The attached table showing the percentage of Federal payments that would have been provided the District annually under the formula approach from 1963 through 1972 supports this percentage range. (The table referred to follows:)

Relation of Federal payment formula to general fund local revenues, 1963–72

1 Estimates for 1967 and future years assume enactment of additional revenues recommended in 1967 budget.

Mr. STAATS. An authorization related to general fund revenues would have many of the advantages of the formula approach, including that of providing an incentive for the District to increase revenues from local sources, realizing that the Federal Government would continue to provide its proportional share. It would have the added advantage of removing the argument, sometimes made in opposition to the administration's formula, that the formula proposed would establish a precedent regarding payments in lieu of taxes. It might also remove other concerns that have been expressed regarding the formula approach.

The formula approach would relate the authorization more closely to Federal demands on the city for services than would be a fixed percentage of revenues. However, either approach would enable the District to improve financial planning on the basis of predictable revenues from both local and Federal sources.

On this point, I am speaking particularly to the question of procedures for determining the assessed value of Federal buildings.

The CHAIRMAN. I think it would avoid the attack that is made on the formula approach. I wonder if it does eliminate the argument that it establishes a precedent. Would you still not have that argument, whether you used an "in lieu of tax" formula or a percentage formula? How do you eliminate the argument?

Mr. STAATS. Because the amount of payment under the alternative I am suggesting here would be related to the amount of local general fund revenues raised, rather than to the amount of assessed valuation of Federal property. Also, Mr. Chairman, we have the historical situation where for many years there was a percentage approach, the 50 percent formula, which prevailed for many years. So, what would be suggested here is a percentage which would be related to the amount of local taxes and other charges which are imposed by the District of Columbia on taxpayers in the District.

60-600 0-66 3

The interesting thing about this is, that for a 10-year period where we have made this analysis a percentage ranging from 20 to 25 percent would produce about the same amount of Federal payment as if the formula had been applied during that period of time. So that we think this would be adequate, it would have many of the same advantages as the formula approach, and possibly would meet some of the criticisms.

However, we would still favor as our first choice, our first preference, the formula approach; because we think that is equitable, we think it is sound. We do not agree with some of the objections that have been raised to it, but nevertheless I think our objective here ultimately ought to be to provide some kind of rational basis so that the District can plan its financial program for the period ahead.

I believe that the percentage approach that we have suggested here would do that in very large part.

The CHAIRMAN. I wholeheartedly concur with everything you have said. Of course, I continue to favor the formula approach. Being practical, if you can't secure the formula approach maybe there is some other approach you can use.

If I understand your statement correctly, whether you take the formula approach or take the percentage approach, it would simply be authorization. You still would be required to come before the Appropriations Committees of the House and the Senate in order to secure the money to go with the authorization.

Mr. STAATS. That is correct.

Senator TYDINGS. Mr. Staats, if either of your formula approaches had been in effect the last 10 years, how would the authorizations arrived at by way of the formula have related to the moneys actually appropriated by the Congress?

Mr. STAATS. Of course, a part of the problem in the past has been that the authorization has been low, also. It is only within the last 2 or 3 years that we have had as much as $50 million authorization. Under the formula approach in 1967 we produced about $61.9 million of authorizations. So that the limiting factor in 1967 is going to be the authorization.

Senator TYDINGS. How would it have related to the authorizations passed by the Congress over the last 10 years?

Mr. STAATS. I do not have a table on that, Senator Tydings. I would be glad to furnish it for the committee.

Senator TYDINGS. It would be helpful for us to have. I know it will be in the minds of the Members of the House as to how much more they would have had to authorize and how much less.

The CHAIRMAN. They have never appropriated the full amount of the authorization to my knowledge. How much it has fallen short of the authorized amount, I am unable to say. I am sure we can get it from the District people when they testify.

Mr. STAATS. We will be glad to supply that table. We will work with the District. If the District does not have it when they appear here this morning, we will work with them and supply it.

You are quite right, Mr. Chairman, I do not recall in recent years any time the Congress has appropriated the full amount of the authorization. On the other hand, the authorization, if it is too low, tends to affect the appropriations action.

The CHAIRMAN. We have always been told this. If we have a higher Federal payment authorization figure then the Appropriations Committees are more likely to provide the amount of appropriation needed.

Mr. STAATS. This situation is not unlike any other_authorization, where an authorization tends to constitute a ceiling. It also tends to constitute an indication of intent on the part of the legislative committees and the Congress as a whole as to what is an appropriate amount for a given program.

But the Appropriations Committee has to look at that year by year on the basis of the total budget problem it has before it.

The CHAIRMAN. Thank you very much. If the District people don't have this table, we will ask you or some of your people to work with them and have it supplied for the record. Thank you.

(The table referred to follows:)

Federal payment to the District of Columbia general fund

Mr. STAATS. Mr. Chairman, I turn now to the borrowing authority provision:

Title VII would provide a new and more flexible basis for determining the maximum amount which the District can borrow from the Treasury for general fund purposes. Instead of the present lump sum amount of $175 million (excludes $50 million authorized for core rail rapid transit system), the legislation would authorize the District to borrow up to the maximum outstanding debt equal to 6 percent of the 10-year average of the combined assessed value of real and personal property (including property owned and used by the Federal Government).

