[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]





                   INSPECTOR GENERAL'S REPORT ON THE


                    HOUSING AUTHORITY OF NEW ORLEANS

=======================================================================

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 4, 2001

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 107-21


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice      BARNEY FRANK, Massachusetts
    Chair                            PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska              MAXINE WATERS, California
RICHARD H. BAKER, Louisiana          CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama              LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware          NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma             KEN BENTSEN, Texas
ROBERT W. NEY, Texas                 JAMES H. MALONEY, Connecticut
BOB BARR, Georgia                    DARLENE HOOLEY, Oregon
SUE W. KELLY, New York               JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                MAX SANDLIN, Texas
CHRISTOPHER COX, California          GREGORY W. MEEKS, New York
DAVE WELDON, Florida                 BARBARA LEE, California
JIM RYUN, Kansas                     FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama                   JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio           JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina      CHARLES A. GONZALEZ, Texas
DOUG OSE, California                 STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois               MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania      RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
GARY G. MILLER, California           WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia                STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York       MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania         
SHELLEY MOORE CAPITO, West Virginia  BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio

             Terry Haines, Chief Counsel and Staff Director
                                 ------                                

              Subcommittee on Oversight and Investigations

                     SUE W. KELLY, New York, Chair

RON PAUL, Ohio, Vice Chairman        LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              JAY INSLEE, Washington
ROBERT W. NEY, Texas                 JANICE D. SCHAKOWSKY, Illinois
CHRISTOPHER COX, California          DENNIS MOORE, Kansas
DAVE WELDON, Florida                 STEPHANIE TUBBS JONES, Ohio
WALTER B. JONES, North Carolina      MICHAEL CAPUANO, Massachusetts
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
ERIC CANTOR, Virginia                WILLIAM LACY CLAY, Missouri
PATRICK J. TIBERI, Ohio




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 4, 2001.................................................     1
Appendix:
    June 4, 2001.................................................    49

                               WITNESSES
                          Monday, June 4, 2001

Beard, D. Michael, Southwest District Inspector General, Office 
  of the 
  Inspector General, HUD.........................................    20
Davis, Deborah, Chairwoman, Desire Resident Council Association, 
  New 
  Orleans, LA....................................................     5
Drozdowski, Chester J., Director, HUD Office of Public Housing, 
  New 
  Orleans, LA....................................................    17
French, Laura, Resident, St. Bernard Apartments, New Orleans, LA.     8
Jefferson, Hon. William J., a Representative in Congress from the 
  State of Louisiana.............................................    34
Morial, Hon. Marc, Mayor, City of New Orleans, LA................    31
Nicotera, Frank, Executive Monitor, Housing Authority of New 
  Orleans........................................................    35
Solomon, Rod, Deputy Assistant Secretary for Policy, Program and 
  Legislative 
  Initiatives, Office of Public and Indian Housing, HUD..........    19

                                APPENDIX

Prepared statements:
    Kelly, Hon. Sue W............................................    50
    Baker, Hon. Richard..........................................    75
    Beard, D. Michael (with attachments).........................    88
    Davis, Deborah...............................................    76
    Drozdowski, Chester J........................................    80
    Nicotera, Frank (with attachments)...........................   177
    Solomon, Rod.................................................    85

              Additional Material Submitted for the Record

Kelly, Hon. Sue W.:
    ``$860,000 Program Promoted Aroma and Color Therapy,'' The 
      Washington Post, June 1, 2001..............................    52
    Guste Homes Resident Management Corp. letter, May 29, 2001...    57
    Lafitte Economic Development Corp. letter, June 14, 2001.....    56
    ``Tenants at Odds with HANO Revitalization,'' The Times-
      Picayune, June 14, 2001....................................    54
The National Advisory Council of The Housing Authority of New 
  Orleans, policy statement......................................   227

 
                   INSPECTOR GENERAL'S REPORT ON THE
                    HOUSING AUTHORITY OF NEW ORLEANS

                              ----------                              


                          MONDAY, JUNE 4, 2001

             U.S. House of Representatives,
      Subcommittee on Oversight and Investigations,
                           Committee on Financial Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:30 p.m., in 
room 
C-501, Ceremonial Courtroom, Hale Boggs Federal Office 
Building, New Orleans, Louisiana, Hon. Sue W. Kelly, 
[chairwoman of the subcommittee], presiding.
    Present: Chairwoman Kelly.
     Also Present: Representatives Baker, Vitter and Jefferson.
    Chairwoman Kelly. This hearing of the House Financial 
Services Subcommittee on Oversight and Investigations will come 
to order. Without objection, all Members' opening statements 
and questions will be made part of the record.
    For the information of the people who are testifying and 
those in the audience, there will be a period of time in which 
your testimony will be recorded. You have 5 minutes to testify, 
at which point, 4 minutes into it, if you're getting close, I'm 
going to tap the end of this gavel. Don't get alarmed. It just 
means you're coming close toward the end. A minute is still a 
pretty long time, so keep talking. I'll let you know. I'll 
really bang the gavel if you go way over. But, we really are 
here to hear what you have to say, so feel comfortable about 
saying it, because that's why you're here and we're glad you're 
here.
    This afternoon, we're going to discuss the report issued 
last month by the Inspector General of HUD on the Housing 
Authority of New Orleans and the distressing problems that were 
disclosed in that report.
    In 1996, the subcommittee held a hearing here chaired by a 
different subcommittee chairman, but in this same building, on 
the problems that HANO has had in providing a safe, decent, and 
sanitary housing. The Inspector General's report calls into 
question claims of improvements made by the HANO under the 
Cooperative Endeavor Agreement.
    It's my hope that we will identify how HANO's problems have 
affected the lives of the thousands of residents who depend on 
it for housing and to search for ways to improve their living 
conditions. All of us, regardless of where we live, want to 
make a better life for our families. We need a place where our 
children can grow without fear, without danger. We need an 
open, clean, peaceful neighborhood. HANO residents deserve 
management that quickly responds to maintenance requests, keeps 
its promises to make long-term neighborhood improvements, and 
wisely spends its funds.
    I want to begin by thanking my colleague on the Financial 
Services Committee, Congressman Richard Baker, a deeply 
concerned Representative from nearby who both brought this 
situation to my attention and asked me to convene this hearing. 
We're grateful for his support and his expertise on this issue. 
Also later this afternoon, we will welcome Congressman William 
Jefferson, who represents this area. For his hospitality, we 
welcome him and thank him for welcoming us to this great city 
and we welcome Congressman David Vitter, a strong advocate for 
the people of Louisiana.
    Both Congressman Baker and Jefferson were here 5 years ago, 
and I can understand the passion and frustration that they must 
feel for trying again to get a handle on the problems at HANO 
and see some real improvements. We also want to thank Chief 
Judge A.J. McNamara of the Eastern District of Louisiana and 
his staff for their cooperation in using this courtroom.
    The Inspector General's recent report on HANO raises some 
really troubling questions about events over the past 5 years. 
The report states that after spending over $139 million of the 
$243 million it received for modernization of the units in 
these past 8 years, HANO has not revitalized even one of its 
conventional sites. The report also states that management at 
HANO has constantly changed without improvement in results. In 
fact, HUD's own staff wrote that HANO can plan, but not 
implement, and that whatever progress has been touted as 
``all''--and I'm quoting from the report--``smoke and mirrors'' 
end of quote.
    HANO's most recent scores on HUD's public housing 
assessment system are, once again, failing, after claiming they 
made improvements for the last 2 years. That claim might have 
been shaky at best, according to the report, since HUD 
management in Washington wouldn't even allow its own New 
Orleans Housing Office to verify the earlier report.
    The bottom line is that hundreds of millions of dollars 
have been spent by HANO in the last 10 years, but apparently 
without a lot of positive result. Five years ago, the HUD 
Investigator General testified that, and I'm quoting: ``The 
best path for HUD is a total takeover of the authority.''
    Last month, the same IG official concluded that HANO cannot 
renovate, demolish, build, or manage its units. That is where 
HANO was 5 years ago, and 5 years of operating under a 
cooperative endeavor agreement hasn't changed that fact. I do 
not doubt that there have been some positive actions taken in 
the last year to stop the bleeding, but it might be time for 
some more drastic action to help HANO's residents finally get 
the housing and management that they're entitled to.
    At this point, I'd like to let Members of the subcommittee 
and their staff know that it's my intention to enforce the 5-
minute rule and I will hope that we will cooperate with this. I 
want to advise everyone here, we have plenty of time to hear 
everyone's viewpoints, but I also want to remind you that we 
need to maintain decorum that is required in all congressional 
hearings and in Federal courtrooms. So please do not applaud or 
comment loudly for a particular witness or a subcommittee 
Member.
    At this time, I'd like to turn to Congressman Baker for his 
formal opening statement. Thank you, Congressman Baker.
    [The prepared statement of Hon. Sue W. Kelly can be found 
on page 50 in the appendix.]
    Mr. Baker. Thank you, Chairwoman. I certainly appreciate 
your willingness to travel from New York to come to this great 
city and to be of help to us in this most difficult problem.
    I must first confess to those who are today though, Madam 
Chairwoman, I have a difficult mission ahead of me. I'm an LSU 
graduate and I have to say you Tulane Greenway supporters, 
congratulations. That doesn't flow off my lips very easily, but 
I've said it. My dad is a Tulane grad and my daughter is a 
Tulane grad. They often refer to me as the only illiterate in 
the family, so I hope you carry the Louisiana banner proudly to 
the World Series and bring back home that title for us one more 
time.
    This is a very difficult problem, Madam Chairwoman, 
Congressman Vitter. Unfortunately, it is a frustrating, long-
standing problem. I have been involved in these discussions 
with prior secretaries of HUD, with other folks within the 
Inspector General's office, with all levels of HUD officials. 
When I first began this effort some years ago and traveled 
through many of the projects and spoke to the residents, I left 
this city with a very heavy heart, realizing that the United 
States Government was the largest slum landlord operator in the 
United States. And it has been a continuing haunting 
realization that we are simply not making the progress that any 
reasonable person should expect for the quality of lives for 
the individuals affected.
    It's my hope that the subcommittee, after listening to the 
testimony today, will explore any and all alternatives and 
spare no effort in pursuit of an appropriate resolution.
    This time, for the first time, I'm hoping that this 
subcommittee with this committee's leadership, working with the 
officials at HUD, that we can make changes that residents will 
see as being real. This is not just about a waste of taxpayer 
dollars. It's not just about Government inefficiency. It is, 
however, about the quality of people's lives. I don't want to 
go through another 5 year window and sit in this courtroom 
again with other Members of Congress and read another Inspector 
General's report that tells us that no matter how many dollars 
we spend, no matter how hard we try, that people still continue 
to live in the worst abysmal conditions one can imagine.
    So, I thank Congressman Vitter for his willingness to 
participate. I am appreciative that Congressman Jefferson will 
be here later this afternoon. And Chairwoman Kelly, I am 
extremely appreciative for your willingness to come to the 
city, take the necessary report back to Chairman Oxley, and 
let's all join hands together. This is not a partisan issue. 
It's not a Federal/State battle. It is a problem for all of us 
that we ought to be able to join hands and get this fixed this 
time the right way. Thank you very much.
    [The prepared statement of Hon. Richard Baker can be found 
on page 75 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Baker. We'll now 
go to Congressman Vitter for his opening statement.
    Mr. Vitter. Thank you very much, Chairwoman Kelly, for your 
leadership for coming to our part of the world to address this 
important issue and thank you, Richard, for your leadership 
over many years on this troubling matter. The last time this 
subcommittee met here to discuss the issue was 1996. I was not 
a Member of Congress then and really, I'm coming to the issue 
in a fairly new and fresh way as a Member of Congress.
    But I did grow up in the area. I have continued to read 
about the news accounts of this very troubling matter and so, 
just as a citizen looking from afar, I've long been concerned 
about this decay of the housing stock of New Orleans that has 
not only a remedy has failed to be found by the housing 
leadership, actually the decay has been led by HANO and 
mismanagement there. And so I'm very interested in the issue as 
a resident of the region of southeast Louisiana and, pending 
what we hear at this hearing, I certainly fully support the 
idea that we now need to do something fundamentally 
dramatically different. We have been talking about this problem 
and we have been negotiating interim stop gap measures for well 
over 5 years and nothing fundamental has apparently changed. So 
I'm very, very eager to hear from residents and hear from 
anyone interested in what we should do differently so that we 
can move beyond these recurring themes and recurring problems 
with some more dramatic action. And I thank you for letting me 
be a part of this hearing. I'm not a Member of the committee or 
the subcommittee but, as a local representative, I'm certainly 
very interested in and I appreciate the invitation to be here.
    Chairwoman Kelly. Well, I thank you very much. There are no 
more opening statements from the congressional Members here, so 
we're going to begin with our first panel. Before us today we 
have Ms. Deborah Davis who's the Chairwoman of the Desire 
Resident Council Association and she's a 44-year resident. In 
addition, we have Ms. Laura French, former Chairwoman of the 
Residents' Council and a resident of the St. Bernard Apartments 
who's lived in HANO facilities for 55 years.
    You're both aware that this subcommittee is holding an 
investigative hearing and, when doing so, that the Chair may 
decide to take testimony under oath. Do either of you have any 
objection to testifying under oath? The response is no. That's 
fine. The Chair advises you that under the rules of the House 
and the rules of this subcommittee, you're entitled to be 
advised by counsel. Do any of you desire to be advised by 
counsel during your testimony today? The response is no. Thank 
you very much.
    In that case, if you would please rise and raise your right 
hand, I'm going to swear both of you in.
    [Witnesses sworn.]
    Chairwoman Kelly. Thank you very much. Each of you is now 
under oath. Without objection, your written statements will be 
made part of the record. You're each now going to be recognized 
in turn to give a 5-minute summary of that testimony.
    Ms. Davis, we'd like to begin with you.

