PANAMA CANAL COMMISSION AUTHORIZATION AND OVERSIGHT— 1980 / HEARING BEFORE THE SUBCOMMITTEE ON THE PANAMA CANAL OP THE COMMITTEE ON MERCHANT MARINE AND FISHERIES HOUSE OF REPRESENTATIVES NINETY-SIXTH CONGRESS FIRST SESSION ON AUTHORIZATION OF FUNDS AND OVERSIGHT OF THE PANAMA CANAL COMMISSION FOR FISCAL YEAR 1980 Serial No. 96-7 Printed for the use of the Committee on Merchant M d Fisheries 49-653 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1979 COMMITTEE ON MERCHANT MARINE AND FISHERIES JOHN M. MURPHY, New York, Chairman THOMAS L. ASHLEY, Ohio JOHN D. DINGELL , Michigan WALTER B. JONES, North Carolina MARIO BIAGGI, New York GLENN M. ANDERSON, California E (KIKA) DE LA GARZA, Texas JOHN B. BREAUX, Louisiana GERRY E. STUDDS, Massachusetts DAVID R. BOWEN, Mississippi CARROLL HUBBARD, Jr., Kentucky DON BONKER, Washington LES AuCOIN, Oregon NORMAN E. D' AMOURS, New Hampshire JAMES L. OBERSTAR, Minnesota WILLIAM J. HUGHES, New Jersey BARBARA A. MIKULSKI, Maryland DAVID E. BONIOR, Michigan DANIEL K. AKAKA, Hawaii MICHAEL OZZIE MYERS, Pennsylvania JOE WYATT, Texas MIKE LOWRY, Washington EARL HUTTO, Florida EDWARD J. STACK, Florida BRIAN DONNELLY, Massachusetts PAUL N. McCLOSKEY, Jr., California GENE SNYDER, Kentucky EDWIN B.-FORSYTHE, New Jersey DAVID C. TREEN, Louisiana JOEL PRITCHARD, Washington DON YOUNG, Alaska ROBERT E. BAUMAN, Maryland NORMAN F. LENT, New York DAVID F. EMERY, Maine ROBERT K. DORNAN, California THOMAS B. EVANS, Jr., Delaware PAUL S. TRIBLE, Jr., Virginia ROBERT W. DAVIS, Michigan WILLLAM CARNEY, New York MELVIN H. EVANS, Virgin Islands Carl L. Perian, Chief of Staff Lawrence J. O'Brien, Jr., Chief Counsel Frances Still, Chief Clerk Jack E. Sands, Minority Counsel Subcommittee on Panama Canal CARROLL HUBBARD, Jr., Kentucky, Chairman DAVID R. BOWEN, Mississippi DAVID E. BONIOR, Michigan JOHN D. DINGELL, Michigan WALTER B. JONES, North Carolina MARIO BLAGGI, New York GLENN M. ANDERSON, California MIKE LOWRY, Washington ROBERT E. BAUMAN, Maryland DAVID C. TREEN, Louisiana ROBERT K. DORNAN, California WILLIAM CARNEY, New York PAUL N. McCLOSKEY, Jr., California (Ex Officio) JOHN M. MURPHY, New York (Ex Officio) Terrence W. Modgun, Staff Director Bernard Tannenbaum, Special Counsel W. Merrill Whitman, Consultant Kenneth C. Fendley, Professional Staff (II) CONTENTS Page Hearing held— July 16, 1979 1 Statement of— Constant, Thomas M., Secretary, Panama Canal Company 3 Murphy, Hon. John M., chairman. Committee on Merchant Marine and Fisheries 10 Parfitt, H. R., Governor of the Canal Zone 3 Additional material supplied — Parfitt, Gov. H. R.: Board of Directors costs 20 Breakdown of building maintenance 40 Calculation of toll rate increase, required on October 1, 1979 14 General canal expense 17 General corporate expense 16 Increase in budget 21 Increase in financial management costs 64 Name and pay level of persons engaged in performance of the con- tracts 66 Net impact on Treasury appropriations versus Commission revenue deposits 35 Questions of Mr. Hubbard and responses 43 Ratio of personnel costs to total 65 View on section 104 provisions 36 Volume of traffic 18 Communication submitted— Joint letter of July 18, 1979, from Hon. John M. Murphy, Hon. Carroll Hubbard, and Hon. Robert E. Bauman to James T. Mclntyre, Jr 29 Appendix A — Estimates submitted by the Panama Canal Organization to the Congress in May 1979 68 Appendix B — Estimates derived and submitted by the Panama Canal Organiza- tion on July 16 143 (in) PANAMA CANAL COMMISSION AUTHORIZATION AND OVERSIGHT— 1980 MONDAY, JULY 16, 1979 House of Representatives, Subcommittee on Panama Canal of the Committee on Merchant Marine and Fisheries, Washington, D.C. The subcommittee met, pursuant to notice, at 10:12 a.m., in room 1334, Longworth House Office Building, Hon. Carroll Hublaard, Jr., chairman of the subcommittee, presiding. Present: Representatives Murphy, Hubbard, Bonior, Lowry, Bauman, and Carney. Staff present: Terry Modglin, staff director, Panama Canal Sub- committee; Merrill Whitman, consultant, Merchant Marine and Fisheries Committee; Bernard Tannenbaum, consultant. Merchant Marine and Fisheries Committee; Ken Merin, minority counsel, Panama Canal Subcommittee; Molly Dominick, secretary, Panama Canal Subcommittee; Taddy McAllister, clerk, Panama Canal Sub- committee; Michael Smith, research assistant, Panama Canal Sub- committee; and Ken Fendly, staff assistant, Panama Canal Sub- committee. Mr. Hubbard. The Panama Canal Subcommittee will now please come to order. Welcome, Governor Parfitt, Mr. Constant, fellow members, ladies and gentlemen. Earlier this year the Panama Canal Subcommittee devoted 9 days to hearings on legislation which would establish the frame- work for the operation of the Panama Canal to the year 2000. As a result of those hearings, H.R. Ill was reported from the subcom- mittee, the full committee, and then approved by the House on June 21. Last month the subcommittee held 2 more days of hear- ings on the activities of the Government of Panama that raised serious questions about that government's reliability as a future partner in the operation of the canal. Today this subcommittee has an opportunity to give its full attention to the budget and activities of the prospective Panama Canal Commission in its crucial first year of operation. In order to provide an objective basis for the examination of the Panama Canal Commission budget, the subcommittee has asked our distinguished witness to assume that the terms of H.R. HI as passed the House would be enacted into law. I want to emphasize that this assumption does not presume any action in the other body as to the terms of H.R. HI. The terms of the legislation may change, but we must take as our guide the document approved by our own body. (1) Why must we have authorizing hearings at this time? The answer is straightforward: without proceeding to examine the Com- mission budget at this time, the subcommittee might not have adequate time to examine that budget after H.R. Ill or another bill was enacted, and consequently we would be giving inferior treatment to this crucial examination. This, then, is a matter of legislative responsibility. As an opponent of the Panama Canal Treaties and as one who voted against H.R. Ill, I could take the obstructionist path and attempt to delay any further legislation on the Panama Canal. But the House has indicated its intention to enact a law giving form to the parameters of the new treaty. The will of the House must be taken as a guideline. No authorization bill for the fiscal year 1980 operations of the Commission now lies before the subcommittee. The Executive has not submitted an authorization request. Further, I have not intro- duced an authorization bill because I believe that it would be best to obtain a consensus of the subcommittee members subsequent to these hearings as to the precise form which an initial authorization ought to take. Considering the many documents available to us, I do not believe a thorough examination of the prospective Panama Canal Commission budget would be precluded in any way by the absence of a bill at this time. If the terms of H.R. Ill rendering the Panama Canal Commis- sion an appropriated fund agency subject to authorization are en- acted into law, it is my hope that a bill can be presented to the subcommittee, full committee and the House, and then enacted on a very expedited basis. In fact, subcommittee and full committee markup deserve consideration in the near future. The mammoth number of changes required to be made in the canal organization cannot be completed until all the legislation to provide the basis for operation has been enacted. In my judgment, even if H.R. Ill is greatly changed in conference, some sort of authorization could be necessary to provide the basis for the initial appropriations for the Panama Canal Commission. Governor Parfitt, in behalf of the subcommittee, I welcome you and those with you. I look forward to discussing the personal problems, the capital program questions, the diplomatic pressures, and other burdens which face your successor and the Panama Canal Commission. At this time I would like to yield to the ranking subcommittee minority member, Mr. Bauman, for any statement that he wishes to make. Mr. Bauman. Thank you, Mr. Chairman. I want to welcome both the Governor and the Secretary here today, and I look forward to the information that they will provide us. Before we proceed with testimony, I would like to state that in the last few weeks we have heard repeated statements by officials of the Panamanian Government, and particularly Mr. Royo, re- garding the implementing legislation which the House passed, and which the Senate is now addressing. Many of these comments have had to deal with financial terms of that legislation, and how it will be administered, and the attitude displayed has been less than friendly to the United States, and certainly in opposition to the legislation. In one interview, on July 5, Ambassador Lopez-Guevara, said in so many words that he did not care if any bill was passed because Panama did not need any legislation. Other similar statements denouncing the implementing legisla- tion have been made in Panama for domestic political purposes. A recent statement by the Liberal Party indicates that no disburse- ments will be made to Panama, other than those to the treaties, unless they are included in the treaty. The one statement that concerned me a great deal, and I am sure our questions to the Govern will shed some light on it, is one that was made a few days ago, by a member of Panama's Canal Authority. He claimed that he and at least by implication, the Panama Canal Authority which manages the transaction, have no idea where the money is coming from, or under what system it will be managed. So I do think these hearings, are interesting to the public of the United States, and bear on some important policy decisions. So we welcome you here. Mr. Hubbard. Thank you. Congressman Bauman. Congressman Carney, do you have any initial remarks? Mr. Carney. Mr. Chairman, as usual, I am at a loss for words. Mr. Hubbard. That leaves me without a reply. He is not usually without words. I am glad you are here, though, Congressman Carney. Now, I am pleased to present Governor Parfitt, Governor of the Canal Zone, and President of the Panama Canal Company. Thank you for being with us. STATEMENT OF HON. H. R. PARFITT, GOVERNOR OF THE CANAL ZONE: ACCOMPANIED BY THOMAS M. CONSTANT, SEC- RETARY, PANAMA CANAL COMPANY Governor Parfitt. Thank you, Mr. Chairman, members of the committee. With your permission, I would like to abbreviate my opening statement, and provide the full text for the record. Mr. Hubbard. Yes, thank you. [The following was received for the record] Statement of Gov. H. R. Parfitt introduction 1. Mr. Chairman and members of the committee, I am Major General Harold R. Parfitt, Governor of the Canal Zone and President of the Panama Canal Company. I have been asked to appear today to present a request for authorization of the proposed fiscal year 1980 budget program for the Panama Canal Commission under H.R. Ill, the bill passed by the House on June 21 to implement the Panama Canal Treaty of 1977. I am pleased to present this request as I realize these proceedings are being held in the interest of insuring that funds will be available to the Commission when it assumes responsibility for operation of the Panama Canal on October 1, 1979, an interest which I full share. 2. We are all aware that the President has not yet submitted to the Congress a budget program for fiscal year 1980 that reflects operation of the Panama Canal Commission under H.R. HI, because of the uncertainty over what the final legisla- tion will look like and the administration's clear preference for a corporate form rather than an appropriated fund agency. Nevertheless, for the purpose of these authorization proceedings we have funished the Committee with budget schedules which represent this agency's best estimate of the appropriations that will be required by the Panama Canal Commission in fiscal year 1980 pursuant to the provisions of H.R. HI. These budget estimates have not been submitted to the Office of Management and Budget for review and, therefore, numbers in the schedules should not be taken as a sign of administration agreement with all facets of H.R. 111. 3. As you may know already, on May 10 of this year we also furnished to the House Subcommittee on Transportation and Related Agencies, Committee on Appro- priations, fiscal year 1980 estimates under H.R. Ill of appropriation requirements for the Panama Canal Commission. We have refined these earlier estimated to reflect our most current outlook with respect to Commission program requirements and to conform with the final version of H.R. Ill as passed by the House. APPROPRIATION REQUIREMENTS 4. Mr. Chairman, our authorization request covers three appropriations for the Panama Canal Commission in fiscal year 1980, totalling $507.7 million. One is an appropriation of $40 million to be deposited in the "Panama Canal Emergency Fund' established by H.R. 111. A second appropriation of $427.3 million is required for operating expenses of the Commission and for expenses incident to the liquida- tion of claims against its predecessor agencies, the Panama Canal Company and the Canal Zone Government. The third appropriation required is $40.4 million to pro- vide for capital equipment replacement and additions, and construction or acquisi- tion of other plant assets and fixtures. I would like to highlight for you some of the more important aspects of these requests. EMERGENCY FUND 5. H.R. HI provides that on October 1, 1979, the Secretary of the Treasury will establish and thereafter maintain in the Treasury a fund to be known as the "Panama Carnal Emergency Fund." The bill further authorizes $40 million to be appropriated for this purpose for the fiscal year beginning on October 1, 1979. For subsequent fiscal years, however, only such additional sums as may be specifically authorized would be appropriated for the fund. 6. Although H.R. Ill authorizes the initied $40 million deposit into the fund at the beginning of fiscal year 1980, we have included this amount in the Commission's budget request to insure that it is provided for in the fiscal year 1980 Appropri- ations Act. 7. The Emergency Fund will be available to the Commission on a continuing basis to defray emergency expenses and to insure continuous, efficient, and safe operation of the Panama Canal, if funds appropriated for operation and maintenance of the canal are insufficient for such purposes. It should be noted, however, that H.R. Ill imposes two specific limitations on the use of these funds. First, they can be used to cover increased costs attributable to unprogrammed increases in traffic only to the extent such traffic produces additional compensating revenues. Second, these funds C£uinot be used to make any of the payments to Panama required by Article XTTI of the Panama Canal Treaty of 1977. 8. A $40 million request for this purpose was also contained in the budget estimates provided in May to the House Subcommittee on Transportation. OPERATING EXPENSE APPROPRIATION 9. An operating expense appropriation of $427.3 million is also requested. Of this amount, $76.5 million is needed to discharge obligations of the Panama Canal Company and Canal Zone Government estimated to be outstanding as of September 30, 1979, and $350.8 million to cover regular operating expenses of the Commission in fiscal year 1980. 10. H.R. Ill requires that, in terms of funds, the Commission made a fresh start, so to speak, in that all unexpended cash balances in accounts of the Panama Canal Company and Canal Zone Government at year-end 1979 must be covered into the U.S. Treasury. The amount to be deposited in the U.S. Treasury is estimated at $88.1 million. However, the year-end accounts payable, accrued liabilities for sala- ries, wages and leave currently due terminated employees, and amounts due on undelivered purchase orders and contracts for these two agencies, will require funding in early fiscal year 1980. The estimated amount required by the Commis- sion to liquidate these obligations of the predecessor agencies is $76.5 million, as indicated earlier. However, I have been advised that 0MB thinks this estimate may be low because of technical working problems with H.R. 111. H.R. Ill requires that all unexpended funds, including some obligated funds, be turned in to the Treasury on September 30, 1979. They believe the only way this can legally be done is to cancel the current contracts and renegotiate them. They further suggest that in such a case the renegotiated contracts might be higher than the cancelled ones, and there might be some courts suits in testing the cancellations. If H.R. Ill were to provide for return of unobligated funds rather than unexpended funds, this problem could be avoided. 11. Aside from these prior obligations, we project $350.8 million will be required to cover operating expenses of the Commission itself in fiscal year 1980. This amount includes the estimated cost to the Commission of such expense items as personnel services and benefits, materials and supplies, tranportation, communica- tion, and claims. In addition, it provides funds to cover certain other costs imposed on the Commission by the Panama Canal Treaty and H.R. HI, which I would like to take a few moments to discuss at this time. 12. Included in the budget request are treaty payments to Panama estimated at $73.2 million. This is comprised of a $10.0 million fixed annuity payment, a $10 million payment for specified public services that Panama is to perform, and a $53.2 million payment calculated at the rate of 30 cents per net vessel ton transiting the canal in fiscal year 1980. Although the First two payments are fixed for fiscal year 1980, the tonnage payment could vary depending upon the extent actual traffic in that year deviates from projections on which the payment was estimated. 13. Under H.R. Ill the Panama Canal Commission is required to reimburse the Civil Service Retirement Fund for the unfunded liability associated with the early retirement provisions contained in the bill. Reimbursements are to be made from appropriations of the Commission in annual amounts as determined by the Office of Personnel Management. These payments to the fund will be considered as operating costs and, accordingly, will be included in the tolls base for recovery from shipping. 14. The Office of Personnel Management has estimated the total cost of the early retirement program at $219 million, to be amortized over a period of 20 years through payments of $16.7 million annually. We have included this amount in the budget. 15. The Panama Canal Treaty provides for the establishment of a system whereby certain Commission employees may be temporarily assigned to assist Panama in the operation of certain functions for which it assumes responsibility on October 1. The Commission would be reimbursed for any of its employees who are so assigned. In such areas as the ports and railroad, where the Commision will make use of services to be provided by Panama, it is to our advantage to render assistance to the extent possible to insure continuity of services at acceptable standards. In addition to the assignment of personnel, this assistance would include maintenance and other sup- port. 16. Despite earlier efforts on our part to ascertain from the Government of Panama its needs in this regard, it is only very recently that specific indications have been given us regarding the extent of supporting services Panama will require. They may have underestimated the problems inherent in assuming responsibility for operational activities of such magnitude and complexity as the ports and rail- road. Because of this concern, I have advised Panamanian officials that by no later than July 20 we must have their final requests for supporting services. Although we lack specific information at this time on what Panama may request in the way of total assistance, I believe it is prudent to include a contingency amount in the budget to cover the potential need to furnish substantial support to the Government of Panama after October 1. 17. For the foregoing reasons, I have included $6 million in the fical year 1980 operating budget as contingency funds for assistance to Panama. Additionally, $0.7 million has been included for payment of 19 current employees whose services have been specifically requested. As I stated earlier, no assistance will be provided to Panama on other than a fully-reimbursable basis. 18. Mr. Chairman, I would like to bring to your attention at this time that we have budgeted for continuation by the Commission of sponsoring education and medical care for former employees of the Panama Canal Company and the Canal Zone Government, and their dependents, as well as for active Commission employ- ees and their dependents. It is our construction of the pertinent section of H.R. HI that the bill authorized the Commission to cover these costs. In our view, however, H.R. Ill as passed does not provide for continued sponsorship by the Commission of such other categories of persons as ministers, employees of non-profit orgranizations and others. Accordingly, no funds have been requested for providing educational and health care services to these persons. 19. As a final point in this area, I would like to call your attention to the fact that the Canal's operating activities currently provide extensive support for capital program projects, and they will continue to do so under the Commission. Conse- quently, there is a requirement for inclusion in the authorization of a provision for reimbursing the operating expense appropriation from the capital appropriation. 20. The total amount requested for the operating expense appropriation is the same as that contained in the May budget submission to the House Subcommittee on Appropriations. Although the amounts are the same, substantial reprogramming has taken place. CAPITAL APPROPRIATION 21. An appropriation of $40.4 million is requested to provide for capital equipment replacements and additions, as well as construction or acquisition of other plant assets and fixtures, to remain available until expended. Of that amount, $13.2 million is required to discharge obligations of the predecessor agencies estimated to be outstanding as of September 30, 1979. Major projects include $5 million for channel improvements, $4.3 million for acquisition of additional towing locomotives for the locks, $3.9 million for the replacement of dump scows used in the dredging operation, and $3.5 million for a new tugboat. 22. The $40.4 million capital appropriation being requested is $5.1 million less than that which was forseen when we submitted the earlier estimates to the House Appropriations Subcommittee. This reduction is due primarily to a refinement of our capital projects program to delete funding for projects which are not expected to be initiated prior to the end of fiscal year 1980. 23. This completes my presentation on the appropriation requirements for the Commission in Fiscal Year 1980. The picture would not be complete, however, without at least a brief discussion of the revenue picture. REVENUES 24. H.R. HI requires that all revenues of the Commission, including tolls, be covered into the Treasury which serves as a means to reimburse the U.S. Govern- ment for the appropriations provided the Canal agency. It is worthy of noting that among the items to be included in the tolls base and, hense, in the revenue stream, is interest on the U.S. investment. In fiscal year 1980 interest expense to the Commission is projected at $20.9 million, based on an average yield rate of 10.25 percent as estimated by the U.S. Treasury. 25. We are currently estimating toil revenues of $221 million in fiscal year 1980 at existing rates. Revenues from other sources are estimated at $89.2 million for a total of $310.2 million. As compared to projected accrued costs, which is the account- ing necessary for the determination of adequate toll rates, we project a commission deficit of $79.3 million, including $5 million resulting from a capital surcharge. This translates into a requirement for a toll rate increase of 35.9 percent, without considering sensitivity of Canal traffic to toll increases. 26. I should alert the Committee to the fact that if implementing legislation is not enacted in the xiear future, the Panama Canal Company will be unable, under the procedures for changes in tolls as set forth in H.R. HI, to place adequate new toll rates in effect by October 1. This will result in an underrecovery of cost for each day's delay in placing adequate rates in effect. Accordingly, to recover full cost of operations for the year, the rates established under H.R. Ill must provide for an offsetting overrecovery during the months they will be in effect. This could result in the need for a toll increase in excess of the 35.9 percent previously mentioned. 27. In closing, in response to your request, herewith is some general information concerning the outlook for fiscal year 1981. I would caution, however, that we are now in the process of formulating the budget for fiscal year 1981 and we do not yet have finalized data. 28. Transits are expected to increase from 13,310 in fiscal year 1980 to 13,515 in fiscal year 1981, generating tolls at current rates in the amount of $221 million and $231.6 million respectively. Such traffic levels will generate annuity payments to Panama of $53.2 million in fiscal year 1980 and $55.8 million in fiscal year 1981. Addmg the $10 million fixed annuity payments and the $10 million public service payments results in total payments to Panama in those years of $73.2 million and $75.8 million respectively. Current projections indicate that the tolls increase of 35.9 percent required in fiscal year 1980 should be adequate to sustain a breakeven budget in fiscal year 1981. 29. Mr. Chairman and members of the Committee, this concludes my opening statement. I will now attempt to answer any questions you may have. Thank you for your attention. [The following was submitted:] Suggested Language for Authorization general provisions Funds appropriated for the Panama Canal Commission may be appropriated notwithstanding section 3679 of the Revised Statutes, as amended (31 U.S.C. 665), to the extent necessary to permit payment of such pay increases for officers or employ- ees as may be authorized by administrative action pursuant to law which are not in excess of statutory increases granted for the same period in corresponding rates of compensation for other employees of the Government in comparable positions. PANAMA CANAL EMERGENCY FUND For expenses necessary to defray emergency expenditures and to insure continu- ous efficient and safe operation of the Panama Canal, where funds appropriated for the operation and maintenance of the Canal prove insufficient for such purposes, $40,000,000, to remain available until expended. OPERATING EXPENSES For operating expenses necessary for the Panama Canal Commission, including hire of passenger motor vehicles and aircrafts; uniforms or allowances therefor, as authorized by law (5 U.S.C. 5901-5902); official reception and representation ex- pense; operation of guide services; residence for the administrator, contingencies of the administrator, and to employ services as authorized by law (5 U.S.C. 3109); maintaining and altering facilities of other United States Government agencies in the Republic of Panama and facilities of the Government of the Republic of Panama for Panama Canal Commission use; and for payment of liabilities of the Panama Canal Company and Canal Zone Government that were pending on September 30, 1979 or that may accrue thereafter, including accounts payable for capital projects, $427,262,000. There may be credited to this appropriation, funds received from the Panama Canal Commission's capital outlay account for expenses incurred for sup- plies and services provided for capital projects and for payment to other United States Government agencies funds received from officers and employees of the Commission, and/or commercial insurors of Commission employees, for expendi- tures made for services provided to Commission employees and their dependents by such other agencies. CAPITAL PROGRAM For acquisition, construction, and replacement of improvements, facilities, struc- tures, and equipment required by the Panama Canal Commission, including the purchase of not to exceed forty-eight passenger motor vehicles of which twenty-eight are for replacement only; to employ services authorized by law (5 U.S.C. 3109) for payment of liabilities of the Panama Canal Company and Canal Zone Government that were pending on September 30, 1979 or that may accrue thereafter; to improve facilities of other United States Government agencies in the Republic of Panama and facilities of the Government of the Republic of Panama for Panama Canal Commission use, $40,419,000 to remain available until expended. Fiscal Year 1980 Budget Estimate operating expenses Program and financing [In thousands of dollars] 1980 Program by activities — Operating costs: estimate Transit operations 243,529 Supporting services 49,278 General corporate expense 97,840 Total operating costs 390,647 Unfunded adjustment to total operating costs * —28,790 Total program costs, funded 361,857 Change in selected resources —4,091 Total operating obligations 357,766 FUNDING OF OBLIGATIONS CARRIED FORWARD FROM PREVIOUS AGENCIES Accounts payable and accrued liabilities: Panama Canal Company 60,035 Canal Zone Government 5,064 8 Operations undelivered orders: Panama Canal Company 11,133 Canal Zone Government 264 Total obligations carried forward from previous agencies 76,496 10.00 Total obligations 434,262 Financing: 11.00 Offsetting collections, Federal funds, services and supplies provided Panama Canal Commission, capital outlay account —7,000 21.40 Unobligated balance available start of year 23.40 Unobligated balance transferred to other accounts 24.40 Unobligated balance available end of year 25.00 Unobligated balance lapsing 40.00 Appropriation 427,262 Relation of obligations to outlays: 71.00 Obligations incurred, net 427,262 72.40 Obligated balance start of year 73.40 Obligated balance transferred, net 71.00 Obligated balance, end of year, appropriated funds 42,510 90.00 Outlays 384,752 ' Includes $20,854 interest costs recovered in toll rates and paid to the U.S. Treasury in the deposit of tolls. CAPITAL PROGRAM Program and financing [In thousands of dollars] Obligations 1980 Program by activity: estimated Transit operation projects 23,543 Supporting activities projects 2,703 General corporate projects 948 Acquisition of other assets 50 Adjustment for slippage and recoveries —2,000 Total obligations, current program 25,244 Funding of undelivered orders from predecessor agencies: Panama Canal Company 12,562 Canal Zone Government 613 Total obligations 38,419 Financing 24.40 Unobligated balance, end of year 2,000 40.00 Appropriation 40,419 Relation of obligations to outlays 71.00 Obligations 38,419 72.40 Obligated balance, start of year ' 73.40 Obligated balance, transferred, net 74.40 Obligated balance, end of year i _ 10,367 99.00 Outlays 28,052 ' Includes $425,000 in undelivered orders from Canal Zone Government capital funds that may be transferred to the Department of Defense in order to complete various projects. 