[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




                     STRENGTHENING AND REJUVENATING
                      OUR NATION'S COMMUNITIES AND
                          THE HOPE VI PROGRAM

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 29, 2003

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-23



89-932              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice         JULIA CARSON, Indiana
    Chairman                         BRAD SHERMAN, California
RON PAUL, Texas                      GREGORY W. MEEKS, New York
PAUL E. GILLMOR, Ohio                BARBARA LEE, California
JIM RYUN, Kansas                     JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         CHARLES A. GONZALEZ, Texas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSELLA, New York               CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  DAVID SCOTT, Georgia
JEB HENSARLING, Texas                ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey             
TIM MURPHY, Pennsylvania             BERNARD SANDERS, Vermont
GINNY BROWN-WAITE, Florida
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
           Subcommittee on Housing and Community Opportunity

                     ROBERT W. NEY, Ohio, Chairman

MARK GREEN, Wisconsin, Vice          MAXINE WATERS, California
    Chairman                         NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska              JULIA CARSON, Indiana
RICHARD H. BAKER, Louisiana          BARBARA LEE, California
PETER T. KING, New York              MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          BERNARD SANDERS, Vermont
    Carolina                         MELVIN L. WATT, North Carolina
DOUG OSE, California                 WM. LACY CLAY, Missouri
PATRICK J. TOOMEY, Pennsylvania      STEPHEN F. LYNCH, Massachusetts
CHRISTOPHER SHAYS, Connecticut       BRAD MILLER, North Carolina
GARY G. MILLER, California           DAVID SCOTT, Georgia
MELISSA A. HART, Pennsylvania        ARTUR DAVIS, Alabama
PATRICK J. TIBERI, Ohio
KATHERINE HARRIS, Florida
RICK RENZI, Arizona


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 29, 2003...............................................     1
Appendix:
    April 29, 2003...............................................    47

                               WITNESSES
                        Tuesday, April 29, 2003

Frasier, Joan Walker, Executive Committee Member, Jeffries Tower 
  Residents Organization, Atlantic City, NJ, on behalf of 
  Everywhere and Now Public Housing Residents Organizing 
  Nationally Together (ENPHRONT).................................    22
Glover, Renee, Chief Executive Officer, Atlanta Public Housing, 
  President, Council of Large Public Housing Authorities, 
  Washington, DC.................................................    23
Guzman, Thomas D., Director, Iowa Downtown Resource Center, Des 
  Moines, LA.....................................................    25
Husock, Howard, Alfred Taubman Center for State and Local 
  Government, John F. Kennedy School of Government, Harvard 
  University, Cambridge, MA......................................    27
Liu, Hon, Michael, Assistant Secretary, Public and Indian Housing 
  Department of Housing and Urban Development, Washington, DC....     7
Marchman, Kevin E., Executive Director, National Organization of 
  African Americans in Housing, Washington, DC...................    29
Popkin, Susan J., Urban Institute, Washington, DC................    30
Tracey, Brian, Senior Vice President, Bank of America on behalf 
  of the Nation Association of Affordable Housing Lenders, 
  Washington, DC.................................................    32
Zukoff, Lisa B. Executive Director, Wheeling West Virginia Public 
  Housing Authority on behalf of National Association of Housing 
  and Redevelopment Officials, Washington, DC....................    34

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    48
    Liu, Hon. Michael............................................    49
    Frasier, Joan Walker.........................................    55
    Glover, Renee (with attachments).............................    61
    Guzman, Thomas D.............................................    78
    Husock, Howard (with attachments)............................    83
    Marchman, Kevin..............................................   103
    Popkin, Susan J..............................................   108
    Tracey, Brian................................................   120
    Zukoff, Lisa B...............................................   125

 
                     STRENGTHENING AND REJUVENATING
                      OUR NATION'S COMMUNITIES AND
                          THE HOPE VI PROGRAM

                              ----------                              


                        Tuesday, April 29, 2003

             U.S. House of Representatives,
 Subcommittee on Housing and Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:14 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Robert Ney 
[chairman of the subcommittee] presiding.
    Present: Representatives Ney, Tiberi, Harris, Waters, 
Carson, Lee, Watt, Clay and Scott. Also in attendance was Mr. 
Leach.
    Chairman Ney. [Presiding.] The subcommittee will come to 
order. The subcommittee meets today to discuss our nation's 
communities and the HOPE VI program, which is administered by 
the Department of Housing and Urban Development.
    As today's witnesses well know, Homeownership and 
Opportunity for People Everywhere, HOPE, is the name given to a 
series of housing programs initially authorized by the 
Cranston-Gonzalez National Affordable Housing Act in 1990. The 
HOPE programs are numbered one through five, with HOPE VI added 
later. The HUD Reform Act of 1989 authorized the establishment 
of the National Commission on Severely Distressed Public 
Housing. The task of this commission was to conduct case 
studies and site examinations of public housing developments. 
The commission reported that approximately 86,000 public 
housing units were severely distressed and recommended that 
these units be removed from the housing stock. HOPE VI was 
begun as a result of the findings of this commission.
    The purpose of HOPE VI programs is to revitalize severely 
distressed public housing developments and transform them into 
safe, livable environments. The required element of the program 
is the provision of a effective targeted self-sufficiency 
initiatives so that public housing can regain its role as 
housing for low-income families who are determined to improve 
their status. HOPE VI funds are used to provide three types of 
grants--planning, implementation and demolition. Until 1998, 
the bulk of funding provided for HOPE VI was rewarded to 
planning and implementation grants. Since 1998, most of the 
grantees were awarded funds for the demolition of obsolete 
projects or units. A number of concerned housing support groups 
and legislators are now questioning the necessity of many of 
the demolitions and are debating the future of the HOPE VI 
program.
    President Bush's fiscal year 2004 budget proposal does not 
include funding for HOPE VI. So far, HUD maintains that the 
program resulted in the demolition of 55,000 of the 140,000 
public housing units that have been approved for demolition 
under HOPE VI. In addition, because progress is often slow 
under HOPE VI programs for various reasons, billions of dollars 
in HOPE VI funds remain in the pipeline and demand the 
concentrated attention of HUD and the current grantees.
    Despite the success and popularity of the HOPE VI program, 
not all proponents of affordable housing support this program. 
The intended purpose is to provide quality housing for low-
income families, yet some experts maintain that few of the 
newly constructed units are available to these families upon 
the completion of a project. In some revitalization areas, as 
many as 75 percent of the original public housing tenants 
become displaced. As conscious stewards of the taxpayer's 
income, we must investigate if this is the best use of 
government funding or not. Clearly, the HOPE VI program is in 
need of review. We must determine whether it is proper to phase 
out HOPE VI, and if HOPE VI is to be continued, then whether 
reforms are necessary.
    Both Congressman Leach, H.R. 1614, and Congressman Watt, 
H.R. 1077, have introduced legislation in the 108th Congress 
that includes changes envisioned in H.R. 3995 and H.R. 5499. 
These bills are virtually identical, with the exception that 
the Leach bill includes a section that would allow HOPE VI 
grants to be used to assist small communities to develop 
affordable housing as part of the Mainstreet Redevelopment 
Program. We hope to have an agreement on these two bills and 
move to markup hopefully within the next month.
    Although today's hearing is to discuss the HOPE VI program, 
interested parties may have noticed today the front page of the 
Washington Post article that referred the Administration's 
housing assistance for needy families, or HANF proposal. I do 
intend to introduce this legislation tonight upon request--I 
want to stress upon request--of the Administration, and hold 
the first in a series of hearings on the section 8 program 
beginning May 22. Section 8 reform is a worthy topic and it 
necessitates thoughtful debate and discussion. I look forward 
to the leadership of this subcommittee as we move forward in 
studying this proposal. Again, we have to lay it on the table 
for discussion. Personally, I am in a neutral position on this 
whole proposal. We need to have public hearings and we need to 
have discussions among members of the committee and advocates 
for housing across the United States and with HUD to see if 
block granting works. So at the request of the Administration 
for discussion purposes, I am going to introduce this.
    I want to thank all of our witnesses for taking time from 
their busy schedules to be here today. I look forward to 
hearing the testimony and having a good discussion on the HOPE 
VI program. I would like to thank members for being here today, 
and without objection, all members' opening statements will be 
placed in the record.
    The gentleman from Georgia?
    Mr. Scott. Thank you very much, Mr. Chairman, and let me 
commend you for having this very, very important hearing on a 
most worthy and important program.
    The HOPE VI program is an extraordinary, creative and 
beneficial program. I want to thank this distinguished panel 
for coming before us and for sharing your testimony. The HOPE 
VI program is important to my district and the Atlanta metro 
area of Georgia because both the Fulton County Housing 
Authority and the Atlanta Housing Authority have both received 
HOPE VI grants. Because of their successes with this program, I 
am a cosponsor of both Mr. Leach's bill and Mr. Watt's bill, 
and their efforts to reauthorize and improve HOPE VI. I think 
it is very important to note this strong bipartisan Republican-
Democratic partnership to revitalize and reinstitute HOPE VI.
    With neighborhood revitalization as the cornerstone of its 
strategy, since 1994 the Atlanta Housing Authority has reduced 
its workforce by more than 53 percent. It has increased the 
number of families it serves by 17 percent. It has privatized 
the management of 100 percent of its real estate and leveraged 
$184 million of federal grants, including three HOPE VI grants 
totaling $1.3 million, into $2.5 billion of local economic 
activity. What a success story is the program in the HOPE VI in 
my district. The Atlanta model of mixed-income community 
development is a proven, sustainable neighborhood strategy that 
is definitely eliminating the institutional poverty. These 
achievements have been reached and achieved under the 
leadership, the sterling leadership of one of our panelists, 
Ms. Renee Lewis Glover, from my district in Atlanta, Georgia, 
and we are so proud to have you here, Ms. Glover, who is the 
chief executive officer of the Atlanta Housing Authority.
    If I may, Mr. Chairman, let me just take a moment to 
introduce Ms. Glover to us. Ms. Renee Glover joined the Atlanta 
Housing Authority as CEO in September of 1994. The Atlanta 
Housing Authority is the sixth largest housing authority in the 
United States. It owns and operates approximately 9,500 multi-
family apartments and administers approximately 12,000 section 
8 vouchers. Ms. Glover was named public official of the year 
2002 by Governing magazine, and she has been recognized as one 
of the top 10 women in government by the Center for American 
Women and Politics, the Ford Foundation, and the Council for 
Excellence in Government. She served on the national advisory 
council of Fannie Mae, and was appointed by Congress to the 
Millennial Housing Commission in 2000, charged with providing 
legislative recommendations on national housing policies. Prior 
to joining the Atlanta Housing Authority, Ms. Glover was a 
corporate finance attorney in Atlanta and New York City. She 
received her juris doctorate degree from Boston University, her 
master's degree from Yale University, and her undergraduate 
degree from Fisk University. I welcome Ms. Glover today to our 
committee and we look forward to your testimony.
    Thank you very much, Mr. Chairman.
    Chairman Ney. I thank the gentleman for his statement.
    Mr. Watt of North Carolina?
    Mr. Watt. Thank you, Mr. Chairman. I will be brief, 
although I have a lot to say about HOPE VI and the process by 
which we got here.
    First of all, I want to thank the chairman for convening 
this hearing. This is exactly the way the process should work. 
A debate starts about the value of a particular federal program 
and the best way to resolve that debate is to have people who 
have been in the middle of the programs come and talk about the 
value, the problems, the challenges that they have experienced 
in the program, and then try to see whether there is any way to 
accommodate those problems and concerns and challenges. I think 
that is what we have been trying to do throughout this process. 
We introduced a bill last year to reauthorize HOPE VI and 
improve it by addressing some of the concerns that had been 
identified--displacement of residents, housing authorities who 
were getting funds and were not ready to immediately start to 
use those funds--the range of issues. So the bill that we 
introduced last year and reintroduced this year addresses those 
concerns.
    Then Mr. Leach approached me about an amendment which had 
been offered to last year's bill that had passed the committee, 
which we left out of the bill this year, and wanted to know if 
I would be offended if he dropped another bill that had that 
amendment in it, and I said, not only would I not be offended, 
I would join as a cosponsor in your bill. So I have got two 
bills out there now that I am supporting. All that does is add 
value to the discussion about how to do this.
    The other thing I want to say to the representative from 
HUD in particular is that I have not been one, despite the fact 
that I have authored the bills to reauthorize HOPE VI, I have 
not been one, and I think Secretary Martinez will verify this, 
to say that I have closed my mind to alternatives that would 
improve or make the HOPE VI program a better program. What I am 
waiting on is a specific proposal from this Administration. I 
think some of the things I have heard that may be being thought 
about by the Administration may have some value to them, but I 
do not think we can solve the problem by zeroing out HOPE VI, 
and then talking about how we revised the program. I think now 
is the time to have that discussion and this is the process 
within which to initiate that discussion.
    So I will end where I began, which was to thank the 
chairman for providing this forum in which a discussion and 
evaluation of a valuable program can be made, and we can 
discuss and evaluate how to make it even better. I thank the 
chairman and yield back.
    Chairman Ney. Thank you.
    Our ranking member, Ms. Waters?
    Ms. Waters. Thank you very much, Mr. Chairman and members. 
I have a statement that I am going to submit for the record, 
but I am going to condense my comments by simply saying that 
many of us were alarmed when we learned that the Administration 
was not desirous of reauthorizing HOPE VI. As you know, we all 
have concerns about public housing--the funding for public 
housing, section 8, making more units available, rehab--all of 
that. But HOPE VI has taken on quite a significant meaning for 
distressed housing in this country. While the Administration 
makes the argument that not all of the dollars allocated to 
HOPE VI have been spent, our examination of this issue does not 
lead us to conclude that this is a good reason why HOPE VI 
should not be reauthorized.
    We have learned that the number of applications for it 
outweigh any concerns about whether it is needed. As a matter 
of fact, we believe that if we simply fund it at about 50 
percent of those applications that have been put in, we would 
be going a long way toward providing safe affordable housing 
for so many of our citizens who are in desperate need. Not only 
are we concerned about the lack of reauthorization, we think 
this sends a message. We do not know why, even if you did not 
want to put the dollars into it, if the Administration did not 
want to put the dollars into it, we do not know why you would 
not simply support reauthorization. That is a signal that says, 
we think this program has value. We think that despite the fact 
that all of the dollars have not been spent, we do see progress 
being made.
    We have discovered in our examination of the issue that 
increasingly the housing authorities have reduced the number of 
days that it has taken them to get up to speed, and we think it 
gets even better. We think with the more involvement of the 
private sector and all of that, that these grants can be 
expedited in ways that can put the rehabilitation of housing 
units on line in ways, again, that would make them available to 
people who so desperately need it.
    So what I would like to hear in addition to whether or not 
you understand the request and the needs and the applications 
and what you think about all of that, I need to understand how 
the projects are chosen. My staff has walked through this with 
me, I guess, 100 times now, or many times now, and I do not 
understand how the criteria is evaluated and how you can score 
high and not get selected to be supported for a HOPE VI grant. 
I want to trace the dollars. I am from Los Angeles and our 
needs are great. I want to see what is it going to take for me 
to be competitive with Texas and Florida, for example. I think 
there is something I do not know, I do not understand, about 
how the decisions are made. So I am hopeful that in your 
testimony today you will help me to understand that.
    Also, my staff has brought to my attention that in the 
evaluation, in this criteria and the way that it is evaluated, 
the dollars are directed toward the unit--rehab of units. And 
they have pointed out to me that you have units that are 
located in communities that are in great disrepair and there is 
a need for support for infrastructure and things that do not 
meet the strict criteria for the rehab of units et cetera. So I 
would like some comments about whether or not we can take a 
look at that so that we can factor that in to these 
applications and requests, and this can be given some 
consideration.
    Having said all of that, HOPE VI has a following, not just 
among members of Congress on both sides of the aisle, but 
throughout our communities. People who work on housing issues 
and consumer issues are now in support. We think the relocation 
problems are being worked on. We all are concerned that people 
have options and that they can get back into some of these 
rehabilitated units. We do not want folks to be displaced and 
just disappear, and we not know what happened to them. But we 
support HOPE VI and we would like to see it reauthorized, and 
we would like to see it funded. But even if it is not funded, 
we want to see it reauthorized, and hopefully we can hear 
something about those issues.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Chairman Ney. Thank you.
    The gentlelady from Indiana?
    Ms. Carson. Thank you very much, Mr. Chairman, and 
certainly thank you to the Honorable Michael Liu for being here 
this afternoon. I hope I have pronounced your name correctly. 
If I did not, I apologize, but I appreciate the distinguished 
panel who have gathered here today to present your views in 
terms of the subject matter before this housing subcommittee.
    It seems as though nearly every time this committee hears 
from HUD, one area of another is on the chopping block. The 
public housing drug elimination program is gone, and it served 
very well in my community in terms of a major decline in drug 
activity in the public housing projects, and the budget is 
proposing to knock out brownfield programs, even though this 
committee labored long and hard on it just last year. Section 8 
vouchers will not be funded at the 100 percent level, and we 
are supposed to somehow be pleased with the fact that it might 
be as low as 70 percent after all.
    Now, we are here to hear why we no longer hear HOPE VI. I 
would simply implore the Administration now more than ever not 
to eliminate, not to reduce, not to get rid of so many of these 
vital housing assistance programs that have worked well for so 
long. When I read your advance copy, sir, of your 
Administration's position to eliminate HOPE VI altogether, it 
implied that it had essentially served its purpose, or that 
there were areas where resources had not been utilized, and the 
consequence of that was is that you felt maybe that we do not 
need it at all. As I read your very eloquent statement, it 
reminded me of a man being with a woman for several years, 
having had children and grandchildren, and then decided that 
because she began to move slowly and was not meeting up to 
capacity, that he no longer needed her; that he kicked her out 
in favor of something that may be more energetic, and more that 
would be more palatable to his thinking. While I would be 
opposed to that kind of strategy in terms of eliminating 
domestic tranquility, I would also be opposed to eliminating 
HOPE VI, that has in fact worked well for several communities, 
including my own of Indianapolis, Indiana. We were having plans 
to use further resources from HOPE VI so that we could enhance 
domestic tranquility for lower income people.
    I realize in your statement that you say, well, it was not 
all used, it was used up as fast as it ought to have been, but 
I would suggest to you very respectfully that sometimes when 
things become a little aged, they do not move as fast as they 
used to move, but they still serve their purpose.
    I would respectfully ask for some reconsideration on the 
part of this Administration. I do not want to sound political, 
but I do favor the HOPE VI, as I did section 8, as I did 
brownfields, and as I did the drug elimination program. Even 
though I am becoming an old member of the United States 
Congress and do not move as fast, I would like to assure you 
that all those programs worked extremely well. Inevitably, some 
have a little flaw here and there, a little arthritis and 
osteoporosis, but they still work well. If you would be kind 
enough to take back to the Administration our desire 
collectively, especially on this side of the aisle, to 
reconsider totally throwing the wife out with the bathwater and 
bring her back in and kind of patch her up a little bit and see 
if we cannot move forward with HOPE VI.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Ney. I thank the gentlelady from Indiana.
    Mr. Tiberi, do you have anything? I want to thank the 
gentleman from Ohio for joining us. With that, we will begin 
with panel one, and as is procedure, without objection your 
written statements will be made part of the record and you will 
have five minutes to summarize your testimony.
    Michael Liu is the Assistant Secretary for Public and 
Indian Housing at HUD. He oversees the Administration of all 
public housing section 8 rental assistance and Native American 
programs at HUD--programs that comprise more than 50 percent of 
HUD's operating budget of approximately $30 billion. Prior to 
assuming his position at HUD, Mr. Liu served as Managing 
Committee Member for the Federal Home Loan Bank of Chicago.
    Welcome.

