HOUSING LEGISLATION OF 1966 159 Senator DOUGLAS. No, I think you should reply to the point I raised. I would say this: That we have studied the problem of providing assistance to these people which was, in fact, the intent of 108. We think section 108 needs improvement. Later on in my statement I give the reasons why we feel it must be improved. Senator DOUGLAS. Do you think the Department has a right to disobey an act of Congress on the ground they know better? You are not the lawmakers of this Nation. You are the administrators of the laws. I do not like to use the term "servant," but you are the servant of Congress in a proper sense, as we are the servants of the people. But you are not the dictators to Congress. Mr. REED. Yes, sir. I fully understand that position. I would like to say I am not a constitutional lawyer, but I would say that under advice of counsel we were told that section 108 was permissive was permissive, sir-rather than mandatory legislation. Again, we have the same objective as the committees of Congress in this matter, sir. Senator DOUGLAS. Our attorney says he thinks there is a good deal of merit to your contention. But the question of whether an authorization is binding upon an administratíve body-well, go ahead. We can argue this constitutional question. But to my mind it is a very serious one, and I object to the general tendency that is taking place of a faceless bureaucracy making the decisions, the legislative decisions, which are more properly the matters for those elected by the people to make. We may not make them correctly, and I have some doubts about this legislation myself. But when we do make them, I believe they should be carried out. Go ahead. Mr. REED. Sir, I would like to reiterate that I think this committee and the Department of Defense have exactly the same objective, and what we would suggest is that we, working with the Congress, come up with a better solution to the problem. Senator DOUGLAS. Go ahead. Mr. REED. Thank you, sir. A comprehensive study of the matter was initiated on an urgent basis. Following approval of the essential recommendations of the study, a legislative proposal was submitted to the Bureau of the Budget. That agency is now studying the proposed legislation and obtaining the views of other interested departments. It is our expectation that a legislative proposal will be submitted to the Congress in the near future. Before explaining to the committee the highlights of the proposed legislation, I believe it might be beneficial to discuss section 108 and our reasons for objecting to its language which, in our opinion, makes its implementation as now written impractical. 1. First, the assistance afforded by section 108 would be based entirely on the concept of Government acquisition. There are no alternative provisions for partial compensation for the costs of private sales where such compensation might be both in the interest of the Government and satisfactory to the property owners. 2. Acquisition costs would be based on the averag parable properties during a representative period pric announcements. This broad wording could lead to putes. Moreover, no latitude or discretion is permit mination of acquisition prices. 3. Section 108 contemplates that the Government percent of all losses. Whereas the Department of! that its personnel should be protected from catastrop feel strongly that any program for assistance should concept of loss sharing between employer and emp words, a floor should be placed under the qualified i 4. We believe the matter of eligibility must be defined. For example, it does not appear appropriate ance to temporary civilian employees; we would restr career or career-conditional employees and military p certain specified exceptions, eligible personnel shou or performing duty at the installation at the time announcement and at that time be the owner-occupants for which assistance is claimed. For the most part. assistance should be etxended only to civilian emplo employment out of the commuting area. 5. Section 406 of Public Law 85-241, as amended (4 prohibits, with certain specific exceptions, the constr sition of family housing units "at or in support of m tions or activities" unles specifically authorized by an construction authorization act. There is a substantia whether the Secretary of Defense could proceed with authorized by section 108 unless such line item aut obtained. Our proposed homeowners assistance legislation r going comments, minimizes problems of administratio a solution which is equitable both to the individual ernment. Our recent study of the problem of DOD-connec affected by base closure actions during the period sin 1964, indicates that a substantial number of people are tary and civilian personnel whose employment or ser will be terminated at the various installations or activ for closure during this period as scheduled for closu broken down as follows: We have attempted to estimate how many of the be homeowners eligible for assistance under the c above, and we find that the gross figures are subject reduction. HOUSING LEGISLATION OF 1966 161 Based on sample survey data obtained during our study, we estimated that some 73 percent of the civilian employees are homeowners. Records indicate that some 54.7 percent of the civilian employees will probably leave the impacted areas to take employment