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




 
                  COMMUNITY DEVELOPMENT BLOCK GRANTS:
                 THE IMPACT OF CDBG ON OUR COMMUNITIES

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

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 12, 2006

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-85



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             MELVIN L. WATT, North Carolina
ROBERT W. NEY, Ohio                  GARY L. ACKERMAN, New York
SUE W. KELLY, New York, Vice Chair   DARLENE HOOLEY, Oregon
RON PAUL, Texas                      JULIA CARSON, Indiana
PAUL E. GILLMOR, Ohio                BRAD SHERMAN, California
JIM RYUN, Kansas                     GREGORY W. MEEKS, New York
STEVEN C. LaTOURETTE, Ohio           BARBARA LEE, California
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois               RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       JOSEPH CROWLEY, New York
VITO FOSSELLA, New York              WM. LACY CLAY, Missouri
GARY G. MILLER, California           STEVE ISRAEL, New York
PATRICK J. TIBERI, Ohio              CAROLYN McCARTHY, New York
MARK R. KENNEDY, Minnesota           JOE BACA, California
TOM FEENEY, Florida                  JIM MATHESON, Utah
JEB HENSARLING, Texas                STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey            BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida           DAVID SCOTT, Georgia
J. GRESHAM BARRETT, South Carolina   ARTUR DAVIS, Alabama
KATHERINE HARRIS, Florida            AL GREEN, Texas
RICK RENZI, Arizona                  EMANUEL CLEAVER, Missouri
JIM GERLACH, Pennsylvania            MELISSA L. BEAN, Illinois
STEVAN PEARCE, New Mexico            DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas              GWEN MOORE, Wisconsin,
TOM PRICE, Georgia                    
MICHAEL G. FITZPATRICK,              BERNARD SANDERS, Vermont
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
CAMPBELL, JOHN, California

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

                     ROBERT W. NEY, Ohio, Chairman

GARY G. MILLER, California, Vice     MAXINE WATERS, California
    Chairman                         NYDIA M. VELAZQUEZ, New York
RICHARD H. BAKER, Louisiana          JULIA CARSON, Indiana
WALTER B. JONES, Jr., North          BARBARA LEE, California
    Carolina                         MICHAEL E. CAPUANO, Massachusetts
CHRISTOPHER SHAYS, Connecticut       BERNARD SANDERS, Vermont
PATRICK J. TIBERI, Ohio              STEPHEN F. LYNCH, Massachusetts
GINNY BROWN-WAITE, Florida           BRAD MILLER, North Carolina
KATHERINE HARRIS, Florida            DAVID SCOTT, Georgia
RICK RENZI, Arizona                  ARTUR DAVIS, Alabama
STEVAN, PEARCE, New Mexico           EMANUEL CLEAVER, Missouri
RANDY NEUGEBAUER, Texas              AL GREEN, Texas
MICHAEL G. FITZPATRICK,              BARNEY FRANK, Massachusetts
    Pennsylvania
GEOFF DAVIS, Kentucky
CAMPBELL, JOHN, California
MICHAEL G. OXLEY, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 12, 2006...............................................     1
Appendix:
    April 12, 2006...............................................    57

                               WITNESSES
                       Wednesday, April 12, 2006

Battle-Bey, Marva Smith, President and CEO, Vermont Slauson 
  Economic Development Corporation...............................    40
Burke, Yvonne Brathwaite, District 2, member, Los Angeles County 
  Board of Supervisors...........................................    27
Dorn, Roosevelt F., Mayor, City of Inglewood, California.........    13
Garcetti, Eric, District 13 President, Los Angeles City Council..    10
Graves, Clifford, General Manager, Department of Community 
  Development, City of Los Angeles, California...................    33
Hofmann, Harold, Mayor, City of Lawndale, California.............    15
Jackson, Carlos, Executive Director, Los Angeles County Community 
  Development Commission and Housing Authority of the County of 
  Los Angeles....................................................    36
Jenkins, Alvin, Project Manager, CBA/LA..........................    38
Montiel, Rudolf, Executive Director, Housing Authority of the 
  City of Los Angeles............................................    39
Netburn, Mitchell, Executive Director, Los Angeles Homeless 
  Services Authority.............................................    43
Ovrum, Robert, Deputy Mayor for Housing and Community/Economic 
  Development, City of Los Angeles, CA (on behalf of Mayor 
  Villaraigosa)..................................................     9
Patenaude, Pamela H., Assistant Secretary for the Office of 
  Community Planning and Development, U.S. Department of Housing 
  and Urban Development, accompanied by Nelson R. Bregon, General 
  Deputy Assistant Secretary and Jo Baylor, Assistant Deputy 
  Secretary for Field Policy and Management......................     7
Shockley, Brenda, President, Community Build, Inc................    41

                                APPENDIX

Prepared statements:
    Ney, Hon. Robert.............................................    58
    Solis, Hon. Hilda............................................    60
    Battle-Bey, Marva Smith......................................   111
    Burke, Yvonne Brathwaite.....................................    62
    Dorn, Roosevelt F............................................    64
    Garcetti, Eric...............................................    68
    Graves, Clifford.............................................    71
    Hofmann, Harold..............................................    80
    Jackson, Carlos..............................................    84
    Montiel, Rudolf..............................................    94
    Netburn, Mitchell............................................    97
    Ovrum, Robert................................................   100
    Patenaude, Pamela H..........................................   104
    Shockley, Brenda.............................................   109

              Additional Material Submitted for the Record

Statements of:
    City Council of the City of Los Angeles......................   113
    City of El Monte.............................................   117
    City of Monterey Park........................................   118
    City of Rosemead.............................................   119
    Los Angeles Housing Department...............................   122
    Herb J. Wesson, Jr...........................................   115


                      COMMUNITY DEVELOPMENT BLOCK
                       GRANTS: THE IMPACT OF CDBG
                           ON OUR COMMUNITIES

                              ----------                              


                       Wednesday, April 12, 2006

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:00 a.m., in 
Loker Conference Room, California Science Center, Exposition 
Park, 700 State Drive, Los Angeles, California, Hon. Robert W. 
Ney [chairman of the subcommittee] presiding.
    Present: Representatives Ney and Waters.
    Chairman Ney. I'd like to welcome everyone this morning to 
the Subcommittee on Housing and Community Opportunity's field 
hearing on the Department of Housing and Urban Development's 
Community Block Grant Program, known as CDBG to the rest of the 
country. And today will be an official hearing of the U.S. 
House of Representatives, so the transcripts, as well as the 
conclusions reached today will be taken back to Washington, 
D.C., and will be utilized. I can kind of guess there will be 
support of CDBG today to keep it. Then it will be important for 
the rest of our colleagues in Washington, D.C., to know what 
the attitude was out here.
    I want to thank, first of all, our ranking member--
Congresswoman Maxine Waters--who asked for this hearing. I am 
so happy that you have asked the subcommittee to come here, and 
I thank you for hosting us here in Los Angeles.
    And, of course, Congresswoman Waters and her staff have 
played an extremely active role in preparing for this hearing. 
We want to thank them. Also, Jeff Riley is here today; he works 
for Ranking Member Barney Frank of Massachusetts.
    And our chairman of the Full Committee, by the way, is 
Michael Oxley of Ohio.
    The CDBG program, of course, as administered by HUD, is the 
Federal Government's largest and most widely available source 
of financial assistance to support State and local efforts in 
Government related neighborhood revitalizations, housing, 
rehab, and economic development activities. It is generally 
recognized as the mainstay for targeted community development 
of cities, counties, and rural and urban areas to principally 
benefit low- and moderate-income persons.
    The program has developed its reputation for the past 28 
years, and local officials constantly use CDBG funds to take on 
new challenges in the areas of housing, neighborhood 
development, public facilities, and provisions of social 
services.
    So this program, CDBG, emphasizes HUD's mission of working 
through partnerships with State and local governments. And due 
to the flexibility in the uses of the CDBG funds, the program 
is used in conjunction with many other HUD programs to assist 
communities and to target specific populations.
    I do want to let you know that last month I held three 
House field hearings in rural Ohio that highlighted many of the 
important issues of CDBG that I am sure we are going to hear 
about from you today. And back in Ohio, many local mayors and 
community development officials testified about how CDBG monies 
have been used for a wide variety of projects such as providing 
safe drinking water, sewer repair, and purchase of firefighting 
trucks and equipment.
    To highlight one example, in Knox County, Ohio, CDBG 
funding has allowed for the revitalization of several downtown 
streets, such as in Mount Vernon. The rehabilitation of the 
Mount Vernon streetscape has brought new life to Mount Vernon 
and to residents and visitors alike. They can enjoy the 
renovated shops and restaurants and that, of course, leads to 
more tourists coming, which leads to more money in the 
community and, ultimately, to more jobs. At one time there was 
a question of well, you know, should CDBG be diverted to the 
Department of Commerce? And had that happened, I think you 
would not have been able to recognize the program by the time 
it got out of the Department of Commerce.
    In the areas that I represent, in the 18th District, 20,000 
people is considered to be a large city. Most of our towns 
consist of 1,400 to 2,000-some people. And in some cases--
ambulance service, for example--it would take you 40 minutes to 
get somewhere between communities where there is even a 
hospital. So the ambulance service is important. So I think 
CDBG is something that is just so important.
    Now President Bush's fiscal year 2007 budget proposal 
raises some interesting and serious questions about what role 
community development should play in helping local State 
governments provide safe and affordable housing to its 
constituents. In addition to recommending a new formula change 
for CDBG, that focus is more on the neediest communities which 
was raised, and I hope it is raised here today. That was raised 
back in Ohio by some experts--Coalition for Appalachian 
Development--people running food banks about some of the change 
with CDBG and about the neediest communities and what is 
already being done for the neediest and what that would do by 
kind of changing the formula. So maybe that will be focused on 
today.
    But also the funding level for fiscal year 2007 in the 
budget is .27 cents below last year's enacted levels. So if you 
take the 10 percent cut that actually came out, I think it was 
from the Reconciliation bill there was a cut, which I did not 
vote for the bill I would note for the record. But from that to 
this if you add the 25 if it would go through, and 10 you are 
at 35 percent cut for CDBG over the last couple of years.
    So, again, I think it is an important program.
    Let me just close by saying a couple of things. Now more 
than ever before, I have been in Congress for 11 years and I 
have been in government for 24 years as a State senator, State 
rep, so I have looked at CDBG from the State legislative end of 
things, as I know our Congresswoman has, but I think now more 
than ever since I have been in Congress, this is a time where, 
if you are going to help with CDBG, if it is going to be 
effective to save these concepts, it's going to be effective on 
having this program continue, that the local CDBG, the local 
development entities, the local elected officials have to work 
with their Members of Congress more than ever before. You must 
have a tighter working relationship than ever before with 
Congresswoman Waters and myself, and other Members of the 
House. I think it is more critical than in the past to do that. 
It has to be a partnership in looking at how the programs are 
used.
    So, again, there are a lot of other issues our committee 
has tackled. I am proud to say that we are the first 
subcommittee that went to New Orleans and went down to also 
Gulfport, Mississippi. We were the first ones that did it even 
before the Katrina Committee. We have been trying to address, 
the subcommittee, many many important issuing in housing. And I 
know people think we cannot agree on anything, but in this area 
I am proud to say that our ranking member, Mr. Frank, and our 
chairman, Michael Oxley and other Members, especially on our 
subcommittee, have tried to do many things to help a lot of the 
neediest people. And there is a lot more work to do, but I am 
just proud to say that we have been working on those issues.
    So I want to thank again our ranking member, Congresswoman 
Waters, who has been a pleasure to work with. It has also been 
a pleasure to watch the Congresswoman as a voice for people who 
cannot speak out for themselves, not only here sometimes in the 
process, but also in Washington, D.C., on a national basis. So 
thank you. And I will yield to our ranking member.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Good morning, ladies and gentlemen. Thank you for coming 
out this morning. Your attendance here is very important today, 
and I am so pleased to see this room full.
    It is important for you to be here today because you have 
to understand that we must try to stop the proposed cuts to 
this most important program.
    Before I continue with my remarks, I would like to thank 
Chairman Ney. I would like to thank him for authorizing this 
hearing, and for coming to Los Angeles to listen to our City's 
leadership, and to our program directors testify about how 
important this program is.
    Why is it important for me to thank him? It is important 
for me to thank him because he could very well be in his 
district, doing the work that Members must be doing at this 
time to run for reelection. His election is just next month. 
And so most times Members do not take time from their districts 
to come to somebody else's district to talk about their 
problems; they are focused on their own problems. So I am 
delighted that he responded to my request and is here.
    But more than that, I am delighted that we have been able 
to work together, not only on CDBG, but if you recall 3 years 
ago he was here on Section 8. These are programs that 
oftentimes you only hear from Members on my side of the aisle. 
But I want you to know that Congressman Ney and I struck a 
relationship because a long time ago we decided that the 
problems of the rural community are similar to the problems of 
our urban communities. We both have poor people in our 
districts. We have people who depend on assistance from the 
Government, and because of that, we should be working together.
    Now granted, we are not going to agree on everything, and 
we know that. But those things that we do not agree on, we just 
leave each other alone. But for those that things that we can 
work together on, we certainly do; CDBG is one of those 
programs.
    So, even though this is an official hearing and we do not 
entertain applause at official hearings, I am going to ask you 
to give him a big round of applause and thank him for coming to 
be with us. Let the record show I broke the rules again, Mr. 
Chairman.
    Okay. Let me just get to my prepared presentation this 
morning. I want to get right into the impact of CDBG on our 
communities. The Subcommittee on Housing and Community 
Opportunity--of which I am ranking member--of the Committee on 
Financial Services, is conducting this hearing today. And I 
believe, and I am sure the chairman would agree, that whenever 
we can bring the Congress to the people of our Congressional 
districts, it is well worth the effort.
    Today we are here to determine the impact of CDBG spending 
and proposed cuts in that spending on Los Angeles City and 
County, as well as in the 35th Congressional District, which I 
serve. And while I am going to focus on a few of those programs 
today because I am working very hard to try and preserve all 
kinds of programs, I want you to know that this hearing is 
about all of the CDBG funded programs.
    CDBG is a major Federal program that I have worked very 
hard for since coming to the Congress of the United States. And 
I have tried to protect and strengthen CDBG. CDBG has served 
the Valley to South Los Angeles since 1974. Every year for at 
least 5 years, we have been asked to consider ideas ranging 
from substantial cuts in funding for the CDBG program to 
changes in the way the program funding is allocated. Other 
important community development programs including Section 108, 
the Home program, Brownfields Redevelopment Grants, and the 
National Community Development Initiative and Urban Empowerment 
Zones would be cut or eliminated by this Administration. 
However, I believe that it is because of the role of Mr. Ney 
and others who are advocates for housing and community 
development programs in Congress that our communities have 
benefitted right here in Los Angeles County and the City of Los 
Angeles.
    CDBG forces you to have a role in developing the CDBG plans 
for approval by HUD, since the input of the community is the 
most important step in the process of moving CDBG to a program 
of action.
    Just quickly, what is CDBG? I often hear that from people 
who are not directly involved. And I basically try to explain 
it this way:
    It is tied to three basic activities. It is here to 
principally benefit 70 percent low- and moderate-income 
persons. It aids in eliminating or preventing slums and blight, 
or it is here to meet the urgent community development needs 
that are caused by certain conditions that pose serious and 
immediate threats to the public.
    Although many of you have heard of the CDBG program, or you 
are involved in it, there are often gaps in information 
relating to the President's budget and Congressional action on 
programs such as CDBG, as well as many other programs that are 
in place to assist the communities that we serve.
    Now, I represent the 31st Congressional District, and 
included in that district are several cities: the City of 
Lawndale, the City of Inglewood, the City of Gardena and the 
City of Hawthrone. What you may not know is that the 
President's budget proposal for fiscal year 2007, if enacted, 
would reduce the CDBG program by more than 20 percent. Every 
program supported with CDBG funds would be severely reduced or 
eliminated.
    As a strong supporter in Congress of the CDBG program, I 
have fought and will continue to fight to prevent these cuts. 
These unpopular cuts would affect a broad range of housing 
revitalization, community and economic development activities, 
job creation and public service programs designed to primarily 
benefit low- and moderate-income persons in Los Angeles County 
and City.
    The backdrop for these cuts is simple. In the past 5 years 
CDBG has been responsible for the rehabilitation of over 8,500 
housing units, created and preserved over 2,060 jobs, removed 
over 41 million square feet of graffiti, and provided loans and 
technical assistance to over 7,000 small businesses. The 
President's proposed reduction in CDBG would deny Los Angeles 
County $41.1 million in funding for all kinds of program 
activities. The City of Los Angeles, which will receive $74.5 
million this fiscal year, would receive only $55.8 million in 
fiscal year 2007. This is an inflation adjusted cut of 48 
percent.
    The State of California would lose almost 3 times the above 
amount, that would be $119.7 million. The positive statistics 
that I just cited would read differently if the State of 
California lost $119.7 million.
    What the cut will not reveal immediately is that low- and 
moderate-income persons and families would suffer the most 
because CDBG program is their program.
    And while many of you may not be familiar with all of the 
CDBG funded programs or the requirement that 70 percent of the 
funds be spent on activities to benefit low- and moderate-
income persons, you have to come to rely on these programs in 
your day-to-day activities. And let me just mention a few of 
the programs throughout our City: Big Brother and Big Sister of 
Greater Los Angeles; Mentor Outreach; Junior Blind of America; 
Infant Family Project; Los Angeles County Department of 
Consumer Affairs; Homeowner's Fraud Prevention Project; 
Community Development Commission; Single Family Grant Program; 
Gang Membership Vandalism and Illegal Nuisance; Dumping 
Reduction Program; Watts Labor Community Action Committee, etc.
    Now let us take a look at the impact of cuts on the City of 
Lawndale, an important community in my district. The Mayor is 
here today and he will talk more about this. They would most 
definitely suffer under the proposed cuts for CDBG as well.
    The City's graffiti removal efforts would be undermined, 
and residential rehabilitation grants to low- and moderate-
income residents for electrical, roofing, and plumbing repairs 
would just disappear. And just about everyone in Lawndale knows 
about the Lawndale Civic Center Seniors Hot Lunch program.
    Well, my friends, the City of Lawndale will have to find 
another source of funding for their seniors if these cuts 
become law. I do not need to mention every program that would 
be affected, but this should give everyone an idea of why we 
are here. Youth would be at great risk, seniors would be put at 
risk, blight and graffiti would return, and the overall quality 
of life for each and every one of us would be challenged.
    The City of Hawthorne would lose $321,000 under the 
proposed cuts while the City of Gardena would lose $298,000 
plus.
    Finally, my City of Inglewood would suffer the most with 
the disappearance of $1,100,000 in CDBG funds.
    And I think today's witnesses will answer the important 
mission of this subcommittee. We're here to listen and to learn 
about the impact of the CDBG program on their communities and 
the people who live in them.
    And we thank you very, very much. I want to say to the 
elected officials who have come today, I know your time is 
valuable, and we thank you so much for showing up.
    I want to think HUD for being here today. I know sometimes 
it gets a little bit difficult to defend the President's 
budget. However, in working with HUD, I have found that 
oftentimes there are many ways by which we can get the 
information, and hear from you, that will help us to be able to 
convince others that perhaps we should certainly not be making 
these kinds of cuts.
    With that, to the staff who are out here from Washington, 
D.C., we thank you for the work that you have done on both 
sides of the aisle to help put this together for us today.
    You are here at the California Science Center, which is one 
of the real gems of the overall greater Los Angeles area, and a 
place of which I am very proud. This building, and this 
complex, was part of my work when I served in the California 
State Assembly and we were able to fund a master fund that has 
brought it to the point that it is today. So if you have time, 
just spend a little time here after the hearing.
    Thank you very much.
    And I will yield back my time to the chairman, Mr. Ney.
    Chairman Ney. I want to thank the gentlelady. I thank her 
also for her fine comments.
    I also wanted to let you know before we start that there 
are copies of the testimonies over to the left on the table. 
And you're more than welcome to get a copy of the testimonies 
today.
    Also for the record, without objection, we have several 
statements for the record from: Congresswoman Hilda Solis; The 
City of El Monte, City Manager's Office; The City of Monterey 
Park; and the City of Rosemead.
    Without objection, these statements will be entered for the 
record.
    And today we will start with a panel. The Honorable Pamela 
H. Patenaude, Assistant Secretary for the Office of Community 
Planning and Development, U.S. Department of Housing and Urban 
Development, known as HUD.
    Of course, Mr. Robert, known as Bud as I understand it, 
Ovrum, deputy mayor for Housing and Community/Economic 
Development, City of Los Angeles, California on behalf of the 
Mayor.
    And also the Honorable Eric Garcetti--
    Ms. Waters. Garcetti.
    Chairman Ney. Garcetti. I think in Italian, so I say 
Garcetti. My home city is 85 percent Italian, so if I see a C, 
it's a J. But Garcetti. District 13, president of the Los 
Angeles City Council.
    I think 3 years ago you were a councilman? Okay. That's 
good.
    And the Honorable Roosevelt F. Dorn, Mayor, City of 
Inglewood, California.
    And also the Honorable Harold Hofmann, Mayor, and I have 
heard a lot about Lawndale and a lot of good things, the City 
of Lawndale, as I have many of the smaller towns around here 
also.
    So I want to welcome all of you. And we will begin with 
Assistant Secretary Patenaude.

