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In keeping with and as an appropriate expression of the concept of discontinuing assistance payments, we are proposing a new subsection to section 91 which would be a mandate to the Commission to assure itself that the recipients of financial assistance are using all reasonable self-help to achieve financial independence. It also expresses the Government's intention that assistance payments be reduced or terminated at the earliest practicable time.

Finally, we are recommending deletion of the requirement that the Commissionpropose a definite schedule of such contribution payments which will provide for an orderly and reasonably prompt withdrawal of the Atomic Energy Commission from participation in and contribution toward local government.

The Commission has already substantially withdrawn from "participation" in local government at both Oak Ridge and Richland. With respect to "contributions,” we believe our proposed actions implementing the above amendments are compatible with the "withdrawal” requirement and are both reasonable and practical based upon actual experience and the situation as it exists today.

The reason that the Commission is recommending continuation of the financial assistance authority is that the communities of Oak Ridge and Richland, which were constructed in the early 1940's and managed by the Government until the late 1950's, simply had and continue to have predetermined basic community characteristics which impede their ability to achieve financial independence. For example, one of the most important characteristics is the need for continued emphasis upon the quality of schools at both communities. Another is the narrowness of the respective tax bases which are primarily composed of moderately priced houses.

However, in the few years since incorporation the two communities have made significant progress toward self-sufficiency and have steadily augmented their tax rolls and revenue sources.

It is now believed that at Richland the school district and the city are capable of self-sustaining operations, provided certain one-time costs-principally for school construction-are met by the AEC; and provided other forms of State and Federal assistance continue.

The city of Oak Ridge is not yet at this point. The city cannot be financially self-sufficient and still maintain the necessary level and quality of community and school services until its revenues are significantly increased.

At both Oak Ridge and Richland, AEC has major investments in plant and equipment, and conducts large and important programs. The activities at both locations continue to involve both production operations and research programs. Consequently, AEC continues to have a vital interest in the quality and strength of each community, and in particular in the quality of the school systems.

In view of these determinations, the Commission, in implementing its proposed amendment, plans to make lump-sum payments to the city of Richland and the Richland School District and to continue annual assistance payments to the city of Oak Ridge.

Specifically, we believe that the city of Richland is essentially selfsufficient with regard to annual operating costs, but has a problem in providing for certain capital costs and the actuarial funding of police and fire pension systems. Therefore, at the city of Richland, the AEC

proposes to make a lump-sum payment to the city designed basically to relieve some of the carrying charges for 5 years on capital expenditures for a new civic center, if such expenditures are approved by the voters, and to make certain pension funds actuarially sound. The total costs are estimated to be about $800,000. The AEC would make no further annual assistance payments to the city of Richland under the proposed new legislation barring unforeseen adverse economic developments.

In addition, we are cooperating with the city so as to make it possible for Richland to annex an area of about 5,800 acres north of the city. This is an area suitable for future industrial and residential development. The city is interested in having the land within its boundaries; thereby establishing a potential increase in the tax base. We are working with the General Services Administration and the Department of the Interior to ascertain how this land can be sold to the city on a reasonable basis.

řhe Richland School District is, like the city, self-sufficient with regard to annual operating costs, but it is unable to bond itself sufficiently to provide for capital facilities.

The current AEC financial assistance payments to the district are based upon the formula in Public Law 874, which provides financial assistance to schools in federally impacted areas. These payments would be assumed by the Department of Health, Education, and Welfare, under that law.

To meet the district's capital facility requirements, we are recommending a lump-sum payment toward replacing and renovating certain existing school facilities. Pending detailed engineering studies and using cost data employed by the Richland School District, we estimate the cost to be about $5.6 million.

With regard to the city of Oak Ridge, while the tax base is growing it still does not produce sufficient revenue-when combined with other revenues—to enable the city and its school system to be self-sufficient. Therefore, the Commission is not recommending a lump-sum payment with subsequent termination of AEC assistance.

