by the proposed bill which will permit the municipalities to secure their funds at a more reasonable interest and debt service rate and without the excessive cost of program financing.

Due to the increasing demand of the public for adequate sewage treatment facilities for all towns, many municipalities which discharge their sewage untreated to the streams of the State have been faced with the problem of providing adequate treatment in spite of rising construction costs and fixed legal debt limits. It has been many a municipality's cry to the regulating agencythe State Board of Health-that they have no way of obtaining funds with which to construct the necessary treatment facilities. This is only too true in the case of small towns where it is doubtful if such fees as sewer service charges would even provide the necessary funds upon which a loan at a reasonable rate of interest could be obtained.

The situation for most towns is acute due to the fact that the towns have grown so fast that many of the newer subdivisions are not served by sewers and the town is unable to finance the needed sewer extensions. As a result, less satisfactory means of sewage disposal are being employed in these subdivisions. There are already many cases on record where these methods of sewage disposal have failed and created potential health hazards.

Although many municipalities have created water and sewer boards and thus set up the legal means by which improvements in existing systems and necessary extensions to the old system have been financed, this method of financing is not applicable in all cases. Many of the small towns cannot create these boards due to the organization of the municipality or to the fact that there are already large, outstanding debts against the systems.

The situation with some towns which need a sewerage system but cannot construct one because of their existing legal debt limit is also critical. In this case, the town's development is hindered because the town is unable to provide the necessary sanitary facilities.

A bill-such as your S. 1524-which would enable small towns to obtain these necessary funds at a reasonable rate of interest would certainly pave the way for more adequate sanitation and cleaner streams in Alabama. It is believed that the proposed legislation will provide the necessary means of obtaining these funds.

Again thanking you, Senator Hill, and the 23 other farsighted Senators for your vision and interest which prompts S. 1524, I am

Cordially yours,

ED E. REID, Executive Director.

Senator CAPEHART. Do you think it would be practical to tie the States in to this?

Mr. HEALY. To tie them in?

Senator CAPEHART. In other words, let the States guarantee the Federal Government against loss?

Mr. HEALY. Senator, it would be my impression that there would be some constitutional problems there that might not permit that to work. I would have to

Senaor CAPEHART. How and why?

Mr. HEALY. For example, it is my impression that in some States the State under its particular constitution would not be permitted to guarantee somebody else's bonds. I think we would run into that problem.

Senator CAPEHART. Do you think it might be a good idea for that State to change their system where they could either take care of their own people or, if the Federal Government does it, they could tee that the Federal Government will not lose any money doing it? Mr. HEALY. Well, we are getting into a

guaran

Senator CAPEHART. Yes, I do not want to labor the question, excepting that we do get into States rights in this matter, and the question is: Do the States want the Federal Government taking over more of their responsibilities?

Mr. HEALY. Well, I would say generally, Senator, that the reason this type of demand arises in the first place, I think, is due to a large extent to the fact that the fiscal ability, the tax resources of both the States and the local governments, are very limited. The Federal Government has usurped the revenue sources to such an extent.

Senator CAPEHART. They have taken all the money out for Federal taxes?

Mr. HEALY. Yes, sir. And so the States do not have a big taxing base to work on either. So then we go to the Federal Government. Senator CAPEHART. Do you think some day, if the Federal Government is going to continue to take so much money in Federal taxes, they ought to return some on sort of a pro rata basis as you do in the States on school and other county taxes or tax assessments?

Mr. HEALY. I am sure there would be valid States rights arguments against that sort of a system. This particular measure, Senator, however, would not cost the Federal Government any money. This is setting up a revolving fund. It is not a direct appropriation for Federal aid.

Senator CAPEHART. Would you feel an amendment to this bill might be in order and might even make it a better bill if we simply gave the FHA the right to insure the bond issues or mortgage to the property as they do on housing?

Mr. HEALY. Well, to my mind that would not be a bad idea, and that idea has received endorsement by the State municipal associations when it was brought up last year by this other bill.

Senator CAPEHART. FHA, of course, just simply guarantees the mortgages.

Mr. HEALY. Yes, sir.

Senator CAPEHART. They are really a guaranteeing agency. If the FHA or the Federal Government, with FHA as the agency, guaranteed these bonds, they certainly would be easily sold.

Mr. HEALY. That is right.

Senator CAPEHART. Would that be a more simple method possibly than setting up a corporation to loan Federal funds?

Mr. HEALY. It might be a more simple method and might not have very much objection except on the part of those people who do not believe in tax-exempt bonds. And I understand that was the objection last time-that it would be a situation where the Federal Government would be guaranteeing tax-exempt bonds. Of course, we will always favor the principle of tax exemption on State and municipal bonds. Senator CAPEHART. It would be hard to have your cake and eat it both.

Well, that is all I have, Mr. Chairman.

Senator SPARKMAN. I am sorry that I was not here to hear your statement and also that of Senator Long. I suppose it has been amply covered. We have been very glad to have you.

