Wednesday, January 16, 2008

(Working title) TVA then and now

You're in for a treat, Shoals residents, for a peek at the beginnings of my much heralded new book(s) on the TVA. Your comments are welcomed and deeply appreciated. EN
1939 was a very cold year. The old farmhouse my parents bought with its hilly 57 acres near Prattville, Alabama seemed a good investment especially with its large stock of longleaf heart-pine. We siblings did not recognize the hardships we had faced during the long and uncertain trek through Depression years but still we were happy to have a change from city life. The 19th century steep-roofed and badly weathered house had none of the modern conveniences even of that day.
No electricity, well water by the bucket and privacy in the little house out back. Heat came from a two-sided fireplace in the middle of the four-room house and the wood stove in the kitchen. Those chilly 1939 mornings called for alternately burning up on the fire side and freezing on the back side.
I had never heard of the Tennessee Valley Authority back then; we were far from the dam building going on several hundred miles to the north. But there was one companion New Deal agency I learned something about, the Rural Electrification Administration.
Standing alone as the most socially aggressive of American presidents, FDR pulled every lever of government power both legal and unimagined to form what generally is called the New Deal. The REA was a late comer to the crowded bowl of alphabet soup of new agencies to try to overcome the depressed American economy. The New Deal nearly killed the American spirit of independence, self-reliance and a positive belief in America in exchange for a culture of government dependency. The American culture was greatly damaged even to today with some of the New Deal vestiges of what FDR tried to do – to make Americans first to rely more on the federal government and to reject the concept of a market economy run by the big corporations he despised.
In 1939, the Depression had worsened, not improved as FDR had said it would even after all the many millions spent on a plethora of Washington-directed programs. His soothing and reassuring “fireside chats” did have a mesmerizing effect and probably helped forestall a nationwide panic and there had been enough to panic about, a stock market that had gone bust, a bank “holiday”, and moving off the gold standard. There was not much money in circulation. America at that time still was a market-based economy despite the influence of Keynesian economics that called for central government control.
Sen. George Norris for years tried to get legislation passed that would keep Muscle Shoals under the dominance of the government. Norris in 1922 was chairman of a powerful Agriculture Department committee that held hearings on proposals to take over the partially completed Wilson Dam and the nitrate plants that produced demolitions.
The uncompleted properties were declared surplus after World War I. Two major capitalists of the time, Henry Ford and Thomas Edison, had plans of how they would use the Muscle Shoals facilities that would in Sen. Norris’ view ruin any chances for a TVA-like government program Norris ardently, passionately supported. Roosevelt probably was most happy to get back at the industrialists with the help of the Republican senator from Nebraska and passage of the Tennessee Valley Authority Act in 1933.
Reflecting on the time when Ford and Edison visited the Shoals area of North Alabama in the 1920s when Ford supposedly proclaimed that he would make the Shoals “the Detroit of the South”, it didn’t take long for land speculators to understand the significance of that statement. Ford would build the cars and Edison would provide the electricity.
The genesis of the TVA came long before its enactment into law in 1933. In Senate hearings in 1922 chaired by Sen. George W. Norris, it was clear that Norris wanted the federal government to maintain control of the dam at Muscle Shoals and the nitrate producing buildings in Colbert County.
The dam across the Tennessee River originally was to produce electricity for the process of making explosives during WWI. However, the war abruptly ended and the unfinished dam and other facilities immediately became surplus government property for sale to the highest bidder. When, after repeated attempts of Ford and Edison to make offers for the uncompleted Wilson Dam and other surplus properties continually fell on deaf federal ears, they moved on to other enterprises. Hearings in the Senate. Committee on Agriculture and Forestry (S. 3420, sixty-seventh congress) – 1922 chaired by Sen. Norris
But the more FDR tried Washington-based programs the more doubt crept into American’s belief in its own rhetoric – freedom, independence, the entrepreneurial spirit and in its ability to grow and prosper in a depressed world economy.
The REA was considered a “bootstrap” adventure because there were no grants, only loans. However, through a system of federal loan subsidies, the REA soon became the vehicle to electrify sparsely populated farm areas that had no access to electricity because of cost considerations of private utilities. Our small farm was able to tap on to a transmission line for the first time ever in 1939 four years after FDR’s Executive Order in 1935 authorizing the REA. Later, it would become a law and subsequently folded into the Agriculture Department as today’s Rural Utilities Service.
The REA office in Prattville was graced with a huge drum neon sign with the jagged REA letters in red on each side. That sign was built by my father with some help (hindrance?) from me.
A case can be made that the subsidized REA loan program impeded innovative development of alternative energy sources such as bio-degradables, solar, wind and even wave energy since the 1930s. But as the production of electricity presently provided through the REA and the highly subsidized TVA becomes too expensive, innovation may again take the forefront.
While the thrice-told story of TVA’s beginnings preceded the TVA Act in 1933 by many years, my understanding of it began in the 1960s when as a federal representative of the Department of Housing and Urban Development it became my task to nurture along the several projects in the Shoals area of North Alabama. There were Urban Renewal projects in Florence, Sheffield and Tuscumbia where dilapidated and slum dwellings were razed for redevelopment for both private and public re-uses.
Along Alabama’s northern tier of towns roughly paralleling the Tennessee River Valley were other similar projects all of which also came under the purview of the Tennessee Valley Authority, yet another layer of federal government later to grow to 80,000 square miles of land in parts of seven Southeastern states.
TVA had changed directions so many times, often at the whim of the three-person non-elected board of directors, Congress finally decided on two major issues. TVA would be “self financing”, that is, there would be no more congressional appropriations for its undertakings, and there would be a “fence” around TVA’s territory impenetrable from outside competitive forces.
Later, the Congress changed the makeup of TVA management by requiring an appointed nine-member part-time board who appoints a CEO. Effectively, this means that one person has control of and is responsible for the entire TVA operations with revenues of over $9 billion annually.
A patina of imperial government lies over 80,000 square miles of seven sovereign states in the Southeast. If it were only a vast acreage like much of the unpopulated western lands it would be one thing and it might not be so noticeable but this is a direct federal presence dominating the lives of more than nine million people every day when it comes to their use of electricity.

