Mr. ELSTON. Did you protest against the purchase of the utility by T. V. A.?

Mr. RAULSTON. I talked to Congressman McReynolds, who was our Congressman, and asked him to see that the bill that authorized the purchase of this property provided for replacement, or provided some method to restore our taxes; yes, sir. That was the only way I knew of that we had to protest, of course.

Mr. ELSTON. I believe you said that your tax rate was $2.56 per hundred. Does that include the State tax, or is the State tax in addition to that?

Mr. RAULSTON. The State tax is in addition to the $2.48-that is the 1938 taxes-$2.48, and the 8 cents for State purposes makes $2.56, which was our levy for 1938, and it is $2.57 for 1939, with an additional 8 cents for State purposes, which makes it $2.65. That is our tax rate for 1939, the one that is being paid now.

Mr. ELSTON. Do you consider in your county that the rates charged by the public utility were high, excessive, or oppressive Mr. RAULSTON. Well, I do not know that I did.

Mr. ELSTON. You did not hear much complaint about it, did you?
Mr. RAULSTON. I did not hear a great deal of complaint; no.
Mr. ELSTON. I believe that is all.

Mr. RAULSTON. Now, I said I talked to Congressman McReynolds. That was sometime ago. Of course, he was ill at the time this transfer was made, but this matter has been brewing over there in that territory for a long time, and I think it was when he was making his campaign the last time that I talked to him.

Mr. BYRNS. Mr. Ralston, of course, with further reference to the number of complaints you heard about the electric power rates, you, of course, being a busy lawyer, did not go around looking up complaints?

Mr. RAULSTON. I did not hunt up complaints; no, sir.

Mr. BYRNS. In your county, when you issued these bonds and built the roads and schools and so forth, that was done, I presume, on the assumption that this property which was then owned by the Tennessee Electric Power Co. would continue to be subject to taxation?

Mr. RAULSTON. Yes, sir.

Mr. BYRNS. Now, then, as I understand it, you favor the enactment of the Sparkman-Norris bill?

Mr. RAULSTON. With the direct-payment provision to the county. Mr. BYRNS. In other words, you favor not asking an appropriation from the Congress to replace this tax, but simply for the Congress to permit the T. V. A. to replace the tax lost out of the 122 percent that the T. V. A. is adding to the wholesale electric rate?

Mr. RAULSTON. Yes, sir.

Mr. BYRNS. If there could be some proposition whereby the operating expenses of T. V. A. could be reduced by the elimination of consultants on earthquake investigations, boat design, freezing development, archaeology and such [laughter]-if that could be done, you would favor that rather than an increase in the present electric rate charged by T. V. A.?

Mr. RAULSTON. I do not know what you are talking about, Mr. Congressman. [Laughter.]

Mr. BYRNS. In other words, if the T. V. A. could reduce their expenses, other than to increase their rates, you would favor reduction of expenses in operation, rather than an increase in the rates charged to the public?

Mr. RAULSTON. Yes; of course that would be good business.

Mr. MERRITT. Mr. Raulston, you just said a minute ago that this matter had been brewing for a long time. The reason I asked you about the last issue of your bonds is that I thought perhaps you did not know anything about it at that time?

Mr. RAULSTON. Of course, it has been talked about for some time. We did not know that there was any assurance of it or anything of that kind.

Mr. MERRITT. It seems to me it might be a good policy to be careful and not issue so many bonds.

Mr. RAULSTON. Well, Mr. Congressman, our bond issues run over a period from 1916. This Hales Bar Dam was completed and put into use in 1913, so that fact is very significant, and in 1916 we issued bonds.

Mr. MERRITT. And 1937 and 1938?

Mr. RAULSTON. Yes; we did. The 1939 issue was to take care of a floating debt that we had, that had been accumulated through bad business management, and we had to get rid of it in some way. Of course, we could not let those things go on indefinitely.

The CHAIRMAN. Mr. Raulston, as I understand it, your present county tax rate of $2.56, which includes the 8 cents on real estateMr. RAULSTON (interposing). $2.65 for 1939.

The CHAIRMAN. I mean the one that you have here.

Mr. RAULSTON. That is 1938; yes, sir.

The CHAIRMAN. The tax on real estate, and the county remits that back to the State?

Mr. RAULSTON. Yes, sir; they collect it.

The CHAIRMAN. The State likewise remits certain other taxes back to the county, such as the rural county road tax?

Mr. RAULSTON. Yes, sir.