STATEMENT OF DEBORAH DAVIS, CHAIRWOMAN, DESIRE RESIDENT COUNCIL 
                  ASSOCIATION, NEW ORLEANS, LA

    Ms. Davis. Thank you. I want to thank everybody for the 
opportunity to sit before Representatives of the House and also 
Congressmen and allowing us the opportunity to vent as we 
discuss some of the experiences of redeveloping Desire. One of 
the things I'd like to touch upon at this time is the living 
conditions. Desire, though it may have been built with brick 
veneer, was built very strong. It lasted 44-plus years. And we 
are content that even in this leased state, it's still a home 
to us. It's still strong and it's still a neighborhood to 
residents who still reside in Desire.
    In 1992, the National Committee for Distressed Housing paid 
New Orleans a visit and found that there was some discrepancy 
in the way of management and how they would appropriate the 
funding, and they found that Desire was distressed because of 
poor management and the lack of funding being invested in the 
public housing. So they allowed, by the grace of God, we were 
blessed with a HOPE VI grant. This HOPE VI grant is supposed to 
create opportunity of home ownership for people everywhere and 
not only for people everywhere, the economic development, the 
counseling necessary for residents who've been through 
distressed conditions, de facto demolition. Mismanagement at 
that time was at its worst. And at this time we're still 
waiting on the remedies that this good initiative was supposed 
to bring to our neighborhood and our community.
    One of the problems was that, because of the fact that we 
were granted a HOPE VI grant to the tune of $44 million, some 
of the funding and comp which was directed to stabilize the 
community until all agreements were signed, until all 
approvement from HUD was adhered to, was drawn back. So we 
experienced the lack of maintenance. On the bad side, we 
experienced a tremendous amount of lack of maintenance.
    To this day, the monies have not been let other than to 
hire a program manager and to allow some planning and contract 
negotiation to take place with developers, and we're still at 
this point still waiting. The only difference with that is that 
although it may be the process to handle good business, we find 
that this process does not take care of the human side, which 
was very necessary, was more necessary to us than the brick and 
mortar itself, because when a community goes through de facto 
demolition, it leaves a tremendous amount of scars on the 
individual lives, the children who live there, the seniors who 
live there and also the young adults. They bear the scars of no 
one caring.
    So as a result of that, one of the initiatives that was 
supposed to be was the community support services, which would 
allow residents to get the proper counseling, having gone 
through this distress. Oh, lord. It would allow residents also 
to be trained and placed in job training opportunities so that 
when Desire, in all its opportunity and all of the great wisdom 
that was going to be applied, residents would be ready to meet 
the opportunity. We find that we are not. We're not advocating 
taking the funds away, because it doesn't take away the 
problems or the experience that we bear in our bodies and in 
our emotions. We're saying we're still waiting. It's a good 
program. It was, even though HOPE VI was designed by a 
Republican, we found at that time and were elated that somebody 
cared enough to really come in and look into the problems that 
residents had been facing for years and that we--and also that 
they would look at us as human beings, not as the problem, 
because residents did not tear Desire down. Residents did not 
cause the lack of economic development not to be afforded in 
our community or residents didn't cause the fact that we are 
not able to become a tax file base or have experienced all the 
amenities that normal Americans would have in their lives.
    In fact, we've been penalized and we're just afraid that as 
we speak we're experiencing the slow wheel of slavery all over 
again just because we're not being able to transition and to 
mainstream America through economic development. We're not lazy 
people. Very creative people. God has kept us with the dignity 
of being called a race of people, of being called humans. He's 
reserved that in us. And now they're ready to take back and 
steal HOPE against hope that someone would undo the--that 
prohibit us from moving forward because this was not a 
complicated process. This is not. In fact, residents believe 
they can do it themselves with the necessary experience behind 
some professionalism, consultants and developers. We can do it 
ourselves.
    The other broken promise. One of the other things I'd like 
to touch upon is that the MOU design, because the grant 
agreement didn't allow the residents enough participation to 
help design their future. So the Housing Authority established 
a grant agreement in which we find that at this time they're 
not adhering to it, because the process of setting forth 
developers' agreements and having input into developing those 
agreements and implementing those agreements was taken away 
from us. But we are hopeful that through discussion and those 
things we'll get back on track.
    Also, one of the broken promises was that the amount of 
money afforded Desire community and its neighborhood, we had 
hoped that the Section 3 component, which allowed Federal 
dollars to be contracted out and that these contractors, 
developers, would come back in turn, you know, relinquish some 
of the funding so that we are able to get the proper training, 
even some secondary schooling, jobs creation, business 
creation, with the amount of money. That's one of the broken 
promises that has not been kept.
    Another one is that we had hoped the amount of units, we 
find ourselves now, because of all of the revisions that have 
taken place, the amount of units that has been decided to be 
replaced, I think when the dust cover, there's something like 
260 some odd units whereas you had over 1,100 people who 
transitioned out of Desire to relocate somewhere else in some 
minority community. What we find ourselves now is that, because 
of the housing stock in New Orleans that were not adequate, we 
do not have enough housing that would adequately satisfy the 
waiting list necessarily, the people who trust this process to 
come back online. We need more units in the tune of some 800 
subsidized units. In fact, the whole agency ought to be looking 
more at adding rather than tearing it down, because we 
experienced a type of hopelessness now.
    [The prepared statement of Deborah Davis can be found on 
page 76 in the appendix.]
    Chairwoman Kelly. Ms. Davis, I thank you very, very much 
for your testimony. I want you to know that this morning I went 
out with some of the people from HANO. I went to Desire and 
what you're bringing up is a question I asked them. I saw the 
buildings had been demolished and I said, what's happened to 
the people and are there enough units available for these 
people to be housed in? And I have to say that the response I 
got from a couple of them was exactly the thing you just did. 
They shook their head. They've been tracking as many people as 
they possibly can, but you know and I know there are people who 
we don't know where they went, because the units were knocked 
down and there was no track that got to follow them, because 
it's been happening for some time.
    The other thing I saw there that just broke my heart. I'm 
the mother of four children and grandmother of six. I saw two 
little boys coming back from the store. They had a bag. Each of 
them was carrying a bag. They'd gone probably to the store for 
their mama, and they were standing on the street corner waiting 
to cross that street. Two little boys about 4, 6, 7 years old. 
What a place to have to raise children. What a terrible thing 
to raise children in a situation like that where they grow up. 
How can they have hope? How can they know something that goes 
beyond and know that their lives can reach beyond?
    I think that it's wonderful that you're here to testify. I 
just want to say one more thing. The first trip I made to New 
Orleans, I got here in 1947. I was with my parents and my 
family. We got on a banana boat, because my dad was very 
adventuresome. We took that banana boat down to pick up bananas 
in Honduras, Guatemala, and some other places. We stopped off 
in Cuba. And it was there I had an experience where we slept in 
a place where there were rats scratching in the walls and I was 
afraid and I was afraid to get out of bed and get my mama and I 
was afraid when I heard the rats running under my bed that if I 
fell asleep and my hand fell over the bed, the rat would bite 
me and you know and I know a rat will get a piece out of you 
before you even wake up.
    We can not have children growing up in that kind of a 
situation. I felt that fear. I don't want to see any child in 
America grow up like that. So I really do thank you so much, 
because this is about the mothers and the children in those 
projects. That's why I came down here. Thank you for your 
testimony. Let's move now to Ms. French.
    Ms. Davis, you have something you want to say?
    Ms. Davis. Yes, if you could permit me. Desire, although 
look hopeful at this time, but there are residents that is 
there now, if you move them, I'm not saying that things 
shouldn't change. I'm saying bring the necessary remedy in to 
alleviate some of the problems that's going on. If we move some 
of those seniors now, they will die in the process. And ma'am, 
they've just been through too much and we love them, we love 
our neighborhood. We take care of one another. All we're asking 
is that the necessary funding and wisdom be applied to 
alleviate more--because somebody prep--you know, if we leave it 
now, it's prepped to be sold. It's our neighborhood, and there 
is not another neighborhood in the City of New Orleans besides 
the rich and famous neighborhood that we would rather live in, 
because Desire allows us to love one another and to be 
neighbors. That's what I want to say.
    Chairwoman Kelly. That's beautiful. Thank you, Ms. Davis.
    Ms. French, let's go to your testimony now, please.