9 Detail of Panama Canal Commission — Capital Program Obligations, fiscal year 1980 (In thousands of dollars] Project title Amount Transit projects: Install chamber lighting — all locks 56 Improve wingwall knuckle fendering system — all locks 265 Replace and add tugboats 3,500 Replace dump scows 3,860 Channel improvements 5,000 Replace and add equipment 655 Replace launches and launch engines 600 Replace majors buoys 10 Improvements to facilities 366 Relocation costs, canal support operations 2,404 Add towing locomotives 4,320 Construct launch repair facility 2,000 Construct locomotive cranes repair pits 130 Prior years projects 432 Total transit projects 23,543 Supporting services projects: Improvements to electrical power and communication system 65 Water systems improvements 328 Replace motor vehicles 450 Replace and add equipment 243 Improvements to facilities 42 Minor improvements to quarters 370 Reroof employee quarters 336 Insulate employee quarters 217 Improvements to communication facilities — Phase II 435 Modernize employee quarters 75 Prior years projects 142 Total supporting services 2,703 General corporate: Improvements to Commission buildings 212 Replace and add equipment 21 Advanced engineering planning and design 250 Minor capital additions and replacements 182 Retirement and removal costs 30 Prior years projects 253 Total general corporate 948 Acquisition of other assets: Replace dredge pipe and appurtenances 50 Total acquisition of other assets 50 Total Panama Canal Commission 27,244 Funding of undelivered orders from predecessor agencies 13,175 Total appropriation required 40,419 Summary of revenue and expense [In thousands of dollars] Transit operation— Revenue: Tolls at existing toll rates 221.000 10 Added tolls from 35.9 percent rate revenue ]9,290 Revenue other than from tolls ^^»'^" Total revenues 344,050 Expense > ^6 The substantial excess of funds deposited to Treasury over appropriations utilized is peculiar to the first year of operations. This is because predecessor agencies funds are being used in effect to cover prior year obligations, rather than appropriations as will be the case in subse- quent years. Mr. Whitman. Fine. That is that question. I wanted to clear up one other thing in the relating to the colloquy with Mr. Bauman. . . ^ The question that Mr. Conte asked in the appropriation hearings did not relate to all situations. It related to the situation under the Administration bill, H.R. 1716. His question was, If that were passed, what would be the effect of section 104 of the Government Appropriations Control Act, and the anwer appears to say that the agency would be bound by the provisions of appropriation laws passed by the Congress, unless in the judgment of somebody the answer does not disclose who that somebody would be— compliance with the law would result in either destroying or substantially impairing the function of the agency. I guess I am not really asking a question. I just want to clear it up. Governor Parfitt. I misunderstood the comment that was made. Mr. Whitman. That the premise of the question was not that we have no legislation but that we have the Administration legisla- tion. Governor Parfitt. I see. I did not understand that. Mr. Whitman. I might add as a question, I take it that you are not very familiar with that particular quotation. You can take a look at thai when you get back and see if that does represent your considered view. Governor Parfitt. I will be glad to review it. [The following was submitted:] View on Section 104 Provisions I have reviewed the response to the question from Cong. Conte before the House Appropriations Committee in May 1979 (pp. 803-04). It is substantially correct, in my view, insofar as it deals with the right of a wholly-owned U.S. Government corporation to proceed with and finance its prescribed activities in the absence of action by Congress on the agency's budget program. In other words, if Congress for some reason does not take up or pass the budget proposeils for the corporation, the agency has a right under section 104 to operate under its charter and any other applicable law so long as appropriated funds are not required to finance such activities. Although it may be susceptible of such a construction, it was not my intention to declare that any Federal corporation could carry out programs or make expenditures in the face of an express prohibition contained in an Act of Congress. It is obvious that a governmental entity, created by Congressional enactment, can be partially or completely dissolved, or any of its activities can be specifically prohibited, by subsequent decree of the Congress. Section 104 would not provide a loophole for the Commission to make expenditures against the will of the Congress (in the sense that Congressman Conte used the term) if that will were expressed by prohibitory legislation. To the extent that my prior answer on this point (which would seem to be essentially legal in nature) is inconsistent with the proposition just stated, I would request that it be considered to have been modified accordingly. Mr. Whitman. That is all. Thank you. Mr. Hubbard. Thank you very much, Merrill Whitman. Bernard Tannenbaum. Mr. Tannenbaum. Thank you, Mr. Chairman. 37 You spoke of the turnover rate. You said you did not anticipate any problems, that there would not be any problems. What is the current turnover rate? Governor Parfitt. I do not have it as a percentage, but we do have a very high retirement figure this year. It is about twice what it has been in the past. We anticipate for calendar year 1979, based on what we know today, at least 1,100 retirees. That is about twice what we normally average. Resignations are down, however. In the U.S. employee category, I believe we have a figure of about 100. What I was trying to say before is that we are going from an organization of 15,500 to something like 8,500, but in the process there will be enough stay and particularly in the critical skills to continue to function efficiently; however there are a few critical skills that we are watching because it is not total numbers that counts but where the losses occur. Our feeling is that we will have adequate skills within the Com- mission to continue to perform the functions that are the responsi- bility of the U.S. Government. Perhaps Panama will have a prob- lem more significant than ours because many of the individuals in the ports, and the railroad, are exercising their discretion to bump into the residual U.S. agency. That leaves considerable voids for Panama to fill— a problem which we have predicted and a problem which we have presented many times to Panama, and I think they are just beginning to really understand the extent of that problem. Mr. Tannenbaum. I notice you have been doing a lot of advertis- ing in the United States. The New York Times carries major ads on certain skills. Governor Parfitt. We are repeatedly short of marine engineers, pilots, highly technical mechanical and electrical skills and there will be a continuation of shortages in some of those skills because they do not exist in large numbers in the Panamanian economy. Mr. Murphy. Would you yield at that point? Governor, I understand that the Panama Canal Company hires pilots directly. Governor Parfitt. That is correct, sir. Mr. Murphy. I understand that the pilots want to write a con- tract with the Commission so that they are the entity to control pilots, and then, either as a corporation or a union, deal directly with the Commission, is that correct? Governor Parfitt. That is generally correct. The pilots have entered into discussions with the Marine Director of the Panama Canal with this thought in mind. We are just now fleshing out or having them flesh out their concept. But basically they would like to operate like a pilot organization in the United States, a private organization that deals directly with the shippers. Mr. Murphy. What effect would that have on the operations of the canal, the management of it? Governor Parfitt. I would have to look at that very carefully. It would solve one of our problems which is a continuous problem of adversary employee-management relations. The pilots and manage- ment have never been, through the years, close. There have always been problems of wages and working conditions and so forth so those problems presumably would be solved. On the other hand, the flexibility that the canal agency now has in assignments and so forth would be diminished. We have to look at that very closely, weigh the balance of favorable aspects and the unfavorable aspects before I would want to make a judgment. We are just merely undertaking consideration of that proposal. Mr. Murphy. Could you advance an opinion? Governor Parfitt. My opinion, very frankly, would be offhand, that it would be better to have the pilot force under the manage- ment of the organization. But some means will have to be provided to solve the problems of wages. The wages of the pilots on the ships of the United States, at least, are substantially higher now than they are for piloting in the canal organization. Many of the pilots are adversely affected by the 47,500 limit. That condition probably would be exacerbated in the future by high level freezes. Mr. Murphy. You are in the position that some of the counsels are in around here. Governor Parfitt. Although some do make more than $47,500 because of overtime, the limit is restrictive. Unless that is solved, we will continue to have serious problems with a key element of the work force. Mr. Tannenbaum. I am just curious to see what kind of response you have been getting from some of those ads. Governor Parfitt. We have had rather favorable response re- cently from pilots. The others are coming rather slowly. There is a little concern about what the situation will be after October 1. So there is a little reluctance for people to undertake to come to the Canal Zone right now, until they get a clear delineation of what the future will hold. Mr. Tannenbaum. In the environmental impact assessment, I notice that petroleum and grain comprise approximately 45 per- cent of the total revenue, per tonnage through the canal. Governor Parfitt. That is correct. Grain and petroleum have been two of the high commodity movements. Petroleum and petro- leum products are the largest, as I recall, with grain a close second. Mr. Tannenbaum. With the North Slope oil problem, and the pending recession, current recession, do you think that maybe your figures are too optimistic? Governor Parfitt. We do not think so. We have adjusted, very recently, those figures, and we now anticipate revenues of about $210 million for 1979, and $221 for 1980. If, of course, there were significant additional reductions from North Slope oil, we would have to reduce that downward. We are now contemplating approxi- mately $20 million worth of business from North Slope oil, and we do not see anything on the horizon which would make that go lower in the short term, unless there were a political decision to trade with Japan, or something like that. But pipelines, and those kinds of solutions have some delay time Mr. Murphy. Would the gentleman yield? There is not much leadtime to the Sohio line. If the President's recommendation goes in, and j^ou have an authority that virtually dictates necessary energy facilities, that Sohio line could go through, and then the revenues from the North Slope oil are not around. 39 Governor Parfitt. Our information, sir, is that it would require at least 18 months to put that line into condition to operate. What I was saying is in fiscal 1980, and that is what our tolls are geared to, we do not see that solution as having an affect. Certainly, shortly thereafter it could have an affect. Mr. Tannenbaum. Since you are retiring, I thought maybe you could give us this opportunity to indicate your concerns for the record as to the future viability of the canal, as a viable financial operation. Would you care to comment on that? Governor Parfitt. Well, I certainly would not want to see any tolls increase at this particular period of time, that goes beyond 40 percent. I think any time you go beyond that right now, you could be getting into dangerous territory. It is really speculative to look into the future, but basically we can anticipate the canal will keep pace with other competitive modes or alternatives, which are im- pacted by inflation, as the canal is, and so there should be a reasonable chance of the canal remaining viable financially. There are factors that would impact on that, such as, changing trade patterns and inflationary costs and wages. For example, I note in H.R. Ill there is a mandate to pay the minimum wage, which will impose a high cost in the future, probably very, very significant. So all I can say is, in the short term, it looks like the canal financially is viable, long term it becomes much more specu- lative. More important to me, however, is the fact that the Congress to date, Mr. Murphy specifically, has provided the kind of a frame- work of incentives to the employee, which is critical to the contin- ued efficient operation of the Panama Canal. This need has been accommodated in H.R. Ill, and it is an essential element. Next to that particular provision, there is a need to firm up a good strong cooperative relationship with Panama, and that has to be accomplished in the transition period. If it is not, it could jeopardize the efficient operation of the Panama Canal. I would hope that the mutual interest of Panama and the United States would drive us together, to find an accommodation that would insure that relationship that must be there if we are going to continue to operate the canal efficiently. This is essential be- cause the employees, and the critical skilled employees, will not stay if the conditions deteriorate. I do not anticipate that they will, but if they should, it could jeopardize the efficient operation of the canal. Mr. Tannenbaum. The question I was getting at, though, was the future viability of the canal, with the tolls sensitivity, and the high dependence upon two products, petroleum and grains, and the enormous payment being made to Panama, would you in fact have a self-sustained canal in the future? I know that in the past you have expressed some concern about that. Governor Parfitt. I would still have to express concern, but you are really speculating out in the future. It still looks to me like it is viable, as near as we can tell, but I would not at all presume to 40 estimate at this point in time all the circumstances that are going to unfold in the next 20 years. If there is an erosion in traffic of a substantial nature, and I said this many times, and the inflationary spiral exceeds the traffic growth, or traffic diminishes, then you could be put in a position where the United States would have to subsidize the canal. Mr. Tannenbaum. Was there an erosion in 1973 and 1974- Governor Parfitt. We do not anticipate this at the present time. Our best estimate, which includes a reduction in North Slope oil, and it includes the impact of inflation, would permit us to imple- ment the treaty, and under H.R. Ill, with under 40-percent in- crease in tolls. My concern is that there may be significant delay. In such a case we would have to increase the tolls a substantial amount, and so it could get above 40 percent very quickly. Mr. Tannenbaum. Yes, you have explained. According to the submissions to the Appropriations Committee, $229,000 is required for buildings and sites. Could you break that down for us? Governor Parfitt. $200 and — excuse me? Mr. Tannenbaum. $229,000, commission buildings, et cetera. Do you have a breakdown? Governor Parfitt. I do not have it with me. I would be glad to provide it for the record. [The following was received for the record:] Breakdown of Building Maintenance The $229,000 represents an increase in 1980 over 1979 in operating and mainte- nance requirements for joint-use Company buildings that will be retained by the Commission. The increase is primarily based on (1) increased level of maintenance as recommended by building and structural engineers and (2) an additional require- ments to operate and maintain buildings that were previously sole purpose facilities and managed by the individual operating units. Included in the increased level of maintenance effort in fiscal year 1980 are projects such as the repair and replacement of roofs, exterior painting, repair of termite damage, repair of spalling concrete, installation of security screening and fumigation of facilities. The need for these projects are determined by personnel who are responsible for maintaining the facilities in safe and efficient operating condition. In 1980, additional costs will accrue to this account because of an increase in the number of joint-use office buildings. For example, the Balboa Houseware building, Diablo Heights School complex, Margarita Service Center complex, the Balboa Shoe Store and the Gamboa Commissary, which previously were sole use buildings costed against individual users, will in 1980 be costed against this heading. Mr. Tannenbaum. The types of installations, are these perma- nent type installations, or are they Governor Parfitt. Modifications, is that what you are talking about? If I understand your question correctly, you are saying break down the $229,000, which is modifications to buildings, and so forth. That has to do mainly with renovating office areas, replac- ing of roofs, that sort of thing. Mr. Tannenbaum. Do you know if any substantial funds have been expended in 1979 relating to building— that will be turned over to Panama within, say the next 5 years? Governor Parfitt. We have spent the normal funds that we would spend for maintenance, perhaps a little more for those func- tions that are being transferred, for example, the railroads. We have continued to maintain that railroad in as good, or better 41 condition, as though we were going to continue to operate it. We have minimized the introduction of capital goods which have long- term use, but we have maintained those facilities in as good or better condition as we would have if we were to continue to operate them. Mr. Tannenbaum. You have a launch repair facility, could you explain that? Governor Parfitt. It is now in the Port of Balboa. It is an open- air facility. It is a very inefficient operation because of the weath- er. Our proposal is to move that facility to the industrial division, on the Atlantic side of the isthmus, where we do our general vessel repairs, and to provide an all-weather facility. We just did not have the funds to do it before. Mr. Tannenbaum. What are the channel improvements? Governor Parfitt. The channel improvements include widening and easing bends of the canal, one called the Mamei Curve. We are involved in this program for safety and security because of the larger ships, and we are also trying to do some initial work toward deepening the Panama Canal. Deepening serves two purposes. One, it provides more water, and more draft. If you do not need it for draft, you can use that water for generation of power, and reduce fuel costs. So we think that the deepening is a good pro- gram and of course, the widening, straightening of bends, is essen- tial because of the increased sizes of ships. Mr. Tannenbaum. How does that compare with the channel expense in 1979 and 1978? Governor Parfitt. It is approximately the same. Mr. Tannenbaum. 1978 also? Governor Parfitt. We have been using our dredging equipment to its optimum. We provide as first priority, for maintenance — the cleaning out of siltation. Whatever effort is left over, has been going into improvement, which is the widening and straightening, and the deepening. It has been roughly the same program for many years. Mr. Tannenbaum. Could you explain to us the process of con- structing the budget? Governor Parfitt. The process we use? Mr. Tannenbaum. Yes. Governor Parfitt. Each of the major components of the Canal Organization develops its requirements — requirements that they feel should be funded in subsequent years. Those managers then come before a group which I head, and individually present and justify their capital programs. Prior to this time they have already been reviewed by our executive planning staff for determination of payoff, if it is a payoff project, safety, justification and data verifi- cation. Subsequent to those meetings I approve a program which should be funded in the coming years. Of course, we have taken cognizance of fund availability. For example, in this past year, the managers came in, and stated they would like to have somewhere between $50 and $60 million worth of capital goods and replacements. We have to weigh and analyze the merits, whether it is cost effective to do the project this year, whether it is safe to wait another year, and so forth. That is the general process. 42 I might say further, that is the internal process. Subsequently then I present that program, which includes the operational re- quirements as well as the capital requirements, to the Budget and Finance Committee of the Board. The Budget and Finance Commit- tee then makes its recommendations to the full Board. The full Board then analyzes and provides their approval, after which the program is defended before 0MB, and finally before the Appropri- ations Committee of Congress. Mr. Tannenbaum. Would you say that the budget proposes a tightening or ample room? Governor Parfitt. I would say that it is fairly tight, as far as capital goods and expenditures are concerned. I would say it is prudent, but not tight on the operational side. Very frankly, in structuring the organization for the new agency, I was a little more liberal than I would have been for an ongoing organization because of the trauma and the change that is going to occur, and the fact that you have got to have a little bit of fat, if you want to call it that, during this very difficult period of transi- tion. So I would expect, over time, that some of the overhead require- ments could be reduced. I do not think it would be prudent to reduce them any further than we have done at this point in time, for 1980, for the first year of operation under our new situation. Mr. Tannenbaum. What area do you feel the most Governor Parfitt. We have a composite division called the Gen- eral Services Bureau. This picks up the pieces of what is left from Transportation, Civil Affairs and the Supply and Community Serv- ices Bureaus and pulls together these activities under one head. When you do that, you bring in certain key people who under- stand, and know the system very well, and you try to build on that organization. You find that theoretically you could reduce the num- bers, but practically if you did, you would dilute the skills you need at the outset. So in that particular area, very frankly, I think we may have a structure which is a little fuller than we would require in the final analysis. That is probably the main example. I have also permitted some flexibility in our personnel division, because I know they are going through a terribly difficult time right now, and they will have some transitional problems of significant import. The equal opportunity office is going to have an increased bur- geoning workload because of all the complaints and appeals that are going to come because of the major reorganization. There are areas like that which over time I think we can shrink particularly as we get through the transition. But I have made a very deliberate, very conscientious, very detailed analysis of all the elements of the organization, and it is the best that, in my judgment, can be done under the circum- stances — that should be done under the circumstances. Mr. Tannenbaum. Have all the capital projects that will be underway in 1980, that you anticipate, have they all been shown in the presentation? Governor Parfitt. Yes, sir. Mr. Tannenbaum. How do those compare with, say, 1979 or 1978? 