Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
1668917
label
1974/01/02 HR14600 Panama Canal Company Borrowing Authority
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
1668917
sourceUrl
contentType
document
title
1974/01/02 HR14600 Panama Canal Company Borrowing Authority
citationUrl
collections
White House Records Office: Legislation Case Files
Legislation Case Files
subjects
Panama Canal (Panama)
Legislation
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
1668917
coverageEndDate
logicalDate
1974-12-31
month
12
year
1974
coverageStartDate
logicalDate
1974-12-01
month
12
year
1974
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
9703900abf2929a7
ocrText
The original documents are located in Box 20, folder "1975/01/02 HR14600 Panama Canal
Company Borrowing Authority" of the White House Records Office: Legislation Case Files
at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
Digitized from Box 20 of the White House Records Office Legislation Case Files at the Gerald R. Ford Presidential Library
APPROVED
ACTION
THE WHITE HOUSE
Last Day: January 4
WASHINGTON
December 30, 1974
Posted
1/3
MEMORANDUM FOR
THE PRESIDENT
To Archines
FROM:
KEN COLE
1/3
SUBJECT:
Enrolled Bill H.R. 14600
Panama Canal Company Borrowing Authority
Attached for your consideration is H.R. 14600, sponsored
by Representative Sullivan and seven others, which
increases from $10 million to $40 million the amount
which the Panama Canal Company may borrow from the Treasury,
and changes the method of computing interest on funds borrowed.
OMB recommends approval of this Administration proposal and
provides additional background information in its enrolled
bill report (Tab A).
Max Friedersdorf and Phil Areeda both recommend approval.
RECOMMENDATION
That you sign H.R. 14600 (Tab B).
SEAL N. FORD
PRESIDENT
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE
UNITED
OFFICE OF MANAGEMENT AND BUDGET
PENITYE
STATES
WASHINGTON, D.C. 20503
DEC 4 , 1974
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 14600 - Panama Canal Company
Borrowing Authority
Sponsor - Rep. Sullivan (D) Missouri and 7 others
Last Day for Action
January 4, 1975 - Saturday
Purpose
Increases from $10 million to $40 million the amount which
the Panama Canal Company may borrow from the Treasury, and
changes the method of computing the interest on any funds
borrowed.
Agency Recommendations
Office of Management and Budget
Approval
Panama Canal Company
Approval
Department of the Army
Approval
Department of the Treasury
No objection
Department of State
No objection
Discussion
The Panama Canal Company is a self-sustaining Government
corporation which is funded from tolls collected from vessels
transiting the Canal. A 1959 Act gave the Company authority
to borrow up to $10 million from the Treasury if needed to
continue operations during an emergency, such as a rockslide
or a vessel accident. The borrowing authority has never been
used. The enrolled bill would increase the amount that could
be borrowed to $40 million, and change the method of computing
is
FORD
GERALD
2
the interest on any funds that might be borrowed.
H.R. 14600 is an Administration proposal that was enacted
without change. The increase reflects the Company's estimate
of the amount that would be needed to cover major repairs or
salvage costs and to keep the Company operational for 3 or 4
months. Before the bill was introduced, the interest rate
provisions were revised at the suggestion of Treasury to
conform to current Administration policy.
In its enrolled bill letter, the Company states:
" the increase
represents a conservative
action
it is not anticipated that the
Company will actually draw on the increased
borrowing authority except in extreme emergency
situations. The authorization will be utilized,
as at present, to backstop the Company's
obligations
"
We agree with the Company that the bill merits your approval.
The probability of an accident requiring emergency funds has
increased significantly since 1959 due to an increase in the
number of vessels using the Canal and the fact that nearly
one-fourth of them are almost as wide as some of the locks.
Assistant Director for
Legislative Reference
Enclosures
R. FORD
DEPARTMENT OF STATE
Washington, D.C. 20520
December 26, 1974
Honorable Roy L. Ash
Director, Office of
Management and Budget
Dear Mr. Ash:
Thank you for your communication of December 23
requesting the views and recommendations of the
Department of State on the Enrolled Bill
H.R. 14600, "To increase the borrowing authority
of the Panama Canal Company and revise the method
of computing interest thereon."
The Department of State does not object to the
passage of this legislation.
Please continue to call on me whenever you believe
I might be of assistance.
Cordially,
Linivod Holton
Linwood Holton
Assistant Secretary
for Congressional Relations
STATE
OF
THE TREASURY 3HL DEPARTMENT
THE GENERAL COUNSEL OF THE TREASURY
WASHINGTON. D.C. 20220
1789
DEC 23 1974
Director, Office of Management and Budget
Executive Office of the President
Washington, D. C. 20503
Attention: Assistant Director for Legislative
Reference
Sir:
Reference is made to your request for the views of this
Department on the enrolled enactment of H.R. 14600, "To
increase the borrowing authority of the Panama Canal Company
and revise the method of computing interest thereon."
The enrolled enactment would amend section 71 of title 2
of the Canal Zone Code to increase the amount which the Panama
Canal Company may borrow from the Treasury from $10 million
to $40 million outstanding at any one time. The enrolled
enactment would also revise the method of computing the rate
of interest on amounts borrowed under the authority of
section 71 of title 2, Canal Zone Code from a rate computed on
the coupon rates prevailing on the last day of the month
preceding the Company's borrowing to a rate determined by the
Secretary of the Treasury, taking into consideration the average
market yield on outstanding marketable obligations of the
United States of comparable maturities during the month preceding
the issuance of the notes or obligations. This rate conforms
to current Administration policy.
The Department would have no objection to a recommendation
that the enrolled enactment be approved by the President.
