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Most recently this year, and it is for this reason that I find the work of the subcommittee so helpful, this year my department has spent considerable effort in developing statewide housing targets for the Commonwealth as well as allocating these targets among the particular regions. This type of legislation would be very welcome to those of us who are working in this particular area.
Finally, in Massachusetts, this year we are working on a program of establishing a housing management institute. Your committee has shown the need for developing a capability to manage the many units which we are now finally producing in this country. The private sector management capabilities is presently inadequate to meet increasing needs, especially in the areas of subsidized units for people of moderate and low income.
So for all these reasons, Mr. Chairman, I am very happy to be here to be able to testify before your subcommittee on behalf of Gov. Francis W. Sargent and the National Governors' Conference.
(Mr. Charkoudian's prepared statement with attachments follows:)
PREPARED SPATEMENT OF LEON CHARKOUDIAN, COMMISSIONER, DEPARTMENT OF
COMMUNITY AFFAIRS, MASSACHUSETTS, REPRESENTING GOVERNOR FRANCIS W. SARGENT AND THE NATIONAL GOVERNORS' CONFERENCE
The purpose of this testimony is to respond to the legislative initiatives of the Subcommittee on Housing which are contained in the proposed "Housing and Urban Development Act of 1971” (H.R. 9688).
Before commenting on specific provisions of H.R. 9688, we wish to commend the Members of this Housing Subcommittee for developing a Congressional alternative to housing and community development legislation submitted by the Executive Branch. The investigative research which culminated in the introduction of this bill will strengthen the arm of the Congress in dealing comprehensively with the problems of housing and community development.
Although the bill contains many parts, our comments will be limited to a few sections most important to State Governments. HOUSING BLOCK GRANTS TO STATE AND METROPOLITAN HOUSING AGENCIES (TITLE V)
This proposal would authorize state legislatures to create state- and metropolitan-wide housing planning agencies representative of local elected officials which would be charged with the responsibility of developing a three-year housing program. The program would spell out the number of subsidized units to be built each year for three years, the types of units to be built (single-family, multi-family, or public housing); the general income groups to be served;
and the general location of the units. These state and metropolitan planning agencies would be eligible to receive housing subsidy block grants, discretionary funds and incentive payments if their three-year program were approved by the Department of Housing and Urban Development.
In our analysis of Title V we recognize three primary goals which we enthusiastically endorse:
First, the reform of the present housing subsidy delivery system in order that the essentially public policy decisions which are now made in private between FHA and the sponsor will be in the public domain.
Second, a recognition that unit production goals should not be the only criteria by which subsidized housing programs are evaluated. Equally important is where those units are located, who lives in them, whether they are close to sources of employment, and whether adequate public services are made available.
And third, Title V places a heavy responsibility upon state and local elected public officials for the development and maintenance of low- and moderate-income housing units.
The goals of Title V are laudable and should be supported. We are not as certain, however, that the exact mechanism which would be established by Title V is the most appropriate for the achievement of these goals.
Under Title V, State and metropolitan housing planning agencies would submit to the Secretary of Housing and Urban Development a three-year program which would include the five specific items mandated by section 507(a). The Secretary would be given authority to determine whether or not each plan submitted "substantially complies" with the requirements of Title V. We submit that if one of the goals of Title V is to depend more heavily upon the decision-making capabilities of state and local elected public officials, the "substantially compatible test of Title V places in the Secretary of Housing and Urban Development, and in reality in the hands of HUD bureaucrats, considerably more power over the community development decisions of state and local officials than they now have. We would encourage this Subcommittee to rewrite Section 507 in order that a minimal review process be established consistent with the Civil Rights Act of 1968 and with other pertinent legislation. On this most controversial issue, at no time should federal bureaucrats be allowed to second-guess a plan agreed upon by state and local elected public officials. Political consequences of an agency's plan should be the responsibility of those elected officials which agreed to the plan. In the past, we have found instances where, because of a detailed review process imposed by the federal government, elected officials were sometimes able to shirk their responsibilities and to place the blame for their inactions on the regulations and guidelines of the federal bureaucracies.
