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authorize the lease or other disposition of facilities and propertiescan only be construed as relating to facilities or properties lawfully acquired.

Secretary KENNEY. It is our position

Mr. Hill (interposing). It is our position that these were lawfully acquired.

Secretary KENNEY. And, therefore, had authority to dispose either under the First or Second War Powers Act.

Senator ROBERTSON. And it is the contention of your legal counsel that that is all that is involved in this issue?

Secretary KENNEY. That is correct.

Senator ROBERTSON. The three steps that I mentioned? First, the appropriation bill, the limitation bill, coming into agreement with the naval committees, and

then you dispose of it? Mr. HILL. I think Public Law 289, as has been brought out, refers to disposal as well. It assumes the existence of collateral authority such as the first or second war powers grant, and it refers to coming into agreement on disposal. It is our position that we satisfied that coming into agrement provision.

Senator ROBERTSON. I believe that was an issue raised by our counsel as to whether you actually came into agreement merely by notifying them what you were doing.

Secretary KENNEY. I say we had come into agreement because we notified them what we intended to do, and then what we did when we did it.

The CHAIRMAN. But the project that you asked approval of on January 6, 1945, was one in which the Navy Department, the War Department, the Federal Works Agency, all participated, the Federal Works Agency to the extent of $3,500,000. Now, by the time you notified them in the fall that the work was proceeding, the Federal Works Agency had dropped out of it completely, had advised you they had no legal right to enter into and go on and pay three and a half million that it cost.

Senator ROBERTSON. I think it is a principle of evidence in law that you can draw an inference from a fact, but you cannot draw an inference from an inference.

Now please state what facts you are relying on, and what inferences from those facts you are relying on, to make it clear you are not relying upon an inference upon an inference.

Mr. HILL. In the first instance, the report which was made by the interdepartmental committee, plus the President's letter of transmittal to the Senate, can be regarded as having in contemplation that there would be a disposal of that aqueduct. I am not aware of what discussions occurred aside from the formal record, but by the two letters it seems to me we added to the contemplation that there would be a disposal, and, when the disposal occurred, we promptly notified the committees that the disposal had occurred.

I attach significance to the use of the words "come into agreement” as distinguished from “there shall be written advance approval" or some such similar language, particularly in the context that recital of compliance will be conclusive evidence.

As I see it, that provision is a sort of general information-keeping the Congress informed as to acquisitions and disposals—and it seems

to me that on the record the Navy Department adequately performed that responsibility.

Senator O'Conor. Do you attach any significance to the comment of the chairman of the Senate committee to the effect that he desired to be kept informed as possibly denoting the lack of finality?

Mr. HILL. It could either be that or a rather routine statement to say, “I would like to be kept advised.” Actually, if you projected that into the future, that would require us at every session of Congress, on all sorts of continuing programs, to come into agreement.

Senator McCLELLAN. Do you construe "coming into agreement” to mean simply that if you write a letter and advise the committee that you are proceeding on a certain project and if you do not get approval from the committee or something actually committing the committee to your views and your plans, you just take silence as acquiescence and then construe it as having come into agreement?

Mr. HILL. I think that the decision as to what coming into agreement means would have to turn in each case on the language. Now, would Senator Walsh's letter be understood ordinarily as his expression on behalf of his committee of approval ?

Senator McCLELLAN. Do you have a copy here of Senator Walsh's letter? The CHAIRMAN. This is the one

when the war was on. You did not consider it pertinent to advise the committee in the fall of 1945 that this was not a project being performed cooperatively with the Federal Works Administration ?

Mr. HILL. 'Of course, that sequence occurred

The CHAIRMAN (interposing). When the committee approved the project it approved it as a cooperative effort of the War Department, Navy Department, and the Federal Works, and then the Federal Works advised you later on that they were not able to enter into it, that it did not have the legal right to enter into and pay three and a half million.

Mr. HILL. Bear in mind that this occurred in a very short period of time. I do not offer this in extenuation, but the time between the letter and the point where we had arranged for complete recoupment of the Federal Government's investment was short,

The CHAIRMAN. But, you have not, have you, under the contract ?

