Enactment of the President's proposed rural development special revenue sharing would permit full funding by communities of needed community development. projects and programs.

Public Facilities Program

Recommendation 13: "HUD should establish a program designed to provide grants of fifty percent to communities under 15,000 population for the construction of administrative and public safety facilities. Supplemental assistance up to an additional thirty percent should also be allowed in cases where more than one of the local governments in a community join together to construct a common facility."

HUD has no legislative authority for a program of this type. Enactment of the President's proposed general and special sharing measures will provide new and unrestricted funds to be used as the states and localities deem appropriate.

III. ADMINISTRATION OF FEDERAL PROGRAMS

Small Town Services Program

Recommendation 14: “The functions and responsibilities of the Small Town Services program should continue to involve four major program areas: (a) informational assistance; (b) general assistance and advice; (c) interagency coordination; and (d) research."

Recommendation 15: "The Small Town Services program should be augmented in order to be more effective in assisting small communities. Consideration should be given to the establishment of the program function at the regional level." Recommendation 16: "The Small Town Services program should take the lead responsibility in urging the development of a small community data system based upon the small community profile methodology designed for this study." The community profile format calls for and outlines essential elements for the comprehensive diagnosis of a small community-economic, physical, social, and governmental aspects. The study report points to the potential of utilizing the small community profile as an analytical and technical/management tool by HUD program officials (particularly at the Area Office level), states, areawide agencies as well as the small community itself for assessing local problems and needs and identifying specific solutions. The profile methodology provides a comprehensive approach to viewing the small community and often supplements data required in HUD program applications. Comments received from HUD field officials indicate a diversity of uses for a comprehensive Community Profile; e.g., supplemental and supportive to narrower program profiles, additional substantiation for both program and project needs useful to program managers and their teams in working with a community, a guide for government officials at all levels, and a fully documented statement of problems and needs as well as local resources available.

The Community Profiles developed by the study have been distributed to each Regional Office as well as to each of the respective mayors for their use and comment. To date, both the written and verbal responses indicate that both communities and HUD would benefit if comprehensive Community Profile guidelines were developed and issued.

Also, a technique to utilize the community profile methodology is spelled out in the report. A "Classification Ranking of Small Communities" based upon a factor analysis process can provide a HUD program administrator useful information in considering a community's grant application. He can use the factor analysis data as a tool in making his judgment between application for aid. It enables him to select that application that presents the highest indication of success, based on past performance of that community in handling grants or other factors shown on the chart.

Recommendation 17: "The Small Town Services program should concentrate its efforts on communities of 25,000 population or less."

The Small Town Services Program, located in the Department's Office of State and Local Management Assistance, is assigned the mission to provide an improved focus and increased assistance for meeting small town housing and community development problems and needs. One of its major functions is to provide staff support and technical assistance in identifying and analyzing the special housing and community development problems and needs of small towns and rural areas, and recommend appropriate action. A regional counterpart staff to serve as a focal point for small town services and non-metropolitan development matters has been provided in each of the Department's ten regional offices.

Although no formal policy has been established to focus on problems of communities under 25,000 population, the activities of this Office have been so addressed. For example, HUD's participation with USDA and OEO in developing and implementing improved rural housing programs, cited earlier in this report, is an example of the focus being placed on rural areas and communities under 25,000 population. Also, the efforts of this program have been concentrated on stimulating, monitoring and evaluating various demonstration efforts and studies that deal with the problems and special needs of the smaller communities of 25,000 population or less.

Program Application Reviews

Recommendation 18: "HUD field offices should be instructed to conduct preapplication conferences with committees especially for major projects such as housing, urban renewal and water and sewer, prior to submittal of formal applications for funding. Conferences should be held in the applicant community and not at the HUD field office."

Since the completion of this study report, the Department has established 43 Area Offices, throughout the nation, having comprehensive program review and approval authority. The procedures in effect or in the process of being updated call for a conference with each community prior to the submission of a formal program application. The decentralized Area Office structure facilitates the use of the pre-application conference technique in all instances where the community is the applicant.

With reference to applications for housing projects, other than public housing, these are usually submitted by private sponsors and are expected to comply with the planning requirements of the local authorities. To invite small town officials to sit in at a pre-application conference on such numerous housing project applications would result in further delays and reduction of the volume of housing produced in smaller communities.

HUD field offices are now negotiating "annual arrangements" with selected individual communities, packaging Community Development and other HUD aids in a coordinated series of programs most appropriate to meet locally-defined problems and priorities. This negotiation process enables the discussion of suitable programs with community elected officials prior to the filing of formal applications. Further, HUD is now developing a Project Selection System for Community Development Programs which would enable a HUD judgment as to a community's eligibility and priority for community development funds before the submission of detailed technical information is required. This would avoid the burden, particularly onerous on a small community, of preparing such information for projects which cannot or will not be funded.

