I believe—and I believe it is the thinking of those people out there, and I am sure it is if we could go for 2 or 3 years under P. and S. loans with deferred payments, with the interest kept current, that would be helpful. You do give that on your FO loans, 2-year defer ments. Mr. WILLIAMS. Yes. Mr. WALTER. If you could do the same thing with the P. and S. loans, in that first 2 years, that man is made. Paying it off in the first year often breaks his back. We would like to see the FHA give the young people a chance to pay it off in the early development years. Senator JACKSON. One of the things that came out of this meeting in Richland on February 10 was a recommendation for a 3-year moratorium-the first 3 years-on the payment on principal. In other words, this first 3 years, they just do not have the income with which to make the payments, and it is a unique situation that applies in this area. I wondered, Mr. Williams, what the view of the Department were on that. I meant to raise that earlier. Mr. WILLIAMS. There is authority under the present statute to defer payments until the end of the second full crop year. Senator JACKSON. Not for 3 years? Mr. WILLIAMS. Two years. That permits deferment of both principal and interest, and that authority has been exercised. Senator JACKSON. You mean in the Columbia Basin? Mr. WILLIAMS. Yes. We have been administratively following a policy where moneys are advanced to produce a specific crop to schedule those annual recurring expenses for payment at the end of the first crop year, et cetera, to keep from pyramiding that debt. We have deferred payments for investments in machinery, livestock, and other capital items. Senator JACKSON. Then they would still have to pay off the principal within 4 or 5 years, within the 7-year period? Mr. WILLIAMS. Yes. That is where the ceiling is. Senator JACKSON. These people, Mr. Chairman, are anxious to pay their debts. I do think we have been operating on a fiction. It has been assumed that they are going to start paying the first year or two when, in fact, it is an impossibility. They are leveling the land, they are getting the land prepared for new crops. They are trying out new lands with new crops without any experience. The whole purpose of these amendments, of course, is to try to work out a realistic credit program that these people can meet, and if a good farmer can meet those conditions, then those who cannot comply, of course, have no business being in, and have no reason to complain. I do believe we are operating at the present time on an unrealistic basis. It is not the fault of your people, Mr. Williams. It is a new situation that has developed. Has the Farmers' Home Administration given any thought on this recommendation of the farmers in the area to extend the moratorium period from 2 to 3 years? Mr. WILLIAMS. Not to my knowledge. 78487-562 Senator JACKSON. It would be helpful if we could have their comments on it. If you extend this period, you will solve the problem anyhow. But you will still need authority to extend it beyond the 2-year period. Mr. WILLIAMS. Yes. There is statutory authority to defer payment for 2 years to the end of the second full crop year. Senator JACKSON. It may require an amendment to the bill here, S. 3374, to include that additional authority on a discretionary basis. Senator SCOTT. Thank you very much. If you will give us that information for the committee, it will be helpful. -Senator JACKSON. The other gentleman is Mr. Don Mitchell, with the Bureau of Reclamation. While the Bureau does not have any part, Mr. Chairman, in the extension of credit, the Bureau of Reclamation, of course, has a vital stake in this program inasmuch as the Columbia Basin project is under the Bureau and they work very closely with the Farmers' Home Administration in trying to develop the new farms, and maybe Mr. Mitchell would like to make some comments on this. Senator Scorr. We would like to hear from you, Mr. Mitchell. STATEMENT OF DONALD S. MITCHELL, CHIEF, LAND AND WATER BRANCH, IRRIGATION DIVISION, BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR Mr. MITCHELL. My name is Donald S. Mitchell, Chief of the Land and Water Branch, Irrigation Division, Bureau of Reclamation. As Senator Jackson pointed out, the Department of the Interior was not requested for a report on this particular bill, and the comments I make here today are not necessarily those of the Department. But the Bureau of Reclamation is vitally interested in this credit problem on the Columbia Basin project, not only on the Columbia Basin, but on all of our reclamation projects. However, I think the credit problem is more serious in the Columbia Basin than in most of our other projects primarily due to the vast size of the undertaking. We are in general agreement with the provisions set forth in the bill, and we think it would go a long way in taking care of some of the problems there. In addition, we think that more funds are needed for the project. We certainly believe that the FHA has done an excellent job within their authority and the funds available, and the personnel that they have had available on the project, but I might point out that as of January 1, 1956, the FHA had only 346 active loan cases on the Columbia Basin project, and that amounted to only about 11 percent of the farms that were eligible to receive water. So they have a relatively small percentage of the farms in the basin that are borrowing from the FHA. I think if additional funds could also be made available to FHA, it would go a long way in answering the problem. I would like to make this one additional point that Mr. Walter brought up. I think it is well recognized by all agricultural people that it is necessary to level land for irrigation and any time you go in and disturb the topsoil, which you must necessarily