 STATEMENT OF PAMELA H. PATENAUDE, ASSISTANT SECRETARY FOR THE 
 OFFICE OF COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT 
  OF HOUSING AND URBAN DEVELOPMENT, ACCOMPANIED BY NELSON R. 
  BREGON, GENERAL DEPUTY ASSISTANT SECRETARY, AND JO BAYLOR, 
   ASSISTANT DEPUTY SECRETARY FOR FIELD POLICY AND MANAGEMENT

    Assistant Secretary Patenaude. Thank you, Mr. Chairman.
    I am pleased to be here in Los Angeles on behalf of 
Secretary Alphonso Jackson.
    I am joined here today by my General Deputy Assistant 
Secretary, Nelson R. Bregon, and Hud's Assistant Deputy 
Secretary for Field Policy and Management, Jo Baylor.
    Thank you Chairman Ney and Ranking Member Waters for 
scheduling this field hearing to discuss the reform of the 
Community Development Block Grant program.
    The CDBG program has been the Federal Government's primary 
vehicle for assisting State and local governments with a wide 
range of community development activities aimed at improving 
the lives of low- and moderate-income families.
    Chairman Ney. If you could yield for a second?
    Can you hear the witness in the back? You can. Okay. There 
was a question of whether you could or not. I'm sorry. Go 
ahead.
    Assistant Secretary Patenaude. Thank you. During the past 3 
decades over $113 billion has been appropriated for the CDBG 
program. These funds are used for housing rehabilitation, 
public services, infrastructure, and economic development 
activities.
    The President's fiscal year 2007 budget retains the CDBG 
program at HUD with the recognition that the program's impact 
has defused over time. We propose to redirect CDBG's ability to 
target community development needs. We have identified a series 
of initiatives that, if enacted, will sustain the CDBG program 
in the future.
    One critical reform is the revision of the CDBG formula 
which has been essentially untouched since the 1970's. Over the 
past decade, we have witnessed steady erosion in the ability of 
the formula to target CDBG funding to community development 
needs. Demographic changes, development patterns, and other 
factors have created significant distortions in the 
distribution of the CDBG funds.
    In February of 2005, HUD released a study that identified 
two serious deficiencies that result from the current formula. 
First, many communities with lesser need for CDBG funds receive 
much more per capita than many communities with greater need. 
Second, many communities with similar needs receive very 
different per capita amounts.
    For example, here in California, the Cities of Santa Monica 
and Santa Maria have approximately the same population. Under 
the current formula, they both receive about $1.3 million 
annually. However, in terms of need, they are very different.
    Santa Monica has a per capita income of $43,000 and a 
relatively low level of distress, while Santa Maria has a per 
capita of only $14,000, and significantly more distress.
    While Santa Maria's community development needs are much 
greater, the current formula does not recognize this. I think 
we can all agree that it is critical to restore equity to the 
distribution of funds to improve targeting and to preserve the 
fairness of the CDBG program.
    The second major initiative proposed in the President's 
budget is the establishment of a challenge fund. This fund 
would enable CDBG grantees to obtain additional funding for 
community and economic development activities in distressed 
neighborhoods. In order to be considered for a challenge grant, 
a grantee will need a strategy that concentrates public and 
private investment in distressed neighborhoods.
    The reform also proposes to consolidate programs that 
duplicate current efforts, such as BEDI, Rural Housing, and 
Section 108.
    Finally, we are implementing a new performance measurement 
framework to establish clear measurable goals and community 
progress indicators for our formula programs.
    Improvements to HUD's Integrated Disbursement and 
Information System, commonly referred to as IDIS, are critical 
to the success of this performance measurement. We are working 
to transform the current antiquated version of IDIS into a user 
friendly web-based system. These enhancements will make the 
system easier to use and will expand our ability to collect 
data that shows the effectiveness of CDBG.
    The Community Development Block Grant program helps 
communities across the Nation address a variety of needs. 
However, program reforms are necessary to improve and expand 
the economic opportunities of the lives of low- and moderate-
income Americans.
    I thank you for this opportunity to speak with you today 
about the Administration's proposal to reform the CDBG program, 
and I look forward to answering your questions.
    Thank you.
    [The prepared statement of Assistant Secretary Patenaude 
can be found on page 104 of the appendix.]
    Chairman Ney. Thank you very much.
    Mr. Ovrum?

    STATEMENT OF ROBERT OVRUM, DEPUTY MAYOR FOR HOUSING AND 
  COMMUNITY/ECONOMIC DEVELOPMENT, CITY OF LOS ANGELES, CA (ON 
                 BEHALF OF MAYOR VILLARAIGOSA)

    Mr. Ovrum. Good morning, Mr. Chairman, and Ranking Member 
Waters. I am very pleased to be here today to present testimony 
on behalf of Mayor Villaraigosa.
    Although the Mayor is very distressed by the President's 
fiscal year 2007 budget proposal to consolidate and reformulate 
funding for the Community Development Block Grant program, we 
are certainly very encouraged by the commitment of Congress to 
understand the impact of this proposal on the nation's low- and 
moderate-income population. Thus, on behalf of the Mayor and 
everyone here, allow me to say how pleased we are that you are 
visiting us in Los Angeles for this important discussion.
    As you may know, the Mayor was recently appointed to be the 
Chair of the United States Conference of Mayors Task Force on 
Poverty, Work, and Opportunity. We are very excited to work 
with the Mayors around the country to address the important 
issue of poverty by developing strategies that will make our 
Federal, State, and local dollars stretch further while 
enhancing the positive input that we can make on the lives of 
the poor. At the same, the Mayor looks forward to working with 
Congress to ensure that the critical programs and services 
funded by CDBG are preserved for the people who rely on them.
    As you will hear in other testimony this morning, CDBG 
funding is vital to the City of Los Angeles. For over 30 years, 
CDBG has been one of the most effective tools available to the 
Government to strengthen local communities. CDBG provides the 
flexibility and the funding to address the needs of the poor 
and working families who continue to face tremendous quality of 
life and opportunity challenges.
    Here, in Los Angeles, in the undisputed commercial and 
cultural atmosphere of the richest State in the richest Nation 
in the history of the world, you see close to 10,000 homeless 
children. Thousands of kids arrive in public schools every day 
who do not have a bed for the night. Poverty, however, is not 
confined just to Los Angeles.
    It has been 50 years since Brown v. the Board of Education, 
but one-third of African-American children still live in 
poverty.
    Across the country, 6 million school children are on the 
verge of failing out of school.
    Eleven million Americans cannot read a bus schedule or fill 
out a job application.
    Three-and-a-half million sleep in shelters and doorways and 
highway underpasses.
    These statistics are constant reminders of what level of 
work remains to be done in this City and across the country.
    That is why the Mayor remains deeply concerned that the 
City again continues to face substantial reductions in Federal 
funding for programs funded under our Housing and Community 
Development Block Grant program, particularly CDBG. Last year, 
that reduction amounted to approximately $9 million, or 11 
percent of our allocation from the previous year.
    While our Federal allocation shrinks, the need for services 
and the number of requests for funding continues to grow. For 
the 2006/2007 program year the City received a total of 215 
applications requesting in excess of $254 million in CDBG 
support, of which only approximately $73 million was available 
and awarded. It is my hope, and the Mayor's hope, that the 
policy leaders in Washington do not confuse the disappearance 
of this program with the disappearance of the problem of 
poverty.
    In a few minutes our general manager of the Community 
Development Department, Clifford Graves, and others, will share 
with you some of the great program efforts funded in the City 
with CDBG dollars. Mr. Graves will provide you with an outline 
of how the City historically uses these funds and how any 
additional reductions will impact the City and its most needy 
residents.
    Again, thank you for the opportunity to address you this 
morning. And thank you very much for coming to Los Angeles, and 
for your interest in Los Angeles.
    Thank you very much.
    [The prepared statement of Mr. Ovrum can be found on page 
100 of the appendix.]
    Chairman Ney. Thank you.
    Mr. Garcetti?

STATEMENT OF ERIC GARCETTI, DISTRICT 13, PRESIDENT, LOS ANGELES 
                          CITY COUNCIL

    Mr. Garcetti. Thank you very much, Mr. Chairman. It's 
wonderful to have you back here in Los Angeles. And Ranking 
Member Waters, thank you for your extraordinary work on behalf 
of not only your own district, but this entire region, and the 
United States in this area.
    And, Mr. Jones, it is good to have you back in Los Angeles, 
as well.
    I wanted to thank you for being here and for being so 
generous when we come to Washington with all of your time as 
well in looking at the context of what we are discussing.
    Just as a side note, Mr. Ney, you know Los Angeles was 
really settled by midwesterners and we have whole neighborhoods 
that in the past were known as, you know, Little Ohio and 
Little Indiana and other parts. So that legacy is continuing 
the links here. So consider this your second home.
    You know, let me change what I was going to be saying. I 
have been spending the last 4 weeks editing my fiancee's 
doctoral dissertation which is on welfare poverty in America. 
And she took a case study from the midwest in Michigan, where 
she detailed and interviewed 80 women who were sampled and 
their life experiences; what it was that brought them to live 
in poverty, and what it is that is keeping them in poverty.
    And what was interesting about what she has been looking 
at, and that I have been editing for the last few weeks, is 
that we have something called the American Dream here in the 
United States which says we are all just one lucky break away 
from making it. And on the flip side of the American Dream is 
something that many people do not talk about, which is what 
happens to that one person who has one unlucky break: An 
abusive household that a child is raised in; somebody who is 
born into a homeless family; somebody who unfortunately does 
not have a social network in the neighborhood where they live 
in to find the job opportunities, no matter how strongly they 
look around each corner for it.
    So the ideological context of what we talk about here 
today, Republican, Democrat, nonpartisan, as many of us are 
here as local officials is the ideology of having the most 
basic government outreach to make sure that those who are on 
the flip side of the American Dream, in fact, living an 
American nightmare, have a way out.
    The political context of this you well know. We are a 
Nation at war, but we have been a Nation at war for 3 decades 
against poverty under Presidents Nixon and Ford, under 
President Carter, under President Reagan, the first President 
Bush, and President Clinton. We have seen an expansion of that 
war on poverty. We have seen the belief across partisan lines 
that it is a war that is worth winning.
    Unfortunately now the political context at the local scene 
has shifted dramatically. And I know that Congresswoman Waters, 
Congressman Ney, and so many other Members of Congress meet 
each year with the National League of Cities when we come 
there, and 95 percent of Congress sits down with local 
officials in one day. It is one of the most impressive lobbying 
undertakings anywhere in the United States. And we are speaking 
with one voice.
    And I chair for the Los Angeles County, I am the president 
of our National League of Cities Local Cities. So on behalf of 
the 88 Cities that are here we are speaking with one voice 
across partisan lines about the importance of this.
    And then lastly, I want to put into context the need that 
we have here in Los Angeles. We recently used block grant 
monies to finally take a snapshot of our economy here in Los 
Angeles. And there are some wonderful things that showed that 
we got out of the recession from the 1990's, retooled and are 
very nimble in terms of the economy and the entrepreneurship 
that we had. But as you break that down by geography, we have 
had some troubling statistics.
    In south Los Angeles more than a decade after the riots 
here, we lost 8 percent of the jobs. All the rest of the 
regions of Los Angeles saw job growth, and yet we saw a decline 
there.
    I know that you want accountability for these dollars, and 
we want that, too. It is already there because of the great 
work of HUD. Ask any of these community groups whether it is 
easy to get this money, easy to spend it, easy to apply for it. 
It is not. It is very stringent. In fact, some people are 
scared away because it so stringent, so we know we have the 
accountability.
    But secondly, if I can leave you with one thing, I want you 
to know that we are not here with our hat in hand saying we are 
not going to step up, too.
    In Los Angeles, we have built the largest affordable 
housing trust fund, partially with the block grant dollars, but 
with our own general fund monies, too. Every dollar that we 
have put out there on affordable housing, we have leveraged 
five fold; five fold with State, private, and nonprofit 
dollars. This fall, the Mayor and I are putting on the ballot a 
$1 billion affordable housing bond here in the City of Los 
Angeles, the largest affordable housing bond anywhere in the 
country's history locally. So we are not just saying give us 
the money; we are doing our part and we are stepping up.
    We are asking you to continue to be that partner, and I 
know that you all feel that same way.
    I want to thank you from the last time that you were here 
because it was Congresswoman Waters who first said you know we 
always see these signs up saying the council member and the 
mayor are rebuilding this area, doing this wonderful project, 
but how about the Members of the House? And we passed policy 
based on that recommendation here in the City that now when we 
spend those block grant dollars, it gives credit to Washington, 
too, to our Representatives who are helping to spend that 
money, and we have those names up there as a recognition of the 
partnership that we have here.
    But I will share with you in closing that each dollar of 
this funding that we put out there, a dollar of block grant 
that goes to the trust fund that brings $5 more dollars in and 
builds housing and has created about 200,000 permanent jobs 
here just in the construction industry in the last few years, 
$1 of Brownfields' money near the port in Wilmington where one-
quarter of all of our City's scrapyards are, where we are able 
to take a Brownfields, that has been greatly polluted, that we 
finally turn around for a company that makes almost a quarter 
of all the AYSO uniforms for our kids throughout this country, 
was able to double the jobs that they have there.
    $1 that goes into a new shelter in Hollywood and takes a 
person off the streets who has never been in a shelter in his 
life, and whom I just talked to a couple of weeks ago. And for 
the first time in 25 years, he has a job and is cleaned up.
    We know that this is accountable money. We know that it is 
flexible money and we know that we are your partner in that 
money. As we continue to spend, we hope that you will recognize 
the taxpayer money that is represented here, but behind us that 
goes to Washington, D.C., prioritizes that partnership from the 
Federal level as well.
    And I want to thank you, Chairman Ney, for being such a 
strong voice. And as the National League of Cities moves 
forward, you know that there is a bipartisan support for this. 
We see a different move from the Administration, but we know 
that we have so many allies in Congress across party lines. And 
we hope that not only can we beat back the cuts, we hope we can 
restore the levels that were there before.
    Thank you.
    [The prepared statement of Mr. Garcetti can be found on 
page 68 of the appendix.]
    Chairman Ney. I want to thank you for your testimony. And 
we're going to suspend the regular order for a second.
    There are people standing in the back, and I think in the 
hallway, there are some extra chairs that have been set up. So 
please have a seat. I was told there was some people in the 
hallway. So, please feel free to have a seat.
    And also, we are here for a lot of people today in 
communities of all ages, but the younger generation is what 
everybody is about, and I think I see some younger generation 
friends in the audience. And I know the Congresswoman wanted to 
give some recognition.
    Ms. Waters. Well, I certainly do. One of the things we 
tried very hard to do, and I think we accomplished it, was to 
make sure that all of the CDBG funded program recipients 
received a notice about this hearing. We are going to need you 
to help us in this fight and in this struggle to try and keep 
these cuts from becoming reality.
    For those young people who came today, you are welcome. For 
those young people who are identifying us by way of your 
banner, thank you very much. And for those young people who 
want to sit down, we have some extra chairs. Welcome. Thank you 
for being here today.
    Mr. Garcetti. Mr. Chairman, if you will excuse me, we have 
a Council meeting at 10:00 that I have to preside over.
    Chairman Ney. Yes. You are excused.
    Ms. Waters. Thank you very much.
    Mr. Garcetti. My apologies.
    Chairman Ney. And to the young people again, welcome. They 
range in all ages, but I think I see a 2-month old also over 
there, who is probably the youngest visitor in the history of 
House hearings.
    So, again, welcome to all you great young people. And I 
think we can give them a round of applause. Thank you.
    Mayor, Mayor Dorn?

