[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                 H.R. 2930, THE SECTION 202 SUPPORTIVE 

                  HOUSING FOR THE ELDERLY ACT OF 2007 

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 6, 2007

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-59

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39-538 PDF                 WASHINGTON DC:  2007
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            RICHARD H. BAKER, Louisiana
CAROLYN B. MALONEY, New York         DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois          MICHAEL N. CASTLE, Delaware
NYDIA M. VELAZQUEZ, New York         PETER T. KING, New York
MELVIN L. WATT, North Carolina       EDWARD R. ROYCE, California
GARY L. ACKERMAN, New York           FRANK D. LUCAS, Oklahoma
JULIA CARSON, Indiana                RON PAUL, Texas
BRAD SHERMAN, California             PAUL E. GILLMOR, Ohio
GREGORY W. MEEKS, New York           STEVEN C. LaTOURETTE, Ohio
DENNIS MOORE, Kansas                 DONALD A. MANZULLO, Illinois
MICHAEL E. CAPUANO, Massachusetts    WALTER B. JONES, Jr., North 
RUBEN HINOJOSA, Texas                    Carolina
WM. LACY CLAY, Missouri              JUDY BIGGERT, Illinois
CAROLYN McCARTHY, New York           CHRISTOPHER SHAYS, Connecticut
JOE BACA, California                 GARY G. MILLER, California
STEPHEN F. LYNCH, Massachusetts      SHELLEY MOORE CAPITO, West 
BRAD MILLER, North Carolina              Virginia
DAVID SCOTT, Georgia                 TOM FEENEY, Florida
AL GREEN, Texas                      JEB HENSARLING, Texas
EMANUEL CLEAVER, Missouri            SCOTT GARRETT, New Jersey
MELISSA L. BEAN, Illinois            GINNY BROWN-WAITE, Florida
GWEN MOORE, Wisconsin,               J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee             JIM GERLACH, Pennsylvania
ALBIO SIRES, New Jersey              STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio              JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               THADDEUS G. McCOTTER, Michigan
JIM MARSHALL, Georgia
DAN BOREN, Oklahoma

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
           Subcommittee on Housing and Community Opportunity

                 MAXINE WATERS, California, Chairwoman

NYDIA M. VELAZQUEZ, New York         JUDY BIGGERT, Illinois
JULIA CARSON, Indiana                STEVAN PEARCE, New Mexico
STEPHEN F. LYNCH, Massachusetts      PETER T. KING, New York
EMANUEL CLEAVER, Missouri            PAUL E. GILLMOR, Ohio
AL GREEN, Texas                      CHRISTOPHER SHAYS, Connecticut
WM. LACY CLAY, Missouri              GARY G. MILLER, California
CAROLYN B. MALONEY, New York         SHELLEY MOORE CAPITO, West 
GWEN MOORE, Wisconsin,                   Virginia
ALBIO SIRES, New Jersey              SCOTT GARRETT, New Jersey
KEITH ELLISON, Minnesota             RANDY NEUGEBAUER, Texas
CHARLES A. WILSON, Ohio              GEOFF DAVIS, Kentucky
CHRISTOPHER S. MURPHY, Connecticut   JOHN CAMPBELL, California
JOE DONNELLY, Indiana                THADDEUS G. McCOTTER, Michigan
BARNEY FRANK, Massachusetts
























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 6, 2007............................................     1
Appendix:
    September 6, 2007............................................    37

                               WITNESSES
                      Thursday, September 6, 2007

Allton, Terry, Vice President of Support Services, National 
  Church Residences..............................................    27
Feingold, Ellen, President, Jewish Community Housing for the 
  Elderly, Boston, Massachusetts.................................    22
Frigo, Michael, Vice President, Mayslake Village, Westmont, 
  Illinois.......................................................    23
Garvin, John, Senior Advisor to the FHA Commissioner, and Acting 
  Deputy Assistant Secretary for Multi-Family Housing, U.S. 
  Department of Housing and Urban Development....................     7
Kondor, Deje, Executive Director, Presbyterian Homes and Housing 
  Foundation of Florida, Inc.....................................    20
Lizarraga, David C., President and CEO, TELACU/Millennium, LLC...    16
Protulis, Steve, Executive Director, Elderly Housing Development 
  and Operations Corporation (EHDOC).............................    25
Slemmer, Thomas W., Board Chair-Elect, The American Association 
  of Homes and Services for the Aging............................    18

                                APPENDIX

Prepared statements:
    Maloney, Hon. Carolyn B......................................    38
    Allton, Terry................................................    39
    Feingold, Ellen,.............................................    46
    Frigo, Michael...............................................    65
    Garvin, John.................................................    67
    Kondor, Deje.................................................    72
    Lizarraga, David C...........................................    79
    Protulis, Steve..............................................    86
    Slemmer, Thomas W............................................    97


