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DEVELOPMENT OF TERMINAL MARKETING FACILITIES
cost of the new facility. There is not any way of getting around that.
Now, aside from this direct and important financial interest that the railroads have in this bill, we, generally speaking, are opposed to it also on just the broad ground of fundamental principle. We think it injects the Federal Government into a field where it has no proper place. To carry that a bit further, we are sure that ultimately it will mean that the Government itself will have to take over and operate a substantial number of the facilities that would be built under this proposed bill. I do not think there is any escape from that. The provision in the bill that contemplates lending by the Government only where private capital is not available, to my mind, almost inevitably leads to that conclusion; because, under normal conditions, there is not any question that a justifiable facility, one that can be proven satisfactorily to be self-supporting, will have no difficulty in securing private financing, and that is the very kind you won't lend money on under these provisions you have here.
I think it would be hard to think of any matter that is more essentially local in its very nature than is this matter of providing market facilities for a given community. For that reason, I think this is a matter that should be left to each community to work out for itself.
In that connection, I think I might comment just briefly on what you, Mr. Chairman, have mentioned here more than once. Of course, on the face of this bill, there is nothing in it that is compulsory at all. You say it is up to each community to determine for itself whether it wants one of these loans and, if it does, to come in and ask for it. I think that is only a superficial analysis of the real situation. This bill has in it a little more than a provision for guaranteeing loans or lending money on such facilities as may be promoted by strictly private enterprise. You have a promotional feature in your bill. You hook it up with the Agricultural Marketing Act of 1946; you impose the duty and responsibility on the Secretary of Agriculture virtually to promote just this sort of thing. I do not recall the section of it.
The CHAIRMAN. What is wrong with that?
Mr. Soury. The Secretary of Agriculture has already, as many of these witnesses have said, made studies and made reports and made recommendations. This one I read from, the Maryland State Planning Commission report, is along the same line and says on its face that the commission prepared it in cooperation with the Department of Agriculture. This represents a typical report, in other words. There are others that have been issued under the name of the Department itself
, but this is equivalent to it. And what happens when one of these reports invariably makes a definite plan and makes a recommendation for a location? It is wholly unrealistic to think that real estate operators who see a chance to profit by securing the location of one of these facilities in a given area will not get busy immediately and undertake to promote it. It is just natural. They have an opportunity there to go out and secure options on large areas of land surrounding the proposed location. They might even be in a position where they could donate or offer to donate virtually free that part of the space that would be needed for the proposed terminal with the thought of the enhancement in value that it will bring about in the adjoining land on which they have an option.
It is not difficult to promote any kind of project with the prospect of its being financed by easy Federal money. It is just impossible to overestimate the lure that attaches to an offer by the Federal Government to lend money for any purpose, and you will never lack people who will undertake to organize the necessary machinery to qualify themselves to get some of that money.
My own thought is that with the national debt at its present level and with Congress pressed, as it is, to economize on all sides and to hold the Federal expenditures down as much as possible, even at the possible risk of not providing adequate national defense, it is certainly no time to be looking around for a new way either to spend or to commit the tax revenues- to spend them or to risk them. And there is no question about it here, that it involves both.
Mr. PACE. Did you say you would risk the adequacy of our defense?
Mr. SOUBY. I say the commitment either to guarantee a loan or to make a loan on a project of this sort necessarily involves serious risk. Now, you commit the funds initially in your bill. You say it is necessary to have an appropriation; so you authorize an appropriation. It is true the amount you authorize looks small, but, as these gentlemen have told you who have testified here, if you build one facility at New York and it should come over here and apply for a loan or for your guaranty, you would more than exhaust your funds that you set up here in this bill.
Now, what happens? You cannot afford to lend to one facility in New York and not do the same thing for the rest of the country. The result is that this initial commitment of $25,000,000 for your guaranty fund and $50,000,000 for your loan fund is just a beginning; because if you start it, you cannot stop it. You have to keep on as long as anybody comes in and qualifies. As I say, I think it is a mistaken approach to the whole problem.
I am not an expert on these terminal facilities; I am merely a lawyer; but I am accustomed to listening to testimony and, as I have sat here and listened to the testimony of these experts on both sides, mostly on the side of the proponents, I have become convinced that there is not a report that has been written here supporting one of these proposed centralized marketing facilities that will hold water.
