Page 6


Padre Island Maneuverings Rate Compromise Possibly in Offing of their bill, because when they come to committee they were ready with a sweeping substitute and thefur began to fly. Several prcivisions in the substifined by Stewart as “snakes in the grass.” SpeCifically, Stewart did not like the fact that HB 522 made the School Land Board the bargaining agent in ceding the land, that the Board could bargain with the federal government “at its discretion,” that the federal government had to pay “a sum of money .. . as determined by the School Land Board,” and that the land was left open for the use and development of the oil companies for directional drilling, housing of employees and storage of oil. Of these provisions, only the directional drillingin the form of a request, not a demandwas in the original bill introduced by Glusing, LaValle and Preston. Stewart posed the question, “Is there hanky-panky going on?” The original bill had fixed the governor alone as the bargaining agent. The school land board is composed of the governor, the commissioners of the general land office, and the attorney general. Stewart called this scattering of authority the first “snake.” Rep. Ronald Bridges, Corpus Christi, one of the signers of Stewart’s bill, cautiously agreed for the reason that “ever since the land scandals” he hasn’t liked to see responsibility for land action scattered too widely. Stewart felt the bill’s particulars were too demanding of the federal government and even hostile to it. Bridges was inclined to agree, but he was more politic about expressing it. “I don’t want to criticize any of my colleagues in this matter,” he said. “But I will say I am suspicious of any efforts to make the bill so complex that the federal government might just give up the whole idea. I’m not saying the bill was intentionally written to discourage the federal government. I’m just saying I’m suspicious of it.” Stewart’s fears were apparently ill-founded, however, for the Hale amendment, while it retains the School Land Board as bargaining agent and provides for directional oil drilling, does away with most of the other features which Stewart found objectionableand yet the amendment was readily accepted by the Glusing force. “We had put in such wording as ‘at its discretion’ just so the state would be in a better position to retain its mineral rights and that sort of thing,” Glusing told the Observer later. Which leaves the main debate still going over how long the national park should be. The Hale amendment calls for 88 miles. Glusing said that was okay with him, but he indicated it wouldn’t disturb him if more land were retained by private owners than this length would allow, because in general he likes the way the owners are developing the land for public use, especially on the south end. But Yarborough, in Austin over the weekend, said he would positively refuse to cut back the 88mile provision in his Senate bill, and Bridges said he was in hearty and unbudging agreement. On this point they are bitterly opposed to both U.S. Reps. Joe Kilgore and John Young, who have introduced bills to limit the seashore park to 65 miles, Kilgore’s reason being that he wants to leave the land in use for county tax purposes. Young recently said he didn’t really expect the park to be that short, but that after his bill is compromised with Yarborough’s 88-mile bill, he expected the park limit to be set around 75-80 miles meaning the private owners on the island would gain from eight to 13 miles over what the Yarborough bill would allow. Such talk of further compromise inflames Bridges: “We really should have the whole island. But we compromised that request to 100 miles, and then we compromised that to 88 miles. To go further would not be compromise, it would be surrender. “The 88-mile version leaves nearly 40 miles for private development, and considering how long it has taken to obtain the few miles of private development that we now have, I think it ridiculous to consider cutting the size of the park further.” Over in the Senate, one finds more agreement with the position of Harlingen’s Rep. Menton Murray, who said the size of the park isn’t nearly so important , as is the conditions under which it is established. Sen. Reagan, one of the sponsors of the Senate bill, told the Observer: “Have you ever been there? Well, all that sand is the same, and I would not kill the bill in a fight over 15 miles of sand. I’d rather get a park that is 75 miles long than none at all.” On this point, Yarborough has said, “Some people say they want a Miami Beach-like resort down there. Private ownership has enough room to build three Miami Beaches on Parde now. And there will be more chance for a Miami Beach-type resort area if they don’t have honky-tonks scattered for 117 miles.” Reagan said he is in no hurry to push his bill and would rather wait until the national congress takes some action to serve as guide. “I think Yarborough and Young and Kilgore should get together and work out something and get that through. Any plan they send to us will be agreeable, I’m sure.” Reagan said Sen. Hubert Hudson, Brownsville, one of the opponents of the bill in its present AUSTIN The bill to make the University of Houston a part of the state system is far from dead in the Senate, but the best chance for its passage seemingly rests with the old Senate formula for beating the odds: a good turnout of supporters, an encouraging absence of opponentsand a sympathetic man in the speaker’s chair, if one can be found. One day this week backers of the UH bill lacked only the last element in the formula. Sen. Dorsey Hardeman, San Angelo’s gift to the thrifty brotherhood and one of the most dedicated foes of an expanded college system in Texas,’ was in the chair substituting for Lt. Gov. Ben Ramsey and he would not allow the UH bill to be brought up. At that moment the bill’s backers were in the majority. Two weeks ago Sen. Robert Baker, sponsor of the UH bill, fell seven short of the necessary 21 votes to get the Senate rules sus pended for consideration of the bill. A sample poll of the senators by the Observer this week indicated that most of them favor state support of UH in principle. Those who oppose bringing it into the state system apparently do so solely for economic reasons. At present the University of Houston is so hard-pressed that it charges a whopping $600 yearly tuition, one of the highest in the South. But if the school were added to the state system, it would nearly double the state budget for state colleges and universities. To lessen the size of this pill and make it easier for economyminded legislators to swallow, Rep. Maco Stewart, Galveston, has proposed that half the cost of operating UH be borne by the state, the other