                 H.R. 2930, THE SECTION 202 SUPPORTIVE



                  HOUSING FOR THE ELDERLY ACT OF 2007

                              ----------                              


                      Thursday, September 6, 2007

             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 10:10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Waters, Maloney, Clay, 
Sires, Ellison; Biggert, and Capito.
    Ex officio: Chairman Frank.
    Also present: Representative Mahoney.
    Chairwoman Waters. This hearing of the Subcommittee on 
Housing and Community Opportunity will come to order.
    Good morning, ladies and gentlemen. I'd first like to thank 
Ranking Member Judy Biggert for being here today and the 
members of the Subcommittee on Housing and Community 
Opportunity for joining me for today's hearing on H.R. 2930, 
the Section 202 Supportive Housing for the Elderly Act of 2007.
    I'd like to start by noting that without objection, Mr. 
Mahoney will be considered a member of the subcommittee for the 
duration of this hearing. Also without objection, all members' 
opening statements will be made part of the record.
    I am looking forward to hearing from the two panels of 
witnesses today, because the Section 202 program is such a 
cornerstone of our Federal response to the needs of our 
Nation's most vulnerable elderly households.
    I appreciate the work of Mr. Mahoney in crafting H.R. 2930, 
which is designed to ensure that Section 202 retains its 
vitality. Today over 6,000 projects, containing over 310,000 
units nationwide, receive assistance under this program. 
Enacted as Section 202 of the Housing Act of 1959, it is among 
our oldest Federal subsidized housing programs, and the only 
HUD program with the sole focus on meeting the needs of the 
poor elderly.
    I'd like to start with the good news about the 202 program: 
it works. By this I mean that the combination of affordable 
housing and coordinated supportive services provided by 202 
project sponsors has been proven to enable elderly tenants with 
a median age of 76 to live as independently as possible for as 
long as possible. This goal, referred to as helping seniors age 
in place, is part of what I regard as almost a technological 
revolution over the last few decades in meeting the health and 
housing needs of many vulnerable populations.
    At one time, the frail elderly, the mentally ill, and the 
otherwise disabled could expect to live for long periods in 
institutional settings, because those were the only places 
equipped to meet their needs for long-term support. Today, 
entrepreneurial nonprofits have worked with government at all 
levels to develop housing plus services models that instead 
promote more independent living. And these new models make 
sense physically as well as morally, while preserving 
individual dignity, a principle on which our Nation was 
founded, and that would alone justify preferring independence 
over institutionalization.
    It turns out that it also generally costs more to do their 
own thing, just as cycling chronically homeless, often mentally 
ill individuals through detoxes, shelters, hospitals, and jails 
is far more expensive than providing them with supportive 
housing. So, too, are nursing home settings and frequent 
hospitalizations in comparison to 202 supportive housing 
projects for the elderly who are still well enough to live in 
them. Simply put, the longer we can help seniors to stay on the 
more independent end of the housing and services continuum, the 
better it is for them, and the better it is for taxpayers.
    But the 202 program does face major challenges. First, the 
current 202 portfolio doesn't come close to meeting the need. A 
2006 AARP survey of 202 project sponsors found an average of 10 
seniors waiting for each unit that becomes available. And in 
202, a bipartisan, congressionally appointed commission on 
senior housing and health needs, with which I know several of 
today's witnesses were involved, called for the creation of an 
additional 730,000 units of affordable housing by 2020.
    In light of this overwhelming need for more elderly 
housing, I'm compelled to note that the Administration's recent 
budget request for HUD's housing for the elderly appropriations 
account, which includes 202, have consistently sought to cut 
the program significantly. This includes a reduction from the 
Fiscal Year 2007 funding level of $735 million to only $575 
million in the President's Fiscal Year 2008 request.
    Fortunately, the appropriators have to date declined to 
make these cuts. I hope this hearing plays a part in moving the 
202 program to a firmer footing, both programmatically and 
financially. In any event, Title I of H.R. 2930 seeks to 
streamline the new construction process of the new 202 program. 
Since 1990, the 202 program has operated as a capital advance 
and an associated rental assistance stream known as PRAC, which 
combine to meet the development and ongoing operating costs of 
the project.
    Title I responds to the concerns I have heard, namely, that 
as now administered, the 202 program imposes on potential 
sponsors all the inflexibility and bureaucracy that might 
conceivably be justified in a funding stream that pays a 
project's full freight in a program that no longer does. In 
order to use scarce resources to reduce more units, HUD has 
made the understandable policy decision to thrust 202 sponsors 
into a world of mixed finance.
    Title I proposes to ease that transition by, among other 
things, requiring HUD to make adjustments to the PRAC to 
reflect certain unexpected increases and project operating 
costs, consider delegating some administrative responsibilities 
in mixed finance transactions to State or local housing 
agencies with strong underwriting expertise, and develop new, 
more responsible, development cost estimates.
    I am interested in today's witnesses' experiences with the 
current process. In particular, I hope to hear about their 
ideas about meting project funding needs in the area of 
services and services coordination, a thing that not only runs 
through H.R. 2930, but also resonates across a number of issues 
the subcommittee will be addressing this fall.
    Second, as one might expect in a program of 202's vintage, 
much work must be done simply to preserve the existing stock of 
projects. At particular risk are the 40,000 to 45,000 units 
funded prior to 1974, when the program was structured as a 50-
year, 3 percent loan, many of which do not have any rental 
assistance attached to them. Nearly 10 percent of those units 
are in California. To serve low- income seniors as these 
projects head into their second half- century will require some 
sort of ongoing funding beyond affordable tenant rents. H.R. 
2930 would create a senior preservation rental assistance 
program for this purpose. If HUD or other witnesses have viable 
alternatives to that approach, I'm certainly open to hearing 
them.
    Additionally, these projects need access to new capital to 
undertake needed repairs and program improvements. Fortunately, 
today's lower interest rate environment offers a real 
opportunity to refinance and recapitalize them. I understand, 
however, that HUD and many 202 nonprofit sponsors disagree 
about the flexibility these organizations should have in using 
the proceeds of such refinancing. Title II of H.R. 2930 
provides additional flexibility, including lifting the current 
cap for their use for supportive services permitting 
developers' fees for nonprofits and enabling nonprofit sponsors 
to reallocate funds generated by refinancing an individual 
project's refinancing to a broader range of activities 
consistent with a nonprofit mission.
    I'm interested to hear HUD's views on these measures, as 
well as the other provisions of the bill, whose original co-
sponsors I again wish to thank for their bold proposals to 
address the needs of this critical housing program for the 
elderly.
    At this time, I would like to call on Ranking Member 
Biggert to present her opening statement, for 5 minutes.
    Mrs. Biggert. Thank you, Chairwoman Waters, for holding 
this important hearing on the Section 202 Supportive Housing 
for the Elderly Amendments Act.
    I'll keep my remarks brief, as I'm interested in hearing 
from our witnesses this morning about how we can best 
streamline and simplify the development of affordable housing 
for our seniors. As we all know, the Baby Boomer generation has 
begun to reach retirement, and that means more and more elderly 
Americans need access to affordable housing.
    They also need housing that is coupled with supportive 
services and features that promote independence for aging 
residents. Section 202, the primary Federal housing program for 
seniors, is designed to do just that. Our goal today is to 
examine what changes we can make to this program to satisfy the 
growth and demand for affordable senior housing and better meet 
the needs of seniors across the country.
    Specifically, we will evaluate whether H.R. 2930 provides 
the necessary flexibility to the Section 202 program so that 
local community groups can best serve the needs of our seniors. 
And I thank the bill's sponsor, Mr. Mahoney, for being with us 
today.
    Also, we'll propose changes to the Section 202 program to 
enable better use of mixed financing, tax credits, grants, and 
loans to preserve and build housing for seniors.
    Finally, I'm interested in learning more about the impact 
of the provisions in Title II of H.R. 2930, which is intended 
to expand refinancing opportunities for older Section 202 
properties. How can the changes in Title II benefit taxpayers, 
our community organizations, and most importantly, seniors?
    I'm confident that this morning's witnesses will be able to 
answer these questions, and more. I know this because we have 
the privilege of welcoming to this morning's hearing a 
constituent of mine, Mr. Michael Frigo, who is vice president 
of Mayslake Village. And with him is Father Larry Dreffein, 
President of Mayslake Village. Welcome. And I'll formally 
introduce Mr. Frigo when the second panel begins, but I can say 
that I visited Mayslake Village many times, and I have seen 
firsthand the wonderful work they are doing for seniors in Du 
Page County in Illinois.
    In 1960, what is now Mayslake Village, was a ministry 
started by the Chicago area Franciscan friar community with the 
goal of serving the needs of low- and moderate-income seniors. 
Today's Mayslake is a model facility of over 600 units of 
affordable housing to low- and moderate-income seniors in my 
congressional district.
    So I look forward to hearing from Mr. Frigo about the ways 
that we can amend the Section 202 program to help his 
organization, and others like it, provide even better housing 
and improve our services to the Nation's seniors.
    I'd also like to welcome HUD acting Deputy Assistant 
Secretary Garvin and all of this morning's witnesses, and I 
look forward to your testimonies.
    I yield back.
    Chairwoman Waters. Thank you very much, Ranking Member 
Biggert.
    I would now like to recognize for 3 minutes the chairwoman 
of the Subcommittee on Financial Institutions and Consumer 
Credit, Mrs. Maloney.
    Mrs. Maloney. Thank you, Chairwoman Waters and Ranking 
Member Biggert. I would like very much to be associated with 
the comments of both of the distinguished leaders of this 
committee. There is no program that's more important to 
seniors, and I want to congratulate the leadership of 
Congressman Tim Mahoney for introducing this legislation, which 
not only reauthorizes the program, but also adds a series of 
improvements that will help expand the supply of affordable 
housing to the elderly.
    I would say in New York, Chairwoman Waters, there are 
probably 20 or 30 seniors waiting to get into each 202 project 
or each 202 apartment. There is no other program that is more 
beloved, that provides more assistance and help and allows our 
elderly to retire with great dignity. It happens to be my 
favorite housing program. Every year, I have many, many 
requests for 202 housing projects. We never have enough dollars 
for it. This reauthorization is extremely important, and I 
would say that the seniors of this country are indebted to your 
leadership, Mr. Mahoney, for moving this forward and making 
this happen.
    I have a list of statements about the improvements in the 
program, and I would ask unanimous consent to place it in the 
record. I look forward to the testimony, particularly of the 
community groups, the religious organizations that are on the 
ground working hard to provide this housing, and of course, 
HUD; we appreciate your leadership. And we're so glad that 
you're here, Mr. Garvin. I look forward to your testimony, and 
I'd like to put my statement in the record.
    Just to close, I'd like to say that with the rapid increase 
in housing prices over the last decade, we have seen in my 
community, and probably many other communities across this 
country, that many seniors are priced out of the communities 
that they helped build. This is wrong. 202 housing and the 
reauthorization of this program will help provide more 
affordable housing options to seniors and afford opportunities 
for safe, affordable housing.
    Again, I congratulate Mr. Mahoney and the chairwoman for 
moving this forward, and the ranking member for her support. 
Thank you so much.
    Chairwoman Waters. Thank you. Without objection, your 
information will be accepted in the record.
    Mrs. Capito, for 3 minutes?
    Mrs. Capito. Thank you, Madam Chairwoman, I just want to 
welcome the witnesses. I look forward to this extremely 
important topic, certainly, across the country. My State of 
West Virginia has a high amount of low-income elderly who are 
in great need of not only affordable, but safe and better 
quality housing. And I appreciate the opportunity. I want to 
thank the chairwoman and the ranking member for bringing this 
forward today.
    Chairwoman Waters. Thank you very much.
    Mr. Sires, for 3 minutes.
    Mr. Sires. Thank you, Madam Chairwoman. I also want to 
congratulate my colleague on this legislation. It's certainly 
needed.
    Having been a mayor for 12 years, I can tell you that 
there's no grater need than housing for seniors. I used to kid 
people. I used to say, ``You know, you don't need money to get 
reelected anymore, all you need is housing for seniors,'' 
because the need was so great.
    I happen to come from an urban area. People were not well 
off, and this 202 is a lifesaver. You could see in their faces 
after they moved in and you went by their buildings how happy 
they were that they had a roof over their heads. So I really 
want to commend my colleague and the chairwoman for having this 
hearing. And any help that I can provide to my colleague on 
this issue to expand the program, please count on it.
    I also would like to say that I think more in the future of 
the private sector and government sector combined to do some of 
these senior programs, and also I think it's something we 
should look at. So thank you very much.
    Chairwoman Waters. Thank you, very much, Mr. Sires.
    Now, Mr. Ellison, for 3 minutes?
    Mr. Ellison. Thank you, Madam Chairwoman.
    I just want to lend my voice to other colleagues and 
members who have commended Mr. Mahoney on this excellent piece 
of legislation. I am a supporter of it and look forward to 
hearing the witnesses. I will also make this comment, and that 
is that our seniors are the people who have blazed the trails 
for the rest of us. They have knocked down barriers and built 
up bridges so all the rest of us could walk across, and a 
decent, caring nation should care for them, as well.
    I think Section 202 advances the improvements that 
Congressman Mahoney has proposed, and we'll improve and 
strengthen that, as well. So I just want to commend him and 
look forward to hearing the witnesses.
    Thank you. I yield back.
    Chairwoman Waters. Thank you very much.
    And now for the man of the hour. The author of H.R. 2930, 
one of our new members from the State of Florida, who makes us 
all very proud with the introduction of this legislation, Mr. 
Mahoney.
    Mr. Mahoney. Thank you, Chairwoman Waters.
    I'd like to thank Ranking Member Biggert, and to say that 
I'm really humbled to be here with my colleagues, working 
together for seniors. I'd like to point out that Chairwoman 
Waters, you have provided unbelievable leadership on housing 
issues, not only for seniors, but also for victims of Hurricane 
Katrina, and you have been a real inspiration for me.
    I'd also like to thank Chairman Frank for his tireless 
leadership in addressing the affordable housing crisis that's 
gripping our Nation.
    I'd also like to welcome Ms. Deje Kondor, who will be 
participating in today's hearing. Ms. Kondor is the executive 
director of the Presbyterian Homes and Housing Foundation of 
Florida, which manages 19 affordable housing communities for 
over 3,500 seniors, comprised of more than 3,000 apartments 
throughout Florida. And earlier this year, I had the pleasure 
and opportunity to visit one of the facilities located in my 
district, Presbyterian Homes of Port Charlotte.
    As our elderly population grows, the need for affordable 
housing will increase. In 2005, there were approximately 37 
million Americans over the age of 65. According to the U.S. 
Census Bureau, the number of seniors is expected to grow 
rapidly during the next several decades.
    Despite this increase in demand, the number of affordable 
housing units is shrinking. According to the Joint Center for 
Housing, for every unit of affordable housing constructed, two 
are lost, either by a conversion of affordable to market rate 
housing or by sponsors of Section 202 housing opting out of the 
program when their contracts expire.
    In 2002, Congress created a bipartisan commission to study 
the need for affordable housing in support of services for the 
elderly. In the Commission's report to Congress, entitled, ``A 
Quiet Crisis in America,'' they stated that, ``This nation, 
despite competing demands for national resources, must respond 
to the critical need for affordable housing and home and 
community-based supportive services with substantial financial 
commitment and effective policies.''
    The report also concluded that all seniors, no matter what 
their individual circumstances and resources, should be able to 
continue to live where they prefer, regardless of their income, 
with services that they need to maintain personal dignity and 
quality of life.
    One of the most important responsibilities we have as a 
society is to ensure that our seniors have safe and affordable 
places to live. The Section 202 Supportive Housing for the 
Elderly Act is the first step in achieving this goal. This 
important piece of legislation will give owners of 202 
facilities the ability to leverage the property's equity, 
access much needed capital, and benefit from low interest rates 
from private lenders.
    By doing so, this legislation will ensure that these 
facilities are preserved and improved to meet the changing 
needs of seniors. In addition, the bill allows for funding to 
be used to increase the services that Section 202 communities 
provide for the residents, allowing them to live a more 
independent life.
    Finally, this bill will assist seniors living in older 
section 202 facilities by extending them rental assistance.
    I look forward to working with members of the committee on 
this legislation, and again, I would like to thank Chairwoman 
Waters, and I look forward to hearing the testimony of our 
witnesses today.
    I yield back the balance of my time.
    Chairwoman Waters. Thank you very much.
    At this time, I'd like to introduce our first panel, which 
consists of Mr. John Garvin, Senior Advisor to the Assistant 
Secretary for the Office of Housing, and Acting Deputy 
Assistant Secretary for the Office of Multifamily Housing. 
Deputy Assistant Secretary Garvin, I want to thank you for 
appearing before the subcommittee today, and without objection, 
your written statement will be made part of the record. You 
will now be recognized for a 5-minute summary of your 
testimony.

      STATEMENT OF JOHN GARVIN, SENIOR ADVISOR TO THE FHA 
 COMMISSIONER, AND ACTING DEPUTY ASSISTANT SECRETARY FOR MULTI-
     FAMILY HOUSING, U.S. DEPARTMENT OF HOUSING AND URBAN 
                          DEVELOPMENT

