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institution. At that time the hospital became subject to State standards for hospital licensure. Upon inspection by the State, many physical and structural deficiencies were found which required correction before the hospital could be fully licensed. Two factors were evident: (1) If any considerable part of the existing plant was remodelled, the entire plant would have to be brought up to code requirements (2) The conditions of the building did not seem to warrant considerable expense in remodelling since the basic structure was inadequate, a fire hazard and of insufficient value to remodel. The State Department of Health was then asked to make a feasibility study to determine if it felt the hospital should be remodelled, and if remodelled, would comply fully with licensing standards. Said study was made on February 19, 1963. The building was subsequently classified by the State Department of Health as “nonconforming, permanent." Upon advice from the State Department of Health, immediate plans were made to employ an architect and replace the existing plant with a new structure at the time Hill-Burton funds were available.

All during this period close liaison was maintained with the local office of the A.E.C. At the time the hospital was classified as “non-conforming, permanent" and requested by the Department of Health to make plans for replacing the hospital as soon as Hill-Burton funds were available, the local office of A.E.C. became aware of our problems with the physical plant. However, we hoped that the hospital would be able to fund its current and past depreciation adequately to provide its portion of funds needed for rebuilding and along with a community fund drive, borrowed capital and Hill-Burton funds, a building project could be completed by 1968 or 1969.

Two significant factors developed which now indicate that Hill-Burton funds will not be available for at least four or more years. Hill-Burton funds have been segmented over the years covering an increasing number of other types of health facilities in addition to hospitals and the increase in cost of hospital construction has progressively decreased the number of hospital beds which can be built annually with the limited funds available. It would now appear that our total hospital plant which is physically deteriorating at an accelerated rate, is inadequate in size to handle a progressively increasing patient load, is inefficient in operation, and so deficient in physical facilities for patient care as to be hazardous, will not be replaced until as late as 1975 to 1977.


Washington, D.C., September 29, 1967. Mr. JOHN T. CONWAY, Executive Director, Joint Committee on Atomio Energy, Congress of the United States

DEAR MR. CONWAY: This letter confirms information supplied earlier to the Joint Committee Staff Counsel regarding future assistance payments, under the provisions of the Atomic Energy Community Act of 1955, as amended, to Kadlec Methodist Hospital at Richland, Washington.

The hospital plant at Richland, which had been constructed and operated by the Atomic Energy Commission, was deeded to Kadlec Methodist Hospital, Inc., on September 9, 1956. Assistance payments under the provisions of Section 91a. of the Atomic Energy Community Act of 1955, as amended, were made as follows: Fiscal year 1957.

$244, 420 Fiscal year 1958..

205, 499 Fiscal year 19.79_

103, 616 Fiscal year 1960.

49, 121 Fiscal year 1961.

71, 372 Fiscal year 1964-

138, 000 Total.---

$12, 061 The payment in FY 1957 included $90,000 to cover the cost of rehabilitation work and $70,000 in lieu of transferring accounts receivable and to provide necessary working capital.

The FY 1964 payment was for construction of substitute heating facilities for the hospital. These facilities were necessary because the central steam plant, which supplied steam for heating the hospital as well as other community facilities, was closed down upon completion of the new Richland Federal Building.

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Exclusive of the heating system, the hospital has been self-supporting since 1961 and has been able to build up a substantial fund (approximately $1,500,000) for future hospital construction.

Section 91a. of the Atomic Energy Community Act of 1955, as amended, prorides for the payment of annual assistance payments for ten years from the date of transfer to the entity "having jurisdiction to collect property taxes or to the entity receiving the installation transferred." The date of transfer for the hospital plant was September 9, 1956. Section 91d., then provides, “with respect to any entity not less than six months prior to the expiration of the ten-year period” that the Commission shall submit to the Joint Committee on Atomic Energy its recommendation as to the need for any further assistance payments beyond that ten-year period.

