Fourth, the bill appears erroneously to assume that the Corporation could be self-supporting. As a result, it provides no mechanisɅ for meeting the losses which we think are certain to be involved in the Corporation's operations, and if implemented would thus involve a potentially large hidden subsidy in the for of Federal borrowings which could not be repaid. Also, the bill would provide for backdoor financing which is inconsistent with the Congressional Budget Act and contains an exemption from budget controls which we believe to be unnecessary and unjustifiable, particularly in view of the substantial costs, borrowing and real economic impacts contemplated. Fifth, the bill would provide that the Corporation would acquire properties from FHA and other Government agencies, on a mandatory basis, through the issuance of corporate obligations in amounts based on fai market value but not to exceed the unpaid balance of any mortgage. These provisions, in the case of FHA, would operate to derive the insurance funds of cash flow that would otherwise be realized in property dispositions and would also in some cases preclude recoveries that might have been obtained covering fuLL losses. In this respect, the bill would complicate the already difficult financial problems of the Special Risk and General Mortgage Insurance Funds which would be charged with most of the properties likely to be acquired by the Corporation. The above comments are made with recognition of the fact that the program Proposed by S. 1988 is a "demonstration" only. However, the demonstration would be costly, involve creation of an entity and program that might be difficult to terminate, and contemplates an approach which for the reasons indicated - we believe to be unpromising and undesirable. For all of the reasons discussed above, we strongly oppose enactment of the bill. - The Office of Management and Budget has advised that there is no objection to the presentation of this report from the standpoint of the Administration's program. Sincerely, /s/ Robert R. Elliott Robert R. Elliott Senator CRANSTON. I am grateful to each of you for being here; now we will start with a panel of local government officials consisting of the following persons: Hon. John Reading, mayor, city of Oakland; Bob Chastain, Oakland Redevelopment Agency; Hon. John Sutter, city councilman, Oakland; and Hon. Fred Cooper, chairman, board of supervisors, Alameda County. If you would each come forward to the front table I would be very grateful. Fred and John have not yet arrived but they were out in the neighborhood, and I expect them very shortly. Mayor READING. Fred is back there. Senator CRANSTON. Fred, would you come up to the table. We are starting off with the first panel. Mr. Mayor, if you would lead off. STATEMENT OF JOHN READING, MAYOR, CITY OF OAKLAND Mayor READING. Thank you, Senator Cranston. Senator CRANSTON. I appreciate your presence very much. Mayor READING. Let me say I appreciate your presence here also and your holding a hearing here in the city of Oakland. I think it is encouraging to all of us that you recognize the problem and are willing to address yourself to it. In the three decades since World War II, Oakland has seen dramatic changes. Population growth has remained modest compared to the growth of the metropolitan area. An exchange of population has taken place that has left the city with a disproportionate share of low-income and unemployed people, while at the same time, industry and trade have moved to the suburbs, eroding both the job opportunities available and the tax base that supports basic city services. The city, in short, has increased problems and has less fiscal capacity to deal with them. I don't need to belabor the plight of central cities. Oakland's experience is a familiar story to us all, Oakland has been a leader in making use of available programs, Federal, State, and local, to deal with its problems. Our urban renewal program, public housing program, past activities supported in part by EDA and other programs, give testimony to our ability to utilize the programs available. We have by no means, however, placed our total reliance on Federal or State programs. We have always been active in our own behalf. We have faith in the future of Oakland and are prepared to invest our own funds and efforts in that future. A notable example is Oakland's sports complex, which, combined with winning baseball. football, and basketball teams, has focused national attention on Oakland. Local taxes made possible the bay area rapid transit system. Port facilities developed by the Port of Oakland have made Oakland a leading center for port activities on the west coast. Oakland has made a significant commitment to many improvement projects through the use of tax increment funds, including a project to house 300 displacees from our city center project. I emphasize the local effort we have made because we see the solution of urban problems as a partnership between local, State, and Federal levels, and I want to make it clear that we have demonstrated in the past our willingness to carry our share of the burden so we feel quite free to point out those areas where we think the Federal effort has not always kept pace. We are not pleased with the freeze on subsidized programs such as 235 and 236, or with the manner in which public housing, subsidized housing and FHA housing programs have been administered by the Federal Government in the last few years. We are pleased to have a