Senator LONG. In other words, practically the entire State of Texas is in position to enjoy joint rail rates of water and rail transportation? Captain INGERSOLL. That is correct. Senator MYERS. Senator Reed, any questions? Senator REED. No questions. Senator LONG. Could I ask you this point? What is being done to your knowledge by the Coyle Lines and lines operating between New Orleans and Houston, Tex., on less-than-bargeload shipments? Captain INGERSOLL. The Coyle Line has a joint rate structure with the Federal Barge Lines to offer all-water service on less-than-bargeload quantities from Mississippi River points to Houston and perhaps Galveston. No traffic moves on those rates. I am not too clear why that is the case. If any traffic appears, it is my understanding that it is moved on by truck. Perhaps it is because the volume is too small to justify their actually handling the traffic. Senator LONG. You think it might be partly because Houston and Galveston people do not know about those joint rates between Coyle Lines and Federal Barge Lines? Captain INGERSOLL. That might well be the case. We have engaged in no solicitation in Texas in recent years. Senator LONG. Is there, in your opinion, an excellent possibility for development of trade between Houston and Chicago and St. Louis, for example, by water? Captain INGERSOLL. No question of it. Before the war it is my understanding upwards of 200 cars a week moved out of Texas or into Texas by Federal Barge Lines. Senator LONG. Are you using your containers that you have been studying and developing on the Coyle Lines? In other words, when you use a container for Federal Barge Lines' less-than-bargeload shipments, do you ever transfer those containers from Federal Barge Lines to some other line and ship them on out? Captain INGERSOLL. There is an operator on the canal who has a container operation on a small scale with which we have participated in some traffic. Senator LONG. Who is that operator? Captain INGERSOLL. Gulf Canal Lines. Senator LONG. What experience has he had with the containers? Is he operating it successfully? Captain INGERSOLL. I am not too familiar with the details. It has been my superficial impression that his water-line operation has been very unsuccessful and his terminal operation, getting the freight to and from the barges, has been quite successful. The combination, I am told, is unsuccessful-I believe because of lack of volume. Senator LONG. What type of barges does the Gulf Canal Line use? Captain INGERSOLL. I think they are just pieces of different landing craft welded together. The operation is too small. Senator LONG. Not at all designed for that type of operation? Captain INGERSOLL. That operation is too small to do any good. That is the whole thing. Senator REED. Mr. Chairman, I hope Senator Long can confine his questions. I would like to get this proceeding over with. Senator LONG. No further questions. Senator MYERS. Thank you, Captain. We are deeply grateful to you. Mr. Fred Smith, from the General Accounting Office. You may proceed, Mr. Smith. STATEMENT OF FRED SMITH, ASSISTANT DIRECTOR, CORPORATION AUDIT DIVISION, GENERAL ACCOUNTING OFFICE Mr. SMITH. Mr. Chairman, my name is Fred Smith. I am Assistant Director of the Corporation Audit Division of the General Accounting Office. I have a short statement here and I would like to read, presenting the position of the General Accounting Office with respect to S. 211. Whether or not the functions of the Inland Waterways Corporation are to be continued or extended, as is proposed in S. 211 and the amendments thereto, is a matter for determination by the Congress concerning which the General Accounting Office has no occasion to take a position. That, of course, is a policy question. We wish now specifically to disclaim responsibility for the statement that, "The General Accounting Office also has recommended that the Government withdraw from the (Inland Waterways) business," appearing at page 64 of the report on Federal Business Enterprises submitted to the Congress on March 31, 1949, by the Commission on Organization of the Executive Branch of the Govern ment. The General Accounting Office audit reports on Inland Waterways Corporation for the fiscal year 1946 commented that the Corporation was at a crucial point in its existence. That is even more true now. Equipment is antiquated and much of it must be replaced if the Corporation is to operate with reasonable efficiency and economy. Damage claims have increased due to leaky and otherwise defective barges. Operating losses have been financed at the expense of depreciation reserves. Replacements, if any, have been negligible. Audits by the General Accounting Office of financial transactions of the corporation have disclosed deficiencies in accounting practices and serious impairment of its capital. In view of these conditions, it would appear timely for the Congress to examine thoroughly and critically the operations of the corporation, in the light of the policies stated in the organic law, and determine the course of its future policy. As pointed out in report of the Comptrolled General on S. 211, sent to the committee February 10, 1949, the audit studies of the General Accounting Office were undertaken impartially and with the view of presenting to the Congress facts useful in its determination of future policy. The provisions of S. 211 