Sincerely yours,
General Counsel
DEPARTMENT DE OF DE NSE
DEPARTMENT OF THE ARMY
WASHINGTON, D.C. 20310
JUINT
AMERICA
27 DEC 1974
Honorable Roy L. Ash
Director, Office of Management and Budget
Dear Mr. Ash:
The Secretary of Defense has delegated responsibility to the Department of the
Army for reporting the views of the Department of Defense on enrolled enact-
ment HR 14600, 93rd Congress, "To increase the borrowing authority of the
Panama Canal Company and revise the method of computing interest thereon."
The Department of the Army on behalf of the Department of Defense recommends
approval of the enrolled enactment.
The title of the act states its purpose and what it will accomplish.
The enactment of this measure is recommended because section 71 of Title 2,
Canal Zone Code, 76A Stat. 13, provides that the Panama Canal Company may
borrow from the Treasury for corporate purposes up to $10 million. That
amount is the total that may be outstanding at any given time. Such loans
are subject to interest at a rate determined by the Secretary of the Treas-
ury based on the coupon rates for comparable marketable obligations of the
United States on the last day of the month preceding the Company's borrow-
ing. This borrowing authority was established by Public Law 86-200, approved
August 25, 1959, 73 Stat. 428.
The potential requirement for emergency funds has significantly increased
since 1959. In that year, the $10 million available fund was equivalent
to the average tolls income for vessel transits that would be generated over
78 days. However, in Fiscal Year 1973, the borrowing limit equaled tolls
income the Panama Canal Company received in 32 days. Estimates for Fiscal
Year 1974 predict tolls receipts of $10 million for each 31-day period. If
for any reason the Panama Canal were to become inoperable for more than a
few days under present conditions, the $10 million available from the
Treasury would be inadequate to cover major repairs or salvage costs and
also keep the Canal organization operational as a self-sustaining enterprise.
The need to have immediate access to funds sufficient to meet any emergency
situation is essential.
The Board of Directors of the Panama Canal Company at its July 1972 meeting,
after considering the emergency contingency needs of the Company, adopted a
Honorable Roy L. Ash
resolution to seek legislation to increase the borrowing authority to $40
million. Such a sum will assure adequate resources to react on a timely
basis to emergencies during periods when Congress is not in session.
The revision of the method of computing the rate of interest on amounts
borrowed under the authority will place Canal Company borrowings on the same
interest rate formula now applicable to a large number of Federal agencies.
Approval of the enactment will cause no apparent increase in budgetary re-
quirements of the Department of Defense.
This report has been coordinated within the Department of Defense in ac-
cordance with procedures prescribed by the Secretary of Defense.
Sincerely,
Howard H. Collary
Howard H. Callaway
Secretary of the Army
PANAMA CANAL COMPANY
312 PENNSYLVANIA BUILDING
WASHINGTON, D.C. 20004
OFFICE OF
THE SECRETARY
December 23, 1974
Honorable Roy L. Ash
Director, Office of Management
and Budget
Washington, D.C. 20503
Dear Mr. Ash:
This is in response to your request for comment on H.R. 14600
which would increase the borrowing authority of the Panama Canal
Company from the present limit of $10 million to $40 million. The
legislation would also change the method of computing the interest
upon any funds the Company might borrow from the United States
Treasury.
This legislation was proposed by the Panama Canal Company
with the full support of the Governor of the Canal Zone. It is
pointed out that since this borrowing authority was established
in 1959, it has never been used by the Company and would pro-
vide funding only in case of an emergency, such as the possible
closing of the Canal by reason of an accident involving a ship in
transit. Due to the increase in salaries and the cost of materials,
the cash requirements of the Company to cover expenses that are
fixed or that, as a practical matter, are irreducible have grown
far beyond the needs of 1959. It is felt that an increase of the
borrowing authority to $40 million represents a conservative action
to meet potential emergency needs of the Company in the forseeable
future.
It is not anticipated that the Company will actually draw on the
increased borrowing authority except in extreme emergency situa-
tions. The authorization will be utilized, as at present, to back-
stop the Company's obligations. Accordingly, enactment of the
proposed legislation does not entail any forseeable expenditure
of funds by the United States Government in the future.
The Panama Canal Company and the Canal Zone Government both
recommend signature of this bill by the President.
Sincerely yours,
Thomas MConstand
Thomas M. Constant
Secretary, Panama Canal Company
Assistant to the Governor of the
Canal Zone
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
ToNendrity
DEC 4 , 1974
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 14600 - Panama Canal Company
Borrowing Authority
Sponsor - Rep. Sullivan (D) Missouri and 7 others
Last Day for Action
January 4, 1975 - Saturday
Purpose
Increases from $10 million to $40 million the amount which
the Panama Canal Company may borrow from the Treasury, and
changes the method of computing the interest on any funds
borrowed.
Agency Recommendations
Office of Management and Budget
Approval
Panama Canal Company
Approval
Department of the Army
Approval
Department of the Treasury
No objection
Department of State
No objection
Discussion
The Panama Canal Company is a self-sustaining Government
corporation which is funded from tolls collected from vessels
transiting the Canal. A 1959 Act gave the Company authority
to borrow up to $10 million from the Treasury if needed to
continue operations during an emergency, such as a rockslide
or a vessel accident. The borrowing authority has never been
used. The enrolled bill would increase the amount that could
be borrowed to $40 million, and change the method of computing
THE WHITE HOUSE
WASHINGTON
WARREN HENDRIKS
MEMORANDUM FROM: Ven FOR: Laenford MAX L.
FRIEDERSDORF
SUBJECT:
Action Memorandum - Log No. 863 B
Enrolled Bill H. R. 14600
The Office of Legislative Affairs concurs in the attached proposal
and has no additional recommendations
Attachment
CARD
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 863
Date:
Time:
December 27, 1974
7:00 p.m.
FOR ACTION:
Geoff Shepard oh.
