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state their needs will be for the State of Kentucky doubled what is presently invested by 1980; and further call to the attention of some of the members of this committee that they are supporting this legislation which allows for increase in the interest rate up to 3 percent on the intermediate financing providing, however, there is a reduction in the restrictions formally imposed upon the 2 percent loan program.
I am happy to acknowledge this statement from my home State. (The statement referred to above follows:)
STATEMENT OF J. K. SMITH, GENERAL MANAGER, KENTUCKY RURAL ELECTRIC
COOPERATIVE CORPORATION Mr. Chairman and Members of the Committee: The Kentucky Rural Electric Cooperative Corporation is the State Association of Rural Electrics representing rural electric cooperatives in Kentucky which serve approximately 265,000 users.
We are pleased to have this opportunity to provide a statement in support of the concept embodied in the proposed legislation designed to amend the Rural Electrification Act of 1936, as amended, to facilitate the extension and improvement of rural electric service to the rural areas of the country.
We support the supplemental financing proposal for the rural electrification program which is designed to furnish additional sources of capital funds to meet the growing needs of the rural electric systems. Since the beginning of the program in 1936 through March 31, 1966, total loan funds amounting to $355 million have been approved for the rural electric cooperatives of Kentucky. These are funds which have been necessary to meet our growth requirements. We estimate that we shall need an equal amount, or approximately $355 million, to meet our needs between now and 1980. We must have the assurance of an adequate loan program to meet the unique capital needs of the rural electric systems.
STATEMENT OF KRECC TO HOUSE AGRICULTURE COMMITTEE This proposed supplemental financing program through establishment of a Federal Bank for Rural Electrics includes the basic fundamentals which we support, i.e. an intermediate interest rate of approximately three per cent (3%), refinancing provisions under the developmental rate, a financing program that is flexible and free from restrictions, and the long term assurance to the rural electric systems that they will own and operate their own banking institution.
We recognize that some rural electric systems will have continued need for low interest rate loans similar to the present Rural Electrification Administration loan program. We support continuation of the present loan program of the Rural Electrification Administration to the extent necessary to meet these critical needs.
We support the legislation as embodied in H.R. 14000. This legislation will enable the rural electric systems to grow and to carry out their obligations to their members in accordance with the fundamental concepts of the rural electrification program.
Whereas, we the members of the Board of Directors of the Kentucky Rural Electric Cooperative Corporation, the State Association of Rural Electric Cooperatives, being assembled in our regular meeting on this fifth day of April, 1966, in Louisville, Kentucky, and
Whereas, hearings on rural electrification appropriations for fiscal year 1967 are being terminated before House and Senate Committees, and
Whereas, the rural electric cooperatives in Kentucky, along with all rural electric systems throughout the nation, are vitally concerned that adequate funds to assure the continued growth and development of the rural electrification program be appropriated for fiscal year 1967. We further believe that the sum of $612-million as recommended by the National Rural Electric Cooperative Association for fiscal 1967 is realistic to carry the program through the present critical transitional period until the supplemental financing program can be established, and
Whereas, we are equally concerned that these appropriations be made free from restrictive language that endangers the program, particularly the generation and transmission phase, and unnecessarily interferes with the authority of
the Administrator of the Rural Electrification Administration as clearly set forth in the Rural Electrification Act, and
Whereas, Congressman W. R. Poage of Texas has introduced H.R. 14000, a bill amending the Rural Electrification Act to provide for a supplemental financing program for the rural electrification program. This bill is one that can be enthusiastically supported by the rural electrification leaders, and
Whereas, we understand that the Administration soon will also be sending to Congress legislation that will implement the supplemental financing program. Through discussions between the National Rural Electric Cooperative Association and the Budget Bureau, and other officials of the Administration, we understand that this proposed Administration legislation will be acceptable to the rural electrification leaders, and
Whereas, this marks the first attempt to amend the Rural Electrification Act since 1949 when it was amended to provide for rural telephone loans. We realize that opening the Act for amendment involves a certain amount of risk, and
Whereas, we are interested that the supplemental financing program as finally adopted provide adequate growth capital at equitable terms for the rural electrification program and that adequate funds be appropriated to REA to allow continued growth for rural electrification until the financing program is established: Therefore be it
Resolved That the rural electric cooperatives of Kentucky wish to take this means of expressing our viewpoints on these matters and to request Kentucky's Congressional delegation to provide leadership and counsel in resolving these crucial issues.