 STATEMENT OF LAURA FRENCH, RESIDENT, ST. BERNARD APARTMENTS, 
                        NEW ORLEANS, LA

    Ms. French. First I would like to say good evening to the 
panel. If I may, I would like to say to Congressman Baker, I 
heard of this hearing 5 years ago the day of the hearing, when 
it was over, because I would imagine I would have been here and 
begged someone to hear, because it's the same cry. But I would 
like to start, if I may, by reading a letter that I started 
writing to Mr. Cochran on behalf of our problems at St. 
Bernard.
    My name is Laura French. I live at 4090 Gibson Street, 
Apartment 8, northern Louisiana. I'm located in the St. Bernard 
housing development. To Mr. Andy Cochran, U.S. House of 
Representatives, HOB, Washington, DC. Dear Mr. Cochran, this 
letter is to follow up our telephone conversation. As I stated 
on the telephone, residents of the St. Bernard housing 
development are experiencing discrimination. Our civil rights 
are being violated and we are being held hostage in our too 
small apartments for our family size.
    Mr. Cochran, I've lived in the St. Bernard for a long, long 
time. I've been on the resident council for over 20 years. For 
the past 10 to 15 years we've had to live under dictatorship, 
being forced to live by rules and regulations that are not 
applied to persons in prison or the penitentiary systems. As I 
said before, we need someone to help turn this situation 
around, not someone who is just going to listen. I've been 
singing this tune for the past 5 years to congressmen, 
Senators, city council persons. We made the front page of the 
Times-Picayune for having residents living in overcrowded 
conditions, yet all of this fell upon deaf ears.
    I would hope something positive comes out of this trial. I 
know the residents need something positive to happen in their 
lives during this crisis. As I stated on the telephone, we need 
someone to take action on these matters. Attachments are a page 
with some of the problems and a page with names of persons 
living in overcrowded apartments. Overcrowded families, 
families living in overcrowded apartments. There are families 
with up to four or more persons living in 1-bedroom units. Some 
of these families have been in these apartments for over 10 
years. Some households have teenage sons and daughters. Even 
though these families have been living under these conditions 
for years, they have to live like this even longer since the 
U.S. Congress has mandated the demolishing of housing 
developments and placing the people here in the St. Bernard 
development community center. In April of 1998, like thieves in 
the night, HANO set the wrecking ball to the 1400 block of 
Milton Street, 1412 through 1450. Three buildings, consisting 
of 24 1-, 2-, 3- and 4-bedroom apartments were demolished. The 
Housing Authority was supposed to build a community center on 
that property. In January, 1999, in an ANROC meeting, Mr. Ron 
Mason, executive monitor for HANO at that time stated he had 
bad news for some of the leaders. There wasn't any money to 
build community centers and the St. Bernard development was one 
of the sites that would not get a community center.
    Demolition process. The Imperial Drive site was demolished. 
Desire, Florida, St. Thomas and C.J. Peete are in the process 
of being demolished. St. Bernard is the home site for all of 
the residents from these sites. That is fine, because we feel 
that it could have been St. Bernard up for demolition. HANO and 
HUD are placing families from these sites in St. Bernard. The 
only problem I have with this is they're all still giving these 
families 3- and 4-bedroom apartments with two and three people 
on the lease while forcing our residents to move out of their 
apartments into smaller units. Example: HANO placed a lady and 
three small boys from the Imperial Drive site into a 4-bedroom 
apartment. The oldest brother is not 7 years old yet. HANO 
forced a family with four dogs and a 2-year-old out of a 4-
bedroom apartment and placed a family with two people from 
Imperial Drive in that 4-bedroom apartment.
    Housing Authority's waiting list. There are people who left 
their apartments to drug activity, did time in jail, they 
return from jail and they receive apartments before persons who 
were on the waiting list before these people ever applied for a 
project in the first place.
    Rodents. Over the years some apartments in the St. Bernard 
apartments have always had problems with mice from time to 
time. In 1997 HANO had the vents of the concrete base of the 
building welded closed and the iron gates locked. When they 
did, cats were locked under the buildings and all the cats 
died. The poor cats cried until they died under these 
buildings. After this happened, the rats started coming into 
the apartments any way they could. They ate their way through 
the walls, air conditioner closures, clothes dryer vents, 
through toilet commodes, up the bathtub drain, through holes in 
the floor that contractors left open after renovation in the 
1980s. The rats had full run of these apartments. When finally 
a few cats did begin to come around, the rats pulled 
switchblades on the cats and most of them fled.
    Roaches are a problem in a development simply because some 
of the residents don't fight them and the HANO has nothing to 
give us to help to combat the roach problem. In these 
apartments, everyone has to fight the roaches together or the 
roaches run from apartment to apartment and no one will get rid 
of the roaches.
    Dogs. HUD and HANO have given permission for residents to 
have dogs. The residents have to pay a $75 fee and register the 
dog as a live-in. There are too many pit bulls, Dobermans, 
Rotweilers and every dog you can possibly name. There are too 
many people living on the site for people to be allowed to have 
dogs. Most of the seniors don't want dogs as pets or 
companions. Besides, the dogs mess all over the place and we 
step in poops daily because the dogs don't wear Pampers. They 
are trained only to mess outside. HANO will let you pay $75 to 
have a dog in your own zero rent.
    I'm sorry. I have to apologize. I had to stop it because 
our summer program was coming in and I had to start writing for 
the summer program. But I just want to say to the panel. It 
hurts. We are people living in 1- and 2-bedroom apartments. I 
mean large families. Mothers with three to maybe five children. 
Even in 2-bedroom apartments. You have teenagers sleeping 
together, 14, 15, boys and girls. They've been living like this 
for a long time. Now that the demolition is being done, they 
have to stay here because HUD said demolition comes first. So 
if you've been living like this, you're going to continue 
living like this, because they have to get the residents who 
are coming from the sites who are having demolition settled. 
It's unfair. We all are people. We all are human. I don't think 
we should have to live like this.
    Chairwoman Kelly. Thank you very much, Ms. French.
    There is one correction I'd like to make. You said that the 
U.S. Congress had demanded that the units be demolished. This 
is not true. Congress serves a function of appropriating money. 
It is the Housing and Urban Development agency, which comes 
under the Executive Branch of the Government that allows HANO 
to demolish these apartments. So I wanted to clear that up. 
Congress can make laws that govern the amount of money that 
goes to these agencies. We can also make some other laws, too, 
but in this particular instance, it was not the Congress that 
caused the demolition of any of these units.
    Ms. French, you wanted to say something.
    Ms. French. I'd just like to say, Ms. Kelly, whenever we 
question the Housing Authority about something and it's always 
``HUD did it'' or ``the Congress mandated it.'' I asked, ``Let 
me see this. Where is this?'' ``Oh, we're going to get it for 
you. We're going to get it to you.'' Whatever. I haven't seen 
anything yet. The only thing I remember is in 1995, I believe, 
then-President Clinton did the one strike policy on television. 
But I haven't seen anything. But when they tell you ``HUD 
mandated it'' or Congress, those two entities. I've asked over 
the years, ``Let me see where HUD has said this.'' ``Oh, we're 
going to get it for you. So-and-so, you find it. You get it for 
her and give it to her.'' And it just goes on and on.
    But, I would like to ask you, Ms. Kelly, also. You said 
about your visit to Desire. Did you visit St. Bernard?
    Chairwoman Kelly. We did not. We didn't have enough time. 
We managed to get to B.W. Cooper, St. Thomas, Fisher, Florida 
and Desire. That was all we were able to fit in this morning. 
We had a pretty busy morning, because I kept popping out of the 
van and going into some of these places. I felt it was 
important that we actually look at what the conditions are. So 
we didn't get a chance, but I promise you, Ms. French, that if 
I get back down here, if you'll let me, I'll come and you can 
take me for a walk. Will you do that for me?
    Ms. French. Yes, I would. And if you can't come, if you can 
send someone, I would appreciate that very much. We need 
someone to see what we're saying about our living conditions at 
the St. Bernard development.
    Chairwoman Kelly. That's what I tried to do as much as 
possible this morning. We will continue to try to work with 
you. I'm just so saddened by the conditions. As Ms. Davis 
pointed out, we know that these are neighborhoods. We know that 
you love each other, you support each other. We know you know 
your neighborhoods and it's important that we keep that 
neighborhood going if we possibly can. So I wanted to say to 
you, I don't know who told you that they would get back to you 
about these mandates from HUD and so forth, but HUD can 
mandate. Congress doesn't do that, but HUD does. Congress can 
dry up the money, Congress can do some other things. But if 
they promised you that, you keep on them and, if they don't get 
back to you, you've got Mr. Cochran's address now. You write to 
him. All right? That goes for you, too, Ms. Davis. You write to 
him. You write to me. Write to any one of us. Mr. Baker here is 
a Representative, Mr. Vitter. You write to Mr. Jefferson. We'll 
get back to you.
    Ms. French. I've written to Mr. Jefferson on a couple of 
occasions.
    Chairwoman Kelly. Well, we'll talk to him about that. Right 
now, I just have a couple of questions if I can find them here. 
There's a couple of questions. One, have either one of you ever 
seen any results from something called the Institute for 
Resident Initiatives?
    Ms. Davis. Well, Desire opted not to use the Institute for 
Resident Initiative, because of the fact that we realized that 
HUD was not going to duplicate programs and we needed TA. We 
needed somebody to come in and at least help us expand on the 
program that residents are already running. So we opted not to 
take the funding or to use the Institute of Resident 
Initiatives.
    Chairwoman Kelly. That was an election you made?
    Ms. Davis. Yes.
    Chairwoman Kelly. OK. What about you, Ms. French? Have you 
seen anything?
    Ms. French. Frankly, the Institute for Resident Initiatives 
is now National Center for the Urban Communities.
    Chairwoman Kelly. I'm sorry. I didn't hear that clearly.
    Ms. French. The Institute for Resident Initiatives is now 
the National Center for the Urban Communities. Is that the same 
program? That's what I'm trying to say.
    Chairwoman Kelly. No. It's at Tulane.
    Ms. French. Yes. Tulane University.
    Chairwoman Kelly. Have you ever seen any results, anything 
from it?
    Ms. French. Ms. Kelly, I don't know if I have to raise my 
hand or raise my feet. I would like to take the 5th on that.
    Chairwoman Kelly. Well, OK. I just wondered, because 
they've been getting about $2 million a year and I wondered if 
either one of you have seen any results from the programs?
    Yes, Ms. Davis.
    Ms. Davis. Just one. After the revision in 1999, Desire 
Revitalization Revision, they did a campaign to go out and sell 
the idea of Section 8 to residents and we lost hundreds of 
residents, because of the grass is greener on the other side 
theory. So that's about all. Also we compete against their 
basketball team.
    Chairwoman Kelly. They took the Section 8. They got people 
on Section 8?
    Ms. Davis. Well, they encouraged some of our residents to 
take it and now they're having problems, because the income 
does not support the Section 8 theory.
    Chairwoman Kelly. Thank you. Are either one of you aware of 
the use of Drug Elimination grants in the Housing Authority 
and, if so, I'd like to know how effective they have been. Yes, 
ma'am.
    Ms. French. We were getting about $25,000 Drug Elimination 
funds to run a 36-week after-school program and that wasn't so 
successful. Our program is successful, but it could be even 
more. For the--program trying to spend $25,000 for 36 weeks on 
about 60 to 80 children. And I don't find that as enough funds 
to run it, but we don't know who you go to to ask for more.
    Chairwoman Kelly. Perhaps this hearing will----
    Ms. French. We have a beautiful program at St. Bernard, 
because we feed them hot meals and we have TOW tour and we just 
have arts and crafts. We have good programs, but you get what 
you pay for, and when you have to pay people little money, you 
get a little service. And we tried to ask for raises, but they 
say HUD and the Congress don't allow you to get more than 
whatever.
    Chairwoman Kelly. HUD, Ms. French, not Congress.
    Ms. French. I'm only saying what they told me. I can only 
say what they tell me. Yes, we received $25,000 for 1998-1999 
and 2000 and maybe for 2001. But they say it's the last year 
for it.
    Chairwoman Kelly. Thank you very much. I've run out of 
time, so I'm going to move on and ask my colleagues to ask 
questions.
    Mr. Baker, will you please.
    Mr. Baker. Thank you, Madam Chairwoman.
    Ms. French, you commented that there was a fellow who got 
convicted over a drug problem and got access to a unit before 
people who had been on the waiting list for some time.
    Ms. French. OK. Let me say this. For instance, and I want 
to say it all. I'm not about putting anybody out. Everyone 
needs somewhere to live. If you committed a crime and you did 
your time or whatever, I don't think that should take away from 
you having another chance.
    Mr. Baker. No. Sure.
    Ms. French. OK. There are persons who are on the waiting 
lists for an apartment with the Housing Authority and this guy, 
he received an apartment. He was on the waiting list also, I 
would assume. Somewhere in there, I don't know how long he had 
that apartment, a year, a month, or whatever, something 
happened with drug activity. I don't think it was on the site. 
But, by the same token, he had to move. He went to jail. So lo 
and behold, he got out of jail and had an apartment. I didn't 
know this, just through another tenant. Tenants come and talk 
to me. They see things. How did he get another apartment? My 
daughter has been waiting. My daughter was waiting for an 
apartment when he had an apartment. So anyway, it wasn't about 
him not having an apartment. I was wondering about this speedy 
process.
    Mr. Baker. Right. That's my question. What do you think 
went on in making that decision?
    Ms. French. I think it was who you knew.
    Mr. Baker. OK. That's what I wanted to know. Because my 
time is limited, I've got a couple more. Other than this fellow 
being caught by the police and taken to jail, that got him out 
of the facility for some time while he was paying his dues.
    Ms. French. Yes.
    Mr. Baker. Do you feel that there's a method that's good 
today where if you have a problem resident, understanding that 
you don't want to see anybody without a place to live, but if 
you've got that fellow behind the door with that big Rotweiler 
who's doing things you didn't want to have done around your 
family, is there a way to get that person out of that unit 
today?
    Ms. French. Well, they more or less put them out for drug 
activity, if the door is kicked in or if you're caught with 
drugs. If you're on a lease, you don't even have to be in St. 
Bernard, you can be in St. Rose. If you're caught with drugs 
and you're on the lease in the development, you're put out.
    But let me say this, Mr. Baker. The guy is back and he's 
not a problem. The only problem is how he got back before. 
People are still waiting when he was there before. The 
Rotweilers and all the big dogs from time to time, they fight. 
Sometimes they are so big or so strong when they be walking 
with the owner on the leash, they get away from the person 
walking them or what-have-you.
    In St. Bernard we may be listed as 1400 units and that's 
what we have there, 1436 units, but you would think that's 1436 
families. No, sir. We're about 5,000 or more strong, because a 
lot of these people are doubling up also. But it's too large a 
place for dogs, especially vicious dogs, and they are all 
vicious, because when you raise them in the house, people get 
them as puppies and raise them in a house, then they go to 
eating up their furniture, their shoes or what-have-you, then 
they put them out. It's not my dog any longer. Then he's biting 
and running behind everybody in the neighborhood.
    Mr. Baker. Let me ask a follow-up of both of you before my 
time is up. Is it your opinion today--and both of you are long-
term residents of two different projects. I believe you, Ms. 
French, serve on a resident council and Ms. Davis, you've been 
very active in public housing issues. Do you have confidence 
today that the Housing Authority of New Orleans can fix the 
problems you have or do you think it's time to make some 
significant change?
    Ms. Davis. I have confidence that they are able to fix what 
it is that's necessary, providing they have the proper 
leadership, both from the persons who appropriate the funding 
and HUD.
    Mr. Baker. Well, if you knew there was $84 million in the 
bank account they haven't spent, what would your opinion be 
then?
    Ms. French. $84 million for Desire. $84 million for the 
sites in general?
    Mr. Baker. For the operation. I mean it's not enough to 
solve the problem. My point is that there are resources that 
have been made available by the Congress to the Authority, 
which haven't been spent and that was when I was here 5 years 
ago, Ms. French, it was the same explanation then. ``If we had 
the resources, we could fix it.'' Well, what I'm telling you is 
there's a lot of resources that haven't been spent during this 
5-year period while we've been saying ``fix it or else.'' Is it 
time for ``or else''?
    Ms. French. Does that mean you all will take the $84 
million back?
    Mr. Baker. No, ma'am. What it would mean is we'd have a 
different set of people. We'd take the switchblades from the 
rats, we'd make smaller dogs or no dogs, we'd put paint on the 
walls, we'd put screens on the door, we'd put glass in the 
windows. We'd have people come down and make a difference 
tomorrow instead of telling you that Congress hasn't given us 
the money. We'd make folks do what should have been done 
already. I've never met a Government operation that couldn't 
spend the money we sent them.
    Ms. French. That's right.
    Mr. Baker. And I'm just saying if that's what's going on 
here, wouldn't you, as representatives of the residents, be 
willing to accept a new effort, a new way of doing it?
    Ms. French. Yes, sir. By all means.
    Ms. Davis. Yes.
    Chairwoman Kelly. Thank you very much, Mr. Baker.
    Mr. Vitter.
    Mr. Vitter. Thank you very much, Ms. Davis and Ms. French. 
I really appreciate your being here. Really appreciate your 
testimony. And I was not able to go on the tour this morning, 
but I will absolutely take you up on your offer and I'm here 
every weekend, so I will do it within the next 2 weeks and I'll 
get your name and contact information from the staff and I'll 
be at St. Bernard and then I'll be at Desire and personally 
I'll look forward to that.
    As was mentioned, this subcommittee was here 5 years ago 
trying to kick off a new effort at the local level, trying to 
make sure things were really changing. I just want to get a 
sense of what's changed on the ground in those 5 years. We've 
heard about a lot of demolition. There's obviously been a lot 
of demolition. What's changed in terms of safety or gas 
problems, fire hazards, electrical problems? What's life been 
like on the ground in those 5 years?
    Ms. French. It hasn't been good. Life hasn't been good, 
especially to--I keep stating about people. To live 
overcrowded. Let me say it to the panel. I raised six children 
in St. Bernard. I had four in a 1-bedroom apartment. No one 
told me to lay down and make all those babies, but, by the same 
token, I had them. There were larger apartments. But I had four 
children in a 1-bedroom apartment. I had six in a 2-bedroom 
apartment. So I know by experience of having to live 
overcrowded.
    And this is more or less what I'm asking that they relieve 
the overcrowdedness of our people. You can take a little paint 
brush and put a little mortar and everything on the walls and 
they'll look nice. But if people are living in overcrowded 
conditions, that apartment is about to bust, so that little 
paint and what-have-you is not going to last long.
    Mr. Vitter. Ms. French, in the 1996 hearing, the 
subcommittee heard from another resident, Mrs. Demery, a former 
resident, and she spoke about how her son had fallen from a 
third floor window which had long since lost its glass and 
frame and her son suffered very serious permanent brain damage, 
physical disability. She also said two others had recently 
fallen from similar windows to their death. Do you know if 
these third story windows have all been fixed in St. Bernard?
    Ms. French. I would assume some of them have been fixed at 
the St. Bernard. I remember the Demery case.
    Mr. Vitter. I'd like to assume all of them have been fixed. 
Do we know the answer to that one way or the other?
    Ms. French. May I also say this here. I remember the Demery 
case, but right now the Housing Authority is in the process of 
removing the windows in LA113. That's something I don't know if 
you all are familiar with. One-eight means the older unit at 
St. Bernard, 113 means the newer units. They're in the process 
of taking--they want to remove our old windows and replace them 
with the newer storm windows or what-have-you. Somewhere in the 
early 1980s, they removed the old windows from 18 and put these 
storm windows in and we don't want them at 113 because the 
storm windows are no good. It's nothing but aluminum snap-in, 
and when bricks or stones is coming, the windows leave before 
you. We don't need them. Not that we don't want them. We don't 
need them. We are satisfied with our old windows. They may need 
a little trim to stop them from squeaking or whatever like 
that. We don't need those new windows.
    Mr. Vitter. Do you know if all those broken out windows, 
particularly on higher floors, third floor, have been closed 
up?
    Ms. French. There are some third floor windows that are 
still broken out where people live. Yes.
    Mr. Vitter. Mrs. Demery, again 5 years ago, also testified 
about the loss of her 8-year-old niece.
    Ms. French. That's Aquinetta Demery.
    Mr. Vitter. Due to a fire.
    Ms. French. Is that Aquinetta Demery?
    Mr. Vitter. Judy.
    Ms. French. Aquinetta.
    Mr. Vitter. I'm being told this is a Judy Demery. But 
anyway, she talked about the loss of her 8-year-old niece from 
a fire due to faulty wiring. In your opinion, your observation, 
what's gone on with electrical problems and wiring in those 5 
years?
    Ms. French. Well, it was wired too fast back in 1979-80. It 
was wired too fast. When they wired our apartments, they was 
rolling. They was wired too fast, and no one really came around 
and checked it. We did have a lot of faulty wiring and it's sad 
to say that a lot of people who had fires back then got put out 
because they said they was the tenants' fault.
    Mr. Vitter. And just in the last 5 years, what do you think 
has happened with that wiring? Has it been fixed? Has it been 
corrected?
    Ms. French. No indeed. No, it hasn't. No, it hasn't.
    Mr. Vitter. And also the subcommittee, at that time 5 years 
ago, heard that fire alarms had been installed during the so-
called renovation, but the residents said they've never been 
checked, they've never been really inspected. What do you think 
the state of the fire alarms is?
    Ms. French. They were checked. I would say they all were 
checked in some way, inspected, what-have-you. But from time to 
time I guess--I don't know if they're run by battery, but 
sometimes they go off just from a little smoke from your 
apartment. But, I would say that you would need, in a site that 
big, that large, why would you just let the whole maintenance 
contractor that come out every so often check for fire. You 
should have someone hired to check this daily, just go around 
to the apartments for to be checking now and then, every so 
many years or what-have-you. Check them and make sure they're 
working.
    Mr. Vitter. Ms. Davis, what about Desire? We've heard about 
demolition and then overcrowding which has gotten worse because 
of that. What about basic conditions? Public safety, electrical 
wire, windows, these sorts of things we're talking about? What 
do you think has happened to the condition of that in the last 
5 years?
    Ms. Davis. Well, in the last 5 years, preventive 
maintenance implementation has--we haven't experienced that and 
that's what we're lacking. Someone, after they do HQS 
inspection and you find a problem with the apartment, will come 
back and remedy the apartment. And so in the last 5 years, I 
believe that even in the last 5 years, maintenance was kept up. 
Residents would be more stabilized and not relocate under 
duress because many of them relocated because nothing was being 
repaired.
    Mr. Vitter. So again, besides the demolition and the 
increased overcrowding, has anything significant happened on 
the ground in these last 5 years?
    Ms. Davis. Besides demolition?
    Mr. Vitter. Yes.
    Ms. Davis. Nothing. I mean we're still waiting on units to 
come online so we can transition to this newer safe and decent 
and sanitary units.
    Mr. Vitter. I appreciate hearing from both of you and I'll 
look forward to meeting you at St. Bernard and Desire within, 
say, a couple of weeks. I'll look forward to that visit.
    Chairwoman Kelly. Thank you very much, Mr. Vitter.
    The Chairwoman notes that Members may have additional 
questions for this panel which they may wish to submit in 
writing so, without objection, the hearing record is going to 
remain open for 30 days for Members to submit written questions 
to the witnesses, all witnesses, and place their responses in 
the record. This first panel is excused with our great thanks 
and appreciation for your time, and we will now empanel the 
second panel. Thank you both very, very much for wonderful 
testimony today.
    Ms. French. Thank you.
    Chairwoman Kelly. Gentlemen, are you ready? For our second 
panel, we're very thankful that Mr. Chet Drozdowski, the 
Director of the Office of Public Housing here in New Orleans, 
has joined us. Next to him we have Mr. Rod Solomon. Mr. Solomon 
is the Deputy Assistant Secretary for the Policy, Program and 
Legislative Initiatives Assistant in HUD's Office of the Public 
and Indian Housing. He is testifying in the stead of Paula 
Blunt who was originally scheduled to be here with us today. 
She is the Acting General Assistant Secretary for HUD's Office 
of Public and Indian Housing. But she was unable to be here 
because of a medical emergency in the family. So Mr. Solomon, 
we do welcome you and thank you for being willing to step in 
and speak with us here today.
    After Mr. Solomon, then we're going to hear from Mr. D. 
Michael Beard, the District Inspector General for the HUD 
Office of Inspector General. Mr. Beard testified at the 1996 
hearing on HANO. Gentlemen, you are all aware that this 
subcommittee is holding an investigative hearing. When doing 
so, the Chair may decide to take your testimony under oath. Do 
any of you have any objection to testifying under oath? The 
Chair then advises each of you that under the rules of the 
House and the rules of the subcommittee, you're entitled to be 
advised by counsel. Do any of you desire to be advised by 
counsel during your testimony today? In that case, would you 
please rise and raise your right hand and I'll swear you in.
    [Witnesses sworn.]
    Chairwoman Kelly. Thank you very much. All of you are now 
under oath. Without objection, your written statements are 
going to be made part of the record. You will each now be 
recognized to give a 5-minute summary of your testimony, and 
we'll begin with you, Mr. Drozdowski.

