Utility spokesmen, in seeking to change the present policy on Federal reimbursement, are seeking to exploit both the Federal Government, the States, and their local subdivisions. First, they have come to the State and local legislatures, seeking legislative sanction to establish themselves free of charge within the public highway right-of-way, agreeing that as a consideration for such permission, they would remove their facilities at no cost to highway agencies. Now that they have obtained this valuable concession from the States and localities, they come to the Congress seeking to have the Federal Government pay their relocation costs. We are unable to see any equity or justice in utility proposals of this kind.

If the Congress should see fit to provide for Federal reimbursement of utility relocation costs in highway right-of-way, it may well consider the complete prohibition and elimination of utilities from occupying Federal-aid highway rights-of-way, to most effectively forestall the very difficulties caused by the utilities in the first instance. Highway officials would be among the first to applaud such a revised policy. The argument of the utilities that expense relocations to accommodate highway construction cause heavy expenditures which result in increased rates to their consumers is not a sound one. It is unsound because the utility consumer may or may not be the same citizen who through various highway taxes pays for the cost of acquisition of the highway right-of-way. If this argument is sound, then the utility should pay its proportionate cost of the State highway right-of-way it uses or a proportionate rental fee which payments would accrue to the benefit of the mass transportation operators and freight truckers and other vehicle operators using the highways.

It is true that utility consumers, or some of them, also pay highway taxes. But so does the storekeeper, the industrialist, the farmer, and many other motorist groups. If paying gas taxes entitles each of these groups to the free use of the highway rights-of-way to conduct their business, as the utilities seem to assert, then the storekeeper can set up his shop in the highway right-of-way too, free of charge; and so can the industrialist, the farmer, and others. They, in turn, could then claim reimbursement for the relocation of their facilities located in the public highway right-of-way. Utility arguments of this kind are untenable.

Our investigation shows that in many States publicly owned nonrevenue producing utility facilities, such as sewers, fire and police signal systems, and street lighting systems are presently relocated at the expense of available highway construction funds.

Utility spokesmen may assert that the proposed acceleration of the Federal-aid highway program would result in tremendous new financial burdens on utilities. Presumably the National System of Interstate Highways would be included. In the recent report Needs of the Highway System (H. Doc. No. 120), it is indicated that approximately 15 percent of the existing mileage of 37,700 (or 5,655 miles) are already adequate according to the standards established, that is, until 1974. Accordingly, no new utility relocation costs will be involved here.

As to the remaining mileage, the study of highway needs, based on engineering practices which now obtain in the several States, indicates that the bulk of the existing mileage of the Interstate System will be relocated on new highway right-of-way rather than improved on

existing location. This fact is emphasized not only in the highway needs report, but also in the Clay Committee report in the following language:

On a considerable portion of the interstate network (especially in urban and suburban areas) it will be more economical to relocate than to acquire the additional land necessary to permit control of access. Realinement of the highway to eliminate sharp curves will be required in some sections and changes in location to reduce mileage between terminal points will be required in others.

In short, no burdensome or extraordinary utility relocation work will be necessary in connection with the Interstate System.

It seems to highway officials that the utilities are seeking further subsidies from the Congress. State highway departments and the Federal Government have already been subsidizing utilities for many years by permitting them to make free use of the highway right-of-way and facilitating their maintenance operations at lower costs than would otherwise be possible. Moreover, the highway departments and Federal Government have been paying higher construction and maintenance costs to accommodate utilities in the highway right-of-way. Now the utilities are asking for further subsidies.

Why should the State highway departments or the Federal Government further subsidize the utilities? If the utilities need more subsidy, the funds should come out of general funds and not out of highway funds, because the incidence of the benefits are much more widespread.

There are many legal ramifications to the utility relocation problem. An impartial and exhaustive investigation of this matter has recently been made by the Highway Research Board of the National Research Council. It is now available as Special Report 21. It contains a wealth of data which would be of interest to this committee. We call your particular attention to the titled subject "Judicial Decisions" appearing on pages 1 and 2 of this report. With the permission of the committee, we would like to insert a summary of it into the record.

In conclusion, we again urge the Congress to defeat any proposed legislation which is an intrusion upon State sovereignty and which would give the utilities vested rights and reimbursements to which they are not entitled.

The Federal-Aid Highway Act of 1944 already provides in a general way for financing of the cost of relocation of public utilities arising out of highway construction, to the extent that such procedure is recognized under the laws of the several States. The American Association of State Highway Officials recommends a continuation of the present policy.

It might be well to consider whether the constitutional right exists to reimburse the utilities out of public funds for relocation in the highway right-of-way. Would this be making grants of public funds to private individuals or corporations, in violation of constitutional prohibitions?

