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vehicle pools, bulk petroleum storage and handling, laundries, civilian personnel offices, fire stations and equipment, school buses, steamships, marine repair shops, docks and piers, harbor craft (tugs, launches, and barges), construction and equipment of ports, quarry and rock crushing plants, concrete manufacturing plants, construction and maintenance inspection units, printing plants, office machine repair units, and photographic units.

I desire that an initial report be made not later than July 1, 1953, and at such times thereafter as is considered appropriate.

By copy of this memorandum the Secretary of the Navy and the Secretary of the Air Force are being directed to furnish you with such assistance and information as you determine to be necessary.

ROGER M. Kyes, Deputy.

POLICY STATEMENTS

Senator KNOWLAND. I think the policy statements on the part of Congress and its appropriate committees are very clear in this regard, and I am certainly prepared to fully support Senator Bridges and Senator Ellender in regard to this matter. I would be very disappointed if prompt action is not taken to carry out what has been the subject of discussion now for 6 or 7 years.

Senator ELLENDER. And it has actually been recommended by those in the field in the Canal Zone.

Senator KNOWLAND. This is a case where inertia should be eliminated.

General SEYBOLD. Yes, sir. I would like to add in answer to the question which I do not believe I fully answered on the record as to the saving to the Company. The unification of course would reduce our unit costs of operating hospitals, and it might be estimated that that would run around $200,000 a year.

Senator ELLENDER. How much?
General SEYBOLD. $200,000 a year.

Senator ELLENDER. $200,000 on your part and $370,000 by other armed services. That is a half-million dollars, and that is not to be overlooked.

Senator KNOWLAND. It represents a lot of income tax from the citizens.

Senator ELLENDER. I should say so.

General SEYBOLD. Well, of course we must keep in mind that our side is always paid by the company.

Senator ELLENDER. I understand that.
General SEYBOLD. I do not defend it, Senator, on that basis.

Senator ELLENDER. It would just increase your so-called profits to that extent where you could turn more into the Treasury.

Senator KNOWLAND. Or amortize the cost of construction.
General SEYBOLD. Yes, sir.

AMORTIZATION OF CANAL COSTS

Senator ELLENDER. Another thing, Mr. Chairman, I would like for our chairman to contact the Bureau of the Budget and find out how long this study is going to go on looking toward legislation that would permit the amortization of the cost of the canal.

Senator KNOWLAND. I will say to the Senator from Louisiana that I have already directed the clerk of this committee to address a communication to the Director of the Budget, Mr. Dodge, calling his attention to the long history of this situation and the testimony before this committee and the Armed Services Committee of the House, and I have also requested that a representative of the Bureau of the Budget be here tomorrow as well as the Defense Department so that we can get this thing tied down rather than have it left at loose ends.

Senator ELLENDER. Fine.

Senator KNOWLAND. Are there any further questions at this time! We are going to continue tomorrow this discussion of the Canal Zone government. The Governor will be here, I understand.

Senator ELLENDER. I have more questions, but I will reserve them for tomorrow.

Senator KNOWLAND. Do you have any questions, Senator Dworshak?

Senator DWORSHAK. I regret, Mr. Chairman, that I missed most of the statement of General Seybold. I do not know whether there are any proposals or recommendations made for any drastic changes in administration for the next fiscal year. I presume I can check and be ready tomorrow?

Senator KNOWLAND. He will be here tomorrow.

EXPENDITURE FOR BOXCARS

I notice in a communication dated January 19, 1954, Senator Bridges, chairman of the full committee, had directed an inquiry to the Secretary of Defense, Mr. Wilson, and while this is applicable. I think, to the Defense Department rather than to the Governor of the Canal Zone government, he mentions that in addition the 1935 justification contemplated a capital expenditure of $530,000 for the replacement of 50 boxcars. I wonder if you could throw any light on the amount of traffic that would justify or warrant the capital investment for 50 additional boxcars.

General SEYBOLD. The matter of boxcars, of course, is intimate with the railroad, sir. Our railroad rolling stock is worn out, depleted, and it is at present the facility on which we depend upon for transfer of our supplies from the Atlantic to the Pacific, and it will be more and more in use as we are now beginning to utilize the Army coldstorage warehouse on the Pacific side. The railroad has been a prob lem, as the chairman knows, now for several years. Actually, at the moment, it is paying its way with depreciation and affording some support to the general costs of the company. We can foresee where that may not be so. It is our planning now, and this has not developed, but it is our planning that it appears to be a desirable thing and would be a desirable thing to replace the railroad by a highway entirely within the Canal Zone.

