A-78711, AUGUST 10, 1936, 16 COMP. GEN. 136

A-78711: Aug 10, 1936

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CONTRACTS - PUBLIC UTILITIES - STEAM FOR LOW-COST HOUSING AND SLUM CLEARANCE PROJECTS THERE IS NO AUTHORITY FOR CONTRACTING FOR A PERIOD OF TEN YEARS WITH A PUBLIC UTILITY CORPORATION FOR THE FURNISHING OF STEAM FOR HEATING PURPOSES IN A LOW-COST HOUSING AND SLUM-CLEARANCE PROJECT. THE REASONABLE COST OF INSTALLATION OF THE STEAM LINE TO BE BORNE BY THE GOVERNMENT AND REBATE TO BE MADE ON STEAM BILLS UNTIL INSTALLATION COST WITH INTEREST IS RETURNED. PROVIDED THE RATES TO BE CHARGED ARE REASONABLE AND SUCH AS ARE CHARGED SIMILAR CONSUMERS. ONLY TO THE EXTENT RECEIPTS FROM THE OPERATION OF THE PROJECT ARE INADEQUATE THEREFOR. WHICH IS LESS THAN THE COST OF PRODUCING OUR OWN STEAM WHEN THE CAPITAL COST WHICH MUST BE EXPENDED IS TAKEN INTO CONSIDERATION.

A-78711, AUGUST 10, 1936, 16 COMP. GEN. 136

CONTRACTS - PUBLIC UTILITIES - STEAM FOR LOW-COST HOUSING AND SLUM CLEARANCE PROJECTS THERE IS NO AUTHORITY FOR CONTRACTING FOR A PERIOD OF TEN YEARS WITH A PUBLIC UTILITY CORPORATION FOR THE FURNISHING OF STEAM FOR HEATING PURPOSES IN A LOW-COST HOUSING AND SLUM-CLEARANCE PROJECT, NOR FOR A CONTRACT FOR A PERIOD OF ONE YEAR, RENEWABLE AT THE OPTION OF THE GOVERNMENT FROM YEAR TO YEAR FOR A PERIOD OF TWENTY YEARS, WITH A COVENANT OF NON-USER OF HEATING FACILITIES OTHER THAN THOSE OF THE CONTRACTOR APPLICABLE TO BOTH THE UNITED STATES AND ANY ASSIGNEE IN THE EVENT OF SALE OF ANY OR ALL OF THE PROJECT. STEAM FOR HEATING PURPOSES IN A LOW-COST HOUSING AND SLUM-CLEARANCE PROJECT MAY BE OBTAINED FROM A PUBLIC UTILITY CORPORATION UNDER A CONTRACT FOR ONE YEAR, RENEWABLE AT THE OPTION OF THE GOVERNMENT, THE REASONABLE COST OF INSTALLATION OF THE STEAM LINE TO BE BORNE BY THE GOVERNMENT AND REBATE TO BE MADE ON STEAM BILLS UNTIL INSTALLATION COST WITH INTEREST IS RETURNED, PROVIDED THE RATES TO BE CHARGED ARE REASONABLE AND SUCH AS ARE CHARGED SIMILAR CONSUMERS, OR AN ARRANGEMENT MAY BE MADE SIMILAR TO THAT DESCRIBED IN 8 COMP. GEN. 654, BUT PAYMENTS FOR SUCH SERVICE MAY BE MADE FROM THE FUNDS AVAILABLE FOR CONSTRUCTION OF THE PROJECT ONLY FOR PERIODS PRIOR TO JULY 1, 1937, AND ONLY TO THE EXTENT RECEIPTS FROM THE OPERATION OF THE PROJECT ARE INADEQUATE THEREFOR.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, AUGUST 10, 1936:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF JULY 18, 1936, AS FOLLOWS:

IN CONNECTION WITH THE LOW COST HOUSING AND SLUM CLEARANCE PROJECT IN INDIANAPOLIS, INDIANA, BEING CONSTRUCTED UNDER THE SUPERVISION OF THE HOUSING DIVISION OF FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS AND KNOWN AS PROJECT H-1601, IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT THE HEATING AND FURNISHING OF HOT WATER FOR THIS PROJECT MAY BE DONE MORE CHEAPLY THROUGH THE PURCHASE OF STEAM FROM THE LOCAL UTILITY COMPANY, NAMELY, THE INDIANAPOLIS POWER AND LIGHT COMPANY, THAN THROUGH THE CONSTRUCTION OF AN INDEPENDENT STEAM GENERATING PLANT OR BY THE INSTALLATION OF INDIVIDUAL HEATING UNITS IN THE VARIOUS BUILDINGS.

