under the Act with regard to these communities lie in the area of local financial assistance, as prescribed in Chapter 9 of the Act.

Chapter 9, Section 91a, states that assistance payments shall be for a period of ten years and lists the criteria to be given consideration in determining the amount and recipient of the assistance. Section 91d requires the AEC to present to the Joint Committee on Atomic Energy its recommendations as to the need for further assistance to any entity receiving payments under Section 91a not less than six months prior to the expiration of the 10-year period.

Financial assistance payments are being made to the City of Oak Ridge, the City of Richland, and the Richland School District. The Oak Ridge Hospital of the Methodist Church, Inc., has not required financial assistance, and the Kadlec Methodist Hospital at Richland is now operating without assistance. Accordingly, assistance to the cities of Oak Ridge and Richland and to the Richland School District constitute the outstanding obligations. Total assistance payments made under P.L. 221 and estimates for the balance of the 10-year period are summarized in the attached table.

Although, under the provisions of the Act, the 10-year period for assistance pay. ments to the cities of Oak Ridge and Richland and the Richland School District runs until FY 1969, budgetary schedules of both the communities and the Commission dictate that action to arrive at decisions concerning assistance beyond the 10-year period be made well in advance of that date, and preferably during 1967.1

The communities of Oak Ridge, Tennessee, and Richland, Washington, were constructed and managed in the early 1940's by the Department of the Army's Manhattan Engineer District as wartime adjuncts to the District's nuclear facilities. The communities were transferred to the newly created AEC in 1947. Transfer of these communities, under the provisions of the Community Act, to private ownership and self-government began in 1956; and both cities were incorporated by 1959. The long period of Government ownership of commercial and residential properties, and Government management of municipal affairs predetermined many of the basic community characteristics which now affect their financial capability. One of the most important characteristics is the continued emphasis upon the quality of the school system at both communities. Good school systems were, and continue to be, essential to attract and retain the technical and scientific talent required for AEC research and production activities.

In the few years since incorporation, the two communities have made significant progress towards self-sufficiency and have steadily augmented their tax rolls and revenue sources. As a result, the percentage of AEC assistance to total revenues has been steadily dropping.

It is now believed the Richland School District and the City are capable of selfsustaining operations, provided certain one-time costs (principally for school construction) are met by the AEC.

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 increased.

At both Oak Ridge and Richland, AEC has major investments in plant and equipment; and conducts large and important parts of its programs. AEC and contractor employment is currently about 13,000 in Oak Ridge and 7,800 at Richland. 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.

Based on an analysis of the conditions at Oak Ridge and Richland, and a review of proposals made by the local authorities at these communities, the Commission recommends the following:

1. That AEC be authorized, but not required, to make assistance payments to Oak Ridge and Richland through June 1979.

2. That AEC, subject to the conditions stated below, make "lump-sum" payments to the City of Richland and the Richland School District for the purposes stated herein: and that AEC continue annual assistance payments to the City of Oak Ridge.

1 Public Law 87-719 amended the Atomic Energy Community Act of 1955 to provide for the disposal of Federally-owned properties at Los Alamos, New Mexico. This report does not relate to Los Alamos, New Mexico. Annual assistance payments to the Los Alamos Hospital were begun in 1964 and to the schools in 1966. Payments to the County of Los Alamos will begin in 1967. The 10-year period for these separate payments, thus, will not begin to expire until the middle of the 1970's.

3. That, after FY 1969, the Richland School District obtain assistance through the Department of Health, Education, and Welfare under Public Law 81-874, 20 USC 236–244, hereinafter referred to as P.L. 874; and that AEC discontinue direct assistance payments to the City of Richland and the Richland School District.

4. That AEC assistance payments to the City of Oak Ridge be discontinued at such time as the amount of school assistance available through the Department of Health, Education, and Welfare under P.L. 874 (or other similar programs) and increases in the City tax base or revenue from other sources permit the City of Oak Ridge to be self-sufficient.

We believe that these recommendations are in accord with the requirements of Section 91d of P.L. 221. This section provides that, if the Commission recommends further contribution payments, "it shall propose 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."

