who is familiar with the area and the local people and is working every day with those people and with other groups in the community on other rural credit programs.

After plans have been prepared, a typical budget is developed to demonstrate conclusively that the income to be received will meet all estimated costs.

(b) The Farmers Home Administration does take into consideration the overall costs of the system per connection. We also carefully analyze the ability of the system to provide adequate supplies of water at a reasonable cost that will meet the total demands of the users. We carefully check alternate water supply sources to determine which of several sources, in some cases, would be most feasible. The necessary design economies which make these rural systems feasible are made possible by another procedure peculiar to Farmers Home Administration operations. Each water system design is carefully calculated to provide the water supply needed by each user along the line using a maximum simultaneous demand of 3 gallons per minute per tap. Maximum and minimum pressures are carefully calculated for each control point on the system to make sure that the systems are so balanced and designed as to provide the needed services for each user in the most economical manner possible. Complete hydraulic calculations of this nature are rarely made for large urban systems.

(c) Other factors taken into consideration include assured uses of water by local industries, special uses by such agricultural enterprises as dairies and greenhouses, and evident increases in the average income from livestock where farmers are concerned.

Question. 3. In administering section 306 of the 1961 act, does the administration require that associations be unable to obtain sufficient credit elsewhere to finance their plans at reasonable rates and terms, similar to the requirements of section 302 of the act?

Answer. 3. The Farmers Home Administration requires that associations be unable to obtain credit elsewhere. This determination is required for all loans under title III of the Consolidated Farmers Home Administration Act of 1961, as amended, by the provisions of section 333 of the same act.

Question. 4. Does the administration require that the association, if it has bonding authority, actually attempt to issue bonds?

Answer. 4. Farmers Home Administration personnel reviewing applications from associations make careful investigations of the availability of other credit to each applicant. If it appears that it may be possible for the applicant to market its bonds on the open market, it will be required to issue the bonds and make a public offer.

Question. 5. What criteria does the administration have relating to the projected annual earnings from a water system to the cost of repayment of principal and interest? Does the administration require that the projected annual earnings be 11⁄2 times the annual cost of repayment of principal and interest, which I understand is common in municipal financing?

Answer. 5. The Farmers Home Administration does not provide financing in competition with established sources of credit or with private lenders. Securities offered by applicants must be unsalable at reasonable rates and terms in the financial markets and therefore there is no requirement that a certain "bond coverage" be provided. The only requirement is that the projected annual earnings be at least equal to the amount required for operation, maintenance, debt service, and maintenance of a reasonable reserve.

Question. 6. What is the average development cost per connection of rural water districts receiving loans or insuring loans under section 306 of the 1961 act?

Answer. 6. The average development cost per connection of rural water districts receiving loans under section 306 of the 1961 act is approximately $1,140 per tap.

Question. 7. Do you have any figures as to the cost per 1,000 gallons of water to users of rural water district water?

Answer. 7. The average cost per 1,000 gallons of water used by rural water district residents is approximately $1.50 per thousand gallons. For a large water user this will go down to about 50 cents per thousand gallons based on the usual graduated water rate schedules.

Question. 8. Do you have any figures as to the monthly minimum charges per connection?

Could you supply the committee with such figures for the years 1963 and 1964 for each district, together with the number of gallons of water available for

this minimum charge and the average number of gallons actually purchased per connection?

Answer. 8. Detailed figures are not available for years 1963 and 1964; however, during the period of January to April 1965, the monthly minimum charge per connection averaged approximately $6 per month. The average monthly charge was $7.50. During the same period, the projects approved provided for an average of 3,000 gallons per month for the minimum charge. The average number of gallons actually purchased per connection on these systems is not available and could only be obtained by a careful analysis of the records of each operating association.

Question. 9. Do you have any figures with you as to the source of water for water districts receiving loans or insuring loans during 1963 and 1964, as between surface water and well water?

Could you supply the committee with such information indicating the source of the water, that is whether a well or surface water, and if a well whether it was a new well or whether an existing well was used, and the depth of the well. Answer. 9. Statistics are not available for loans made during 1963 and 1964; however, an analysis of the loans made during fiscal year 1965 indicates that approximately 63 percent of the borrowing associations developed water from deep wells; 29 percent purchased water from other rural water districts, municipalities, and water authorities; and 8 percent developed surface water supplies. Practically all of the wells were new wells. Figures are not available on the average depth of such wells, but most of them were deep wells with pumping depths in excess of 200 feet.

Question. 10. Could you supply the committee with the number of miles of distribution piping in rural water districts insuring or receiving loans during the years 1963 and 1964, and any in 1965 that are available?