IV. STATE ASSISTANCE TO SMALL COMMUNITIES

Expansion of State Role in Assisting Small Communities

Recommendation 19: "The Federal Government should continue to encourage the establishment of Offices of Community Affairs in states which do not have them."

Recommendation 20: "The Federal Government should encourage states to assume greater financial responsibilities for assisting small communities in such areas as technical and planning assistance, housing, urban renewal, and other programs aimed at rebuilding and revitalizing small communities.”

A major vehicle to achieve these objectives is the President's proposed program for general and specific revenue sharing. Through a general revenue sharing and six special revenue sharing proposals, states and local governments will receive substantially automatic allocations of funds and thereby be given a full share in the task to chart the nation's growth and development. In support of these revenue sharing proposals, a new and broadened program for Planning and Management Assistance to states, to area-wide agencies, and to localities was requested for FY 1972 ($100 million requested-$60 million appropriated). This grant program will enlarge the 701 Comprehensive Planning Assistance Program objectives by providing broader and more flexible state support for local governments to build their capacity to govern effectively. Emphasis is planned on the development and use of comprehensive management (not planning) processes. Also, through use of funds under Section 111(b) of the Demonstration Cities and Metropolitan Development Act of 1966, HUD has helped to support ten state technical assistance offices concerned with strengthening the capability of local general purpose government and relating state planning and service delivery sys

tems to locally-determined plans and priorities. In the State of Texas, such HUD support helped provide the stimulus for the creation of a cabinet-level department of community affairs.

State Encouragement of Small Community Consolidation

Recommendation 21: "The Federal Government should urge states to strongly discourage the further proliferation of municipalities and provide financial and other incentives to encourage either municipal consolidations or the transfer of area-wide functions to regional agencies."

Increased emphasis on the creation and support of area-wide planning and service districts to identify problems and priorities, and mobilize available resources is underway. Multi-county districts afford a new focusing device to achieve more flexible and responsive smaller community and non-metropolitan governmental institutions and services. During FY 1971, $3.4 million in comprehensive planning grants were distributed by HUD, through the states, to 155 non-metropolitan districts in 34 states. This is compared with $1.4 million awarded to 61 districts in 18 states during FY 1969, the first year this program was funded. As of June 30, 1971, 38 states had officially delineated area-wide planning and development districts. The potential of the regional or area-wide agencies approach to provide new direction and solutions for small community consolidation or coordination is still largely untapped.

The Department has supported through its 701 grant program and Research and Technology program various efforts designed to achieve community consolidations and area-wide improved public services. For example, a Research and Technology grant has been made to Technical Foundation, Inc. of the West Virginia Institute of Technology, designed to improve public services in some thirty rural communities in the Upper Kanawha Valley of West Virginia.

V. THE GROWTH OF REGIONAL AGENCIES

Recommendation 22: "HUD should recommend to the Bureau of the Budget that it should actively encourage state governments to implement provisions of the Budget Bureau directives providing for common or consistent planning and development districts at the regional level. If conformance is not forthcoming within a reasonable amount of time, other means should be considered to produce compliance."

Recommendation 23: "HUD should urge the states to delegate responsibility for providing better coordination and the common use of resources where feasible in each regional planning and development district to one of the local participating agencies. The non-metropolitan planning district or COG should be considered for assumption of this role. Ultimate responsibility for coordination, however, should remain with the states."

These recommendations are being implemented by the Department primarily through the revised Comprehensive Planning Grant Program Draft Handbook, dated September 1971. Program policy is that whenever possible local assistance and services should be provided through area-wide mechanisms, so as to gain the benefits of a more desirable scale of economy possible with a common or shared professional staff at the area wide level. Also, the Office of Management and Budget through its revised OMB Circular A-95, dated February 9, 1971, spells out guidelines for achieving improved cooperation with state and local governments through regional planning and service districts.

In summary, much useful data on smaller community development with recommendations was presented by this study report. The Department has utilized and plans to further consider the report findings, recommendations, and their implications for achieving sound small town development.

NOVEMBER 1971/Revised MARCH 1972/FCD.

Mr. ROE. That is all, Mr. Chairman.

Mr. KLUCZYNSKI. Mr. Finn.

Mr. FINN. Mr. Chairman, I have no questions. I just want to make a short statement to explain the absence of the two minority members of the subcommittee.

I wanted to assure you that Mr. Stanton and Mr. Horton are both involved with matters closely involved in what you are doing this morning. Mr. Stanton is involved with the housing bill markup, and

Mr. Horton is involved with the Government Operations Committee in the marking up of the legislation in the Department of Community Development. And I am sure they would have liked to have been here otherwise.