   STATEMENT OF ROOSEVELT F. DORN, MAYOR, CITY OF INGLEWOOD, 
                           CALIFORNIA

    Mr. Dorn. Good morning.
    I would like to begin by thanking Chairman Ney for 
conducting these hearings today.
    I want to especially thank Inglewood's Congressional 
Representative, Congresswoman Maxine Waters, for her constant 
efforts on behalf of the City of Inglewood and the other 
communities and the United States that she so admirably 
represents.
    The City of Inglewood has participated in the Community 
Development Block Grant program since its inception. Our 
residents and businesses have benefitted greatly from the 
crucial Federal funding provided through the CDBG program.
    The CDBG program has provided more than $25 million in 
assistance to low-income families, individuals, and businesses. 
Indeed, the CDBG program has been vitally important to the City 
of Inglewood and to our ability to enhance safety, prosperity, 
and increased livability within our community.
    Inglewood utilized CDBG funds to educate and protect low-
income individuals with regard to housing discrimination. In an 
effort to ensure fairness and eliminate housing discrimination, 
over 10,000 low-income individuals have benefitted from fair 
housing counseling. These monies have funded legal assistance 
to individuals who are victimized by unfair housing practices.
    The CDBG funds help us in our overall effort to maintain a 
suitable living environment in our community. Inglewood uses 
over $1.3 million annually in CDBG funds to build and improve 
the public infrastructure system in CDBG-eligible portions of 
the City.
    These infrastructure improvement projects include: 
Redesigning streets for increased traffic safety around local 
parks and schools; increasing pedestrian mobility for persons 
with physical and developmental disabilities through an 
aggressive program of installing pedestrian wheelchair ramps in 
over 350 locations throughout Inglewood, and; increasing 
neighborhood safety through improved property maintenance and 
correction of building violation deficiencies. These efforts 
have resulted in achievement of an 80 percent correction rate 
of over 8.000 residential and commercial property maintenance/
code enforcement violations. Additionally, CDBG funds are used 
to eradicate over 18,000 annual incidences of graffiti. This 
funding allows our City to enhance our community beautification 
efforts, which in turn encourages home ownership, community 
pride, and investment in our City.
     CDBG funds are a powerful community-based crime prevention 
tool. Our City has leveraged CDBG public service funds to 
assist several local nonprofit organizations to assist our 
police department to combat gang-related crime. This effort 
resulted in the development of vital game and intervention 
programs that divert at-risk youth from becoming involved in 
gang activity. As a result of our community-based crime 
prevention efforts, gang activity in the City was reduced by 18 
percent over the past 3 years. We need CDBG funds to continue 
our efforts in this regard.
    CDBG helped spark an economic development boom in 
Inglewood. The City of Inglewood suffered from an increasing 
blighted downtown area after the relocation of our major 
retailers from the City: Sears Department Store; J.C. Penny; 
and Boston stores. Inglewood leveraged $1.2 million in CDBG 
Section 108 loan funds, with $700,000 in Redevelopment Funding, 
and $500,000 in Department of Commerce Economic Development 
funds, to rebuild the infrastructure in the downtown area and 
provided over $250,000 in small business loans, and created 10 
full-time jobs.
    As a result of the economic development and beautification 
of the City's central business district, major retail and 
restaurant chains have decided to open stores in our City. 
These businesses include: Home Depot; Target; Bed, Bath and 
Beyond; Chili's; Marshall's; Michael's; Ross Dress for Less; 
Staples Office Supplies; Bally's Total Fitness; Red Lobster; 
and In-N-Out Restaurant. These new developments have resulted 
in hundreds of additional jobs being created in the City. We 
fully anticipate that the other prominent national chains will 
follow now that the City of Inglewood is viewed as an 
economically viable place to conduct business.
    Inglewood, like most other cities throughout the Nation, 
depends on CDBG funds to provide services and improvements that 
are vital to maintaining the vitality of our community. The 
changes proposed within the President's fiscal year 2007 budget 
would adversely affect the residents of Inglewood and our 
businesses. In fact, our budgeted CDBG revenues for the current 
fiscal year represent a 23 percent decrease in funding from the 
previous year. Our overall budgeted revenues from the 
Department of Housing and Urban Development represent a 27 
percent decrease from last year. The proposed ``reform'' of the 
CDBG program would undermine our ability to help low-income 
families at a time when they need our help most.
    I want to take this opportunity to respectfully urge the 
members of this committee to take steps to protect a crucial 
source of funding for communities across the Nation. As the 
President of the National Conference of Black Mayors, I 
represent over 600 mayors across this country, and to reduce 
CDBG would hurt their cities significantly. In many instances, 
CDBG is the life blood of those cities. So I urge you to do 
everything you can to prevent the loss of these funds.
    America is a generous Nation that is constantly giving to 
others around the world. Now, I humbly ask that you do what is 
right and extend the same spirit of generosity to the citizens 
of America right here at home.
    Again, thank you very much for extending me an opportunity 
to testify before you today.
    [The prepared statement of Mayor Dorn can be found on page 
64 of the appendix.]
    Chairman Ney. Thank you, Mayor.
    Mayor Hofmann?