Senator LONG. Mr. Chairman, might I supplement my statement and the witness' statement by one additional fact?

STATEMENT OF RUSSELL B. LONG, A UNITED STATES SENATOR FROM THE STATE OF LOUISIANA-Resumed

Senator LONG. I asked the municipalities in my State to make a survey to see the need of this situation, and they reported to me that

there is only 6 percent of the communities in Louisiana with population less than 5,000 who have any public sewerage systems at all. So I would submit that when we have a need that great that 94 percent of the smaller communities need those facilities, that it is something that both the Federal Government and the States could very well devote some attention to.

I have here letters that I received with regard to this year's bill and also two letters that I think should be extremely worthy of the committee's attention with regard to the bill I submitted last year to guarantee these bond issues.

Senator SPARKMAN. Without objection, that will be included in the record.

(The letters referred to follow :)

Hon. RUSSELL LONG,

NEW ORLEANS, LA., April 6, 1955.

Senator United States Senate, Washington, D. C.

DEAR SENATOR LONG: Thanks for your letter of March 31 and S. 1524 introduced by you in the 84th Congress. I am sure if this legislation is enacted it will help the people of Westwego get adequate sewerage disposal facilities which is badly needed in our community. We are very grateful to you for the help you are giving to our people and wish you the best of luck.

Sincerely yours,

Hon. RUSSELL B. LONG,

ROY C. KELLER, Mayor City of Westwego, La.

VILLAGE OF CLARKS, Clarks, La., April 13, 1955.

The United States Senate, Washington, D. C. DEAR SENATOR: This is to acknowledge receipt of your letter dated March 31, 1955, concerning a bill (S. 1524), introduced by you; and which is designed to assist small municipalities in securing financial aid in acquiring facilities necessary to the comforts and well-being of the citizenry involved.

I have read with much interest the copy of this bill, and feel certain that every provision contained therein merits approval; basing my conclusion upon the fact that to overcome even the minor difficulties encountered, financial aid from some source is necessary in the management of every municipality, small or large, though I would place special emphasis on the small.

Clarks is a village of seven-hundred-and-sixty-odd inhabitants. Its only source of revenue is from a municipally owned water system, consisting of two wells and a storage tank, which was given to the town by the Louisiana Central Lumber Co., and the participation in the State tobacco tax.

This has been our only means of functioning now for some 18 months; having been incorporated since September 1953. We need street improvement, bridge repair, not to mention sewerage; yet all of these necessities are out of our reach unless some means of assistance is placed at our disposal.

This bill, S. 1524, would do the job, and I wish to assure you that the council and I are for it wholeheartedly.

Very truly yours,

Hon. RUSSELL LONG,

United States Senate, Washington, D. C.

E. L. KRAFT.

TOWN OF PATTERSON, Patterson, La., April 4, 1955.

DEAR RUSSELL: It's been many a year since we last saw each other in law school. I am happy to be able to say that in renewing our acquaintance by this letter I am writing to encourage you in your efforts to provide one of the greatest needs of our small towns.

Patterson is a perfect example of the predicament small towns are in. Our assessment is just a bit over 1 million, yet our proposed sewage system will cost around $300,000. This will make our bonds difficult to sell, at best, so naturally we hope that your proposed bill becomes a law. I'd appreciate your

In addition to the improvement of facilities for better health and sanitation, much useful employment will be generated by the provisions of this bill, and I need not speak of the extreme importance of this aspect, in view of the very widespread unemployment and partial employment which exists in the country today.

It should also be mentioned that, in addition to the importance of the measure from the standpoint of the improvement of human health and sanitation conditions, it would be of importance to the preservation of fish and wildlife. There are many areas where the present very inadequate arrangements for the disposal of sewage, and particularly the lack of sewage-treatment systems, constitute a serious problem of stream pollution.

I have been advised by both municipal authorities and bond experts that under the present circumstances it is virtually impossible for small communities to market their bonds for the purpose of providing facilities for better health and sanitation. The interest rates are sky high at the present time, and only something in the character of a Federal guaranty will make them more marketable. I wish to emphasize the fact that the bill, if enacted, will not result in any cost to the Federal Government. Provision is made for the payment of administrative costs and for the payment of losses which may be the result of default of bonds guaranteed by the Federal Government. If experience should prove that the loss premium of 1 percent of the face value of the bonds is not sufficient, Congress could increase the charge, or reduce it if an undue surplus should be accumulated.

The bill, as presently drafted, applies only to municipalities, but I recognize that it will be desirable to make provision for its application to areas which lie outside municipal boundaries, and I intend to request that the staff of the Committee on Public Works study the problem to determine the best means of providing the additional coverage. It would be helpful to the committee and its staff if Members of the Senate could indicate particular problems with regard to their own States. There are many special types of local government organizations in the several States, and language should be found to include those which are appropriate.