Mr. HILL. Subject to the administration of the provision on the 5-year period.

The CHAIRMAN. The Navy can lessen or cancel the obligation of the city of San Diego after 5 years.

Mr. HILL. As has been quoted, it permits reexamination at 5-year intervals and redetermination of price at which the city can acquire it.

The CHAIRMAN. Was the contract with the city of San Diego submitted to the Naval Affairs Committee !

Mr. HILL. It was, sir, by these letters.
Secretary KENNEY. It was transmitted to both committees.
The CHAIRMAN. Attached to the letter?
Secretary KENNEY. That is correct.
Mr. MACOMBER. After it was signed?

Secretary KENNEY. After it was signed. But, also remember this, that that contract could have been terminated at any time, and we

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had also kept the two committees advised that we were going to try and work out an eventual disposition to the ciy.

Let me read from the earlier report where we reported to the committee of Congress that we were going to endeavor to work out a plan relative to eventual amortization by the city of San Diego for its proportionate share of the cost of the project. We not only got from the city of San Diego its proportionate share of the project but the total cost of the project.

I also want to point out that the amount of money to be expended by the Nayy Department is not in excess of the amount which we had originally listed would be the amount of our obligation.

The CHAIRMAN. That is clear, because of the favorable bid.
Secretary KENNEY. That is correct, Mr. Chairman.

Mr. MACOMBER. When you say “isted," Mr. Kenney, it never was listed in any appropriation request, was it?

Secretary KENNEY. I do not know what details they went into in those appropriation requests.

Mr. MACOMBER. Let me call your attention to this appropriation act, Public Law 347, under which you claim authority, which was passed in June. The interdepartmental committee was not even constituted until October.

Mr. Hill. What is the significance of that?

Mr. MACOMBER. That it was extremely unlikely that it would have been included in the appropriation request on which 347 was based.

Secretary KENNEY. That may be very true, but there are probably hundreds of other projects in here too that were not reported. Congress has made a blanket appropriation for $1,474,000,000 for projects of that type.

Mr. HILL. 289 was explicit in the authorization in the blanket form of various construction, and there is a provision in there which you probably have noticed that the approximate cost indicated for each of the classes of projects enumerated above may in the discretion of the Secretary of the Navy be revised upward or downward. Actually, 24 million was appropriated and earmarked for miscellaneous, and was adequate to cover this.

Mr. MACOMBER. I appreciate that; but I also appreciate the figure given in Public Law 289, $24,360,000, is getting near enough to an exact figure to show that there were definite projects in contemplation. When you think that your total was down to $1,644,373,024 there must have been certain specific projects submitted to support that figure since they got down to odd dollars.

Mr. HILL. I cannot explain why they get down to odd dollars.
Secretary KENNEY. 348 does not get down to odd dollars.
Mr. MACOMBER. I was referring to 289.

Secretary KENNEY. That again was reported to the committee—this specific project.

Mr. MACOMBER. Afterward?
Secretary KENNEY. Before we went into it.
Mr. MACOMBER. Nine months after the law was passed.

Mr. Hill. The law contemplated the grant of blanket authority and coming into agreement on specific projects. It granted discretion to the Secretary to move money around to take care of unusual conditions. The Navy could not be coming up and saying, “We are changing from project À to B." That was the contemplation of 289.

Mr. MACOMBER. Have you there the list of water supply projects that were included in the miscellaneous structures that were justified under Public Law 289 for the $24,000,000 figure! I think there was some $3,000,000 worth altogether of water utility projects included in the one-billion-four-hundred-thousand-odd dollars.

Admiral MANNING. We were in wartime then, and this bill was predicated on carrying on the war for a year, so there was naturally a good deal of come and go in it because we could not anticipate all the projects that would develop in a period of a year during the height of the war.

Mr. MACOMBER. Did you think if it went so far as to include 3 million for water supply that you could take 24 million for other water supply

Mr. Hill. Provided we come into agreement with the Senate and House Naval Affairs Committees. It was to accomplish that type of situation.

