For reasons I have just recited, I believe title III of the bill S. 1566 is especially desirable. Under the provisions of that title, the Federal Government would be subject to special levies for local improvements. This is only just, inasmuch as in instance after instance the traffic volume and the satellite construction traceable directly to Federal activity compels building and unusual repair of roads, installation of water and sewer systems, and additional personnel to protect the properties and people employed therein.

While I feel very strongly that such legislation as we have proposed in this bill is urgent and justifiable, I also want to make plain, Mr. Chairman, my feeling that no one should mistake the understandable pride any community exhibits when the Federal Government determines it will become a neighbor. Yet, our cities, towns, and counties must not be punished because Federal Government requires increasing land and buildings to carry on its ever-mounting obligations to its citizens.

The merit of in-lieu legislation has been widely acknowledged. Your committee, I know, is aware of the report of the President's Commission on Intergovernmental Relations, of which the chairman has been a member, which recently recommended that Congress act to lighten the financial burden which Uncle Sam has imposed on our people in so many communities throughout the Nation. I subscribe heartily to the comments of this Commission when it said:

The immunity of federally owned property from State and local ad valorem taxation has reduced the tax base of many communities which rely on property taxes as their chief source of revenue. The impact of this immunity is uneven; it is particularly severe in areas where the value of Federal property is a large part of total property values.

The last-quoted remark of the Commission applies with particular force, as I have endeavored to demonstrate by the figures I have cited, to sections of my State of California.

The reason why your committee has been pressed to consider the pending proposals for Federal in-lieu payments is clearly shown by the President's Commission. That body, which included many representatives of local government, including a former member of the House who now is mayor of Los Angeles, Norris Poulson, observed :

This problem has increased in importance with the acceleration of property acquisitions associated with the war and defense efforts and with diverse other Federal programs, including urban housing, power production, resources conservation, and regional development and reclamation.

Senator HUMPHREY. May I just interrupt there, Senator, to say that while the Commission on Intergovernmental Relations had several dissents on other chapters in its report, I think it should be made a matter of record that in the instance of the task force report on payments in lieu of taxes for local governments from the Federal Government, there was no dissent, and that there was general and specific approval and keen interest.

And I would say further that this is the one area where we in this Commission felt that the Federal Government could exercise leadership to do something to restore financial stability and financial resources to these hard-pressed local communities. As you know, this problem of taxation split up between the many agencies and levels of government is becoming the most difficult problem in our whole Federal system. We studied it for months, and actually felt that the beginning of any equitable solution to the tax problem between Federal, State, and local government was right in this area of Federal properties and payments in lieu of taxes.

That is why I personally feel that although we may want to comment concerning the encroachments of Federal activities upon local jurisdictions, the real test of what the Federal Government is going to do is in this area. This is where we can begin to meet the problem.

And if we get a beginning here of some equitable adjustment and payment, we are going to do a great deal toward affording local and State governments a real opportunity to be governments in the full sense of the word.

We are constantly nipping at their ability to govern and to give service, because the lifeblood of their governmental structure is their

revenue sources.

These revenue sources are being dried up piece by piece. All this talk that the States should do this, and that the local governments should do that, and that the Federal Government seems to be taking over more and more, is just plain talk, until we get this revenue problem cleared up. It is revenue which is the economic plasma, may I say, for communities that are in shock right at the present time.

Senator KUCHEL. Well, the chairman is completely right on that, and our legislation is designed to bring that into fruition. Senator HUMPHREY. That's correct.

Senator KUCHEL. I trust that your Committee will concur in the following excerpt from the report of that Commission which I wish to quote in concluding my own remarks:

The Commission believes that these payments are necessary to help preserve financially healthy local governments. Present tax immunities of Federal property have weakened many local governments * * *. Equity as between Federal and local taxpayers requires the National Government to make appropriate payments.

The bill S. 1566 is directly designed to meet that obligation and provide justice and equity for the smaller units of government which are the foundation of our whole nation. It ought to be enacted into law before the neighbors of the Federal Government are bowed down further by the load of taxes required to finance local governments.

Mr. Chairman, as Senator Goldwater was testifying and as Senator Cotton asked questions which certainly are relevant to the problem before this committee, I jotted down several points which I am going to offer by way of my answer to the questions which the Senator asked, and by way also of my own feeling of some of the principles which this committee ought to agree upon as the basis for fashioning whatever legislation may be approved by it during the balance of the 84th Congress.