    Mr. Garvin. Thank you very much, Chairwoman Waters, Ranking 
Member Biggert, and distinguished members of this committee. 
Thank you for the opportunity to testify today on H.R. 2930.
    As you mentioned, my name is John Garvin, and I am the 
Senior Advisor to the Assistant Secretary of Housing, Federal 
Housing, Mr. Brian Montgomery, who sends his regrets that he 
can't be here today. I also, for the last few months, have been 
serving as Acting Deputy Assistant Secretary for Multi-family 
Housing, and in this role, oversee the Section 202 program.
    I would like to start by also thanking Congressman Mahoney 
for recognizing the need to address services and affordable 
housing options for seniors.
    The 202 program is one of the Nation's major sources for 
providing safe and affordable housing to America's very-low-
income seniors. The program funds construction, rental 
assistance, and in many cases, service coordinators. Within 
Section 202, there is also an assisted living conversion 
program, the goal of which is to modify 202 developments to 
better serve frail seniors who require a higher level of 
services to be able to age in place.
    Section 202 is a very comprehensive program, and one that 
serves many frail seniors, as well. As Chairwoman Waters 
mentioned, it has proven a great program since 1959. I would 
like to take this opportunity to commend HUD staff nationwide, 
as well as our industry stakeholders, many of whom are here 
today, for their complete dedication to this program and their 
hard work in making this program the success that it is.
    The average age of a 202 resident is approximately 75 or 76 
years old, and they have an annual average income of around 
$9,500. To date, we have more than 300,000 Section 202 units in 
our portfolio. Section 202 units are limited to serving seniors 
aged 62 or older, who have incomes of less than 50 percent of 
an area's median income, or, as mentioned before, a very low 
income.
    Each year while providing continued rental assistance, HUD 
also provides construction funding for approximately 4,500 new 
units. Unfortunately, over the last 12 years, production in the 
Section 202 program has decreased by almost 50 percent, from 
7,800 units in 1995, to 4,200 units in 2006. The main reason 
for this decrease is as we renew rental assistance, that money 
comes out of the construction pool. So as we produce more, more 
rental assistance is required to be renewed annually, and that 
takes away from what we can use to increase production.
    I don't need to tell this committee about the growing need 
for affordable housing options for seniors, as Chairwoman 
Waters also mentioned the AARP survey that said there are 10 
seniors waiting for every one unit that becomes available, and 
Congresswoman Maloney mentioned that she thinks it's more like 
30 in New York. Obviously, the need is there. We don't have to 
debate that issue.
    Secretary Jackson and Commissioner Montgomery are very 
committed to preserving existing 202 units. Moreover, they want 
to increase production of new units to address the ever-growing 
demographics of seniors in need of affordable housing. One of 
the main reasons Commissioner Montgomery hired me to come to 
HUD from the multi-family industry is to bring about some 
changes to the 202 program so as to make it leverage better 
with the low income housing tax credit, both 9 percent and 4 
percent credits.
    While I mentioned that I am extremely impressed with the 
HUD staff nationwide, and their work on the 202 program, and 
industry stakeholders, we need to do more. There are a lot of 
changes we can make to streamline the program, making it more 
attractive to tax credit sponsors. Right now, there are many 
barriers--unintentional, most of them--that get in the way of 
tax credit developers using 202. If we could get that 
utilization strong, we could increase the production of 202 
units, leverage with tax credits and the services that the 202 
program bring in, and we could do that exponentially.
    Christian Montgomery asked us to come up with a 
demonstration program which we all saw in the 2008 budget, 
which was basically addressing some of the need for 
streamlining in the 202 program. We got together with the 
American Association of Homes and Services for the Aging, and a 
lot of the stakeholders in this room today, to come up with a 
good report which recommended several changes to the 202 
program.
    While the 2008 demonstration program in the 2008 budget did 
not make it through markup, HUD's staff has proposed guidance 
to break down many of these barriers that we'll discuss here 
today. We will continue this effort administratively and will 
take into serious consideration any sound proposal that eases 
the way to leveraging other sources of funding with 202 and to 
preserve and create more units.
    We value our partnership with the American Association of 
Homes and Services for the Aging and look forward to our 
continuing work with them and other organizations to increase 
affordable housing options for seniors.
    Again, thank you for the opportunity to be here today, and 
I welcome any questions you may have.
    [The prepared statement of Mr. Garvin can be found on page 
67 of the appendix.]
    Chairwoman Waters. Thank you very much, Mr. Garvin.
    We have been joined by the chairman of the Financial 
Services Committee, Mr. Barney Frank.
    I will recognize him for as much time as he may need.
    The Chairman. Thank you, Madam Chairwoman.
    I apologize, because I will have to go to the Floor. The 
Native American Housing bill is on the Floor, and we will be 
dealing with a number of issues, including, I will say, an 
amendment I found somewhat intriguing to the Native American 
Housing bill. This is a program that provides housing for 
Indian tribes, and we will have an amendment dealing with 
illegal immigration. And I'm afraid the Indians' response is 
going to be, ``Why didn't we think of that?''
    [Laughter]
    The Chairman. I am pleased to be here today, Madam 
Chairwoman, and this is a further example of the leadership you 
have given as chairwoman of this subcommittee. Working with you 
on a range of issues has been a great pleasure.
    And I'm also glad to be here at the start of ``Tim Mahoney 
day'' at our committee, because the gentleman from Florida is 
the sponsor of this bill. And this afternoon, the bill that he 
has created and co-sponsored with his Florida colleague, Mr. 
Klein, will be having a hearing, and in both cases, responding 
to real needs. I see a lot of friends who are active in the 
elderly housing field, and I am glad to be here. I hope we can 
get a bipartisan movement here, because we are talking about 
making a good program better.
    We don't control the amount of money, but we do have the 
responsibility to make it go further. And I do think when many 
of us go to the appropriators and say, let's have more money 
for this program, the fact that we will have helped to improve 
it, and made it more flexible and more efficient, should stand 
us in good stead.
    I am very glad to be here and see so many friends, and I 
will go over to the Floor knowing that under the chairmanship 
of the gentlewoman from California, and my other colleagues 
here, and the ranking member, with whom we've been able to work 
very constructively in a lot of ways--the gentlewoman from 
Illinois--things are in good hands.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you, Mr. Chairman, and we are all 
appreciative for your leadership and the assistance that you 
have given to Mr. Mahoney. We are very proud. Thank you very 
much.
    Mr. Garvin, we gave you a list of questions that we would 
have you respond to at this hearing. Your testimony did not 
match the questions we had asked you to deal with, so we are 
perhaps going to have to ask some of those questions at some 
time during this hearing.
    But first, let me start on the issue of removing some of 
the bureaucratic delay in mixed finance 202 projects. There 
seems to be some level of agreement that it makes sense not to 
duplicate every administrative process at HUD and every other 
public finance agency involved.
    You have proposed a demonstration program involving tax 
credits and tax housing agencies, and H.R. 2930 seems to 
provide somewhat more room for delegating underwriting and 
other functions to State and local agencies. Can you describe 
for me your understanding of the difference between your 
proposed demonstration program and what the bill would allow? 
Specifically, I'm interested in knowing what specific kinds of 
delegation H.R. 2930 would allow and what circumstances HUD 
would not be comfortable with and why?
    Mr. Garvin. First, Chairwoman Waters, I would like to say 
we did get your questions and we have formal answers to each of 
them. I think a lot of those questions would take a half hour 
to answer; they're very technical. But we will submit those to 
you.
    On the delegation to the local housing agencies, in our 
demonstration program we were considering when it came to the 
use of tax credits and tax-exempt bond financing of having the 
State housing agency that allocates the credits, the 
underwriter, and HUD would approve the underwriting. That would 
take away one step. H.R. 2930 has a similar concept, but it 
seems to move all of Section 202 to housing agencies within a 
90-mile radius of a proposed development. I think that is a 
little far-reaching right now.
    We would like to analyze it a little bit more and get a 
better grasp on how many agencies would be administering 202 if 
that proposal were successful. We just have a feeling that it 
might take a lot longer to get local housing agencies up-to-
speed on how this program works, and we feel that it would be 
losing a little bit of our responsibility as a strong fiduciary 
with that.
    Chairwoman Waters. Thank you very much. On the issue of the 
use of proceeds from refinancing, can you tell me why HUD views 
it as critical that excess proceeds only be used for pretty 
limited purposes in the same project? What would be the concern 
if nonprofits were able to use these proceeds more broadly, as 
H.R. 2930 envisions?
    Mr. Garvin. We just see such a shortage of affordable 
housing funds that we think to use excess proceeds from 
recapitalization to do non-housing, while mission-driven, while 
good nonprofit, mission-driven purposes, we think that there's 
such a shortage of affordable housing, and as you mentioned, a 
lot of these older properties are in need of fixing up. But we 
think the proceeds need to stay on that property for housing 
needs.
    Chairwoman Waters. Thank you very much, Mr. Secretary.
    I am going to recognize our ranking member for 5 minutes 
for questioning.
    Mrs. Biggert. Thank you, Madam Chairwoman.
    Mr. Garvin, what do you perceive to be the major challenges 
facing HUD in furthering the goal of preserving these existing 
202 properties?
    Mr. Garvin. I think that along the line with what 
Commissioner Montgomery asked me to do when I first came to HUD 
is figure out ways to make the 202 program more attractive to 
the housing tax credit sponsor. There are a lot of excellent 
nonprofit developers out there that are already mixing 202s 
with tax credits. But as I'm sure many of them will bring to 
your attention right after I finish, there are a lot of issues 
that need to be worked out to make this program a little bit 
more seamless. If we could make it a more seamless program, 
then we could do a lot more, and more importantly, do it a lot 
faster.
    Mrs. Biggert. What is HUD currently doing to address the 
need for elderly housing preservation?
    Mr. Garvin. As I mentioned before, we have a really good 
rapport with all recommendations from a group of stakeholders, 
many of which are here, that we are going through, and we 
proposed it in our 2008 budget. But the demonstration program 
didn't make it through the 2008 budget. It doesn't mean we're 
not continuing to do what we can do administratively to take a 
lot of these. I know we've talked about increased costs. We 
have done quite a few things to make it a smoother program.
    Mrs. Biggert. Do you think that the bill that's been 
introduced will help to be able to move that forward?
    Mr. Garvin. Again, we haven't had the time to do a proper 
comprehensive assessment, but the bill does have very similar 
proposals to what was in the study group's recommendations.
    Mrs. Biggert. Mr. Frigo, from my district, is going to 
testify.
    Is this a concern that comes up all over the country as far 
as the aging properties have small, you know--
    Mr. Garvin. Efficiency?
    Mrs. Biggert. --efficiency units, and, you know, people 
find that very hard to live in? Is this a problem across the 
country? And will the bill, as you know, will that help to 
address that issue and maybe solve that problem?
    Mr. Garvin. With or without the bill, we hear about the 
issue quite a bit. We don't hear from it in places like New 
York or something where efficiencies are still marketable, but 
we do have serious concerns. We see it all over the country. 
There will be 40 vacant efficiency units and the sponsor would 
like to refinance and rehab the building and make it 21 
bedrooms. And we're firmly of the belief that 40 vacant units 
do not need to be subsidized. I'd rather be subsidizing 20 
occupied units than 40 vacant units.
    So yes, we're on the same exact page on that issue.
    Mrs. Biggert. Well, with the buildings that are the older 
buildings to be revamped, restored, there's been a difference 
in those because of the date that they were built, so there 
aren't any rent subsidies. Is there going to be a change in 
that if these buildings are restored? Would that change, 
whether they would receive a rent subsidy in those buildings?
    Mr. Garvin. That wouldn't. We would have to seek new 
authority to come up with a rental program for those units.
    Mrs. Biggert. Do you think that's a good idea, to match 
them up? I think one of the problems is if they cost more than 
a one-bedroom in a newer building, it seems unfair that people 
should be paying more.
    Mr. Garvin. Exactly.
    Mrs. Biggert. All right. With that, I yield back.
    Chairwoman Waters. Thank you very much.
    I would like to go straight to Mr. Mahoney so that he can 
have an opportunity to ask some questions of the Secretary.
    And so, Mr. Mahoney, let me give you an opportunity to 
question our witness.
    Mr. Mahoney. Thank you for your courtesy, Madam Chairwoman.
    Mr. Garvin, thank you for being here today. I appreciate 
it.
    You know, in the written testimony that you provided the 
committee, I noted that HUD estimates that there are over 1 
million senior renters experiencing worst case housing needs, 
and you went on to cite statistics from the Commission on 
Affordable Housing and health facility needs for seniors in the 
21st Century that indicated that an additional 730,000 rent-
assisted units will be needed by 2020.
    You also indicated that HUD is researching ways of 
addressing the declining numbers of Section 202 units, all of 
which are included in H.R. 2930. My concern, and the main 
reason why I introduced the legislation, you know, is that it 
is taking way too long. You indicated that we began witnessing 
the decline in Section 202 housing in 1995, yet here we are in 
2007, 12 years later, and we're still researching ways to 
reverse this dangerous trend.
    And now you're saying that one of the things you just 
brought up here today is the fact that part of the issue is, 
you know, an increase in units increases the amount of rental 
assistance, so therefore that's going down. That indicates that 
there has to be a priority problem, too, because we're talking 
about a budget issue. We're talking about Mr. Frank saying that 
we could provide some ideas on how to make the program better. 
But at the end of the day, it's the Administration's 
responsibility to address the needs in terms of the budget and 
the funding and so on and so forth.
    My question is, when are we going to start taking this 
seriously for our seniors? I mean, this is a situation where 
for every person who is in one of these homes, there are 
anywhere--in my district, 20 to 30 people waiting, and these 
are crises. I mean, these are people in crisis. This is 
somebody's grandmother who cannot afford to live. You said it 
yourself--living on $9,500 a year. When does this become a 
priority for this Administration to do something about this?
    Now, why does a guy like me have to get involved in working 
with the committee to, you know, bring it to your attention? I 
mean, it's unbelievable to me that you came here, and this bill 
has been out now for 2 months, and you haven't done an 
assessment on it? Can you explain that? What's going on? What's 
happening with the priorities there?
    Mr. Garvin. It is definitely a priority of this 
Administration to address this. That's why we really need to 
find the ways to use the biggest producer of affordable 
housing, which is lowering the housing tax credit. That's why 
we put it in our budget. That's why we continue--even though it 
didn't pass in the 2008 budget markup--to do whatever we can 
administratively.
    I give you my word; I have been at HUD for about a year-
and-a-half. It has been my top priority the whole time I've 
been there, as it is the Commissioner's and the Secretary's.
    Mr. Mahoney. Well, I recognize that you're here, and you've 
taken on this responsibility because you're passionate about 
it. But, at the same time, you know, what's happening with the 
budget, and how successful are you getting the resources that 
you need from this Administration to do something about this 
problem?
    Mr. Garvin. Well, we want to make sure the resources we do 
get, budgetary resources, are used in their best way. We have 
issues right now of some of the 202. And let me preface this by 
saying that the overwhelming majority of the 202 sponsors are 
excellent, on-time producers. Unfortunately, we have a large 
amount of money that's in the pipeline, and we just don't feel 
fiscally responsible asking for more and more money while we 
have funds.
    We have some developments that have been funded in 1999 
that still aren't completed, and we needed to get that money 
worked out. And I think a lot of the changes--some of the 
reasons for the slowness was because of the bureaucratic red 
tape we were talking about earlier.
    So we're dual-tracking both. We're trying to streamline our 
efforts as your bill does--recognizes it as well.
    Mr. Mahoney. But you recognize that HUD has been 
streamlining their efforts for what, 10 years?
    Mr. Garvin. I don't know if we've been streamlining for 10 
years.
    Mr. Mahoney. I mean, it has been going on since the 1990's. 
When does it become critical? When does something happen in the 
Administration that makes people jump up and say, ``We have to 
reverse this?'' We know it's a problem.
    Mr. Garvin. We have jumped up and said we have to reverse 
it, in January of 2006, when Commissioner Montgomery charged us 
to get moving on this.
    Chairwoman Waters. Thank you very much, Mr. Mahoney.
    I'd like to call on Mr. Sires now for questions, and 
following his questions, we have to break and go to the Floor.
    We do not want to keep you, Secretary Garvin. At the end of 
that time, you may be dismissed.
    Mr. Garvin. Thank you.
    Chairwoman Waters. Mr. Sires?
    Mr. Sires. Well, Mr. Garvin, I guess you could say, ``saved 
by the bell.''
    [Laughter]
    Mr. Sires. But I have to tell you, I have a combination of 
a statement and a question, and I could not agree more with my 
colleague. As a former mayor, I cannot tell you how hard it was 
trying to put a senior project together in dealing with HUD.
    I think all the gray hairs that I had during my 
administration was dealing, trying to put together a project. 
It was impossible. You may say whatever you may here, but I 
lived it. I was in the trenches. I had the people in my office 
every day, and it is really a shame, in a country where the 
population is getting older, that our responsibility to take 
care of them sometimes is not looked upon as very important. I 
tell you that for seniors, the need is great. The need is great 
for seniors who are handicapped, and seniors who are blind.
    We have to find a way to streamline the process. I did tax 
credits. Between trying to get the property, trying to deal 
with you, trying to get the finances, trying to get--it took me 
more than a year, and I don't know what we can do, and I'm 
hoping that this bill helps streamline the process, but when 
you make a statement that has been the reduction from a peak of 
creating 8,200 units to 4,500 units, that, to me, is very 
bothersome.
    And to try to expedite this process, I think it should be 
in everybody's interest. You use the money that you have there. 
Why is it so difficult for municipalities to put together a 
project to build a senior citizen project? Because you know 
what happens? Many people just surrender. Many municipalities 
give up on the process because they feel that HUD doesn't care 
and they feel that it's too hard to put it together. And by the 
time you finish the project and I'll tell you my experience, 
your cost is 20 percent more, because construction goes up, 
property value goes up, so all I can say to you is that somehow 
we have to find a way to streamline the process and make it 
faster--put it on some sort of a fast track.
    Because there is a list. My housing authority had a list of 
about 2,500 to 3,000 people, a waiting list. And I can tell you 
that more than half of those were seniors.
    So I guess that's a statement, and it's like I said to you 
before, you probably were saved by the bell.
    Do you have any comments about that?
    Mr. Garvin. I just want to reiterate that we do care, and 
the issue of capacity is something we recognize deeply. We do 
have a predevelopment fund out there to get municipalities on 
board, so we'll cover the cost for them to learn the program 
and do the predevelopment work on the deal. So, hopefully, that 
will add some of the local governments.
    Mr. Sires. Well, Mr. Garvin, when you came in, you said 
from the peak of 8,200 units to 4,500 units.
    Mr. Garvin. That's annual production, though. I hope you 
recognize that within that, we are still funding rental 
assistance at tens of thousands, if not hundreds of thousands, 
of dollars.
    Mr. Sires. You see, you bring a lot of memories. I hate to 
interrupt. For one of the things we had to do, and HUD gave us 
permission for, is to bond in the future so we could fix the 
units, because there was no money for units to be fixed.
    So HUD gave the authorities permission to bond so they 
could fix up some of those units. That's also something you 
have to look at.
    Chairwoman Waters. Thank you very much.
    The Chair notes that some members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions and to 
place the responses in the record.
    This panel is now dismissed, and we would like to get to 
the Floor for the vote. I think it's going to be about 20 or 25 
minutes, and then we will return for the second panel. We thank 
you for your patience.
    [Recess]
    Chairwoman Waters. The subcommittee will come to order, and 
we're going to call on our second panel.
    Please come forward. Is Mr. David Lizarraga here?
    Oh, there he is. This is our first witness, Mr. David 
Lizarraga, president and chief executive officer of TELACU, a 
friend that I've known for many, many years, who has done 
tremendous work, not only on behalf of seniors, but on behalf 
of poor people, working people, and housing and community 
programs. I'm very pleased to introduce Mr. Lizarraga, who has 
served as chairman, president, and chief executive officer of 
TELACU for nearly 4 decades.
    With over $500 million in assets, TELACU operates the 
Nation's largest community development corporation and is the 
44th largest Hispanic business in the entire United States. 
Under Mr. Lizarraga's leadership, TELACU has innovated in a 
wide range of areas, including its core approach of ensuring 
that its core for-profit businesses in the areas of financial 
services, real estate development, and construction themselves 
benefit the community as well as support TELACU's nonprofit 
entities.
    In particular, TELACU has been a leader in leading the 
housing and social services needs of California's elderly, 
including under the 202 program. Indeed, TELACU developed and 
operated two excellent 202 projects in my area--TELACU Terrace 
and TELACU Senior Housing. Therefore, I know, Mr. Lizarraga, 
that you will make a valuable contribution today to this 
subcommittee hearing, and consideration of H.R. 2930. I 
certainly look forward to your testimony.
    Also, we have Mr. Slemmer; a second witness will be Mr. 
Thomas Slemmer, chief executive officer of the National Church 
Residences.
    And is Ms. Maloney here? I think she would like to 
introduce our next witness, Ms. Kondor.
    Ms. Maloney? Ms. Maloney, would you like to introduce Ms. 
Kondor? No, is that Mr. Slemmer?
    Mrs. Maloney. Mr. Mahoney does.
    Chairwoman Waters. Oh, I'm sorry.
    Mr. Mahoney. That's okay.
    Chairwoman Waters. Go right ahead.
    Mr. Mahoney. I'm really excited about the fact that we have 
the executive director of Presbyterian Homes and Housing 
Foundation of Florida, Deje Kondor, with us. And I'm really 
very, very pleased, because there's a lot of talk about working 
with faith-based organizations and concerns about Democrats and 
our commitment to working with organizations like this.
    And whether it be the Presbyterian Homes or the Catholic 
housing organizations over on the East Coast and Martin County, 
we have great organizations doing a wonderful job and we have 
great leadership. And I'm really pleased that Ms. Kondor is 
here from my district.
    Chairwoman Waters. Thank you very much.
    Chairman Frank is not present, but I know that had he been 
here, he would like to have introduced Ms. Feingold. So, Ms. 
Feingold, thank you for being here. She's our fourth witness, 
and she's the president of the Jewish Community Housing for the 
Elderly. And Ranking Member Biggert, I know there's someone you 
would like to introduce, Mr. Frigo.
    Mrs. Biggert. Thank you, Chairwoman Waters.
    Yes, I am delighted to introduce Michael Frigo, and I 
mentioned him before, but he is the vice president of Mayslake 
Village, which is located in Westmont, in my district, the 13th 
Congressional District. And Mayslake is a nonprofit 
organization which operates a low-income housing project, with 
620 apartments on a 40-acre campus. And he's managed this 
facility and during his tenure, has worked to complete six 
renovation projects at Mayslake, including projects with the 
help of HUD Section 202 program--replace 1960's buildings with 
new buildings that could better serve the needs of seniors at 
Mayslake. And they just recently opened a new facility in Will 
County in Plainfield, Cedar Lake.
    Since 1992, he has been the vice president and he is a CPA, 
having worked at McGladry & Pullen as partner in charge of 
auditing and accounting services before coming to Mayslake. I'm 
happy to welcome him here.
    Chairwoman Waters. Thank you very much.
    Our sixth witness will be Mr. Steve Protulis, president, 
Elderly Housing Development and Operations Corporation.
    Our final witness will be Ms. Terry Allton, vice president 
of support services, National Church Residences.
    Without objection, your written testimony will be made part 
of the record. You will now be recognized for a 5-minute 
summary of your testimony.
    We'll start with Mr. Lizarraga of TELACU.

