LOAN PROCEDURE The Bureau of Reclamation plan of procedure requires that the full amount of the loan be available at the time that the loan is approved. The contracting district could thus be assured that the full amount of the loan has been appropriated and that funds will be made available as needed, permitting it to schedule its work for maximum efficiency. Also, the district would not be hampered by a potential of extra costs of contracts that are subject to the availability of funds. Funds will be released to the water users' organization only as required not in the entire amount of the loan at one time. Chairman HAYDEN. Are there any other advantages in this procedure? Mr. NIELSEN. That which I have just stated are the advantages, and we doubt our present ability to enter into a loan contract expressing a subject to appropriations qualification. Chairman HAYDEN. These funds are for this project exclusively. You are trying it out for the first time on this one? Mr. NIELSEN. Yes, sir. Chairman HAYDEN. Who determines whether the district shall borrow money and construct its own distribution facilities or have them constructed by the Bureau of Reclamation and the district sign a repayment contract? Mr. NIELSEN. I think under Public Law 130 the option lies with the district. If the district can show it is a responsible agency, don't think we have an option. Chairman HAYDEN. Are there any other districts that are ready to go ahead with the construction of their own distribution systems? If so, where are they? Mr. NIELSEN. There are at least 2 and I think possibly 3 that might be said to have some prospect of being able to use funds under this program in fiscal year 1957; the Madera Irrigation District, the Terra Bella Irrigation District, and the Porterville Irrigation District, all of which are in California. This supplemental does not include funds for any of those three. SOURCE OF WATER Senator ELLENDER. Where would this district in question get its water? Is it already provided for there? Mr. NIELSEN. We are presently building the Monticello Dam and the supply canals. Senator ELLENDER. And to carry the water to the area to be irrigated is what this money is to be used for? Mr. NIELSEN. Yes, sir. Senator ELLENDER. Is that off the farm? Mr. NIELSEN. Off the farm? Senator ELLENDER. Yes. Mr. NIELSEN. We do not go on the farm. Senator ELLENDER. This is not to be used on the farm itself but only to carry it from the reservoir to the farm? Mr. NIELSEN. From the main canals to the sublaterals, through the sublaterals. Senator ELLENDER. Under what conditions is this money loaned? Mr. NIELSEN. On the basis of a repayment contract which will provide for repayment without interest. Senator ELLENDER. Forty years? Mr. NIELSEN. Yes, sir. Senator ELLENDER. What more advantage is there to that than what we had before? Mr. NIELSEN. The difference lies in the fact that the irrigation district can construct its own distribution system. Senator ELLENDER. Who supervises the cost in order to see that what is loaned out will be used for that purpose and not in excess of the cost? Mr. NIELSEN. I think the Secretary has the express responsibility of seeing that the loan is made prudently and the work is carried on as a prudent man would. Chairman HAYDEN. If the loan was for $12 million and it cost $12,500,000, they would have to put up the other half million? Mr. NIELSEN. Short of getting a supplemental loan, they would. The law requires that the district must furnish up to 10 percent of the loan in cash, materials, labor, rights-of-way, and that sort of thing, but does not express the lower limit of what they may be required to contribute. Senator THYE. What is the land within the area now being used for? Mr. NIELSEN. Some irrigation, principally by pump, but dry-land farming, and some new lands. Chairman HAYDEN. Suppose that they had a loan for $12 million and they let a contract for $11,500,000, what becomes of the half million? Mr. NIELSEN. The machinery we are thinking of would require that we approve generally their plans and specifications and we would advance so much money to them as was necessary to cover the plans and specifications which they submit to us. We don't propose to advance them more money than the work that they have in the specifications and plans states. Chairman HAYDEN. That is, as the work proceeds, they get the money. They do not get it in a lump sum? Mr. NIELSEN. That is the way we propose to handle it. Senator ELLENDER. This loan is to be made to a district which is a legal entity? Mr. NIELSEN. Yes, sir. LOAN SECURITY Senator ELLENDER. What security have you got there? Suppose that the district does not get sufficient farmers to guarantee repayment? Mr. NIELSEN. The recent amendment to the law requires that the title remain in the United States until Congress otherwise provides, so that the United States always has the ability to recapture that system and enforce its rules and its collection. Chairman HAYDEN. There is another way that the United States can surely get the money. If they do not make their payments, you can turn off the water. Mr. NEILSEN. That is right. ADVANTAGE OF LOAN PROCEDURE Senator DwORSHAK. What is the advantage of this plan compared to the past procedures? Mr. NIELSEN. I think, principally, California irrigation districts felt that they could construct distribution systems more cheaply than can the Bureau of Reclamation. I think they have sponsored the legislation. Senator DwORSHAK. That would relieve the Bureau of all managerial responsibilities. Mr. NIELSEN. Not all. We think, since title is in the United States, we will have to inspect from time to time as we would on an ordinary reclamation project to make certain that property is being properly maintained. Senator DwORSHAK. They will actually operate the distribution system? Mr. NIELSEN. Yes, sir. 160-ACRE LIMITATION Chairman HAYDEN. Do all reclamation laws apply to this project that is, the 160-acre limitation, and so forth? Mr. NIELSEN. Not all of them. We are satisfied that the 160-acre limitation does. There are some fringe provisions that we are trying to search out now. Chairman HAYDEN. Any further questions, gentlemen? STATUS OF AINSWORTH PROJECT Senator DwORSHAK. Senator Hruska has requested that