  STATEMENT OF CHESTER J. DROZDOWSKI, DIRECTOR, HUD OFFICE OF 
                PUBLIC HOUSING, NEW ORLEANS, LA

    Mr. Drozdowski. Good afternoon, ladies and gentlemen. I 
would like to take the opportunity to thank the subcommittee 
for the opportunity to testify this afternoon. It is very rare 
indeed that the director of a field office has the opportunity 
to present his perspective on a particular issue.
    The ARD report issued by the Office of the Inspector 
General on 11 May 2001 is, in my opinion, a highly accurate 
representation of what has happened at the Housing Authority of 
New Orleans for the period beginning just after the Cooperative 
Endeavor Agreement was signed in February, 1996 to a period 
which ends just about December, 1999.
    My comments this afternoon will touch on the four questions 
from a director's perspective that have been posed by the 
committee in its letter to Secretary Martinez and will also 
look at a number of issues raised by the Office of the 
Inspector General including the Field Office's attempt to 
verify the Housing Authority's public management assessment 
scores in 1998 and to correlate the 1998 scores with the HANO's 
current advisory scores under the public housing assessment 
system. The comments made are relative to the period of time 
covered by the Inspector General's report.
    During that time, the Cooperative Endeavor Agreement had 
minimal impact on the quality of housing for the residents of 
the Housing Authority of New Orleans. During that period of 
time, no major relocation took place at the two HOPE VI 
construction sites of Desire and St. Thomas. Only minimal 
demolition took place at either of the two HOPE VI sites during 
the 3\1/2\ year period. However, during the latter part of 
1998, there were some modernization projects that were started 
at selected sites throughout the Housing Authority.
    During the same period of time, some internal improvements 
of the Housing Authorities were noted. While there were 
recruitment of key management employees and some restructuring 
of the Housing Authorities organizational operations which all 
had a positive effect at the time, HANO began to experience 
major difficulties in its Section 8 department. This key 
department, the major component in its relocation program, 
would subsequently collapse in the mid-year 2000.
    From the field office perspective, the Cooperative Endeavor 
Agreement was expected to get new management and direction into 
the Housing Authority of New Orleans. It was further expected 
to apply aggressive action to: One, relocate the residents from 
the HOPE VI construction sites; Two, demolish units which had 
been approved by the department as part of HOPE VI; Three, 
engage the HOPE VI construction program; Four, improve the 
maintenance of the Housing Authority; Five, develop plans of 
action for the demolition of units identified as no longer 
viable to be maintained by the Housing Authority; and Six, to 
reorganize its internal operating structure. The Housing 
Authority made little progress in any of the aforementioned.
    During the first 2\1/2\ years of the Cooperative Endeavor 
Agreement, there appeared to be an all-out effort to achieve a 
passing score of at least 60 percent on the department's PHMAP 
assessment program. It appeared to be the ultimate end game 
strategy of the Cooperative Endeavor Agreement. To the casual 
observer, getting off the trouble list might have appeared to 
be a major accomplishment, but for those who knew the ins and 
outs of the program, getting a passing score was not an 
accomplishment at all. There was very little correlation 
between the self-certified assessment program and the public 
housing inventory stock that is safe, sanitary and decent.
    HANO crossed the mystical management trouble threshold in 
1997 when an appeal was granted by HUD headquarters. Later in 
the year, in July of 1999, HANO subsequently appealed their 
troubled modernization status. After a review of the 
information, my staff recommended to me to deny the appeal as 
the Housing Authority had not provided sufficient 
justification. HANO was advised of their appeal status. Under 
the PHMAP regulation, an appeal denied by field officer 
director may be appealed directly to the assistant secretary.
    In November, 1998, HUD headquarters reversed my decision 
and in December, 1998 I was instructed to inform HANO that they 
had successfully appealed their PHMAP score. The Housing 
Authority was given a passing score effectively taking them off 
of the modernization troubled list.
    The following calendar year in 1998, HANO certified to a 
management score of 85.16 and an overall modernization score of 
64.70. A review of my staff certified that the information 
provided once again raised a number of skeptical concerns. It 
is at this point that I requested necessary travel and per diem 
funds to bring a team together from my Mississippi Program 
Office to perform a confirmatory review of HANO's documentation 
and verify, among other things, the quality of maintenance and 
accuracy and timeliness of the required inspection of units.
    A series of email followed my initial email request. 
Headquarters did not provide necessary funds of approximately 
$5,500 to bring a team to examine the Housing Authority's 
documentation and housing stock citing that I had failed to lay 
out a sufficient case for the confirmatory review.
    The PHMAP program has been replaced by the assessment 
system. The management component of the PHMAP program is still 
self-certified and, to this date, the Housing Authority has 
still received failing scores. Since 1981, the Department of 
Housing and Urban Development has provided for the Housing 
Authority slightly over $1,100,000,000, $800 million of which 
has been provided in the last 10 years. It is difficult to 
explain to the residents living in HANO properties or to the 
citizens of New Orleans or Louisiana or someone living in 
upstate New York or Des Moines what the impact of $1 billion 
has made to the quality of life or the sustainability of the 
housing program in New Orleans.
    [The prepared statement of Chester J. Drozdowski can be 
found on page 80 in the appendix.]
    Chairwoman Kelly. Thank you very, very much.
    Next we have Mr. Rod Solomon. Mr. Solomon, thank you very 
much. I apologize for the fact that we don't have a name tag in 
front of you, but we know who you are.

   STATEMENT OF ROD SOLOMON, DEPUTY ASSISTANT SECRETARY FOR 
 POLICY, PROGRAM AND LEGISLATIVE INITIATIVES, OFFICE OF PUBLIC 
                    AND INDIAN HOUSING, HUD

    Mr. Solomon. Thank you, Congresswoman, and I'm very pleased 
to have the opportunity, even without a name tag, to appear 
before the subcommittee on behalf of Secretary Martinez. On his 
behalf, I want to thank the Congresswoman, Congressman Baker, 
Congressman Vitter, and Congressman Jefferson, for holding this 
critical hearing on providing the tenants of the Housing 
Authority of New Orleans decent, safe and sanitary housing. 
That is the most basic mission of the Housing Authority, and 
the new Administration is committed to taking every reasonable 
step to see that that mission is carried out as well as 
possible.
    In coming in and looking at this situation, HUD's actions 
will be based on its own prior experience and evaluations such 
as that of Mr. Drozdowski who, of course, has been here on the 
ground seeing this firsthand, and other evaluations. In that 
regard, we will be considering carefully the audit report that 
you are just about to discuss and the work of the 
congressionally-mandated National Advisory Council with which 
you, Mr. Baker and others of you have been closely involved.
    HUD will promptly take any actions to implement remedies 
that clearly and permanently promise to improve the living 
situation of the residents. I also want to note the compelling 
testimony that you just heard from Ms. French and Ms. Davis. 
That will also certainly be reported promptly to headquarters 
and HUD's leadership will be made aware of it.
    Secretary Martinez is committed to improving the living 
conditions at HANO, as he is with public housing nationwide. We 
have a new Deputy Secretary, Alfonzo Jackson, who has been 
confirmed but not sworn in yet, who has administrative 
experience running three large and formerly troubled housing 
authorities across the Nation. The Secretary has asked him 
personally and immediately to work on this matter directly and 
to look over what we have and propose remedies.
    Madam Chairwoman, the subcommittee asked a number of 
specific questions. My written statement responds to them, and 
I will be glad to answer any questions you have on them, but in 
the interest of moving the hearing along, I would thank you now 
and wait for questions later.
    [The prepared statement of Rod Solomon can be found on page 
85 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Solomon.
    Next we have Mr. Michael Beard.

