THE PANAMA CANAL The Secretary of War exercises general supervision over the administration, maintenance, and operation of the Panama Canal. The Governor of the Panama Canal is the chief administrative officer of this activity. He has complete executive authority over the Canal and its operations, subject to the orders of the President, issued through the Secretary of War. The primary purpose of the administration of the Canal is to pass vessels through that waterway as expeditiously and as safely as possible. To accomplish this it has become necessary to engage in many related activities, including the function of providing various supplies and services to ships and to personnel resident in the Canal Zone. These activities are conducted jointly by the Panama Canal organization and the Panama Railroad Co. as an adjunct thereof. The Panama Railroad Co., originally a private company, has been completely owned by the United States Government since 1904 and has been operated through a board of directors appointed by the Secretary of War, who holds all the stock of the company except the qualifying shares of the directors. The Panama Canal has been open to commerce for approximately 22 years. During this period, exclusive of 8,113 transits of vessels of the United States Government which passed through the Canal without the payment of tolls, transits of large, ocean-going commercial vessels passing through the Canal have totaled 87,603, of which 38,702 were of American registry. During the year 5,382 ocean-going commercial vessels passed through the Canal, as compared with 5,180 in 1935 and 5,234 in 1934. There was a slight increase in the amount of tolls collected and in the volume of cargo carried through the Canal, as well as an increase in the number of transits. The more important trade routes served by the Canal and the tons of cargo moving over these routes during the past fiscal year were: Between the Atlantic and Pacific coasts of the United States, 7,719,075 tons; between the United States and the Far East, including the Philippine Islands, 3,438,159 tons; between Europe and South America, 2,726,053 tons; between Europe and Canada, 2,472,332 tons; between Europe and the United States, 2,403,568 tons; between the east coast of the United States and the west coast of South America, 2,108,384 tons; between Europe and Australasia, 1,056,821 tons; between the United States and the Hawaiian Islands, 514.666 tons; and between the United States and Australasia, 511,992 tons. During the past year Panama Canal revenues from tolls amounted to $23,506,806.46, from postal and miscellaneous receipts $119,915.21, while the net revenues from business enterprises amounted to $920,185.23, a grand total of $24,546,906.90. Net operating charges amounted to $9,095,067.13, thus leaving a balance of $15,451,839.77 revenue in excess of operating charges, exclusive of interest. However, including interest charges at the rate of 3 percent per annum. on the capital investment of the Canal, the operations for the year show a deficit of $947,254.93, as compared with a similar deficit of $771,618.59 for 1935. The rate of 3 percent approximates the rate of interest paid by the United States Government on funds borrowed to construct the Canal. The interest charge is based on a total capital investment of $546,636,490.05 as of June 30, 1935, which is the actual cost to the United States Government of constructing the Canal and its auxiliary works. This capital investment and the expenses listed above do not include any of the expenses incurred by the Government to fortify the Canal nor for plant used by the military forces. Panama Railroad Co. revenues from the operation of the railroad, commissaries, harbor terminal facilities, the steamship line, etc., totaled $13,178,466.98; expenses totaled $12,476,415.31, resulting in a net revenue from its various business enterprises of $702,051.67. Adding to this miscellaneous profit and loss items resulting from interest, exchange, etc., the net revenue received by the Panama Railroad Co. for the year was $1,127,340.85. Dividends declared by the railroad for the year and credited to the United States Government amounted to $700,000. During the past year work progressed on the construction of a new town site and headquarters for the dredging division at Gamboa, the junction of the Chagres River and the Canal In its new station the dredging division will be more centrally located to carry on its duties of maintaining and improving the dredged channel; and in addition to this its equipment would have access to the dump areas in Gatun Lake in case the Canal were ever closed by a major slide in Gaillard Cut. The steady growth of traffic through the Canal since its opening and the progressive increases in the size of newer vessels have indicated the necessity of planning eventually to increase its capacity. Authority to start investigations along this line was authorized by House Joint Resolution No. 412, approved May 1, 1936. The purpose of this legislation was to authorize a study of the time when the present capacity of the Canal should be increased and of the manner in which this increase should be made. LEGISLATION The present system of measurement of vessels for the collection of tolls, having no justification in equity among the several types of ships, may be considered as a form of subsidy to