Mr. JACKSON. Thank you very much. We have great respect for them, and we know how they support our programs.

Mr. KLUCZYNSKI. I want to thank you for the splendid testimony. It is always a pleasure to have you before this committee. And thanks again for the splendid cooperation.

Mr. JACKSON. Thank you very much.

Mr. KLUCZYNSKI. The next witness will be Mr. Alvin Jones Arnett, Executive Director, Appalachian Regional Commission.

TESTIMONY OF ALVIN JONES ARNETT, EXECUTIVE DIRECTOR, PRESENTING STATEMENT OF DONALD WHITEHEAD, FEDERAL COCHAIRMAN, APPALACHIAN REGIONAL COMMISSION; ACCOMPANIED BY PAGE L. INGRAHAM, INTERGOVERNMENTAL PROGRAMS

Mr. ARNETT. Mr. Chairman and Mr. Bergland, the statement is that of Donald Whitehead, the Federal Cochairman of the Appalachian Regional Commission. I am the Executive Director.

Accompanying me is Mr. Page Ingraham, who is Director of Intergovernmental Programs at the Commission.

Mr. Chairman, it is a pleasure for me to appear before this committee which is considering major Federal policies and programs relating to rural areas and their implications for small business. The Appalachian Regional Commission, since its establishment more than 6 years ago, has been vitally concerned with the problems of rural areas and their need for economic development.

The region has a network of small- and medium-sized communities and cities with only one major metropolitan area, that being Pittsburgh. Central Appalachia, consisting of portions of Kentucky, West Virginia, Virginia, and Tennessee, has one of the largest concentrations of rural population anywhere in the country-in fact it is one of the densest in the United States. In the southern part of the region, an agricultural economy is being increasingly affected by industrialization and urbanization while in the north a coal-steel-railroad economy is shifting to new types of manufacturing and service employment. We have been faced with the problems of change in rural areas and in small and large business which have had a profound impact on the region.

One of the major characteristics of an area experiencing difficult economic growth problems is the special impact on small business which serves local markets and on rural areas where it becomes difficult to provide an adequate level of health, education, and other services. The findings of some recent studies, for example, illustrate the extent of the slack that exists in service and retail employment. It was found that an increase in industrial jobs does not necessarily result in a corresponding increase in service and retail employment, this meaning in small business jobs. This would indicate that existing service and retail establishments are operating below capacity and therefore receiving less return than they should. Another indication

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of the particular impact on small business is the active and predominant participation in local industrial and development organizations by small businessmen. They know that their future depends on continued growth of the economy. Their livelihood is fixed by the local market and they need a growing population and rising income level. Another major characteristic of areas lacking adequate economic growth is the disparity that exists between services and facilities available in the rural areas and those in urban areas.

These disadvantages in educational and medical facilities and services, housing, living standards and personal income are marked. Rural governmental institutions may be unable to respond and provide the type of public services required. The small local governments are frequently not equipped to undertake the planning and development activities necessary to overcome their handicaps.

Our activities under the Appalachian Program have borne out this experience and have shown that the best way to aid rural areas and small business is to undertake a combined urban and rural development program for the total economic growth of an area. The decision to focus on total economic development, broadly construed, has allowed the Commission to concentrate limited resources where they will have the greatest impact while still responding to those needs of people which affect economic growth.

Focusing on total economic development led to the adoption by the Commission of a policy which emphasizes the concentration of investments in areas with growth potential or in areas having a substantial impact on a growth area. The policy recognizes that it may be necessary to provide health and education services in other areas so that the people in more isolated regions, who cannot be served effectively by facilities in a growth area. may nevertheless, receive the health and education services they need in order that they may participate more effectively in society and the economy and thereby contribute to the economic growth of the area. By concentrating major investments at selected locations it is possible to provide the necessary level of services readily accessible to the surrounding rural hinterland. Only by the effective application of such a policy will it be possible to encourage centers which provide a level of services sufficient to provide an alternative to continued migration to major metropolitan concentrations. Such a policy can contribute to a more "balanced" national development an increasingly sought-after objective.

A number of Appalachian programs illustrate the impact of a total development policy for both urban and rural areas. The local development districts, which cover most of the Appalachian area— and by the way, our Appropriations patron-Mr. Evins smiles down, if only from a portrait-this area covers the mountainous region from Schoharie County in New York to Kemper County in Mississippi, it runs down the ridge of the Appalachian Mountains. So, it extends almost from New York City to the Gulf of Mexico, with roughly 20 million people. These local development districts which cover most of the Appalachian area, are an organizational embodiment of this relationship. The planning and development districts provide an area-wide forum within which rural and urban, public and private interests can jointly develop programs to provide necessary services and foster the economic growth of the area.