cold and that it is necessary to have this heavy-weight clothing. To give you an idea, I have brought down, if you would like to look at them, these photographs, and also one of the suits. That [indicating] is the outfit with the heavy outer jacket.

The CHAIRMAN. That is supposed to be a sailor?
Paymaster PEOPLES. Yes; sir.

The CHAIRMAN. Is this money all for this extra clothing?

Paymaster PEOPLES. For nothing else, approximately 200,000 suits.
The CHAIRMAN. How much will a complete outfit cost?
Paymaster PEOPLES. A complete outfit will cost about $22.58.

The CHAIRMAN. You are not going to have them all in a cold climate?

Paymaster PEOPLES. No. We are figuring on a slight percentage of loss. The fleet, as far as we can tell, will be in the North.

The CHAIRMAN. You are figuring on being able to equip everybody?

Paymaster PEOPLES. Yes, sir. It takes a long while to manufacture these clothes.

Mr. SHERLEY. About how many suits?

Paymaster PEOPLES. About 200,000.

The CHAIRMAN. Each outfit consists of the enumerated articles? Paymaster PEOPLES. Yes, sir.

Mr. SHERLEY. Where will you get them?

Paymaster PEOPLES. From various manufacturers.

Mr. SHERLEY. How?

Paymaster PEOPLES. By competition. We have secured some preliminary prices already. For the wind-proof shirts and trousers the lowest figures we have received are from

We have gone the limit on competition in all of our purchases. The CHAIRMAN. This is not to be charged to the men as the other clothing?

Paymaster PEOPLES. No, sir. It was looked upon by the Secretary as being for unusual service abroad brought about by the war solely and of such a nature that it should be kept aboard each ship as the men come and go.

A message has just been received from Admiral Sims to the following effect:

It is proposed to use British standard winter heavy clothing under an arrangement for loan and gratuitous issue as recommended by a special flotilla board to consider the matter. The present need for certain articles is urgent, as the nights are cold. As soon as American Navy standard item of heavy clothing is received will discontinue use of the British variety.

TEMPORARY GOVERNMENT FOR WEST INDIAN ISLANDS.

The CHAIRMAN. For expenses incident to the occupation of the Virgin Islands you ask $200,000.

Paymaster PEOPLES. That is an item that was brought up in this way, and I will be glad for Mr. Reed, who has been our expert on finances connected with the Virgin Islands since we took them over, or since the declaration of war, to answer any questions in reference to it. The governor of the islands sent an estimate to the Secretary, which was handled by the Chief of Naval Operations, who has immediate jurisdiction over the islands, and the Secretary went over the various estimates and eliminated many items. He recommended this particular item of $200,000

The CHAIRMAN (interposing). What is it for?

Mr. REED. The original appropriation for the islands makes good the deficit in the revenues due to the change in ownership by $100,000, and that was based on the budget of the islands as it had been prepared by the Danish authorities there, but a survey of the situation by the governor showed that they would not be sufficient by $11.000, even maintaining the conditions under the present status, but there are certain conditions there which should receive correction. One of them is the water supply. There are no waterworks in any of the towns. They depend on their cisterns and a few insanitary wells, and there are a few wells back inland, from which the water has to

be hauled. That brings about a condition which it seems should be corrected.

Another feature is that there is no fire protection in any of the towns. They use old-fashioned hand carts, with tubs and tanks to which hand pumps are attached, and in the event a fire started in any town it is reported that it would be practically impossible to stop it if there should be any breeze blowing at all. If that be true, there should be some arrangement made to give them better fire protection.

In the Government offices there is no furniture except what was the property of the Danish Government, which will shortly be removed. They have allowed it to remain there temporarily, but when it is removed the offices will have to be fitted up. They do not even have safes or lockers to keep confidential papers in, except oldfashioned safes. The Government building should be thoroughly outfitted.

Another feature is the sewage disposal. There is no arrangement at all now, but it does not appear that much can be done in that way with this small sum of $200,000.

The CHAIRMAN. What will you do with this $200,000? Under the law all of the revenues of the Virgin Islands are available for expenditure for the conduct of the Government there.

Mr. REED. But, due largely to changed conditions in the shipping world and changes in the revenue laws, the revenues will fall off very materially.

