STATEMENT OF WILLIAM E. FINLEY, VICE PRESIDENT, THE ROUSE CO., COLUMBIA, MD.

Mr. FINLEY. Good morning, Mr. Chairman.

My name is William E. Finley, senior vice president, the Rouse Co. Our organization is a private corporation dedicated to the building of new communities.

I gather the reason we have been invited here today is because we have probably had the most intensive experience and what seems the most successful experience in the United States in financing, planning, and building a new city of over 100,000 people. We are aware of the fact that as the Nation grows, there is a clear need for new communities, both near existing metropolitan areas and beyond commuting distance of metropolitan areas.

We are also aware of the fact that private enterprise itself cannot accomplish the task of the building enough new communities where they are needed and when they are needed.

The good fortune we had in being able to acquire a site, now some 18,000 acres, between Baltimore and Washington was the result of as much luck as skill. The fact we were able to finance the project through the assistance of major life insurance companies was a mark of their long-term wisdom and their confidence in us and in the project. But I do not believe that such similar partnerships are likely to be able to acquire land and finance new communities at a scale sufficient to divert enough of the population of the future away from existing metropolitan areas.

I think that this is a propitious time to talk about the fact that new cities are critical because old cities are getting too big. The whole problem, just this very week, of a dirty cloud of air hanging over the east coast resulting in sickness and other disasters is strong evidence of the fact that there is literally only so much air above large cities. And it is possible for cities to get too big, witness the case of New York, and that unless there is a national policy which directs the enormous growth which is assuredly coming to small towns and to new towns, we are going to be in much more trouble than we already are by the end of the century. The world is not going to come to an end as far as we know in the year 2000 and we have other future citizens to be concerned about.

We talk, all of us, about the next 100 million people. Well, there are going to be several hundred million beyond that. And unless the United States establishes a policy of urbanization as proposed in this mechanism in this bill, we are going to be faced with too many New Yorks and too many Los Angeleses that are both coming to the edge of unlivability.

I think it is fair to say that even Joseph Stalin with his powers in the Soviet Union was unable to stop the growth of Moscow. And Moscow has continued to grow to a point where it is almost to the point of being unmanageable. The principle behind this fact is that growth cannot be stopped by fiat even in a dictator's land. Instead, it must be redirected by incentives and by policies and governments willing to carry them out.

This bill, I believe, would encourage the bringing into being both public and private entities with the specific task of building new

communities. I believe we would find, just as we have found as a result of the 1949 Housng Act, that cities and States and regions would respond by creating agencies working with private enterprise to bring about new communities.

It is clear to those of us who are active in the money market that large funds necessary to acquire sites will probably not come from private enterprise. It is unreasonable at this point in our business and tax history to expect large investors to put up money for land at a fixed interest rate when those same funds could be devoted to income-producing properties which clearly respond to inflation and allow those investors to earn an increasing rate of return overtime. Therefore, the provisions of this bill which provide, through loans and grants to public and private entities, funds for the acquisition of land and the installation of necessary utilities, roads and other facilities, seems to me very critical.

There is also a very great demand to find a way to get the major American industries, those that have been able to produce an enormous amount of products, into the city building business. There are very few firms in the country-you can count them on the fingers of one hand-who have declared themselves to be in the business of building new communities. And they are mostly very small firms, undercapitalized, and are not going to be able to do the job.

The report of the National Committee on Urban Growth Policy recommended a very modest program of 100 new towns of 100,000 and 10 new metropolitan areas of a million each, providing for only 20 million people. I believe that to accomplish even that in the coming 30 years will take a bill like this, is going to take incredible Federal leadership and vision, and is going to take a great deal of money. Those of us in the large-scale real estate business can verify that money is made by the creation of urban values. If the policies and funds envisioned in this bill were utilized to buy rural land and convert it to urban values, the Government, I believe, would get most of its money back over time. And it would have accomplished a great deal.

I happen to believe that this bill if enacted and funded could have a greater impact on the quality of urban life in this Nation than any other legislation that has ever been passed, including the FHA bill and the Housing Act of 1949.

Now, for the record, let me ask you, you and your associates who built Columbia, how long a time did it take you to pull together the land that was required?

Mr. FINLEY. We were operating, of course, privately and secretly as such land purchase has required. It took approximately 5 years from the initial conception of building a new town to the time in which the first families were able to move in. It took approximately a year to get ready to request financing. It took about a year to acquire the land, working day and night. It required buying over 165 separate parcels, farms.

The CHAIRMAN. How much is involved, roughly, how many acres? Mr. FINLEY. Originally, it was about 14,000 acres, a little larger than Manhattan Island. We bought one-tenth of a rural Howard County, Md., and it took $23.5 million. And there were many holdouts. There were lands that we couldn't buy made planning easier, but, of cours

there was no system whereby the local government, if they had wanted to, was able to assist in the assembly of land.

The bill you have before you would allow public and private entities to work together to assemble sites where they are needed, the shape they are needed, and at prices that can be afforded.

Among the greatest difficulties in new community building is the cost of the initial land, of putting in all the improvements and waiting for profits to come out in order to make the thing work at all.

In our projections, we had 5 years of predevelopment and 15 years of projected development for a city of 120,000 people. And this project will not get into the black until approximately 12 to 13 years after the initial expenditure. This is called patient money. In the current money market, and I think in future private money markets, there is not going to be very much patient money available and that the kind of funds you envision in this bill are going to be absolutely essential if new communities of any size, scale or number are going to get built. The CHAIRMAN. When you originally made your plan, did you block out on the drawing boards the exact area that you wanted to obtain? Did you have to make any changes because of holdouts?

