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back in our country would have a value of about $2,000, whereas on this basis-I am not including that because I only wish we had the benefits of it in New Jersey, to get heat for $5 a month on a $7,500 house.
Mr. MATCHETT. These costs here are for direct labor and direct material as of June 30, 1934.
Chairman DONAHEY. The committee will recess until 1:30.
Mr. BIDDLF. Could you make it 1 o'clock? We are a little behind in our schedule.
Chairman DonahEY. Without objection, 1 o'clock.
(Whereupon, at 12 o'clock noon, the hearing was recessed until 1 p. m.)
AFTERNOON SESSION, THURSDAY, DECEMBER 1, 1938 (The hearing was resumed at 1 p. m.) Chairman DONAHEY. We will proceed.
Mr. BIDDLE. Colonel Parker, the chief engineer of the T. V. A. wants to say a word to the committee, with respect to when he thinks they want to hear him. Will you stand up here, Mr. Parker?
Chairman DONAHEY. Colonel Parker desires to make a short statement to the committee.
Colonel PARKER. I wanted to inquire when the committee will be able to hear us. We have a number of our principal men up here waiting to appear before the committee, and it is rather detrimental to our work to be here any longer necessary, and we are very anxious and willing to give you whatever information we can, but we would just like to know.
Chairman DONAHEY. You were subpenaed for Monday?
Chairman DONAHEY. I would like to hear from the committee. Any information that we can possibly give this witness who has been here since Monday.
Have you anything to say, Mr. Biddle?
Mr. BIDDLE. No, I don't think-Colonel Parker will be the next witness after this one, and we have, as Dr. Morgan is coming from Yellow Springs on Saturday, I think it is fair that we should devote Saturday morning entirely to Arthur Morgan, as we agreed.
Chairman DONAHEY. Can you tell about when you can finish with this witness?
Representative WOLVERTON. I indicated, Mr. Chairman, when the committee adjourned, I mentioned the fact that I had reached page 365 in the report, and that there were but few items remaining and a few pages that remained of the report, so that that would not take very long, but the more important matter that they indicated, to come to the attention of the committee, that was with reference to the figures that appear in the report of the General Accounting Office, purporting to have been taken from the books of the T. V. A., with reference to the financial transactions, I want to bring to the attention of the committee the reports made by T. V. A. to Congress, and show the conflicting statements and items and amounts, many of which I think are important. I had only picked out
Chairman DONAHEY. Do you know how much time would be consumed?
Representative WOLVERTON. I wouldn't think that the whole thing ought to take very much over an hour.
Chairman DonaHEY. Could we conclude, you think, this afternoon, all of the questions that you want to ask?
Representative WOLVERTON. Absolutely.
Chairman DONAHEY. Would any other members want any additional time with this witness?
Representative WOLVERTON. It may be that some of these matters that I have been inquiring into would be of interest to some of the members of the committee, and they would want to make inquiry, but I am speaking of the time necessary for me to get the major facts before the committee.
Chairman DONAHEY. You will be through with this witness by this evening?
Representative WOLVERTON. Absolutely.
Senator Schwartz. I understand that you will try to get through in an hour.
Representative WOLVERTON. I will hope so. Chairman DONAHEY. You may know that you will be the next witness just as soon as he concludes with this witness; is that satisfactory?
Colonel PARKER. Yes.
Chairman DONAHEY. There are three or four witnesses here that can't be heard, except one tomorrow; the rest of them might go home until next week.
Mr. BIDDLE. That is true. I will confer a little later with them. Chairman DONAHEY. You may proceed with the witness.
TESTIMONY OF STUART B. TULLOSSResumed, WITH TESTI.
MONY OF WILLIAM A. OWEN AND FRANCIS T. MATCHETT
Representative WOLVERTON. When the adjournment was called at 12 o'clock, we were discussing the rents charged for properties by the T. V. A., which seemed to be a basis of criticism in your report, on page 360.