  STATEMENT OF DAVID C. LIZARRAGA, PRESIDENT AND CEO, TELACU/
                        MILLENNIUM, LLC

    Mr. Lizarraga. Good morning, Chairwoman Waters, and thank 
you for your outstanding leadership over the years in every 
level of housing legislation, and many others as well. They 
have been very important to all our communities.
    Ranking Member Biggert and other members of the committee, 
thank you so much for giving us the opportunity to speak to you 
today.
    My name is David Lizarraga, and TELACU began developing 
senior housing in 1975. Today we own and operate Section 202 
and tax credit-financed housing communities that serve 
thousands and thousands of low-income seniors and families in 
the greater Los Angeles area. The Section 202 program provides 
funding to address a particularly vulnerable group of seniors, 
those living on very low incomes and below 30 percent of the 
area median income level.
    However, while the Section 202 program is a very good and 
important program, it is in need of certain improvements that 
will allow it to much more effectively serve senior Americans. 
In TELACU's extensive experience in the 202 program over the 
years, we have found that the repeated underfunding of the 
Section 202 development awards, and operational subsidies, have 
made development more difficult to accomplish in recent years. 
The cumbersome process of working with HUD at both the local 
and headquarters level increases project delays by sending the 
developer through a very complicated process of underwriting.
    Currently, we must go through layers and layers of 
approval, including repeated requests for waivers from obsolete 
program provisions. H.R. 2930 will allow more discretion at the 
field office level where HUD staff members are much more 
familiar with projects and local conditions that require a 
variation from HUD policies. TELACU, like most nonprofit 
developers, spends a great deal of time looking for additional 
or ``gap'' financing from other programs and local governments 
to make up for shortfalls for HUD funding. It is not unusual 
for an average TELACU-sponsored 202 project to require funding 
from at least four different sources to cover shortages in 
project funding.
    May of those ``gap'' financing sources are awarded on a 
competitive basis and in funding rounds that rarely correspond 
with a Section 202 NOFA process. This means that TELACU's 
development team must prepare additional applications and wait 
for award announcements before, during and after the Section 
202 application process. As delays increase and construction 
costs rise, we now find that the amount of ``gap'' financing we 
ultimately need often turns out to be far greater than 
anticipated, forcing us and our team to return to those 
entities that made initial commitments to a project to ask for 
more additional funding.
    Many of the local governments we work with have expressed 
frustration that the Section 202 projects are beginning to feel 
like a ``bait and switch,'' with the developer returning to the 
city and making greater demands on their decreasing pools of 
resources. We believe that the additional discretion at the 
local level, as provided for in H.R. 2930, will help to reduce 
delays and consequently the gap we must fill to make projects a 
reality.
    It is a fact that nonprofit developers, HUD, and Congress 
must be more creative in using our resources to further our 
joint goal of providing more affordable housing. To this end, 2 
years ago, TELACU made a proposal to HUD that would have 
allowed TELACU to refinance seven of our older Section 202 
properties through a private funding source. This transaction 
would have generated approximately $800,000 annually in 
savings.
    We proposed that after repaying HUD's debt, performing 
capital improvements on our senior housing, and increasing our 
building reserves, TELACU be allowed to create a revolving 
equity fund from its interest savings. That money would enable 
TELACU to leverage other financing to develop affordable homes 
for low-income, first-time home buyers. Home sales proceeds 
would have replenished the fund for new projects, and each 
year, this fund would have increased by another $800,000 
generated by the interest savings from the 202 refinancing.
    Despite the fact that our plan at that time was 
overwhelmingly supported at the local level as a highly-
creative model for expanding housing resources, and was looked 
upon very favorably by Secretary Jackson, TELACU waited a year-
and-a-half to have our request denied by HUD headquarters 
staff. We were informed that HUD did not want to approve the 
utilization of interest cost savings from 202 housing projects 
to benefit home ownership for low-income individuals, and given 
the recent events in the credit markets that will negatively 
impact millions of low income homeowners, we find this decision 
to have been very unfortunate.
    While the refinancing provisions in H.R. 2930 may not allow 
TELACU savings from refinancing to be used as originally 
proposed, then TELACU would be able to now use 202 section 
refinancing proceeds in excess of our project capital repair to 
repair our housing, to reinvest it in our housing, and to 
address the funding gaps, our new senior housing projects, and 
to hire additional coordinators.
    You know, we get about 1,000 applicants for 75 units every 
time we build the 75 units. We literally have to go to a 
baseball field and have a lottery, so that in some way we not 
discriminate as to who is selected. But that's the need that's 
out there. This added flexibility will allow housing providers 
to meet the needs of their various communities with clear, 
focused direction, as opposed to a vague, drawn-out process of 
submitting requests to HUD with no idea if they fall within 
permissible policy or not.
    TELACU believes that H.R. 2930 will not only improve the 
ability of nonprofit organizations to develop new 202 
properties, but that it will advance our collective goal of 
addressing the affordable housing shortage and the needs of 
senior Americans in an increasingly complex development 
environment. We must bring the 202 program into the 21st 
century with creativity, vision, and fiscal responsibility.
    I would like to express my gratitude to Representative 
Mahoney--thank you very much for your very, very enlightened 
legislation that really addresses the need--Chairwoman Waters, 
and Ranking Member Biggert, and the members of the subcommittee 
present here today, for your leadership in making this 
possible.
    Thank you very much.
    [The prepared statement of Mr. Lizarraga can be found on 
page 79 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Slemmer.

