residential and school development. In addition, nearly $6.25 million in private dollars has been invested, with promising prospects for more private investment in the near-term future. The area has enjoyed an increase in assessed valuation from just over $8 million in 1969 to nearly $13.5 million in the current fiscal year. Notwithstanding the large investment, both public and private, already made, there is clearly a need for additional and substantial amounts of public and private investment over the next five years in order to stabilize and to turn around the area into a more productive status. A great portion of the public investment needed must be in Section 312 residential rehabilitation loans. The facts clearly point out the need for public funding assistance.

MAJOR PROBLEMS

A.

Insufficient and Inconsistent Funding Levels. The major problems encountered with the Section 312 program have not been the program itself but rather the lack of continuity in funding and the lack of national administration commitment to continuation

of the program. The program locally has a marked and extremely high degree of success and citizen acceptance. Indeed, the Section 312 program seems to us to be a most efficient utilization of scarce funds in that it has a national set of standards, a record of experience, and a known success record. On the other hand, many of the efforts being expended now by cities and communities throughout the nation to establish local rehabilitation loan programs are handicapped by the absence of national assurances and guidelines, which inevitably results in unproductive downtime. The lack of commitment and the absence of continuity to the Section 312 program have resulted locally in less units being rehabilitated than the case would have been had there been an adequate and continuous level of funding. We have a high local demand for the program, but limited resources to deal with the demand. This point is, even now, more fundamental than before in that under the new dual formula system which is proposed by the Adminisration, the City of Fresno's formula amount will drop from a high of $8.9 million to a low of $3.82 million in Fiscal Year 1980. It becomes most apparent that without the assistance of either Section 312 monies or urgent-need monies, or funds from the Urban Development Action Grant program, the City of Fresno's revitalization activities will be severely curtailed.

It is absolutely essential, therefore, that in those instances where communities are facing such severe cutbacks, as is the case of Fresno, that they be given top priority consideration in the allocation of discretionary monies, urgent-need monies, or funds from the Urban Development Action Grant category.

B. Funds for Commercial Rehabilitation. Another major problem which we have experienced over the years in carrying out the program

has been the unavailability of commercial rehabilitation funds in residential areas. What this has resulted in has been pockets of commercial blight being left or retained in essentially residential areas where rehabilitation activity has taken place without the wherewithall to cure the total problem.

It is unrealistic to feel that revitalization can occur without dealing with all of the component problems of blight, commercial blight being one major element. It is recommended, therefore, that a means be developed whereby commercial rehabilitation funds can be made available in defined residential rehabilitation areas. This would go a long way toward doing the total job, which is what we are all striving to do. Notwithstanding the potential for involving the Small Business Administration in this process, that methodology has proven ineffective at getting at this matter.

C. Insufficient Relocation Funds for Rehabilitation Areas. In community development rehabilitation areas, relocation monies are eligible on a very limited and token basis. We have found this

to be a problem in two basic areas: (1) It does not allow for sufficient new construction to occur, and (2) It does not allow the neighborhood to retain financial equity from those individuals who would otherwise desire to remain in a given neighborhood.

In my opinion, what is needed is relocation benefits sufficient to move a family from Point A to Point B while rehabilitation or new construction is underway; provide for the rental costs at Point B; and provide for the moving costs back to Point A. We believe that if properly controlled and administered, this would be of vital assistance to neighborhoods which are desirous of not losing residents who are there but who must wait for a structure to be either built or rehabilitated.

D. Historic Preservation Designations. We fully support the concept of historic preservation and believe that this effort is a highly desirable activity. Problems have developed, however, with the unpreciseness and improper timing of designating structures and/or areas. As a general statement, we would hope that this process could be tightened up so as to preserve those structures or areas which are truly deserving of preservation, and not focus on all structures which are old. It does not follow that because a structure is old, it is worthy of retention.

E. Improperly Maintained Public Housing Units. A major concern that the citizens have expressed on many occasions has been that of intrusion into their neighborhoods of HUD Section 23 leased housing operated under the auspices of the local housing authority. The citizens are not objecting to the units themselves, or to the program, but to the apparent low-quality of construction and maintenance that is evident. They rightly perceive this as an intrusion of blight into their neighborhoods, and a disincentive to rehabilitate their own residences. The problem here is again that of an adequate level of funding for Section 23 and Section 8

to provide for maintenance and care of the units being provided in order to prevent a governmentally-backed program from blighting neighborhoods.

ADVANTAGES OF SECTION 312

The Section 312 program clearly has a set of definite advantages that merit close consideration by Congress. First, and it seems to us, foremost, is the nationwide set of standards, procedures, and guidelines for implementation that the program has already in place. The benefit here is the avoidance of costly downtime in setting up local programs and the greater efficiency that is possible in all using a common set of criteria and standards. Secondly, a major benefit is the direct involvement of FHA personnel in the loan process. This has the distinct advantage of providing an ongoing pool of professional administrative talent already in place.