For one thing, none of them ever takes into consideration as a part of the cost of the new facility those sacrifices and losses I speak of that will be incurred both by the dealers, the railroads, and the others. That is out of the picture. Every one of them, on the other hand, does say flat-footed that the rentals proposed in the new facility that would be necessary to make them self-sustaining would result in substantially increased rentals as compared to those that the same dealers are now paying. They all say there is a big plussage as far as the rentals go.
Now, where do they get their saving? They get their saving by a calculation as to how much your cartage and trucking is going to cost, how much you are going to save in loss and wastage, and how much you are going to save in pilferage. This report I have here is an ingenious one. When estimating those intangible things, they just say “Well, we will assume half of the wastage, but in the case of pilferage we cannot say that, because it develops from our investigation that as a matter of fact, most of the pilferage takes place inside the facility, and we do not see how we are going to cure all of that by moving it.” So they took a saving of only 25 percent for pilferage.
Then, when they came to the cartage, they apparently undertook to figure some saving on all of the trucking involved. Let us see what that involves. We will take the situation at Philadelphia. I want to make clear now that I am talking about the integrated market as distinguished from a multiple-facility market. At Philadelphia they have a multiple-facility at the present time, and what is the situation? The traffic that comes into Philadelphia must come there by rail or by truck. The traffic that comes by truck now goes directly to the market on Dock Street, I think they call it. Now, if this facility at Dock Street were adequate to handle what comes in there, where would you have any saving so far as the handling charges of truck-borne traffic are concerned if you move from Dock Street to some other place? The trucks come directly into Dock Street, and if those facilities were adequate, it would involve the same type of handling that you would have if you moved into some integrated terminal. That is truck traffic. There is no place for a saving on that.
Then you take the railroad traffic. These witnesses have all told you that some 50 percent, probably, or at least a large percent of the rail traffic that goes into any of these important cities is pulled directly to the warehouse of the chain stores, and so on, and already has the same direct delivery you contemplate you would get if you moved into some other sort of facility.
Another large percentage of the rail traffic is handled directly in the present rail produce terminals with modern equipment, as this description I gave you describes it, handling it directly from the car to the platform or to the truck, just as it would be if you moved over to a new terminal.
Now, what is left? There is a little bit of rail traffic that is now delivered on team tracks which is ultimately trucked from the team track into this so-called Dock Street market. That is the only part of all of this Philadelphia traffic on which you stand to make any saving whatever in the handling charges in a unified terminal facility as compared with the present multiple facility situation at Philadelphia.
That is merely an illustration. It goes to the whole picture all over the United States.
As I say, I am not an expert, but I am in the habit of listening to testimony and undertaking to analyze it intelligently, and I am just trying to tell you that the operation of the total traffic moving into any of these metropolitan areas which is subject to any economy, any saving, because of bandling it through a unified terminal compared with handling through a multiple-facility marketing arrangement is almost negligible. I submit that is a very important thing.
Now, there is one other angle to that. Like any other practice or situation that grows up in a private enterprise economy, this existing arrangement for the handling of produce through these multiple facilities may on its face appear to be highly wasteful and undesirable; yet actually, when you come to analyze it and find out all of the underlying conditions, it may have a real economic justification. I say that because I know from my own experience that the railroads have had a great deal of experience in the efforts that have been made in the different communities to set up one of these unified terminals. This is not a new idea; it has been going on over the years and in some case
has been carried out and has worked fine. But that does not mean it will work fine everywhere. Usually their efforts have failed, and the reason they have failed is because you could never get a location that was reasonably satisfactory to all of the people involved. What would represent a desirable location and result in convenience to some of the shippers or some of the dealers would result in a corresponding or even a greater inconvenience and expense to some of the others.
Now, in my opinion, one of the inherent weaknesses in the bill, Mr. Chairman, is that you propose to set up a rigid pattern of one type of facility; in order to qualify under the law it has got to be what they call a single integrated facility; and you set that up as a rigid pattern for all communities without its being possible for anyone to say if that pattern would adequately fit all communities. I think we all must know that the time comes in the growth of a community when it becomes physically impossible to supply its needs of these perishable agricultural products through a central facility.
