Mr. BARRETT. Thank you, Mr. Secretary, for a very fine statement. I will come back a little later and comment on your statement. But in order to give the members an opportunity to ask questions this morning I am going to forgo my questions. And before proceeding with questions I would like to inform the members that we will be proceeding under the 5-minute rule for the first round of questions. We will then come back and proceed under a 10-minute rule, giving everybody an opportunity to ask questions, and hoping that we can bring the Secretary back this afternoon if it is necessary.

Secretary ROMNEY. Mr. Chairman, not knowing what is going on this afternoon, I have a very important meeting at 4 o'clock. I am available up until 4 o'clock if that doesn't inconvenience the committee. I ought to attend that meeting, because it deals with a matter vitally affecting our Department's activities, and other departments; it is an interdepartmental meeting.

Mr. BARRETT. We will be very careful looking into your time schedule, Mr. Secretary. I want to inform you that after 3 o'clock we pay double time. And the economy can't stand double time, so we will have to let you out at an appropriate time. But we are hopeful that we can bring you back tomorrow morning if it is necessary. Secretary ROMNEY. I hope that isn't because you don't consider me worth double time.

Mr. BARRETT. Mr. Widnall.

Mr. WIDNALL. Thank you, Mr. Chairman.

Mr. Secretary, the community development special revenue-sharing proposal would include the type of activities which are now eligible under the 312 rehabilitation loan program. It would also end the separate fund which now exists for 312 rehabilitation loans. This program has been very successful throughout its history. I dislike seeing the activity in this program diminished. Do you expect that recipients of community development special revenue sharing will set up rehabilitation activities on their own? Wouldn't the administrative problems of each locality setting up a loan program be prohibitive.

Secretary ROMNEY. I think they would set up such programs, Mr. Congressman, because I think they recognize the importance of these rehabilitation programs. I think there is a growing recognition throughout the country and in local communities of the importance of maintaining the existing housing stock, and therefore the importance of code enforcement and the importance of rehabilitation. The fact that abandonment is growing and spreading across the country is, I think, of concern to local officials. I do think in addition to continuing to make the funds available so that they can determine how much of the money they want to use for rehabilitation-because under the special revenue-sharing approach they would be free to use more money for rehabilitation if they feel that that is a more important priority than other uses but in addition to the special revenue-sharing program and the rehabilitation programs, I am convinced that we do need to improve home repair and modernization programs. And we are working on such recommendations, because I am greatly concerned about this deterioration in existing housing stock.

I admit that there is no way to say with absolute certainty whether the local officials would give equal attention. But I am inclined to think they would.

Mr. WIDNALL. The second part of the question was, Wouldn't the administrative problems of each locality setting up a loan program be prohibitive?

Secretary ROMNEY. They have to have some organization now in that connection. I would like to ask Gene Gulledge.

Floyd Hyde points cut that at the present time the local renewal agency handles it so that they already have the administrative organization to handle it.

Gene, do you have any additional comments on it?

Mr. GULLEDGE. No, sir. The point is that the program is implemented now through a local organization. And that local organization merely gets a specific amount of money through the Federal channel, and specifically directed for this purpose. And under the proposal the organization already in being there would use such funds as the governing body decides ought to be used for that purpose. I don't think the administrative part of it would vary greatly from what happens now. Mr. WIDNALL. Mr. Secretary, or Mr. Gulledge, of the mortgages that the FHA has currently insured, what percent are subsidized and what percent are unsubsidized?

Mr. GULLEDGE. Our total new mortgages-are you talking about the total, Mr. Congressman, of existing and new housing? Because the breakdown is quite different there.

Mr. WIDNALL. I would also like to get the percentages subsidized by FHA against the total FHA and conventional that are unsubsidized. Mr. GULLEDGE. We are going to run pretty close to a 50-50 basis right now. We are going to do around 425,000 subsidized FHA mortgages this year against around 800,000 total. So it is about a 50-50 proposition, a little heavy on the subsidized at the moment. When you get into the new construction only, it is much heavier, of course, in the subsidized field. About 80 percent of the new construction is subsidized.

Mr. WIDNALL. Do you have any figures on the number of subsidized contracts and units that have gone to Fannie Mae?

Mr. GULLEDGE. Fannie Mae estimates that somewhere around 75 or 80 percent of the subsidized units are going to Fannie Mae under the present market conditions.

Mr. WIDNALL. Mr. Chairman, my time has expired. I would like at this time to ask permission, or unanimous consent, to insert in the record an excerpt from the book called "Building for Tomorrow,' President Nixon's plan for urban community development revenue sharing, where a series of questions and answers are posed about the capacity to use these funds wisely and how the funds should be used. Mr. BARRETT. That may be done without objection. And it is so

ordered.

Mr. WIDNALL. Thank you, Mr. Chairman.

(The excerpt from the book, "Building for Tomorrow," referred to by Mr. Widnall, follows:)

ANSWERS TO YOUR QUESTIONS ABOUT URBAN COMMUNITY DEVELOPMENT REVENUE SHARING

What are the advantages of the new system?

Urban Community Development Revenue Sharing replaces four current programs. Although each-Urban Renewal, Model Cities, Neighborhood Facilities and Rehabilitation Loans-were created to do an effective job, they proved

to be fragmented, wasteful and weighted with red tape and paperwork. President Nixon's plan calls for a simplified system where State and local governments could, if they wished, continue these programs or elect to put the money to work where it is more needed. There would be a more equitable distribution of money based on a formula that establishes the needs of cities. The cities would no longer be required to match Federal funds.

Do State and local governments have the capacity to use these funds wisely?