The hospital's ten-year assistance period expired on September 9, 1966. In accordance with the provisions of Section 91d., on November 3, 1965 the AEC supplied the Joint Committee on Atomic Energy with information with regard to the assistance payments made to the hospital and recommended that no further assistance payments be made. It was noted at that time that this recommendation had been discussed with the hospital officials and they foresaw no further need for AEC assistance.

It is our understanding that the hospital officials have been planning an exten-
sire construction program which would be financed through a combination of its
own funds, assistance under the Hill-Burton Act, as amended, and other locally-
derived financial support. Inasmuch as there is a separate and specific Federal
program which could fully meet the hospital's needs, if circumstances permitted,
we doubt if it would be appropriate for the AEC to request authority now to
make assistance payments to the hospital.
Sincerely yours,


General Manager. Representative HOLIFIELD. Now, gentlemen, will each one of you identify yourselves to the reporter?

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Mr. Clark. Samuel Clark, Richland superintendent of schools. Mr. DIETTRICH. Karl Diettrich, Richland, school board member. Mr. SULLIVAN. John Sullivan, mayor of the city of Richland. Mr. FULLER. Murray Fuller, Richland city manager. Representative HOLIFIELD. Thank you, gentlemen. It is getting along toward the time for the House and Senate to convene. It has been suggested that you place your statements in the record at this point. They will be received in their entirety. Then we will give you the privilege of summarizing your position, providing you don't take longer than you would in reading your statements. (The documents referred to follow :)

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Gentlemen, let me say immediately that the legislation, as proposed, seems
basically fair to the City of Richland.

However, we would like to explain our position briefly toward the assistance
payments to the City. We would also like to request that certain parts of the
proposed legislation be clarified or that policy be established now so that the
people of Richland may know the rules under which they can continue to strive
to become self-sufficient.
In June, 1959, the first municipal function transferred from the U.S. Atomic
Energy Commission to the City. Since then the City has tried to establish and


follow long-range policies permitting self-sufficient operation by the end of the assistance period under Public Law #221.

In 1959 the biggest problem, which still exists in part, was to find revenues to pay for the high level of municipal services expected by the citizenry and by the federal agencies.

Richland had inherited a low property tax base because it was created as a single purpose, federally-owned community. Major industry was tax-exempt. Taxable industry otherwise was almost nonexistent.

Then, too, commercial development was much more meager than one would expect in a city of Richland's size. Equally, housing then consisted of homes constructed under wartime conditions, at wartime pace. All of this housing continues to serve, and therefore does not afford increasing tax revenues even as services continue and the costs of services increase.

These have been and partly are continuing problems. To help meet them, the City has joined with other governmental and private organizations to develop diversified industry that will increase the tax bases generally.

By itself and as a member of the Tri-City Nuclear Industrial Council, Richland has diligently supported the diversification of the Hanford plant. This diversification, still continuing, has begun to bear fruit. New construction has increased our tax base.

For instance, a year ago, in relation to the average per capita tax base for first-class cities in Washington, Richland had a per capita tax that was only 53 percent of average. Next year we expect that base to be 60 percent of average. However, even then, we shall be 40 percent under average.

This situation presents difficulties. No matter how we speak abstractly about taxes, we finally are speaking about how many dollars we ask each of our families to pay each year. And here we speak just not of City taxes but of all other taxes levied by other agencies within the City Limits, such as the separate school district.

Richland's per capita tax situation leaves it in the position of carrying one of the highest total millage levies for first-class cities in Washington, State law requires that the citizens pass bond issues or excess operating levies by a 60 percent majority. With tax bills the way they are, it is difficult therefore to pass these measures, at least by a 60 percent majority.

According to national figures, Washington State ranks sixth in the amount of State and local taxes assessed against its citizens. This is not a litany of complaints. Quite to the contrary. It is simply an outline of a special situation that a unique, federally-created city is trying to overcome. It wants to be independent as soon as it can.