STATEMENT OF HONORABLE MICHAEL LIU, ASSISTANT SECRETARY, PUBLIC 
      AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN 
                  DEVELOPMENT, WASHINGTON, DC

    Mr. Liu. Thank you very much, Mr. Chairman. As you said, my 
testimony is in for the record; Michael Liu, Assistant 
Secretary for Public and Indian Housing at HUD. I will 
summarize. I think in the interest of time I will specifically 
direct my verbal comments to the questions presented to us in 
your invitation to come before you this afternoon, Mr. 
Chairman.
    The first question has to do with the Administration has 
not included additional funding for HOPE VI in fiscal year 
2004; would you please explain why you believe HOPE VI should 
not receive future funding. To go over the reasons very quickly 
and in general at this point, and of course be open for 
questions later, first of all, as we all know, as you 
described, the program was authorized for a 10-year period 
which expired in 2002. The Administration did request an 
authorization for fiscal year 2003 and the Congress agreed with 
that. There will be funding for fiscal year 2003. However, we 
have found a number of fundamental issues and fundamental 
design flaws with the program. Over time, we have now come to 
understand that now that we have dealt with much of what was 
originally considered the most severely distressed public 
housing in America, there is some very serious questions as to 
what that really means today. I think there are some attempts 
through legislation to address that question, but there is a 
lot of debate in academia, among practitioners, among public 
housing authorities as to what type of revitalization, what 
type of housing we need to address, something which does 
deserve very close examination and something which should be 
very considered and measured as we move forward.
    Secondly, one of the major purposes of HOPE VI as 
originally designed was to eliminate most of the severely 
distressed housing in America--86,000 units. In fact, in 
combination with HOPE VI and other demolition programs within 
HUD, we have to date actually demolished over 100,000 units, 
with another 40,000 units plus or minus a few, approved, 
upwards to 140,000 within the next year. The cost per unit we 
have found to be extremely high under the HOPE VI program as 
compared to the HOME program. It is 120,000 in the aggregate 
nationwide, which is considerably more than what we have found 
for similar type units in the HOME program.
    There has been concern about time frames in which these 
programs in which the grants are actually implemented. We see 
successes such as in Denver, Milwaukee and Seattle, a very 
minority, 15 out of the 165 grants through 2001, only 15 have 
been completed. Whereas programs across the country--New 
Orleans, Cleveland, Gary, Indiana--we see projects struggling 
to stay on schedule.
    A perverse incentive exists in the current program. That 
is, if we intend to address the most distressed housing, many 
times that is in part related to the capacity of the housing 
agency to maintain that property. Yet, we want to work with 
housing authorities that know how to spend this money and how 
to move in the development world. So we see a very fundamental 
tension in this program that we need to pause and look at and 
to work out as we move forward. This is one of the major 
reasons why we have found that the program has moved much 
slower than all of us would like to see.
    The second issue that was posed to us was to address our 
public housing reinvestment initiative. In a nutshell, the 
public housing reinvestment initiative is a proposal which has 
been put forward by the Administration to further provide a 
tool to public housing authorities to access private sector 
capital for the purposes of rehabilitation and revitalization 
of public housing; $131 million has been put aside to support 
the credit subsidy involved, which is linked to up to an 80 
percent guarantee of the program. This proposal is separate and 
apart from our HOPE VI initiative. It is one more in a line a 
other tools which we have developed over the last five or six 
years to assist public housing authorities going to Wall 
Street, going to the markets. We have approximately 50 housing 
authorities today that have either completed or are in the 
pipeline to get bond financing and debt deals which will allow 
them to access literally billions of dollars of private sector 
capital to assist their needs in dealing with backlogged 
capital needs. The public housing reinvestment initiative is 
one more tool, in addition to those which already exist today, 
to assist public housing authorities and agencies to move in 
this direction. These are tools which were not in existence 12, 
13 years ago when the original National Commission on Severely 
Distressed Public Housing was in existence, or when they 
completed their report.
    We are also asked to address the specific proposal, H.R. 
1614, introduced by Congressman Leach. While we think that 
there are some very good ideas in that legislation, the 
specific targeting of small communities tied to we believe the 
Mainstreet program, and as defined in the bill itself, clearly 
is not linked to public housing. In fact, there is language 
there that specifically de-links it from the most severely 
distressed public housing, which I think is indicative of our 
position, which is that there is need to reexamine some of the 
underlying fundamental issues before we move on.
    The next question that we were asked to address----
    Chairman Ney. I would note, not to interrupt, but the time 
has expired. If you would like to summarize?
    Mr. Liu. In the end, Mr. Chairman, we think that the 
program has met its primary goal, the initial goal of 
eliminating the most severely distressed public housing. It has 
some inherent conflicts which we need to review, and it is time 
that we do so.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Michael Liu can be found on 
page 49 in the appendix.]
    Chairman Ney. Thank you. And also some questions may arise 
on the remaining issues that you had, or if you want to work 
them into the conversation, we can also do that.
    With that, I did want to ask you, since you mention in the 
testimony about HOME units and also HOPE VI, and you show that 
there has been a big difference in being able to do those, why 
do you think there is such a big difference? Is it the 
Administration within HUD, or is it some difference of rules or 
regulations? Why would there be such a big difference in 
administering the two programs?
    Mr. Liu. Those are one of the issues that we think is a 
valid issue for us to review and look at during this period, as 
we look forward as to what should be the next iteration of how 
we address the backlog needs. The fact that the HOME program 
has shown to be a much more cost-effective program, we have to 
do a better analysis to see exactly why. Flexibility may be one 
issue--the flexibility on the part of the entities involved in 
the development; the fact that the HOME program is not 
necessarily tied to use by public housing agencies, which in 
many instances may not be the best entities across the country 
to be involved in complex real estate-type of development.
    Chairman Ney. Because both programs are leveraging low 
income tax credits and private funds, so they are both doing 
that. Both are administered under HUD. But has there ever been 
a comprehensive look at why one was working better than the 
other? You were talking about the housing authorities, maybe 
that is one part of it.
    Mr. Liu. There has not been a direct comparison to the 
degree of analysis which would allow us to actually come 
forward with a more comprehensive answer at this time.
    Chairman Ney. The other question I had, HOPE VI funds are 
distributed by way of the notice of funding availability, NOFA, 
which is published by HUD each year. The fiscal year 2002 
revitalization notice of funds availability on July 31, 2002, 
for which applications were due by November 29, 2002, and the 
awards were announced March 5, 2003. The fiscal year 2002 NOFA, 
demolition NOFA, was published on April 4, 2003, with the 
applications due by June 3, 2003. Can you explain what takes it 
so long--what is the delay time in there to be able to publish 
the NOFA?
    Mr. Liu. For fiscal year 2002, we went to considerable 
lengths to adjust the program to deal with some of the concerns 
that we had; to streamline the process for public housing 
agencies once they did receive their grants, so that we could 
mitigate the concerns that we saw of grants made prior to that 
point in time. So from the standpoint of that work, to review 
what we thought would work, to get views from those involved in 
development and with the housing agencies, that is what took us 
the time in order to get our NOFA out in the time frame that we 
did.
    Chairman Ney. Because on the other hand, you hear housing 
authorities who people will say, well, they have a delay there, 
but they might come back and say, well, the delay is actually 
here in Washington; $500 million is in the pipeline, but it is 
sitting here because it takes a year to get the NOFA out. That 
is the other side of the argument.
    Mr. Liu. Well, the time frame that we are talking about 
here, Mr. Chairman, just deals basically with--we are not 
counting any time in which it takes them to apply and in which 
the award is granted in order to, in terms of our global view 
of what is at issue and what is a problem here. I think even if 
you discounted the grants made in 2001, there were 16 made in 
that year. The remaining 149 of those we only had fewer than 14 
which were completed by the end of fiscal year 2002.
    Chairman Ney. So for this year the grants will come out 
quicker?
    Mr. Liu. We believe that we will need less adjustment so 
that we certainly anticipate that we will be able to get a NOFA 
out a few months earlier, and that the process will probably be 
accelerated.
    Chairman Ney. And one note, agencies will run into this all 
over the government. I just wondered if internally there has 
been any type of look or consideration of how possibly to 
streamline it or if anything has been discussed?
    Mr. Liu. Absolutely. In terms of, we have cut our review 
process, which used to take upwards of four months, of five 
months, because we have changed the application process where 
housing agencies have to be much more project-ready. The actual 
review process is much shorter. I think we took approximately 
six weeks instead of the normal three to four months that it 
would take once the applications came in.
    Chairman Ney. The final question I had--you mentioned 
several alternative methods for revitalizing distressed public 
housing, such as bond financing and property-based initiatives. 
Today, not all the public housing agencies have the expertise 
to use the alternative methods that you do discuss in your 
testimony. How do you propose that the smaller, more rural 
communities address the revitalization and redevelopment needs?
    Mr. Liu. Actually, we find a tremendous number of the 
smaller and modest-sized housing agencies around the country 
are able to access capable advice and guidance from either 
consultants or people associated with local and state 
organizations to assist them. I can rattle off a few names of 
cities now which would give you an example. We have Marquette, 
Milwaukee, Suffolk----
    Chairman Ney. Not to interrupt, but I have been told there 
is a total of about 50.
    Mr. Liu. Approximately 50 that are right now in the queue, 
but there are more every day. We get calls every day, and we 
have done, again, these account for close to probably $2 
billion or $3 billion.
    Chairman Ney. I appreciate the effort, but it is 50 out of 
2,600, we have got to somehow work together to get the curve 
up.
    Mr. Liu. Understood.
    Chairman Ney. Thank you.
    The gentlelady from California?
    Ms. Waters. Thank you very much.
    I don't know if I have a question as much as I have a 
statement. I am struck by how dispassionately we are discussing 
this issue, when in fact there is a housing crisis in America, 
and certainly a housing crisis among poor people and working 
people. As I understand it, most Housing Authority Directors 
were never considered to be experts as developers and 
contractors. They took the jobs basically described as jobs 
that would manage public housing under the public housing 
authority. So if we know that, what then is HUD's 
responsibility to help develop that capability, rather than 
sitting back and saying, oh, we gave you some money and you 
didn't get it done; you are too slow; you don't really know 
what you are doing.
    What is HUD's responsibility in helping with this new 
mission that is now on this public housing authority to 
eliminate distressed housing, and I guess build more units. 
What is your role? What do you do to assist them?
    Mr. Liu. Congresswoman, since the start of the program, it 
is my understanding, and we certainly have staff which have 
been with the program for the time frame that it has been in 
existence, we get nothing but compliments from the industry 
organizations on the professionalism and the outreach and the 
efforts made by our staff to work with those housing agencies 
that not only receive grants, but those who have attempted to 
get grants and are interested in the program. We currently are 
very active in working with NAHRO and FATA and CLAFIN and the 
various organizations in permitting staff to be out at their 
conferences to provide information and background on the 
programs.
    Ms. Waters. If I can take back my time, I hate to interrupt 
you, but we only have so much time. Really, the proof of the 
pudding is in the eating. You get all these compliments--what 
are they saying now that you are not reauthorizing the program? 
You do not want to put in any more money, and the compliments 
do not mean anything. The whole idea was to do something about 
this distressed housing, and I suppose provide some safe and 
secure situations for people to live in. So I guess what I am 
saying is, I guess what you are telling me is you think you 
have done a good job.
    Mr. Liu. Congresswoman Waters, I think we have done what 
the program initiated in regards to both the demolition, but we 
would all agree, I think there is a consensus that a lot more 
has to be done to focus our energies in ensuring that the units 
that were promised need to be built. Less than 25,000 of the 
promised 85,000 units that were projected to be built under the 
program have been completed.
    Ms. Waters. So what are you being complimented on if your 
assistance has not resulted in the building of those units?
    Mr. Liu. We have been complimented on the fact that we have 
tried mightily, working with many entities, that as you have 
pointed out, were not initially capable. These are one of the 
fundamental issues.
    Ms. Waters. Are you saying then that you have failed? That 
despite all your hard work and everything that you have done, 
you have just failed to be able to help the housing authorities 
get the job done?
    Mr. Liu. One of the fundamental issues that we do have to 
examine here and which was I think raised by Chairman Ney, is 
whether or not public housing agencies are the only entity that 
should be involved in developing housing; whether or not in 
terms of HOPE VI, whether or not they are the only entity that 
should be considered to be grant recipients. Right now, many of 
them work with private developers under contract, but there are 
some opinions out there that perhaps a redevelopment program 
might work better working directly with other entities.
    Ms. Waters. Let me just say this, I think it has taken HUD 
too long, and I am not accusing any one Administration, because 
this crosses Administrations, has taken too long to come to the 
realization that, hey, something is wrong here. I mean, given 
the fact that you are now coming to that conclusion and you are 
