May 6, 1964
PAGE 10174
ANSWER TO READER'S DIGEST ARTICLE ON FEDERAL URBAN RENEWAL PROGRAM
Mr. MUSKIE. Mr. President, recently my attention was called to an article appearing in the March issue of the Reader's Digest which was highly critical of the Federal urban renewal program. As a member of the Senate Subcommittee on Housing, I felt that I had a definite responsibility to check into this article and ascertain all of the facts. I felt that if the article were based on fact, then the subcommittee had the responsibility to recommend amendments to the existing law to bring about needed reforms. On the other hand, I felt that if the article were not based on fact then it was imperative that the record be set straight.
I recently communicated with Mr. William L. Slayton, Commissioner of the Urban Renewal Administration, and asked for a detailed report covering the salient points raised in the Digest's article. I have now received that report, which pinpoints certain misleading and inaccurate statements in the article.
Let us look at some of these misstatements. The article states "charges of graft, favoritism, waste, arbitrary uses of power have risen to a roar." There is no evidence to support such a statement, and the testimony of the General Accounting Office is in direct contrast to it. Again, the article states that the Housing Agency "is asking Congress this year for authority to spend $3 billion more for urban renewal." Obviously, no effort was made to check this statement against the facts. As is well known, the administration has asked for $1.4 billion in authorization for the next 2 years.
Again, the article charges that cities rarely pay their share of an urban renewal project in cash. A routine check of the facts discloses that cities have paid or will pay more than 35 percent of the total local share of net project cost in the form of cash. This has amounted to more than $319 million in cash.
Mr. President, the opponents of urban renewal appear to be mounting an all-out offensive on this program, their actions geared to coincide with congressional action on the Housing Act of 1964. No one will object to a consideration of this legislation on its merits, and in an effort to set the record straight, I ask that the text of Commissioner Slayton's report be inserted at this point in my remarks.
There being no objection, the report was ordered to be printed in the RECORD, as follows:
TEXT OF REPORT
ALLEGATION
"Many big projects have been carried out competently, but in a shockingly large number, costs have skyrocketed. Charges of graft, favoritism, waste, arbitrary use of power have risen to a roar."
URA Reply
The General Accounting Office and the chairman of the Independent Offices Subcommittee of the House Committee on Appropriations, Representative ALBERT THOMAS, Of Texas, who have policed, audited, and reviewed urban renewal operations in detail virtually since the program started in 1949, do not agree.
Representative THOMAS made the following statement at the conclusion of the hearings for the fiscal 1963 budget: “It has been fantastic to me, the amount of money and the amount of different pieces of property involved. I think there are around 60,000 or 65,000 pieces of property that have been bought. I have not heard of any public scandal. It is fantastic."
On November 20, 1963, during an exhaustive hearing on urban renewal conducted by the House Banking Committee's Subcommittee on Housing, Chairman ALBERT RAINS asked the following of Louis W. Hunter, Assistant Director of the GAO:
Mr. RAINS. "In all your investigations have you found any evidence of corruption or crookedness or stealing in this program at either the local or regional level of any type?"
Mr. HUNTER. "No, we have not, Mr. Chairman.”
At the conclusion of Mr. Hunter's testimony Mr. RAINS again asked: "In your investigation up to now, Mr. Hunter, in a program of this kind, which is a vast program, I want to ask this question: By and large has this program been administered in keeping with the law?"
Mr. HUNTER. "From the work we have done I think we could not say otherwise."
ALLEGATION
"The U.S. Housing and Home Finance Agency, having swallowed up $4 billion already, is asking Congress this year for authority to spend $3 billion more for urban renewal.
URA Reply
The $3 billion figure is wrong. The request is for $1.4 billion for the next 2 years.
This would provide approximately the same rate of approvals as the level of the past 3 years.
ALLEGATION
Erieview
The Digest article is critical of an urban renewal project called Erieview in Cleveland, Ohio. The gist of its complaint is that the Urban Renewal Administration approved the demolition of a number of sound commercial buildings in this downtown project area. The article alleges that city building inspectors had previously certified as sound most of the buildings which Cleveland officials later reclassified as substandard in order to make the project eligible for an urban renewal grant of $33 million. It charges further that a party of Government employees from Urban Renewal's regional office in Chicago briefly toured the Erieview site, did not look inside the buildings, and endorsed the city's reclassification.