OF THE LATTER TWO METHODS A CENTRAL HEATING SYSTEM WOULD BE THE LESS EXPENSIVE. THE COST OF CONSTRUCTION OF SUCH A SYSTEM WOULD BE APPROXIMATELY $100,000. THE INDIANAPOLIS POWER AND LIGHT COMPANY HAS INDICATED A WILLINGNESS TO FURNISH THE NECESSARY STEAM FOR THE PROJECT AT A COST OF APPROXIMATELY 48 CENTS PER THOUSAND POUNDS, WHICH IS LESS THAN THE COST OF PRODUCING OUR OWN STEAM WHEN THE CAPITAL COST WHICH MUST BE EXPENDED IS TAKEN INTO CONSIDERATION.

IN ORDER TO PROVIDE THE STEAM FOR THE PROJECT, IT WILL BE NECESSARY FOR THE INDIANAPOLIS POWER AND LIGHT COMPANY TO CONSTRUCT A STEAM MAIN FOR APPROXIMATELY 4,000 FEET, RUNNING FROM THE CLOSEST POINT AT WHICH STEAM IS NOW AVAILABLE IN THE CITY OF INDIANAPOLIS TO THE SITE OF THE PROJECT. THERE IS LITTLE LIKELIHOOD THAT THERE WILL BE OTHER POSSIBLE USERS OF STEAM ALONG THIS ROUTE, THE INDIANAPOLIS POWER AND LIGHT COMPANY IS UNWILLING TO EXPEND THE SUM NECESSARY TO INSTALL THIS LINE, WHICH IS IN THE NEIGHBORHOOD OF $60,000, WITHOUT SOME GUARANTEE FROM THE GOVERNMENT THAT THE STEAM WILL BE USED FOR A SUFFICIENT LENGTH OF TIME TO ENABLE IT TO RECOVER, THROUGH THE MEDIUM OF ITS STEAM BILLS, AT LEAST A FAIR PORTION OF THE AMOUNT OF ITS ORIGINAL EXPENDITURE. OF WHICH WOULD BE SATISFACTORY TO IT. THE FIRST IS THAT THE GOVERNMENT ENTER INTO A TEN-YEAR CONTRACT FOR STEAM. UPON THIS BASIS THE POWER COMPANY WILL INSTALL THE NECESSARY MAINS WITHOUT COST TO THE GOVERNMENT.

THE VALIDITY OF ENTERING INTO ANY SUCH CONTRACT IS QUESTIONABLE IN VIEW OF THE FACT THAT THE LIFE OF THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS IS LIMITED TO JUNE 30, 1937. IT IS MY UNDERSTANDING THAT THE APPROPRIATION, INSOFAR AS IT MAY BE AVAILABLE FOR EXPENDITURES UNDER CONTRACTS OF THIS TYPE, IS LIMITED TO THAT PERIOD. HOWEVER, THE RECENT GEORGE-HEALEY BILL, PUBLIC, NO. 837, 74TH CONGRESS, PROVIDES UNDER SECTION 3:

"SUCH PAYMENTS IN LIEU OF TAXES AND ANY OTHER EXPENDITURES FOR OPERATION AND MAINTENANCE (INCLUDING INSURANCE) OF ANY LOW-COST HOUSING OR SLUM- CLEARANCE PROJECT DESCRIBED IN SECTION 1, SHALL BE MADE OUT OF THE RECEIPTS DERIVED FROM THE OPERATION OF SUCH PROJECTS. TO PROVIDE FOR SUCH PAYMENTS AND EXPENDITURES THE FEDERAL EMERGENCY ADMINISTRATOR OF PUBLIC WORKS IS AUTHORIZED FROM TIME TO TIME TO RETAIN OUT OF SUCH RECEIPTS SUCH SUMS AS HE MAY ESTIMATE TO BE NECESSARY FOR SUCH PURPOSES.'

NO TIME LIMITATION ON THE AVAILABILITY OF FUNDS DERIVED FROM SUCH RECEIPTS IS IMPOSED BY THE BILL AND, IN VIEW OF THIS PROVISION, IT IS SUGGESTED THAT THERE MAY BE A POSSIBILITY OF ENTERING INTO A CONTRACT WITH THE INDIANAPOLIS POWER AND LIGHT COMPANY FOR FURNISHING STEAM FOR A PERIOD OF TEN YEARS WITH A SPECIFIC PROVISION THAT PAYMENT FOR SUCH STEAM IS TO BE MADE ONLY OUT OF SUCH PROJECTS.