CC (for information): Warren Hendriks
NSC/S noobs
Jerry Jones
Phil Areeda no obj on
Max Friedersdorf
FROM THE STAFF SECRETARY
DUE: Date: Monday, December 30
Time: 1:00 p.m.
SUBJECT:
Enrolled Bill H.R. 14600 Panama Canal Company
Borrowing Authority
ACTION REQUESTED:
For Necessary Action
X For Your Recommendations
Prepare Agenda and Brief
Draft Reply
K
For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K.R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 863
Date:
Time:
December 27, 1974
7:00 p.m.
FOR ACTION:
Geoff Shepard
1
CC (for information):
Warren Hendriks
NSC/S
Jerry Jones
Phil Areeda
Max Friedersdorf
FROM THE STAFF SECRETARY
DUE: Date: Monday, December 30
Time: 1:00 p.m.
SUBJECT:
Enrolled Bill H.R. 14600 - Panama Canal Company
Borrowing Authority
ACTION REQUESTED:
X
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
Approval
ACS.
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Warren K. Hendriks
telephone the Staff Secretary immediately.
For the President
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 863
Date:
Time:
December 27, 1974
7:00 p.m.
FOR ACTION:
Geoff Shepard
cc (for information):
Warren Hendriks
NSC/S
Jerry Jones
Phil Areeda
Max Friedersdorf
FROM THE STAFF SECRETARY
DUE: Date:
Monday, December 30
Time: 1:00 p.m.
SUBJECT:
Enrolled Bill H.R. 14600 - Panama Canal Company
Borrowing Authority
ACTION REQUESTED:
X
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
No objections Preek OK
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material. please
Warren K. Hendriks
telephone the Staff Secretary immediately.
For the President
93D CONGRESS
HOUSE OF REPRESENTATIVES
REPORT
2d Session
No. 93-1276
INCREASING THE BORROWING AUTHORITY OF THE
PANAMA CANAL COMPANY
AUGUST 12, 1974.-Committed to the Committee of the Whole House on the
state of the Union and ordered to be printed
Mrs. SULLIVAN, from the Committee on Merchant Marine and
Fisheries, submitted the following
REPORT
[To accompany H.R. 14600]
The Committee on Merchant Marine and Fisheries, to whom was
referred the bill (H.R. 14600) to increase the borrowing authority of
the Panama Canal Company and revise the method of computing
interest thereon, having considered the same, report favorably thereon
without amendment and recommend that the bill do pass.
PURPOSE OF LEGISLATION
The purpose of H.R. 14600 is to increase the borrowing authority
which the Panama Canal Company possesses to borrow from the
United States Treasury. The present limit of the authority is $10
million; this legislation will raise that limit to $40 million. The legisla-
tion would also change the method of computing the interest upon
any funds the Company might borrow from the Treasury. Presently,
that computation of interest is based upon the coupon rate of current
marketable obligations of the United States of comparable maturities
as of the last day of the month preceding the Company's borrowing.
H.R. 14600 would make the rate of interest dependent upon the
average market yield of these obligations for the preceding month.
LEGISLATIVE BACKGROUND
H.R. 14600 was introduced on May 6, 1974, by Mrs. Sullivan, for
herself, Mr. Leggett, Mr. Murphy of New York, Mr. Stubblefield,
Mr. Metcalfe, Mr. Bowen, Mr. Grover, and Mr. Mosher. Hearings
on this legislation were held on April 24, 1974, prior to its introduction.
38-006
2
3
The bill was ordered reported unanimously from the Panama Canal
A major reason why tolls revenue and expenditures have increased so
Subcommittee on May 16, 1974, and ordered reported unanimously
greatly in past years has been the increased usage of the Canal by
by the Full Committee on Merchant Marine and Fisheries on August 6,
vessels in interoceanic commerce. In 1952, for example, the first year
1974. The need for this legislation derives from the financial obligations
after Panama Canal reorganization, there were 7,324 interoceanic
of the Panama Canal Company and from the specific financial environ-
transits of the Canal; in 1972, there were 14,238 interoceanic transits.
ment within which the Panama Canal operates today.
This doubling of traffic has made necessary a constant increase in the
The Panama Canal Company operation is a cost recovery enterprise
rapidity of the sequence with with vessels must move through the
which derives the great majority of its revenues from the tolls on
Canal. Also, this increase in Canal traffic has brought with it an in-
vessels which transit the Canal. The revenues of the Company are
crease in the number of large vessels which move through that water-
expended for general administrative and operating expenses and for
way. This year, nearly one-quarter of those vessels which will transit
any capital projects which the Company might undertake after
the Canal will have beams with a width of 80 feet or more. Since the
authorization from Congress. Any disruption or significant decrease
width of the Panama Canal locks is only 110 feet, the danger of a
in Panama Canal traffic for any reason would place the Panama
blockage, stoppage, or collision in the Canal has greatly increased. In
Canal Company in a situation in which it might be difficult for that
short, notwithstanding the efficiency with which the Panama Canal is
organization to meet its operating expenses. For this reason, a reserve
run and the excellent ship-handling skills of the Canal pilots, the
borrowing fund was instituted many years ago in order to provide a
danger of a maritime accident in the Canal which could cause a
source of capital by which the Company could insure continued
major blockage of that waterway and eliminate transit and tolls
operation. In 1948, a special fund of $10 million was set up in the national
revenue for a significant period of time has multiplied.
Given the vital commercial importance and the national strategic
Treasury consisting of contributions of revenue which had been
interest in the Panama Canal, it is imperative that the operation of
deposited by the Panama Canal Company and which were excess to
the Canal be continuous and efficient. The particular circumstances
the needs of the Company.
which affect Canal transits today, as they have been enumerated
In 1959, Public Law 86-200 changed the basis of the borrowing
above, render even more important a satisfactory level of borrowing
authority. In lieu of any special fund set up in the Treasury by the
authority for the Panama Canal Company.