Furthermore, we are fearful that the proposed Federal legislation would cause critical conflict between Federal and State laws which could possibly take years to adjust, causing a critical and unwarranted delay in the highway modernization program that is so badly needed to maintain the economy of our Nation.

Thank you.

Mr. DEMPSEY. Thank you very much.

Your request to insert the judicial decisions appearing at pages 1 and 2 without objection will be put in the record.

Mr. BALFOUR. Mr. Chairman, they are attached to this report, and we would like also to introduce the research job that they have done in the record in its entirety. I would like to file it with the committee. Mr. DEMPSEY. Without objection. The judicial decisions will be put in the record.

(The judicial decisions referred to are as follows:)

AN ANALYSIS OF COURT DECISIONS CONCERNING UTILITY RELOCATION

The following summary is taken verbatim from a recent publication of the Highway Research Board of the National Research Council entitled "Relocation of "Public Utilities Due to Highway Improvement: An Analysis of Legal Aspects," special report 21, 1955.

JUDICIAL DECISIONS

Over 250 judicial decisions affecting public utility relocation necessitated by highway improvement have been examined in connection with this investigation. The following is a summary of legal principles enunciated by the courts in such

cases.

State legislatures possess and exercise sovereign and complete control over all highways within their jurisdiction, and are responsible to the general public for the construction, maintenance, and improvement of those highways.

Quite often the legislatures delegate their control over some of those highways to State highway departments, and their control over other highways to the various local governmental units traversed by those highways. Any such delegated agency of the State, as well as the State itself, is considered by the courts to be a trustee for the general public. This is true whether the State has obtained a fee simple title in the lands it uses for the highways, or whether it merely acquired an easement over those lands for highway purposes.

The highways are, naturally, designed primarily for the use of the traveling public. They may, however, be used for any purpose which serves the public's interest in transportation, communication, sewage, or health.

Thus, it is a generally accepted principle, often codified in statute, that public utilities designed to serve these public purposes may also make use of designated classes of the highways for the location of their facilities and equipment, provided that this use does not inconvenience or hamper the public in its ordinary use of the highways, and subject to various qualifications and regulations.

Many of those States which have specific authorizations require the utilities first to obtain the consent of the highway department or of the municipality through which the highway passes. And in all States, the erection, maintenance, and repair of the utility facilities are subject to the supervision and control of the highway department or local governmental unit, as provided either specifically by the terms of the statute or other permission, or impliedly under general common-law principles. Even if the utility constructs its facilities within the public right-of-way of the highway pursuant to express permission of the State, of the highway department, or of the local community, the utility's rights are secondary and subordinate to the interests of the traveling public.

If the utility locates without consent in the public right-of-way, then it is generally treated by the courts as a trespasser, or at most, as a tenant at the will of the public, or by sufferance of the public, and can be required to move its facilities whenever required to do so and at its own cost.

When the utility obtains the express or implied consent of the appropriate highway authority and expends money in reliance on that consent, it does secure an interest in the highway location which might be termed a "right" or, more accurately, a "privilege," in that location, for some limited purposes; it is also subject to corresponding duties or obligations because of that location. This means that the municipality or highway department cannot arbitrarily, without a valid reason, rescind the consent and require the utility to move its facilities, or impose a charge for the use of the highway after having permitted its use free of charge, or arbitrarily impair the obligation of its "contract" with the utility. On the other hand, the utility's right or franchise to locate in the public ways may be taxed by the city or State, or a charge can be imposed as a condition of the municipality's original consent.

Even if the courts should label the utility's privilege as a "vested property right," for purposes of protecting it from the arbitrary extinction of this right,

they have also recognized that no utility can acquire a vested right to remain in any specific location in the highway.

This conclusion follows from the fact that no government or its agency-State or local-can make any contract or agreement which impairs its police power. The police power has been defined as the power to make all reasonable regulations necessary for the preservation of the health, safety, welfare, and convenience of the public. Accordingly, any consent granted to a utility to occupy the public highways is always subject to reasonable exercises of that police power. This is true whether the condition is express or not.

It is universally recognized that the control of highways is a proper subject for the exercise of the police powers. Accordingly, users of the highways whether travelers thereon or utilities whose facilities are located therein, are required to obey without compensation reasonable police regulations designed to facilitate the use of those highways by the traveling public.

The courts have uniformly held that the State, acting through its legislature, its highway department, or its local governmental units, can require utilities to relocate, at their own expense, any facilities located within the right-of-way of a public highway to another position within the highway right-of-way whenever the necessities of highway improvement require.

This is true whether the utility facilities are located under, over, in, or upon the highway, and regardless of the type of improvement of the highway, whether it be the widening of an existing highway, a change in alinement or grade, the elimination of a crossing at grade of the highway with railroad tracks or with another highway, the construction of access and feeder roads or traffic interchanges, or any other necessary engineering betterment.