The CHAIRMAN. How much?

Mr. REED. It is estimated that for St. Thomas and St. John there will be a falling off of $36,000 alone, assuming that the conditions of last year will continue, which is not probable, because the foreign trade is liable to be less now than last year. That is true because there are not so many ships available to handle the traffic. Then, the harbor fund will lose $8,000. The estimated loss on imports at St. Croix is $54,000, as compared with the previous year. There is also a loss due to the increase in the cost of supplies on the islands amounting to $15,000. If conditions were allowed to remain exactly as they are, there would probably be a deficit of from $10,000 to $20,000 over and above the $100,000 which has already been appropriated. But it seems that some steps should be taken at this time to improve the condition of the water, or at least to put in a few wells and also to improve the fire protection.

The CHAIRMAN. Is there any comprehensive report upon the conditions there?

Mr. REED. There is a very complete report, which is preliminary, and which I will be glad to put in the record. But it is the intention of the Secretary, if this additional money is allowed, before authorizing its expenditure, to require the Government to submit a more detailed report as to how it can best be applied.

The CHAIRMAN. The proper way would be to require that before we allow this money. Before we appropriate the money we would like to see the detailed estimates and report.

Mr. REED. Their fiscal year runs from March to March, and it seemed that it would be inadvisable to delay asking for the money until the final report. I will submit this report for your record. (The report referred to is as follows:)

NAVAL GOVERNMENT,

From: Governor.

THE VIRGIN ISLANDS OF THE UNITED STATES,
Government House, St. Thomas, May 10, 1917.

To: Secretary of the Navy (Operations).

Subject: Virgin Islands of the United States; preliminary report.

1. The following preliminary report on general conditions in the Virgin Islands of the United States is submitted:

2. Finances.-The following estimate of the financial situation of the islands is only tentative, as the exact condition can be known only after a complete investigation in St. Croix as well as a more thorough examination in St. Thomas than has as yet been possible. The figures given in the reports following are, however, believed to be correct, and eonugh progress has been made in the investigations to show conclusively that the appropriation of $100,000 provided by the act of Congress approved March 3, 1917, will be inadequate to prevent a very serious deficit long before the expiration of the local fiscal year (Mar. 31, 1918).

3. In order that local financial matters may be understood it must be realized that St. Thomas and St. Croix have been operated almost as distinct countries, having entirely different rates of import and export duties, and even different tariff rates as between the two islands. The islands of St. Thomas and St. John operate under a combined treasury and budget which are distinct from those of St. Croix. In addition, the harbor of St. Thomas has yet another budget and treasury, which are not under the jurisdiction of the St. Thomas Colonial Council, but are controlled by a harbor board, of which the governor is ex officio, chairman. About 10 years ago an arrangement was made whereby the harbor was supposed to contribute to the St. Thomas treasury 50 per cent of net profits yearly, provided such amount did not exceed 50,000 francs. It was the intention that the remainder of the profits should revert to the harbor surplus fund. It will be seen from the above that there are, in effect, three separate working funds or local treasuries in the islands, and while the harbor fund bears a certain relation to the St. Thomas treasury the St. Croix treasury has no connect on with the harbor fund and treasury of St. Thomas.

4. The revenues of the three budgets referred to for many years have been insufficient to meet the running expenses of the islands, and a very large part of such expenses has been provided for in the national budget of Denmark. The part of the island expense borne directly by Denmark may be estimated at about $150,000 per annum. This expenditure was, however, largely offset by certain revenues, which will not accrue to the United States. The Danish colonial lottery yielded a revenue of about $110,000 per year, and from $10,000 to $15.000 per year was contributed by the island of St. Croix. There were also certain expenses paid by Denmark, such as salaries and upkeep of the State church, and pensions and allowances to Danish officials, which will not be a liability against the United States. After making allowances for the revenue and expenses which do not apply to present conditions, there still remains an amount of about $130,000 to be paid from some source other than the estimated revenues of the islands, even without making any allowance for the large decrease in revenue incident to reduced import duties under the new tariff law, These figures, however, include the cost of maintenance of the gendarmerie, which for the fiscal year 1915-16 was about $85,000. The work of the gendarmerie is now being performed by marines, but in case the policing of the island is eventually taken care of by constabulary of civilian police, as it ought to be, the cost of maintenance, as well as the cost of original equipment, would properly be charged as an expense of civil administration.