moving in some ways to privatize and make sure that you have 
some loan guarantees by which to get some companies in there I 
guess who want to do this work and all of that--let's agree 
that we can chew gum and walk at the same time. We do not have 
to stop and say, well, we just discovered we have not been 
doing such a good job; let's take another few years and do a 
study. Let's authorize this program, reauthorize it. Let's keep 
the money flowing. Get the private sector in there. I do not 
care. I understand what some of this is about. I do not 
necessarily agree with it all the time, but I get it. Let's get 
the private sector in there and let's keep moving so that we 
can do the demolition and we can do the building and the rehab 
or whatever it is it takes to get it done. That is not a 
question. That is just my opinion.
    Thank you, Mr. Chairman.
    Chairman Ney. The gentleman from Ohio, Mr. Tiberi?
    Mr. Tiberi. Thank you for coming, Assistant Secretary Liu.
    Back in 1989, I was volunteering in a project in what is 
currently my district--it was not my district at the time--and 
ended up actually starting a learning center with a teacher 
from the Columbus city schools. That project was a pretty 
horrible project. It was unbelievable in terms of, it would not 
have met building code at the time. That is how poor it was in 
terms of its shape. That was one of your HOPE VI projects that 
I would like to tell you is now done and completed and quite 
nice.
    Having said that, however, and that would probably be 
considered--and there were three in the district that I 
represent that have been successful--at the time, that 
particular project when it was built was criticized by many in 
the community, and watch dogs around central Ohio, because of 
the cost of that particular project. In fact, an argument was 
made at the time, and off the top of my head I cannot remember 
the actual number, that you could have taken every resident 
that was being displaced and replaced back into the new 
facility, you could have taken each one of them and built a 
house for them at the cost under the HOPE VI program that it 
cost to rebuild this new facility, that was once called Windsor 
Terrace and then was renamed Rosewynne; again, very nice.
    My question to you is with respect to the HOPE VI projects, 
because I certainly do not have the understanding that you have 
across the country with respect to HOPE VI, is there any 
concern internally that the criticism was somewhat legitimate? 
That you could have provided maybe homeownership to some folks, 
rather than rebuilding the unit in terms of these costs that 
were incurred to replace what was there--which by the way, 
absolutely needed replaced?
    Mr. Liu. Congressman, that is a very insightful question. 
The question of providing other opportunities in addition to 
rental housing as part of the concept of HOPE in housing is 
certainly one which in fact was envisioned by the original 
writers of the final report on the National Commission on 
Severely Distressed Public Housing. Until recently, we have not 
really seen more developments, more plans under HOPE VI which 
provides homeownership as a key component part of the HOPE VI 
plan. They have been more in a very smaller supportive role, 
and unfortunately many times to a great degree in market rate 
versus designed to work with various other subsidy programs and 
supportive programs to provide public housing residents with 
the opportunity or the chance to perhaps qualify. That is 
changing a bit around the country, but definitely it has been a 
concern of this Administration.
    Mr. Tiberi. That the cost of these units just not only in 
Columbus but also throughout the country exceeded maybe 
expectations at the time, and that other opportunities to 
provide maybe even better housing, at what it was costing to 
provide this type of housing could have been done for the best 
interests of the residents?
    Mr. Liu. One of the fundamental problems that has dogged 
the program has been the difficulty on the part of the 
applicants to project costs in a much more accurate fashion. 
Total development cost has been one of those.
    Mr. Tiberi. I know the Housing Authority Director in 
Columbus believed it was a good program for Columbus, but there 
was criticism from the outside in terms of what the costs were. 
I have a little bit more time. I wanted to just touch on one 
other thing. Low-income tax credits has been in the news lately 
with respect to the issue of the dividend tax cut, what impact 
it would have on low-income tax credits; the impact of 
proposing this elimination. What would it mean to housing, in 
your opinion?
    Mr. Liu. Congressman, we certainly will defer to Treasury 
for the Administration's formal statement on this issue, but I 
will point out from a personal standpoint, from history, at the 
outset the low-income housing tax credit program in fact was a 
program that was invested in mainly by small investors. It was 
only after some time evolved in the program did the large 
corporate investors get into the picture. So perhaps we are 
just at another point in evolution.
    Mr. Tiberi. Well, I certainly thank you. It has certainly 
been a success in central Ohio.
    Thank you, Mr. Chairman.
    Chairman Ney. Thank you.
    Mr. Scott from Georgia?
    Mr. Scott. Thank you very much, Mr. Chairman, and Assistant 
Secretary Liu, thank you very much for coming.
    I guess the nature of my question is sort of, where do we 
go from here? You have mentioned the issue of need, today's 
need in terms of an issue of whether we continue this. When 
Secretary Martinez was before the committee, I put some 
questions to him, and I was left with the impression that all 
hope is not lost to revitalize this whole program. On a visit 
that I had to the White House some time ago, I mentioned the 
question to President Bush. He said that discussions can still 
be forthcoming, but there are major, major concerns.
    I would like us to start off from the premise that why we 
need to save this program; why we need to do it. I was very 
interested in the responses that you gave as to some of the 
reasons why you think it needs to go out. When you do a cost-
benefit analysis, in this case I think we can safely say that 
the benefits of keeping the HOPE VI program intact and moving 
it with some changes, with some clarifications, I think we do 
need to address the issue that you raise of how we can move 
more quickly in the process.
    I think also the issue of some of the displacement of some 
of the people--are we creating more of a problem--can be 
addressed. But when you look at my city of Atlanta and you look 
at what has been done there, I would like for us to look at the 
success of what we have done there--not just Atlanta, but I 
represent Atlanta. There are some other places--Boston, 
Seattle, some of the other communities--who I am sure have done 
equally well. Given the major need that we still have, wouldn't 
the more responsive thing to do, given the need for housing, 
given the success of this program, and as I pointed out to the 
President and to Secretary Martinez, this is indeed a 
Republican initiative. That is to be applauded, and we applaud 
it. It does all of those things. It brings about 
responsibility. It takes people from living in a mound of 
public dependency. It takes people who were once living that 
way and tearing down and demolishing those units that were 
basically for welfare recipients, and turning them into where 
people of mixed income can live and grow together. But the most 
important thing that it has done is it has stimulated those 
communities all around it.
    In Atlanta, all around the Carver Village, which is in my 
community in my district, we have taken $44 million of federal 
tax dollars and we have converted that into almost $200 million 
by building shopping areas and revitalizing those communities. 
So I am not clear on the evidence, that we have enough evidence 
to justify doing away with this program. It seems to me that I 
think your biggest leg that you are standing on here is one 
which you mentioned, the cost per unit in comparison to your 
HOME block grant program; that it costs--did you say?--about 33 
percent more to build one of these units than that. Can we not 
try to find out why that is happening, and maybe address the 
specific issues within this program, and put things in the bill 
that would address those and not turn this program out? What is 
that difference, the 33 percent? Why does it cost that?
    Mr. Liu. Congressman, some of the issues that you raise and 
which you pinpoint, and some of the issues related to cost, 
some of the issues related to timing and timeliness of these 
projects, go to some of the very premises of the HOPE VI 
program, which will require lots of debate. I have already 
mentioned one in regards to what are the proper entities in the 
community. In Atlanta, certainly the public housing agency 
appears to have been extremely successful. I have been there. I 
know Ms. Glover and I think there has been a lot of accolades 
rightfully so provided to your city and to your Administration 
there. But by far, Atlanta is the exception rather than the 
rule--the very rare exception. So I think a healthy debate on 
what entity should be involved in development has to take 
place, and that is a tremendously controversial subject. I 
would be the first to indicate that.
    Whether or not we are in fact providing options to people, 
or the belief that they can move on beyond public housing, the 
jury is still out. The mixed income model works to the extent 
that we have dealt with where we have been able to build the 
units to provide better housing. But having we in fact provided 
people the encouragement to move beyond public housing once 
they have received those wonderful units? We do not know as 
yet.
    Chairman Ney. The time has expired.
    Mr. Scott. Alright, thank you.
    Chairman Ney. Mr. Watt of North Carolina?
    Mr. Watt. Thank you, Mr. Chairman.
    You have indicated in your testimony that you think HOPE VI 
has served its purpose. I am wondering whether that means that 
there are no more severely distressed housing units throughout 
the country. Is that what that means?
    Mr. Liu. Congressman, from the standpoint of what was 
identified in the national commission's report on severely 
distressed public housing, where they estimated 86,000 units, 
the fact that we have moved forward in a very deliberate 
process to review severely distressed housing over the past 10 
years and we now are in the situation where I can state that we 
have demolished over 100,000 units----
    Mr. Watt. I know the numbers game. I guess the question I 
am asking is, are there still severely distressed public 
housing units in America? I cannot believe that HUD is saying 
that there are not any, if that is what you are saying, because 
I know in my own community there are public housing units that 
are boarded up. They cannot be lived in because they are so 
severely distressed. So I just cannot imagine that HUD is 
telling this committee that there are no severely distressed 
public housing units left in America.
    Mr. Liu. As I mentioned, congressman, I think the 
definition, which I think your legislation and Congressman 
Leach's legislation attempts to deal with, and which others 
have commented on, is one of the fundamental issues that we 
have to ask ourselves.
    Mr. Watt. There is really nothing in my legislation that 
deals with the issue of severely distressed public housing. My 
bill and Mr. Leach's bill address some of the concerns that 
have been raised about the Administration--first of all, the 
displacement of residents which we think ought to be made a 
high priority in the consideration of applications, the delays 
that have occurred in commencing and completing projects which 
we think should be addressed in the reauthorization of HOPE VI. 
I mean, we start from the presumption that there continue to be 
severely distressed public housing units. I guess the thing 
that I am a little distressed about is that HUD seems to now be 
saying that that is not the case. We can pursue that 
discussion.
    Let me just talk about a couple of other things that you 
mentioned, and give you my perspective on them because I 
think--and maybe we will get more information about these 
things. You talked about the time frames for completing these 
projects. My perception was always that it would take longer to 
build a community, which is what most of these HOPE VI projects 
have been about, than it takes to build a house, or it takes to 
build an apartment. If you were just going to tear down the 
existing distressed public housing and build back on the 
existing footprint, you could do that fairly quickly. But all 
of these things, it seems to me, take longer because you are 
building--the whole process of HOPE VI was to build community, 
not just housing, not low-income public housing. You were 
trying to build a community through HOPE VI.
    The cost per unit, it seems to me, is just a--unless you 
define it in some other way--if you take the cost of all that 
was done in Atlanta around rebuilding that community and you 
divided by the number of housing units, you are absolutely 
right--it is going to come out to something that is higher than 
building the public housing back there. The cost of building a 
community is higher than the cost of building a public housing 
unit, but that was the whole philosophy of HOPE VI in the first 
place--not to just build concentrations of blocks of housing 
that there that really--you know. So what I hear you saying is 
that HOPE VI has been maybe a victim of its own success. I 
thought some of the things that you are now describing as 
problems with HOPE VI were the very things that we set out to 
try to accomplish through HOPE VI.
    So I know my time is up, but let me just make this point. I 
guess I am disappointed that today your position seems to be 
substantially different than the one Secretary Martinez was 
expressing. We now have had three different positions on this. 
We got the budget that says we are putting nothing in it for 
HOPE VI. Secretary Martinez came a couple of weeks later after 
that and said, well, we do not really intend to terminate HOPE 
VI; we just want to improve it. I said, well, okay, give us 
what you want to improve it with so we can start talking about 
it. And now today, I am hearing there are no more distressed 
housing units in America. We don't need the program. So you 
have got to figure out what it is you are saying at HUD and in 
this Administration before we can move forward, because those 
are three entirely different positions that we have heard.
    Mr. Tiberi. The gentleman's time has expired.
    Mr. Watt. Thank you, Mr. Chairman.
    Mr. Tiberi. I would like to recognize Ms. Carson from 
Indiana.
    Ms. Carson. Thank you very much.
    I do not want to be problematic because I realize you have 
very tough choices here. Understand that I come from 
Indianapolis, Indiana where we have the highest rate of home 
foreclosures in the country, the highest rate of bankruptcies 
in the country, and borders on the highest rates of 
unemployment. So I am up here trying to squeeze anything out of 
a bloodless turnip that I can, so I am sure you would respect 
that.
    My question is, you want to move toward a more cost-
effective process for HUD and public housing, so eliminating 
HOPE VI, eliminating the baby in the bathwater and the wife is 
one way you want to be more cost-effective. Does the 
Administration have its level of cost-effectiveness resources 
in the budget on the way to approval, and if so, at what 
amount? That is a difficult question, but I am not well today. 
I just cannot get this in my head.
    Mr. Liu. Congresswoman Carson, I will point to the various 
tools, many of them which are not in the budget today because 
they do not have to be in the budget. We have our bond and debt 