Panama Canal Company, the Company was given authority to bor-
A technical provision of H.R. 14600 would change the method by
row up to $10 million from the United States Treasury and then repay
which the rate of interest on any money borrowed by the Company
the required amount at a rate of interest determined by the Secretary
would be determined. This change in determination of rate of interest
of the Treasury taking into account the coupon rate on current mar-
was enumerated above. H.R. 14600 would in this respect place Canal
ketable obligations of comparable maturities as of the last day of the
Company borrowings from the Treasury on the same basis as that
month preceding the Company's borrowing (Section 71 of Title II,
which many other federal agencies experience, such as the Postal
Canal Zone Code, 76A Stat. 13).
Service, the Federal Home Loan Banks, and the Federal Housing
The borrowing authorization under Public Law 86-200 has never
Authority.
been used. The efficient operation of the Panama Canal and the
As mentioned previously, H.R. 14600 was recommended and is
fortunate continuance of traffic without major interruption has al-
fully supported by agencies of the Executive Branch. This legislation
leviated the need to utilize the authorization.
was unanimously reported by your Committee.
The projected effectiveness of the financial protection of the $10
million authority has decreased significantly from that time when the
COST OF LEGISLATION
fund was first established. In 1952, for example, the total sum of tolls
revenue for the calendar year was $30.4 million, and $10 million was
The borrowing authority of the Panama Canal Company is a back-
an amount equal to nearly four months of tolls revenue. In 1959, $10
stop provision which to this date has never been used. Since the
million was equivalent to 78 days of tolls revenue. Today it is equiva-
Panama Canal Company is by statute a self-sustaining enterprise and
lent to somewhat less than one month's revenue. In actuality, the
since any monies borrowed from the United States Treasury are to
$10 million borrowing authority represents only about one-quarter
be re-paid by the Company at market rates, it is estimated that this
of the financial protection originally provided by that sum when first
legislation will result in no additional cost to the government.
established by statute.
While the tolls revenue has risen SO have the general expenditures of
DEPARTMENTAL REPORTS
the Panama Canal Company SO that the Panama Canal has continued
to operate successfully on a cost recovery basis, but has not generated
H.R. 14600 was the subject of an Executive Communication (No.
excess revenues since 1969.
2204) from the Governor of the Canal Zone. The text of the Executive
Communication and agency reports on H.R. 14600 follow herewith:
II.R. 1276
H.R. 1276
5
The bill as introduced would authorize the creation of a
[Exec. Comm. No. 2204]
fund which would include the $10 million referred to, plus
PANAMA CANAL COMPANY,
additions to be made by the Board of Directors from time
OFFICE OF THE PRESIDENT,
to time, which fund would be available for the use of the
Balboa Heights, Canal Zone, April 10, 1974.
Company. Accretions to the fund would decrease the base
Hon. CARL ALBERT,
upon which interest is payable and withdrawals would in-
Speaker of the House of Representatives,
crease the base to the extent of the withdrawal. The com-
Washington, D.C.
mittee took the view that such a fund might be built up to
DEAR MR. SPEAKER: Enclosed for consideration by the Congress
far more than the present $10 million figure in the course of
time and that to permit withdrawal of such increased amount
is a proposed bill that would increase the amount of money that the
Panama Canal Company is authorized to borrow from the Treasury
without any control by the Congress was undesirable.
from a present limitation of $10 million to not more than $40 million
Accordingly, the bill was amended to authorize a borrow-
and would revise the method of computing the rate of interest thereon.
ing authority of $10 million, with interest payable on the
amount borrowed. Since there had been no withdrawals
Section 71 of Title 2, Canal Zone Code, 76A Stat. 13, provides that
the Panama Canal Company may borrow from the Treasury for corpo-
from the original fund, the committee was of the opinion
that this limit was not likely to prove unduly restrictive.
rate purposes up to $10 million. That amount is the total that may be
outstanding at any given time. Such loans are subject to interest at a
However, if future needs of the Company indicate that a larger
sum would be desirable, application can be made to the Congress
rate determined by the Secretary of the Treasury based on the coupon
rates for comparable marketable obligations of the United States on
for enlargement of the authority. H.R. Rept. No. 86-655, at p.
the last day of the month preceding the Company's borrowing. This
2 (1959). (Emphasis added.)
borrowing authority was established by Public Law 86-200, approved
The Panama Canal Company has SO far not had need to exercise
August 25, 1959, 73 Stat. 428.
its authority to borrow from the Treasury. Nevertheless the potential
Prior to the amendment of section 71 by Public Law 86-200, the
requirement for emergency funds has significantly increased since
Company was required to leave on deposit with the Treasury a special
1959. In that year, the $10 million available fund was equivalent to
fund amounting to $10 million. Any part of that sum could be with-
the average tolls income for vessel transits that would be generated
drawn and expended whenever the corporation determined that it
over 78 days. In fiscal year 1973, the borrowing limit equaled tolls
was necessary. Under the prior law, however, the Company was
income received in 32 days. Estimates for fiscal year 1974 predict tolls
obligated to pay interest on the entire $10 million even as it remained
receipts of $10 million for each 31-day period. The Canal organization
intact in the Treasury. That anomaly was corrected when Congress
is necessarily maintained at an operational level that can handle the
substituted the present right to borrow out of general funds in the
vessel traffic through the waterway. Due to the increase in salaries.
Treasury.
and the cost of materials, the cash requirements of the Company to
The fixing of the amount of the original emergency fund and the
cover expenses that are fixed or that, as a practical matter, are irre-
subsequent borrowing authority at $10 million had been done some-
ducible have grown far beyond the needs of 1959. If for any reason
what arbitrarily. It appears from the record that there had been
the Canal were to become inoperable for more than a few days under
established in 1948 for the predecessor corporation (the Panama Rail-
present conditions, it is reasonably certain that the $10 million avail-
road Company) an emergency fund consisting of that amount of
able from the Treasury would be inadequate to cover major repairs
surplus on hand that had accrued to the Railroad Company at that
or salvage costs and also keep the agency operational as a self-sustain-
time as a result of funding depreciation reserves.
ing enterprise.