half by Harris County. This is a new proposal and he hasn’t had time to get a wide a/Tripling of reaction to it. But the willingness of the big companies to support the idea of a commission did not mean they weren’t full of fight on specific items in Struve’s bill, and so adamant was their opposition to some points that Rep. Cannon predicted sweeping alterations in the measure before it comes back to the full committee next week. Bitterest opposition was to the rate basis in Struve’s bill. Struve asked that the rate of return be based on the telephone company’s original investment, minus depreciation. One and all, the representatives of the phone companies demanded that the rate of return continue to be based on what they called the “fair evaluation,” that is, present worthnot, as Struve suggests, original worth. ‘Hocus-Pocue Rupert Loper, rates and revenue requirements supervisor for Southwestern Bell, said: “If a person paid $8,000 for a home 20 years ago, it would probably take $20,000 to replace it today. A fair evaluation of that house on the contemporary market would be something less than $20,000, but it would certainly be far more than $8,000. When the house was built, it might have rented for $80 a month. But what should it bring now? Maybe $150 a month. “We collect our revenue in today’s dollars and pay our expenses in today’s dollars. If we fixed our rate base on another day’s dollar value, it wouldn’t be realistic.” But Struve countered by calling the “fair value” criterion “a lot of hocus-pocus to let the court set any rate it wants. The formula isn’t fixed. It’s called the ‘fair value’ formula because it sounds sweet.” Bryan Sloan, Abilene accountant and Struve’s principal wit ness, added: “To the extent that you consider present replacement value rather than historical cost for the purpose of setting rates, you are forcing the public to furnish the companies with a replacement fund. But replacement costs should be up to the companies. That’s why they’re making a profit.” Struve slammed at the replacement value of equipment as a basis for, rate-making with the argument: “Southwestern Bell can and does buy equipment from Western Electric. Southwestern Bell, as a public service, is supervised by the FCC. But Western Electric isn’t. And both are owned by American Tel & Tel. All right, so Southwestern Bell buys a $10 telephone from Western Electric for $20, then it cries about the cost of equipment going up and asks for a rate increase based on present high prices set by Western Electric. Southwestern gets its higher rates, Western Electric makes a big profit, and AT&T pockets it all.” After the session ended, Cannon predicted Struve would have to forget the rate basis reform if he wanted to win his larger goal, a commission, without having to fight every phone company, big and little, in the state. The telephone executives also hotly opposed the “substantial evidence” clause in his bill, which would prohibit the companies from introducing new evidence in appeals to the court from a judgment by the commission. In other words, the appellate court would only have to decide whether or not the commission had had sufficient evidence on which to base its decision. If it did have, that would be that; no new evidence would be considered by the court. This, in general, is the system used by federal courts in appeals from federal commissions. Traditionally in Texas such appeals have been handled in trial de novo fashion, that is, the appellant can start all over and present his case, plus any new evidence, again. The phone companies want to perpetuate this tradition. Gulf State’s Johnson was candid as to the reason: “It gives us two chances to win our case instead of one.” But since venue in de novo appeals is traditionally in one county, Travis, for the entire state, Rep. Neil Caldwell said he was afraid that removing the “substantial evidence” provision would allow the companies to load the court docket and fight a delaying battle that would unjustly favor their side. 2-Way Profit Until the point in the debate at which the phone executives conceded their general willingness to accept regulation, most of the Struve-side testimony was aimed at showing the companies’ arbitrariness in setting rates. Sloan gave this example: The federal government used to tax intrastate telephone calls 25 percent. “Then the government de-nded to cut the tax rate back to 10 percent. On a $1 call, that would have meant the total charge would have been cut back from $1.25 to $1.10. But just before the reduction went into effect, Southwestern Bell announced a 10 percent increase in rates. That means that the $1 call is now $1.10, plus 11 cents tax, bringing the old $1.25 call to $1.21. Of the 25 cent tax reduction, the company benefitted by 10 cents. Only a four cent reduction was passed on the Texas customer.” None of the telephone executives argued the point. W. F. Ayres, president of the Municipal Pipe and Fabricating Company of Houston, testified that his plant is located just two miles outside the city limits but that his bill is $97.35 a month per telephone line, whereas a cafe just inside the city limits has to pay only the usual $16.50 a month price, because the latter is regulated by the city of Houston and Ayres’ phone is not regulated at all. He said he used to be charged only $74.25 a line, but that on Nov. 15, 1960, the phone company informed him it was increasing the rates “because they could; if I did not like it, they would . be glad to discontinue the service.” AyreS called the telephone industry “virtually a monopoly” and he complained that the customer “has no place to appeal.” John Barnhart, Corpus Christi attorney and former member of the House who unsuccessfully introduced a bill similar to Struve’s in 1951, sent a message to the subcommittee saying that Bell Telephone has “the unchecked power of a monarch to impose its rates at will upon the people of Texas.” Struve said he was afraid the League of Municipalities might object to a state commission’s usurping their power to set rates, but Cannon doubted it. “Setting rates is like setting taxes,” he said. “Both are unpleasant busi” ness. Noboby would make me mad if they usurped my chore of helping to see taxes, and I think the cities would be happy to pass on the rate-setting chore to somebody else.” B.S. THE TEXAS OBSERVER Page 3 April 8, 1961 form, would withdraw his opposition if a road were stipulated, and Reagan indicated he agrees with Hudson on this point. “I was down there at Padre over the weekend and you couldn’t drive 10 miles,” he said. Hudson told the Observer he definitely would tack an amendment onto the ‘bill in the Senate to require a road built through the center of the island “and I will tell every member of this