This requirement was originally proposed by the AEC, but in a different context than the Chapter 9 as now written. The Commission proposal was in connection with an AEC suggestion for a three-year period of full assistance to the communities while the problem could be more fully studied. Its purpose was in support of a strong desire to have these special atomic energy communities become independent and self-sufficient. Although the assistance formula proposed by the Commission was rejected, the substance of the "withdrawal" requirement was retained in the second sentence of Section 91d. It is clear, however, from the report of the Joint Committee on Atomic Energy (Senate Report 1140, page 16, and House Report 1402), that the Committee did not believe the residents of Oak Ridge and Richland should be required to assume the full responsibility for maintaining the level of services desired by the Commission "regardless of the existence or nonexistence of other revenues from which these burdens can be met". That Report also stated, (Page 15) the fact "the plants are owned by the Federal Government should not exempt the Federal Government from recognizing the burden which these plants necessarily impose on the local governments ***" The Commission already has substantially withdrawn from "participation" in local government at Oak Ridge and Richland; and the recommendations cited above will not reverse this situation. With respect to the requirement for orderly and reasonably prompt withdrawal of "contributions" to local government, this goal was stated before incorporation of the communities and before there was any actual experience in local self-government at either community. It was an expectation toward which both the Commission and the communities should work. At Richland, barring substantial adverse economic changes, payment of certain one-time costs to the City and School District, coupled with P.L. 874 payments by the Department of Health, Education, and Welfare, should eliminate the need for further AEC assistance. At Oak Ridge, the special AEC assistance would be discontinued whenever the conditions are such as to permit the City to be self-sufficient.

The recommendations in this report concerning continued authority for providing financial assistance, if necessary, are believed to be compatible with the spirit of the "withdrawal" requirement in Section 91d and both reasonable and practical based upon actual experience and the situation as it exists today.

General

DISCUSSION

The need for continuance of some financial assistance at Oak Ridge and Richland is basically the result of the historic development of the communities. When Government ownership and management were terminated, the cities were virtually "fully grown" with regard to both residential development and their responsibilities to provide adequate school, utility, and municipal services. However, because of their location and the fact that their only reason for existence was to support defense installations, neither community had the usual amount of commercial and industrial investment associated with cities their size. The major industry and primary sources of employment were tax exempt.

The property which was on the tax rolls consisted almost entirely of lowcost, wartime constructed homes. Many of the schools and municipal buildings, which the communities accepted from the AEC, were of the woodframe, wartime type of temporary construction, more expensive to operate and to maintain than those of other comparable communities.

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Prior to the transfer of municipal and school facilities, the Government established a high level of services in these communities, especially in the school systems, so as to assure recruitment and retention of highly skilled and technical project personnel.

Therefore, the communities, at the time of their incorporation, were in the difficult situation of having to provide a high level of services, but having a relatively low tax base from which to obtain revenues. The communities have continued to provide services in terms of the above requirements, and, in the opinion of the AEC, they have fully complied with the first-listed purpose of the Community Act, which is: "the maintenance of conditions which will not im pede the recruitment and retention of personnel essential to the atomic energy program."

Despite the problems faced by these communities at the time of their incorporation, both communities have been augmenting their tax rolls and adding to their revenue sources. As a result of the effort by the communities, the percentages of AEC assistance to applicable total revenues have been dropping over the past few years. The percentages now stand (FY 1966 at Oak Ridge and Richland Schools and CY 1966 in Richland City) at 23.6%, 15.0%. and 10.6% for Oak Ridge, Richland School District, and Richland City, respectively. If payments which would otherwise be available to them from the Department of Health, Education, and Welfare under P.L. 874 are subtracted from AEC assistance, the percentages of the special AEC assistance under the Community Act to total revenues would be: 13.6% for Oak Ridge, and 0.01% for the Richland School District. Richland City would remain unchanged.

Much of the fiscal improvement can be attributed to growth in the amount of taxable property. This growth primarily consists of: new, higher-priced homes; a modest amount of commercial investment; and some industrial investment (although very minor at Oak Ridge).

However, looking ahead, it is not reasonable to expect the construction of new homes to continue at the same rate as occurred soon after the sale of the communities. Supporting commercial investment also has its limits in terms of the amount of services needed to meet a fairly stable population. For these reasons, it is believed that a principal key to the long-term self-sufficiency of both communities lies in a major infusion of industrial investment.