43 Governor Parfitt. Actually the program is about the same as 1978. Mr. Tannenbaum. The programs contain some projects and im- provements that are turned over to Panama in 1979, is that so? Governor Parfitt. You will have to identify the item, sir. I am not familiar with the item you are referring to. Mr. Tannenbaum. We will pull that out. In the meantime, let me ask another question. Do you know of any other projects that are underway with regard to property Governor Parfitt. No, we have no Mr. Tannenbaum. Just the normal repairs? Governor Parfitt. Just the normal repairs, and there are a minimum of minor capital programs for activities that are being transferred over to Panama. Mr. Tannenbaum. The pier program was in the 1979 budget? Governor Parfitt. The pier program? Mr. Tannenbaum. Yes. Governor Parfitt. I do not have any reference here to a pier program in 1979. Mr. Tannenbaum. I have no further questions. Mr. Hubbard. Governor, it is now 12:13 p.m. We still have sever- al questions that we will not have time to ask today. I will ask unanimous consent that the remaining questions that I do not ask in the next few minutes, be submitted for the record. Additionally, Governor, I would ask that appropriate members of your staff please meet with the members of the subcommittee staff, headed by Terry Modglin, to discuss some of the elements in your budget in more detail, and if you would, please try to answer the remaining questions that we do not ask today. There is not a multitude of them, but there are some that we simply will not take time for today to ask, but we would like to submit these to you for your answering at your first convenience. Governor Parfitt. Be glad to, sir. Mr. Hubbard. Do I hear any objection to the unanimous consent request that these remaining questions that I do not ask, be sub- mitted for the record? Hearing none, let me insert these few remaining questions in the record. [The following questions and responses were received for the record:] Questions of Mr. Hubbard and Responses of Governor Parfitt a. financial management Question 1. Recently vou furnished a statement to Chairman Murphy showing that Arthur Andersen & Co. has received over $2.5 miUion in fees for consulting services performed for the Panama Canal Company. Are these payments included under this head of the appropriation? Answer. The $2.5 million of fees paid Arthur Andersen & Co. cover services rendered by that firm over a ten year period, from July 1969 to date. Up until fiscal year 1979, all payments under contracts with Arthur Andersen & Co. were included under the heading of Consultants and Advisors in both the Company's budgets and operating accounts. Starting with fiscal year 1979, however, payments to Arthur Andersen & Co. on contracts providing for information system development have been charged to the ADP cost accounts to conform with 0MB Bulletin No. 78-11, Guidelines for Use of Consulting Services, dated May 5, 1978, and GAO Office Pamphlet No. 4, Illustrative Accounting Procedures for Federal Agencies, Guide- 44 lines for Accounting for Automatic Data Processing Costs. Payments to Arthur Andersen & Co. under contracts providing for professional advice on accountmg and tolls matter continued to be charged to the Consultants and Advisors account. Our fiscal year 1980 budget estimates reflect the direction received from 0MB and GAO to cost consultant services for information system development to ADP operations and projects contractual services from Arthur Andersen & Co. of $150,000 for information system development and $151,000 for professional advice on accounting matters. ^ ,. _ Question 2. What is the total amount of consultants contracts now outstanding.' Answer The total amount of all Company consultants contracts outstanding as of June 30, 1979 was $101,657.65. Question 3. How much has been spent on such contracts, including expenses in 1979? Answer. Through the first nine months of fiscal year 1979, there has been spent $360,524.53 on such contracts. Question 4. How much is included in the 1980 budget for consulting contracts and associated expenses? . Answer. The fiscal year 1980 budget provides $577,000 for all consulting contracts for the Commission. B. PERSONNEL Question 1. Panama's request for personnel— The Canal Company has indicated in previous testimony that the Panama Canal Commission will assign employees for a limited period of time and on a reimbursable basis, to assist Panama in the oper- ation of ports, the railroad, and other activities it assumes under the new Treaty. This I gather is under the authority of paragraph 8 of Article X of the Treaty. (a) How many employees have been requested by Panama, for which activities, and at what cost? Answer. This matter has been under discussion since January of this year. Panama originally requested the loan labor of a small group of employees to assist in the operation of the railroad and the ports, including marine bunkering. Panama has in the last two weeks submitted a new request which expands the original group to a total of 73. The estimated annual cost for this larger group, exclusive of overtime and holiday pay, is $1.9 million. Question IfbXV. How will we receive Panama's prompt reimbursement for the services of these employees? Answer. Monthly bUlings to Panama will be made for services provided, and cash payments would be expected within 15 days of the billing date or the amounts could be offset against annuity payments to Panama. Question l(bX2). Under Section 251 of H.R. Ill, in terms of cash flow, can we not offset these costs against the Treaty pa)anents to Panama? Answer. Yes, offsets are possible. Question l(hX3). If an offset mechanism is used, would part of the payments to Panama be designated as receipts from Panama and put back in or kept in the Panama Canal Commission fund? Answer. Any offsets against Treaty payments to Panama would be considered receipts for deposit in the Panama Canal Commission fund. Question 2. What amounts have you budgeted for recruitment and retention incentives for the Panama Canal Commission for fiscal year 1980? How does the cost per employee of these incentives compare with the average cost per employee for the Panama Canal Company? Answer. We have budgeted for the continuation of the 15 percent differential (15 percent of base salarv) for employees who are currently receiving the incentive and will continue with the Commission. Budgetary provisions for new or replacement employees include this differential only where it is expected that recruitment out- side of Panama will be necessary. Question 3. Material previously submitted to the Congress by the Panama Canal Company indicates that quite a few new administrative positions will be created for the Panama Canal Commission. In the Company's submission to the House Appropriations Committee, we see nine Executive Secretary positions at a cost of $334,000 that are said to be necessary because of activities discontinued by the Canal Zone Government. Then there are 4 new Executive Secretary positions additionally created at a cost of $162,000. We also see 3 additional Labor Relations positions at a cost of $45,000. There are numerous other examples of an increase in administrative positions. (a) Why does the Panama Canal Commission need so many new administrative positions? Answer 3(a). Although our current estimates for 1980 would indicate an increase of 50 administrative positions over 1979, the figure is misleading in that it reflects 45 the charging to this account of 27 ongoing administrative positions of the Canal Zone Government to be assumed by the Commission, and 34 other positions relating to increased training requirements which are not administrative positions in the true sense. If these positions were not shown in the count, the Commission's admin- istrative staff would show a decrease of 11 from the 1979 level. The positions transferred in from the Canal Zone Government are to perform former governmental functions now to be carried out bv the Commission, such as the executive secretary, fire, police, and certain health functions. The transfer also provides for the positions of Administrator and Deputy Administrator and staff. The 34 positions related to increased training requirements are for apprentice/ towboat/pilot trainees and support personnel for the program. The expanded train- ing program is required to fulfill treaty commitments to train Panamanians so that they can qualify for positions at all levels. There will be 20 new positions established to accommodate treaty requirements. However, these positions, which include the Coordinating Committee Staff, Office of the Ombudsman and labor relation specialists for collective bargaining, will be more than offset by the abolishment of 31 pre-treaty administrative positions. Question (b). Would you compare the ratio of administrative positions to non- administrative positions for the Panama Canal Company in Fiscal Year 1979 and for the Panama Canal Commission in Fiscal Year 1980? Answer. The ratio of administrative positions to non-administrative positions in fiscal year 1979 was 1:10.9, as compared to 1:8.2 for fiscal year 1980, excluding the 34 apprentice training program positions. C. EMPLOYMENT COSTS Question 1. How much of the estimated costs under employment costs will be required by actions taken pursuant to the 1977 Treaty? Answer. In 1979, the employment costs include recruitment and repatriation expenses which are expected to be increased due to reductions in force and termina- tions of employees at year-end 1979. Additional costs for the purpose were included in the 1979 supplemental requests of $1,837,000 for the Company and $1,301,000 for the Government. A continuation of higher turnover rates will contribute to high recruitment and repatriation costs in 1980, but it is difficult to attribute a specific portion of this cost to the Treaty. The apprentice program does include provision for the addition of 25 training positions in 1980 at an incremental cost of $74 thousand in that year. D. TOLLS Question 1. Are tolls on Government vessels included in the revenues in the budget estimate submitted for the Panama Canal Commission? Answer. Yes. The budget estimates for fiscal year 1980 project toll revenues of $925 thousand related to the transit of U.S. Government vessels for that year. Question 2. If Government vessels do not pay tolls, would the amounts computed for credit be considered for the purposes of appropriation accounting revenues deposited in the Panama Canal Commission fund? Answer. My initial view was the H.R. Ill would permit a continuation of the present practice of offsetting tolls credit on government vessels against interest due the Treasury on the U.S. investment. In my judgment this would be the preferred treatment since it would eliminate the need for U.S. agencies to seek appropriations that are to be paid directly back into the Treasury. Based on a closer review of H.R. Ill however, it appears that subsection 412(d) could preclude amounts calculated for tolls credit on Government vessels from being considered as revenue deposited in the Panama Canal Commission fund. The basis for this conclusion is that subsection 412(d) provides that tolls credits are to be calculated for the specific purpose only of prescribing rates of tolls and calculating the payment to Panama under paragraph 4(a) of Article XIII of the Panama Canal Treaty. E. SUPPORTING ACTIVITIES /. Supply Question 1. What are the supply services that will be continued under the Com- mission? Answer. The supply service is the centralized procurement and warehouse oper- ation. This activity is responsible for the procurement of all major supplies and equipment. It also operates a centralized warehouse for materials used by Panama Canal activities and an excess property disposal activity. These functions will con- tinue under the Commission. 49-653 0-79 46 Question 2. What accounts for the increase in cost of these services in 1980 compared to 1978 and 1979? Answer. The operating cost of this activity increases from $3,428,000 in 1979 to $4,448,000 in 1980. About 50 percent or $0.5 million of this charge is due to loss of gross margin on sales of materials to employees and organizations. The remainder of the charge is accounted for by cost escalation, $0.3 million, and $0.1 million each for additional excess property disposal and added maintenance work to structu //. V/ater transportation Question 1. What is the basis for continued operation of the SS Cristobal? Answer. The SS Cristobal is a primary link in a well organized and efficient procurement and resupply system of the Panama Canal Company/Canal Zone Gov- ernment. It will serve the same mission for the Panama Canal Commission. It is and will continue to be a major carrier for military cargoes coming to and leaving the Canal Zone and carries cargo for other Government agencies and contractors as space permits. The Panama Canal procurement and resupply system procures all logistics sup- port from the United States that cannot be obtained reasonably in the Republic of Panama. The procurement office is in New Orleans, which serves as the neck of a giant national funnel that collects supplies from all over the nation to New Orleans for movement to the Zone via the SS Cristobal. Retrofit, household goods and military-civilian personal automobiles move northbound from the Zone to New Orleans. The system has proven to be economical, reliable, successful and timely. As a U.S. Government vessel, the SS Cristobal is not subject to interruption of cargo loading/unloading activities through labor unrest at Gulf Outport. Over the years, this has proven to be a significant advantage and should remain so. Much of the responsibility for retail sales to United States employees has been transferred to U.S. Military sales outlets in the Canal Zone. A large portion of these supplies will move via the SS Cristobal, partially offsetting the loss of retail sales cargo that was sold in Panama Canal Company outlets which cease operation September 30, 1979. If the Commission were not to continue the use of the Cristobal, which operates on a fixed schedule of 25 sailings per year, it would have to maintain larger operating supply inventories with the attendant higher costs. Various studies over the years have reconfirmed that use of this vessel for ocean transport is more economical and reliable than either commercial or MSC/charter modes. Should the costs of the SS Cristobal, under the Treaty appear to be out of line with the benefits realized by the United States Government, a study will be made to determine the desirability of continuing the vessel's operation. Question 2. Is it not true that in the past net costs of operation of the Cristobal were largely absorbed in charges against the retail sales operation for ocean trans- portation which in turn was charged off tjo employment costs of the Company as a whole? Answer. Costs of operation of the SS Cristobal have historically been largely recovered through ocean freight and handling charges billed to the users. The net cost of operation, which represents total costs less revenues from the military and other government agencies, is distributed to the operational and retail store inven- tories. Most of the freight cost charged to the retail store inventories was not recovered since the selling prices of the retail goods are based on U.S. prices. This is in accordance with the accepted policy that the Canal employee should not be required to pay more for these items than his U.S. counterpart. Question S. How will the costs of operation of the Cristobal be accounted for by the Commission which will no longer operate retail stores? Answer. The cost of operation of the Cristobal will continue to be accounted for by distributing the cost to users, whether they be the military or the Commission. As mentioned earlier, the military will assume responsibility for retail sales to U.S. Commission employees starting October 1. Accordingly, a large portion of SS Cristo- bal freight costs previously allocated to the Canal organization retail operation, will now be borne by the military since their usage of the vessel will increase. Question I How does the increased cost of bunker fuel affect the operating margin of the Cristobal? Answer An increase in the cost of bunker fuel results in increased operating costs for the SS Cristobal, as it does for all other ocean carriers. When this occurs, we must do what all other carriers, do in this situation, increase the tariff rates for our services. ///. Marine terminals Question 1. What is the current estimate of the 1979 revenue of the bunkering service? ® 47 Answer. The most recent operating estimate for marine bunkering in fiscal year 1979, including all divisional costs but no allocation of general and administrative expense is: ^^„^„, Accrued costs $4,551,000 Less: Interdivisional transfer 228,000 Net expense 4,323,000 Revenue 3,698,000 Net operating loss 625,000 Based on results through the month of June, it is anticipated that the loss for fiscal year 1979 will be about $400,000 to $500,000. The principal function of bunkering operation is to provide a pumping service for the movement of oil sold by commercial oil companies to transiting vessels. The loss operation this year is due to a depressed level of oil sales by these companies. Question 2. What is the current estimate of the 1979 revenue of the other marine terminal operations? Answer. The other marine terminal operation provides cargo handling and steve- doring across the piers in the Canal Zone. Most of the cargo movements are in behalf of enterprises operating in the Republic of Panama. The operating cost estimate for this activity, including all divisional costs but no allocation of general and administrative expense, is: Amount Accrued costs $23,154,000 Less: Interdivisional transfer 1,557,000 Net expense 21,597,000 Revenue 25,456,000 Net operating margin 3,859,000 IV. Utilities Question 1. How is the Power System affected by the Treaty? Answer. The Power System is affected by the Treaty as follows: The Power System will be transferred from the Company to the Commission. Although many areas of what is now the Canal Zone will transfer to Panama, the power system will continue to serve these areas until such time as the Government of Panama's power utility can provide this service directly. Panama Power Utility will be billed on a cost recovery basis for this energy. Any costs for expanding our system to meet Panama's expansion in these areas will have to be financed by the Panama Power System. Question 2. What is the relationship of the Company's Power System to Panama's Power System? Answer. Our power system and the Government of Panama's power system have had an exceptionally good working relationship for the past several years. Since 1964, the systems have been physically inter-connected in order to aid each other in emergencies as well as to optimize the generation of power using the cheapest generators in both systems. In addition, the Company, in 1969, entered into an agreement with the Panama Power Utility to purchase 30-megawatts of capacity. The agreement will expire in 1989 but is subject to renegotiation. Question 3. How will the Treaty affect the sale of water to Panama. Answer. Panama currently consumes approximately 74 percent of the potable water produced by the two Panama Canal Company water filtration plants. After entry into force the water now being supplied by the Company to commercial vessels, commercial enterprises, churches and other non-profit organizations, and the three Latin American townsites turned over to Panama, will be supplied to these consumers on behalf of Panama and at Panama's expense. This will increase the volume of water supplied to Panama to approximately 81 percent of production, with a corresponding decrease in the percentage of potable water delivered to the remaining PCC customers (i.e., military. Commission facilities, employees in Com- mission housing, etc.). The total quantity of potable water produced at our two filtration plants is not expected to increase significantly due to the fact that we are now operating very near our practical capacities (63 million gallons per day). Question. 4- It is the Committee's understanding that the Government of Panama currently owes over $9 million to the Canal organization. A GAO report, dated June 4, 1979, states that the debt was $9,243,799.55 as of February 28, 1979. We under- stand that an agreement with the water agency in Panama has been concluded and 48 that some of the past water bills have been paid. (Reference— GAO report, Back- ground Information on Implementing Legislation, pages 23-27). (a) Do you believe the past debts of the Government of Panama will be paid? Would they be paid to the Panama Canal Commission? Answer. The Government of Panama h£is expressed agreement to a proposed exchange of notes between the two governments covering the terms of payment for their past debts as well as for services to be provided them in the future by the Commission. Under the proposed note agreement, Panama's back debt would be paid over a three-year period through quarterly installments, with pa)mients due after October 1, 1979 being offset against amounts due them under Articles III and XIII of the Panama Canal Treaty. To be excluded from this agreement, is the $744,156 of delinquent water accounts which are currently being paid on a monthly basis in accordance with a separate agreement entered into earlier with Panama s water agency. Barring an unexpected change in Panama's position with respect to these obligations, the notes will be formally exchanged and payment of these past debts will be made through the offset process. Direct payments or offsets will be considered as receipts by the Commission. Receipts applicable to Canal Zone Government accounts would be deposited by the Commission into the general fund of the Treasury, whereas receipts applicable to Panama Canal Company accounts would be covered into the Treasury to the ac- count of the Panama Canal Commission fund. Question 4(h). In the budget estimates submitted to the Appropriations Commit- tee, was there included in the projected revenues any sums for the repayment of these past debts? Answer. Revenues associated with these past debts of Panama were recorded in the books of account of the Panama Canal Company and Canal Zone Government in the accounting period in which the services were rendered. Accordingly, the fiscal year 1980 budget estimates for the Commission do not project revenues as such for repayment of these outstanding accounts. However, the amount expected to be paid by Panama in 1980 against Panama Canal Company receivables is included in our projection of cash deposits to the Panama Canal Commission fund during the year. The budget does not reflect deposit of payments of Canal Zone Government receiv- ables, however, since these payments will be covered into the general fund of the Treasury. As such, and in accordance with H.R. Ill, these deposits will not apply toward reducing the U.S. investment in the Commission. Question 4(cJ- — In terms of the business accounting for tolls calculation, how should the repayment of the past debts due from the government of Panama, or the signature of Panama on an agreement to repay those debts affect the allowance for doubtful accounts now carried as a liability on the balance sheet of the Company? Would the amount for doubtful accounts be reduced to zero when an agreement was signed, or would it be reduced as amounts were paid? Answer. The past debts of the Government of Panama will be considered collect- ible upon the exchange of notes between the two governments. At that time, the allowance for doubtful accounts established against the debt will be cleared with the amount being transferred to a deferred credit account. This deferred credit will be amortized over a five-year period, which will have the effect of reducing future toll rate requirements. This treatment was approved by the Board of Directors of the Company with the objective of returning to shipping moneys assessed them earlier through the toll rates when the Panama accounts were considered uncollectible. Although the Panama debt is to be paid over a three-year period, the credit will be amortized over five years on the basis that shipping was charged initially for these costs over a similar time frame. Question kid). How would the repayment of debts by Panama affect the tolls estimates and adjustment for the Panama Canal commission for fiscal year 1980? Answer. A five-year amortization of the allowance for doubtful accounts estab^ lished against this debt will reduce by about $1,733 million the costs to be recovered through tolls m fiscal year 1980. Based on projected toll revenues of $221 million, this would amount to a reduction in the toll rate requirement for 1980 of about 0.8 percent. F. GENERAL CORPORATE EXPENSE INTEREST Question 1. The 1980 estimate for the Panama Canal Commission as an appropri- ated-fund agency shows a category of expense referred to as "General Corporate Expense. What is the basis for use of that terminology in a non-corporate agency? Answer. The title "General Corporate" was carried over from previous budgets and will be changed in future submissions for a non-corporate agency Question 2. Under Section 412 of H.R. Ill, the toll formula for use of the Panama Canal is designed to recover interest on the investment of the United States in the Panama Canal. Under Section 413 of H.R. Ill, the base for interest is reduced by 49 transfers of assets from the Panama Canal Commission and increased by assets brought into the Commission. (a) At the present time, what do you project to be the amount of the base for payment of interest? Answer. Section 413 of H.R. Ill also provides that the interest base shall be reduced by the amount of Panama Canal company funds covered into the Treasury pursuant to Section 232 of H.R. Ill and be increased by appropriation and de- creased by deposits of revenue. Such deposits of revenue will include interest and thus the investment base is reduced each year by the amount of interest. The interest base is estimated as follows: Amount Net direct investment balance, estimate September 30, 1979 $318.9 Transfer of property: Transfers in: Canal Zone Government assets 12.8 Transfers out: Company assets to Panama • — 77.1 Company assets to other Government agencies —0.2 Inventory to other Government agencies and Panama —1.6 Total -66.1 Consolidation of equity of U.S. Government in Thatcher Ferry Bridge with direct investment 18.1 Deposit of Company cash in U.S. Treasury pursuant to section 232 of H.R. Ill -82.0 Interest-bearing investment at beginning of 1980 188.9 TRANSACTIONS 1980 Appropriations: For obligations from previous agencies 76.5 Emergency Fund 40.0 FY 1980 operations 350.8 Less: Undrawn amounts at yearend held to meet obligations —42.9 Emergency fund —40.0 Capital: For obligations from previous agencies 13.2 Fiscal year 1980 capital 27.2 Less: Transfers to DOD during 1980 -0.7 Less: Undrawn amounts at year-end 11.3 Net appropriations withdrawn from U.S. Treasury 412.8 Revenue deposits: Operating revenue including $20.9 in interest —384.5 Capital surcharge —5.0 Proceeds from sale of inventory and collection of receivables —6.8 Total revenue deposits in U.S. Treasury —396.3 Interest-bearing investment at and of fiscal year 1980 205.4 ' Includes Thatcher Ferry Bridge. Question 2(h). What amount would be recovered in fiscal year 1980 for the pay- ment of interest? Answer. The interest cost to be recovered in tolls in fiscal year 1980 is estimated at $20,854,000. Question 2(c). Would this amount be placed in the Panama Canal Commission fund, or would it go to the General Treasury fund? Answer. Tolls will include a factor for interest according to section 412(b) of H.R. 111. Section 232(b) further provides that tolls shall be deposited in the Treasury in the Panama Canal Commission Fund. Thus, interest payments will be deposited in the Panama Canal Commission Fund. 50 G. CAPITAL n Transit projects Question 1. How does the procurement of additional towing locomotives at $4 million fit into your projections of traffic for the coming years? Answer. The fit is a good one since towing locomotive requirements relate directly to the number and size of vessels to be serviced and these requirements have been increasing steadily. The table below shows actual transits in fiscal year 1977-78 and the latest forecast through 1981. Daily Percent Percent average 80 foot 100 foot oceangoing beam beam Fiscal year transits and over and over 1977 (Actual) .... 1978 (Actual) .... 1979 (Estimate). 1980 (Estimate). 1981 (Estimate). 32.9 35.5 8.1 35.0 35.5 8.4 35.8 42.2 14.2 36.4 44.0 14.6 37.0 45.1 15.1 Through fiscal year 1978 we had a total of 57 towing locomotives. In fiscal year 1979, 8 towing locomotives were added, giving a new total of 65 towing locomotives. Based on the above projections and on increasing maintenance requirements to keep up with the age of the original 57 towing locomotives, an additional 5 towing locomotives should be procured in fiscal year 1980. Supporting service projects Question 1. Are the Water System Improvements scheduled for 1980 at $885,000 for the purpose of serving the Canal areas or the Republic of Panama outside the Canal areas? Answer. The recommended fiscal year 1980 program contains a total of $328,000 for water system improvements— $278,000 to complete projects commenced in fiscal year 1979 and $50,000 to add a coagulation feed system at Mt. Hope Filter Plant. All scheduled Water System Improvements are required for the Canal areas, and they have been programmed primarily to improve service to our customers in our areas and our DOD customers. Since the Commission's water system will also serve sections of Panama City, Colon, and the communities of Rainbow City, Paraiso, and Pedro Miguel, residents of these communities will benefit from the system improvements. Question 2. What is the project for improvements to communications facilities at $500,000 in 1980? Answer. The project is for a new Private Automatic Branch Exchange (PABX) to replace the 1930 vintage switching equipment at the Coco Solo townsite. The town- site stays with the Canal enterprise after Treaty entry into force. The current estimate cost included in the fiscal year 1980 budget is $435,000. Capital program procedures Question 1(a). Since this is the first budget review of this kind conducted by this committee will you tell us about the process of constructing the budget, particularly in reference to the capital program? Answer. For capital the Bureaus and independent units of the Canal enterprise submit recommended projects. These projects are then analyzed and ranked. A management review is held and each manager has an opportunity to support his projects. Rankings are then revised and a recommended capital program for the Agency is prepared for submission to the Board of Directors. The operations budget is similar except that most operating activities are ongoing ^.^^r^p the capital program consists of many one-of-a-kind-projects. The operating otticials submit their operating budgets based on the requirement to control obliga- tions, operating margin (or cost), and numbers of employees. Each submission re- ceives a comprehensive review often requiring managers to address their total resources and staff requirements in addition to the incremental changes over the prior year. An in-house management review is conducted by officials of the Company at which each manager justifies his programs. A great deal of consideration is given to the priority of needs at this time especially in attaining the Company's operating objectives. . 51 Subsequent to the above reviews the Budget and Finance Committee of the Company's Board of Directors reviews the recommended capital and operating budget program prior to the full Board's consideration. After the Board approves the Agency's request, the budget is submitted to 0MB and Congress for approval. Question 1(h). As I understand it, the budget is given a close look by the Board of Directors before it goes to 0MB. Is this the case? Answer. The normal sequence of events for budget approval is for a comprehen- sive review in turn by the agency management and then the Board's Budget and Finance Committee, with that committee making its recommendations to the full Board. The budget as approved by the Board is then submitted to the Office of Management and Budget. This process was followed for the 1980 President's Budget. However, the timing and circumstances of subsequent 1980 submissions under H.R. HI were such that this review process could not be followed. The 1980 budget estimates submitted in May to the Congressional Appropriations Committees were provided to the Board and 0MB after that submission. Our most current 1980 estimate was reviewed and approved by the Budget and Finance Committee on July 10 and submitted to the full Board on July 24, 1979. Question 2. Does the Capital Program for 1980 you have discussed here show all the capital projects that will be underway in 1980? Answer. The Capital Program discussed for fiscal year 1980 includes all capital projects that are expected to be underway in fiscal year 1980. Question 3. How does the Board, the 0MB and the Budget get a comprehensive view of the total amount of obligations and expenditures in a given year? Answer. Primary emphasis in Board presentations for capital programs is on an obligation basis, however, expenditures for individual projects are stated in the narrative project justifications provided to the Board. Since funds are obtained on an obligation, full project funding basis, this type of review is appropriate. The Office of Management and Budget and the Congress receive comprehensive informa- tion on both obligations and expenditures in the form of the Program and Financing schedule published in the Appendix to the President's Budget and subsidiary sched- ules and justifications by project such as those provided on pages 55 to 73 of the Panama Canal Commission, Justification of Programs and Estimates for the fiscal year ending September 30, 1980. Question 4(ci)- I understand that the Capital Program for 1979, that is the program for the year now in progress, contained some projects for improvement of the piers that are to be turned over to Panama on October 1, 1979. What were those projects? Answer. There were two projects in the fiscal year 1979 Capital Program to improve pier areas: (1) the improvement of storage areas at the Cristobal Piers, and (2) the improvement of storage areas at the Balboa Piers. Question 4(b). When, specifically, were these projects approved by the Board of Directors? Answer. The two projects were approved by the Board of Directors in July 1977. Question 4(c). When were they approved by 0MB? Answer. 