Senator MCGRATH. In other words, you would not sell to the District of Columbia on the same basis that you are willing to sell to Arlington? Mr. AULD. There is no reason why we should not consider this as strictly retail when it comes out of hundreds of miles of mains, is handled and rehandled, and the meters are read and the bills prepared. There is a tremendous amount of expense incidental to the retailing of water which would go with both municipal and Federal consumption. Senator CAIN. Has this question been raised legislatively before? Mr. AULD. Not to my knowledge, sir. Senator CAIN. How long has it been going on? I suppose for as long as you have had a system, the Federal Government has not paid for water it has used? Mr. AULD. That is correct. It has been for 89 years. Senator CAIN. And yet, 89 years ago they built the capital plant? Mr. AULD. Precisely. Senator CAIN. Which the District itself never paid for in any lump sum? Mr. AULD. The District government, in later years, prior to 1925, did make substantial contributions to that plant, too. In fact, the District government has got more cash tied up in the capital plant than the Federal Government. Senator CAIN. The Federal Government has made no contribution to the plant facilities for a long time, I suppose? Mr. AULD. Under the WPA, several hundred thousand dollars of labor was put in the system back in the 1930's. During the war emergency period, in order to supply Bolling Field and Bellevue magazine with water, the Army and the Navy contributed toward a trunk main which was essentially for their exclusive use. We considered that part of the system. We received some Lanham Act assistance, but these three, together, amount to a little less than $1,000,000. Except for that, there has been no Federal aid for many years. Mr. BATES. Does Arlington County reach over into Alexandria? Do you supply the city itself with water? Mr. AULD. No, sir. Alexandria is supplied by a private water company which, as far as I know, is self-sufficient. Senator MCGRATH. I meant to say, Arlington County. Mr. BATES. Arlington County is just across the river. Mr. AULD. Yes. That fills out what was originally the District. of Columbia. There was a 10-mile square, and then the retrocession of that property back to Virginia. Incorporated in that area is Arlington County. Mr. BATES. Have there been any studies made of the metropolitan requirements looking forward over a period of 25 or 50 years, because of the shortage of water, or the anticipated shortage, in any of the adjacent communities? Mr. AULD. We feel that this report looks at the problem on an essentially metropolitan basis. We recognize the fact that Maryland has a sufficient supply and from their own advice, they feel that they are permanently self-sufficient. We have recognized Arlington County as a probable permanent user of our water. We have designed for their needs. Beyond that, of course, lies Fairfax County in Virginia. There is now legislation pending in this Congress which authorizes the sale of water to users in Fairfax County. Mr. BATES. Now, geographically, I am sorry, but I do not know where Fairfax County is. Is it north, east, south, or west? Mr. AULD. That lies generally west and south of Arlington County and borders it. Mr. SMITH. What you are speaking of would be just on the border of Arlington County, Falls Church. Mr. BATES. Oh, yes. Mr. TALLE. Mr. Chairman, I am looking at this chart. I see four curves on it. The upper one represents the 40 cities with the highest rates. The lowest one represents the 40 cities with the lowest rates. Now, your average represents 40 cities in between the highest 40 cities and the lowest 40 cities. Would you not be substantially better off financially if you charged the average rate? Mr. AULD. Of course, that would reduce the required borrowings decidedly. Mr. BATES. Well, the thing I think you are facing here in the District of Columbia is a problem similar to that we had years ago in Massachusetts. I was part of a commission that studied the matter of the $50,000,000 addition to the so-called Boston metropolitan district, but up there we never did think of having our rates so low in that area that it would only give us a balance of $200,000 toward a capital outlay over a period of years, and even what you say today is that you do not expect these revenues to sufficiently increase to take care of any of that capital outlay until 1970. And I think you are treading on pretty dangerous ground there, where your surplus revenue is just a minute part of the cost of this major improvement. Mr. AULD. I would like to point out that our actual income takes care of the greater part of this capital outlay. Mr. BATES. Well, according to your figures here, speaking about your income, we have them right here, and in 1946 it was $3,400,000 and that is your income. Mr. AULD. Yes, sir. Mr. BATES. And your outlay was $3,400,000. Let us see: Your revenues for water in 1946 were $3,400,000, and the expenditures in 1946 were $6,400,000, and $2,000,000 of that was for capital outlay, or in other words, your revenue just about equaled the $3,400,000. That would be about a $600,000 excess, or a $500,000 excess. There is a $3,400,000 as against $5,000,000. Is that the figure you have? Mr. AULD. In 1946, according to my figures, we had a free balance of $659,000 after all expenses. Mr. BATES. Let us take