URA Reply
The statement that "most of the 118 buildings in the Erieview area had been judged sound by Cleveland housing inspectors" is untrue.
The Erieview project involves an area in downtown Cleveland which the city decided was blighted and obsolete. Accordingly, the city drew up a plan for redevelopment of the area which required the demolition of a number of buildings that were plainly substandard. Still others had to be removed in order to carry out the plan; most of them were obsolete and exerted a blighting influence on the surrounding area; some constituted hazards to health and safety; some had to be taken to widen streets and relieve traffic congestion; and some had to be taken down to provide enough land to attract sound, new development.
The General Accounting Office, while critical of the determination made to demolish some of the structures in the Erieview project, agrees that the demolition of structurally standard buildings is justified in renewing an area. This was stated by Bernard Sacks, supervisory accountant of the GAO Civil Accounting and Auditing Division, to the Housing Subcommittee of the House Banking and Currency Committee. In the course of hearings involving Erieview, Mr. Sacks said: "We have never in any of our reports suggested that standard buildings should never be torn down. We recognize that in many instances, because of the location of buildings, or because of their relationship to the proposed reuse of the land, it may be necessary to tear down structurally standard buildings."
The bond issue to raise funds to pay the city's share of urban renewal project cost was approved 2 to 1 in a referendum. And, after a series of public hearings attended by more than 500 persons and lasting for 12 hours, the Erieview plan was adopted by a unanimous vote of Cleveland's 33-member city council.
The project was also challenged in the courts, but unsuccessfully. The court of common pleas of Cuyahoga County said: "The engineers of the past did a good job of planning for a little city, then of small consequence. But is a large part of the downtown area of the great metropolis of Cleveland to lie moribund in the cocoon which was woven for it when a village more than a century ago?"
And the Ohio Court of Appeals said: "The extensive evidence here shows that the legislative body of the city had before it a great mass of factual data upon which it makes its legislative judgment that the area in question is, in fact, a blighted area, deteriorated and deteriorating, and, as a consequence, detrimental to public health, safety, and welfare. Thus, we conclude from all the documentary evidence above described and all other evidence contained in the record, that the findings of the trial court must be sustained.”
As to the visit of employees from the regional office to Cleveland to inspect the buildings: The facts are, officials of the regional office made three trips to Cleveland in connection with the project during which, among other things, they made sample inspections inside the buildings.
ALLEGATION
Columbia Plaza
The gist of the complaint in the Digest article is that a firm of contractors had bought more than half of a 9-acre tract for private redevelopment when the Redevelopment Land Agency of the District of Columbia decided to redevelop the area with the aid of Federal funds. The article says that the Redevelopment Land Agency selected another group of developers even though the original firm by then owned 90 percent of the area. The article also charges that the "deal brazenly ignored the law's requirements as to what kind of property can be taken over by urban renewal," and that a "backstage" operation was involved.
URA Reply
The fact is that the firm of contractors referred to in the Digest article had tried for more than 11 years to acquire all of the land in the area needed for redevelopment. A stalemate had been reached and the Board of Commissioners of the District of Columbia concluded that renewal assistance was necessary. It adopted an urban renewal plan for the area and received a Federal urban renewal grant reservation of $958,276. The contractors, who had been unable to acquire all of the needed land, were given an opportunity to redevelop the area. They did not choose to do so, so another redeveloper was chosen and the contractors referred to in the article became minority stockholders in the selected firm of redevelopers.
All of this was done in the full light of citywide publicity. The redevelopment plan was approved after two public hearings. At both hearings the project received substantial support from a broad range of citizens.
ALLEGATION
Point I
"The program is prodigal in its spending of taxpayers' money." The Digest article is critical of the operation of the program under which the Federal Government pays two-thirds of the net cost of a project and the locality pays the remaining third in cash or grants-in-aid (such as streets, schools, or other public improvements in or serving a project area).
The article also charges that cities rarely pay their share of local costs for urban renewal in cash.
URA Reply
The Federal urban renewal statute specified the two-thirds Federal, one-third local sharing of the cost of urban renewal. In enacting this formula Congress confirmed the findings of many congressional committee investigations -- that slums were a national problem and that the afflicted communities should not, and could not be expected to bear the entire cost of eliminating them. Furthermore, the law provides that cities may pay their share of renewal costs with either cash or noncash grants-in-aid.
Noncash grants-in-aid may cover public facilities, such as schools, streets, utilities, parks, and similar improvements that are essential to sound urban renewal and are a necessary part of the cost of the project. Therefore, the law properly provides that communities should be given credit for the cost of providing necessary public facilities serving project areas.
