Mayor CELESTE. Well, no, I do not think I would want to go that far.

Mr. CRAMER. Well, then you would want to go to the position that only if you meet your debt limit the Federal Government should come

in

Mayor CELESTE. Well, I think those communities that do not have a borrowing ability, those communities that cannot get money otherwise, ought to be able to come to the Government.

After all, the Federal and State governments have preempted the best sources of income. In many areas there are communities which cannot support the kind of facilities that are required today on the basis solely that they are

Mr. CRAMER. The Federal Government has not preempted real estate taxes.

Mayor CELESTE. I beg your pardon?

Mr. CRAMER. The Federal Government has not preempted real estate taxes, water taxes, and there are many municipal taxes that the Federal Government has not touched.

But your position then is that in those areas, where they have met the debt limit and do have a debt limit, the Federal Government should be available to provide the money in grant form?

Mayor CELESTE. No, I can't agree with that statement, Mr. Cramer. Mr. Chairman and, I think, members of the committee, I believe that if locally the project needs can be met, if the finances are available at the local level-I do not think that grants ought to be made to communities.

Mr. CRAMER. Well, whether grants are available is a decision of the local people, and you want to take that away from them?

Mayor CELESTE. No, that is not true at all, Mr. Cramer. I do not agree with you.

In many cases in the present programs that you now provide, provide for matching funds, for instance.

In many of these cases the communities cannot obtain the matching funds for the programs that are now in existence.

Mr. CRAMER. Well, I think we are going around robin's barn, but it is quite obvious that people in a local community, by backing their public officials, No. 1, and their budgets, or, No. 2, if it is a revenue project, by voting in a proper election for the revenue program, a bond issue program, such as sewage disposal plants, and in the school systems or school districts with regard to the school bond issue programs and so forth, that those decisions are now made by the people on the local level, and the only result of your proposal, of the Federal Government making grants in those areas, would be the Federal Government to make those decisions rather than the local people.

Mayor CELESTE. Well, Mr. Cramer, Mr. Chairman, and members of the committee, as a matter of fact, the local governments always vote on these matters-I should not say "always," but 99 percent of the time.

Mr. CRAMER. There is nothing to vote on if the Federal Government grants 100 percent of the cost, is there?

Mayor CELESTE. Well, this is not proposed at all. I do not believe, Mr. Chairman, and Mr. Cramer, and members of the committee-I do not believe that this is proposed at all, is it?

Mr. CRAMER. Yes, in one section of the bill it is.

Mr. SCHERER. I have just one question.

Mr. BLATNIK. Mr. Scherer.

Mr. SCHERER. You mentioned in your statement that you are limited by the debt limits of the various States.

That is one of the limitations that prevents you from moving forward with these programs. Is that right?

Mayor CELESTE. This is, in many cases, true; yes, Mr. Scherer.

Mr. SCHERER. Of course, there is nothing to prevent a legislature, if it wants to, or a city council from raising the debt limit.

Mayor CELESTE. Oh, Mr. Scherer, most of the debt limitations in Ohio are statutory.

Mr. SCHERER. That is what I mean. The legislature can change that.

Mayor CELESTE. Oh, yes. By that time the disaster could have been here and gone, though.

I think we have heard this pretty well described earlier by two Governors. I am quite concerned about this problem.

As, for example, the other evening I was in one of the field towns in southern Ohio, not far from Cincinnati, as a matter of fact, and I met an engineer there who said that they were just planning a new addition to a steel mill, which was going to reduce the number of jobs from 1,550 to 175.

Now, I think we have to make plans in advance of this happening, because there are 1,400 people that are going to be out of work in a hurry.

Mr. SCHERER. Well, what efforts has your association made to get the Ohio Legislature to raise the debt limit?

Mayor CELESTE. Well, I think that, perhaps, the Ohio municipal league is one of the best in the country, and I think that they are constantly at work trying to accomplish this.

Mr. SCHERER. You have more difficulty with the Ohio Legislature than you have coming to Congress?

Mayor CELESTE. Mr. Scherer, I would not want to comment on that.

I think it is equally-municipalities are equally anxious with your desire to preserve the public funds.

Mr. SCHERER. I doubt that.

Mr. BLATNIK. There being no further questions, Mayor Celeste, we thank you very much.

This concludes our testimony for today.

The hearings are adjourned for today until 10 o'clock tomorrow morning.

(Whereupon, at 1:29 p.m., the hearing adjourned until 10 a.m., Friday, March 30, 1962.)

STANDBY CAPITAL IMPROVEMENTS ACT OF 1962

FRIDAY, MARCH 30, 1962

HOUSE OF REPRESENTATIVES,
COMMITTEE ON PUBLIC WORKS,

Washington, D.C.

The committee met, pursuant to recess, at 10 a.m., in room 1302, New House Office Building, Hon. Clifford Davis presiding.

Mr. DAVIS. The committee will be in order.

We are meeting for further consideration of H.R. 10113 and a companion bill, H.R. 10317.

I should like to explain that the House is not in session today and we have been pretty hard at it for some weeks; so you will not see too many members on the committee today, but we are building a record, and that is the important thing.

Mr. Dooley will introduce Mr. McGee in just a moment, but when I got Mr. McGee's statement it frightened me. I was afraid he was going to ask to read all of this, which would mean we would be meeting over the weekend and have to start again Monday, but Mr. Dooley made the explanation that much of this will be in the appendix which we, at the proper time, will admit to the record. It may be that Mr. McGee will want to summarize and then make his full statement a part of the record verbatim.

Perhaps you would like to summarize and hit the important or high spots?

Mr. Dooley, will you present Mr. McGee to the committee?

