Employees at June 30, 1957, in addition to the managers were as follows: Earl B. Wilcox, forestry consultant_ Monthly salary in June 1957 $950.00 591. 67 350.00 TRAVEL We have checked the travel expenses and it appears that payments have been made in accordance with Government Travel Regulations. In the management contract, Mr. Favell's address is given as Lakeview, Oreg., and Mr. Phillips' address is given as Salem, Oreg. On information from the Management Specialists and in accordance with their telephone conversations with the Portland area office, it is assumed that the residence of the managers given in the contract is their permanent base of operations, and any travel made by them in connection with this contract is computed from the time they leave their residences. RENT AND UTILITIES The lease for the quarters at 139 South Seventh Street expires March 31, 1958, with option to renew to March 31, 1960. The rent is $125 per month, which does not include utilities. The leasees have made various lease improvements which remain with the building with the exception of the venetian blinds and light fixtures. These may be removed on expiration of the lease. LEGAL EXPENSES The office of Hart, Spencer, McCulloch, Rockwood, and Davies of Portland, Oreg., have represented the managers on legal matters. We examined their invoices and found them to be in order. INSURANCE AND BOND PREMIUMS The bonds in the possession of the Secretary of the Interior at June 30, 1957, were as follows: T. B. Watters, (expires June 24, 1958) Amount $25,000 25, 000 25, 000 We were informed that there is no fire or theft insurance on the equipment. CONTRACT PAYMENTS TO STANFORD RESEARCH INSTITUTE A contract was made with the Stanford Research Institute, of Stanford, Calif., which was approved by the Secretary of the Interior on July 29, 1955, the purpose of which, according to the contract, was to provide factual data and to draw appropriate conclusions on the problems faced by the Management Specialists in order to assist them to make decisions and evolve a plan which will result in maximum overall benefits to all present and future members of the Klamath Tribe of Indians by assisting in the appraisal of reservation resources and determining the most equitable way of apportioning the tribal assets, etc. The contract price for this work, including the amendments thereto, was $21,250. Total payments made amount to $20,772.72. CONTRACT PAYMENTS TO WESTERN TIMBER SERVICES The act provides that an appraisal of all tribal property be made showing its fair market value by practicable logging or other appropriate economic units. Bids for this work were received and the successful bidder was Western Timber Services, of Arcata, Calif., whose contract was approved February 17, 1956, by the Secretary of the Interior. The time for completion of the appraisal, after extensions, was May 2, 1957. The appraisal report was delivered in May 1957. It was examined, and various omissions and errors were found which are reported in the Review Report, Appraisal of the Property of the Klamath Tribe of Indians, dated May 18, 1957. The appraisal report was returned to Western Timber Services for correction, and has not been returned to date. It is expected that the corrected report will be delivered before October 21, 1957, based on a new work order recently issued. The total estimated cost to June 30, 1957, was $155,000. We were informed that, since June 30, 1957, additional work has been contracted for in the amount of $15,000, making a total estimated cost of $170,000. The last invoice on which payment was made by the managers is dated April 10, 1957, and it shows that work in the amount of $130,766.45 was completed at that time. The contract states payments will be made on 80 percent of the value of the work completed. Therefore, $104,613.04 was paid, based on their invoice. The balance has not been paid because of the omissions in the appraisal report. A performance bond in the amount of $100,000 was issued on behalf of the Western Timber Services by General Casualty Company of America. OTHER EXPENSES We checked various invoices and items making up the other itemized expenses shown under expenditures and found them all in order. Senator NEUBERGER. Mr. Wolf, do you have some questions of Mr. Watters? Mr. WOLF. I just have a couple regarding this question of Government purchase of the reservation. If the Government purchases the reservation, your idea is that private industry will still manufacture the timber; buy and manufacture it? Mr. WATTERS. Yes. I think this: This could well be; the sale under this program. Let's talk about free enterprise a little. Under the present setup, the Government has what I'd say is not an operating concern; it is a reservoir of timber, and, in the past, and now, we have some 5 or 6 small mills and Weyerhaeuser Timber Co., and I understand relations are very fine between those different companies. Now, at the present time, and under the present method, where they don't have to buy the stumpage outright and they don't have to pay it all in cash, these small mills have been able to come in and compete with the larger mill for timber. And if this-I can envision this-if this law goes through as written, and it can't be prevented, the majority of this timber is going to get into the hands of larger operators. Eventually, these smaller mills are going to be eliminated. So I say that, if the Government should buy this and continue it on the same basis, they are promoting free enterprise from the lower level rather than the higher. Mr. WOLF. Then the only question that really is involved here is: Who should manage the growing of the timber? Mr. WATTERS. Well, as far as we are concerned, yes, and that, we feel, is something that we shouldn't