'They were approved by 0MB in October 1977. Question 4(d). The transcript of the 1979 Appropriation Hearings before a subcom- mittee of the Committee of Appropriations shows that these projects were still in the Capital Program on Feb. 22, 1978 and they were not excluded before the program was approved. Are they still in the program? Answer. The two projects were deleted from the Capital Program in June 1978. Question 4(e). Was the cancellation of these projects approved by the Board of Directors and 0MB? If so, on what rationale were they cancelled? Answer. The two projects were cancelled by the President of the Panama Canal Company on his own authority. The projects were not submitted to the Board of Directors nor to 0MB for approval of the cancellation. The President determined that it was not appropriate to initiate the two new projects in view of the Treaty and the transfer of facilities. Question 5. Do any other projects in the Capital Program for 1980 or prior years involve improvements of property to be transferred to Panama within the next five years? Answer. There are no capital projects in the fiscal year 1980 program which would involve improvements to property being transferred to Panama within the next five years. During fiscal year 1979, the following improvement projects have been in progess: 1. Improvements to three unsafe road intersections totaling $147,000, which are considered to directly benefit the Commission and its employees. Work on two of the intersections began in fiscal year 1978 and on the third in fiscal year 1979. All will be completed in fiscal year 1979. 52 2 Construction of a small automobile ramp at the Cristobal piers at a cost of $49,000 to serve roll-on/ roll-off operations. This was started m 1978 and completed in 1979 and was required to allow for an efficient operation. 3. Small cell addition to the jail at the Balboa Police Station at a cost of $3,000. This work is already completed. ■, . r, ,i 4. Complete renovation work of toilets at the Piers and RR yard in Balboa at a cost of $22,000. , , . . ^ , mrrnu . A project to Improve Oil Handling Facilities was included in fiscal year 1979 but was cancelled in June 1978. ^ i • In addition, in 1979 we have the following projects to maintain facilities operating efficiently: , • ,. ^ ^ r 1. Replacement of Marine Bunkering valves, pumps, and pipelines at a cost ot $263,000. 2. Replacement of Terminals Equipment at a cost of $100,000. 3. Replacement of RR Rail at a cost of $125,000. 4. Freight charges of $53,000 for the delivery of replacement RR Rolling stock. H. MISCELLANEOUS Question 1. Several years ago, at the request of the Subcommittee, you provided data giving the percentage breakdown of operating expenses of the Panama Canal Company and Canal Zone Government. (a) Does the percentage breakdown of expense of the Panama Canal Commission differ markedly from the percentage breakdown for the Company? Answer. For comparision purposes, the attached Schedule A combines the average operating expenses of the Panama Canal Company and Canal Zone Government for the 10-year period 1966-75 by major object classification. Schedule B compares the combined agency expenses for the 10-year period 1966- 75 with the fiscal year 1980 projected expenses for the Panama Canal Commission. Question (h). In previous testimony before the Subcommittee, you have indicated that the percentage of the Canal operation's fixed and marginal costs— 65% to 35%— would remain the same for the Panama Canal Commission. Do you retain that view? Answer. Based on a cursory review of the latest projections of costs and using the 1970 Arthur Andersen & Co. study as a guide, the percentage of fixed to marginal cost was determined to be virtually the same (61 to 39 percent). It should be emphasized, however, that the review was made without a comprehensive update of the AA study. Nevertheless, the review had reasonable and practical £issumptions on which to base the estimates. SCHEDULE A-TO ACCOMPANY ANSWER TO QUESTION H. 1(a) [In millions of dollars] Personnel Supplies and materials Cost of sold Interest Panama Canal Net cost Company of Govern- services ment Depreci- ation All others Total Panama Canal Company 90.9 33.8 12.5 3.2 21.1 12.5. li. -7.6.. 27.8 9.8 2.3 1.7 1.9 7.6. 176 3 Canal Zone Government 48 8 Elimination of Panama Canal Compa- ny services on a combined basis... Total 124.7 15.7 21.1 12.5. 27.8 12.1 11.2 225.1 Percentage breakdown 55.4 7.0 9.4 5.5. 12.4 5.3 5.0 100 53 SCHEDULE B-TO ACCOMPANY ANSWER TO QUESTION H. 1(a) [In millions of dollars) lO-yr. average 1980 estimate 1966 ami 1975 pet. Amount Percent Personnel Supplies and materials $124.7 15.7 55 7 9 6 12 6 $176.9 '37.5 ^0.2 .... 20.9 (=■) .... 18.0 ^73.2 16.7 M6.1 6.5 «18.5 384.5 46 10 Cost of goods sold 21.1 Interest Net cost of Canal Zone Government 12.5 27.8 5 Depreciation Payments to Panama 12.1 5 19 Retirement costs 4 Cost of DOD health and education services 4 Purchased power . 2 All others, net 112 5 100 5 Total operating expenses 225.1 100 ' Reflects principally the higher cost of petroleum products. 'Retail and food unit operations discontinued by terms of 1977 Treaty with Panama ' Reflects discontinuance of governmental functions. ♦Annuity payments to Panama are based on (1) 30 cents per Panama Canal net ton of shipping transiting the Canal; (2) fixed annuity of $10 million; and (3) public service payment of $10,000,000. » These costs were previously a portion of the net cost of Canal Zone Government. •Reflects certain residual governmental functions transferred to the Commission, i.e., Police, Fire, some of which terminate at the end of the 30- month transition period. Question 2. What is the estimated amount of the funds of the Panama Canal that will be on hand on September 30, 1979 and that will be covered into the Treasury under Section 232 of H.R. 111? Answer. It is estimated that Company cash on hand at September 30, 1979 to be covered into the Panama Canal Commission fund will be $82 million. Question 3. What is the estimated amount of unexpended funds of the Canal Zone Government that will be covered into the Treasury under Section 231? Answer. It is estimated that $6 million of unexpended Canal Zone Government funds will be covered into the Treasury. Question 4. What are the liabilities of the Company and Canal Zone Government for which appropriations would be required? Answer. The liabilities of the Company and Government include principally the amounts due for salaries of employees, annual leave currently due terminated employees, supplies purchased but not yet paid, unpaid contractor services, and estimated amounts due for past ship accidents. In addition to liabilities for supplies and services received but not yet paid, there are outstanding contracts and purchase orders for supplies and services on order at year-end that have not been received but which represent a commitment for eventual disbursement of funds. LIABILITY ESTIMATE, SEPTEMBER 30, 1979 [In thousands of dollars] Panama Canal Company Canal Zone Government Total $16,211 7,800 3,500 ., $264 3,000 $16,475 10,800 3 500 7,000 21,000 .. 1,800 8.800 21,000 4,524 .. 4 524 60,035 11,133 12,562 5,064 264 613 65,099 11,397 13,175 Accounts payable Accrued salaries Severance pay due terminated employees. Annual leave due terminated employees... Claims for vessel damages Other accrued liabilities Undelivered orders for: Operations Capital Total 83,730 5,941 89,671 54 I. TRANSIT OPERATIONS A. Maintenance of channel and harbors Question 1. Please describe the nature of this activity. Answer. Maintenance of channel and harbors consists of a variety of activities. (a) The primary nature of this function is to maintain proper navigable depth in the channels and anchorages. In addition, meteorological and hydrographic condi- tions are observed and studied. This function also includes the operation of a wide range of facilities such as lights, beacons, buoys, and other navigational aids, dams and spillways, and other earth structures adjacent to the waterway. Under the maintenance of the channel and anchorages we operate a drill boat which is used for subaqueous drilling and blasting, and dredges (one 15 cubic-yard and one 13 cubic-yard dipper dredge, a IVz yard clamshell/derrick dredge, and a 3,500 cubic- yard-per-hour suction dredge), and a variety of support craft. (b) This function also accomplishes aquatic weed control, clean-up of floating debris materials, and maintains the breakwater which protects the anchoreiges at Cristobal and controls and cleans up oil spillages in Canal waters. (c) Furthermore, under this function, we monitor the weather and control the levels of Madden and Gatun Lakes and maintain the dams and spillways associated with the structural integrity of the waterway. Question 2. To what extent is the dredging work in the program essential to operation of the Canal? Answer. The dredging work and the maintenance program is essential to keep the canal and channels open to canal traffic. That is: (1) removal of some 2.5 million cubic yards of siltation that accrues in the canal proper each year, (2) it removes critical shoals that crop up at random in the canal channels, and (3) the removal of slides at they occur. Question 3. What is the general level of dredging provided for in the budget, or put in a different way, what is the object of the dredging program? Answer. The object of the dredging program is to maintain the canal to the approved navigable depths and to perform various approved channel and anchorage improvement programs for fiscal year 1980. The program includes about 133 days of maintenance dredging with our suction dredge, about 227 days of channel improve- ment dredging (split 50/50 between the suction dredge and the dipper dredge), and about 200 days of subaqueous drilling. Question 4. What obligation does the PC Commission have to maintain the har- bors at either end of the Canal? Answer. The Commission will have no obligation to maintain the harbors at either end of the canal. This is in accordance with the provisions of the Treaty. However, it is possible that the Government of Panama may request our assistance in its harbors; this assistance would be rendered only if our resources were not otherwise committed to canal activities, and only at the Government of Panama's expense. Funds are not included in the fiscal year 1980 budget for performing harbor maintenance. Question 5. Does the capital program include any projects to improve the harbors? Answer. Capital improvement of the harbors will, under the Treaty, be no longer the responsibility of the Canal Agency. Again, it is a possibility that the Govern- ment of Panama may request our assistance in this matter. And again, we would render this assistance only after all of the essential needs of the canal were met and, then, only at the Government of Panama's expense. The fiscal year 1980 budget does not include funds for harbor improvements. Question 6. Does the capital program include any projects to improve the Canal, such as, widening, deepening, providing more water? Answer. Yes, the capital program includes the projected following projects: (a) Widening Mamei Curve: This project is currently underway and the majority of the blasting has been done and dredging also has begun. (b) Deepening: This consists of deepening Gaillard Cut three feet and to deepen Gatun Lake channel. This project would provide more water for canal usage. (c) Bohio Curve: This project consists of removing Orchid /DeLesseps Islands. This particular curve is the worst in the canal. The total Canal Improvements Projects are estimated at a cost of $5 million annually through fiscal year 1985. 55 Question 7. What is the breakdown of the $238,640,000 costs shown for transit operations? Answer. The tabulation below identifies by functions, the costs included in the May submission for the Transit Operations. These estimates are an update to the estimates contained in the 1980 President's Budget and reflect workload changes and cost refinements (i.e. increased cost of fuel, etc). [In thousands of dollars] Transit operations: i^so estimate Maintenance of channels and harbors 38,394 Navigation service and control 51,583 Locks operations 32,839 General repairs, engineering, and maintenance services 32,615 Security and protection services 17,737 Industrial health and sanitation 2,565 Public service payments to Panama 10,000 Annuity payments to Panama 64,930 General canal expense 18,716 Total operating costs 269,379 Less intra-agency recoveries 30,739 Net operating costs 238,640 Question 8. Taking up the elements of the trans'* operations services individually, shown in the 1980 budget, please explain the differences between the actual 1978 cost, the 1979 estimated costs, and the amounts shown for 1980. Answer. The following explanation covers the costs as shown in the President's Budget for 1980. Subsequent revisions to that budget are provided in the answer to question No. 14. (a) Maintenance of channels and harbors: In addition to some maintenenace and additional fuel requirments due to changes in dredging schedules, the primary reason for increases in fiscal year 1979 over 1978 is cost escalations. In fiscal year 1980, a two-year project to repair the Miraflores Spillway is programmed for com- pletion with somewhat lower costs in that year. This reduction in costs is expected to be offset by less costs being transferred to capital dredging projects. (b) Navigation service and control: Although some additional staffing require- ments were necessary in fiscal year 1979 over 1978, due to increased workload, the predominant reason for the increase in 1979 is due to wages and other cost escala- tion. Cost escalations in fiscal year 1980 have been offset in part by cost reductions due to discontinuance of commercial launch services, as required by terms of the 1977 Treaty with the Republic of Panama. (c) Locks operations: In addition to wages and other cost escalations, the estimates in fiscal year 1979 and fiscal year 1980 provide for additional costs for major maintenance on locks equipment and services. (d) General repair, engineering, and maintenance service: The decrease in operat- ing costs in fiscal year 1979 over 1978 is attributable to a decline in workload, principally in the maintenance and vessel repair activity. In fiscal year 1980, the cost decrease reflects elimination of commercial repairs and sales, as required by the new Treaty with Panama. (e) Security and protection service: In fiscal year 1978 and 1979, these activities were distributed among other Company and Government activities. Amounts shown in fiscal year 1980 represent transfers from the Canal Zone Government of residual police, fire, and other security services and a transfer of the Canal Protection Force from the General Canal Expense line item. (f) Industrial health service: The costs in 1980 are for residual functions trans- ferred from the Health and Sanitation of the Canal Zone Government. (g) General canal: In fiscal year 1979, the estimates reflect principally cost escala- tion with some decrease in the provision for marine accidents. In fiscal year 1980, the estimates reflect the payment to Panama of (1) $10 million fixed annuity, (2) $10 million for public services, and (3) tonnage payment calculated at 30 cents per Panama Canal net ton. Also, the estimates reflect reductions due to the transfer to 56 another line item of the Canal Protection Force, and the Thatcher Ferry Bridge to Panama. Question 9. What are the "Supporting Services" referred to in the estimates on an appropriation basis? Answer. The "Supporting Services" category includes essential utilities, supply, and other incidental supporting functions that are required to satisfactorily accom- plish the Commission's mission. Included in the utilities area are electric power, communications, water, and central air conditioning serv'ices. The supply and logistical functions provides for the purchasing and warehousing of supplies and materials and transportation require- ments of the Commission. The major activity of the incidental supporting functions is the operation and maintenance of the housing program for employees of the Commission. Question 10. Please summarize the changes in the operating costs of those acti\'i- ties in comparison to the actual results for fiscal year 1978 and the estimated results for 1979. Answer. The increase in operating cost in 1979 over 1978 is due principally to cost escalation for wages, supplies and materials, fuel and contractual services. In addi- tion, there were some minor program increases for overhaul of equipment and maintenance for employee housing, retail units and water system. The decrease in operating cost in 1980 over 1979 is due to the transfer or elimination of certain Company functions as required by the terms of the 1977 Treaty with Panama. The harbor terminals, marine bunkering, and railroad oper- ations are being transferred to the Republic of Panama on October 1, 1979. The retail units, food units, theaters, and bowling alleys will cease operation as required by the Treaty. In addition, there will be a reduction in the scope of operation for the housing program due to certain quarters transferring to the Republic of Panama. Question 11. The 1980 estimate for the Panama Canal Commission as an appropri- ated-fund agency shows a categor>' of expense referred to as "General Corporate Expense." What is the basis for use of that terminology- in a non-corporate agency? Answer. The title "General Corporate" was carried over from previous budgets £md will be changed in future submissions for a non-corporate agency. Question 12. Please give us a summary of what expenses are included in the category of "General Corporate Expense". Answer. The latest estimates of general and administrative expenses in 1980 are presented in the following table. The cost estimates differ from the President's budget to conform to the requirements of H.R. Ill and our latest estimates. [In thousands of dollars] Executive direction 5,245 operations direction 3,562 Financial management IO.'tSS Personnel adminsitration *"..' 3379 General services 6100 Recruitment and repatriation 4,443 Employee states travel 1 522 Transportation of employee vehicles 'g59 Apprentice training program \ 495 Employer contributions to FEGLI, FICA and Incentive Awards"""!'"!!!!! '750 Early retirement 26 700 Interest !.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 2oi854 Death and disability compensation 1568 Employers contribution to Federal Health Insurance plans !!!!!!!!!!!!!!!!!!!!!!! 5!l47 Alien cost relief payments 1*579 Alien cost relief annuitant welfare program !..!!!!!!!!!!!!!!!!!! 309 Reimbursements to DOD for education and health costs!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 12.388 Probation, parole and judicial system 626 Mail and director}' unit !!!!!!!!!!!.!!!!!.!!!!.!! 454 Community and professional library !!!!! 53^ Joint personnel program !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 476 Repairs to buildings and excess facility expense !!!!!!!!!!!! 908 Amortization of deferred credits from Panama accounts receivable !!!!!!!!! 11,733) 57 1980 current eatimaU Panama Social Security payments 715 All other expenses and credits, net (530) Total general and administrative expenses 98,650 Question 13. How do the costs in that category (General Corporate Expense) compare with similar costs in 1979 and the estimated costs in 1980? Answer. Costs for General Corporate Expense in the President's budget were as follows: 1978 actual 1979 estimate 1980 estimate Net cost of Canal Zone Government $23 340 $26,182 .. 20,758 .. 59,805 106,745 Interest 19,361 49 350 Other general corporate expense $61 760 Total general corporate 92,051 61760 The changes in the President's Budget between 1978 and 1979 reflect general cost escalation and certain costs resulting from the Treaty including repatriations of $1.3 million for the Government and $1.8 million for the Company and severance pay for $4.6 million. In moving from 1979 to 1980 the reductions include elimination of the net cost of Canal Zone Government portions of which are absorbed by various Commission units, elimination of interest as proposed under H.R. 1716 and reduced scope of Treaty related costs offset by cost escalations. The revised estimate of general expense under H.R. Ill is $98.6 million, the increase over the President's Budget is due principally to the requirements imposed by H.R. HI to pay interest, $20.9 million, and early retirement costs of $16.7 million. Question 14- Are the total costs shown in the May document still good estimates? Answer. The fiscal year 1980 estimates submitted in May have been revised to incorporate our latest funding requirements as it relates to workload and other refinements of costs. A basic assumption made m developing the estimates was that H.R. Ill would be the basis for implementing the Treaty since it had been or either was to be presented to the House of Representatives, which is an initial step in the legislation process. The attached schedule provides an explanation of major variations between the President's Budget, the May submission to Congress, and the current estimate. SCHEDULE [In millions of doliars] Opefating Tolls costs deficiency President's budget, fiscal year 1980 326.3 46.7 Revised traffic projections per tolls proposal ($14.3 tolls, $3.2 tonnage payments to Panama) 3.2 -11.1 Increased costs in transit activities due primarily to revised traffic projections Revised estimate of marine accident costs Retirement fund payment, dynamic cost basis Interest on investment Fuel oil price escalation Towing locomotive overhaul program Facility relocations due to treaty, rescheduled Operating assistance provided to Panama Consultative committee established per treaty Revised assumption for health sponsorship 4.7 2.6 2.0 2.0 29.4 29.4 18.2 18.2 4.0 1.8 .8 .8 .8 .8 .7 .2 .2 -3.0 -3.0 58 SCHEDULE— Continued [In millions of dollars] All Other, including additional personnel for customs liaison (8), mail sorting (4), guards (9), and all other, net (1) and savings from 5.5 percent pay cap Capital acquisition factor change Recovery of accounts receivable from Panama May submission to Congress Revised traffic projection (-$6.6 tolls, -$1.7 tonnage payments to Panama -$0.5 other revenue) Retirement fund payment, change to static cost basis Fuel oil price escalations, further change Operating assistance for Panama, contingency Maintenance of locks, navigation, service equipment Facility relocations, rescheduled back to 1979 Interest cost change to 10.25 percent interest rate Revised estimate of marine accidents, accrual from $8.0 to $6.0.... All other cost variations including maintenance requirements, com- mercial work, and varying employments, net Provision of tug service for harbor Repatriation additional provision Current Estimate, fiscal year 1980 Operating Tolls costs deficiency -1.8 -2.8 .2 -1.7 -1.7 383.8 84.1 -1.7 5.4 -12.7 -12.7 6.0 1.7 60 1.6 1.6 -.8 -.8 1.9 1.9 -2.0 -2.0 1.2 1.5 -2.0 1.2 .6 384.5 79.3 J. NAVIGATION SERVICE AND CONTROL Question 1. Please describe briefly the functions included in this activity. Answer. Navigation Service and Control is comprised of two Divisions— the Tran- sit Operations and the Canal Support Divisions. Functional responsibilities are as follows: Transit operations division Supervision and enforcement of rules and regulations governing navigation of Canal with respect to transiting vessels from the Pacific Sea Buoy to the Atlantic Sea Buoy. The scheduling and control of vessels for Canal transit and the assign- ment, training and supervision of pilots. Canal support division Supervision and enforcement of rules and regulations governing functions includ- ing tug, launch, and deckhand services; admeasurement of vessels for tolls assign- ment; inspection of vessels; responding to vessel emergencies; and the operation and maintenance of tugs, launches and related shore facilities. Question 2. For what level of traffic is this function budgeted? Answer. The fiscal year 1980 budget estimate provides for a forecast of oceangoing transits as follows: Total oceangoing transits 13,310 Daily average (percent) 36.4 80 foot beam and over (percent) 44.0 100 foot beam and over (percent) 14,6 Question 3. Is this your current projection of traffic for fiscal year 1980? Answer. Yes, this is the current projection of traffic for fiscal year 1980. Question 4- How many pilots are now employed? Answer. Out of a force ceiling of 230 pilots, there are 219 on board as of July 18, 1979. The fiscal year 1980 ceiling provides for 233 pilots. Question 5. Is this number of pilots adequate to handle the traffic at current levels? Answer. Our 219 pilots are barely adequate to handle traffic at current levels. The workload requires frequent overtime. Pilot recruitment prospects though cur- rently favorable have been uncertain and may well be troublesome in the future. 59 The pilot training cycle is lengthy, so that we must hire now for senior pilot requirements in 1986 and 1987. Question 6. What is the established workweek for pilots? Answer. We have two basic forms of pilot employment: (a) Regular: Pilots work a basic 6-dav week and get overtime for all work over the first 40 hours. A normal workload is 3 assignments per week, 43 weeks per year (9 weeks leave) which totals 129 assignments per year. (b) 6-4 Plan: Pilots work 6 weeks of duty followed by 4 weeks of special leave, an average of 31.2 weeks per year and approximately 4 assignments per week. During their duty period, pilots are available for assignment seven (7) days per week. Question 7. What is the average amount of overtime worked by a pilot? Answer. Pilots average 212 overtime hours per year. Question 8. How does overtime affect the pilots' pay? Answer. Pilots are paid time-and-one-half for all work over 40 hours. They earn extra premium compensation for working holidays, nights, Sundays and various other special assignments. 