Mr. WISE. The point that I am making is that you are beginning to develop a tool that is made up of many sticks, and that the Highway Planning Act is one of them. There is a very similar requirement. almost precisely the same kind of thing that now pertains to the expenditures of funds under the Land and Water Conservation Act of

1964.

Now, I say, with the Highway Act we are beginning to get some dialog, we are beginning to see that perhaps our thoughts on just highway planning were not broad enough. We are on the way to achieving dialog, communication and a great deal of understanding in the metropolitan area. If you would rather leave the act the way that it is, in terms of consistency with metropolitan planning, at the present time this would be fine, provided that the development of the demonstrations program was a part of the cities' comprehensive planning process. The objection that I was raising is that rather than saying that it should be consistent with a plan, we feel that it should be developed as a part of the plan. Now, if you want to leave it consistent with the metropolitan plan, but indicate that it should be a part of the comprehensive planning process within the city, this would, I think, overcome your objection.

Mr. REUSS. Mr. Moorhead and Mr. Ashley and I have proposed an additional criterion by way of amendment to the demonstration cities program of the administration which would require a workable program, which means communitywide, before you could get a demonstration grant. And that would meet at least part of your point, would not it?

Mr. WISE. Yes; it would.

Mr. REUSS. Thank you.

I do have one more short question.

I enjoyed your whole testimony, and particularly about new towns. I wonder if you have noticed as I did that whereas the State ownership part of the new towns proposal requires multi-income communities, the mortgage insurance portion does not. Don't you think the good planning for State-owned new towns is equally important for mortgage insurance to new towns?

Mr. WISE. If I were drawing the legislation, I would certainly draw it that way, Mr. Reuss, very definitely.

Mr. REUSS. Thank you.

Mr. BARRETT. Thank you, Mr. Reuss.

Mr. Wise, you have been a very informative witness here this afternoon. We have been very glad to have had you and your associate here.

The committee will recess until Monday morning at 10 o'clock. (Whereupon, at 2:23 p.m., the subcommittee adjourned, to reconvene at 10 a.m., Monday, March 7, 1966.)

DEMONSTRATION CITIES AND URBAN DEVELOPMENT

MONDAY, MARCH 7, 1956

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON HOUSING

OF THE COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2128, Rayburn House Office Building, Hon. William A. Barrett (chairman of the subcommittee) presiding.

Present: Representatives Barrett, Mrs. Sullivan, Moorhead, St Germain, Gonzalez, Widnall, and Harvey.

Mr. BARRETT. The committee will come to order.

The first witness this morning is Frederick Simpich, president of Oceanic Properties, accompanied by Mr. Harlan S. Geldermann.

Mr. Simpich, we are certainly glad to have you and your associate, Mr. Geldermann, here this morning. We do want to make you feel at home. We understand that you just had some surgery. And realizing that, we are going to try to speed up the time for you and not exhaust you in any way and get the best results that we can out of your testimony.

If you desire to read your testimony through, you may do so, and after you finish we will ask you some questions.

STATEMENT OF FREDERICK SIMPICH, PRESIDENT OF OCEANIC PROPERTIES; ACCOMPANIED BY HARLAN S. GELDERMANN, PRESIDENT, GELCO DEVELOPMENTS

Mr. SIMPICH. Thank you, Mr. Chairman. I would like to read our testimony, but I would like to be asked questions afterward, in which Mr. Geldermann will assist me in answering.

Mr. BARRETT. Before we continue, Mr. Simpich, we have one of our most capable Members here this morning. I know he is both a good friend of yours and Mr. Geldermann's. And he has proved to be one of our most capable and productive Congressmen. Don Edwards of that great State of California. And I would like Don to introduce both of you here this morning.

Don, would you do this honor for these two distinguished gentlemen? STATEMENT OF HON. DON EDWARDS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. EDWARDS. Thank you, Mr. Chairman and members of the subcommittee.

It is my pleasure to introduce two distinguished gentlemen and good friends of mine. Mr. Frederick Simpich, Jr., of Honolulu,

president of Oceanic Properties, and Mr. Harlan S. Geldermann, of Danville, Calif., president of Gelco Developments.

These two gentlemen have long been involved in homebuilding and land development. They are noted throughout the West for their creative work in the planning of new communities. They have important and thoughtful testimony in connection with provisions of the housing bill which have to do with the provisions for new towns and I am sure that you will find your discussions with them most helpful in your present considerations. Thank you.

