units, according to what the experts believe is a reasonable division, 8,000 are substandard that require either replacement or complete rehabilitation, and 16,000 are in various stages of decay.

The major cost in this typical city, as it would be in all cities, would be the acquisition of blighted buildings. (Under the President's program, acquisition will be carried out by a city agency set up to run the demonstration, using powers of eminent domain in much the same way as they are used in the urban renewal program.) The cost of acquiring 24,000 units in a "typical" large city project would be about $140 million.

DEMOLITION COSTS NOTED

Based on past experience, an average of about one-fourth of the 8.000 substandard units would require demolition. The cost of demolishing 2,000 units would be $2 million, the cost of replacing these with new units would be $24 million.

The rest of the units, the remaining 6.000 substandard units and the 16,000 in various stages of decay, would require various degrees of rehabilitation costing more than $80 million.

To these basic physical costs-about $250 million all told, are then added other costs of a social nature: relocation of neighborhood residents, as necessary; administration and planning; and "community participation" and social programs such as day care, employment and family-counseling services.

If other community facilities such as schools, health centers and neighborhood recreational centers are included, as they may well be, the total "social" costs of the program would amount to roughly $100 million, thus producing a total cost of perhaps $350 million.

Similar models can be drawn up for cities in the intermediate and low population groups. Average costs of the intermediate programs are about $170 million, in the small city group about $30 million.

RESALE FACTOR VITAL

The gross costs of the program can be computed from these models by multiply. ing these average costs by the number of cities in each population category and then by adding the three categories together. The approximate result is $5.3 billion. Additional costs, including the renovation of stores and shops in the area, produce a final gross figure of about $5.6 billion.

In computing net costs-the next step-the experts have devised a resale price low enough to allow those who buy the upgraded units to charge rents within the reach of low-income groups. This represents a conscious effort to avoid the experience of many urban renewal projects, which have often cleared out slum areas only to refill them with housing that no low-income person can afford.

The resale figure generally used by experts to achieve these objectives is $7.000 for rehabilitated units and $12,000 for totally new units.

Their assumption is that a $7.000 unit would produce a rent of $60 monthly, which they believe is within the capacity of those earning less than $3,000 annually. A $12.000 unit, they estimate, would produce a rent of from $100 to $110

a month.

These resale figures are then multiplied, in effect, by the number of units involved in the overall program to reach a total "recovery" figure of $3 billion. This is then subtracted from gross costs of more than $5 billion to bring the net to a level that Mr. Johnson thinks is manageable by local treasuries and the Federal budget.

COMMENTS ON NEW YORK TIMES STORY ON DEMONSTRATION CITIES PROGRAM, FEBRUARY 20, 1966

The New York Times article of February 20, 1966, about the proposed demonstration cities program by Robert Semple, presents an analysis of a demonstration cities program under certain assumptions that emphasize the costs of physical improvements. Within this framework it is an interesting and arithmetically plausible analysis.

The analysis was obviously geared to the $2.3 billion demonstration cities program cost mentioned by the President in his message on the proposed demonstration cities program. The $2.3 billion as used in the Times story represents the net cost of the program. It appears from the article that this net cost is derived

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by an assumption that about 24,000 units would be acquired in a typical large city to be either demolished or rehabilitated. The costs of acquisition and rehabilitation in the typical large city would amount to $250 million. To this would be added $100 million of expenditures for community facilities, such as schools, health centers, neighborhood and recreational centers, as well as the social cost of the program. For smaller size cities for the same types of improvements, smaller amounts would be required. For all the cities that would be involved, the costs for these purposes would be about $5.3 billion and additional costs primarily for renovation of commercial properties, producing a final gross figure of $5.6 billion in the Times analysis. The proceeds from the sales of units that have been rehabilitated would then be deducted from the gross cost to arrive at an estimated net cost figure of $2.3 billion.

It is important to note that the Times analysis has been built up on the basis of a model for a typical city under certain assumptions as to the population and number of dwelling units in the demonstration area, and on the assumption that the major part of the cost involved will be for housing improvements and other physical improvements. The social services cost is not identifiable in dollar terms.

In an analysis of this sort, all models necessarily have to be based on certain dor assumptions as to the arithmetical factors involved. The formula and the purposes for which supplementary grants would become available under H.R. 12341 would cause a different focus upon the factors that may be involved than in the New York Times analysis.

The stated purpose of H.R. 12341 is for "rebuilding slums and blighted areas and for providing public facilities and services necessary to improve the general welfare of the people who live in these areas." The demonstration program effort, thus, would be designed to have a comprehensive and coordinated program of social services to better the lot of the people in the area, as well as to improve the physical conditions in the area. It is intended that all available Federal aid programs for both social betterment and physical improvements should be utilized to the maximum extent feasible for accomplishing these purposes. To induce the cities to undertake such an effort, they would receive supplementary grants equal to 80 percent of the local share required for all projects or activities which are a part of the demonstration program and financed under existing grant-in-aid programs.