elsewhere. Accordingly, some 39.9 percent of the total civilian group are homeowners who will relocate and would therefore be eligible for consideration under proposed DOD criteria. A comprehensive study of military personnel at activities announced for closure indicates that 10.4 percent are homeowners, all of whom will relocate. Application of these percentages to the above table indicates that a total of some 44,353 homeowners, 31,373 civilian, and 12,980 military, might be eligible for relief consideration. Our studies further show that many of the smaller closure actions will have only marginal impact on local housing markets, and homeowners in such localities would not be eligible for assistance, nor in fact need assistance, under a cost-sharing formula which carries a deductible feature such as is employed in casualty insurance policies. A realistic assistance program must be primarily directed to those areas which have experienced or will experience a major impact; areas such as Mobile, Ala.; Salina, Kans.; and Amarillo, Tex., to mention just a few. Since 1961 the Department of Defense has energetically pursued an economic adjustment program to assist communities in attracting new industries and in finding new uses for the real property and facilities of the installation slated for closure, and in other ways to mitigate the economic impact upon a community and its citizens resulting from the closure of a military base. Senator DOUGLAS. Mr. Reed, I am very happy to endorse that paragraph. The Department of Defense has done excellently on this. Mr. REED. Thank you. As successful as these actions have been, we recognize that something more is needed in the form of assistance to dislocated Government-connected homeowners. When housing values drop significantly as a direct result of a closure action, personnel relocating to another area frequently find they cannot dispose of their homes at reasonable prices. Our recent studies have indicated that these people have three primary requirements. They need : Relief from outstanding mortgage obligations. Some funds with which to acquire a new home in a new area. Restoration of at least a portion of accumulated equities which may represent life savings. We find that there is a trend in private industry toward greater assistance for transferred employees. At the same time there is a similar trend in Government. We have followed with interest the progress of H.R. 10607 which recently passed the House of Representatives. It is a bill which provides additional benefits for Federal civilian employees, including: Expenses of travel to new location to seek a home prior to moving. Up to 30 days' temporary living expenses at a new location in the continental United States. Per diem expenses during move for family members as well as the employee. Increased weight limits for household goods. Reimbursement for necessary lease terminations. Reimbursement for necessary sales expenses for o closing costs for new homes. Although H.R. 10607 will fill an important need, it d itself specifically to this problem of displaced homeow the matter of sales and closing costs. The legislation proposed will form a useful supplemental benefit to th ing legislation. Directing our comments now to the specific aspects o assistance to these homeowners, the legislation embodies assistance which, while it does not make eligible home does protect them against what might be termed catast It was considered necessary that the formula conta designed to meet a wide range of needs, from those owners (principally military) who are anxious to obta high mortgages, to the needs of long-term civilian owner cerned with recovering a reasonable portion of thei "equities." The formula proposed provides for acquisition by ment on the basis of one of three alternates to be chose owner: Ninety percent of prior fair market value less the decline in value subsequent to the base closure or Ninety percent of prior fair market value less prior value for each year of occupancy, with a n charge of 3 percent, or The amount of the outstanding mortgage(s) FHA-insured or VA-guaranteed mortgages, or the outstanding conventional mortgage (s) up to 90 prior market value. Both of the first two alternates employ a threshold o the fair market value prior to the base closure announce designed to eliminate a great many marginal cases whe substantial. Alternate No. 1 is based on the concept of proportic ing between the individual and the Government. Alternate No. 2 substitutes a charge for "use" or the property while occupied. Alternate No. 3 is the "high-mortgage" option. In addition to these acquisition alternates, the for bodies an incentive for private sales, in the form of to cover a portion of selling costs. This feature will acquisitions, which are far more costly than incentive the other hand, the formula recognizes that there is a le soft markets must be supported by acquisitions. Procedures for implementing this legislation, if e developed so that individual cases may be speedily p envisioned that the Department of Housing and Urba because of its outstanding experience in the field of r erties, will play a major role in these procedures. Th be beneficial to the Government and to the individual. HOUSING LEGISLATION OF 1966 163 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 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? |