Public Law 86-200 as the bill was originally introduced would have
The basic danger of closure of the waterway stems from the passage
provided for payment of the Panama Canal Company's excess funds
of large vessels and those with hazardous cargo. Inasmuch as the
into a special account in the Treasury from which the agency could
Canal locks are only 110 feet wide and a considerable part of the chan-
borrow. Money paid into the fund by the Company would have
nel, which is used for two-way traffic, is limited to 500 feet, the marked
reduced the interest bearing investment of the United States in the
increase in the beam of vessels arriving for transit is a valid measure
Canal enterprise, and amounts borrowed from the fund would have
of the seriousness of the problem. The record shows that 309 ships.
served to increase the interest base until the loan was repaid. The
with a beam greater than 80 feet transited the Canal in fiscal year 1959.
final text of the bill, however, specified that the borrowing authority
The total in 1973 had increased to 3,205 such vessels. The projection
would be limited to $10 million, with interest payable on the amount
for 1974 is an estimate of 3,500 vessels with a beam in excess of 80
borrowed.
feet.
The limitation was considered by the House Merchant Marine and
The Company has a well-trained force of highly skilled pilots, tug
Fisheries Committee to be adequate at that time, and the report on
masters, and other marine and locks personnel. It carries on a continu-
the bill noted that the agency could apply to Congress to have the
ous program of instruction in accident prevention. Every effort is
limitation increased when such a change seemed desirable. The Com-
made to minimize the possibility of a major marine disaster. Not-
mittee report, in part, read as follows:
withstanding these precautions, however, the need to have immediate
access to funds sufficient to meet any emergency situation is essential.
H.R. 1276
H.R. 1276
6
7
Approximately two-thirds of all cargo carried through the Panama
DEPARTMENT OF THE ARMY,
Canal originates in or is destined to the United States. Canal traffic
Washington, D.C., May 13, 1974.
constitutes roughly 16 percent of all ocean-born commerce of the
Hon. LEONOR K. SULLIVAN,
United States. Consequently, paralysis of canal operations, even for a
Chairman, Committee on Merchant Marine and Fisheries, House of
short period of time, must be avoided if possible.
Representatives, Washington, D.C.
After due consideration of the emergency contingency needs of the
Panama Canal Company, the Board of Directors, at its July 1972
DEAR MADAM CHAIRMAN: This will respond to your request to the
meeting, adopted a resolution to seek legislation to increase the bor-
Secretary of Defense for the views of the Department of Defense on
rowing authority to $40 million. In my view an increase of the borrow-
H.R. 14600, 93d Congress, a bill "To increase the borrowing authority
ing authority to $40 million represents a conservative action to meet
of the Panama Canal Company and revise the method of computing
interest thereon."
potential emergency needs of the Company in the foreseeable future.
Such a sum would assure adequate resources to react on a timely
The title of the bill states its purpose.
basis to emergencies during periods when Congress is not in session.
The Department of the Army favors the bill.
Section 71 of Title 2, Canal Zone Code, 76A Stat. 13, provides that
At the suggestion of the General Counsel of the Treasury, the pro-
posed legislation transmitted herewith would also revise the method
the Panama Canal Company may borrow from the Treasury for
of computing the rate of interest on amounts borrowed under the au-
corporate purposes up to $10 million. That amount is the total that
thority of section 71 of Title 2, Canal Zone Code. This section presently
may be outstanding at any given time. Such loans are subject to in-
provides that the interest rate shall be computed on the coupon rates.
terest at a rate determined by the Secretary of the Treasury based on
prevailing on the last day of the month preceding the Company's
the coupon rates for comparable marketable obligations of the
borrowing. According to the General Counsel of the Treasury that
United States on the last day of the month preceding the Company's
formula "is technically deficient and not in accord with current Ad-
borrowing. This borrowing authority was established by Public Law
ministration policy." He suggests that the interest formula should be
86-200, approved August 25, 1959, 73 Stat. 428.
based on current market yields averaged over the month preceding
The potential requirement for emergency funds has significantly
any borrowing by the Company. The attached proposed bill would
increased since 1959. In that year, the $10 million available fund was
accomplish this purpose. Such a revision of the formula, if enacted,
equivalent to the average tolls income for vessel transits that would
would place Canal Company borrowings on the same interest rate
be generated over 78 days. However, in Fiscal Year 1973, the borrow-
formula now applicable to a large number of Federal agencies which
ing limit equaled tolls income the Panama Canal Company received
have authority to borrow from Treasury.
in 32 days. Estimates for Fiscal Year 1974 predict tolls receipts of
It is not anticipated that the Panama Canal Company will actually
$10 million for each 31-day period. If for any reason the Panama
draw on the increased borrowing authority except in extreme emer-
Canal were to become inoperable for more than a few days under
gency situations. The authorization will be utilized, as at present, to
present conditions, the $10 million available from the Treasury
backstop the Company's obligations. Accordingly, enactment of the
would be inadequate to cover major repairs or salvage costs and also
proposed legislation does not entail any foreseeable expenditure of
keep the Canal organization operational as a self-sustaining enter-
funds by the United States Government in the future.
prise. The need to have immediate access to funds sufficient to meet
The Office of Management and Budget advises that it has no ob-
any emergency situation is essential.
jection to the presentation of this legislative proposal.