     STATEMENT OF HAROLD HOFMANN, MAYOR, CITY OF LAWNDALE, 
                           CALIFORNIA

    Mr. Hofmann. Good morning. My name is Mayor Harold Hofmann, 
and I am starting my 17th year this morning as Mayor of the 
City of Lawndale.
    It is my pleasure to be here representing the community of 
Lawndale. I am here to discuss what CDBG funds do for Lawndale, 
how those funds are used to support and enhance our City, and 
what it would mean if those funds were to be cut, or worse, 
eliminated.
    I hope that this testimony will allow the subcommittee to 
see the great things the CDBG does for this community and allow 
you to discern why it is necessary to stop cuts in CDBG 
funding.
    Lawndale is a community of approximately 31,000 people, but 
it is strategically located in what we affectionately call the 
``Heart of the South Bay.'' As is the case in many California 
cities, Lawndale's financial resources are severely limited. 
This is shown in the two largest areas for generating revenue: 
Property tax and sales tax. In 1978, when California's 
Proposition 13 was passed, Lawndale was a City that had no 
property tax. Today the City receives a very small percentage 
of what the residents pay in property tax, and much less than 
the average California city's portion.
    Additionally, with the small size of approximately 1.9 
square miles, Lawndale does not have a great deal of retail 
development, and therefore does not receive much sales tax. 
Because of these factors, the City of Lawndale must rely on 
other funding sources, including CDBG, to pay for many of the 
programs we operate.
    Lawndale is a community that has been participating in CDBG 
since its inception 32 years ago. This funding has been 
benefiting the community in many ways. However, in recent 
years, due to funding decreases, City staff has not had the 
ability to fund or implement any new projects. In the past, to 
determine what programs the City was able to provide, the staff 
generally recommended continuing existing CDBG funded program 
that provided the most benefit to the qualified residents. When 
a CDBG project was completed, or additional CDBG funds were 
made available, staff recommended the implementation of new 
projects. This was accomplished through the request for 
proposals to implement new projects. This has not happened in 
some time, and the City has been using it's dwindling CDBG 
funds to support the same programs year in and year out.
    Most recently, funding has gone to an item that is 
considered extremely important, and has become a necessity. The 
previously noted strategic location of Lawndale in the heart of 
the South Bay has caused, and will continue to cause, a 
significant number of vehicles and large amounts of traffic 
which are generated by Lawndale's larger surrounding neighbors. 
Because of this, large portions of Lawndale's CDBG money goes 
to improve and maintain our 22 miles of streets and to make our 
sidewalks A.D.A. compliant and more accessible to residents and 
visitors alike. In recent years, CDBG funding has been also 
used for procurement and advances for the Lawndale senior 
citizen population with goals of creating a new senior 
facility. These funds are currently used to support these 
seniors with a nutrition program, providing daily meals at 
reduced, and often, no cost. And other programs currently 
funded through the CDBG include residential rehabilitation and, 
of course, graffiti removal. These programs allow for the 
community of Lawndale to continue to appeal to and attract 
families, and move away from blighted conditions.
    As you may be aware, the Federal Government has been 
cutting funding to CDBG over the year with funding for CDBG 
decreasing significantly over the past 3 years. If funding is 
cut further for Lawndale's CDBG's program, its residents will 
be affected in immeasurable ways. Cuts in this type of funding 
will harm the City's continued success in the programs it 
currently provides. The City would need to seek other funding 
for programs, but would likely be forced to eliminate a great 
deal of those programs.
    I would like to take this opportunity to thank the 
subcommittee for allowing me to speak today on behalf of the 
community of Lawndale. I urge you to use what you have heard 
today and do all you can to stop any reduction or elimination 
funding for the current and future CDBG programs.
    Thank you.
    [The prepared statement of Mayor Hofmann can be found on 
page 80 of the appendix.]
    Chairman Ney. I want to thank all of the witnesses. And I 
think by what you are doing today will be a great tool to help 
us for those of us who do not want the cuts, it will be a great 
tool to help us with this hearing and your voice today.
    I have a couple of questions. And I am basing some of these 
off of the hearings in Ohio, and frankly probably one of the 
questions I am going to ask about the formula and the neediest, 
might better be answered by the second panel when I realized 
because they work with, you know, sometimes a little bit more 
intricate details.
    But in the Administration's proposal, putting aside the 
dollar figure in the cut, but in the proposal is to have a 
shift to help the neediest of the needy. And do you have any 
comments on that change within the formula to do that or do you 
have any thoughts on it?
    Mr. Ovrum. Let me just say quickly, and again I think, Mr. 
Ney, you are correct; the second panel might be better equipped 
to deal with that. There have been a number of formula 
proposals that we have looked at. We do not see any one of them 
at this point becoming the leading option in our mind. The 
thing that we want to urge upon you most is to fully fund the 
program and then we would be happy to work with you on an 
equitable funding formula.
    Chairman Ney. If fully funded? Okay.
    Mayor?
    Mr. Dorn. I do not agree with the formula that has been 
proposed; I think needy is needy. And I think we need to have 
the CDBG fund fully funded so that those individuals can be 
helped.
    I mean, of course, if an individual is out on the streets, 
that individual is needy. If an individual is hungry, living in 
a shelter, that individual is needy. All of them need to be 
helped. I mean in a country this rich, why would we even 
consider saying well, this needy person we are not going to 
help, but this needy person over here we are going to help?
    The formula does not work. Let us fully fund CDBG.
    Chairman Ney. Mayor?
    Mr. Hofmann. Who are we to determine who is really in need? 
I mean, if you are in need, you are in need. And we, as a City, 
we look at that and we try to help everybody that we can help.
    Chairman Ney. Well, the response back, and I asked this 
question because back in Ohio when we went to the rural areas 
like the Coalition for Appalachian Development, they felt that 
if the formula is altered, that they already try to take care 
of the neediest. And if the formula is actually altered, you 
would kind of restrict, maybe somebody is put in a category of 
poor, but they would not be in the neediest, and all of a 
sudden you cannot help them. They thought the flexibility--
basically they are saying what you have said. And so I was just 
curious if the same feeling was out here on that.
    I want to ask a question about micromini loans. Let me tell 
you where I am coming from on this. We have asked this question 
also back in Ohio, and again maybe the second panel deals with 
it more. But has anybody has embarked on the use of micromini 
loans?
    After the United States went into Afghanistan, there was a 
whole ``big picture'' attempt to fund certain things through 
the United States Department of Commerce. And we found out that 
micromini loans were helping, especially in the areas of 
helping the women who weren't allowed to read all these years 
or to own a business. And it is something that maybe surprised 
people when they heard about it, the theory being used in 
Afghanistan. We have been using it for years back home because 
the micromini loans are sometimes $100, $200--under $1,000. So 
back home some of the groups have been using these micromini 
loans in Ohio. And I was just wondering if any of you have any 
familiarity with them with them or the use of them, or have 
they been used here or not?
    Mr. Dorn. We have used micromini loans for small businesses 
that need money for a short period of time. Micromini loans 
have been very vital to some businesses just getting started. 
And we have used those, yes.
    Mr. Ovrum. And Mr. Graves will speak to what we have done 
in Los Angeles on that during his portion.
    Chairman Ney. Yes. One question I had, I want to ask of 
HUD, but one of the things about assessing the program is the 
argument we hear out there that HUD is still using COBALT as 
the process. And I guess information to be transmitted to CDBG 
participants by computer somehow, but HUD uses COBALT. And I 
did not think this was accurate. Believe me, I am the last 
person to be a computer whiz. I am a history teacher by degree, 
so I am not into it. But we do hear comments, well, HUD is 
using COBALT, so it is an old, old system in the process of 
electronics, and therefore it is not an accurate gauge of the 
effectiveness of CDBG,
    Assistant Secretary Patenaude. Thank you, Mr. Chairman.
    HUD is currently revising the IDIS system. And by the fall 
of 2006, we will move to a web-based program or platform, if 
you will. And I am not a computer tech, but I understand it is 
currently a COBALT mainframe.
    Chairman Ney. Yes. Because if I can remember, I hope I have 
my years right, but I think in 1999, Rick Lazio, I think, was 
head of the Housing Subcommittee. But HUD was revising it back 
in 1999. So that is my institutional history. And I am not 
trying to get you here. I am just saying I think I heard that 
back in 1999.
    Assistant Secretary Patenaude. Mr. Chairman, if I may, the 
Secretary of HUD recruited a top talent. We have a new Chief 
Information Officer, Lisa Schlosser. She is personally 
committed to this. We have biweekly meetings with the 
contractor that is handling the revisions to IDIS. And I can 
assure you that this time HUD will get it taken care of.
    And as I said, by the fall of 2006, it will move to the 
web-based platform.
    Chairman Ney. By the fall of 2006?
    Assistant Secretary Patenaude. This fall.
    Chairman Ney. Okay. Well then, what about some of the 
comments people have made that the system is not as up-to-date 
as it should be, and it is not accurately portraying the use of 
CDBG or its effectiveness; either way, I mean, you could argue 
it.
    Assistant Secretary Patenaude. We can currently tell you 
what CDBG is being spent on. But with the implementation of the 
performance measurement framework, we will be able to 
accurately gauge the successes the CDBG program is having.
    Chairman Ney. Yes.
    Assistant Secretary Patenaude. And we will fully implement 
the performance measurement system in fiscal year 2007, but we 
will begin workshops this May. And the workshops will continue 
through the fall so that we can successfully implement this new 
system.
    Chairman Ney. And I appreciate that. And I do not want to 
be putting you on the spot, because you are not OMB, but OMB is 
saying that CDBG is not effective. So if OMB is saying that, 
are they getting that from HUD, or has OMB just made that 
statement and not utilized the uses in the right way? What do 
you think about OMB's statements?
    Assistant Secretary Patenaude. As you know, the program was 
PARTed, which is an OMB tool to rate the effectiveness of the 
CDBG program 2-plus years ago. And, unfortunately, the program 
was rated not effective under the current part system.
    The Office of Management and Budget was instrumental in the 
development of the performance measurement framework, so I 
believe that this is one step in the direction that OMB 
supports.
    Chairman Ney. So OMB thinks it is not effective, then does 
HUD think the program is effective?
    Assistant Secretary Patenaude. We are implementing the 
performance measurement framework so we can accurately gauge 
what the program's effectiveness is. And OMB was a partner in 
that. The stakeholders were involved.
    Chairman Ney. Yes.
    Assistant Secretary Patenaude. And it was a 2-year process 
developing this. And I believe the performance measurement 
framework was developed in response to the PART on the program.
    Chairman Ney. So actually it is kind of up in the air then 
if HUD has not determined whether it is effective or not, and 
people would tend to judge, I think, a little bit more HUD's 
determination of the program than OMB. I am talking as a Member 
of Congress. OMB says a lot of things. But it is hard for me 
and other people dealing with this to visualize how OMB can say 
that it is not effective when HUD itself really is not in the 
assured position yet of determining how effective it is because 
you are trying to upgrade the systems to make that 
determination. And so I just wonder how OMB could have decided 
it. It just seems that OMB would be flawed in coming out and 
saying that this is not an effective program.
    Assistant Secretary Patenaude. Well, as you know, the PART 
is a tool that they used, and it is obviously not a perfect 
tool to gauge the effectiveness of a program. And the same PART 
is used to evaluate every Federal program. And as a result of 
that score, OMB engaged in dialogue with HUD to develop this 
performance measurement framework so that we can accurately 
gauge.
    Chairman Ney. Yes.
    Assistant Secretary Patenaude. Again, we have seen many, 
many successes with the program, but we do not currently have a 
system in place. We are implementing it right now so that we 
can assure the taxpayers that the money is being used wisely.
    Chairman Ney. It just seems that OMB has jumped the gun to 
say it is not effective when they are trying to communicate 
with HUD to see if it is effective.
    Just to go back in a little history with OMB, they had 
deemed that we could severely cut back the black lung clinics 
because we have less coal miners now. And, of course, black 
lung is something people got 25 years ago. We fought that when 
President Clinton was in office, and when President Bush was in 
office, so we fought under two Presidents. We argued with OMB 
because they kind of just talked to somebody and deemed well, 
there are less coal miners, without talking to Health and Human 
Services to find out the long term effects of pneumoconiosis, 
which is black lung.
    And so you look back on some of their history and how they 
make decisions. Now, sometimes they will have a more precise 
model. But I think this is another case where OMB, if you do 
not have a system kind of perfected it as HUD to determine the 
effectiveness, I just do not know how they could have had a 2-
year kind of sit down on this, OMB, and deemed that the program 
is not effective. It seems like they should maybe listen more 
to what you all developed by 2006, I would assume.
    Assistant Secretary Patenaude. Well, they were a partner at 
the table. And I do believe that they, by being a partner at 
the table, they were at all of the public interest group 
meetings. I think they do support the reform of the CDBG 
program, and part of that reform is the implementation of the 
performance measurement system.
    Chairman Ney. I should explain, I am sorry, to the 
audience. I apologize because of words we use in Washington, 
D.C., a lot. But OMB is Office of Management and Budget. So I 
should explain. I am sorry for not explaining that in the first 
place.
    I will stop because I do want to get to our ranking member. 
But one other question I had, do you have any comment on the 
neediest of the needy and the formula, any comment on it?
    Assistant Secretary Patenaude. The current formula is 
flawed. As you know, the demographics have changed and it has 
been 30 years since the formula was developed. And we can use 
the examples of St. Louis, Detroit, and Miami, where we have an 
aging housing stock. Communities actually benefit from that. I 
am a native from New England and we all know that in New 
England, the pre-1940 housing is very, very valuable, but yet 
New England benefits from the pre-1940 housing.
    We look to Detroit, that has demolished much of the pre-
1940 housing. The pre-1940 housing, when it is demolished, 
works against them because the need is not there.
    Chairman Ney. Okay. Just for the record, explain the 1940, 
what it is.
    Assistant Secretary Patenaude. Housing that was developed 
prior to 1940 is part of the current formula, and that is what 
is creating this distortion. And, obviously, you know the older 
cities benefit from this when indeed, many of the pre-1940 
housing in Boston and even in Washington, D.C., are very high-
end housing now. It is very expensive to rehab that housing. So 
that is part of the distortion.
    So we look at communities, the example I cited in my 
opening remarks. We have communities with very different needs 
receiving the same amount. So when we talk about targeting to 
the most needy, the formula that we propose would fix the 
current distortions.
    Chairman Ney. Thank you.
    Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Let us continue with trying to understand how you make 
decisions. First of all, let us recognize that last year's 
budget eliminated CDBG. Was that decision based on performance 
studies?
    Assistant Secretary Patenaude. I was not in this position 
last year. As you know, I was confirmed on April 15th of last 
year.
    Ms. Waters. But surely they told you what they were doing. 
No?
    Assistant Secretary Patenaude. I was not involved in the 
budget process for fiscal year 2006.
    Ms. Waters. All right. Then I will not pursue that line of 
questioning. I am trying to find out how decisions are made.
    So the budget that we are dealing with proposes a 
substantial cut, 20 percent cut. But tell me how that relates 
to performance criteria measurements that you entered into the 
Federal Register on March 7th. Did you enter--
    Assistant Secretary Patenaude. We did. We published the 
final notice of the performance measurement framework.
    Ms. Waters. The final notice of the performance measurement 
framework--what?
    Assistant Secretary Patenaude. The performance measurement 
framework.
    Ms. Waters. Framework.
    Assistant Secretary Patenaude. That is the system that we 
will work with our grantees.
    Ms. Waters. This is where HUD will be conducting these 15 
workshops?
    Assistant Secretary Patenaude. We will be.
    Ms. Waters. Tell me about those.
    Assistant Secretary Patenaude. The workshops will be for 
our grantees. They will be throughout the country. We will have 
one here in LA in August and we will work with the grantees to 
successfully implement this program. Many, many grantees 
already have performance measurements in place, but this is to 
put a uniform system in place and it will be required to enter 
this information into the system.
    Ms. Waters. Well, give me an example of what you will do 
when you come to Los Angeles?
    Assistant Secretary Patenaude. The workshops that will be 
conducted, they will be technical workshops, I think, on how to 
enter the--
    Ms. Waters. Are you going to invite all of the grantees to 
a workshop?
    Assistant Secretary Patenaude. I believe that all grantees 
will be invited to these workshops.
    Ms. Waters. There will be a number of workshops or one 
workshop?
    Assistant Secretary Patenaude. We will be conducting 15 
workshops for this.
    Ms. Waters. One of them will be in L.A.?
    Assistant Secretary Patenaude. I believe just one is 
scheduled for L.A. at this time. If I can check with my General 
Deputy--
    Ms. Waters. Okay. All right. Let us see. You will have one 
here.
    You will be inviting some grantees or all grantees?
    General Deputy Bregon. All grantees.
    Ms. Waters. Okay. What will happen when all of the grantees 
come to this workshop? Tell me how it works.
    Assistant Secretary Patenaude. We are working with the 
contractor right now to develop the curriculum, the training 
curriculum. Part of this will be technical on the revisions to 
the IDIS system, which are very much welcomed. The IT system 
will be much easier to use for the grantees who will be part of 
it.
    The performance framework, how to enter the activities into 
the system. And we also will be training all of our CDBG 
directors. As you know, we have 40 CDBG directors located 
throughout the country so that the technical assistance will be 
available from HUD as well as our technical assistant 
providers.
    Ms. Waters. The information that you will be entering into 
the system, is that information that you will use then to 
evaluate particular programs?
    Assistant Secretary Patenaude. That's correct. When a 
grantee puts together their plan and submits their annual 
performance plan, we will be able to actually look to see were 
the results achieved that they set out in their annual plan.
    Ms. Waters. All right. So that I am very clear about this, 
and I may be mixing up some of the terminology, when you talk 
about the grantee, are you talking about the City of Los 
Angeles, the County of Los Angeles, or all of the programs that 
are involved with the City and the counties?
    Assistant Secretary Patenaude. The grantees are the 
entitlement communities that receive the grants directly from 
HUD. And then the States are also grantees.
    Ms. Waters. Okay. So, the City of Los Angeles and the 
County of Los Angeles will be the grantees receiving this 
information. Now, the information that they are inputting into 
the system is going to be evaluated in some way. Can you 
explain that to me a little bit?
    Assistant Secretary Patenaude. Obviously, it will take a 
year for this to accumulate the information. But the grantee 
submits a plan to HUD, what they intend to do, with their CDBG 
dollars. At the end of that year they submit another plan. And 
by looking at what is now in the new IDIS system we were able 
to compare what they set out to do and whether or not they 
actually achieved the results.
    Ms. Waters. Let me ask if our staffs from Congress have 
been involved or will be involved in any way in this training, 
or will be trained on what you are doing?
    Assistant Secretary Patenaude. I do not think we have plans 
for that, but I think it is a wonderful idea. And we can reach 
out to the Congressional staffers and include them. We have 
1,100 entitlement communities that will be trained, so we can 
certainly reach out to the staffers.
    Ms. Waters. We need to know what you are doing at HUD.
    Mr. Chairman, do you think it would be possible that we 
could send a letter to the Secretary requesting that our staffs 
be brought up to date and trained on what is going on with this 
evaluation process, this performance measurement criteria?
    Chairman Ney. We can do that without objection. And then it 
will be transmitted to the members of the subcommittee.
    Ms. Waters. All right. I think that is going to be very 
important.
    Now let me understand a little bit more the example that 
you provided at the beginning of your testimony, where you 
compared Santa Monica to Santa Maria, was it?
    Assistant Secretary Patenaude. Correct.
    Ms. Waters. You talked about the income of Santa Monica 
compared to Santa Maria. Are you trying to say to us that if 
there are enclaves, support people in Santa Monica, that 
somehow they will not count because Santa Maria should have 
much more money because they have many more poor people?
    Assistant Secretary Patenaude. The new formula does have as 
a basis poverty. We are looking at a better distribution of the 
funding. So the communities that have less distress would 
receive less CDBG dollars, the communities with greater 
distress would receive a greater amount of money.
    Ms. Waters. In this evaluation process, is it possible that 
there would be communities that are now receiving money that 
would not receive funds because HUD would consider the 
population of the poor not poor enough, or too small a 
population to be considered?
    Assistant Secretary Patenaude. Currently, we have over 
1,100 entitlement grantees. And it is possible, and again we 
would need to finalize this piece of legislation, but it is 
possible that grantees would no longer be eligible as an 
entitlement community but would be eligible to compete for 
funds through their State.
    Ms. Waters. This is with your challenge grant?
    Assistant Secretary Patenaude. No. The challenge grant is 
separate. The challenge grant would be another opportunity for 
distressed communities to receive additional CDBG funding. But 
communities currently in Chairman Ney's District, his 
communities, he does not have any entitlement communities; his 
communities receive their CDBG dollars directly from the State.
    Ms. Waters. Discuss the challenge grant a little bit more 
so that I can understand it.
    Assistant Secretary Patenaude. The challenge grant is 
introducing a competitive, not competitive in the traditional 
sense where you would submit an application, but competitive in 
the sense that communities that have made tremendous progress, 
you know, leveraging private dollars, concentrating CDBG 
dollars would be eligible for a challenge grant which could be 
up to $200 million is what is proposed in the President's 
budget. Certainly one community would not be eligible for that, 
but many communities.
    Ms. Waters. When you talk about leveraging private 
resources are you talking about poor communities such as Santa 
Maria trying to have access to private capital, private 
resources by which to be eligible for a challenge grant?
    Assistant Secretary Patenaude. That would be one factor. 
But we would be looking at a community to see how well they 
used all Federal resources concentrating in a distressed 
neighborhood.
    Ms. Waters. So what if Santa Maria, this very poor 
community with $13,000 incomes, did not use it as well, what 
would happen?
    Assistant Secretary Patenaude. They would not be eligible 
for the challenge grant.
    Ms. Waters. But they would still be eligible for a CDBG?
    Assistant Secretary Patenaude. That's correct.
    Ms. Waters. So those communities who have relationships 
with the private sector who are able to attract private 
capital, who are able to be involved in economic development 
activities where there's private participation would be 
eligible for challenge grants?
    Assistant Secretary Patenaude. They would. But leveraging 
the dollars is not the only criteria. We currently have 
neighborhood revitalization strategy areas, we have over 250 of 
them. They are designated by our CDBG offices. Those 
neighborhood revitalization strategy areas, CDBG are being 
concentrated in that area. And that is what we would be looking 
for in the challenge grant. So they would need to have a plan, 
and at some point an established track record of concentrating 
dollars for the greatest impact.
    Ms. Waters. Finally, given what you propose to do in 
examining a community's performance or ability to leverage, 
etc., how did you come up with the 20 percent cut for the 2007 
budget year?
    Assistant Secretary Patenaude. Secretary Jackson said in 
the hearing 2 weeks ago, the Secretary made that recommendation 
throughout the budget process. And the $3 billion CDBG number 
was not stand alone. When they developed the budget it was with 
the consideration that there would be reform to the program. So 
by targeting the dollars the Administration believes that the 
$3 billion in CDBG funding is sufficient to meet the community 
development needs.
    Ms. Waters. So what you are basically saying is you did not 
have any real criteria? You did not have any real way by which 
you evaluated this? The Secretary pulled it out of the air?
    Assistant Secretary Patenaude. I think the Secretary puts a 
great deal of thought into the preparation--
    Ms. Waters. Oh, I am sorry. I did not mean to ask you that. 
I know you cannot agree that the Secretary pulled it out of the 
air, but the real question is you did not have any way by which 
to evaluate the grantees or their programs that could lead you 
to that kind of conclusion at this time?
    Assistant Secretary Patenaude. I do believe a lot of 
thought went into developing the budget--
    Ms. Waters. No. I thought you were not involved in the 
budget. I mean, I want to know what the criteria was for the 
evaluation. How did you do performance evaluation that would 
lead you to the conclusion that 20 percent of the CDBG funds 
should be cut?
    Assistant Secretary Patenaude. I do not believe it was 
based on performance. When we proposed the fiscal year 2007 
budget for CDBG we were talking about a formula revision. And 
that was the number that the Secretary submitted to the Office 
of Management and Budget--
    Ms. Waters. Well, tell me about the performance, the 
revision of the formula, how did that work? How did that lead 
you to a 20 percent reduction? Describe to me how you revised 
the formula that led you to the conclusion that CDBG should be 
cut by 20 percent?
    Assistant Secretary Patenaude. I am not sure there is a 
direct correlation between the 20 percent--
    Ms. Waters. I am not either, that is why I am asking you. I 
am not either. Twenty-seven percent I am being told. I do not 
know how you got to that.
    Assistant Secretary Patenaude. It is a 20 percent 
reduction. The 27 percent, you have to take the earmarks and 
the setasides out of it. So for the formula portion of the 
program it is a 20 percent reduction from fiscal year 2006.
    Ms. Waters. Well, let me just ask this: If in fact we 
really did not have the kind of evaluation or the kind of 
criteria for evaluation to make that determination, is it 
possible at all that we could not come up with a 20 percent cut 
for 2007 year? And let us look at performance criteria and even 
formula revisions to see what we come up for the next budget 
year. Is it possible not to move for 2007 and is there anything 
that we could do here today that would help you to say to the 
Secretary that these cuts will be extremely harmful, unexpected 
at this time and detrimental to our communities and we would 
ask that they would not be pursued? With the performance 
criteria and CDBG formula revision you must show what kind of 
changes you would like to make.
    Maybe after you do the real work you may go in the opposite 
direction. Do you think that would be reasonable to request of 
the Secretary?
    Assistant Secretary Patenaude. Well, as you know, Secretary 
Jackson worked very, very hard to keep the CDBG at HUD, we're 
very, very pleased that it is in our fiscal year 2007 budget. 
He fully supports the program. And as he said in a hearing 
before your committee, you know the funding level is up to the 
Congress. This is the proposed amount for CDBG that the 
Administration has put forth.
    Ms. Waters. Well, we know that. What we would like to do is 
work with you and not have to fight with HUD. As you know, we 
have significant bipartisan support for full funding for CDBG. 
And some of our strongest advocacy is coming is coming from the 
Republican side of the aisle, where Members have little towns 
and cities that depend on CDBG money for their infrastructure.
    I brought attention to Lawndale as one of the smallest 
cities in my district, because they depend heavily on CDBG for 
infrastructure. He talked about the traffic problems that they 
have and how they are able to deal with those, using CDBG just 
as my Mayor from Inglewood.
    So I will just leave you with this; I think what we are 
going to hear today, and what the people in this room want to 
hear is:
    (1) We cannot afford the cuts; and
    (2) We understand when Departments, Agencies, or this 
Administration would like to evaluate what is going on. But we 
really do understand the difference between some reasonable or 
credible evaluation and just some kind of speculation about 
whether or not programs are meeting the needs or whether or not 
the formula is correct.
    So, I would like to say to you that one of the things you 
can do that would be very helpful for all of us on both sides 
of the aisle is to say, you know I really do think before we do 
any cuts we ought to be able to justify them. Otherwise, we're 
just not believable. Okay?
    Assistant Secretary Patenaude. The fiscal year 2007 budget 
has an increase for the Home program, the Continuum Care, those 
are our homeless programs. The SHOP program, which funds the 
self-help such as Habitat for Humanities. So we did see 
increases in other programs in the Office of Community Planning 
and Development for fiscal year 2007 that will also serve the 
communities in need.
    Ms. Waters. Okay. I understand. And while we appreciate the 
other programs, we need those, plus we need CDBG. And while you 
identify that you have those programs that are continuing, you 
are cutting other programs. Are you not cutting Brownfields 
also?
    Assistant Secretary Patenaude. We are consolidating the 
Brownfields program. It is an eligible use right now under the 
CDBG program.
    Ms. Waters. Would you like to tell me what other programs 
you are cutting?
    Assistant Secretary Patenaude. The Section 108 loan 
guarantee program was consolidated into the CDBG program.
    Ms. Waters. Consolidated? But do you understand Section 108 
is extremely important to economic development? My City of 
Inglewood was able to expand its business community by 
reconfiguring the median in its main thoroughfare of Market 
Street, which helped to bring more businesses onto that 
community. And it has just been booming. Section 108 is really 
important. And do you know why I really like it. It was my 
first big accomplishment as a Member of Congress to keep it 
from being scored so that it could be used for cities. And so I 
am very partial to the Section 108 Loan Guarantee. And it is a 
very special program for me and I think for the cities.
    So what else did you cut?
    Assistant Secretary Patenaude. The rural housing program is 
also being consolidated into the CDBG programs.
    Ms. Waters. Where you use ``consolidated'', I use ``cut.'' 
Now where are we differing?
    Did you know the rural program was being consolidated, Mr. 
Chairman?
    Chairman Ney. Clinton, did we know the rural program was 
being consolidated?
    Our counsel tells me we that knew it was being 
consolidated.
    Ms. Waters. Okay. So what else are you consolidating?
    Assistant Secretary Patenaude. Those are the three programs 
that will be consolidated with the CDBG reform.
    Ms. Waters. Okay. So thank you very much. And I am going to 
move on.
    Assistant Secretary Patenaude. Thank you.
    Ms. Waters. Let me just thank our Mayors. I see that 
Supervisor Yvonne Burke has come in, Mr. Chairman. And we would 
like to have an opportunity for her to give her statement.
    I just want to say to my Mayors, because I know that they 
probably have to leave, that it is very important for you to 
work very closely with your Members of Congress. I know you do. 
We work very closely together. But if we are to engage the 
Members of Congress in the struggle, they have to be aware of 
the importance of these programs to their districts.
    Many Members will go along and they will say yes, they 
should be refunded. But they do not have the experience of 
really knowing what these programs are doing. We do because 
they are in our jurisdiction. This is the subcommittee of the 
Financial Services Committee that has the responsibility for 
oversight. But when you have members who do not serve on this 
committee, it is important for you to do several things.
    (1) It is important for you to get together with the 
Members of Congress and to tell them what your ideas are about 
funding programs and developments ahead of time. Let us not 
wait until you need gap funding and then you are coming for an 
earmark to try to keep something going that you started. Let us 
not wait until there are problems with some of these funding 
ideas to get to the member.
    In the City of Los Angeles, Mr. Ovrum, there was some talk 
today about the affordable housing trust fund. We like the 
idea, but if you are going to use CDBG or Home monies with 
their programs and you are announcing the program, the Members 
of Congress should know about it. We do not want to read about 
it in the newspaper. We want to know about it, because this is 
money we fight for and we work very hard for.
    In Los Angeles, for example, you have this huge delegation. 
Some of them sit on the Appropriations Committee, like Lucille 
Roybal-Allard, you want her involved in this housing trust 
fund. We do not want to see that a housing trust fund is being 
announced and we are hearing about it for the first time.
    That also goes for the development projects in our 
districts. If you are working with developers on projects, you 
and CRA, do not let us find out about it through the back door. 
We want to hear about it upfront so that we will understand not 
only how the dollars are being spent, but, in many cases, how 
we can be very helpful, in other cases how we can add funds.
    Now, I have a request from the City of L.A. for some gap 
funding for a project at Vermont Manchester--no Manchester. You 
did not do that. Broadway Manchester. It was to build a parking 
facility. I did not even know you were developing the parking 
facilities. And I am not going to add that to my earmark 
requests to assist you with that because you are coming at it 
too late, and I have other earmarked requests that are in line 
that I have to pay attention to.
    So the message is this, mayors: Include your Members of 
Congress early on and particularly those who, again, do not 
have a lot of detail about these programs. Otherwise, those of 
us who are sitting here working for CDBG and Section 108 and 
home programs, etc., we are going to start to get more involved 
in writing into the appropriations legislation what can and 
cannot happen; so we would appreciate that.
    And if you would take that back. I see that your CDBG 
Director is here. We would appreciate it very much.
    Thank you very much.
    Yes, sir?
    Chairman Ney. And any of the Mayors, of course, who have to 
leave, but we have Ms. Burke.
    I do have, without objection, a statement for the record 
from Jan Perry, council member, City of Los Angeles
    Chairman Ney. And we welcome, we actually met you before 
out here, a former colleague of the U.S. House, the Honorable 
Ms. Burke.