6-4 pilots are paid a special schedule allowance. Overtime adds approximately $8,400 to the average pilot's pay. Question 9. In the consideration of H.R. HI on the floor of the House a question was raised about the desirability of contracting for pilots service. Please comment on that proposal. Answer. "The pilots association has had exploratory meetings with Marine Bureau management on this subject. It would be premature to take a firm position on this matter. The pilot association and management are actively pursuing this matter. Question 10. Will you describe the organizational structure contemplated for performance of the navigation service and control functions under the Commission? Answer. The Navigation Service and Control organization will remain essentially the same as it is today. It provides for the merger of the former Port Captains Balboa and Cristobal organizations and the Director of Admeasurement unit into a single division — the Canal Support Division. The Transit Operations Division is continued as in its present form. Question 11. What would be the effect on this function of an increase in traffic of 10 percent. Answer. An increase in traffic of 10 percent would result in a sustained average number of oceangoing transits of approximately 40 ships per day, with peak periods up to 44 transits. Increase in pilot deckhand and tug staffing would be required as follows: Pilots 9 Deckhands 94 Tug crews (28 employments) 7 The above additional staffing levels would cost approximately $1.8 million annual- ly in fiscal year 1980 dollars. It would also be desirable to promptly advance capital replacement of one tugboat and the construction project for a vessel tie-up station. Specifically the fiscal year 1981 tugboat replacement should be advanced to fiscal year 1980. In addition the phased fiscal year 1981 through fiscal year 1985 construction of a tie-up station north of Pedro Miguel Locks should be accelerated. Both projects total an estimated cost of $7.8 million in fiscal year 1980 dollars ($4 million for tug replacement and $3.8 million for the tie-up station). Question 12. What is your estimate of the maximum possible increase in traffic in fiscal year 1980 in comparison to the level of traffic contemplated by the budget estimate? Answer. Our current forecast provides a range of transit estimates, the high end of which estimates oceangoing transits in fiscal year 1980 at 13,490 or approximate- ly 36.9 daily, on average. This forecast is based on our best current information regarding factors that could affect Canal traffic levels. However, the Canal's increas- ing dependence on commodities such as grains and petroleum, combined with the current uncertainties in U.S. and world economies, provides a potential for substan- tial deviation even outside the expected range. K. LOCKS OPERATIONS Question 1. Please describe briefly the function performed by these operations. Answer. The Locks Division is responsible for the operation and maintenance of the Atlantic and Pacific Locks and related facilities, handling of all vessels in the Locks, operation and maintenance of the Miraflores Spillway and Miraflores Bridge. Question 2. For what traffic level does the budget estimate provide? Answer. The fiscal year 1980 budget estimate provides for a forecast of oceangoing transits as follows: 60 Total oceangoing transits '^^'4^4 Daily average ^^-^ 80 foot beam and over (percent) ^^-^ 100 foot beam and over (percent) 14.b Question 3. What level of service will be provided by the funds included in the budget estimate? (Note: Answer should be in the number of locks, crews, and hours of service ) Answer. Beginning October 1, 1979 through January 31, 1980, the configuration of Locks crewing will be as follows: -xi. o u Gatun (3 lifts)— 7 crews each day, 24-hour service two lanes with « hours relay in one lane. Pedro Miguel (1 lift)— 5 crews each day, 24-hour service one lane, lb-hour service one lane. Miraflores (2 lifts)— 6 crews each day, 24-hour service two lanes. Call-out overtime (ten times per month) is provided as required through January 31 1980 Beginning February 1, 1980, the configuration of Locks crewing will be as follows: Gatun (3 lifts)— 8 crews each day, 24-hour service two lanes with 16-hour relays in one lane. Pedro Miguel (1 lift)— 6 crews each day, 24-hour service two lanes. Miraflores (2 lifts)— 7 crews each day, 24-hour service two lanes with 8-hour relays in one lane. Locks crewing provides capability to handle traffic levels for fiscal year 1980 with projected ship mix. , ,. ,. . , , Question 4. What level would the traffic have to reach before the funding provided by the estimate would become so insufficient as to affect the service provided by the Locks? Answer. Sustained daily traffic levels beyond 38 would require additional re- sources. Question 5. What would be the cost of providing necessary additional service to meet the situation described in your answer to the last question? Answer. A sustained daily average beyond 38 transits would require the following locks crewing. Gatun (3 lifts)— 9 crews each day— 24-hours service with 24-hour relays in one lane. Pedro Miguel (1 lift)— 6 crews each day— 24-hours service two lanes. Miraflores (2 lifts)— 9 crews each day— 24-hours service with 24-hour relays in one lane. If the above crewing were provided on a. permanent basis they would cost approxi- mately $1,500,000 annually in fiscal year 1980 dollars. It would also be desirous to promptly advance the locks locomotive procurement and Gatun Locks chamber lighting project. Specifically the 5 towing locomotives in the fiscal year 1980 program should be increased to 10 and the lighting project advanced from fiscal year 1981 to fiscal year 1980 at a total estimated cost of $5.6 million ($4.3 million for additional locomotives and $1.3 million for locks lighting). L. GENERAL REPAIR, ENGINEERING AND MAINTENANCE SERVICES Question 1. Please describe the services included under this heading in the budget. Answer. This activity provides a wide range of maintenance and repair work on structures, loading equipment, and shop and construction equipment necessary to the safe and efficient operation of the entire Canal Enterprise. Included here are engineering designs and services, construction contract administration, routine building maintenance and electrical repair services, the operation of a general laboratory, and topographic and hydrographic surveys. Question 2. What is the organizational structure contemplated for the perform- ance of these functions? Answer. These functions are now performed by elements of the Engineering and Construction Bureau. There is no change contemplated in this organization in fiscal year 1980. Question 3. To what extent would increases in traffic through the Cansd affect the level of activity of these services? Answer. Traffic increases would tend to increase general repairs, engineering and maintenance services to a degree; however, the increase would not be a straight line and would have minimal immediate impact. For instance, the floating equipment must be overhauled at intervals to prevent corrosion regardless of whether the equipment is used. However, as additional floating equipment such as tugs are 61 added to the fleet to meet increased traffic, the workload of certain of these activities would correspondingly increase. M. SECURITY AND PROTECTION SERVICES Question 1. Please describe the security and protection services included under this head in the budget. Answer. Police: The Canal Commission Police, for a 30 month transition period will have concurrent criminal jurisdiction and investigative responsibilities with Panamanian law enforcement authorities in Canal Operating Areas, Canal Housing Areas, Areas and facilities granted to the United States outside of Operating Areas, Military Areas of Coordination, Defense Sites, and Ports and Piers Areas. This responsibility will be accomplished by joint Canal Commission/Panama National Guard patrols in the aforementioned areas. Additionally, the Canal Commission Police operate the penitentiary which will have a projected population of 137 inmates by October 1, 1979. Fire: The Canal Commission Fire Division is responsible for fire protection and fire fighting aboard ships and floating equipment in Canal waters, locks areas, and is jointly responsible with the Government of Panama's Fire Department for fire protection of^ land base areas such as Defense Sites, Commission and Military Housing Areas, Ammunition Areas, and Chemical Storage Areas. Further, the Commission Fire Division is responsible for resuce and emergency ambulance serv- ice for Commission townsites. Canal protection: The Canal Protection Division is a major division in the Secu- rity and Protection Services of the General Services Bureau, Panama Canal Com- mission. The mission of the Canal Protection Division is to protect the security of selected installations of the Panama Canal Commission, which are vital to the management, operation and maintenance of the Panama Caned and to ensure that these installations remain inviolable. Internal security: This provides for loyalty investigations and intelligence and security services for the Government and the Company. For 1980, these services will be performed by the Commission as a part of its Security and Protection Services function. Question 2. How many employees are involved? Answer. Police: During the transition period the Commission Police will gradually phase out of existence. On October 1, 1979 the Canal Commission Police will have an authorized strength of 314 full time permanent employees. By the end of fiscal year 1980 the number of full time permanent employees will reduce to 287. On April 1, 1982 the number of full time permanent employees will be 34. Fire: 140 employees. Canal protection: 195 full time permanent employees. Internal security: 12 employees. Question 3. What is the nationalitv of these employees? Answer. Police: The fiscal year 1980 employee composition of the Police Division is expected to be 228 U.S. citizens and 86 non-U.S. citizens. Fire: 20 U.S. citizens and 120 non-U.S. citizens. Canal protection: Based upon information presently available, including impact of RIF action, at Entry into Force the Canal Protection Division will consist of 100 U.S. citizen and 95 non-U.S. citizen employees. Internal security: 12 U.S. citizen employees. Question 4- Would an increase in the level of traffic affect this function? If so, to what extent? Answer. Police: An increase in the level of Canal traffic would not directly affect this function. Fire: An increase in the level of traffic would increase the number of calls to fires and other emergencies. Canal protection: Fluctuations in the level of traffic will not affect the operational responsibilities of the Canal Protection Division. Internal security: An increase in the level of Canal traffic would not affect this function. Question 5. H.R. Ill provides for transfer to the custody of the Attorney General of prisoners serving sentences of more than one year. WTiat effect will that provi- sion have on the cost of this function? Answer. It will not have a significant impact on the cost of this function in fiscal year 1980. We estimate that there will still be about 38 penitentiary inmates who will have to be cared for after transfer of prisoners serving sentences of more than one vear. Since penitentiary costs are relatively fixed, only minor cost reductions will be possible until the facility can be completely closed. Question 6. What will be done with prisoners who are serving less than one year? 62 Answer. They will continue to be cared for in the penitentiary until the numbers are reduced sufficiently to be transferred to the Balboa Jail. It is probable that transfer to the Balboa Jail could take place when the population of the penitentiary drops below 20 inmates. N. INDUSTRIAL HEALTH AND SANITATION Question 1. Please describe the Industrial Health and Sanitation Services included under this head in the budget. Answer, (a) Industrial health services will include the prevention of occupational diseases and injuries through survey or industrial operations as well as monitoring the professional and technical aspects of the Panama Canal Commission's adherence to the requirements of the Occupational Safety and Health Act (OSHA). In addition, the industrial health function will include: liaison with and monitoring the results of, Commission participants in the alcoholism rehabilitation program; repsiratory protection program; radiation protection program; air sampling program; documen- tation of exposure to hazardous substances; coordination, review and follow-up on line of duty injuries and medical examining board requirements and findings; coordination and review of all physical examinations for Commission employees; operation of five first-aid stations located in industrial areas; and provision of quarantine and disease control /immunization capability required by the Panama Canal Commission to ensure continued sanitation of the Canal operating area. As an outgrowth of treaty related discussions with Government of Panama coun- terparts, the Panama Canal Commission will exchange communicable disease and industrial health information. There will also be a continuing and important re- quirement to maintain close liaison with the Department of Defense (MEDDAC) and the Government of Panama on industrial health and sanitation matters. (b) Zoonotic disease control capability will be retained to accomplish certain quarantine functions directly related to operations of the waterway. Among the quarantine functions to be performed are (1) The examination of animals aboard arriving vessels when such animals originated from countries infected with foot and mouth disease or other quarantinable diseases, (2) the inspection of ships' stores at the request of the master or agent where spoilage is suspected, (3) the safeguarding of chilled, fresh or frozen meats that arrive on vessels from countries with foot and mouth disease to preclude unloading of such products in areas of Commission responsibility, and (4) supervision of the disposition of ships' garbage in instances where infected meat is involved. In addition, the Commission s veterinarians will provide liaison with their DOD and GOP counterparts as well as with other national and international organizations/agencies. (c) Sanitation of the Canal Operating Areas remains as a major function of the Panama Canal Commission. In carrying out this responsibility in various areas and installations in and around the Commission operating and housing areas, the Sani- tation Division will maintain field crews to insure proper drainage and larviciding and vector control activities in all areas likely to breed mosquitoes. It is further expected that the proper exercise of this control will cause Commission sanitation workers to operate beyond the surveyed limits of Commission areas so as to eradi- cate all mosquito breeding habitats within flight range of townsites and work areas. Other services provided by Sanitation personnel are as follows: 1. Rat inspections to vessels at piers made available to U.S. 2. Maintain food sanitation controls at restaurants in Canal Operating Areas. 3. Control minor disease vectors, such as bats, ticks, flys, etc. 4. Monitor the quality of drinking water. 5. Monitor refuse collection and disposal. 6. Follow-up on communicable disease occurrences (Epidemiology). 7. Respond to public complaints. 8. Monitor the sanitation of public areas. (d) The Safety Program will continue to promote the provisions of the Occupation- al Safety and Health Act as it applies to the Commission, will effect and monitor compliance with the agency's safety directives, and will exercise technical supervi- sion over the safety officers employed in the Commission's bureaus. Funding for this function is provided for under Operations Direction. Question 2. To what extent would increases in traffic through the Canal affect the level of activity of these services? Answer. The nature of the services provided is such that increases in Canal traffic will not significantly affect the level of activity of these services. Question 3. How are these services performed now? Answer. With the exception of four of the five first aid stations and the safety function, all services described in N-1 are currently provided by the Division of Sanitation, Division of Public Health and the Division of Veterinary Medicine, all which are a part of the Health Bureau. Other activities of the current Health Bureau relate to the providing of medical care to individuals and are being trans- ferred to DOD because the treaty precludes the Commission from providing health and medical services to individuals. However, the treaty does not assign any role to DOD in the management, operation and maintenance of the Canal. The four first aid stations referred to above are currently operated by three bureaus of the agency but their operation is under the technical supervision of the Health Bureau. After October 1, in the interest of improved and more efficient management, all five of the first aid stations will be consolidated under and operat- ed by the Office of Health and Safety. The fifth first aid station is currently operated by the Health Bureau. The safety function currently exists as a separate and independent unit reporting directly to the agency head. Because of its close interrelationship with industrial health, the safety function will be organized under the Health and Safety Office after October 1. Question 4- Would it be feasible to consolidate this function with the Health functions being transferred to DOD? Answer. Though possible it would not be desirable to consolidate the Industrial Health and Sanitation functions with those functions being transferred to DOD. The Panama Canal Commission is, by treaty, charged with the responsibility for the efficient management, operation and maintenance of the Canal. The Industrial Health and Sanitation functions constitute a vital part of the agency mission, while the Health portion of DOD's mission will be primarily one of providing medical services to individuals. Because of different agency missions (and thus placing different priority on re- sources) it is unlikely that the Panama Canal Commission would receive the same level of support in these important areas if the responsibility were transferred to others. Finally it was never contemplated that these services would be transferred to others and DOD has not budgeted for these functions. Question 5. Please describe the organizational structure contemplated for perform- ance of these functions. Answer. The health and safety responsibilities of the Panama Canal Commission will be consolidated into an Office of Health and Safety. The organization of Health and Safety Office will consist of an Office of the Director and four operating units: Industrial Health, Sanitation, Zoonotic Disease Control and Safety. The Office of the Director will exercise executive direction and have overall responsibility for the administration and supervision of all health and safety related activities remaining with the Panama Canal Commission as well as performing essential liaison with DOD, other U.S. Government agencies and other providers of health care to the Commission and employees and dependents. The Industrial Health element will include responsibilities for the prevention of occupational diseases and injuries through survey of industrial operations as well as monitoring the professional and technical aspects of the Panama Canal Commis- sion's adherence to the requirements of the Occupational Safety and Health Act (OSHA). In addition, the industrial health function will include: liaison with, and monitoring the results of. Commission participants in the alcoholism rehabilitation program; hearing conservation program; respiratory protection program; radiation protection program; air sampling program; documentation of exposure to hazardous substances; coordination, review and follow-up on line of duty injuries and medical examining board requirements and findings; coordination and review of all physical examinations for Commission employees, operation of five first aid stations located in industrial areas; and provision of quarantine and disease control/immunization capability required by the Panama Canal Commission to ensure continued sanita- tion of the Canal operating areas. The Sanitation element will include responsibility for conducting ditching, larvi- ciding and vector control activities in all Canal operating areas, areas made availa- ble to the U.S. for housing Commission employees. In addition, by joint GOP/CZG agreement, the Commission's sanitation forces will jointly sanitate, with their GOP counterparts, a one mile wide zone outside of townsite boundaries to insure insect free housing areas. The Sanitation element will also provide vessel derat services at piers made available to the U.S. Government; food establishment inspections in Canal operating areas and, together with GOP counterparts, similar inspections in housing areas, monitor the purity and quality of drinking water in Commission areas as well as monitor refuse collection. The Zoonotic Disease Control activity will include responsibility for accomplishing certain quarantine functions directly related to operations of the waterway. Among the quarantine functions to be performed are (1) the examination of animals aboard 64 arriving vessels when such animals originated from countries infected with foot and mouth disease or other quarantinable diseases, (2) the inspection of ships' stores at the request of the master or agent where spoilage is suspected, (3) the safeguarding of chilled, fresh or frozen meats that arrive on vessels from countries with foot and mouth disease to preclude unloading of such products in areas of Commission responsibility, and (4) supervise the disposition of ships' garbage in instances where infected meat is involved. In addition, the Commission's veterinarians vdW provide liaison with their DOD and GOP counterparts as well as with other national and international organizations/agencies. The Safety element will include responsibility for insuring agency compliance with OSHA requirements and the agency's safety program as well as providing technical supervision over safety personnel assigned to the various bureaus and filed units of the Commission. Question 6. How many people are involved? Answer. The functions described above will require a total of 147 full-time perma- nent positions. Mr. Hubbard. This pertains to the financial management, on page 770. Please give us the description of the proposed organiza- tion and staffing of this function under the Commission. Governor Parfitt. I will be glad to provide details for the record, but basically the financial operation would be organized and staffed essentially as it is today, with very minor changes. Mr. Hubbard. Earlier I was asking for some of the elements in your budget in more detail. They were asked because of the uncer- tainties which surround the authorization for the Panama Canal Commission. How many people will be employed in this function under the Commission? Governor Parfitt. The current estimate is 8,246 full-time perma- nent, and a total staffing of 8,595. That is the total staffing for the Commission. Mr. Hubbard. What about the financial people? Governor Parfitt. Financial Vice President. Mr. Hubbard. Under Financial Management, how many will be employed? Governor Parfitt. Full-time permanent staff of 346 people, and a total of 372 in the Financial Vice President's office. That is for 1980. Mr. Hubbard. OK. What is the basis for the increase in costs between 1978 and 1980, as to Financial Management? Governor Parfitt. I will have to provide that for the record, sir. I will be glad to do so. [The following was received for the record:] Increase in Financial Management Costs The increase in Financial Management costs of $1,335,000 from 1978 to 1980 is accounted for as follows: Amount Wage and other cost escalation $1,109,000 Employment of 4 additional auditors to strengthen internal controls and other employments for workload 128 000 Additional requirements for computer rentals, maintenance, and suiv plies ($101,000 in 1979, $67,000 in 1980) „ 168 000 65 Planned in reduction in 1980 due to reduced workloads (15 full-time permanent and 6 others) — 131,000 Varying requirements for employments in continuing positions (1979 + $134,000 and —$84,000 in 1980) 50,000 Another 11,000 Total 1,335,000 The current estimate for 1980 is somewhat higher than the President's budget principally due to the possible need to continue hospital billings for Commission employees, expected increased claims activity and accounting systems development work. Mr. Hubbard. Under "Personnel," page 771, just one question. The subcommittee was told, sometime ago, that about one-half of all Panama Canal Commission costs, and 64 percent of all non- treaty payments of the Commission would be personnel related. Are those numbers, percentages of operating expense, or do they include operating and capital expense? Governor Parfitt. I believe they are basically related to the operation expense, but again I will confirm that for the record. [The following was received for the record:] Ratio of Personnel Costs to Total The ratios of personnel costs to total costs were developed by using only the operating cost of the Panama Canal Commission. Mr. Hubbard. And also, please confirm if these figures are cor- rect. This is under employment costs on page 771. How do the items under this head of the estimates relate to the heading, "Per- sonnel Administration"? Governor Parfitt. Personnel Administration is essentially the staff that handles all the personnel activities of the organization, and employment costs are costs relating to all the employees of the entire Commission. Mr. Hubbard. Under tolls. Under section 412(d) of H.R. Ill, the President may require U.S. Government vessels to pay tolls to the Panama Canal Commission, or the tolls that would have been levied on those vessels would be computed, and those amounts treated as revenues of the Panama Canal for the purpose of pre- scribing the rates of tolls, and computing payments to Panama. Has any decision been made as to whether the President will require Government vessels to pay tolls? Governor Parfitt. No decision has been made. I believe we would continue to function as we do now; that is, provide an offset against interest payments. Mr. Hubbard. What is your present estimate of tolls revenue in fiscal year 1979 and fiscal year 1980? Governor Parfitt. 1979 is $210.8 million, and 1980 is $221 million. Mr. Hubbard. Can you estimate for us how much of the esti- mated toll revenue is derived from movement of North Slope petroleum? Governor Parfitt. $20 million. Mr. Hubbard. What is your present assessment of the extent of future use of the canal for North Slope oil? 66 Governor Parfitt. Through 1981, as I said, we still anticipate about the same level of business, perhaps some slight pickup. We are, at this point in time projecting about $21.6 million of revenues from North Slope oil in 1981. The midrange would depend on many of the factors mentioned before concerning alternatives. Mr. Hubbard. We are almost through. Governor. During hearings on H.R. Ill, a partner in Arthur Anderson recommended a program of revaluation of Panama Canal assets with a view to establishing new depreciation rates. Was this program developed under a contract with the company? Governor Parfitt. I do not believe this was developed under the contract with us. During the course of discussions they developed that concept, and presented it to our staff, but no significant amount of time or analysis was made, and certainly not at our request. But the same individuals under contract to us developed that concept and presented it to our financial officials. Mr. Hubbard. How long a period would be required for such a valuation program, and development of a program for use of the results? Governor Parfitt. I cannot give an authoritative answer. There is some feeling that it could be done within a year. It has been my own view that although the concept is an appealing one, that with all of the other changes and the difficulties that we have now, that it should be deferred for subsequent decision. Mr. Hubbard. Is Arthur Anderson still under contract to per- form consulting services for the company? Governor Parfitt. They are, sir. Mr. Hubrard. Last, if you have a contract with Arthur Anderson at the present time, please furnish the names of the pesons en- gaged in the performance of the control, and the rates of compensa- tion paid to Arthur Anderson for the services of each. Would you do that for us? Governor Parfitt. I will be glad to, sir. [The following was received for the record:] Arthur Andersen & Co. [Contract Nos. PC-lp-1287 and PC-lp-1293] Name and pay level of persons engaged in performance of the contracts Amount • Leonard J. Kujawa, partner $822 Edward F. Lukes, partner 822 Dan M. Cone, manager V '.'.„". 607 Patrick J. Condon, manager IV 577 Donald A. Legel, manager II 487 Robert N. Talbert, staff II '.'Z'ZZ'Zl 346 ' Daily rate of compensation (when worked.) Mr. Hubbard. Do you have anything else that you would like to add, Governor Parfitt? Governor Parfitt. No, sir, I think the testimony today has devel- oped most of my concerns, and points that I would like to present. Mr. Hubbard. Governor, this might be the last time you testify before a congressional committee or subcommittee. I want to com- mend you for the candor and honesty with which you have ad- 67 dressed this subcommittee, and other congressional bodies in the past. I want you to know that we appreciate the splendid job you have done in operating the canal, and from this chairman — members of the committee, and all others interested in the Panama Canal, we express our appreciation to you, and congratulate you. Governor Parfitt. Thank you, Mr. Chairman. Mr. Hubbard. Thank you again, Mr. Tom Constant, for being with us. You were very helpful to Governor Parfitt, and to each of us, even though your remarks for the record were somewhat limit- ed. Thank you both. The subcommittee is now in adjournment. [The following was submitted:] 68 Appendix A— Estimates Submitted by the Panama Canal Organization to the Congress in May 1979. These Estimates Formed the Basis for the Questions Presented by the Panama Canal Subcommittee on July 16, 1979 Canal Zone Government Panama Canal Company 1978-1979 Panama Canal Commission 1980 JUSTIFICATION OF PROGRAMS AND ESTIMATES FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1980 (FOR USE OF HOUSE AND SENATE COMMITTEES ON APPROPRIATION?) CANAL ZONE GOVERNMENT - PANAMA CANAL COMPANY, 1978-1979 PANAMA CANAL COMMISSION, 1980 Justification of Programs and Estimates for the Fiscal Year Ending September 30, 1980 Table of Contents Page No. Summary Statement i Canal Zone Government Operating Expenses Introduction 4 Program and Financing 5 Detail of Accrued Costs by Activity 6 Canal Zone Government Capital Outlay Introduction 14 Schedule of Capital Projects 15 Panama Canal Company (1978-1979) Panama Canal Commission (1980) General and Administrative Expenses Under Statutory Limitation Introduction 16 Program by Activities 17 Exhibit I - Summary of Variations, 1979-1980 18 Exhibit II- Summary of Accrued Expenses and Variations by Activity, 1979-1980 21 Exhibit III- Detail of Variations, 1979-1980 21 Program Descriptions 27 Operations Not Under Limitation Program and Performance 30 Revenue and Expense 32 Statement of Financial Condition 33 Statement of Equity of the V. S. Government, September 30, 1978 35 Tolls Statistics 36 Tolls 37 Transit Operations Maintenance of Channels and Harbors 38 Navigation Service and Control 38 Locks Operations 39 General Repair, Engineering, and Maintenance Services 39 Security and Protection Services 40 Industrial Health 40 General Canal Expense 41 Supporting Services Operations Supply and Logistical Services 42 Utilities 45 Other Supporting Services 48 General Corporate Expense Net Cost of Canal Zone Government 52 Interest Payments to U. S. Treasury 53 Other General Corporate Expense 53 Capital Outlay Summary of Capital Projects 55 Capital Project Justification, Index 59 Justifications 60 70 CANAL ZONE GO'.'ER.NMEirr - PANAMA CANAL COMPANY, 1978-1979 PANAMA CANAL COMMISSION, 1980 SL'ftARY STATtMENT Introduction The Panaca Canal Treaty of 1977 defines a new agency, the ?ana=a Canal Comsission, as the successor agency to the existing Panama Canal Company- Canal Zone Government organization. The Panama Canal Cocnciission is to take the form of a corporate agency of the United States Government, with a nine-member Board of Directors and an Administrator and Deputy Administrator, all appointed by the President of the United States. The Board of Directors will be comprised of five U. S. and four Panamanian nationals. The Administrator and Deputy Administrator will be U. S. and Panamanian, respectively, until 1990, at which time the citizenship of the incumbents will be reversed. Tr.e Panama Canal Coocission will operate ar.d -air.rair. the interoceanic waterway. Many functions now performed by the present organization will either be discontinued or transferred to private or governmental agencies in the Republic of Panama, or to other U. S. Government agencies. Legislation is being proposed to implement the new treaty on the anticipated effective date of October 1, 1979. Accordingly, no appropriations are requested for the Canal Zone Government for 1980. However, outlays for obligated balances in the operating expense appropriation account will be made by the administration of the Panama Canal Comnission. For the Canal Zone Government capital outlay appropriation, certain governmental programs will be assumed by the Coomission and others by the Department of Defense. Related fund baTances at year-end 1979, if any, will be transferred to the receiving agency. ■acilitie; There will be a transfer of major functions and related facilities to the Govemaent of Vanama and the Departaeat of Defense upon entry into force of the treaty. Among those functions to be transferred to the Government of Panama are the following: -Ownership, management and operation of the ports at 3alboa and Cristobal, and provision of all coccercial services to vessels utilizing these port facilities. -Ownership, management and operation of freight houses. Panama Railroad and its -Criminal jurisdiction, subject to certain conditions, in all parts of what is today the Canal Zone, with the exception of Canal operating and housing areas, and the port areas, for 30 months after entry into force, after which time the police, courts and prison systems of the U. S. Government will cease to exist on the Isthsaus. -Performance of custoas, irEigrstion and quarantine controls. -Operation of cotamerclal activities not directly related to the management and operation of the waterway. -Operation of a postal service, and after 30 months from entr;.