STATEMENT OF THOMAS W. SLEMMER, BOARD CHAIR-ELECT, THE AMERICAN 
        ASSOCIATION OF HOMES AND SERVICES FOR THE AGING

    Mr. Slemmer. Thank you, Chairwoman Waters, and Ranking 
Member Biggert. And Mr. Mahoney, thank you very much for 
introducing this legislation.
    I am testifying this morning on behalf of the American 
Association of Homes and Services for the Aging. I am honored 
to be the chair-elect and serving on their board of trustees. 
We have 5700 members in the American Association of Homes and 
Services for the Aging, all not-for-profits, 70 percent faith-
based. We are a big proponent of affordable housing for 
seniors. Today, we are serving about 2 million seniors, so I 
come before you supporting this legislation and thanking you 
for your leadership in addressing what we think is a really 
critical issue here for us.
    I do serve as executive director for National Church 
Residences. We are one of the larger not-for-profit developers 
and operators of affordable senior housing in the country. We 
have two facilities in your district, Mr. Mahoney--one in 
Sebring, I believe, and Grove City--and also one in St. Louis, 
Roosevelt Apartments. And what we're finding is an incredible 
need to make some changes in the 202 program because of the 
aging portfolio. We've talked about the demand here today, lots 
and lots of demand. We see that not only as a demand for 
housing, but also for services.
    Our organization operates healthcare facilities, hospice, 
service coordination, assisted living, and nursing facilities. 
We have homeless housing, and what we see is that housing is 
really a solution of a lot of problems that are out there 
facing our aging consumers.
    So thank you so much for your support of this sorely needed 
legislation.
    I just want to quickly give you an overview of what this 
legislation does. One of the things it addresses is that we 
believe we're losing affordable housing at a rate that is 
alarming. We think maybe we're losing twice as fast as we're 
building it--market rate forces in the areas where these 
communities are located, where there's a lot of interest in 
market rate housing and also aging buildings. And H.R. 2930 
provides an opportunity for you, I think, as well as our 
providers, to develop a financially-sound development and 
preserve this housing.
    I testified before a subcommittee like this about 5 years 
ago, and I said the 202 program was one of the best programs 
that the government ever came up with. I could not tell you 
that today. It's not the case, and it's primarily because of 
the complexity of the transactions that made development and 
preservation of these projects under the 202 program kind of a 
Herculean effort.
    The program needs an overhaul, and H.R. 2930 does that. The 
key provision that we're looking at here is delegated 
processing. We're suggesting that this legislation really 
addresses a major problem with HUD processing by shifting the 
processing of HUD funds over to State housing finance agencies 
and other State development agencies. The reason for that is 
that the tax credit program now accounts for the biggest 
development effort under affordable housing; and the 202 
program oftentimes, the tail-wagging of the dog, where we have 
multiple sources of financing and yet the HUD regulations are 
getting in the way of sound development. In more and more 
deals, Section 202 funding is fully matched or even exceeded by 
other sources.
    Ideally, agencies that are administering HOME funds now and 
CDBG are maybe better prepared to serve as an allocating agency 
for the Section 202 grants. It's particularly important if 
you're going to do any kind of mixed financing with tax credits 
that we have kind of a simultaneous processing of 202 funds as 
well as other State and local and tax credit funding.
    HUD staff admit to us that they don't understand tax 
credits and the complexities that go along with that. They 
don't really have the time or the resources to learn it, and 
HUD rules are not well-suited to tax credit transactions.
    The other problem that this legislation addresses, the 
development cost limits, let's just say very clearly, they 
don't work. Everybody knows they don't work. The pipeline 
problem often is caused by the underfunding of development 
costs as well as PRAC allocations.
    That's the reason the pipeline is so long, because it 
requires sponsors to go out looking for funding and trying to 
pull together multiple sources of funding to make the program 
work. I don't think 202 was intended to be that way when it was 
originated and certainly really requires a major problem to be 
addressed today.
    I would also say that this legislation addresses 
preservation. Preserving this housing stock is really 
important. In our written testimony, we talk about some of the 
examples of this. The older 202 housing stock is really in need 
of preservation, and H.R. 2930 goes a long way to address this, 
primarily by coming up with a preservation voucher for 202 
program sponsors that would allow lower income residents to 
stay in these buildings as we renovate them to the tax credit 
program.
    We discuss a lot more in our written testimony. I can't go 
into all of it, but I would be glad to answer any questions 
about it. I thank you, Chairwoman Waters, and also Congressman 
Mahoney, for your leadership in sponsoring this legislation is 
sorely needed.
    [The prepared statement of Mr. Slemmer can be found on page 
97 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Kondor?

  STATEMENT OF DEJE KONDOR, EXECUTIVE DIRECTOR, PRESBYTERIAN 
         HOMES AND HOUSING FOUNDATION OF FLORIDA, INC.

    Ms. Kondor. Good morning, Chairwoman Waters, Ranking Member 
Biggert, and distinguished members of the committee. And my 
special thanks to Congressman Mahoney.
    My name is Deje Kondor, and I am the executive director of 
Presbyterian Homes and Housing Foundation of Florida. I am 
honored to speak to you today as a member of FAHSA, the Florida 
affiliate of AAHSA, the American Association of Homes and 
Services for the Aging.
    We are a faith-based nonprofit organization dedicated to 
serving the housing needs of low-income seniors for over 40 
years on the west coast of Florida. We receive our sponsorship 
through the Presbyterian Church, U.S.A., specifically two 
presbyteries, the presbytery of Tampa Bay and Peace River 
presbyteries.
    The Presbyterian Church does not provide us with any 
funding whatsoever. With over 3,000 units in 19 different 
communities in the State, we are the largest nonprofit sponsor 
of HUD housing in Florida. Of our 19 communities, 9 of them are 
202s. H.R. 2930 can provide us with the tools to preserve our 
senior communities and build new ones.
    I want to talk first about our old 202s. We have four of 
those, totaling 816 units, but in those 816 units, only 43 of 
those units benefit from project-based, Section 8 rental 
assistance.
    The other very-low-income residents in those buildings 
would not be able to afford to stay there if we did substantial 
rehabilitation to the buildings, because the rent would have to 
go up.
    If H.R. 2930 were to become law, those very-low-income 
seniors would receive project-based rental assistance. We had, 
2 years ago, received two low-interest, 1 percent, 15-year 
loans from the State of Florida to do elevator rehab at two of 
our old 202s. This past year, we applied and also were granted 
another 1 percent, 15-year loan at our community for over 
$500,000 from the State of Florida.
    We were told by HUD that we could not accept this loan, 
because the only moneys that we had to repay the loan were 
through operational funds derived from tenant rent. The HUD 
staff in Jacksonville told us that the sponsor could pay the 
mortgage payments on this low-interest loan, but not the 
community itself. So therefore, we had to tell the State of 
Florida that we could not accept the 500,000, 1 percent loan.
    If this legislation were enacted, we could refinance the 
mortgages and accomplish the substantial rehabilitation that is 
necessary in these old 202s instead of a piecemeal approach.
    Refinancing. We refinanced two of our three 202s. It was an 
extremely laborious and complicated process and took much 
longer than projected. The direction provided by H.R. 2930 
would make refinancing more direct and a lot easier.
    Our new development. We have experienced what every Section 
202 PRAC sponsor has experienced: insufficient construction 
dollars; insufficient initial budgets; and long time delays. 
Our newest property, which is Trinity Apartments of Lakeland, 
was opened in December of this past year. It's a 70-unit, 5-
story building with 73 seniors currently living there.
    Before the building was even begun, the concrete costs were 
$359,000 more than originally budgeted. In addition to that, we 
felt that there was good cause to have an emergency generator 
at the property. It's five stories. It's located in Lakeland. 
It was hard hit in 2004 by Hurricane Charlie, Francis, and 
Jean. They had power outages for over 10 days.
    We were refused $30,000 for an emergency generator in a 5-
story, senior high-rise. We feel that local and State housing 
authorities could be more realistic at assessing what the needs 
of those communities are.
    I want to talk briefly about the obligations that HUD has 
to provide rent increases to cover operating costs, which of 
course include insurance. Our organization from 2004, we spent 
a little under $700,000 in insurance premiums. Our October 1, 
2006, bill was $1.25 million. HUD has repeatedly refused to 
grant us rent increases to cover these deficits in funding to 
pay our insurance premiums.
    We are hopeful that Congress will demonstrate some 
direction and national policy to support affordable senior 
housing. We believe that H.R. 2930 offers a ray of hope for 
assuring the future of all Section 202 senior communities.
    Thank you for considering this legislation, and I encourage 
you to support H.R. 2930.
    [The prepared statement of Ms. Kondor can be found on page 
72 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Feingold?

