So it is of no concern as a piece of Federal legislation how they handle it after they buy distribution properties from the Govern

ment agency.

Mr. SMITH. At this point it might be interesting to have appear in the record some of the figures on the revenues, because we have just been discussing that.

To June 30, 1943, it is estimated that the cumulative revenue derived will be $20,250,700; to June 30, 1944, $38,736,600.

The approximate plant investment for the war industries using Bonneville-Grand Coulee power as of 1943 is $159,000,000, and approximate annual value of the production is $661,000,000. There are 119,000 people employed by these war industries, showing how vital these projects are in connection with our war effort.

Senator BURTON. Do those figures that you gave include the Bonneville project?

Mr. SMITH. They are the estimated revenues of Bonneville and Grand Coulee. I think they are cumulative.

Senator BURTON. Since they started?

Mr. SMITH. Yes.

Senator BURTON. What was that first one that you referred to? Mr. SMITH. That was the one ending June 30, 1943, $20,250,700. Senator BURTON. For how long a period?

Mr. SMITH. Since 1940.

Senator BURTON. What was the 1944 figure that you gave?
Mr. SMITH. $38,736,600.

Senator BURTON. That indicates that the two projects would add $18,000,000 a year? Is that right?

Mr. SMITH. They would, Senator, yes.

We are going to furnish all those figures in detail before the hearings are concluded. But I thought that right at that point, in view of the fact that we have been discussing this, it might be well just to have a few brief figures in the record.

Senator BONE. I think that it is well to keep in mind in this hearing that there are two kinds of debts that will be handled by this agency. The first debt is the one arising out of the issuance of revenue bonds. That debt will be amortized out of the revenues of this system.

The second debt is the debt to the Treasury of the United States, which is set up on the books of the Administration. That debt arises out of appropriations that you gentlemen have voted to build the dams and to install the generating equipment.

That debt will be capitalized on the books. If it is $100,000,000, then it will be set up on the books as a debt of $100,000,000 to the Treasury. I could not give the figure now. But whatever debt is allocated to power will be set up as an item of capital debt on the books of this Administration, and each year out of its revenues, this institution will have to pay back to the Treasury a part of that debt, plus interest on the whole debt, or interest on the balance that is unpaid at that time.

Mr. SMITH. Of course, that is only a part, because there is only a part of it allocated to power. A part of it is allocated to navigation and a part to flood control where there is flood control. Then, of course, at Grand Coulee there is a part of it that is allocated to

reclamation. So there is a segregation and an allocation of portions of the cost there that has to be taken into account, of course.

Senator OVERTON. It will only be the part that is allocated to power that will be reimbursed to the Federal Government from these revenues?

Mr. SMITH. Yes.

And that is what I referred to when I stated that the power part of the project is apparently, from the present indications, going to be amortized much sooner than any of us thought who were most enthusiastic when we advocated this project at its inception.

Senator OVERTON. Then there will not be any reimbursement to the Government for the other parts of the cost?

Mr. SMITH. No. But that will not be any more so than in other sections of the country, for navigation and flood control.

Senator BONE. I omitted one item. This is simply cumulative. When I said that this item of capital debt would include the matters that I mentioned, I overlooked including another item, and that is these main transmission lines. These heavy transmission lines have been built through the State. They are very heavy, heavy enough so that they can carry voltages in excess of 200,000.

This debt would also be capitalized and set up on the books, because, although this Columbia Power Administration would own these main transmission lines, they would also have to be amortized out as a debt to the Federal Government. In other words, we are trying to set these things up so that the Administration will deal literally at arm's length with the Government. While the Government owns it, the system will have to pay its way along,

Mr. SMITH. Of course, the fact to emphasize, it appears to me, is that this is absolutely a self-liquidating project. We have every reason to believe that ultimately and finally this project is not going to cost the taxpayers of the United States one thin dime. It is a self-liquidating project.

Mr. DONDERO. Senator Overton remarked in regard to whether or not the flood control part of the cost would be amortized. That would also apply to the navigation part; would it not?