Did I understand that the five cases related on that page, which I have referred to, are illustrative of the general rental situation with respect to properties owned by the T. V. A.?
Mr. MATCHETT. That is true.
Representative WOLVERTON. In the years that have succeeded the making of that report, has there been any adjustment of that criticism by the T. V. A., using other rentals?
Mr. MATCHETT. In a number of cases the monthly rentals have been changed, but not in any large amount, nor in proportion to the cost.
Representative WOLVERTON. Does that apply to Norristown, or Norris Village?
Mr. MATCHETT. It does.
Representative WOLVERTON. Is there any additional tax placed upon the residents of Norris who enjoy this low rate of rent with
respect to cost of school facilities, or is that provided free of charge, and as a part of their service as residents in that community?
Mr. MATCHETT. The children of residents are entitled to free schooling.
Representative WOLVERTON. Has any computation ever been made by the General Accounting Office as to how much is apparently lost by the T. V. A. in its failure to charge what would seem to be a more proper rent on the basis of the value of the properties?
Mr. MATCHETT. I don't know offhand of any case where we have computed the loss, but we have stated that the rentals charged would not cover the cost of maintenance and operation.
Representative WOLVERTON. Well, of course, you have only used five instances here, which well illustrates the point, but it doesn't give the committee a picture as to how_serious may be the situation when it is applied to the entire field of T. V. A.
Mr. MATCHETT. At the time this report was prepared the cost of the houses at Norris was not known; they were under construction and at such a point the cost would be meaningless. At this point, the houses at Wheeler were almost in the same fix, but in subsequent reports I am sure that you will find that there will be some comment.
Representative WOLVERTON. Am I to take from that, that these costs which are placed on page 365 with respect to these five properties have increased since that time?
Mr. MATCHETT. They have, considerably.
Mr. Tulloss. So that under those circumstances, if the rent hasn't increased proportionately, the situation has grown worse instead of better.
Mr. MATCHETT. That is true.
Representative WOLVERTON. Do you have in your files the information that would enable the committee to have a complete picture of the rents that are charged for the properties of the T. V. A.?
Mr. MATCHETT. I think that we do.
Representative WOLVERTON. I, for one, and I can only speak for myself, would be glad indeed if that could be made available to us without in any way curtailing your efforts to get to us a report of 1935, 1936, 1937, and 1938.
By whom are these properties occupied—by employees entirely, or are they also open to the general public?
Mr. Matchett. You are speaking of this time or the present date?
Representative WOLVERTON. At the present time; that is the situation that we have to deal with.
Mr. Owen. Norris Dam is now complete, and the number of employees has been reduced at Norristown, so that they rent to outsiders as well as T. V. A. employees. Some of the renters live in Knoxville and work for the T. V. A., but they are outside people renting the houses.
Representative WOLVERTON. Do you know what proportion are employees?
Mr. Owen. No, I don't think that we made an investigation of the proportion further than that they stated, and we could tell by the accounts receivable at the store that some of them were outsiders.
Representative WOLVERTON. Would one-fourth be a fair estimate? Mr. OWEN. I think that one-fourth would be pretty close.
Representative WOLVERTON. So that one-fourth, if that is the correct proportion, of these properties owned by T. V. A. are being rented at what seems a subnormal rent to persons who are not in the employ of the T. V. A.
Mr. OWEN. Yes. Representative WOLVERTON. Are there any other services besides school that are supplied to those who rent these properties?
Mr. OWEN. Well, they have a community center, which consists of a gathering place, and I don't know, the usual cooperative stores, and the motion pictures, at Norristown, which is in the community.
Representative WOLVERTON. When you make reference to pictures, I don't suppose that they supply them as a means of entertainment, without cost?
Mr. OWEN. They charge for the pictures.
Representative WOLVERTON. That wouldn't be a service that would be rendered as a part of the rental?
Mr. OWEN. No, sir.