   STATEMENT OF ELLEN FEINGOLD, PRESIDENT, JEWISH COMMUNITY 
         HOUSING FOR THE ELDERLY, BOSTON, MASSACHUSETTS

    Ms. Feingold. Thank you very much for inviting me to appear 
before you, Chairwoman Waters and Ranking Member Biggert, and 
all our heartfelt thanks to Congressman Mahoney for his work on 
bringing this bill forward.
    I am Ellen Feingold, the president of Jewish Community 
Housing for the Elderly in Massachusetts. And in 2001 and 2002, 
I was co-chair of the congressionally mandated Commission on 
Affordable Housing and Health Facility Needs for Seniors in the 
21st Century that really set the context for this legislation, 
which JCHE strongly supports.
    We have developed and operate over 1,050 apartments for 
low-income elderly in Boston and Newton, Massachusetts, and are 
currently developing another 150 units in Framingham. We have 
1,300 people on our waiting list. We've also refinanced and are 
close to the end of renovating one of our developments, an 
occupied building that opened in 1973 with 256 apartments.
    For years, it's been our mission to enable our frail, low-
income, elderly residents to live out their lives in the JCHE 
homes without having to move to a higher care facility. We've 
been exceptionally successful; only 2 to 3 percent of our 
residents move to a nursing home. The average age in our 
buildings is over 80; the average income is under $9,000 a 
year, and on average, people live in our buildings over 11 
years. That is what a 202 program can do.
    We are very grateful to the committee for drafting this 
legislation. It covers a lot of issues we wrestle with. Many of 
us on this panel are faith-based, non-sectarian, large and 
small, dedicated to providing decent and supportive housing to 
elderly people with low incomes. But our job has gotten harder 
and harder over the past decade, to the point that where our 
public policy and programs are intended to produce this kind of 
housing, in practice the obstacles tell a different story.
    When we started, we built our first 202 development with 
243 apartments in 1971 with one 202 mortgage that paid every 
penny we needed to complete the building, which is still 100 
percent occupied. Today, we are in the process of developing a 
150-unit, mixed-income building with 50 Section 202 units, 40 
tax credit units, and 60 market units. But that's not all. 
We'll have a State housing finance agency mortgage, grants from 
the State's Priority Development Fund and Affordable Housing 
Trust Fund, two other State housing grants, grants from 
foundations that support ``green'' buildings, a sponsored 
contribution of the developers fee, plus $5 million we've had 
to raise from foundations and other donors to make the pro 
forma work; nine sources with all of the inconsistencies and 
timetables, etc.
    One little contradiction, an example. The HUD 202 maximum 
unit size is smaller than the tax credit minimum unit size. 
Both agencies look at each other and say, we're right. But the 
major result is pipeline delays that have caused an inflation 
of cost for this project of 50 percent over the past 2\1/2\ 
years. You know, if HUD can't fully finance the low-income 
housing that is its mandate, it has to help mixed financing 
work. And I have a lot of respect for Secretary Garvin, but the 
fact of the matter is they have not helped mixed financing 
work.
    Our organization, helped by Congressman Frank, whom we 
salute, and Congressman Capuano, put the mixed income financing 
on the books. That was 6 years ago. HUD has not helped make it 
work. It is counterproductive, wastefully expensive, and unfair 
to make organizations like us resolve these conflicts. H.R. 
2930 addresses many of the problems we faced. HUD has 
historically taken the position that nonprofits are incompetent 
to manage their own money.
    As the committee well knows, the developers over the years 
of 202 housing have had the fewest problems of any government-
supported housing. Yet HUD's effort to keep the money under 
control has reached an extreme where organizations like ours 
find ourselves with our surplus proceeds, which are investor 
contributions, now locked up in a Section 8 set-aside for 
future Section 8 needs.
    In other words, investors in a tax credit program designed 
to create new housing, more housing, that money is replacing 
money that HUD should be spending on Section 8. My written 
testimony gives you a blow-by-blow description of the woeful 
process that we went through to get to this point, but we were 
not even permitted to use the funds for cost overruns in the 
rehabilitation and for hiring additional support staff to 
assist tenants in their 80's and 90's to pack their belongings, 
cover their furniture, and leave their apartments at 8 a.m. 
each day while the construction was in process. Why is that not 
an appropriate use of investor proceeds?
    One other issue I would just like to raise is that many of 
us around the table who use the 202 program have also used 
other Federal and State housing finance agency programs to 
develop housing and run it as if it were a 202. All of our 
buildings are funded under five different Federal and State 
programs, and all utilize Section 8 subsidies for the rents.
    I want to thank you again for having us here. It's a 
pleasure.
    [The prepared statement of Ms. Feingold can be found on 
page 46 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Frigo?

 STATEMENT OF MICHAEL FRIGO, VICE PRESIDENT, MAYSLAKE VILLAGE, 
                       WESTMONT, ILLINOIS

    Mr. Frigo. Chairwoman Waters, Ranking Member Biggert, and 
the entire committee and staff, I'd like to thank you for 
giving me the opportunity today to speak to you regarding this 
very important matter of senior housing.
    My name is Mike Frigo, and I'm the vice president of 
Mayslake Village, which is located in Westmont, Illinois, 
approximately 15 miles west of downtown Chicago. Mayslake 
Village has been a partner with HUD since 1960. We currently 
have five different HUD-sponsored buildings with 622 apartments 
on our campus. Our oldest building goes back to 1971. In 1971, 
the subsidy on this building was a 3 percent mortgage with a 
50-year amortization and no rent assistance.
    The main reason I am here today is to discuss H.R. 2930, 
which speaks of some very important, exciting amendments to the 
HUD Section 202 program. All of the proposed items mentioned in 
this amendment make a great deal of sense and will allow us to 
preserve our oldest project, which is in deep financial 
trouble. This oldest project is known as the Center Building. 
It is functionally obsolete. It has 100 efficiency apartments 
that are no longer rentable. These are the only efficiencies 
among the 622 apartments on the campus. This building also has 
50 one-bedroom apartments, for a grand total of 150 apartments 
in the Center Building.
    The efficiency apartment's living space is only 300 square 
feet, compared to the one-bedroom apartments, that are 540 
square feet in size or more on our campus. We have no demand 
for the efficiency apartments, and there is no waiting list for 
them, either. Currently, 85 of the 100 efficiency apartments 
are sitting empty, and as our older residents vacate these 15 
units, we expect that they, too, will become empty.
    Our problem at Mayslake Village in renting these efficiency 
apartments is so bad that 2 years ago, after Hurricane Katrina 
hit New Orleans, we had five senior citizens who had evacuated 
from New Orleans come to Mayslake Village seeking shelter. Of 
these five senior citizens, only two would accept the 
efficiency apartment. The other three informed me that they 
would rather squeeze in and stay with their families than move 
into a 300-square-foot efficiency apartment.
    Today, only one of those two people still lives at 
Mayslake, as the other person moved out a few months after 
moving into our facility, stating to me that the small space 
was driving her crazy. Since we have such a large number of 
empty apartments in this building, we have experienced 
significant financial losses over the last 5 years, totalling 
$1.58 million. We have used our own funds to cover these losses 
so the building could remain solvent. However, we are running 
out of funds. For the last year ended June 30, 2007, we have 
put $400,000 of our own money into this building to keep it 
afloat.
    We do have a practical and efficient plan prepared to 
rehabilitate this building. It calls for taking two efficiency 
apartments and combining them into a one-bedroom apartment, 
which would measure approximately 600 square feet. Ultimately, 
this would result in creating 50 one-bedroom apartments, which 
I know we would be able to rent immediately. In addition to 
that, we would also need to modernize the existing 50 one-
bedroom apartments, because they have the original bathrooms 
and kitchens from 1971.
    We have been working on this rehabilitation project for the 
past 3 years with our architects, engineers, and consultants, 
and they inform me that if we were to start this construction 
today, it would cost approximately $10 million. In contrast, I 
have also been told by our experts that if we were to construct 
a new building with 100 one-bedroom apartments, it would cost 
approximately $15 million. Thus, by rehabilitating this 
building, we would save approximately $5 million.
    H.R. 2930 would create a senior preservation rental 
assistance contract which would allow our property to be 
refinanced and rehabilitated. Additionally, this amendment 
would give our residents a rental assistance program, which we 
have never had for this building since its inception in 1971. 
Both the funding to rehabilitate and a rental assistance 
program would enable us to keep this building going for another 
40 years.
    In closing, I would like to again thank you for giving me 
this opportunity to speak to you about Mayslake Village and the 
importance of passing H.R. 2930. These changes will benefit all 
of our low-income seniors in the United States.
    I thank you.
    [The prepared statement of Mr. Frigo can be found on page 
65 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Protulis?

   STATEMENT OF STEVE PROTULIS, EXECUTIVE DIRECTOR, ELDERLY 
     HOUSING DEVELOPMENT AND OPERATIONS CORPORATION (EHDOC)

    Mr. Protulis. Good morning, Chairwoman Waters.
    First of all, let me just thank you for giving us the 
opportunity to speak to such wonderful persons as yourself and 
the ranking member of the minority.
    Let me just say to you the following thing: I am not going 
to read my statement, because I am going to speak from my 
heart.
    The organization I represented many years ago in Washington 
was the National Council of Senior Citizens. And about 10 years 
ago, I became the CEO of a company that created a lot of 202s 
through participation from the Congress. I learned a new 
experience, and I learned the unbelievable crisis that we have 
in this country. I got a little bit upset when after spending 
18 months after Senator Sarbanes appointed me to the commission 
to review affordable housing for seniors.
    We spent unbelievable energy between Republicans and 
Democrats, appointed by both sides, from this book, and what 
happened to this book remains on the shelves. No one ever 
bothered to open it up and study the hard work of citizens like 
ourselves, to learn and to help each other. And we had several 
debates; our co-chair can tell you. We spent hours and hours, 
debate on both sides of both groups, trying to find a common 
ground.
    One of the things that we recommended was that 40,000 units 
were needed every year to even come close to the need of 
Section 202, the best-running program in this country. There's 
never been a single scandal ever in Section 202 at any point of 
mismanagement by anyone in this country.
    So what happened now? We get less than 4,000 units for the 
whole country, and properties in 14 States I have, like in the 
State of Florida, I have over 1,000 people in each property 
waiting.
    And let me just tell you what happened to me yesterday. I 
flew in from Cleveland. I spent 5 years to finish a project of 
40 units in the most devastated part of Cleveland. And I could 
not have enough money from the Federal Government to finish the 
202, and I was lucky enough, because of my background with the 
labor unions, to get the City of Cleveland to donate $257,000 
worth of project and the State of Ohio to donate $600,000 so we 
can make the ends meet.
    So yesterday we cut the ribbon. We have 40 units in there. 
We have 40 seniors, happy as hell, for living in dignity in 
their olden days. And what happened to us? We have to have a 
part-time manager, because there's not enough resource in the 
program to have a full-time manager, a part-time maintenance 
person. And guess what? No money for the service coordinator. 
So we, in our organization, subsidize those people so they can 
serve those seniors after the money and the project was given 
by the government. It doesn't make sense.
    The way we do it now is we have so little money for so few 
applications to be approved, that the government cuts the units 
to a lower level. Everybody at this table can tell you, if you 
get less than 60 units, you are going to lose money the first 5 
years. It is impossible to continue saying that we support 
Section 202, and we tighten everything. And then we deal with a 
bureaucracy of the HUD government, where in my opinion, one of 
the things you're going to find is a lot of people have left 
HUD and retired.
    And the brains and the memories of the efforts that were 
made, do you realize that 5 years ago, they cancelled the 
library in HUD so there's no history of things that can be 
asked for people that are experts of the government to help 
people like ourselves?
    I can tell you. I can go on or not. I know one thing: you 
give me 5 minutes of my life to come and tell you, I can spend 
5 hours, and the rest of us can do the same. It's about time.
    I am so pleased to introduce this legislation and I promise 
you not only that, but if you look behind me, when I was 
testifying as a member, I always bring seniors. The seniors 
behind me come from Council House, and they have come up here 
and demonstrated and testified many times about many issues 
before, and are ready to go on the streets and do what it takes 
to make sure that we take care of the seniors' indignity and 
the government's sponsor.
    You know, I don't know anything about tax-graded, and I had 
to learn about tax-graded, because what has happened from HUD? 
They're pushing more tax-graded, because that seems to be the 
direction they want to go, and I couldn't believe when the 
Secretary of HUD said one day when he testified that that's the 
direction we should go in housing.
    I don't believe that's the direction we should go. We can 
use the entrepreneurs. We can use the tax-graded, but we should 
not abandon a 202 Section. It's the best program ever created 
in this country.
    Thank you very much. I appreciate that.
    [The prepared statement of Mr. Protulis can be found on 
page 86 of the appendix.]
    Chairwoman Waters. Thank you. Thank you very much.
    Mr. Allton?

