infusion of $5 billion, as proposed in H.R. 13853, would therefore mean 500,000 construction jobs, and 750,000 additional jobs for our economy.

To make the delivery of those funds more effective, the National League of Cities and the U.S. Conference of Mayors would offer the folllowing suggestions:

In section 709 (c), we recommend that units of general purpose local governments-cities, townships, counties-be designated as eligible for grants, rather than the vague "communities."

All facilities approved for funding should be consistent with applicable regional and local plans.

The bill should give clear direction to HUD that projects should not be restricted on the basis of population or dollar amounts of projects. One of the major problems cities encounter with HUD's water and sewer program is an arbitrary limit on the dollar amounts for each project. This is unrealistic limitation for capital works that have citywide and regional implications.

We thank you for this opportunity to present the views of the National League of Cities and the U.S. Conference of Mayors. The needs are there, and cannot wait to be met if we are to have rational growth and development, for our urban and nonurban areas alike, and if we are to have a clean environment. That is why we are here testifying in support of the "Emergency Community Facilities and Public Investments Act of 1972." If there are any questions, we shall be pleased to answer them.

(Mr. Rousakis' prepared statement and a supplemental statement of the National League of Cities and U.S. Conference of Mayors on local revenue effort follows:)

PREPARED STATEMENT OF HON. JOHN ROUSAKIS, MAYOR OF SAVANNAH, GA., ON BEHALF OF THE NATIONAL LEAGUE OF CITIES AND UNITED STATES CONFERENCE OF MAYORS

Mr. Chairman, Members of the Committee, my name is John Rousakis. I am the Mayor of Savannah, Georgia, and am here on behalf of my City, the National League of Cities, and the United States Conference of Mayors. The National League of Cities represents, directly or through its affiliated state municipal leagues, approximately 15,000 incorporated municipalities in the nation. The United States Conference of Mayors is the agency of elected chief executives of the nation's major cities; it is composed of the mayors of all cities over 30,000, of which 750 are now eligible, most of whom are members. We appreciate this opportunity to testify in support of H.R. 13853, the "Emergency Community Facilities and Public Investment Act of 1972".

H.R. 13853 would amend Title VII of the Housing and Urban Development Act of 1965 to authorize the Secretary of HUD to make up to 100% grants to eligible communities for the construction of basic public facilities. Five billion dollars would be authorized for such grants. These grants would be funded on a contractual authority basis, a major and welcome feature. Contract authority would provide cities with a more secure flow of funds than can be expected under annual appropriations and is necessary for the extended time involved in planning, financing and funding the major capital projects eligible under this bill.

This is a necessary bill, because it would give cities a means for influencing urban growth. In the absence of a national growth policy, despite Title VII of the Housing Act of 1970, cities must themselves step into the vacuum and use the tools available to shape their development. The prime determinants for growth patterns today are the location and quantity of sewer lines and waste treatment facilities. Without them, cities would stagnate. Uncontrolled, (and by that we mean inadequate or sporadic funding) the pattern of sprawl and nonrational growth will be perpetuated. An adequate and certain flow of funds as proposed in H.R. 13853 will give cities the means to influence-if not control— these key factors for urban growth.

To say that the nation's cities need the $5 billion is to state the obvious, but we do and we hope for favorable action on this bill.

The municipal needs, in the types of projects eligible for funding, are well documented. In the area of water pollution control and treatment, the National League of Cities and the U.S. Conference of Mayors conducted a survey of the waste treatment facility needs of 1,105 cities. Based on that survey, we projected a total need for sewage treatment facilities, over the five year period of 1971 to 1976, to be $33-$37 billion.

Our responses were broken down into:

Primary and secondary treatment_

Tertiary treatment_

Interceptor and storm sewer improvement_

$9, 311, 987, 574

4, 100, 386, 533 8, 368, 738, 149

Our survey received responses that further broke down the third category, interceptor and storm sewer improvement, into various program categories. Identified needs for interceptors and treatment programs for storm water flows totalled $1,826,877,000, of which $542,377,000 was for interceptor needs, and $1,284,500,000 was for storm overflows treatment programs. For separation and improvement of storm sewer systems, identified needs totalled $1,772,125,000. The Bureau of Hygiene of HEW found, in a 1969 survey, that 900,000 persons were drinking potentially dangerous water, and 2 million persons were drinking inferior water safe, but with bad appearances, odor, or taste. This study covered only 9 regions of the country, with a total population of 18.2 million. In addition, 56% of the 969 water systems were physically deficient in some respect.

Similarly, the need for sewer facilities is also well documented. The Department of Commerce estimates that there are now 53 million people, about 26% of our population, that are not served by adequate sewer lines. The Environmental Protection Agency has estimated, based on somewhat older figures, that 43 million Americans are not served by any sewer lines.

The backlog in applications to HUD has been variously estimated to be between three and four billion dollars. The actual demand is undoubtedly much higher if these applications are included from communities which would have filed had the pipeline not been so backed up already.