Answer. 10. Detailed figures are not available on the pipe used in Farmers Home Administration financed water systems during 1963 and 1964. However, a careful sampling of reports on water systems approved during the past fiscal year indicates that the average length of pipe is 16.6 miles per system. This totals about 6,400 miles for this fiscal year.

Question. 11. Do you have any figures as to the type, size and total footage of each type and size of pipe that was used in systems in 1963-64?

Could you supply the committee with such information for each installation in these years?

Answer. 11. Detailed figures are not available on the pipe used in Farmers Home Administration financed water systems during 1963 and 1964. However, a careful sampling of reports on water systems approved during the past fiscal year indicates that approximately 18.9 percent of the total linear feet is cast iron, 22.5 percent is asbestos-cement, and 56.4 percent is plastic pipe. Most of the plastic pipe, however, is 3 inches or smaller in diameter whereas most of the asbestos-cement and cast iron pipe is 6 inches or larger in diameter.

Question. 12. Do you have any figures with respect to the type of service lines installed on systems during 1963-64?

Could you supply the committee with information as to the type of pipe used and the size of the pipe and the total footage of each size and type?

Answer. 12. Complete information is not available on service lines installed to connect individual water users' homes to the mains. However, these service lines are generally 4-inch copper or plastic pipe with an average length of 40 feet per customer.

Senator AIKEN. If you insure what would seem to be a perfectly safe loan, you probably would not know the size of pipe used in it and where it was used.

Mr. BERTSCH. That is true.

The CHAIRMAN. All right, Mr. Richard, Mr. Hout, Mr. Snell, and Mr. Humes.

STATEMENT OF THADDEUS S. SNELL, LEGAL COUNSEL, WATER SYSTEMS COUNCIL, CHICAGO, ILL.

Mr. SNELL. Mr. Chairman and members of the committee, my name is Thaddeus S. Snell. I am an attorney practicing at 134 S. La Salle Street, Chicago, Ill. I am here today on behalf of the

water systems council, a national trade association of manufacturers of farm and domestic pumps and water systems and their suppliers. The council has about 50 members and associate members. With me today are: James Richard, president of Red Jacket Manufacturing Co., Davenport, Iowa, and president of the council; Fred Hout, president of Barnes Manufacturing Co., Mansfield, Ohio, a director and chairman of the council's legislative committee; and Mr. Durwoad Humes, executive secretary of the Water Systems Council of Chicago, Ill.

Mr. Chairman, I should first like to express, on behalf of the Water Systems Council, our appreciation for the committee's generosity in permitting us to appear today. We believe that the rural water district legislation introduced by Senator Aiken, and cosponsored by many members of this committee, is of fundamental importance to the rural areas of this country, and we deem it a privilege indeed to present our views to this distinguished committee.

We have provided the committee with a list of members and a brochure, which describes our activities, for reference purposes.

You will note familiar names among members of the Water Systems Council. These names include some of the larger companies in American industry. It also includes among its members many smaller companies whose sole business is the manufacture of pumps, pumping equipment, and other components of water systems. In common parlance, many of the members of the Water Systems Council are indeed "small business."

Our industry has devoted its resources and efforts for over 30 years toward bringing people living in rural areas of this country ample, reliable quantities of pure and wholesome water to supply both agricultural and domestic needs.

We have also provided the committee with a few copies of a handbook which is one of our projects and which is now in its fourth edition, which describes and is typical of some of the work which this council has done in attempting to bring to America complete information on the design, installation, and operation of water systems.

We are keenly aware that rural water use, excluding irrigation, has more than doubled in the past 25 years. Steadily increasing demands can be anticipated as more and more rural families begin using automatic washers, dishwashers, and garbage disposals, and as more farmers begin taking advantage of automated water services for liquid manure handling, liquid feeding, environmental control, and similar modern farming techniques.

It is apparent that there must be a coordinated and well-planned approach among governmental and private agencies if means are to be devised for solving economically and effectively the myriad of problems posed by steeply rising water demands. Such cooperation must exist at National, State, and local levels. The Water Systems Council is firmly committed to applying its energies, abilities, and personnel in the years ahead toward this goal.

It is for this reason that we appear today.

Our interest is limited to that part of S. 1766 which relates to water facilities.