financing tools which work with the capital fund in moving to 
work with cities, they work with the capital fund and our 
operating subsidies where we can leverage these dollars to 
produce bonds--in Chicago, a $300 million bond last year alone. 
We have bonds in the pipelines, bond deals for one entity for 
$700 million. We have interesting loan proposals.
    Ms. Carson. Excuse my interruption--are you backing those 
bonds? Are we in some kind of crap game or what? Are you 
putting the resources behind the bonds that you are getting?
    Mr. Liu. Yes, we are; yes, we are. Through our capital 
subsidy program, we are putting together--we have the resources 
needed and there is a process in place where we provide, with 
the housing agency, working with them, the debt service dollars 
which provide the comfort for Wall Street to issue these bonds.
    Ms. Carson. So instead of HOPE VI, you spend around behind 
the bonds, guarantee the bonds, work with the housing 
authorities who in turn will replace this in a way that you 
find feasible and appropriate?
    Mr. Liu. Exactly.
    Ms. Carson. You see, I am easy to get along with, even 
though I do not agree with you. You know what I mean?
    Mr. Liu. Understood.
    Ms. Carson. But I respect your position on this.
    Thank you, Mr. Chairman. I yield back--I am sure he is 
happy--the rest of my time.
    Mr. Tiberi. Thank you.
    I would like to recognize Mr. Clay from Missouri.
    Mr. Clay. Thank you, Mr. Chairman. Let me also thank 
Ranking Member Waters for holding this hearing also, and thank 
you, Assistant Secretary, for being here.
    Let me say that HOPE VI is a vital program of the housing 
umbrella that has the unique mandate of placing people of 
varying economic levels in the same community. I represent St. 
Louis, Missouri. We have a very successful HOPE VI project 
going there. I noted that you came down pretty hard in your 
testimony on public housing authorities. I assume that you 
intend to turn over their authority to the states through 
grants or block grants. Is that the way that HUD is going?
    Mr. Liu. That is for the section 8 program, and our 
proposal on HANF, Congressman Clay, but that does not affect 
the public housing program. We are not proposing a block grant 
for the public housing program.
    Mr. Clay. How does HUD plan to replace demolished units?
    Mr. Liu. Currently, for those housing agencies that have 
not been able to participate in the HOPE VI program, they get 
their capital fund subsidy on an annual basis. Through that 
capital fund subsidy, housing agencies today, whether or not 
they are part of the HOPE VI program, have some means to deal 
with the capital needs, backlog needs, revitalization needs in 
their public housing units.
    Mr. Clay. How well is that going as far as people that are 
displaced? Are there plans that will return them to the 
developed properties? If there are, how well is that going as 
far as placement?
    Mr. Liu. Well, back to the HOPE VI program specifically, 
that has been one of the major criticisms which we recognize of 
the program--that there is displacement or there is concern 
about being able to be relocated back into those units. Let me 
clarify. The program does require today that the housing 
agencies provide a relocation plan, and every family is 
promised a voucher that they, working with the housing agency, 
can use in the interim while units are being built. Not all 
families take advantage of that, and there have been criticisms 
that not enough units have been built back on the footprint or 
on the sites that we are talking about. Of course, a number of 
years ago a federal law was passed which did away with the one-
for-one replacement requirement, so that housing agencies and 
HUD and the states and the counties and the cities no longer 
have a requirement to replace one-for-one every single public 
housing unit which is demolished and planned for redevelopment.
    Mr. Clay. Wait a minute. Now, we are getting into 
philosophy here. Do you feel as though HUD has a responsibility 
to actually provide housing or decent affordable housing for 
those who are in need of housing?
    Mr. Liu. Absolutely. That is HUD's mission.
    Mr. Clay. You still have that mission?
    Mr. Liu. Absolutely.
    Mr. Clay. Okay. Let me ask you about the application 
process. You kind of talked about that in your testimony, about 
the PHAs having problems with that. We have many more 
applications than are processed each year. What do we do with 
the applications from the previous years?
    Mr. Liu. Those applications which have been submitted and 
which have not been successful are considered unsuccessful 
applications and we have a level playing field each and every 
year as we move forward. The work they have done may be very 
good in terms of their experience for another application, or 
as a framework for them to proceed on their own redevelopment 
without the HOPE VI dollars in place.
    Mr. Clay. Okay. Thank you, Mr. Secretary. Let me say that 
since I have heard the criticism that there is a lack of 
resources, why wouldn't we stay with HOPE VI?
    Mr. Liu. Congressman, as I have pointed out, when you step 
back from the minority of cases when there have been successes, 
the overwhelming majority of grants have not been completed. We 
still need to focus in HUD and the housing agencies which have 
that money--it is going to be $3.5 billion by the end of fiscal 
year 2003--to make sure that the promises made in those 
applications will come to fruition for the betterment of those 
communities, as well as the residents involved.
    Mr. Clay. Okay. So what happens in a community like St. 
Louis? Do we just now--do we aggressively pursue high-density 
communities and make them all section 8 public housing? Is that 
where we are going with this?
    Mr. Liu. Not at all. As I indicated, today separate and 
apart from HOPE VI there are many communities that are 
embarking on very aggressive revitalization of the public 
housing in surrounding communities, using the resources that 
they have not, without HOPE VI.
    Mr. Clay. How do we get the mixed income?
    Mr. Liu. They are making them mixed-income. You can make 
them mixed-income.
    Mr. Clay. Is it working, do you think?
    Mr. Liu. The jury is still out.
    Mr. Clay. Thank you, Mr. Chairman.
    Mr. Tiberi. The gentleman's time has expired. Thank you.
    Ms. Lee is up next.
    Ms. Lee. Thank you, Mr. Chairman. I want to thank you and 
our ranking member and our Assistant Secretary for this 
hearing. Forgive me for being late. If I ask a question that 
has already been answered, I apologize. I will take your 
testimony, however, and read it very carefully.
    I want to ask a couple of things. Well, all of us of course 
have benefited--our districts have benefited from HOPE VI. Just 
in my own area, I believe we have about $12.7 million in HOPE 
VI grants. But one thing that some of us are noticing is the 
Administration's focus more on homeownership as a priority. We 
all support homeownership and believe that that is the American 
way, but in doing that tend to undervalue and under-fund public 
housing. For example, there is no request, again, for HOPE VI 
in the budget. The drug elimination program has been completely 
forgotten, I guess, and we are trying to see how we can restore 
that. But the section 8 vouchers, you are going to block grant 
it, or are trying to block grant it to the States. With the 
desperate need of housing in this country, I would think that 
HOPE VI and the drug elimination program, section 8 should be 
increased and accelerated, and even presented to our 
constituents in the country as a priority, when really it looks 
like there is a retrenchment on public housing. Could you 
comment on that just in the context of HOPE VI and what you 
just said about the funding? If I heard you correctly, you are 
saying that the grants have not all been executed. I would 
think that you want to make it work, the community groups want 
to make it work, public housing authorities in cities and 
counties and this committee--everyone wants to make it work. So 
why isn't there more focused effort to make it work, rather 
than say it is not working, so we are not going to fund 
anymore?
    Mr. Liu. Well, congresswoman, I think you have actually 
placed the emphasis exactly where we want to go, which is to 
use our resources over the next few years to ensure that the 
$3.5 billion for revitalization, which will be in the pipeline 
by the end of fiscal year 2003 or at least by the end of the 
calendar year 2003, be used, be managed, be leveraged, so that 
we can build those units; so that we can provide the supportive 
services; so that we can provide an array of options for public 
housing residents, rather than adding to the pipeline; adding 
to a program that still needs to meet all of its goals in every 
city across America--not just in some cities, but in all of the 
cities where the actual dollars exist right now.
    Ms. Lee. But you are saying $3.5 billion has not been 
spent?
    Mr. Liu. By the end of this calendar year 2003, there will 
have been $3.5 billion not spent. As we speak right now, there 
is $3 billion in the pipeline.
    Ms. Lee. Okay. Does that $3.5 billion, even if it is spent, 
meet the need in terms of affordable housing and in terms of 
those individuals and families that need this type of housing 
and public housing specifically?
    Mr. Liu. Well, for HOPE VI, for the particular communities 
that are receiving the grants, we think that, and we hope that 
based on what has been provided to us in terms of the need, 
that yes, the dollars are there to provide what is planned by 
that housing agency in that city. Understand that it is hoped 
that this $3.5 billion will also leverage many more dollars of 
the private sector and other resources from other parts of 
government so that we are really talking literally in some 
instances, well as a whole we are probably talking hundreds of 
millions of dollars that will be flowed toward these various 
HOPE VI projects, without reauthorization in 2004.
    Ms. Lee. So there is a loss of--what?--$574 million from 
the program for this year, for 2004?
    Mr. Liu. For 2003, it is $574 million for the overall 
program, and of course we are not proposing that the program be 
funded in 2004.
    Ms. Lee. Okay. Why wouldn't you want it funded? Why 
wouldn't you want more communities to benefit from HOPE VI?
    Mr. Liu. We believe that there are some fundamental issues 
as to, one, the definition of what is most severely distressed 
public housing. We have been criticized. The program has been 
criticized by advocates of the program, by resident groups, as 
well as those who oppose the program generally that today, 
versus 10 or 12 years ago, there is a difference as to what 
might be considered severely distressed housing, and that it 
should not be in the eye of the beholder. There should be 
clearer definitions. There should be a clearer consensus 
understanding. We agree that there needs to be debate on this 
fundamental issue.
    Mr. Tiberi. The gentlelady's time has expired. I would like 
to remind all the panelists that they can submit written 
questions to HUD for responses, and I am sure you will respond 
and it will be reflected in the record as well.
    I would like to thank Mr. Liu for taking time to testify 
today. I would like to remind everybody that we have a second 
panel that we are going to have seated. Again, thank you, Mr. 
Liu, for coming today. I will ask the second panel to make 
their way up to the table and I will introduce the second 
panel, and give everybody an opportunity to----
    Mr. Watt. Mr. Chairman, did Mr. Leach not have any 
questions?
    Mr. Tiberi. Mr. Leach did not have any questions, but thank 
you for bringing that up. You have supporters out there, Mr. 
Leach. I am going to allow Mr. Leach also to introduce one of 
the panel members who is from the Hawkeye state.
    Mr. Leach. Would you like me to do that now, sir?
    Mr. Tiberi. Sure.
    Mr. Leach. Mr. Chairman, first let me thank Mr. Liu for 
appearing, and simply, Mr. Secretary, to indicate that you are 
going to be followed by a State official from Iowa. So as 
distinguished as you are, you are going to be over-shadowed.
    In any regard, Mr. Chairman, I would like to indicate that 
one of our next panelists is Mr. Tom Guzman from the State of 
Iowa. Tom represents the Iowa Department of Economic 
Development's Main Street Program. Tom is one of the leading 
experts in the country on Main Street-types of economic 
development. He has consulted on programs in Arkansas, 
California, Colorado, Connecticut, Illinois, Maine, Michigan, 
Mississippi, Missouri, New Mexico, New Hampshire, Ohio, 
Oklahoma, Oregon, South Dakota, Washington, and Wisconsin. I 
only stress this to note that rural America faces severe 
housing and economic development challenges, as well as urban; 
and secondly that Mr. Guzman is, from my perspective, the 
second leading authority in the world on this subject. I stress 
second, Tom, because 28 years ago when I was a young candidate 
for the Congress, I attended a series of meetings throughout my 
district seeking office, and there was a lady that often 
attended, similar Rotary's and Kiwanis', talking about Main 
Street as it was originally put together. My talking about a 
balanced budget did not seem to get anywhere. Her talking about 
Main Street did. So I promptly asked her to marry me, and I 
have become a long-term advocate of the Main Street program. I 
would hope that as this bill goes forward, people would 
recognize that there are parts and parcels of housing that do 
apply, and economic development that apply to communities under 
30,000. The Iowa model, I think, is an impressive one.
    Thank you for allowing me to introduce Mr. Guzman--a first 
class individual and an expert on the particular subject.
    Chairman Ney. I want to thank you.
    The next panelist--Mr. Scott, do you have any additional 
comments about Rene Glover? Mr. Scott has made an introduction 
of the Executive Director of Atlanta Public Housing. We move on 
to Mr. Howard Husock. He is a research fellow at the Taubman 
Center for State and Local Government. He is also the director 
of the Case Program at the John F. Kennedy School of Government 
at Harvard University. He has published numerous articles, as 
well as books on housing and entrepreneurship.
    Next is Kevin Marchman. He is the Executive Director of the 
National Organization of African Americans in Housing, a 
nonprofit organization here in Washington, D.C. He has over 24 
years of experience in the public housing field, having served 
first as director of the HOPE VI program at HUD, and then as 
Assistant Secretary for the Office of Public and Indian Housing 
at HUD. Previously, Mr. Marchman was the Executive Director of 
the Denver Housing Authority. I want to welcome you to the 
committee.
    Susan Popkin is a nationally recognized expert on public 
and assisted housing, with more than 15 years experience in 
researching issues related to housing in neighborhoods. Her 
work focuses on a wide range of issues related to housing and 
neighborhoods. Brian Tracey is a Senior Vice President and 
Community Development Market Executive for Bank of America here 
in Washington, D.C. Joan Walker Frasier is the chairperson of 
the Atlantic City Resident Advisory Board. She also serves as a 
State Delegate for the National Organization of Public Housing 
Residents, ENPHRONT. Ms. Frasier has been a resident of public 
housing for over 10 years. She is currently a resident at the 
Jeffries Towers, a public housing development in Atlantic City.
    Last is Lisa Zukoff, who has been the Executive Director of 
the Wheeling West Virginia Housing Authority, my birthplace by 
the way, since 1997. Previously, she headed two other housing 
authorities. Ms. Zukoff has construction experience with rural 
rental housing projects and section 8 new construction 
projects.
    Welcome. With that, we will begin with Joan Walker Frasier.