These supplementary grant funds could be used to (1) assist cities to provide their required share of the cost of projects or activities which are part of the demonstration program and are funded under existing Federal grant-in-aid programs, and (2) provide funds to carry out other, nonfederally assisted, projects or activities (including projects or activities of the type eligible for Federal assistance under existing grant-in-aid programs) undertaken as part of the demonstration program.

In drawing typical city models to analyze program cost in accordance with the bill, therefore, three critical factors are involved in the calculations: (1) the program cost as based on the local determination of components of the program and the mix of such components; (2) the proportion of these program costs that would be borne by expenditures under ongoing grant-in-aid programs typically expected for a city of a given size; and (3) the disposition among program components, as determined by the local city demonstration agency, of the supplementary grant funds obtained under the formula provided by the

bill.

It is in the nature of the program that each qualifying community will develop an imaginative program predicated upon its particular needs and circumstances. Cost estimates for any individual city cannot be stated definitively in advance because of variations in program components that would occur from locality to locality and because of variations in levels of funding that will be available for regular Federal grant-in-aid programs in different localities. Therefore, given certain assumptions about program components and available present Federal grants-in-aid, we can build up estimates of typical situations. We cannot, however, calculate fund allocations until the proposals from cities

are received.

The starting point for an estimate of the program cost would be similar to one of the points used in the New York Times analysis; namely, a model of a typical large city. The Times' model was a city of 700,000 with a demonstration area of 80,000 to 100,000 people, containing 24,000 dwelling units, of which 8,000 need to be demolished and 16,000 require some degree of rehabilitation.

It should be noted, however, that in a city of 700,000 to 800,000, the total number of substandard units in the entire city is likely to be between 20,000 and 25,000. Furthermore, all but about 4,000 are likely to be substandard by virtue of a lack of adequate plumbing facilities and therefore amenable to rehabilitation. The 4,000 or so would be the total number of dilapidated units in the city. Therefore, in an area of such a city that might contain about 80,000 residents and have 24,000 dwelling units, it is unlikely that all 24,000 would require either extensive rehabilitation or demolition as the Times analysis has assumed. In fact, if we assume that 16,000 would require some form of rehabilitation ranging from major to minor rehabilitation, as the Times analysis assumes, but also that one-fourth of the units in the area or 6,000 need only normal maintenance and repair, perhaps 2,000 units would have to be demolished. This would significantly reduce the net cost required to deal with housing in the area.

On the other hand, a significantly larger allowance should be made for social services in the area as well as certain physical improvements that would help achieve the social purposes, such as schools, health centers, and neighborhood centers. The bulk of the funds required for physical improvements and social services would be provided under regular existing Federal grant-in-aid programs, such as urban renewal, public housing, neighborhood center grants, economic opportunity programs, manpower development and training, and numerous others. The typical amounts of such Federal program expenditures and the required local matching share can be estimated for a city of a given size, containing a demonstration area of a given population. Eighty percent of the local matching share of such activities would then determine the potential supplementary grant entitlement for the demonstration program in that city.

For a city of between 700,000 and 800,000, with about 24,000 families in the demonstration area, the supplementary grant entitlement for the demonstration program in that city might amount to an estimated $15 to $20 million per year or $75 to $100 million over 5 years. The total program activities, including those under the regular Federal grant-in-aid programs as well as those supported by the supplementary grant funds, might amount to as much as $75 million a year, or $375 million over a 5-year period. On the basis of such estimates for 60 to 70 cities of different sizes, it is contemplated that $2.3 billion in supplementary grant funds would be required over a 6-year demonstration program period, of which 5 years would constitute the active operating period after the first year of preparing the plan. The total program impact, including regular Federal grant-inaid program expenditures and State, local, and private expenditures in all the demonstration areas could rise to an aggregate total of about $10 billion over the 5-year period.

All size categories of cities have been thought about instead of the three shown in the New York Times story. Demonstration cities could range in size from 1 million or more to cities of less than 50,000. The largest number of cities would be in the smallest size category. A good geographical distribution in all parts of the country would also be sought.

In summary, the New York Times story was an attempt to explain how a net cost of $2.3 billion would accommodate a physical improvement program. It was a logical but limited explanation of a city demonstration program.

The estimate that has been presented herein, based on the provisions of the bill, is indicative of how the figure of $2.3 billion was arrived at. As the estimate related to the bill indicates, there will be a great deal of flexibility in the sizes of cities and types of activities undertaken under the demonstration cities program.

The bill also contemplates that (as the President stated in his message on city demonstration programs) "the complete array of all available grants and urban aids in the fields of housing, renewal, transportation, education, welfare, economic opportunity, and related programs" will be available under existing Federal programs to cope with problems in the demonstration area. Finally, the bill definitely contemplates a broader program scope with much more emphasis on social services than was contemplated in the New York Times example. Mr. ASHLEY. Secondly, on page 2 of your statement you say you will make it possible to treat the human needs of people in the slums, and at the same time the physical rehabilitation will be carried

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We do have in this program two rather distinct elements, as I underdit. One is the capital improvement rehabilitation, and the other

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is the human needs factor. These are quite different. Capital improvements can be paid for, and then constitute a continuing cost. This canlitati: not be said, as I see it, where the increased input of socal services to a particular area are involved. Are these meant to be continuing costs to the Federal Government?