MANAGEMENT OF STORES AND OTHER SERVICES AT NORRIS
Representative WOLVERTON. With respect to the stores, are they all on a cooperative basis?
Mr. Owen. The grocery store and the service station were sold to cooperatives.
Representative Wolverton. Who holds the stock in the cooperatives?
Mr. OWEN. The cooperative is operated for the benefit of the purchasers of the material and supplies, and so on, that is sold. They pay market prices for what is sold and at the end of the year, when an accounting is made, the reduction representing a profit is redistributed back to the purchasers. There is stock sold.
Representative WOLVERTON. If there is any profit it goes to the benefit of those who have patronized the store?
Mr. OWEN. Yes.
Representative WOLVERTON. Suppose that there is a loss, who assumes it?
Mr. OWEN. Well, I don't know just how that is handled because those activities that were sold were first on a paying basis, as I understand, and are operating at a profit. Of course, this stock that was sold, there was some cash fund left there, but I don't know just how they handle a loss; I suppose in proportion to the earnings; if they earned proportionately they would take out of the amount they collected for stock proportionate for the loss.
Representative WOLVERTON. I don't think it is a theoretical question that I am asking with reference to that for this reason: That when we were in Knoxville, there was a T. V. A. witness before us-I think he was connected with the Budget Department-who presented a budget and it showed on the page I turned to at that particular time, by accident, that they expected a loss to occur in the commissary and also in the drug store, and I think the reason given was increased wages paid.
Now, it is because of that which I saw in one of the T. V. A. books before the committee at that time that I am asking if these stores are conducted at a loss, as they estimated it would be for that year, who assumes that loss?
Mr. OWEN. The purchasers would have to assume the losses if they accepted the profits on some basis, and now just what basis they have worked out as a cooperative, I didn't inquire very closely.
Representative WOLVERTON. Are all elements of cost taken into consideration in the price that is charged for the goods that are sold in the commissary or the drug store, or is the price to the purchaser based on the price that was paid for the particular article?
Mr. Owen. The price is based on the current market price of like or similar merchandise.
Representative WOLVERTON. But I have in mind that the stores were built at some expense to the T. V. A., and there certainly is an administrative overhead expense, because I see from your report here that you made checks on the receipts and expenditures, found in some instances there were shortages, and so forth, and what I am trying to get at is, are all of the elements that go into a private storekeeper's account in determining the price that he charges to the purchaser provided for under this set-up or does the T. V. A. carry a part of that expense?
Mr. Owen. Well, while the T. V. A. operated it, it naturally did carry a part of the expense inasmuch as if there was any loss it would be a T. V. A. loss, but when it goes over to the cooperatives, my understanding is that they have to compete with outsiders, in order to sell merchandise, and that they do sell at regular market prices in order to avoid clashes with the merchants about through the community and territory.
Representative WOLVERTON. You don't mean to infer that there are competitors in the same line of business in the town of Norris?
Mr. Owen. No, but there are neighboring towns that establish a market price for a certain article.
Representative WOLVERTON. Let us take just one element of cost and that is the expense of a place to do business.
Mr. OWEN. Yes, sir.
Representative WOLVERTON. Are these stores owned by the T. V. A. or by the cooperatives?
Mr. Owen. These stores are owned by the T. V. A. and leased to the cooperatives.
Representative WOLVERTON. Do you have any knowledge of the terms on which they are leased?
Mr. Owen. At the filling station, it was so much on a gallon sold, a certain amount, based on sales.
Representative WOLVERTON. Do you know whether the returns received by the T. V. A. on that business was commensurate with the amount invested in the building of the service station?
Mr. OWEN. Well, I would have to refer to my working papers again to get the exact return. In other words, it would be over a period of time on a gallon basis tɔ see whether the return was commensurate.
Representative WOLVERTON. If you don't have the figures before you, I don't want to seem to be trying to hold you down to a dollarsand-cents basis, but merely to get the benefit of your general knowledge of the subject over a period of several years. Did it seem as if