priate," so that the management fund will reflect the full strength of the co-op program right from the start. This need not be done in terms of dollars and cents, but I believe that the formula-premiums minus losses and administrative expenses should be written into the law. To illustrate, I might point out that as of August 31, 1965, premiums of this class amounted to $27,430,000; administrative expenses were $9,687,000 and losses were $693,000. Thus, the "appropriate" amount to be placed in the management fund at that time would have been $17,050,000. Unless the full amount is placed in the mutual fund, the provision for periodic disbursements based on the strength of the fund is of very little value.

Finally, Mr. Chairman, sections 3 and 4 of my bill are identical in design to section 102 of your bill, H.R. 13065. While our provisions may differ somewhat in language, they are addressed to the same difficulty and would accomplish the same end.

I believe that these provisions are fair to both mortgagors and mortgagees, and I believe that they are necessary to get the new mutual fund underway. Last year, we amended section 213 (m) of the National Housing Act to authorize the transfer of funds from the general insurance fund to the management fund, and we provided. that, before this transfer could be effected, the mortgagee or lender would have to consent to this transfer. There is no legal basis for requiring this consent, for it was not required in the case of other funds which were consolidated into the general insurance fund. In any event, mortgagees have declined to consent to the transfer of 78 mortgages with a face amount of over $141 million. And the number of mortgages with respect to which no decision has yet been made is 109, with a face amount of over $202 million. Thus, about half the mortgages which might have been transferred to the new mutual fund still languish in the general fund, and our primary aim in providing mutuality has been thwarted.

The reason which promotes mortgagees to decline consent to transfer has to do with a restriction on the use of FHA debentures which appears to me to have been unintended by the drafters of that provision. At present, when a default occurs, the FHA pays the mortgagee in debentures with varying maturities. These debentures, in turn, may be used by the mortgagee in paying premiums on any FHA insurance, whereas should defaults occur on mortgages insured under the general fund, the resulting debentures cannot be used to pay premiums on 213 management type co-op accounts. What we have, in effect, is a one-way street, so that large lending institutions, which carry a good deal of FHA paper, elect to withhold consent, so that all their accounts are in the same general insurance fund, and thus all debentures can be used to pay all premiums.

Both the chairman's bill and my bill seek to rectify this anomalous situation, by removing the onerous restriction. With this restriction removed, the requirement of mortgagee consent is no longer appropriate, and accordingly, is also removed. Thus, all accounts of management type co-ops will be transferred into the management fund, which we established for this purpose.

Mr. Chairman, the sole objective of the legislation I have discussed chis afternoon is to provide equitable treatment for owners of management type co-ops. Where a class of property holders has demon

strated over the years its determination and ability to meet its mortgage commitments, they should be given the meaningful encouragement which this legislation provides. Outstanding performance must be recognized and rewarded. This subcommittee realizes this, I know, for it was this subcommittee which amended the Housing and Urban Development Act last year, to establish the new management fund. I am confident that you will continue to scrutinize legislative proposals and seek ways to improve them, and I believe that the provisions of my two bills would enhance the quality of the Housing and Urban Development Amendments of 1966.

Mr. Chairman, I should like to thank you once again for the courtesy extended to me this afternoon, and I would be happy to entertain any questions which you, or any of my other distinguished colleagues, may have.

Mr. BARRETT. Congressman Halpern, I do not have any questions to ask you, but I do want to say that you have made a very fine presentation here this afternoon. I am quite sure the committee will give every consideration to your recommendations.

Mr. HALPERN. I thank the chairman.

Mr. HARVEY. I wanted to add my commendation, also a very fine statement. I have no questions.

Mr. BARRETT. Mr. Moorhead?

Mr. MOORHEAD. Only to join with my colleagues and say that we have received as I would expect from the gentleman from New York, a very persuasive statement.

Mr. REUSS. This sounds like a heavenly chorus. You make a very persuasive case and I am persuaded.

Thank you very much.

Mr. BARRETT. Thank you, Mr. Reuss.

Thank you, Congressman Halpern. All time has expired.