The CHAIRMAN. And in that way each acts as a collecting representative of the other. Now, I have just this one question, and it may be impertinent and improper, but I would just like to ask you about it. I believe you stated that the first bond issue was in 1916, and your last one was in 1939 ?

Mr. RAULSTON. Yes, sir.

The CHAIRMAN. This last bond issue was mostly for schools? Mr. RAULSTON. No; the last bond issue was to take up a floating indebtedness that had been created over a number of years.

The CHAIRMAN. In other words, your county, like my county, is engaged in the practice of issuing what we call "county warrants"? Mr. RAULSTON. Yes, sir.

The CHAIRMAN. And running the expenses of the county on those until you accumulate a considerable debt. Then you refinance it by a bond issue?

Mr. RAULSTON. That is true. That is what we did in this instance. The CHAIRMAN. All of your issue except about $87,000 was back as far as 1916?

Mr. RAULSTON. No, sir.

The CHAIRMAN. $87,112?

Mr. RAULSTON. No; that was not that far back. In 1916 we had an issue, also in 1921 and 1923. The 1916 issue was road bonds; 1921 was school bonds; 1923 was courthouse bonds. The courthouse burned in 1922, and we raised $24,000 in bonds. That is the remaining part of the bonds that are not paid off. Then the rural road bonds in 1927, 1929, 1933, 1935, 1937, and 1939.

The CHAIRMAN. Do you have what is known as a fiscal court or a tax commission in your county, or some other body that authorizes the issuance of bonds, or do you do it by vote of the people?

Mr. RAULSTON. The county court is authorized under the general enabling act. That is a court composed of the justices of the peace elected from the districts.

The CHAIRMAN. That is the magistrates, as we call them?

Mr. RAULSTON. Yes, sir; the magistrates.

The CHAIRMAN. How many have you in the county?

Mr. RAULSTON. We have 13. Maybe it is 14. I am not sure. I think they elected a new one recently.

The CHAIRMAN. When this proposed purchase of the Tennessee Electric Power Co.'s properties was pending, did any citizen or taxpayer of your county, or any of the bondholders that hold the outstanding obligations of the county that would be affected by these T. V. A. properties out of taxation, bring any sort of a suit to deter the sale of it in any way?

Mr. RAULSTON. No, sir; not in my county. I do not believe there was in that section.

The CHAIRMAN. Was any kind of suit of that kind started anywhere in the State of Tennessee?

Mr. RAULSTON. I could not say. I just do not know. Not that I recall.

The CHAIRMAN. When your county court, consisting of your magistrates, authorize the sale, issuance and sale of bonds, do those bonds constitute a lien upon all revenues that are collected in the county from property taxes and all other taxes?

Mr. RAULSTON. No, sir; it constitutes a lien on the property of the county. Then if we default in our bonds, a mandamus suit would be instituted to compel the county court to levy a tax sufficient to pay that off-well, of course, they just take judgment on the bonds, and then they would mandamus the county court, compel the county court to raise the tax sufficient to take care of the indebtedness.

The CHAIRMAN. Are any of those bonds held by people or banks in the county?

Mr. RAULSTON. There are some few that I hear of. Of course, we do not know where they are. We pay through the banks, and the banks-I believe some New York bank handles our distribution.

The CHAIRMAN. Then no objection was made, either by court proceeding or otherwise, by anyone in your county to the taking out of this property from taxation?

Mr. RAULSTON. No, sir.

The CHAIRMAN. They were all led to believe that they were going to get much benefit that would more than offset that?

Mr. RAULSTON. We were told that last year. We were told that repeatedly.

The CHAIRMAN. That is all.

Mr. BROOKS. You stated some time back that the utilities assess-ments were around $3,000,000?

Mr. RAULSTON. Yes, sir; $3,400,000.

Mr. BROOKS. I notice the chart here shows $4,300,000. Would you look to get that straight?

Mr. RAULSTON. In our county?

Mr. BROOKS. Yes; in your county.

Mr. RAULSTON. Well, I do not agree with that statement.

Mr. BROOKS. In Marion County, Tenn., 1938, the assessment for utilities, $4,446,000.

Mr. RAULSTON. Is that all utilities, or Tennessee Electric Power Co.?

Mr. BROOKS. All utilities.

Mr. RAULSTON. Well, all utilities, as I have it here-I am only speaking from information furnished me by the county official who has it, the trustee of the county, there was $3,687,394.28 in 1938. In 1938—well, public utilities were the same, exactly. Of course, the assessment was made for the years 1938 and 1939.

