Mr. ALEXANDER. The collection

Mr. BROWN. You say that language does not cover what you are talking about?

Mr. ALEXANDER. Doesn't cover, and I am sure it is not intended to cover collection sewers as we interpret the lateral system in terms of serving the home. It could be outfalls, interceptors and collectors, and we have gone into this hassle as to what is an interceptor, what is a collector, many times.

Mr. BROWN. But the cost of connecting to the systems is by and large the developers' and builders' obligation and ultimately the homeowners' obligation, isn't it?

Mr. ALEXANDER. In new subdivisions and new homes, yes, but not in existing homes. And I think this is where our problem is.

Mr. BROWN. And I understand that it is your testimony, Mr. Alexander, that you would be able to put to good use-I know Michigan is one of those States that has lots of need; but do you think you would be able to put it to use immediately?

Mr. ALEXANDER. Very definitely.

Mr. BROWN. You disagree then with the Environmental Protection Agency in its testimony to the committee on H.R. 11896 when it said:

The waste treatment construction industry does not presently have the capacity nor do we believe it can expand rapidly enough to provide for the construction of larger funding demands.

Mr. ALEXANDER. Let me reiterate somewhat what someone mentioned here earlier, the lack of a sufficient number of contractors or engineers for design. We have taken bids just in the last couple of months; we have taken bids on a $12 million system; we have taken them on another $4 million and some-odd thousands, and each time we have had 36 contractors bidding. That indicates that we do not have enough contractors around-I do not know what

The CHAIRMAN. The time of the gentleman has expired.

Without objection, we will stand in recess until 2 o'clock this afternoon.

In the meantime, there is a film going to be shown. I am sure it will be of great interest, and any of you desiring to remain will be privileged to do so; and you may go ahead.

(Whereupon, at 12 noon, a recess was taken until 2 p.m., this same

day.)

AFTERNOON SESSION

The CHAIRMAN. The committee will come to order.

The committee was listening to the members of the committee asking questions when we recessed until 2 o'clock, and we were down to Mr. Cotter, I think, on the questioning.

And, Mr. Cotter, you may proceed.

Mr. COTTER. Thank you, Mr. Chairman.

I would like to direct this question to Mr. Wilcox.

Mr. Wilcox, where I come from, in Connecticut, many of the communities are supplied with water through private water companies. I do not know that this situation prevails in Pennsylvania. Does it?

Mr. WILCOX. Yes. According to the data we have, we have 348 private companies listed in Pennsylvania.

Mr. COTTER. What percentage of your State would they be supplying?

Do you have any idea at all?

Mr. WILCOX. Well, I do not know what percentage of the population. That would be 348 out of 854. That is somewhere roughly around 27 percent.

Mr. COTTER. Yes. But they could probably only be supplying 10 percent of the water?

Mr. WILCOX. Yes.

Mr. COTTER. The water used in the State?

Mr. WILCOX. The city of Philadelphia has its own water supply, and there is a substantial portion of the Pennsylvania population

Mr. COTTER. Why I raise this question is: According to the bill the grants could only go to communities and counties and towns and cities, and I was just thinking of what the situation would be as to a town that got its water from a private water company, and sometimes it is difficult to take these private water companies out of being; they get their authority from the legislature, as I understand it, and a town finds difficulty in putting in a water system. Have you any thoughts on that?

Mr. WILCOX. Many of the private water companies in Pennsylvania are very poorly operated. I do not think that there is the problem of municipal acquisition in Pennsylvania that you may have in Connecticut.

I once worked for the Connecticut Public Expenditure Council, and I know that a good many corporations were historically and privately chartered by the general assembly, and I think your situation might well be more difficult than the Pennsylvania situation.

Mr. ČOTTER. It can't very well, under the terms of this bill, give a private water company any grants or funds to provide a system, and it is virtually impossible, without paying an outrageous figure, to buy the right of the private water company.

Mr. WILCOX. At least the immediate reaction is to feel that the grant should not go to a private water company.

Mr. COTTER. I concur with that as well.

Mr. WILCOX. Mr. Rosso suggests that there would be the possibility of the types of loans that were in the past available but that I think would apply to nonprofit groups rather than to commercial water companies.

