Increased weight limits for household goods. Reimbursement for necessary lease terminations. Reimbursement for necessary sales expenses for old homes and closing costs for new homes. Although H.R. 10607 will fill an important need, it does not address itself specifically to this problem of displaced homeowners except in the matter of sales and closing costs. The legislation which we have proposed will form a useful supplemental benefit to this other pending legislation. Directing our comments now to the specific aspects of the proposed assistance to these homeowners, the legislation embodies a formula for assistance which, while it does not make eligible homeowners whole, does protect them against what might be termed catastrophic losses. It was considered necessary that the formula contain alternatives designed to meet a wide range of needs, from those of short-term owners (principally military) who are anxious to obtain relief from high mortgages, to the needs of long-term civilian owners who are concerned with recovering a reasonable portion of their accumulated "equities." The formula proposed provides for acquisition by the Government on the basis of one of three alternates to be chosen by the home owner: Ninety percent of prior fair market value less 25 percent of the decline in value subsequent to the base closure announcement, or Ninety percent of prior fair market value less 1.5 percent of prior value for each year of occupancy, with a minimum "use" charge of 3 percent, or The amount of the outstanding mortgage(s) in the case of FHA-insured or VA-guaranteed mortgages, or the amount of the outstanding conventional mortgage (s) up to 90 percent of the prior market value. Both of the first two alternates employ a threshold of 10 percent of the fair market value prior to the base closure announcement; this was designed to eliminate a great many marginal cases where losses are not substantial. Alternate No. 1 is based on the concept of proportionate loss sharing between the individual and the Government. Alternate No. 2 substitutes a charge for "use" or "enjoyment" of the property while occupied. Alternate No. 3 is the "high-mortgage" option. In addition to these acquisition alternates, the formula also embodies an incentive for private sales, in the form of a cash to cover a portion of selling costs. This feature will help minimize acquisitions, which are far more costly than incentive payments. On the other hand, the formula recognizes that there is a level below which soft markets must be supported by acquisitions. Procedures for implementing this legislation, if enacted, will be developed so that individual cases may be speedily processed. It is envisioned that the Department of Housing and Urban Development, because of its outstanding experience in the field of residential properties, will play a major role in these procedures. This, we feel, will be beneficial to the Government and to the individual. The foregoing are just the highlights of this proposed legislation. Department of Defense representatives will discuss in detail all of the elements of the legislation when requested by the various interested committees. In summary, while we do not support the implementation of section 108, we do support the principle and the intent expressed in that legislation to provide financial assistance to those military and Government employee homeowners who have been adversely affected by a military base closure. We believe our study has produced legislation which improves upon the original section 108 language and which achieves the objective of that section by providing equitable relief for these deserving people. I greatly appreciate the opportunity to give you our views on this important matter, and I would be pleased to attempt to answer your questions. Thank you. Senator DOUGLAS. Mr. Reed, I have two or three comments to make on your testimony. The first is I wish you had given us the benefit of your criticism of the projected section 108 when it was before this committee. Were you Deputy Assistant Secretary at that time? Mr. REED. I was at that time, sir, and the Department was not asked to comment on that legislation, sir. Senator DOUGLAS. Was not asked for any? Mr. REED. We were not asked. Senator DOUGLAS. Did you know this was up? Mr. REED. We did not know, sir. To the best of my knowledge, our first information on this came when the section was introduced on the floor of the House as an amendment to the bill, I believe by Mr. Kunkel of Pennsylvania. Senator DOUGLAS. Did you appear before a House committee? Mr. REED. We did not appear. We were not invited, sir, to testify. Senator DOUGLAS. Well, we are always glad to have departments testify before us. We do not feel they have to have a specific invitation. We welcome your criticism. And I think some of your points are well taken. But it would have been much more helpful if you had given us the benefit of your criticism in advance