- into force, health services for non-U. S. citizen emrslovees. y.ajor functions to be transferred to the IJepartment of T-efense are the health services, including operation of hospitals and clinics, and education services, including primary and secondary school operations and operation of a two-year coominity college. 71 SUMMARY STATEMENT (Continued) Canal Zone Government The programs and activities described for the Canal Zone Government constitut operating expenses and capital outlay for the fiscal years 1978 and 1979. All regular operating expenses of the Canal Zone Government Incurred through September 30, 1979, including depreciation and other non-fund expenses, are recovered from individuals and agencies served and from the Panama Canal Company, The agency known as the Canal Zone Government will cease to exist after September 30, 1979. Panama Canal Company /Panama Canal Commission The Panama Canal Commission is the successor agency to the Panama Canal Company, and will operate generally as the Company has operated since its inception in 1950. The primary purpose of the Commission is to operate and maintain the waterway. The Commission is expected to be financially self- sufficient in its operations and to make payments to Panama as specified in the Treaty of 1977. The budget programs and activities represent, in 1978 and 1979, the operations of the existing organization, the Panama Canal Company. For 1980, the estimates reflect operations under the reorganized entity, the Panama Canal Commission. Major assumptions used in determining costs and recoveries for the Panama Canal Commission in 1980 were: 1. The Treaty will enter into force on October 1, 1979, the beginning of fiscal year 1980. 2. The Commission will not be required to pay interest to the U.S. Treasury on the net direct investment of the United States in the Canal. 3. There is no longer a requirement to reimburse the U. S. Treasury for the net cost of Canal Zone Government. 4. The $10 million contingent payment is not considered a cost for inclusion in toll base, with payment dependent upon the generation of revenues in excess of requirements. 5. The toll base can include a provision for funding capital requirements over and above those which are funded through normal depreciation charges. 6. Panama will be charged full cost recovery rates for all services rendered by the Commission. 7. The Coiranission will continue to provide electric power, water, and telephone services to the former Canal Zone area. 8. Panama will charge the Commission for railroad and pier services at rate levels similar to what the Company charges its commercial customers. 9. Department of Defense rates for education and medical care will be in line with what the Canal Zone Government would have charged in fiscal year 1980 for these services. 10. The Commission will continue to sponsor the education of individual students, who at Treaty date, were being sponsored by the Panama Canal Company or Canal Zone Government, and such sponsorship is not assumed by another U. S. Government agency. 2 72 SUMMARY STATEMENT (Continued) Panama Canal Company/Panama Canal Commission 11. The Commission will continue to sponsor the medical care for certain elderly and disabled individuals who are presently the responsibilities of the Panama Canal Company or Canal Zone Government in DOD hospitals. 12. The Treaty of 1977 specifies the following payments to the Republic of Panama. These payments will be made from Canal operating revenues. -Thirty cents per Panama Canal net tons transiting the Canal. This amount is to be adjusted biennially after the initial five years of the treaty, to reflect changes in the United States wholesale price index for manufactured goods. -A fixed annuity of ten million dollars. -Ten million dollars for certain specified public services provided in Canal operating areas and in housing areas. -An additional amount up to ten million dollars per year to the extent that revenues exceed expenditures. In the event revenues in any one year do not produce a surplus sufficient to cover this payment, the unpaid balance is to be paid from operating surpluses of future years. Based on the preceding assumptions and the Treaty-related reorganization, the net operating result for fiscal year 1980 is estimated at $4,0 million. The margin of $4.0 million contemplates a toll rate increase yielding an estimated $46.7 million in tolls revenue in 1980. General and administrative expenses of the Commission under statutory limitation are estimated at $31,334,000 in 1980. The capital obligational program for the Commission in 1980 totals $23.0 million. Major projects scheduled for obligation are (in millions of dollars) : 1980 Obligations Channel improvements $ 5.0 Additional towing locomotives and spare components 4.0 Replace and add equipment, transit operations .. 2.5 Construct launch repair facility 2.0 Relocation of certain activities due to the Treaty of 1977 1.3 Replace launches and launch engines 1.1 Replace and add motor vehicles 0.7 Replace and add equipment, supporting operations 0.6 Improvements to water system 0.5 Improvements to communications systems 0.5 Reroof employee quarters 0.5 Minor improvements to quarters 0.5 1 73 CANAL ZONE GOVERNMENT OPERATING EXPENSES The Canal Zone Government administers the civil government and health and sanitation functions within the present Canal Zone. The programs described on the following pages for the Canal Zone Government portray operations through September 30, 1979, at which time the agency will cease to exist. All regular operating expenses of the Canal Zone Government, Including depreciation and other non- fund expenses, will be recovered from Individuals and agencies served, with the remaining unrecovered cost paid by the Panama Canal Company. Obligated balances in the Canal Zone Government operating expense appropriation, if any, will be transferred to the Panama Canal Commission at fiscal 1979 year-end, to cover any carryover liabilities of the Canal Zone Government. I 74 THE PANAMA CANAL CANAL ZONE GOVERNMENT OPERATING EXPENSES 1978-1979 Program and Financing (In thousands of dollars) 1978 Actual Program by activities : 1. Civil functions: (a) Customs and immigration 1,458 (b) Postal services 2,808 (c) Police protection 9,037 (d) Fire protection 3,713 (e) Judicial system 382 (f) Education/Libraries 23,276 (g) Public areas and facilities 5,055 (h) Internal security 364 (i) Other civil affairs 959 2. Health and sanitation: (a) Hospitals and clinics 27,257 (b) Other public health services 4,375 3. General Government expenses: (a) Office of the Governor 285 (b) Disinterment and reinterment (c) Other general government expenses- ... 5,139 Total program costs 84,108 Unfunded adjustments to total program costs: Depreciation included above -2 754 Total program costs, funded 81,354 Change in selected resources -843 Total obligations 80, 511 Financing : Offsetting collections from Federal funds .. 12,600 Appropriation in Annual Act 71,067 Supplementals: Civilian pay raise * Commuted leave and abnormal repatriations. * Disinterments and reinterments, Canal Zone cemeteries Unobligated balance lapsing -3^156 Total financing 80 511 * NOTE: Included in The Budget of the United States Government. page 1095, Supplemental Appropriation Proposals. 1,627 3,106 10,167 4,201 438 24,362 5,213 401 987 30,188 4,909 386 1,703 5.541 93,229 -2.743 90,486 3.282 13,600 74,000 1,234 3,231 > 1979 1980 Estimate Estimate 1980 Appendix . I 75 Canal Zone Government Detail of Accrued Costs by Activity 1978-1979 CIVIL FUNCTIONS Customs and immigration : This provides for the activities usually incident to such functions (except that no collection of customs duties is involved) and in addition includes special activities relating to vessels in transit and the execution of certain treaty obligations to the Republic of Panama. For 1980, this function will be the responsibility of Panama. A minor administrative function will be continued in the Commission and costed in the General Canal expense category: Office of the Chief, customs and immigration Balboa customs office Cristobal customs office Immigration and detention Total funded costs Depreciation Total accrued costs Recoveries Net cost, customs and immigration Postal service : The postal system serves the entire Canal Zone and operates under policies and regulations generally similar to those of the United States Postal Service. The service will cease in 1980, with the military Postal Service providing postal service for the Commission and its employees and dependents. A directory service unit will continue with the Commission to assist in the transition period. The costs for this service are in the General Corporate Expenses of the Commission: Operation and maintenance, postal service . Transportation of mail Interest expense on postal savings Total funded costs Depreciation Total accrued costs Recoveries Net cost, postal service 1978 1979 1980 Actual Estimate Estimate (Dollars in thousands) 128 123 787 927 542 572 1 ,458 5 1,627 1 - - 1 ,458 1,627 3 .455 2 1,625 _L 2 567 224 2 2 793 15 2 808 1 847 2 847 240 3 3 090 16 3 1 106 913 1 193 76 Canal Zone Government Detail of Accrued Costs by Activity 1978-1979 CIVIL FUNCTIONS Police protection : This includes the usual police functions of preservation of the peace and enforcement of the law in the Canal Zone, including operation of jails and a penitentiary. The police protec- tion function will continue in 1980, with some reduction in scope, in the Security and Protection Services of the Commission. Many police functions will be performed jointly with Panamanian police personnel. Supervision and general operations General police protection Penitentiary operation and maintenance .... Maintenance and rental of equipment Total funded costs Depreciation Total accrued costs Recoveries Net cost, police protection Fire protection ; All fireflghting facili- ties in the Canal Zone, except for certain aircraft crash fires, are consolidated under the C:;nal Zone Government. In 1980, some fire protection responsibility will transfer to Panama. The Commission will perform fire protection service in those areas remaining with the Commission and for the military ; Fire station operations Fire hydrant maintenance Fire chief's office Total funded costs Depreciation Total accrued costs Recoveries Net cost or income (-) fire protection ., Judicial system : This includes the operation of two magistrate courts and the expense of the district court (excluding salaries) which serves as both a State and Federal Court. A public defender service is provided. A reduced workload in 1980 is costed in the Commission in the General Corporate Expense category: Magistrates' courts Public defender Logistical support of District court Total accrued costs (funded) Recoveries Net cost, judicial system 1978 1979 1980 Actual Estimate Estimate (Dollars in thousands) 561 729 6,855 7,522 1,325 1,545 206 248 8,947 10,044 90 123 9,037 10,167 41 51 ,454 23 160 3,637 76 3,713 4,639 201 47 134 382 200 3,970 22 4. ,117 84 4. 5' ,201 ,359 -J^ J58 438 182 238 77 Canal Zone Government Detail of Accrued Costs by Activity 1978-1979 CIVIL FUNCTIONS Education: This provides for the operation of schools, kindergarten through college, and in certain areas payment for educa- tional benefits for the dependents of Canal Zone residents, the dependents of U. S. citizen Government employees residing in the Republic of Panama, and, on a space-available basis certain other residents of the Republic of Panama. There also are specialized programs for the handicapped. Also included is the operation of public libraries. Pursuant to the Treaty, the Department of Defense will operate the schools. Only those swimming pools in Commission areas, and a community library will remain with the Commission, The operation ot these pools is costed in supporting services activity and the library is costed in general corporate expense. Reimbursements to the Department of Defense for educa- tional services is costed in General Corporate Expense: Higher education Secondary education Elementary education Community libraries Swimming pools Administrative & general expense Total funded costs Depreciation Total accrued costs Recoveries Net cost or income (-), education 1978 1979 1980 Actual Estimate Estimate (Dollars in thousands) 1,574 9,211 8,583 510 837 1.895 22,610 666 23,276 26.642 1 ,573 9 ,037 9 ,489 592 869 2 ,167 23 ,727 635 24 ,362 26 ,812 Public areas and facilities : This includes the cleaning, lighting, and maintenance of streets and highways; maintenance of sewers; and care of public areas within the Canal Zone, not including military reservations. Also included are the operation and maintenance of recrea- tional facilities. Pursuant to the Treaty, Panama will assume responsi- bility for the maintenance, lighting and cleaning of streets not in Commission operating areas as well as traffic management. The residual functions retained by the Commission are costed in the General Canal Expense category: 49-653 0-79-6 78 Canal Zone Government Detail of Accrued Costs by Activity 1978-1979 CIVIL FUNCTIONS Public areas and facilities (Cont'd) : Maintenance of streets and sewers Care of grounds Recreational facilities program Street lighting Street cleaning Traffic Management Total funded costs Depreciation Total accrued and net costs, public areas and facilities 1978 1979 1980 Actual Estimate Estimate (Do illars in thousands) 2,534 2,581 887 948 225 255 315 327 136 116 45 64 4,291 4,142 913 922 5.055 5.213 Internal Security : This provides for loyalty investigations and intelligence and security services for the Government and the Company. For 1980, these services will be performed by the Commission as a part of its Security and Protection Services function. Total accrued and net costs. Internal Security ither (ivil Affairs : This includes licensing, civil defense activities, and supervision of the civil functions program. The major portion of the licensing function will transfer to Panama in 1980. The remaining functions will be absorbed by the Commission: Civil Affairs Director's office License functions Civil defense Youth activities program Total funded costs Depreciation Total accrued costs Recoveries Net cost, other Civil Affairs 496 491 - 287 327 - 67 65 - 98 94 977 - 948 . 11 10 987 - 959 914 915 - 79 Canal Zone Government Detail of Accrued Costs by Activity HEALTH AND SANITATION Hospitals and clinics : Two general med- ical and surgical hospitals, with out- patient clinics, are maintained and operated to furnish medical care to eligible civilian and military person- nel. A neuropsychiatric and domiciliary hospital and a leprosarium also are operated and maintained. The hospitals and clinics will be operated by Depart- ment of Defense in 1980 and the leprosarium will become the responsibility of Panama. A residual responsibility for certain public health services, presently a part of the Other Public Health Services function, will be accomplished by the Commission in its Industrial Health and Sanitation function. General Hospitals : Patient services Dietetics Logistical support Education and training Pharmacy & other non-hospital costs Supervision and general expenses Total funded costs Depreciation Total accrued costs Recoveries Net cost or income(-), general hospitals. Canal Zone Mental Health Center : Patient services Dietetics T.ogistical support • •> i\i!i(Mi and eoneral expense Total funded coses Depreciation Total accrued costs Recoveries Net cost or income(-), C.Z. Mental Health Center Palo Seco Hospital : Patient services Dietetics Logistical support Supervision and general expenses Total funded costs Depreciation Total accrued costs Recoveries Net cost, Palo Seco Hospital 1978 1979 1980 Actual Estimate Estimate (Dollars in thoi. sands) 14,518 16,214 1,023 1,251 3,840 4,255 954 1,076 549 491 1,804 2.061 25,348 22,688 587 645 25,993 23,275 26.085 29,443 -3,450 -2.810 2,499 2,598 309 331 371 412 271 259 3,600 3,450 41 59 3,659 3,492 3,932 4,108 -449 -441 ' 208 228 113 133 114 126 50 45 532 485 6 U 536 490 _ 480 525 - 80 Canal Zone Government Detail of Accrued Costs by Activity 1978-1979 1978 1979 1980 HEALTH AND SANITATION Actual Estimate Estimate (Dollars in thousands) Hospitals and clinics sumnary : Funded costs 26,624 29,480 Depreciation 633 708 - Total accrued costs 27,257 30,188 Recoveries 30.497 34,076 Net cost or income (-), hospitals and clinics -3.240 -3,888 Other public health services : This provides for community wide public health services, a social welfare program, sanitation and quarantine work in the Canal Zone and for ships calling at its ports and transiting the Canal, inspection of food processing establishments, and facilities for animal care and quarantine. For 1980, this program, reduced in scope, will be accomplished by the Commission in its Industrial Health and Sanitation function: Health director's office Sanitation Preventive medicine and community health service (incl. Dental & Mort.) Vf^terinary services Garbage collection Cemeteries Total funded costs Depreciation Total accrued costs Recoveries Net cost, other public health services... 416 469 1,151 1,275 1,624 1,822 596 694 333 372 235 259 4.891 4,356 19 18 4,909 4,375 803 863 4,046 3.572 . 11 81 Canal Zone Government Detail of Accrued Costs by Activity GENERAL GOVERNMENT EXPENSES Office of the Governor : This provides for the executive direction of all Canal Zone Government activities and includes the expenses of the office of the Governor and his residence, the office of the Executive Secretary, and provision for certain contingencies. All costs of the office of the Governor which pertain in 1980 are included in the Executive Direction function of the Commission: 1978 1979 1980 Actual Estimate Estimate (Dollars In thousands) Governor ' s office Contingencies of the Governor Official residence operations and maint ... Costs of conducting hearings on the Isthmus Total accrued and net cost. Office of the Governor Disinterment and Reinterment : Provides for the exhumation and reinterment of U. S. citizen remains buried in cemeteries coming under the jurisdiction of Panama under the Treaty. 235 296 - 5 30 - 45 58 - . 2 386 - 285 Funded and accrued costs Other general government expenses : This includes the costs of recruitment and repatriation and employees' home leave travel, aid to indigents, payments to certain former employees and other general charges. Those costs which will conti- nue with the Commission in 1980 are shown in the corresponding accounts in the General Corporate expense category. Employment costs : Employees' states travel Recruitment and repatriation Transportation of employees' vehicles .. Health benefits contribution Employer's contribution to FEGLI Death and disability compensation PICA tax Other general government costs : Buildings and sites Alien cash relief payments to former employees Alien cash relief payments to widows of former employees Miscellaneous expenses and credit net .. Total funded costs Depreciation Total accrued costs Recoveries 640 884 756 874 104 325 1,268 1,488 221 195 252 296 123 151 830 962 80 75 37 497 4,808 331 5,139 (4.783) 5,314 227 5,541 (4.847 ) Net cost other general government expenses. 9,922 82 Canal Zone Government Detail of Accrued Costs by Activity 1978-1979 1978 1979 1980 CANAL ZONE GOVERNMENT SUMMARY Actual Estimate Estimate Funded costs Depreciation Total accrued costs Recoveries from services Anticipated recovery from appropriation for disinterments and interments (Dollars 81,354 2,754 in thousands) 90,486 2,743 84,108 60,768 93,229 65,344 Total recoveries 60,768 Net cost Canal Zone Government 23,340 83 CANAL ZONE GOVERNMENT CAPITAL OUTLAY No appropriation is requested for 1980, since the Canal Zone Government will cease to exist as of September 30, 1979. The 1979 capital outlay appropriation for the Canal Zone Government provides for the acquisition by purchase, construction, or otherwise of capital assets required for operation of the Canal Zone Government. For 1979, the appropriation includes improvements and replacements to educational facilities and municipal systems; improvements to roads and streets; ImprovementE and rehabilitation of health facilities that provide for the correction of structural deficiencies at Gorgas Hospital; improvements and replacements to police and fire facilities; and addition and replacement of obsolete and worn-out equipment. Under the terms of the Panama Canal Treaty of 1977, certain of these Canal Zone Government programs will be assumed by the Panama Canal Coomission, and others by the Department of Defense. Related fund balances at year-end 1979, if any, will transfer to the acquiring agency. 84 CANAL ZONE GOVERNMENT CAPITAL OUTLAY SCHEDULE OF CAPITAL PROJECTS (In thousands of dollars) Obligations Actual Project thru 1978 1979 1980 Total 1977 Actual Estimate Estimate Subse- quent years CIVIL FUNCTIONS Replace and add equipment,. 2,206 Education: Improvements and replace- ments to educational facilities 1,537 Public Areas and Facilities: Additions and replace- ments to municipal systems 972 Road and street replace- ments 1,308 Community Recreational facilities 185 Other Civil Functions: Improvements and replace- ments to other civil functions 1 ,048 Total Civil Functions.. 7,256 HEALTH AND SANITATION Replace and add equipment.. Hospitals and clinics: Improvemei.*-s and rehabil- itation to health facilities Total Health and Sanitation 1,543 497 317 158 896 210 202 138 40 7 3,548 2,430 6,067 4,980 J_41P_ 55 1,165 561 Cl'Ni;in»iT--iii t i» SB rhe rolls as enployeeE of the Panama Cant! ConnniBBion, and the caK£ nf ^^»«^-T - Bexvaxes will be fully recovered frnr. the Paname Government, de <«iT1 yt-MT xai flndk a»»»r ^yramf^ to be requested by Panama is not determinable at this t-r»g Accncdli^y, s provisiDnal aacwmT of 56. 7 nilliDn is inclndfid to meet 14. 2b ■rt'* ■ wffy sf csiBEiaita£ing t±ie transfer of facilltieE to Panama Bad 2te le yaif ent nf Defense, nesr ?"ri better understandings of the CaamiEsiot ' e 1 1 ■|ii«ii ^*mTi"i*»»: and «i"i-i«>« come tc li^t. These ne» interpretationE and asBumptions Imne is aome instances involved significant changes to the est i ma tee of costE and xewenues >•■■■? iiii»|i|' in rhs President's Budget, l^iose changes and reviEions < s 8 O ►J Z < O H •a M M c CO Cl< CO S3 CO 3 ig 4J o< c .J M < w o w ex c |m u c CO § o c [14 c u CO (^ o E CO u M O W P< 3 § O O o § VO r-i r^ OO "^ t» 00 m rH CMI vT) 00 r^ o o> m O r-l CSI n 00 ^\ CSI C C O. . ij o •-" c w ^- en u CD 3 (U •u >, C en vO O O § > D 41 OS t^ < CO >, C CO -H •O >^ C k. «) C ad u en o ■rH O C u CO < :0 .-I O P3 D. U O CD C 60 O u o -^ w CO J3 O CO E -H O-i 4-1 CD ID > O (J 01 a. o 4J a 00 -H a-" O iJ 00 -r4 a o .-I CO D »o CO o o vO o o o 00 ^ c c SC (U o a E -H w a c u > e w to M O 0) 60 ►4 o > -H U O --I O .-I o ^ § C 4) ° x Pu tj i« c o > o > -o o a H o m c o c -. J3 1-. JD (Xi o o o -a "o »j •W ..-I OJ ,.-( —( CB O O O O O O to XI J3 J3 c o "O T3 -a IfiO o. «■ go 8^ O O O -' -J 00 3 T3 ^ a> cr c OS a. ^ 5§ CD « 3 —I O O. S 8 S 161 PANAMA CANAL COMMISSION FUND. 1980 Program and Performance The Panama Canal Treaty of 1977 designates the Panama Canal Commission as the successor agency to the Panama Canal Company and Canal Zone Government. Legislation is being proposed to establish the Panama Canal Commission as an appropriated fund agency. The primary purpose of the Panama Canal Commission will be to operate and maintain the interoceanic waterway. The Commission is expected to be financially self-sufficient in its operations and to make pay- ments to the Republic of Panama as specified in the Treaty of 1977. The following budget programs reflect operations of the Panama Canal Commission for the full fiscal year, 1980. 1. Transit Operations . The services performed by this activity are: Current Estimate (Dollars in thousands) Maintenance of channels and harbors $ 36 , 361 Navigation service and control 52 ,77A Lock operations 36 , 992 General repairs, engineering, and maintenance services 35,071 Security and protection services 17,281 Industrial health and sanitation 2,595 Public service payments to Panama 10,000 Annuity payments to Panama 63,220 General canal expense ." 23,356 Total operating costs 277,650 Less Intra-agency recoveries -41.121 Net operating costs 236,529 Annuity payments to Panama are for certain public services to be provided by Panama, a fixed annuity of $10 million, and an annuity based on net tonnage of vessels transiting the canal. These payments are prescribed in paragraph 5 of Article III and paragraph 4(a) and 4(b) of Article XIII of the Panama Canal Treaty of 1977. Vessel traffic volume and other indices of workload are as follows: Current Estimate Ship transits (over 300 net Panama Canal tons) 13,310 Tolls (with a rate increase of $79,290) $300,290 Capital obligations for 1980 include the following major projects: $5.0 million for channel improvements; $4.3 million for additional locks towing locomotives; $3.9 million to replace dump scows; $3.5 million to add a tug boat; $2.4 million to provide for the renovation of certain facilities to relocate activities of the Commission displaced from facilities transferred to the Government of Panama under the 1977 Treaty; and $2.0 million to construct launch repair facilities. 162 2. Supporting services . The services performed by these support activities are: Current Estimate (Dollars In Thousands) Supply and logistical services $ Al , 721 Utilities 38,816 Other supporting services 15 , 404 Total operating costs 95 , 941 Less Intra-agency recoveries -46,663 Net operating costs 49,278 Capital obllr^atlons for fiscal year 1980 Include the following major projects; $0.5 million for motor vehicle additions and replacements; $0.4 million for minor improvements to quarters; $0.4 million for improvements to communication facili- ties - Phase II; $0.3 million for water system Improvements; and $0.3 million to reroof employees quarters. 3. Administrative and general expense . This category includes the overall direction and administrative expenses of the commission; the costs of the employee health benefits program; early retirement costs; the annuitant welfare program; death and disability payments; and the cost of health and education services provided to commission employees and dependents at Department of Defense facilities. Also included is the interest payment to the U. S. Treasury on the investment of the Government in the Canal. The interest payment is not included In the appropriation request, but is a component of the toll rate and is paid into the Treasury from tolls received from transiting vessels. It is the Agency's understanding of Section 413 of HR 111 that the interest payments will serve to reduce the investment of the Government in the Canal and thus the interest cost over a period of years. 4. Financing . Under proposed implementing legislation, the Commission will be authorized to seek appropriations for its capital needs, operating ex- penses, and for those debts and obligations of the Panama Canal Company and Canal Zone Government outstanding at year-end 19 /'9. In addition, the Treasury will maintain a Panama Canal Emergency Fund of $40 million in 1980 from which the Commission may make withdrawals for those purposes authorized by law. 5. Operating results . In 1980 it is proposed to recover all costs and obtain $5.0 million for capital requirements in excess of depreciation expense through a toll rate increase yielding $79.3 million. This additional tolls Income requirement represents an increase of 35.9% in tolls revenue without giving consideration to tolls sensitivity. 