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estimates for the telephone program for fiscal year 1966, it is a very tight budget, and our experience indicates that this will mean an expanding backlog of application on hand. As a result of this we may very definitely have a problem of readjusting the scale of the program for fiscal year 1967.

LETTER FROM THE REA TELEPHONE ASSOCIATION Senator HOLLAND. I have just received a letter dated June 2 from Mr. Peterson which I am going to place in the record, who has requested that that course be followed, and this letter indicates a greater problem than at the time he testified. I believe you have had a copy of that letter?

Senator YOUNG. Yes.

Senator HOLLAND. All copies to our committee. The letter will now be copied into the record. (The letter referred to follows:)

NATIONAL REA TELEPHONE ASSOCIATION,

Minneapolis, Minn., June 2, 1965. Hon. SPESSARD L. HOLLAND, Chairman, Subcommittee on Department of Agriculture and Related Agencies,

U.S. Senate, Washington, D.C. DEAR SENATOR HOLLAND: On May 31, 1965, with 1 month of fiscal year 1965 remaining the amount of REA telephone loan applications on hand totaled $126,505,000. The amount of telephone loan funds available for loan approvals for the last month of fiscal year 1965 is approximately $15 million. Assuming that the last month of fiscal year 1965 will produce $8 to $10 million in additional applications (May produced over $10 million), it would appear that our estimate that $118 million in telephone loan applications would be carried over into fiscal year 1966 was sound.

This amounts to $22 million more than the $96 million estimate mentioned on page 37 of House Report 364, Department of Agriculture and related agencies appropriation bill, 1966, which accompanied H.R. 8370, passed May 26, 1965. To prevent a severe shortage of telephone loan funds for fiscal year 1966, it would seem prudent to use the $118 million figure above mentioned, in assessing the need.

The greatest need for fiscal year 1966 exists in REA's southeast area where the following amounts of telephone loan applications were on hand on May 31, 1965: Alabama

$4, 287, 000 Georgia.-

5, 712, 000 Florida.

6, 258, 000 Kentucky-

5, 760, 000 Mississippi.

4, 620, 000 South Carolina.

2, 128, 000 Tennessee

5, 964, 000

Total.-----

34, 729, 000 Hoping that this information will be helpful to you and members of your committee in its deliberations, I am Respectfully yours,

A. HAROLD PETERSON, E.recutive Director.

TELEPHONE LOANS BY TYPES Senator HOLLAND. What is the breakdown of your loans for this last year, this current year, 1965, bet ween loans to the cooperatives and loans to the small independent telephone organizations?

Mr. CLAPP. For this fiscal year, IIr. Chairman, through the month of May, we have approved loans totaling $24,159,000 to 13 cooperatives.

This amounts to 29 percent of the total funds loaned in the telephone Param.

The balance, $58,436,000, or 71 percent of the total, has been made to 97 independent commercial type companies. This accounts for 69 percent of the total number of loans made.

Senator HOLLAND. Those amounts do not seem to comply with the breakdown of percentages that you mention.

Mr. CLAPP. It would be pretty close. The commercial companies in terms of numbers of loans represent 69 percent, in terms of dollars represents 71 percent of the loans made.

Senator HOLLAND. During fiscal year 1965, through May?
Mr. CLAPP. That is correct.

TELEPHONE LOAN RESCISSIONS Senator HOLLAND. Now, the cancellations that you speak of, that you estimate now would be about $7 million; will they be divided between these two groups or how will they apply to affect the figures that you have just stated ?

Mr. CLAPP. I imagine that the balance of the loans made this year would follow substantially the same pattern that is already established.

Senator HOLLAND. My question was related to the cancellations.
Mr. ClApp. I misunderstood your question, Mr. Chairman.

Practically all of the rescissions are of loans made to commercial companies—about $7,496,000 as compared to about $8,000 in rescissions of loans made to co-ops.

Senator HOLLAND. Then those rescissions will change substantially the figures that you have just placed in the record with reference to total loans to commercial borrowers and to cooperatives!

Mr. CLAPP. No, Mr. Chairman, because these rescissions are of loans made in prior years. The figures I gave you with respect to the loans

I approved this fiscal year are not affected by the rescissions figure.

Senator HOLLAND. Well then, it would affect some of the figures given for earlier years?

Mr. CLAPP. This is correct.

Senator HOLLAND. I wish you would file for the record a statement showing the total outstanding loans to the cooperatives and also to the independent companies.

Mr. Clapp. We would be glad to do that, Mr. Chairman.
(The information requested follows:)

OUTSTANDING BALANCE OF TELEPHONE LOANS AT MAR. 31, 1965

Commercial companies--
Cooperatives---

$554, 004, 503 285, 745, 668

Total.--

839, 750, 171

Mr. ClApp. I could give you those totals right now if you would like them.

Senator HOLLAND. All right.

Mr. Clapp. The net cumulative total of loans made up through the 31st of May of this year shows $102,164,318 to cooperatives or 34.9 percent of the total, and $751,370,096 to commercial companies; this amounts to 65.1 percent of the total.

