, can be more precisely projected and understood, and, in addition, a degree of control highly desirable in all cases where predominantly spending activities are involved readily can be achieved, The General Accounting Office is of the opinion, therefore, that the Corporation should be required to submit budget estimates for annual appropriations, in ad vance, covering anticipated losses segregated as to (1) pioneering activities and (2) other activities. 5. The General Accounting Office recommends that the Corporation be required to pay interest periodically on the capital investment of the Government, at rates calculated annually in advance by the Secretary of the Treasury to reimburse the Government's cost. Similarly, it is believed that the Corporation should pay a proportionate share of the cost to the Government of carrying out the Civil Service Retirement and the Federal Employees' Compensation Acts. These two recommendations have been made and are being made by us with respect to all Government corporations participating in these programs, and are essential if the operations are truly to reflect their actual costs to the Government. Hon. EDWIN C. JOHNSON, JANUARY 26, 1949. Chairman, Committee on Interstate and Foreign Commerce, United States Senate, Washington, D. C. MY DEAR CHAIRMAN JOHNSON: Mr. Jarrett's letter of January 14, 1949, addressed to the Chairman of the Commission and requesting comments on S. 211, introduced by Senator Wherry et al., to amend the act entitled "An Act to create the Inland Waterways Corporation for the purpose of carrying out the mandate and purpose of Congress as expressed in sections 201 and 500 of the Transportation Act, and for other purposes," approved June 3, 1924, as amended has been referred to our legislative committee. After careful consideration by that committee I am authorized to submit the following comments in its behalf: S. 211 would have the effect of increasing the capital stock of the Inland Waterways Corporation by $18,000,000 and of authorizing an appropriation of that amount for the purpose of paying for such subscription. The question involved in this proposal is one of policy for the Congress, and we have no information which would enable us to express a helpful opinion thereon. Respectfully submitted. WALTER M. W. SPLAWN, Chairman, Legislative Committee. Mr. EDWARD JARRETT, STATE OF NEW YORK DEPARTMENT OF COMMERCE, Clerk, Senate Committee on Interstate and Foreign Commerce, Senate Office Building, Washington, D. C. DEAR MR. JARRETT: Please enter the enclosed statement from the New York State Department of Commerce into the records of the hearings now being held before your committee on proposed legislation relating to the Federal Barge Lines. We are opposed to S. 211 for the reasons given in the attached statement. Sincerely yours, LESLIE HILL PRINCE. STATEMENT BY LESLIE HILL PRINCE, DIRECTOR, WASHINGTON OFFICE, NEW YORK STATE DEPARTMENT OF COMMERCE Any group proposing to expand the operation of the Federal Barge Lines by the Inland Waterways Corporation must prove the value to the whole country of this subsidy. For many years these operations have been defended as cheap transportation. In fact, it is very expensive transportation when you include the cost of maintaining the navigability of the Mississippi River and the operation of the tax-free Inland Waterways Corporation. The Federal Barge Lines was a war baby of World War I. At first their operation was justified on the basis that we had the river, we had to keep it clear anyway for private operation, and we had the boats left from the war. So, why not put the boats and the river together for the benefit of primarily agricultural shippers in the Mississippi Valley. The cost fears of the expenditures of such subsidized shipping have been realized. It is now proposed to expand the operation rather than merely use it to salvage part of the cost of barges originally built for war purposes. Although the cost of operating the Federal Barge Lines is met by the taxpayers of the United States, of whom a substantial percentage live in New York State, their operation is building the port of New Orleans at the expense of the port of New York and the inland ports of Buffalo and Oswego. Paying tax to destroy our own business is not popular in New York State. The proponents of the present subsidy measure will have to prove to the people of the Northeast that they should be taxed to support unnecessary public service. Has any necessity for subsidized water transportation been shown, or has the case rested on the simple proposition that a shipper benefits when part of his cost of transportation is paid by somebody else? This fact we willingly concede; but we have no desire to be the "somebody else" at the expense of New York State's facilities, supported by New York State taxpayers. Perhaps the people in the Mississippi Valley would be willing to underwrite this operation, in which case we have no quarrels with how they use their own money. Our quarrel is with those who would tax us to destroy our own business. Nor do we quarrel with those who feel that maintaining a navigable waterway adjoining several States is a legitimate Federal expenditure. New York State continues to support her barge canal, successor of the old Erie Canal of a century ago, but our canal system is navigated by privately owned companies operating barges and motorships between the Great Lakes ports and the ports of Albany and New York. Continued subsistence of the Federal Barge Lines has already resulted in the diversion of a substantial volume of this private enterprise to the Mississippi Valley. For instance, no sulfur was carried over the New York State Barge Canal during 1948 due to the low freight rate established by the Federal Barge Lines. Formerly, as much as 300,000 tons per year moved through the New York State Canal System. So, not only the New York State taxpayers but also private water transportation companies are injured by this Government competition with private enterprise. We would be derelict in our duty to the taxpayers of the State of New York and to the industry and commerce of our State if we did not oppose H. R. 328, H. R. 429, and S. 211. |