THE POWER COMPANY'S SECOND PROPOSAL IS THAT THE GOVERNMENT AGREE TO PURCHASE STEAM FOR A PERIOD OF ONE YEAR; WITH AN OPTION OF RENEWAL FROM YEAR TO YEAR FOR TWENTY YEARS; WITH A COVENANT NOT TO USE STEAM, OR ANY SUBSTITUTE THEREFOR, EXCEPT THAT MADE AVAILABLE BY THE POWER COMPANY, FOR TEN YEARS; AND WITH A FURTHER COVENANT THAT THIS RESTRICTION BE IMPOSED UPON ITS ASSIGNEE SHOULD THE GOVERNMENT IN ANY MANNER DISPOSE OF ALL OR PART OF THE PROJECT.

SUCH A CONTRACT WOULD INVOLVE THE COMMITMENT OF NO APPROPRIATION BEYOND THAT NOW AVAILABLE EITHER FROM THE ALLOTMENT MADE FOR THE CONSTRUCTION OF THIS PROJECT, WHICH IN THE OPINION OF THE COMPTROLLER GENERAL DATED JULY 27, 1935, NUMBER A-62998, IS AVAILABLE FOR THE PURCHASE OF STEAM, OR FROM ANY FUNDS WHICH MIGHT BE RESERVED BY THE ADMINISTRATOR OUT OF THE RECEIPTS OF HOUSING PROJECTS AS PROVIDED IN THE GEORGE-HEALEY BILL. THIS ARRANGEMENT, HOWEVER, SO CLOSELY APPROXIMATES A CONTRACT FOR THE PURCHASE OF STEAM, AS UNDER THE CIRCUMSTANCES NO OTHER METHOD OF HEATING THE PROJECT WOULD BE AVAILABLE, THAT THE SAME QUESTIONS HAVE ARISEN IN REGARD TO ENTERING INTO SUCH AN AGREEMENT AS HAVE ARISEN WITH REFERENCE TO THE FIRST METHOD PROPOSED.

THE THIRD ALTERNATIVE IS THAT THE GOVERNMENT PAY TO THE INDIANAPOLIS POWER AND LIGHT COMPANY, IMMEDIATELY UPON THE INSTALLATION OF THE STEAM LINE IN QUESTION, THE ACTUAL COST INCURRED BY THE POWER COMPANY IN INSTALLING THE LINE, WITH A GUARANTEE FROM THE POWER COMPANY THAT THE COST WILL NOT EXCEED $60,000. THE GOVERNMENT IS TO TAKE STEAM ON THE BASIS OF A YEARLY CONTRACT RENEWABLE AT THE OPTION OF THE GOVERNMENT, WITH A PROVISION THAT THE STEAM COMPANY SHALL REBATE TO THE GOVERNMENT 20 PERCENT OF THE BILLS FOR STEAM UNTIL THE GOVERNMENT HAS BEEN REIMBURSED FOR THE ENTIRE INITIAL EXPENDITURE FOR THE LAYING OF THESE PIPES, PLUS INTEREST ON UNREBATED BALANCES AT A RATE TO BE AGREED UPON BY THE POWER COMPANY AND THE GOVERNMENT, BUT NOT LESS THAN THREE PERCENT A YEAR; AND WITH A FURTHER PROVISION THAT, IF THE GOVERNMENT USES STEAM FOR A PERIOD OF TEN YEARS, AT THE END OF THE TEN YEAR PERIOD THE POWER COMPANY WILL RETURN TO THE GOVERNMENT ANY AMOUNT OF THE INITIAL COST MADE BY THE GOVERNMENT WHICH HAS NOT BEEN RETURNED THROUGH THE MEDIUM OF THE 20 PERCENT PAYMENTS.

A FOURTH POSSIBLE METHOD OF HANDLING THE SITUATION IS THROUGH THE TYPE OF CONTRACT CONSIDERED IN 8 COMPTROLLER GENERAL 654. IN THAT CASE THE VETERANS' BUREAU CONTRACTED FOR WATER FOR A HOSPITAL IN BEDFORD, MASSACHUSETTS, AND PROTECTED THE CONTRACTOR'S INVESTMENT BY A PROMISE TO PAY THE CONTRACTOR A FIXED AMOUNT AT THE END OF EACH YEAR IN THE EVENT THE GOVERNMENT'S OPTION TO RENEW THE YEARLY CONTRACT WAS NOT EXERCISED. THE POWER COMPANY HAS NOT YET INDICATED ITS WILLINGNESS TO CONTRACT ON THIS BASIS BUT IS GIVING CONSIDERATION TO IT AT THE PRESENT TIME.