  STATEMENT OF D. MICHAEL BEARD, SOUTHWEST DISTRICT INSPECTOR 
         GENERAL, OFFICE OF THE INSPECTOR GENERAL, HUD

    Mr. Beard. Thank you, Chairwoman Kelly. I'm very pleased to 
be invited back to testify again.
    Our most recent report, published in May, deals with three 
major topics: the status of the Cooperative Endeavor Agreement; 
the authority's progress on its modernization; and how HUD 
itself had reacted to Congress's request for an advisory 
council. I'd like to get right to the bottom line here.
    Over to my right I have a chart up for the subcommittee to 
see. It is funding provided to HANO since 1992. I picked 1992, 
because that's the year where HUD really first started to try 
to turn HANO around. Since 1996 when the Cooperative Endeavor 
came in, it runs about $440 million, but I want you to know 
since 1992, $832 million made available to the Housing 
Authority of New Orleans.
    Over here is Tracy Edwards. She's a member of my staff. 
Last week, Tracy and some of her compatriots from our office 
went out and took 100 photographs for the purposes of coming to 
this hearing. The first photograph that she is going to show 
you is of an occupied building at the corner of Senate and 
Hamburg Street at St. Bernard. You will notice that half the 
building is occupied and the other half is under active 
construction. The resident who lives in the occupied half told 
us that the construction has been going on since around 1998 or 
1999 off and on. So they've lived in this building under 
construction looking like that since 1998 or 1999 off and on.
    The second picture that she will show you is an abandoned 
building at C.J. Peete. Now there are abandoned buildings all 
over in all the projects. I want you to note that this one has 
lots of broken windows, easy access for any kids to get in 
there and play around and fall out these windows. There's 
boards up there hanging off the top of the roof that any good 
wind would bring down. This is somewhat typical. There's vacant 
buildings all over the place.
    The third picture she's going to show you is of a building 
in St. Thomas. That woman standing up there on the balcony, she 
is the single tenant in that building. She's 70 years old. She 
has to climb three flights of stairs that are filled with trash 
and debris to get up to her apartment. See the broken windows 
that are in the building that she lives in?
    The next picture Tracy is going to show you is a picture of 
a ceiling in a stairwell in a building in Arborville on Conte 
Street. The stairwell reeks of mildew. I mean it literally 
bowls you over when you walk into the stairwell. A resident 
told us that dirty bath water leaks from that pipe that's in 
the ceiling any time someone takes a bath. The leak has damaged 
the ceiling and walls. The water now collects in the stairs 
causing a safety hazard.
    Tracy, being the nice lady that she is, was able to talk 
herself into several apartments. I've got a few highlighted 
photos from some of the apartments that she got into. This is a 
stove that's in a unit at Fisher on Whitney Avenue. The 
resident told us that only two burners work and she has 
reported this problem repeatedly to HANO and yet she's still 
having to cook her family suppers on that stove.
    We have plenty of internal photographs to show you that 
literally, my staff members said tears came to their eyes when 
they were in these places. And this next one is gross. We're 
going to show you a bathroom at another unit at Fischer on 
Whitney Avenue. I want you to take a look at that table that's 
sitting in the bathtub. The lady took that table away from the 
hole in the wall and set it in the tub to show the auditors the 
hole in the wall. The smell drove the auditors out of the 
bathroom. The bugs that came crawling out of the wall grossed 
them out. She told them she has had this bathroom looking like 
that for 3 years. Tracy has just a couple more photos of that 
same bathroom. The tenant told Tracy that the smell often makes 
her ill. You can certainly see why. $832 million over the last 
5 years for the Cooperative Endeavor Agreement, $400 million, 
this is the way the place looks.
    HUD removed HANO from their troubled list back in 1998. 
That took care of two of the three conditions for the 
Cooperative Endeavor Agreement to go out of existence and yet 
it is still in existence. Five years ago, I testified here in 
this very room talking about the troubles then and we heard 
plenty of testimony that said things are going to be fixed. 
They're not.
    [The prepared statement of D. Michael Beard can be found on 
page 88 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Beard. Those are 
amazing, just amazing pictures. Tracy, thank you very much for 
your help.
    I'd like to just ask you, Mr. Drozdowski, and Mr. Beard 
repeated also, the fact that HUD allowed HANO to manipulate 
itself off of the troubled list in 1998. Specifically, then-
Secretary Cuomo prohibited you from performing a confirmatory 
review, according to your testimony. Do you believe that that 
may be the reason that HANO was removed from the list?
    Mr. Drozdowski. Yes, indeed. A confirmatory review would 
have done a number of things. First of all, it would have 
checked the work orders to make sure that we could have 
followed that trail of work to be done to prevent this sort of 
thing from happening at the Housing Authority. It was certainly 
within the best interest of the department to make sure that 
there was increased department surveillance at the Housing 
Authority of New Orleans. It had been troubled for a number of 
years, 20 years to be exact, and the history showed that very 
little got done at any given time in its past.
    Chairwoman Kelly. Mr. Solomon, do you think HUD would allow 
that to happen again?
    Mr. Solomon. No.
    Chairwoman Kelly. That was a succinct answer.
    In your opinion, Mr. Drozdowski, what was former Secretary 
Cuomo's motivation for stopping you from performing that 
confirmatory review in 1998?
    Mr. Drozdowski. Well, I couldn't say Secretary Cuomo 
specifically. It certainly went up our chain of command through 
field operations and the person that I was dealing with was out 
of the office of the Deputy Assistant Secretary for Assisted 
Housing, Ms. Cousar. We certainly made a case, we thought we 
made a case, that justified a few thousand dollars to go out 
and look at the conditions of the Housing Authority and to 
verify their scores.
    Chairwoman Kelly. I'm looking for a quote where I thought I 
saw his name. I wish that Secretary Cuomo were here better able 
to explain the actions of HUD at this time. There was a 
decision made in June by Secretary Cuomo to extend the CEA and 
continue to placate, according to you, the mayor. I think 
placating the mayor may have been good party politics in an 
election year, but it's pretty awful public policy when you see 
what has resulted with thousands of people living in squalor, 
pictures just as we've seen. I wish that the Secretary were 
here. I think it's very disappointing that thousands of 
residents in this public housing might be used as political 
pawns. I think it's clear that perhaps by extending that CEA, 
Secretary Cuomo may very well have been trying to help someone, 
possibly Vice President Gore, but it wasn't the people who were 
living in public housing that he was trying to help, and I 
think that's a real shame.
    I have another question of you, Mr. Solomon. I have here in 
my hand a news story saying that this Administration is 
eliminating an $860,000 housing program that used to counsel 
public housing tenants on kicking drugs and it was a drug 
program. This program I'm talking about now has been 
eliminated, because this program just barely got started. The 
program is called Creative Wellness and what it basically did 
was trying to use applied kinesthesiology. They had a wellness 
trainer. For instance, she mentioned that sun and earth tones 
are good and pink and blue drain energy. I assume that the 
Administration decided to eliminate this particular program 
because it's more interested in eliminating rats and roaches 
than it is looking at whether or not pink and blue are 
particularly good colors for residents to wear. Is this true?
    Mr. Solomon. Yes. We felt that that program was not a 
proper use of Federal money, and that the money should be used 
for activities that were more clearly accepted to be on point 
for drug elimination.
    Chairwoman Kelly. I see I've run out of time, so I'm going 
to go on to Mr. Baker.
    Mr. Baker. Thank you, Ms. Kelly.
    Mr. Drozdowski, I read somewhere, either in a written 
statement or in other documents, that since 1983, it's your 
opinion, about a billion dollars or so in funds have been 
allocated to HANO. Is that correct?
    Mr. Drozdowski. That's correct, sir. We did a survey just 
last week. We went back to 1981, as that was actually one of 
the first reports that the IG had issued regarding the Housing 
Authority of New Orleans. Our analysis showed $1,149,000,000 to 
be exact.
    Mr. Baker. So that from 1983 to the present moment, 
$1,100,000,000 in round numbers has been made available to the 
Authority.
    Mr. Drozdowski. That's correct.
    Mr. Baker. Is it your opinion that it's a lack of funding 
that's prevented the Authority from making substantive changes 
in the quality of housing?
    Mr. Drozdowski. No, sir. A billion dollars is a lot of 
money. It can certainly build and repair a lot of units and 
take down a lot of units. This is just mismanagement of the 
funds and the inability to get the program off.
    Mr. Baker. So after spending a billion one, your opinion is 
that the prior Administrations involved in the conduct of the 
Housing Authority in New Orleans, perhaps officials within HUD, 
have resulted in inept management of taxpayer dollars for this 
purpose.
    Mr. Drozdowski. I would agree with that statement, Mr. 
Baker.
    Mr. Baker. Was it your opinion that when you wanted to 
engage in the confirmatory audit of HANO's scoring that some 
official at a higher level than your office in DC perhaps 
engaged in this decisionmaking process and, for some unknown 
reason, reversed your professional inquiry?
    Mr. Drozdowski. Yes, sir. That's correct.
    Mr. Baker. I would want for the record to note that at that 
time I was engaging in conversations with Secretary Cisneros 
asking specifically that appropriate action be taken to remedy 
this problem. In that window, Madam Chairwoman, I requested the 
Secretary to explore the possibility of a receivership, given 
the long history of the HANO's under-performance. I received 
similar treatment, if it's any concern, and my request was not 
acted upon.
    Do you think that a receivership would be an adequate 
remedy for the problems we face?
    Mr. Drozdowski. Yes, sir. In my written statement I do say 
that the receivership must be put on the table again to revive 
the Housing Authority of New Orleans.
    Mr. Baker. What other items might be put on that table 
besides receivership?
    Mr. Drozdowski. Well, we've look at, as an organization, as 
a HUD organization, public housing organization, the 
possibility of separating the Housing Authority into smaller 
units. That's a distinct possibility.
    Mr. Baker. So you're suggesting that big mismanagement be 
made into little mismanagement.
    Mr. Drozdowski. Well, it's easier to correct perhaps.
    Mr. Baker. So you would have different people engaged in 
project by project responsibility. Would that be fair?
    Mr. Drozdowski. That would be a fair statement. Yes, sir.
    Mr. Baker. One of the things which the proponents of HANO 
have made me aware of, and I tend to agree with them, is that 
the current body of law under which they operate is restricted 
with regard to making sweeping management decisions and, for 
that reason, a receivership might be the more advisable, 
because it would unleash the ability of whoever would be given 
the responsibility to make changes in a dramatic fashion. Is 
that view one that has merit?
    Mr. Drozdowski. Yes, sir. It does.
    Mr. Baker. Thank you.
    Mr. Beard, you've been engaged in this business for some 
time. It appears that your report of this year is not 
significantly different than your report of 1996 except that we 
have a lot more money in this report compared to the 1996 
report. Are you basically telling me that conditions have 
remained the same, gotten worse, or has there been minor 
improvement, in your view?
    Mr. Beard. Oh, there's been minor improvement, but the 
conditions are still the same for the tenants.
    Mr. Baker. Is the manner of improvement the demolition of--
--
    Mr. Beard. There's been some demolition, some new windows, 
some new doors but, generally speaking, there has been no 
progress at all during the 5 years on any one of the 10 
conventional sites getting any of them turned around.
    Mr. Baker. When the buildings have been demolished, I've 
read that there is a lack of 4-bedroom units within the market, 
that the 2- and 3-bedroom units are located on the west bank. 
There are concentration concerns with relocating families 
continually to that area. What has happened to the tenants who 
occupied public housing that's been demolished?
    Mr. Beard. I honestly don't know. I mean we're talking 
several thousand that have been removed from these projects as 
they're targeted and demolished. I don't know where they go.
    Mr. Baker. Mr. Solomon, I really don't have a question. I 
just have a statement, because I understand the 
Administration's position on this matter. I just wish to state 
for the record concluding my remarks that these circumstances 
are intolerable. This is a public embarrassment. People's lives 
have been ruined. We've had young people falling out of 
windows, as Mr. Vitter has stated. Permanently injured or 
killed. This is not something we can stand by and tolerate any 
longer, and I don't know what action I can take more 
aggressively than I've taken in the past, but I assure Madam 
Chairwoman, Mr. Vitter and Mr. Jefferson that whatever it is, I 
don't care how radical. I would leave the word reasonable on 
the edge. If it takes tearing things upside down to get this 
fixed, we have got to start doing it.
    Thank you, Madam Chairwoman.
    Mr. Solomon. Thank you. Perhaps this is unnecessary, but in 
case I do need to repeat it, I think the Administration 
understands the urgency of the situation. Again, its leadership 
will hear your comments directly.
    Mr. Baker. Well, thank you. I just think the Inspector 
General's report and the comments of the field officer have 
such enormous credibility for the need for change. There is 
just not an adequate explanation that can be given. Certainly 
over the decade we have got to have earned the honor of being 
the worst in the country, and that is something for which we 
all share a great degree of shame.
    Chairwoman Kelly. Thank you very much, Mr. Baker.
    Mr. Vitter.
    Mr. Vitter. Thank you, Madam Chairwoman. I just have a 
couple of comments, probably no questions, but I just find this 
figure, any of the figures we're talking about, astounding. 
Since 1992, $832 million. Madam Chairwoman, in southeast 
Louisiana we're debating a couple of big potential public 
construction projects now. One is the new phase of the 
Convention Center, which is very important for economic 
development. That would take about $4- to $450 million dollars. 
Another possible project that the New Orleans Saints have been 
pushing is a brand new stadium for the New Orleans Saints. That 
would take about $450 million, $350 million of which would be 
public. You could do both of those things immediately at the 
same time with that amount of money and have change left over 
and yet we, as taxpayers, have spent that amount of money on 
HANO since 1992 and we have virtually nothing to show for it. 
It is just mind-boggling. Like I say, it is the budget for what 
would be the two biggest public construction projects in 
Louisiana history with change left over.
    My other comment is to Mr. Solomon, as a representative of 
the new Administration. I urge you to take this sense of 
outrage and urgency back to your leadership in Washington. 
Sometimes I think there is a problem. A new Administration 
comes to town and is only hearing this hard story for the first 
time and has not lived through these three and four and five 
failed reform efforts over the last decade. But you need to 
read the history and you need to communicate the history, 
because there have been all of these failed reform efforts. 
There has been over $1 billion of spending with virtually no 
results. So I hope the new Administration digests all that and 
takes it to heart before it gives HANO just another pass at 
just another band-aid approach to limping along for the next 
few years. I really urge you to take that bit of history and 
that sense of urgency back to your leadership in Washington.
    Mr. Solomon. Thank you. I will do that.
    Chairwoman Kelly. Thank you very much, Mr. Vitter.
    I'd like to go back for one minute to the Cooperative 
Endeavor Agreement. I was running out of time and really didn't 
get a chance to explore that a little bit. Mr. Drozdowski, how 
many years do you think it's going to take to bring all the 
HANO facilities up to code, if ever?
    Mr. Drozdowski. I've given some thought to that just over 
this past week. Given what they're doing now, it would probably 
be, at the rate they're moving, probably the year 2030 or 2031 
to get anything moving.
    Chairwoman Kelly. Thirty to 31 years?
    Mr. Drozdowski. I would say that, and here's why I'm saying 
this. It's taken--we've given--it's been 1994 since the HOPE VI 
for Desire was awarded to the Housing Authority of New Orleans 
and we still haven't knocked the buildings down. We still have 
families living at Desire. Construction is scheduled to start 
probably in the next 16 to 18 months. It's going to take 
another 3 or 4 years to complete that project. It's a long, 
involved process and, of course, it also deals with how fast 
can you move with the funding that is available with the 
department. It's a long, drawn out process, and we've watched 
literally, at least since the Cooperative Endeavor was signed, 
probably 5 years.
    Chairwoman Kelly. Do you think that--assuming that it might 
be continued, when do you think that HANO might just complete 
even one for the revitalization? I mean just take one.
    Mr. Drozdowski. The report that the Inspector General put 
out is quite accurate for a period of about the beginning to 
about 1999. Since February of 2000, a lot has started to 
happen. Buildings have started to come down at St. Thomas, for 
instance. Some buildings have started to come down at Desire. 
St. Thomas will probably be the first project that will be 
completed, and we're looking at a completion date of some time 
around the year 2003, beginning 2004.
    Chairwoman Kelly. So you're thinking that St. Thomas may 
be--we were out this morning.
    Mr. Drozdowski. A lot of work has been done there.
    Chairwoman Kelly. Yes. We saw a number of things that have 
been deconstructed. We saw some flat land. But the question is 
what about the permitting process and so on? Do you think we're 
still looking at 2004 to get some units there?
    Mr. Drozdowski. St. Thomas is a very visible and 
interesting project, and I think there's a lot of support for 
the St. Thomas project. I think when you go further, the Desire 
project has less appeal. As you start working on the 
conventional projects, C.J. Peete and Bernard and the other 
projects, there's less of an appeal. I think St. Thomas will be 
completed on time. I think we'll have problems with the rest of 
the projects.
    Chairwoman Kelly. Mr. Beard, would you agree with that?
    Mr. Beard. I'd like to make a couple of points. Ms. French 
told you very clearly there's no maintenance. That's how that 
bathroom gets created. I agree St. Thomas might be up around 
2003-2004, and that's going to be handed over to a housing 
authority that doesn't maintain anything. It won't be too long 
before that building looks like that again. Until they fix the 
management here, particularly the maintenance, I don't care how 
many new buildings you build. The problem isn't going to go 
away.
    Chairwoman Kelly. One of the things I'd like to ask you 
about, gentlemen, is that there's a projected income mix at St. 
Thomas. Sixty seven percent of the units are going to be market 
rate. Only 33 percent are scheduled to be public housing 
eligible units. So they're not all going to be returned to the 
kinds of people that were removed from those units. Would you 
care to comment on that?
    Mr. Beard. We did a report a few years ago on the HOPE VI 
program nationwide, and this was one of the problems that we 
identified in that report, that HOPE VI comes in and 
revitalizes a neighborhood and puts in an income mix. But what 
really happens is the people at the bottom of the scale 
literally disappear. We did some stories just recently, 
particularly one in Atlanta. We don't know where those people 
went that used to live in the Techwood Homes in Atlanta. HOPE 
VI came in, really made that place a beautiful, livable 
neighborhood, but where did those people go that used to live 
there? I think that will happen to a lot of the residents at 
St. Thomas. They'll be moved out. They will not fit into this 
mix that we have to make this nice St. Thomas neighborhood. 
You'll ask me and I'll tell you, I don't know where they're 
going to. They're just going to disappear.
    Chairwoman Kelly. Sounded like Ms. Davis was trying to 
plead for that neighborhood to stay, and I'm just concerned 
that the neighborhoods will somehow come back if we're down to 
bare earth and we come up with a mix like that. It's not bad to 
have a mix. It's a good thing. But my concern is when we're 
moving people out and we're talking about thousands of people 
being moved out while their units get destroyed, where do they 
go when Ms. Davis pointed out there's not enough housing stock 
in New Orleans to house those people. Where are they supposed 
to go if we're tearing down the units? I don't know the answers 
to these questions. I'm simply raising them and hope that 
perhaps you have some thoughts that you'd care to share with 
us. Any one of you may answer that.
    Mr. Solomon. Well, just generally for these redevelopment 
efforts everywhere in the country, the basic alternatives for 
the short run and the longer run are other public housing or 
Section 8. The Housing Authorities have a responsibility to the 
residents, as long as they adhere to their leases and do what 
they are supposed to do, to house them somewhere. The 
Government's efforts are supposed to be making this situation 
better. That means it is incumbent, if we are going to use 
Section 8, that the Section 8 program be working, and that 
Housing Authorities--and again, I mean generally--track these 
families and that this be a coordinated effort. We need to make 
sure that those responsibilities are carried out.
    Chairwoman Kelly. In the testimony of one of you--in a 
report, I should say, of one of you, I believe it was the HUD 
IG, Mr. Beard, was it you? You said that the Section 8 housing 
program is really dysfunctional or non-functioning at all. Is 
that still the truth?
    Mr. Beard. That's the truth here in New Orleans in that 
it's the place that they could use to help relocate tenants if 
it were operating smoothly and efficiently, which it's not. I 
think the lease rate is somewhere around 60 percent of what 
they've got available.
    Mr. Drozdowski. Sixty eight percent.
    Mr. Beard. Sixty eight percent of what they've got 
available they've got leased up. So there's a lot of room there 
they could be using and they're just not operating effectively 
enough to do it.
    Chairwoman Kelly. You have the vouchers available?
    Mr. Beard. Yes, they have vouchers available.
    Chairwoman Kelly. Is it the fact that there's no housing 
available for people who will accept those vouchers and accept 
those families? Where's the rub here?
    Mr. Drozdowski. The Section 8 program has to be worked on a 
regular basis. The issue, of course, is where do you find the 
units that are available and suitable for Section 8 rental? 
What our assessment is in the field office is that the Section 
8 program has never been worked effectively. I've talked to my 
counterparts in Chicago, for instance, where they had the same 
sort of problem. They brought in a private contractor, 
contracted out the entire Section 8 program, and the Section 8 
program in Chicago is working very well. So I think he's right. 
The point we should be making is that, at least during the 
period that we are looking at during the Cooperative Endeavor 
Agreement, the Section 8 program literally did not function 
properly and is now suffering the consequences of that 
mismanagement.
    Chairwoman Kelly. Thank you very much. That gives us at 
least some kind of a picture.
    Mr. Drozdowski, do you think the CEA ought to end?
    Mr. Drozdowski. Yes, ma'am.
    Chairwoman Kelly. Mr. Beard, do you?
    Mr. Beard. Yes, ma'am.
    Chairwoman Kelly. Mr. Solomon, will you take that, please, 
back to the Secretary?
    Mr. Solomon. Yes, ma'am.
    Chairwoman Kelly. Thank you very much.
    Mr. Baker, have you further questions?
    Mr. Baker. Yes, Madam Chairwoman. Thank you.
    Mr. Beard, I didn't get to ask the question last time that 
I asked of Mr. Drozdowski as to the remedies in response to we 
should end the CEA. Do you think receivership is now the 
appropriate step, and perhaps before you answer let me give you 
this advisory. I spoke with Ms. Gaffney last week and she has 
expressed some level of support for this. So maybe that helps 
with your decisionmaking on that point.
    Mr. Beard. I think it's the best thing since sliced bread.
    Mr. Baker. Great. I didn't think you needed that other 
piece of information, but I just wanted to make sure.
    As to administrative or judicial, do you have a preference? 
Receivership.
    Mr. Beard. Judicial.
    Mr. Baker. And what would be your reasoning for that 
approach?
    Mr. Beard. Complete independence from the political process 
and the town.
    Mr. Baker. Based on the comments of Mr. Drozdowski 
concerning Secretary Cisneros, Under Secretary Cuomo's actions 
with regard to the certification by HUD of the HANO scoring, it 
would seem to be fairly evident to people that political 
considerations have driven the expenditures, or the lack 
thereof, I would say in this case. And again, given the 
observation that 68 percent of the Section 8 certificates have 
been used leaving 32 and we still have people in dilapidated 
housing, there really is no excuse for our current condition.
    Before I ask this next question of you, I need to make a 
preface. The current Executive Monitor, Mr. Nicotera, who I 
believe will be on our next panel, I believe has done good work 
since his appointment to this responsibility, but we've taken 
an intolerable, very bad, difficult situation and made it 
merely just bad. I have had, in conversations with him, 
discussions concerning the mechanisms by which we could unleash 
good professional judgment to do the work that needs to be 
done, and I intend to pursue that line with Mr. Nicotera in the 
next panel.
    But I make that point in his defense, but then to ask this 
question. Do you, and perhaps Mr. Drozdowski is the appropriate 
party or between the two of you for sure, have knowledge that 
HANO has asked for a waiver from the mandatory demolition rule 
for four particular projects? And I speak of Cooper, Fisher, 
Florida and Guste have been determined to be not meeting the 
appropriate standards or that they should be demolished, that 
HANO has asked for a 10 year waiver of that requirement 
meaning--let me translate for those who didn't understand that 
gibberish--that the current request is for tenants of those 
four projects which do not meet decent habitable standards by 
HUD's own measure, are going to be asked to stay there at least 
10 more years?
    Mr. Beard. Let me make that very visual for you, 
Congressman. That bathroom is located in one of those projects. 
She's lived, she told us, 3 years and they're asking her to 
stay another 10 until they get her on the fix list. You're 
exactly right. They have asked for a waiver not to do anything 
for 10 years to that bathroom.
    Mr. Baker. Well, I just want the resident representatives 
here to understand what we are trying to communicate. We are 
here really to try to figure out how to fix this. We are being 
told that we have money in accounts for various purposes that 
remain unspent. We're being told that we have properties which 
don't meet minimum standards to live in, and we're being asked 
to turn our heads for another 10 years. I think the power of 
that needs to be fully understood by those who are worried 
about change. The one thing we do know is what we have today is 
not acceptable, and we have to do everything within our power 
to change it and yet we find ourselves in the posture of being 
asked to turn our heads for another decade. Frankly, in my 
conversations with Congressman Jefferson about this matter, 
that's what disturbed him the most. I realize he's been in 
Congress now over a decade and he's seen young people grow up 
in this environment with no evident change in living condition 
and now he's being asked to turn his head again for another 
decade. Watch them grow into young adults. That's 
incomprehensible.
    Is it your judgment that the current circumstance and the 
lack of expenditure of funds can be laid to mismanagement, 
turnover, lack of a comprehensive plan? I know that Anderson 
Consulting was paid $3.7 million about 1998 or so to develop a 
short- and long-term plan. What happened to the money and 
where's the plan?
    Mr. Beard. Their draft of that plan we really liked. I 
don't think anybody ever actually implemented it, but there has 
been a number of excellent plans made.
    Mr. Baker. You paid $3.7 million for a plan that was put on 
a book shelf?
    Mr. Beard. It almost works out that way. I mean they plan 
and then it just doesn't go any further than that.
    Mr. Baker. I read somewhere, I don't know if it was your 
comment or a quote from someone else, that HANO loves to plan, 
but doesn't like implementation.
    Mr. Beard. That's a quote from one of the HUD people.
    Mr. Baker. How much in the aggregate of the $832 million 
spent, how much of that has gone into consulting and planning?
    Mr. Beard. I would hate to venture a guess, but I can point 
out to you that on the Comp Grant Funds that are $279 million, 
I think they had somewhere in the neighborhood of $70 million 
or $80 million that went to what's called ``soft costs,'' which 
is that sort of activity.
    Mr. Baker. So a conservative guesstimate would be $70 
million.
    Mr. Beard. Just out of that one block of the Comp Grant 
Funds. You'd have to speak to them. HOPE VI has just as large a 
number of--they all come with their consultants, their 
planners, their engineers, their lawyers, their accountants. I 
mean it costs a lot of money to employ them.
    Mr. Baker. To eat here in the city is nice, but it can be 
expensive, too, I hear. If you had to make a recommendation to 
this subcommittee based on your analysis today, beyond the 
question of judicial receivership, are there other elements 
that you would want to make to us as a part of resolution of 
this problem?
    Mr. Beard. We've always maintained over the years to get it 
out of the politics of the local city, and that was our intent 
this time. When we were recommending smaller entities, we were 
hoping that someone might be able to focus on one or more of 
these 10 projects and turn some of them around.
    Mr. Baker. But that would only be subsequent to a 
determination of a judicial receivership to give them the 
authority to take appropriate action.
    Mr. Beard. That's right.
    Mr. Baker. I don't want to take inappropriate time. Thank 
you, Madam Chairwoman.
    Mr. Beard. Let me just emphasize that the Office of 
Inspector General has been publishing pictures like this since 
1983.
    Chairwoman Kelly. I thank you, Mr. Baker.
    I just want to put this in perspective a little bit. $3.7 
million for the Anderson plan. Before I got to Congress, I 
rehabilitated real estate. I went out with my kids and we 
walked through buildings and we would take a look how we could 
rehabilitate real estate. I hate to see a beautiful building go 
to waste. So I'm going to throw out some figures.
    I come from New York, from the greater New York area north 
of the city, so I'm not in the city, but I always figure it 
costs $400 to fix a window. $400 and they spent $3.7 million 
for a plan that's on a shelf. $200 for a door, $50 to put a 
good dead bolt lock on it. That's what we're talking about in 
the scale of things. You can put in a whole new kitchen for 
about $3,000. And we're talking about $3.7 million for a plan 
that's sitting on a shelf.
    You know, if you just stop and think about the scale of 
what we're talking about here, we can talk in terms of millions 
of dollars, but it's only a few hundred dollars that some of 
these residents need to rehabilitate a building, to 
rehabilitate what they're living in, to give them a decent 
place to live, to rehabilitate. To go in and reconstruct that 
bathroom with waterproof sheetrock to cover that wall, to put 
on new tile, to put in a bathroom sink, a toilet, a new tub, 
you're talking maybe, at the most, $3,000. $3,000 and we 
spent--I shouldn't say ``we.'' The Housing Authority spent $3.7 
million on a plan that's on the shelf.
    Mr. Baker. Will the gentlelady yield?
    Chairwoman Kelly. I certainly will yield.
    Mr. Baker. It was my intention, Madam Chairwoman, I had 
what I called a virtual tour for the subcommittee that I wanted 
to take you on, primarily those four buildings that were being 
requested to have the 10 year waiver on the demolition 
standard. It's apparent with our next panel that we will be 
pressing the time envelope a bit for you to make your flight, 
and I may do that at another occasion when you might choose to 
make it available.
    But it is almost inconceivable to me that when we look at 
the financial condition, you look at the physical condition, 
when you're talking about fixing those windows, we don't have 
GAAP accounting standards used here, and the $10 million of 
judgments awarded that are on the books as a result of 
individuals being harmed by the lack of maintenance, if you put 
that on the books, I believe you would find our organization to 
be insolvent, much less litigation that is in the pipe and 
still pending that we don't have resolution for that could run 
those numbers literally into the hundreds of millions of 
dollars.
    So that lack of maintenance has had a very significant 
effect far beyond just inefficient expenditure. It's 
unbelievably costing us huge sums of money, because we aren't 
maintaining these buildings properly. So one problem leads to 
another, which is, I think, just getting us to an end result 
which is just no longer defensible. Thank you.
    Chairwoman Kelly. Thank you, Mr. Baker. And you're right. 
We have gone on.
    Mr. Vitter, you have no further comments? We thank this 
panel very much. I appreciate your being here and I know that 
there may be additional questions, not only from us, but also 
from Congressman Jefferson so, without objection, the hearing 
record is going to remain open for 30 days for the Members to 
submit written questions for these witnesses and for them to 
place their responses in the record. This panel is excused and 
we'll now go to the third panel. I would like to take at this 
point about a 10 minute break just so everyone can shake their 
legs out a bit. Thank you.
    [Recess]
    Chairwoman Kelly. Thank you very much. If you will all 
please be seated, we're going to start the hearing right now. 
As you know, we're trying to get this hearing moved along. We 
move to our third panel before us.
    We're pleased to have Mayor Marc Morial. Mayor, your place 
is here at the table, if you will, please. And Mr. Frank 
Nicotera, the Executive Monitor of the Housing Authority of New 
Orleans. You're both aware that this subcommittee is holding an 
investigative hearing and, when you do so, the Chair may decide 
to take testimony under oath. Do either of you have any 
objection to testifying under oath?
    Mr. Nicotera. No, ma'am.
    Chairwoman Kelly. Mr. Mayor, you do?
    Mayor Morial. I'm raising my hand.
    Chairwoman Kelly. Well, that was fast. Then the Chair 
advises you that under the rules of the House and rules of the 
committee, you're entitled to be advised by counsel. Do any of 
you desire to be advised by counsel during your testimony 
today?
    Mr. Nicotera. No.
    Mayor Morial. No.
    Chairwoman Kelly. In that case, please raise your right 
hand and I'll swear you in.
    [Witnesses sworn.]
    Chairwoman Kelly. Thank you very much. Each of you is now 
under oath. Without objection, your written statements will be 
made part of the record. You will each now be recognized to 
give a 5-minute summary of your testimony. We will begin with 
you, Mayor Morial.