FINANCING RURAL ELECTRIFICATION A rural electric financing study has been made by the National Rural Electric Cooperative Association, an organization representing all rural electric systems. This comprehensive study includes an objective review of the long term capital requirements of the rural electric systems, an appraisal of rural electric systems' abilities to absorb higher loan costs and still meet their objectives, and the unique requirements of the overall program of rural electrification. We urge every rural electric leader to study the data in the financing report and to participate fully in the formulation of a final plan.
It has been the feeling of the rural electrics in Kentucky for some time that this step is needed. By resolution of our membership in 1959, we requested that a study be made of our financing needs.
The financing study offers for consideration three types of financing to meet the needs of the rural electric systems:
(1) Retention of the present REA loan program as now operating. Many rural electrics must have financing under terms and conditions which apply to our loan program as it is operated at the present time.
(2) Intermediate financing through the Rural Electrification Administration. There are rural electric cooperatives which can afford to pay a higher interest rate on their loans, but still need many of the other features that would be available under the intermediate financing plan. This would involve amending the Rural Electrification Act to provide for an interest rate based on the cost of money to the government with this cost averaged over a 20-year period, 50-year amortization, and elimination of restrictions now applied on present REA loans.
(3) Supplementary capital through establishing arrangements for attracting non-government capital for meeting rural electrification loan needs. We have some systems which, by virtue of the economic conditions of the areas in which they serve, can meet their objectives through borrowing funds under the supplementary financing phase of this program. We recommend that this be a guaranteed loan program with the Rural Electrification Administration acting under the authority of Congress and being authorized to offer securities on the open money market to secure capital to meet rural electric loan requirements.
We believe that these three steps of financing will serve the needs of all rural electric systems.
Rural electric cooperatives are pledged to the concept of area coverage which requires the providing of adequate, dependable, low cost electric service to all users in the cooperative service area on an equal basis. For this reason the financing of the rural electric systems must be designed to meet the unique requirements of these systems.
Therefore, be it resolved that the rural electric cooperatives of Kentucky go on record as supporting a financing program administered by the Rural Electrification Administration embracing the principle of the three phases of financing as stated in this resolution for meeting our future program needs.
The CHAIRMAN. We will place in the record at this point several statements which have been received, which will be made a part of the record, together with those submitted by the members of the committee.
(The prepared statements of Alton Þ. Wall, J. B. Slack, Henry M. Armfield, Eli Seawell, J. C. Brown, Jr., Robert W. Scott, Allan Swanson, L. C. Carpenter, follows:)
STATEMENT OF ALTON P. WALL, GENERAL MANAGER, RANDOLPH ELECTRIC MEMBER
SHIP CORPORATION, ASHEBORO, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee:
My name is Alton P. Wall, and I am the General Manager of Randolph Electric Membership Corporation, Asheboro, North Carolina. Randolph Electric serves rural areas in Randolph, Alamance, Moore, Montgomery, and Chatham Counties, which are located in the Central Piedmont area of North Carolina. At present, 10,246 services are in place, served from 1,942 miles of line.
Randolph Electric is a member of the Tarheel Electric Membership Association and also a member of the National Rural Electric Cooperative Association, whose spokesmen will discuss in depth the legislation under consideration,
Randolph Electric Membership Corporation would like to be recorded as supporting fully the Supplemental Financing Plan, which is based upon a lengthy study by the National Rural Electric Cooperative Association and Kuhn-Loeb.
Certain members of the Board of this Corporation and myself participated in state, regional, and national meetings, in which these plans were discussed and adopted.
We specifically support the provisions of H.R. 14,000 and H.R. 14,048, and we are in general agreement with the administration's plan (HR 14,837), However, we feel that it would be improved by incorporating certain features, which will be discussed by representatives of the National Rural Electric Cooperative Association.