increasing the capital stock of the corporation from $15,000,000 to $33,000,000 do not disclose whether the additional funds are for the purpose of (a) rehabilitation of existing facilities and equipment, (b) purchase of modern equipment and other facilities, or (c) financing of operating losses. It appears evident that the general purposes, at least, for which any additional capital is to be used should be determined by the Congress and specified in the legislation. That determination is implicit in the most fundamental of the legislative functions, namely, the power of the purse. It is assumed that the corporation will justify its request for increased capital by submitting a complete and specific plan of rehabilitation-within the framework of the general purposes set forth by the Congress-covering future operations and the replacement, modernization and financing of facilities and equipment. Adequate budgetary and financial control depends on this being done. Section 4 of the proposed amendment to S. 211, introduced March 23, 1949, would increase and diversify the membership of the advisory board which was established under the organic law to advise the Secretary of Commerce. However, reliance upon an advisory board, which has no power to direct and enforce policies in the affairs of the Corporation, appears entirely inadequate. The General Accounting Office strongly recommends that the Corporation be headed by a vigorous and responsible board of directors, clothed with the authority and duty effectively to direct its affairs. The lack of such a board of directors is regarded as perhaps the greatest weakness in the present organization. Section 3 of the amendment would regulate certain pioneering activities of the Corporation. In this connection, the Corporation apparently concedes that its operations now fall into two classescommercial and pioneering. The advantages, from an accounting and budgeting viewpoint, of recognizing this division to the maximum extent practicable are believed to be obvious. Whether the development of the rivers and related facilities be treated as a whole project, or as divisible, an accurate appraisal of the results of operations at any given time must depend upon the availability of financial data permitting ready evaluation on the basis of progress so far made. The costs of new development and the benefits of completed development, when segregated, can be more precisely projected and understood, and, in addition, a degree of control highly desirable in all cases where predominantly spending activities are involved readily can be achieved. The General Accounting Office is of the opinion, therefore, that the Corporation should be required to submit budget estimates for annual appropriations, in advance, covering anticipated losses segregated as to (1) pioneering activities, and (2) other activities. The General Accounting Office recommends that the Corporation be required to pay interest periodically on the capital investment of the Government, at rates calculated annually in advance by the Secretary of the Treasury to reimburse the Government's cost. Similarly, it is believed that the Corporation should pay a proportionate share of the cost to the Government of carrying out the Civil Service Retirement and the Federal Employees' Compensation Acts. These two recommendations have been made and are being made by us with respect to all Government corporations participating in these programs, and are essential if the operations are truly to reflect their actual costs to the Government. Senator MYERS. Any questions, Senator Reed? Senator REED. No questions. It is a very interesting statement that Mr. Smith has made. Senator MYERS. Any questions, Senator Long? Senator LONG. I would like to ask you this: Would not these recommendations of yours require that the Congress every year should go over the operation of the Federal Barge Lines and pass upon them and appropriate or not appropriate the money for the operation of it? Mr. SMITH. Well, Senator, the Corporation Control Act now contemplates that procedure. The corporations are supposed to present a budget, and the Appropriations Committee is supposed to review and approve the operations as set forth in that budget. Senator LONG. I am sure you know that the railroad interests would like to completely destroy the Federal Barge Lines if they could. Would that not give them an annual opportunity to come in and try to destroy a competing form of transportation? Mr. SMITH. I presume they have the opportunity now to appear before the Appropriations Committee. I do not know. Senator LONG. But in a separate form Federal Barge Lines simply operates out of its own funds at present? Mr. SMITH. Yes, sir; but the Corporation Control Act requires it to submit a budget each year to the Appropriations Committee, and that is incorporated in the annual appropriations made for Government corporations. Senator LONG. Would you prepare these amendments you have in mind in the form of concrete amendments so we might consider offering them to the committee? Mr. SMITH. Yes, sir. Senator MYERS. You might send those suggestions to the committee in the form of amendments. I think that might be very helpful. Mr. SMITH. Yes, sir. Senator MYERS. Thank you ever so much. During the course of Mr. Lloyd L. Harvey's testimony yesterday Senator Johnson of Texas inquired if he, Mr. Harvey, could