 STATEMENT OF HON. MARC MORIAL, MAYOR, CITY OF NEW ORLEANS, LA

    Mayor Morial. Thank you very much, Madam Chairwoman, 
Members of the subcommittee, Congressman Jefferson, Vitter and 
Baker. Madam Chairwoman, I'm pleased to be here. I want to 
apologize to you for not having any written testimony. I was 
advised that this hearing would take place on June 24. I 
received that letter approximately 10 days ago and wasn't 
notified until Wednesday/Thursday last week that this would be 
the new date of the hearing. As all three Louisiana Members of 
this panel know, the Louisiana Legislature is in session and I 
was required to spend Thursday in Baton Rouge and left to go to 
New York on Friday, so I did not have an opportunity to prepare 
for you any written testimony.
    But let me offer you some observations which I think are 
important:
    One, I really appreciate the Congress's continuing interest 
in public housing in New Orleans and also public housing on a 
national basis;
    Two, I want to offer to you some ways in which I think that 
the Congress, working with the new Secretary of HUD, could be 
helpful to this process. One is that the HOPE VI program is 
broken and the HOPE VI program which is currently financing 
improvements at both St. Thomas and Desire, a well-intentioned 
program, is a program that needs dramatic overhaul, and here's 
why.
    First, the red tape from the Federal level through the HUD 
bureaucracy associated with getting these projects approved 
smacks of some kind of Russian or criminized bureaucracy. The 
approvals needed and the approvals necessary and the delays 
associated with both of these projects in the time, from the 
time that these grants were awarded to the city to the current 
period, we have built convention centers, we have added two new 
concourses to our airport and built a new ticket terminal. 
We've built swimming pools and amusement parks. The time period 
and the bureaucratic approvals and delays associated with these 
two projects leaves much to be desired. That, despite the good 
intentions of what I believe were three successive HUD 
secretaries: Former Secretary Kemp, Secretary Cisneros, and 
Secretary Cuomo, all three committed to work to try to 
eliminate some of the bureaucratic delays associated with this 
program.
    Second, with respect to HOPE VI, because HOPE VI is the 
primary financing vehicle, Congressman Baker, put before Public 
Housing Authorities for the redevelopment of Public Housing 
Authorities. The second very, very broken part of HOPE VI is 
that the mixed financing requirements are overly ambitious, and 
have made it very, very difficult for developers to proceed to 
complete these projects. What do I mean?
    The idea behind HOPE VI is that you give an amount of 
Federal money and you say to a developer, ``Now you go out and 
raise the rest through private equity, private debt, tax 
credits, and public money.'' At St. Thomas, a site which I 
believe you visited today, there are tax credits. The city, 
through a recent bond issue, has committed $6 million. The 
State, through the capital outlay process. Imagine that. We've 
got to go to the State capital outlay process to try to finance 
the redevelopment of an essentially Federal public housing 
development. They've committed an additional $6 million and the 
developer has indicated to us in order to close the final gap 
he may need a tax increment financing initiative from us to 
fill the gap.
    The mixed financing requirements are overly ambitious and 
what they do at the end, respectfully, is place a good program 
in a situation where, if you look around the country, very few 
HOPE VIs have been completed. One focus is to say, ``Well, 
maybe the Public Housing Authorities didn't do their job.'' I'm 
here to say that there is a bigger problem begging for a 
solution, and that is that the HOPE VI program needs overhaul.
    The third area where the HOPE VI program, I believe, leaves 
a lot to be desired is in the area of what it does in terms of 
relocating public housing residents. Simply providing public 
housing residents with a Section 8 voucher is not enough for 
effective relocation and, in many instances, what these 
initiatives are doing is causing displacement, doubling up, 
tripling up of families under the guise of relocation. A better 
solution must be found.
    Fourth, very importantly, Public Housing Authorities must 
competitively compete for HOPE VI grants. There is no guarantee 
that you're going to get the grant, Congressman Jefferson. So 
what may happen is a Public Housing Authority may be waltzed 
down the road of demolition in an effort to comply with 
stringent HUD requirements of decommissioning apartments which, 
quote ``don't meet minimum housing standards.'' Large public 
housing developments are demolished and there's no money to 
redevelop them because not enough money has been committed to 
redevelop every site which is demolished.
    This program, despite its well-intentioned beginnings, 
despite tremendous efforts from three successive HUD 
secretaries, from local Public Housing Authorities, from all 
sorts of developers and experts, is a program crying out for 
significant change.
    Second observation----
    Chairwoman Kelly. Excuse me, Mr. Mayor, but you weren't 
here when we established the ground rules for this hearing. It 
was that everyone has 5 minutes for testimony, so if you could 
please sum up, we'd appreciate it.
    Mayor Morial. Well, I'd really ask for some additional 
time, if I can have some additional time, Madam Chairwoman. I 
understand the ground rules, but these are very, very important 
issues. I see your aide shaking saying no, don't give the mayor 
any additional time. But I will comply with your request and 
stay as long as I can for questions. But I want to hit on two 
other additional points, and those are that there are two 
things in the----
    Chairwoman Kelly. I just want to say if you could do it in 
a couple of minutes, I'd appreciate it.
    Mayor Morial. Two quick things I want to add, and that is 
that currently one of the biggest advances that we've made in 
this city is that we have significantly reduced violent crime. 
I am proud of that. And it's happened because we've worked very 
hard and it's happened because we've placed community policing 
substations in public housing developments to give people in 
public housing the same kind of policing that people in other 
neighborhoods have had. We've financed that with a drug 
elimination grant program. Congressman Vitter, that program has 
been proposed for complete and total elimination, as has the 
community policing program.
    Second, on the budget, after HOPE VI, the only pool of 
money that Public Housing Authorities have for construction is 
the Comprehensive Modernization Program. That program, better 
known as the Comp Mod Program, is also proposed for 
approximately a 30 percent reduction in this year's budget, and 
I would beg and plead with this subcommittee to look very 
closely with that, weigh in with the appropriators on those two 
points. And I'd be happy to answer any questions you have.
    Chairwoman Kelly. Thank you very much, Mr. Mayor.
    At this time, I want to turn to my colleague, Mr. 
Jefferson. I'm so glad you were able to be here, Mr. Jefferson. 
We welcome your appearance with the subcommittee and would like 
to at this point let you have time for a statement.

  STATEMENT OF HON. WILLIAM J. JEFFERSON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Jefferson. Thank you, Madam Chairwoman. I want to thank 
you very much for permitting me to speak for a brief moment on 
this, and I want to thank my colleagues Richard and David 
Vitter for coming down to work with us on these important 
issues and thank you, Madam Chairwoman, for your attention.
    This is a very difficult subject for all of us. You have a 
Mayor in front of you who has worked his heart out in the city 
to do the best job that he could, and he's done an 
extraordinary job, as he has just mentioned, on the crime 
reduction issues, not only in public housing, but across the 
city. He has spoken passionately about these issues and worked 
hard on them. These are very tough issues. They have proven to 
be intractable over the years. We have tried one form after 
another of governance, of changing governance, of new 
contracts, all sorts of different arrangements, and all sorts 
of Federal programs. The Mayor has just described one that he 
thinks isn't working very well. All sorts of arrangements with 
our tenant leadership and trying new ways to make the programs 
work more effectively.
    I haven't come here today to condemn the work of this 
committee. I think it's important work. I think questions need 
to be asked and answered. Nor have I come here to point fingers 
at the Administration for their efforts, because I think 
they've been genuine and they have been well-founded and, in 
many respects, they have been helpful. All of us though when we 
talk about these properties of brick and mortar and all these 
pictures and so on, we don't have any people in there. This 
really turns out to be all about the people who living in 
public housing and what happens to particularly a lot of the 
children who live there and who ought to have a better chance 
for a better life. We ought to be able to say at the end of the 
day that we did something for them.
    And so I've come here with an open mind with a few 
conditions though to it. It's easy for us to characterize what 
is happening here as a political exercise by a Republican 
committee. I don't believe that's what it is. And it's easy to 
say that the Mayor is a strong Democrat, as am I, and we can 
point fingers in that direction. But I think it has to be above 
all that and I know that I've talked to Richard privately about 
it and I know that he is working in that direction and Susan, I 
haven't had a chance to talk with you about it, but I'm 
confident that you will and that David will so that at the end 
of the day what we really are focused on here is how we can 
make quick work of what needs to be done in these developments 
so that we do not see another generation of children grow up in 
sub-standard housing in this city. That's the bottom line for 
me. That's the bottom line, I believe, for the local 
administration and ought to be the bottom line for this 
subcommittee.
    If we can work in that direction and work on it well, I'm 
sure there are some things that need to be changed at HANO. I'm 
sure there are things that need to be changed at HUD. I'm sure 
there are things that need to be changed with our Federal 
legislation to make it work better. Whatever the requirements 
are, bottom line has to be that what we do here must always be 
with the people who live in public housing in mind and we ought 
to be focused now on as quickly as possible getting to some 
solutions for the people out here without anything about 
politics. I think if we work with that as our basic condition, 
then I think that I'm certainly willing to work with this 
subcommittee and with the Chairlady and with Richard and with 
David and with everybody on both sides of the aisle to try and 
make this process work for all of us.
    So I thank you for letting me make these brief remarks and 
I welcome you to our city, and I'm sorry you have to come and 
go so quickly. But I'm very happy to see you here and I look 
forward to getting back to Congress and sitting down with you 
and trying to work hard on these issues so we can come to 
resolution for the people who live in public housing, 
particularly for the children who live there so we can make 
sure that we do not have another generation of children growing 
up in public housing where they don't have a decent chance and 
they don't have the support that we need to give them.
    Chairwoman Kelly. Thank you very much, Mr. Jefferson. 
You're absolutely correct. This issue is not a political one. 
This is a matter of public policy that affects the lives of the 
people sitting in this audience who must live in substandard 
housing, and we need to all of us put our shoulders to the 
wheel to make sure that this policy is changed enough so that 
money gets to those people so they can have good lives. Thank 
you very much for being here and for making that statement.
    Mr. Nicotera, we'd like to go to you for your statement.