Thirdly, a most important advantage is the high degree of program acceptance by citizens, homeowners, professionals, lending institutions, and home improvement contractors.

Fourthly, the Section 312 program has the distinct advantage of being adapted to a wide range of local housing and community development options, ranging from a combination of revitalization tools to a straight residential rehabilitation effort.

OBSERVATIONS

It is clear to me, and I hope ultimately to the Congress, that rehabilitation of housing does not work and will not work unless the people involved in the affected neighborhoods want it to work. The successful rehabilitation effort requires a high degree of community participation, both individually and collectively. No matter how much the need, or how high the purpose, if the local folks don't want to be involved, the program will fail.

In this regard, we have attempted locally to involve as many local citizen groups and public and private entities, such as local lending institutions, in the process of developing a feasible residential rehabilitation program. Locally, the public citizen groups include the Fresno Metro Ministry, the Southeast Fresno Concerned Citizens, the official citizen participation Neighborhood Councils and the Fresno Citizen Participation Commission, the Fresno Housing and Community Development Commission, the Redevelopment Agency, and, of course, the City Council which must make the decisions and take the responsibility for the program being adopted and implemented.

A most heartening development locally is the recent commitment of $3 million in funds for below market rate interest loans by three

local lending institutions. They have agreed to participate provided the community does its share through upgrading the public investment in the target area's infra-structure as well as to augment the private loan program with local community development funded subsidized loan programs, Section 312 rehabilitation loans, non-interest bearing grants of community development funds to those residences with owners having incomes below the poverty level, and with professional assistance and monitoring by city staff personnel. A key factor in helping to organize and promote this multifaceted partnership effort has been the direct involvement of citizens in formulating the parameters of the local program. We are convinced that it will succeed because the people want it to succeed!

ANALYSIS

Notwithstanding all of the above, and I believe the comments to be valid, it seems to me that directly funded public rehabilitation programs, while they may be operationally sound and well managed, still constitute the least productive (volume wise) means of providing major rehabilitation in this country.

It

is my belief that to the extent that we are able to cause the private sector to become the major financing source for rehabilitation, conservation, and preservation in this country, only then will we be maximizing the public-private partnership which is absolutely essential if we are to succeed with the revitalization of American cities.

Although many localities, Fresno included, have been successful in developing locally administered rehabilitation programs, this represents only a piecemeal approach to a major and massive national problem. On the one hand, we have 312 rehabilitation which is a direct funding methodology. On the other hand, we have totally privately financed rehabilitation which is the most highly leveraged methodology of rehabilitation. It is my belief that through this partnership the public sector must do what it does best, and the private sector should do what it does best. In the former case, the provision of public facilities, infrastructure, code enforcement, and other police powers to insure and maintain quality units; and in the latter case, the provision of monies to the consumer for home improvement loans and other rehabilitation activities.

What is needed is a comprehensive approach to this problem, an approach which recognizes the necessity for a multiplicity of strategies in the resolution of the problem. These strategies would include direct lending programs such as the 312 and 115 grant, local community development rehabilitation activities which provide leverage, and the recycling of community development funds, as well as directly funded private monies for rehabilitation activities. Many private lending institutions are reluctant to make loans in high risk areas, based on fiduciary and other

management relationships which they have with the Federal government and its regulatory bodies and, therefore, on investors and shareholders. Many lending institutions find that they are faced with a conflict situation and an inability to meet job goals and priorities. The end result is the much talked about redlining.

It is my belief that the Congress, through this Committee and other pertinent committees, can get at this question of risk by providing shared risk mechanisms which would allow for a free flow of private monies into designated rehabilitation areas. I am not totally familiar with the mechanics of such a proposal, but representatives of the U.S. League of Savings Associations did present such a proposal to this Committee in September 1975. I have read the substance of that proposal and firmly believe that if the mechanics were adopted, it would go a long way toward establishing a national private strategy which would go a long way toward the matter of funding consistent and major rehabilitation efforts in this country.

The idea of shared risk is not new, and the idea of mortgage insurance is not new. It seems to me that with the quality of staff and knowledgable people in the area of financing, that there is no reason why we should not be able to develop such a solution.

In summary and in the final analysis, it will be through this partnership of public and private actors that we get the job done. It will be through a combination of funding techniques that we are able to structure a program to get at the core of rehabilitation demands which exist; and finally, it will be through commitment to this notion and leadership that we are able to focus the attention and work effort necessary to getting this program underway.

Thank you.