At the present time, this would increase the maximum permissible borrowing to $255 million, and this maximum would rise to an estimated $319 million by 1972 as the property valuations involved gradually rose. This basis for determining the upper limit in District borrowing is comparable to that under which most local units of government operate throughout the United States. It has also the distinct value of relating borrowing to potential revenue, which lump sum authorizations, of course, do not do.

The provisions of the bill relating to the general fund borrowing authority should also be considered in the context of the District's anticipated need for borrowed funds. Of the $175 million now authorized for general purposes, $18.7 million has already been appropriated and $17.2 million is requested in the 1967 budget. Should borrowing continue at the projected rates, the present loan authorization will be exhausted in 1968. Some provision for additional borrowing will need to be made before that time if the District is to be able to provide the schools, libraries, health, welfare and recreation facilities required by its citizens.

Use of the borrowing authority would continue to require appropriations by the Congress. There is no reason to expect that borrowing would receive undue emphasis, since both the President and the Congress would review the requests for the necessary appropriations. Moreover, more adequate annual Federal payments would minimize reliance on borrowing which would otherwise be required to finance new capital facilities. However, it is clear that a serious backlog of capital outlay need has developed in the District, and that additional borrowing will be necessary to meet this backlog within the reasonable future. As the President indicated in his budget message, the provisions of this bill relating to the District's borrowing authority would

(1) Conform to debt limits generally used throughout the United States for local governments;

(2) Relate the debt limit more closely to ability to repay;
(3) Enable the District to incur new debt as repayments are

made.

SUMMARY

In conclusion, I wish to emphasize that the two major legislative proposals which I have outlined, together with increases in District tax rates which the Commissioners have recommended and which the President supports, represent, in our judgment, a constructive fiscal program which will meet the most critical fiscal requirements of the District. Both the payment formula and the debt formula, moreover, contain desirable incentives for the District to make any necessary adjustments in tax rates and in assessed valuations, since the impact of such changes would be shared by the Federal Government. President best summarized the need for increased effort for financing the District government in his statement that "increases in District resources must, as always, come largely from local taxes. Commensurate increases in support by the Federal Government are also necessary."

The

This concludes my prepared statement, Mr. Chairman. Thank you. The CHAIRMAN. I think that is a very fine statement. You have made your point clearly, and succinctly. I commend you for an

unusually splendid presentation. I have no more questions of you, largely because I completely agree with you. I think you do have to do these things to face up to the needs here in the Nation's Capital. The sooner we do it, the better.

I recognize we do have problems. I am particularly pleased by the suggestion of alternatives which may result in some final enactment. (Commissioners supplementary report and recommendations on Federal Payment and Borrowing Proposals may be found on p. 344.) Senator Prouty?

Senator PROUTY. I have no more questions.

The CHAIRMAN. Thank you very much, Mr. Staats. We are pleased that you were able to come here. I know you are an extremely busy man, particularly with the hearings coming up Thursday morning.

If we have any more questions, we will contact you.

Mr. STAATS. Thank you, Mr. Chairman.

The CHAIRMAN. Good luck to you in your new position.
Mr. STAATS. Thank you.

The CHAIRMAN. Our next witness is the president of the District of Columbia Board of Commissioners, Mr. Tobriner, accompanied by his fellow Commissioners, General Duke and John Duncan. There may be others whom you will desire to have with you at the table. I see you do have Schuyler Lowe with you. Maybe you might identify others for the record.

STATEMENT OF HON. WALTER N. TOBRINER, PRESIDENT, BOARD OF COMMISSIONERS; ACCOMPANIED BY HON. JOHN B. DUNCAN, MEMBER, BOARD OF COMMISSIONERS; BRIG. GEN. C. M. DUKE, ENGINEER COMMISSIONER; SCHUYLER LOWE, DIRECTOR, DEPARTMENT OF GENERAL ADMINISTRATION; KENNETH BACK, FINANCE OFFICER; AND PETER HERMAN, BUDGET OFFICER, DISTRICT OF COLUMBIA

Commissioner TOBRINER. Mr. Chairman, this is Mr. Kenneth Back, in charge of the Finance Department; Mr. Peter Herman, who is the Director of our Bureau of the Budget. I think all the others are known to you at the head table.

The CHAIRMAN. Very well. You may proceed, Mr. Tobriner.

Your entire statement will be incorporated in full in the record. You develop it in your own style. I have not read the statement. I would suggest possibly in the interest of hearing as many witnesses as we can and expediting as much as possible that you might direct your attention to the Federal payment and the question of the borrowing authority. If you are in agreement with what Mr. Staats said. and I assume you are, probably we don't have to get into that too much. I will let you proceed in your own way. No. 1, what are your needs and why do you need this money and where are you going to get it?

I suppose those are the two questions. Why do you need it and where are you going to get it?

(The statement referred to follows:)