Another quantifiable national need is for jobs. The April "Area Trends in Employment and Unemployment" published by the Department of Labor has almost 900 labor market areas experiencing substantial or persistent unemployment. As our table shows, the unemployment situation in the construction industry is even bleaker:

UNEMPLOYMENT IN THE CONSTRUCTION INDUSTRY-SEASONALLY ADJUSTED (IN PERCENTAGES)

We might suggest that these unemployed construction workers would like to see more money going into construction of needed public facilities. Also the unemployed scientists and engineers, and the people coming home from Vietnam or coming out of high school or college, or sitting around in our nation's cities, would like to get jobs building or working at these facilities.

It is an accepted rule of thumb that an expenditure of $1 million for public facilities produces 100 onsite and offsite construction jobs, and 150 jobs in consumer industries, wholesale and retail trades. An infusion of $5 billion, as proposed in H.R. 13853, would therefore mean 500,000 construction jobs, and 750,000 additional jobs for our economy.

To make the delivery of those funds more effective, the National League of Cities and the U.S. Conference of Mayors would offer the following suggestions: In Section 709 (c), we recommend that units of general purpose local governments-cities, townships, counties-be designated as eligible for grants, rather than the vague "communities";

All facilities approved for funding should be consistent with applicable regional and local plans;

The bill should give clear direction to HUD that projects should not be restricted on the basis of population or dollar amounts of projects. One of

the major problems cities encounter with HUD's water and sewer program is an arbitrary limit on the dollar amounts for each project. This is unrealistic limitation for capital works that have city-wide and regional implications. We thank you for this opportunity to present the views of the National League of Cities and the U.S. Conference of Mayors. The needs are there, and cannot wait to be met if we are to have rational growth and development, for our urban and nonurban areas alike, and if we are to have a clean environment. That is why we are here testifying in support of the "Emergency Community Facilities and Public Investments Act of 1972." If there are any questions, we shall be pleased to answer

them.

SUPPLEMENTAL STATEMENT OF NATIONAL LEAGUE OF CITIES AND U.S.
CONFERENCE OF MAYORS ON LOCAL REVENUE EFFORT

I realize this is a time of unprecedented demands on the federal budget. Any one of our nation's domestic needs deserve high priority. We could spend all the money available just for any one-and that could take the entire resources of this country. We can't do that, and we know it.

The nation's cities are not here asking for more federal dollars because we're unwilling to raise them at home. Cities are facing a total revenue gap estimated at $262 billion between 1966 and 1975. Cities will raise $25 billion in increased city charges, and $63 billion in net city debt. But $125 billion must come from the Federal Government.

The National League of Cities ordered TEMPO, General Electric's Company's Center for Advanced Studies to develop an objective economic study of the revenue gap facing cities. The TEMPO Report issued in January, 1967 found that the nation's cities face a staggering $262 billion revenue gap-$125 billion of which can only be closed by the federal government-over the ten year period 1966-1975. The projections were done based upon dates developed by the Joint Economic Committee (See Table I below).

TABLE 1.-ESTIMATED ANNUAL REVENUE GAPS AND RECOMMENDED FUNDING SOURCES FOR THE 1966-75

State and local taxes have risen from 5.6% of GNP in 1950, to 7.2% in 1960, to 8.5% in 1968-1969. Since 1963, a total of 113 cities which levy specific charges to support refuse collection have increased their total charge by an average of 59%. A total of 218 cities levy charges for sanitary sewer service, and 154 of these have increased charges by an average of 77% during the same period.

Since cities are creatures of their states, with mandated costs and services, but also with state-imposed limitations on the type and amount of taxes that may be raised, many cities have responded to this revenue gap by reducing city expenditures and capital improvements. The 1972 Municipal Yearbook reports that 70 cities out of 193 specifically reduced to lack of funds and 4% to bonding problems.

But, generally speaking, cities cannot either legally or practically raise their taxes. The major tax source for most cities is the property tax. However, most cities have a maximum limit for property taxation imposed by state law or con

stitutions and most cities are at their limit. Other cities which are not at their limit find increasing property taxes is practically impossible. These cities usually have independent school districts who have also utilized the property tax as the major source of education revenues. As education costs soared over the last few decades, property taxes for education increased significantly. The property taxpayer is caught in the squeeze. He does not discriminate between property taxes paid for city services or education. He only knows that his property taxes are exorbitantly high. Today's "taxpayer revolt" is largely due to the substantial increases in the property tax by independent school districts. Consequently, cities are "boxed-in" both legally and practically from levying higher property

taxes.

Because of the limited revenues that cities can derive from the property tax, they have over the last few decades, increasingly turned to the sales tax. Invariably, for the cities to obtain sales taxing power, they have had to seek legislative authority from their state governments. At the same time, states have claimed the sales tax as a major source of revenue. Thus, cities find it almost impossible to gain further authority to increase sales taxes, when the states are looking towards the same form of taxing power for their own needs.

