Senator HUMPHREY. We know we will have your cooperation and your expert knowledge that comes from good practical experience. Thank you.

Senator GOLDWATER. Thank you, Mr. Chairman.

Senator HUMPHREY. Senator Kuchel, we will hear from you next, and then we have Senator Potter here. I am very happy to have Senator Kuchel before our committee, may I say to my colleagues.

I want the record to note that Senator Kuchel has been insistent that we proceed forthwith with a discussion of in-lieu tax payments to local government on real estate owned by Federal agencies.

It has been my happy privilege to be associated with him in this endeavor. We have talked about it repeatedly, and, Senator, I think you are the catalytic agent that really got this hearing off, so I want to welcome you and permit you to proceed in your own way.

STATEMENT OF HON. THOMAS H. KUCHEL, A UNITED STATES SENATOR FROM THE STATE OF CALIFORNIA

Senator KUCHEL. I wish to thank the chairman of the committee very much for his generous comment. This whole problem is one that has interested me over a long period of years, as I know it has the chairman.

And by way of introduction, I will recall that during the 83d Congress when I was associated with the presentation of the so-called lease-purchase legislation, I had many conversations with the distinguished Senator from Minnesota respecting the potential hazard to local government which was involved in that legislation.

I think it is true that he and I at that time agreed that by reason of the fact that the lease-purchase legislation was designed to keep available for local ad valorem tax purposes the public construction contemplated under it for a minimum of 10 years and a maximum of 25 years, that we would have time, if we took advantage of it, in the 84th Congress to provide some general legislation on the subject of this lieu taxation.

And I am most honored to be a coauthor with the Senator from Minnesota, my friend Hubert Humphrey, and the Senator from Arizona, my friend Barry Goldwater, in presenting to this committee one of the pieces of legislation before it.

The hearing today, Mr. Chairman, is an opportunity I have long sought to emphasize the need for action by Congress on a problem that threatens to undermine local government and break the back of taxpayers in many portions of our Nation.

I greatly appreciate this chance to urge approval by the Government Operations Committee of legislation by which the Federal Government will ameliorate the financial distress of many counties, communities, and special districts all over the country.

I am here to recommend a favorable report on some measure that will provide for Federal payments compensating local governments for taxes lost through removal of property from the assessment rolls because of an immunity which I am sure is far broader than the framers of our Constitution ever envisioned.

The trend in Federal real property ownership-which brings with it a historic and often inequitable exemption from local taxation-has reached the point where Uncle Sam is far and away the biggest landlord on the North American Continent. As such, Uncle Sam enjoys unusual privileges. As a result, many communities in which he owns property have come to wonder whether it is a benefit or a disadvantage to be the home of some regional or district or area office of a Federal department or bureau, as they see more and more chunks of revenueproducing real property taken by Federal activities.

For decades and even for generations, communities throughout this country felt honored to be chosen as the location for headquarters of Federal activities. The local people believed that payrolls of Federal agencies would transfuse financial plasma into the economic bloodstream. The honor of being the center of a Federal Government program or function boosted civic pride.

The condition now has developed where the presence of the Federal Government often is a headache instead of a benefit. Neither the tangible nor intangible compensations from being the home of a Federal agency are sufficient from the viewpoint of many taxpayers.

I was happy to join with you, Mr. Chairman, in sponsoring S. 1566 because I feel very strongly that the time long ago arrived when the Federal Government must make real and specific contributions to our local governments. Until this or some other similar legislation is enacted, the Federal Government is undermining the financial foundations of States, counties, cities, school districts, and other bodies dependent upon revenues in the form of taxes on physical property.

This bill recognizes that our Federal Government cannot continue taking control of more and more land which, if privately owned, would yield substantial sums for the support of schools, building of roads, and provision of all kinds of public service, such as fire and police protection, hospitals, welfare, libraries, and sanitation.

My concern about Federal ownership of land and buildings within the States first was aroused when I became controller of California, At that time, the amount of property in our State in the possession of the National Government was so large that State and local officials were alarmed about the inability to meet mounting costs of State and local government.

The condition which confronts California is not unique. According to the recent inventory by the General Services Administration, the United States owns buildings throughout the Nation with a cost value of $14,400 million. This is not, of course, a true index of the taxable worth of such property because the worth in numerous instances has increased with the passage of time. However, using a conservative figure of $5 per $1,000 this means that Uncle Sam, if he were an owner subject to taxation, would pay $72 million annually toward the upkeep of the communities in which he has an ownership interest.