The Federal government has no monopoly on wisdom or honesty. Local leaders have already demonstrated the capacity to deal skillfully with developmental questions when they have had the resources and freedom to do so. The responsibility for making decisions about local community developmental activities should be returned to the State and local level so that problems could be dealt with expeditiously.

Who would decide how funds would be used?

Local government officials, those most readily accessible to voters in the communities. Recipient governments would only have to publish a statement of objectives and projected use of funds. This would permit the public to make sure the local program responds to local needs. An end-of-year audit would also be required.

Will civil rights be protected?

Yes. There could be no discrimination in the use of Urban Community Development Revenue Sharing funds, and the rights of all persons to equitable treatment would be protected. Any monies expended under this program would be considered as Federal financial assistance within the meaning of Title VI of the Civil Rights Act of 1964.

What activities would be allowed with urban community development revenue sharing funds?

Recipients would be urged to devise their own programs to suit their own needs in support of community development. In addition, all of the activities eligible for support under the present categorical grants, including:

Acquiring land for a wide range of development purposes.

Constructing public works, neighborhood facilities, streets, parks and playgrounds.

Enforcing housing codes.

Rehabilitating residential properties.

Demolition of buildings and clearing of land.

Providing relocation payments and assistance for those displaced by Community Development activities.

Providing Model Cities services activities.

Administration will no longer be fragmented and based on the rise and fall of specific projects. Red tape will be cut because Federal applications and requirements will no longer have to be prepared, filed or met. Local needs would no longer be shaped to rigid Federal standards. Rather, Federal community development support would be shaped to suit local needs and priorities.

Which present programs would be included under the new systems?

Four categorical grant programs: Urban Renewal, Model Cities, Neighborhood Facilities, and Rehabilitation Loans. All the sub-categories covered by urban renewal would naturally be included. Local governments could, if they wish, continue or expand all of these programs.

Would HUD continue to administer any categorical assistance programs?

Yes. Open space grants, water and sewer grants, and public facility loans would remain. These activities could also be undertaken with shared revenues, if the community so desired. The New Community Development Corporation would not be directly involved under the new Act.

Are the Department's Housing Assistance Programs affected?

No. Only the Rehabilitation Loan Program is included in Revenue Sharing. Why use Standard Metropolitan Statistical Areas in allocating funds?

The greatest problems of urban community development, revitalization and growth, occur within "metropolitan areas" which includes suburbs. There has been an explosive population growth in these metropolitan areas. Today almost seventy percent of the Nation lives within the 247 designated Standard Metro

politan Statistical Areas. Urban developmental problems created by this concentration of people present high priority needs for public expenditures.

What is a Metropolitan City and what is a Metropolitan Central City?

A metropolitan central city is the largest city over 50,000 in the SMSA, generally around which the SMSA is structured. A metropolitan city is any other city within the SMSA with a population of 50,000 or more.

How will funds be divided within the SMSA?

Within each SMSA designated central cities and the other metropolitan cities will receive funds based on their population, degree of overcrowding, extent of housing deficiencies, and the number of families living below the poverty line. The balance of allocations to each SMSA will be available for distribution to metropolitan cities, counties and smaller communities.

Could a Metropolitan City receive less than in the past?

No. Most cities would receive more. If a city received less under the formula, the "hold harmless" provision would release additional funds to bring it up to its former base.

How do we know what Metropolitan Cities received in the past?

A five-year program level average was calculated up to and including the last completed fiscal year for all metropolitan cities for all Urban Renewal and Rehabilitation Loan programs. A full twelve-month figure for Model Cities was added to the other averages.

Will funding always remain at the same level?

No. As total appropriations for Urban Community Development Revenue Sharing increase, steadily larger amounts will be distributed. In the case of the Model Cities program, however, a demonstration program with a five program year limit was contemplated. Therefore, after a community has completed the five "action years,' its "hold harmless" calculation will no longer include a twelve-month Model Cities allocation.

What about smaller communities both inside and outside of the metropolitan areas?

Smaller cities clearly have community development needs, although of a lesser magnitude. Smaller communities are eligible to receive assistance from the funds administered by HUD. These funds may come from SMSA balances and the twenty percent discretionary funds. President Nixon requested an additional $100 million of Urban Community Development Revenue Sharing to distribute exclusively to communities below 50,000 population.

What will happen to Neighborhood Development Program Projects?

The contracts approved would continue in effect after January 1, 1972, through the end of the contract year. After January, however, these contracts would be funded from Community Development Revenue Sharing.

Funds escrowed in connection with Neighborhood Development conversions would be available to cities after January 1, 1972, if a city chooses to continue that program. However, outlays are to be deducted from the gross "hold harmless" amount, to avoid double funding.

What will happen to Urban Renewal commitments?

All metropolitan cities would get their formula share automatically. Cities could continue to receive disbursements from existing conventional urban renewal reservations. However, the Federal outlays would be deducted from the city's gross "hold harmless" amount to avoid double funding. The net "hold harmless" amount, if any, would then be paid out of the Urban Community Development Revenue Sharing funds.

What will happen to Model Cities programs?

It will be up to the local community to decide if its own Model Cities program meets its local needs, or if the money can be better spent locally on some other urban development program. Model Cities action-year contracts will continue to be approved as scheduled until January 1, 1972, and will continue in effect until the end of the contract year. After January 1, the contracts already approved would be funded from Urban Community Ďevelopment Revenue Sharing to avoid double funding. Unused Model Cities appropriations would lapse on June 30, 1972. The Revenue Sharing "hold harmless' formula would include the Model Cities component (that is, the 12-month funding level) until conclusion of fiveaction-years for the particular city.

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