The Board and Management of Randolph Electric Membership Corporation urge upon you the necessity of finding supplemental financing for our cooperatives, because under the law passed in the 1965 General Assembly, our Cooperative is charged with the utility responsibility in the area it serves. Our area surrounds many towns in the Piedmont North Carolina, which exceeds the 2,500 limitation on the use of REA funds.
Our headquarters county (Randolph) is the third fastest growing county in the state. As the cities expand their corporate limits over our service area, it is imperative that we have a source of funds, with which to meet our responsibility.
I appreciate very much the opportunity to make this statement.
STATEMENT OF J. B, SLACK, SEAGROVE, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee :
My name is J. B. Slack of Seagrove, North Carolina. I was reared on a farm in central North Carolina during the horse and buggy and kerosene oil lamp days. During my days as a student in primary and high school, I could use only an oil lamp to study by. Not until I entered college in 1922, did I have the privilege of studying by electric light.
During my entire life, I have either been on a farm or have worked directly with farm people. During the late 20's and early 30's, while working as a county agriculture agent, I tried diligently to interest the public utility serving the area where I worked to build lines into some of the more thickly populated areas of the county, but I was never successful. When the Rural Electrification Act was passed, I assisted the farmers in my county in forming a rural electric cooperative. The cooperative was formed and was granted a loan by the REA to build lines. When a contract was let by the cooperative for construction of lines, the public utility serving the area immediately started paralleling the coop lines. This was the same utility, who less than five years before had told me they would not, under any circumstances, consider building lines into some of these very same communities.
Rural electric coop's were formed all over the country and rural people were able to have the blessing and benefits of electric power for the first time. These rural electric coop's have, for the most part, grown strong, and through loans from the government have been able to bring the benefits of electric power to their rural areas. Most, if not all, of the power companies have fought rural electrification from its very beginning. Their primary criticism was the low interest loans made available by the Government. These same cooperatives having reached a position of strength and stability, are now in a position to begin to stand on their own feet and go to public money market for much of their financing, as provided in HR 14000 and HR 14837. These bills provide for a system of supplemental financing for rural electric cooperatives that will lift much of the burden from the Congress and the U.S. Treasury. But, who are the chief opponents of this method of financing to let the cooperatives carry this load. From what I hear and read in the press, it is the same power companies, who have always complained that these coops, using low interest rate loans from the government, are competing with in areas where prior to passage of the Rural Electrification Act, they refused to furnish electric power.
The same sort of objections and criticisms were heard from the money lenders at the time of passage of the Federal Land Bank Act and the Farm Credit Administration Act. Who now can say the Farm Credit system has not been eminently successful and has permitted farmers to build a strong self supporting financing program that is not a drain, in any sense of the word, on the Federal Government. The rural electric cooperatives are simply asking, through this legislation, for an opportunity to do the same thing.
I wish to thank the Committee for the opportunity to make this statement.
STATEMENT OF HENRY M. ARMFIELD, ASHIEBORO, North CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is Henry M. Armfield. I am in the banking business in Asheboro, North Carolina, which is also the headquarters of Randolph Electric Membership Corporation, an REA borrower. Also serving in our area is Carolina Power and Light Company, a company in which I own stock.
I have watched with a great deal of pride and satisfaction the growth and development of our home county of Randolph. I know that Randolph EMC has played an important role in that development. The cooperative has been a major sponsor of the Northern Piedmont Area Development Association and the Sandhills Area Development Association, both of which have been instrumental in promoting the industrial and agricultural growth of the area served by the co-op. The co-op's manager, Mr. Alton Wall, recently served as president of the Northern Piedmont Association.
I appear here in support of HR 14000 and HR 14048. As a banker, I admire the wisdom of the cooperatives for seeking ways to bring non-government financing into their program. It makes good sense for them to have sources of capital available to them without stifling restrictions. Capital should be available that is limited only by the adherence to sound banking principles. I understand that the present REA funds are limited and these are available only with restrictions that could hamper the orderly growth of the co-ops or jeopardize their ability to continue to give fine electric service at reasonable rates. For instance, I am aware that Randolph EMC will, by 1974, need an additional $212 million in capital funds if it is to adequately meet the rapid increase in farm automation and industrialization already taking place in our area. Without a source of adequate capital, there is a danger that this growth will be slowed.
