Mr. BARRETT. Mr. Secretary, it is our understanding that there is one aspect of the new proposed demonstration city legislation which seems to be bothering some people. The current concern seems to be that the 60 or 70 cities which would become eligible for supplemental grants would also step up their demand for existing Federal aid grant programs; for example, the urban renewal grant program. And if this is so, it is argued that this could mean an increased drain on the existing authorization for present Federal grant programs, and consequently, less available funds for all of the other cities and towns of the Nation which are not in the first eligible group of participating cities under the demonstration program. I do not think this a real concern. But I would very much like to have you assure the subcommittee members on this point.

Secretary WEAVER. Mr. Chairman, we have considered this point, recognizing that it might well arise. And both I and the administration are committed to the policy-carrying out this program will not in any wise or any way decrease the amount of urban renewal funds which any city, whether it is in the program or not in the program, would have had if there had not been any program. The answer is a definite no. This will not take away any funds that would otherwise have gone to a city which may not participate in the demonstration. We are not robbing Peter to pay Paul in this program.

Mr. BARRETT. Thank you, Mr. Secretary. Mr. Widnall?
Mr. WIDNALL. Thank you, Mr. Chairman.

In the section dealing with the Federal coordinator, it says that "nothing in this section shall be construed to vest in the Secretary any authority to exercise or delegate any function or duty vested by law in any Department or agency of the Federal Government." Does that mean the Federal coordinator will have no authority over the disbursement of other programs even if they tie in with the demonstration project?

Secretary WEAVER. It does. It means that the Federal coordinator will first coordinate the programs in the Department of Housing and Urban Development, which we have the authority to do through the regional office. It means essentially that he will work very closely with the localities' coordinator, or the local agency carrying out the demonstration program in order to facilitate that individual's or that agency's reaching into all of the existing programs and helping them make contact with the Federal agencies which administer these programs. However, the decision governing the use of those programs will remain in the agencies to which Congress has given appropriations and authority to carry out those programs. This will be a coordinating function in the sense of the coordinator using his good offices using his knowledge, and the facts that he has and the contacts that he has at the regional and at the Federal level to sort of lubricate the process, as it were.

Mr. WIDNALL. The President's message said:

Once authorized, the supplemental fund would be made available in a common account. They would be drawn at the discretion of the community to support the program. They would be certified by the Federal coordinator. It seems to me that leaves no discretion to the local officials at all. It also appears that the Federal coordinator will have complete control of disbursement of funds, at least of supplemental funds, for all

perhaps, under HUD or not, that went to the city demonstration program in the first place. How can local control be talked about when the President himself has spelled out that this will be circumscribed? Secretary WEAVER. It is not circumscribed, sir. The whole activity which is carried out in the demonstration city program will result from a program. The program will be developed by the locality before there is a Federal coordinator in the picture. This program, which will be planned with a 90-percent Federal payment, will be the basis on which the demonstration grant money, or the supplemental money, will become available to the locality. The locality then will have made a commitment to carry out a program to achieve certain results. It will then say how it will achieve these results. The Federal coordinator will be there simply to see that instead of having to get these supplemental funds from five or six Federal sources, it will funnel through one source. What those funds are spent for is determined by the local government in accordance with the plan and the program the local government has devised. They make the determination. The Federal coordinator does not make the determination of what these funds are spent for. And the law specifically says that they can be spent for any purpose which is consistent with the program that they have developed. They cannot be spent for things that are inconsistent with the program or not included in it.

Mr. WIDNALL. Your authority would rest in the Federal coordinator for final approval of supplemental funds as they came in from the various agencies; is that not so? None of the agencies would provide the funds unless the Federal coordinator so certified?

Secretary WEAVER. No other agency provides any of these supplemental funds. These funds are provided by the Department of Housing and Urban Development on the basis of the amounts of the nonFederal contribution to certain existing grant-in-aid programs. This amount will be certified by the various agencies of the Federal Government that administer these programs. The Secretary of Housing and Urban Development will confer with and discuss with all of the other Secretaries and heads of agencies which administer existing grant-in-aid programs which are part of a city's program. The calculation of the amount of the supplemental funds available to a city because of non-Federal contributions to these existing grant programs becomes a responsibility of HUD, and the payment of these supplemental funds becomes the responsibility of HUD.

Mr. WIDNALL. Under the definition of a city demonstration agency, do you mean by local governing body the local elected governing body? Secretary WEAVER. I do.

Mr. WIDNALL. Would you have any objection if we added the word "elected" in the bill?

Secretary WEAVER. No. I think we have it in several places. I do not think this would cause any difficulty.

Mr. WIDNALL. I bring this up because in 1964 the minority suggested a direct tie between the local public agency and local elected officials. At that time we received a letter from you in opposition to the idea.

