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make a mockery of many other fine recommendations of the Hoover Commission for governmental efficiency.
In like manner, should such a task be placed upon the Corps of Engineers, the situation would be adequately covered by the remarks of Maj. Gen. B. L. Robinson, Deputy Chief of Engineers for Construction, in a speech on October 11, 1954, when, speaking of the involved complexity of the problem, he stated :
* * * and if we classified our waterways into categories * * * and if we were to establish schedules of charges based on the characteristics of each category of shipping and upon the commodities it carried * * *; after doing all of this, we would face the monumental task of adjusting those rates and schedules to the already established and immensely involved rate structures of rail and motor carriers, with all their complexities of geographical division, points of service, commodity classes, long- and short-haul stipulations, fourth section adjustments, and whatnot. Yet some adjustment would have to be made; for if it weren't, the competitive situation between carriers would become a shambles, and the waterways transportation industry would undergo a complete upheaval.
Gentlemen and Mrs. Griffiths, that excerpt is an understatement of the impossible situation this proposed action would bring about. Proponents of this proposal have indicated that the Government must be repaid for its investment in these facilities. We submit that in years past and to come, the benefits to accrue to all the people and the billions of dollars already invested and to be invested in industrial and commercial expansion as a result of these facilities will repay the Government many times over the investment in these improvements.
Finally, the imposition of tolls would seriously weaken and impair our national defense. Today, the most modern inland waterways fleet in the world is plying our inland streams, representing hundreds of millions of dollars in investments; and having proven in World War II the value of such low-cost mass movement of basic commodities to the war effort, a large part of this national-defense asset would be lost in peacetime as a result of a drying up of river commerce under these proposals. You cannot, in a few short months or years, in event of national emergency, build an inland waterway fleet, no more than you can build a navy for national defense in a short time.
Water transportation facilities have also allowed a dispersal of many vital wartime industries such as chemical, steel, metallurgical, aircraft, and aluminum throughout the protected interior of our river valleys and away from our crowded coastal regions. Needless to say, the chief incentive for such dispersal in the future would no longer exist under these proposals.
It takes no crystal ball to recognize the fallacies existing in these recommendations, and I do not believe that all of the possible serious consequences could have been considered in making such recommendations. We sincerely trust that the Congress, through committee hearings such as this, will realize that, regardless of the frequent voices that "cry out of the wilderness" charging "subsidy," the transportation policies which have stood the test of history have produced the greatests industrial and accompanying transportation economy ever known to mankind. Change for the benefit of change cannot be justified. Who has failed to prosper under the present policies? Gentlemen, what sound reason can be advanced for this proposal ? Thank you.
Mr. Chairman, I would like the opportunity of reading into the record Mr. Dyer's letter, if that is permissible.
Mr. JONES. Will you let me examine it first? Mr. EVERHART. It is addressed to you, sir. Mr. Jones. All right. Mr. EVERHART. This has to do with some of the examples I was giving as to the consequences.
NASHVILLE BRIDGE Co.,
Nashville, Tenn., October 26, 1955. Hon. ROBERT JONES, Chairman, Subcommittee on the Hoover Commission Report,
House of Representatives, Washington, D. C. DEAR MR. JONES : I had hoped to appear personally before your committee, but I have a scheduled meeting which calls me away from Nashville on October 31, and I am truly sorry.
I will, however, try to explain herein some of the reasons why we here at our company are inalterably opposed to user charges or tolls on our inland waterways.
Let me point out first that our national security requires decentralization of industry. It must, therefore, be made possible for all types of industry to economically exist and grow in decentralized locations. During both World Wars, our plant here in Nashville built ships and various other types of vessels and steel structures for the war effort. In the last war, we won the Army-Navy E with three stars during our construction of many types of vessels for the Navy, including submarine chasers, minesweepers, personnel lighters, and others. Many other relatively small shipyards throughout the entire country did likewise, and it was largely through the combined efforts of these smaller decentralized plants that this Nation's war effort was so successful.
The economical existence of a plant such as ours is made possible only by reason of the availability of low-cost water transportation. The rail freight rate on steel from Pittsburgh to Nashville is about $15 per ton. We cannot overcome a $15per-ton differential in the steel cost and compete during ordinary times with yards located in the Pittsburgh or Chicago districts. Consequently, were it not for the much lower water rates on steel from Pittsburgh or Chicago to points such as Nashville, most of the inland boat building would be concentrated in a few areas adjacent to steel mills, and the hundreds of smaller yards in decentralized locations such as ours would go out of business and would not be available to assist in any national emergency which might arise.
