[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
 THE NEW YORK CITY EXPERIENCE: HOW HAS THE COMMUNITY DEVELOPMENT BLOCK 
                  GRANT PROGRAM SHAPED THE BIG APPLE?

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON FEDERALISM
                             AND THE CENSUS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 25, 2005

                               __________

                           Serial No. 109-77

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform



                                 ______

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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida           C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada                BRIAN HIGGINS, New York
KENNY MARCHANT, Texas                ELEANOR HOLMES NORTON, District of 
LYNN A. WESTMORELAND, Georgia            Columbia
PATRICK T. McHENRY, North Carolina               ------
CHARLES W. DENT, Pennsylvania        BERNARD SANDERS, Vermont 
VIRGINIA FOXX, North Carolina            (Independent)
------ ------

                    Melissa Wojciak, Staff Director
       David Marin, Deputy Staff Director/Communications Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

               Subcommittee on Federalism and the Census

                   MICHAEL R. TURNER, Ohio, Chairman
CHARLES W. DENT, Pennsylvania        WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       PAUL E. KANJORSKI, Pennsylvania
VIRGINIA FOXX, North Carolina        CAROLYN B. MALONEY, New York
------ ------

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     John Cuaderes, Staff Director
                       Shannon Weinberg, Counsel
                          Jon Heroux, Counsel
                         Juliana French, Clerk
            Adam Bordes, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 25, 2005....................................     1
Statement of:
    Bloomberg, Michael R., mayor, city of New York...............     9
    Butts, Rev. Dr. Calvin, pastor of the Abyssinian Baptist 
      Church; Chris Kui, executive director of Asian Americans 
      for Equality; and Dr. Ingrid Gould Ellen, associate 
      professor of public policy and urban planning at the New 
      York University Furman Center for Real Estate..............    65
        Butts, Rev. Dr. Calvin...................................    65
        Ellen, Dr. Ingrid Gould..................................    89
        Kui, Chris...............................................    80
    Towery, F. Carlisle, president of the Greater Jamaica 
      Development Corp.; Ronay Menschel, chairman of the Board of 
      the Phipps Houses; Mark Willis, executive vice president of 
      community development programs at JPMorgan Chase; and 
      Andrew Reicher, executive director of the Urban 
      Homesteading Assistance Board..............................    30
        Menschel, Ronay..........................................    37
        Reicher, Andrew..........................................    49
        Towery, F. Carlisle......................................    30
        Willis, Mark.............................................    42
Letters, statements, etc., submitted for the record by:
    Bloomberg, Michael R., mayor, city of New York, prepared 
      statement of...............................................    12
    Butts, Rev. Dr. Calvin, pastor of the Abyssinian Baptist 
      Church, prepared statement of..............................    71
    Ellen, Dr. Ingrid Gould, associate professor of public policy 
      and urban planning at the New York University Furman Center 
      for Real Estate, prepared statement of.....................    91
    Kui, Chris, executive director of Asian Americans for 
      Equality, prepared statement of............................    83
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, prepared statement of...............    98
    Menschel, Ronay, chairman of the Board of the Phipps Houses, 
      prepared statement of......................................    39
    Reicher, Andrew, executive director of the Urban Homesteading 
      Assistance Board, prepared statement of....................    52
    Towery, F. Carlisle, president of the Greater Jamaica 
      Development Corp., prepared statement of...................    33
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Ohio, prepared statement of...................     5
    Willis, Mark, executive vice president of community 
      development programs at JPMorgan Chase, prepared statement 
      of.........................................................    44


 THE NEW YORK CITY EXPERIENCE: HOW HAS THE COMMUNITY DEVELOPMENT BLOCK 
                  GRANT PROGRAM SHAPED THE BIG APPLE?

                              ----------                              


                         MONDAY, JULY 25, 2005

                  House of Representatives,
         Subcommittee on Federalism and the Census,
                            Committee on Government Reform,
                                                      New York, NY.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
the Sixth Floor Gymnasium of the Thurgood Marshall Academy, 
200-214 West 135th Street, New York, NY, Hon. Michael R. Turner 
(chairman of the subcommittee) presiding.
    Present: Representatives Maloney, Rangel, and Turner.
    Staff present: John Cuaderes, staff director: Juliana 
French, clerk; and Adam Bordes, minority professional staff 
member.
    Mr. Turner. Good morning. I want to welcome you to the 
Subcommittee on Federalism and the Census and our hearing today 
on, ``The New York City Experience: How has the Community 
Development Block Grant Program Shaped the Big Apple?'' A 
quorum being present of the subcommittee, this subcommittee 
will come to order.
    Before I go into my written remarks, I want to thank the 
mayor and his staff for an excellent tour today that we had of 
Harlem and the wonderful community development activities that 
are going on here. Although this hearing is about CDBG and the 
funding that the Federal Government provides, we know that this 
story is really the fabric of communities and the discussion of 
community development.
    Community development is about changing the places that we 
live and changing the lives of the people that live there. We 
have seen those examples today of people taking leadership in 
their communities and with Federal assistance being able to 
garner resources and to change their communities.
    I want to thank Congressman Rangel for having us here in 
his district today. We know you must be very proud of the 
things that the community here has accomplished I am certain 
with the aid of your leadership and we are very excited to see 
those examples today.
    I also want to thank Congresswoman Maloney for suggesting 
this hearing. She suggested this hearing not only because of 
her commitment to the CDBG Program but because of her intimate 
knowledge of the excellent accomplishments here and the fact 
that if we look at this Federal program and we look for 
accomplishments that we knew we could find them here in New 
York City. I appreciate her leadership and having us here.
    I would like to welcome you all to the Subcommittee on 
Federalism and the Census Field Hearing entitled, ``The New 
York City Experience: How has the Community Development Block 
Grant Program shaped the Big Apple?'' This is a followup to 
three hearings the subcommittee has held in Washington, DC, and 
the second field hearing held on the topic of CDBG.
    As a former mayor I understand that in order to comprehend 
the benefits and shortcomings of national programs, one should 
go to where the real action takes place. Field hearings allow 
us to do just that, to reach out to you and hear your views, 
your concerns, and your suggestions.
    As most of you here today are aware, CDBG is one of the 
largest Federal direct block grant programs currently in 
existence for use by local governments. State and local 
governments use CDBG moneys to fund various housing, community 
development, neighborhood revitalization, economic development, 
and public service provision projects.
    For over 30 years the CDBG Program has been a critical tool 
in the arsenal of cities to help create livable communities for 
individuals and families. Without question the program provides 
vital funds for addressing poverty and other community 
development needs. That is why I have worked hard this year 
along with my colleagues in Congress to ensure that the CDBG 
Program continues to receive a funding level similar to 
previous fiscal years.
    Nevertheless, in recent months the effectiveness of the 
program has been called into question. Much of this scrutiny 
has been related to the mechanisms used for delivering CDBG 
funds to grantees and whether those grantees have ultimately 
spent those funds in the most effective way.
    For this reason this subcommittee has come here to hear how 
you here in Harlem and elected officials and community leaders 
at the local level have used these funds and how your citizens 
have benefited from the CDBG Program. We are interested in 
learning from you what works in the program but also what does 
not.
    I am very pleased with the response to this hearing, 
especially the number and quality of witnesses seeking to 
testify today. It is this kind of response that makes it great 
to be back in New York City, especially in Harlem. On two 
occasions last year I had the opportunity to visit this great 
community. The first was with Congressman Chris Shays as part 
of a community development tour organized by living cities to 
see the successes of their programs.
    On my second visit to Harlem I had the opportunity to honor 
a number of Youth Action/YouthBuild students from my district, 
a program sponsored by the original Youth Action Program and 
Homes Program founded and located here in Harlem. It is because 
of this past experience and the presence of our distinguished 
panelists today that I am excited about this hearing. I know 
that it will be a tremendous success because of the experiences 
and successes that each of the members can bring to this panel.
    With that said, I would like to express my appreciation to 
the city of New York and to Mayor Bloomberg and to the Thurgood 
Marshall Academy for hosting us today. I would also like to 
thank my friend and colleague Congresswoman Carolyn Maloney and 
the Honorable Charles Rangel.
    I understand we also need to thank Dr. Calvin Butts who 
assisted us in arranging for this location today and, of 
course, the principal of Thurgood Marshall, Dr. Sandy Johnson.
    Our first panel consists of the distinguished mayor of this 
great city, Michael Bloomberg. I want to thank him again for 
his leadership and his efforts. I know, mayor, you must be very 
proud of your city and the things that you are accomplishing in 
the area of community development. Certainly your community is 
responding and your leadership is appreciated as we look to the 
great things that are happening in your communities and 
neighborhoods.
    Our second panel of witnesses consist of four 
representatives from the city of New York Development 
Community. They are F. Carlisle Towery, president of the 
Greater Jamaica Development Corp.; Ms. Ronay Menschel, chairman 
of the Board of the Phipps Houses; Mark Willis, executive vice 
president of Community Development Programs at JPMorgan Chase; 
and Andrew Reicher, executive director of the Urban 
Homesteading Assistance Board.
    Finally, our last panel we have three distinguished 
witnesses and they are Dr. Calvin Butts, Pastor, who we 
recognized earlier; Mr. Chris Kui, executive director of Asian 
Americans for Equality; and Dr. Ingrid Gould Ellen, associate 
professor of public policy and urban planning at the New York 
University Furman Center for Real Estate. I look forward to 
their expert testimony today.
    I now yield to the distinguished gentleman and long-time 
Member of Congress from the 15th District of New York, the 
Honorable Charles Rangel for any opening remarks that he wishes 
to make.
    Mr. Rangel. Thank you, Mr. Chairman. We are fortunate to 
have a former mayor at such an important subcommittee and my 
community thanks you for coming here. I want to thank Carolyn 
Maloney. Without her strong suggestion as to having our great 
community selected we probably would have been lost in the 
South Bronx some place.
    I think we really want you to take back to Washington, Mr. 
Chairman, the exciting enthusiasm of a community that has such 
a rich intellectual and cultural history that actually got 
bombed out in terms of homelessness, abandoned buildings, empty 
lots. Yet, we continue to persevere with people like Calvin 
Butts and Percy Sutton and entrepreneurs who came together with 
List and Enterprise and being able to have the empowerment 
zones and the restoration of the Apollo brought back a 
community that once again all of us can feel so proud of.
    Kids can go to school and know that they are coming home to 
decent surroundings, a place for people to live and go to work 
and to be able to bring people back home. It is a thriving, 
exciting community and the Federal Government must step up to 
the plate to make certain that this rich community remains 
affordable to all of our citizens so that they will be able to 
enjoy living where they have seen this rebirth of an exciting 
community.
    I want to thank the mayor and, more specifically, the 
chairman of the Housing and Preservation Department. There are 
so many ribbon cuttings that we are having in our community 
with Calvin Butts, with List, with Mark Willis, with the Addict 
Rehabilitation Center, people who have such exciting ideas as 
to how they wanted to see a community, and with local, State, 
and especially the Federal Government's help was able to 
fulfill those dreams.
    I hope we can take back to Washington the concept that we 
have heard, ``If it ain't broke, don't fix it.'' This is a 
community that has come back and we want to continue to make 
certain that our kids and generations to follow would be able 
to enjoy all that they are able to enjoy today.
    Thank you, and thank you, Carolyn, for your constant 
support, not only for this program but fighting for the city of 
New York. Thank you, Mr. Chairman.
    Mr. Turner. I now turn to my friend and colleague, the 
Honorable Carolyn Maloney, who sits on this subcommittee and 
who, as we acknowledged, first proposed the subcommittee come 
to New York City. Mrs. Maloney, I yield to you for your opening 
comments.
    Mrs. Maloney. Thank you so much. It is so wonderful to be 
home here in Harlem and to see the wonderful work of HPD and of 
the community to rehabilitate it. Ten years ago I was on the 
city council and spent a lot of time in Harlem. We just came 
from a tour. Mr. Mayor, it was unbelievable. Broadhurst used to 
be a drug infested crime area.
    New housing for families, TIL buildings turned into co-
operatives, the great Apollo helped by CDBG, St. Morris Park 
historic district, the parks. The city really is a symbol of 
how CDBG can work. Charlie, you must be so proud. What a 
wonderful legacy that under your leadership working with others 
all this affordable and available housing has come to our 
neighborhood.
    I tell you, we could not have a better friend than my 
colleague Michael Turner who was a mayor for 8 years in Dayton, 
OH, so he knows the challenges that mayors face. He knows the 
need for a flexible program that confront the needs as they 
come forward whether it is combating arson or urban blight or 
whatever. He was very instrumental in beating back the attempt 
to totally dismantle the CDBG Program and move it to commerce.
    Give him a standing ovation because that is important to 
our city. I mean it. They tried to cut it and move it and they 
tried to cut out the housing component which is the most 
important part of the program and this guy helped us put it 
back in.
    More importantly, he is going to help us save it because 
those people who tried to cut it out are going to be coming 
back after it. I am very pleased to welcome my constituent and 
friend Mayor Bloomberg as one of our witnesses, along with many 
colleagues with whom I used to work many years ago. I see you 
haven't gone too far in your life. You are still here battling 
for affordable, available, quality housing and it is wonderful 
to see all of you.
    Mr. Mayor, I appreciate very much the attention that your 
staff has focused on housing. It is critically important. As 
you know, even though we put 60 percent of city money in, 
without that 40 percent of Federal support it is very hard to 
do the many wonderful renovations and rebuildings and 
improvements that literally help people.
    I just want to state very seriously that one of the 
justifications the administration advanced for eliminating CDBG 
as we know it, and as the mayor knows, both mayors know, this 
is one of the few block grant programs that are flexible for 
communities so that you can use that money in a creative way to 
confront whatever the problem is. New York City, I am very 
proud of this city, historically has been a leader in coming up 
with answers on whatever the problem is.
    Regrettably CDBG did not score well on the OMB assessment 
rating test. While we supported it and we got it back, we need 
to come up with a way to measure the results of CDBG that 
demonstrates the benefit it has provided and I hope that we can 
work together with the witnesses today to find a scientifically 
solid measurement to put up against the administration's test.
    Also, because the program remains under-funded while more 
and more communities become eligible and apply to it, we face 
an ever shrinking pie and that situation will intensify with 
the questions of fair share. As representatives of this 
community, we each need to make the case for New York City. No 
one that has spent any time reviewing the numbers can contest 
that New York has significant needs and that the city has 
directed a CDBG funding to those who need it most but we need 
to make that case as strong as possible.
    I wanted to really note the very professional nature of 
your staff in Washington, Mr. Mayor. They are able. They are 
competent. They get back with research quickly. They are 
warriors for New York and we need them. A lot of formula 
changes look like they are not going to have a lot of impact 
but they mean a great deal of money, sometimes millions, to New 
York City and they do an excellent job.
    I appreciate your being here very much and the support of 
your staff. Charlie, you are the best always. Thank you, Mr. 
Turner. We are going to work together to make sure we preserve 
it in the next budget, too. Thank you so much.
    Mr. Turner. We will now start with the witnesses. Each 
witness has kindly prepared written testimony which will be 
included in the record of this hearing. Each witness has also 
prepared an oral statement summarizing their written testimony. 
Witnesses will notice that there is a timer light on the 
witness table. The green light indicates that you should begin 
your remarks and the red light indicates the time has expired.
    In order to be sensitive to everyone's time schedule, we do 
ask that witnesses cooperate in limiting their remarks. After 
the oral presentations of each panel, the subcommittee will 
followup with a question and answer period. It is the policy of 
this committee that all witnesses be sworn in before they 
testify.
    Mr. Mayor, I understand that you have Rob Walsh and Shaun 
Donovan with you who will also be answering questions so if the 
three of you would please rise for the administration of the 
oath.
    [The prepared statement of Hon. Michael R. Turner follows:]