Secretary WEAVER. I beg your pardon?

Mr. WINALL. I would not read your comment at this time, but I would like to place in the record this portion, Mr. Chairman.

Secretary WEAVER. I didn't hear what the context of that was.

Mr. WIDNALL. The Republican minority in our 1964 housing bill suggested a direct tie-in between the local public agency and the local elected officials. You wrote the committee at the time in opposition to the idea.

Secretary WEAVER. Yes. I think the difference is between a special purpose activity, as contrasted to a comprehensive activity. Obviously, if you are going to have a coordinated comprehensive activity, it is going to have to have citywide concurrence, and it is going to have to be related to an elected body. I think the activities are quite different. But we are perfectly willing to accept the principle in this

program.

Mr. WIDNALL. Mr. Chairman, I would like to have permission to put it in the record.

Mr. BARRETT. Without objection.

(The document referred to by Mr. Widnall is as follows:)

[From the Congressional Record, Mar. 5, 1964, p. 4369]

(The following is an excerpt from a letter addressed to Chairman Patman by Dr. Weaver in answer to the chairman's request for agency comment on H.R. 9771, 88th Congress, an omnibus housing bill, introduced by Congressman Widnall.)

"Section 307. Definition of local public agency:

"This section would amend the definition in section 110(h) of the Housing Act of 1949, of a 'local public agency' qualified to carry on an urban renewal project. Under present law, a project may be carried on not only by a State, county or municipality but also by any other 'governmental entity or public body,' so long as it is 'authorized' (under State and local law) to carry on the project. The amendment would limit eligibility of other governmental entities and public bodies only to those acting as agents for State or local governments. "The Housing Agency believes that this proposed amendment would unjustifiably interfere with the right of States and localities to decide for themselves their proper relationship to local public agencies. Close coordination between local public agencies and elected local governments is always desirable. However, it would appear that there is no impelling need which would justify the proposed detailed intercession by the Federal Government in these State-local relationships. Under section 102(d) of the Housing Act of 1949, it is already necessary, as a condition to obtaining an advance of funds for survey and planning, that 'the governing body of the locality involved has by resolution or ordinance approved the undertaking of such surveys and plans and the submission by the local agency of an application for such advance of funds.'

"Also, under section 105 (a), the governing body of the locality must approve the urban renewal plan before the local public agency can obtain a Federal loan or grant contract for the project. Finally, the local public agency must almost invariably obtain the concurrence of the local governing body, in order to obtain financing for the local share of the project.”

Mr. WIDNALL. Does this legislation mean that if the Administrator deems it desirable to provide a city demonstration agency with a Federal plan for a Federal administrator, he could do so?

Secretary WEAVER. No. It means if the city requests and if the Federal agency has the bodies and the resources available, it will meet the requests of the city. It does not mean that we are going to send this technical assistance in, for two reasons. We would not have enough if we wanted to, and in the second place, we would not want to. Mr. WIDNALL. You are going to provide direct technical assistance instead of money to hire local employees for private consultants, are you not?

Secretary WEAVER. If the city requires it and if we have the resources we will make technical assistance of many types available to it. I would

not want to be categorical about what those types will be now. It will vary, I am sure, from city to city.

Mr. WIDNALL. This could be in direct competition with private planning, could it not?

Secretary WEAVER. I do not think so. I think you would have to have a private planner to develop the planning or the city might decide to hire its own people. We will not send in a team of technical people who will actually do the planning. They might be consultants to help to get the plan done, but the plan would have to be developed by the city out of its resource or any resources that it gets from us. The technicians from Washington and the agency will not do the planning.

Mr. BARRETT. Mrs. Sullivan?

Mrs. SULLIVAN. Thank you, Mr. Chairman.

Mr. Secretary, we think you will agree that you sent us two very challenging new proposals: (1) To give a tremendous stimulus to supplemental grants on top of existing grants, and to the rebuilding or rehabilitation of large areas of our city; and (2), a second bill using a similar mechanism to stimulate and give incentive to orderly metropolitan growth.

I think we have much to learn yet about the details and the actual way in which this program would work. But I do have one question that comes immediately to mind, and that is whether a given city could qualify for both programs at the same time, in other words, could city X have both a demonstration city program and a program for metropolitan development grants?

Secretary WEAVER. I think the answer would have to be "Yes and no." It would have to be "Yes" in the sense that a given city might participate in both activities, but it would not always be the direct recipient or the local sponsor in both. It would obviously be a direct recipient in the demonstration cities program. But the metropolitan development grants would go to the city in some cases and in some cases to a special-purpose agency of government or to an ad hoc committee or a State body or some other body other than or larger than the city itself. But the city would participate in and benefit from the metropolitan grant although it would not always be the agency that would develop the program and apply for it to the Department. Projects or activities assisted under the demonstration cities program could not receive metropolitan development grants.