Despite its many advantages. I should not want to oversell the benefits to result from the proposed legislation. Local initiative in instituting worthwhile projects in the fields covered by the bill will still determine the extent of the improvements to be undertaken, and this is as it should be. It must necessarily be true unless Federal funds are to be provided directly to finance these projects, and I do not believe that the deficit budget which the Government already faces should be made worse by the very large expenditures which would be necessary.

Also, the bill does not remove or attempt to alter in any way the limitations at present placed on municipalities by their State legislatures with regard to the limits on debts which they may incur or the procedures under which they are authorized to issue bonds. It may be necessary that State legislaturès give consideration to changes in State laws which would make it easier for local government agencies to undertake essential public works improvements. I believe they would be encouraged to do so by the Federal guaranties which this bill would provide.

Very special credit is due, in my opinion, to the energetic work which has been done by the Southwest and Central Municipal Improvement Association of Louisiana, and I desire to record my appreciation for their assistance in framing the proposed legislation. Their work, and that of numerous other similar organizations throughout the country, will be greatly assisted if Congress passes the bill.

I believe it is highly desirable to pass the proposed legislation during the present session, and I very much hope that the committee will be able to give careful consideration to it without delay. I also hope that Members of the Senate will find the time in their already overcrowded schedules to study its provisions and to give support to it, both in the committee and when it reaches the Senate floor, as I hope it will.

Mr. President, in support of the bill, I ask unanimous consent to have printed at this point in the Record the text of two letters I have received, urging the passage of the proposed legislation.

The Presiding Officer (Mr. Ferguson in the chair). Is there objection?

If enacted, this bill would provide the means whereby the Federal Government would guarantee the principal and interest of bonds issued by municipalities having a population of less than 10,000 inhabitants at the time of the last Federal census. Guaranties of such bonds would apply only to those which were for 'the purpose of providing public works as defined under the proposed legislation. These would be limited to: First, the storage, treatment, purification, and distribution of water; second, sewerage and sewerage facilities, including seweragetreatment works; and, third, gas-distribution systems. All three of these types of public works are vitally connected with the standard of health and sanitation of our population.

The act would be administered by a Commissioner, who would most appropriately be the Federal Housing Commissioner, because of this official's experience with the administration of certain other legislation of a related character. It is provided, however, that the President could designate another agency to administer the program, if it should be desirable to do so.

The procedure which would apply under this act is as follows: A municipality, having less than 10,000 inhabitants, would go through all of the usual procedure under the applicable State legislation for drafting the plans, and for taking the decision to issue the bonds for the purpose of constructing the public works in question. We have specifically in mind that the legislation should not permit the Commissioner to interfere unduly in the decisions which are presently and should continue to be the province of the local citizenry and their duly elected officials.

After the municipality had taken the necessary steps to be in a position to issue bonds for purposes which fall under this act, the officials thereof would obtain a certificate from the Attorney General, or other chief legal officer of the State in question, as to the legal validity of the proposed bond issue and the authority of the municipality to issue same.

This certificate and other information, which it is appropriate for the Commissioner to require in order to determine that the bond issue is a valid one and that the project which it is proposed to finance is a sound one, would be submitted by the municipality to the Commissioner.

The Commissioner would be required to act promptly on all applications. In the event that he finds that an application is deficient and cannot be approved, he is required to report in writing to the municipality specifically as to the deficiencies which he alleges, and it is provided that the municipality can, at any time thereafter, when it considers that these deficiencies have been remedied, resubmit an application.

In the event the Commissioner approved the application, the municipality would be granted a term of 1 year during which it could submit for endorsement the bonds which were to be sold to finance the proposed public work. Unless the Commissioner found that the certificates were irregular in some respect, and therefore could not be approved under the terms of his earlier approval of the project as a whole, he would forward them to the Treasurer, who would be required to endorse them to show that they were fully guaranteed, both as to principal and interest, by the United States Government. The bonds would then be returned to the municipality for sale.

There are two types of charges which would be authorized by this proposed legislation. The first pertains to the administrative costs incurred by the Commissioner. He would be authorized to establish an initial scale of charges which he estimates would be required to cover the costs which he expects to incur. The Commissioner would also be required to review these charges annually, and to make such adjustments in them as experience warranted. The administrative charges must be paid before the bonds are transmitted by the Commissioner to the Treasurer for final endorsement.

The proposed legislation also provides that a fee of 1 percent of the face value of the bonds shall be charged as a premium designed to provide a pool from which losses due to default will be paid. This premium could be paid after the sale of the bonds and out of the proceeds thereof.

Mr. President, it is my hope, and that of the other Senators who joined with me in introducing this bill, that it will prove very beneficial in assisting small communities to build and to improve their essential public works. In particular, there are serious deficiencies throughout the entire country in faciliites for the disposition and treatment of sewage which should be remedied.

In regard to my own State of Louisiana alone, it has been ascertained recently that only 6 percent of communities with population below 5,000 have public sewerage systems.