Next, we hear from two very fine distinguished gentlemen from the great State of Ohio, Mr. Karl Hertz, president, Board of County Commissioners of Clark County, Ohio, and Mr. Harry Norman, director of urban renewal, Springfield, Ohio.

Mr. Hertz and Mr. Norman, it is nice to have you here this after

noon.

May I say that you have sent one of the finest Congressmen that we have yet seen in the United States. He is a very knowledgeable person; he speaks only when he has something to say. He has won the admiration of all the Members in the House.

STATEMENT OF HON. ROBERT E. SWEENEY, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF OHIO

Mr. SWEENEY. I thank you for your very nice introduction and to my colleagues who grace this subcommittee. I certainly want to say first of all, I do appreciate the opportunity of coming here this afternoon and have the honor of introducing to the subcommittee and to you, Mr. Chairman, Mr. Karl Hertz, who happens to be the city commissioner of the city of Springfield, Ohio. Mr. Hertz is here before the subcommittee to testify in support of H.R. 12341, the city demonstration bill in 1966. He is uniquely qualified to make comment on this important legislation that you are studying, Mr. Chairman. Not only

does he have a rich experience in governmental service, he is also a professor of sociology at Wittenberg University in that same city. Accompanying him this afternoon is the city manager of the city of Springfield, Mr. J. L. Caplinger. These gentlemen, Mr. Chairman, come from my State, and they have exhibited in their governmental offices and in their private undertakings a growing concern for this legislation on the Federal level to assist them to plan more comprehensively and demonstrate more effectively their ideas as to how America is going to improve the community life of its cities.

You know, we in Ohio are very proud that Springfield, Ohio, was the publishing capital of the United States. I think at one time it had that distinction.

There has been some urban decay in this city in southwest Ohio. There is a tremendous need for urban renewal and revitalization in the economy of the entire area.

This city, Mr. Chairman, is a city of approximately 85,000 people in the inner city with a metropolitan population of approximately 135,000 people. They have a very, very limited financial capacity to afford the high cost of renewal.

In representing the State of Ohio at large, I know of no city in my State that needs to be assisted by both State and Federal Governments than their city. I am proud to present at this time Mr. Hertz and Mayor Caplinger for comment concerning H.R. 12341.

Mr. Hertz.

STATEMENT OF KARL HERTZ, CITY COMMISSIONER OF SPRINGFIELD, OHIO

Mr. HERTZ. Mr. Chairman and members of the committee, I am Karl Hertz. First, I want to express my very deep appreciation for the opportunity to appear before this distinguished committee and my deep thanks to Mr. Sweeney for arranging the opportunity to testify on legislation which can have far-reaching significance for the future of my community and for many others like it.

Springfield is an old city. It is a part of the original frontier of the old Northwest Territory. Gen. George Rogers Clark campaigned through our valley. We have a park named in his honor.

We are an old industrial city. We were once national leaders in the production of farm machinery. We are still the home of a major plant of the International Harvester Corp. Our people, especially some of our old, established families have been and still are conservative. They are very hesitant about accepting Federal funding to solve their problems.

We once also were, as Congressman Sweeney has pointed out, the publishing center of the world-the home of Collier's family of magazines.

We must and we strongly desire to recapture our economic vitality and potential. Our leading citizens have organized just recently as a committee for community action now. They are ready and willing to accept Federal funding, they have told us this as the governing body of the city of Springfield, Ohio.

We have their support, we have the support of our county commission, we have the support of the press. We want to move. But we face a number of interrelated and deeply disturbing problems.

We have a decayed downtown with many empty stores and thus a decaying tax base in the central business district. We have large areas of substandard housing with narrow streets, leading to serious overcrowding and traffic congestion. We have poverty pockets, both Negro and Appalachian whites.

We have had considerable social unrest, especially among our Negro youth, and except for the very fine leadership of the Springfield Urban League, of our city manager and of the very fine police department that we have, we would have had violence during the past summer. We have averted this.

We are thus in some respects not in a good position to attract the business and industry we need. But we do not have the tax base that we need, although we are going to ask our citizens for increased taxes. Ohio tax laws and the Ohio constitution limit our bonded indebtedness and our taxing capacity. We want and need help. We need, in fact, a total renewal. We hope for a genuine Springfield renaissance. But to do this we need financial assistance of a volume that will do the job. We see in the proposed demonstration city legislation the kind of hope that we need that we can once again be the kind of city we

once were.