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    [Witnesses sworn.]
    Mr. Turner. Please let the record reflect that the 
witnesses have responded in the affirmative. At this time then 
it is my honor again to recognize the mayor of New York City, 
Michael Bloomberg. We appreciate your time that you have spent 
in preparing for this hearing and also your attendance here 
today.
    It is important for us to get information from you. We have 
had the opportunity to see some of the great successes from 
your leadership and we want to hear obviously the ways in which 
CDBG and the Federal assistance has contributed to that.
    Mayor Bloomberg.

   STATEMENT OF MICHAEL R. BLOOMBERG, MAYOR, CITY OF NEW YORK

    Mr. Bloomberg. Chairman Turner, thank you. I join 
Congresswoman Maloney and Congressman Rangel in welcoming you 
and the members of the subcommittee to New York City, and 
especially to Harlem. I think when you go out on the streets 
you see what can happen when the public and private sectors 
work together and whether it is Sheena Wright and Calvin Butts 
of Abyssinian Development Corp. or similar groups throughout 
the city, you see that when people of good intentions roll up 
their sleeves and say, ``Let us not complain.''
    Let us not look back but let us go forward, you really can 
make a difference. Harlem also offers just excellent proof of 
what Federal community development block grants funding can 
achieve and continue to accomplish in our city.
    Mr. Chairman, as a former mayor yourself, you undoubtedly 
appreciate the importance of Federal support for our cities 
that permits a high degree of flexibility in discretion at the 
local level while also requiring local accountability. That is 
federalism at its best. I think it also perfectly describes the 
operation of the CDBG Program in New York City. It is why the 
program has produced outstanding results in housing and 
community development in our city.
    This morning here in Harlem you have seen exactly what I am 
talking about. Twenty years ago this proud neighborhood was 
plagued by the widespread abandonment of housing. My 
predecessors at city hall, Mayors Koch, Dinkins, and Guiliani, 
used CDBG funds to reverse that trend here and elsewhere in our 
city.
    The result is that today Harlem, like other New York 
neighborhoods that were once on the decline, are now 
experiencing a heartening revival. You only have to look at 
what has gone on on this street right by Thurgood Marshall 
Academy. Just take a look down 125th Street where two new 
hotels are being built.
    That means that we now have a new challenge, preventing the 
displacement of long-term community residents and ensuring that 
Harlem and other neighborhoods in our city remain places that 
people of all income levels can call home. The adaptability and 
local autonomy built into the CDBG Program means that we can 
use CDBG funds to do exactly that.
    With me today is the commissioner of the city's Department 
of Housing, Preservation, and Development, Shaun Donovan. New 
York City annually spends about $260 million in CDBG funds and 
HPD administers the larger share, roughly 60 percent, of that 
sum.
    Here in Harlem in Bushwick, in the South Bronx, and 
elsewhere in our city, HPD uses community development block 
grant funds to help tenants in what were once abandoned city 
owned apartment buildings to establish low-income co-ops and, 
in this fashion, take part in the great American dream of home 
ownership.
    We draw on CDBG funds to plan the reuse of former 
industrial brownfields in our city for affordable housing 
development. A key part of our administration's ambitious plan 
to develop and preserve affordable housing for more than 
200,000 New Yorkers.
    Shaun's team also uses a substantial percentage of CDBG 
funds for what they rather prosaically describe as code 
enforcement. Let me tell you what code enforcement means in New 
York City. When landlords in Harlem or in other communities are 
unable to unwilling to make basic emergency repairs in low-
income housing, tenants call our 311 citizen service number for 
help.
    We then use CDBG funds to ensure that people who have 
nowhere else to turn get heat, hot water, and can live in homes 
that are safe. We also use CDBG funds for comprehensive 
improvement programs for substandard privately owned 
residential buildings. Safe, affordable housing is crucial to 
the revival of communities like Harlem but so are many other 
factors. The genius of the CDBG Program is that it encourages 
such robust neighborhood development.
    Also with me today is Rob Walsh, the Commissioner of the 
New York City Department of Small Business Services. A major 
mission of Rob's agency is creating healthy environments for 
the businesses that sustain neighborhood life in our 
revitalized communities.
    As detailed in our written testimony, SBS's neighborhood 
Small Business Solution Centers, its storefront renovation 
programs, and other initiatives, all of which benefit from CDBG 
funding, are helping us realize that goal in Flatbush in 
Brooklyn, Hunts Point in the Bronx, and in other communities.
    CDBG funds also support daycare centers that help New 
Yorkers with children move off the welfare rolls and onto the 
job payrolls. They fund the renovations of senior centers 
throughout the city. CDBG funds also underwrite the city's 
outreach to homeless mentally ill men and women in and around 
the Staten Island Ferry terminals.
    The CDBG Program is, in short, critical to the people of 
New York. When the proposed Federal budget threatened it with 
extinction earlier this year, I wrote to congressional leaders 
expressing my strong support for preserving this program. I 
applaud the action taken by the Senate and the House to 
maintain the CDBG Program. I urge you all to increase funding 
to at least last year's levels.
    Mr. Chairman, like you and other members of this committee, 
our administration also believes strongly that CDBG funds must 
be spent where they are needed most and that local governments 
must be held to stringent standards in their expenditure. We 
have promised the people of New York just such efficient, 
transparent, and accountable city government and we have 
delivered in the administration of these funds as in other 
areas.
    Let me stress unequivocally that our administration has 
zero tolerance for waste, fraud, or other misuse of any public 
dollars. What is more, CDBG funding has been highly targeted 
and has produced results. As you know, Federal law requires 
that a minimum of 70 percent of CDBG funds benefit low-income 
people.
    In New York City I am happy to say we far exceed that 
target. In fact, 93 percent of our CDBG funds benefit low-
income people. Independent research findings and other 
testimony that will be presented to you later today will also 
describe the economic ripple effect that CDBG funds have in 
encouraging nonprofit and private lenders to invest their own 
funds in housing and community development.
    By supporting our initiatives in affordable housing, small 
business development and other areas, CDBG funds have played a 
vital role in the revival of our neighborhoods. Because New 
York is the Nation's largest city, the one most frequently 
visited by tourist from overseas, and a symbol to the world of 
how our Nation has bounced back since September 11th, every 
American has a stake in helping us continue to write such 
success stories.
    We look forward to working with this committee to insure 
that happens. Now we will be glad to take your questions.
    [The prepared statement of Mr. Bloomberg follows:]