EITHER OF THE FIRST TWO PROPOSALS WOULD BE A SATISFACTORY ARRANGEMENT FOR THE PUBLIC WORKS ADMINISTRATION. IF YOU DETERMINE THAT NEITHER OF SUCH ARRANGEMENTS MAY BE MADE, THE THIRD PROPOSAL WOULD ALSO BE ACCEPTABLE, ALTHOUGH THE LARGE IMMEDIATE OUTLAY OF FUNDS REQUIRED MAKES THE PROPOSAL LESS DESIRABLE.

THE TYPE OF CONTRACT IN THE BEDFORD CASE WOULD ALSO BE ACCEPTABLE, ALTHOUGH THE RESPONSIBILITY OF OBTAINING AN APPROPRIATION FOR EACH SUCCESSIVE FISCAL YEAR ADEQUATE TO MEET THE CONTINGENT OBLIGATION OF SUCH A CONTRACT MAKES THIS ARRANGEMENT LESS DESIRABLE THAN THE FIRST TWO PROPOSALS OF THE POWER COMPANY.

BEFORE NEGOTIATING FURTHER WITH THE INDIANAPOLIS POWER AND LIGHT COMPANY, I DESIRE YOUR OPINION ON THE FOLLOWING MATTERS:

1. MAY THE GOVERNMENT ENTER INTO A CONTRACT WITH THE POWER COMPANY FOR STEAM FOR A PERIOD OF TEN YEARS, AND IF SUCH CONTRACT MAY BE MADE--

(A) WILL ANY FUNDS REMAINING IN THE APPROPRIATION 40-433/70684, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, NATIONAL INDUSTRIAL RECOVERY 1933-1937, AND ALLOCATED FOR THE INDIANAPOLIS HOUSING PROJECT BE AVAILABLE FOR PAYMENTS UNDER THIS CONTRACT, OR MUST PAYMENTS UNDER SUCH A CONTRACT BE MADE OUT OF RECEIPTS DERIVED FROM HOUSING PROJECTS IN ACCORDANCE WITH SECTION 3 OF PUBLIC, NO. 837, 74TH CONGRESS; AND, IN EITHER CASE, WILL THESE FUNDS BE AVAILABLE FOR SUCH PAYMENTS AFTER JUNE 30, 1937?

2. MAY THE GOVERNMENT ENTER INTO A CONTRACT WITH THE POWER COMPANY FOR SUPPLYING STEAM FOR ONE YEAR, OR UNTIL JUNE 30, 1937, RENEWABLE AT THE OPTION OF THE GOVERNMENT FROM YEAR TO YEAR FOR A PERIOD OF TWENTY YEARS, WITH A COVENANT THAT FOR TEN YEARS THE GOVERNMENT WILL USE NO STEAM, OR ANY SUBSTITUTE THEREFOR, EXCEPT THAT MADE AVAILABLE BY THE INDIANAPOLIS POWER AND LIGHT COMPANY; AND WITH A FURTHER COVENANT THAT THIS RESTRICTION WILL BE IMPOSED UPON ANY ASSIGNEE OF THE GOVERNMENT IN THE EVENT OF THE DISPOSAL OF ALL OR PART OF THE PROJECT? IF SUCH A CONTRACT MAY BE MADE, MUST PAYMENTS PURSUANT THERETO BE MADE OUT OF RECEIPTS FROM HOUSING PROJECTS, OR MAY THEY BE MADE OUT OF FUNDS REMAINING IN THE APPROPRIATION 40-433/70684, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, NATIONAL INDUSTRIAL RECOVERY 1933 1937, AND ALLOCATED FOR THIS PROJECT?

3. MAY THE GOVERNMENT ENTER INTO A CONTRACT FOR ONE YEAR OR UNTIL JUNE 30, 1937, RENEWABLE FROM YEAR TO YEAR FOR TEN YEARS AT THE OPTION OF THE GOVERNMENT, UNDER THE TERMS OF WHICH THE GOVERNMENT WILL PAY THE INITIAL COST OF THE STEAM LINE IN A SUM NOT TO EXCEED $60,000, IF THE INDIANAPOLIS POWER AND LIGHT COMPANY WILL FURNISH STEAM FOR THE PROJECT AND AGREE TO REBATE 20 PERCENT OF ALL STEAM BILLS UNTIL THE COST OF THE STEAM LINE PLUS INTEREST IS RETURNED TO THE GOVERNMENT, AS PREVIOUSLY OUTLINED? IF SUCH A CONTRACT MAY BE MADE, MAY FUNDS APPROPRIATED UNDER APPROPRIATION 40- 433/70684, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, NATIONAL INDUSTRIAL RECOVERY 1933 1937, AND ALLOCATED FOR THIS PROJECT BE USED TO PAY THE INITIAL COST OF INSTALLING THE STEAM LINE?