Mr. Nielsen be asked this question: Is there sufficient money to make a start on the Ainsworth, Nebr., unit? Mr. NIELSEN. There are no construction funds available for starting construction of the Ainsworth unit. Senator DWORSHAK. Do you have ample funds to complete engineering work? Mr. NIELSEN. The planning work is completed. The project has been authorized. Actually, we have brought Ainsworth to the point of a negotiated contract which the board of directors of the district have approved. But we have no construction money. Senator DwORSHAK. When will you be ready to initiate construction? Mr. NIELSEN. We could initiate construction when funds for this purpose are made available to the Bureau. Senator DwORSHAK. You have not asked for any? Mr. NIELSEN. There is no money for construction in this supplemental or in our regular appropriation bill. Senator DwORSHAK. As I understand the situation, the Ainsworth project was authorized so recently as to be prevented from appearing in the regular appropriation bill? Mr. NIELSEN. That is correct. Senator DwORSHAK. So to give effect to this recent authorization this year, construction funds must be appropriated through a supplemental? 78089-56 Mr. NIELSEN. Yes, sir. Senator DWORSHAK. How much money would you need for fiscal year 1957? Mr. NIELSEN. We estimate that we could economically use $1,600,000 this year. Chairman HAYDEN. We thank you for your statement. VIRGIN ISLANDS CORPORATION REVOLVING FUND FOR LOANS STATEMENTS OF DR. KENNETH A. BARTLETT, PRESIDENT, VIRGIN ISLANDS CORPORATION; AND A. M. EDWARDS, ASSOCIATE SOLICITOR, DEPARTMENT OF THE INTERIOR JUSTIFICATION Chairman HAYDEN. We will now hear from Dr. Kenneth Bartlett, representing the Virgin Islands Corporation. House Document No. 403 includes $550,000 for the "Revolving fund, Virgin Islands Corporation." The justifications will be included in the record. (The justifications referred to follow:) VIRGIN ISLANDS CORPORATION (H. Doc. 403) Revolving fund, Virgin Islands Corporation Request for 12 months from July 1, 1956--- PURPOSE AND NEED FOR SUPPLEMENTAL FUNDS $550,000 The Board of Directors of the Virgin Islands Corporation requests that its loan fund be increased by $550,000 in order to insure sufficient authority to finance its loan program. This amount would provide a total of $1 million for loans to private enterprises. There is currently available $450,000 of which $80,000 represets outstanding loans, and the balance, $370,000, is available for new loans. The Corporation has pledged $200,000 of this balance and has under consideration the application of the Virgin Isle Hotel for a loan of $240,000. In addition, two hotels on St. Croix have discussed the possibility of securing loans for financing their enterprises, and there are indications that loans may be requested for the financing of mortgages on private homes when they cannot be handled by local banks. The act of June 30, 1949 (63 Stat.; 48 U. S. C. 1952 ed., sec. 1407 b (g)), authorizes loans only when funds are not available from private sources. The Board of Directors is of the opinion that this loan program should be considered by the Congress to determine whether it was the congressional intent that loans similar in nature to that sought by the Virgin Isle Hotel should be made, in view of the fact that such loans are not available from private sources, and, whether the granting of such loans is consistent with the President's program on such matters. There is currently available to the Virgin Islands Corporation the sum of $450,000 for the purpose of making loans to private enterprises. Of this amount, $80,000 is represented by outstanding loans and the balance of $370,000 is available for new loans. The Board of Directors of the Corporation has recently pledged loans of $100,000 each for Estate Carlton and A. H. Riise Distillers Corp. The loan to Estate Carlton is to be used for construction of additional tourist facilities and the loan to A. H. Riise Distillers Corp. is to be used primarily to enlarge its distilling operation and to provide working capital. As soon as these 2 loans are consummated, the Corporation will have a balance of $170,000 remaining for new loans. On or about March 15, 1956, the Virgin Isle Hotel made application for a loan of $240,000 for the purpose of construction of an additional 30 rooms. These rooms would substantially increase the number of tourist facilities available on St. Thomas during the season and would naturally lead to increased expenditures in the islands by tourists. The act of June 30, 1949 (63 Stat. 351; 48 U. S. C., 1952 edition, sec. 1407b (g)), the act creating the Corporation, authorizes loans only when funds are not available from private sources. Therefore applicants must show that they are unable to secure these loans from private sources both in the islands and on the mainland. The Board of Directors of the Corporation at its meeting in St. Croix on March 16, 1956, in considering the loan program as authorized, determined to request that the Corporation's loan fund be increased $550,000, thus making available the total sum of $1 million for loans. It was the opinion of the Board that this matter should be considered by the Congress to determine whether it was the congressional intent that loans similar in nature to that sought by the Virgin Isle Hotel should be made, in view of the fact that such loans are not available from private sources, and, further, whether the granting of such loans is in keeping with the President's program on such matters. Since the last meeting of the Board, two other hotels on St. Croix have discussed the possibility of securing loans for financing such enterprises, and there is also the possibility of a loan being requested for the financing of mortgages on private homes which cannot be handled by local banks. It is for these reasons that we believe an additional sum of $550,000 should be made available for the granting of such loans. GENERAL STATEMENT Chairman HAYDEN. I think you had better read your statement, since it is short. Dr. BARTLETT. Yes, sir. I am Kenneth A. Bartlett, President of the Virgin Islands Corporation. Mr. Chairman and members of the committee: I appreciate the opportunity to appear before this committee to discuss the operations |