 STATEMENT OF JOAN WALKER FRASIER, EXECUTIVE COMMITTEE MEMBER, 
 JEFFRIES TOWER RESIDENTS ORGANIZATION, ATLANTIC CITY, NJ, AND 
   ON BEHALF OF EVERYWHERE AND NOW PUBLIC HOUSING RESIDENTS 
           ORGANIZING NATIONALLY TOGETHER (ENPHRONT)

    Ms. Frasier. Good afternoon. I am Joan Walker Frasier, 
State Delegate of the National Organization of Public Housing 
Residents, ENPHRONT. I am a public housing resident in Atlantic 
City, New Jersey, and an executive board member of the Jeffries 
Tower resident organization, and also an ENPHRONT State 
Delegate.
    I want to first express ENPHRONT's strong position that 
there should not be any further reduction in the overall public 
housing appropriations account. Second, the HOME VI program 
should be re-funded and reauthorized. However, an authorized 
program can only be effective if comprehensive reforms are 
made. In lieu of a re-funded HOPE VI, appropriators should be 
urged to shift to the public housing capital fund any amount 
equal to the fiscal year 2003 HOPE VI appropriations. 
Furthermore, it is important to understand that a reformed HOPE 
VI can only work if Congress adequately funds the public 
housing capital and operating funds in order to prevent further 
deterioration of public housing stock. In reauthorizing HOPE 
VI, it is important that Congress align the program with the 
original goals and recommendations developed by the National 
Commission on Severely Distressed Public Housing. The 
commission's final report, among other things, emphasized that 
developments were to be revitalized and preserved through 
rehabilitation and replacement housing. The commission did not 
place heavy emphasis on demolition as a necessary activity to 
treat distressed properties. The commission also expressed 
support for replacing distressed public housing units with hard 
units that would be deeply subsidized.
    ENPHRONT believes that another important step in reforming 
HOPE VI is to define concretely the terms ``severely 
distressed.'' The looseness and lack of consistency of the 
definition, along with the lack of reliable data on the 
condition of properties, has made it nearly impossible to 
identify with any certainty the number of properties that are 
truly distressed. We recommend that HUD be required to develop 
a clear definition of ``severely distressed'' that reflects the 
opinion of residents, activists, public housing agencies, and 
housing experts. The agency should also be required to create 
and maintain a list identifying properties that are severely 
distressed based upon the new definition.
    The loss of public housing units under HOPE VI is another 
major area of concern. ENPHRONT strongly believes that the 
program should not result in the loss of hard units that are 
affordable and targeted to extremely low-income households. 
There are several ways to reform HOPE VI in order to address 
this. For instance, a reformed program should allow HOPE VI 
funds to be used in conjunction with project-based vouchers in 
order to facilitate the production of more hard replacement 
units. In addition, reform should remove all barriers to 
combining HUD funds.
    ENPHRONT is also concerned about the large number of 
residents who do not return to revitalized communities. We 
believe that residents living in a property anytime in the one 
year period preceding submission of the HOPE VI application and 
who remain public housing residents or receive voucher 
assistance should have the right to live in units developed 
under HOPE VI. H.R. 1614 can address this concern by adding to 
the selection criteria and element that looks at the extent to 
which the plan demonstrates that all reasonable steps will be 
taken to ensure that the maximum number of existing residents 
will be offered a priority for and are encouraged to reoccupy 
dwelling units in the revitalized community.
    Resident participation is another area where reform is 
needed. Existing HOPE VI requirements fail to ensure that 
residents are engaged in the HOPE VI process in any meaningful 
way. H.R. 1614 attempts to address this concern by requiring 
ongoing participation in the redevelopment process. However, 
other reforms are needed if resident participation is truly to 
be meaningful. First, the selection criteria section of H.R. 
1614 should be amended to require that HUD evaluate the 
applications based on the extent of early and sustained 
involvement in the application process. Second, housing 
agencies should be required to provide to resident 
organizations funds to enable them to retain independent 
technical assistance.
    I thank you for this opportunity to testify and I urge you 
to review my full written comments, and look forward to working 
with you in the near future. Thank you.
    [The prepared statement of Joan Walker Frasier can be found 
on page 55 in the appendix.]
    Chairman Ney. I want to thank you, Ms. Frasier, for your 
thoughtful testimony. We will review the entire piece of 
legislation. Thank you for coming to the U.S. Capitol.
    Next, Ms. Renee Glover.

  STATEMENT OF RENEE GLOVER, CHIEF EXECUTIVE OFFICER, ATLANTA 
PUBLIC HOUSING, AND PRESIDENT, COUNCIL OF LARGE PUBLIC HOUSING 
                  AUTHORITIES, WASHINGTON, DC

    Ms. Glover. Thank you, Mr. Chairman, and Ranking Member 
Waters, and the outstanding congressman from Georgia, David 
Scott.
    I want to put a little bit of perspective around this 
discussion, because quite frankly I think we are talking about 
some very, very serious issues. I believe, based on our 
experience in Atlanta, that the HOPE VI program is probably the 
most significant economic development program that has ever 
been done in this country. When I say that, you only have to 
look at the results, because we have a serious problem that is 
brewing in this country. We have inadvertently locked out too 
many Americans from the American dream. I will tell you in 
terms of getting to a description or definition of distressed 
public housing, you only need to look at the people. In 
Atlanta, in the large communities where we have not treated the 
communities with HOPE VI, we have families--and this is the 
average income--of $7,300 a year. That is not $17,000 that is 
not $70,000--that is $7,300. In all of the public housing 
communities, there is a captive elementary school. Those 
schools are at the flat bottom of the state. Even in the 
Appalachian areas, these schools are terrible performers and we 
have a very high rate of truancy. So people are not being 
provided an opportunity to pursue the American dream. We have a 
disproportionate rate of crime because, quite frankly, people 
prey on a sense of hopelessness.
    The question is, and I think this is what the Congress 
should look at, is if there are thoughtful solutions that can 
solve these problems and reconnect the families to the 
mainstream of America, because I think a fatal flaw that 
evolved over the years with the public housing program was 
taking the people out of the mainstream, because the biggest 
cost is re-integrating families into the mainstream. We have 
developed 11 mixed-income communities. What is a mixed-income 
community? A mixed-income community is a market-rate community 
that has an affordable resource seamlessly inside of it. If the 
affordable component is not seamless, then you end up with the 
NIMBY-ism and the other types of resistance that you have in 
the programs. But guess what? It is working. The most 
frequently asked question that we got back in 1996 after we 
developed the first community is, who is going to want to live 
next door to those people? Well, shame on us as a society for 
coming up with a policy that creates a people called ``those'' 
people. Those people are you and I, and but for the grace of 
God could we be living in the communities.
    So if we can, with the same dollars, leverage those 
resources, leverage the know-how in the private sector, and 
create healthy communities with great schools, because I also 
want to let you know that we are working with the school 
system. Schools that were at the flat bottom are now exceeding 
performance in the state. What that all means is that 
environment matters. We do not want to leave any children 
behind, but if we have children living in horrible conditions, 
then I believe we can do better than that. I think that we 
absolutely must reauthorize the HOPE VI program. There is a lot 
of focus on it takes too long. Well, it took us 60 years to 
develop a policy over time that ended up isolating families. 
Segregation around income is just bad public policy.
    So I want to come back to you with a few thoughts in terms 
of reauthorizing the program. We have got 60 years of evidence 
that proves without any debate or discussion that concentrating 
poverty is bad public policy. We want to blame the families who 
grow up in these situations that often attract preying 
individuals and poor schools and poor social services and what 
have you, and then we want to say, why aren't those families 
more successful? Well, those families are not more successful 
because they have been cut off from the American dream. I 
believe we are better than that. So let's stop concentrating 
poverty. But you cannot stop the concentration of poverty if 
the country is not prepared to make an investment in this 
program. That is what HOPE VI is. It is a thoughtful strategic 
investment that leverages private resources and that in fact 
creates a community of hope and excellence and most 
importantly, providing resources so families can be in the 
mainstream.
    Secondly, we should leverage and work with the private 
sector and apply market principles. In every one of the 
distress public housing communities in a one-mile radius, there 
is total disinvestment around public housing communities. In 
fact, we use the term in Atlanta that these communities have 
become residential brownfields. Well, just like you have to 
make an investment to eliminate the brownfields effect of real 
estate, we have got to make an investment in terms of 
residential brownfields, because again as a country, we are 
better than that.
    Chairman Ney. I don't want to cut you off, but the time has 
expired and we are trying to keep to the five minutes. I will 
let you summarize. It is very compelling testimony.
    Ms. Glover. Thank you. A third recommendation--this needs 
to be comprehensive community building, and not re-building a 
program that was based on failed policy. The true weapons of 
mass destruction are hopelessness, a lack of strategic 
investment, leaving children and families behind, and locking 
them permanently out of the American dream. I believe that in 
the country, we have the political will and the corporate will 
to solve these problems. It works. We have proof that it works, 
and I urge this committee to be thoughtful about reauthorizing 
the Hope VI program.
    Thank you.
    [The prepared statement of Renee Glover can be found on 
page 61 in the appendix.]
    Chairman Ney. Thank you for your testimony.
    Mr. Guzman?

STATEMENT OF THOMAS D. GUZMAN, DIRECTOR, IOWA DOWNTOWN RESOURCE 
                     CENTER, DES MOINES, IA

    Mr. Guzman. Chairman Ney, thank you for the opportunity to 
visit with you. I would especially like to thank Congressman 
Leach for his invitation to have us come and talk, perhaps from 
a different angle on the HOPE VI initiative. I would again like 
to thank you for the opportunity for me to share some of my 
thoughts concerning the HOPE VI program, and the reauthorizing 
including the Small Community Mainstreet Rejuvenation and 
Housing Act of 2003.
    Main Street Iowa is in its 18th year of providing technical 
assistance and capacity-building services to Iowa communities 
committed to improving the social, physical, economic and 
political values of their city centers. Through a lot of hard 
work from hundreds of community leaders across our State, Main 
Street Iowa today is recognized nationally as one of the most 
successful Main street models in the country. Because of their 
efforts, Iowa Main Street communities have received the Great 
American Main Street Award six times. It has only been awarded 
40 times in the country, and six of those are within our great 
state of Iowa.
    Iowa is a state of low population growth. Most of our 
counties and most of our communities actually experience 
population loss. Despite this trend, the 2000 census revealed 
that 74 percent of Iowa's Main Street communities, regardless 
of where they were located in the state, experienced population 
gains, which means that they are being allowed to thrive, not 
just survive, as many other small towns are in our country. The 
Main Street Approach (R) is a copyrighted and trademarked 
program of the National Trust for Historic Preservation. It is 
an economic development program within the context of historic 
preservation. Since the early 1980s, almost 2,000 communities 
nationally have utilized the Main Street Approach (R). It is 
successful because it sets high standards for communities to 
aspire to. Communities that consistently meet these standards 
are recognized as nationally certified Main Street communities. 
In Iowa, about 75 percent of our communities achieve this 
designation annually.
    As part of the program, Main Street communities are 
required to track their incremental economic impact. Since 
1986, Main Street Iowa communities have recorded the following 
impacts--and you need to recall, this is a state with small 
communities and small populations. We have a net gain of over 
2,300 business starts, expansion and relocations in our Main 
Street communities that employ over 6,500 people full time. 
Thousands of local citizens have invested over $363 million 
into downtown building rehabs, purchases and construction. What 
is really amazing is the private sector ratio, when you compare 
that to the state investment in operating the state Main Street 
program. Last fiscal year, for every dollar that the state 
invested in the state Main Street program, the private sector 
invested $131. Since we started the program in 1986, it is a 51 
to 1 return. I am willing to bet that there are very few state 
or federal programs that can match that kind of excellent 
return.
    In 2001, we built a partnership with the Federal Home Loan 
Bank and with the Iowa Finance Authority to create a new loan 
pool offering low-interest commercial loans to rehab upper 
floors, renovate old downtown buildings, and for new 
construction. Last month, we are pleased to say that we 
celebrated our first $1 million milestone. That may seem small 
to an awful lot of people, but all of these but one project 
that we funded were in towns under 12,000 in population--truly 
small towns. However, access to capital for downtown 
development projects like upper-floor housing is always scarce. 
Federal programs do not seem to fit the needs of Iowa 
communities because they do not fit the criteria for eligible 
projects or the project minimums are just way too large. 
Talking about HOPE VI today just astounds me, at the amount of 
dollars that we are investing and what I could just think what 
those could do in smaller communities. Most of the federal 
programs are targeted for larger urban areas and offer little 
opportunity for utilization by rural America. We understand 
that the need is great in urban America. However, the needs of 
rural America are also great and should be addressed as well.
    We must invest in the revitalization and rejuvenation of 
our smaller communities who have made the commitment to invest 
in themselves, Main Street communities. They have the 
organizational capacity necessary to efficiently utilize 
development tools. Making these tools available for Main Street 
communities under 30,000 just is smart business.
    HOPE VI reauthorization is an excellent example of how we 
can fine-tune an existing legislative authorization and make it 
relevant and useable for America's smaller communities to 
address affordable housing. This reauthorization does not 
authorize new money for this partnership. It merely takes 
advantage of existing monies that could already be authorized. 
By including criteria, this could allow America's smaller 
communities to participate in providing affordable housing.
    I want to admit that I am not an expert on HOPE VI. That is 
because it, as currently authorized, there is no opportunity 
for us to use it in our State. However, we need HOPE VI to be 
reauthorized. We need it to include language allowing small 
states like Iowa the opportunity to develop affordable housing 
for low-income families. I can truly visualize hotels, upper-
floor apartments and economic vitality to communities as a 
result of this.
    The signature of America is embedded in its smaller 
communities. Developing tools which assist in making them 
stronger, more livable communities is good for every state in 
our nation. By doing so, we strengthen the economic, physical, 
political and social health of our country, and that is a very 
good thing.
    Thank you.
    [The prepared statement of Thomas D. Guzman can be found on 
page 78 in the appendix.]
    Ms. Harris. [Presiding.] Mr. Guzman, thanks so much for 
your testimony. The Main Street Program--you bring a whole 
different orientation to this. I had the opportunity to oversee 
those in Florida. They were extraordinary, so I thank you for 
your testimony and your quick summation.
    Mr. Husock, thank you for being here. Welcome, from Harvard 
Kennedy School.
    Mr. Husock. I believe that the chairwoman is in fact an 
alumna of the Kennedy School.
    Ms. Harris. Yes, I am an alumna.