rather than waiting until after the act is passed and then refusing to carry it out. That is my first comment. The second comment that I want to make is that I notice you propose that the Department of Housing and Urban Development, because of its outstanding experience in the field of residential properties, would play a major role in these procedures. Now, is that a euphonious way of saying that you want the Department of Housing and Urban Development to pick up the check Mr. REED. No, sir. Senator DOUGLAS. Rather than the Department of Defense? Mr. REED. The check will be picked up by the Department of Defense appropriations, sir. Senator DOUGLAS. By the Department of Defense? Mr. REED. By Defense. Our point Senator DOUGLAS. You pledge yourself to that? Senator DOUGLAS. You pledge yourself to that? Mr. REED. I hereby pledge the Department to that. I would like to say we feel the interests of the Government would be best served by those who have had the highest level of experience in handling such properties. We are not per se real estate people. And this is our objective here. Senator DOUGLAS. Now, it may be that we would want to include these provisions or some modification of them in the housing bill that we have under consideration. I understand that H.R. 10607 is now before the Committee on Government Operations. Mr. REED. We understand that. Senator DOUGLAS. We do not wish to get involved in a jurisdictional quarrel with that committee. But the original clause was before and passed upon by our committee. Subject to the opinion of the chairman, it would seem to me any revision of this act should be carried out by this committee rather than by another committee. I believe Senator Sparkman has asked for the details of the revisions which you favor and thus far has been unsuccessful in obtaining them. Is that correct? Mr. REED. The details of what is proposed in our legislation? Mr. REED. This legislation is currently under review in the Bureau of the Budget. But, knowing of the extreme interest of this committee, I was given permission as an exception to the normal rule to discuss with you the highlights of what was intended in the legislation. We envision, sir, that legislation will be up Senator DOUGLAS. Why are you not willing to discuss that before this committee? You must get a clearance from the Bureau of the Budget first? Mr. REED. Yes, sir. Before a department can talk on a piece of proposed legislation. Senator DOUGLAS. One of the committee staff raises a very interesting question. Would your legislation provide retroactive benefits to those who have been denied compensation because of the failure of the Defense Department to carry out the provisions of section 108? Mr. REED. Any person who has sold his property or had suffered foreclosure at one of the bases which was closed subsequent to November 1, 1964, which is the date established in section 108, would be compensated under this proposal, if he had suffered a substantial loss. Senator DOUGLAS. I wonder if you would be willing to try to get the Bureau of the Budget to expedite its action and, as soon as a suggested set of recommendations is ready, if you would transmit them to this committee. Mr. REED. I would be pleased to do that, sir. Senator DOUGLAS. Thank you. Senator Proxmire? Senator PROXMIRE. No questions. Mr. REED. Thank you, Mr. Chairman. Senator DOUGLAS. Please consider this question as to the relative roles of the bureaucracy and the legislative bodies in the modern State. Mr. REED. Thank you, sir. I will. (The following information was later submitted for the record :) DOD STUDY OF ASSISTANCE TO HOMEOWNERS IN BASE CLOSURE AREAS The problem HIGHLIGHTS The November 1964 base closure announcements had an unprecedented impact. DOD has demonstrated a responsibility toward communities and individuals affected by base closures through gradual phase downs wherever feasible and through its economic adjustment program. However, when housing values drop significantly as the result of a closure action, the needs of dislocated DOD-connected homeowners are immediate and pressing. They need : Relief from outstanding mortgage obligations; Some funds with which to acquire a new home in a new area; and Restoration of at least a portion of accumulated equities which may repre sent life savings. Section 108 Congress demonstrated its concern for this problem by enacting section 108 of the 1965 Housing Act. But section 108 poses inherent administrative problems. It could mean underwriting speculative profits. It ignores the recognized concept of "loss sharing" between employer and employee. Homeowners assistance in private industry Industry plans are not relevant to the DOD problem. Yet there is a clear trend toward more widespread industry recognition of a responsibility to assist transferred employees. Present and proposed Government assistance At present the Federal Government only provides for moving expenses, including