Solutions leading to financial self-sufficiency for the city of Oak Ridge depend on a substantial increase in the tax base and/or increased State aid coupled with the availability of Public Law 874 school assistance and greater local revenues. .

The city is making a strong effort to attract private industrial firms. However, while some industrial growth has occurred, it has not yet been significant. AEC is cooperating, closely with the city in making a tract of land (230.2 acres) available for purchase by the city for industrial development and for transfer of suitable river sites (about 1,300 acres) within the city of Oak Ridge to the Tennessee Valley. Authority for industrial development by that agency in cooperation with the city.

Actual payments to the city of Oak Ridge are presently based upon a formula which is part of an overall agreement we have with the city, This agreement expires at the end of the original 10-year period of assistance payments. The amount of and basis upon which payments after 1969 will be made will be subject to negotiation at that time. As a result, no dollar figure is presently available. However, the proposed amendment to the act, if enacted, will influence the Commis

sion's general approach to these negotiations, and it would be our intention throughout the ensuing period to work toward an arrangement which will assist the community in achieving self-sufficiency.

We view this approach as a teaming up of resources in the hope that the city's revenues can be increased to the point where the more usual form of assistance for federally impacted areas can eventually supplant this special AEC assistance.

In addition, the provision for a 10-year extension of AEC authority for assistance would permit further opportunity for congressional review of the situation during this period and, in the interim, would give continued recognition to the special circumstances that require the extension.

This concludes my prepared statement.

I would like to introduce some of the people with me. Of course, Commissioner Johnson and Mr. Hollingsworth are with me. Mr. Keto, who is Director of the Office of Economic Impact and Conversion. Mr. Wende is the Deputy Manager of the Oak Ridge Operations Office. Beside him, is Mr. Waggoner, Assistant Manager for Administration of the Richland Operations Office.

We have Mr. Hiestand, of our Office of the General Counsel, and other members of the staff of Mr. Keto's office.


Senator PASTORE. Whose initiative was it in regard to Richland in reaching a lump-sum payment? Was it the AEC or its Manager at Richland?

Mr. ERLEWINE. I believe it was discussions between the local office of the AEC and the city government of Richland.

Senator PASTORE. Now I don't want to make an analogy here, because I don't know the facts intimately—but in my experience in the past in practicing law where people were severely injured there was always an attraction in getting a lump-sum settlement. They would go into business and use the money to rehabilitate themselves; but after a short while there was an element of failure, and then there was this regret that this assistance had fallen off.

Now with reference to Richland, what is the percentage of governmental activity as against nongovernmental activity in Richland?

Mr. Johnson. Mr. Chairman, the percentage of governmental activity is fairly high.

Chairman PASTORE. So, if you made a lump-sum settlement and it did not work out and the money was poorly invested—and I am not suggesting that it will be, I am not making an argument now, I am merely raising a hypothetical situation—the Government could not really insist upon the fact that it had made the lump-sum settlement as an agreement and therefore was going to wash its hands of the affair. We can't allow Richland to die.

Mr. Johnson. Mr. Chairman, this is why the legislation proposes authorization that would permit the Commission to make any further adjustment that might be necessary over a 10-year period.

Chairman PASTORE. Then why do we have to have a lump-sum settlement ?

Mr. Johnson. Because the city needs capital funds. These are more difficult to get. They are about at the limit of their bonding capacity.

They need this one piece of money to put them in a continuing sound financial position.

Chairman PASTORE. If these things are necessary, then why don't we make a grant? Why do you call it a settlement? A settlement of what? If we are going to be tied into this thing for a time to come, I am afraid later on if this thing reverses itself and it gets itself into trouble, you are going to be in trouble when you come before the Congress.

Let us assume 10 or 15 years from today at a committee hearing you say that Richland needs further help and for our own interest we must grant it. First of all, this is a faraway place. It was chosen so because of the activity there which makes it very hard for them on a competitive basis, without some Federal help, to attract nongovernmental industry. These things all become difficult.

Mr. Johnson. I would like to make one remark here, Mr. Chairman. I happen to know that the people in Richland were actually quite interested in getting themselves self-sufficient.

