rise to a dilemma. If the boundaries that shape the many programs are loosely drawn, there will be much duplication and overlapping; but if they are tightly drawn, there will be much redtape and many needs will go unfilled because they fall in gaps between the program boundaries.

Often these gaps cannot be foreseen, since they are revealed only by operating experience or newly emerge from shifting local conditions. The President, in his message to Congress on special revenue sharing for urban community development, gave example both of the duplication and of the gaps that inevitably arise. This is what he said:

Each program is surrounded by its own wall of regulations and restrictions and coordination between programs is often very difficult. Sometimes programs work at cross purposes and sometimes they needlessly duplicate one another. For example, the Federal Government, working through two different agencies, has been known to fund two different local authorities to build two sewer systems to serve the same neighborhood.

The inflexibility of the present system often means that money could not be used where the need for money is greatest. If a city suddenly finds it must put in new street lights, it cannot use funds that are earmarked for demolition or rehabilitation. Geographic restrictions are always a problem. Money for an urban renewal project which has been approved for one carefully defined neighborhood, for example, cannot be used at a closely related site just across the street, if that street happens to be the boundary of the renewal area.

Now, there are some local public bodies that temporarily benefit from the duplication and confusion in the system, because they are more skillful than others in obtaining multiple Federal grants. But in the long run, even they suffer from the drain of processing complex applications, and from delay and uncertainty in the Federal response.

More wasteful still are the losses that result when Federal and local energy, time and money, are spent on projects and activities of low priority, merely because funds are available just then under some narrow categorical program. Yet, other losses result when fragmented programs are inconsistent or give rise to harmful side effects that could be avoided under a more rational way of carrying out the business of government.

Urban community development revenue sharing would contribute to a more rational way of doing business for these reasons:

Major existing categorical programs would be consolidated into a unified flexible system of Federal assistance.

Project area and other constraints and contingencies of categorical programs would be eliminated.

Funds would flow to units of general local government so that there will be less fragmentation of responsibility at the local level. Local officials would be free to use resources on the basis of locally determined community development needs and priorities, thereby shifting decisionmaking authority from Federal officials to local officials.

Funds would be allocated to communities on a uniform and equitable basis which takes into account objective need factors and established levels of program activities.

Central cities and other cities of 50,000 or more would be assured of a stable annual flow of funds free from delays and interruptions.

There would be no detailed project requirements to delay the flow of funds and the start of community development activities at the local level. Federal operations would be simplified.

Local matching would not be required, thereby reenforcing the incentives provided by the other features of the proposal to use funds for high priority local purposes, rather than for projects for which it is easiest to budget the local share.

Local elected officials will be clearly in charge of managing shared Federal funds flowing to communities. Thus, both the incentives and the responsibility for getting effective results will lie with those closest to the people and the problems.

And the people will generally enjoy an increased ability to influence the use of community development funds as a result of their opportunity to judge by their votes the performance of local officials.

Now, all the activities which are eligible for support under all the present urban development categorical programs would be eligible for assistance. Funds could be used to acquire, clear and redevelop land; to construct public works such as water and sewer facilities; to build streets and malls to enforce building codes; to fund demolition activities; to rehabilitate slum and blighted neighborhoods; to support the health, social, and similar activities for which model cities supplemental grants are now authorized; and to provide relocation payments and assistance for those displaced by the activities.

No local activity currently funded by categorical grants would have to be discontinued. Every community would have the authority and capability to maintain—and even to expand-any of these current programs.

The only precondition for assistance would be a statement by the city saying how it plans to use the funds. Their use would not be subject to prior Federal approval. With the elimination of excessive Federal redtape, the great attention now being paid to keeping within the boundaries of individual grant-in-aid statutes and regulations could be shifted to seeking substantive achievements which promote sound community development. As in the case of the programs being replaced, the requirements of the relocation and antidiscrimination laws would apply.

For the first full year of operation, we will be requesting $2 billion for urban community development revenue sharing, which includes $100 million set aside for the exclusive use of communities having a population of less than 50,000.