 STATEMENT OF YVONNE BRATHWAITE BURKE, DISTRICT 2, MEMBER, LOS 
              ANGELES COUNTY BOARD OF SUPERVISORS

    Ms. Burke. Well, thank you very much to Chairman Ney and 
also to our Congresswoman Maxine Waters.
    We are certainly pleased to have you here. It is my 
pleasure to have a chance to share with you some of my 
concerns.
    My remarks will discuss the importance of the Community 
Development Block Grant, and maybe I should say, you are in our 
2nd District here, Exposition Park, it is in the 2nd District. 
We have both of our Mayors here are part of the 2nd District. 
And we are very pleased to have you here because these are 
issues that are of vital concern to us.
    And today you will also hear from Carlos Jackson, the 
executive director of the County's Community Development 
Commission which administers our CDBG program on behalf of Los 
Angeles Urban County.
    Although you are receiving testimony on several aspects of 
CDBG, I am going to comment specifically only on the formula 
program.
    CDBG programs play a key role in improving the quality of 
life for low- and moderate-income residents of Los Angeles 
County. I am deeply concerned about the proposed cut for 
Federal fiscal year 2007. The proposed 25 percent reduction in 
funding will be a loss of $7.7 million to the Los Angeles Urban 
County program. As you know, we have already been reduced 
annually since 2001. In 2001, our entitlement was $39 million, 
and with the 24 percent proposed cut for next year, our 
entitlement will be reduced to $23.1 million. That is a loss of 
$16 million in a 6-year period. It is vital that Congress 
maintain formula funding for the CDBG program at the $4.3 
billion to improve the quality of life of our citizens.
    I want to acknowledge the past support of Congresswoman 
Waters for our programs and for this large urban program. And 
in its 32 years the program has been used constructively to 
provide housing, community and economic development, and public 
service projects. Our funds are normally leveraged with funding 
from other sources to develop affordable housing. We have been 
able to bring in tax credits, we are able to bring in banks. 
The only way we are able to utilize the funds that we have is 
because anyone who comes in to move forward with one of those 
programs, they know that we are leveraging other funds and they 
are going to have to leverage other funds to make it viable in 
Los Angeles County where land is expensive, construction is 
expensive, and where it is necessary to have affordable 
housing. Our biggest problem, we have 90,000 homeless and it is 
basically a housing problem, affordable housing.
    So we have to do this kind of development. And we also 
support business.
    And I would like to give you one example. I believe this is 
right outside of your District, but Martin Luther King 
Hospital, where we have the Los Angeles Eye Institute, which 
has been involved with $21 million multi-discipline health care 
facility that will be adjacent to Martin Luther King Hospital. 
And this eye institute will provide, not only is it an eye 
institute, this is going to meet the requirement of Martin 
Luther King to have a place for doctors to hold their offices.
    And what has happened in our other hospitals, there is the 
opportunity for a practice plan. Martin Luther King Hospital 
did not have a practice plan. This will institute a practice 
plan with a facility adjacent to the hospital where those 
doctors will be able to have their practice and they will not 
have to go miles away from the hospital in order to carry that 
out and to make it competitive with other hospitals.
    Now this money is a combination of 108 Loan Guarantees and 
Economic Development Initiative Funds. And $3 million in 
private funding to construct a facility that will provide 
health services to low- and moderate-income people.
    In addition, CDBG funds are allocated for important 
``public service'' activities. Our residents benefit from 
public service activities: Meals on Wheels for seniors; after 
school programs for youth; drug intervention; homeless 
assistance; and domestic violence counseling. The Los Angeles 
County Board of Supervisors values CDBG in that it provides the 
flexibility for us to prioritize the allocation of funds to 
address our local needs. And just like you said, we want to 
know about what's going on.
    I believe that we provided to you a list of all of those 
funds that we are allocating, but I just want to talk about a 
couple. UJIMA. UJIMA came to the County for $1 from HUD when 
HUD no longer--when they had received it back in a foreclosure. 
We now have a proposal out to totally redo the UJIMA project. 
And there are proposals that have been accepted and that is 
moving forward.
    The Salinas property that we acquired from Compton High 
School, the school district when they no longer wanted that 
land. We have proposals out. We have not been able to arrive at 
those. But these are some of the things. We purchased the land 
from Compton and now we are moving forward for a major housing 
project there and the proposals have not been accepted totally, 
but it is in outreach to the community. And I am sure you will 
be hearing from some of the members of the community. Ninety-
seven units of condo projects there.
    So I want to thank you for conducting this field hearing 
and to restate this is a vital program to Los Angeles County. 
It has been successful, it has been effective in providing 
services to low income people. And I am confident in the course 
of this hearing that you will realize how important CDBG is to 
the County and also some of the other programs that you 
discussed with HUD. We cannot afford to suffer the loss of any 
more in terms of drastic cuts.
    And I join all members of the Board of Supervisors in 
looking forward to continuing to work with your committee to 
assist in anyway we can to move forward where we can continue 
to have this funding that is vital.
    Thank you.
    [The prepared statement of Ms. Brathwaite Burke can be 
found on page 62 of the appendix.]
    Ms. Waters. Thank you.
    Chairman Ney. I really did not have any questions. I want 
to thank you for coming.
    I did want to follow up on something, though, that the 
Congresswoman has mentioned, I think it is important and 
actually it was raised during the hearings in Ohio, and it is 
earmarks. A lot of members are afraid to say the word 
``earmark'' today. It is a thing you're not supposed to say.
    And as I made clear, we have a cancer center being 
constructed in Knox County and that is because we talked with 
local officials, they communicated to our office, and I put it 
in. In fact, you can put my name next to any earmark and piece 
of legislation that you want. Not you, but the government. But 
I always make it clear that I do not think the U.S. Government 
would have said wow, I really think the people in Knox County 
who are pretty isolated need a cancer center, let us just do 
one. No. It is because the local officials, or I could name you 
places you have never heard of that $20,000, $40,000 helps to 
bring water. Because I have areas that do not have potable 
water. There is no water in people's houses. They get it out of 
wells, and maybe the wells were destroyed. They now go down the 
road and they get it out of a spring. We have places like that. 
And again, you know, I do not think the Federal Government is 
going to say we giveth water today to Ohio or other places.
    And so I am mentioning earmarks, and I will put my name on 
them. I mentioned earmarks, I know the Congresswoman will. But 
I think the Congresswoman raises a really good point, too. The 
communication is a turning point. And with the attack on the 
funds and the cuts on the funds and what we are trying to do to 
help people back in the districts, the communication at the 
local level to the Member of Congress is absolutely more 
critical than it has ever, ever been. Because we are not going 
to hear what people are doing. And I have said this to our 
local government officials on both sides of the aisle. We are 
not going to hear it out of the Federal Government. They are 
not going to call us up and say guess what is going on down in 
the district.
    So I just wanted to dovetail in there. I think it is more 
critical, again, then ever before. Right now we are battling 
the money, but it is again the process of it, too.
    Ms. Waters. Well, no, I hear about Ohio. My husband was 
born in Zansville.
    Chairman Ney. Well, I live 30 miles from Zansville. Do you 
have any relatives back there?
    Ms. Waters. He has. They are not mine. So I hear plenty 
about Zansville.
    Chairman Ney. By the way, well we have learned a new term, 
too. If things do not go right in November, I think that the 
line all of us in elected office ought to use is I did not 
lose, I was consolidated.
    Ms. Waters. We learn something new everyday.
    I want to thank Supervisor Burke for coming today. I know 
how busy she is. And I do know about a lot of the programs, and 
I will talk with you a little bit more about the Martin Luther 
King project. We certainly cannot talk too much about it today, 
because it would take us all day to do that.
    But I want to ask you something. I think I read that L.A. 
County has come up with a very ambitious program for the 
homeless.
    Ms. Burke. Yes.
    Ms. Waters. And that you are spending County revenue to 
help deal with this problem. And I suppose you may be putting 
together money from wherever you can pull it from to deal with 
this problem. And as I understand it, you're trying to do 
something to get rid of the concentration of the homeless in 
the downtown area and to ask communities to accept their share 
of responsibility in dealing with the homeless. Any of these 
dollars Federal dollars?
    Ms. Burke. For the most part, these are our general revenue 
dollars. We took out of our $80 million that we're taking out 
of--this housing trust fund is a motion that Supervisor Molina 
and I introduced some time ago saying that we need to have a 
housing fund that is separate. However, we will call on Federal 
dollars. Because first of all, if we have family assistance and 
we have stabilization, we are going to have to have some of the 
mental health dollars, we are going to have to have some of 
those dollars that go for general-- well, our general relief is 
local, but we will be calling upon--we have to use Federal 
dollars to provide many of the services that will be provided.
    This housing fund is a commitment from our general fund, a 
$15 million ongoing commitment, not 80 million every year. $15 
million ongoing from our general fund. Now, of course, you may 
immediately say well, will that take away from some of your 
health dollars that you use from the general fund? We feel that 
in a sense many of the people we are talking about go in and 
out of our hospitals everyday. These are the people that when 
someone wants to get rid of them, they call for an ambulance to 
take them to the hospital.
    So there are Federal dollars. But basically this is a 
general fund revenue source.
    Ms. Waters. So what we are looking at, we have the City 
that has put together or extended or a housing trust fund. The 
County will have its own housing trust fund. And the two of you 
will work with each other.
    Ms. Waters. Well, that is what I was wondering. The two 
would be working together.
    Ms. Burke. Right.
    Ms. Waters. And have they bought into your plan and you 
bought into their plan about how you are going to disperse from 
downtown?
    Ms. Burke. Well, there is a very strong feeling, I think, 
from the City and--well, let me say this. The City, part of 
their program is a facility that is in the 2nd District but is 
really close to Skid Row. And that is controversial because 
there is a difference on the Board on terms of whether some 
people believe there should be any kind of additional facility 
there. But I suspect that will all be worked out.
    I have committed to support the facility. I understand that 
we do need to disperse, but you also have to have services 
where the people are. You know, all of the people are not going 
to leave. And it is a very difficult thing to say we are going 
to have all the services far away when you have the people 
right there. But I support the idea of having facilities in 
every district, all five districts. But at the same time we do 
have the people who are right there.
    Ms. Waters. One of the things that I am going to ask of the 
Mayor and of the County Board is that you include us in those 
discussions.
    Ms. Burke. Certainly, yes.
    Ms. Waters. Because I was involved about a year ago, and 
after the fact in a plan that Ms. Tobacca was trying to 
advance.
    Ms. Burke. Oh, yes.
    Ms. Waters. And all of a sudden the resident councils were 
up in arms. And we ended up in a meeting one night with over 
1,000 people at Crenshaw Christian Center where the community 
was opposed to the plan that Ms. Tobacca was advancing.
    I think that if we have an opportunity to get involved with 
the discussions early on, we can help come to some conclusions 
about where facilities could be or should be located, or ways 
that we could at least communicate with the communities rather 
than hearing about it on the tail end. Because normally what 
happens if we are not involved and we hear about it at the last 
minute, we just go along with the people, whatever they say. 
You know that is the easy way out. But if we are involved in 
planning and development, we can defend a good decision. So I 
am going to ask the Mayor that we be involved.
    Ms. Burke. Right.
    Ms. Waters. And I would like to ask you that you be sure 
and get our staffs involved.
    Ms. Burke. Right.
    Ms. Waters. So that we can help in the development of the 
plans.
    Ms. Burke. We certainly will do that. But it is not going 
to be easy. There are not going to be very many communities 
opening their arms. But I do want to say one community, we had 
a lot of problems when there were homeless people coming to Ted 
Watkins Park during the day.
    Ms. Waters. Yes.
    Ms. Burke. The church, Grant AME, came forward and has 
provided a facility for people there so that the homeless can 
go there rather than going into the park. And the community 
there is very happy with that, they are accepting it.
    So it is not going to be easy to find a facility location, 
but at the same time we would like to work with you.
    Ms. Waters. Okay.
    Ms. Burke. As we move forward to try to identify a 
location.
    Now, a location that the Mayor is suggesting is not in the 
1st District, it is in the 2nd District, but it is close to 
Skid Row and that is highly controversial.
    Ms. Waters. I am sure.
    Ms. Burke. Yes.
    Ms. Waters. Okay. Thank you very much. Thank you.
    Mr. Mayor, did you have a last word you would like to leave 
with us before you leave?
    Mr. Hofmann. No, other than thank you very much for coming 
in.
    Ms. Waters. You are welcome.
    Mr. Hofmann. And letting us be part of this discussion.
    Ms. Waters. Thank you very much.
    A round of applause for our first panel.
    Chairman Ney. We will take a very, very short recess as the 
second panel sets up. And it'll be Mr. Clifford Graves, Mr. 
Carlos Jackson, Mr. Al Jenkins, Mr. Rudolf Montiel, Mr. 
Mitchell Netburn, Ms. Brenda Shockley, and Ms. Marva Smith 
Battle-Bey. And then we will go into our second panel.
    And I want to thank the audience.
    We will be right back.
    [Recess]
    Chairman Ney. The committee will come back to order. The 
short recess turned into a little bit longer one, but that is 
okay.
    And we will go straight to the panel. We have:
    Mr. Clifford Graves, general manager, Department of 
Community Development, City of Los Angeles, California;
    Mr. Carlos Jackson, executive director, Los Angeles County 
Community Development Commission and Housing Authority of the 
County of Los Angeles;
    Mr. Al Jenkins, project manager, CRA/LA;
    Mr. Rudolf Montiel, executive director, Housing Authority 
of the City of Los Angeles;
    Mr. Mitchell Netburn, executive director, Los Angeles 
Homeless Services Authority;
    Ms. Brenda Shockley, president, Community Build, 
Incorporated; and
    Ms. Marva Smith Battle-Bey, president and CEO, Vermont 
Slauson Economic Development Corporation.
    Thank you. And we will start with Mr. Graves.

 STATEMENT OF CLIFFORD GRAVES, GENERAL MANAGER, DEPARTMENT OF 
     COMMUNITY DEVELOPMENT, CITY OF LOS ANGELES, CALIFORNIA

    Mr. Graves. Thank you, Mr. Chairman, and Congresswoman 
Waters. My name is Clifford Graves and I am the general manager 
of the Community Development Department for the City of Los 
Angeles. And thank you very much for taking the time to hold 
this hearing here in Los Angeles. I think the turnout today, 
from the veterans to the kids, indicates the level of interest 
there is in this very important program.
    And I am especially pleased that you came out now; I have 
been with the City about 3 years, long enough to develop a 
genuine sense of pride about what the City has been able to do 
with the block grant program over the years, and also to be 
extremely disturbed about what the future for the program might 
hold.
    As you all know, the secret to the block grant success has 
been that while it targets a certain population, the most 
challenged part of our population, it basically it leaves it to 
local officials to tailor programs and set priorities that are 
best suited to their particular community, whether it is a town 
in your district, Mr. Chairman, whether it is the City of Los 
Angeles, the City of Lawndale, or whatever. And it is that 
ability to respond, to have the officials closest to the issue 
respond in an appropriate way. It is what frankly separates 
this program from most other Federal programs and it was the 
reason for the program being formed back in the 1970's.
    Now, Mr. Chairman, you have talked about the typical city 
in your District. Obviously, Los Angeles would have a hard time 
fitting in your District, but we have not only a lot of people, 
some 4 million, but we have over a million people in this City 
who are under the age of 18. We have 100,000 young people 
between the ages of 16 and 24 who are out of school and out of 
work. And it goes without saying, that is more than most of the 
cities in this country, so we are dealing with a problem of 
great magnitude. And when you add the complexity of this being 
probably the most ethnically diverse city in the country--41 
percent of the population is foreign born, and 140 languages 
and dialects are spoken in the schools--it gives you an 
indication that the programs that the City puts into place to 
address the issues are going to be different here than anywhere 
else.
    And the flexibility of the program allows it to adapt over 
time. It is not necessary to go back to Congress every few 
years to amend the program to deal with some new issue that has 
come to the forefront. Local officials can adapt things as 
needed.
    For example, in Los Angeles, early in the program's life, 
as I understand it, the bulk of the funds were spent on capital 
projects, neighborhood facilities, and things like that. After 
the riots of the early 1990's, the City shifted its focus 
toward public services, trying to rebuild the social 
infrastructure of our most challenged areas. And that continues 
to be a priority today, but it has been recognized here that 
there is a growing gap in the economy between the kinds of jobs 
that are being created here, that Mr. Ovrum was referring to, 
and the skills of the workforce who should be meeting that 
need. It is hurting our economic development, and it also 
means, as Mr. Ovrum pointed out, that a large part of our 
population is not benefitting from this economic growth. 
Therefore, the Mayor and City Council have begun to shift parts 
of the block grant program toward economic development and 
marrying our economic development work with the work we are 
doing in workforce development through, among other things, the 
Workforce Investment Act.
    The irony is that you know full well what is happening with 
the proposals for funding of the block grant; the same thing is 
happening in the Workforce Investment Act. Whereas in 1995, the 
City's allocation under the block grant was nearly $100 
million, it is now down to $74 million this year, and it will 
go down even further. And if you add the effect of inflation, 
the City has about half as much purchasing power and half the 
level of services available to deliver now than it had 10 years 
ago, whereas the issues are getting more complex.
    In order to address this, the City has sought to basically 
intertwine the block grant with the other things it does with 
its own funds, and with other outside funds. I would like to 
use just a few examples this morning.
    In the community facilities area, the City passed a library 
bond issue some years ago which resulted in a renaissance in 
the public library system throughout the City. In the most 
needy areas, services and facilities a little above the 
standard were considered to be important, but could not be 
afforded under the bond issue, so many of the libraries in the 
most needy areas got special features and special facilities 
using Community Development Block Grant funds.
    They were also used because, in many of our challenge 
areas, land acquisition was especially complicated and the 
block grant was just able to supplement a much larger amount of 
funds.
    Similarly, there was one area of south Los Angeles that was 
very much lacking a facility suitable for supporting a major 
community center. So block grant funds were used to build the 
Rita Walters Learning Center in south Los Angeles, which 
includes an alternative high school, a community center, and a 
number of other outreach services. Many of those services are 
funded by other programs, City funds, school district funds, 
and others. The block grant also funds some of them, but it was 
the block grant which made that facility possible, which, in 
turn, makes available a whole range of services that the 
community needs.
    I mentioned the importance of rebuilding and strengthening 
the social infrastructure of the City. The City of Los Angeles 
has partnered with hundreds of nonprofit agencies around the 
City to deliver a wide range of human services, some of which 
you'll be hearing about from other panelists, but the block 
grant is the glue that holds these systems together.
    We have molded many of these organizations into what we 
call family development networks, which are essentially 
consortia with common databases, and common client management, 
and we have 12 of them around the City. Their base funding is 
the block grant. But to use an example, we are using funding we 
get from the State of California's Office of Traffic Safety to 
use these agencies to promote traffic safety. And last year, we 
were able to give out 6,000 free child safety seats to needy 
families, and over 13,000 bicycle helmets to increase the 
safety of young people. Again, if it weren't for the block 
grant providing the infrastructure, these specialized programs 
could not work.
    In the economic development area, it is very interesting. 
The money is used as either a stimulus or as gap financing to 
make projects that are badly needed become feasible. Probably 
the biggest success story we have had in recent years is that, 
as you probably know, there is an area adjacent to Skid Row and 
the modern downtown on the other side known as the Old Bank 
District. It's the former financial district of the City which 
includes a lot of multi-story, obsolete office buildings.
    The neighborhood was unsavory, to say the least. CDD used 
to be located there until about a year ago. But the City was 
trying to figure out what could be done to stimulate 
development there. So two things were done. First the City 
passed what it called an adaptive reuse ordinance which eased 
certain requirements for residential developmental that were 
making the projects unfeasible. There still weren't many takers 
for that. Then one developer came forward with a proposal. The 
City provided a $5 million Section 108 loan to go against a $37 
million project. That project was so successful that it is 
largely credited with kicking off what now some people are 
saying is about a $10 billion building boom in that part of Los 
Angeles. And we have not been asked to provide any more 108 
funding after that first one.
    We are using block grant in that same area in another way. 
While housing has taken off there, there is a shortage of 
commercial services. And so we are using what we call the L.A. 
Business Assistance program, which is a technical assistance 
program for small and emerging businesses to provide special 
marketing, business planning, and site selection services to 
retailers who want to locate in that area but run into 
problems--
    Chairman Ney. I'm sorry. I have to note we do have a 5-
minute rule for--
    Mr. Graves. Oh, I'm sorry.
    Chairman Ney. Literally, I could listen to you for another 
half hour because I think you are going down the right path 
and, actually, you provided me some food for thought on just a 
few things you said already.
    Mr. Graves. Okay.
    Chairman Ney. But we do have the 5-minute rule so we can 
get everybody in. But if you would like to just summarize what 
you were saying, the rest of your statement will be entered for 
the record.
    Mr. Graves. Fine. There is a fuller statement that has 
already been provided for the record.
    I would like to just conclude by saying again the important 
thing about the block grant program is its flexibility and 
ability to adapt over time. And you have had an interest in 
formulas and performance measures and so forth like that, and 
there are always ways to tinker with the program. But the 
important thing is keep targeted on who you want to serve and 
allow local officials the discretion to figure out how best to 
do it.
    [The prepared statement of Mr. Graves can be found on page 
71 of the appendix.]
    Chairman Ney. Thank you.
    Mr. Jackson?