Mr. BARRETT. Thank you, Mr. Edwards.

Mr. SIMPICH. Thank you, Don.

Mr. GELDERMANN. Thank you, Don.

Mr. BARRETT. You may proceed with your testimony, Mr. Simpich. Mr. SIMPICH. Thank you, sir.

We are here representing a joint venture in the development of a new community on 12,000 acres of land in San Jose, Calif. A subsidiary of Castle & Cook of Honolulu, Hawaii, of which Mr. Simpich is president, is also developing a 2,000-acre new community on the outskirts of that city. The following comments in support of certain features of the housing legislation under consideration are pertinent to both of these substantial new community developments.

Our remarks will be in support of H.R. 12939 introduced by Congressman Barrett, chairman of the Subcommittee on Housing, and H.R. 12946 introduced by Congressman Patman, chairman of the full Committee on Banking and Currency.

Last year the Congress enacted a significant new program of mortgage insurance for privately financed land development, which encouraged the formation of new communities. There was thus established as national policy the principle that the creation of such communities is one valid ingredient of urban expansion. And urban expansion there will be, sooner than most realize. The Nation's cities must expand to accommodate 200 million people in the next 20 years. For example, Honolulu, small among American cities, with its half a million population, will nearly double in size in this period and require urbanization of 25,000 acres of the scarce land on the island of Oahu.

If this urban expansion is to occur in an orderly and planned fashion, it must take place in the form of new communities and, unfortunately, the $10 million limitation imposed on the FHA mortgage insurance program for land development in last year's legislation is inadequate. We have before us the cash flow requirements for a new community within the city limits of San Jose. This statement, based on over a million dollars of planning, research, and engineering work and generated by computer, shows that a cash amount in excess of $20 million is required for this development. Clearly, only organizations with vast resources can undertake such a development. Passage of Congressman Barrett's and Patman's measures will make it possible for smaller developers and builders to participate in the way urban America should and must grow.

Further, the latitude given the Secretary of Housing and Urban Development, in extending the term of such mortgages beyond 7 years is important. Again referring to the cash flow for the new community in San Jose, we find that 11 years are required for the developer to recover his investment of cash.

While the conference of mayors has remained silent on this legislation, it is significant that the city manager of San Jose and the mayor of Honolulu are both strong advocates of the two new communities with which we are concerned and of the legislation which we endorse today.

Adoption of title II will provide the spur to the proper urbanization that the American public aspires to and which our economy and technology are capable of producing. Although almost entirely profitmotivated, the housing industry has, nonetheless, repeatedly demonstrated its anxiety to create a better living environment for Americans of every income level. The greatest and most dramatic opportunity to accomplish that objective has, in recent years, been couched in comprehensive preplanned urbanization. Unfortunately, however, after much probing over the past two decades, involving vast expenditures of private capital, one fact has become inexorably clear: The success of the new communities concept requires Federal assistance. Specifically needed are (1) single-source, large, long-term, low-interest loans: and (2) a clearinghouse set up to efficiently amass, organize, and disseminate factual information relating to this vast new industry. There are no conventional sources for the type of loan required. Smaller builders must either compromise the concept of the new communities development or resort to exorbitant interest payments, 12 percent is not unusual, plus some "sweetener" to attract the lender. The added inducement may take the form of an option on a large share in the equity or other collateral participation in the success of the venture. Conventional financing for land development is usually for a term of 3 years or less, while the development of a true new community will take from 10 to 20 years to complete.

Adoption of title II will have a multiplicity of benefits:

1. It will permit better housing and a better environment to be put on the market at lower prices.

2. It will insure smaller developers an opportunity to participate in the new communities concept by providing credit sources not now available to them.

3. It will permit devotion of greater areas to open space and the provision of more generous amenities.

4. It will permit better quality throughout.

5. It will insure better planning.

6. It will permit the creation from the outset of an environment balanced as to residence, recreation, open space and employment.

7. It will provide properly sized utilities and roads which will yield economies in the future thereby reducing the capital cost of the facilities as well as the service costs to the homeowners.

8. It will make for comprehensive planned coordination of transportation, greenbelts and open space, regional parks, recreational facilities and other regionwide cultural and physical amenities.

9. Because all of the regular amenities, such as schools and public buildings, will have been provided, it will do much to insure the success of the new communities concept, as this is directly related to the confidence of the home buyer in the ultimate outcome of the project. May we make one final point. The very small builders and contractors have been concerned that encouragement of the new communities concept would somehow divert construction business away from