Mr. BROOKS. There are additional utilities outside of that, are there?

Mr. RAULSTON. Yes, sir. Of course, we have the telephone company and the water company.

Mr. BROOKS. That is $3,000,000 then out of the $4,446,000.

Mr. RAULSTON. Yes, sir. It would be $3,330,495. And there would be some reduction on that, because the Cooperative Electric Co. there owns part of that property. Then the city of South Pittsburg has the water company that was formerly included in that assessment that belongs to the power company.

Mr. BROOKS. So it would probably be less than $3,000,000? Mr. RAULSTON. I would say something a little over $3,000,000. Mr. SCHAEFER of Illinois. Mr. Raulston, you have been following the T. V. A. legislation since its inception, have you not? Mr. RAULSTON. Yes, sir. I have been watching it.

Mr. SCHAEFER of Illinois. You recall that when it first passed the House, the House refused the 5 percent to Alabama and Tennessee, and it was incorporated in the legislation by the conferees? recall that, do you not?

Mr. RAULSTON. I do not recall the incident; no, sir.
Mr. SCHAEFER of Illinois. That is all.

You

The CHAIRMAN. That is all, Mr. Ralston. Thank you very much. Mr. Kefauver, have you any other witnesses that you want to call at this time?

Mr. KEFAUVER. Mr. May, I have some others, but they would rather wait until after Mr. Fitts testifies.

Mr. SPARKMAN. Mr. Chairman, Mr. Lapsley is here representing Alabama. He will only take about 10 minutes, and I would like to suggest that he be heard at this time.

The CHAIRMAN. I think that is a good idea. We will be glad to hear you at this time, Mr. Lapsley. Will you state your name and residence and representation?

STATEMENT OF JOHN W. LAPSLEY, MONTGOMERY, ALA., COUNSEL FOR THE STATE DEPARTMENT OF REVENUE OF ALABAMA

Mr. LAPSLEY. My name is John W. Lapsley. I am counsel for the State Department of Revenue of Alabama.

The CHAIRMAN. Where do you live in Alabama, Mr. Lapsley?

Mr. LAPSLEY. Mr. Chairman, I am counsel for the State Department of Revenue in Alabama. I am now in Montgomery. I formerly came from Selma, and was practicing law in Birmingham at the time I was counsel for the Reconstruction Finance Corporation there for several years. But Selma is my home.

The CHAIRMAN. You come here now as the representative of the Governor of Alabama?

Mr. LAPSLEY. Yes, sir.

The CHAIRMAN. And you have a statement you wish to make?

Mr. LAPSLEY. Yes, sir. Mr. Chairman, I want to avoid, if possible, taking up unnecessarily the time of the committee, but I want to let the committee know that in Alabama we have made a very careful study of the situation as to what our tax losses are at the present time, and what tax losses we may anticipate in the future, not knowing exactly what sales might take place or to what extent our tax system may be upset.

We understand that the sales of utilities in North Alabama will probably

The CHAIRMAN (interposing). Pardon me just a moment. Mr. Raulston, are you planning to leave the city now?

Mr. RAULSTON. Yes, sir.

The CHAIRMAN. Might I interrupt you for the purpose of just asking Mr. Raulston one question that I overlooked.

This loss of $82,000 in your county is 1 year's loss, and will be a continuing loss year after year?

Mr. RAULSTON. Yes, sir.

The CHAIRMAN. That's all.

Mr. LAPSLEY. We understand the sales may affect 15 counties in north Alabama, but what facilities and what properties will be included in those sales we are unable to determine, for the reason that the T. V. A. power is at the present time being used in Bessemer, 10 miles from Birmingham, and also at Tarrant City, on the other side of Birmingham, and if they supply sufficient power to supply the city of Birmingham and take over the operation of the Birming ham Electric Co., it will practically double the estimates that we have of the tax loss that may result.

The CHAIRMAN. In other words, every time they take over a large area of utilities they cut the State out of that much more revenue? Mr. LAPSLEY. Yes.

The CHAIRMAN. Birmingham is a big town, the biggest city in your State?

Mr. LAPSLEY. Yes, sir. As a matter of fact, to get a general picture of it, we find that the sales of electric current in Alabama amount to about $25,000,000, and the State, county, and municipal tax amounts to about $3,000,000. That is somewhat comparable with Tennessee, excepting that Alabama's total tax bill seems to be a little less on utilities than in Tennessee, although the gross sales are approximately the same in the last few years.