I think New York would be an illustration. I think everybody agrees, and I understand the Department of Agriculture thinks, that is the last place where this bill ought to be applied, if enacted, not only because it would be more than exhaust the funds which the bill provides, but I think they also have doubt as to the practicality of concentrating in one place the handling of all produce for an area the size of New York with a population of 7,000,000 or 8,000,000, taking in the whole metropolitan area. You are bound to reach a point where your very conception of this unified, single, intergated facility will not fit. I merely use New York as an extreme illustration, but that is one illustration. It may be true in numerous other places.
That concludes my remarks.
The CHAIRMAN. Mr. Souby, I would like to ask a few questions. You complain about the section which deals with promoting improvements in marketing facilities. You say that is a section here which authorizes the Secretary to promote the building of facilities. Actually you know they have a Market Division in the Department headed by Mr. Crow which has been engaging in promoting improvements in market facilities for years.
Mr. Souby. You are absolutely right.
The CHAIRMAN. And through that Department we have spent millions of dollars and Mr. Crow has made numerous investigations and tried to promote, with the aid of the Federal Government and Federal taxpayers' money, the building of better facilities. Then we passed the act of 1946, the Research and Marketing Act, for the very same purpose and have spent millions of dollars on research in trying to improve our distribution system.
Now, if your objection is sound to the promotion provision in this bill; it is likewise sound as it may be applied to the Research and Marketing Act or to the Department's Market Bureau.
Mr. Souby. I think you misunderstood what I intended by my remarks. My remarks would have been the same had that section been omitted from this bill because, as you say, the Department is alıeady doing the same thing under the Agricultural Marketing Act of 1946. My point was to tie that in with your suggestion that there was nothing in this bill that brought in any form of compulsion. I agreed with you on that, but I said, nevertheless, you were not looking beyond the surface of the legislation. If you get under the surface, you have two items. You have this promotional activity by the Secretary of Agriculture, whether under this bill or under the present Agricultural Marketing Act, and on the other hand you have an incentive and stimulation of real estate promoters or any other sort of promoters to take advantage of those reports and recommendations of the Secretary to set up an organization that would be eligible under this act for the loans. I was tying the two together.
That is not my objection to the bill; I object to the bill fundamentally. I say it is unsound.
The CHAIRMAN. I know, but you did object to that one provision.
Mr. Souby. No; I was just trying to tie it in to show there was, beyond the surface of the bill, an additional incentive held out to the promotion of an enterprise of this sort. It is not merely an advisory proposition, in other words.
The CHAIRMAN. This section you refer to does relate
The CHAIRMAN. That is for a very specific purpose, so that we will not have a duplication of effort among the different Government agencies.
Mr. Souby. That is not the point. I was not criticizing that one feature of the bill, because I do not like the bill at all—any feature of it.
The CHAIRMAN. But that was one feature you mentioned.
The CHAIRMAN. The next was you are afraid if we authorize the granting of credit to applicants who could not obtain adequate credit locally, we would ultimately come into Government ownership.
Mr. Souby. I think so.
The CHAIRMAN. What precedent do you have to cite for that, except here and there an isolated case? We have gone out on a tenant purchase program which this committee created in a Farmers Home Administration, and we have directed in the bill that credit should not even be made available to those low income tenant farmers unless they could show to the Secretary's satisfaction substantially the fact that they could not obtain adequate credit elsewhere. Now, they have to make this showing in order to get those loans, and that organization today has a wonderful record, and the Government has not come into the ownership of a large part of the farm lands with which we have been dealing.
You can take the same thing with the railroads. The Government has loaned millions and hundreds of millions of dollars to the railroads; yet nobody suggested we were ultimately going to take over the railroads and operate them.
Mr. Souby. You did not have such a provision in that law.
Mr. Souby. That the Government would take over and operate and foreclose.
The CHAIRMAN. No; but if the railroad were to default, the only thing the Government could do was to take it over and operate it.
Mr. SOUBY. A lot of them did default on their RFO loans, and the RFC has gone into the bankruptcy court along with the other preferred creditors and gotten its money, but you did not have any