5. In order to arrive at an estimate of the net deficit to the United States it is necessary to take into consideration the effect of the new tariff law governing import and export duties. During recent years a very large proportion of imports both to St. Thomas and St. Croix was from the United States, and the removal of import duty on materials produced or manufactured in the United States, when taken into consideration with present shipping conditions, make it practically certain that at least 90 per cent of the revenue heretofore derived from imports will be lost. A net loss of $36,000 for this one item under the budget for St. Thomas and St. John must be expected. This amount will be augmented to some extent during the present fiscal year by the loss of shipping dues, etc. The St. Thomas Harbor budget places gross revenues of the harbor at about $30,000. It is not believed that the revenue actually accruing

will exceed $16,000, which will about balance the ordinary expenditures. There is estimated in the St. Thomas budget a revenue of $8,600 representing the contribution of a part share of the surplus of the harbor treasury during the year. This estimate is based on a condition of affairs that does not now exist, and it is believed that this estimated revenue will entirely disappear. The amount of import duties at St. Croix will, under normal conditions, not exceed $6,000 instead of the budget estimate of $60,000. The amount which may be expected to be derived from export duties is highly problematical, as this is dependent upon the result of the sugar crop. Many estimates have been received on this point, these estimates varying from 5,000 to 9,400 tons. From information now at hand it would seem that 8,000 tons may be accepted as a tentative estimate, but the accuracy of this estimate depends greatly upon the weather and labor conditions. Using these figures, there would be during the year, a probable net gain on exports of $32,000. In preparing the budget estimates, no allowance was made for the increased cost of necessary supplies, and it is believed that purchases of this kind will cost about $15,000 more than the budget figures. There are a few other items of revenue which are probably overestimated in the several budgets, but suflicient information has not as yet been obtained to enable reliable estimates to be arrived at. The amounts involved are, however, comparatively small and will not greatly affect the final result.

6. In recapitulation, the following statement presents an estimate of the net deficit which can be foreseen at this time. It must be remembered that the estimated revenues in the several budgets are entirely covered by estimated expenditures, and any decrease in the budget estimates of revenues must therefore result in a net deficit unless expenditures can be correspondingly decreased. 7. The statement follows:

Loss on imports, St. Thomas and St. John_.

Loss of estimated receipts from harbor fund

Estimated net amount to be paid directly by the United States (expenses heretofore paid by Denmark, based on expenditures of fiscal year 1915-16, revised to meet present conditions).

Estimated loss on imports, St. Croix_-__

Additional expense incident to increase in cost of general supplies__

$36,000 8, 600

44,400

51.000

15,000

Saving under St. Croix budget (contribution to Denmark).

15,009

47,000

Estimated net deficit.

111,000

8. In explanation of the above estimates the following remarks may be of interest:

"The local fiscal year dates from April 1, and while the records of the fiscal year 1916-17 (from April 1, 1916, to March 31, 1917) are not yet available, the records for several years prior to March 31, 1916, have been carefully examined, as well as the local and Danish budgets for the fiscal year 1917-18. In estimating the revenues for the next fiscal year, it seems to have been the custom to average the receipts and expenditures for the preceding five years. This, however, does not meet present conditions, as the shipping has decreased to a very large extent during the war. The estimates given herein have, therefore, been based principally on the fiscal year 1915-16, corrected as far as possible to meet present conditions"

9. The estimated deficit of $111,000 represents only the net deficit which can be foreseen at this time, and does not provide for any expenditures in the way of fire protection, water supply, sewage disposal, constabulary or native police to replace marines, maintenance and upkeep of Government buildings, furniture for Government houses, equipment of Government offices, necessary increases of salaries of certain employees, etc.

10. The necessity for certain of the improvements above referred to is vital. For water supply the islands are dependent upon what may be collected in cisterns, and when the supply of water obtained during the rainy season is below the average, hardship and suffering ensue, especially among the poorer classes. This is the case at present, and many of the people are compelled to obtain water from any of their more fortunate neighbors whose cisterns are not yet entirely dry, or resort to some of the few wells in the town, the use of which is not considered conducive to good health conditions. East of the town of St.