Mr. TIPTON. Thank you very much, Mr. Chairman, and thank you very much Senator Schoeppel. The CHAIRMAN. The Bureau of the Budget has that request and Mr. Sweeney will see that it is taken care of. (The document containing the answers to the questions raised by Mr. Tipton is as follows:) EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D. C., June 15, 1954. Hon. JOHN W. BRICKER Chairman, Committee on Interstate and Foreign Commerce United States Senate, Washington, D. C. MY DEAR MR. CHAIRMAN: This will reply to your letter of May 27, 1954, requesting the comments of the Bureau of the Budget with respect to certain questions raised by Mr. S. G. Tipton, general counsel for the Air Transport Association, in his testimony on S. 3435, a bill to incorporate the Washington National Airport, and for other purposes. The views expressed below have the concurrence of the Department of Commerce. Mr. Tipton first of all raised a question of public policy regarding congressional review of airport appropriations. While it is true that the airport, under the terms of S. 3435, will not be required to finance its entire program from annual appropriations, nonetheless the Congress will have full opportunity to scrutinize the Corporation's operations. The Corporation, as provided by the Government Corporation Control Act, will submit an annual business-type budget for review and approval by the President and the Congress. In addition, the Corporation will be subject to an annual commercial-type audit by the Comptroller General. Inasmuch as the airport is a business enterprise, the businesstype budget and commercial-type audit will disclose more fully the results of the airport's operations and thus make possible more effective congressional control than can be obtained under present procedures. Mr. Tipton has also raised a number of questions related to the capitalization and financing of the Corporation. In this connection, it should be noted that some of the questions with respect to rate policy would arise irrespective of whether the airport is incorporated. The principle difference is that the bill establishes a statutory standard for determining the Government's investment; limits the elements to be included in the rate base; and provides budget and audit procedures calculated to disclose fully to the Congress and industry the facts which will enable them to judge the fairness and equity of charges assessed by the airport. At the present time there are no statutory standards to guide the airport in fixing rates. Under the terms of the bill, the Corporation would be required to bear the cost of operating and maintaining the airport and paying interest on the capital of the airport fund, in accordance with the formula set forth in section 7 (b). As in the case of other Government corporations, capital assets will be depreciated on the basis of standards and principles generally applied in private industry. In accordance with these principles, items such as land would not be depreciated. Interest would be paid annually to the Treasury, but depreciation charges would be reflected on the Corporation's books and, to the extent earned, retained by the Corporation. Funds derived from depreciation could be spent by the Corporation for replacement of capital facilities and other purposes. The bill does not provide, and it is not the intention, that the Corporation shall, over a period of years, amortize the Government's investment in the airport. The bill would require a determination of the capital of the fund, "taking into consideration original cost, less depreciation, the usable value to the airport if clearly less than cost, obsolete and unusable facilities and equipment, and other reasonably determinable factors which would reduce the value of the assets of the airport." The Department of Commerce has made a preliminary valuation based on original cost less depreciation and other minor fixed factors. This valuation, about $19 million, would include working capital and all other assets of the proposed Corporation. The Department has not made any adjustment of this figure based upon "the usable value" of specific items "to the airport, if clearly less than cost," and for the most part we have not taken into consideration "obsolete and unusable facilities and equipment, and other reasonably determinable factors which would reduce the value of the assets of the airport," so that this $19 million represents a maximum figure. We believe that we can safely say that the capital of the fund will not exceed that amount. The annual interest payment on the capital of the fund will depend on the final valuation; furthermore, it will vary from year to year with the United States Treasury long-term interest rate. However, based on the maximum figure of $19 million, and the current Treasury interest rate of 22% under the formula provided in section 7 (b) of S. 3435, and applying the factor also in section 7 (b) of reducing the capital for interest purposes by what would have been the Federal contribution had the airport been built by a local public agency, we estimate the annual interest charge at $360,000. A rough estimate indicates that annual depreciation charges will amount to approximately $825,000. This figure, of course, cannot be fixed accurately without a detailed engineering survey