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Mr. Davis. Oh, I recommend amending section 509 in both nstances, and that applies to both bills. Mr. BARER. Now, evenMr. Davis. It remains the historical parallel which the Congress lways tried to maintain between title 11 loans, and which has been he historically, the Congress has maintained that parallel.
Mr. BARER. Now, under the provisions of title 11, and specifically hose in section 1104 which describes vessels that are qualified to obtain the mortgage guarantee, the Secretary of Commerce can use he discretionary-well
, it isn't a discretionary power; it's a requirement. He exercises his discretion in determining whether or not the project is economically feasible. Mr. Davis. He has to make a determination.
Mr. BARER. If these bills were passed through utilization of section 509, that is not a per se qualification for title 11? Mr. Davis. That's right.
Mr. BARER. In other words, even if the amount of down payment or these vessels we're talking about was reduced to 1272 percent rom 25 percent, the Secretary of Commerce would still have the power to say "no" to any applications that he didn't think was economically justified?
Mr. DAVIS. That's right. That's true.
Senator BARTLETT. Mr. Davis, a report has come to me. I don't want to test its validity—that you originally drafted some language similar to that which appears in 2247; is that correct?
Mr. Davis. Yes. We drafted it in relation to 509; yes.
Senator BARTLETT. And you always have a right to state personal conclusions, distinct from that of the administration. Would I be correct in an inference which I gained early today in that you personally lavor this?
Mr. Davis. Well, I want to preface my remark by saying that my personal opinion is really of no moment. I personally favor it, but that is really beside the point.
Senator BARTLETT. Maybe, maybe not. We think very highly of your opinions, perhaps more highly than those of the Assistant Secretary of the Department of Transportation for Public Affairs.
Mr. Davis. The Assistant Secretary of the Department of Transportation for Public Affairs may have been under some restrictions himself.
Senator BARTLETT. I am confident that was the case. (Laughter.]
When did you first learn the sad news, the tragic news that the Bureau of the Budget was opposed to this?
Mr. Davis. Six-thirty night before last.
Senator BARTLETT. And how long had the Bureau had this under consideration?
Mr. Davis. Well, it had our legislative proposal before them for some time. More than year. They had had our reports on these particular bills since October 5 or 6. I have forgotten which.
Senator BARTLETT. So at 6:30 p.m. on Alaska DayMr. Davis. What day? Senator BARTLETT. Alaska Day, marking the occasion at Sitka, Alaska, when the American flag was raised, the Bureau of the Budget reached a negative conclusion on this after having it under consideration for more than a year.
Mr. Davis. That was our legislative proposal; yes.
Senator BARTLETT. It had nothing to do with the flag raising. [Laughter.]
And you have told us that if we were to move in a position contrary to that recommended by the Bureau of the Budget that experience of the past would offer rather conclusive evidence that no Federal money would be lost?
Mr. Davis. No; no direct appropriations would be lost.
Senator BARTLETT. And you haven't lost anything yet, you say. You have made a profit, direct or indirect.
Mr. Davis. Well, we have yet had title XI ventures that have failed, but overall, we have made a $12 million profit.
Senator BARTLETT. Of course, every business may fail. The Small Business Administration knows this when it makes loans, but you are i talking about the aggregate experience?
Mr. Davis. That is right.
Senator BARTLETT. Now, have hearings been held on this bill for S. 2211 in the House of Representatives? From something you said earlier, I gathered that they had been held.
Mr. Davis. Yes; yesterday.
Senator BARTLETT. Now, I recognize the possibility that Mr. Sweeney, and I am not seeking to cast-principally for the reason you named that he must report what he is directed to report-may not be the greatest expert on maritime matters in the United States, I was baffled, confounded, confused, and perplexed by those words in that paragraph which I quoted from his report to Chairman Magnuson that the future role of ocean-going tug and barge in the movement of bulk ocean freight is uncertain. I personally want to say that anything is uncertain, but if anything seems certain in maritime, it is that the barge has demonstrated the capability which is recognized by many operators, and more and more are turning to the tug and barge operation just as they are turning to containers.