It, therefore, seems absolutely essential in the interests of our national safety that the present economic equilibrium which permits the existence of decentral. ized industry throughout the country must be maintained.
The imposition of user charges or tolls on our inland waterways would completely upset this present economic equilibrium and cause an industrial upheaval which might grow into a national disaster. Our plant would close down, together with hundreds like it, and the ramifications of unemployment, population shifts, and complete disruption of our economy could lead to a real calamity.
We are, therefore, opposed to the imposition of user charges or tolls on our inland waterways, not only in the interest of self-preservation and the continuing existence of our own company, but in the interest of our nationai security and the economic stabilization of industry throughout our country.
I respectfully urge the committee's thoughtful consideration of our position in this matter. Yours very truly,
HARRY B. DYER. Mr. JONES. Without objection it will be received and made a part of the record subsequent to the examination of the present witness.
Mr. EVERHART. Mr. Chairman, aside from the prepared statement, I would like to say in answer to an earlier question of the Congressman from California, that I was one of the delegates who went to the Bureau of the Budget with our very nominal proposal for construction funds. I can certainly say that we very definitely feel that the recommendations of the Hoover Commission task force have already completely permeated the executive branch to a certain extent and, therefore, we certainly feel that these recommendations will bring a complete halt to further development of the Cumberland.
Mr. JONES. Whom did you talk to in the Bureau of the Budget ?
Mr. EVERHART. We had an audience before Mr. Schwartz, who I believe is Deputy Director of the Budget, and Mr. Rappaport
Mr. JONES. Mr. who?
Mr. EVERHART. Mr. Schwartz and Mr. Rappaport, Assistant Deputy Director in Charge of Public Works, and another staff member by the name of Schad, I believe it was.
Mr. Jones. What was the subject of your discussion with the people you have named in the Bureau of the Budget?
Mr. EVERHART. We took to Washington a very carefully prepared presentation which we felt was one of the strongest justifications for the start of any project that could be assembled. By justification I mean on the benefit-cost ratio formula, which we felt was very conservatively stated.
Mr. JoNEs. On what project?
Mr. JONES. And you presented the lower Cumberland project in the form of a petition and an analysis of the project to the members you have just named, who were employees of the Bureau of the Budget?
Mr. EVERHART. That is correct.
Mr. EVERHART. They gave us a very cordial reception and a very cordial hearing and asked us why we had not been before the Chief of the Corps of Engineers. We stated to them that our understanding was that some type of a directive, either verbal, written, or otherwise, had been sent out stating that they would not submit, that is, that the Corps of Engineers would not submit requests in their budget for any projects or the start of any project costing over $25 million.
Mr. JONES. Did that directive have to come from the Bureau of the Budget?
Mr. EVERHART. They stated to us no such directive had ever gone out of that organization. We had a very definite understanding that such had been the case. They then brought to our attention the fact that they thought it still was not too late because, as they put it, we had a very convincing argument on our lower Cumberland project.
Mr. JONES. And did they suggest you go back to the Corps of Engineers?
Mr. EVERHART. They suggested even at this late date on October 19 we go back to the Chief of the Corps of Engineers, and when I asked them what date had been set for the submission of the various agencies' budgets they told me September 30, which, of course, had already passed. They brought out, further, if we could come back to this area and get some private utilities interested in the power production facilities of this multipurpose lower Cumberland project we would have a much more excellent chance of getting it underway, and they suggested we do that.
Mr. JONES. Did they suggest any particular company you should contact ?
Mr. EVERHART. Well, I think the firm of Kentucky Utilities was mentioned as a likely prospect.
Mr. JONES. Mentioned by whom?
Mr. JONES. Mr. Rappaport suggested, even though this was an authorized project already approved by the Congress and had become a public law, that you should then go back to the State of Kentucky and interest a private utility in taking over a possession owned by the Federal Government?
Mr. EVERHART. That is correct. And they suggested if we could get them interested in working out some arrangement to take over the investment in the power production facilities and distribution of power and then pay the Federal Government a nominal fee for the use of the water which, of course, would generate that electricity, that we would certainly have a far better chance of getting it started.