which would be made as soon as possible after enactment of the bill. These are the two major cost items not now reflected in the airport's accounting, but which should be considered in fixing rates regardless of whether the airport is incorporated. Other indirect costs, such as civil service retirement, employees' compensation contributions, and the administrative expenses of the advisory board, which also will be reflected for the first time as items of airport expense, I will not be substantial. Turning to more technical considerations, Mr. Tipton expressed some misgivings about the inclusion in this bill of a reference to the description of the airport contained in the statute which this bill would supersede. We believe that this objection could be met by inserting in line 3 of page 1 of the bill, between the statutory reference "(54 Stat. 686)" and the comma, the following words: "excepting section 1 (b) thereof, which is continued in effect,". There is enclosed a memorandum from the Deputy General Counsel of the Department of Commerce to the Secretary of Commerce discussing the legal implications of a transfer of the airport land to the proposed Corporation. The Bureau of the Budget would have no objection to the amendment to section 1 of S. 3435 suggested by that memorandum. Sincerely yours, To: The Secretary of Commerce : ROWLAND HUGHES, Director. JUNE 11, 1954. From: Deputy General Counsel, Department of Commerce, Hal B. Corwin. Subject: The effect of the proposed transfer by S. 3435 (83d Cong.) to the proposed Washington National Airport Corporation of title to realty on which the Washington National Airport is located. There is pending before the 83d Congress, S. 3435, a bill introduced by Senator Bricker at the request of the Department of Commerce. This bill has for its purpose, among others, the creation of a Federal corporation "to protect, operate, improve, and maintain the Washington National Airport as a business enterprise and a public service facility." This bill would transfer to the Corporation "all property, real, personal, and mixed, now operated by the Administrator of Civil Aeronautics as the Washington National Airport ***" 2 Some concern was indicated during the hearing before the Committee on Interstate and Foreign Commerce of the Senate on this bill with respect to the possible effect, of such a transfer of the realty on which the airport is located, on the existing agreement between the State of Virginia and the United States Government under which the area in effect is declared to be a Federal reservation. This concern may arise from pronouncements, for example, of the United States Supreme Court in S. R. A., Inc. v. Minnesota where realty acquired by the United States for public purposes and over which the United States had acquired exclusive legislative jurisdiction pursuant to the Constitution sold to a private purchaser under a contract of sale giving the purchaser right of possession but reserving legal title in the property as security for the payment of the purchase price by installments. The Supreme Court held that when the purchaser took possession of the property, it became subject to the territorial jurisdiction of the State." 1 Sec. 5 of S. 3435. 2 Sec. 16 of S. 3435. 3 327 U. S. 558. 4 Art. I, sec. 8, clause 17. 5 Supra at p. 565. was The question posed by those concerned over the effect of the transfer of realty by the bill, S. 3435, is answered in our opinion by the views elsewhere expressed by the Supreme Court as to the relationship of a wholly owned Federal corporation to the United States Government. In 1939 the Supreme Court was confronted with the question of "whether a national bank may pledge assets to secure deposits of funds made by governmental agencies, even though they may not be 'public money' within the scope of section 45 of the National Banking Act; (13 Stat. 99, 113; 12 U. S. C., sec. 90)." (Inland Waterways Corp. v. Young, 309 U. S. 517, 518.) Two wholly owned Government corporations, the Inland Waterways Corporation and the United States Shipping Board Merchant Fleet Corporation, had made deposits in a national bank which became insolvent. In deciding this case, the court used language which appears to us to be particularly relevant in considering the significance of the form which the holder of the legal title to the airport lands takes insofar as it relates to the agreement between the State of Virginia and the United States Government on jurisdiction over the premises: "So far as the powers of a national bank to pledge its assets are concerned, the form which the Government takes-whether it appears as the Secretary of the Treasury, the Secretary of War, or the Inland Waterways Corporation-is wholly immaterial. The motives which lead the Government to clothe its activities in corporate forms are entirely unrelated to the problem of safeguarding governmental deposits, and therefore irrelevant to the issue of ultra vires * * * The true nature of these modern devices for carrying out governmental functions is recognized in other legal relations when realities become decisive. * * * "The funds of these corporations are, for all practical purposes, Government funds, the losses, if losses there be, are the Government's losses." " In 1945, the Supreme Court in the case of Cherry Cotton Mills v. U. S. (327 