4. IF THE INDIANAPOLIS POWER AND LIGHT COMPANY WILL ASSENT TO SUCH AN ARRANGEMENT, MAY THE GOVERNMENT ENTER INTO A CONTRACT SIMILAR TO THAT DESCRIBED IN 8 COMPTROLLER GENERAL 654, AND, IF IT MAY, WILL FUNDS REMAINING IN APPROPRIATION 40-433/70684, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, NATIONAL INDUSTRIAL RECOVERY 1933 1937, AND ALLOCATED TO THIS PROJECT BE AVAILABLE FOR PAYMENTS UNDER THIS CONTRACT BOTH BEFORE AND AFTER JUNE 30, 1937, OR MUST THESE PAYMENTS BE MADE OUT OF RECEIPTS DERIVED FROM THE OPERATION OF HOUSING PROJECTS, BOTH BEFORE AND AFTER JUNE 30, 1937, OR MUST A SEPARATE APPROPRIATION BE MADE EACH YEAR, AT LEAST LARGE ENOUGH TO COVER THE CONTINGENT PAYMENT WHICH WOULD BE MADE IF THE GOVERNMENT FAILED TO EXERCISE ITS OPTION TO RENEW THE CONTRACT?

YOUR QUESTIONS NUMBERED 1 AND 2 MUST BE ANSWERED IN THE NEGATIVE IN THEIR ENTIRETY. THE SITUATION HERE PRESENTED IS PRIMARILY A CONSTRUCTION RATHER THAN AN OPERATION OR MAINTENANCE MATTER. ALSO, CONTRACTS FINDING THEIR AUTHORITY ON THE BASIS OF APPROPRIATIONS MAY NOT OBLIGATE THE GOVERNMENT BEYOND THE PERIOD FOR WHICH THE APPROPRIATIONS HAVE BEEN MADE AVAILABLE. SEE LEITER V. UNITED STATES, 271 U.S. 204. FURTHERMORE, NO OFFICER OR EMPLOYEE OF THE UNITED STATES, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY TO THAT EFFECT, IS AUTHORIZED TO CONTRACT THAT THE GOVERNMENT WILL USE NO STEAM OR ANY SUBSTITUTE THEREFOR EXCEPT THAT MADE AVAILABLE BY THE CONTRACTOR DURING A PERIOD OF 20 YEARS.

IF THE INDIANAPOLIS POWER AND LIGHT CO. WILL NOT ENTER INTO A CONTRACT SIMILAR TO THAT CONSIDERED IN DECISION OF JULY 27, 1935, A 62998, WHICH WAS ENTERED INTO BY THE GEORGIA POWER CO., THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS MAY LEGALLY CONTRACT WITH THE INDIANAPOLIS POWER AND LIGHT CO. ON THE BASIS PROPOSED IN YOUR QUESTION NUMBERED 3, PROVIDED THE RATES TO BE CHARGED FOR STEAM BEFORE DEDUCTION OF THE PROPOSED REBATE ARE REASONABLE AND NOT IN EXCESS OF THOSE CHARGED TO SIMILAR CONSUMERS. ALSO, THERE WOULD APPEAR NO LEGAL OBJECTION TO A CONTRACT SUCH AS REFERRED TO IN QUESTION 4. SEE IN THIS CONNECTION CONTRACT NO. W-425-ENG-2, DATED JANUARY 18, 1934, BETWEEN THE UNITED STATES REPRESENTED BY THEODORE WYMAN, JR., CAPTAIN, CORPS OF ENGINEERS, AND THE BOWDOIN UTILITIES CO. WHICH WAS CONSIDERED IN DECISION OF MARCH 21, 1935, A-60676, AND THE DECISION IN 8 COMP. GEN. 654, TO WHICH YOU HAVE REFERRED. SUCH PAYMENTS AS MAY BE MADE BY THE UNITED STATES IN EITHER CASE SHOULD BE MADE FROM THE RECEIPTS DERIVED FROM THE OPERATION OF THE PROJECT, BUT THE APPROPRIATION OR FUND AVAILABLE FOR THE CONSTRUCTION OF THE PROJECT MAY BE USED FOR SUCH PAYMENTS PRIOR TO JULY 1, 1937, IF AND TO THE EXTENT SUCH RECEIPTS ARE INADEQUATE TO COVER SUCH PAYMENTS IN ADDITION TO OTHER AUTHORIZED EXPENDITURES FOR THE OPERATION AND MAINTENANCE OF THE PROJECT.