efficiently than systems of operation limited to the various jurisdictions because the cooperation of the jurisdictions involved will prevent overlapping services and allow most efficient use of local finances and personnel. After these systems are developed, then the State and Federal programs to aid these units of local government may be developed according to the characteristics of the systems which these units have established.

Generally, the small city must make do with local talent. Some of the most dedicated people to be found anywhere hold positions in our small municipal governments. Despite atrociously low pay in many instances, they exhibit the finest sense of public service. But by and large they are amateurs, and they need help.

I believe that we have somewhat of a model in Tennessee that merits study and consideration for wider application. A State planning commission was established in the 1930's, and one of its most significant contributions has been in the local planning field. Through several regional offices and a staff of trained planners-though turnover has been quite a problem-assistance has been given to cities in developing comprehensive plans and in solving zoning problems. Since 1950 the Municipal Technical Advisory Service of the University of Tennessee has been providing technical assistance to municipal officials on operational problems in the fields of public works, municipal law, ordinance codification, finance and accounting, management, and public relations. This year, using matching Federal funds under title I of the Higher Education Act of 1965, we have expanded our staff to provide six generalist consultants, each of whom is given a district comprising about 50 cities. This district arrangement will enable us to contact officials in the field more frequently and to give them even better service. The State of Tennessee and its local governments combined are putting upward of a million dollars a year into these two programs. In the area of training North Carolina provides a very good example. Since the 1930's the Institute of Government at the University of North Carolina has been offering training in many subject fields to personnel at all levels of government in that State. Its total professional staff now approximates 30. The University of Tennessee, at the request of State and municipal officials, this year is launching a training program which we hope will soon approach the scope of the North Carolina program.

There are other similar programs in other States, but I am not familiar with the details of them. There are many areas in which joint. and cooperative action can be beneficial, and there are signs that many States and their local governments are moving in the right direction. The quality of local public administration is a basic ingredient of successful and progressive small communities, and we should help the people there on the firing line in any way that we can.

Mr. KLUCZYNSKI. Thank you, Mr. Hobday. Mr. Potvin.

Mr. POTVIN. The witness has offered and I present herewith for the record a report entitled "Credit Problems of Small Municipalities," prepared by the Department of Urban Studies of the National League of Cities.

Mr. KLUCZYNSKI. Without objection it will be made a part of the record.

(The report referred to follows:)

CREDIT PROBLEMS OF SMALL MUNICIPALITIES*

The Market for Bond Issues of Small Municipalities

Long-term municipal debt outstanding totals in excess of 29 billion dollars.1 In the nine-year period 1957-65, such debt increased by approximately 1.4 billion dollars a year, and there is every indication that municipal debt outstanding will continue to increase at no less a rapid pace in the future.

With few exceptions, the nation's cities, like its citizens, are compelled to borrow in order to obtain funds for the construction and acquisition of capital facilities. However, unlike private citizens who can secure loans with relative ease at fixed interest rates, small municipalities, particularly those having less than 10,000 inhabitants, often are penalized, solely on the basis of their size, in the rate of interest they must pay. This occurs in spite of the fact that the degree of credit risk involved is not an intrinsic characteristic directly attributable to size alone.

The average annual net interest costs of bonds in the "A," "B," and unrated categories for municipalities having less than 10,000 inhabitants and for municipalities having 10,000 to 250,000 inhabitants are compared for the five-year period 1961-1965 in Table I on the following page. In each year, the average annual interest costs paid by smaller municipalities exceeded the average costs paid by the larger municipalities. Application, on a monthly basis, of the Bond Buyer Index to the various categories of bonds shows that the time of sale is not a significant factor contributing to the consistently lower net interest costs enjoyed by the larger municipalities. Table II shows the difference, expressed in basis points, ** between the average annual interest costs of small and medium sized municipalities as a deviation from the Bond Buyer Index. In each case, the adjusted interest costs for the medium sized municipalities are less than those for the small municipalities. The difference varies from 4.0 to 79.9 basis points depending upon the year and the type of bonds.

*This paper was prepared by David R. Berman and Lawrence A. Williams of the National League of Cities' Urban Studies staff for the Subcommittee on Economic Progress, U.S. Congress Joint Economic Committee, Congressman Wright Patman, Chairman. It appears, slightly abridged, in a Joint Committee Report. See U.S., Congress, Joint Economic Committee, Subcommittee on Economic Progress, State and Local Public Facility Needs and Financing, Vol. 2, 89th Cong., 2d Sess., 1966.

**A "basis point" is one-hundredth of one percent of the bond yield. Each basis point constitutes $0.10 in interest per year on a thousand dollar bond. On a $500,000 bond issue, maturing serially over 20 years, an increase of 25 basis points in the interest rate increases interest payments by $13, 125.

Source: Investment Bankers Association of America very kindly provided the raw data on a monthly basis. The data were converted to an annual basis because the number of issues marketed in some months provided too little material upon which to base conclusions. See Appendix A for a presentation of the data on a monthly basis.