At least 80 percent of the $1.9 billion basic funds would be divided among the standard metropolitan statistical areas for distribution to units of general local government within those areas. Each metropolitan area's share would be based on a uniform and equitable formula comprised of four equally weighted factors-population, poverty, amount of overcrowded housing, and extent of housing deficiencies. Within SMSA's, central cities and cities of 50,000 or more people would receive an automatic distribution of funds on the basis of the same four-part formula.

For the first time, metropolitan cities across the Nation would be able to plan their annual capital improvement budgets knowing with a greater degree of assurance how much Federal development assist

ance they would receive for the coming year. Each city's share would be determined on the basis of needs factors, removing an aspect of the current system under which higher project costs support and generate greater Federal grants.

The balance of each SMSA's allocation would be used

(1) to "hold harmless" metropolitan cities so that they would not receive less under revenue sharing than they have been receiving annually under the urban development categorical grant program being replaced; and

(2) for distribution to cities and counties within the SMSA. particularly counties and smaller cities which have had continuing community development activity under the categorical programs. Up to 20 percent of the basic funds would be available for discretionary distribution by HUD to units of general local government and States. These funds would be used to

(1) provide "hold harmless" funds;

(2) assist localities which have demonstrated special needs or special performance capabilities; and

(3) fund locally initiated innovative programs.

Now, smaller communities inside and outside of SMSA's which have had continuing HUD support for community development activitiesrather than single or intermittent projects-may be assured of receiving equitable "hold harmless" treatment. As I mentioned earlier, there is a special authorization with a $100 million appropriation request for the exclusive use of communities of less than 50,000 persons. These communities would also be eligible for "hold harmless" support from the 20 percent discretionary funds and from the SMSA balances, which together would be in excess of $451 million after all metropolitan cities' "hold harmless" requirements had been met. Finally, all smaller communities outside of the metropolitan areas would also be eligible for community development aid from the $1.1 billion requested for rural community development revenue sharing.

Now, our proposed legislation would consolidate a number of categorical programs-urban renewal (including conventional urban renewal and the neighborhood development program, code enforce. ment, interim assistance, demolition), rehabilitation grants and loans, neighborhood facilities, and model cities. Federal support will be continued for these programs between now and the effective date of the new legislation, and we will of course honor all commitments under the old programs.

Now, at this time, Mr. Chairman, I would like to turn to S. 2333, the bill which you recently introduced as an alternative to the administration's community development proposal. Consideration of both approaches should be helpful in our joint effort to develp a greatly improved system of Federal aid for urban community development.

Both proposals are in full accord as to the basic need to consolidate existing categorical programs into a single more flexible system of Federal assistance. This area of agreement is of far more importance than the several points of difference. I would, however, like to outline briefly the features of the alternative proposal which I believe are most open to question.

One is the inclusion in S. 2333 of local application and Federal review requirements instead of an automatic formula governing the distribu

tion of funds, as provided in the administration's bill. The inclusion of the preconditions for Federal assistance, even though in a streamlined form, would preserve more administrative processing than is desirable, and cause delay in the flow of funds to localities and in the execution of their community development activities.

I appreciate the valid concerns which led to the inclusion of these requirements, but believe that, on balance, these concerns can best be satisfied through the locality's annual statement of its objectives and projected use of funds and the audit requirements contemplated in the administration's bill. I feel that the minimal additional protection to be gained by a prior Federal review is outweighed by the need to assure cities that they will receive a stable, annual flow of funds.

The funding provisions of S. 2333 do not in fact provide localities with the desirable certainty of funding. The provision of billions of dollars in contract authority at the Federal level aggregates resources at that level. But it gives no assurance to any individual community as to its share of the aggregate funds, or indeed that it will. receive any at all, in view of the requirements for Federal administrative processing.