U. S. 536) again ruled most specifically on the contention that a corporation wholly owned by the Federal Government should be treated as a private corporation. The petitioner in this case was owed $3,104.87 by the Government in refund of taxes paid by petitioner under the Agricultural Adjustment Act. The petitioner owed the Reconstruction Finance Corporation a $5,963.51 balance on a note for borrowed money. The Comptroller General directed the Treasury not to pay out the refund to the petitioner, but to issue the check to RFC to partially liquidate petitioners' indebtedness to that governmental agency. The petitioner challenged such action on the grounds that RFC should be treated as a privately owned corporation and that the indebtedness to RFC was not a claim "on the part of the Government" entitling it to be set up as a counterclaim under the Comptroller General's procedure. The Court answered this challenge thus: "We have no doubt but that the setoff and counterclaim jurisdiction of the Court of Claims was intended to permit the Government to have adjudicated in one suit all controversies between it and those granted permission to sue it, whether the Government's interest had been entrusted to its agencies of one kind or another. Every reason that could have prompted Congress to authorize the Government to plead counterclaims for debts owed to any of its other agencies applies with equal force to debts owed to the RFC. Its Directors are appointed by the President and confirmed by the Senate; its activities are all aimed at accomplishing a public purpose; all of its money comes from the Government; its profits, if any, go to the Government; its losses the Government must bear. That the Congress chose to call it a corporation does not alter its characteristics so as to make it something other than what it actually is, an agency selected by government to accomplish purely governmental purposes" (Inland Waterways Corp. v. Young, 309 U. S. 517, 524).' In our opinion the use of the corporate form is equally irrelevant to the agreement between the State of Virginia and the United States Government with respect to jurisdiction of the sites of the airport property. If, there remain any reservations with respect to this position, there would appear to be no objection to amendment of line 8, page 1, of S. 3435 by insertion between the word "created" and the comma, the phrase "as an agency and instrumentality of the United States". Such an amendment would, in our opinion, clarify rather than create any different rights. Supra at p. 524. Hon. ROWLAND HUGHES, UNITED STATES SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, June 8, 1954. Director, Bureau of the Budget, Executive Office of the President, Washington 25, D. C. DEAR MR. HUGHES: On May 27, 1954, I forwarded to you certain questions raised by the Air Transport Association concerning S. 3435, a bill to incorporate the Washington National Airport. In connection with your reply thereto, I wish you would consider the draft bill "To improve the administration of the public airports in the Territory of Alaska," which was forwarded on May 28, 1954 to the Vice President by the Secretary of Commerce. A companion bill has been introduced as H. R. 9436. I am advised that there is substantial similarity between the problems presented by the public airports administered in the Territory of Alaska, under the jurisdiction of the Secretary of Commerce, and the Washington National Airport. I note that it is only with respect to the latter that the establishment of a Federal corporation is suggested. In connection with the Alaskan airports, a revolving fund is proposed along the lines suggested by the Comptroller General for the Washington National Airport. The principal difference between the two approaches would appear to be the question of the right of suit. I am sure your comments on this proposal for the Alaskan airports will assist the Committee in its consideration of S. 3435. Sincerely yours, JOHN W. BRICKER, Chairman. EXECUTIVE OFFICE OF THE PRESIDENT, Hon. JOHN W. BRICKER, BUREAU OF THE BUDGET, Washington 25, D. C., June 15, 1954. Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: This will reply to your letter of June 8, 1954, requesting the comments of this office on certain differences between a draft bill to improve the administration of the public airports in the Territory of Alaska and S. 3435, a bill to incorporate the Washington National Airport, and for other purposes. The fundamental difference between the two bills is that S. 3435 provides for the creation of a Government corporation with the usual corporate powers and flexibility while the Alaska airports bill deals only with the method of financing airport operations and its principal purpose is limited to the establishment of a revolving fund. The Deputy Director of the Bureau of the Budget submitted to your committee at the time of his testimony on S. 3435, a columnby-column analysis showing the similarities and differences between a revolving fund and a Government corporation. The decision to recommend incorporation of the Washington National Airport was not made until after consideration of other possible solutions to the airport's problems, such as the creation of a revolving fund and use of the business-type budget and accounting procedures