CIVIL FUNCTIONS, DEPARTMENT OF THE ARMY APPROPRIATIONS FOR 1954 WEDNESDAY, MARCH 25, 1953 UNITED STATES SENATE, The subcommittee met at 10:30 a. m., pursuant to call, in room F-39, the Capitol, Hon. William F. Knowland (chairman of the subcomtee presiding. Present: Senators Knowland, Young, Dworshak, Hayden, Ellender, and Robertson. Senator KNOWLAND. The hour set for the hearing having arrived, mittee will come to order. This morning we will hear from the Panama Canal Company, and irst witness will be General Seybold, President of the Panama Company. Gentlemen, you may proceed. CIVIL FUNCTIONS DEPARTMENT OF THE ARMY-PANAMA CANAL COMPANY KATEMENTS OF BRIG. GEN. J. S. SEYBOLD, GOVERNOR OF THE CANAL ZONE AND PRESIDENT, PANAMA CANAL COMPANY; DSLEY H. NOBLE, COMPTROLLER, PANAMA CANAL COMPANY; KATTHEW ROBINSON, MEMBER, BOARD OF DIRECTORS, PANAMA CANAL COMPANY; AND T. COLEMAN ANDREWS, MEMBER, BOARD IF DIRECTORS, PANAMA CANAL COMPANY CANAL ZONE GOVERNMENT eral SEYBOLD. Mr. Chairman, I would like to introduce at this e people of the Canal organization who are with me, Mr. MatInson, who is a Director of the Panama Canal Company in 1rs, and Mr. Lindsley H. Noble, the Comptroller. Mairman and gentlemen of the committee, my name is John i. I am Governor of the Canal Zone and the President and r of the Board of Directors of the Panama Canal Company, have come here today to testify in connection with the budget aes of these two agencies for the fiscal year 1954. Panama Canal enterprise is conducted by two separate but related organizational units, each with well-defined functions. Cart: Zone Government is an independent agency of the United teaministered by the Governor of the Canal Zone, and the a Canal Company is a corporate agency and instrumentality -United States, the management of which is vested in a Board tors. Although the President of the United States has delestatutory supervisory authority over these agencies to the rary of the Army, the two agencies are not a part of the Departf the Army or of the Department of Defense. rganizations are under the same general direction and are red to the same primary mission, which is to provide for the of ships through the canal as efficiently and expeditiously In addition to operating the canal itself, it is necessary, f the geographical location and political status of the Canal te to corduct numerous auxiliary business enterprises to provide eeeis of shipping and for canal employees, and to administer ment and sanitation of the Canal Zone. Basically the ca- a commercial enterprise partaking of the nature of a public Its activities are closely linked with the field of international -commerce. Because of this, it must be conducted on a busiwith the autonomy and latitude for independent action -onable limits customarily enjoyed by business enterprises al to their efficient operation. 1 under which the canal organizations have operated since 11 give important consideration to these needs. I should emphasize their continuing importance in the best interest not fe canal itself and the users of its services, but of the United Sternment as a whole. CONVERSION OF ORGANIZATION The version of the canal organization from a relatively inGovernment agency to an efficiently operated business enter e of shifting to meet changing economic conditions has zz well. Our efforts are directed to resolving such difficulties 's of activity and in all phases of operation. Because of rature of the organization, there has been some adverse some groups receiving services. The issues are becom- and can now be more easily identified. They are also emberstood and may require substantive legislation. FUNCTIONS The Canal Zone Government administers the civil governm sanitation of the Canal Zone. Although its funds are initial vided by congressional appropriations, they are ultimately re the Treasury by revenues and by reimbursements from the Canal Company from its toll and other earnings. The Com required to be entirely self-supporting and, except for possibl ordinary losses or major capital requirements, to be self-fin It is required not only to repay the United States Treasury net operating costs of the Canal Zone Government, as I have ex but, in addition, to pay an interest return on the net direct inv of the United States in the corporation presently set at 2.05 PROPOSED CHANGES IN APPROPRIATION STRUCTURE For the Canal Zone Government, we are proposing some in appropriation structure in the interest of simplification o presentation and accounting. In total, for both expenses and outlay, we are asking for $15,823,000, which is $2,177,000 less appropriation for fiscal year 1953. This reduction is due to in our requirements for capital outlay for the Canal Zone Gov Revenues of the zone government repayable to the Unite Treasury are estimated at approximately $3,800,000. For the Panama Canal Company, we seek neither opera capital funds from the Congress, but expect to finance both ments for that year entirely from the Company's own co revenues and working capital as we have done in both years reorganization of July 1, 1951. We estimate that capital exp for fiscal year 1954 will total $11,122,000, principally for rep of substandard housing for employees. We expect to repay to the United States Treasury for 1 sum of $14,200,000. This covers our obligations for interes operating costs of the Canal Zone government less some due the Company for tolls on United States Governmen Over and above this and based on tentative accounting cal we expect to earn a profit of $1 million, which will be use finance our capital program. TOLLS The primary source of the Company's income is from to on vessels transiting the canal. Tolls are estimated to a approximately $30 million in 1954, which is about the perienced for 1952. Operating results since the budget was indicate that toll revenues for 1953 will be substantially hi this. They may amount to as much as $36 million as a re creases in traffic arising largely from the critical political prevailing in the Middle East and the Far East. CHANGES IN FISCAL STRUCTURE The Company has undergone and is continuing to unders in its fiscal structure as a result of its change to corporate It is being placed on a sound business basis. It does no |