Title V would provide for a system of incentive payments of $3,000 per unit over a ten-year period. We have three reservations about this proposal . First, although it is the intent of the incentive payment to assist communities in the provision of governmental services to low- and moderate-income units, we are not totally clear as to which jurisdiction, suburban or central city, would get most of the incentive payments. For instance, it may be true that the costs of governmental services required for each new housing unit in central city areas may be higher than in suburban areas. If this were true, central city jurisdictions would get most of the incentive payments and the intent of Congress to provide units for entire metropolitan areas would be diluted. Second, it would be difficult to establish such an incentive payment program without making it retroactive to all existing housing subsidy units. It would be unfair not to compensate localities which have accepted subsidized units in the past while those who accepted units in the future were compensated.
Most important of all, we believe that the most effective single incentive to acceptability of subsidized housing units is whether or not adequate provision is made for the proper management of housing projects and proper counseling of the tenants. It will probably make little difference how much cash is offered when a particular locality is about to accept or reject subsidized housing units when, in a neighboring town, there exists a "Section 236” project only two years old which is in an advanced state of decay due to poor housing management. Title III of H.R. 9688, “Counselling in Improved Management Activities”, speaks to part of this problem, however it may be worthwhile to include in H.R. 9688, a requirement that the Secretary could not approve the construction or occupancy of subsidized housing units unless the sponsor had made provision for housing management and counselling services. The federal government is now constructing some 600,000 subsidized housing units per year. No one is developing plans of that magnitude to provide qualified housing managers or to provide counselling services to every tenant who moves into these units. Unless such provision is made in federal law, and unless the HUD Secretary is required to provide such services, the acceptability of subsidized housing units will dwindle rather than increase throughout our metropolitan areas.
Third, Title V earmarks 80 percent of the available housing subsidy funds to metropolitan areas and 20 percent to state agencies. This requirement should be deleted from the bill. It may be that in some States more than 20 percent of the housing need exists in non-metropolitan areas, and it also may be, in some States, that the State would elect to operate directly under this proposal with no metropolitan housing planning agencies being established.
URBAN DEVELOPMENT BANK (TITLE VIII) The National Governors' Conference will be meeting next week and discussing the whole issue of the municipal bond market. We do not believe that it is possible for the National Governors' Conference to support the Urban Development Bank proposed in Title VIII of H.R. 9688. There is growing sentiment in Congress to restructure the municipal bond market. Regarding further Congressional action in this area, the National Governors' Conference Committee on Executive Man
agement and Fiscal Affairs will be recomm
mending to the Conference next week criteria for the evaluation of various municipal bond proposals. These criteria are: (1) The use of any federal credit assistance programs for State and local governments should be entirely voluntary. (2) Such assistance should be free of federal interference and intervention in matters of state and local concern (3) Such assistance should be simple, dependable and free of delay, and (4) Such assistance should not be viewed and an alternative to federal grant assistance where the latter is appropriate and necessary.
The Urban Development Bank proposed by Title VIII of H.R. 9688 does not meet all of these criteria. The bank would be relatively free to determine which projects it funded and which it did not. The bank would have sole discretion in determining the extent to which the bank approved the substance of the project to be undertaken by the State or locality. Most important of all, the bank would be free to set the interest rate and to determine the volume of loans at any given time. These decisions are now made in the marketplace; and we prefer that they remain in the marketplace.
STATE AND METROPOLITAN DEVELOPMENT AGENCIES (TITLE VII) Unlike Title VIII, Title VII meets the criteria outlined above for acceptance by the National Governors' Conference. Title VII would enable state housing agencies to accept federal guarantee of their bonds and notes in the taxable market and to receive interest differential payments to make up the difference between the interest rate on taxable securities and the interest rate which they would have had to pay on tax-exempt securities.