 STATEMENT OF CARLOS JACKSON, EXECUTIVE DIRECTOR, LOS ANGELES 
 COUNTY COMMUNITY DEVELOPMENT COMMISSION AND HOUSING AUTHORITY 
                  OF THE COUNTY OF LOS ANGELES

    Mr. Jackson. Thank you. Good morning, Chairman Ney and 
Ranking Member Waters.
    I would also like to express our appreciation on behalf of 
the County for your leadership, Mr. Chairman and Congresswoman 
Waters, and also Congressman Miller in your continuous support 
of the CDBG program.
    I have also submitted written testimony regarding the 
concerns that we have on CDBG and the Administration's 
proposals. But I would like to go on with some spontaneous 
remarks after listening to the Assistant Secretary of HUD 
regarding their perception, their determination as to why they 
perceive a necessity to change the program as well the 
reduction.
    One of the comments made by the Assistant Secretary was 
about success. All you have to do is look in this room and see 
the results of people who have been assisted or as well as 
prevention with the young people by putting them into positive 
programs.
    I have been affiliated with the program for over 15 years, 
and there have been various challenges to the program over the 
years. But I sincerely believe, in my professional experience, 
that CDBG has been as Mr. Graves had indicated, really the glue 
in a lot of economic and community development activities.
    There is sufficient regulatory compliance for those 
entities or entitlements that are not fulfilling their role. I 
wish they had stayed to hear some of the successes, because 
this is really about people and human beings. And by them 
leaving, I think they are missing a major dimension as to why 
we are concerned about what is happening.
    Chairman Ney. I just wanted to let you know, I will assure 
you that we will make sure that portions of this record will be 
provided to HUD.
    Mr. Jackson. No, I appreciate that.
    Chairman Ney. But I understand your point; had they been 
here, it would have been better.
    Mr. Jackson. You know, we brought some charts to indicate 
the overall impact of our program. I mean, in 6 years we will 
be losing $16 million. Our program is different from an 
entitlement jurisdiction in that we are the Urban County 
Program. Not only are we concerned about the unincorporated 
areas of the County where we have approximately a million 
people, but also 49 cities like the City of Lawndale that 
received funding through us. These cities really do not have a 
lot of opportunities through the State to get funded, and so 
they rely on this type of funding to do housing, community 
development, commercial development, etc. It is very important 
to them, as well as to us.
    HUD talks about performance. For every dollar we put into 
housing, there is a leverage of 3 other dollars. It's one to 
three. And that has been historically our pattern.
    CDBG has to be leveraged to make it very positive and very 
productive.
    L.A. County, our program, as I indicated we are going to 
suffer almost a 41 percent reduction in 6 years, as Supervisor 
Burke indicated. That is very hard to swallow in times of the 
demographic changes, the tremendous need on human services, 
social services, and more so, affordable housing.
    I do not need to say much about affordable housing, but our 
median price of a house here is $565,000. We calculate that it 
takes about $140,000 annual income to afford the purchase of a 
home, and that really is beyond many of us at this point. 
Eleven percent of the residents of L.A. County can afford to 
buy a home. And so block grant is used for that purpose.
    We have exceeded the performance measures of HUD in terms 
of their requirements. Almost 95 percent of our funds are spent 
on low-income residents. There is not an issue about our draw 
down rate; we are .81 percent, and the requirement is 1.5.
    And, again, there are many entities like us who are very 
successful at implementing the program. I just do not 
understand how they arrive at these programmatic changes.
    We support the 108 program. We hate to see it consolidated. 
But more so as you indicated, Congresswoman Waters, it is a 
cut. It is a consolidation into the block grant allocation. I 
also think that the BEDI is very important.
    But on the 108, the cities that we work with, we have 11 
participating cities who have used a total value of $56 million 
in 108's. And these are small cities that don't have the 
opportunity to accumulate a lot of funds at one time. So this 
becomes an incentive for them to get involved with 
revitalization efforts.
    Because of time, I am just moving through the different 
things.
    But I would like to say that we have not taken a position 
on the four alternatives in the formula. We are waiting for the 
actual proposal from the Secretary to determine what the impact 
would be. But if there is any negative impact in terms of 
reduction in funding, we would oppose that. I think this area 
of Los Angeles County cannot endure any further cuts, cannot 
endure a 25 percent cut.
    As to the wealthy communities, well, there are poor people 
throughout the County. And I think Mayor Dorn really made a 
very strong point. We are splitting hairs about who is poor. If 
you are poor, you are poor. And I think that is where we have 
concerns that we do have communities who could be perceived as 
being rich, however they do have a substantial number of 
seniors who are in need of services. Like, for example, the 
City of Santa Monica, which is not one of our cities, they are 
one of the concentrations of homeless and they are trying to 
address that.
    So in conclusion, we support that the funding should be 
restored to the $4.3 billion nationwide. And we will hold back 
on our opinion yet to see what the formula will bring out by 
the Secretary. But it is very unfortunate to sit here in front 
of you to say we are going to suffer another $7.7 million 
reduction when our population is increasing, our poor 
population is increasing, as well as the homeless population. 
So many different needs and we are losing the ability to 
address those needs.
    Thank you.
    [The prepared statement of Mr. Jackson can be found on page 
84 of the appendix.]
    Chairman Ney. Thank you.
    Mr. Jenkins?

      STATEMENT OF ALVIN JENKINS, PROJECT MANAGER, CBA/LA

    Mr. Jenkins. Thank you. And good morning.
    I would like to thank Chairman Ney and Ranking Member 
Waters for inviting me to be here to represent the 
Redevelopment Agency.
    The primary goal of the Redevelopment Agency for the City 
of L.A. is really to eliminate blight and create economic 
development and to assist in providing affordable housing 
within the area.
    The CDBG funds have proven to be vital for the efforts that 
we have within the south L.A. area. Each of the 9 redevelopment 
project areas within south L.A. has relied heavily on the 
availability of these CDBG funds. As you know, most of the 
southern L.A. redevelopment project areas are unable to sustain 
themselves with the provision of increment funds or with 
program income, and that is really the nature of the project 
areas. And if the areas were able to sustain themselves, then 
there would be no reason to have redevelopment out there in 
those particular areas.
    In many cases, redevelopment within south L.A. would not be 
possible at all without having these particular funds from 
CDBG.
    I oversee three different redevelopment projects areas in 
the south L.A. area being the Crenshaw/Slauson and western/
Slauson areas. And these HUD funds not only provide a direct 
source of funding, but also enable the leveraging of a great 
deal of private funding for these different projects in order 
to take place as well.
    Improvements that are a direct result of CDBG funding 
include a variety of different types of benefits for the 
community. One, for instance, is providing commercial facade 
grant programs for those areas such as Merk Park Village, 
Western Avenue, Crenshaw Boulevard, and Slauson Avenue. Those 
funds have been critical in providing improvements so that 
those small businesses which cannot afford it to make 
improvements on their buildings that they can take place which, 
of course, overall helps to beautify the South L.A. area.
    Street scape programs within the area also have a direct 
benefit to the community with new street plannings, street 
furniture, and other types of improvements.
    Another reason that we use the block grant funds are public 
improvements which are, again, throughout the south L.A. area.
    Besides these community benefits, other major developments 
would not even be close to be able to be provided without use 
of these funds, including the recently built Chesterfield 
Square Retail Shopping Center on the corner of Western and 
Slauson where funds were used for that. The Marlton Square 
project which is just beginning and is under construction under 
the very first phases and relies heavily on those funds. And 
other major catalytic projects within the south L.A. area as 
well.
    These projects and improvements rely on the use of CDBG, 
BEDI funds, Section 108 funds, and T&I. And the Agency has over 
the years experienced a significant decline in the amount of 
funds that are available. And these have been called out and 
mentioned by Cliff Graves and other speakers that we've had 
this morning.
    Therefore, I would urge the committee to assist the 
improvement programs for South L.A. by resisting these budget 
cuts for fiscal year 2007 of the block grant funds.
    Chairman Ney. Thank you.
    Mr. Montiel?

   STATEMENT OF RUDOLF MONTIEL, EXECUTIVE DIRECTOR, HOUSING 
              AUTHORITY OF THE CITY OF LOS ANGELES

    Mr. Montiel. Good morning Chairman Ney and Ranking Member 
Waters. I represent the Housing Authority of the City of Los 
Angeles, one of the largest in the Nation. And I appreciate 
this opportunity to discuss with you the importance that CDBG 
funding represents to the services we provide our public 
housing clients that number nearly 25,000 in our City.
    The Housing Authority receives its funding through the 
City's allocation of CDBG. And just as communities are not just 
bricks and mortar, these dollars that we receive from CDBG are 
instrumental in allowing us to really improve the lives of the 
clients that we serve.
    We have raised the percentage of AMI of our families from 
17 to 24 percent, primarily because our families have developed 
to the point that they can become working families and move on 
through that continuum in the housing arena.
    CDBG funding from the City helps us fulfill those 
responsibilities to our clients in the areas of safe, healthy 
communities, family self-sufficiency and most importantly, it 
even helps to support the Administration's ownership society; 
moving families into an ownership scenario.
    Over the last 4 years, the City has reduced the level of 
CDBG funding for the Housing Authority by nearly 57 percent. 
They have had to do this because of the cuts that the City has 
received. Today we receive just over $600,000 a year. And in 
2002, we were receiving nearly a million and a half dollars.
    The further reduction of CDBG funds proposed for the 2007 
budget would inflict mortal wounds to already weakened client 
service programs in public housing. The competition for the 
shrinking services will affect educational programs such as 
tutoring after school in computer learning centers, employment 
programs such as job training and job fairs and family 
development in everything from anti-violence to parenting 
classes to events that we hold for seniors.
    We are working very closely with the LAPD to address 
violence issues in our communities. But, again, just as 
communities are not made up of just bricks and mortar, safety 
in our communities is not policing alone. And it is the 
interaction with services and opportunities for the youth that 
will lead our communities to be safer and more liveable.
    Given the extreme challenges Los Angeles faces from 
organized gangs, low levels of educational attainment, and the 
City's rank as the homeless capital of the Nation, funding to 
provide affordable housing services and to support healthy 
communities is as important to the City as it ever has been. 
And we urge you to help us restore full funding to the CDBG 
program.
    Thank you.
    [The prepared statement of Mr. Montiel can be found on page 
94 of the appendix.]
    Chairman Ney. Ms. Battle-Bey?

STATEMENT OF MARVA SMITH BATTLE-BEY, PRESIDENT AND CEO, VERMONT 
            SLAUSON ECONOMIC DEVELOPMENT CORPORATION

    Ms. Battle-Bey. Good morning. I want to say welcome to 
Chairman Ney, and to our very own Congresswoman Waters. I am 
Marva Smith Battle-Bey, the president of Vermont Slauson 
Economic Development Corporation. We are located in south Los 
Angeles, and have been there for about 25 years.
    Every year I make a trip back to Washington to save CDBG 
``again.'' And I say, ``again,'' because we come every year.
    I also chair the National Congress for Community Economic 
Development in Washington, D.C., that is made up of about 600 
or so CDC's across the country and the California Community 
Economic Development Association here in the State of 
California. We represent over 200 CDC's.
    I want to talk specifically about some of the work we have 
done over the years, and how that work has involved Community 
Development Block Grant dollars. Because I think that you have 
heard a lot about the uses that the City and the County have 
for CDBG, but I want to put our perspective in very personal 
terms as it relates to people who reside in our neighborhood 
and people who do business in our neighborhood.
    We have built five supermarket-based centers of various 
sizes in south Los Angeles, all of them coming after the 1965 
riots. Our first property at Vermont and Slauson was the first 
shopping center that was built in 1981 after the 1965 Watts 
riots. So it took almost 20 years before there was a main 
commercial development in South Los Angeles. And that was done 
because of CDBG dollars.
    There was a tremendous gap in our funding request. Working 
with a private developer, we ended up needing CDBG dollars. And 
those dollars came through an Urban Development Action Grant 
(UDAG) funds as well as through general CDBG funds.
    We built that center in 1981 when interest rates were 22 
percent. That was the regular interest rate for borrowing. 
Thank goodness there was some CRA legislation that passed in 
1977 and we were able to borrow $2.5 million from a local bank 
at 10 percent. Okay. That was still expensive money. Now people 
talk about interest rates of about 7 percent, 8 percent. We 
were talking about 22 percent money when we built that shopping 
center. We could not have done it had it not been for CDBG 
dollars.
    That shopping center brought major businesses to our 
neighborhood and provided over 500 jobs. We also put in a 
number of small businesses; like our McDonald's which was 
African-American owned. We have a Post Office there. Some of 
these amenities that typically weren't in shopping centers in 
our neighborhood, we were able to bring to that location 
because we had block grant dollars.
    We are tremendously under-retailed in south Los Angeles. 
There is not one major project in the 25 years I have been 
involved in economic development that has not involved CDBG 
dollars. The private sector comes because we can leverage block 
grant money, and we do so at three to one, four to one, five to 
one ratio. So it is well worth saving the Block programs.
    One last comment. It is not particularly related to 
economic development, but it is related to the Section 202 
Housing program. That program is supposed to have a very 
significant cut as well. As the baby boomer population 
continues to age, many of whom are sitting across this panel 
today, there will be an increased demand on senior housing. So 
if we do not continue to build senior housing, we are going to 
have tremendous problems with the baby boomer population and 
finding adequate housing.
    Thank you.
    [The prepared statement of Ms. Battle-Bey can be found on 
page 111 of the appendix.]
    Chairman Ney. Thank you very much.
    Ms. Shockley?

 STATEMENT OF BRENDA SHOCKLEY, PRESIDENT, COMMUNITY BUILD, INC.