At the outset we would like to make it clear that the Water Systems Council endorses the basic concept of S. 1766, that Federal assistance is

appropriate to bring improvements in water supplies at a reasonable cost to rural residents who are unable to, or to the extent that they are unable to, themselves finance such improvements. The Consolidated Farmers Home Administration Act of 1961, as amended, has established the framework for carrying out this basic concept. Sections 302, 303, and 304 of this act authorize loans or the insurance of loans to individuals who own and operate farms, live on farms or are farm tenants for purposes of development and improvement of water facilities where no other credit is available to them. Section 306 of this act as it presently reads also authorizes loans or the insurance of loans to associations, not-for-profit corporations and public or quasi-public agencies operating as a water district to develop and improve the facilities supplying water to farmers and rural residents where credit is not otherwise available and financial assistance is needed.

S. 1766 proposes to fill a gap in this existing legislation. It proposes to authorize grants to such water districts where, as we understand it, the development costs are so high that they cannot be financed on a sound basis through loans, and grants are necessary in order to supply water through water districts on an economically feasible basis.

We recognize the need for filling this gap and support this concept. However, we suggest that the problem is still not solved and that the bill does not go far enough to accomplish its objectives in three particulars.

First, it does not solve the problem of the individual whose water supply is inadequate and who is not part of a water district and who is unable to improve his water supply through a loan or insured loan as authorized under sections 302, 303, and 304 of the act.

Second, the bill does not establish or require the establishment of guidelines or standards of economic feasibility which will assure the most economical use of the Federal funds available to accomplish the objective we all endorse.

Third, the bill does not establish or require the establishment of technical and engineering standards to assure proper construction of the facilities being financed.

Senator AIKEN. It seems to me they have made fairly reasonable loans in some of the areas which have potential for growth. But it is the cost in the areas where it would be $15 to $20 a month that I am most concerned with. Some of these run $1,000 per family with the interest coming to $5 a month.

Mr. SNELL. Mr. Chairman, this is a matter of great importance to the private water systems industry. We think we have some important recommendations to make to implement this legislation to accomplish the objectives that I understand 93 Senators have endorsed.

The CHAIRMAN. You will have to amend the bill considerably to perform what you are proposing.

Mr. SNELL. That is right.

(Discussion off the record.)

Senator AIKEN. Will you proceed, Mr. Snell?

THE ROLE OF THE PRIVATE WATER SYSTEM

Mr. SNELL. S. 1766 reflects a misunderstand or lack of information of which our industry is becoming painfully aware. The misunderstanding is that a public or community water system supplying water

to a number of users from a single source is preferable to a source of supply which is private and supplies only one user.

I would like to refer to the letter the chairman introduced in the record from the Department of Agriculture and the comment on page 1 to the effect that "in many parts of the country the only solution to the rural water problem is a large central system." We believe this is inaccurate. We believe that there are few, if any, areas in the country where the only solution to the rural water problem is a large central system. It may be a solution, and in some instances it may be the best solution, but we do not believe it is the only solution.

One page 11 of the statement of the Administrator, the statement appears that "many rural people never will have running water" if they do not receive this Federal assistance. Now, this overlooks the possibility of a private system which can supply that running water to rural residents. This concept undoubtedly reflects the image of the windmill and hand pump. The water systems industry is frank to accept responsibility for allowing this misconception to exist. Our public relations have been inadequate. We have not done an effective job in making people aware of the modern private water system. What we say is not in criticism of those who support this concept, but a confession of our own failure to tell our story.

Senator AIKEN. You are referring to a community or individual water system?

Mr. SNELL. The concept that the community system is the only answer to the problem. We admit that we have somehow allowed this concept to develop and we do not criticize those who support this concept that the only answer is a central system. The fact is that the water systems industry has not gone to seed. When electricity was brought into farms and rural areas a water systems revolution occurred as significant in rural America as replacement of the horsedrawn plow with the tractor.

For the committee to fully understand the suggestions and recommendations which we would like to make, I would like to, at this point, ask Mr. Fred Hout to say a few words to the committee about the modern private water system.

Senator AIKEN. Mr. Hout?

STATEMENT OF FRED B. HOUT, CHAIRMAN, LEGISLATIVE COMMITTEE, WATER SYSTEMS COUNCIL, MANSFIELD, OHIO

Mr. HOUT. Thank you. I will make this very brief. I have a prepared statement which I would like to present and would just like to thumbnail it very quickly here, not imposing on your time any longer than necessary.

I am president of Barnes Manufacturing Co. We have about 500 employees in plants scattered around. We have been building pumps since 1895.

I think if I could try to put this in perspective very quickly, it is this. That there is misunderstanding regarding the merits of central supply versus individual supply. I would like to make this positive statement. That individual supply is equal to and in many cases better than central supply.