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    Mr. Turner. Mayor, there are two basic criticisms that were 
levied against CDBG in the process this year when the proposal 
occurred to zero out the budget. One was that the program 
lacked specifics in its goals and objectives. The goal and 
objective that was cited was that of community development. The 
term community development was one that lacked clear definition 
and, therefore, it was very difficult to provide any 
measurement as to whether or not community development has 
occurred.
    The second was that the belief that CDBG was a duplication 
of other programs, that there were other sources readily 
available to cities to seek funding to apply to some of the 
programs, projects, some of which you have just described. 
Would you talk for a moment about the issue of community 
development?
    I think someone such as yourself who have worked in the 
areas of turning neighborhoods around can certainly speak to 
the issue of how can we look at knowing when community 
development is occurring that it is something that CDBG can 
cause to happen and the act that what other sources you might 
look to as a mayor to replace CDBG funds if they weren't 
available.
    Mr. Bloomberg. Well, it would be very difficult to replace 
the funds obviously. The city is always strained by lots of 
different objectives and needs. Let me say that I think we are 
not an expert on how other cities use CDBG funds so we can 
really only talk about ourselves but I think there are ways to 
measure the effectiveness of this program. You go out in the 
streets and you look for vacant lots, deserted buildings.
    If those aren't there, that says people are going and 
renovating and moving in, not leaving. They are doing it 
because the community is better. You look at the crime 
statistics. Communities that are growing have lower crime 
because people want to make sure that they have safe 
neighborhoods and they understand they are part of police work, 
working with the police and having zero tolerance for neighbors 
who try to take away their freedoms to go about their business.
    Looking at the schools and seeing whether the schools are 
getting better, that is another way all of this comes together. 
If people have hope and pride in their neighborhoods, if they 
think that things are getting better and it is not hopeless, if 
they come to the realization that they don't have to settle for 
the problems of the past. In fact, in this country they can 
make things better. I think you go back and you say that is the 
result of a lot of things but CDBG money is clearly a big part 
of it.
    You want to add something, Shaun? Mark Page is my 
commissioner for all the moneys that get distributed, Office of 
Management and Budget. Mark.
    Mr. Page. I think New York City's budget obviously in the 
short-term, I mean, sometimes a little bit more money and 
sometimes there is less but overall it is under extreme stress 
all of the time in finding resources. The existence of this 
program over now decades means that there is an ongoing program 
and an ongoing research that can be focused on the community 
development and low-cost housing purposes that it served so 
well without having to start by competing with every other city 
service for the money.
    It is actually a continuous source and it can focus on how 
best to spend this sum with some confidence that it will go on 
which is perhaps why it is so important that Federal funding 
continue in this program, that it not become the same kind of 
annual competitive process that city services otherwise face.
    Mr. Donovan. I think also, just to take a specific example, 
when you ask about replacing that funding, if you think about 
the In-Rem housing stock that we saw this morning on the tour, 
nobody would have predicted when CDBG was begun exactly what 
the funding would have been used for.
    We were able to respond to that crisis by managing those 
properties, the day-to-day how are you going to pay the bills, 
who is going to be in those buildings making sure the tenants 
are safe. Nobody at that point would have predicted that 10 
years later we would have had such success in turning those 
buildings around that we would have been able to shift that 
money to a new use which was actually beginning to rehabilitate 
them and beginning to focus on the privately owned stock.
    None of the other Federal housing programs have that 
flexibility that allows us to shift those to those needs 
whether it is Section 8 vouchers, tax credits, home funding, 
all of those we use to build projects. CDBG is really the only 
funding stream that we have that we can use flexibly to be able 
to shift with the changing needs that we have in our community 
and that is what is so critical about the flexibility.
    Mr. Turner. Flexibility is an important point because just 
as your needs shift, the needs of every community throughout 
the country shift and differ so allowing a program where the 
Federal Government doesn't dictate how they are to be used 
really does allow the local community to determine what needs 
they are responding to or have as a priority.
    That leads me to my next question. You were talking about 
the things that you accomplished and the shifting needs and 
flexibility. I am very impressed with the leveraging aspects of 
CDBG. When those funds are used by a community as seed moneys 
how they attract other capital. Mayor, perhaps you could talk 
about the issue of how those funds have been able to attract 
other investments as you have identified areas through 
development.
    Mr. Bloomberg. Mr. Chairman, I don't think any government 
even combining Federal, State, and city tax revenue sources 
would have enough money to make the big dent that this country 
needs in improving its housing stock and solving lots of other 
problems. You have to have the private sector come in.
    The private sector is driven by capitalism. You have to 
make it attractive for them. They have to think that they can 
earn a good return and they will look to the trends, how safe 
their investment is going to be, and whether it is likely to 
get other investment whether they are going to be the only 
investor, which they don't want to be, or whether they will 
join a whole group of people.
    I have always thought that Congress should hold cities 
accountable for how they spend the money. But when a city does 
it intelligently and shows results, don't penalize that city by 
taking money away from it. Quite the contrary. You are really 
getting something for your money and you should give them even 
a greater share.
    You have to have an incentive for cities to use money 
intelligently or they will waste it. New York City has not 
wasted Federal moneys. I think you can demonstrate with clear 
hard numbers that this city whether it is in job creation or 
making a better quality of life for people or finding housing, 
those people who were here during the tough times and now are 
getting squeezed out by a rising real estate market, you can 
show that New York City has done with the Federal Government 
what Congress intended those moneys to accomplish.
    Rob, you want to talk about job creation just as a good 
example.
    Mr. Walsh. Well, job creation is one example. Our agency 
uses a very small portion of the money but it goes a long way. 
Over the last 3 years we funded over 150 different groups who 
are out there working to improve store fronts along commercial 
districts, some of the things you saw today whether it was on 
125th Street, 116th Street.
    I quickly think of an example on Myrtle Avenue and Brooklyn 
where we worked with the local development corporation 
grassroots effort. Over the last 2 years over 40 small 
businesses moved into the area opening up coffee shops that 
didn't exist and restaurants and bookstores and other 
businesses that happened.
    When you start thinking about leverage, you look at some of 
the other development, the private sector development that is 
taking place. In the case of Myrtle Avenue a local university 
also moved onto a block which they would have never thought 
about before. We could not have done that without the money 
because where else would the grassroots organization get the 
money.
    They could go to the banks. They could go to a number of 
other groups but it is limited funds. New York City has the 
most comprehensive local development corporation system in the 
city. Many of these groups are one, two, three, four blocks of 
merchants associations that have come together.
    What the mayor has done in the last 2 years, as I mentioned 
to you on the bus, he has taken the Workforce Investment Act 
money to the Department of Employment and he has linked it with 
small business services. We are now making links between 
economic development as you would see in the local stores.
    We have set up small business centers throughout the five 
boroughs. We went by one today on 125th Street. We go after the 
merchants and we ask about jobs. ``What jobs do you have and 
what jobs are available?'' We are now linking that money. We 
are leveraging other Federal money, other State money, other 
local money to get people jobs in their communities.
    Mr. Donovan. I would add on the housing side that you will 
hear from two folks today in testimony, Mark Willis from 
JPMorgan Chase who will talk very directly to this issue of 
leveraging. Every single project that we do we link up with the 
private sector with a very sophisticated network of banks like 
JPMorgan Chase and others that bring funding to these projects 
to leverage the Federal funds.
    At the same time you will also hear from Professor Ellen 
from NYU who will talk about the leveraging effect that these 
funds, particularly CDBG funds, have had on neighboring 
property owners.
    Very sophisticated statistical analysis that shows that 
where these investments are made people surrounding those 
investments improve their properties more than in other areas 
and the values of those properties rise more than other areas. 
That shows very directly that there is private investment 
leveraged by these investments if they are done right as they 
are done in New York City.
    Mr. Turner. I now recognize Mr. Rangel for his questions.
    Mr. Rangel. Thank you. Mr. Mayor, would you share with the 
chairman in addition to improving the quality of education and 
creating jobs how important it is that low and middle-income 
people be able to gain access to the apartments that are being 
built in the community?
    Mr. Bloomberg. The Congressman is part of an effort. He was 
really the instigator in getting our administration to form a 
commission of government leaders, of union leaders, of 
developers, of financiers to try to make sure that one of the 
biggest growing industries in this city, construction, is open 
to everybody who lives in this city. We want to make sure that 
all of our industries and all parts of city government roughly 
reflect the population of this city. In the past there are 
reasons to believe that was not the case.
    It turns out that by working with the unions and with the 
developers you are starting to see more and more agreements on 
big projects that the developers agree to make sure that 
minority and women-owned businesses, for example, get an 
opportunity to bid on contract, they have knowledge of them, 
they know how to bid, and they get the opportunity to partner 
with bigger companies.
    You are starting to see the unions open up and understand 
that it is in their interest if they want to have the best work 
force and grow with the city, that they make their programs 
available to everybody. It is also incumbent on the city to 
make sure that our education system going forward produces 
children or young adults that have the skills necessary to 
compete in the modern world.
    Today you go into the construction industry and you have to 
have a level of academic skills that would have been unheard of 
just 10 or 20 years ago. Today construction is a job that 
requires the ability to work together and to use complex 
technology to build the great buildings. The Congressman has 
kept our feet to the fire and we have a long ways to go but I 
am committed to making sure that everybody in this city who 
wants a good job has the opportunity. All they have to do is to 
work hard.
    This is a city where we don't ask where you come from. We 
only ask what you can do. While that is probably not true 100 
percent it is getting more and more every day. We have an 
educational system that for a big city is actually pretty good 
but for a system that produces children with the skill sets 
required for tomorrow's jobs we have failed too many of our 
children and we are committed to not doing that anymore.
    One of the things I am most proud of is that we started to 
close the gaps between different ethnic groups, for example, in 
this city, or different economic groups in terms of the 
children's ability to read and write at grade level. We still 
have a long ways to go but the latest results were very 
encouraging. I want to make sure that whether you want a job 
with city government or you want a job in the private sector, 
if you work hard, that opportunity is available to you.
    Mr. Rangel. Well, the major thrust of my question is how we 
formulate the rent structure in these buildings so that there 
will always be set aside a sufficient number of apartments for 
low and moderate-income people because whenever a community is 
being improved as fast as we are, it is always the fear that 
the people who struggle to make it this way will not be able to 
afford to stay here.
    Mr. Donovan. What we have done in the properties that we 
have renovated here in Harlem and the new construction that you 
see going on all over Harlem under this mayor's administration, 
we have focused first of all on making sure that existing 
residents can stay in place and we do that in a couple of 
different ways.
    One is we use a combination of CDBG funds and other Federal 
funding with Section 8 vouchers which are another incredibly 
important resource to make sure that rents get set at 30 
percent of that individual or family's income and make sure 
that they are able to stay.
    Even more importantly we have an expansive effort. We have 
now helped close to 20,000 households become homeowners in 
those city-owned buildings. Not only are they able to stay 
affordable but they can actually participate in the 
revitalization of the community through building equity in home 
ownership.
    We actually visited a couple of those, they are called TIL 
buildings, this morning on our tour of Harlem and they are a 
very, very important part of our overall strategy to help 
people stay in the community. In fact, the training that we do 
in other parts of that TIL Program are funded directly by CDBG 
so it is a very, very important piece of our overall strategy 
in terms of helping folks stay in the community and keep that 
housing affordable.
    Mr. Rangel. Thank you, Mr. Chairman.
    Mr. Turner. Congresswoman Maloney.
    Mrs. Maloney. Thank you for your testimony. You outlined 
all the wonderful things the city is doing with these grants 
and we saw it today. One of the justifications the 
administration uses for eliminating CDBG as we know it was that 
the program did not score well on the OMB assessment rating 
test.
    Maybe from your perspective you could help the Federal 
Government define what progress is. How can the Federal 
Government define what progress is? Do you have a rating system 
within HPD or within the administrative Executive Office that 
rates these programs and defines whether or not they are 
successful?
    In other words, the Federal Government wants more 
accountability and they want a definition of what is success 
that they can rate. Second, should a city lose grant dollars if 
they cannot meet the Federal benchmark for success? More 
importantly, what should be that banner for success that they 
can objectively look at it so we can answer their concerns?
    Mr. Bloomberg. Shaun can give you some specifics but I 
would argue that, in fact, the Federal Government should insist 
on deliverables, should insist that their money is used 
intelligently, should measure whether or not there is progress, 
and penalize those who don't make progress and reward those 
that do. Otherwise, it is just verbiage.
    If you want some macro numbers as to whether or not Federal 
programs--it is always difficult to single out the affect of 
any one of them but I will give you some numbers that say that, 
in fact, New York City is using Federal moneys intelligently. 
Our population is at an all-time high. Life expectancy in this 
city is greater than it is in the country as a whole.
    Our bond rating has been raised to the highest it has ever 
been in history. Our crime rate has declined to where it was 
back at the beginning of the 1960's. Deaths by fire, deaths by 
traffic, all of those kinds of public health things the numbers 
are down to low numbers that nobody ever would have expected.
    You can go right down whether it is improving schools or 
improving quality of life, whether it is measured by people 
that vote with their feet or measured by independent agencies. 
You can make the case that we are doing it intelligently--
whether it is Federal moneys, State moneys, or city moneys.
    Shaun, you want to add specifics?
    Mr. Donovan. Yes. First, I would just say I think no 
administration in any city around the country is more focused 
than the mayor is around this issue of accountability. From 
what we have done in putting things up on our Web sites to 
measuring the performance of every single agency throughout the 
city it has been enormous focus. We would love to be helpful on 
this issue as you go forward with the specifics of it.
    Mrs. Maloney. Commissioner, have you developed any type of 
evaluation mechanism specifically for the CDBG grants that show 
they have been successful that we might be able to use on the 
Federal level that shows that maybe it is generated more people 
living in an area, more tax revenue, more community activity?
    Mr. Donovan. I would say a couple things. First of all, we 
do have testimony from Professor Ellen that will speak directly 
to that issue. Very clearly the research that we have done 
around the city's housing investments has demonstrated 
substantial increases in neighboring property values, 
improvements in many, many neighborhood indicators such as 
crime and others and has actually showed a dramatic return to 
the city itself in terms of increased tax revenues. On all of 
those we have very good evidence that shows that these results 
have been achieved.
    What I would also say, however, is that we have to 
recognize that this program by its very nature and flexibility 
is a difficult one to measure. We have to retain some 
flexibility in the measurement systems themselves because of 
the flexibility of the program. We think that the joint 
consensus document that has been developed in Washington among 
a number of groups is a good start in terms of doing that.
    Develop some broad categories for performance and rate them 
within those broad categories. I think beyond that trying to 
get to a single or a very limited set of indicators on these 
programs because of its very nature is going to be difficult 
and really would be a mistake we believe.
    Mr. Page. I think this question of an objective rating 
scale, we think that we spend the money very effectively for 
community development but what does that mean? I think it might 
be helpful to just briefly go down the list. We obviously spend 
a lot of attention on housing but we spend CDBG money on home 
repair services for elderly homeowners to prevent abandonment 
of buildings.
    There is a certain amount of money for information provided 
to the elderly and senior citizen centers on housing. There is 
daycare in some communities, assistance to crime vehicle 
victims, improvement of schools, graffiti, vacant lot cleanup 
and greening of vacant lots. There is a whole broad list of 
very specific purposes where this money is spent which we think 
the purposes are successful and effective in building 
communities and making the city a good place to live.
    But a quality rating you need to look at the very specific 
uses and see how that is working in that community. It is hard 
to figure how you bridge from this very concrete detail to some 
sort of cosmic level that is going to be meaningful to Federal 
OMB. It is going to be a lot of work to do that.
    Mrs. Maloney. OMB also proposed to move CDBG out of HUD to 
really terminate its housing function and to move it to the 
Department of Commerce for mainly economic development. From my 
years on the city council CDBG was housing. It was used to 
leverage TIL, to leverage investment, to leverage the 
preservation of historic buildings.
    We saw all of that today. I would like the mayor to 
elaborate and give us some more examples of how CDBG has been 
used to leverage the money for housing, the newest initiative, 
the new market place plan, how will CDBG support that, and how 
has it worked. Another very important part of it is the 
flexibility which you pointed out in your testimony.
    I think that is a very important part of CDBG that it is 
flexible and that your creative team can work on coming up with 
new ideas of how to use that and giving concrete examples of 
how it has been used creatively will help us save the program. 
There is also a movement in Congress to move it away from a 
block grant that gives the discretion to a city to more of a 
formula-driven program and your feelings on whether or not it 
should remain a block grant flexible program and why.
    Mr. Bloomberg. Well, for a start, Congresswoman, I think 
each city has its own unique problems but even more importantly 
what is a city where the boundaries create the city and create 
the suburbs vary so dramatically that if the Federal Government 
has one size fits all kinds of requirements, you will wind up 
really doing nothing for anybody.
    In terms of the economic development, in the end I have 
always been a believer that companies go where their labor 
force and their customers want to live. The best thing that you 
can do to create economic activity is to make a place where 
everybody says, ``That is where I want to raise my family, send 
my kids to school, have the entertainment of family things 
together, quality time.''
    That has been our strategy in this city, reduce crime, make 
the schools better, improve the parks, keep the street clean, 
make sure there are cultural institutions. When you do that, 
companies say, ``I don't have any choice. That is where I want 
to be because that is where the work force I need and my 
customers are going to be.'' Those quality of life decisions 
are the first decisions generally that people make. Then they 
go looking for a job.
    Mr. Walsh. You will hear later today from Carlisle Towery 
and I think that is one of the great examples of what Carlisle 
has done over the decades in Greater Jamaica Development Corp. 
Obviously there is a lot more work to be done. Rebuilding the 
retail corridor, improving the transportation, working with the 
local university, creating jobs.
    You will hear about the industrial initiatives going on, 
saving the manufacturing jobs. The manufacturing and industrial 
jobs pay more so we should be spending a good amount of money 
to ensure that there are skilled workers. Congressman Rangel, 
this is something that you have talked about on the new 
commission on jobs of training people in those areas. Not only 
construction but other skilled areas in addition to retail 
where there is a greater possibility for promotion and 
opportunity. That is exactly what you are going to be hearing 
from Carlisle later on.
    Mr. Turner. Thank you, Mayor Bloomberg. I appreciate both 
your hospitality today and then the tour, your comments here 
today, and the preparation that you have had for this hearing. 
Also, it has been great to look at your leadership in community 
and neighborhood development.
    The second and third panel that we are going to have are 
some of the partners that you have used in formulating some of 
this redevelopment from the private sector, the nonprofit 
sector, and also your faith-based partnerships. We are going to 
be very excited to hear from them.
    Before we end this panel, I wanted to give you an 
opportunity, or any of your staff opportunities, to add to the 
record anything that we have not asked today that you did want 
to speak on or anything that you have heard in questions that 
you would like to embellish before we end panel one.
    Mr. Bloomberg. I would just like to urge you to listen to 
Congresswoman Maloney and Congressman Rangel when they argue 
for more funds for this program and particularly where those 
funds should be spent. I think they are both highly 
intelligent, have the interest of the country at heart. You 
couldn't do better than follow both of them. Incidentally, 
while you are here, we would love to have you spend more time 
and spend more money. We need the sales tax revenues.
    Mr. Turner. Thank you. Then we have just some closing 
remarks from Mr. Rangel.
    Mr. Rangel. I can hardly resist the opportunity to have a 
candidate running for reelection under oath but I will pass. 
Thank you for coming, Mr. Mayor. I want to thank the chairman 
for honoring our community and the work that we have done, and 
certainly our friend Carolyn Maloney for pointing it out. We 
are so proud of what we have done and we know we have a lot 
more to do.
    We couldn't have done it without the people in the 
audience, Mark Willis and certainly Rev. Dr. Calvin Butts. The 
Harlem community of churches have done such a fantastic job. 
Before this hearing I made an appointment to visit some people 
at the Calvary Hospital. As you know, it is a hospital for the 
terminally ill.
    I won't be able to hear the rest of the testimony but in 
addition to the rebuilding of Harlem, I cannot be more proud of 
the people that are in this audience that have taken time out 
to show our appreciation for the Federal Government, local and 
State officials, for making our community. My mom was born 
here. I was born here. It is a great deal of pride to be able 
to see this happen before I leave. Thank you so much.
    Mr. Turner. With that we will take a 2-minute recess as we 
turn to panel two. The witnesses consist of Carlisle Towery, 
president of the Greater Jamaica Development Corp.; Ms. 
Menschel, chairman of the Board of the Phipps Houses; Mark 
Willis, executive vice president of Community Development 
Programs at JPMorgan Chase; and Andrew Reicher, executive 
director of the Urban Homesteading Assistance Board. Thank you.
    [Recess.]
    Mr. Turner. If everyone can take their seats, we are going 
to start with the second panel.
    Our second panel of witnesses consist of four 
representatives from the New York City Development Community. 
They are F. Carlisle Towery, president of the Greater Jamaica 
Development Corp.; Ms. Ronay Menschel, chairman of the Board of 
the Phipps Houses; Mark Willis, executive vice president of 
community development programs at JPMorgan Chase; and Andrew 
Reicher, executive director of the Urban Homesteading 
Assistance Board.
    I know that you are all aware that on the table there are 
lights that will tell you when the 5-minute period has 
concluded. You also get a yellow warning before it actually 
concludes. At that point if you could summarize and conclude 
your comments. If I have mispronounced any of your names, 
please reintroduce yourselves. Thank you for being here, both 
for preparing your written testimony and the time that you are 
taking in sharing your stories with us today.
    We will begin with Mr. Towery.