Senator HOLLAND. Do these amounts reflect the rescissions?
Mr. CLAPP. Yes, sir.
Senator HOLLIND. This is a net amount.
Mr. Clipp. This is a net cumulative total.
Senator YOUNG. Mr. Chairman?
Senator HOLLAND. Senator Young?

REPAYMENT RECORD OF TELEPHONE BORROWERS

Senator Young. What is the repayment record on loans of this type? Have you figures on the repayment record, on the commercial loans and the co-op loans?

Mr. Clapp. Yes, sir, we have records analyzed by these categories and then, of course, we can identify those delinquents so we would know whether they are commercial companies or cooperatives.

(The information requested follows:)

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Senator Young. Is the repayment record of both types of loans about the same?

Mr. CLAPP. I have not looked at these particular figures recently, Senator. I think there is probably only one characteristic that is somewhat different for the cooperatives as compared to the commercial companies.

I think it can be said to the cooperative's credit that their rate of payment in advance of due date is significantly higher than the rate of payment in advance of due date by the commercial companies.

I think so far as the delinquency record is concerned-well, I would want to check this—but I think the delinquencies are probably in those areas that are of the thinnest coverage. Our experience has been that this is the kind of area in which the cooperatives operate, so of those few borrowers that are delinquent, probably the larger percentage would be cooperatives.

Senator Young. With the dwindling farm population it could be that you will have somewhat of a problem making these cooperatives

Mr. CLAPP. There is no question about this, Senator. It is definitely true, and it is understandable that the cooperatives in the telephone program have drawn the thinner territory to serve. Consequently, their problems are compounded by dwindling farm population in those territories.

Senator Young. The farmer, even if his income is low, cannot get along without REA.

pay out.

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Mr. CLAPP. Mr. Chairman, in response to Senator Young's question, as of March 31, 1965, there were three borrowers that were delinquent in the telephone program-two of them were cooperatives, one was a commercial company.

Senator YOUNG. That is a remarkable record.

Senator HOLLAND. Will you show the amounts and names, can you bring it down to the end of May?

Mr. CLAPP. We would be glad to, Mr. Chairman. Senator HOLLAND. I wish you would show that for the record, please. (The information follows:)

Telephone borrowers delinquent at May 31, 1965 Commercial companies :

Amount Byron Telephone Co., Inc., Byron, Ga...

$5, 313 Lindrith Telephone Co., Inc., Cuba, N. Mex.

4, 311 Oklahoma Telephone & Telegraph Co., Inc., Dustin, Okla--

3, 736 Cooperatives :

Dickey Rural Telephone Mutual Aid Corp., Ellendale, N. Dak.----- 100, 000

Total.

113, 360

ELECTRIC LOANS BY PURPOSE Mr. CLAPP. Mr. Chairman, would you want me to go on to the administrative funds now or are there further matters that the committee would like to cover before I proceed?

Senator HOLLAND. In the hearings last year, we asked you to file, and you did file, a table showing the amount and percentage of electric loans by purpose for the fiscal years 1946 through 1964.

I wish you would bring that table up to date through 1965 and file it. Mr. CLAPP. We will be very happy to.

(The information follows:) Amount and percentage of electric loans by purpose, fiscal years 1946 through 1965

(Dollar amounts in millions)

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19652

111.0

37.6

32.6

87.5

29.7

.1

294.9

96.0

100.0

1 Breakdown between generation and transmission not available for years 1946 through 1951. Through May 31 only.

ENERGY PURCHASED AND GENERATED BY REA BORROWERS

Senator HOLLAND. We have also been getting a table showing the total energy purchased and generated by REA borrowers, fiscal years 1952–64 was the last one appearing on page 115 of the printed record last year; will you bring that up to date also?

? Mr. CLAPP. We would be very happy to, sir. (The information follows:)

Total energy purchased and generated by REA borrowers, fiscal years 1952-65

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Senator HOLLAND. Now, in order to point up the difference between what your testimony and the action of the other body shows, let us put in one paragraph now, the contrasting figures, in connection with the electrification loans. Your request is how much?

Mr. CLAPP. Our request is for $350 million of new obligational authority, including a $65 million contingency fund.

Senator HOLLAND. That contingency fund in the budget was shown to go to both programs?

Mr. CLAPP. That is correct, sir.

Senator HOLLAND. And the House action, as I understand it, was for the same amounts that you have mentioned except that the $65 million for contingency purposes would be earmarked solely for electrification.

Mr. CLAPP. That is right.

Senator HOLLAND. That is the only difference between the House action and your request?

Mr. CLAPP. Yes, sir.

Senator Young. Mr. Chairman, may I ask this question : How much less is this than your request of the Bureau of the Budget?

Mr. CLAPP. Our request to the Bureau of the Budget was for $390 million; this is $40 million less.

Senator HOLLAND. What is that?
Mr. CLAPP, $40 million less than our request.

Senator HOLLAND. Did you have a contingency fund request in your presentation to the budget?

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