I might point out that Springfield's past prosperity was based actually on Federal help. The national road authorized by the Congress of the United States, better than a century ago, contributed to our early prosperity. We hope that this present legislation will once again recapture our prosperity.

If the Congress of the United States wants to find a middle-sized city that was once preeminent, where it can demonstrate that such a city can come back to a position of leadership, we believe that Springfield is eminently qualified to be such a city.

We are eager, we are united, we are already planning and Mr. Caplinger, the city manager, will tell you of some of the plans we are making. We hope very strongly that the Congress will pass this farreaching legislation for demonstration cities.

I thank the committee once again for this opportunity to appear here.

Mr. BARRETT. Mr. Norman, do you want to make a statement?
Mr. CAPLINGER. I will make the statement.

STATEMENT OF JAMES L. CAPLINGER, CITY MANAGER, SPRINGFIELD, OHIO

Honorable Chairman and members of the subcommittee, I am James L. Caplinger and I desire to make a statement with leave of the subcommittee.

I would like to point out that I have with me, in addition to the city commissioner, Dr. Karl Hertz, Mr. Harry Norman who is the urban renewal director of Springfield, Ohio.

As a preliminary remark I would like to echo the words of Dr. Hertz in thanking, and expressing our deep gratitude to, this subcommittee for making this opportunity available for us to testify.

We appreciate it very deeply.

Also, Congressman Sweeney's assistance in inviting us to Washington is appreciated.

Springfield, Ohio, is located equal distance between Dayton, Ohio, and Columbus, Ohio. Therefore, we are in a metropolitan area.

Springfield is an area where town does in fact meet country. We are located in a rich, agricultural area. But, our area is also a growing industrial center, and our industry in the city has now expanded into the area beyond our corporate limits into the county.

Springfield is an old city, having been settled long before the Civil War. We early became an industrial center, the publishing center of the world and a leading producer of farm machinery. But these are days gone by because we are not noted today for either publishing or farm machinery.

Now, there has been great industrial growth in Springfield. We are one of the homes of International Harvester Co., lightweight trucks, Steel Products Engineering Co., a division of Kelsey-Hayes and Bauer Bros., all three companies having expanded recently. But the closing of some of our major concerns and the attendant problems which have been created by empty buildings and decaying buildings in the heart of our city has created blight in our surrounding neighborhood.

This has damaged the morale of our people and has caused decline in our tax base. This has had a damaging effect upon our entire community.

In other words, I think that we might say that antiquity is setting in in many of our neighborhoods and areas in our city. Obviously this has harmful effects on our residential areas.

In conjunction with this, the downtown core area has decayed. It has decayed to such an extent that unless there is massive expenditure of money in the downtown area, our central area has decayed beyond reclamation.

This massive spending is in fact beyond the capabilities of our city. Now, Springfield, like most cities, has traditionally been what we might term a housekeeper government. We have maintained the peace, we have put out fires, we have sold water, we have provided sewer service, and we have maintained the streets. Since antiquity has set in in our industrial areas, in our downtown, and in our residential areas, our physical setting is not attractive, and this among other factors has created social problems.

In an attempt to reverse this trend downward, our city has come up with a new spirit of progressive desires, I think, in government and among our citizens. Our people now have an air of optimism about the future, and our government in Springfield has started to change its thrust from that of a housekeeper to a person-centered approach. We are not just maintaining the peace and maintaining streets, but we are looking at people, and the needs of people in trying to help them create what we might call the good life.

Therefore, we have turned our attention to urban renewal. We have turned our attention to the Economic Opportunity Act of 1964. We have turned our attention to our health department and have improved it in an attempt to try to assure that each citizen will have at least minimal health care for his family.

We have entered into a rather large demolition project without Federal funds in order to remove some of our slums and to provide better housing for our citizens.

We have established a human relations committee to work with the problems of minority groups. We have established a recreation department to help our people use their leisure time.