    STATEMENT OF FRANK NICOTERA, EXECUTIVE MONITOR, HOUSING 
                    AUTHORITY OF NEW ORLEANS

    Mr. Nicotera. Thank you, Madam Chairwoman, Congressman 
Baker, Congressman Jefferson, Congressman Vitter. It's my 
pleasure to appear before the subcommittee today. Despite all 
of the testimony prior to me, I'm here to present a picture of 
HANO as I have seen it over the last 15 months as the Executive 
Monitor. From my position, I think the HANO management team 
that's in place right now is probably the strongest public 
housing management team that's been in New Orleans in years. 
I've been in New Orleans since 1977, and it certainly goes back 
that far. If you just drive around the city, despite what the 
critics say, there's more ongoing development and modernization 
at HANO properties right now than at any time in the last 30 
years. The last significant development at HANO was back in the 
1960s. I have some examples before you and I know Congresswoman 
Kelly, you had a chance to see some of those this morning at 
St. Thomas.
    That demolition started in July of 2000 and, as of today, 
it's more than 80 percent complete. At Desire, the master site 
developer mobilized in March and they're continuing the 
demolition. That's the picture that's closest to you. That 
demolition is proceeding and that project will start 
infrastructure construction probably sometime in July or 
August.
    On the modernization side, just to correct some of the 
testimony that was heard earlier: The first large scale new 
units that we'll actually bring online are at the Florida 
development where we're doing a comprehensive modernization, 
reconfiguring out public housing apartment-type units into 
townhouses, cutting the old street through so that they can 
have walk-up entrances to the fronts of the units, and we're 
also going to build some new duplexes. And also at the Guste 
high rise development. We have already finished the east wing 
and a new elevator lobby with new elevators, which were badly 
needed, because the old ones would break down frequently. And 
we have a number of accessible units in that building, and I 
believe there's 88 units in the east wing which were turned 
over to the resident management corporation this week so that 
they could be reoccupied and the rest of that project will be 
done about this time next year.
    We've heard discussions about relocation. Well, at St. 
Thomas I'm happy to report that as of about 3:00 this 
afternoon, the last resident of St. Thomas was relocated. At 
Desire there's approximately 70 families left. The first stage 
of C.J. Peete, which is another development that we're 
undertaking as a mixed finance development utilizing 
Comprehensive Grant Funds. The first stage has been relocated 
and we've begun demolition on another stage.
    The Section 8 problems have been noted in the IG report and 
here today. But I want to compliment the current HANO 
management under Ben Bell and his staff. They didn't hide from 
this problem. Nobody tried to bury this problem. We took on a 
very difficult position last year when we went into the 
administration and found out that there were some serious 
problems in Section 8, there was some serious neglect on the 
inspection side, and we had heard rumors for years, but we 
started digging. We did it in a professional way like you would 
in any normal business. You hire an expert to come in who has a 
background in fraud accounting and take a look at all of the 
files and see if there's a problem. And that's what we did so 
we could come up with a comprehensive solution. It resulted in 
some folks being terminated. It resulted in some folks being 
moved. It resulted in the privatization of the inspection 
function so that we could get more reliable inspections and get 
them done quicker and so that we could get new units inspected 
so that residents would be relocated faster, despite all those 
problems.
    As of today, the actual utilization rate of Section 8 
vouchers is 81 percent, not 68 percent. And so in less than a 
year, we have increased it by over 10 percent. We know we need 
to get to 90 or 95 so that we have enough Section 8 properties 
available and so that it brings in some Section 8 
administrative fees to HANO. That's an important resource. I 
think the fact of the matter is that we've completed the 
relocation at St. Thomas. We've completed all but 70 at Desire 
and, even with a broken Section 8 department, the HANO staff 
has been able to put in the time and effort necessary to 
complete relocation so we can get both of those HOPE VI 
projects going.
    We have been trying over the last few years, and 
particularly over the last year, to convert HANO to an asset 
management organization. And it's interesting when I hear 
discussion of breaking it down into smaller housing 
authorities, because breaking it down is not going to increase 
any funding for HANO. The way the HUD regulations are written 
now, operating subsidies are calculated on the number of units 
in service. Comp Grant funds or capital funds are calculated by 
the number of units. So the only thing that breaking HANO down 
into smaller authorities will do is increase administrative 
costs if you have to service the needs and the costs of several 
different boards.
    What HANO has already done is turn two properties at B.W. 
Cooper and Guste Homes over to resident management 
corporations, and those are both functioning well. Those are 
businesses owned by the residents that have been set up. It's 
something they tried to do for years. They were encouraged by 
the city administration, but it wasn't until the last 2 years 
that we finally got those programs going, and now they're doing 
a fine job of managing and they're there on-site. They know 
where the problems are. They know who the problems are, and 
they do a much better job of management.
    Now as far as the HOPE VI projects, we're not going to 
manage St. Thomas. When St. Thomas is finished, our developer, 
Historic Restoration, through their management entity, will 
manage St. Thomas including the public housing units. We'll get 
a portion of the subsidy to cover our costs for asset 
management services, which is supervising the contractors in 
place. The same model will be used at Desire, the same model 
will be used at C.J. Peete when that is completed. So that's 
five of eleven conventional sites, and there certainly is room 
to convert some of the other sites to private management or a 
combination of private management and resident management. It 
is the way to go, in my personal opinion. I don't know that 
everyone shares that, but that's my personal opinion. It's good 
to have folks on-site who are living there 24 hours a day 
involved in the management of the properties.
    There have been some comments and there were some reports 
with regard to HANO's finances. HANO's finances on a day-to-day 
basis are fine. They operate within budget, they actually 
operated in the black the last 2 years. The only reason that 
HANO fails the financial indicator under the PHAS measuring 
system is because they have had this long-term accumulation of 
judgments and settlements from litigation. This started back in 
1991 when HANO was under private management and, for reasons 
that I have never been able to determine, the private 
management company just stopped paying claims and stopped 
providing insurance. So those accumulated and when I joined 
HANO in 1997 as general counsel, those claims were in excess of 
$18 million. They're down now close to $10 million. But, 
because of those large, unfunded litigation costs, HANO can not 
pass the PHAS indicator. So that is going to be a continuing 
problem. It was there in 1996. It was not addressed by this 
Cooperative Endeavor, and I don't know why, because some type 
of system should have been set up to correct that. And besides, 
some of those folks who have legitimate claims who have been 
waiting for money for 4 or 5 years are entitled to recover 
their money.
    As far as the Section 8 program is concerned, there's been 
suggestions that it should be turned over to the city and run 
by a non-profit. With all due respect, Mr. Mayor, the city gave 
us their Section 8 program in 1999 with HUD's blessing. And I 
know the city doesn't want it. So that is not a well-reasoned 
suggestion.
    With regard to Section 2002. Tearing down the four sites 
that are under 202 consideration and vouchering them out is not 
a practical solution. The New Orleans residential real estate 
rental market will not support that type of massive relocation, 
and that's not just a guess from me. We went to one of the 
acknowledged experts in this area, Doctor Wade Regas at the 
University of New Orleans. He is used by developers and 
government all over the Gulf Coast and the State of Louisiana, 
and he issued a report to HANO that supports our suspicions. So 
that is not a realistic possibility.
    What HANO plans to do is apply for HOPE VI grants for both 
Fischer and Guste, two of the sites that are under 202 
consideration. Is that my minute?
    Chairwoman Kelly. You've got 1 minute.
    Mr. Nicotera. One minute. OK. At Florida, quickly, when 
this side of the development is finished, which will be next 
year, the master plan is to move residents from the other side 
that's under 202 into the new units and then we can deal with 
the other units later.
    As far as planning. I heard some comments about the 
Anderson Report. It's not on the shelf. It's being used. The 
Comprehensive Modernization Program that HANO has undertaken, 
which includes a little bit of work at all of the sites on a 
scheduled basis, was an Anderson recommendation. And I might 
add that HUD hired Anderson and HUD paid Anderson directly. 
That was not a HANO contractor. We accepted those 
recommendations and we worked with them. We've modified them to 
meet some of the requirements of the Louisiana Housing Finance 
Agency, because some of their projections were a little 
optimistic. The fact is we don't have that much money available 
in tax credits every year.
    Finally, I think we all share the same concerns and that's 
why we're here, and that's why I'm going to be as candid with 
all Members of the subcommittee as possible, provided I 
remember everything. We all have great concern for the 
residents. The residents in New Orleans have been subjected to 
numerous methods of management, all resulting in the same 
thing: a lack of units, a lack of quality units. We've made 
some headway in the last year, and we're continuing to make 
headway, but I realize that it's not enough and it doesn't meet 
the expectations of everyone in this room. But that's no reason 
to discredit the current HANO staff. If changes are to be made, 
don't throw the baby out with the bath water. These are 
dedicated folks who are intelligent, have worked in a variety 
of fields. They have experience, they work hard, they are the 
hardest working people I have ever worked with, and I have 
practiced law for 20 years, and they beat most lawyers I know. 
They're there nights and they're there weekends and they're 
truly committed to making things better, but they're 
handicapped by the past.
    Chairwoman Kelly. Excuse me.
    Mr. Nicotera. And that's the end of my opening remarks.
    [The prepared statement of Frank Nicotera can be found on 
page 177 in the appendix.]
    Chairwoman Kelly. Thank you very much. I appreciate that. 
Mr. Nicotera, I enjoyed going through the different areas with 
you this morning, but I'm left with a couple of questions. You 
said that there was a lack of the capital funds and yet I have 
in front of me a printout showing that the status of the open 
programs as of 2000, there was available to the city for 
capital fund programs $28 million. I have the fact and we've 
talked before that there's $85 million available for renovation 
and modernization. When I walked through and up into some of 
those buildings this morning, I'm going back to this little 
chart. I sat at my kitchen table before I came down here and 
just listed out the cost of a few things like $600 to install a 
new toilet with the plumbing, $400 for a window, $50 for a 
lock, a dead bolt. I'm talking about an installed price and 
yet, in walking through some of these areas with you, we were 
looking at buildings where residents themselves have stuffed 
pillows and clothing or cloth of some kind in to try to cover 
glass that had been broken out of their windows.
    Now, doggone it, if it costs $400 to fill up some window 
panes in a project, how come we can't go into one of these 
areas and fill up those panes while they're waiting to get 
moved? Why should they be condemned to live in units where 
there are no windows being repaired? Why should children, 
little tiny children, grow up in these areas where they're told 
they have to wait because there's no money for repair when we 
know that there's $85 million that's untapped that could go 
right out to make those residents have a better life right now. 
As Mr. Jefferson pointed out, you're going into generation 
after generation. How can those kids grow up in any kind of 
hope for their lives, their own lives, when they see that the 
big guys in the neighborhood are the drug dealers, because 
they're the only people who can get up and out, because they 
make enough money to do so?
    I think we're condemning generation after generation in 
these houses, and I find that an unacceptable use of public 
funds if we don't get it done and get it done yesterday. And I 
don't blame you, sir, because I know you haven't been on the 
job that long. I do, however, feel that the Housing Authority 
of New Orleans bears a large share of the guilt for letting 
people live in these circumstances. I think, no matter how long 
somebody has been there, surely there must be a way to get 
somebody up there to replace window panes so kids don't fall 
out and die.
    Mr. Nicotera. I agree with you, Madam Chairwoman, and just 
in discussing the funding. The fact is that as of right now, 
over 91 percent of our capital grant funds have been obligated 
and 65 percent have been expended. I'm getting that information 
from the last report that the local HUD office gave to the 
National Advisory Council just this past week. There's 
$243,625,000 capital funds authorized to HANO, $222,653,000 
obligated and $156,553,000 expended. We have obligated all of 
the funds through the 1998 year and we're on schedule to do the 
1999 and 2000 years. All of those funds are going into 
activities such as you indicated but, if there is an emergency 
situation where there is a broken----
    Chairwoman Kelly. Excuse me. I'm sorry, sir, but would you 
give us those facts in writing, because that certainly doesn't 
match what I have.
    Mr. Nicotera. It's Exhibit 1 to my written testimony.
    Chairwoman Kelly. It's Exhibit 1. Well, we just got your 
written testimony an hour ago.
    Mr. Nicotera. That's right.
    Chairwoman Kelly. So we'll try to find that. Thank you.
    In the interest of time, I'm going to go first to Mr. 
Jefferson. Mr. Jefferson, have you any questions you'd like to 
ask this panel?
    Mr. Jefferson. Am I to understand that the people who have 
been moved out of St. Thomas as you're making the demolitions, 
all these families have been placed in livable residences and a 
family unit?
    Mr. Nicotera. Generally, about 50 percent of the residents 
have gone to other public housing units and the rest have gone 
to Section 8 units owned by private landlords.
    Chairwoman Kelly. All of them?
    Mr. Jefferson. Do we know where all of the people are?
    Mr. Nicotera. We can track all the residents who have been 
relocated from St. Thomas, Desire and C.J. Peete.
    Mr. Jefferson. And they all are settled into some decent 
place, as far as you know?
    Mr. Nicotera. There's supposed to be a tracking mechanism 
in place that does some follow-up to make sure that folks don't 
fall through the cracks. That's part of the services that IRI 
was providing.
    Chairwoman Kelly. Will the gentleman yield?
    Mr. Jefferson. Yes.
    Chairwoman Kelly. Earlier, Mr. Nicotera, you heard Ms. 
Davis say that the residents don't know where everybody went, 
that there is no--I believe Ms. Davis said something that 
indicated that there is no tracking for some of those people in 
Desire.
    Mr. Nicotera. There is tracking. I do not know when it 
began. I think it was in 1997 or 1998. So folks who were 
relocated before that date, and that's before I got to HANO, 
then I'm not sure if everyone was tracked. I could supplement 
my testimony and indicate that later.
    Chairwoman Kelly. In the Inspector General's report, there 
is an indication that not everyone was tracked.
    Mr. Nicotera. Is there a particular----
    Chairwoman Kelly. Well, it says that in the report.
    Mr. Nicotera. With your permission, I'll consult with the 
HANO staff and supplement my written testimony and address that 
issue.
    [The information referred to can be found on page 219 in 
the appendix.]
    Chairwoman Kelly. I wish you would and get back to us, 
please.
    I'm sorry, Mr. Jefferson. Yield back.
    Mr. Jefferson. I'll reclaim my moment. Let me ask you this 
question. If you continue on the path that you're following 
now, having just started 15 months ago, given the problems that 
have been discussed here today, how long do you think it might 
take you to get the repairs made that need to be made? I know 
it's an ongoing dynamic thing. I know you can't fix them and 
nothing else breaks, but are you on a path now where you think 
you can do appropriate maintenance for these properties and on 
a path where you can do the things we have to do with respect 
to construction and demolition? How long would it take you to 
get to where we all want to see this project end up if we 
stayed on the path that you're now pursuing and nothing else 
changed? How long would it take to get to the end of it?
    Mr. Nicotera. I have to condition my answer, because we 
have four sites that are under this consideration for 2002 and 
some of those sites present difficult maintenance. If nothing 
is done or no additional funding is provided so that we can 
revitalize those properties, it's almost impossible to do 
routine maintenance and have it last for any appreciable period 
of time. I believe that if you take those four properties just 
out of the equation for right now, I think the plans that HANO 
has for ongoing modernization would show that all of the sites 
would be addressed, and it's not total redevelopment, but at 
least modernized, I believe by, I think it's 2008 or 2009. But 
that assumes there's a gap in funding. We can't do it with the 
present comprehensive grant formula. There would be probably 
close to a $200 million gap in funding. If we want to do 
everything that's on our schedule within that period, there's 
not enough money under the comprehensive grant program 
formulas.
    Mr. Jefferson. The last thing. So over the next 18 years 
you would need $200 million more if you pursue your present 
operating management scheme to actually catch up with your 
maintenance and keep it going and to bill out the----
    Mr. Nicotera. That really just deals with the modernization 
and development activities.
    Mr. Jefferson. Modernization. That doesn't deal with the 
maintenance activities.
    Mr. Nicotera. No.
    Mr. Jefferson. What does it take to do that and keep it 
going?
    Mr. Nicotera. Well, most of that budget is funded from the 
operating subsidy, although there's discussion and there is a 
situation now where there is kind of a spike and HANO is using 