STATEMENT OF TERRY ALLTON, VICE PRESIDENT OF SUPPORT SERVICES, 
                   NATIONAL CHURCH RESIDENCES

    Good morning, Chairwoman Waters, Ranking Member Biggert, 
and other members of the committee. Thank you very much for 
inviting us here today.
    My name is Terry Allton, and I am vice president of support 
services at National Church Residences. That means that I have 
the responsibility of making sure that our 160 service 
coordinators that we have in 28 States across the Nation have 
adequate tools and resources so that they can go and help the 
seniors who live in our buildings.
    My primary job is working with service coordinators, and so 
that's what I want to take a minute to talk to you about. The 
reason we're so excited about this particular legislation is 
it's going to provide and open up a revenue stream of funding 
for service coordination that doesn't currently exist.
    Congress provided appropriations for HUD service 
coordinator grants in Section 202s; however, HUD refused to 
allow PRACs to be eligible for the service coordinator grants. 
So there is very little cash and very little ability to finance 
service coordinators in those PRAC Section 202 communities, 
which is very challenging for us. And I wanted to make sure 
that you understood how important service coordination is. And 
the best way for me to tell you that is to share a story.
    Marsha Powell, who is a service coordinator in Clinton, 
North Carolina, shared a story with me about a resident who 
came to our building. This gentleman, an elderly gentleman, 
lived in a tobacco barn. He took a bath in a stream. That's 
where he got his drinking water. He ate meals at a gas station 
where the local gas station owner would provide him food and 
let him use the rest room. The gas station owner became very 
concerned about him. It was going to get cold. Winter was 
coming, and he happened to hear about a property down the 
street that was for low-income elderly, and the gas station 
owner came down and got an application for the gentleman. He 
was eligible to move in. We were very fortunate to have a 
vacancy, so he was able to take that. Now, that's not where the 
story ends. This gentleman had nothing. He had no furniture. He 
had no clothes. He has no food. He has no forks, knives, 
utensils. And the service coordinator (this is where they're so 
important and where they come into play) was able to get 
donations from local churches. She brought in different 
agencies, different volunteer programs, and was able to provide 
this gentleman with a furnished apartment with clothes, food, 
pantry. And that's why this program is so important.
    We do a great job providing the housing, but if you are our 
average resident, aged 79, your average income is a little bit 
more than Mr. Garvin said. It's around $10,018 a year. And 40 
percent of the residents who live in our building are frail, so 
they don't have a lot coming in. So the housing is the one big 
piece, but the second big piece is how are they going to 
continue to live and not have to choose between food, rent, and 
prescription drugs.
    And in our organization, we found that it's very important 
to make sure that if we're going to take that money from the 
Federal Government, we need to show that we have positive 
outcomes. And we know that when a resident works with one of 
our service coordinators, 91 percent of the time, those 
residents are able to age in place. It is excruciatingly 
important that they do not have to go to nursing homes 
unnecessarily, and that they do not have to go to the hospital 
unnecessarily. We are able to take care of them in their home 
where they want to live, and in many cases, our residents live 
in our buildings for 20 or 25 years.
    The other thing that is very important for us to know is 
that when a resident works with a service coordinator, they're 
able to save that resident on average $279 a month in expenses. 
And if you remember, I just said their average annual income is 
$10,000. That's a third of their annual income. That is huge 
for them, and that's why residents will say when you go and 
talk to them about their property they're very blessed and very 
thankful to have that unit that they know they're able to live 
in. But they are even more grateful that they have the service 
coordinator, because it allows them to live in a safe place, 
but then also have food, prescription drugs, clothing, 
furniture, and all those other things that are excruciatingly 
important.
    So I thank you very much for allowing this bill to be 
presented. We are strongly supportive of it. We hope that we 
continue to find more avenues to fund service coordination and 
affordable housing, because housing with services is going to 
be able to have the potential to save Medicare and Medicaid 
hundreds of thousands, if not millions of dollars if we can 
really invest in that type of program.
    So thank you very much for the time.
    [The prepared statement of Ms. Allton can be found on page 
39 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Let me thank all of you for the services that you are 
providing, the leadership that you are providing, and for being 
here today to help us understand better what we can do to be of 
assistance to you as you provide these housing opportunities 
for our seniors.
    Let me start with, I think, Mr. David Lizarraga, because I 
want to make sure I understand. I personally am interested in 
flexibility. I think that in order to be creative, you need 
flexibility.
    You have described in so many ways how some of the rules 
and regulations of HUD just do not allow you to be able to do 
the best job. I think I'm interested in the refinancing aspect 
of all of this, and I believe that your ability to refinance 
perhaps could go a long way toward helping to rehab and 
revitalize these projects. And I want to make sure that we do 
everything that we can to do that.
    But in addition to revitalization, if you had the 
flexibility to use funds from the refinancing efforts, what are 
the other kinds of things you would do with that? Starting with 
Mr. David Lizarraga.
    Mr. Lizarraga. Thank you, Madam Chairwoman.
    Well, first of all, we would have to utilize those sources 
to meet the major need. That major need is making sure that the 
senior housing stock that we have built in the last 30 years is 
still meeting all the standards and needs that HUD requires.
    Chairwoman Waters. Okay.
    Mr. Lizarraga. And so that would be the first priority. The 
second priority we use would be you use some of those resources 
for additional services for those seniors who so badly need the 
supportive services. In any event, you know, as I indicated, 
the model that we presented 3 years ago, and you've heard the 
message, that was then and this is now. Right?
    Chairwoman Waters. Yes, Mr. Frank says it all the time.
    Mr. Lizarraga. Yes. That was a concept that met the 
approval of the staff at HUD at every level. And at the end 
they finally said, you know what? We don't like the idea, 
because we shouldn't be leveraging dollars for other than 
senior housing.
    That's okay with us. I saw at the need at that time that 
maybe there would be a more varied response to the utilization 
of those dollars, however, the fact is that that equity is 
lying there, sitting there, providing no service to anybody. 
And that money can be leveraged with additional dollars to meet 
the tremendous need. And it's revenue-neutral. It doesn't cost 
the government one single dollar more. Okay?
    So what would we be doing? We'd be accessing capital and 
leveraging assets on the properties. We would be accessing 
lower rates. Okay?
    In addition to that, we would be raising the cap on 
supportive services. All those are the things that seniors 
need, and it's just lying there dormant. In addition to 
refining, I think, the outdated legislation that's there and 
rules and regulations that are there, to streamline the 
process. You have heard testimony after testimony after 
testimony about how we need to be gatherers.
    You know, the HUD dollars simply do not meet that need, so 
we have to go to 20 percent set-aside redevelopment dollars. We 
have to go to other sources of funding, like in the County of 
Los Angeles, as you know, in the City of Los Angeles, we use 
industry dollars. Other cities that don't want to use their 20 
percent set-aside dollars for any type of senior housing or 
low-income housing, grant it to the county so that they can 
deliver it in other areas other than themselves.
    So that's what we have to do, and this would be another way 
of leveraging dollars that in other words would not be 
utilized.
    Chairwoman Waters. Thank you so much.
    I wanted to ask, I think it is Mr. Frigo. You described 
these efficiencies that you would simply like to combine two 
and get 600 feet of space. You have the plans. You know what 
you need to do, and I know that you need to have resources to 
do it with. You are continuing with the plans. Does this bill 
help you to be able to do that and to make good sense out of 
it? The idea that those properties are sitting vacant just 
tears me apart.
    Mr. Frigo. Yes, Chairwoman Waters, it does. We have been 
meeting with HUD, and they basically have said that you can 
look to pay off the mortgage and go find some other financing. 
And we've looked for other financing through the housing 
development authority, but that would raise the rents, as one 
of my other colleagues said, ``considerably,'' so it would no 
longer be affordable.
    So this bill would greatly help us because it would allow 
us to refinance and then allow us to take those efficiencies 
and convert them.
    As I mentioned in my testimony, as soon as we convert them 
to one-bedrooms, they would be rented.
    Chairwoman Waters. Wow, that's great.
    Mr. Lizarraga. So that would be very helpful.
    Chairwoman Waters. Thank you very, very much.
    I think, Mr. Slemmer, you had your hand up. You wanted to 
share something with us?
    Mr. Slemmer. Well, I just wanted to support the other 
testimony, as HUD already has the discretion, we believe, to 
allow excess funds to be put in a trust fund. There are 
examples that happened around the country where HUD could put 
restrictions on it for use for affordable housing development 
or land acquisition for affordable housing development to have 
sign-off control.
    So it's not like the money is going to be squandered at 
all. In fact, it's a waste of money, we believe. Transactions 
we did in California where you have excess funds available, HUD 
requires you to just put it in reserve for a property that 
doesn't need it. So it really is kind of ridiculous, and we 
think this legislation will solve that problem.
    Chairwoman Waters. That's excellent. Thank you very much.
    I'm going to recognize Ranking Member Biggert for 
questions.
    Mrs. Biggert. Thank you.
    Mr. Slemmer, you said that there was going to be a need for 
an additional 730,000 units by 2020. The program has been flat-
funded, although there was a cut by the Administration and then 
the appropriations authorization has going up to being flat-
funded from 2007 to 2008 in the appropriations bill.
    What role can the program play to meet the need then, the 
202 program?
    Mr. Frigo. Thank you very much.
    The program, I think, provides a vital piece of affordable 
housing spectrum in that it really serves very-low-income 
seniors with services in that housing. There are other 
programs. There are voucher programs that you are funding, as 
well as the tax credit program. But we think this legislation 
allows you to leverage the 202 funding so they can really 
provide more housing than it's producing now and also provide 
more services.
    Right now there are so many bottlenecks that prevent this 
program from being efficiently operated that we think it can be 
used and the money can be added to this to really provide a 
very significant piece of that 730,000 units that are going to 
be needed.
    Mrs. Biggert. Thank you.
    And Mr. Frigo, you know, I've been to see these 
efficiencies, and they really are small. But the building 
itself seems to be in pretty good shape and not quite as nice 
as the new facilities that you built recently. So, do you think 
it's more economical to refurbish those units rather than to 
start over again?
    Mr. Frigo. Yes, Congresswoman. We actually had our 
engineers look at the building and they came back and they 
said, you do not want to waste the money to tear this building 
down. It lends itself very nicely for rehabilitation, and it 
would be a crime to tear the building down because it is 
structurally sound.
    Mrs. Biggert. Is there any rule or regulation? It just 
seems to come to mind that if you refurbish, you have to 
provide the same number of units, like a one-for-one unit?
    Mr. Frigo. There is.
    Mrs. Biggert. And is that the problem that you have?
    Mr. Frigo. That's one of our problems. So in our case, 
where we have 100 efficiency apartments and we convert them 
into 50 one-bedrooms, we would have to find 50 units to replace 
the 50 that disappeared with the conversion. And when I first 
heard that rule, I thought it was a joke. And when no one was 
smiling from the other side from HUD, I said, so how do you do 
this?
    It was analogous to me of the Wizard of Oz, where they say, 
go find the witch's broom. I thought, how do you do this? So 
we've been trying to work that through, too, but that is a very 
difficult requirement to meet, for obvious reasons.
    Mrs. Biggert. So do you think this bill that's been 
introduced will alleviate that?
    Mr. Frigo. It would greatly assist us in what we're trying 
to do, absolutely.
    Mrs. Biggert. But what does it do for the one-for-one. Does 
it change the regulation? Is it a regulation?
    Mr. Frigo. My understanding that it makes it easier to take 
those efficiencies and convert them into one-bedrooms. So I 
don't know the specifics of all of it, and maybe somebody in 
the room does. But my understanding is that it would eliminate 
that roadblock of the one for one replacement, is my 
understanding.
    Mrs. Biggert. What we've seen thus far, it says that it's 
going to clarify that the reconfiguration of efficiencies to 
one-bedroom apartments is permissible where projects are 
struggling with vacancies and obsolete units. So it sounds like 
it, but I'm going to have to check out the language, and maybe 
Mr. Mahoney knows a little bit more about that.
    Mr. Slemmer. I don't believe it's in the statute now. I 
think this basically allows HUD not to require that one-for-one 
provision, so I think it directly deals with this and would 
solve the problem.
    Mrs. Biggert. Thank you. Would it also enable you to have 
the rent assistance so that it matches what the other buildings 
are?
    Mr. Frigo. The rent assistance would be invaluable, because 
currently the rent in that building is about $400 a unit, and 