Mr. COTTER. Thank you. That is all.

The CHAIRMAN. Mr. Williams.

Mr. WILLIAMS. Thank you, Mr. Chairman, and I must apologize to the witnesses for leaving this morning in the middle of the hearing. I had 140 constituents arrive in three busloads; so, that was the reason for my absence.

I have listened to some of the testimony this morning, and I have read some of the testimony last night.

Am I not correct in assuming that the counties and the municipalities are operating these sanitary sewage facilities or the water-treatment facilities, charging a user service charge?

Mr. WILCOX. Yes, I think that is correct.

Mr. WILLIAMS. So that actually any bond issue that a municipality would have to float could be amortized by taking a part of that user's fee and applying it against the bond issue?

Mr. WILCOX. Yes.

Mr. MURPHY, I think it all depends on the rate of interest you are generally talking about on revenue bonds, the revenue derived from the user charge, if that would be enough to offset the generally higher interest rate that you would receive on a revenue bond.

Many of our countries are finding that they have had to go to general obligation bonds as opposed to the revenue bonds, simply because the interest rates were just inordinately high on the revenue bonds. That is a problem they are faced with.

Mr. WILLIAMS. That would be based on your experience. In other words, if you had a municipality where the experience was poorin other words, they were not charging a high enough fee, or they were not managing their operations efficiently, they would have a poor experience, and, therefore, any bonds that would be floated by that municipality would carry a high interest rate.

That leads me into my next question: The Federal Government today is having difficulty in borrowing money. We have a limit on long-term borrowing by the Federal Government. I think it is 4% percent; it was raised from 4%, and, of course, most of our borrowing is being done on a short-term basis at interest rates around 7 percent. Now, of course, when the Federal Government floats bonds or issues paper, the interest that is paid to those poeple lending the money or buying the bond is taxable.

Now, it is true that in all of our States, when a municipality or a county floats a bond, the interest on those bonds is nontaxable? Mr. MURPHY. Yes, that is correct.

Mr. WILLIAMS. So that actually what you are saying to us and what this bill says is that the Federal Government is going to borrow the money, give it to the municipality, the county or to the State, and, then, we are going to charge our taxpayers more money for the money we have had to borrow to give to you because we have to borrow on bonds where the interest is taxable, whereas your municipality and county and State bonds are tax exempt; and this means anything up to 11⁄2 to 2 percent difference in the interest rate that is paid.

Mr. WILCOX. Mr. Williams, I think the analogy is fine, given the premise, or the analogy as you described it is sound, given the premise. The only difference is that an awful lot of communities simply do not have the resources to borrow, beg, or steal the money.

I think the Darby Borough may be in your district.

The Darby Borough does not have a water problem. If the Darby Borough had a water problem, it wouldn't be able to get the funds on any basis except on a grant basis, to meet the problem, because the tax base is not there. The point that I tried to make this morning is that there are just hundreds-and I will almost go so far to say as many as a thousand-communities in Pennsylvania that simply do not have the local tax base to borrow money tax-exempt or otherwise, and we need this kind of 100-percent grant program to meet the environmental program and the sewer and water problems of those kinds of communities.

Mr. WILLIAMS. Let me use the analogy that you used about Darby Borough.

You said Darby Borough has no sanitary problems or sewage problems?

Mr. WILCOX. I did not say that.

Mr. WILLIAMS. You are right, if you did say it, for the reason that the Darby Borough is part of the Darby Creek Joint Authority

consisting, I believe, of 13 municipalities, and the credit of that authority is excellent. So that, if those same 13 municipalities decided to get together and form an authority for supplying water to their residents of those 13 communities, there, again, because they are in with 12 other municipalities, the rate of interest at which they could float the bonds is substantially less than the interest that would have to be paid by the city of Philadelphia.

I will go just one step further. I think you are aware, Mr. Wilcox, of the fact that Delaware County and Philadelphia are probably going to float a joint bond issue in order to upgrade and expand the Philadelphia Southwest Sewage Treatment Plant. Then, I am confident that the interest rate will be far lower than anything that the Federal Government will have to pay.

Mr. WILCOX. Well, again, the only point I was making—and, perhaps, it was unwise to use Darby Borough as an example, because it does have adequate services in these particular respects.