    Ms. Shockley. Thank you. Thank you, Chairman Ney and 
Ranking Member Waters for the opportunity to testify on the 
impact of Community Development Block Grant, CDBG, programs on 
communities in south Los Angeles.
    My top and general comments would certainly echo that of 
all my colleagues from the community development advocacy 
organizations as well as from local government.
    I am here today to put a face and a voice on the type of 
organizations, programs, and communities that have 
significantly benefitted from both direct and indirect CDBG 
funding. Community Build's initial funding in 1993 was a $3 
million CDBG emergency assistance grant in the aftermath of the 
civil unrest. That funding was matched by $1.5 million in State 
funding and was used to provide employment training to youth 
and young adults who had actually been disenfrancished and were 
actually a part of the conditions that led to the civil unrest 
of 1992.
    With that funding, not only did we provide employment 
training services to youth and young adults, we partially 
financed the development of 24,000 square feet of commercial 
development on a site that had been destroyed during the 
unrest. That development has spurred further development in 
that are and revitalized the surrounding community.
    Direct CDBG funding was received by Community Build again, 
and in that opportunity we were able to acquire, renovate, and 
expand to a 9,000 square foot youth center that I must tell you 
is located in the 35th Congressional District and it has served 
over 12,000 youth and young adults since 1994, and annually 
serves a minimum of 1,200 youth and their families.
    Community Build has also received CDBG funding indirectly 
through the budget of the City of Los Angeles. Community Build 
is a one-stop environment for youth and their families. As a 
result, we access CDBG funds each and every day, whether it is 
a referral to a homeless shelter, housing rehabilitation, home 
ownership assistance, nuisance abatement, or the Targeted 
Neighborhood Initiative. By way of example, Community Build 
provides safe passage to the youth in our gang prevention 
middle school program, L.A. Bridges. Through L.A. Bridges, too, 
which is funded by CDBG through the CDD Department of the City.
    We are slated to provide gang prevention and intervention 
in an expanded geographic area using CDBG funding.
    We partner with Jennesse Center, a domestic violence 
prevention organization that is funded by CDBG.
    Our youth participating programs at the Youth Technology 
Training Program, that is also funded by CDBG.
    Community Build refers students and their families to the 
Rita Walters Learning complex that Mr. Graves mentioned on 
Manchester and Vermont, and to the youth and family centers, 
family development networks in our community. All of these 
programs are funded by CDBG.
    But as Ms. Smith Battle-Bey said, one of the most critical 
aspects is the 108 loan fund, which is glue for some projects 
and critical leverage for others. The flexibility of the 
funding allows organizations like Community Build to access 
conventional bank financing by blending rates to make debt 
service manageable.
    The Brownfields program is also very, very important 
because in a community such as ours that has experienced long 
term disinvestments there are many potential development sites 
in need of toxic remediation.
    Community development and revitalization requires as many 
tools as possible. CDBG funding is one of the most effective 
tools for turning around neighborhoods and turning around 
lives. For organizations such as Community Build, decreasing 
these resources and eliminating important programs such as 
Brownfields would not only be crippling, but in many cases 
devastating.
    Thank you for the opportunity to offer testimony, and I 
urge you to restore the CDBG program and funding.
    If time permits, I just have two brief observations and 
comments regarding issues that have been raised during the 
course of this hearing.
    The first has to do with the discussion with the 
representative from HUD, whom I wish, too, was still here, 
regarding the evaluation of the program. And I would just 
submit to the subcommittee that the nature, the very unique 
nature of CDBG resources is that it is catalytic funding and it 
doesn't necessarily lend itself to a one size fits all 
evaluation tool. That really the idea of looking at how the 
impact and the outcomes relate, it may be more a function of 
the tool than the reality. Because we can all tell you how much 
a small amount of CDBG money will be able to make a big project 
happen. So I raise questions with the tool and would hope that 
the committee would as well.
    Finally, on this issue of the formula and this language 
regarding the neediest of the needy. And what I think some are 
missing is that one of the very critical and important aspects 
of CDBG is to help families and neighborhoods from slipping 
into the ranks of the neediest of the needy as well as serving 
the neediest of the needy. And that is a critical aspect that 
often, to sort of paraphrase, allows us by investing CDBG 
dollars you're offering a hand before someone needs a handout.
    Thank you.
    [The prepared statement of Ms. Shockley can be found on 
page 109 of the appendix.]
    Chairman Ney. Thank you.
    And the last witness. Before we do, without objection, I 
have a letter from Herb J. Wesson, Jr., council member from the 
10th District, signed also by Jan Perry and Bernard Parks. 
Without objection, it will be part of the record.
    Chairman Ney. Thank you.

