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MEMORANDUM

OFFICE OF THE MAYOR

SAN FRANCISCO

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To:

JOHN H. TOLAN, JR.

Deputy for Development From: WILLIAM S. KENNEDY

Financial and Management Specialist Subject: Midtown Park Corporation, dba

Midtown Park Apartments

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In accordance with your instructions, I have prepared (shown below) a Balance Sheet as of June 30, 1973 and an accompanyin Statement of Profit and Loss for the six months ended on that date for the subject entity.

The figures were supplied unaudited by the bank, and as I did not have access to the accounting records, I am in no positio to vouch for their accuracy. I did, however, compare them wi those on the December 31, 1972 statements, and they appear reasonable with one or two exceptions. Therefore, adjustment have been made for these. It seems, for example, that no accruals were set up covering audit fees, fire insurance, or depreciation; consequently, I have done so. In addition, to conservative, I wrote off a suspense item of $4,384.15.

Following are the details of the changes to the bank's Profit and Loss figure:

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BALANCE SHEET

June 30, 1973

ASSETS

$ 16,733.68

Cash in Banks
Accounts Receivable
Less:

Res. for Doubtful
Accounts

$ 7,421.44

-0

Mortgage Escrow Deposits
Tenants Security Deposits
Loan Trust Fund
Replacement Fund

7,421.44
10,745.58
25,334.33
12,934.12
20,407.81

$ 93,57:25

Leasehold Improvements
Furniture and Equipment

7,295.23
4.340.90

Less: Reserve for Depreciation

11,636.13
6.390,36

5,239,77

Total Assets

$ 98,816.73

LIABILITIES

Accounts Payable

$ 30,648.95

Provision for Payment to City

10,000.00

Net Worth

Balance 12/31/72
Profit 6/30/73

$ 55,718.69

2,449.09

58,167.78

Total Liabilities

$ 98,816,73

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In my opinion this operation can bear the payment to the City of $10,000 as was done last year, and you will note I have provided for it in the accounts. You will also note the above Balance Sheet does not reflect an asset for the value of the building or a liability for the mortgage against it which is correct seeing the corporation is the owner. However, these items are not carried on the City's Accounting Records either, even though the Real Estate Department lists the building as City property.

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Senator PROXMIRE (acting chairman). The committee will come to order.

Chairman Sparkman has left to answer the quorum, but meanwhile we will proceed.

Our next witness is the former distinguished Congressman from New York, a good friend of the committee, James Scheuer, now of the National Housing Conference.

STATEMENT OF JAMES H. SCHEUER, PRESIDENT OF THE NATIONAL

HOUSING CONFERENCE, ACCOMPANIED BY A. M. PROTHRO

Mr. SCHEUER. Mr. Chairman, I am delighted to be here today, and I have with me Mr. Prothro, who served for many years as General Counsel to the FHA and then Deputy General Counsel to HUD, and he is now practicing law with Krooth & Altman, works around the clock. He also works around the year with NHC, and it is a great pleasure to have him with me.

Senator PROXMIRE. Very good.

Mr. SCHEUER. I have a statement that I want to submit for the record.

Senator PROXMIRE. The entire statement will be printed in full in the record (see p. 149).

Mr. SCHEUER. We will be glad to answer questions.

Let me just hit three points hard to start out with. No. 1, as to the question of equitable treatment for housing programs. It is true we have not devised a way of housing all the poor well, nor have we devised a way of educating all our people with good education or providing all our people with superior meal service, yet we do not close down our schools and hospitals, because we fail to achieve design and delivery systems of other public services for all of the theoretically potential constitutents.

And to my mind, it is a curious anomaly to me as to why, for the first time, this administration has said, because we cannot do the whole job now, we are not going to do anything.

To me that symbolizes the administration's apparent longing to get out of the housing business. I think that equitable treatment philosophy should be looked on for what it is worth. Somebody ought to say, "The Emperor ain't got no clothes on.”

I have heard criticism of 235 and 236. We have heard the word "mismanagement" and so forth. Housing programs, unfortunately, tend to reflect the human condition and people are not perfect. Tenants are not perfect, project owners are not perfect, and government administrators are not perfect and government is not perfect.

I have been a critic of housing programs for a generation. Most of the housing programs that we have now are serving the American people very well; and millions of American families over the last generation, and over the close to 40 years that we have had housing programs, have led lives that were enriched and enhanced, far happier, far more satisfying, with far better environments for their kinds to grow up, than they would have had, had there not been these Federal housing programs.

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There have been a very small number of defaults in 235 and 236. In my own personal experience as a housing sponsor, I can tell you many of these problems have been due to conditions far beyond the control of the developer or the nonprofit group. These include increase in city taxes, increase in wages and other operating expenses that cannot be controlled, and whoever is making the decision on project operation and maintenance is caught between Scylla and Charybdis. Does he watch painfully and sadly and see the project deteriorate, or does he try to protect the project and people by providing minimally adequate operating resources. Of course, in some cases where inflation has hit housing, something has to give; but I think to blanket all Federal housing programs as failures, to blanketly label 235 and 236 as failures, is to state a gross misstatement. It is not fair to the work of Democrats and Republicans who have worked so diligently in both the House and the Senate to produce housing for all Americans.

Third, on the meeting of the deficit in public housing projects, I think we have simply got to find a way of making public housing programs viable and functioning. I think we have to do more than we have in the past, not less.

I believe we have to enable local public housing agencies to provide far more security than they have in the past, through stimulation of tenant groups who can do better through their own eyes and presence around the project, through the provision of locks and bolts and intercoms, some space modification that Oscar Newman has talked about, but above all, providing some kind of tenant facilities and services, and seed money, that make that project hang together as a group of human beings who are relating to themselves and relating to the neighborhood.

With those three comments on the questions you asked some of the mayors, let me very briefly hit some highlights on your bills and the administration bills.

Over the years, we supported reform and change. We support whatever permutations and shifts of emphasis and new techniques in the programs are necessary to make them viable. And we felt that the administration had taken over a formidable job and a laudable and perhaps needed job in reevaluating and giving scrutiny and oversight to over 35 years of housing program experience in 6 months' time.

We hoped, too optimistically, perhaps, that they might have come up with fresh thinking to enable us on both sides of the aisle in a nonpartisan way to get on with housing Americans more effectively.

We feel they have given us too little too late. The housing programs were suspended with a promise of better programs. Nine months later, we were presented with renewed promise for better programs, a slight thaw of the freeze, but a very clear indication that the Federal Government wants out of the housing business.

Meanwhile, of course, the disastrous effects of the moratorium continues. The housing problem increases. The backlog of needs continues to grow and our capability to produce decent housing is rapidly diminishing

We cannot urge strongly enough in answer to your question to the mayors that the Congress take an all-out, flat, obdurate approach and really dig its heels in on the moratorium.

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