submit the names of companies that were willing to engage in less-thancarload shipments. He has submitted some evidence as was requested by Senator Johnson, and we will incorporate that in the record at this point. (The data referred to follows:) FURTHER STATEMENT OF LLOYD L. HARVEY Senator Johnson asked what the attitude of private carriers would be toward handling less-than-bargeload river traffic. My answer was that, in my opinion, if private operators who might embark their own investment in such traffic were not threatened with the loss of that investment through subsidized Government competition—and, I would add, below cost rail competition-then private operators could be expected to handle lessthan-bargeload traffic, as they did before the war. Senator Johnson asked for some confirming expression of operators. question was put to operators, and their expressions are appended. The OPERATORS' STATEMENT Private operators handled less-than-bargeload traffic in volume before the war. One such operator, for example, operating on the Ohio River (from which the Federal Barge Lines is excluded by law), built its business on less-thanbargeload traffic, and in at least one prewar year derived more than half its revenue from its joint-rate business. Federal Barge Lines in 1948 embargoed less-than-bargeload traffic, and did so for one of the same reasons that have forced private operators at the same time to cut down that field of operation. Private operators would engage in less-than-bargeload traffic if the causes that have forced them out of it were removed. Those causes are two: First. During the war all costs of operation increased, particularly terminalhandling costs caused by rising wage scales and falling efficiency. The railroads The raised rates, but did not raise water-competitive rates proportionately. result was that the barge lines, including the Federal Barge Lines, lost their less-than-bargeload traffic-and the railroads which secured it on a noncompensatory basis did not make a profit on it. So long as noncompensatory watercompetitive rail rates are allowed private operators cannot obtain any substantial volume of less-than-bargeload traffic, and the Federal Barge Lines will move very little such traffic-and that little at a loss-which loss will have to be covered either by public subsidy or by profitable business taken from private water lines. Convincing evidence of this is found in the protest against this rail rate-making practice, addressed to the president of the Association of American Railroads by the Director of the Office of Defense Transportation during the war, on April 1, 1942, and already in evidence before you. Second. Private operators who would enter the less-than-bargeload field of operation feel that they are confronted with Government-subsidized watercarrier competition, so long as the Federal Barge Lines operates in that field with public money and without restraint. As a result of the first factor above mentioned, there is not enough less-than-bargeload traffic for more than one carrier. Water transportation has a lower cost basis than rail transportation. If rates were not allowed to go below the cost-of-service floor of each individual operator, and Government competition were eliminated, private operators would have the same inducement as formerly to engage in less-than-bargeload traffic, and there is no reason to suppose they would not respond in the same way as before. An example of the rail rate-making practice above referred to is found in the protest which the United States Maritime Commission renewed on June 17, 1949, to the Interstate Commerce Commission against noncompensatory rail rates on water-competitive freight on the west coast. LLOYD L. HARVEY, Port of New York Authority, PITTSBURGH, PA., June 29, 1949. Stoneleigh Court Building, Connecticut Ave, NW., Washington, D. C.: We concur in your proposed statement to Senate Foreign and Interstate Commerce Committee concerning Federal Barge Lines legislation, citing circumstances and conditions which have heretofore interfered with efforts of privately owned carriers for hire to establish and maintain less-than-bargeload freight-transportation services. LLOYD L. HARVEY, Port of New York Authority, UNION BARGE LINE CORP., CHICAGO, ILL., June 29, 1949. Stoneleigh Court Building, Connecticut Avenue NW., Washington, D. C. As read to me over long-distance telephone, I endorse your statement which points out the conditions why privately owned barge lines are not handling carload traffic today on Mississippi River waterways. JOHN I. HAY, President, John I. Hay Co. [From the Official Railway Guide, July 1948] MISSISSIPPI VALLEY BARGE LINE Co. ST. LOUIS 1, MO. Carload and less-carload service between Cincinnati and Memphis, Cincinnati and New Orleans and points served by water carriers beyond New Orleans; also between St. Louis and New Orleans and points served by water carriers beyond New Orleans; also joint rates with Rail Carriers based differentially under water-rail rates when from, to, or via Cincinnati; when to, from, or via Memphis and New Orleans. Carload and less-carload liability: Contract terms and conditions of bill of lading covers liability for loss or damage due to ordinary causes and further for full coverage due to fire or marine perils, floods, windstorms, or other acts of God while freight is in our possession. |