transportation of household goods, plus certain temporary living expenses outside CONUS. Pending legislation which the administration has supported (H.R. 10607) provides civilian employees with additional benefits: Expenses of travel to new location to seek home prior to moving; Up to 30 days temporary living expenses at new location in CONUS; Per diem expenses during move for family as well as the employee; Reimbursement for lease terminations; and Reimbursement for sales expenses for old homes and closing costs for new homes. Eligibility under this study Non-DOD-connected personnel would be excluded. Eligible employees must be military personnel or DOD career or career-conditional employees assigned to a closed activity at the time of the announcement of the closure action (with certain exceptions). They must have been the owner-occupant of a dwelling in the impacted area at the time of the closure announcement (with certain exceptions). They must have been transferred (military) or required to relocate to new employment outside the commuting area (civilians), unless they qualify for assistance on the basis of hardship. Families of deceased employees who would have been eligible would also be eligible. Formula for assistance The proposed formula provides for acquisition by DOD of housing of eligible personnel in impacted areas on the basis of three alternates. In addition, there is a cash contribution toward sales expenses for those who elect to sell on the private market. This multifaceted approach has been tailored to meet the needs of short-term owners (mostly military) who principally require mortgage relief, as well as the needs of long-term owners (mostly civilians) who are concerned about recovering a reasonable portion of their accumulated equities. Each alternate is relatively simple. The formula employs a threshold concept in determining acquisition prices, similar to the deductible feature in auto insurance policies. It employs a loss-sharing concept similar to that frequently used in insurance. The sales incentive will encourage private sales and minimize the need for Government acquisitions in areas where market value declines have been moderate. Formula acquisitions will support local housing markets in areas of relatively sharp declines. Scope of assistance The program includes DOD homeowners affected by base closure actions announced subsequent to November 1, 1964. (Same starting date as in sec. 108.) The total of military personnel and civilians affected by such closure actions is 203,280. Of these, an estimated 44,353 would be homeowners eligible for consideration. Cost Fiscal year 1967 costs are estimated at about $58 million, far less than the estimated cost to implement section 108. Procedures Section 108 would require acquisition of homes by DOD. They would then be turned over to FHA for disposal. Here it is contemplated that FHA would act as DOD agency in acquiring, holding, and disposing of properties. Senator DOUGLAS. I would like to ask the distinguished chairman of this committee to introduce several representatives of the Old Domininion. STATEMENT OF A. WILLIS ROBERTSON, U.S. SENATOR FROM THE STATE OF VIRGINIA, AND CHAIRMAN, SENATE COMMITTEE ON BANKING AND CURRENCY Senator ROBERTSON. Mr. Chairman of the subcommittee, as you, of course, know, this is a very busy period for us all. Senator Sparkman had to leave to attend a meeting of the Foreign Relations Committee that is considering what should be done to get an honorable peace in Vietnam. It is not a very happy situation, and that concerns all of us. At the moment, the distinguished Secretary of the Treasury is testitying before my subcommittee on his budget. And, of course, we will not have any money to fight the war against Vietnam or anything else unless we collect it, and naturally I have got to be there to see that he gets some money to collect the taxes to pay the bills. But it is good of you, considering how pressed we all are, to give me this opportunity to present to this committee some very valued constituents and warm friends from an area with which my family has been associated for many years. I do not know whether you know it or not, but my father was a home missionary of the Baptist Church. In 1900 he was serving four little country churches in Franklin County. There was not a high school in the county-not one. His pay was $500 a year, with a small parsonage. He had five boys, and I was the oldest one. He was a highly educated man and practically had three degrees. He could read the classics in Greek, Latin, and Hebrew. He wanted his sons to be educated. So in 1904 he moved to the little college town of Salem. Now, that is a very old and historic town near what was known as Fort Lewis in the Revolutionary War. Many years later the Norfolk & Western built through that area and established headquarters at what was called Big Lick. That became the fastest growing city in Virginiajust 7 miles away. 1 |