This is not so. Cities have paid or have obligated themselves to pay more than $319 million of their share in cash -- the total amounting to more than 35 percent of the total local share of net costs.
This includes virtually all projects that reached the execution stage as of June 30, 1963.
ALLEGATION
Point 2
"The program operates like Robin Hood in reverse. It approves the taking of property by police power from ordinary citizens and selling it by advance arrangement to other, often wealthy, private citizens at prices frequently as low as 30 percent of acquisition cost.
"For example: In Washington, D.C., the city's Redevelopment Agency paid the D.C. Transit System, of which 0.Roy Chalk is president, $1,266,605 for some property, then later leased it back to his Chalk House West, Inc., for 99 years at a bargain rental of $43,221 a year."
URA reply
Urban renewal land is acquired in the same way that land is acquired by highway, military, school, and other public agencies through purchase or eminent domain. Land is purchased at fair market value, on the basis of two separate, independent appraisals. In most cases land is acquired by negotiation, rather than condemnation. If property owners think the offered price is too low, the case may be settled in court.
Cleared land is always sold to redevelopers at fair value for its new uses. The selling price must be competitive with land elsewhere in the community. The cost of the acquired land is almost always higher than its selling price because the acquired land usually contains buildings and other facilities that must be cleared before new construction can begin.
This results in a deficit that is met partly by the Federal Government, partly by the locality. This is the "subsidy." It is the cost of eliminating slum and blight. Not a penny of this money goes to the redeveloper.
The cleared land Mr. Chalk leased was only a portion of the land and improvements originally acquired from his company, D.C. Transit. Furthermore, Mr. Chalk was awarded this portion in open competition as to design, and without knowledge of his identity as a bidder until after the award was made by a disinterested panel. The Digest article failed to mention that the property acquired from D.C. Transit included improvements -- a major car barn and a storage yard -- that had to be paid for. The property that was leased consisted of cleared land and was limited in its development by the renewal plan.
The values for both acquisition and disposition were determined on the basis of appraisals by outside professional appraisers.
The Digest article also failed to mention that in order to obtain the best possible residential development the Redevelopment Land Agency announced in advance the fair value of the land and held a public competition based on the quality of the redevelopment proposals. Eighteen separate proposals were received. They were identified only by number (not by name) and turned over to a panel of distinguished architects.
This panel, by a vote of 4 to 1, selected the entry submitted by Mr. Chalk. Only after it had submitted its report did the panel learn the identity of the sponsor and the architect who had prepared the plan. Although the annual rental that will be paid for this parcel is $43,221, based on fair, independent appraisals, the imputed capital value that will be deposited to the project's account for this parcel is $720,335. The difference between that amount and the acquisition cost represents the cost of acquiring and clearing the existing buildings, as well as the restrictions on the new use of the land.
In addition, the Digest article does not mention that the annual District of Columbia tax on the land and improvements before renewal was $6,891, while after renewal it will be about $98,000.
ALLEGATION
Point 3
The Digest article charges that the urban renewal program "forces poor but independent homeowners into subsidized public housing."
The article charges that urban renewal "in practice seems to displace, most often, poor Negroes."
It charges that in Alexandria, Va., the Durant Civic Association "is struggling desperately to prevent destruction of a neighborhood of neat, clean, older houses, owned and well kept by thrifty Negroes whose families have lived there for as long as 100 years." It implies that A. Melvin Miller, an FHA attorney, is leading the fight against the urban renewal project.
URA Reply
This accusation is untrue. Most of the 157,000 families relocated to date were living in substandard housing, much of it unfit for human habitation, before urban renewal. Each family must be provided with an opportunity to rent or buy standard housing within its means. Approximately 80 percent of these families have been relocated into decent, safe, and sanitary housing. Only about 6 percent are known to have relocated, despite offers of assistance from the city, into substandard housing. The remainder are families which could not be traced or moved out of the city. No one is forced into public housing or any other kind of housing. About 22 percent of the 157,000 families moved to public housing.
About two-thirds of all of the families removed by urban renewal are Negroes since, because of low incomes and discrimination, they constitute a disproportionate number of those who live in slum and blighted areas. A great majority of them now live in better houses than they had before.