Unique among all federal agencies, the Tennessee Valley Authority makes its own rules, then assures adherence to them. TVA goes to court when they deem it necessary and it has done so without authority from the Justice Department of the United States. In a recent case, the TVA chose to file suit against the explicit direction of the attorney general not to do so. In legal matters, the attorney general of the United States speaks for the United States government; separate parts of the same government cannot go their own way choosing to sue or not to sue at will. Legal chaos surely would result.

Such is the case of the TVA in its attempts to avoid falling under the same rules of all other federal agencies. The Environmental Protection Agency, in an attempt to require the TVA to correct perceived violations of the Clean Air Act, was told that because it was part of the same government that it could not sue the TVA. It would be the same as suing one’s self. The fact of its own abject failure to self-regulate diminishes any other case for compliance, further eroding public trust.

Franklin Delano Roosevelt forced passage of the TVA Act in 1933 partly to pay back Sen. George Norris (R-Neb.) for his help in FDR’s presidential campaign and to wrest some of the power from free-market businesses, those big corporations whom he despised.

FDR said he wanted an agency with the power of the federal government, among other things, to take personal property and with the flexibility of a private corporation. Trying to mix those obvious impossibilities (if you believe the Constitution) has resulted in haphazard execution of the TVA law and has left in its wake a mélange of start-stop projects many of which have resulted in multi-billion dollar boondoggles. FDR’s obvious political ploy (an “experiment”) has turned the TVA into an arrogant federal agency that appears to answer to no one.

TVA has picked and chosen just which rules it wants to go by. For example, for many years TVA was in the land sale/swap business managing to turn some tidy “profits”. It was not until the Supreme Court Kelo case, which now allows public entities to acquire private properties by eminent domain (taking) and to turn them over for private development, did the present administration take action to stop federal agencies from doing the same thing.

Through Executive Order 13406, which prohibits federal agencies from using acquired properties for any but public uses, the TVA effectively was stopped from providing such private to public (TVA) and then for commercial uses. Only the traditional uses in keeping with previous interpretations of the Fifth Amendment to the Constitution are now available, that is for public roads, schools and other public entities. The executive order lists examples.

Since the Kelo decision, many states have adopted laws or are in the process of passing them that would prohibit eminent domain takings for private use. There is an instance in Fresno, CA where the local governing body in one scenario seems about to force the sale of private property to assemble it for a private developer. While it may turn out to be legal under California law and it appears to be accommodated by the Kelo decision, this kind of public taking is frowned on by most Americans.

The thing that put the kibosh on the possible Bass Pro Shop development in Veterans Park in Florence, Ala. was the clamping down on the TVA which by executive order prohibits federal agencies from taking private property and turning it over to a private developer even though in this case the TVA acquired the land many years ago.