do to level it, and put it in shape for irrigation, it takes 2 to 3 to 4 or even to 5 years sometimes to bring that land back to its maximum production capabilities. This is a very important point in this question of a moratorium in the early years of these loans. The soil in general is good in the Columbia Basin, but, as I say, whenever you disturb that topsoil, you have to more or less start over to build up the fertility, and that takes time. I have no further remarks. Mr. WALTER. There is one thing. The Government definitely has an obligation to take care of those people who are now in trouble, particularly in the South District. It was the Bureau of Reclamation that sold them the land and required them to have assets of only $4,500 to qualify. They have pulled up stakes wherever they were located. They were not promised by the FHA that they would get loans, but they were encouraged that they would be able to get FHA loans. They left their jobs and came out there and bought their piece of land, and we had no selection in picking these settlers. The irrigation district or the commission had no choice in that. It was strictly done by the Government. Their $4,500 is not adequate. They do not have the repayment capacity in the eyes of the FHA at present, but they are there and have expended this $4,500, and they are unable to get their land developed. They have pulled up stakes elsewhere. They are out there practically stranded through governmental activity, through the FHA and the Bureau of Reclamation. They didn't promise them anything, but they made pretty glowing reports of the possibilities that they would be able to get loans. They do owe them an obligaiton. They owe them an obligation to take care of those people who want nothing more than a chance. The $4,500 was inadequate. Mr. ZAHN. You might add that each one is a young veteran under the veterans' preference clause in the basin. Senator SCOTT. Are there any further questions? Senator JACKSON. Mr. Chairman, I had one additional letter that I wanted to put in the record following my remarks. Through an oversight I left it out. It is from Mr. Harold J. Eidemiller who is Secretary of the South Columbia Basin District. The letter summarizes the meeting that was held on February 10 with Mr. York and myself and states the problem, I think, very, very well. I merely want to express my personal apreciation for arranging this meeting this morning. I know we are all busy and it was on rather short notice. Senator Magnuson and myself are indebted to you for taking time out and arranging this meeting while these people were in the city from the State of Washington. (The letter referred to follows:) Senator HENRY M. JACKSON, SOUTH COLUMBIA BASIN IRRIGATION DISTRICT, Senate Office Building, Washington, D. C. DEAR SENATOR JACKSON: Last Friday, February 10, some 20 veterans, owners of farm units in the Columbia Basin project met with Joseph E. York from the Washington office, Farmers' Home Administration, in an attempt to obtain relief from the present financial difficulties they are having with the FHA determina tions as administered by the Pasco office. This delegation was a very small proportion of those having a grievance since an effort was made to keep the attendance as small as possible. Mr. York was very sympathetic and explained what FHA could not do according to law and promised to take the various complaints back to the Washington office. Unfortunately he suffered a fatal heart attack the next morning and we are sure that time did not permit any action that would carry on his intentions and it is our purpose now to furnish a résumé of the situation. A primary cause of the trouble is the requirement that repayments under the production and subsistence loans be made the first year of operation. This has resulted in attempts to raise an annual crop such as beans, corn, or wheat on soil that in its virgin condition is totally unfit for such purpose. Were it possible, and we think it is, to make these loans with no repayment the first year, payment of interest only the second year, and then a graduated repayment schedule beginning at the end of the third year. This would permit the borrower to devote his entire attention to the establishment of a stand of legumes and grasses on his farm without which no measure of success will ever be attained on the type of soil involved. Had such a program been followed, then this being the third year, some of the legumes or grasses could be plowed under and a cash crop planted with assurance of a profitable yield. As it is 2 years have been lost and we are right back at the beginning with the soil in even poorer shape than in the beginning. When this viewpoint is presented to FHA personnel we are met with a lot of words giving lip service to the idea of a legume and grass program but with no encouragement as to deferring repayments. This is equivalent to lifting oneself by one's bootstraps for in order to strive for the repayment it is necessary to devote a great part of the total acreage to an annual crop which due to the difficulty in furnishing moisture by reason of heat and wind and the care that must be taken to prevent erosion takes all of the farmer's time and he is therefore unable to establish a permanent seeding on the remaining acreage. We believe this deferral of repayment can be accomplished by departmental action under the present act. The Farm Home Administration Act was enacted on the assumption that it would be used to rehabilitate existing farms where buildings and other facilities were already in existence and it was not foreseen that it would be used in situations such as ours, wherein we must have living quarters for our families and our livestock and must have time to tame and enrich the soil itself. The limit on the production and subsistence loan is