At present, because of the low industrial investment, Richland's per capita tax base in 1965 was approximately 53% that of the average of other first-class Washington cities; and Oak Ridge's was about 67% (based on 1964 data, and excluding recent reappraisal results) that of the average of Tennessee cities over 20,000 population.

In the short run, additional revenues to meet operating costs must come from established resources, usually the local property tax, and, sometimes, increased State aid. It should be noted that neither the State of Tennessee nor the State of Washington have State income taxes as a source for state aid revenues; nor do either of the States permit a local payroll or income tax. There is, thus, no opportunity for either community to tax directly the above average incomes of the residents. Both communities are, however, diligent with respect to other local tax efforts, and both utilize available State and Federal funds other than those provided through AEC financial assistance payments.

For example, the State constitution limits the amount of property tax that can be levied by Richland; but special levies can be approved by a 60% majority vote. By virtue of these special levies, the Richland rate is presently comparable to, or higher than equivalent-sized, nearby communities. The School District has recently been authorized a 26 mill increase in its tax rate for 1968. This will make the Richland rate among the highest in Eastern Washington.

The tax rate (combined City and County) on property in the City of Oak Ridge is already the State's highest among cities over 20,000 (when all rates are adjusted to reflect variations in assessment ratios); and increases in the Oak Ridge rate are virtually certain in the future to meet the $6-million cost of new school and municipal facilities recently authorized by the voters. While these new facilities will assist in maintaining a community better able to support the AEC activities and to attract private industry, their cost will widen the tax rate gap still further between Oak Ridge and other Tennessee cities, a condition that could impair the City's industrial development efforts.

While the impact of the above tax rates is significant to the individual homeowner, when multiplied by the low total tax base, these rates fail to produce sufficient revenue for the operating and capital expense requirements of these communities.

It is true that many other communities have Federal "impact" problems; the situation at Oak Ridge and Richland is different, however, because in these communities, their facilities were created by the Government in essentially remote areas. In the more usual case of Federal impact, the community already possesses some private commercial and industrial investment, as well as an operating school system. In the case of Federally "impacted" areas, the increased burden upon a community's schools is met through assistance to the local school system under two laws: Public Law 81-815, 20 USC 631-645, hereinafter referred to as P.L. 815, and P.L. 874, discussed before.

P.L. 815 provides funds for the construction of new facilities. The formula operates on the basis of fast population build-ups related to Federal programs. It is, therefore not available to Oak Ridge and Richland. P.L. 874 provides annual assistance to meet school operating costs. It provides either a basic minimum amount per pupil in those states where per pupil costs are below a national "floor" or matching amounts in the more well-to-do States. These payments are reduced dollar-for-dollar for any school system that is receiving other forms of Federal assistance for general operating expenses. Consequently, Oak Ridge and Richland have been precluded from receiving this assistance.

Nevertheless, the amount of AEC assistance to Richland schools has been computed over the years on the basis of the P.L. 874 formula, as certified by the Department of Health, Education, and Welfare. Because of the relatively high per pupil contribution now being made by the State of Washington, the matching nature of the P.L. 874 assistance formula has been sufficient, together with special annual operating levies, to cover the annual school operating costs at Richland. This is the principal reason that the AEC can recommend that, after a one-time capital grant, AEC assistance to the Richland School District can be terminated.

P.L. 874 payments would, however, be far short of what is required at Oak Ridge, where the State contribution per pupil is roughly one-half that of Washington State.

All of the factors discussed above: the historic development of these communities; the low tax bases; the lack of industrial development; the high level of services (especially in the school systems); and, in the case of Oak Ridge, the relatively low level State support to the schools, lead the AEC to conclude that financial assistance should be continued. However, because the financial situations in the communities differ, the AEC is proposing to implement its legislative authority differently for the two communities. The legislation would authorize, but not require, the AEC to make financial assistance payments. The Bill affords the AEC the flexibility to make lump-sum, annual, or other periodic assistance payments; to discontinue or, as necessary, to resume the making of payments. Oak Ridge

While the City of Oak Ridge tax base is growing, and was recently augmented by about 17% as a result of a reappraisal of all property, 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 City of Oak Ridge has officially requested an extension of financial assistance without a specific termination date.