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Secretary WEAVER. Well, I think there are two categories of these. In the first place, there are those costs which are now provided for ut by grant-in-aid programs in which the Federal Government makes a partial grant. These are, as you know, over the various terms, depending upon the nature of the services. Obviously these would be continuing.

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Secondly, there would be those services which would have to be augmented during the period of this particular proposal. Here you would have the supplemental money being used over a period of time.

Mr. ASHLEY. As far as the social services are concerned, we are now primarily being paid by the local community, this would be a contribution of almost every Governor for the duration of the program in the 6 years, is that correct?

Secretary WEAVER. Well, the program would have to be effected in the sense of being substantially completed from the physical side of it within a period of 5 or 6 years. The question of how the services would be financed and for how long, would have to, I am afraid, be handled on a case-by-case basis. There is nothing in the law that would limit the period. Some might go beyond the period which we call the completion of the project. Because this is completion more or less in its physical rather than its social aspects. Obviously, there would be a problem here. It could not go on ad infinitum.

Mr. ASHLEY. Precisely. Under the OEO program we have the same kind of a problem, where services are provided, where funding is on an annual basis, and the cities engaging in the program find it difficult to sustain services that have been initiated. Is there this problem?

Secretary WEAVER. There is this problem. But I don't think it is quite as severe here, because in the first place we are talking about an appropriation over a 5-year period which gives you more than just the annual appropriation problem.

Secondly, I think there is the fact that some of these programs, particularly some of these social programs, if they are successful will have less of a need after the 5-year period. If you are training people, for example, who are not yet employable, over a 5-year period you should get over the bulk of that, and you would not have to continue to spend as much money after 5 years for that as you did during the

first 5 years.

Mr. ASHLEY. Doctor, have you had a chance to examine the amendments that several of us have worked out?

Secretary WEAVER. Yes, I have.

Mr. ASHLEY. I wonder if you would care to comment on adding some additional criteria for eligibility. The amendment addresses itself to two additional criteria. First, that the sections of the neighborhood in question be subject to higher priority economic and social pressures, such as population density, crime rate, public welfare participation, delinquency rate, unemployment, educational level, health and disease characteristics, and degree of substandard and dilapidated

housing, and second that there is in effect in such section or neighborhood a workable program such as is currently a requirement for renewal funds?

Secretary WEAVER. Well, as far as the first is concerned, I think that we are in complete agreement as to the objective. The bill requires that there be an impact on slums and blighted areas, and that there be an impact on low-income families. In order to qualify for this program you would have to deal with areas which have high priorities. according to the criteria which you have described. The difficulty here I think is this, if you establish a high-priority system it might require the city to select, as between several areas, that one that had the highest index on these criteria rather than meeting them in general. Mr. ASHLEY. Why don't you want to do that anyway, Doctor? Secretary WEAVER. Well, I think there is a problem here, sir. It may well be that the first area that you select for this program may not be the worst area. It has got to be a bad area. It has got to have all the criteria that you mentioned

Mr. ASHLEY. But you have got a year's planning.

Secretary WEAVER. But my point is this, that it may well be that you not only have a question of tearing that area down where it is bad and rehabilitating it where it is not too bad, but you would also have the possibility of getting your first proposal, your demonstration proposal, a successful one. And it may be that the area that will lend itself to the initial success while you are learning and experimenting may not be the worst area. It has got to be a bad area. And I think you should have that flexibility in order to make the program work.

As to the workable program, the workable program concept is a citywide concept. The elements in the workable program cannot be segmented. But in order for any city to qualify for this it would have to be making use of some of the programs, such as low-rent housing or urban renewal which already require a workable program. So this will be accomplished by the existing situation and while I agree with the purpose of the amendment, it is really not necessary. Mr. BARRETT. Mrs. Dwyer?

Mrs. DWYER. Mr. Chairman, Mr. Secretary, both you and the President as well as other top administrative officials concerned with urban affairs have frequently emphasized the essential character of an efficient mass transit system as a part of a healthy metropolitan area. Mr. Secretary, do you expect to retain jurisdiction over your Department's present mass transportation program under the President's proposed Department of Transportation?

Secretary WEAVER. I am afraid I won't make that decision, but I think that decision will be indicated, or at least the line of that decision will be indicated sometime this week when the President's message on transportation comes up to the Congress.

Mrs. DWYER. But could that mean that you lose jurisdiction? Secretary WEAVER. I think you will have to wait until the message comes up.

Mrs. DWYER. Thank you.

Mr. Secretary, I understand H.R. 12341 carries authorization for two programs over a 6-year period. How much are H.R. 12946 and H.R. 13064 going to cost the Federal taxpayer?