In fact, utilities can be required to relocate their facilities to other positions within the highway when other governmental functions require. They cannot however, be required to bear the cost of relocation merely to benefit some other privately owned utility or some proprietary activity of the Government, such as the operation of certain municipal utilities. The courts, however, are not uniform in classifying various municipal activities as governmental or proprietary.

However, no one has suggested that highway construction or improvement is designed for private, rather than public, benefit. It is universally held to constitute a governmental activity.

Nothing in the nature of the Federal program of aid to the States for their highways alters this conclusion that the States can compel utilities to relocate at their own cost facilities located within the public highway right-of-way. Federal aid to highways consists merely in the appropriation of money to be matched by the States and to be spent on a designated system of highways, provided that minimum standards of construction are met. The Federal Government does not initiate highway-construction projects. The States have unfettered discretion to determine whether or not any highway projects are to be undertaken, the nature of the project, and whether the project is to be financed entirely from State funds or under the Federal-aid provisions.

Thus, Federal participation does not prevent the State from invoking its police powers in connection with any highway project. Nor does the Federal Government exercise control over the projects sufficient to transform the States into agents for the Federal authorities in carrying out the projects. The Federal grants merely recognize a legitimate national interest in the improvement of existing highways.

In addition to the Federal-aid highway program, the Federal Government participates in other highway projects by cooperating with other Federal departments in constructing highways to and in national parks, national forests, national monument areas, military and naval reservations, Indian lands, and other Federal lands. In aid of these projects, the Federal Government exercises a power akin to that of the police power of the States, and can compel utilities to relocate their facilities located within the right-of-way of the highways when highway improvement requires.

Federal law presently provides that railroads which are required to eliminate grade crossings of their tracks with public highways are entitled to reimbursement, regardless of the State laws on the subject; but it does not presently provide for reimbursement of the cost of utility relocations except in those States where the State is obligated by law or otherwise to bear this cost. This fact does not constitute an unconstitutional discrimination in favor of the railroads, but merely indicates a reasonable legislative classification based on legally significant differences between railroads on their own private right-of

way involved in grade-crossing projects and other utilities whose facilities are located within the public right-of-way.

Mr. McGREGOR. I take it for granted you are not in accord with some recommendations that are being made in the other body relative to 2 percent for repayment of utility relocation?

Mr. BALFOUR. That is correct, sir.

Mr. DEMPSEY. I gathered that from your statement.

Mr. Gentry?

Mr. GENTRY. Mr. Balfour, what is the history of this problem? I know it came up in Texas. I had not known that all utilities were on the highway right-of-way. I did not know that. Of course, I learned it. Has that been a custom forever, letting

Mr. BALFOUR. That has been a long-established custom I think since the days that communications systems came into existence. Mr. GENTRY. I feel they should not even be there, and certainly I agree with you we should not be paying for them.

Mr. SCHERER. I have one question.

Mr. DEMPSEY. Mr. Scherer.

Mr. SCHERER. Mr. Balfour, is it not a fact today public utilities commissions or public service commissions of the various States fix the rates that utilities are allowed to charge consumers?

Mr. BALFOUR. That is correct, sir.

Mr. SCHERER. And in fixing those rates the utility commissions take into consideration the various costs that utilities have in furnishing the service. Is that not right?

Mr. BALFOUR. That is correct; yes.

Mr. SCHERER. And then they allow them a fair return on those costs and their capital investments?

Mr. BALFOUR. Yes.

Mr. SCHERER. And then would not the increased costs to utilities in relocations be a part of the costs which utilities commissions would allow in fixing future rates for consumers?

Mr. BALFOUR. Yes.

Mr. SCHERER. And is it not a fact that in most public utility contracts there are escalator clauses whereby the rates to the consumers are increased as the costs of the service increase, as the price of coal goes up, as the cost of labor goes up?

Mr. BALFOUR. In many cases that provision is made.

Mr. SCHERER. So is your statement not just a little in error when you say that these costs may not be passed on to the consumer? Are they not actually passed on to the consumer?

Mr. BALFOUR. I mean by that statement that in many, many casesI would say in the majority of cases of relocation required by highway construction, when the utility facility is placed in the highway right-of-way under permit, the cost of that particular relocation as compared to the overall cost of construction, reconstruction, and maintenance of the utility facility is so slight that it could hardly be discovered as a matter affecting rates one way or the other.

Mr. SCHERER. Whether it is slight or not, it is one of the costs that is taken into consideration when a public utilities commission of a State fixes or approves rates that are allowed to be charged by a utility?

Mr. BALFOUR. That is, of course, correct.