Mr. SMITH. Yes. They are not amortized here or elsewhere, as my friend from Michigan well knows.

Mr. DONDERO. The theory is that that part is returned to the people in lower cost of transportation and in safety and savings?

Mr. SMITH. Yes. That is the theory on which we construct all navigation and flood-control projects. The cost is returned to the taxpayers in savings from reduced freight rates, low-cost transportation, and benefits from opening up new markets, increased commerce and trade.

Mr. ANGELL. Of course, ordinarily there would be no direct returns to the Government on the flood control and navigation features. Mr. SMITH. That is right.

Senator OVERTON. I think that there should be furnished for the record figures showing the percentages which are allocated to these different things, such as we have just mentioned.

(For the figures requested see appendix A, at end of hearings.) Senator BURTON. Am I correct in understanding that in the event that the Columbia Power Administration does not make the pay

ments on these revenue bonds that it is supposed to make, we can compel them to do so?

Senator BONE. That is right. We have a reference in this billI want to come back to this later-there is a "certification" by the Administrator of what he proposes to purchase. He also files a declaration which describes the improvements, betterments, or whatever it is. It is done much after the fashion that these cities operate out West.

Against that declaration on that certification these bonds would be issued. All of the costs of the required systems would have to be determined and reflected in the revenue bond issues.

He then has to bring the bond issue within the four corners of the certificate and declaration. The bonds on their face, because of the statutory wording here, would have to be very much like the bond issue of a city like Tacoma or Seattle. The bond would have to recite on its face briefly that it was payable only and solely from the revenues from the system, because it could not transcend the statute. It couldn't go beyond the pledge in the statute.

There is no pledge of the Treasury there. Any person buying the bond would understand that point fully, just as they understand the nature of the similar bond they buy from Seattle or Tacoma or any other of those western cities.

The revenue bond is now thoroughly ingrained in the American investment system. It is well known. I have had dozens of inquiries from bond houses about these proposed bonds. They know what they are.

We have even consulted some of their bond experts about the language here, and we have inserted in this bill the usual provision for a writ of mandamus to see that a proper protection is maintained. In other words, if your administrator neglected to pay the bond when due, the owner could sue out a writ of mandamus and have the court compel him to do that.

I think that that is only fair. It is the only remedy that a bondholder has. It is a common practice backed by years of experience in many States. There is no lien on the assets, no lien on the corpus of the property.

Senator BURTON. May I try to get this thing right in my mind. Although there is no lien on the property, the holder of a revenue bond has a prior claim on the revenue that comes ahead of the claims of the owner of the property. Is that right?

Senator BONE. I can give you a rather crude illustration. Municipalities afford their bondholders very broad remedies. Let us take my city of Tacoma.

Let us say that it put out an issue of revenue bonds. Upon the due date, it did not pay the interest on the bond. A bondholder could go into court and tell the judge his trouble.

The judge would call in the proper city official and say, "Why didn't you pay this interest?"

"Well, we just didn't have the money."

"Well, how much would you have to raise the rates in order to get the money to pay it?"

"We would have to raise them one twenty-seventh of 1 percent to get the money to handle both maturing bonds and interest." "I will make an order for you to so raise the rates."

It is just a matter of an engineering determination of what they have to be to meet such obligations.

We provide in here that in case there should be any inability to meet any obligation to the Treasury, it will be carried forward as a continuing obligation.

Mr. SMITH. There are lines of decisions that hold that the courts will enforce an increase of the municipal rates if it is necessary.

Senator BONE. If we are going to rent the other fellow's money, we want at least to give him a chance to come in and protect himself. This provision merely follows a common practice.

This is going under the rates established with the approval of the Federal Power Commission. This Bonneville Administration is making a rate of $17.50 a kilowatt year. There isn't anything in America like that, as a general rate.

I know that there were some men who were skeptical about it in the beginning. I heard a great many men who know something about rates, say that Bonneville could not make a rate like that; that it would be entirely too low. But it has been a very profitable operation apparently.