To that end and because of the approaching end of Public Law #221, the City in 1966 appointed a citizens' committee to study its financial situation. We now have that committee's report, its figures, its assumptions, its conclusions and recommendations. Copies of this report have been furnished to the U.S. Atomic Energy Commission, and we have copies available now for the Sub-Committee if they desire the same. (See app. 16, p. 229.)

The committee assumed "that our conclusions could be invalid if there were any major changes in the pmployment level at the atomic energy sites, or in the size of the City, or in the Washington tax structures as it relates to the cities."

Granting that major assumption, the committee reported that after 1969 the deficit between income and expenditures might not be great if the City steered a conservative fiscal course.

The City Council upon receiving and studying the report then decided to make certain requests of the U.S. Atomic Energy Commission, as follows: (A copy of the letter making these requests is attached.) (See p. 122.)

1. That the U.S. Atomic Energy Commission fund the police and firemen's pension funds on an actuarial basis to forestall the possibility of the City facing a great pension expense out of general fund revenues shortly after 1969. The request stemmed from the fact that when the City assumed control of police and fire protection it also assumed forces in which many of the men already har many years in service. Almost one-third of the men in the forces are eligible for retirement about 1970. In this request, the U.S. Atomic Energy Commission has concurred.

2. The City asked the U.S. Atomic Energy Commission to pay the balance of indehtedness on a set of proposed civic buildings to be voted on for bonding on September 19th. The buildings include a new library, a meeting center, and a recreational center, to replace the present library and community center building.

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These present facilities are of wartime construction. The present wood-frame community center is not only too small and generally inadequate, but it is also a fire danger and a general expense to the community. In short, it is inadequate and costly.

The request for A.E.C. funding therefore is for help to keep the total millage rate for necessary capital expenditure within reasonable bounds.

The A.E.C. has proposed to pay a lump sum that would cover 40 percent of the bond and interest cost for five years after 1969. Its figures assume that the mill levy will be about four mills and that by the end of the assistance payment the City's assessed valuation will have grown to the point where four mills, generally taxed, wil pay the remaining bond and interest costs.

This proposal is a considerable modification of our original request. As a compromise, we do feel that the A.E.C. ought to contribute 40 percent of the total costs for the entire time of the bonding. These buildings are replacements of substandard facilities. They are necessary to continue and to enhance the level of intellectual, cultural and recreational services necessary for the adequate functioning of the community and therefore of the personnel of the Hanford plant.

At the very least, we think the revision of Public Law #221 ought to contain language that will assure that the tax cost to our citizens will not exceed four mills-that, in short, if the projections of valuation by the A.E.C. do not in fact hecome reality, the A.E.C. will make the additional funding necessary to keep the tax load within the four mills.

3. We asked for the transfer to the City of 5800 acres of government land bordering the City. This area of sand and sagebrush is commonly known as the Horn Rapids triangle.

We asked for this land for one main purpose. We saw that we need a longrange source of municipal income, first from leasing the land for private use, later from the taxes stemming from industrial and residential development. We are now in fact in the process of annexing and zoning this land through the permission of the U.S. Atomic Energy Commission. However, until the land is ours, we get no income from it.

We recognize the legal problem of donating the property to us. We ask, however, that the various federal agencies involved can establish a purchase price and purchase terms low enough to bring this property within the City's reach.

4. We also asked that the electrical service to what is known as the 300-Area of the Hanford plant be donated to the City.

This request stems from our need for a short-term, immediate source of incame of approximately $30,000 a year to apply against a possible deficit right after 1969.

In this request the U.S. Atomic Energy Commission has not concurred.
We only say here that our total aim is to be a community financially self-
sufficient. To be off of annual subsidy and not to have deficit budgets is our
5. We made one further request apparently not to be covered in the U.S.
Atomic Energy Commission's report on future assistance.

This request, put simply, is that new legislation provide for specific re-examin-
ation of Richland's financial situation if there is to be any significant curtailment
of the operation of the Hanford plant. We cannot urge this too strongly.