163 Revenue and Expense Transit operations: Revenue Expense Net operating Income, transit operations ... Supporting activities operations: Revenue Expense Net operating income, or loss(-) supporting activities operations Administrative and general expenses: Revenue Interest Other Administrative and general expense, net .... Capital surcharge collected in tolls Current Estimate (Dollars in thousands) $344,050 236.529* 107.521 44,922 49^278 -4.356 468 20,854 77.796 98.182 4.983 * Reimbursements of $7,000 for capital expenditures has been netted against expenses. 164 PANAMA CANAL COMMISSION FUND, 1980 Statement of Financial Condition (Dollars in thousands) ASSETS Fund balance with Treasury and In banks Accounts receivable, net Inventories: Materials and supplies Less: Allowance for obsolete and excess Inventories Inventories , net Prepayments ^ Properties, plant and equipment, net Other assets: Deferred charges: Relief payments to former employees and widows Marine traffic control development Dredge Pipe Other Total other assets Total assets Current Estimate $ 54,877 9,637 23,748 (341 ) 23,407 724 469,012 9,298 155 1,311 408 11,172 LIABILITIES, RESERVES. AND EQUITY Liabilities : Accounts payable: U.S. Government agencies Other Total Accrued Liabilities: Salaries and wages Claims to damages to vessels Other Total Total accounts payable and accrued liabilities Long-term liabilities (unfunded) : Unfunded leave liability - Commission Unfunded repatriation liability - Commission . Relief payments to former employees and widow Total long-term liabilities (unfunded) Total liabilities Reserves : Special C. Z. Government costs Canal locks overhaul Casualty losses Marine atcidents ; Total reserves 7,963 7.137 15,100 2,853 9,469 3,659 15,981 31.081 31,012 8.826 9.298 49.136 80.217 6,293 5,091 819 1.273 13,476 165 PANAMA CANAL COMMISSION FUND, 1980 Statement of Financial Condition (Dollars in thousands) Current Estimate Government equity : Unexpended budget authority Unobligated balance - Capital $ 2,000 Undelivered orders: Operations 11,429 Capital outlay 10 , 367 Accounts receivable due U.S. Treasury 9,637 Invested capital 441,703 Total Government Equity 475,136 Total Liabilities, Reserves and Equity 568,829 166 Tolls Current Estimate (Dollars in thousands) rclal traffic: Ocean-going $220,010 Small craft 65 Total connnerclal tolls 220.075 U.S. Government traffic: Ocean-going 915 Small craft 10 Total U.S. Government tolls credits 925 Provision for toll rate increase in FY 1980 79.290 Total tolls and tolls credits 300.290 Number of Transits Commercial traffic: Ocean-going Small craft _ Total commercial United States Government traffic: Ocean-going Small craft Total U . S . Government Total revenue transits Free transits, not Included: Ocean-going Small craft Total free transits Total number of transits Other Data Average number of ocean-going commercial vessels per day 36 , 2 Total Panama Canal net tons transiting (in thousands) 177,400 Canal Traffic Highlights The traffic patterns which began developing In the latter part of fiscal year 1978 are projected to continue through fiscal year 1980. The estimates for fiscal year 1980 Indicate moderate growth In basic canal traffic (all traffic excluding Alaska oil movements), combined with a movement of Alaska oil that is anticipated to generate approximately $20.0 million in tolls revenue and 675 ocean-going transits. The estimate of Alaska oil moving through the Canal is based on the assumption that neither an arrangement to exchange the oil with Japan nor utilization of pipelines will Interfere with the flow of oil. 13 ,210 775 13 ,985 100 180 280 14 ,265 45 45 14 .310 167 Transit Operations Maintenance of Channels and Harbors Current Estimate (Dollars In thousands) Operating Expenses ; Suction and dipper dredging operations $ 6,130 Other floating equipment operations 3,301 Coredrill operations 1,586 Meteorological and hydrographic 2,231 Maintenance repairs and overhaul services 4,168 Supervision and general operations 2,409 Other 7 , 219 Depreciation and nonf und expense 9,317 Gross operating expenses 36,361 Interdivlsional sales and services 893 Net operating expenses 35,468 Revenue : (Sales of Service) " 18 Reimbursements for work performed on capital projects 5,000 The basic purpose of this function is to maintain proper navigation depth in the channel and terminal ports. In addition, meteorological, hydrographic and seismologic conditions are observed and studied. This function also includes the operation and maintenance of a wide range of equipment and facilities such as lights, beacons, buoys and other navigation aids, the dams and spillways, and Other earth works and structures adjacent to the waterway. The Treaty will have no significant impact on the operations of this activity in fiscal year 1980. Navigation Service and Control Current Estimate - (Dollars in thousands) Operating Expenses ; Transit and port pilotage $ 14,721 General port operations 1,206 Vessel control, admeasurement and dispatch ' 4,375 Handling ships' lines 10,547 Tug and launch operations 18,407 Supervision and general operations 2,392 Depreciation and nonf und expense 1,126 Gross operating expenses 52,774 Interdivlsional sales and services 101 Net operating expenses 52,673 Revenue; Harbor pilotage 1,610 Handling ship's lines 12,902 Tug and launch services 18 , 884 Wharfage, moorings, right of basin and misc 75 Total revenue 33,471 The Navigation Division under the Panama Canal Commission is responsible for the transiting of vessels through the canal, docking vessels, and providing 168 Transit Operations Navigation Service and Control (Cont'd ) related services such as tug and launch service, boarding and admeasuring ser- vices, traffic control, and linehandllng services. The general prohibition against all commercial services contained in the new Treaty will eventually eliminate all commercial launch services and miscellaneous wharfage mooring services provided by the Panama Canal Company. However, Panama has asked that the Commission continue to provide harbor tug services in 1980 on a reimbur- sable basis until they can arrange for alternate services. With this exception, operations in the Navigation Service and Control activity remain largely unchanged . Canal Transits (numbers of vessels); Current Estimate Over 300 PC net tons: Commercial U. S. Government .. Free Small craft 13,210 100 1,000 Locks Operations Current Estimate Operating Expenses ; Lockage operations Locks maintenance and repair Administration, supervision, and general operations Accrual for locks overhauls, nonfund .... Depreciation and other nonfund expense . . Gross operating expenses Interdivisional sales and services Net operating expenses Revenue : (Dollars in thousands) $ 9,939 19,402 3,041 2,727 1,883 36,992 2,172 34,820 This activity is responsible for the direct supervision," operation and maintenance of the locks and appurtenances, including periodic major overhauls of the underwater portions of the locks. The Locks Operations will continue under the new Treaty without change in scope or mission. (^neral Repair, Engineering and Maintenance Services Current Estimate Operating Expenses : General maintenance Vessel repair services Electrical services Engineering services Contract and Inspection services General laboratory services (Dollars in thousands) $ 12,613 12,051 4,863 3,813 838 377 169 Transit Operations General Repair, Engineering and Maintenance Services (Cont'd ) Current Estimate Operating Expenses (Cont'd): (Dollars In thousands) Depreciation and other nonfund $ 516 Gross operating expenses 35 ,071 Interdivisional sales and services 30.954 Net operating expenses 4,117 Revenue ; (Sales of Services : Reimbursements : For work, performed on capital projects This activity provides the wide range of maintenance and repair work on structures, floating equipment, and shop and construction equipment necessary to the safe and efficient operation of the total canal enterprise. Also included here are those related engineering services such as surveys, preparation of designs, cost estimates and specifications for work, and the general supervision and administration of constructiom and demolition work performed by private contracting firms. The estimates for this activity in 1980 reflect those changes associated with the Treaty requirement to cease all commercial activities. Workload Data Current Estimate Work for account of Panama Canal Commission and (Dollars in millions) other organizations: General services $ 14.5 Vessel repair services 12.2 Electrical services 4.8 Engineering services 3.6 Contract and inspection services .7 Security and Protection Services Current Estimate Operating Expenses ; (Dollars in thousands) Police protection $ 9 , 288 Fire protection 3,546 Canal protection force 2,795 Industrial security services 414 Emergency preparedness 95 Supervision and general 938 Depreciation 20 5 Gross 'operating expenses • 17,281 Revenue : 2.382 This activity provides for police and fire protection services within the Commission operating and housing areas; industrial security services; emergency preparedness; and the operation of detention centers and a prison. 49-653 0-79-12 170 Transit Operations Industrial Health and Sanitation Current Estimate Operating Expenses : (Dollars in thousands) Industrial health service $ 1,151 Zoonotic disease control 103 Sanitation 1,335 Depreciation 6 Gross operating expenses 2,595 Revenue : 8 Industrial Health and Sanitation activities include functional and professional supervision of Industrial first aid stations and on-the-job injuries; the coordination and review of physical examinations of Commission employees; prevention of occupational disease and injuries; and related industrial health services. Also included here are sanitation programs for control of disease vectors, maintenance of sanitation. standards In Commission operating and housing areas, and zoonotic disease control and food inspection programs . General Canal Expense Current Estimate Operating Expenses : (Dollars in thousands) National Policy Costs: Payments lo Panama for public services $ 10,000 Fixed annuity payment to Panama 10,000 Panama Canal net tons transited payment to Panama 53,220 Technical assistance to Panama 6,678 Cost of health services provided by DOD 3,667 Board of Local Inspectors 401 Miraf lores Swingbridge maintenance 82 Special canal studies, traffic, and capacity studies 50 Central launch repair and marine salvage 370 Accrual for casualty losses and damages to vessels 6,200 Other miscellaneous canal expense 851 Functions formerly provided by Canal Zone Government: Customs liaison unit 418 Maintenance of public areas 2,175 Treaty implementation costs: Relocation of offices and facilities 1,061 Boundary surveys , updating maps Retail stores closeout costs 495 Addititsnal costs for printing of forms and regulations 89 171 Transit Operations General Canal Expense (Cont'd ) Current Estimate Operating Expenses (Cont'd): (Dollars In thousands) Provision for reproduction of drawings of facilities turned over to Panama $ 59 Marine terminals closeout costs 102 Depreciation and other nonf und expense 658 Gross operating expenses 96,576 Interdivlslonal sales and services 1 Net operating expense 96,575 Revenue 6,678 This category of expense comprises the annuity and public services to Panama; the cost of health services to certain elderly and disabled former employees and their dependents; a provision for casualty losses and damages to vessels; and a number of one time costs associated with the implementation of the Treaty. 172 SUPPLY AM) LOGISTICAL SER\TCES Supply Services Current Estljtate (Dollars in thousands) Revenue: Sale of goods ^ 193 Sale of services 41^ Total revenue 23^ Operating Expenses ; Cost of goods 13,620 Warehouse operations 2 ,062 Procurement operations 847 Scrap and salvage operations 135 Excess property, liquid fuel, and office furniture operations 433 Management and general operations 1 , 349 Depreciation and other nonfund 352 Gross operating expenses 18,798 Interdivlsional sales and services 1A.033 Net operating expenses 4^765 Operating margin or cost (-) -4^53 1 This activity is con^jrlsed of the storehouse operations and provides for the purchasing, warehousing, and issuing of supplies and materials required bv Coinmis- sion units. Current Estimate Storehouse services Receipts (line items) ... Issues (line items) Sales (line items) Tons of metal classified 32,000 280,000 45,000 1,500 Motor Transportation Current Estimate Revenue ; (Sales of Services) Operating Expenses ; Motor, vehicle operations Repair shops Administrative and general expense . . . . Depreciaeion and other nonfund expense Gross operating expenses Interdivlsional sales and services . Net operating expenses Operating margin or cost (-) 4,839 1,936 432 65A 7,861 7.852 1 173 SUPPLY AND LOGISTICS SERVICES Motor Transportation (Cont'd ) This activity operates and maintains motor transportation facilities and repairs construction, material handling, fire fighting, police and grounds maintenance vehicular equipment of the Commission. In addition, the repair shops operated on both sides of the Isthmus provide miscellaneous repair services to other units of the Commission. The major Impact of the Treaty on th^s activity is the reduction in workload associated with discontinued governmental activities, and elimination of repair services to private Individuals, Workload Data Current Estimate Number of passenger-carrying vehicles (net fleet at year-end) 90 Numbfer of trucks, trailers, and other vehicles 619 Mileage, all vehicles except trailers (in thousands) 6,992 Water Transportation Current Estimate (Dollars in thousands) Revenue: (Sales of Services) $ 6,900 Operating Expenses : Funded costs 14 , 99A Depreciation 68 Gross operating expenses 15,062 Interdivlsional sales and services 8,162 Net operating expenses 6,900 Operating margin or cost (-) ^ The Water Transportation activity operates the SS CRISTOBAL, a vessel of 10,000 gross tons, between New Orleans, Louisiana, and Cristobal, Canal Zone. It is planned that 25 round trip voyages will be made annually. The vessel la an essential adjunct to the operation and maintenance of the Panama Canal. It provides necessary cargo transportation service between the United States and the Isthmus for the Panama Canal Commission and its employees, as well as other U. S. agencies located in the Canal Zone. Workload Data Current Estimate Tons of cargo shipped (in thousands) 147 Number of passengers transported 550 13 174 UTILITIES Power System Current Estimate (Dollars in thousands) Revenue : (Sales of Services) $ 23,105 Operating Expenses ; Power generation 22 ,071 Power transmission and distribution 2,626 Supervision and general operations 1,232 Depreciation 1.392 Gross operating expenses 27,321 Interdivisional sales and services 4,716 Net operating expenses 22,605 Operating margin or cost (-) 500 The Power System operates and maintains generating stations, transmission lines, substations, and distribution systems to furnish electric power throughout the Canal area. Power is also purchased to augment the- system's generating capacity. During periods when there is an adequate supply of water in Gatun and Madden Lakes, maximum possible power is supplied from Commission hydroelectric and steam sources. Additional load variations up to peak demands are supplied from gas turbines and purchased power which also substitutes for base load units requiring emergency or planned maintenance. During the dry season, Gatun hydroelectric generation is curtailed to conserve water for transits and the energy is supplied from the most economical available source. Workload Data Current Estimate Total power sold, including distribution to Panama Canal activities KWH (millions) 603 Canal Area peak, MW 101 Generating stations operated: Hydroelectric 2 Gas turbine 1 Steam and gas turbine 1 Substations remote controlled ' 6 Miles of transmission lines 101 . 5 Communications System Current Estimate (Dollars in thousands) Revenue ; (Sales of Services) 1,726 Operating Expenses: Central office equipment 663 Telephone systems operations 850 Electronics operation 1,816 Microwave system 84 Supervision and general 1,277 Depreciation and nonfund 469 Gross operating expenses 5,159 Interdivisional sales and services 3,379 Net operating expenses 1,780 Operating margin or cost (-) , -54 ^ 175 Communications System (Cont'd) The Communications Branch provides full scope telecommunications and electronics services for the Panama Canal Commission, including engineering design and specifications of systems; procurement, installation, and maintenance of facilities and equipment; and, where appropriate, operation of systems, such as telephone, microwave, radio paging, data transmission, and other communica- Cions systems throughout the Canal areas. The Commission will continue to provide communications services under the new Treaty. Workload Data Current Estimate Telephone exchanges 5 Microwave channels 580 Trunk lines 58 Telephone instruments 10 , 700 UTILITIES Water System Current Estimate (Dollars in thousands) Revenue : (Sales of Services) Operating Expenses : Pumping operations Filtering operations Reservoir and water line maintenance Miscellaneous operations and maintenance Supervision and general operations Depreciation Gross operating expenses Interdlvisional sales and services Net operating expenses Operating margin or cost (-) The Water System consists of two principal units, one serving the Pacific side of the Isthmus, including Panama City, and the other serving the Atlantic side, including the city of Colon. Raw water Is pumped to filtration plants where it is filtered, treated, and then distributed to Canal and military operating areas and Panama. Central Air Conditioning Service Current Estimate Revenue: (Sales of Services) 1,251 Operating E^tpenses : Operation and maintenance 1,251 Depreciation 99 Gross operating expenses 1,350 Interdlvisional sales and services 297 Net operating expenses 1,053 Operating margin or cost (-) 198 IS 176 Central Air Conditioning Service (Cont'd ) This operation consists of a chilled water pumping and cooling plant In the Balboa area which chills and distributes water to users by means of Insulated pipes. Two loops of insulated pipes are used, one carrying chilled water to the buildings in the Ancon area and the second serving the Balboa area. The buildings served provide the necessary air distribution systems, heat exchange equipment, and humidity controls. The Commission will continue to operate this service under the Treaty including, on a reimbursable basis, the provision of air conditioning service for connected buildings transferred to Panama and other governmental agencies. Workload Data Current Estimate (Tons of air conditioning) Connected tons at year-end 3, 850 OTHER SUPPORTING SERVICES Housing Current Estimate (Dollars in Thousands) Revenue ; (Rentals) $ 5,449 Operating Expenses ; Quarters operation 1,132 Quarters mai'-tenance 3,424 Supervision and general operations 858 Depreciation and other nonfund expense 835 Gross operating expenses 6,249 Interdivisional sales and services 190 Net operating expenses 6,05 9 Operating margin or cost (-) -610 The revenue and expenses shown represent the rental income and operation and maintenance costs associated with providing living quarters in the Canal operating areas for employees of the Panama Canal Commission, and to certain other individuals eligible for quarters. Rental rates are established on a comparability basis. Workload Data Current Estimate Apartments In Inventory 3127 Occupied Apartments 2 956 Bachelor Rooms in Inventory 98 Bachelor Rooms Occupied 20 177 OTHER SUPPORTING SERVICES (Cont'd) Grounds, Custodial and Other Services Current Estimate (Dollars in Thousands) Revenue: (Sales of Services) Grounds maintenance $ 439 All others 170 Total revenue 609 Operating Expenses : Youth activities 164 Swimming pools 584 Other recreational facilities ^85 Care of grounds 3,711 Garbage and trash disposal 310 Custodial and community services 2,630 Agency press and duplicating service 1,356 Depreciation and other nonf und 215 Gross operating expenses 9,155 InterdivLslonal sales and services 7,578 Net operating expenses 1,577 Operating margin or cost (-) -'ibii This activity provides for the care of grounds and the disposal of trash and garbage. Custodial services are provided for the various buildings and offices of the Commission. Additional services are also provided such as operation, maintenance and rental of garage stalls; storage and issue of furniture items for rental to quarters occupants and pickup, delivery and moving van services. Agency press and duplicating service activity Is a Government field printing plant authorized under regulations of the Joint Committee on Printing. It provides press, duplicating, and related services. The costs fo^ the youth activities program and operation and maintenance of swimming pools and other recreational facilities, previously a governmental responsibility, are provided for in this activity. ADMINISTRATIVE AND GENERAL EXPENSES Executive Direction Current Estimate Director's expenses $ 79 Administrator's office and staff 3,458 Secretary's office, Washington, D. C 192 Panama Canal Information Office 795 Tour guide, launch, and reception service 230 Consultants and advisors 427 Official Residence of Administrator 64 Total executive direction 5,245 -17 178 ACMINISTRATIVE AND GENERAL EXPENSES (Cont ' d ) Executive Direction (Cont'd ) This function is comprised of: The Board of Directors, whose members are paid per diem and travel expenses for meetings and time spent on special services of the Commission, the Office of the Administrator, with an executive planning staff and legal office; the Secretary's office in Washington, respon- sible for liaison with the Congress and Federal Government departments and agencies; the Panama Canal Information Office, responsible for public relations activities, press and news releases and the publication of the Panama Canal Review and a weekly newspaper in English and Spanish; the guide and reception service which provides tours for visitors to the Canal area; and a provision for consultants for special studies. Canal improvements, and organizational studies. Operation and maintenance of the Commission Administrator's residence is included here. Legislation implementing the Panama Canal Treaty of 1977 provides that an ombudsman be established, and the expenses therefore are included in the Administrator's office and staff. The Coordinating Committee expenses are also shown here. Operations Direction Current Estimate (Dollars in Thousands) Marine Director's office Engineering and Construction Director's office Health and Safety Chief's office General Service Director's office General and special engineering service Total, operaf'ons direction .; 397 917 436 910 902 3,562 This function comprises the offices of bureau heads responsible for directing the non-administrative operations of the Commission. Also Included are varying needs for general and special engineering services, such as pre- liminary designs and estimates for development of capital programs and studies relating to use and alterations of existing facilities when functional changes are proposed. Financial Management Current Estimate Total financial management 10j753 The Financial Management activity covers the Financial Vice President's Office and staff, and the cost of the annual audit of the Commission by the General Accounting Office. Estimates for the Financial Vice President's office and staff cover the cost of development of accounting, financial, and rate-making policies; the issuance of accounting procedures; the maintenance of the general books of account; the preparation of payrolls and maintenance of records relating thereto; the preparation of the overall financial statements and reports; establishment of systems of internal control and conduct of comprehensive internal audits; audit and settlement of all claims and demands by or against the Commission; collection, custody, and disbursement of funds; budget programming, administration, super- vision, and coordination; and responsibility for manpower control and cost control. 18 179 ADM INISTRATIVE AND GENERAL EXPENSES (Cont 'd) Personnel Administration Current Estimate (Dollars in Thousands) Total personnel administration -. 3,879 Included herein are costs of administering the personnel functions of the Panama Canal Commission, training and executive development programs conducted by the Personnel Bureau, and the operation of an industrial training school for apprentices and other employees who benefit from advanced technical training. Also Included is administration of the incentive awards program. General Services Current Estimate Administrative Services Division 3,065 Public services 80 Company buildings 2,930 Contingencies of the Administrator, Panama Canal 25 General Services 6.100 Included in this function are general services performed for the Panama Canal such as records management and forms control; messenger service; the preparation of various permits, authorizations and other documents, including issuance of travel and transportation orders for official travel; operation and maintenance of office buildings; photographic services; microfilming; certain duplicating work utilizing of flee- type duplicators, photocopying machines and related equipment; participation of the Panama Canal Information Office in public affairs observances and ceremonies; and a contingency provision for disbursements specifically approved by the Administrator of the Commission. Employment Costs Current Estimate Employees' States travel 1,522 Apprentice training program 1,A95 Employer's contribution to FEGLI A70 Incentive award payments 150 nCA 130 Total emplojnnent costs 3,767 Included in this activity are certain employment costs of the Commission which are general in nature and not identifiable with other specific activities. The estimates Include provision for employee states travel, certain other Statutory costs, and payments of awards in the Incentive awards program. This activity also covers a long-range training program designed to facilitate local recruitment for administrative, management, and craft positions. The program is administered and supervised by the present personnel administration staff. 19 180 ADMINISTRATIVE AND. GENERAL EXPENSES (Cont ' d ) Interest Payments to the United States Treasury The Interest rate for 1980 Is to be determined by the Secretary of the Treasury based upon average market yields in the month preceding the beginning of the fiscal year. The average interest-bearing investment, the annual interest rate, and the interest are shown below: Average Interest-bearing Investment (In millions) 203,445 Interest Rate X 10.25 (In Thousands) $20,854 Current Estimate (Dollars in Thousands) Operating Expenses ; Death and disability (Federal Enployees Compensation Act) , Federal Employees Health Benefit Act . contributions Alien cash relief payments to former employees and their widows Severance pay Annuitant welfare program ... J Joint personnel program Extraordinary repairs to buildings and sites and official moves Amortization of the cost for early retirement .... Panama Social Security payments Excess facility expense Recruitment and repatriation expense Transportation of employee vehicles Mail and postal services: Pro rata share of Military Postal Service costs. Provision for indicia postage requirements Directory unit and mail forwarding costs Community library Probation and parole costs Judicial system All other funded costs, net Reimbursement to DOD for education and hospital services Amortization of recoveries of accounts receivable Repatriation expense variation (nonfund) Depreciation and other nonfund expense Gross operating expenses Interdivisional sales and services Other general corporate, net Revenue $ 1,568 5,147 1,579 50 308 476 627 16,700 715 281 4,443 859 453 150 304 581 199 427 105 12,388 -1,733 -1,076 594 45,145 655 44.490 468 20 181 ACMINISTRATIVE AND GENERAL EXPENSES This activity Is charged with certain general expenses not assignable to other activities. Death and disability payments are shown here, as are the Commission's share of premium costs for employee health benefits insurance. Alien cash relief estimates reflect the effect of Public Law 91-335 which provides widows benefits and for periodic cost of living adjustments similar to those given Civil Service retirees. The annuitant welfare program comprises a small group of doctors and nurses who make home visits to aged former employees and their survivors who have meager Income. The Joint Personnel Program, which requires the direct employment of personnel, includes the functions of a Civilian Personnel Policy Board and a Central Employment Office, which operates under direction of the Policy Board. Costs of this program are fully recovered from participating agencies. The Commission costs for amortization of the expense for the liberalized retirement provision of the Treaty implementing legislation are included here. The provision for social security payments to Panama represents payments on behalf of those employees covered under the Panamanian social security system. Reimbursement to Department of Defense represents the Commission's expense for hospital and education services provided to eligible Commission employees and dependents including scholarship to the local junior college. Also included are the expenses for postal services, a community library, the judicial system including probation and parole activities, and the costs for recruitment, repatriation and transportation of employee vehicles. The amortization of recovery of receivables represents the first of five annual credits for outstanding accounts previously written off as uncollectable which are expected to be recovered from the Republic of Panama. 