Mrs. SULLIVAN. Secretary Brownstein, last Thursday, I was pleased to introduce a bill, H.R. 13063, which hopefully for the first time. would provide a financing mechanism to encourage bona fide nonprofit organizations to rehabilitate existing houses for sale to low-income prospective homeowners at the very low 3-percent interest rate made possible under section 221(d) (3), the low-market-interest-rate program. May I have it inserted in the record at this point? (The material referred to follows:)

[H.R. 13063, 89th Cong., 2d sess.]

A BILL To amend the National Housing Act to authorize a limited experimental program of insurance for mortgages executed by nonprofit organizations to finance the purchase and rehabilitation of deteriorating or substandard housing for subsequent sale to lowincome purchasers

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 221 of the National Housing Act is amended by adding at the end thereof the following new subsection:

"(i) (1) In addition to mortgages insured under the other provisions of this section, the Secretary is authorized to insure under this subsection, as hereinafter provided, mortgages executed by nonprofit organizations to finance the purchase and rehabilitation of deteriorating or substandard housing for subsequent resale to low-income home purchasers and, upon such terms and conditions as the Secretary may prescribe, to make commitments for the insurance of such mortgages prior to the date of their execution or disbursement thereon. "(2) To be eligible for insurance under paragraph (1), a mortgage shall"(A) be executed by a private nonprofit corporation or association approved for purposes of this subsection by the Secretary, for the purpose of financing the purchase of property upon which there is located deteriorating or substandard housing consisting of five or more one-, two-, three-, or fourfamily dwellings of detached, semidetached, or row construction and of rehabilitating such dwellings with a view to subsequent resale as hereinafter provided;

"(B) be secured by the property which is to be purchased and rehabilitated with the proceeds thereof;

"(C) be in a principal amount not exceeding the fair value of the property at the time of its purchase under the mortgage plus the estimated actual cost of the proposed rehabilitation;

"(D) bear interest (exclusive of premium charges for insurance and service charge, if any) at the rate in effect under the proviso in subsection (d) (5) at the time of execution;

"(E) provide for complete amortization (subject to paragraph (5) (E)) by periodic payments within such term as the Secretary may prescribe; and

"(F) provide for the sale of the rehabilitated dwellings in accordance with paragraph (5).

"(3) No mortgage shall be insured under paragraph (1) unless the mortgagor shall have demonstrated to the satisfaction of the Secretary that (A) the property to be rehabilitated is located in a neighborhood which is sufficiently stable and contains sufficient public facilities and amenities to support long-term values, or (B) the rehabilitation to be carried out by the mortgagor plus its related activities and the activities of other mortgagors, together with actions to be taken by public authorities, will be of such scope and quality as to give reasonable promise that a stable environment will be created in the neighborhood. "(4) The aggregate principal balance of all mortgages insured under paragraph (1) and outstanding at any one time shall not exceed $20,000,000.

"(5) (A) No mortgage shall be insured under paragraph (1) unless the mortgagor enters into an agreement (in form and substance satisfactory to the Secretary) that it will sell the dwellings involved, upon completion of their rehabilitation, to individuals or families (hereinafter referred to as 'low-income purchasers') determined by the Secretary to have incomes below the maximum amount specified (with respect to the area involved) in section 101 (c) (1) of the Housing and Urban Development Act of 1965.

"(B) The Secretary is authorized to insure under this paragraph mortgages executed to finance the sale of individual dwellings to low-income purchasers under subparagraph (A). Any such mortgage shall

"(i) be in a principal amount equal to that portion of the unpaid balance of the principal mortgage covering the property (insured under paragraph (1)) which is allocable to the individual dwelling involved; and

"(ii) bear interest at the same rate as the principal mortgage, and provide for complete amortization by periodic payments within a term equal to the remaining term (determined without regard to subparagraph (E)) of such principal mortgage.

"(C) The price for which any individual dwelling is sold to a low-income purchaser under this paragraph shall be the amount of the mortgage covering the sale as determined under subparagraph (B), except that the purchaser shall be required to pay on account of the property at the time of purchase such amount (which shall not be less than $200, but which may be applied in whole or in part toward closing costs) as the Secretary may determine to be reasonable and appropriate in the circumstances.

"(D) Upon the sale under this paragraph of any individual dwelling, such dwelling shall be released from the lien of the principal mortgage, and such mortgage shall thereupon be replaced by an individual mortgage insured under this paragraph to the extent of the portion of its unpaid balance which is