  STATEMENTS OF F. CARLISLE TOWERY, PRESIDENT OF THE GREATER 
  JAMAICA DEVELOPMENT CORP.; RONAY MENSCHEL, CHAIRMAN OF THE 
    BOARD OF THE PHIPPS HOUSES; MARK WILLIS, EXECUTIVE VICE 
PRESIDENT OF COMMUNITY DEVELOPMENT PROGRAMS AT JPMORGAN CHASE; 
      AND ANDREW REICHER, EXECUTIVE DIRECTOR OF THE URBAN 
                 HOMESTEADING ASSISTANCE BOARD

                STATEMENT OF F. CARLISLE TOWERY

    Mr. Towery. Thank you, Mr. Chairman, distinguished Members 
of Congress. We very much appreciate your leadership on this 
issue and the attention you are giving to New York City.
    I am Carlisle Towery from Greater Jamaica Development Corp. 
This is a wonderful opportunity for us to point out the 
productive partnership with the city and my organization 
through CDBG funded contracts with the Department of Small 
Business Services and the Economic Development Corp.
    The staffs we work with in these two dedicated agencies are 
especially able, innovative and effective. We have had no 
experience over my 34 years there of any waste, and I mean 
that, or any misuse but just talent and dedication and results.
    The flexibility of the CD funds have been essential in the 
undertakings we have had with them, an older downtown in the 
center of Queens County serving some 600,000 people. A large 
minority of lower and middle-income populations have been the 
beneficiary.
    In a 10-year period early in our efforts, Jamaica took some 
huge hits. Economic distress, disinvestment, loss of public 
confidence all characterized Jamaica between 1975 and 1985. 
These were the effects from outlying regional malls beginning 
in the 1960's. By 1972 four large malls encircled downtown 
Jamaica.
    Jamaica has come back since 1985 due largely to a 
thoughtful, ambitious overall plan backed by consensus and 
executed with actions and projects enabled by CD funds, 
leveraged several times over in particular projects providing 
us with a base of operating support.
    Another Federal program, the Community Reinvestment Act 
[CRA], I want to emphasize, has played with CDBG a fundamental 
role in Jamaica's recovery and growth. Region-serving public 
investments were made in Jamaica pursuant to its plan and major 
private investments have followed.
    Our mission is jobs really, economic development, enabling 
job growth, assisting in retaining and attracting and creating 
a setting hospitable to jobs and private investment. We 
undertake a range of activities. I have appended our corporate 
resume, as we call it, which elaborates and indicates the level 
of CDBG support for our involvement in each effort.
    Note that CD funds have been used in various ways by us and 
by the city to accomplish a range of projects leveraging 
substantial public and private dollars. And CD funds for our 
operations have built our capacity to attract private 
participation in our work and to generate earned income. Our 
base operating budget in 1980 was $1.7 million of which 20 
percent came from CDBG funds. This past year CD's share of the 
$8.7 million we spent was 4 percent.
    I will reference a few of the 37 projects in that resume in 
which we were instrumental and which CDBG funds assisted, 34 of 
the 37 key projects through Small Business Services and EDC and 
the city of New York. One of the Mid-Block Project with capital 
costs of $64 million over a 20-year period. It is hard for us 
to calculate precise CD participation, which we can do, but 
assuming that 10 percent of our funds were spent over that 
time, CD participation was $500,000 roughly.
    The U.S. Food and Drug Administrationsited an $85 million 
regional headquarters and lab in Jamaica. The project cost us 
over the years $800,000 in predevelopment work and $125,000 of 
that came from CD.
    Intermodal Infrastructure Improvements with Congressman 
Meeks who is another very able Congressman in community 
development, and Senator Schumer using U.S. DOT CMAC funds. We 
did vision, planning, and implementation project in which we 
have raised $21 million from State and Federal funds toward a 
$50 million project.
    We had an interesting Clearance and Improvement plan, a 
city urban renewal plan. We did some high visibility 
improvements for flat parking and a farmer's market. We spent 
$200,000 of CD funds. We ended up acquiring from the city their 
municipal parking facilities and just recently built a garage 
$11 million of which the architectural design fee for that 
garage, $220,000, came from CD funds. They also underwrote 
demand and feasibility analyses of $75,000.
    CD funds capitalized $375,000 to startup in 1980 a small 
business revolving loan fund, U.S. EDA funds and private funds. 
We have loaned $5.6 million in small deals leveraging $24.4 
million from private sources creating 540 jobs and retaining 
780. I am happy to report scarce business for our fund in 
recent years which I attribute to the exceptionally good work 
of several commercial banks cooperating with, and often 
exceeding, Community Reinvestment Act objectives.
    We created four Special Assessment Districts that cost 
about $250,000 over several years to launch, create, and hand 
off four business improvement districts. The annual budgets of 
those four are now about $1.2 million. I hope that indicates 
some of the leverage factors that we have in specific projects.
    CD funds have been an essential element that allowed us to 
work with government for Jamaica's economic recovery. I want to 
highlight, please, the remarkable multiplier effects of CD 
funds skillfully administered by this city for local and 
economic development. Thank you very much.
    [The prepared statement of Mr. Towery follows:]

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    Mr. Turner. Thank you.
    Ms. Menschel.

                  STATEMENT OF RONAY MENSCHEL

    Ms. Menschel. Thank you, Mr. Chairman. Thank you 
Congresswoman Maloney and Congressman Rangel for having this 
hearing. It is very important to New York City.
    I want to focus my remarks on two communities that we are 
deeply involved with in the South Bronx because I think it best 
illustrates the impact of the CDBG funding in New York City.
    The first is one in Morrisania where Phipps Houses, which I 
might add is not-for-profit, 100 years old. We own 4,100 units 
of housing. We have been involved in community development for 
100 years. The properties that we rehabilitated through the 
city's vacant cluster program were the vacant In-Rem properties 
that sort of symbolized the decay of the South Bronx in the 
1970's.
    The city at that point in the late 1980's provided funding 
so that these buildings could be rehabilitated. Subsequently 
we, through another city program that has been assisted by 
CDBG, and that is the Neighborhood Redevelopment Program, has 
taken over partially occupied buildings. Most important we were 
able to integrate the tenants of these buildings into the 
programs that we had established, the human services, 
educational, social services programs that were established in 
the community through both our vacant cluster program and the 
community redevelopment.
    A second community where we have invested for approximately 
30 years we run a Beacon School and that, too, is a program 
that has been assisted by CDBG. The importance of this Beacon 
School investment is that it has encouraged us to leverage from 
the base of the Beacon School further investment in the 
community. We raised through charitable support money for 
educational programs, Head Start, After School, a whole host of 
programs to help our residents move forward on the base of 
sound housing which we provide in the community.
    CDBG has helped and assisted the Bronx River Alliance. It 
has provided assistance to a local community arts group. It has 
provided assistance through Green Thumb. As you see in my 
written statement, a lot has been done with the community in 
building up the fabric of the community through a whole host of 
programs. I think that really points to the importance of CDBG 
and that is the flexibility of funding a variety of programs, 
the sum of which is much greater than just adding up each 
individual part.
    The administration asked Mayor Bloomberg about the 
effectiveness, I think, of the administration's management of 
the programs. They have been very effective. The mayor has put 
communities and affordable housing four square in his agenda. I 
have remarked to myself right now whenever we have rezoning, 
and that is a major portion of his agenda, it is no longer a 
question of whether there is to be affordable housing. The 
argument is over what the percentage of affordable housing 
there is to be.
    The mayor is looking for affordable housing in all of these 
communities. This, of course, is the result of providing funds 
directly but also providing incentives for private development 
for that affordable housing.
    Let me go back to West Farms, the question of where the 
money is going and the needs of the communities to which it is 
going. West Farms, that is our South Bronx community where we 
have this Beacon School, is one of the poorest communities in 
the area.
    We lost something like half of the housing in the 1970's 
through abandonment and through drug problems. The community 
now is home to immigrants. Sixty-three percent of our families 
speak a language other than English and 20 percent are 
linguistically isolated households.
    These communities are homes to immigrants and my pitch to 
you is that the needs of these families are a national concern 
and, thus, justify Federal resources being devoted to community 
building in communities of immigrants as well as communities of 
families who need further assistance to advance economically 
and socially in this country. Thank you.
    [The prepared statement of Ms. Menschel follows:]

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    Mr. Turner. Mark Willis.