Under date of March 4, 1964, Mr. Miller sent a letter to Reader's Digest denying that the Durant Civic Association and he have been opposed to the project. He said the quotation attributed to him was taken out of context and its true meaning distorted. Mr. Miller added that the statement attributed to him in the Digest article was in opposition to particular sites which were being recommended for public housing. They were not part of the urban renewal project.
ALLEGATION
Point 4
"Urban renewal ruins thousands of small business enterprises, many of which could survive and even flourish under programs to rehabilitate rather than raze their areas." A study by Brown University is cited as showing that 40 percent of the shops in urban renewal areas in Providence, R.I., had to go out of business.
URA Reply
The majority of businessmen displaced by urban renewal benefit from the move. They are aided by (1) fair value, subject to court determination, for business property acquired in renewal areas; (2) Federal payments up to $25,000 for moving costs; (3) low-interest loans from the Small Business Administration for reestablishing in new locations.
The Digest article ignores the part of the Brown University study that states that the reasons for the failure of some of the relocated businesses to reopen were many and varied. Some small businessmen were going to close their shops anyway because they could not earn even a poor living in a slum area; others had better job offers.
The Brown study also states that nearly 60 percent of the businesses that relocated successfully had the same or higher income after moving. More than half (54 percent) moved into a newer building than they had been occupying, 62 percent said their new quarters were in better condition, and nearly 65 percent reported larger space.
Reports to the Federal Government and other studies of business relocation have consistently shown a substantially lower percentage of businesses failing to relocate successfully than the Brown University study. The 187 cities with active relocation programs as of September 1963 showed a loss rate of about 29.5 percent. A study by the University of Connecticut of 21 urban renewal projects in 14 cities reported an even lower loss rate of 25.6 percent.
ALLEGATION
Point 5
"The program encourages land grabbing and hasty starts on ill-conceived projects, often followed by long periods of stagnation. About 20 percent of all projects are abandoned.
"Boston, for instance, now has 19 urban renewal projects involving $227,960,000."
The article quotes the State auditor of Massachusetts as saying that the principal result of the Boston Redevelopment Authority's operations has been the establishment of many parking lots on valuable land, which have been rented to private operators "at a fraction of their value." Also, that land owned by the authority is not subject to real estate taxes, and that the delay in construction has cost the city thousands of dollars in taxes.
The article states that during the period of the audit (late 1957 to early 1963) "approximately $1,675,000 was paid to various contractors for maintenance and major repairs to property scheduled for demolition." It added that the auditor was unable to find a single case in which the work was done under contract resulting from competitive bidding.
URA Reply
Actually, the program is designed to prevent hasty starts on ill-conceived projects. Detailed surveys are required before a project can be undertaken.
The record on abandonments shows that ill-conceived projects are not undertaken. They are abandoned as soon as planning surveys show they are not feasible.
The projects described as "abandoned" are those where surveys resulted in a determination that the project should not be undertaken. No project has been abandoned after land acquisition began.
By mid-1963, for those projects that had been approved for execution, 21,970 acres of land had been acquired, redevelopers had been selected for nearly 58 percent of the land acquired, and another 15 percent was ready for sale. Of the land for which redevelopers had been selected, 84 percent had redevelopment under contract, underway, or completed.
The Digest figures are inaccurate. The 19 urban renewal projects in Boston involve a total of $120,710,864 in Federal capital grants.
Some of the cleared land has been used for parking but the chief result has been a reduction -- not an increase -- in the number of parking spaces in the three areas where land has been cleared. The Boston Redevelopment Authority has a policy of allowing parking lot operators to continue in business until the land is actually needed for redevelopment. They are being charged either the same rental they were paying before the authority bought the land, or, if they had owned the land, a fair rental based on two independent appraisals of the property.
The delays encountered in the early days of the program have been eliminated. Nearly $7.4 million in construction has been completed in Boston's New York Streets project; more than $11.5 million has been completed in the West End project and another $11 million has been started; and $47 million in new construction has been started in Government Center.
During an even longer period (July 1955 to February 1963) repairs on these projects totaled less than $487,000. The remaining expenditures consisted of wages for janitors, watchmen, etc. ($457,081.88); fuel, light, power, and steam ($529,982.57); insurance ($224,797.75); and water and sewerage charges ($72,252.84).
These costs were paid from rents collected during the period. It is necessary to maintain these buildings in a decent, safe, and sanitary condition during the period when people and businesses are being relocated.