Mr. JONES. And they told you to request of a public utility that they pay a nominal fee for what would be constructed by Federal funds, that would rightfully belong to the people, and that they would then turn over to the private utility those power potentials of the lower Cumberland ?
Mr. EVERHART. That is correct. Mr. Jones. I have heard everything now. I have heard of Niagara, Hells Canyon, and Dixon-Yates, but this is a matter that should be a subject of serious discussion and of investigation and questions, and I assure you as one member of this committee it will be brought to the attention of the President and his Office in order that he can make inquiries as to the policies now being pursued by the Bureau of the Budget in usurping the lawful intent of the Congress in authorizing those types of projects. It is reprehensible to me that such a policy would be pursued by the Bureau of the Budget or anybody else in the Government.
Mr. EVERHART. Mr. Chairman, we feel that when we went there that we had one of the finest justifications for a project that had ever been presented under, not our formula, but theirs, in which the navigation benefits alone would return over 1 for 1, and with all of the other benefits, excluding recreation, a benefit-to-cost ratio of 2.81 to 1, and if you wanted to include recreation it ran up to over 4 to 1.
Mr. Jones. The 2.8 figure is based on the Corps of Engineers' estimate of the project.
Mr. EVERHART. No, sir. I think the Corps of Engineers runs about 1.38, if I am not mistaken. But we simply analyzed the Corps of Engineers
Mr. Jones. Do you know what the estimate of return on the investment was when it was considered and authorized by the Congress!
Mr. EVERHART. I believe that was in 1953, if I remember the report. I think it was 1.38 or 1.39. But the very interesting thing about that is that based on the future tonnage in that particular report over a period of 20 years' projection, we had passed that tonnage in only
Mr. JONES. The Bureau of the Budget directed you to come back here and get the Kentucky Utilities, or whatever the company is that operates in Kentucky, to come down and agree to take over the power and then the Federal Government would build it?
Mr. EVERHART. We would have a much more excellent chance of getting the project underway. Mr. JONES. This is a shocking revelation. Mr. LIPSCOMB. Mr. Chairman. Mr. JONES. Yes, sir.
Mr. LIPSCOMB. Did you say, or has the chairman just pointed out, that they directed you to do so?
Mr. ÉVERHART. No; they did not direct us to. They suggested we would have a much better chance of getting our project underway if that could be done and if we could convince some private utilities to take over the power production facilities. They did not direct us to and we immediately decided against any such move as that.
Mr. LIPSCOMB. Mr. Chairman, I believe that inasmuch as this gentleman has made certain charges about the Bureau of the Budget, it would be advisable at some future date to have the man and his committee, together with the Bureau of the Budget, discuss this frankly and openly with this subcommittee and find out what happened at such meeting.
Mr. EVERHART. We would be very happy to have such a meeting.
Mr. Jones. I think it is of such paramount importance as far as the policy of the Federal Government is concerned that we should immediately dispatch a request to the President or to the Assistant to the President, Mr. Adams, making known what you have just divulged or alleged here, and that, therefore, the whole problem would not be a matter for us to undertake, but for the President himself through his proper officials to make inquiry into the whole subject.
Mr. LIPSCOMB. Mr. Chairman, inasmuch as the Corps of Engineers are in the audience, or representatives of the Corps of Engineers are here, why would it not be advisable as long as this man is on the witness stand to inquire of them as to the factual information about the directive he mentioned ?
Mr. Jones. It is the intention of the Chair to receive the Corps of Engineers immediately after we reconvene after lunch.
You are not saying that the district engineer was present?
Mr. JoNEs. Who else was with you at the time you talked to Mr. Schwartz and Mr. Rappaport?
Mr. EVERHART. Mr. F. Kay, director of industrial development of the Nashville Chamber of Commerce.
Mr. Jones. Do you know where Mr. Kay is?
Mr. JONES. Where is he?
Mr. Griffin Hoagland, of Paducah, Ky., who is chairman of the Association of Commerce, Kentucky, on the lower Cumberland development; and Mr. Green, who is executive vice president of the Paducah Association of Commerce.
Mr. JONES. They were all present when this conversation took place with Mr. Schwartz and Mr. Rappaport?
Mr. EVERHART. And Mr. Harry Dyer, of the Nashville Bridge Co., was also present.
Mr. JONES. And Mr. Harry Dyer was also present?
Mr. JONES. So the status of the project now is that if you get approval from the Kentucky Utilities, a private utility, you can stand