enter into. 98089-57--3 Mr. WOLF. Now, collaterally, it has been often said that it is desirable to increase the local taxation base. Do you believe that the shared-revenue provisions, such as those found in the national forest, provide an equitable basis for providing the tax income of local government? Mr. WATTERS. That is 25 percent? Mr. WOLF. Yes. Mr. WATTERS. Yes; I do. Mr. WOLF. You believe that is equitable? Mr. WOLF. That's all, thank you. Senator NEUBERGER. I just want to follow up several of the questions Mr. Wolf asked, which I think are very cogent. Throughout this entire State, which at the time is the principal producing State of timber of the entire Nation, if I am not mistaken, there are three classifications of Government-owned timber: National forest, Bureau of Land Management holdings, and Indian timber. Has it not been your observation that that timber, managed on a sustained-yield basis, has helped to maintain much private enterprise in this State in the form of logging camps, sawmills, pulp plants, and various other timber-processing companies and operations all over the State? Mr. WATTERS. Well, Senator, I just have to make a very casual statement on that, because I still want it understood that I have notin fact, I wasn't an observer of the lumber industry, had no connection with the lumber industry in any way, and all that would be is just personal observation on my part. But I do know, as far as Klamath County is concerned, we estimate that, I think, 9 percent of the economy of Klamath County has come from that reservation, which is a sizable sum. Certainly it is valuable to this community, not only from that standpoint but also for watershed and recreation benefits. There is no question about that. Senator NEUBERGER. In addition, one other question asked by Mr. Wolf seems to me ought to be pursued a little bit. If these holdings of the Indians went on the tax roll, do you believe that would be as financially valuable to county government in the long run as if county government received the traditional 25 percent allotment from the sale of Federal timber stumpage which prevails under national forest operation? Mr. WATTERS. You mean if it was sold to private industry and went on the tax roll? Senator NEUBERGER. That is right. Mr. WATTERS. Well, of course, one big gimmick, if it went on the tax roll I think a big portion of it wouldn't be there over 4 or 5 years; then it would be gone. Senator NEUBERGER. In other words, it would be cut over? Mr. WATTERS. Yes; that is right. Senator NEUBERGER. And then it would cease to be of value to the tax roll? any substantial Mr. WATTERS. That is a certain percentage of it. There again, I am not a forester, but certainly a big percentage of it will be clear cut and no tax return from it. It will probably go back to the county. Senator NEUBERGER. Whereas if it were managed by the United States Forest Service on a sustained-yield basis, the county govern ment would receive, I think it is, 25 percent of those stumpage fees over a very prolonged period of time as this timber was harvested. I believe a report has shown that this reservation will support some 80 million board-feet annually. Mr. WATTERS. That is correct. Senator NEUBERGER. To be cut. So that income under Forest Service management would continue, if not indefinitely, at least for a very prolonged period of time. Mr. WATTERS. Well, it would be indefinitely and, of course, there has been an estimate made of some $244,000 in taxes we will get. Now it is very easy to figure the 25 percent of the sale of 80 million or 81 million board-feet of timber is going to amount to a little more than $244,000. I would certainly like to see Klamath Falls get it if they could. Senator NEUBERGER. I certainly agree with you in that estimate. Do you have any more questions? Mr. WOLF. I have just a couple about this trust agreement. I notice that one provision of the trust agreement allows the trustee to dissipate the trust principal to insure the stability of payments. Do you think that there should be some check on that? Why is that in there? Mr. WATTERS. Well, of course, when you are writing a document, you don't know what is going to happen 25 years from now, and we must figure that this trustee, in the first place, is going to be a big outfit. They are not going to do something just because they have authority, but in case of a catastrophe of some kind, as I understand it, the trustee is allowed to dissipate it, not continue. Mr. WOLF. I didn't see any check, anything that would stop him from going all the way. As a matter of fact, paragraph 6 of the trust agreement says that the trustee is directed as long as feasible to operate the timberland on a sustained-yield basis. Mr. WATTERS. Yes. Mr. WOLF. Which gives the implication that there might be a situation where it wasn't feasible and then he could proceed on a liquidation. Mr. WATTERS. Well, now we feel that we tried to be just as liberal as we could, I will admit that. And if the Secretary closes the door Mr. WOLF. This is something still under consideration; this isn't final? Mr. WATTERS. Yes. It is not final, it is a tentative plan. That is a good question. It will probably be raised before the final document is written, but as I say, it is pretty hard in figuring the future, and we did liberalize it. Mr. WOLF. This is something you will give consideration to further, you expect? Mr. WATTERS. Yes; no question about it. Mr. WOLF. I had one other question. Under this agreement you are replacing the Indian Bureau with a private trustee? Mr. WATTERS That is right. Mr. WOLF. Is there any action contemplated to equip the beneficiaries to take over the management ultimately, 30 years from now, so that they don't have to stay in a perpetual-trust status, or haven't |