Senator THYE. I would like to ask, from the standpoint of Secretary Kenney and your Department, in what manner have you secured assurance that the city of San Diego would always proceed to meet its payments under its contract. That is, this $500,000 per year for the next 32 years, or the life of the contract.

Mr. Hill. We have not obtained a bond, to my knowledge. I think we are relying on the general financial integrity of the city of San Diego backed by the vote that took place.

Senator THYE. Supposing in the course of the next 5 years that the city of San Diego—that is, the city council and mayor-were to come to the Navy Department and say, “We have been compelled to furnish the Navy Department with water that cost us considerable, and from here on out we feel that we have fulfilled any obligation that we have to the Navy Department, and we do not propose to make any further payment.” Then, just what would you do and in what manner could you proceed to assure that you or the Navy Department was not at a loss?

Secretary KENNEY. San Diego has entered into agreement, and I asume the city of San Diego intends to live up to their agreement. If it defaults, we would have the normal rights which one has against a contractor who defaults under his agreement.

Mayor Knox. May I interpose a remark! I think the contract clearly gives to the Navy the right of entry and taking over possession of this $14,000,000 aqueduct. However, our other contracts with the metropolitan water district for the payment of some $34,000,000 total are not cancelable and are a direct tax and charge upon our entire property values. So, I think the Navy has protected itself, as I told you before, in a very nimble-witted way. They have complete assurance that if we do not pay the bill every year that they can come in and take it away from us. And if you can tell me how much water we can carry in buckets from Los Angeles to San Diego, a distance of a hundred miles, that would be the only thing we would get for our other 34 million if we do not pay for this.

Senator BRICKER. What would the Navy do with it if they took it away from you?

Mayor Knox. I presume they would turn it over to the War Assets Administration and sell it to somebody for almost nothing. I do not know.

Senator THYE. That is just what I was afraid of, Mayor, and evidently it would be contemplated.

Secretary KENNEY. That is one of the things that bothers me.

Senator THYE. That is just one of the reasons that bothers Congress members, to see the Navy entering into something after VJ-day that may wind up in just exactly that manner—that it is surplus because it is not being paid for—and that you then dispose of it in a manner where they buy it for a fraction on the dollar ultimately.

That question seems to be before the Members of Congress.

Secretary KENNEY. What we entered into after VJ-day was a contract to recoup our losses. We had to have this water, whether VJ-day came or did not come.

Senator O'CONOR. Do you not think there are other actions open to the Navy such as specific performance ?

Mr. HILL. I think there would be good possibility of specific performance. This right of entry upon default is not the exclusive remedy.

Senator BRICKER. Has there ever been such action brought by the Department against another city?

Mr. Hill. By Government against a city? I am not aware of it, Senator,

Senator BRICKER. I am not either.

Senator THYE. It was Senator McCarthy's contention this morning there was not the dire emergency, and that is why he insisted on those figures, and his questions never established that you had a dire emergency existing out there. That is what Senator McCarthy was suggesting in his argument this morning.

Secretary KENNEY. That was the point which, when I was giving my statement, I wanted to put in the record—that there was, according to the figures we had, this emergency, dire emergency, and I was given • to understand from other members of the committee that

The CHAIRMAN. Senator Robertson asked to have the legal question discussed first because he wanted to hear it.

. Secretary KENNEY. Then, I would like to give that data there. I would like very much to give the figures as to the water situation as it appeared to the Navy Department.

The CHAIRMAN. I think, unless there is objection, we might have those figures for the record—but, just a minute. Have the members of the committee completed their pursuit of the other questions? If so, you may proceed, if you will, with the data relating to the water supply which you have.

Secretary KENNEY. These are the figures that have been given to me, and it was these figures which I have brought down to date as the basis for the decision by the Navy Department to continue with the construction of the aqueduct.

San Diego's principal source of water is derived from El Capitan and San Vicente Reservoirs. The extent to which water supply has been impaired is shown by the storage of water in these as follows, in terms of millions of gallons.

June 1, 1944, 34,702 millions of gallons.
June 1, 1945, it had dropped to 29,850.
On October 1, 1945, to 24,234.
By January 21, 1946, to 23,781.

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