The fact that provision is made in S. 2333 for a 3-year authorization and a 2-year contracting cycle does give to localities a greater chance to continue to receive funds than under a 1-year authorization and contract time limit. But a locality may receive no contract at all. Thus, the stable annual funding found in the administration's proposal under its formula approach is lost in S. 2333.

Also, bearing in mind the way in which budget accounts are kept, the multiyear authorization and contracting cycle of S. 2333 involves a large and immediate budgetary impact in the form of back-door financing. This has no counterpart in the administration's bill, under which Federal assistance is made available on a more automatic basis geared to need.

If the Congress enacts the administration bill, it will be accepting two principles: (1) That funds should be made available for a broad range of community development purposes; and (2) that these funds should flow on an automatic basis.

This would lay down the firmest possible foundation for adequate and continued funding through the lasting cooperation of the substantive and appropriations committees, based on agreement within the Congress as a whole on the principle of certainty of funding. There is no better assurance of continued funding since no Congress can bind future Congresses to continue any program, and authorizations of contracting authority are as likely to be changed as any other authorizations where certainty of funding is not an intrinsic part of the underlying legislation.

There is a further question concerning the provision in S. 2333 that governs a locality's maximum grant amount. Seventy-five percent of the funds would be allocated to the locality on the basis of its past level of community development activities, with annual incremental increases of 15 percent. This takes no account at all of objective need factors. I agree that a locality should continue to receive funds in amounts at least equal to its past level of grants, and this would be done under the administration bill with the hold-harmless standard. However, I don't believe that a maximum grant formula should be

based solely on past levels of activity under standards that would perpetuate the most generous treatment of those who have been best treated in the past, while continuing to exclude others. The bill's formula appears to me to be unfair to the many communities whose urgent needs, under any objective standard, have outstripped their past ability to capture Federal grant funds. These communities should be entitled to receive funds in accordance with their needs and as a matter of right, as under the proposed administration formula.

Now, Mr. Chairman, I would like to turn to the housing consolidation and simplification bill, which is the other major proposal before the committee. It would consolidate, simplify and improve the numerous mortgage insurance and private housing subsidy programs. It would also make important modifications in the low-rent public housing program.

Over a year ago, I called to the attention of this committee the number and complexity of our existing statutory authorities and the maze of regulations, circulars, forms and processing procedures that have grown out of them. I pointed out the frustration, the cost, the red tape and the delay occasioned by this program hodgepodge. I urged enactment of a simpler statutory framework as a means of facilitating more effecitve participation by builders, lenders and sponsors; as a means of improving administration of the programs by Federal personnel; as a means of enabling more effective congressional oversight: and, most important, as a big step toward meeting the greater need for better housing for American families.

In my testimony a year ago I detailed the inconsistencies, conflicts, and complexities of the present program authorities, and discussed many of their shortcomings. The experience of the intervening year has strengthened my conviction that without major program simplification we are headed for trouble. Earlier this year before the Senate and House Appropriations Committees, I stressed that housing programs are so numerous and so complex that they are almost impossible to administer soundly. Before the Senate committee I said:

I cannot overemphasize this too much. We have so many programs and so many different requirements, that it is impossible for people to keep them all in mind and do an effective administrative job.

Before the House Appropriations Committee I stressed that complexity is increased because we have to protect many interests.

[We] are in a position where we have to protect the consumer, we have to protect the government, we have to protect this whole situation under circumstances that make it far more difficult to protect the basic interest than I have ever had to contend with before in any field I have ever been in.

I cannot state the matter any more clearly or emphatically than that. The multiplicity of specialized and often inconsistent programs has not only resulted in predictable redtape and delay, but has compounded the difficulty of accommodating enormous production increases with very modest increases in staff. We need your help in simplifying these programs, and we need it now.

Our proposal last year to consolidate about half a hundred FHA programs into a new Mortgage Credit Assistance Act, to be effective 6 months after enactment, was, I realize, somewhat startling to the many people who had become accustomed to dealing piecemeal with the provisions of the National Housing Act. Also, some argued-per