STATEMENT OF HOWARD HUSOCK, ALFRED TAUBMAN CENTER FOR STATE AND 
LOCAL GOVERNMENT, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD 
                   UNIVERSITY, CAMBRIDGE, MA

    Mr. Husock. Thank you very much. I am Howard Husock. I am 
Director of public policy case studies at the Kennedy School 
and I am a contributing editor to City Journal magazine, 
published by the Manhattan Institute of Policy Research, where 
most of my writing on housing issues has appeared.
    I am testifying in favor of the Department of Housing and 
Urban Development's budget proposal for the HOPE VI program. I 
am not sure--I might be the only one on this panel. There is no 
doubt that HOPE VI developments have replaced severely 
distressed housing and there is no doubt that they have 
provided homes which are better than their residents could 
otherwise have afforded. But beyond this superficial 
attractiveness, there are significant questions about HOPE VI 
which, especially at a time of budget constraint, ought to be 
taken seriously. I would like to frame some questions for the 
committee that I hope you will take seriously.
    Question one, are we confident that over time HOPE VI 
projects will be well maintained? It is important to keep in 
mind that the developments which previously stood on HOPE VI 
sites, were also hailed when they were built as a great step 
forward. This was even true of the public housing high-rises 
now so thoroughly discredited. It is a lot easier to cut 
ribbons on new projects than to maintain those projects over 
time. Like other public housing before it, HOPE VI faces 
fundamental challenges because by design, many of its residents 
have low incomes and thus pay low rents. These developments 
will depend on a combination of market rents and public 
subsidies. Neither of these is an assured income stream. We 
must always wonder whether those managing subsidized housing in 
addition have the capacity and the competence to maintain it 
over time. Their track record in the main--not every housing 
authority to be sure--but in the main has not been reassuring. 
So before we spend millions more on additional HOPE VI 
developments, it is far from inappropriate to pause to see 
whether those built to date can indeed be well maintained.
    Question two, will middle-income tenants choose to live and 
remain in HOPE VI developments? Just because a development has 
designated a number of units for middle-income tenants or 
owners is no assurance, especially in a period of declining 
rents and real estate prices when other options may be 
affordable, that they will move in. I have already been told by 
a HOPE VI developer in Chicago he doubts he can attract the 
requisite number of middle-income tenants for a planned 
development in the city's State Street corridor. This is a 
crucial question for a couple of reasons. Not only will the 
developments need income to ensure proper maintenance, but 
income mixture, as has been alluded to before, is a key part of 
the theory of HOPE VI. It is based on the belief that higher-
income households will set good examples for those of lower 
income. If it proves difficult to attract or to retain higher-
income households, the developments could quickly become new 
versions of the housing they replaced.
    Question three, can we be sure that that HOPE VI social 
experiment will work? We have proceeded on the supposition that 
the presence of middle-income households will provide positive 
role models and generally improve the social fabric in HOPE VI 
projects, but we should keep in mind, this is a hypothesis. It 
is not a proven approach. Sociologists have long recognized 
that it is difficult for households of significantly divergent 
incomes to establish deep relationships. We cannot rule out the 
possibility that instead of higher income households serving as 
role models for those of lower income, that instead there will 
be friction between the two groups. We have already seen this 
happen when section 8 rent voucher households have moved into 
higher-income neighborhoods, most famously in the south suburbs 
of Chicago.
    Question four, is new housing designated for those of very 
low income in keeping with our larger goals for American family 
structure? By designating significant number of HOPE VI units 
for those of very low income, we cannot flinch. We must 
acknowledge the fact that it is highly likely that many, many 
of these households will be single-parent households. Such 
households, after all, dominate existing public and otherwise 
subsidized housing. HUD figures show today 6 percent of public 
housing households have two parents and children as residents. 
Among public housing families with children in which the head 
of the household is not elderly, not disabled, take the out of 
the mix, 88 percent are headed by single parents. HOPE VI risks 
providing new units for single-parent households, which in 
contrast to our overall public assistance policy, will come 
with no time limit. We have to ask whether we are providing 
better housing for single-parent families than that which 
lower-income two-parent families can themselves afford, and are 
thereby sending a message inconsistent with our broader efforts 
to encourage the social stability and effective child-rearing 
which two-parent families in the aggregate provide.
    Question five, is HOPE VI making the best use of the land 
on which the developments have or will be built? Engaging the 
cost, we should not confine ourselves to the cost of 
construction and Administration. We have to keep in mind there 
are other things you could do with that land. In Boston, for 
instance, the HOPE VI development in the city's Mission Hill 
section occupies a site adjacent to some of the best hospital 
and medical education facilities in the world. It is quite 
possible that had that land been put up for public bid, that 
other private or nonprofit use might have been made of it, 
boosting the city's economy and providing jobs for poor people 
and middle-class people alike. Should we assume that simply 
because public housing has occupied a particular site, that 
subsidized housing of some kind must always occupy that site in 
perpetuity. If we do so, we risk creating what I call a frozen 
city, one in which economic growth is more difficult to attain. 
Keep in mind, the public housing in New York City today 
occupies and acreage equivalent to 156 World Trade Center 
sites.
    I would be less than candid were I not to concede I am 
skeptical, it is pretty clear, about the wisdom of the HOPE VI 
program. Still, I hope that those committed to improving our 
cities, and especially committed to improving the prospects for 
the poor, will understand the sincerity of the questions that I 
have tried to raise here. The fact that in my view the answers 
to all are very much in doubt makes the proposal to pause, at 
this point and take stock of the program, the right policy 
choice.
    Thank you very much.
    [The prepared statement of Howard Husock can be found on 
page 83 in the appendix.]
    Ms. Harris. Thank you, Mr. Husock.
    Our next speaker is Mr. Kevin Marchman. Welcome.

 STATEMENT OF KEVIN E. MARCHMAN, EXECUTIVE DIRECTOR, NATIONAL 
  ORGANIZATION OF AFRICAN AMERICANS IN HOUSING, WASHINGTON, DC

    Mr. Marchman. Thank you. I am going to limit my remarks to 
just two issues this afternoon.
    First, I want to review something that was said earlier 
today, and talk a little bit about the history of the HOPE VI 
office. I was fortunate enough to be recruited to HUD in 1994 
to open up the HOPE VI office. Many people did not know it at 
the time, but we worked on two tracks. It was the HOPE VI 
office and also the office dealing with troubled housing 
agencies. In the first two years of HOPE VI, many of those 
grants went to housing authorities who had issues. It was our 
responsibility to work with those housing authorities as they 
began to run the grants.
    In 1996, the HUD inspector general released a report saying 
that the HOPE VI office simply did not have enough controls, 
and that we should add controls to the program. We started the 
office with two people. I believe now there are up to 50. I 
mention all that in terms of the time that it takes in order to 
do these HOPE VI programs. It has expanded, there is no 
question about it, but expanded for one real good reason. When 
we opened up the office, in agreement with Congress, we wanted 
to go through the total transformation of public housing in 
this country. We were not interested in simply replacing 
projects. We were looking at communities. We were looking at 
homes, and not projects and not units.
    The fact is, yes, the HOPE VI office and the HOPE VI 
program is perhaps the best program that HUD has had in the 
last 25 years to work with public housing. There is no question 
that what it replaced is far--the HOPE VI replaced a program 
that needed terrible, terrible changing. The fact is that the 
HOPE VI program looked at families, looked at communities, 
looked at economic development. And the fact is, if you look 
city from city--and I probably could name you 25--HOPE VI has 
been a success in these cities. The cities that have issues 
have had issues in their Administration in any case, but even 
those are changing. I needed to make that clear.
    I have had the opportunity to testify in front of the 
commission that set up the HOPE VI program some 10 years ago. 
We simply said, nothing less than total transformation is 
needed. It was not just about demolition of units. I have had 
the great fortune to run housing authorities throughout the 
country, in Denver and San Francisco and Chicago, New Orleans 
and Camden. When I was at HUD, I ran the program for four years 
and am now working with NOAAH, the National Organization of 
African Americans in Housing--we work with HUD in expanding 
opportunities for MBEs and WEs in the HOPE VI program. Flat-out 
experience tells me and it should tell you that the HOPE VI 
works and it needs to be reauthorized.
    Thank you very much.
    [The prepared statement of Kevin E. Marchman can be found 
on page 103 in the appendix.]
    Ms. Harris. Thank you very much, Mr. Marchman.
    Dr. Popkin, thank you for coming today to testify on the 
panel.

 STATEMENT OF SUSAN J. POPKIN, URBAN INSTITUTE, WASHINGTON, DC

    Ms. Popkin. Thank you for inviting me to testify today on 
behalf of the reauthorization of the HOPE VI program.
    The goals of HOPE VI are ambitious, seeking to address the 
physical problems of distressed public housing, while also 
improving the overall well-being of residents and promoting 
self-sufficiency. HOPE VI targeted some of the most beleaguered 
housing in this country--dilapidated public housing 
developments that had failed to deliver on the promise of 
decent housing for the poor. The problems HOPE VI seeks to 
address are among the most complex and difficult to solve.
    My remarks today are based on findings from the Urban 
Institute's research on the impact of HOPE VI on original 
residents. Our findings indicate that the effects of the 
program on original residents have been mixed, but on balance 
the story is generally positive. Where HOPE VI has been 
implemented effectively, most former residents have clearly 
benefited. In these cases, residents have moved to lower-
poverty neighborhoods and reported real differences in housing 
quality, safety and improvements in mental health and outlook. 
However, there are still concerns and evidence that some former 
residents are struggling in the private market, that relatively 
few have returned to the new developments, and that large 
numbers face barriers to making the transition out of 
dilapidated public housing and to self-sufficiency.
    In my full testimony submitted today, I highlight three 
findings from our research. First, and most significant, many 
former residents moved and made significant improvements in 
their living conditions. These families are living in better 
housing and less-poor neighborhoods than their original HOPE VI 
developments. Second, residents are facing challenges. A 
substantial proportion of families are struggling to find and 
keep housing in the private market. Many face challenges in 
facing higher utility costs and dealing with individual 
landlords. In sites with tight rental markets or where 
demolition far outpaces the production of new units, many 
former residents have ended up in other distressed communities. 
Finally, a large number of households face serious challenges, 
including disability and mental health problems, which threaten 
their ability to make a successful transition to either new 
mixed-income housing developments or the private market.
    These findings support the continuation of HOPE VI, but 
also highlight the need for reallocation plans that reflect 
local rental market realities, offer better relocation services 
that provide housing search assistance to encourage residents 
to consider moving to lower-poverty neighborhoods, address the 
needs of hard-to-house residents such as the disabled, large 
families, households with members with criminal records, and 
those with complex personal situations, provide enhanced 
community and supportive services that offer residents both 
pre-and post-move services and include tracking and monitoring 
of residents.
    Adopting these guidelines has the potential to improve 
outcomes for the original residents of HOPE VI developments by 
offering the opportunity for public housing families to move to 
better housing and safer communities--environments that can 
better serve the needs of these low-income families and help 
them to improve their life circumstances.
    Thank you.
    [The prepared statement of Susan J. Popkin can be found on 
page 108 in the appendix.]
    Chairman Ney. [Presiding.] I want to thank the witness for 
her testimony.
    Mr. Tracey?

STATEMENT OF BRIAN TRACEY, MARKET EXECUTIVE, BANK OF AMERICA ON 
   BEHALF OF THE NATIONAL ASSOCIATION OF AFFORDABLE HOUSING 
                    LENDERS, WASHINGTON, DC

    Mr. Tracey. Yes, good afternoon Chairman Ney, Ranking 
Member Waters, members of the subcommittee. Thank you for this 
opportunity to testify both on behalf of Bank of America, as 
well as the National Association of Affordable Housing Lenders.
    Community development at Bank of America works to help 
build stronger and healthier neighborhoods throughout this 
country. Our associates at Bank of America do that by 
developing real estate, providing financing, and making equity 
investments all in low-and moderate-income communities, using a 
variety of financial tools and programs and working with 
individuals, government, nonprofit organizations and businesses 
in these neighborhoods. One of those tools is the HOPE VI 
program.
    Community development at Bank of America has been involved 
as a lender, investor, or developer in more than two dozen HOPE 
VI projects in such cities as Atlanta, Charlotte, Los Angeles, 
Nashville, Baltimore, Seattle, Chicago and Houston. Public 
grant funds largely to HOPE VI resources have been used to 
leverage private debt and equity capital, often in the form of 
low-income housing tax credits to transform existing public 
housing sites, revitalize the surrounding community, and 
importantly, improve the lives of public housing residents.
    Bank of America's first HOPE VI project provides an 
overview of how we view the program. First Ward Place in 
Charlotte involved the comprehensive redevelopment of an uptown 
city neighborhood. More than 30 government agencies, community 
groups and private businesses came together to transform the 
former Earle Village, a crime-ridden, badly deteriorated public 
housing complex, into a mixed-income urban neighborhood 
containing public housing units, affordable and market-rate 
apartments, townhouses and for-sale single-family homes. First 
Ward Place now has important community services previously 
nonexistent in this community.
    Funding for First Ward Place came from a broad base of 
local support, not only Bank of America and the housing 
authority, but also nonprofit organizations, as well as the 
city itself. Our goal, and importantly the community's goal, 
for First Ward Place was to create a strong neighborhood of 
skilled, employable and economically independent residents 
living in a safe, comfortable homes with room for people from 
all income levels--homes where all of us in this room would be 
comfortable. Importantly, the transformation of First Ward 
Place, made possible by the HOPE VI funding, has resulted in 
private capital flowing to areas adjacent to the community, 
creating a multiplier effect often overlooked in judging the 
success of HOPE VI developments.
    While HOPE VI has been an invaluable tool for neighborhood 
redevelopment and affordable housing, additional resources are 
needed. The proposal to assist public housing authorities to 
take advantage of established private capital markets, moving 
certain public housing developments to project-based section 8 
and making more effective use of other mainstream affordable 
housing and community development financing tools would seem to 
be a compelling new resource for sustainable preservation of 
affordable housing, but this should be viewed as a new 
resource, and not a replacement for the HOPE VI program. Bank 
of America and the other members of the National Association of 
Affordable Housing Lenders would welcome the opportunity to 
expand and deepen our role in the redevelopment of public 
housing in severely disinvested communities.
    The implementation of any such proposal, such as the public 
housing reinvestment initiative, should build on existing 
established practice. Many lenders, including Bank of America, 
have significant experience in providing financing for 
properties with project-based section 8 vouchers. This 
experience can provide models for the implementation of any 
such new proposal.
    Now, I touched in my written testimony on certain 
criticisms of the HOPE VI program, that being that progress is 
slow and is costly. While some of this criticism is valid, some 
is not. Initially, some public housing authorities may lack the 
experience to undertake real estate development work with 
private lenders, but one benefit of the HOPE VI program is the 
public-private partnership that is created by this program, 
which should ultimately result in the housing authority gaining 
real estate development skills. That is a benefit of this 
program. Also, many HOPE VI developments are complex by the 
very nature of the real estate itself, and would be slow to 
progress and expensive to develop regardless of the funding 
source. I think it is important that we distinguish the actual 
cause and effect for the cost and the degree of delay for these 
projects.
    Finally, let me comment on just one other issue--managing 
change in a HOPE VI neighborhood. Importantly, neighborhood 
goals are identified early in the HOPE VI process, with 
government and the community given a great amount of input and 
influence over the outcomes of the effort. While there may be 
some displacement, we view revitalization that leads to 
economically and ethnically diverse communities with a range of 
incomes as a favorable outcome, as long as safe and decent 
housing is available for those displaced. There must be room 
for everyone in the changed neighborhoods.
    In summation, Bank of America and the National Association 
of Affordable Housing Lenders believe that HOPE VI is a 
valuable and effective tool for revitalization of low-and 
moderate-income neighborhoods, while improving the lives of 
public housing residents. Private capital will play a role in 
improving public housing, and those of us at Bank of America 
and the National Association of Affordable Housing Lenders do 
not stand dispassionately on the sidelines on these issues. 
Rather, we stand ready to bring the financial resources of our 
members to bear in these communities, but we need help. The 
poorest of the poor is such the government is still needed as a 
catalyst, helping to spark private investment. We believe that 
HOPE VI should continue to be one such spark.
    Thank you for the opportunity to participate in this 
hearing and I would be glad to answer any questions at the 
conclusion of our panel. Thank you very much.
    [The prepared statement of Brian Tracey can be found on 
page 120 in the appendix.]
    Chairman Ney. I thank the gentleman for his testimony.
    Ms. Zukoff?