Mr. DOOLEY. Mr. Chairman, it gives me great pleasure to introduce to you this morning a neighbor of mine from New York. He comes to us this morning with the knowledge and experience of one associated with the investment banking field for more than 35 years. In the course of these years his responsibilities brought him into intimate contact with the complexities of municipal financing. In 1933–34 he was finance examiner for the Federal Emergency Administration on Public Works. Again in 1949-51 he left private business to be deputy comptroller of the State of New York, and is presently a partner of R. W. Pressprich & Co.

At this time it gives me great pleasure to present to the committee Mr. Cushman McGee.

Mr. DAVIS. Thank you, Mr. Dooley. That certainly qualifies him as an expert witness.

Mr. McGee, we are delighted to have you take the time out to comedown to this committee to testify, and we recognize you now.

337

STATEMENT OF CUSHMAN MCGEE, CHAIRMAN, MUNICIPAL SECURITIES COMMITTEE, INVESTMENT BANKERS ASSOCIATION OF AMERICA; ACCOMPANIED BY GORDON L. CALVERT, INVESTMENT BANKERS ASSOCIATION, DISTRICT OF COLUMBIA

Mr. MCGEE. Mr. Chairman and members of the committee, it is an honor to be accorded the privilege of appearing before the committee, and I am grateful for the opportunity. I do so as the official representative of the Investment Bankers Association of America, of whose Municipal Securities Committee I am chairman.

Ás Congressman Dooley has said in his generous introduction, I am a resident of the State of New York and I have been an officer of the State at a time in the past, with considerable experience in connection with the flotation of municipal securities from the viewpoint of an investment banker, as well as a public official in the two terms in which I have appeared on public payrolls.

This morning I am accompanied by Mr. Gordan L. Calvert, who is assistant general counsel and municipal director of the Investment Bankers Association of America.

Taking advantage of the privilege you have accorded me, Mr. Chairman, I should like to summarize my statement somewhat extemporaneously, with permission, if I may, to review the record, and I do ask that my statement in full be accorded inclusion in the record, together with its two appendixes.

Mr. DAVIS. Without objection, that is ordered at this point. It will appear in the record in full as you have presented it, as though

read.

Mr. MCGEE. May I briefly identify the Investment Bankers Association of America?

It consists of a voluntary and unincorporated association of which there are some 800 members located throughout the United States and Canada. These are investment banking firms that are engaged in all aspects of underwriting of securities.

Many of the members deal largely, and in some cases exclusively, in the flotation of State and municipal securities. Buying these securities outright for cash and taking the risk of market fluctuations they provide a very definite service in the purchases of these securities from public bodies and in the distribution of them to investors of all types. The association has had occasion during the last 5 years to collect a considerable amount of data regarding the issuance and sale of public securities. I believe the association has more and better statistics on this subject than any other organization in the United States. As a matter of fact, several Federal agencies have had occasion to utilize the data provided by the association from time to time, and the association's publications have been cited by such organizations as the Federal Reserve Board and other agencies.

My statement formally includes a description of the principal points of H.R. 10317 and an earlier bill, H.R. 10113. Of course, for you gentlemen I do not need to summarize those provisions.

I should like to make as my first principal point the thesis that States and local governments are able to secure public facilities through bond sales in very large amounts. As a matter of fact, they have

been doing so in record volume. It is advisable to consider this particular subject as essential background for the consideration of major bills that are before you gentlemen.

The sale of new issues of municipal bonds to provide long-term financing for the construction of public facilities has steadily increased over the past 10 years and reached a record high in 1961. The record for the years 1952 to 1961 is set forth in the small table at the bottom of page 2.

The word "steadily" is used in the sense that there has been a very definite trend upward from the 1952 level, where the total volume was $4.4 billion to a total of $8.3 billion last year, in 1961. There have been fluctuations in the total volume trend, but the trend is really a very strong one, and it shows a very great ability that the States and municipalities have had in raising money from the private market, as distinguished from a Federal agency.

These totals do show fluctuations that are significant, as I will explain later.

The appendixes which are attached to my statement include as the first one, identified as A, a list of the total amount of new issues of State and municipal bonds sold in each State in 1961. The appendix is identified as a preliminary tabulation, and as not yet complete. The total of $8.3 billion is so substantial that it is properly indicative of the immense volume of securities sold during that year.

While I say it is not complete, there are probably very few issues that have not yet been tabulated and included in the total.

Attached as appendix B to this statement is a list of 3,629 new issues of State or municipal bonds sold during the first 6 months of 1961. That is only 6 months rather than the entire year. Appendix B numbers some 70 pages and, frankly, that has been included in order to show you gentlemen how our States and municipalities have been able to go forward in providing public works construction during the first 6 months of 1961 in each of your districts. The names of the issuers of each of these securities are set forth under the titles of each State, and the amounts of the securities, and, where we have a record of the interest cost at which those securities were issued, that is also included in the record.

Were we to have provided the entire year, I venture to say that the appendix would have numbered some 140 pages. Frankly, we are not yet in a position to give you the details on the last month of the year, and that is one reason why perhaps we were not burdening you with the additional volume of documentation. However, the first 6 months of 1961 is a fair representation of the wide scope of this particular volume.

The trend in the issuance of bonds continued this year, and in the first 2 months of 1962 the volume was a record $1.9 billion.

For many years advocates of various programs of Federal financial assistance to States and municipalities have alleged that local governments were not longer able to finance needed facilities because of inadequate revenues, or statutory, or constitutional debt restrictions: but the record clearly demonstrates that States and local governments can and are continuing to finance increasing programs of construction of public facilities.