Our bill would not make every square foot of federally owned land subject to taxation. Nor would it mean that every Federal building would be listed by tax assessors. It carefully exempts the publicdomain lands such as parks, forests, grazing areas, and bombing ranges. It would not affect structures that are intended to render service primarily to the residents of the area, such as post offices and customhouses. Furthermore, it would not apply to either land or improvements owned before a cutoff date to be fixed by Congress.

The bill would, however, take a long step toward a fair relationship rnments. It provides several

between the Federal and loc

different types of compensation or cost-sharing and acknowledges the obligation which Uncle Sam must assume if he is not to become a specially privileged land baron.

To demonstrate the need for a law accepting the obligation of the Federal Government, I should like to discuss several aspects of Federal property ownership in California.

The State board of equalization of my State has supplied me with figures, which I feel are extremely conservative and somewhat dated, that show the 58 counties of California would be entitled to receive every year $2,695,145 if Uncle Sam paid $5 per $1,000 on the 1952 assessed value of only the land acquired and improvements made since 1938. I want to emphasize that this inventory does not include publicdomain land or buildings erected more than 17 years ago. If California could assess all Federal land in the State which amounts to 46.2 percent of our entire area-I repeat that, Mr. Chairman, of all the land in California, the second largest State in the Union, but geographically and populatively 46.2 percent of our entire area-it would collect $26,950,000 on this modest basis.

The GSA inventory was eye opening to me, and, I believe, should cause every Member of Congress to give serious thought to what will happen if the Federal Government continues to ignore its obligation to either pay taxes or make some other kind of payment to local governments.

I knew that Uncle Sam held a lot of property in California, but not until I saw the GSA report did I realize that the estimated original cost of the Federal buildings in our State was $1,503,000,000 and that structures, which includes bridges, railroads, powerlines, and roads, represent a cost of $1,340,000,000. The total of these two items is $2,843,000,000. At a tax rate of $5 per $1,000, the revenues from these properties would be $14,215,000.

Senator HUMPHREY. Senator, may I interrupt to ask you whether the tax rate you are using as an example, $5 per $1,000, would be a conservative estimate?

Senator KUCHEL. Yes; it would, Mr. Chairman. I think that that is a conservative figure based upon the tax rate, generally, in the State of California.

Of course, there is no valid reason to require the Federal Government to pay taxes or other compensation on all of these properties. Nevertheless, this inventory indicates that the Federal Government enjoys a tremendous tax exemption, adds heavily to the local property owner's burdens, and ought to accept a reasonable share of local government costs, particularly where it partakes of local government benefits.

The situation in California was serious enough for the State senate to order an investigation of Federal holdings as far back as 1949. In a report filed in 1951, the senate interim committee on public lands voiced fear about the expansion of Federal ownership. It said that in a period of 13 years, Federal holdings of land in our State jumped 6,500,000 acres from 39,316,908 acres in 1937 to 45,900,157 acres in 1949-and pointed out this was an increase of 6.5 percent in that relatively short period.

The State senate committee acknowledged the Federal Government, from time to time, has recognized the revenue loss suffered by local governments, and it has provided limited contributions such as shares of receipts from sales of timber, from grazing permits, and duck hunting stamps, and made in-lieu payments on certain housing projects. However, the California committee pointed to various discrepancies, such as the tax exemption for officers' quarters and other residences on military posts and naval stations.

An outstanding instance of hardship in our State is San Diego County. As the site of the largest naval base on the west coast, San Diego County, at the time of the State senate committee survey, had 36.37 percent of its area owned by Uncle Sam. The total estimated assessed value of that property was $105,870,000. The Navy installations in general were high-value lands in urban centers, the report commented. Since that survey, Navy and Air Force holdings have expanded. The worth 5 years ago of Army, Navy, and Air Force installations was given as $95,526,041, which at the tax rate then applicable would have yielded $5,913,063. This is no trifling sum for a county so heavily settled and with such pressing obligations to its residents.

Senator HUMPHREY. Senator, do you mind if I interrupt on a point of information, so that the record may be as complete as we can make it? Is there any payment at all in lieu of taxes made in San Diego on this property?