The Secretary of Housing and Urban Development and the Secretary of the Treasury now have the authority outlined in Title VII of H.R. 9688 with respect to new community projects sponsored by public developers. Title VII of H.R. 9688 is basically an expansion of that authority to include housing units which are not constructed as a part of new communities.
PLANNING AND MANAGEMENT (TITLE IX) The goals of this Title—to improve the decision-making capabilities of state and local elected officials and to provide funds for the modernization of state and local governments--could not be opposed by any of the witnesses before this Subcommittee. These goals are in the interest of the federal government and should be pursued vigorously.
Of interest to the Subcommittee is the recent recommendation of the President's Advisory Council on Executive Reorganization (Ash Council) in which the Council, in discussing the management capabilities of state and local governments, concluded: “We recommend that executive management grants be made to the States to be administered by the Office of Management and Budget. These grants should be on a formula basis. They should provide for an automatic passthrough as to a major portion of the grant for cities and urban counties over 75,000 population. Each Governor should have the discretion to make grants to smaller, general purpose units of government or to combinations of these governments.”
It is the position of the National Governors' Conference in a policy adopted in August 1970, that "Assistance should be provided to plan comprehensively at the interstate, regional, metropolitan and local levels; to encourage local government to cooperate in solving area-wide problems through comprehensive planning, review and coordination; to foster intergovernmental attacks on problems of national rural and urban development, and to establish a method for exchange of development information among local, state and federal governments. Any legislation should provide that the grants be administered by the Executive Office of the President for distribution to the States, and through them to regions, metropolitan areas, counties and localities.”
It is our very strong feeling, that a mission-oriented functional agency, such as the Department of Housing and Urban Development, cannot adequately administer a comprehensive management program without making that program functionally oriented. Our experience with the 701 program in the Department of Housing and Urban Development has been that it has assisted states and localities to strengthen our housing planning and production capabilities. That is a proper role for the Department. However, Congress should not mandate upon the Department the additional functions of overseeing the improvement of the overall decision-making capabilities of local elected officials and the modernization of state and local governments.
However, we believe that the Department of Housing and Urban Development should administer a functional planning program that would assist localities to better utilize the community development and housing subsidy funds provided by the Department. This is the extent of the proper role in planning for the Department of Housing and Urban Development as it is presently structured.
We have appended to this statement, a two part legislative proposal as an alternative to Title IX of H.R. 9688. The first part would establish within the Executive Office of the President a $100 million planning management program which would be allocated to the States and through them to localities and regional agencies by means of a statutory formula. A State-by-State breakdown of the allocations is provided for your information. Funds could be used primarily for improving the decision-making capabilities of state and local elected representatives and for the modernization of state and local government similar to the functions outlined in Title IX of H.R. 9688. The second part of this proposal would create within the Department of Housing and Urban Development a functional community development and housing planning program which would be tied to 1/2 percent of the funds appropriated for community development purposes under Title VI of H.R. 9688.
The Department of Housing and Urban Development, a mission-oriented functional agency, needs a strong functional planning program unencumbered by demands to accomplish more than HUD can reasonably be expected to accomplish in addition to its important community development and housing programs. What we are proposing here is a means by which the Congress can be assured that the proper focus on the problems of management and government modernization which affect more than housing and community development will be given priority by the federal executive branch. An overall management planning program administered by the Department of Housing and Urban Development would almost automatically focus upon the priorities of that Department to the exclusion of others.
NARRATIVE DRAFT OF PROPOSED MANAGEMENT PLANNING ACT OF 1971
SECTION I. FINDINGS AND PURPOSES
This section would contain language to the effect that Congress finds that the federal system would be unable to respond effectively to the needs of citizens without expert management at the State and local general purpose governmental level; and that previous federal planning programs have been limited to specific functional areas; and that a mission-oriented federal agency would be unable to administer a comprehensive management planning program.
Congress would therefore declare that it would be the purpose of this Act to strengthen the management capabilities of State and local general purpose units of government and to assist them to respond to the needs of all their citizens by the allocations of their resources determined, both organizationally and substantively, at the local level.