Mr. FINLEY. Yes, sir. We did some trial purchases just to see what would happen in the area. We bought about 1,000 acres, and there was no flurry. Prices did not go up. And so we blocked out a general section like 25,000 or 30,000 acres. And we told the people who were buying the land for us, "Buy everything you can within this large area, and we will see."

We checked the transactions daily. And we were able to then pretty much zero in on an area where it looked like we were going to be successful. There was a central 800 acres that we clearly had to have owned by a Washington land speculator who did not know to whom he was selling or for what reason. If he had, he would have taken us to the cleaners, and it would have had a substantially negative effect on the land assembly. As it was, some land we purchased at $600 an acre, some land we purchased at $15,000 an acre; but the overall average of $1,500 per acre was satisfactory for our purposes.

There is one thing I would like to add to my comments. It has to do with the method of building a new community. Our company is playing the role, in effect, of land purchaser, planner, land developer. And then we in turn bring in homebuilders. We do not build homes. We are not in competition with homebuilders. What we do, in effect, is create an environment within which homebuilders can work much more easily, much more quickly, than they ordinarily can do if they have to go out, buy land, subdivide, rezone, go through the whole process themselves. We have over 20 private builders working within the context of a planned new city, and it is a real bonanza for them. And even in this money market, they are doing very well. They are moving ahead where other builders have dropped right out of the building business because they cannot get funds to go ahead for land acquisition and all those other steps.

So new communities, I believe, can be a real boom for the homebuilding industry that is in such desperate straits now, because they create an environment within which the small builder can work.

The CHAIRMAN. I want to get back to the land because to my way of

thinking, that is our most difficult problem in building new towns. You have mentioned a couple of rather large tracts.

The first thousand acres, was that one tract or several?

Mr. FINLEY. It was several. The average size was like, I think, 200

acres.

The CHAIRMAN. And then you mentioned about buying another tract that you said was owned by the land developer.

Mr. FINLEY. A land speculator; right.

The CHAIRMAN. Was that just one tract?

Mr. FINLEY. There was one of 800. There was one other of 1,000. But the rest were all much smaller, from 25, 50, 100, 250. As I say, we had 165 separate acquisitions, and we negotiated with over 400 owners and were able to only buy the 165.

The CHAIRMAN. How many people live in Columbia now?

Mr. FINLEY. We have about 10,000 new residents in our first 2 years and growing at the rate of about 7,000 or 8,000 people a year.

The CHAIRMAN. You speak of new residents, did you have any te fore that?

Mr. FINLEY. There were 6,000 people living within the boundaries of the land that we purchased.

The CHAIRMAN. Did they continue to live there?

Mr. FINLEY. Oh, yes.

The CHAIRMAN. And what is the total population thers ?

Mr. FINLEY. Within the general boundaries of Commbia, abra. 16,000 people.

The CHAIRMAN. 10,000 of whom bought homes gon balto ja teat right?

Mr. FINLEY. We do not build. They are renting xranceta trag homes, moving into 221(d)(3) housing, which we have term, and wal said growing at the rate of about 7.000 a year.

The CHAIRMAN. Do you have any industry in them!

Mr. FINLEY. Oh, ves.

The CHAIRMAN. What nature!

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time in getting homebuilders to keep down the price of housing. It is a combination of cost of money, construction, and the fact that we have had an excellent market.

We are now joint venturing with some small builders in order to try and bring down the price of housing in many cases below $20,000 in order that a greater percentage of the people who work in Columbia can live there.

The CHAIRMAN. Where do the other people work, the people who live in Columbia and do not work there?

Mr. FINLEY. Primarily in the corridor between Baltimore and Washington.

The CHAIRMAN. How far is Columbia from Washington?
Mr. FINLEY. It is about 20 miles.

The CHAIRMAN. How far is it from Baltimore?

Mr. FINLEY. About 15 miles.

Very few people realize it is only 37 miles from the White House to the Baltimore City Hall.

The CHAIRMAN. I think most of us do.

Mr. FINLEY. You may, but I do not think many people do.

The CHAIRMAN. I never had the White House as my starting point, although I have been there a good many times.

I hope some day I may come up to see Columbia. I have never been out there.

Now, let me ask you what about schools and churches and community centers and things of that kind, playgrounds, recreation areas? Mr. FINLEY. The provision of schools is a county function.

The CHAIRMAN. I am talking about the land. You had to set aside the land.

Mr. FINLEY. Our company, in effect, provides the school sites at the locations which we and the board of education agree. The county builds the schools. We provide parks, playgrounds, lakes, open spaces, swimming clubs, tennis clubs, golf courses. All those facilities are provided by the development entity.

The CHAIRMAN. What about land for churches?

Mr. FINLEY. That is set aside in every village, reserved in every village. And we negotiate with the church groups for them to build their own buildings.

The CHAIRMAN. Recreation areas?

Mr. FINLEY. Yes; they are all provided.

The CHAIRMAN. Clubs and so forth?

Mr. FINLEY. Yes, sir. About 25 percent of all the land in Columbia is reserved for permanent open space and community facilities.

The CHAIRMAN. Well, thank you very much. I rather feel that if the new town movement-and I realize you were more or less pioneering in this field-is to succeed the way we hope it will, we have got to have industry, business, commercial establishments that will give employment to the people who live in that area. And I think that must be taken into consideration in the building of any new town.

Now, the thing that has bothered me all along has been this problem of assembling the land. And we have tried to help in that way in legislation by making it possible to insure those land purchases. But still, you have the problem of bargaining between the developer and the owner of different tracts of land.