I know in the case of Alaska that a very considerable share of all the freight transported there now goes by tug and barge. This is true elsewhere,
of course. Mr. Davis. Well, it is true that there has been an increase in tug and barge operations, particularly in coastwise, in their coastal trade. I am not aware that there has been an extensive ocean-transoceanic development in tug and barge business, but I am also not prepared to
Senator BARTLETT. Well, that, of course, depends on what you consider to be such. I think we have rather extensive barge operations in Hawaii from the west coast, don't you?
Mr. Davis. Yes, we do, and that is not a short distance. Senator BARTLETT. This is quite a hual over there. It isn't a short distance from Seattle to Whittier or Anchorage, Alaska, or Seward?
Mr. Davis. No, it is not.
Senator BARTLETT. Do you agree with Mr. Sweeney's statement, Secretary Sweeney's statement about the uncertainty of the future of the tug and barge operation as being the reason for denying those who
re in that business, or who seek to go into it, the right to get the 8772 percent mortgage guarantee?
Mr. Davis. Well, I can't question the success of those that exist today. I prefer to answer that way. Senator BARTLETT. Thank you very much. Mr. William N. Muster, please, accompanied by William L. Kohler, egal representative.
The committee will be in recess 2 minutes, while you muster your forces.
(Recess.) Senator BARTLETT. All right, Mr. Muster, the committee will pe happy to hear from you.
Mr. MUSTER. Thank you.
STATEMENT OF WILLIAM N. MUSTER, EXECUTIVE VICE PRES-
, Ohio, with offices in Los Angeles and New York City. Our vessel is the last overnight passenger steamer on the Mississippi, Tennessee, and Ohio Rivers. For 9 months a year the Delta Queen travels the western river system from St. Paul in the North to New Orleans in the South, Pittsburgh in the East and to the gateway to the West at St. Louis. | The riverboat business isn't what it was 77 years ago when hundreds of vessels similar to the Delta Queen plied the same trade route. Nearly all other forms of transportation now are either faster or cheaper than paddle wheel steamboats, but our passengers have discovered that riding on a riverboat can be one of the most satisfying of all vacations.
Take a trip on the Delta Queen, and you see the results of many Federal waterway projects: locks and dams, recreation facilities, bridges, land reclamation and the impressive skylines of our cities. Cities that now realize that the river is their waterfront and not their backyard. A riverboat is a great way to see America.
Thousands of American and foreign visitors have made the Delta Queen a big success in these last 5 years. In fact this year we are about to finish a season sold out to nearly 95 percent of our capacity. A real record for us. In fact a real record for anyone in the travel business.
But despite this recent success, we are still a very small company with only modest financial resources. Therefore, Public Law 89-777, which was passed last year, has caused a serious financial problem within our company. We must build a new riverboat and that requires a great deal of capital.
The new law was enacted partly as a result of the Yarmouth Castle disaster and one of its principal purposes was to improve the standards of ship construction for greater safety of life at sea. We were sympathetic with the desire of Congress to rid the seas of unsafe ships and insure the financial responsibility of the carriers calling at U.S.
ports. But we did not expect the Delta Queen to be put in the same class as deep-draft passenger vessels on the high seas.
We asked Congress for sufficient time to build a new vessel that would meet the safety standards of the present Maritime regulations. We pointed out the necessity for continuity in our business and our spotless record in financial responsibility to our passengers. As a result, the act was amended before passage to allow the Delta Queen to operate until November 1, 1968.
Now after endless hours of planning and hundreds of drawings, our new boat is designed and on paper. Coast Guard approval on design and fire retardant materials is expected soon and construction can begin in a couple of months. But we face a major hurdle of financing the first new overnight passenger vessel that could be built in this country in many years.
Since we were thrown in the same category as deep-draft vessels when the safety legislation was passed, it seems only fair to put us in the deep-draft category when we talk about financing,
The Federal mortgage and loan insurance under title XI of the Merchant Marine Act of 1936 provides that vessels of 3,500 gross tons or more and capable of 14 knots or more shall be eligible to receive 87% percent Federal mortgage insurance. You just can't get a boat that big up the Ohio River. Therefore, we must build a boat which presently is only eligible to receive 75 percent Federal mortgage insurance, unless the law is updated.