                    STATEMENT OF MARK WILLIS

    Mr. Willis. Thank you. Members of the committee, good 
morning. Thank your for the opportunity to speak to you today.
    My name is Mark Willis and I head the Community Development 
Group at JPMorgan Chase. The Community Development Block Grant 
Program has played a critical part in allowing us to provide 
over $3 billion in financing for affordable housing and 
community economic development in New York City over the last 
10 years.
    In addition to our community development loans and 
investments, JPMorgan Chase has also provided over $5 billion 
in home mortgages and small business loans in New York City's 
low and moderate income neighborhoods in just the last 5 years. 
Without the city's commitment to rebuilding these communities 
and without the flexible dollars that come from the Community 
Development Block Grant Program we would not have been able to 
infuse these types of dollars in these communities.
    I want to just take a second. You were nice enough before, 
Mr. Chairman, to mention the previous tour by Living Cities. I 
do wear a couple of the hats here, one of which is co-chair of 
Living Cities which is a consortium of national foundations, 
financial institutions, and Federal Government agencies working 
together to increase the vitality of America's cities and 
quality of life in urban neighborhoods.
    Over 15 years it has invested more than $370 million in 
cities across the country helping to leverage over $11 billion. 
All of that, again, would not have been possible without the 
kinds of support that come to cities through the Community 
Development Block Grant Program. Wherever I look and talk about 
what is important in communities, you see the incredible 
importance that Community Development Block Grant money makes.
    I also serve as co-chair of Housing First! coalition in New 
York city of over 300 nonprofit and for-profit developers, 
community-based organizations, religious institutions, civic 
groups, businesses, banks and labor unions that support a 10-
year, $10 billion housing plan. You can see what tremendous 
gains and support we have gotten from the mayor here.
    Again, when you look at what the sources of money are and 
the ability of the Federal Government to help in the city's 
housing program you see the importance of the Community 
Development Block Grant Program.
    From a bank's point of view, and I guess I am the one that 
is going to speak from the perspective of the financial 
services industry, it is important where we invest to have 
communities that are stable and where people, projects, 
businesses can afford to borrow money and be able to pay that 
money back.
    The role of Community Development Block Grant Programs 
here, you have heard many other examples in stabilizing 
communities here. It has been incredibly important for us to be 
able to invest, to lend that $3 billion that I mentioned 
before, to invest over a quarter of a billion dollars in the 
New York Equity fund which works under the Low-Income Housing 
Tax Credit Program to create affordable housing in all five 
boroughs.
    If you want to make a difference in communities, you want 
to be able to attract large amounts of private capital. The 
building blocks of that start with programs like the Community 
Development Block Grant Program.
    I am very fortunate at JPMorgan Chase to head a unit that 
specializes in working in low and moderate-income communities 
that brings a very specialized and knowledgeable set of experts 
to be able to be, what I sometimes call using the shorthand, 
investment bankers to low and moderate-income communities. 
There is no way we could do that in isolation, again, without 
the kind of investment that this city has made and so much of 
that goes back to what is available as a result of the 
Community Development Block Grant Program.
    There are lots of examples you are hearing from other 
people about the way these flexible dollars have been able to 
help to stabilize communities, help them then rebuild 
themselves and grow and prosper. I think the message that I 
would like to leave here is obviously healthy neighborhoods 
benefit all of us and government plays a key role in turning 
around our intercity neighborhoods.
    This flexible program that you have, the Community 
Development Block Grant Program, has been key to this work. 
Without these types of investments by the public sector, the 
private sector institutions like JPMorgan Chase would not be 
able to do what they do best, invest in the future of our 
communities, the people, the housing, and the businesses. Thank 
you very much.
    [The prepared statement of Mr. Willis follows:]

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    Mr. Turner. Mr. Reicher.

                  STATEMENT OF ANDREW REICHER

    Mr. Reicher. Good morning. Thank you for your interest and 
concern for the Community Development Block Grant Program and I 
am pleased to have the opportunity to appear before you this 
morning. I want to talk a little about UHAB and I want to talk 
about CDBG-funded program, the TIL Program which you have heard 
some about already.
    This program has been central to my work and my 
organization for the past 27 years. I am Andrew Reicher and I 
serve as executive director of UHAB, the Urban Homesteading 
Assistance Board. UHAB was founded in 1973 in response to New 
York City's housing abandonment crisis.
    Sponsored by the Cathedral Church of Saint John the Divine, 
UHAB was founded on the simple notion that these abandoned 
buildings were opportunities and not problems and that given 
the right resources and technical assistance, neighborhood 
residents could help meet their own housing needs through the 
rehabilitation and ownership of these buildings.
    UHAB's early work was Urban Homesteading providing 
technical assistance and training to groups of low-income 
residents, homesteaders, undertaking the self-help rehab of 
vacant city-owned buildings and purchasing them as limited 
equity co-operatives with their own sweat equity.
    As you no doubt heard this morning, in the early 1970's 
disinvestment and non-payment of taxes and landlord abandonment 
continued to grow throughout the 1970's affecting up to 20 
percent of the city's housing stock and over 40 percent of the 
housing in some low-income neighborhoods.
    In 1977 Local Law No. 45 was enacted. This allowed the city 
to begin foreclosure after just 1 year of non-payment of taxes 
instead of 3. This new In-Rem law intended to stop landlord 
abandonment resulted in the city taking ownership of buildings 
before they were vacant and abandoned.
    Between 1978 and 1979 the city vested title to 14,000 
buildings with nearly 40 percent still occupied. What had been 
a crisis of vacant, abandoned and often burned and devastated 
property was now a management and fiscal burden. The newly 
created Department of Housing Preservation and Development 
accepted a proposed solution from the Task Force on City Owned 
Property, a coalition of elected officials and housing 
advocates and city-owned building residents, to create a series 
of alternative management programs that became the Division of 
Alternative Management Programs [DAMP].
    These programs were designed to repair and dispose of the 
properties often as tenant-owned co-operatives. Chief among 
these programs is the Tenant Interim Lease Program. The TIL 
Program was designed to give tenants an opportunity to learn 
how to own and operate their own building during an interim 
period lasting 3 to 5 years. The buildings remained in city 
ownership and were leased and managed by the Tenant 
Association.
    TIL is a people program, not bricks and mortar. The 
Community Development Block Grant money is invested in staff, 
both city and UHAB, to help build strong co-op organizations. 
The HDFCs you saw this morning are a good example. UHAB under a 
Community Development Block-funded project provided training, 
series of manuals and class materials, and technical 
assistance.
    Tenant Associations opened a bank account and began 
collecting rents, paying bills, making needed repairs, 
employing staff, and undertaking all the functions of the day-
to-day management of a New York City apartment building.
    HPD monitors progress and oversees buildings; receives 
monthly financial and management reports. Rehab plans are 
developed by HPD. Then the residents are temporarily relocated 
while the building undergoes extensive rehabilitation utilizing 
city Capital and HOME Funds. Once rehab is completed UHAB 
converts the building to co-operative ownership selling the 
apartments for $250 per apartment.
    The sale and co-op conversation trigger a new set of 
issues, skills and knowledge for the tenants and leaders. The 
co-op corporation takes on all the responsibilities of home 
ownership, management and co-perative governance.
    Through our CDBG-funded contracts UHAB provides an array of 
training courses, seminars focused on these co-ops that build 
on the TIL experience. Follow-on technical assistance remains 
available as help the Tenant Associations to make the 
transition to co-operative and to help with whatever issues 
they may face in the future.
    Community Development Block Grant-funded training, 
technical assistance, and ongoing support both from UHAB and 
HPD staff has been essential for the success of the TIL Program 
for nearly 27 years. The manuals, training materials, and 
technical assistance methods developed for the TIL Program have 
been used by organizations undertaking similar development in 
cities throughout the country from Alaska to Texas, Vermont to 
California including Iowa, Nebraska, New Jersey, Washington, 
DC, Chicago, Boston, Minneapolis. Groups in Russia and South 
Africa have built upon the method, materials and capacity that 
this CDBG-funded program has developed.
    As for the success of this Community Development Block 
Grant Program, research has shown that over 1,000 co-ops 
resulting from TIL and other alternative management programs 
are the best managed and best maintained when compared to 
similar housing. The co-operatives over time are more 
affordable and have lower levels of drug and crime activity 
than buildings in their neighborhoods.
    Given a choice residents prefer the TIL Program than other 
programs that lead to co-operative home ownership over rental 
development and disposition programs. Residents involved with 
the TIL Program are reported to learn skills and confidence 
that results in improved employment, increased education 
attainment, higher levels of civic participation, and a high 
likelihood of voting.
    The TIL Program and the resulting co-ops have been 
effective tools overcoming the impact on neighborhoods of 
abandonment, disinvestment, and preventing displacement of low-
income residents in hard economic times and will in the future 
prevent displacement due to gentrification in the current 
housing market. CDBG and the TIL Program provide much more.
    The knowledge, experience, materials and processes 
developed through this effort serve as the basis for local 
residents, community organizations, banks, housing developers 
and others to undertake co-operative home ownership as part of 
new housing programs like the Third-Party Transfer Program to 
meet the city's current housing situation.
    Co-op home ownership based on the success of the TIL 
Program has become an important tool in the efforts to preserve 
nearly 200,000 units of existing affordable housing that is at 
risk today in New York City.
    Thank you.
    [The prepared statement of Mr. Reicher follows:]