As for the bids, more than 99 percent of the repair and maintenance work orders involved less than $500. Most of them were emergency jobs. For these reasons, bid taking would have been impractical.
ALLEGATION
Point 6
"Urban renewal programs often enrich slum owners. A slum landlord can split single apartments in two and then, because of crowding aggravated by demolitions elsewhere, charge huge rents. Finally he sells out to urban renewal, and since slums pay high returns per square foot of space, he receives a handsome price. He takes his bonanza, pays a 25-percent capital gains tax, buys another slum, and waits for urban renewal to buy him out again ad nauseam."
URA Reply
These same enriched slum owners are referred to elsewhere in the Digest article as poor but independent home owners. Actually, genuine slum lords are among the most vigorous opponents of urban renewal, since it deprives them of their lucrative operations. Under urban renewal they receive only fair value for their properties. The handsome price can be no more than fair value, and this price is frequently determined by a jury.
In some 700 projects more than a quarter of a million substandard housing units have been or soon will be eliminated. In addition, the workable programs for community improvement require housing and other codes as well as more effective code enforcement. Since 1955 (when the workable program began) to July 1963 the number of communities with housing codes jumped from 56 to 736.
ALLEGATION
Point 7
"Once a program is started, no one is free from condemnation on whim. If but one small structure in a block of five buildings can be declared substandard, all houses or businesses in that block can be condemned for urban renewal."
URA Reply
The Urban Renewal Administration's requirements on this point are quite specific and are not subject to whim. Local renewal agencies must provide evidence that acquisition of properties is necessary to accomplish the renewal of the area.
ALLEGATION
Point 8
The Digest article attributes to the U.S. Chamber of Commerce a statement that the administration asked 2,400 city mayors to use their influence for passage of legislation to create a Department of Urban Affairs.
URA Reply
The U.S. Conference of Mayors and the American Municipal Association, national organizations representing mayors and other public officials, advocated the establishment of a Department of Urban Affairs for years before President Kennedy recommended such a Department. It was not necessary to influence them, as the U.S. Chamber of Commerce charges -- they were calling for it. Furthermore most local chambers of commerce are active supporters of urban renewal in the localities where the program operates despite the opposition to this program by the national body.
Mr. MUSKIE. Mr. President, I think that there are several things which must be kept in mind in any consideration of the Federal urban renewal program. First of all, the program operates on the basis of local initiative. The statute itself and the legislative history make this clear. Thus, for example, the Federal law specifically requires approval by the local governing body of the community before an application for a survey and planning advance can be filed with the URA. This, of course, is the first step in the urban renewal process. The law further requires approval by the local governing body of the community of the project urban renewal plan. Often, the locality itself must provide some cash to help defray its local share of net project cost. This requires action by the governing body of the locality.
I believe it is proper that this program be based on local initiative, and I would vigorously oppose any amendment to change this.
But along with local initiative must go local responsibility.
Thus, a locality may evolve a completely feasible and economically sound urban renewal plan for its project area, but the plan may be one on which reasonable men may nevertheless disagree. For example, the locality may after long and deliberate consideration decide to acquire a structurally sound building in the area so that the objectives of the project area plan may be fully accomplished. I am sure that there are reasonable men who will argue the validity of such an action and the merits of the expenditure involved. But in such a case, it seems to me that so long as the legal and administrative criteria of the Federal program are met and so long as the action proposed is consistent with State and local law, the decision must be a local one and should not come out of Washington.
I think that we must also keep in mind that the urban renewal program, like any other, is not perfect. I am sure that mistakes have been made in the past, and I am also sure that mistakes will be made in the future. The real test is whether the program and those charged with its administration have learned from their past experiences. In my experience, I have found the Urban Renewal Administration always willing to sit down and discuss problems in a completely objective manner. Its Commissioner and his staff have been most willing to consider alternative courses of action. For example, during the recently concluded subcommittee hearings on the Housing and Community Development Act of 1964, I asked Mr. Slayton if he felt the program by its very nature was not geared more toward the larger community than the smaller one, like many of those in my home State. As it happened, the URA had been considering this problem, and subsequent to the hearing we discussed this matter further. I know that concerted efforts are now well under way in trying to simplify procedures to facilitate the full participation of smaller communities. In attempting to meet problems of this type head-on, I think that Commissioner Slayton and his staff should be commended.
Mr. President, in closing let me say for the record that if there are weaknesses in the Federal urban renewal program, let us correct them, but let us be sure that any corrective actions are based on facts.