Our new boat is estimated to cost $4 million. We don't have the $1 million required for the down payment. If we could get the same insurance privileges as larger passenger vessels, we would only need a down payment of $500,000. This we can do.
The legislation which we favor is designed to cover only passenger vessels of a specific weight and speed suitable for operation on the inland waterways. There is other legislation before this committee which seeks to accomplish something similar to what we propose, but it amends different sections of the act and broadens the scope of coverage. It may be that our objective can properly be accomplished in more than one way.
We hope, however, that the legislation will not be so broad that it raises new problems or controversy that will delay enactment. Our desire is only to remedy the specific problem created for the Delta Queen by the enactment of Public Law 89–777. If there is a delay in getting this bill passed, we will not meet our deadline.
We know now of opposition to this legislation. We can't think of any group that would be adversely affected by it. There is no additional cost to the Government. This legislation would only authorize the Secretary to improve our financial stability by guaranteeing a larger mortgage. The funds will be arranged for privately,
In fact, in our opinion, enactment of this legislation will have an important positive effect on the long-range economics of our river system. One boat can only begin to realize the potential of the public's demand to see and travel the rivers.
In Europe, for example, on the Rhine River system, which is much smaller than ours, there are hundreds of river boats profitably engaged in transporting passengers from one city to another. In fact, one company, the Koln Dusseldorfer Rhinedampschiffhardt Geschellshaft has 26 passenger vessels plying the Rhine. The legislation we advocate
fill encourage and make possible similar expansion of river travel in be United States. We appreciate this committee's cooperation in setting this hearing o promptly. We know you understand the urgency of our project. e hope you will approve a simple, separate bill that can come to a bor vote without delay.
Senator BARTLETT. Thank you, Mr. Muster. Let me start out by saying that if I were entirely opposed to your ase, your remarkable ability in pronouncing that German name rould cause me to lean the other way. That is one of the best demontrations that has been made before this committee in years. Laughter.]
If S. 2211 should be enacted in its present form, utilizing an amendaent to section 509 of the Merchant Marine Act of 1936, would you eek an 8772-percent mortgage guarantee under title XI or construcion aid directly under section 509?
Mr. MUSTER. I am a little confused as to the numbers of the secions, but our only desire is to get the mortgage insurance as such. We re not applying for the old loan arrangement which was set up on the pooks.
Senator BARTLETT. Now, you said here, Mr. Muster, that "We know of no opposition to this legislation." Since you arrived here this morning, you have learned otherwise?
Mr. MUSTER. That is right. May I submit, Mr. Chairman, that the statement by the representative of the Budget Department took me by quite a bit of surprise, but it provided the basis for an interesting fact which you might like to hear. Based on what he said, in 25 years our payment of insurance premium on this one boat could contribute spproximately $200,000 to the already realized $12 million profit that has been accrued under the past operation of the ship mortgage insurance. We would be very happy to make that contribution to the Government's profit. Senator BARTLETT. To the general welfare. Mr. MUSTER. Right.
Senator BARTLETT. In the event you do not get the legislative reief you seek in this session of Congress, or even if you do get it, and, for example, the shortage of steel might prohibit your beginning construction earlier next year so that you could get delivery of a new vessel for the 1969 season, what will you do?
Mr. MUSTER. I think very likely we would be seriously crippled in our operation because we depend upon the year-to-year continuity of advertising promotion to get our passengers. I think there is a possibility that such an event could happen, because of steel shortage or because of work delays. The deadline which the Government gave us, 2 years, to be completely realistic, is an extremely short deadline tó design and build a boat. And, in our opinion, and in the opinion of several deep-draft operators that we talked to, it is not sufficient time.
Senator BARTLETT. Well, have you talked to the Coast Guard concerning their attitude to an extension of November 1968 deadline?
Mr. MUSTER. Yes, we have; and their answer is that they are not in a position to grant the extension; that it is a matter of law.
Senator BARTLETT. Have you given consideration to suggesting a bill which would have that result?