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    Mr. Turner. Well, I want to thank each of the members of 
our second panel again. You are practitioners, if you will, in 
the area of community development. You bring to the table a 
great amount of expertise and knowledge of community 
development. But I want to commend you also because we know 
that because of your hard work you are making a difference in 
communities and in people's lives. You are changing the 
opportunities for communities and, therefore, the people that 
live there by the partnerships and the efforts that you put 
together.
    We have heard some great stories from you today in your 
testimony on partnerships on capacity building, on leveraging, 
on the need for flexibility. I am going to talk for a minute 
about the criticisms that we have heard of the CDBG Program, 
areas where it has had vulnerabilities and attempts to try to 
close the program. And a little bit about some of the issues 
where HUD could improve its administration that might help us 
in advocating the program.
    One of the criticisms against the CDBG Program was that it 
was ineffective. In the argument of its ineffectiveness the 
Office of Management and Budget looked to how success is 
measured. HUD's response is that every community is required to 
do a comprehensive plan. In the comprehensive plan they must 
detail eligible uses for the funds. If the community spends 
those funds consistent with the consolidated plan, then it is 
deemed effective.
    OMB sought a little bit greater analysis of even if you 
spend it consistent with how you say you are going to spend it, 
what are you achieving? How is the community changing? What can 
we see that has occurred in the community that would not have 
occurred without these funds?
    My question to you is going to go to the consolidated plan 
process because HUD's initial response was in the community the 
practitioners, if you will, and the community leadership have 
an opportunity to participate in the consolidated plan and 
thereby formulated an impact of the description of what the 
uses are for.
    Many people consider that to be insufficient, that we need 
a greater justification, greater measurement to be able to show 
all of your results. I wonder if you might speak for a moment 
if any of you in your organizations have participated in New 
York City's process of formulating its consolidated plan or, as 
HUD has said, in looking at whether or not the funds in the 
local community are being spent consistent with the 
consolidated plan.
    Mr. Towery. Mr. Chairman, I have been there quite a while 
in this business of practitioner of economic development. I 
can't remember the number of times I have participated with the 
city in planning and discussing numerous times. I do not recall 
a precise focus on the consolidated plan but we are planners in 
Jamaica and we participate all the time with the planners from 
the city on both the economic side and the city planning side.
    We are not short on planning and we are not short on result 
measurement. We are held accountable by DSBS in our reports for 
what we have done with their funds on an annual basis. I think 
it would be quite easy for me just with my little turf to 
report on the effectiveness of the funds. There is no question 
in my mind that there are many, many things that otherwise 
would not have happened or would have taken much longer. I 
would love to have a crack at justifying all of our projects 
that we have worked on.
    Ms. Menschel. My experience has been really HPD has had 
ongoing consultation with our organization and other 
organizations on what is happening, what the needs are in our 
communities. Furthermore, we have headed up local planning 
initiatives working with the residents of our communities to 
determine what is needed and that, too, is fed through the 
network of community boards that the city has and the reports 
of those community boards I know is very important in 
developing the CDBG plan.
    If I may just make one additional comment, I think that 
sort of the proof is in the pudding. Prior investments by the 
Federal Government and housing restoration and just building up 
housing does not prove nearly as successful as what you have 
seen in the last 25, 30 years. For me it marks back to the Koch 
housing plan in 1986 in which Mayor Koch launched a 10-year 
investment by the city. Those were city dollars but what CDBG 
did was to provide resources that complimented that capital 
investment.
    Furthermore enabled the city to maintain and gradually 
graduate into the NRP programs and other programs, all this 
housing stock the city had taken ownership in. Then from our 
point of view having invested significantly both our private 
equity and our city capital dollars, the inspections and the 
maintenance of properties has been terribly important.
    Finally, the compliment of social services has been 
important in maintaining those neighborhoods so the fact of the 
matter is that you see neighborhoods that investments have been 
made over the last 25 years and you don't see them going into a 
period of deterioration. The fact is they are getting better 
and better. You saw it out here today. That in a sense is the 
most telling indicator, if you will, of success.
    One other indicator. When welfare reform was approved, our 
communities were supportive of people who needed to get off of 
welfare and find employment. Even as the time periods expired, 
even as the economy became more difficult, people did not go 
back onto welfare. Our welfare rolls, I think, are probably the 
lowest they have been in years. There, too, is another success 
of the construct that is providing flexible multi-program 
support for our communities.
    Mr. Willis. I would like to make a couple comments here 
thinking about the program and evaluating it, one of which is 
here, as Ronay and others have said, Mayor Koch started this 
plan in 1986. We are here almost 20 years later. It is a great 
time to be talking about all of the successes that we can see 
really in almost every, if not in every, neighborhood across 
the city.
    The point of that is this is longer term. It isn't like you 
can come up with something that is going to change in 6 months. 
I was at one point Deputy Commissioner for Development and we 
went through the first year and a half of the Koch plan and 
nothing happened that people could see at all. Yet, a whole 
infrastructure was being put in place. A pipeline was being 
developed. The conversations and consulting with the community 
was going on.
    One of the things that I would caution here in coming up 
with a criteria that you don't want just what are the inputs. I 
understand that. If you are looking for long-term change you 
can't ask for short-term results and make the dollars depend on 
that. I am sure I don't need to mention to the chairman here. 
He has seen many other cities as I have including his own where 
he was previously the mayor.
    They may not be having all the prosperity that New York 
City is and may not be seeing what we are seeing in the 
turnaround in almost all, if not all, of our neighborhoods. I 
think this is very, very hard to be able to come up with 
criteria. We keep talking about the flexibility and the 
flexibility across cities and across this 20 years as to what 
the money has been used for and to measure the progress.
    One thing that I would mention, I know in New York City it 
did leverage the 10-year Koch plan. $5.1 billion here in 
Community Development Block Grant Program and the activities. 
As talked about before, we would not have been able to have the 
impact we have today.
    Mr. Reicher. I would echo it. I mean, in terms of 
participating in the city planning, I mean, our contracts that 
we had for 27 years now we report meticulously to the city. In 
that reporting we also find a lot of things that we learn so 
that over time we changed our approach. We have adjusted this 
and changed that. We measure both the success and things that 
didn't work so well are able to change.
    The city for its part is receiving incredible amounts of 
information each month and each year from us that goes into 
their specific planning as well as sort of comprehensive looks 
that we take periodically of all the buildings that we have 
worked with to see where they are going, trying to understand 
what are the indicators of success and so forth.
    One of the great things about Community Development Block 
Grants is that while there are lots of sort of bricks and 
mortars, you know, financial kinds of numbers that you can look 
at, the other things that are much harder to quantify are the 
successes over time of building the people who live in these 
buildings, the skills that they learn and the tasks that they 
undertake and the accomplishments that they make.
    The success of the TIL buildings to become co-ops has 
little to do because in the early years very little rehab was 
done. It has to do with the efforts and the desire of residents 
to sort of remain in their buildings and then the skills that 
the Block Grant-funded contracts and literally the city Block 
Grant-supported staff are able to support them and provide so 
that they can do this work. It is not something that we do. It 
is not something really that the city does. It is a way of 
facilitating others.
    That is going to be very hard to measure, I believe. It is 
something that while being accountable measuring, doing all 
those kinds of things are going to be important, the program 
and its flexibility and the success, at least, from what we 
have done could easily be lost if we had to be accountable for 
a dollar in and a dollar out kind of thing because there is a 
lot of unmeasurables that we need to, I guess, either learn how 
to measure or articulate in other ways.
    Mrs. Maloney. I want to thank all of you for your life-long 
dedication to affordable housing. I had the honor of working 
with all of you when I was on the city council and it is truly 
great to see you again.
    Andy, one of my personal favorites was the Homesteading 
Program and we worked very hard in East Harlem with you and 
others in HPD to save housing. I know you said it is very hard 
to get an accurate measurement tool but we have to do it 
because if we don't do it and help come back with a measurement 
tool, they are going to keep coming at us.
    I just would join the chairman in really asking the same 
question that later in writing if you could come back with a 
perspective of how to pursue an accurate measurement tool. 
Obviously in the TIL Program it could be the number going into 
ownership. Just living in the apartment is saving the building. 
It is very, very important.
    Mark, you raised the point, which I thought was a very good 
one, that you have to look at it long-range. Housing is not 
something that you do, and you know more than any of us on the 
whole panel, over night. It takes long-term planning and 
thinking to get the financing together. I believe deeply and 
strongly in CDBG. What we saw today shows it works. It has 
literally revitalized entire neighborhoods not only with 
commerce but housing. It is incredibly important. We have to 
come up with it.
    Ronay, congratulations on your 100th anniversary of Phipps 
Houses which happens to be located in the district that I 
represent and we have been honored to represent you. And, of 
course, Mr. Towery, you probably hit every single program out 
there that you got involved.
    One of the things, and my question is to ask you to think 
about how we document and work with HPD so that we can come 
back with a document before they cut us again next year so that 
we can come in and ask for more money and not just try to 
maintain our position.
    I love cities. I think cities are so important for ideas, 
for the strength of the country. Yet, I see many of our funding 
formulas hurting cities. I think a major question of the 21st 
century is going to be who pays for the cities of the aging 
infrastructure, the many, many challenges that are unique to 
cities. Yet, the support federally has been dwindling for 
cities.
    Instead of sitting there and waiting for what happens, 
which is another cut back in CDBG or cut back in Section 8 or 
in public housing support, what ideas are created anew that you 
think we should take back and try to implement and come forward 
with aggressive new ideas as opposed to just sitting there and 
trying to defend the housing programs that have been in place 
that are now literally being chipped away every single year.
    How can we confront who pays for the cities? What are the 
great ideas to save our cities? You can get back to us in 
writing or anyway that you think we could respond. You are 
wonderful examples. You have all done incredible work and we'll 
take that back to Congress with our report.
    Mr. Willis. I'll just do something that the mayor if he 
were here would probably say. One thing is it would be nice if 
we weren't sending so much more to Washington than comes back 
here. It is not just ignoring but really I think that there is 
a great deal of economic engine here that needs to be allowed 
to do its own work without having a net drain.
    Mrs. Maloney. Any other ideas? Are you having any problems 
with interacting with HUD or regulations that you feel need to 
be modernized?
    Ms. Menschel. Maybe I will just say that I think HUD, some 
of its regulations and dealing with community groups could be 
streamlined. I think that is one of the virtues of CDBG is that 
there is this block grant and there is the flexibility of local 
decisionmaking and there is a lot of value to that as opposed 
to a bureaucracy often driven from Washington that is making 
things very complicated and it is taking a lot of time and that 
cost money.
    Mrs. Maloney. Well, we will take that back.
    Mr. Willis. I would just say from, again, the financial 
services sector in order to be able to put the investments we 
have in the community, we need a reliable partner and I think a 
lot of this discussion about this program and many others are 
making it more questionable about whether that public/private 
partnership can actually work so that we can bring the kinds of 
dollars that we have into the neighborhoods that you have seen 
today.
    Mrs. Maloney. Are you accessing the Treasury Department's 
financial services programs that they have for communities? Are 
you working with them, too?
    Mr. Willis. We would like to think we have one of the best 
CDFI programs in the country for everybody, Community 
Development Financial Institutions. We just got a low-income 
housing tax credit allocation so we would be working with that 
program as well. And BEA, another acronym for people, Bank 
Enterprise Act, is also something else we have been able to 
take advantage of. There are many problems.
    I guess the most important one really in Treasury is the 
Low-Income Housing Tax Credit Program which we are one of the 
largest investors in the country in that program. Not just here 
in New York City but obviously a lot of other places as well so 
those are programs. The nice thing about low-income housing tax 
credit, ``Here are the rules and you follow those and here is 
what you get.'' I think there are other programs that because 
they are subject to annual appropriation and the kind of debate 
we are having here make it hard for us to do long-term--get 
involved in long-term projects that require public/private 
leverage.
    Mrs. Maloney. I must say that after HPD cut the Section 8 
program I literally had one community group that was afraid 
they cut their 202 even though they had it and did not want to 
go forward with it. What you are saying is that the disruption 
and reliability of the program is causing huge problems in the 
partnership. I think that is an extremely valid point you made.
    Mr. Reicher. One of the things that I would mention is that 
I see a striking parallel in sort of the early days when the 
city was facing sort of abandonment In-Rem housing crisis and 
sort of recently identified crisis that we are facing in HUD 
funding projects which are the buildings that are failing out 
of their inspections, the distressed HUD subsidized buildings.
    We have identified 70 to 90 buildings with 17,000 units in 
New York City alone and this is a nationwide phenomenon of 
buildings that are severely distressed under HUD financing. 
There are a lot of lessons to be learned of the TIL Program and 
the other CDBG-funded programs that the city used to redevelop 
these programs. We have actually been able to turn nine of 
these buildings over to residents and to local community 
groups, Abyssinian being one of them, and some of them right in 
this neighborhood.
    But there is another 70, 80, 90 buildings in the city alone 
and HUD's response and the ability for them to move properties 
in the proper direction and provide the support and so forth 
has a lot to learn from what we learned over these last almost 
three decades with the In-Rem properties in New York City. I 
think it is a place where we are going to preserve housing. 
This is some of the kind of housing we already know how 
preserve. We just need a willing partner in Washington.
    Mrs. Maloney. Thank you. My time is up. I congratulate all 
of you for your extraordinary achievements in affordable 
housing.
    Mr. Turner. I want to thank you also. Your stories are 
inspiring and your critical expertise is obviously necessary 
for the success that is here and other communities certainly 
can benefit from what you are accomplishing and using the best 
practices and the models that you have here and the efforts 
they are taking in their communities.
    Before we go to our next panel, I just want to give you one 
opportunity if you have any closing comments on anything that 
we have not asked you that you did want to say to give you an 
opportunity to put that on the record now.
    Mr. Towery. Mr. Chairman, I realize that I didn't mention 
that I am not sure that anything we are doing or have done is 
replicable. They are sort of unique. There is no handbook for 
how you do it in a place like this except that my experience 
was when I went there, this place had deteriorated or was in a 
level of problem where it was too bad for the private sector to 
invest and stay and stick with it and not quite bad enough 
compared to other parts of New York City for government to 
really have programs. It was never a model city under Lyndon 
Johnson. It wasn't bad enough to be a model city.
    There is something to be said about nonprofit brokers and 
advocates who work with both sectors and speak out of both 
sides of their mouths and say to government, ``Look how bad it 
is,'' and to Mark Willis, ``Look how good it is,'' so that you 
can put together the public and private sectors around specific 
objectives.
    I don't know if that is replicable or not but when you are 
devoted to a particular place and you have a plan and you have 
consensus behind it, you really do need the flexibility of 
either sector agent or broker who can put it all together and 
stick with it and persist and glue it together.
    I think that is a lesson that--I don't know how you would 
do it otherwise without CDBG funds. We probably wouldn't be 
here if when we got our first CD money our board had left 
essentially from the private sector, was disinvesting and 
moving out to the suburbs.
    We probably could not have managed to operate and continue 
that role without the CDBG contract. It matched what we already 
had and challenged us to raise more. As I told you, now it is a 
very small portion of our income that we do raise. This is 
tooting my own horn but in a generic way, please. Thank you.
    Ms. Menschel. Maybe just further on your question about 
looking at the cities in the future. I think that what we have 
seen in recent years is far more integration, as we have all 
started to say, of both private investment and public 
investment. Shaping programs that are going to encourage 
private investment and facilitate it as opposed to undermining 
it is important. A lot of that is timeliness and predictability 
of the government side of things.
    The second is the role of not-for-profit in communities. 
Not-for-profits often are the organizations that are there for 
the long haul. That is very important for community stability 
and protection of the investments that are made.
    Mr. Turner. Any closing comments?
    Mr. Willis. I am fine. Thank you.
    Mr. Reicher. I know that one of the areas that is also at 
issue is the funding of city staff. I should say that our 
ability to accomplish what we have accomplished in our program 
comes in a partnership with HPD. Our ability as a nonprofit and 
our relationship with residents in buildings and the co-ops is 
of one nature and HPD staff has their role to play.
    Without both of them it is a much more difficult one. I 
think that the overall impact of the program needs to be looked 
at. I know this comes up, and came up, and will continue to 
come up. I think that it would diminish the success of the 
program to sort of say absolutely you can't have it one way.
    Mr. Turner. Thank you. Well, we thank you very much and we 
will take a short recess as we seat the third panel.
    [Recess.]
    Mr. Turner. Thank you. We will reconvene to hear our third 
panel. We have Rev. Dr. Calvin Butts, pastor of the Abyssinian 
Baptist Church; Mr. Chris Kui, executive director of Asian 
Americans for Equality; and Dr. Ingrid Gould Ellen, associate 
professor of public policy and urban planning at the New York 
University Furman Center for Real Estate.
    Dr. Butts, we will start with you.