a fairly large percentage of the capital funds for operating 
expenses which are allowed under the HUD funding formulas. They 
kind of got caught in a trick bag, because several years ago 
when the Cooperative Endeavor first came into place, they moved 
aggressively to demolish a lot of these sites with promises of 
future funding, but the future funding didn't come. If you 
compare HANO from 1996 until now with, let's say, Washington, 
DC that was put under a judicial receivership at about the same 
time, Washington, DC received five HOPE VI revitalization 
grants from 1996 to the present time. HANO received none. I'm 
sure there are naysayers out there who say even if we got them, 
we couldn't handle them. But the point is if you're going to 
try to really revitalize and turn the Housing Authority around, 
then at least give it the same opportunities that you're giving 
to other Housing Authorities that were in similar conditions. 
There's not a cheap way or a quick way to do this. We're 
talking about 30 years of deferred maintenance and trying to do 
it now less than 6 years under the Cooperative Endeavor. With 
the manner in which you have to get things approved at HUD 
every step of the way, the process just takes longer. So any 
solution that this subcommittee proposes has to deal with the 
issues at HUD as well.
    Mr. Jefferson. From the point of view of this judicial 
receivership you just mentioned under which Washington is now--
--
    Mr. Nicotera. I think they've come out of it actually.
    Mr. Jefferson. OK. But my question is there's been talk 
about that sort of thing up here on this panel, I understand, 
before I came here today. What would be your feeling about that 
sort of thing happening now, looking at what you're doing? Is 
it all negative? Is it all bad? Or what?
    Mr. Nicotera. Well, I'm kind of biased, and I don't want to 
make any self-serving remarks, because that may show up in the 
next IG report, but the fact is I'm very partial to the 
management staff at HANO. I feel for them and I would hate to 
see a situation come into play where they would be discarded. 
But the reality is, if you're asking for my opinion, the 
reality is Washington, DC was able to turn around quicker and 
get their buildings revitalized quicker under the judicial 
receivership, because they had a judge who wasn't afraid to 
tell HUD you need to move faster. So I think that's one 
benefit, but I'm sure there's certainly other models.
    Mayor Morial. I want to respond to that, because it's 
probably sort of a similar question. First of all, the Housing 
Authority is not part of the government of the City of New 
Orleans. It's a separate State-chartered political subdivision. 
Second, in the Cooperative Endeavor Agreement that we signed in 
1996, I effectively gave up my ability to appoint the HANO 
board of commissioners, which was a power that the Mayor of New 
Orleans had had since the 1930s or 1940s when this Housing 
Authority was created.
    I think respectfully what you effectively have now, because 
I negotiated the Cooperative Endeavor Agreement, is 
receivership without calling it receivership. And that's 
because what you have is the Executive Monitor, the Executive 
Director of HANO, all of the top staff people at HANO were 
selected by HUD. HUD serves as the board of this Housing 
Authority, has to approve every single decision that this 
Housing Authority makes, and you in effect have receivership 
without calling it receivership.
    In the case of Washington, DC, that receivership began 
because the residents filed a class action suit against the 
Washington Public Housing Authority. That receivership was not 
initiated by the Department of Housing and Urban Development. I 
think Mr. Nicotera makes the point that I agree with. Whatever 
management system you have, call it what you want, describe it 
the way you want, unless sufficient funds are committed to 
address the 30 years of deferred maintenance, unless the HUD 
bureaucratic rules are relaxed, fast-tracked, substantially 
reformed or changed, then what you have is the same old same 
old under a different name.
    I think that we have learned in the years that we have 
dealt with this that it is tremendous frustration that you can 
have. For the first time in the history of this agency, highly 
talented and skilled staff people who do not owe their jobs to 
politics, who, if they were running another agency and had the 
same resources without all of the bureaucratic layers that 
they've got to deal with, would get a whole lot more done. So I 
fundamentally believe that whatever management system you have, 
unless you've got the sufficient commitment of funds, the 
change in the bureaucracy and some adjustments in the programs, 
that's where the proof is and the proof of changing this agency 
is going to be in that.
    When I took office, I did something quite radical. I 
committed that I would make the residents, the majority of the 
board, the Housing Authority, because I was inspired by Jack 
Kemp and Henry Cisneros who at the time said in their speeches 
and their writings, ``give the residents more control.'' That 
move was opposed by HUD, criticized by the Inspector General, 
as a management system, which at the time I thought was 
progressive. The Cooperative Endeavor Agreement, which modeled 
what Henry Cisneros did in many other parts of the country now 
finds itself under criticism as a management system.
    The most important thing is you call it what you want to 
call it but, unless you deal with the underlying issues, 
funding on one hand, the administrative bureaucracy and the 
approval process which is so extenuated and attenuated, and the 
fundamental problems in the design, flaws in the design, 
particularly the HOPE VI program, I think it's going to be very 
difficult to substantially and fundamentally change this 
agency. I am prepared to work with you and I am open to 
anything that's going to lead to meaningful change for the 
people that I represent. I'm open to anything. I'm open to a 
quality, substantive discussion that will lead to that result. 
But what I do have objections to is superficial gestures or 
superficial changes which don't deal with the fundamental 
problems associated with public housing.
    One of the problems we have historically in New Orleans, 
because we've got a lot of people, we're the second or third 
poorest city in America in terms of the degree and the numbers 
of people who live below the poverty line. We've probably got 
the highest percentage of our residents who live in public 
housing anywhere in America. Washington is a much smaller 
system. Our Executive Director is now the Executive Director in 
Washington, DC. Detroit, Philadelphia. Many of those systems 
are much smaller than ours in terms of the percentages. We have 
a much larger system which makes it much more difficult to 
change.
    What I think has worked is resident management. At B.W. 
Cooper, at Guste where rent collections are up, where there's 
more of a sense of empowerment there. But even with resident 
management, control over capital budgets and things like that 
still remain up the chain through HANO with the Department of 
Housing and Urban Development. So it doesn't fast track 
anything. It doesn't allow them to be entrepreneurial. So I am 
open to anything and I'm open to a discussion with this 
subcommittee, with our Member of Congress who represents these 
areas, Congressman Jefferson, to what, in fact, will work and 
lead to substantive and meaningful change. But what I do have 
an objection to is anything that's going to be superficial 
where people are going to say, ``Guess what? We changed the 
management structure. We called it a different name, but we 
never ever really addressed the underlying issues that face 
this agency.'' And I am committed to that and I am open to 
working with you in that regard.
    Chairwoman Kelly. Thank you very much, Mr. Mayor, and thank 
you, Mr. Jefferson. I want to go on record as saying that this 
subcommittee is not here on a superficial mission, Mr. Mayor. 
We're here to do business, and I appreciate what you said.
    Mr. Baker.
    Mr. Baker. Thank you, Madam Chairwoman. I think we're on 
the edge of something important here, Mayor. You and I have had 
conversations about this and many subjects over the years. 
Perhaps not always as positive as either of us would like. But 
I sense a willingness on your part that frankly I am encouraged 
by. I'm dramatically changing my direction here from earlier 
comments through the hearing. I am listening to your intent. 
It's that, with the assent of Congressman Jefferson, that if a 
plan can be developed that you think is real, that without 
regard to what the plan looks like today, because we don't know 
what it is, you would be willing to facilitate that plan's 
adoption. Do you, today, have confidence that Mr. Nicotera's 
efforts over the past 15 months have been very constructive?
    Mayor Morial. I believe so. Mr. Nicotera has worked very, 
very hard and has done good work as Executive Monitor.
    Mr. Baker. Listen carefully to these questions of Mr. 
Nicotera, because if this goes well, I think we're together 
here for the first time.
    Mr. Nicotera, in our discussions over the past weeks--let 
me back up. I'm omitting a very important step. Let me say to 
you that I think the conduct of your office, your professional 
staff, your shop over the past 15 months has, in fact, 
accomplished more than any prior Administration relating to 
public housing in the City of New Orleans since I have been an 
observer of the process. So I start commending you for your 
efforts. Having said that, my comments are in no way relating 
to a lack of professionalism on your part, but a broader set of 
issues that relate to the constraints in which you find 
yourself operating, to which the Mayor has made reference.
    In order to solve the problem which Congressman Jefferson 
started to pursue moments ago, how long would it take, and the 
answer was 7 or 8 years to do the basics if we exclude four 
major projects from consideration, which is----
    Mr. Nicotera. And get more money.
    Mr. Baker. And get plenty more money. If we were to do this 
a different way based on your recommendation, the only way I 
know of, based on our discussions, to get around the 
limitations that currently restrict you from engaging in the 
process you wish to engage in is to go to a judicial 
receivership. If the current staff, staff you select, were to 
remain at your side to put the plan in effect with a concurrent 
statement that this subcommittee would pursue to its utmost 
ability the funding needed to make the plan work, I am 
convinced we have a unique political opportunity here where all 
forces are lining up in a similar direction and, with your 
leadership, we could perhaps fashion an agreement that would 
indeed put paint on the walls, frames in the windows, and get 
you the money you need to relocate residents at an acceptable 
rate.
    By acceptable, and this is my view of it, I don't know what 
other Members may feel on this subject, but I'd like to see 
closure on this in a 5-year window and that's an extremely 
aggressive effort in light of the magnitude of the problem that 
you're left with. Do you think a judicial receivership is the 
appropriate step to take to get you where you need to be in 
order to fix the problem?
    Mr. Nicotera. First of all, let me put a couple of 
qualifiers in there. I think that the Congress appointed the 
National Advisory Committee. I would hope that this 
subcommittee will take their recommendation, because----
    Mr. Baker. Let me add to that point. I'm the one who 
started that trouble.
    Mr. Nicotera. I know.
    Mr. Baker. Just so you know that you're not treated 
differently, HUD took 15 months to appoint that panel, because 
they should have concluded their work by now. I had a 
conference call with the counsel last week.
    Mr. Nicotera. I actually walked in the room halfway through 
the conference call.
    Mr. Baker. I apologize to you.
    Mr. Nicotera. No. I appreciate it. I think you were 
complimentary to the HANO staff, and I appreciate that.
    Mr. Baker. Well, my point of making this public is I have 
asked the Advisory Council to conclude their work by the next 
August meeting and report to us in September so we can move 
forward. We can't hold this up waiting on a council to come 
with another recommendation, which frankly we don't know what 
that will be.
    Mr. Nicotera. Right.
    Mr. Baker. But I don't want to have the Advisory Council be 
the shield for you and this subcommittee to reach an agreement 
today if we can reach an agreement.
    Mr. Nicotera. I think, first of all, I don't know if I'm 
the person to reach the agreement. I think the city has input 
into that, because they do have the power to appoint and that 
is an issue.
    Mr. Baker. But my point is is that right now we both have 
regard for your work. You are at a pivotal point. You're 
telling us that with the good effort you've made, that with 
certain changes, you could make the kind of changes the Mayor 
and I and Congressmen Vitter and Jefferson both want.
    Mr. Nicotera. There are certainly benefits to the judicial 
model and actually, I think now that the HUD regulations--
because of HANO's size, I think the HUD regulations would 
almost require that.
    Mr. Baker. So that in order for you to get where you want 
to be in a 5- or 6-year window with appropriate funding, a 
judicial receivership with maintenance of the professional 
staff you select to implement whatever the program turns out to 
be is----
    Mr. Nicotera. I don't know that I'm ready to sign up for 
another tour of duty, to be honest with you.
    Mayor Morial. You've got to, Frank. You're drafted.
    Mr. Nicotera. I'm being drafted. Is that what's happening 
here? Can I have counsel now? Is it too late for me to have 
counsel? I'm sorry. I didn't mean to make light of the 
question, but we've been here a while. I guess I'm getting a 
little punchy.
    Mr. Baker. I don't know if you were here earlier, but after 
rats with switchblades anything is in play to here today.
    Mr. Nicotera. I enjoyed that. I had a very good mental 
picture of that.
    Mr. Baker. So did I, as well. I've met a few in my life.
    Mr. Nicotera. Actually, before we moved the HANO offices, 
you probably would have found a few of those inside the old 
office building. I'm glad we got the staff out of there.
    Mr. Baker. I really think this is constructive. Mr. Mayor, 
would you want to----
    Mayor Morial. Let me say this. I'm open to discussing the 
specifics of a proposal like that with you, Congressman, 
because the money, the elimination of the restrictions and the 
approvals and fast tracking, that is what this agency needs. 
And also, sincerely, a commitment by the subcommittee to look 
at redesign of a number of programs. Secretary Martinez, in my 
initial meeting with him, indicated that he wanted some 
guidance from local elected officials such as mayors about what 
HUD programs work and what HUD programs may need change and 
need reform. I think in the public housing area, the HOPE VI 
program needs some change and needs some reform with respect to 
mixed financing, relocation, and many of the very difficult 
issues that we face today. So I am open to discussing the 
prospects of your proposal. It encourages me and I do think if 
we sat down and talked about it, I do think we might be able to 
come up with a constructive solution.
    Mr. Baker. I would suggest as a follow-up, to move things 
along a little bit, because I know the Chairwoman has to catch 
a flight and the most important thing is making sure the 
Chairwoman catches her flight.
    Mayor Morial. We've got great hotels here, Madam 
Chairwoman. You come to dinner with me, too.
    Mr. Baker. I would suggest that the principals here get 
together for a meeting as soon as possible to discuss the 
concrete elements of this and, since we have a Member of the 
Appropriations Committee here as well who will speak for 
himself, I think we have a number of elements here that might 
be beneficial and these, indeed, are unusual circumstances and, 
if it starts this positively, we've got a shot of making it 
work as long as we're not all throwing bricks at one another, 
and that's not our intent. We're here today to try and help. 
Thank you, Mr. Mayor. Thank you, Mr. Nicotera.
    Chairwoman Kelly. Thank you very much, Mr. Baker.
    Mr. Vitter.
    Mr. Vitter. Thank you, Madam Chairwoman.
    I want to underscore and echo Richard's comments and also 
the Mayor's comments. I think the key is not to do something 
superficial. I think the key is to do something truly 
fundamental. In my opinion, and everyone may not agree with 
this, but in my opinion, just from reading the history, because 
I haven't been involved as a Member of Congress until recently, 
I think a lot of the restylings of the management in the last 5 
to 10 years have been relatively superficial. I think we need 
to talk about something much more fundamental in terms of 
really smoothing the way for a much faster action, much more 
dramatic action that we can really demand some results on and, 
based on what I know of it, that would seem to point to some 
version of judicial receivership.
    So I would really encourage these sorts of discussions with 
an aim of doing something really fundamental and not 
superficial. I think we've been through a few rounds of the 
superficial. Over 9 years we've been through $832 million of 
the relatively superficial, in my opinion. I just did some 
quick math on that. We're talking about 13,000 families under 
your jurisdiction. That's $70,000 a family. That's $650 a month 
a family. We're saying some of these conditions that were the 
same as they were 5 and 10 years ago. So I want to certainly 
echo Richard's comments and the Mayor's pledge to work toward 
some truly fundamental change rather than mandate superficial 
approaches.
    Chairwoman Kelly. Does anyone else have any more questions?
    Mr. Baker. Madam Chairwoman, I don't have a question. I 
just want to compliment you for your initiative in coming to 
the city today. I think your effort here is going to result in 
some significant potential for change, and I'm most 
appreciative for your time and interest. Thank you.
    Mr. Jefferson. I want to reiterate my appreciation for 
having you here as well. You and I have traveled all over the 
world at different times. This is the first time I've had the 
pleasure of having you here with us, so thank you very much for 
coming.
    Chairwoman Kelly. Thank you. It's a real pleasure to be 
able to be here in New Orleans. I've been back a number of 
times and every time I come, I like the city more and more. So 
it's wonderful. It's going to be great to come down here and 
see this housing taken care of.
    I want to note that some Members may have additional 
questions for this panel and they may wish to submit them in 
writing. So without objection, the hearing record is going to 
remain open for 30 days for Members to submit written questions 
to the witnesses and place their responses in the record. This 
third panel is excused and the subcommittee has a great 
appreciation for your willingness to be here and your time.
    I want to thank Mr. Baker, Mr. Jefferson, Mr. Vitter, and 
their very capable staffs including my staff for all of their 
assistance in making this hearing possible. This hearing is now 
adjourned.
    [The hearing was adjourned at 5:00 p.m.]




                            A P P E N D I X



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