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transit facilities and equipment. This higher level of maintenance on transit facilities and equipment is necessary to provide acceptable levels of safety and operations in the transiting of ships through the waterway. This serves also to make up some maintenance deferrals from previous years. All these maintenance costs will be covered by revenues.
Senator THURMOND. How many additional Panama workers are to be added as a result of this increase?
Mr. MCAULIFFE. The varying requirements for maintenance and overhaul are accomplished, in many instances, through the use of temporary and parttime employments. By far, the majority of these employments are obtained through the local labor market and are Panamanian citizens. Peak periods of maintenance effort occur in the dry season months and the employments associated with these maintenance projects are not a component of the Commission's permanent full-time workforce. The number of temporary workers associated with this increase would vary depending on the availability of workers and the nature of the project.
Senator THURMOND. Did Panama request this increase?
Mr. MCAULIFFE. No, Sir. The Agency's maintenance requirements are the result of standards of preventive maintenance established over the years which have been proven effective in routine and cyclical programs of maintenance and repair efforts. Requirements identified in periodic inspection and survey activities by engineering and other specialist personnel, and established maintenance programs, comprise the core of the Agency's overall maintenance and overhaul requirements, all of which are aimed at maintaining the waterway and as to assure its continued safe and efficient operation throughout the life of the Treaty.
FINANCING CAPITAL IMPROVEMENTS
Senator THURMOND. Is there any doubt that all capital improvements being initiated can be financed to completion from Canal revenues?
Mr. McAULIFFE. None whatsoever. The Panama Canal Act of 1979 ensures in three ways that capital improvements will be financed to completion from canal revenues. First, the toll provisions of that Act require that rates be set at levels calculated to produce revenues to cover all costs of operations, including capital for plant replacement, expansion, and improvements. This places a legal mandate on management to insure that toll rates remain adequate to finance capital improvements being sought. Secondly, the Act provides that no funds may be appropriated to or for the use of the Commission in any fiscal year in excess of the estimated revenue to be deposited in the Commission Fund during that year, plus any unexpended revenue balance in the Fund from prior years. This provision imposes on the Commission the ongoing requirement that revenues be sufficient to cover appropriations. Finally, the Act requires that any unrecovered costs be included as an element for recovery in setting toll rates. Thus, in the event revenue proved insufficient to cover costs in any given period, the shortfall would be recovered prospectively.
EMERGENCY FUND
Senator THURMOND. Do you still feel the $25 million emergency fund is the proper level of money for this fund?
Mr. MCAULIFFE. In my judgment, $25 million will provide a reasonable and needed level of reserves to ensure the continuous and efficient operation of the waterway. It is based on an assessment of the costs that could be incurred for the correction of landslides into the Canal, the removal of vessels obstructing the channel, the clean up of a major oil spills, as well as the potential cost for meeting unanticipated traffic increases. It also represents an amount that could prudently be set aside from Canal revenues for that purpose. At some future point in time, the Emergency Fund may have to be increased to keep pace with inflation.
Senator THURMOND. Why do you feel additional money could be "expeditiously processed" if necessary?
Mr. MCAULIFFE. I believe an emergency of such proportions, costing in excess of $25 million, would be of such importance to the Canal operation that it would prompt expeditious processing by OMB and the Congress. The $25 million emergency fund and any funds that could be diverted from operations would provide us the means to initiate a large part of the emergency work. In the meantime, we would request supplemental funding authority to complete the project and restore operations.