The Board of Directors of the Panama Canal Company at its July
Sincerely yours,
1972 meeting, after considering the emergency contingency needs of
DAVID S. PARKER, President.
the Company, adopted a resolution to seek legislation to increase the
Enclosure.
borrowing authority to $40 million. Such a sum would assure adequate
resources to react on a timely basis to emergencies during periods
A BILL To increase the borrowing authority of the Panama Canal Company and
when Congress is not in session.
revise the method of computing interest thereon
A revision of the method of computing the rate of interest on
amounts borrowed under the authority would place Canal Company
Be it enacted by the Senate and the House of Representatives of the
borrowings on the same interest rate formula now applicable to a
United States of America in Congress assembled, That section 71 of
large number of Federal agencies.
Title 2 of the Canal Zone Code is amended as follows:
For the foregoing reasons, the Department of the Army strongly
1. By striking out from the first sentence "$10,000,000" and
recommends that the bill be favorably considered.
inserting in lieu thereof "$40,000,000".
The enactment of this bill will cause no apparent increase in budg-
2. By striking out the third sentence and inserting in lieu
etary requirements of the Department of Defense.
thereof "Such notes or other obligations shall bear interest at a.
The Office of Management and Budget advises that, from the stand-
rate determined by the Secretary of the Treasury, taking into
point of the Administration's program, there is no objection to the
consideration the average market yield on outstanding marketable-
presentation of this report for the consideration of the Committee.
obligations of the United States of comparable maturities during
Sincerely,
the month preceding the issuance of the notes or other obligations.'
HERMAN R. STAUDT,
Acting Secretary of the Army.
H.R. 1276
H.R. 1276
8
9
COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., May 14, 1974.
SECTION 71 OF TITLE 2, CANAL ZONE CODE
Hon. LEONOR K. SULLIVAN,
Chairman, Committee on Merchant Marine and Fisheries, House
§71. Borrowing from Treasury
of Representatives, Washington, D.C.
The Panama Canal Company may borrow from the Treasury, for
DEAR MADAM CHAIRMAN: With respect to your request of May 8,
any of the purposes of the Company, not more than [$10,000,000]
1974, for our consideration of H.R. 14600, 93d Congress, a bill to
$40,000,000 outstanding at any time. For this purpose, the Company
increase the borrowing authority of the Panama Canal Company
may issue to the Secretary of the Treasury its notes, or other obliga-
and revise the method of computing interest thereon, this to advise
tions, which shall have maturities agreed upon by the Company and the
that we have no comment to offer.
Secretary of the Treasury, but shall be redeemable at the option of
Sincerely yours,
the Company before maturity in such manner as may be stipulated in
ROBERT F. KELLER,
the obligations. [Each obligation shall bear interest at a rate deter-
Acting Comptroller General
mined by the Secretary of the Treasury, taking into consideration the
of the United States.
current average rate on current marketable obligations of the United
States of comparable maturities as of the last day of the month
THE GENERAL COUNSEL OF THE TREASURY,
preceding the issuance of the obligation of the Company.] Such
Washington, D.C., May 15, 1974.
notes or other obligations shall bear interest at a rate determined by the
Hon. LEONOR K. SULLIVAN,
Secretary of the Treasury, taking into consideration the average market
Chairman, Committee on Merchant Marine and Fisheries, House of
yield on outstanding marketable obligations of the United States of com-
Representatives, Washington, D.C.
parable maturities during the month preceding the issuance of the notes or
other obligations. The Secretary of the Treasury shall purchase obliga-
DEAR MADAM CHAIRMAN: Reference is made to your request for
tions of the Company to be issued under this section, and for such
the views of this Department on H.R. 14600, "To increase the borrow-
ing authority of the Panama Canal Company and revise the method of
purpose the Secretary of the Treasury may use as a public-debt
transaction the proceeds from the.sale of any securities issued pur-
computing interest thereon."
The bill would amend section 71 of title 2 of the Canal Zone Code
suant to the Second Liberty Bond Act, as amended, and the purposes
to increase the amount which the Panama Canal Company may
for which securities may be issued pursuant to the Second Liberty
borrow from the Treasury from $10 million to $40 million outstanding
Bond Act, as amended, are extended to include any purchases of the
Company's obligations pursuant to this section.
at any one time. The bill would also revise the method of computing
the rate of interest on amounts borrowed under the authority of sec-
tion 71 of title 2, Canal Zone Code from a rate computed on the coupon
rates prevailing on the last day of the month preceding the Company's
borrowing to a rate determined by the Secretary of the Treasury,
taking into consideration the average market yield on outstanding
marketable obligations of the United States of comparable maturities
during the month preceding the issuance of the notes or obligations.
This rate conforms to current Administration policy.
The Department has no objection to the bill.
The Department has been advised by the Office of Management and
Budget that there is no objection from the standpoint of the Admin-
istration's program to the submission of this report to your Committee.
Sincerely yours,
EDWARD C. SCHMULTS,
General Counsel.
CHANGES IN EXISTING LAW
In compliance with clause 3 of rule XIII of the Rules of the House
of Representatives, as amended, changes in existing law made by the
bill, as reported, are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new matter is printed in italic,
existing law in which no change is proposed is shown in roman):
H.R. 1276
H.R. 1276
Calendar No. 1325
93D CONGRESS
SENATE
REPORT
2d Session
No. 93-1397
AN ACT TO INCREASE THE BORROWING AUTHORITY
OF THE PANAMA CANAL COMPANY
DECEMBER 17, 1974.-Ordered to be printed
Mr. MAGNUSON, from the Committee on Commerce,
submitted the following
REPORT
[To accompany H.R. 14600]
The Committee on Commerce, to which was referred the bill (H.R.
14600) having considered the same, reports favorably thereon with-
out amendment and recommends that the bill do pass.
The Committee on Commerce, to which was referred the Bill (H.R.