now $10,000 and cannot extend beyond 7 years. At the time this limit was set this was probably ample but with the greatly increased prices the farmer must now pay he cannot stretch the money thin enough to cover his needs. Not less than $30,000 total assets are required to furnish the barest essentials for a new farm operation and the borrower will still need to trade the use of machinery with his neighbor and will have barely adequate housing for his family. We believe that this operating loan limit should be raised to not less than $15,000 and a borrower allowed to use FHA funds for 10 years. This can only be accomplished by a change in the act. Much complaint is heard of the requirement that too great a part of the farm ownership loan be expended in the building of a residence. Settlers not financing through FHA are content with the barest minimum in living quarters until such time that the farm will pay its way and FHA borrowers would like the same privilege. Approximately $7,000 is now used for this purpose and interest charges alone will amount to about $400 annually. In addition this amount will not build the house that is wanted and the family would far rather live in a basement until such time as they were able to build what they wanted. This part can be changed by departmental ruling and should be, so that the development of the farm will not be handicapped for lack of capital. We do not want to see a debt built up against a place that will be impossible to pay but wish to keep the total loan as low as possible with a more realistic program of how the money is used so that maximum results will be had in making the farm pay its way. We think that FHA borrowers are not getting the best practical advice from the supervising personnel. It is not possible for someone to outline a program for a borrower to follow when the adviser is without practical experience himself. Good judgment is also a prime requisite for one in this position. We know of a situation where the borrower had a crop of beans to harvest and had found a combine harvester for sale for $1,100 with a guaranty that it would be in new condition; he was to pay $500 after harvest and the balance after harvest the succeeding year. FHA refused to permit the purchase and the borrower was forced to depend on hiring his beans harvested and to wait until the hired combine could reach his place. As a consequence the beans were rained upon several times and only a small portion of his crop was salvaged. Then FHA approved the payment of $579 to the custom operator. The county advisory committee for Franklin County consists of one owneroperator of a farm on the project, one dryland wheat farmer, and the third lives in Pasco and owns a small acreage devoted to grapes just adjacent to town; this committeeman was formerly an FHA supervisor. We submit that all three should be owner-operators of farm units on the project since 100 percent of the loans are made there. Veterans from all over the United States were encouraged to seek lands in the Columbia Basin project and the project was set up to give them preference in obtaining land and the means of establishing themselves in a profitable occupation but somewhere along the line there has been a failure in carrying through to see that he has had an ample opportunity to work out has own salvation and if immediate help is not forthcoming many of these young familites will have to give up and sacrifice the savings they brought with them together with 2 or 3 years of work and hardship and, disillusioned and bitter, start all over again. There are many that came here to select their farms and before returning home to sell out and close up their affairs, conferred with FHA about finances and were told that "in all likelihood" FHA would go along with them. Imagine their disappointment and bewilderment when arriving here to stay being told that for various reasons FHA could not make them a loan. Now they are here, have quit their jobs, sold their homes, and are using their savings for living expense with nowhere to go for help in financing the start of a farming operation. Certain farm units can only be successfully operated with the use of sprinkler irrigation and other units will require this method on a major part of the acreage. Present policy of FHA prohibits loans for sprinkler systems unless the prospective borrower has enough money of his own so that he wouldn't need to borrow anyway. Policy should be revised to permit loans for sprinkler systems when such method is indicated by competent advice available to the settler and, further, FHA should not be allowed to completely veto the determinations of other Federal agencies in setting up criteria for loans. The Bureau of Reclamation, Soil Conservation Service, Extension Service, and others have made exhaustive studies of the proper methods to be used in developing basin lands and their recommendations should not be totally disregarded. In closing, we strongly urge that action be taken at the earliest possible date to correct these injustices and that means be found to enable these veterans to help themselves to success and that any effort made does not end in a flood of words. We have just heard of one boy who has given up the struggle for financing and walked away. Sincerely yours, HAROLD J. EIDEMILLER, Secretary. Senator SCOTT. I am glad to do it. We will be glad to hear from you. Senator JACKSON. The main thing we need now are the reports from the Department just as soon as possible, so the committee can act on it. We do face a crisis. Our people are in bad shape out there, and I think that that view is sustained by your agency, Mr. Williams; isn't that correct? Mr. WILLIAMS. That is correct. Senator JACKSON. Thank you very much. (Whereupon, at 11 a. m., Tuesday, May 9, 1956, the subcommittee adjourned.) |