permissible under the Budget and Accounting Procedures Act of 1950. It was concluded that a revolving fund by itself, while making possible considerable financial flexibility, would not afford the necessary degree of operating flexibility. The factors justifying incorporation of the Washington National Airport do not apply in the same degree to the Alaska airports. There is no comparison between the volume, variety and complexity of business operations carried on by the Washington and Alaska airports. Furthermore, the Alaska airports probably will be unable to operate on a fully self-sustaining basis at this stage of their development. This fact is recognized by section 11 (f) of the Alaska bill which authorizes appropriations to cover losses sustained in the operation of the airports. It should be noted that this provision is not contained in S. 3435. We believe that establishment of a revolving fund will provide the flexibility required at this time by the Alaska airports. The question of incorporating the airports should be reviewed when they approach their practical operating capacity and demonstrate their ability to be substantially self-supporting. Sincerely yours, ROWLAND HUGHES, Director. The CHAIRMAN. I think we ought to make a part of the record at this time, Public Law 674 of the 76th Congress and Public Law 59 of the 80th Congress as well as Public Law 208 of the 79th Congress, which refer to the boundary line question Mr. Tipton testified about. (The laws referred to are as follows:) [PUBLIC NO. 674-76TH CONGRESS] [CHAPTER 4443D SESSION] [S. 3927] AN ACT To provide for the administration of the Washington National Airport, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That for the purposes of this Act (a) "Administrator" means the Administrator of the Civil Aeronautics Authority. (b) "Airport" means the Washington National Airport, which shall consist of, and include, the tract of land, together with all structures, improvements, and other facilities located thereon, lying partly in the District of Columbia and partly in the State of Virginia, particularly described as follows: Commencing at a point of beginning, said point being the intersection of the property line of property owned by the Richmond, Fredericksburg and Potomac Railroad Company, and dredging base line at station 0+18.99 referenced south 6,808.21, west 9,078.02, running in a southeasterly direction on a bearing of south 22°51'18'' east a distance of 6,270.91 feet, more or less, to station 62+89.90 of said dredging base line. Thence 13°30' right on a bearing of south 9°21′18′′' east a distance of 1,332.29 feet, more or less, to station 76+22.19 of said base line. Thence 11°04′19′′ right on a bearing of south 1°43'01" west a distance of 1,231.20 feet, more or less, to station 88+53.39 of said base line. Thence 12°40'41'' right on a bearing of south 14°23′42'' west a distance of 2,409.32 feet, more or less, to station 112+62.71 on said base line. Thence 1°15'44.3'' right on a bearing of south 15°39'26.3'' west a distance of 4,938.38 feet, more or less, to United States Coast and Geodetic Survey Station WATER, referenced south 22,220.86, west 8,395.54. Thence 17°09′25.6" left on a bearing of south 1°29′59.3'' east a distance of 85.58 feet, more or less, to a corner of the property line between the United States of America and Smoot Sand and Gravel Corporation. Thence 85°59'59.3'' right on a bearing of south 84°30'00'' west a distance of 1,516.41 feet, more or less, to a monument located at a corner on the property line of the Richmond, Fredericksburg and Potomac Railroad Company, said monument being referenced south 22,451.75, west 9,902.73. Thence 85°50′06.7'' right on a bearing of north 8°09'54" west a distance of 442.68 feet, more or less. Thence 5°00'12'' left on a bearing of north 13°10'06" west a distance of 578.64 feet, more or less. Thence 4°57'25" left on a bearing of north 18°07′31′′ west a distance of 462.94 feet, more or less. Thence 1°34'50'' left on a bearing of north 19°42'21'' west a distance of 943.56 feet, more or less, to the point of a curve having an angle of 27°52'45'' right radius 1,241.15 feet, long chord 597.98 feet, on a bearing of north 5°45'58'' west. Thence along the arc of said curve a distance of 603.92 feet, more or less, to the point of tangency of said curve. Thence along a tangent to said curve on a bearing of north 8°10′24′′ east a distance of 232.33 feet, more or less, to the point of a curve having an angle of 36°59'09'' left, radius 1,046 feet, long chord 663.56 feet on a bearing of north 10°19′10.5'' west. Thence along the arc of said curve a distance of 675.22 feet, more or less, to the point of tangency of said curve. Thence along a tangent to said curve on a bearing of north 28°48'45'' west a distance of 256.75 feet, more or less. Thence 30°33'10" left on a bearing of north 59°21′55'' west a distance of 287.84 feet, more or less. Thence 40°45'20'' right on a bearing of north 18°36'35" west a distance of 1,142.08 feet, more or less. Thence 5°43'29'' right on a bearing of north 12°53'06'' west a distance of 118.02 feet, more or less, to the point of a curve having an angle of 26°20'50'' right, radius 3,665.71 feet, long chord 1,670.85 feet on a bearing of north 0°17'19'' east. Thence along the arc of said curve a distance of 1,685.66 |