We are just up to the position, Mr. Chairman, where we need equipment to bring our materials back and forth. We have to augmens that rolling stock under the present way in which we are operating. The cost of a highway, which we feel would be highly beneficial in many other respects, would be a considerable initial cost, but it would once and for all solve many problems that we do have with the Republic of Panama.

Senator KNOWLAND. I should think it would be almost essential for the defense of the canal in the event of war, among other things.

LAND ROUTE ESSENTIAL

General SEYBOLD. I am not too cognizant of the viewpoint of the Armed Forces. The Armed Forces look upon things a little bit differently than the civil government and at to their probable powers in actions of emergencies or subemergencies than we do in the case of civil problems. We feel, and we feel very strongly, that a land route within the Canal Zone is an absolute essential for the operation of the civil government and company. So there we have the problem of the depletion of our railroad rolling stock which is upon us now, and we must maintain this supply route, against the building of a rather costly 22 miles of highway.

Senator ELLENDER. Well, general, to what extent could you use the present railroad bed upon which to put a highway?

General SEYBOLD. Very much. The preesnt program would include that. Unfortunately, the fill across the deeper part of the lake is only a one-track, you might say, fill.

Senator ÉLLENDER. Yes.

General SEYBOLD. It needs greatly to be widened, and that is the expensive part.

Senator ELLENDER. But you do not have trestles there; it has all been elevated through deposits of rocks!

General SEYBOLD. Yes, it came out of the old Culebra cut. We would only have to build 22 miles because the rest of it is built; that is, to Fort Davis. Senator KNOWLAND. What is the rough estimate of the construction ? General SEYBOLD. Somewhere around $7.5 to $8 million. Senator ELLENDER. You mean to complete the road! General SEYBOLD. Yes. Senator ELLENDER. I thought it would be more than that. General SEYBOLD. We would use the old roadbed. Senator ELLENDER. I understand.

General SEYBOLD. But it needs quite a bit of additional fill to widen the base.

Senator ELLENDER. You could obtain the fill close by, and it would not be a problem?

General SEYBOLD. Oh, yes.

Senator ELLENDER. And I presume you could use the present tracks to carry it and dump it?

General SEYBOLD. Yes.

Senator KNOWLAND. The committee will stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 11:15 a. m., Wednesday, March 10, 1954, the subcommittee recessed to reconvene at 10 a. m., Thursday, March 11, 1954.)

CIVIL FUNCTIONS, DEPARTMENT OF THE ARMY

APPROPRIATIONS, 1955

THURSDAY, MARCH 11, 1954

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, D.C. The subcommittee met at 10 a.m., pursuant to recess, in room F-39, the Capitol, Hon. William F. Knowland (chairman of the subcommittee) presiding.

Present: Senators Knowland, Dworshak, Hayden, Ellender, McClellan, and Robertson.

CIVIL FUNCTIONS

PANAMA CANAL COMPANY

STATEMENTS OF WILLIAM FINNAN, ASSISTANT DIRECTOR, OFFICE

OF ORGANIZATION AND MANAGEMENT, AND FRED MCNAMARA, BUREAU OF THE BUDGET

GENERAL STATEMENT

Senator KNOWLAND. The committee will come to order.

We have at this time Mr. Finnan and Mr. McNamara, of the Bureau of the Budget. Gentlemen, we had the Governor of the Canal Zone before us yesterday and several questions were raised by members of the committee relative to the amortization of costs of the canal and also the question of the duplication in facilities in the Canal Zone area.

I would like to read a brief section from yesterday's record. The comments made were as follows:

Senator ELLENDER. Another thing, Mr. Chairman, I would like for our chairman to contact the Bureau of the Budget and find out how long this study is going to go on looking toward legislation that would permit the amortization of the cost of the canal.

Senator KNOWLAND. I will say to the Senator from Louisiana that I have already directed the clerk of this committee to address a communication to the Director of the Budget, Mr. Dodge, calling his attention to the long history of this situation and the testimony before this committee and the Armed Services Committee of the House, and I have also requested that a representative of the Bureau of the Budget be here tomorrow, as well as the Defense Department, so that we can get this thing tied down rather than have it left at loose ends. Senator ELLENDER, Fine.

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