STATEMENT OF LISA B. ZUKOFF, EXECUTIVE DIRECTOR, WHEELING WEST 
   VIRGINIA PUBLIC HOUSING AUTHORITY, ON BEHALF OF NATIONAL 
ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS, WASHINGTON, 
                               DC

    Ms. Zukoff. Thank you, congressman. It is always nice to 
see a neighbor, Congressman Ney. Thanks, committee.
    My name is Lisa Zukoff, and I represent a small housing 
authority in West Virginia. We have 600 public housing units 
and 400 vouchers. We undertook a grant application in 1998. We 
were not awarded the first year, and went back in 1999 and were 
awarded $17.1 million to renovate Grandview Manor and Lincoln 
Homes public housing developments, which totaled 328 units. To 
date as a 1999 grantee, we have completed phase one, 39 rental 
units, and are currently under construction with 23 
homeownership units. I would like to mention that the three 
market-rate units in the homeownership phase have sold first.
    I urge you to reauthorize the HOPE VI program. HOPE VI has 
undeniably and positively changed the face of Wheeling's public 
housing and the way our agency does business. It provides 
residents with housing choice and economic opportunity and 
helps stimulate the depressed economy of Wheeling. Managing the 
grant motivated my agency to reexamine its priorities and 
organization, and we established a new department in relocation 
and expanded our supportive service program, which also 
benefits our general public housing and housing voucher 
programs. We are now poised to become the affordable housing 
developer in our city. We also offer assistance to other 
agencies in our areas attempting to obtain HOPE VI grants.
    Regarding the statutory changes in H.R. 1614, NAHRO 
believes that the statutory changes can be further enhanced, as 
noted in my written testimony. Along with a commitment to 
reauthorize the HOPE VI program must come a commitment to 
adequately fund the capital, operating and housing choice 
voucher programs that support HOPE VI and the residents served 
by public housing. NAHRO, which represents both public housing 
and community development interests, has considered the 
proposal thoughtfully, but we must point out that there are 
other funding sources available that small community have 
access to, and we cannot recommend using scarce public housing 
resources for non-public housing programs.
    Relocation and resident choice in housing has become a big 
issue in HOPE VI. First, HUD applications require that 
residents that live in the complexes that are going to be 
revitalized through the HOPE VI program approve of the 
applications. Moving is difficult and creates anxiety in the 
community, and change is difficult for all of us. A major goal 
of the HOPE VI program is the de-concentration of poverty. This 
means that not everyone can come back, however all the 
residents are housed with a voucher or in other assisted 
housing units.
    In relocation summary, the lack of affordable housing in 
this country is an issue which is greater in scope than the 
HOPE VI program. One can debate whether the units demolished 
under HOPE VI were viable or not, but the fact remains that 
there is an affordable housing crisis in America that affects 
renters, prospective homebuyers and homeowners alike. HOPE VI 
assists in providing quality affordable rental and 
homeownership housing, and the program should be continued.
    Progress of Hope VI--I brought one of four volumes of our 
closing documents for phase one of our HOPE VI project. These 
properties have a lot of federal dollars and require due 
diligence. To give you an example, our tax credit closing 
required 170 documents just to close that phase of the mixed 
finance deal. So when you talk about taking a long time, this 
one book of four helps explain what it takes to close a mixed-
finance deal. It is very complicated work. HUD has also dealt 
with this problem through their NOFA process by demanding 
readiness by those receiving their grant awards over the last 
several years in their NOFA process.
    Leveraging private funds in the process of assembling an 
application--this is a timely effort. It took us over a year in 
advance to plan the application. Probably a minimum lead-time 
is needed for any city that has not been involved in 
development to get that work, just to meet with all the players 
involved. Also, we really would like the committee to look at 
planning grants that used to be involved in the HOPE VI 
process, for smaller agencies in communities that do not have 
the resources, to put the applications together. An average 
cost of putting a HOPE VI application together is about 
$200,000.
    The public housing reinvestment initiative that was spoken 
of earlier and is part of the reauthorization bill--this is a 
good tool for agencies that can make it work, but this does not 
provide the large infusion of cash needed to attract 
investments in public housing, nor is it financially feasible 
to use this approach for severely distressed public housing.
    In conclusion, we would like you to please consider 
reauthorizing the program at a level of $625 million. Thank you 
very much for the opportunity to speak before the subcommittee 
today. My full written testimony is submitted for the record.
    [The prepared statement of Lisa B. Zukoff can be found on 
page 125 in the appendix.]
    Chairman Ney. I want to thank everyone for their testimony.
    I just wanted to follow up, Lisa, with the $200,000 that it 
costs to get an award of----
    Ms. Zukoff. $17.1 million. The first application, it cost 
us $180,000.
    Chairman Ney. Can you just elaborate a little bit? I am 
taking it from the angle because I am familiar with you, 
obviously, we know each other, and as a small public housing 
authority in a small community.
    Ms. Zukoff. We actually had to use our operating reserves 
to actually help pay for that application, but our board felt 
very strongly that it was needed. You have to pay for an 
extensive market study. Usually if you do not have a 
development background, we had to hire a consultant to assist 
us. We had to hire urban planners. Your construction costs have 
to be cost-certified by accounting folks who deal with 
construction. It is very expensive.
    The second year, we gleaned a lot of experience from the 
first year and we only had about $60,000 in the application. We 
wrote the application ourselves, but we did indeed have to 
update our market study, have our urban planners involved, and 
have the cost certifications. So that was bare-bones with 
$60,000.
    Chairman Ney. Do you utilize Bel-o-mar at all in this?
    Ms. Zukoff. Yes.
    Chairman Ney. You do. The other question I want to ask you, 
then, knowing the cost, should it just be public housing 
authorities that are involved with the HOPE VI or should we 
find a way that other entities can be involved to help 
complement or to help public housing authorities?
    Ms. Zukoff. Well, I think it is a partnership. There are 
obviously other entities involved with our agency--the city and 
different organizations--we have 30 memorandums of agreement 
with other service agencies within our city that help with our 
HOPE VI grant. I think there needs to be a way for smaller 
communities. Our city population is 30,000. Obviously, there 
are much more rural and smaller communities that can benefit by 
such a program. But I really would hate to see public housing 
funds go out of the public housing program. So I think, yes, 
there is a need, and should we find a way to work them in--
absolutely.
    Chairman Ney. Which gets to the other point of my question, 
which would be, should we attempt to change--and I stress the 
word ``partnership''--attempt to change the partnerships with 
the public housing authorities? In other words, if it is tough 
for the especially smaller public housing authorities, should 
there be any type of change where we create new partners to 
work with public housing authorities? Is there something we can 
do to help the public housing authorities that would stay 
strictly within their domain?
    Ms. Zukoff. I think we have been able to really grow as an 
agency as a result of HOPE VI--learning the process. It has 
been a partnership with state housing finance agencies. I think 
that we really just need to look for ways and avenues to train 
public housing folks to work with others. This is not a grant 
that was done strictly by the housing authority. We have many, 
many partners.
    Chairman Ney. Okay, well then what is the advantage to 
continuing to use just public housing authorities?
    Ms. Zukoff. It is the public housing resources--the dollars 
that we feel at this point they keep dwindling away, a little 
bit every year. Drug elimination--the operating fund gets cut, 
we get less money because there was a mistake at HUD last year. 
I mean, we are dealing with all of these efforts. This money 
needs to stay within the public housing authorization side of 
the bill. I feel very strongly about that. So while I agree 
that there are other avenues for other folks to be involved in 
this partnership, let's find some other pot of money to do that 
work with.
    Chairman Ney. Thank you.
    The question I have for Susan Popkin--you state that many 
former residents made significant improvements in their living 
conditions. Was this success made independently or did the 
housing authority help to do the bridge in this transition?
    Ms. Popkin. It is a result of where they have ended up 
moving. Whether they have moved to a section 8 unit or a new 
development, this is residents' perceptions. They perceive that 
they are living in better housing. They particularly perceive 
that their new neighborhoods are much safer than where they 
started. That has had a clear impact on people's mental health 
and their overall outlook.
    Chairman Ney. Would that be independent from the public 
housing authority?
    Ms. Popkin. This is where they were placed when they were 
relocated.
    Chairman Ney. I want to thank you.
    Our ranking member, Ms. Waters?
    Ms. Waters. Thank you very much.
    Ms. Glover, I want to thank you for your very articulate 
and thoughtful testimony. I do not think that Mr. Husock heard 
you because he asked some questions that I think you had 
already addressed when you described that decent, safe housing 
and environments help to promote a lot of other good things--a 
lot of hope and a lot of possibilities. But since he did not 
appear to hear you, I would like to just phrase the question so 
that you can help me with a response to him.
    Do you believe, first of all, that HOPE VI is but a social 
experiment that provides housing for single parents on land 
that could better be utilized for other purposes? And that it 
will be housing that will be maintained anyway because the 
housing that would have been torn down was not well maintained 
and everybody knows it is going to go back the same way, and 
that it will not be housing that will attract mixed-income 
residents anyway because they do not really want to stay there. 
If they do, it will only be friction between the two groups. 
And won't we be sending a bad message to two-parent households 
that we are doing all of these things for single parents, and 
what does that say about our values? And in the final analysis, 
this won't be managed well, and perhaps there is a better way 
to think about doing this. Maybe we should not be doing this at 
all.
    Could you help him respond in some way?
    Ms. Glover. I would be delighted. First of all, going back 
to actual experience. It is interesting, when we first got 
started one of the most frequently asked questions was, who is 
going to want to live next door to those people? So the key and 
the success is creating true market-rate housing with an 
affordable component seamlessly inside of it, so that the 
affordable component does not overwhelm the market rate nature 
and quality of the community. Temporary poverty does not mean a 
lack of values. It is really creating a community of 
opportunity. The mixed income communities have maintained on 
average a 95 percent occupancy across the market-rate units, 
the tax credit assisted units, and the public housing units, in 
all of the 11 communities and by the way, even during the 
downturn in the economy. The great thing about it is that all 
of the families take great pride in these communities. Everyone 
is thrilled with the elimination of the public housing stigma.
    Too often, we punish the assisted families for bad 
outcomes. Bad policy creates bad and unacceptable results. So 
what I am saying to the critics of the Hope VI program is that 
you really have to be on the ground to see what is going on, 
because we have seen some extraordinarily positive results 
coming out of the program. I would urge this committee that no 
federal dollars should be spent expecting positive outcomes and 
great expectations. The worst thing that you can do with any 
program is lower the expectations such that you expect no one 
to be successful. In our new mixed income coummunities the 
employment has increased by 400 percent. That is tangible. We 
have seen the incomes increase substantially and we are not 
talking about just running out the old crowd and bringing in a 
new crowd. We are talking about working with the families, but 
in a positive environment.
    By the way, mixed-income communities is going back to some 
basics. I grew up in Jacksonville, Florida, and the communities 
were mixed-income communities at that point. I think it 
happened only in the late 1980s and 1990s that we started 
running to the suburbs to have houses line up with our 
perception of ourselves based on the incomes that we were 
earning. Mixed income communities have strengthened public 
schools, which are performing off the charts. We have had such 
tremendous results. I really urge this Committee to look at the 
testimony and also the supplement to the testimony which shows, 
by the way, that we have moved the real estate to an improved 
use by following market principles, and not creating a 
concentrated poverty situation which in fact devalued not only 
that piece of property, but the surrounding neighborhoods.
    Ms. Waters. I would like to ask Mr. Howard Husock, does 
that answer some of the questions that you raised with us? Does 
that help you at all?
    Mr. Husock. The question is going to be answered over time. 
Whether mixed-income developments are going to be sustainable 
as mixed-income developments, we do not know whether that is 
going to be proven over time. As for whether the impact on the 
surrounding areas--do we know that if a private commercial 
development had built it on that same site we would not have 
had similar positive effects on the surrounding areas? It is 
quite possible.
    As far as the mixed-income question specifically, as I 
said, I have visited with developers of HOPE VI in Chicago who 
are concerned, doubtful that they will be able to attract 
higher income households to those new developments in the State 
Street corridor of Chicago. We do not know whether that is 
going to work out in the long run. And remember, if you go to 
somebody and you say, look, I am going to give you a new house. 
It is a better house than you could afford on the private 
market. It is a brand new development. It is kind of like, I am 
going to give you hamburger for 59 cents a pound. You are going 
to get a long line of people at first. Let's see how those 
developments stand up over time, and whether those households 
will remain. Sure, they will come for the good deal. Will they 
stay? Because communities maintain themselves over time.
    Ms. Waters. What would your alternative be for helping to 
revive safe, secure housing and environments for poor people? 
How would you do it?
    Mr. Husock. I think we need to take advantage of the 
existing stock of public housing, and to deploy it in a 
different way. This really diverges from the theme of this 
panel, so I don't know if you want me to go off that way.
    Ms. Waters. Yes, I am asking you. I want you to go off.
    [Laughter.]
    Mr. Husock. We have a large number of public housing units 
already in this country. I think we ought to make use of that 
resource as a time-limited resource. In other words, as people 
move in, say this is temporary assistance to needy families, 
just as we do with public assistance.
    Ms. Waters. Say, give them a year or two, and then say you 
are out of here, you have to get out?
    Mr. Husock. I believe the public welfare law is a longer 
period of time than that. I was suggesting it might be longer 
than that.
    Ms. Waters. Oh, three years, four years, five years--
something like that?
    Mr. Husock. Five years might be----
    Ms. Waters. Without regard to----
    Mr. Husock. Since you suggested it, five years seems like a 
good figure.
    Ms. Waters. What if the income has not changed?
    Mr. Husock. Well, as you know, before the Welfare Reform 
Act of 1996, there was great concern that it was going to lead 
to homelessness, based on the premise that if everything stays 
the same, conditions are going to be terrible. Why do we want 
to be that pessimistic?
    Ms. Waters. No, that is not what I asked. I asked what was 
your alternative for providing housing for poor people--safe 
housing, better environments? And if you believe that you 
provide it for a limited period of time, be it two years or 
three years or four years, my follow up question was, what if 
the income has not changed? What if five years after or three 
years after they are into the housing that may be subsidized or 
public housing, they work every day, they do the very best they 
can, but not only did the income not change, but they lost 
their health benefits and on and on and on. What would you do 
for that family?
    Mr. Husock. I think the emphasis ought to be on encouraging 
the path towards self-sufficiency during that interim. I do not 
really want to speculate about a pessimistic scenario in which 
people are not going to, and in which we will not trust people 
to improve their prospects.
    Ms. Waters. You don't want to talk about pessimism?
    Mr. Husock. I believe in their capacity to make life 
changes that will improve their prospects and I hope that that 
would be the outcome. I would be interested in knowing, for 
instance, in the Atlanta situation how many of the HOPE VI 
tenants have graduated from HOPE VI? How many of them said, 
well, this is a great apartment; I would like to stay here. Or 
how many have graduated and moved out? Is that a goal, to move 
them out? If not, why not?
    Ms. Waters. The chairman has been very, very generous in 
the amount of time he has given us, and I would love for this 
discussion to go on, but we cannot do that. Let me just wrap it 
up by saying that my family lived in public housing for many 
years. I know this subject very, very well--not from a 
theoretical Harvard point of view, but from a very personal 
point of view. I am a great defender of public housing and HOPE 
VI falls right in that category. So I am pleased that you are 
here today. I am not so sure what you came here to say. You 
raised some questions. I asked someone with great experience 
and knowledge to help you, but of course you dismiss the 
information that she shared with you, and began to wonder about 
what would happen 20 or 30 years from now. But I am glad that 
you are here. It keeps me focused. Thank you very much.
    Chairman Ney. I want to thank the gentlelady.