14600) to increase the borrowing authority of the Panama Canal Com-
pany and revise the method of computing interest on the amount bor-
rowed, having considered the same, reports favorably thereon with-
out amendment and recommends that the Act do pass.
SUMMARY OF PROPOSED LEGISLATION
H.R. 14600 would increase the borrowing authority of the Panama
Canal Company. At present, the limit of this authority is $10 million.
This legislation would raise that limit to $40 million. The legislation
would also change the method of computing the interest upon any
amount which the Company might borrow from the Treasury. The
present method of computation of interest is based upon the coupon
rate of current marketable obligations of the United States of com-
parable maturities as of the last day of the month preceding the Com-
pany's borrowing. H.R. 14600 would make the rate of interest de-
pendent upon the average market yield of these obligations for the
preceding month.
BACKGROUND
The Panama Canal Company operation is a cost recovery enterprise
deriving a majority of its revenues from the tolls imposed on ships
which transit the Canal. The revenues of the Company are utilized for
general administrative and operating expenses and for any capital
38-010
2
3
projects which the Company might undertake after authorization
AGENCY COMMENTS
from Congress. Any disruption or significant decrease in Panama
Canal traffic for any reason would place the Company in a situation
The comments of the agencies and departments received by the com-
mittee follow
in which it might be difficult to meet its operating expenses. For this
reason, a reserve borrowing fund was instituted many years ago in
DEPARTMENT OF THE ARMY,
order to provide a source of capital by which the Company could in-
Washington, D.C., September 27, 1974
sure continued operation.
Hon. WARREN G. MAGNUSON,
In 1948, a special fund of $10 million was set up in the Federal
Chairman, Committee on Commerce,
Treasury consisting of contributions of revenue which had been de-
U.S. Senate, Washington, D.C.
posited by the Company and which were excess to the needs of the
DEAR MR. CHAIRMAN This will respond to your request to the Sec-
Company.
retary of Defense for the views of the Department of Defense on H.R.
In 1959, Public Law 86-200 changed the basis of the borrowing au-
14600, 93d Congress, a bill "To increase the borrowing authority of the
thority. In lieu of any special fund set up in the Treasury by the Com-
Panama Canal Company and revise the method of computing interest
pany, the Company was given authority to borrow up to $10 million
thereon."
from the United States Treasury and to repay the amount at a rate of
The title of the bill states its purpose.
interest determined by the Secretary of the Treasury.
The Department of the Army favors the bill.
The borrowing authorization under Public Law 86-200 has never
Section 71 of Title 2, Canal Zone Code, 76A Stat. 13, provides that
been used because of the efficient operation of the Canal and also be-
the Panama Canal Company may borrow from the Treasury for
cause of good fortune in that there have been no serious natural dis-
corporate purposes up to $10 million. That amount is the total that
asters or ship collisions or groundings which have delayed or stopped
may be outstanding at any given time. Such loans are subject to in-
traffic through the Canal for a sufficient period of time to effect sub-
terest at a rate determined by the Secretary of the Treasury based
stantially the collection of tolls.
on the coupon rates for comparable marketable obligations of the
However, the $10 million limitation of the borrowing authority is
United States on the last day of the month preceding the Company's
no longer adequate. Since 1959 construction and labor costs have risen
borrowing. This borrowing authority was established by Public Law
astronomically and should a major interruption of traffic occur, this
86-200, approved August 25, 1959, 73 Stat. 428.
amount would, in all likelihood, be insufficient to provide for restora-
The potential requirement for emergency funds has significantly in-
tion of normal traffic through the Canal.
creased since 1959. In that year, the $10 million available fund was
Toll revenues and expenditures have increased greatly in past years
equivalent to the average tolls income for vessel transits that would be
because of the increased usage of the Canal by vessels in interoceanic
generated over 78 days. However, in Fiscal Year 1973, the borrowing
commerce. In 1952 there were 7,324 interoceanic transits of the Canal;
limit equaled tolls income the Panama Canal Company received in
in 1972 there were 14,238 such transits. In effect, traffic has doubled in
32 days. Estimates for fiscal year 1974 predict tolls receipts of $10
twenty years. Also, the number of large vessels using this waterway
million for each 31-day period. If for any reason the Panama Canal
has increased. This year, nearly 25 per cent of those vessels which tran-
were to become inoperable for more than a few days under present
sit the Canal will have beams with a width of 80 feet or more. The
conditions, the $10 million available from the Treasury would be in-
width of the Panama Canal locks, however, is only 110 feet. Therefore,
adequate to cover major repairs or salvage costs and also keep the
the danger of a blockage, stoppage or collision in the Canal has in-
Canal organization operational as a self-sustaining enterprise.
creased greatly.
The need to have immediate access to funds sufficient to meet any
Because of the vital commercial importance and the strategic in-
emergency situation is essential.
terest of the United States in the Panama Canal, it is necessary that
The Board of Directors of the Panama Canal Company at its July
the operation of the Canal be continuous and efficient. Therefore, the
1972 meeting, after considering the emergency contingency needs of
Panama Canal Company requires an increase in its borrowing author-
the Company, adopted a resolution to seek legislation to increase the
ity in order to insure that the Canal remain open at all times to inter-
borrowing authority to $40 million. Such a sum would assure adequate
oceanic traffic.
resources to react on a timely basis to emergencies during periods
H.R. 14600 would also place Canal Company borrowings from the
when Congress is not in session.
Treasury on the same basis which many other Federal agencies
A revision of the method of computing the rate of interest on
experience.
amounts borrowed under the authority would place Canal Company
COST
borrowings on the same interest rate formula now applicable to a
large number of Federal agencies.
The Panama Canal Company is, by statute, a self-sustaining opera-
For the foregoing reasons, the Department of the Army strongly
tion and since any funds which the Company might borrow from the
recommends that the bill be favorably considered.