Chairman PASTORE. I realize that, and I applaud that, I think they have done a marvelous job. I am not talking about that at all. I repeat again, I am not being critical of the people there. I applaud this idea of being independent of Government help and to run their own affairs the way they feel they should be run. I am not against that. I am only questioning this matter of a lump-sum settlement—why it is necessary, and whether or not if they need certain things that we feel in the public interest they should have, why we can't do it anyway.

But you say a lump-sum payment.

Mr. Johnson. I don't think it is worded that way in the legislation although it is not wide open.

Mr. ERLEWINE. This authority is to permit us to come up with the type of arrangement that is best suited for the community and our negotiations to date have indicated this is a form that would be satisfactory to them and to us.

Now the main reason, as Mr. Johnson has indicated, is a strong need for rather large capital funds for the school system.


Chairman PASTORE. Here again I speak from experience. The Congress has been at loggerheads with the administration with reference to the impacted area legislation. It has been the Congress that from time to time has come up with the full commitment but the administration has not asked for it. They would like to phase it out. They feel that the bill that had to do with elementary and secondary education help is a boon to many localities.

Of course, it does not fit it in the same slot of impacted area help: And there

may be a time, the chances are, that that might go out of existence. I think, myself, that you ought not to unshackle the AEC from its responsibility with reference to that community.

Mr. JOHNSON. Mr. Chairman, we don't think we are.

Chairman PASTORE. Wasn't there some presentation here made that some help will come from the impacted area legislation?

Mr. ERLEWINE. This is assumed; yes.

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Chairman PASTORE. We keep going in the Congress by challenging the administration, as we have in the past, and we have done it several times—as a matter of fact the House did not come up with the full commitment and we in the Senate raised it to the full commitment the last time--but this has been resisted by the administration. Now I hope that if we do rely upon that and that falls through, that we are tied in sufficiently to that community that we do not hurt it in the sense that families will not further be attracted there to the detriment of the essential establishment we operate there. Do I make myself clear on that?

Mr. Johnson. Very clear. I think the Commission has every intent of not letting the community go down the drain in any sense. If we find the quality of the schools to be deteriorating, we will definitely take some action and seek further support.

Chairman PASTORE. You haven't answered my question. What is the Government activity percentagewise vis-a-vis private industry?

Mr. Johnson. That has to be answered really for the tri-cities area, because so many people live in the adjacent cities. My recollection is that the Government payroll there is roughly about 25 percent of the total. Of course, the indirect payroll, the people who depend on the Government payroll undoubtedly is at a much higher figure.

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Chairman PASTORE. What is the population of Richland? Mr. Johnson. The population is about 23,000 and the payroll has been fairly steady between 8,000 and 9,000 employees at Hanford. The tri-cities area is about 60,000 to 80,000 population. The municipal population in 1966 was: Kennewick, 15,400; Pasco, 16,350; and Richland, 26,500 for a total of 58,250. If the surrounding small areas are included, it goes up to about 90,000.

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Chairman PASTORE. If this plan with reference to Oak Ridge and Richland is adopted, in what range are we speaking in dollars?

Mr. ERLEWINE. With respect to Richland, we can say more precisely, but not really precisely. We have the proposed $5.6 million for the schools and another approximately $800,000 with regard to the city.

Chairman PASTORE. Is that the lump-sum payment we are talking about?

Mr. ERLEWINE. That is correct.

With respect to Oak Ridge, we are proposing a continuation of the annual assistance payments. We have no basis for assuming just what that will be in the future. Chairman PASTORE. What has it been?

Mr. ERLEWINE. It has been based on the formula agreed to by the city and the AEC, which is as follows: It assumes a base payment of $1.252,000, assuming a tax rate of $1.24 per hundred dollar valuation. And then the base payment will be increased or decreased as that tax rate goes up or down. At the present time, for fiscal year 1968, the payment will be $1,474,000, because the tax rate will go to $1.46 per hundred dollar valuation.

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