 STATEMENTS OF REV. DR. CALVIN BUTTS, PASTOR OF THE ABYSSINIAN 
    BAPTIST CHURCH; CHRIS KUI, EXECUTIVE DIRECTOR OF ASIAN 
 AMERICANS FOR EQUALITY; AND DR. INGRID GOULD ELLEN, ASSOCIATE 
 PROFESSOR OF PUBLIC POLICY AND URBAN PLANNING AT THE NEW YORK 
            UNIVERSITY FURMAN CENTER FOR REAL ESTATE

               STATEMENT OF REV. DR. CALVIN BUTTS

    Dr. Butts. Good morning. Thank you. I want to commend the 
House Government Reform Subcommittee on Federalism and the 
Census on conducting this hearing. I want to again greet and 
welcome to Harlem and Thurgood Marshall Academy the Honorable 
Michael Turner from the Third District of Ohio, the great city 
of Dayton. Thank you very much for being here.
    And, of course, to say hello to our dear friend 
Representative Carolyn Maloney. We also appreciated the 
appearance of Congressman Rangel, our Congressman. And I am 
pleased to have an opportunity to testify on such an important 
matter.
    The successful and sustainable revitalization of our urban 
centers has been and is a driving principle of my personal 
efforts for well over 30 years. In addition, I now lead a 
nearly 200-year-old institution, the Abyssinian Baptist Church. 
By the way, Mr. Chairman, I want to say that the chairman of 
our deacon board and many of our members who reside in this 
community and elsewhere have been a part of this hearing 
throughout its entirety. I want to thank them for being here 
because they know the importance of this very important 
hearing.
    The Abyssinian Baptist Church has been at the forefront of 
social justice issues since its inception. Abyssinian has also 
been a leader in the development of Harlem from its birth as 
the African American business, social, and cultural capital of 
the world over 80 years ago through its development and 
revitalization today.
    You have and will hear a lot of statistics about the 
importance of the Community Development Block Grant Program. My 
task today is to breathe life into these numbers and to give 
you a sense of the flesh and blood impact the Community 
Development Block Grant Program has had on the heart and soul 
of one of the most important communities in the United States 
of America, the community of Harlem.
    I believe Harlem is a fitting community to examine and 
evaluate the past success and the future of such an important 
national program. The story of Harlem's decline and its 
revitalization of a community world renown for its rich 
cultural legacy has been constantly elevated as the story that 
most exemplifies the story of our Nation's urban centers for 
its triumphs and its tragedies. Federal policy has always 
played a critical role in the development as well as the 
destruction of our communities.
    Adam Clayton Powell, Jr., one of the great leaders of the 
Abyssinian Baptist Church, one of the great leaders of the 
Harlem community, and one of the great leaders of our nation, 
understood the impact of Federal legislation on our communities 
and, as such, sponsored and co-sponsored more than 50 measures 
of responsible Federal legislation. We here in Harlem have also 
felt the impact of Federal policy designed sometimes 
intentionally and sometimes not to dismantle, disempower, and 
destroy our communities.
    We well remember the Housing Act of 1934 which established 
the Federal Housing Authority with the intention to improve 
housing conditions and standards which in actually promoted 
segregation and through the Federal Homeowners Loan Corp. 
defined black integrated and racially changing neighborhoods as 
not credit worthy. Actually drew maps coloring these 
neighborhoods red. Federal policy red-lined our communities 
early on and choked out economic development and home ownership 
and other wealth-building opportunities for its inhabitants.
    Another appalling example is the Housing Act of 1949 which 
was founded on slum clearance. And the Interstate Act of 1956 
which allowed local municipalities to use imminent domain to 
pay through communities of color. I mention these Federal 
policies today to underscore the critical importance of your 
deliberation about the future of the Community Development 
Block Grant Program.
    Much of Adam Clayton Powell's sponsored legislation was 
directed to correct those destructive policies of this 
investment. Those policies led directly to the blight and decay 
in Harlem that was present when I came to Harlem in 1972.
    After nearly five decades from 1910 to 1950 of immigration 
and an extraordinary growth of the African American population, 
central Harlem's population peaked at 226,000 persons in 1950.
    Beginning in 1960 to 1990 the trend of the previous five 
decades was reversed to population decline and central Harlem 
lost 54 percent of its population during this same period. With 
the abandonment of residential and commercial properties and 
red-lining by financial institutions between 1970 and 1980 
central Harlem had its largest single population loss of 34 
percent within one decade.
    By 1990 the area's population had declined to its lowest 
count of 98,747. The first increase in population since 1950 
did not occur again until the recent census of 2000 reporting a 
population of 107,178, a modest gain of 8,431 residents over 
the previous 1990 census count.
    Mr. Chairman, I want to continue with this because those 
who have gathered, and I know you already have the testimony, 
this is so important when considering this Federal program that 
is in jeopardy. When I came to Harlem in 1972, 2 years before 
the Community Development Block Grant Program was initiated, it 
became apparent that the Federal Government had to step in and 
try to deter the widespread abandonment.
    It is difficult to describe the socioeconomic climate of 
Harlem at the inception of the Community Development Block 
Grant in 1974. Plainly, a Federal aid package with its housing 
initiatives and commitment to creating viable communities could 
not have come at a better time.
    Harlem was badly damaged during the civil unrest of the 
1960's, a situation that was exacerbated by the city's 
financial crisis in the 1970's. There was blight and 
devastation perpetuated by decades of disinvestments marked by 
an exodus of residents suffering from unbearable economic and 
societal factors, a pandemic of poverty which included soaring 
crime and increased substance abuse.
    Not only were the residents who remained in despair 
isolated and discouraged but a neighborhood that was once 
renowned for its residential housing was ravaged by decades of 
arson and abandonment thereby creating a housing stock that was 
deplorable and without dignity and a homeless population that 
was escalating daily.
    Over 60 percent of the housing stock in Central Harlem was 
owned by the city of New York. Owners of buildings simply 
walked away and did not pay property taxes, water and sewer 
taxes, no maintenance, utilities, electricity in common areas, 
no heat and hot water, living conditions that were dangerous to 
life, health, and safety. Community residents were suffering.
    The city of New York was able to use Community Development 
Block Grant funds to maintain these buildings. Although no 
municipality ever has the intention of becoming a principal 
landlord because of the loss of income through tax roles, the 
city could have condemned the buildings, displaced hundreds of 
thousands of people.
    Yet, the city of New York to its credit took a bold move 
and decided not to displace people. With Community Development 
Block Grant funding the city of New York maintained these 
buildings and the character and fabric of this community which 
directly impacted future successful sustainable development and 
laid the foundation for the comprehensive community development 
initiatives that are implemented today.
    Preserving housing is a beachhead against neighborhood 
decline. When you are fighting a war, which is what we are in, 
against neighborhood decline, you need beachheads, a position 
or foothold on an enemy shoreline captured by troops in advance 
to further an invading force and comprehensive community 
development was that invading force and without Community 
Development Block Grant Funding to preserve those buildings for 
future development, Harlem would be a footnote in history 
books.
    In fact, a symbol of Harlem's rebirth, one that could not 
have been possible without the preface of Community Development 
Block Grant funding is the construction of the building in 
which we sit right now, the Thurgood Marshall Academy for 
Learning and Social Change. This very building, 90,000 square 
feet, state-of-the-art facility is the first new high school to 
be built in Harlem in more than a half century.
    In addition, Abyssinian Development Corp. built over 1,000 
units of affordable housing for low and moderate-income 
families and some were completely vacant buildings that the 
city was able to maintain, architectural jewels of the pre-war 
housing stock. Some were occupied by families that held on as 
the beachhead was becoming secure. Every one of these buildings 
was preserved and maintained using Community Development Block 
Grant funds.
    ADC pushed forward and began to reach out to more residents 
in need of supportive housing, educational opportunities, small 
business development, large commercial enterprises, job 
development, social services, home ownership opportunities, and 
the building of community capacity through civic engagement.
    We could not have created successful sustainable community 
development without addressing community decline and poverty 
through a holistic approach matching every aspect of societal 
ills with appropriate solutions all of which need an inputting 
of resources. Community Development Block Grant funding is 
integral in this process as it is flexible enough to allow 
local communities to decide what their needs are and how they 
should be met.
    The primary objective of the program was to establish a 
broad network for urban revitalization efforts while providing 
maximum flexibility on a local level, essentially the original 
framework for the successes we can account for today.
    Since so much has been accomplished, why do we need 
Community Development Block Grant and Community Services Block 
Grant Programs today? Quite simply for the same reason we 
needed community development block grants in 1974. The broad 
objectives of the Community Development Block Grant Program to 
establish and maintain viable urban communities with decent 
housing and suitable living environment and economic 
opportunities for persons of low and moderate income are still 
critical today.
    Harlem is at a pivotal crossroads today. Much attention has 
been given to the incredible increase in housing production, 
housing prices, and commercial development. Rent increased by 
46 percent from 1990 to 2000 compared to 11 percent in New York 
City overall and 21 percent in Manhattan over the same period 
and property values have tripled in Harlem.
    A common price for a brownstone is well over a million 
dollars. Commercial rents along 125th Street, the main 
commercial corridor, is approximately $125 per square foot. In 
Harlem the dismal ownership rate is 9 percent as compared to 
New York City where about one in three households own their own 
homes.
    The vacancy rate is 3 percent and apartments with an asking 
rent of less than $500 have a vacancy rate of just 1\1/2\. The 
median household income in Central Harlem is only $19,920, 
approximately 52 percent of the citywide median income and only 
42 percent of the median income of Manhattan taking into 
account that there are households with incomes of less than 
$15,000 computed in that average.
    The poverty rate is 36.4 percent and 24 percent of the 
population pays more than 50 percent of their income toward 
rent putting shelter in competition with food and other 
necessities. The rate of unemployment in Central Harlem is 
extremely high at 12.4 percent while the New York City overall 
rate is 6\1/2\ and the community services side, as studies 
suggest, that over 50 percent of African-American males are not 
in the labor force.
    Why not just let the market work? That is what some argue. 
It is the very nature of economic market forces to push out low 
and moderate income families unless systems are in place to 
prevent misplacement. Harlem residents that persevere through 
the unbearable conditions to fight for their children, their 
community, and respectable living conditions will be pushed out 
just as the market bulldozed them in 1974 when the Community 
Development Block Grant funds were first used to maintain and 
build that beachhead.
    The market forces at work are encouraging landlords to deny 
residents decent places to live hoping that they will become 
frustrated and they will move out so that when they do, 
property owners can cash in by leasing at market or above-
market rates for units that were originally allocated for low 
and moderate-income families.
    Much of the Community Development Block Grant funding today 
is used for inspectors to make sure that buildings are 
operating at code and for litigators to hold landlords 
accountable. An epic example of how property owners are being 
driven by market forces is demonstrated in the Ennis Francis 
houses, a 231-unit complex that due to extreme neglect by the 
landlord was in serious disrepair and needed both immediate and 
long-term work.
    Among the 250 housing code violations cited investigated 
with Community Development Block Grant funding were lack of 
heating, leaking ceilings, dangerous peeling lead paint. The 
Tenant Association which formed in 2003 after a week without 
hot water and the collapse of an underground sewage pipe 
leaving a 20-foot by 8-foot festering pit of human waste in the 
community room. On November 1st ADC was assigned as the legal 
administrator for Ennis Francis Houses and managed the building 
and ensured that basic services were restored.
    ADC was able to purchase the Ennis Francis Houses and now 
provides a full array of comprehensive programs for the tenants 
who no longer have to live in fear that their homes will be 
sold to the highest bidder. Ennis Francis Houses is one example 
of far too many landlords that are trying to encourage their 
low to moderate-income residents to live elsewhere as 
affordable rental restrictions are expiring including expiring 
Section 8 contracts, low-income housing tax credit 
restrictions, and municipal restrictions on affordability.
    Community Development Block Grant funds are as important as 
they were in 1974 in preserving and protecting communities. 
This deliberation is critically important. Thousands of 
individuals will be impacted and this committee has the ability 
to alter the characteristics of entire communities across the 
country.
    Community Development Block Grant funding will be integral 
in ensuring that the most vulnerable are not displaced. That 
those who remain in Harlem and communities like it can continue 
to afford living here in decent and dignified living standards.
    Thus, Mr. Chairman, I implore you to think carefully and 
seriously about the impact that your decisions will have not 
only on the Harlem community but communities like Harlem across 
the country. The loss of Community Development Block Grant 
funding will have detrimental affects on entire neighborhoods 
and will destabilize the progress that we have managed to 
achieve since 1974.
    No one is as happy as I am, Mr. Chairman, to see you here 
today. You can't imagine how important it is to have you from 
the great State of Ohio that has produced tremendous leaders 
for our Nation to come and hear from us about how important 
this is. I know you will be successful because God is on your 
side. Thank you very much.
    [The prepared statement of Dr. Butts follows:]

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    Mr. Turner. Thank you very much for that very impassioned 
presentation.
    Mr. Kui.