it's not based on the individual's income. So we often have 
residents who come to us who want the existing one-bedrooms in 
that building, and because of their incomes, the rent would be 
in excess of 30 percent.
    So we're fortunate enough to be able to put them in other 
buildings, but the rent assistance would be the other wonderful 
portion of that, changing the bill to allow us to offer that to 
the residents.
    Mrs. Biggert. So in some cases the efficiency could cost 
more than a one-bedroom.
    Mr. Frigo. Absolutely, absolutely. And again, when you try 
to explain this to an elderly person, they look at you like you 
have three heads. And they say, ``Well, how can that be?'' And 
I said it's a HUD rule. That's why we're fortunate enough with 
the other buildings on our campus to say, well, let's not have 
you move into the Center Building. Perhaps you could move into 
one of our other buildings where there is the rent assistance.
    Mrs. Biggert. Do you have waiting lists for the other 
buildings?
    Mr. Frigo. Yes, we get five to ten phone calls a day, and 
like the rest of my colleagues here, we have a wait list of 
over a couple hundred. And we stop it and cap it off; 
otherwise, we would be up into the thousands.
    Mrs. Biggert. All right. Mr. Protulis, where do these 
people go? I mean, what do they do until they get off the wait 
list?
    Mr. Protulis. I'd like to, first of all, wish that you 
could come to one of our properties and see their faces when 
they call us after a couple of weeks and find out their name 
moved up in the list. And I'd like you to see also in South 
Beach, in one of the most wonderful areas, most expensive real 
estate, we have two gorgeous properties where our poor seniors 
live, where they're among the rich and famous. And I want you 
to see sometimes in the evening when a senior brings their meal 
from the room and they feed the homeless people who sleep 
between cars.
    I mean, that's the real world where we live every day. And 
I hope that you don't take my passion as who is a lunatic, but 
as an American who fought in Vietnam, and believes in the 
strong America that we have.
    To your question earlier, what this bill does to the 
increase of the need, the answer is that it doesn't do 
anything. We are trying to find resources to maintain what we 
have today, because in the study we have in our commission, 33 
percent of the stock that we have on 202s are being opted out.
    In many cases, a lot of people don't even have the 
opportunity to learn what we know in this organization, because 
we have multi-properties. They are single individuals. They 
have work from a church or from a group. They are actually 
starving to find ways, and there is no resolve from anyone to 
help that hundred units.
    So where do the seniors go? I tell you where they go. They 
go to their families. They go to shelters, like in some cases 
cities provide them. And in most cases, they are individuals. 
They actually live in multi-couples and sleeping two or three 
of them at a time.
    I promise you that if you see some of the seniors, when 
they take that first step to a brand new room, you will never 
forget their faces, because it's almost like a new day for 
them. And remember, some of us have been in this business. We 
have an age population between 79 to 82 years old. And as the 
fastest-growing age population, and we have the baby boomers 
coming, so.
    Mrs. Biggert. Well, thank you very much for your passion.
    Thank you. I yield back.
    Chairwoman Waters. Thank you so very much.
    Mr. Clay?
    Mr. Clay. Thank you, Madam Chairwoman, and let me thank you 
for conducting this hearing as well as thank my colleague from 
Florida, Mr. Mahoney, for the introduction of this bill.
    I'd like to start the questioning with Mr. Slemmer, who has 
a property in the City of St. Louis you mentioned, Roosevelt 
Apartments, and Roosevelt happens to be across the street from 
my district office. A wonderful facility, I notice that the 
residents appreciate living there.
    I heard one witness say that it's more cost-effective to 
renovate an older building. Have you found that to be the case, 
that it's more cost-effective to renovate than to build new?
    Mr. Slemmer. Right. It's considerably less expensive. We 
average, I think, about $70,000 a unit hard cost in 202s. It's 
a lot more in other parts of the country, Los Angeles, I'm 
sure. But the renovations are coming in at $20- to $30,000 a 
unit, and many of these older properties for $20- to $30,000 a 
unit, you can get another 30 years of life, so it's 
significantly less expensive.
    Mr. Clay. I raise the issue, because in St. Louis, we have 
a troubled property for aging seniors called Council Towers, 
built in the mid-1960's. It is now roach-infested, rodent-
infested, and has broken elevators. And what is HUD's initial 
reaction when you bring this to their attention, that these are 
problem properties? What has been your experience with HUD?
    Mr. Slemmer. Well, it varies across the country. Some HUD 
offices are better than others. But the primary problem we have 
with HUD is that they are kind of trapped by their own set of 
regulations. So we have a property like you mentioned in 
Sandusky, Ohio, and it's a property that was sponsored by the 
Kiwanis Club. It's built back in the late 1960's, and we have 
several problems that arise.
    Will there be existing HUD debt on that property that has 
to be forgiven or somehow subordinated? That's a big problem 
for HUD. Oftentimes, you reconfigure units. That's a big 
problem for HUD. So you get trapped in the HUD regulations 
oftentimes, and trying to combine the tax credit timing cycles 
with HUD ability to make approvals is really a serious problem.
    Secretary Garvin talked about HUD being interested in 
preservation. I think they are. They're talking about it. I 
think they need an ombudsman or somebody that really expedites 
this process, because preserving affordable housing is 
complicated. It's tricky. And HUD regulations need to be 
interpreted, and they don't have anybody on their staff that 
knows how to do that, really.
    Mr. Clay. Thank you for that response.
    Ms. Feingold, HUD has said that there is a 30 percent 
increase in the 2008 Section 202 request. Is this enough money? 
And, if not, what funding level is needed?
    Ms. Feingold. Thank you for that question, Congressman. In 
the Seniors Commission Report in our research, we documented 
that in 2002, there was a shortage of 6.1 million units of 
housing to serve people with the most serious needs, either 
financial needs or health needs or the condition of their 
housing needs. And we projected that the need would go up to 
$7.5 million in 2020, if we didn't do anything. And the truth 
is, we haven't done anything since 2002.
    The minority report of the Seniors Commission recommended 
that we develop 60,000 units of 202 a year. That won't fill the 
gap, but it at least will show a commitment to trying to fill 
the gap and it will begin to house the serious need we see 
right now.
    The question was raised, what happens to people when their 
rents go up. With another of my hats, I'm a founder of 
something called the Committee to End Elder Homelessness in 
Boston. The number of elder homeless has doubled in the last 5 
years. And what happens to elderly people who are homeless? You 
know the answer. They die. We are consigning old people to 
death with some of the things we're doing for lack of 
commitment to a serious attempt to meet the needs that we have 
now, and they are growing into the future.
    I'll stop. I get excited.
    Mr. Clay. Thank you so much for your response. I thank the 
panel for their testimony.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much, Congressman Clay.
    And now, we're going to go to the author of the 
legislation, who should be feeling tremendously proud based on 
the testimony that we have heard here today. This bill is going 
to indeed change lives, protect people, and provide 
opportunities that never would have been available, but for 
what you are doing.
    And I want you to know that if what you have heard today, 
that there is a need to additionally do a little bit more 
amending or adding, you have the support of your colleagues to 
do that. And I certainly hope that we do everything that we can 
to give the flexibility and allow for the creativity in order 
to preserve and expand, and provide more services to you, Mr. 
Mahoney.
    Mr. Mahoney. Thank you, Madam Chairwoman.
    I'm going to quickly ask you each a question, and then I'm 
going to make some comments. And then I'm going to come back to 
you, and I want it to be very succinct.
    My interest is, and I appreciate the support for many of 
the comments, but I want to know from each of you very 
succinctly, what is one thing that we could do to make this 
bill better, that would make life better? And while you're 
thinking about that, I just want to say that, you know, I 
appreciate it.
    I mean, I was a businessman 2 years ago, and you know, 
there's a large part of life you don't see. And I'm blessed to 
have had the opportunity to do some public service and to go 
out into the community and to see the needs. And I think 
America is blessed to have people like yourself who are 
battling for them. But I'm also blessed to have the leadership 
of Chairwoman Waters and the people on this committee who not 
only allow you to see problems, but to have the wisdom and 
experience of working so many years on this issue to be able to 
help people like myself do something meaningful.
    The other thing I'm going to say is that this is an issue 
of dignity. This is a national moral issue. This is an issue of 
priorities. This country has the resources to take care of its 
people with dignity without raising taxes. Not everything in 
life can be fixed by a tax cut and a prayer. Okay? And this is 
one of these issues that needs to be done.
    So my question is, what is the one thing that we could do 
to make this a better bill, to cut through the bureaucracy, to 
whatever, to make this more meaningful so that you can do your 
jobs?
    Mr. Lizarraga?
    Mr. Lizarraga. Yes. Allow us to refinance and leverage 
these dormant assets in order we can reinvest back into the 
housing stock and the service of the seniors.
    Mr. Mahoney. Thank you.
    Mr. Slemmer. I think the most important piece of 
legislation is a voucher or preservation voucher so that the 
older 202s, when they're rehabbed, the residents in there can 
stay in place at the same rent. That needs to be strengthened, 
I think, a little bit.
    Ms. Kondor. I also have seven 236 properties with very 
little Section 8 assistance in those properties, as well. We 
have many very-low-income seniors who don't receive it, and I'd 
like to see those Section 236 people be able to benefit, too, 
in the event we refinance those facilities.
    Ms. Feingold. I would like to broaden what my colleague 
just said. I think the single most important thing that you can 
build into this bill is ways to make the regulations of the 
various programs work better together. For example, we're 
talking about helping the refinancing and the use of surplus 
resources for 202s. We need the same rights for 236.
    That's the problem my organization has dealt with, the tax 
credit programs. These are regulated by IRS. Somebody has to 
sit down and put together the necessary regulations and 
statutory requirements of those programs so that they work 
together. It should not be so hard to make these things work 
together.
    Mr. Mahoney. Thank you.
    Mr. Frigo. I'm going to stay on the Section 236 theme a 
little bit, because we have the same situation with another 
building that we did not discuss today. And that would be very 
helpful, again.
    Oftentimes, we have to refer people from that building--
that's the 236--to another building, because of the Section 8. 
But as far as what you put together here, I would like to 
commend you again, because it greatly helps us with our 
efficiency problem. So thank you.
    Mr. Protulis. My God, asking me for one statement is like 
asking if it's going to--
    Mr. Mahoney. We're all praying.
    [Laughter]
    Mr. Protulis. I will try to say to you that the fully 
funding of construction of the way the program is working 
today, we are already behind the eight-ball when you get your 
award. It is unbelievable that those of us that worked so hard 
to get a meager 40 or 50 units, we have to go hustle extra 
money because the government does not want to give us a full-
funded construction for properties that we deserve and we show 
a need. And the government seems to know when they give us the 
money, that we're already behind the eight ball, and they say 
well, that's what you get. You don't want it, I have somebody 
else waiting for it.
    That, in my opinion, is wrong.
    Ms. Allton. I would just add that in the legislation I'm 
very thrilled to see that funding would be allowed to use for 
service coordination. What I would like to see is that it's 
not--it's a nice allowance, but it's an absolute requirement.
    Because what tends to happen is when developers or owners 
are looking at their budgets, they will tend to opt-out of that 
service coordination line item, because it costs too much money 
in a very competitive environment.
    So to put everybody at the same table, you know, around the 
table, to make it a requirement, not an option.
    Mr. Mahoney. Could you do me a great favor and put this in 
writing and send that to me so we can look at things to do to 
amend?
    And again, Chairwoman Waters and Ranking Member Biggert, I 
am honored to be here today to be part of this hearing. It's 
very gratifying, and it's again wonderful to be working under 
your leadership. Thank you.
    Chairwoman Waters. Thank you so much, Mr. Mahoney. And I 
want to congratulate you for putting together a wonderful piece 
of legislation that's so desperately needed. And again, I want 
to congratulate you for raising that last question of what else 
possibly can be done to make it even a stronger bill. And we 
await your leadership with whatever additions, amendments, 
again. I certainly believe that you're going to have support 
from both sides of the aisle.
    Don't you think, Mrs. Biggert?
    [Laughter]
    Chairwoman Waters. Thank you all very much.
    The Chair notes that some members may have additional 
questions for this panel, which they may wish to submit in 
writing.
    Without objection, the hearing record will remain open for 
30 days for members to submit written questions to these 
witnesses and to place their responses in the record. Thank you 
so much. The panel is now dismissed.
    [Whereupon, at 12:38 p.m., the hearing was adjourned.]



















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                           September 6, 2007

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