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. AULD. 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 out any capital improvements. You had no capital expenditures at ell in 1945, did you? At least, they do not show in this sheet. Mr. AULD. Yes, sir; we had the distribution system alone which had a capital expenditure of $330,000 in 1945. I do not have the figures for the supply capital right here. Mr. BATES. Well, that would be about $400,000 balance in favor of your capital improvements after your revenues are considered, and your expenditures. Mr. AULD. Yes, sir. Mr. BATES. With $400,000 a year running over a period of years, would that be adequate to take care of this capital investment of $50,000,000 that you have in mind? Mr. AULD. No, sir. Mr. BATES. And, therefore, you are depending upon the Federal and religious organizations to take up that loan. Mr. AULD. Yes. The method by which we suggest the religious payment is set forth in the bill. We, of course, feel that if we receive payment from the District government we should reimburse them for such services as they render us, such as legal, purchasing, administrative, and we'd provide that reimbursement annually to the city government, by way of the appropriations act. It is our suggestion that since the water to churches and charities is given by the Commissioners, not by the Water Department, that the value of such water as is given for good cause be credited to the amount that we would pay back the Commissioners for services rendered us. That is spelled out in one section of this bill. Senator MCGRATHI. May I ask what is the trend of water rates in American cities? Let us speak of these 40 cities on this chart, the trend up or down? Mr. AULD. As to the future, you mean, as the change which may be taking place now? Senator MCGRATH. Well, I am looking at water in the sense that we look at electricity as a utility. The trend in the electrical field is to reduce rates and the reduction usually brings about a greater consumption, thereby the company is just as well off, or better off. Does the same hold true with respect to the sale of water? Mr. AULD. Water systems considered nationally have been falling behind for about 20 years; their operating costs have gone up. I think it is 27 percent, and it is anticipated that they will go up perhaps—or perhaps it was in 1945 anticipated that they would go up about another 15 percent in order to keep up with wage increases, and so forth. Mr. BATES. But notwithstanding that you want the rate to remain static. Mr. AULD. Yes. Mr. BATES. That is the same thing as applying the same principles to the property rate, real estate, whether it be $1.75 or thirty or forty dollars a thousand, as we in New England are in the habit of saying; when the cost of government goes up, there must be some reflection in the ratio of the basic costs, whether it is in the form of water, real, or any other basic tax. I do not see how you can possibly get away from it excepting through the development of some entirely new sources of revenue. |