                  STATEMENT OF CHRISTOPHER KUI

    Mr. Kui. Good afternoon, Chairman Turner, Congresswoman 
Maloney, and guests. Thank you for traveling to New York to 
hear our testimonies and see our communities firsthand.
    My name is Christopher Kui and I am the executive director 
of Asian Americans for equality [AAFE]. When AAFE opened its 
door in 1974 Chinatown was an insular ethnic enclave. Founded 
more than 100 years before by immigrants from China, it became 
the hub of social, cultural, and economic life in New York's 
Asian community.
    Most of the immigrants did not speak English. They had to 
adjust to an entirely different culture than that which they 
had left behind. Naturally, they lived in Chinatown where they 
felt more at ease. At first the community consisted of working 
men employed in restaurants and service industries. The 
liberalization of immigration laws in the 1960's caused 
immigration to swell which resulted in enormous social 
pressures for the community such as lack of housing and decent 
employment.
    Increasingly, more and more people came to AAFE for help 
with affordable housing and adequate living conditions which 
had reached a crisis point. Many local residents lived in 
rundown tenement buildings dating from the 19th century. Others 
were crowded into non-residential spaces that were illegally 
subdivided into tiny rooms.
    The high demand for living space caused many landlords to 
ignore housing codes and occupancy standards, and to demand 
illegal key money from renters. As downtown neighborhoods 
became fashionable, unscrupulous landlords tried to evict their 
low-income tenants, sometimes resorting to extreme tactics like 
harassment and intimidation.
    In partnership with HPD our eviction prevention programs 
have helped our clients in very immediate ways. We have 
actually many clients from Chinatown in the back that traveled 
all the way from Chinatown to Harlem today to really show their 
support for the CDBG Program. I would like to point them out in 
the back.
    In December 2004, a few days before the Christmas holidays, 
an anxious Chinatown resident whose building had no heat or hot 
water for more than 2 months came to AAFE for help. The tenant, 
a senior citizen who spoke practically no English, complained 
that he and his neighbors live in misery because temperatures 
dropped below freezing. The tenants were afraid to notify 
housing authorities for fear of retaliation.
    AAFE was able to step in immediately advising the tenants 
of possible action and provide legal assistance. Meanwhile, our 
staff convened a meeting with HPD and other State agencies, the 
tenants, local elected officials, and the building owner 
onsite. We arrived at an agreement and the tenants had heat and 
hot water in time for the holidays.
    To increase housing opportunities AAFE has developed more 
than 500 units of affordable and senior housing. Working with 
the Enterprise Foundation and HPD AAFE first began developing 
housing in 1986 with the construction of New York City's first 
Federal low-income housing tax credit project called Equality 
House.
    All of us at AAFE felt particular pride and strong 
emotional attachment to this historic project. Equality House 
enabled the Lee family among many such families to provide 
their three children with the stability and opportunity that 
they needed to make a better life. Fifteen years later today 
one son is a police officer, the other son is a nurse, and the 
daughter is an urban fellow pursuing her masters degree at the 
local college.
    Our most recent project, Norfolk Apartment II, was the 
first low-income housing project to be developed after 
September 11th in lower Manhattan in partnership with the city 
and State of New York. Norfolk Apartment II has a total of 52 
units. When the project was announced in 2003 more than 10,000 
families around the city submitted applications.
    CDBG funding has also enabled AAFE to provide core 
immigrant services that continue to include the capacity of the 
Asian-American community to address its own needs. AAFE helps 
new immigrants overcome language and cultural barriers and 
participate more fully in American society.
    Our affiliate, AAFE Community Development Fund, has 
counseled more than 5,000 perspective homeowners and have 
helped secure over $155 million in mortgage financing from 
private banks for 1,200 families to purchase their first home. 
Thousands of other residents come to AAFE every year for 
English-as-a-second-language instruction, naturalization 
information, and citizenship education.
    The flexibility of CDBG funds has allowed AAFE to respond 
to emergencies as well. Immediately after September 11th AAFE 
was able to address the request for assistance to help guide 
affected clients to government agencies such as FEMA. More than 
500 clients were assisted with Medicaid applications and 300 
emergency applications were filed for assistance and temporary 
housing in the first month alone after September 11th.
    Meanwhile, as partners in the Lower Manhattan Development 
Corp.'s $300 million Residential Grant Program, our staff 
helped over 20,000 residents receive housing assistance all 
across Lower Manhattan neighborhoods. Having latitude in the 
type of projects and activities in which we can engage has 
allowed AAFE to serve the role of ``social firehouse,'' 
responding to a crisis quickly and effectively in our 
community.
    In conclusion, a very large part of AAFE's work has been 
possible thanks to funding from the CDBG program. CDBG funds 
have allowed us to respond creatively and with flexibility to 
meet the changing needs of our immigrant community. We have 
been able to provide affordable housing and prevent blight, 
generate new economic investment and create a more significant 
role for our community in the city's decisionmaking process.
    With more than 30 years of experience, AAFE has redoubled 
its commitment to help new immigrants achieve the American 
Dream. Not only has CDBG allowed us to preserve and rebuild the 
physical environment, it has furnished the tools to educate and 
inform our community.
    Chairman Turner, Congresswoman Maloney, help Chinatown, 
help Harlem, and thousands of other communities across the 
United States to maintain and expand the CDBG programs so we 
can preserve our neighborhoods and serve our constituents. 
Thank you.
    [The prepared statement of Mr. Kui follows:]

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    Mr. Turner. Dr. Ellen.

              STATEMENT OF DR. INGRID GOULD ELLEN

    Dr. Ellen. Chairman Turner and Congresswoman Maloney, thank 
you for the invitation to speak to you today about the 
community benefits of New York City's housing and community 
development efforts. During the 1970's as a result of large 
population loses, rising landlord cost, and stagnant tenant 
incomes, entire neighborhoods in New York City were devastated 
by arson and abandonment.
    By 1979 the city had taken ownership through tax 
foreclosure of over 60,000 housing units and vacant buildings 
and another 40,000 units in occupied buildings. Over the past 
two decades or so, through the course of the city's housing 
efforts, virtually all of these properties have been 
stabilized, rehabilitated, and turned over to responsible 
private owners.
    Together with colleagues at New York University, I have 
written a number of research papers that document these 
efforts, and more importantly, they examine the extent to which 
these investments generated spill-over benefits and contributed 
to neighborhood revitalization.
    We have consistently found significant neighborhood 
benefits. Actually identifying the neighborhood benefits 
generated by housing investment is quite difficult. One 
challenge is what metric to use to capture these neighborhood 
impacts. In the series of papers we have written so far, we 
have relied on changes in property values as a summary measure 
of neighborhood improvements. Simply if a neighborhood becomes 
a better place to live, people will be willing to pay more to 
live there.
    Another fundamental challenge is that we can never know for 
sure what would have happened to property values in the absence 
of the housing investment and different statistical models make 
different assumptions about this counter-factual situation. 
Intuitively what our basic approach has been is to assume that 
housing prices would have grown at the same rate of prices of 
comparable properties that are in the very same neighborhood 
but just a little bit further away from the housing investment.
    I would like to highlight two of our results briefly today. 
The first focuses on the neighborhood effects of abandoned 
buildings. We find that the vacant abandoned properties that 
the city had taken over for tax foreclosures significantly 
depressed the value of surrounding properties.
    Specifically, we find that prior to rehabilitation 
properties located right next to these abandoned vacant 
properties sold for significantly less, on the order of about 
28 percent, than comparable properties that were located 
further away but still in the very same neighborhood.
    Property abandonment, in other words, can seriously hamper 
neighborhood development and may be costly for local 
governments which may lose tax revenues as a result.
    The second result I would like to highlight, and maybe a 
somewhat more important result, is that New York City's 
investment in these abandoned, tax-foreclosed properties 
appears to have yielded significant, positive benefits. We find 
that the gap between prices of properties near to assisted 
housing sites and those in the surrounding neighborhoods 
narrows dramatically after the housing investment is completed. 
Moreover, we find that these impacts grow over time perhaps as 
families move in and the population grows.
    As for the magnitude of these neighborhood benefits, we 
find they are substantial. Indeed, a simple analysis of 
approximate cost and benefits suggest that New York City's 
housing investments delivered a tax benefit to New York City 
that exceeded the cost of the city's subsidies provided and 
amounted to some 75 percent of the total public investment 
which includes both State and Federal dollars. This, of course, 
does not include the benefits enjoyed by the individual 
households who actually get to live in the housing. What was 
captured here is simply the community spill-over benefits.
    In summary, I think our results offer strong evidence that 
the investments that New York City has made over the past 20 
years or so to stabilize vacant and abandoned properties and to 
rebuild them as affordable housing for members of the community 
have generated significant improvements in the surrounding 
neighborhoods.
    More generally, I think our results suggest that publicly 
funded housing investments targeted strategically at distressed 
urban properties cannot only create new affordable housing 
units for qualified recipients but also help to revitalize 
urban neighborhoods. Thanks.
    [The prepared statement of Dr. Ellen follows:]

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    Mrs. Maloney. I want to thank the audience. I mean, you are 
really cheering for the right thing, more affordable available 
housing. You have been the best audience I have ever had the 
opportunity to be before.
    Rev. Calvin Butts, your emotional and intelligent history 
and focus and passion. Your remarks were right there and 
pointed out really the importance that your church has really 
played in the revitalization of Harlem.
    Chris Kui, of course, and your organization, we worked so 
closely after September 11th and you are doing so many other 
things. I would like to put all of your testimony into the 
Congressional Record. Next time CDBG is attacked, I want all of 
you up there in Congress talking to our colleagues, setting the 
record straight. You have the stories and the histories.
    Dr. Ingrid Gould Ellen, you have really started to document 
how this investment pays off in improving the quality of life, 
people's lives, and really the livelihood of a community. I 
certainly would like the HPD and really our staffs in 
Washington to work with you if we could come up with an 
alternative way to counter OMB's measurement because obviously 
the program is working incredibly well.
    I can't thank you enough. The chairman tells me we have to 
get back to Washington. If we miss our planes, we will miss our 
votes tonight. I can't tell you how much it was a great honor 
to be home. The worse part about my job is that I have to be in 
Washington all the time and it is greater to be here to see the 
people's faces and what the programs mean to them. It has been 
a great honor for me to be here. Congratulations on this new 
school and everything you are doing to work together. Thank you 
so much, Chairman Turner.
    Mr. Turner. Before we close, I want to thank Congresswoman 
Maloney for her leadership and her interest in holding this 
hearing and inviting me to come to the community and giving 
everyone the opportunity to see firsthand what has been 
accomplished here, but also to get into the Congressional 
Record the important experiences that you all have that are 
direct ties to what the CDBG Program is important. I would like 
to thank Carolyn Maloney one more time for her efforts in 
bringing us here today.
    Mrs. Maloney. Thank you very much. Thank you.
    Mr. Turner. I want to thank all the members of this panel. 
Rev. Butts, thank you for your leadership in your community. 
Clearly your efforts go well beyond just bricks and mortar as 
you look to lead the community. I appreciate the faith-based 
aspect of your participation. We know that is both important 
for the fabric of the community and for the success of many of 
the social services that you are providing. We certainly see a 
tremendous impact that you are having.
    Mr. Kui, I thank you for your participation and your 
efforts. You can hear in your testimony and in your voice that 
this is not just about a community but it is also about people. 
When you talk about the experiences of the people that you have 
been able to intervene on behalf of, you can tell that this is 
obviously a labor of love and not just an issue of a 
neighborhood's boundaries but the people who reside in the 
homes and the lives that you are impacting. I thank you for 
your dedication to that.
    Dr. Ellen, I really appreciate your bringing an academic 
and scientific view to what we all see as community 
development. It was so funny in reading Office of Management 
and Budget's criticisms and critique of CDBG, the first thing 
that they said was, ``Community development is an undefined 
term.''
    Well, community development is something we feel in 
addition to something that we have to measure. Your efforts to 
measure it I do know is difficult. You and I were talking just 
briefly about housing development that we had undertaken in the 
city of Dayton when I served as mayor. I hope to get you out to 
the city of Dayton to see those programs.
    There in trying to justify housing redevelopment 
investment, we even had to argue against individuals that 
looked at measurement of housing property values where they 
averaged the property values sales where a property that was 
sold in its unrehabilitated condition was averaged against its 
final sale price as the incremental impact whether than just 
looking at the overall net impact of the end results.
    I appreciate your looking at this in a manner where other 
people can review the work and who don't necessarily see the 
feeling of community development but can see its numbers.
    I want to thank obviously the audience for participating. 
You have been incredible for giving your time for this. And for 
all of the panel members including the mayor who have shown 
tremendous effort and commitment to this. You are changing your 
community and you are being leaders for people throughout the 
country who look to your city and your neighborhoods for 
examples. Thank you.
    [Whereupon, 1:32 p.m. the subcommittee adjourned.]
    [The prepared statement of Hon. Carolyn B. Maloney and 
additional information submitted for the hearing record 
follow:]

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