In the Fresno case, Donald Trump is the developer who wants the city to carry his water in the assembly of land parcels, just the kind of action now prohibited by federal government agencies. Trump wants to take a bankrupt golf course project called Running Horse and turn it into one of his legendary developments by acquiring the property the easy way.

It now appears that the major creditor for the property, La Jolla Loans, will assume title to their interest in the project, sell it to the City of Fresno who then will assemble the rest of the property by eminent domain and turn all of it over to developer Trump. And if this process ever made it to the present Supreme Court, it probably would be ruled illegal.

The Shoals has its Retirement Systems of Alabama developments and it has performed exceedingly well according to reports even without the addition of a commercial attraction in Veterans Park.

The speculation in the 1920s that Henry Ford was planning a “Detroit of the South” in Muscle Shoals is another bit of irony – those automobile plants (not Ford’s) actually did come to Alabama many years later with no particular thanks to the TVA. Ford’s offer to lease and improve the surplus Wilson Dam at Muscle Shoals and other properties from the federal government was a fact but it was strenuously objected to by none other than George W. Norris, then chairman of a powerful .Agriculture Department committee and later considered to be the “father” of the TVA. Here are some of the comments from those 1922 hearings that preceded the TVA Act by eleven years.

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Sen. James T. Heflin, uncle of Howell Heflin who also later became a United States senator from Alabama, served on that same committee with Norris and he was strongly in favor of the private development proposed by Henry Ford because it offered many permanent and good-paying jobs for the Shoals area. Later, his nephew Howell would laud the TVA and became one of its most ardent supporters.

Besides questioning whether the TVA Act is actually constitutional, (there have been no substantial challenges since Ashwander v. TVA in 1936) there remain some very serious flaws in the execution of its overall scheme. Despite an obvious non-partisan air, FDR was a vicious and vengeful political infighter and became concerned that the Supreme Court was overturning many of his New Deal programs

FDR could not cajole the justices to stop overruling his programs as being unconstitutional so he took another tack. He proposed legislation to put an age limit of 70 years for all judicial appointments but he was aiming at the five judges that kept ruling against him. They were “too old”; he said, the court needed “fresh blood” for the “living” constitution. And then if a justice did not retire, a new one would be added and so on. It could have resulted in a 15-person court or no fewer than nine members. The newspapers picked up quickly on this FDR ploy and called it what it was, “court packing”.

Either the current justices became spooked by FDR’s threats or public opinion began to work against FDR, the court began to go easier on FDR’s programs and the controversial “court packing” scheme was dropped.

Meanwhile, the TVA began its odyssey of trying to figure out how to fill in the numbers on the blank check FDR handed the first appointed TVA directors. They had very different ideas of how to carry out the charge in the TVA Act.
By establishing its own territory, the TVA conversely removes that land area from the jurisdiction of the seven states involved for purposes on rulings on utility rates and on other decisions normally made by those states. There is no longer “state control” over electricity and flood control there and the land effectively is transferred to the federal government for those purposes.
Whenever TVA decides to increase electricity rates, it does so without the authority of any of the states’ public service commissions or any other legal authority of those states. It is incumbent on states to go “hat in hand” to “request” a change in TVA policy (not rates) that affects them.
The point TVA hardly ever discusses is how they have kept electricity rates as cheap as they have been (but not so much so anymore) and how the “mystery” is solved. Your lower rates are caused by the direct subsidy of so-called “backdoor” financing. This amounts to about $25 billion in bonded indebtedness today with an added $5 to $7 billion in the next few years.
TVA’s “dirty little secret” is that it is the users, the stakeholders, of TVA electricity who are on the hook for that huge debt. No one in the TVA hierarchy is personally responsible for it, not your congressional representatives, not even the president of the United States, and technically, not even the government of the United States. Divide 8.7million accounts into 25 billion dollars to get an idea of how much debt you (not we or them) owe today. It comes to about $2800 for each electricity account. Or if you use the so-called logic of TVA’s payments in lieu of taxes that is based on prorated usage, some customers would be in for a huge surprise.
Perhaps taxpayers could claim their share of extra TVA cost as an expense of government directly attributable to them. Maybe the IRS needs to make a ruling on this.
Now that the Southeast is in the middle of a most severe drought, it seems that everyone wants some of the Tennessee Valley water. Likewise, it also seems that the one to try to get that water from is none other than the TVA. Apparently, TVA (the federal government) lays claim to the ownership of that water. Again, states must defer to a federal agency run by a non-elected body answerable only unto itself, raising again the ugly head of sectionalism