Now, with the added pool of power from Grand Coulee, I think that this $17.50 a kilowatt year rate which is made to the municipalities out there, and which is even slightly lower near Bonneville, will amortize this operation without any increase of rates whatever. It should be more than ample.

But suppose that the rate had to be made $17.75 a kilowatt year, It would not affect consumer rates appreciably, but it would make quite a difference in the Administration's revenue. But we do not contemplate any trouble from that source at all.

The whole history of revenue bond financing has been a very happy one. I am sorry that I cannot give you the figures, but I expect that we have issued two or three hundred million dollars' worth of those bonds in the State of Washington. They were first issued in my State in 1895. It was entirely a jump-off operation. Spokane wanted to build a water system. Of course, they are only useful where the thing that you are building is self-liquidating. You could not issue them for a sewer system. Nobody would buy them.

Spokane created a special fund into which it pledged itself to place the revenues from this proposed water system and from that pool of revenue to pay off the bonds or warrants which it issued.

That case was taken to the Supreme Court of the State of Washington and the court held that, while there was no authority anywhere in any statute for this kind of operation, the idea of a special fund into which certain pledged revenues were to be deposited and out of which the debt was to be paid, was not a novel idea; and the city was authorized to do that if it wanted to.

Two years later, in 1897, the legislature of my State passed a law validating this type of bond and provided that any city may create a special fund into which will be put revenue from an operation and that out of that fund they might retire any evidences of debt in the form of warrants or bonds.

That enshrined it in the law in the State of Washington. Mine was the first State in the Union to create this type of security. The theory was sound. Now that practice has spread all over the country,

and I expect that my brother from Cleveland has seen it in operation in his city. In fact, it is employed all over the country.

It is a very useful way of meeting obligations that a city wants to incur without going into general debt.

That was the reason for such bonds. Cities frequently do not want to incur more general debt, because under their system of advalorem taxation, the people feel that it is an unnecessary burden.

Now, in financing an operation such as we propose, you are only doing what a private company does. They issue bonds. There may be some venture money in the operation. It is not a great deal. Most of it does not exist. But the stock is issued. When a private power outfit issues bonds and stock, none of it is ever amortized.

We propose to finance the Columbia operation exclusively by the issuance of revenue bonds and then amortize them.

Mr. DONDERO. Senator Bone, could this operation extend beyond the radius of 300 miles, into any State? Could it go beyond that? I am thinking now of the distance over which power can be transmitted economically and at reasonable cost.

Senator BONE. I cannot answer you, Congressman. I have a big library on the subject, and I have spent a great deal of time in studying this sort of thing.

Mr. DONDERO. How far can power be transmitted economically? Senator BONE. I think that with the extremely high voltages that are now employed, transmission can be effected to 250 and 300 miles without too much line loss. They contemplate that with the heavier metal in the transmission lines and with the step-up in the voltages, they will lower line loses. That is why they have built these heavy transmission lines for Grand Coulee and Bonneville, where they use voltages well in excess of 200,000 volts.

This tends to eliminate line loss, and the spacing on the poles has to be very wide to prevent flash-over. But with these extremely high voltages the line loss is very much less. I think it must be 275 miles from Boulder Dam to Los Angeles. I regret that I do not have the figures, but it is my recollection that it is somewhere in that neighborhood. And they are transmitting at 235,000 volts, or perhaps even more. Do you know what their voltage is? It is 220,000 volts. That is a very high voltage.

Mr. DONDERO. If it were 300 miles in every direction from the place at which it was generated, that would be a pretty good definition of the territory in which this agency would operate.

Senator BONE. That is right. But it is restricted also by the bill to the States of Washington and Oregon. They would not acquire utility systems outside of those States.

Mr. ANGELL. Senator, what is the distance between Bonneville and Grand Coulee?

Senator BONE. You mean, in miles?

Mr. ANGELL. In miles, between the two dams.

Senator BONE. It is 185 miles. You see, Bonneville is on the lower river and Grand Coulee is away up on the upper Columbia, west of Spokane about 90 miles.

They are linked together now. I think that their main transmission lines are pretty well laid out. There will be additions to that system because of the growing load; but that would represent more