United States Treasury pursuant to this legislation must be repaid,
The enactment of this bill will cause no apparent increase in budg-
the enactment of this legislation will result in no additional cost to the
etary requirements of the Department of Defense.
government.
S.R. 1397
S.R. 1397
4
5
The Office of Management and Budget advises that, from the stand-
The Office of Management and Budget advises that from the stand-
point of the Administration's program, there is no objection to the
point of the administration's program there is no objection to the sub-
presentation of this report for the consideration of the Committee.
mission of this report.
Sincerely,
Cordially,
HERMAN R. STAUDT,
LINWOOD HOLTON,
Acting Secretary of the Army.
Assistant Secretary for Congressional Relations.
THE GENERAL COUNSEL OF THE TREASURY,
COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., September 24, 1974.
Washington, D.C., September 26, 1794.
Hon. WARREN G. MAGNUSON,
A-60428
Chairman, Committee on Commerce,
Hon. WARREN G. MAGNUSON,
U.S. Senate, Washington, D.C.
Chairman, Committee on Commerce,
DEAR MR. CHAIRMAN: Reference is made to your request for the
U.S. Senate.
views of this Department on H.R. 14600, "To increase the borrowing
DEAR MR. CHAIRMAN With respect to your request of September 11,
authority of the Panama Canal Company and revise the method of
1974, for our consideration of H.R. 14600, 93d Congress, a bill to in-
computing interest thereon."
crease the borrowing authority of the Panama Canal Company and
The bill would amend section 71 of title 2 of the Canal Zone Code to
revise the method of computing interest thereon, this is to advise that
increase the amount which the Panama Canal Company may borrow
we have no comment to offer.
from the Treasury from $10 million to $40 million outstanding at any
Sincerely yours,
one time. The bill would also revise the method of computing the rate
R. F. KELLER,
of interest on amounts borrowed under the authority of section 71 of
Deputy Comptroller General of the United States.
title 2, Canal Zone Code from a rate computed on the coupon rates pre-
vailing on the last day of the month preceding the Company's borrow-
o
ing to a rate determined by the Secretary of the Treasury, taking into
consideration. the average market yield on outstanding marketable
obligations of the United States of comparable maturities during the
month preceding the issuance of the notes or obligations. This rate con-
forms to current Administration policy.
The Department has no objection to the bill.
The Department was advised by the Office of Management and
Budget that there was no objection from the standpoint of the Admin-
istration's program to the submission of an identical report on this
bill to the House Committee on Merchant Marine and Fisheries.
Sincerely yours,
,
General Counsel.
DEPARTMENT OF STATE,
Washington, D.C., September 24, 1974.
Hon. WARREN G. MAGNUSON,
Chairman, Committee on Commerce, U.S. Senate,
Washington, D.C.
DEAR MR. CHAIRMAN: Thank you for your letter of September 11
requesting State Department comments on H.R. 14600, legislation to
increase the borrowing authority of the Panama Canal Company and
revise the method of computing interest thereon.
The Department of State has no objection to the enactment of this
legislation.
S.R. 1397
S.R. 1397
H. R. 14600
Ainety-third Congress of the United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday, the twenty-first day of January,
one thousand nine hundred and seventy-four
An Act
To increase the borrowing authority of the Panama Canal Company and revise
the method of computing interest thereon.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That section 71 of
title 2 of the Canal Zone Code is amended as follows:
(1) By striking out from the first sentence "$10,000,000" and insert-
ing in lieu thereof "$40,000,000".
(2) By striking out the third sentence and inserting in lieu thereof
"Such notes or other obligations shall bear interest at a rate deter-
mined by the Secretary of the Treasury, taking into consideration the
average market yield on outstanding marketable obligations of the
United States of comparable maturities during the month preceding
the issuance of the notes or other obligations.".
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
December 24, 1974
Dear Mr. Director:
The following bills were received at the White House on December 24th:
S.J. Res. 40
B. 3481
N.R. 8958
H.R. 14600
S.J. Res. 133
B. 3548
H.R. 8981
H.R. 14689
S.J. Res. 262
S. 3934
H.R. 9182
H.R. 14718
S. 251
S. 3943
H.R. 9199
H.R. 15173
S. 356
S. 3976
H.R. 9588
H.R. 15223
S. 521
S. 4073
H.R. 9654
H.R. 15229
S. 544
S. 4206
H.R. 10212
H.R. 15322
S. 663
H.J. Res. 1178
H.R. 10701
H.R. 15977
S. 754
H.J. Res. 1180
H.R. 10710
H.R. 16045
S. 1017
M.R. 421
H.R. 10827
H.R. 16215
S. 1083
M.R. 1715
H.R. 11144
H.R. 16596
vs. 1296
H.R. 1820
H.R. 11273
H.R. 16925
S. 1418
N.R. 2208
H.R. 11796
M.R. 17010
S. 2149
H.R. 2933
H.R. 11802
H.R. 17045
S. 2446
H.R. 3203
H.R. 11847
M.R. 17085
S. 2807
H.R. 3339
M.R. 11897
H.R. 17468
S. 2854
H.R. 5264
H.R. 12044
H.R. 17558
S. 2888
K.R. 5463
H.R. 12113
N.R. 17597
S. 2994
H.R. 5773
H.R. 12427
H.R. 17628
S. 3022
H.R. 7599
H.R. 12884
H.R. 17655
S. 3289
H.R. 7684
H.R. 13022
S. 3358
H.R. 7767
H.R. 13296
S. 3359
H.R. 8214
H.R. 13869
S. 3394
H.R. 8322
H.R. 14449
S. 3433
H.R. 8591
H.R. 14461
Please let the President have reports and recommendations as to the
approval of these bills as soon as possible.
Sincerely,
Robert D. Linder
Chief Executive Clerk
The Honorable Roy L. Ash
Director
Office of Management and Budget
Washington, D. C.