I think certainly one of the questions is to determine what types of property, generally, as the Federal Government obtains ownership of them, ought to be subjected, if not to local taxation at least to a type of in-lieu payments.

It might well be that a basis upon which a principle could be evolved would be to take first into consideration the distinction between the Federal Government's activities which are governmental in character on the one hand, or proprietary in character upon the other.

I think that that at least could be a basis of indicating that the Federal Government, in performing services for the people, should not assume burdens for every piece of property which it holds. But, on the other hand, it could be the beginning of fashioning some type of principle upon which in-lieu legislation might be based.

Secondly, I think there is a question of the conferring of benefits. Certainly on the one hand where the Federal Government, by reason of the needs of the people connected with the efforts of our Defense Department or otherwise, sees it necessary to enter into any State of the Union and utilize large areas of real property there, bringing with it, as the chairman has suggested, thousands and tens of thousands of new families, they and their children receive the benefits of local government.

They receive all the types of welfare assistance in schools, in police protection, and in fire protection, and I think an excellent case, as I know the chairman agrees with me on this, can be made out that we ought to have a sound pattern of legislation equally applicable across the entire country with respect to the moral responsibility of the Federal Government to assume a portion of the burden by reason of the benefits conferred by local government.

There is a concomitant, I think, to that which, in good faith and in justice, we ought to recognize, and that is that the Federal Government in many of its activities confers benefit upon the local people.

And obviously the case of the corner post office in your hometown or mine is an excellent example of something which I am sure no member of the committee would want held up as the horrible example in dealing with this subject generally.

And then I think and this is particularly true, Senator Cotton, with respect to the San Diego situation-I honestly believe as a lawyer there has been some distortion of the application of law to instances where contractors with the Federal Government are given an immunity by reason of an application of the law of agency.

For example and without going into any of the technical details-I do not find anything equitable where contractor A agrees with the Government in advance that the property which he owns in a given area and which he will utilize in fabricating that which the Government desires to buy from him, should by some tortured theory of agency be transferred, so far as title is concerned, to the Federal Government, in advance of delivery.

I deny that that is equitable, and it seems to me that this committee must face that problem head on, and in consultation with the Defense Department, ought to determine what the guidelines will be, so that prime contractor A will not be treated differently in one county in America under the application of the laws of agency than contractor B will be treated in another area in our country under a different set of agreed contractual obligations.

And then, finally, I think, Mr. Chairman, this committee ought to determine the saturation point with respect to the Federal Government acquiring more and more of a percentage of the taxable values in a specific area.

The Senator from Arizona has suggested that his State is owned in greatest part by the Federal Government. It certainly is true that much of that land will not, and should not, be brought under an in-lieu tax bill, such as you and I and others have introduced.

But it is also true that in many areas of this country the needs of the Federal Government in acquiring real property have placed too great a burden upon the remaining homeowners in the community, the remaining private citizens in that area, and one way in which this committee, perhaps, might arrive at a yardstick of equity, would be to determine when in a given instance the requirements of local government, the values of local government, and the area which constitutes the ad valorem tax base of local government find Federal acquisition taxable situation that requires an equitable decision by this committee relative to in-lieu legislation.

sufficient to indicate

a

I mention those to the chairman as some of the things which I believe, with agreement in principle, could be reached by this committee. It might then be fairly easy to write the type of legislation which would obtain the approval of both the legislative and executive branches of our country, and not, the least, the endorsement of local governmental officials across our Nation.

Mr. Chairman, I do want to file for the record the table prepared by the California Board of Equalization to which I have alluded, and also a statement by the Honorable Arthur C. Eddy, the elected assessor of the city and county of San Diego, Calif.

(The documents referred to follow :)

Federal real estate ownership in California-Estimated assessed values and

STATEMENT OF ARTHUR C. EDDY, ASSESSOR, CITY AND COUNTY OF SAN DIEGO, CALIF.

Senator Humphrey and members of the committee, we in local Government appreciate your hearing from us at this busy time of Congress. As an official in daily contact with local taxpayers and homeowners, I cannot emphasize too strongly the importance of pending bills in the in lieu of tax field.