    I just want to make a point of observation, because I think 
this is very interesting. I think that you can have low-income 
individuals who have just as good focus and family values and 
are very good people, and maybe you are living next to somebody 
of a middle income that does not have the same good values. 
However, I think you have to realize the fact that if somebody 
is in a middle-income community, they are going to tend to have 
better services, better opportunity. So I am not sure that some 
of the middle income can learn some family values from some of 
the low income, but I think it is just a fact of life that if 
you are in a middle-income community, that middle-income 
community is going to tend to have better services, more 
access. I just think that is just a way of life. That is a 
personal observation.
    Mr. Scott?
    Mr. Scott. Yes, thank you very much, Mr. Chairman.
    I would like to ask a two-part question and stay on this 
for a moment. First of all, I just think it is very important, 
as Mr. Husock said--you raise some points that we have to 
refute. The purpose of this hearing is of course to get and 
glean information. The other part of it is particularly for 
those of us who are sponsoring legislation to save HOPE VI. So 
when you come with your statements that ask hypothetical 
questions, they have to be answered, they have to be responded 
to.
    I want to take your points, for example, over time. Over 
time means that within an amount of time we will come to a 
conclusion. What we are asking for in this extension of HOPE VI 
is to get the time to make those conclusions. In Atlanta, for 
example, we have had enough money to deal with maybe 13 
projects in one phase or another, but there are 33 on the 
drawing boards. Each one of these cases have proven your point 
on a point-by-point basis. Will they be well-maintained? In 
Atlanta, we have one of our projects in a place called Eastlake 
Meadows. Eastlake Meadows was the site two years ago of the 
United States PGA Golf Classic, which was won by Tiger Woods. 
Because of where it was, it attracted international attention 
and comments on television about how well the project was 
maintained; how well it looked; the attractiveness of it.
    Centennial Place--right in Centennial Center, right in the 
heart of where we had the Olympics; right next door to the 
headquarters of the Coca-Cola Company, the most famous image in 
the world--mixed income, being successful. And then you get to 
the point of the single-headed households of females, who are 
single-family heads. A part of the major purpose of this 
program is to take that very targeted group and give them hope, 
to sustain them. The program is doing its duty and its good.
    Your other point--best use of the land. Not only is it the 
best use of the land, but the land surrounding that area has 
increased in Atlanta to a value of over $2 billion in the worth 
of the land surrounding it, and has proven to be the most 
effective, valuable economic generators in the Atlanta 
community, and in some measures in the state.
    The point that I am trying to make here is that we have got 
to discount every point that you have made. Ms. Glover from 
Atlanta has done an excellent job of that. That is not to be in 
any way disrespectful to you. I believe that your comments were 
probably made and certainly in fair interest, your points 
certainly needed to be raised, because it gives us a change to 
refute them point by point and build the case for this program.
    So I wanted to do that, because we could not let those 
points go unanswered as we move. As you can see, from my 
distinguished colleague Mr. Watt's questions, we are getting 
mixed signals from the Administration. To me, when we get mixed 
signals from the Administration, that gives us hope, because 
they are not fixed in their position on this issue. So we are 
scrapping here to save a program, and we need the help to do 
that.
    In that regard, let me go to you, Ms. Glover, if I may. We 
have legislation that as you can see from this committee has 
great broad bipartisan support. We feel very confident we can 
get that bill. Hopefully we can get it passed, hopefully we can 
turn the Administration around in its desire. We do feel 
confident, but there are some very serious issues that need to 
be corrected. We could use, and will be using the Atlanta 
situation as a model. The two primary concerns it appears to me 
that we have got to correct to build the momentum to revitalize 
HOPE VI is in the area of timeliness, the slowness with the 
process of trying to get these projects up and running, and the 
accountability of the money. The other area is in the cost, 
particularly comparative cost.
    What suggestions would you give us, one, that would help 
our legislation to be responsive to this, and how would we deal 
with these two areas specifically?
    Ms. Glover. Thank you for the question. In terms of 
timeliness of expenditure, we have to put this in context. The 
mixed-income model was not developed until 1996 when the first 
financial closing for the revitalization of Techwood/Clare 
Howell was approved by HUD. The grant was originally authorized 
and funded in 1992, so there was no legal, regulatory or 
financial ability to do mixed-income development until 1996. If 
you took a measurement of how long it has taken to redevelop 
the properties since 1996, you really are not talking about a 
long time frame. What HUD unfortunately has done is they are 
applying modernization timetables to a development process. We 
are not just going out to bid for new roofs and new building 
envelope systems. We are talking about, and the young lady has 
her huge bound volume, we are in fact engaged in a community-
building process. There are tax credit schedules every year. 
For example, in the State of Georgia they come out once a year 
with an offering of low-income housing tax credits. There are 
no set-asides for public housing development, but the policy 
certainly supports it, but there are also limits on how many 
tax credits get awarded to any one deal.
    Because we are doing market-rate development, there also is 
the question of absorption of units into the marketplace. You 
never want to flood the marketplace with too many units, 
because indeed you will not have the market-rate families. So I 
think if we can present to this committee a thoughtful analysis 
about the timeliness of obligation and expenditure, I think you 
will find that what is happening is that we are measuring it 
against the wrong benchmarks. Real estate development is 
fundamentally different than a modernization program I think if 
there are capacity issues, I think we need to be addressing 
those specifically, but we should not create the impression 
that there is a crisis here.
    By the way, the pipeline issue--these dollars have already 
been committed to specific projects. So that is dealing with 
what is on the table, but it does not deal with all of the 
literally hundreds of projects that need funding to do a better 
job and to have a more positive impact on the families and the 
communities.
    Chairman Ney. If I could, the time has expired. Let me get 
to Mr. Watt, and then if you want to come back.
    Mr. Watt?
    Mr. Watt. Thank you, Mr. Chairman.
    Let me just do several things. First of all, I think we 
would be remiss if we did not thank the chair for convening 
this hearing today. It has been an exceptionally good hearing. 
This panel in particular I think has shown us the wealth and 
breadth of opinions, problems, challenges and opportunities 
that are in front of us. I want to say to Ms. Frasier and Ms. 
Glover, despite the fact that I was out of the room when you 
testified, I was watching you in the back room. I just had to 
get something to eat, so I apologize to you. I thought both of 
your testimonies were outstanding. Ms. Frasier, you brought 
some very thoughtful things that a number of us have been 
exploring, of trying to figure out ways to make the HOPE VI 
program, if it does continue, a more effective program that 
does not end up displacing disproportionately or even 
displacing at all. I think there are communities in which a 
better job has been done on displacement and readiness and 
moving forward than other communities. We have seen that from 
this testimony.
    This has just been a great panel, including Mr. Husock. I 
am not going to beat up on him, because I really think he 
raised some questions that need to be raised. They need to be 
raised in academia, where he sits, and he needs to keep raising 
these questions with the students, and we need to raise them 
here, but he needs to understand that these were the same 
questions that were raised 10 years ago at the inception of 
HOPE VI. We have been answering these questions over and over 
and over again throughout this process. His notion that they 
will be answered over time I think is a sound notion, because 
we are answering them over time.
    Ms. Glover certainly has answered them in a comprehensive 
way in Atlanta. I hope that my friend Mr. Tracey will invite 
you to Charlotte to see the First Ward Place development so 
that you can see how the questions that you legitimately 
raised, that you ought to be raising in academia, have been 
anticipated and addressed in a real community. I was thinking 
about, one, you talked about these stresses that exist between 
low-income and higher-income people when you put them in the 
same community. We are answering that question, too. I 
remember, and Mr. Tracey probably can remember this, as soon as 
we got this wonderful community up and running, some of the 
upper-income residents wanted to close a sidewalk that ran 
through the community because the sidewalk went through this 
revitalized community over to the next, what I hope will be the 
next HOPE VI revitalization community. They did not want those 
people. Those people, they say, are walking through our 
neighborhood.
    So there was a stress between the higher-income people in 
that community and the lower-income people in that community 
who had to do a reality check with those folks. They set them 
down in a meeting. It was a classic meeting, and they said, 
well, you know, this was our community before you all ever got 
here, first of all. But second of all, those people that you 
are talking about are us. We just happen to be your neighbors 
now. They are not bad people; they just happen to live in a 
public housing complex over here, just like we did before this 
HOPE VI revitalization.
    Now, that is a creative tension that took place in that 
community. So I am not minimizing even your testimony, Mr. 
Husock. This has been a great panel to demonstrate how vital 
this program has been and how it has been used. I just wanted 
to finally, because I know the red light is on, I want to quote 
from HUD's February, 2000 report, since this is educating Mr. 
Husock day, in which HUD in February of 2000 found that the 
HOPE VI program represents the most dramatic change in public 
housing in the last 60 years and is transforming the nation's 
most distressed public housing projects. The report found, one, 
that HOPE VI is achieving its goals of community building--not 
just putting some houses there--community building. Two, HOPE 
VI is showing impressive results in helping residents move from 
welfare to work. Three, HOPE VI is helping residents move into 
the economic mainstream. Four, HOPE VI is dramatically reducing 
crime and violence in public housing. Five, HOPE VI is reducing 
the isolation of public housing residents. And six, HOPE VI is 
leveraging significant investments in community improvements.
    Those are some of the questions that you asked that we have 
been addressing over the last 10 years under HOPE VI. It was 
not because we ignored the question you asked, they are 
important questions. We have tried to address them, but this 
notion that we should take a breather--this ain't no breather 
that the president is talking about. This is a termination. It 
is an assassination of the program. It is not a breather. You 
will never resuscitate this program if you do not reauthorize 
it this time, because if it is ever terminated, it will not 
ever come back. So if you think this was about taking a 
breather, you obviously did not hear the first panel today. 
This is a termination of the program--a program which 
coincidentally was a Republican program that was based on 
assumptions to every question that you raised which we have 
been answering for the last 10, now 11 years, and getting good 
positive answers to.
    So I will leave that alone. I want to thank Mr. Guzman for 
being here. I think HUD was right. Mainstreet ain't got much to 
do with the original purpose of HOPE VI, but I am a big 
supporter of Mr. Leach and I am on his bill. If that is the 
price we have got to pay to keep HOPE VI going, I am all for 
it.
    And then, I want to thank Ms. Waters and Mr. Leach and all 
the other members who have made this a truly bipartisan effort 
because this should not be partisan. This should be about 
building America's communities and building the hope of 
America. One of my colleagues said this is about keeping HOPE 
VI alive, not keeping hope alive--keep HOPE VI alive. So if we 
end this hearing today, we can just chant, ``Keep HOPE VI 
alive, keep HOPE VI alive.''
    I yield back.
    Chairman Ney. Thank you.
    The gentlelady from California?
    Ms. Waters. Mr. Chairman, I just wanted to thank you, 
because I do not think the people out there realize that as the 
chair of this subcommittee, you did not have to hold this 
hearing, particularly when the Administration is sending you 
another kind of signal. So I am very pleased that you have held 
this meeting today and given all of these fine people an 
opportunity to come here and share with us their experiences, 
and to raise questions.
    Mr. Watt is a little bit more generous in his praise than I 
tend to be, however, I am appreciative not about--not more 
generous in his praise about holding the hearing, but about 
some of the directions of some of our panelists. But I am very, 
very pleased that we have done this, despite the fact that the 
Administration has sent the signal of discontinuing the 
program.
    I do believe there is hope for HOPE VI, and I do think that 
we need to do a little bit more research to help our position. 
For example, I really do want to know how much of that money is 
committed and in the pipeline, and whether or not money that is 
in the pipeline is being considered unspent as the case is 
being made for not reauthorizing this program. So I think 
following this hearing, we have the opportunity for our staffs 
to answer some of these questions through a little bit more 
work, and then we need to everything that we can to try and 
keep this program going.
    Let me just say to Mr. Guzman that I have been talking with 
the chairman part of today about the need for rural housing, 
and I believe that we can have a great bipartisan effort with a 
real rural-urban renaissance, as I call it. I do think that 
many of the needs of the rural community have been unmet, un-
thought about. There is a reason for that. Some of us come here 
knowing and understanding what our jobs are. We get called tax 
and spend liberals, whatever you want to call it, because we 
understand what the needs are and we have a lot of rural 
communities that are just not properly represented in terms of 
the poverty that those communities experience. I am hoping to 
develop a relationship with legislators who represent rural 
poverty who have not seen a need to really work and speak up on 
behalf of those communities. I think together we can do an 
awful lot.
    Again, I want to thank the chairman because he has done a 
yeoman's job in helping to eliminate some of the issues related 
to HOPE VI. I am very pleased that you all came, and I thank 
you for your time and your effort.
    Chairman Ney. I thank the gentlelady from California for 
her remarks.
    The gentleman has a closing comment?
    Mr. Scott. Yes, thank you very much.
    I, too, would like to echo the words of compliments that 
were offered by my colleagues, especially for taking the time 
and coming up. It has been very, very helpful. This has been a 
very, very worthwhile meeting, and it has opened my eyes up to 
the enormity of the problem we are facing and the challenge 
ahead. I think those of you here realize that we do have this 
challenge ahead. We have got to save this program. Hundreds of 
thousands of people all across this country are counting on us 
to save this very worthwhile program. It is my hope that as the 
president and the Administration turns a great deal of its 
attention to domestic issues and what is happening here in this 
country, that they will begin to really focus on this program 
as one of the cornerstones of what we have got to do in the 
future to make this country what we want it to be.
    There is nothing greater that we can do than to provide 
people with housing, a home. This is a process that we start. 
It is very important that we keep the trend moving of mixed 
income. It is very important that we build upon the successes 
that we have had. Certainly, Ms. Glover, you have certainly as 
all of you have done, but as we point to you, Ms. Glover, and 
we look at the success, let us hope that the Administration 
will look at the success of what we have done in Atlanta and 
other cities--in Los Angeles and North Carolina, in Miami, 
Pittsburgh. There are cities all across this country with 
sterling success stories, and let the successes rule the day--
not the one or two areas of failure. You are going to have 
those areas, but we have got to build this country on success, 
not on failures.
    Let us give it time to work, and let us put the 
measurements and the internal controls in to fix the problem. 
If the timeliness and the costliness is a problem, we can look 
to Atlanta to see how they did it and other cities, and make 
sure that we have this in this program. I am just delighted to 
be a part of working with both my colleagues Mr. Watt and Mr. 
Leach on their bills. I appreciate them giving me the 
opportunity to work on it. It is a very, very high priority 
with me, in no small measure because I know the economic, 
social and cultural impact and the positive thrust it has done 
in my home state of Georgia. Just as surely as it has done that 
in Georgia, done the right way, it can be that kind of success 
all across the nation. It has been said before, but there is no 
better way of saying it, let us not throw the baby out with the 
bath water. And as I said before, let's not cut somebody's legs 
off at the knees, and then condemn them for being a cripple. 
Let us save this program and let us let it be the shining light 
that this country is looking for.
    Thank you, Mr. Ney. I appreciate this opportunity, and 
thank you all for coming and sharing with us.
    Chairman Ney. I thank the members for their indulgence 
today and their time, and I want to thank all the witnesses for 
being here today. The chair notes that some members have 
additional questions for the panel which they can submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to these 
witnesses and to place the response in the record.
    Thank you.
    [Whereupon, at 4:56 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                             April 29, 2003
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