certain types which are able to take advantage of this system. Such an indirect subsidy to certain types of American vessels is unsound and, in addition, is necessarily shared by similar types of foreign vessels. For many years the Panama Canal has sought legislation to accomplish certain well-defined results, beneficial not only to shipping interests but to the United States, the objects being: First, to reestablish in the present law the system originally intended by the Congress, which, through technical interpretation, has become ineffective-a system based upon the earning capacity of vessels and patterned generally after that in use for ship canals which had operated successfully over a period of many years, and which is designed to avoid the very inequalities which result from the dual system now in effect; second, to abolish the unsatisfactory, unfair, dual system of measurement whereby toll charges are based on one tonnage rating and the limiting factor on another different and smaller tonnage rating which is subject to manipulation; third, to regain control over the tolls charged and to stop further and apparently endless reductions in tolls paid. It is felt that considerable progress toward a solution of this vexatious problem was made by the enactment on April 13, 1936, of legislation providing for the appointment by the President of a (quoting the act) "neutral committee of three members for the purpose of making an independent study and investigation of the rules for the measurement of vessels using the Panama Canal and the tolls that should be charged therefor, and hold hearings thereon, at which interested parties shall have full opportunity to present their views.” This legislation also provides that the committee shall report to the President prior to January 1, 1937, "and shall make such advisory recommendations of changes and modifications of the 'Rules for the Measurement of Vessels for the Panama Canal' and the determination of tolls as it finds necessary or desirable to provide a practical, just, and equitable system of measuring such vessels and levying such tolls." It is earnestly hoped that as a result of this investigation a single system of measurement rules, which will apply equitably to all vessels in accordance with their earning capacity, will be established as a basis for the collection of tolls by the Panama Canal, and that the toll rates prescribed will permit the operation of the Panama Canal on a completely self-sustaining basis in accordance with recognized business practice. There is also need for legislation which would authorize the Governor of the Panama Canal to pay cash relief to such native or tropical employees of the Panama Canal as may become unfit for further useful service by reason of mental or physical disability resulting from age or disease. American citizens employed by the Panama Canal are eligible to retirement under the Panama Canal Retirement Act, but this covers only those employees who are citizens of the United States. A large proportion of the employees of the Canal are natives of Panama or of countries adjacent to the Caribbean Sea; many of these were employed during the construction of the Canal and should now be replaced by younger and more efficient men. They have been employed at low wages for many years and now find themselves at the retiring age without savings. The method under consideration would provide for payment of a small cash annuity, and the total cost of the plan would be relatively small. Such a measure would be in the nature of a disability retirement, not an old-age pension plan, and would be applicable only to those native workers who had had at least 10 years' service with the Panama Canal or Panama Railroad on the Isthmus. INLAND WATERWAYS CORPORATION The Inland Waterways Corporation continued to function successfully and to fulfill its mission as the congressional agency designated to carry on the Government-owned inland, canal, and coastwise waterways to the point where the system can be transferred to private operations to the best advantage of the Government, of carrying out the mandates Congress prescribed in section 201 of the Transportation Act, 1920, as amended, and of carrying out the policy enunciated by Congress in section 500 of such act. Its operating results for the Government fiscal year were as follows: Tonnage carried by the Inland Waterways Corporation and its There was collected a total of $607,042.70 depreciation funds, which, deposited with the general fund, makes a total reserve fund as of June 30, 1936, of $4,383,829.13. Of this, $3,166,735.01 was invested in Government bonds and the balance distributed as follows: The general fund as of November 1, 1936, amounted to $4,619,407.58, of which $4,290,172.51 was invested in Government bonds, the balance on deposit. During the year there was a general audit of the financial affairs of the Corporation by Haskins & Sells, of New York, who reported assets, liabilities, and corporate net worth, as of December 31, 1935, as follows: Total assets Total liabilities-- Net worth---. The report said: $29, 881, 462. 47 5,647,056. 51 24, 234, 405. 96 We examined or tested accounting records of the Corporation, which consistently have been kept in accordance with the classification of accounts prescribed by the Interstate Commerce Commission. Respectfully, HARRY H. WOODRING, |