general maintenance. Your revenue is $3,442,000. Mr. AULD. Yes, sir. Mr. BATES. Now, expenditures that year were $6,400,000 less $2,000,000; is that right? $2,000,000 from capital expenditures? Mr. AULD. I do not follow that. Mr. BATES. Well, you had $2,000,000 for investment, which includes $2,000,000 for investment, and $44,000 for repayment of the PWA loan? Mr. AULD. That, sir, was an investment that was never made. However we did repay our Lanham Act loans for wartime improvement. Mr. BATES. How much do your records show you spent in 1946? That is, maintenance. And how much for capital outlay? Mr. ACLD. I can give it to you divided as between supply and distribution. For maintenance, a total of $2,163,192 and for capital outlay in 1946, $1,486,294. Mr. BATES. Those are your expenditures? Mr. AULD. Yes, sir. Mr. BATES. That is $3,649,000? Mr. AULD. Yes, sir. Mr. BATES. All right. Now, what were the revenues that year? Mr. AULD. Our revenues were $3,442,000, but we had other balances which gave us a total availability of $4,629,000. Mr. BATES. But wait awhile. I am not talking about balances or reserve funds or investment. I am talking about revenues that year and expenditures that year. Mr. AULD. Yes, sir. Mr. BATES. All right. Your expenditures were $3,649,000, and your revenues were $3,422,000. Mr. AULD. Yes, sir. Mr. BATES. That gives you a deficit of about $227,000. Mr. AULD. That is right; yes. Mr. BATES. Your income and your outgo. Is that typical of your ordinary operating expenses? A deficit of a couple of hundred thousands of dollars every year? Mr. AULD. No, sir. Our operating expenses, as far as I know, exclusive of capital outlay, have never exceeded our income. Mind you, the operating cost was such that there was $1,500,000 for capital outlay. It happens we spent that and a little more for capital outlay. There is necessarily some give and take as between different years in our requirements, but generally speaking, in capital outlay, we have fallen behind the load, and we have generally speaking used up the filtering capacity. Mr. TALLE. Is this chart in the volume you supplied a while ago? Mr. AULD. No, sir; that is in another one. Mr. TALLE. Mr. Chairman, I should like to have this in the record and I ask unanimous consent that it be inserted in the hearings. Senator CAIN. Indeed, sir. Mr. TALLE. The point I started to make some time ago is this: I doubt the wisdom of being so far below the average for 40 cities and then incurring a loan for 25 years without paying anything off during that long stretch of years. It does not jibe with my idea of sound finance. Senator CAIN. Who sets the water rates, Mr. Superintendent? Mr. SMITH. May I ask what is the gross revenue per annum of the Water Department? Mr. AULD. Gross in '47 was-well, '46 actually-was $3,422,929. I have made some studies of water revenue in order to project what we would have available to pay off these loans. There you have your costs-or income back to 1940 on water rents. Senator CAIN. The District has been considering its overall need for increased revenues. What thought have the Department or the Commissioners given to the advisability of increasing rates so that they are - more nearly comparable with similar cities of the same size? Mr. AULD. I don't think that I have discussed that with the Commissioners. I can only express my own view. Senator CAIN. I wish you would. Mr. AULD. My personal view is this: That, first, as I said before, we are in a very unsettled time. Costs are up now; they may stay; they may not. I do not feel that we should saddle the consumer, perhaps, forever, with a rate which in several years may not turn out to be justified. On the other hand, these very tax bills which you now have before you, are going to increase his costs in many ways. Senator CAIN. That is right. Mr. AULD. I am not convinced that we need this raise, and I, therefore, reluctantly, very reluctantly, would recommend it, especially under present conditions. Senator CAIN. You think with present rates you can carry your projected financing? Mr. AULD. Yes. Senator CAIN. Within this rate structure to pay that indebtedness off? Mr. AULD. I am assuming, of course, Federal and District payment for water. Mr. BATES. Yes; that is right. Mr. AULD. As a first principle, we must receive for all we produce. Granted that Senator CAIN. Let us assume that that does not happen, for it has not happened heretofore, what is your future situation? Merely because we have a bill before us which says that the Federal Government will pay for what it uses by no means indicates that a sufficient number of people in the Congress will agree with that. Mr. AULD. Of course. Mr. TALLE. Do you propose to borrow on long-term for 25 years from the Treasury? Mr. AULD. Yes. Mr. TALLE. Do you think that a private bond and investment house would buy such bonds? Mr. AULD. Yes, sir, but we feel that the Federal Government still has a very distinct interest in this system, and that Federal loans could be accomplished, perhaps, with less cost to the consumer. Mr. BATES. Mr. Chairman, I just want to make a brief statement here. According to the figures that have been given to me by the District Auditor, and they are very plain, they are very simple; in 1945 you had revenues coming into the District from water sources of $3,400,000 a year, in round figures, and your outlay was $3,300,000, with |