Since cities are limited in sales and property taxing powers, they have increasingly turned to service charges as a form of revenue. The service charge is a fee charged to the "consumer" for a service rendered. But service charges have not come close to solving the urban fiscal crisis.

Some of the more hard-pressed cities have secured the income taxing power from their state legislatures. But even where the power has been granted it is severely limited by the state legislatures. In all other cases, cities are prohibited from levying income taxes without state legislation or constitutional amendment. The only exception is Ohio, where cities have utilized the income taxing power under a home rule provision in the state constitution. (In Ohio, revenues of cities levying the income tax almost equal the amount received from property taxes.) But, even in Ohio where this constitutional authority exists, the state legislature has put a ceiling on the amount of taxes cities can impose.

Except for the income tax-property tax, sales tax and service charges are highly regressive in nature. To increase these taxes means that the poor and the middle income citizens are paying proportionally more than the rich. Nevertheless, the demand for public services in the cities continues to grow. Without general revenue sharing, cities will be forced, one way or another, to increase such regressive taxes.

Besides being regressive, local taxes do not grow with the economy. While the national government can count on automatic higher revenue yields generated by economic growth to accommodate most growing needs, almost every year state and local policy makers are forced to take the politically risky course in imposing new taxes and raising the rates of existing taxes to meet the rising expenditure requirement of an urbanized society. In 1960, 19 states were imposing both general sales and personal income tax. Ten years later, the number had climbed to 33. Over this same time period, the growth in sales and local taxes collection outpaced national economic growth. State and local taxes rose from the equivalent of 7.2% to gross national product in 1960 to 8.5% of gross national product at the close of the decade. A study by the Advisory Commission on Intergovernmental Relations revealed that between 1950 and 1967 only 47% of the increase in major state taxes-income, and general and selective tax-were the result of economic growth while 53% resulted from legislative enactment.

The CHAIRMAN. Well, thank you, sir. We will first have the other witnesses testify and if you want to make your statements briefer than the text you have prepared it will be satisfactory, with the understanding that each one will be allowed to place his entire text into the record and also to extend your remarks when you pass on your transcript.

The committee has had hearings on this subject over a 10-year period. Every year we have had testimony along this line. So we are not without testimony at all. But we would like for you gentlemen to bring us up to date. That is the object of this hearing. Now it is possible that we will get through these hearings today. If we do we will have a vote on it tomorrow. So after each one has testified then we will yield

to each member of the committee who will be allowed to ask questions of you gentlemen.

So the next witness will be Mr. R. J. Alexander, director of public works, Oakland County, Michigan.

Mr. Alexander, we are glad to have you, sir, and you may proceed

your own way.

STATEMENT OF R. J. ALEXANDER, DIRECTOR OF PUBLIC WORKS, OAKLAND COUNTY, MICH., ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES; ACCOMPANIED BY JOHN C. MURPHY, LEGISLATIVE REPRESENTATIVE, NATIONAL ASSOCIATION OF COUNTIES

Mr. ALEXANDER. Thank you, Mr. Chairman and members of the committee.

My name is R. J. Alexander, and I am the director of public works of Oakland County, Michigan. I also serve as the chairman of the Planning Advisory Council of the Southeastern Michigan Council of Governments (SEMCOG). I am a former mayor of Oak Park, Mich., an office in which I served for 9 years. It is a great honor to testify before this distinguished committee today on behalf of the National Association of Counties. Accompanying me is John C. Murphy, legislative representative for the National Association of Counties.

The National Association of Counties represents nearly 900 county governments which together comprise approximately 70 percent of the Nation's population. NACo's legislative policies are developed by seven policy steering committees, each steering committee being composed of 45 elected and appointed county officials. The recommendations of the steering committees have to be approved by our 70-member board of directors, and the delegates attending NACo's annual meetings before they become official policies of the National Association of Counties. The point is to indicate the broad base of support for our policy statements.

Counties are taking on an increasing number of municipal responsibilities at the local and regional levels. County government activity has expanded into functions and service areas once considered exclusively municipal-parks and recreation, libraries, airports, hospitals, health services and utility systems. County governments are quicklyexpanding their functions into entirely new areas-solid waste management, water and air pollution control, emergency ambulance service, and highway safety. Counties, of course, have always played a large role in our health, welfare, and highway transportation programs. As a result of these added responsibilities, total county employees have increased from 700,000 in 1960 to over 1,200,000 today. The National Association of Counties strongly supports the "emergency Community Facilities and Public Investment Act of 1970" (H.R. 13853). There is no question of the need for greatly increased funding for the HUD water and sewer program. There is more demand for this progra 1 by county and municipal governments in the developing parts of metropolitan areas than for any other HUD program. NACO was indeed disappointed to see the House defeat a recent amendment, offered by Congressman Stephens, to the fiscal year 1972 supplemental appropriations bill appropriating $650 million for the