21 182 PANAMA CANAL COMPANY CAPITAL CUTLAY THRU 1979 PANAMA CANAL COMMISSION CAPITAL OUTLAY 1980 AND BEYOND SCHEDULE OF CAPITAL PROJECTS (In thousands of dollars) AcLual Project Thru 1978 Total 1977 Actual Transit Projects : Channel improvements... 20,939 4,259 5,266 Procure additional towing locomotives... 19,010 7,232 207 Replace dump scows 12,119 9 Replace and add tug- boats 29,882 4,811 69 Relocation costs - Canal Support Operations .. 12,730 Construct launch repair facilities-Mt. Hope . 2,000 Replace and add equip- ment transit 6,358 2,019 1,021 Replace launches and launch engines 5,347 1,203 1,601 Miscellaneous improve- ments to transit facilities 725 - 140 Improve wingwall-knuckle tendering system-All locks 2,821 398 157 Construct locomotive crane repair pits- All locks 130 Chamber lighting-All locks 2,720 - 388 Replace major buoys ... 200 Other transit operatio.n projects: a. Repower Dredge MINDI 5,674 1,880 1,529 b. Con iruct con- ctete apron- Miraflores .... 630 c. Emergency power, Gatun and Pedro Miguel locks .. 436 6 191 d. Replace telemeter- ing system .... 500 350 129 e. Install protective guards on tugs. 160 f. Replace locomotive steam cranes .. 1,745 493 1,115 g. Ft. Davis launch landing 125 h. Replcce locomotive turntables-All locks 929 626 216 Obligations 1979 1980 Subsequent Estimate Estimate Years 6,414 5,000 - 111 4,320 7,140 - 3,860 8,250 3,002 3,500 18,500 500 2,404 9,826 - . 2,000 - 2,718 600 - 1,943 600 - 481 186 190 486 130 226 195 44 3 18 160 - 137 - 125 _ 2,090 87 1 183 PANAMA CANAL COMPANY CAPITAL OUTLAY THRU 1979 PANAMA CANAL COMMISSION CAPITAL OUTLAY 1980 AND BEYOND SCHEDULE OF CAPITAL PROJECTS (In thousands of dollars) Obligations Actual Project Thru 1978 1979 1980 Subsequent Total 1977 Actual Es t imate Es t ima t e Ye nrs__ .Otlier transit operation projects: 1. -Replace chamber and culvert elevators 201 159 15 27 j. Replace softnose, Pedro Miguel and Gatun Locks 666 - 643 23 k. Replace dipper dredge US PARAISO 6,168 6,299 (141) ' 10 1. Modernize Marine Traffic Control System 4,891 4,889 - • 2 m. Improve employee facilities. Maintenance Division, Cris- tobal 81 118" (38) 1 n. Upgrade toilet facilities-All locks 100 - 100 Prior year projects ...22.460 21,647 813 Total Transit Pro- jects 159.747 56.398 13,421 19.059 23.543 4 7.326 Supporting Services Projects : Replace motor vehicles ' 4,988 2,888 846 804 450 Improvements to communication facilities, Phasell 2,225 526 439 Minor improvement to quarters 1,271 405 77 Reroof employee quarters 2,244 871 553 Water system improve- ments 2 , 354 1 , 362 57 Replace and add equipment: Support- ing Service Project 6,107 3,276 967 Insulate quarters . 587 97 125 Modernize existing quarters 1,674 965 257 377 75 Improvements and replacements to Electrical Power and Communication sys. 1,565 719 254 527 65 825 435 419 370 484 336 607 328 1,621 148 243 217 23 184 PANAMA CANAL COMPANY CAPITAL OUTLAY THRU 1979 PANAMA CANAL COMMISSION CAPITAL OUTLAY 1980 AND BEYOND SCHEDULE OF CAPITAL PROJECTS (In thousands of dollars) Actual Project Thru 1978 Total 1977 Actual Obligations 1979 Estimate 1980 Subsequent Estimate Years Supporting Services Projects (Cont'd ) Improveraents to Supporting Services facilities ... 306 61 161 Other supporting services prelects : a. Expand generating capacity 2,548 2,4/ b. Replace employee quarters .... c. Acquisition of military power plant at 6.894 Miraflores .. Replace 90 lb. rail Railroad main line ... Improvement to oil handling facilities .. Replace and add equipment- Maritime .... 2 SS Cristobal Navigational Aids Replace rolling stock, Panama Railroad . . . . ' Construct auto ramp-Cristobal Install diesel fuel system. . Modernize employee facilities, Balboa Roundhouse . . Reroof building 0625-C, Ancon Garage Install 22 MW gas turbine.. 4 7,900 125 3,261 45 2,172 129 W 264 4,249 40 14 125 71 107 35 Acquisition in 1979 approved by Board of Directors. However, subsequent events may require postponement of acquisition to a future period with a minimum requirement in 1980 of $300 thousand. 24 185 PANAMA CANAL COMPANY CAPI'IAL OUTLAY THRU 1979 PANAMA CANAL COMMISSION CAPITAL OUTLAY 1980 AND BEYOND SCHEDULE OF CAPITAL PROJECTS (In thousands of dollars) Oblif,ata Actual Project Thru 1978 1979 1980 Subsequent Total 1977 Actual Estimntc EstimatG Years Other supportinp , services proj ects (Cent ' d) : n. Utility services to Canal Zone Government facilities 68 47 21 o. Rehabilitate sanitary facilities, dock 15 and pier 18 19 - 19 Prior year projects.,. 4,783 4,713 70 Total Supporting Services Projects 56.142 34,381 4.675 14.383 Administrg'. ive and General Projects : Advanced engineering, planning, and design 976 362 161 203 Replacement and improv- ments to Commission Buildings Minor capital additions and improvements . . . Retirement and removal costs Replace and add employee training equipment . Other administrative and general projects: a, Miscellaenous capital improvements .. 204 75 79 50 b. Development at Cocoli Industrial Park 225 215 - 10 Prior year projects ... 253 - i - 25 3 Total Administrative and General Projects 3 .647 1,444 454 801 94 8 697 108 111 266 212 906 445 64 215 182 203 131 32 10 30 183 108 7 47 21 25 49-653 0-79-13 186 PANAMA CANAL COI^PANY CAPITAL OUTLAY THRU 1979 PANAMA CANAL COMMISSION CAPITAL OUTLAY 1950 AND BEYOND SCHEDULE OF CAPITAL PROJECTS (In thousands of dollars) Obligations Actual Project Thru 1978 1979 1980 Subsequent Total 1977 Actual Estimate Estimate Years AcQuisition of Other Assets : Dredge Pipe 1.75 9 765 294 650 50 _;; Total Acquisition of Other Assets 1,759 765 294 650 _ 50 - Total Capital Program. 221, 295 92,988 18,844 34,893 27,244 47,326 Anticipated Delays and Savings - - - - -2,000 2,000 GRAND TOTAL - PANAMA CANAL Ca>IMISSION CAPITAL PROJECTS . . .221,295 92 , 9P8 18 .844 y^ ,893 25,24 4 49,326 26 187 PANAMA CANAL COMMISSION, 1980 Capital Outlay Justification Index Transit Projects : 1. Channel improvements 28 2. Procure additional towing locomotives 28 3. Replace dump scows 29 4. Replace and add tugboats 29 5. Relocation costs - Canal Support Operations 30 6. Construct launch repair facilities - Mt. Hope 30 7. Replace and add equipment, transit 31 8. Replace launches, and launch engines 31 9. Miscellaneous improvements to transit facilities 31 10. Improve wingwall knuckle tendering system - All locks, 32 11. Construct locomotive crane repair pits - All locks ... 32 12. Chamber lighting - All locks 33 13. Replace major buoys 33 Supporting Services Proiects : 14. Replace motor vehicles 34 15. Improvements to communication facilities, Phase II . . . 34 16. Minor improvement to quarters 35 17 . Reroof employee quarters 35 18. Water system improvements 35 19. Replace and add equipment - Supporting Services 36 20. Insulate quarters 36 21. Modernize existing quarters 36 22. Improvements and replacements to Electrical Power and Communication System 37 23. Improvements to employee service facilities 37 Administrative and General Proiects : 24. Advanci- engineering, planning, and design 37 25. Replacement and improvements to Commission Buildings,, 38 26. Minor capital additions and improvements 38 27 . Retirement and removal costs 38 28. Replace and add employee training equipment 39 Acquisition of Other Assets : 29. Dredge Pipe 39 27 188 Transit Prolects 1. Channel Improvements (All dollars in thousands) Project Through Total FY 1977 FY 1978 Actual FY 1979 Estimate FY 1980 Estimate Subsequent Years Obligations Expenditures Recurring Recurring $4,259 4,236 $5,266 5,279 $6,414 6,424 $5,000 5,000 This recurring project provides for a variety of capacity and safety related channel improvements needed to safely accontnodate the future Canal traffic increase as well as a pronounced increase in average ship size. Currently underway are efforts to ease and v.'iden Mamei and Bohio Curves and to deepen the Canal. Improving Mamei Curve is necessary to provide the capability of two- way traffic for large ships at an acceptable level of safety. This effort involves easing the channel deflection angles at the ends of the curve and widening the channel to 800 feet. Easing and widening Bohio Curve will provide a greater degree of safety for transiting vessels. This curve is one of the most difficult in the Canal to negotiate. Wliile the project is still in the study stage, a portion or perhaps all of De Lesseps Island will be removed with entrance and exits to the curve flared to permit a wider channel and flatter curve. Present traffic requires special scheduling to avoid large ships meeting at this curve. Deepening the Canal is a long-range capacity improvement required to meet additional lockage water requirements resulting from increasing size and number of trar-siting ships. This effort involves digging approximately eight miles of Gaillard Cut, about 3 miles of Gamboa reach and some segments of Gatun Lake to a new navigational bottom of 37' PLD. It should be carried to completion within the next few years to minimize scheduling conflicts with transiting vessels, to permit additional hydropower generation, and to minimize total project cost. 2. Procure Additional Towing Loco lotives (All dollars in thousands) Project Through Total FY 1977 FY 1978 Actual $ 207 3,720 FY 1979 Estimate $ 111 3,720 FY 1980 Estimate $4,320 2,000 Subsequent Years Obligations $19,010 $7,232 Expenditures 19.010 110 $7,140 9,460 This nonrecurring project provides for the procurement of a total of ten (10) towing locomotives; four (4) in FY 1980 and six (6) in subsequent years. Eight (8) new locomotives were ordered in FY 1978 and delivered early in FY 1979. Procurement of those eight locomotives was based on a study of requirements to handle a projected traffic of 36.8 ships per day with 357o of those over 80' beam. This projected size has already been exceeded in FY 1978. In addition, the ship mix has changed due to a rapid increase in the number of ships over 80' beam and, particularly, in those over 100' beam. The net result is a considerable increase in the number of vessels requiring 6-car lockages. Thus, the additional ten locomotives are proposed for FY 1980 and subsequent years. 189 Transit Project s 3. Replace L'v i ' p Scows (All dollars in thousands) Project Through- FY 1978 FY 1979 FY 1980 Subsequent Total FY 1977 Actual Estimate E stimate Years Obligations $12,119 $ 9 - - $3,860 $8,250 Expenditures 12,119 9 - - - 12,110 This nonrecurring project is a multi-year program to replace ten (10) obsolete dump jcows (1,000 yd.) with seven (7) hinged r.elf-dumping scows (1,500 yd.) to fulfill the Dredging Division routine emergency dipper drcd;,i.ng and shoal chasing mission. Tlie program call or the acquisition of t\70 (2) scows in FY 1980 with the remaining five in subsequent years. The present fleet of dump scows are the hopper door design and were manufactured between 1916 and 1941. Their use is becoming increasingly expensive, unsafe, and inefficient. The running maintenance and overhaul total cost between FY 1973 and FY 1979 has averaged about $400 a year. Experience has shown that during actual dipper dredging operations two out of ten scows are always out of service for repairs. Because of the antiquated winding machinery of these scows, it is necessary to operate a barge service station to supply compressed air for closing the hopper doors and maintaining the scows after each dumping operation. Upon completion of this project, thc-jarge service station will be eliminated with an annual personnel and maintenance savings of- approximately $150. 4 . Replace and Add Tugboa t s (All dollars in thousands) Project Through FY 1978 FY 1979 FY 1980 Sub.nequcnt _T otal FY 1977 Actual Estimate Estimate Years Oblisations $29,882 $4,811 $ 69 $3,002 $3,500 $18,500 Expenditures 29,882 4,811 69 7 1,950 23,045 Based on current forecasts of Canal Tiaffic, a total fleet of eighteen tugboats will be required to meet tr. nsit demand in FY 1984. There are currently 15 tugi;oats available to service transiting vessels. This non- recurring project will replace three of the fifteen tugboats and will add three tugboats to the fleet. Tlie three tugboats to be replaced are the "ARRAIJAN", built in 1936, and the "SAN PABLO" and the "CULEBP^A", built in 1944. All three tugboats to be replaced are underpowered and lack sufficient bollard pull. Tliey do not satisfactorily meet current or anticipated demand. Tugboat requirements relate directly to the number and size of vessels to be serviced. These requirements have been increasing at an accelerated pace. The table below shows actual trant-its in FY 1978 and the latest forecast through 1981. Daily Ave-rage Fiscal Year Occangoin;^, T i- nn.';it s 1978 (Actual) 35.0 1979 (Estimate) 35.8 1980 (Estimate) 36.4 1981 (Estimate) 37.0 ; 80' Beam and over 35, ,57. 42. .2 44. ,0 45. ,1 °L 100' ' Beam and over 8, ,47o 14. ,2 14. .6 15. ,1 29 190 A. r»p' «ce a r d Add TuRboats (Continued ) "(All dollars in thousands) The previous figures represent averages. On any given day, transit require- ments will vary from the average, at times exceeding 50 percent for vessels of 80 foot bean and over and 25 percent for vessels of 100 foot b. -m and over. Tugbo.1t rcquiresnents can be expressed as the number of tupboat jobs in any given year. Actual FY 1978 tugboat jobs and the forecast through 1981 is as follows: Fiscal Ye?r No. of Tugboat Jobs 1978 (Actual) 42,992 1979 (Estiinate) 45,675 1980 (Estimate) 49,247 1981 (Estimate) 51,357 The current schedule of tugboat replacements and addition will enable the Ti-najna Canal Conodssion to safely meet the requirement of transiting Vessels. 5 . Jicj . ->=ar?on Cr ' -s. Canal Support Operetions (All dollars ' vi thousands) , ,„^„ ,„^„ Project Tnrough FY 1978 FY 1979 Total FY 1S77 Actual Estimate Obligations $12,730 - - $ 500 $2,404 $9,826 Expenditures 12,730 - - 184 2,720 9,826 This is a nonrecurring Treaty related project to provide for the renovation of certain facilities to house managerial and administrative Commission personnel. In accordance with Treaty requirements a number of facilities currently used by Comaission personnel will be transferred to the Government of Panama in FY 1980. As a result functions displaced but remaining with the Coaraission will be relocated to other existing building that will continue with the Commission. Functions to be relocated in FY 1980 include various activities of the Marine jureau. Personnel Bureau, General Services and other miscellaneous staff functions. The total capital cost associated wit) their relocations is $1,278. The other $1,126 is to coc^lete relocation projects started late in FY 1979. 6. Construct Launch Repair (All dollars in housan Project Total Facility, ds) Through FY 1977 Mc. Hope FY 1978 Actual FY 1979 Estimate FY 1980 Estimate $2,000 1,800 Subsequent Years Obligations $2,000 Expenditures 2,000 200 Hiis nonrecurring project provides for the construction of a building and facilities to permit necessary worksite conditions to efficiently conduct an ougoing Launch Maintenance Program. There are no satisfactory areas or facilities fcr launch repair at Mt. Hope at the present time and the present operation is becoming increasingly inefficient. Cost savings from improved efficiency in tianhours utilisation will result in substantial savings over the life of the project. 191 7 . Replace a nd Add Eguiinnent , Transit (All dollars in thousands) Project Tlirough FY K7f Total FY 1977 A" •.-.. i FY 1979 E5;t-;. ate FY 1980 Estiin-ite Subsequent Years ObllEfltions Expenditures Recurring $2,019 Recurring 1,587 $1,021 909 $2,718 1,716 $ 600 2.]46 This recurring project provides for the purchase and installation of ndsccllaneous small tools and equipment required for the efficient operation of the Canal. For navigation services and locks , requirements are estiraated at $128 for FY 1950. For vessel repair, general maintenance op- rations and the Water and Laboratories Branch, requireme'its total ^hl2. FY 1980 funds also cover the delivery of items ordered in FY 1979. 8. Replace- Launches and Lj ur.cli Eiviines FY ]978 Actuf-1 Ti 1979 Esl-.itpyte (All dollars in thousands) Project Through Total FY 1977 n 19 GO 1 stlnii'.tc Ohligations Recurring Expenditures Recurring $1,203 1,137 $1,601 101 $1,9'';3 1,731 $ 600 1,880 Subsequent Years This is a recurring program whicli provides for the repl.icemant of launches, sniill tenders and associated engines which are beyond economic repair. In FY 1930, one (1) small 30-year old dredge tender will be replaced with modern, more powerful version ($375); diesel and gas engine replacumants ($105); and delivery of launches ordered in FY 1979 ($120). 9. l:T.i>rovci:-.3nt s to Fr-cilitic^ ,Ti -n.' (All dollars in thousands) -it Project Total Tlirough n- 1977 FY 1978 Actual FY 1979 EFt-'ir.te FY 1980 Est::i::.-e Subsequent Years Obligations Recurring Expenditures Recuri ing . $ 140 29 $ 219 225 $ 366 305 166 This recurring project prcvid-.-.s for construction f additions or replaccipsr.ts to transit facilities. FY 19S0 requirements include such items as: a. Improve Weather and River Stations $ 115 This project provides for improvements to camp facilities c river stations. Rpplace Sawdust Collection System $ 96 This project providi-s for the replacement of the present inadequate and inelficio.nt system. 31 192 9 . iTOjOrovcmont s to Fa c ilities. Trnnsit (Cont'd ) (Alf dollars in thousands) c. Install Uoll-up doors on Gatun Locks Locomotive Sheds $ 50 Tlie high roofs and open sides of these repair sheds do not adequately protect maintenance personnel and equipment from heavy bloving rains. Roll-up doors will correct this problem. d. Replace Guard House, Pedro Miguel Locks $ 35 The guard booth currently in use is ci\ old V70oden structure built in 1954. It is inadequate, poorly designed, and has nc Loilct or lavatory facilities. FY 1980 funds also iiiclude $70 to cover the completion of work started in FY 1979. 10. r...rro.;- Win^.v-'a]] Knuc kle Ffud-rir" , n-.-st'-.n - All :■ ...ks FY 1980 Esf.imate $ 265 440 (All dollars in thous Project Tctal ands) Through FY 1977 $ 398 398 FY 1978 Actual 157 FY 1979 Estimate $ 481 463 Subsequent Years Obligations $2,821 Expenditures 2,621 $1,520 1,520 This recurring project provides for tlie installation of a total of 12 pneumatic, impact-absorbing fenders at the v/ingwall knuclclcs of all locks. Tie primary purposr- of this project is to improve the wingv7all knuckle fendering ry stems so as t.. increase its ability to absorb greater impact witfiout rupture of the ship's hull. A single tire pneumatic prototype system was installed at Upper Miraflores in 1972 and double fendering systems at Lower Gatun in 1976. It is planned to next install dc-.jble units ot Southwest (lower) Pedro Miguel and ITortheast (upper) Pedro Miguel in 1979, double units at Southeast (lov/er) Pedro Kigjel and Kortliwest (upper) Pedro Miguel in FY 1980. Subsequent i;o 1980 double units \7ill be installed at South Gatun and triple units at South Miraflores. 11. C:r struct LocoruiLivc (Ail dolL-rs in tbou Cr.-;ri.e UoTjair sands) Vi:.t:-Ml 1. >ck. Project Through FY 1978 FY 1979 FY 1980 Subsequent Tof . 1 FY 1977 Act'jil Estiva to Estimate Yc-irs Obligations $ 130 - . _ $ 130 _ Expenditures 130 - - - 81 49 This is a nonrecurring project to construct a peniianent repair pit on the center V7all of e.nch Lock, for use in the inspection, m.aintcnrnce and repnir of electric locomotive cranes. Currently, repair and service pit facilities for these cranes .•ire totally lacking. Maintenance and inspections arc now accoviulished by stationing a crane ovor an open nanhole where a maintenance man lias prepositi ored himself. Tliis project will eliminate this u sati sLictory and inefficient procedure. 32 193 12. Install Chamber LlghtlnR - All Locks (All dollars in thousands) Project Through FY 1978 FY 1979 FY 1980 Subsequent Total FY 1977 Actual Estimate Estimate Years Obligations $2,720 - $ 388 $ 186 $ 56 $2,090 Expenditures 2,720 - 28 496 106 2,090 ' This is a nonrecurring project to provide lighting within all lock chambers 8o that pilots may better see and judge the distance between the ship's hull and locks chamber wall during non-daylight hours. This will allow daylight transits to begin earlier and clear later, thereby increasing their number. The primary purpose of this project is to allow handling of wide beam ships in the lock chambers at nighttime. With an increasing number of larger vessels transiting the Canal restricted to daylight, this project has been developed to permit some of these ships to begin their transits before daybreak and clear the last locks an hour after sunset. The project makes these lockages possible and safe by lighting the chambers to provide visibility in the space between the ship and the locks wall. Ships with 100' to 106' beam are difficult to center in a chamber due to the small operating margin of from 5' to 2' between hull and chamber lock wall. The project will also allow safer handling of all other night transits at these locks. The locomotive boom lights, which are now used for this purpose, are spaced too far apart to provide adequate lighting, particularly on bridge aft ships where the bow locomotives are well forward and a deep black area extends well forward of the bridge. It is proposed to install chamber lighting at the following locations during the years indicated: FY 1978-79 Miraflores east and west lanes FY 1981 Gatun east and west lanes FY 1985 Pedro Miguel east and west lanes In FY 1980 the installation of chamber lighting at Miraflores will be completed. 13. Replace Major Buoys (All dollars in thousands) Project Through FY 1978 FY 1979 FY 1980 Subsequent Total FY 1977 Actual Estimate Estimate Years / Obligations Recurring - - $ 190 $ 10 Expenditures Recurring - - 7 193 - This recurring project provides for adding and replacing major lighted and whistle buoys throughout the Canal, many of which were first installed in 1913. Multi-year funding will permit replacement of deficient buoys and augmentation of the buoy pool which has been seriously depleted by unanticipated losses. 33 194 Supr:^rr ing_Servi c e_Pro^c Is "(Ail dollirrs la thou:ianHs) Proicct Through Tr.'; ...1 FY 1977 Oblisations Recurring $2,888 $ 846 $ 804 $ 450 l->.pcn;i Lures Recurring 2,607 831 540 860 150 This recurring project provides for Che purchiise of replnccnnr !: raolor vehicle. . Unit vehicle costs include f.o.b., factory price, in itcU.c-' charges, inlf.r.l r-iid ocean freight and preparation service costs. Types end esUj.r.;:.ted cost of vehicles proposed for purchase in FY 1980 are as follows: E r> 1 liy. t ed Cap ?, t? ] . .Cps.t. Total $132.0 110.0 26. 60.0 24.6 Totals 56 $450.0 All vehicles to be replaced will .exceed the age/or mileage standarcls prescribed by the General Services Adndni.stration. At this time, 43% of the Motor vehicle fleet mcf-ts the ninimun' rcpl.-ren.cnt stanclards. Failure to provide pronipt replacemc;nt of overage vehicles will inevitably lead to higiier maintenance cost an less jeliability as the oversee vehicles continue in service. [•■:.-:n 2'-:iL>V lt£ Type nn:;.t 1. 22 Sed3' , Regular $ 6.0 2. 20 Seda.:.;, Compact 5.5 3. 4 Station Wagons C.5 4. 2 Buses, 40 pa'-.Hcnger 30.0 5. 3 i'l-ucks, light (piclcijp, carryall, utility, etc.) 8.2 6. 3 Truck, medium (dump, stake, van, etc) 12.5 7. 2 Truck, heavy, (tractor, moving van, line coniitruc- tion, etc.) 30.0 15. Imprcnmenr to Coiniriunjc (All dollars in thousan Project Total St ions Fac ds) Through FY 1977 $ 526 526 ilitics. Ph.- FY 1978 Actual $ 439 3 so. 7.1 FY 1979 Estimate $ 825 57 FY 1980 Estimate $ 435 1,639 Subsequent Years Obligations $2,;25 Expenditures 2,225 - Tliis is a continuation of a project to accomplish Phase II of the modernizatjor of comirunications fr. lities recommended by a consulting firm in January 1968. The first phase was completed in FY 1972 and provided for modernization of telephone and related communications systems in the Pacific area. The second phase contemplates similar improvements for the Atlantic and Gamboa areas. In FY 1979 new central office switching equipment for the Gamboa system and a new electronic Private Automatic Branch Exchange (PABX) for the Coco Solo office is being purchased. Funds for FY 1980 will provide for the insUal l.^tion of the equipment acquired in FY 1979. 34 195 16. K'nor Tmp? ovcnen t s to Qua rters (All dolJdrs in thousands) Project Throitch FY 197S FY 1979 FY 1980 Subsequent Tol .nl Fj' I -77 Actn^] Estiiar: c- E_M ir.i.-il t; ItOrs OblJcations Rccuriinr. $ ^05 $ 77 $ ^il9 $ 370 Expenditures Recurrini; 2C2 151 186 500 172 This progiTam co, tributes to improvcfl manzgciii'jnt/erap} oyce relations by funding quflllt.y improvements to qunittis in a i:.-jnner that exh.nncef. the desirability of the existing quarters. Housing rental r.-ilot; are normnlly increnscd to recover the Corrciiission costs. The continuation o' thii. prograir. is essential due to its effect on employee moialc. Funding for FY 1980 provides the Comrnission' e share of financing for various standarciizcd improvements to approxi -*"' ^ " ^'^" ' ' '- --■-- [y 100 einp: loyac housi ing units. FY 1978 FY 1979 FY 1980 Aclual_ I'Rtiinstc- EstimaiK $ 5.S3 $ 484 $ 336 461 636 263 1 7 . i>cj".cc> i;'iipT ove(i Q .T.rl. c; ■ a (All doliiirs in thousr 'y) Project 'jhrough FY 1978 FY 1979 FY 1980 Subscciucnt Total FY 197 7 Actual LRtJ/.nstc- Estimaiia Ycsri Cb^-ir.^tions Recurring $ 871 E}:pc:iditi res Recurring 744 This progr.-i; providec for the continuing replacement on a cycle bacis of deteriorating roofs of employeo quart;rs which ha\'e exces-.led tl;eir iiov i..al life expectancy ar;J become uneconouiical to repair. Under the provisions of the new Tre-,!: • "(All doiicir'f Obligations Expenditures o Fn cillt ico, Supp( n thousands) Project Through Total FY 1977 =curring $ icurring 'n<; .Services FY 1978 FY 1979 FY 1980 Subsequent Acti.al Esjtimete Estimate Years $ 42 $ 16? $ 42 24 83 157 1 construct ion of additions or rep] lac. :mcnts Thif! recurring project provides for construction of additions or replacements to supporting services fi.jillties necessary for the efficient opeiatioii of tl-.e Canal. FY 1980 funds cover the completion of items scartcd in FY 1979. Adminis tr ative an d Gfl:ioral Pro ier;:s 24 . Adv anc r K nf^irt^e r i rig Plann ing_ and Df r i gn (All dollars in 'lousands) Project Through FY 1978 FY 1979 FY 1980 Subsequent Total FY 1977 Actual Estimate Estlvnate Years Obligations Expenditures Recurring Recurrint 362 362 161 161 203 203 250 250 This recurring project provides for advance engineering planning and design work on projects included, or to be included, in the Panama Canal Commission capital progr.nm for subsequent fisc-^l years. The advance work allows detailed desigri effort on projects selected for accomplishment to be completed in advance which allows early av /ertisement and award of the projects at lovjcr prices. 37 198 2 5 . Imp rovcmenr s to CoBwiission PuildtnRs (All dollars in thousauds) Project -nirouEh FY 1978 FY 1979 FY 1980 Subsequent Total FY 1977 Actual E ^tliaate Esticptc Years . Obligations Recurring S 108 $ 111 $ 266 $ 212 Expenditures Recuiring 69 53 233 204 113 Thic recurring project provides for capital maintenance requirements for ayproxinntely 234 Cormission structures and facilities under the administrative custody of the Buildings Manageraent Branch. "rtie work covers such niiscellaDecnis repairs, replaceicrnts, additions, alterations and rthflbilitations as are required to accoamocate essential needs of Commission units fcr day-to-da;' operations c.- beceusc of changes in mission. Included is the installation and replacement of window or reriote air conditioner units and various si -d central air cond5tioning system- as required due to obsolescence of existing plant and the necessity to reduce tlie high level of electric-al energy consumjition. Funds for FY 19S0 provide for the purchase of custodial equipnent, installations and altc: ations of partitioning and general rehabilitation and renovation to accooLnodcitc organisational needs in Commissj-cn buildings. 2b. M->"nnr CrT>ir 1 .-.dcirirns ann r.e- 'r - etaen . ? FY Esi $ 1979 •••ate 215 87 Err $ 19S0 ir.ste 1S2 320 (All dollar. in thousands) Project Through Total FY 1977 Recurring $ 445 Recurring 445 FY 157S Actual $ 64 47 s. Obligations Expenditures This curring item provider, for ini.cor itars of capital which are ucforesaen or are too i..:;all to warrant separate listicgr. snr' justifications. The suthcrization makes available to the Adniir.istrator of the Conanission ij.c authority deeised essential if the operations cf the entcrjrise are to function without interruption due to need for incli vidua' iteas tljat cannot be anticipsted. The Conanissicn's Board of Directors is info, icd of tlie itenis approved bj- the Adndnistrator . 1 the meeting subsequent to the actioii. 27. Retir'-T-.: ■■ and i;e-,'^nv.-l Cost? (All doi rs in tho-o sands) Project Through FY 1978 FY 157 9 FY 1980 Subsequent Total FY 1977 Actvsl E Ptiii ^rte Estimate Yc srs Obligations Recurring $ 131 $ 32 $ 10 $ 30' - Expenditures Recurring 131 32 10 25 5 This recurring item provides for the removal and/or retirement of PanFtaa Canal Commission capital items from plant. 199 20. ripl.T cc a nfl Add Emp loyee T rainin?; rcinipmcnt (All dollsr:; in llioiisands) Project Through IT 1978 FY 1979 FY 1980 Subsequent Total FY 1977 Actual Er.l: iii.c.tre Lstiniato Years Obligations Recurring $ ] 08 $ 7 $ A7 $ 21 Expenditures Recurring 102 6 29 43 3 This recurring project provides for purcahse .ind installation of miscellaneous equipment required for employee training at the Int'astrial Trade School and the Employee Training Center. Ac.';.^' i oiis of O tl ^r As sets 29. K- place Pro{)■ yenr. In other materials, such as sand, silt, etc., the useful life of the pipe and cylinders varies from two to five years. o 39 II III III 3 UNtVERSITY OF FLORIDA 262 08 28 294 8