greater concern on the part of the Federal Government for local input in the programs, but alarmed at what appears to be a withdrawal of support for the programs both in money and in people. The bill S. 1988 appears to us to be a move in the right direction. I support the purposes of the bill, that is, to prevent "the loss of existing housing units through the phenomenon of housing abandonment" and "redevelopment of well-planned, integrated, residential neighborhoods." I have two particular concerns with the present draft: One, the experimental nature of the program; and, two, I want to make sure that where counties are able and willing to participate in the_program, that there is a maximum degree of local participation. I am not going to go into the details of Oakland's problems. John B. Williams, executive director of the Oakland Redevelopment Agency, will be testifying and supplying that kind of input. I simply want to emphasize that we need Federal intervention in Oakland with the abandoned housing problem, not on an experimental basis, but on a basis of commitment that is commensurate with Federal responsibility for the problem and that gives evidence of a willingness to work with us until the problem is solved. We understand that new programs need a startup phase that may involve a modest beginning and changes as experience dictates, but we need something beyond an experiment. I have emphasized the willingness and ability of the city of Oakland to be active on its own behalf. I believe a maximum degree of local operation of the programs should be included. Thank you. That concludes the statement as far as the city is concerned. I am wearing two hats here today. One, of course, is the mayor of the city of Oakland, but the second one as a member of the board of directors of the League of California Cities, and they also have a short statement which they would like to enter into the record and which I will read now at this time. STATEMENT OF JOHN READING, MEMBER OF THE BOARD OF DIRECTORS OF THE LEAGUE OF CALIFORNIA CITIES Mr. READING. This statement summarizes the League of California Cities' recently adopted policy on housing abandonment, and I might say that this was an item of extensive discussion at the last board of directors' meeting. The Department of Housing and Urban Development's as-is sales program, while providing more immediate occupancy of foreclosed and/or abandoned FHA-insured housing units, allows deteriorated housing to be occupied without repair, and in so doing, increases the levels of substandard housing and the blighting influence of deteriorated units in marginal neighborhoods. The league, therefore, urges HUD to modify the as-is program to require that acquired units be repaired to local housing code standards. Member cities are urged to examine the local impact of as-is sales and, if adverse effects are determined, to enter into discussions with HUD to develop alternative disposition programs. Other possible action programs for the cities include a mandatory presale inspection of any unit unoccupied for over 2 months; presale on prerental code enforcement. I want to interject here a personal observation on that point. The question of either presale or prerental code enforcement, I have some concerns about that. The concerns lie chiefly about the economic impact of requiring the owner of a rental unit, which is already marginal in terms of the economic return to him based on the rent. The economic feasibility of him putting into that a substantial amount of money to bring it up to code in some cases, in many cases, my observation is that this is going to result in a further abandonment of the homes because the landlord, the owner, simply can't get back enough on rents to pay for those improvements. So if we are entertaining that type of legislation, I think there has to be some subsidy involved. I think there should be serious consideration of this because we do need those housing units. To have them continue to be abandoned and subsequently torn down just means that many more housing units are off the market. However we do need them badly and obviously they should be brought up to adequate standards. Other items that are suggested as possible actions for the cities. include an early warning system for monitoring neighborhoods for housing abandonment so we can get started on it early enough before it gets out of hand. Second, the league supports foreclosure aversion bills submitted in this session of Congress [A. 1457, H.R. 5398] which would provide mortgagor, rather than mortgagee, insurance. In addition, there is a proven need for educational and legal counseling to homebuyers and those caught in the foreclosure process. The league urges its member cities to reexamine their allocation of public investments throughout the city and, if warranted, increase the level of public services and improvements in certain target neighborhoods where foreclosure and abandonment is prevalent. By and large S. 1988 is consistent with the league's policy on housing abandonment. It is also consistent with the league's housing policy which stresses housing conservation as the major housing issue to be addressed by local governments. The bill, however, has not been presented to either the board of directors or the Community Development Committee of the league. An area of obvious concern to the league is the extent of cooperation and consultation between the corporation and local officials and residents [section 5(a)]. Housing |