Based on an analysis of expected future revenues and expenditures at Oak Ridge, it has been concluded that Oak Ridge needs continued annual assistance beyond FY 1969. Under the current AEC-Oak Ridge financial assistance agreement, the City receives a base amount of $1,252,000 annually, which is increased or decreased by whatever per cent the City's real property tax rate is greater or less than $1.24 per $100 of assessed value, with a provision for adjustment by the AEC. The provision for annual assistance payments under this formula terminates on June 30, 1969. Under any extension of the AEC authority to make annual assistance payments to Oak Ridge, the AEC would consider a similar formula basis, as well as other alternatives.

Solutions leading to financial self-sufficiency for the community depend on a substantial increase in the tax base and/or increased State aid coupled with the availability of P.L. 874 school assistance and, possibly, 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.

In addition, the City's general fund and school revenues may be augmented in the near future if the Counties of Anderson and Roane, in which the City is located, are successful in enacting the one per cent local option sales tax. Referenda have been scheduled for August 1967 on this issue by both Counties.

It is with this as background that AEC proposes an extension of the financial assistance authority through June 1979, rather than indefinitely as proposed by the City of Oak Ridge. The AEC hopes and believes that the City's economic situation will improve before June 1979. Hopefully, the improvement will be such that, with increased revenues and available Federal aid under P.L. 874 (or any other similar programs which may be instituted), special AEC annual assistance could be terminated on or before that date. The provision for a 10-year extension of AEC authority for assistance to the City 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 at Oak Ridge.

City of Richland

The City of Richland is essentially self-sufficient for annual operating costs, but has a serious problem in providing for certain capital costs and actuarial funding of 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 on capital expenditures and to make certain pension funds actuarially sound. The AEC would make no further annual assistance payments under the proposed new legislation barring unforeseen adverse economic conditions.

The City is in agreement with the principal that, after a lump-sum payment, it would need no further annual assistance payments. The City requested that the following actions be taken by the AEC:

1. Fund the police and firemen's pension funds on an actuarial basis to cover past service costs associated with those members of the police and fire forces who were employed while the City was owned by the Government. 2. Pay off the balance of the indebtedness on a proposed civic center.

3. Donate approximately 5,800 acres of Government-owned land comprising the Horn Rapids Triangle.

4. Donate the "300 area electrical system" owned by AEC.

The AEC agrees with the City's request that the police and firemen's pension funds be on an actuarially sound basis prior to termination of assistance payments. The cost of this request is estimated at $500,000.

The City's proposal that AEC fund the balance of indebtedness on a proposed civic center has been modified by the AEC. In the event a bond issue for this project is approved by the voters, the AEC has already agreed to meet 40% of the annual interest and bond redemption costs for the final two years of the present assistance period, that is through FY 1969. The 40% represents the amount requested by the City and is considered reasonable on the basis that Richland's tax base is approximately 47% below those of comparable Washington cities. Construction of these facilities is within the City's legal bonding capacity; and by 1975, the City's tax base should be adequate to carry the full annual cost of the bonded debt. The AEC proposes, therefore, to contribute 40% of the costs for five additional years after the present assistance period. This would be provided in the form of a lump-sum of some $300,000.

With respect to the land (Horn Rapids Triangle), it consists of about 3,860 acres of acquired land and about 1,940 acres which is public domain land reserved for AEC use. It is an area which is suitable for future industrial and residential development. The City is interested in having this land within its boundaries; thereby creating a potential increase in the City's tax base. AEC believes such acquisition would have long-range benefits to the City and will work with the GSA and the Department of the Interior to ascertain whether the land can be sold to the City on reasonable terms. This approach is in line with the general pattern being followed at Oak Ridge, where that City has requested additional land for industrial development. In specific response to a request from the Richland City Council, AEC will permit the City to annex the Horn Rapids Triangle before AEC release of the land to the GSA and Interior so that it can be properly zoned by the City prior to disposition. This is the same procedure which was followed with the North Richland property which the City also bought.