SECTION II. DEFINITIONS
Director: Means Director of an appropriate office within the Executive Office of the President.
State: Means the several States, the District of Columbia, the Commonwealth of Puerto Rico, and the Virgin Islands, Guam, and American Samoa counted as one State.
City: Means any city, county or other unit of general local government containing more than 50,000 population and which the Director, guided by the level of appropriations for this Act, determines to be in need of assistance.
SECTION III. PLANNING AND MANAGEMENT PROGRAMS
The Planning Management Programs to be assisted by this Act would be those programs to be designed by the State, County or City to meet its own particular needs and to improve the capability of its own elected officials for developing, implementing, and evaluating policies, programs, and projects. No federal agent or agency may negotiate with a State or locality on the content of the activities to be undertaken by funds assisted by this Act if the chief executive officer of the State or city certifies in writing that all the activities to be undertaken with such funds are eligible for assistance under this Act.
SECTION IV. PROGRAM ACTIVITIES
The eligible program activities which may qualify for assistance under this Act would be:
1. Research authorized and/or conducted by a State Legislature to modernize and revitalize State and local government;
2. Improving governmental systems and operations including revenue resource allocation systems and methods for obtaining effective public participation in policy decisions;
3. Improving governmental structures, authorities, and coordinating mechanisms for dealing with the economic, social, and environmental complexities of modern society, including expansion of the role of elected executive officials and general units of government;
4. Establishing objectives, evaluating programs for achieving these objectives, and providing for program balance and coordination in response to State and local needs and priorties;
5. Providing (directly or through grants or contracts) planning, technical assistance, information, or advisory services to communities and agencies needing such assistance or services in connection with activities related to the purpose of this title;
6. Participating in organizations for joint or common governmental or governmental and private action, in solving problems of community revitalization and growth;
7. Other activities or projects, consistent with the purpose of this title which pertain to the coordination, regulation, modernization or improved implementation, management or control of governmental functions;
8. Implementing the provisions of the Intergovernmental Cooperation Act of 1968; and
9. The listing of the above eligible management planning activities does not contemplate the exclusion of other related activities such as:
a. Formulating policies and plans governing the use, development, and conservation of land, and developing and carrying out supporting or implementing procedures; and
b. Identifying and evaluating needs for housing, facilities and services, and formulating specific programs for meeting the needs so identified.
SECTION V. AUTHORIZATION OF APPROPRIATIONS
$100 million would be authorized to be appropriated for fiscal year 1972; $120 million would be authorized for fiscal year 1973; and $150 million would be authorized for fiscal year 1974, with grants available to cover up to two-thirds of the applicants' costs.
SECTION VI. ALLOCATIONS AND DISTRIBUTION OF FUNDS
Of the amounts appropriated for the purposes of this Act, 15 percent shall be allocated evenly among the States. The remaining 85 percent shall be allocated among the States in the same ratio as the population of each State bears to the population of all the States. (This means that each State, at the $100 million appropriation level, would receive at least $283,018; at the $120 million level would receive $339,622; and at the $150 million level would receive at least $424,528.) The Director shall allocate among the States all the funds appropriated for this Act. The money so allocated shall be distributed to the Governor of each State. The Governor shall be required to pass through to the cities and urban counties containing a population of 50,000 or more at least 20 percent of the funds allocated to his State. The remainder of the funds may be retained by the State or allocated to small cities and counties or regional planning districts to be used for State-wide, local, metropolitan area-wide management planning assistance at the discretion of the Governor. In States containing Indian Reservations, the Governor may allocate a portion of the fund to those Reservations.
SECTION VII. ADMINISTRATION OF GRANTS
Payments to recipients: The Director may make provision for the amounts appropriated and allocated to be paid to the recipients at such intervals and in such instalments as he may determine, but in no case will a payment be made to a recipient in advance of expenditure by the recipient for the activities to be