STATEMENT OF MITCHELL NETBURN, EXECUTIVE DIRECTOR, LOS ANGELES 
                  HOMELESS SERVICES AUTHORITY

    Mr. Netburn. Thank you. Good morning, Mr. Chairman and 
Ranking Member Waters. My name is Mitchell Netburn and I am the 
Executive Director of the Los Angeles Homeless Services 
Authority known as LAHSA.
    I am honored that you have invited LAHSA to testify on the 
value of the Community Development Block Grant program as a 
vital tool to help end homelessness. I would also like to thank 
you for holding this hearing in Los Angeles and for your 
ongoing leadership in support of homeless programs.
    LAHSA is a joint powers authority of the City and County of 
Los Angeles. Founded in 1993, LAHSA is governed by a 10 member 
commission appointed by the City and County of Los Angeles. We 
have been the lead coordinator for the second largest continuum 
of care services in the country since the inception of HUD's 
continuum of care funding. This has enabled LAHSA to vigorously 
pursue a regional approach to addressing homelessness. This is 
critical to successfully addressing homelessness, especially 
given the geography covered by our continuum: 4,000 square 
miles and extreme differences in infrastructure and needs 
across the County. Moreover, Los Angeles County encompasses 88 
jurisdictions, including 34 entitlement cities.
    Based on recent statistics, the City of Los Angeles has now 
been titled the homeless capital of the United States. And 
according to Philip Mangano, Executive Director of the U.S. 
Interagency Council on Homelessness, one in nine people who are 
homeless in America resides in Los Angeles County. A truly 
astounding statistic.
    Mr. Mangano's statistic was based on the Greater Los 
Angeles Homeless Count conducted in January of 2005 by LAHSA. 
This involved a point in time enumeration and survey. The 
findings estimated that in the course of a year, close to a 
quarter of a million people, 250,000 men, women, and children 
experience homelessness, and on any given night there are 
approximately 88,000 homeless people throughout the City and 
County of Los Angeles. And tragically, the vast majority--88 
percent--are living on the streets or other places not meant 
for human habitation.
    The Community Development Block Grant provides critical 
funding to address acute problems of communities such as 
poverty and homelessness. Because of its flexibility, LAHSA 
utilizes CDBG funds for a wide range of homeless services and 
housing, including overnight emergency shelters, a respite 
center for families and model programs which target homeless 
people living on the streets and providing them with shelter.
    These programs enable homeless people to live as 
independently as possible and become productive members of 
society. Permanent housing with services is the key to ending 
homelessness, and CDBG funds are critical to developing 
housing. For example, just last week the Bring Los Angeles Home 
Blue Ribbon Panel held a press conference to launch a 10-year 
campaign to end homelessness in Los Angeles County, which is in 
keeping with President Bush's initiative to end chronic 
homelessness.
    A key strategy of the Bring LA Home plan is to create 
50,000 units of affordable housing targeted to people who are 
homeless. Community Development Block Grant funding is proposed 
to comprise 20 percent of the money necessary to achieve the 
50,000 unit goal.
    Contributing to LA County's homeless problem is the 
County's affordable housing crisis. For example, within the 
City of Los Angeles there is a 3 percent rental housing vacancy 
rate based on recent reports. Not only does this mean a tighter 
market for low income renters, but those fortunate enough to 
have a Section 8 voucher are finding it harder and harder to 
find landlords willing to rent to them. To address this 
situation, in November of 2005, Mayor Antonio Villaraigosa 
announced a commitment to add $50 million, including CDBG 
funds, to the City's housing trust fund for permanent 
supportive housing for Los Angeles' neediest residents.
    The CDBG funding that LAHSA receives on an annual basis has 
been an invaluable resource for the agency and its service 
providers who are working in the trenches to end homelessness. 
Currently LAHSA receives about 19 percent of its overall budget 
from CDBG funding. Therefore, a proposed reduction of more than 
20 percent to the CDBG program would be devastating to Los 
Angeles.
    To cite just one example, CDBG-funded programs provided 
203,188 bed nights for people who are homeless in the Los 
Angeles area in the last program year. Assuming a cut of even 
just 20 percent, that would be reduced by over 30,000 bed 
nights. These reductions would severely cripple efforts to 
address homelessness, especially in Skid Row, South Central, 
and Hollywood.
    CDBG funding provides a major foundation for homeless 
service providers as well as a major resource for Los Angeles 
as it seeks to implement strategies to end homelessness. The 
City and County of Los Angeles have made significant 
commitments of resources to end homelessness and collectively 
are moving in the same direction. Any overall reduction in CDBG 
funding or changes to the allocation formula which will reduce 
Los Angeles' share of CDBG fund will force people back on the 
streets and significantly impact our ability to end 
homelessness.
    On behalf of the homeless community in Los Angeles, I thank 
you for this opportunity to provide testimony. We unequivocally 
support continuing the current level of CDBG so that we will 
have the critical resources and Federal leadership necessary to 
reach our mutual goal of ending homelessness in the richest 
Nation in the world.
    Thank you.
    [The prepared statement of Mr. Netburn can be found on page 
97 of the appendix.]
    Chairman Ney. I want to thank the panel.
    I have just a couple of questions and a statement and then 
we will go on to our ranking member who will have some 
questions, I am sure, and the final word since we are in her 
home area. But if she was in D.C., she would probably still 
have the final word, and I mean that flatteringly.
    I wanted to go back, Mr. Graves, because I think you hit 
on--and I am sorry to have cut you off. It was just due to 
time. I think you also touched on something that sparked a 
thought when you talked about the helmets and you talked about 
different ways CDBG has been used. And so I am not sure that 
HUD has taken items like this into account in their 
calculations or the Office of Management and Budget has taken 
these items into account.
    Again, if you look at an ambulance that is purchased for a 
fire department, for example, where I am from, or a nearby area 
Monroe County, Woodsville, Ohio. If you get into a car, the 
quickest you can get to a hospital is technically a 30-mile 
trip, which is going to be 48 minutes speeding, you know, 
between there and the hospital, for example. So you might as 
well say an hour to get somebody there. So if a community like 
that does not use an ambulance, CDBG monies, then there may not 
even be medical care.
    So my whole point to that is that may not be calculated by 
the bureaucracy as a benefit job wise, but it is a quality of 
life and necessity.
    Mr. Graves. Yes.
    Chairman Ney. So I think by your example, just for the 
example the helmets and the seats that were provided, is a good 
local flexibility that does help a community or it helps to 
save somebody's life or going to the emergency room or costing 
more in medical care. I think there are a lot of ways that I am 
not sure that that's calculated in. I don't know.
    Were you ever requested by the Office of Management and 
Budget or HUD to provide these types of items to them as part 
of the wholeness of CDBG?
    Mr. Graves. In formal communications with HUD, they do ask 
for success stories and examples. I am not sure what they do 
with them. I mean, in terms of, I do not know how they're sent 
up the line. But we try to keep HUD apprised, the local office 
here, of what we are doing with the funds.
    Chairman Ney. Yes.
    Mr. Graves. And, frankly, the local office is very 
cooperative in terms of understanding what we are doing, 
interpreting the regulations really in a way that allows the 
City to fulfill its priorities.
    But the answer to your basic question is as far as the 
national level goes we provide that information often to our 
Congressional delegation, to our interest groups, but I do not 
know how they are used.
    Chairman Ney. Mr. Jackson, what was the .81 percent you 
were talking about? You had to be at a certain level of 1. 
something, but it was .81 percent?
    Mr. Jackson. One of the indicators if you run an effective 
program is the draw down rate, that you have spent it over a 
period of time. Usually the cut-off period is April 30th of the 
year. And the requirement is that you cannot have more than 1.5 
of your entitlement unspent. And we have spent way below that 
amount. Basically we are spending our dollars is what it comes 
down to. And we have exceeded that requirement of HUD.
    Chairman Ney. Okay. The question on providing the monies 
for, I think maybe it was Mr. Jenkins, the monies provided for 
money to be able to get into housing, CDBG is used for that to 
be able to get housing for people. Does it provide for down 
payments or--somebody had mentioned about providing money for 
people, the high cost of housing here and try to provide some 
CDBG funds to help people. I am assuming that is helping with 
down payments or--
    Mr. Jackson. Well, also on the subsidy of the development, 
bringing it down so it is affordable and they use other 
resources, lending resources for that purpose. But it is really 
to buy down the land costs maybe the construction site.
    Chairman Ney. Yes.
    Mr. Jackson. But, again, it is only 11 percent of the L.A. 
County residents can afford housing now. To purchase a home.
    Chairman Ney. Is there any shared appreciation where 
somebody gets some benefits and then the money is put back if 
they sell house, they put some money back in?
    Ms. Shockley. CRA does.
    Chairman Ney. And I am referring to, for example, revolving 
loans in small towns--a company gets the revolving loan and 
then they use some of it as sort of a grant but they put it 
back into another revolving loan fund so somebody else coming 
down the road it creates a job. I just wondered if there was 
share appreciation where you are helping people get into the 
house or housing and then they sell at some point in time if 
the price goes up, and then they go back into a program? A 
shared appreciation. You do?
    Mr. Jenkins. Yes. And there have been situations where 
because of the subsidy that goes into, let us say, a home 
ownership program once the house does sell, then the money or 
the appreciation is shared back with the agency. And that is 
being used to help the other homeowners as the new program 
continues on.
    Chairman Ney. Yes. Ms. Shockley, did you have something 
that you wanted to say?
    Ms. Shockley. Well, Mr. Jenkins answered it. The CRA, the 
Community Redevelopment Agency, has--and I believe the Los 
Angeles Housing Department also has programs that allow for the 
revolving loan as well as a shared appreciation. And you have 
to hold the property a certain amount of time and if you sell 
after a certain amount of time, the appreciation is one thing. 
If you get in and you are trying to flip it and you sell it 
sooner, it is more.
    Chairman Ney. Yes. I just think the issue of housing has 
been touched on. And I think housing is just, in a lot of ways 
around the country, at a crisis point. And in particular, for 
example out in the cities. Now I have been in Congress and I 
have served with colleagues, but being on the Housing 
Subcommittee and being with our ranking member who is from 
here, you know, I found out more and more. You can still 
acquire a place, for example, in areas where I am from, you can 
still acquire a 1956 home. 1956 was built with maybe an acre of 
ground for $62,000. I did not get to the 5,000 square foot 
homes yet where it is $320,000 for them.
    Now one of the problems we have, on the other hand however, 
is we had such a downturn of the loss of our coal mines, our 
steel mills our glass houses, you know, all the things that 
have happened. So for people even though, thank goodness it is 
at that price and not everything's cheap, but it is decent 
price, but because of the loss of the jobs people could not 
afford it or they lost their jobs and then they lost their 
credit, and now they have bad credit.
    The other problem we have, we have some space but then 
again, some people do not have water and sewer. And you have 
water and sewer out here, but you do not have the space.
    So I just think that it is dramatic. I mean, the prices and 
the wages are so much higher out here than they would be back 
in rural parts. I mean, I think it's a huge, huge problem that 
the Congress has to continue to come to terms on.
    We went down to New Orleans and the question was posed down 
there. In fact, there was a restaurant owner who said he had, I 
think, 157 jobs open but he could not fill them, because there 
was no place for people to live. And so I think when you are 
looking at poverty and jobs and, you know the whole nine yards, 
it is so difficult.
    And actually some things were pointed out to me today by a 
guest in our audience, I will give her credit for it. We were 
talking about, you know, people say well why would people go to 
a high priced store or a 24 hour store and buy things? Well, 
because they do not have a house, they do not have a microwave. 
And so they go there to get the prepared meals when it would be 
cheaper if they had a house with a kitchen area. I mean there 
is just a whole--I could just go on and on. But I just think 
that the CDBG money has to be critical for that and for the 
housing.
    And so I am just going to wrap up my part of this just 
trying to say that it is important to understand. Being out 
here today, I want to thank again Congresswoman Maxine Waters 
for speaking up, speaking out on these issues, for inviting us 
here. In my opinion being here in Los Angeles and listening to 
the testimony and being able to go back to the U.S. House helps 
my area, helps the entire country. And what we are hearing from 
the rural areas from the hearings, although different 
circumstances, different needs, dovetails the critical nature 
of the timing.
    I am also going to give a pre-warning. This is not just so 
easy that this money is going to go back. Because last time the 
money went back, but it was still was a 10 percent cut. So this 
time we are having a 25 percent cut and we sit there and say oh 
wow, you know instead of 25 percent saying we're going to be 
cut five. Well you take the 5 and the 10, no, that is 15.
    And we are doing a lot of other things, too. I wanted to 
mention, too, with Congresswoman Waters, Chairman Oxley, and 
Ranking Member Frank, we did a GSC bill for affordable housing, 
and I hope the Senate moves on it. We did CDBG budget 
resolution. So we are trying to do some of these things.
    But I want to warn you, you know, speaking to the Senate if 
we can get this restored in the House, it is going to be 
critical in this whole process to get these funds. And in times 
where if the communities are healthy, let us not rip them down 
if they are healthy. But a lot of communities are not healthy 
and they need help. And this is the contrary time to go against 
the job creation and the quality of life elements, which I 
think is obviously CDBG. This is like the worst time I think 
philosophically that the Administration could do this type of 
thing.
    And there are a lot of ways, and I know we have a budget 
out of balance, we could all talk about 100 ways to do it. But 
what I will tell you is, and I have looked at this, you know, 
if we just do not plan a mission right now to Mars, we can save 
$32 billion. You know, I saw things throughout the budget where 
we are giving another $200 million to some program, frankly, I 
have never heard of, and we still cannot find anything out 
about it.
    So going in to just specifically attack CDBG, I think, is a 
contrary way to go. But I just do not want to give you the 
false sense this is so easily restored. We have been down these 
roads and these battles. But today what you did helps us out.
    And I want to again thank our ranking member for something 
that is important, I think, to everybody in the country to try 
to help them. So thank you for your participation.
    I will yield to our ranking member.
    Ms. Waters. Thank you very much, Mr. Chairman.
    And I would like to thank all of the panelists who came 
today to share with us their concerns and to help us to be able 
to have the information by which to defend CDBG and try to 
avoid these cuts.
    I do have a few questions I would like to ask. And a few 
other concerns that I would like to share with you.
    Well, first of all, for all of our participants, know that 
I and others believe very strongly in CDBG and we are going to 
be fighting for all of the money that we can get for CDBG. I am 
very concerned that the 20 percent or so cut that the 
Administration is advancing is going to pit economic 
development against community programs. I really do not want to 
see that happen.
    And I am also concerned, and I have always believed that to 
the degree that we could get Section 108 that could relieve 
CDBG somewhat so that the Section 108 for economic development 
would help to do some of what CDBG monies may have been used 
for, and that way we would have more CDBG monies for some of 
the social programs and programs that we have not even 
mentioned here today.
    First, let me say to all of those who are in the audience 
today who have programs that you would love to tell us about, 
we are going to spend some time learning more about many of the 
programs that have not been mentioned. Someone came to me a 
little bit earlier to show me a program that had to do with 
helping the blind, the adult blind in the Valley. And they 
reminded us that there are many folks who do not necessarily 
know Braille and they just sit all day long. And so we are 
aware that there are many programs that are being assisted that 
we really do need to have even more money for, and we are going 
to fight for them. And we thank you all for being here today.
    For the City of Los Angeles, the challenges are many. I 
think you spoke about the Ted Watkins Park and the fact that 
people from some of the programs, the drug rehab programs were 
being dropped during the wee hours of the morning into Ted 
Watkins Park. Somebody spoke about that issue. And that is true 
because at a Town Hall Meeting I was just besieged with folks 
who said, what are you going to do about it. You know, it could 
have been easy for me to say well, it is not my problem, I mean 
you know I go to the City. But we just do not operate our 
office that way.
    So we got up in the wee hours of the morning and we went to 
the park. And sure enough, there they were. And then we tracked 
down the buses that dropped them off. And then we went to the 
program of the people who were dropping folks off in the park 
to find out what was going on. Well, the fact of the matter is 
we need housing for people who may be in rehab programs, but 
those programs do not provide day care for them during the day. 
They do not know what to do with them, so they drop them off in 
the park and they have their little blankets there. They sleep 
in the park, and then they may go back to the program for a few 
hours a day to do what they do.
    Now, let me just say to our representative here from the 
Homeless Authority. I listened to your testimony about 
permanent housing. But I want to ask you what have we come up 
with to deal with the homeless who do not want permanent 
housing, cannot keep up permanent housing, and will never be 
able to work another day in their lives. They have mental 
problems and on and on and on? Permanent housing will not solve 
their problems. What do we have and who is advancing the idea 
that we need communities that are developed for people who need 
a bedroom, toilet facilities, and communal meals to be taken 
care of in a humane way? We do not need a two bedroom house or 
not the kind of permanent facility that we always think about. 
This other kind of solution could be a permanent facility, but 
it seems as if we are not developing models for the people that 
we really find on Skid Row who really are not going to be able 
to manage the permanent home that we always talk about. Who is 
dealing with that issue. What are you coming up with to solve 
this problem in the homeless community?
    Mr. Netburn. Yes. You know, to some degree my agency is 
working certainly with the City and the County, as well as HUD. 
And while we do focus on permanent housing, we do try to create 
a range of housing options because, as you pointed out, 
homeless people are different and have different abilities. So 
while permanent supportive housing may always be the end goal, 
many people may not be ready for that for periods of time.
    So one of the programs that we started in Los Angeles a few 
years ago, originally spearheaded by Councilwoman Perry, was 
converting our winter shelter program, which only operated a 
few months of the year, by converting many of those beds to 
year round beds. It is a very minimal program, People are there 
just at night, but they do get a meal, clean showering, etc. 
And for many of the people in the program it has become, to 
some degree, de facto permanent housing.
    We try to move as many of those people as we can into more 
stable housing. It is really the lowest level of housing that 
we provide. But certainly in the few years that it has been 
operating, that is where, right now, they are comfortable 
staying. They need those ongoing supports, meals provided for 
them in a communal setting.
    Sometimes you will see after 6 months they will move on, 
sometimes a few years. There are certainly some people who have 
been there since those programs started. And that is quite a 
large number. Currently we are funding about 820 of those beds 
in the City of Los Angeles.
    Ms. Waters. Does anyone have a Rolls-Royce style program 
that will deal with the various needs of the homeless from the 
single person with mental disabilities to the person who, with 
a little bit more educational opportunities, could be trained 
for a job, to the family that needs a two bedroom house? Where 
is the Rolls-Royce idea to deal with the various needs of 
homeless?
    Mr. Netburn. Right.
    Ms. Waters. Does anybody have that?
    Mr. Netburn. There are certainly, I do not know if I would 
want to call them Rolls-Royces, but certainly there are some 
model programs throughout both the City and the County. They 
tend to be separate for families and for singles. There is 
certainly a movement toward integrating homeless families along 
with other populations so you don't create sort of mini ghettos 
of buildings where it is only homeless people. But certainly we 
have some.
    And talking about the population you referred to earlier, 
in a relatively short period of time, there is going to be a 
model facility opening in Santa Monica. It's right there on 
Cloverfield. It is for people who you were talking about who 
really have failed in all the other programs. It is a model 
that the Federal Government funds, and it's called A Safe 
Haven. And the idea is that people can come and go at different 
hours. There are not the regular rules that have to be 
followed, and a tremendous amount of services are provided on 
site.
    Ms. Waters. So they have the health services, both mental 
health services and other kinds of services, associated with 
the program. And these people are engaged in some way during 
the day?
    Mr. Netburn. Exactly. Because particularly for that 
population, and given the transportation issues in Los Angeles, 
it is very hard for somebody, you know, especially without a 
car or especially for a family, if you have two or three kids 
with you, to make an appointment across town to be there at 
1:00 and then to get to another one by 3:00, and you show up a 
little bit late, and either your appointment is canceled or it 
is seen as a negative that you got there.
    Ms. Waters. Yes, but see the Rolls-Royce program that I am 
alluding to would take into consideration those people who are 
job ready, almost job ready who have appointment to keep and we 
could provide the transportation for them.
    Mr. Netburn. Right.
    Ms. Waters. We could provide the child care for them.
    Mr. Netburn. Right.
    Ms. Waters. And let me just say this and then I will be 
saying this to the Mayor and others; while we are moving toward 
a time when it appears that there is going to be a focus on 
poverty and homelessness and the Mayor is making this 
tremendous effort with his housing trust fund and the County is 
doing that, and the Mayor is now designed by the Conference of 
Mayors to lead the Nation in leading with poverty issues, we 
need to develop something for the Congress of the United States 
to fight for and to be challenged for along with CDBG and these 
other programs. We need a comprehensive approach to dealing 
with poverty. And the centerpiece of that is homelessness.
    And so I think what I am asking you for is temporary 
overnight facilities are needed, but we have to get out of 
that.
    Mr. Netburn. Right.
    Ms. Waters. We have to get down to what we are going to 
fight for to get rid of homelessness in America, and 
particularly in Los Angeles with the concentration that we have 
in our City area. So I will be asking my staff to work and to 
get to know all of the programs a lot better. We will be asking 
for those who want to work on the Rolls-Royce idea, the vision, 
you know, for America to deal with homelessness and poverty.
    So I thank you for being here today.
    Mr. Netburn. Right.
    Ms. Waters. And let me just raise a few other questions and 
I will be ready to close.
    For the City of Los Angeles and CRA you mentioned, for 
example, Mr. Graves, that with this problem out at the Ted 
Watkins Park where the people were being left, that Grant AME 
helped out.
    Mr. Graves. That was Supervisor Burke.
    Ms. Waters. Oh, Supervisor Burke.
    Mr. Graves. Yes.
    Ms. Waters. Okay. Now Grant is involved with some extensive 
development in that area where they bought up, acquired land of 
the old Social Security building and those houses that have 
been boarded up on the opposite side of Grant on Central for 
some time, etc. But I do not see them mentioned in your Section 
108 program for the participation in the $50 million that I 
thought we had targeted to do something in that overall area. 
Is there some reason why they are not mentioned?
    Mr. Graves. Congresswoman Waters, they have not been 
discussing 108 funding with us. I believe they are working with 
CRA on a broad project. And what typically happens in things 
like that, as they begin to reach an agreement with CRA, if 
there are extra financing needs, they bring us into the 
package. We have not been working with Grant AME.
    Ms. Waters. Mr. Jenkins, this is not your area. You said 
you were a little west of the area that I am talking about?
    Mr. Jenkins. That is correct.
    Ms. Waters. I see.
    Mr. Jenkins. I do not have the specifics about the Watts 
project.
    Ms. Waters. Okay. I would like my staff to get together 
with CRA and with the Community Development Department to talk 
about some of these projects and to try and understand from the 
point that CRA gets involved with some of these projects, how 
it works with the City for a Section 108 or other CDBG or other 
funding so that we can not only understand how you cooperate 
and how you work together, but how you set your priorities. And 
I want to know more about the development projects. Ms. Battle-
Bey talked about some projects that I am very much aware of. 
But as I look in the south, so-called central L.A. area, I want 
to know more about Broadway Manchester, Vermont Manchester, and 
Grant AME projects. I want to understand exactly what kind of 
resources are being dedicated to these projects and what role 
everybody is playing in them.
    Yes, Ms. Battle-Bey?
    Ms. Battle-Bey. Congresswoman, the Grant AME project came 
before CRA prior to October of 2005.
    Ms. Waters. Okay.
    Ms. Battle-Bey. So there are dollars from CRA involved in 
their project, but I understand that they are not yet fully 
developed and over to the CDC side. So that may be something 
that Brenda can look into as well. Because you have to bring 
those projects back up. You have to keep going back.
    Ms. Shockley. And the Grant AME project has not come to the 
CRA since I have been on that Board.
    Ms. Waters. It has not?
    Ms. Shockley. Our Board. But I will call it out.
    Ms. Waters. Okay. That would be good.
    Mr. Montiel, I cannot let you go because without saying 
something about public housing. We are all very concerned about 
public housing.
    Mr. Montiel. Yes, ma'am.
    Ms. Waters. And I know you have some particular concerns 
that you would like to see targeted revitalization of some of 
the areas that include east L.A. and south central L.A. But 
while you are looking at that issue and working on getting some 
feedback on that, I want to know about what funds you are using 
to deal with drug elimination which HUD wiped out of the 
budget? I understand, and I just talked with the Attorney 
General who was before the House Judiciary Committee about the 
recent efforts at the Jordan Downs Housing Project. For 
example, where evidently there was some cooperation between the 
Housing Authority, the City of L.A., and the Attorney General's 
office to come into Jordan. I think some surveillance cameras 
are being installed and you are doing some other things.
    You are my friend, I am not going to tell you the same way 
I told Mr. Gonzalez. Do not ever come to my District and do 
that anymore without me understanding, at least having an idea 
of what you are doing. We had just been there with you where we 
did a job fair and we held a Black History Month celebration 
trying to make sure that we include public housing in the same 
kind of cultural activities that go on in other parts of the 
City. You were very cooperative. It was very successful. As a 
matter of fact, I had dinner with four participants who got 
jobs and the company that supplied them with the jobs.
    Mr. Montiel. Wonderful.
    Ms. Waters. We had dinner the night before last, not only 
to encourage them to continue to do well, but to serve as role 
models for others who we will be trying to connect with jobs.
    So I want to know when you all come up with the ideas about 
crime prevention on the one hand; we think we have some ideas. 
We are working with you, but we are surprised by some of the 
other ideas. How do we create the kind of communication that 
will help us to work together a little bit better so that 
people will not say to me, well, why did you not tell me you 
all were bringing some more FBI, some more ATF and others out 
here when you came, and we looked pretty stupid. We said we did 
not know. Oh, you did not know they were going to put some 
cameras up out there? Did the Feds do this? No, I did not know.
    And my good friend at the Housing Authority did not call 
me, the Attorney General did not call me. So what should we do?
    Mr. Montiel. Ranking Member Waters, you are absolutely 
correct in that regard. But let me explain from the perspective 
of the cameras at Jordan Downs, the lead agency is LAPD. And 
initially the cameras were always slatted to go on the public 
right-of-way, essentially to provide safe passage for the 
students to get back and forth between the schools.
    What has happened is that LAPD has moved the initiative 
forward to try and also place some of the 12 cameras within the 
development. And what we have gotten from LAPD is an agreement 
working with Chief Bratton and Commander Beck that as they 
place anything within the right-of-way that is within the 
community, that they will have to meet the residents and 
understand the resident concerns and figure out how the cameras 
could be positioned so as not to violate their privacy, etc. 
But essentially this program began as a right-of-way program on 
the public streets.
    What has happened also is that, I think, the Mayor's office 
has been very successful in working with the Department of 
Justice to try and expand that program. And the Attorney 
General issued additional money grants to Los Angeles. And this 
program may be expanded to other areas now on the east side of 
Los Angeles as well, and perhaps more communities surrounding 
our public housing communities in the south side.
    All this is in flux now, but I can give you a commitment 
that as we go forward we are now working a lot closer with some 
of these efforts and we will certainly ensure that your staff 
is the table understanding what is taking place, etc. But on 
this initial initiative at Jordan Downs, it is LAPD that is 
driving that initiative.
    Ms. Waters. Well, I appreciate that, and let me just say 
that we have sent a very clear message to the Attorney General, 
and we will do that with the Mayor and with the Police Chief, 
Mr. Bratton. I do not know what is going on, but I think there 
may be some constitutional issues here. And I am not pleased 
that the Attorney General came here to get tough on crime and 
only brought $1 million dollars with him. If you want to get 
tough on crime prevention, you have to bring money with you to 
talk about how to provide some opportunities for our young 
people.
    So I know that this is your jurisdiction, the Housing 
Authority. You are the top dog. So when they come to you to 
tell you what they are going to do on your territory, I wish 
that you would at least let us know so that we could be 
involved in some dialogue to talk about what we can do on the 
one hand to involve the residents, as well as talking about 
crime prevention and the ways that they would like to proceed, 
or things they would like to do. And also, we must always raise 
the question about what to do about real prevention rather than 
so-called just get tough so that we can provide some more 
opportunities here.
    For example, I do not know--I know that HUD eliminated the 
drug elimination program. I do not know if anything replaced 
that program. I do not know if programs are really being made 
available or coordination is being done to help people get 
GED's. I do not know if we have any job developers who are 
really trying to connect people with jobs, ready to cooperate 
with people on the ground. So we are going to have to get back 
on this. I spent many years working in public housing 
developments. It seems, you know, since that time, things have 
gotten a little bit worse. And so we need to talk about what we 
can do to change the situation.
    Mr. Montiel. Yes, ma'am.
    Ms. Waters. I know we need more money, and I am always 
going to fight for that. But you have this great 
responsibility. Others will come to you and foster their ideas 
on things that will only make your jobs a lot harder.
    Mr. Montiel. Yes.
    Ms. Waters. So I want to stay in close communications with 
you about some of that.
    Mr. Montiel. Okay. And if I could comment, Congresswoman 
Waters. That is the issue that we are before this hearing 
today. We really do not have monies for programmatic aspects 
other than running the public housing. And we are losing 
funding in the capital fund, we are losing funding in public 
housing. We do not get enough money just to run the house, the 
brick and mortar, much less provide what is really needed in 
our communities which is jobs, training, family self-
sufficiency, day care, transportation. Because quite frankly 
most families that could get a job and move their life forward, 
would prefer to live in their house than to live in public 
housing. And if we are not engendering that, then we are 
creating legions of people that will require public housing for 
decades instead of serving as that stepping stone for moving 
families onto better lives.
    Ms. Waters. Well, I appreciate that. And I think one of the 
things we are going to have to do is we are going to have to 
activate some advocacy in our public housing projects to 
confront every level of government about their role in dealing 
with these very real problems. I think these problems are only 
being dealt with in a way that says put some cameras up to 
catch somebody or break down some doors to apprehend someone. 
We have to be about advocating for the resources for the 
investment in these human beings that can help change some 
lives.
    So I just wanted to have a little bit of a talk with you 
about that.
    Mr. Montiel. Okay.
    Ms. Waters. And I hope the message today that goes out from 
here is one about communication with all levels of government 
and with each other. And I am going to talk with the Mayor 
about how do we get the Members of Congress and the members of 
the Board of Supervisors, the Housing Authority, CRA, and CDC; 
how do we get together so that we can start to talk about what 
we are doing and how we are doing it in ways that will 
strengthen us to become even better fighters for these 
resources? Right now I think we are a little bit too 
fragmented. I think that we work in ways that we are dealing 
with what we think is the most needed program or our favorite 
program, or the one that showed up at the most meetings, etc. I 
think we can do better than that. And that is what I would like 
that message to be to every entity today that we have to 
communicate.
    And for Members of Congress, I have made a commitment to 
the California delegation that we are going to create this 
communication, or I am going to have to develop legislation 
that will mandate certain kinds of cooperation and interaction 
so that it will give us more input and more direction. Okay.
    Now, let me close by saying that I would like to thank my 
colleague, Congressman Ney, for taking time from his very busy 
schedule to be here with us in California. This is the second 
time he has honored me with having a hearing.
    As you know, the Republicans are in charge, and they do not 
have to hold hearings at the request of a Democrat. But 
fortunately, we have developed a good relationship working on 
those issues that we can work on together. His interest in 
housing, CDBG, Section 8, home program, 108, and Loan Guarantee 
is absolutely extraordinary. He is concerned about the same 
things that I am concerned about. And his desire to save these 
programs is quite unusual.
    So we hope to be able to use your input and our advocacy to 
bring back these cuts. This will be very, very detrimental to 
our area and that has been spoken to very well here today.
    So again, even though my chairman has often been defensive 
and supportive of me when I break the rules, he is the first 
one to say that I probably break them all the time; whether we 
are here in Los Angeles or in New Orleans, he does a fabulous 
job--I want to tell you, he did a fabulous job. And I cannot 
tell everybody everything that he did publicly because they 
would begin to question his credentials as a good Republican. 
But I want to tell you, he was absolutely extraordinary in New 
Orleans. And because of his work we have been able to do some 
things. And we certainly were able to take some of the CDBG 
money that the Administration thought that we did not need to 
direct toward New Orleans and give them an opportunity to use 
these monies to do some rebuilding. We are also concerned about 
the public housing developments. But, again, I just want to say 
that I am very appreciative to him for the attention that he 
has given to all these issues.
    And I would break the rules and ask you to give him another 
round of applause.
    Chairman Ney. You know, I want to thank the gentlelady for 
her kind comments. And she gives me the other perspective and 
the other side of the aisle, and combined with my 82 year old 
parents who are lifetime Democrats from Ohio, I get another 
perspective from them, too.
    It has been a pleasure to be here. This is productive. This 
helps, like I said, the entire country. Helps our people, helps 
people around this country and it was so important. So thanks 
again for hosting us.
    The hearing record will remain open for 30 days for members 
to submit additional questions, possibly, to you, and we can 
get a response.
    And also, sitting here today we have Nat Thomas, Jeff 
Riley, Clinton Jones, and Tom Johnson. And also Michale was 
here.
    Ms. Waters. And all of our Washington and Los Angeles 
staff.
    Chairman Ney. Yes. I want everyone to stand up from the 
staff and give them a round of applause. There we go.
    And we will submit all their names for the record.
    Ms. Waters. A big round of applause for the staff for 
having done a very, very good job today.
    Chairman Ney. And also one of the staffers, Dana, has his 
new bride here, so that is how dedicated he is.
    Ms. Waters. Oh, okay.
    Chairman Ney. Is that correct? Thank you.
    With that, the hearing is concluded. Thank you very much.
    Ms. Waters. Thank you.
    Chairman Ney. And thank you again.
    The hearing is concluded.
    [Whereupon, at 12:51 p.m. the hearing was concluded.]


                            A P P E N D I X


                             April 12, 2006


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