Senator KUCHEL. Yes. Not only in the housing legislation, but my recollection is that under the appropriation which we made in the 83d Congress with respect to impacted school district legislation, in which you were interested, that there are some districts in San Diego County which have benefited from that appropriation.

Senator HUMPHREY. But that is all? The Navy Department, as such, doesn't make any payment?

Senator KUCHEL. That's correct. And later on, Mr. Chairman, in answer to the question which the Senator from New Hampshire raised, I do want to make a comment on one peculiar instance which has, as an example, the situation in San Diego County.

The impact of Federal ownership was demonstrated by the State senate committee in many particulars. I should like to cite a few of the committee's more impressive examples. Fourteen counties were more than half federally owned. They were by no means entirely rural, forested, or desert, in character, for the committee found Uncle Sam has title to 73.34 percent of San Bernardino, 63.20 of Imperial, 51.87 of Riverside, and 50.01 of Tulare. Even in Los Angeles County, which I am sure the committee appreciates is one of the fastest-growing metropolitan centers in our Nation, the Federal Government owned over 713,000 acres, which represented 27.37 percent of the Los Angeles County area.

There is a common misconception that the overwhelming proportion of Federal holdings in California are public domain, forest, park, and desert lands, most of which would not be eligible for any financial relief under our S. 1566. While it is true that the Interior Department alone accounts for just about half of the total Federal property, the committee found the military services accounted for 2,413,936 acres of the then total of 45,900,157 belonging to the National Government.

The effect of immense Federal holdings, which in numerous cases in California means saddling the load of financing local government on owners of a fraction of an entire county, was shown strikingly by the State senate survey. Humboldt County, a relatively lightly populated section on the seacoast in the extreme northwest corner of California, contained 3,573 square miles and 20 percent was federally owned. Placer County, another thinly settled portion with 1,431 square miles is 30 percent occupied by Uncle Sam. Fresno County, 1 of our most vital agricultural areas, has 38.6 percent of its 5,985 square miles unavailable for taxation because of Federal ownership, a matter involving over $580,000 at the then applicable

tax rate.

I also have here a table compiled for me by the State board of equalization throwing more light on our tax-exemption problem in California. Using valuations as of 1952 and applying only to buildings and improvements acquired or erected by Uncle Sam since 1938, this tabulation, which I desire to submit for the record, shows the estimated value of land and post-1938 improvements in Federal ownership ranges ges from $29,840 in Sutter County to $94,586,990 in Los Angeles, $68,675,420 in San Francisco, $51,948,950 in Solano and $51,499,033 in San Diego. My colleague, Senator Knowland, who likewise has indicated a long-time interest in this subject and is the author of legislation now pending before this committee, lives in Alameda County, and that county contains $7,496,975 worth of Uncle Sam's property, and Federal holdings in neighboring Contra Costa County are conservatively valued at $28,916,241. Even in the county of our State capital, Sacramento, Federal real estate is estimated as worth a minimum of $1,430,400.

With regard to the bill in which I am particularly interested, I wish to point out, Mr. Chairman, that there are limitations, conditions, and safeguards so that there could not be anything resembling a raid on the Federal Treasury. In the long run, even this bill will provide only partial relief to hard-pressed local governments, for it excludes as ineligible for any type of new payment four categories of low-rent housing projects, public domain lands, and properties serving primarily the local public and residents of the area where such property is situated. In the latter categories are courthouses, post offices, weather stations, local irrigation and sanitation projects, airports, experimental farms, and laboratories.

The bill would meet some of the extraordinary conditions that are largely the result of our involvement in the Korean war, World War II, and the cold war. There is overwhelming need to take cognizance of the fact that Uncle Sam owns large factories and tremendous quantities of costly machinery, to say nothing of immense warehouses, docks, utility systems, and other structures that would be assessable if they belonged to private individuals, business concerns, or industrial firms.

There seems to me to be absolutely no justification for allowing one manufacturer of, say, airplanes, to operate in a tax-exempt factory while a competitor pays his annual assessment on the structures where he carries on his production. Furthermore, many of these war-necessary pieces of real estate are in areas where fire and police protection, highways, sewers, and other local governmental functions are essential. In substance, Uncle Sam adds greatly to the burden on cities, counties, water districts, and other bodies and at the same time escapes largely or entirely any responsibility for helping pay the costs of benefits he enjoys.