As a person interested in seeing our area developed to its fullest, I urge your favorable consideration of these two bills.
STATEMENT OF ELI SEAWELL, DIRECTOR OF THE GRAFLAM PRODUCTION CREDIT
ASSOCIATION, BENNETT, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee:
My name is Eli Seawell, and I am a farmer in the Pleasant Grove Township in the southeast corner of Randolph County. I presently operate the farm on which I was reared, and have spent my entire life farming and in farm-related
work. I am a member of the Board of Directors of the Graham Production Credit Association, and a former director of the State ASC Program.
Since 1939, I have been a member of Randolph Electric Membership Corporation, which is a REA-financed Cooperative, serving a five-county area in the central part of the state. I was active in its formation, and have maintained a keen interest in the operation of the Cooperative throughout the years.
I have knowledge of the Supplemental Financing Plan, proposed by NRECA, which is based on a study made by NRECA and Kuhn-Loeb. I am happy to note that the bill, which is now under consideration of this committee, contemplates a banking system patterned after the Federal Land Banks and other farm credit institutions.
I would like to state that I wholeheartedly support the establishment of such a bank, and would urge that provision be made for the transition from government to borrower control, upon the retirement of the majority of the Federal funds.
I appreciate very much the opportunity to make this statement.
STATEMENT OF J. C. BROWN, JR., EXECUTIVE MANAGER, TARHEEL ELECTRIC
MEMBERSHIP ASSOCIATION, RALEIGH, N.C. Mr. Chairman and Gentlemen of the Committee: My name is J. C. Brown. I am Executive Manager of Tarheel Electric Membership Association, whose membership is made up of the 32 electric cooperatives headquartered in North Carolina and one out-of-state cooperative which serves far western North Carolina. These corporations operate more than 45,000 miles of line from which they serve 228,000 households, businesses, and institutions. These 33 cooperatives and Tarheel Electric are also members of the National Rural Electric Cooperative Association, whose spokesmen will discuss in depth the legislation under consideration.
Tarheel Electric Membership Association would like to be recorded as supporting fully the supplemental financing plan which was based upon a lengthy study by N.R.E.C.A. and Kuhn-Loeb and presented to our membership upon a number of occasions, including our mid-year directors meeting at Durham in August of 1965, our regional meeting of the national association at Raleigh in the fall of 1965, at a meeting of managers and others at the International Inn in Washington in December, 1965, and at the February national meeting of N.R.E.C.A., which was attended by approximately 200 North Carolina co-op directors and managers.
In addition, the N.C. Farm Bureau Federation in its annual convention at Raleigh last fall adopted the following resolution:
"We support the rural electric cooperatives in their efforts to find new sources of supplemental private financing, necessary to meet the rapidly increasing demand for electric power. We also recognize that many rural electric cooperatives continue to serve thinly populated areas and therefore are not yet able to provide electric service at rates on a parity with those of urban people. For these electric systems, we urge the Congress to continue to make available REA loans at a rate as low as practical.”
The N.C. State Grange at its convention, also held in Raleigh last fall, and the National Grange at its convention in Topeka, Kansas, adopted strong resolutions giving full support to the rural electric cooperatives in their efforts to develop sources of supplemental financing.
I don't believe any proposition has ever been presented to the Congress that has been more thoroughly studied, understood and supported by a large segment of the population than this one, which is represented by HR 14000 and HR 14048. We specifically support these measures. We also are in general agreement with the Administration Bill (HR 14837), however, we feel it would be improved by the incorporation of certain features which will be discussed by representatives of N.R.E.C.A. We appreciate the opportunity to present our views on these bills.
STATEMENT OF ROBERT W. SCOTT, LT. GOVERNOR OF NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is Bob Scott. I am presently serving as Lieutenant Governor of North Carolina. Prior to my election to this office in 1964, I was Master of the North Carolina State Grange