There are just communities all over Pennsylvania, combined as they might with neighboring communities-and Indiana County happens to be a county we know a little bit about because of the hearings we had, and there are communities called Climer and Black Lick, and you could combine 100 poverty communities, and they would not have a better base on which to borrow money than if they did it singly.

The cold-blooded, realistic fact of the matter is that many, many Pennsylvania communities are in critical financial difficulty, and unless there is some program such as the one proposed in this bill for 100 percent funding, we can talk about non-interest-bearing bonds, or interest-bearing bonds or partial grants or any other scheme and it is not going to work because the financial base is not there in the local community. The people are poverty people; many of them are on public assistance.

By the way, I point out that if we could get a program like this going we might get some of those people off of public assistance, so it would not be all cost to the Federal Government because it would be offset in a number of ways. Some of the people on public assistance could be put to work.

There are various economic spinoffs to the general economy from any effort of this sort, and there is not any other choice but virtually the 100 percent grant program to deal with the water and sewer problems of vast areas of Pennsylvania.

Mr. WILLIAMS. With the indulgence of the chairman, what is the population of Indiana County?

Mr. WILCOX. I just do not know offhand.

Mr. WILLIAMS. I think it is one of the smaller counties of Pennsylvania.

Let me say this to you: Under the EPA $18 billion authorized, 50 percent or more of the cost of construction of sewage treatment facilities and other types of facilities can be gotten as a

grant.

Now, your user fees could pay for the local share and at the same time you would be getting precisely the same spinoff effects, beneficial effects, as you would from a program where the Federal Government is already paying $27 billion a year in interest on the money we owe and would not be putting up everything.

Mr. WILCOX. The community simply does not have the funds to match. The $18 billion is fine, but, as I understand it, Mr. Williams, it requires in every case a certain amount of local matching, and all I can do is repeat myself: The money is there for the matching, and the local money is not there in many cases.

Mr. WILLIAMS. I would like to say one other thing, Mr. Chairman: One thing that bothers me about bureaucracy, whether it be at the Federal level or the State level, or even perhaps the county level, is the length of time it takes to get things done.

Regardless of the way this bill goes, up or down, we are all solidly in back of creating more jobs, we are all solidly in back of cleaning up the environment, and I would hope we could eliminate much of the delay, not only the delay we experience at the local level and the Federal level but also at the State level.

That concludes my questioning.

The CHAIRMAN. Mr. Mitchell?

Mr. MITCHELL. I will be very brief, gentlemen.

For almost 2 years, the Department of Housing and Urban Development withheld funds from Baltimore County in Marylandfunds for sewers and other purposes, because Baltimore County had apparently resisted all efforts to permit the entree of blacks into the area, and because Baltimore County had apparently resisted all efforts to permit low-cost housing for the poor to be constructed in the county.

I take the position that Federal dollars should not be used under any circumstances to subsidize any political subdivision which acts contra to existing law, civil rights legislation, in housing, employment, and so forth.

Within that context, I would like to see some provisio in this legislation which would prevent the subsidizing of any political subdivision, which overtly or covertly follows a practice of apartheid in housing or in employment.

Unfortunately, HUD, if today's papers are accurate, has now knuckled under to political pressure or political expediency and has released some of the funds to Baltimore County.

More specifically, I want to address this question to all of the witnesses:

No. 1, what is your position on Federal dollars being used to help those political subdivisions which resist integration or equal access in housing?

No. 2, what would your feeling be about a proviso being written into this legislation?

Mr. WILCOX. Mr. Mitchell, I would be happy to lead off.

We would favor such a proviso in the legislation, and we believe both Federal and State funds should be denied to communities-and I do not see it in quite the same perspective as you do. I think it goes in many ways beyond the simple matter of racial exclusion. I think it is exclusion of all people, of all economic levels except the rich and the near-rich, and I think it includes young people and old people as well as black families.

We are specifically, in the case of one Federal Government program, the Bureau of Outdoor Recreation's program that goes through my Department, as well as the State-funded program for a recreation match which matched that Bureau of Outdoor Recreation money. denying funds which engage in exclusionary zoning, and we held up