All of our financial projections assume that production and employment at the
Hanford plant will continue at present level or more. They also assume that
diversification will continue but will develop new sources of industrial and com-
mercial taxes to make Richland financially self-sufficient.
We assume stability plus growth.
Any cut-back will disturb the delicate economic situation that exists and will
continue to exist until diversification provides a stable economic base.
Thus we feel that the new legislation must make clear how the City's economic
situation may be re-examined in light of adverse circumstances.

May I say again that we feel the legislation proposed is basically sound, with
the qualifications that I have mentioned. We are sure that with the continuing
cooperation that we have enjoyed so far that we will meet our general operating
expenses by June, 1969, and be as we devoutly wish to be-a self-sufficient

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September 7, 1966. U.S. ATOMIC ENERGY COMMISSION, Richland Operation, Richland, Wash. (Attention of Mr. A. M. Waggonner, Assistant Manager for Administration).

GENTLEMEN: The City of Richland, since the transfer of the first municipal function in June of 1959, has attempted to conduct its affairs toward the elimination of the AEC assistance payments by the end of the ten-year period provided in Public Law #221. The City has actively supported the diversification effort of the Hanford plant as a vital part of the effort to develop the local tax base, and stabilize the local economy.

To take stock of the situation, make projections and recommendations, the “P.L. #221 Study Committee” was appointed by the City Council. The Committee's report has been completed, and copies of the report have been forwarded to you. As you know, the report indicates there will probably be a deficit of revenues to expenditures in 1969, but that the magnitude of this deficit may not be critical. The report of necessity is based on various assumptions: continuation of the present level of Hanford plant operation; increase of local government revenue sources; effect of escalating costs on city operations, et cetera. Changes in conditions can therefore effect the projections for better or worse. The "P.L. #221 Study Committee's" report particularly emphasizes that it does not take into consideration a substantial cutback in Hanford plant operations. We wish to emphasize that point also.

The City Council of Richland believes that the assistance payments can be eliminated in 1969, and makes the following proposals to that end :

1. Annexation of the area between the north City Limits from Stevens Drive to the Columbia River and to and including the 300-Area, and donation of the 300-Area electric system to the City.

This area is a logical extension of our City Limits area. We understand that probably expansion of the laboratory area by private developments would be in the area between the 300-Area and the present City Limits. The City needs to have these developments as part of its tax base.

The donation of the electric system would permit additional immediate revenue to close the gap between revenues and expenditures in our General Fund. Under Bonneville Power Administration's regulations, we are permitted to charge the electric utility five percent of gross revenues in lieu of tax, and six percent of electric system value as return on investment if the electric system is not purchased or built out of electric revenues. The 300-Area electric system is a logical extension of our industrial load in the North Richland area. It is familiar to and was once operated by the personnel transferred from General Electric Company to the City in 1959.

2. Donation of the land between the 1100-Area and the Yakima River reservation boundary south of Horn Rapids Road (the Horn Rapids Triangle) to the City.

This action would permit the City to provide for orderly expansion and de velopment, and by sale or lease provide future revenues for the City. The present division of ownership by the AEC and the Bureau of Land Management is of particular geographic concern at this time.

3. Establish the municipal pension funds on an actuarial basis. The general government employees (members of Statewide City Employees Retirement Sys. tem) and the Fireman's Pension should be on a sound or very nearly on a sound actuarial basis. The Police Pension, on the other hand, is not actuarially sound. Since the personnel were transferred from the General Electric Company with Hanford plant experience service dates, approximately one-third of the police personnel will be eligible to retire between 1969 and 1971. This situation will throw a heavy financial burden on the City's General Fund a few years after the end of the assistance period that will cut into revenues needed to continue normal operations.

These funds were to be actuarially checked by previous agreement with the AEC in connection with the past service payments established in 1959.

4. Replace the Community Center and the Library. These buildings were very inadequate when transferred, and the City requests that the Commission pay forty percent of the bond funding until the proposed termination date of Public Law #221, and pay the total remaining costs of these projects on termination of Public Law #221 assistance payments. Reference is made to the letter of

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