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




 
                FEDERAL SPENDING REQUIREMENTS IN HOUSING
                  AND COMMUNITY DEVELOPMENT PROGRAMS:
                     CHALLENGES IN 2008 AND BEYOND

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 9, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-126


                     U.S. GOVERNMENT PRINTING OFFICE
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            DEBORAH PRYCE, Ohio
CAROLYN B. MALONEY, New York         MICHAEL N. CASTLE, Delaware
LUIS V. GUTIERREZ, Illinois          PETER T. KING, New York
NYDIA M. VELAZQUEZ, New York         EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina       FRANK D. LUCAS, Oklahoma
GARY L. ACKERMAN, New York           RON PAUL, Texas
BRAD SHERMAN, California             STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York           DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas                 WALTER B. JONES, Jr., North 
MICHAEL E. CAPUANO, Massachusetts        Carolina
RUBEN HINOJOSA, Texas                JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri              CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York           GARY G. MILLER, California
JOE BACA, California                 SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
BRAD MILLER, North Carolina          TOM FEENEY, Florida
DAVID SCOTT, Georgia                 JEB HENSARLING, Texas
AL GREEN, Texas                      SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri            GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois            J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin,               JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee             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
BILL FOSTER, Illinois                THADDEUS G. McCOTTER, Michigan
ANDRE CARSON, Indiana                KEVIN McCARTHY, California
JACKIE SPEIER, California            DEAN HELLER, Nevada
DON CAZAYOUX, Louisiana
TRAVIS CHILDERS, Mississippi

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

                 MAXINE WATERS, California, Chairwoman

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


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 9, 2008.................................................     1
Appendix:
    July 9, 2008.................................................    27

                               WITNESSES
                        Wednesday, July 9, 2008

Blom, Dominique, Deputy Assistant Secretary, Office of Public 
  Housing Investments, U.S. Department of Housing and Urban 
  Development....................................................     4
Bryant, Vivian, Executive Director, Orlando Housing Authority....    15
Gamble, Joyours ``Pete,'' Executive Director, Housing Authority 
  of the City of Daytona Beach, Florida..........................    16
Keller, Robin, Vice President, Affordable Housing Development, 
  Volunteers of America, on behalf of the American Association of 
  Homes and Services for the Aging...............................    19
McGraw, Nancy, Managing Director, Eastern Region, Corporation for 
  Supportive Housing.............................................    17

                                APPENDIX

Prepared statements:
    Clay, Hon. Wm. Lacy..........................................    28
    Blom, Dominique..............................................    29
    Bryant, Vivian...............................................    32
    Gamble, Joyours ``Pete''.....................................    36
    Keller, Robin................................................    40
    McGraw, Nancy................................................    52

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Jonathan Philips, Senior Director, 
      Cherokee Investment Partners, on behalf of the National 
      Brownfield Association and Cherokee........................    57


                     FEDERAL SPENDING REQUIREMENTS
                        IN HOUSING AND COMMUNITY
                    DEVELOPMENT PROGRAMS: CHALLENGES
                           IN 2008 AND BEYOND

                              ----------                              


                        Wednesday, July 9, 2008

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 9:40 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Waters, Lynch, Cleaver, 
Green, Maloney, Ellison; and Capito.
    Also present: Representatives Hinojosa and Watt.
    Chairwoman Waters. Good morning. This hearing of the 
Subcommittee on Housing and Community Opportunity will come to 
order.
    Good morning ladies and gentlemen. I would like to thank 
Ranking Member Capito, whom I understand will be in just a 
little bit later, and the other members of the Subcommittee on 
Housing and Community Opportunity who will be joining me today 
for this hearing entitled, ``Federal Spending Requirements in 
Housing and Community Development Programs: Challenges in 2008 
and Beyond.''
    In January, the House passed H.R. 3524, the HOPE VI 
Improvement and Reauthorization Act of 2007, which I introduced 
with Chairman Frank and Representatives Watt and Shays. That 
bill made significant reforms to the HOPE VI program which had 
failed to provide for one-for-one replacement or to protect the 
rights of tenants to return to the new HOPE VI development.
    The bill also address the performance of HOPE VI grantees 
allowing the Secretary to establish performance benchmarks and 
to extend those benchmarks under certain circumstances such as 
litigation or natural disasters.
    However, as comprehensive as that legislation is, once 
enacted it will only address problems in the HOPE VI program 
respectively. H.R. 3524 does not address the issues before us 
today, which are the Federal spending requirements for existing 
HOPE VI grant programs, and how strict imposition of those 
requirements can negatively impact affordable housing 
developments.
    Beginning in Fiscal Year 2002, Congress began to impose 
obligation requirements on many grant programs, including the 
HOPE VI program. Grantees were required to obligate their funds 
within 1 to 3 years, with the time period for obligation 
depending on the type of grant. Once obligated, another law 
required the grantees to spend their funds within 5 years. 
Fiscal Year 2008 marks the first year that grantees will have 
to meet the spending deadline. Grantees that fail to spend 
their funds by September 30th of this year will have their 
funds canceled and returned to the Treasury.
    The HOPE VI program is at risk of losing about $78 million 
this year because of the challenges Fiscal Year 2002 grantees 
have encountered in spending their funds. Many of these 
grantees have had to contend with natural disasters that have 
slowed the pace of construction or forced them to temporarily 
divert resources.
    For example, as Ms. Bryant will testify, in 2004 Orlando 
was struck by three hurricanes. As we have seen in the 
aftermath of Hurricane Katrina, recovery of public housing from 
a natural disaster can be a complicated process. Unfortunately, 
coping with the natural disaster does not exempt a HOPE VI 
grantee from the 5-year spending requirement. In fact, there 
are no exceptions in Federal law for circumstances under which 
the 5-year deadline can be extended.
    Without an extension of this deadline, communities and 
residents will suffer. The majority of the unspent funds are 
construction dollars. If these funds are canceled, fewer units 
will be built, resulting in a further loss of public housing 
units.
    As we are in the middle of an affordable housing crisis, we 
should be working to preserve our public housing stock, not to 
reduce it further. This is why Representatives Corrinne Brown 
and John Mica introduced H.R. 6347, the HOPE VI Amendment Act 
of 2008. This bipartisan bill would extend the expenditure 
deadline from 2008 to 2009 for Fiscal Year 2002 HOPE VI 
grantees who have encountered project delays or cost increases 
either as the result of a natural disaster or the subprime 
mortgage crisis.
    While this bill would assist those HOPE VI grantees 
struggling to get their money out the door, we are aware of 
other programs that may be impacted by the 5-year spending 
requirement. These programs include housing opportunities for 
people with AIDS, brownfields, Section 202, Section 811, and 
homeless assistance grants.
    Many of these grantees, such as Section 202 and homeless 
assistance grantees, routinely encounter project delays that 
are beyond their control. Although Section 202 and homeless 
assistance grant programs are not due to have funds canceled at 
the end of this fiscal year, the first year for cancellation of 
any unspent funds from these programs as Fiscal Year 2009.
    I am concerned that the special types of problems these 
programs encounter could prevent them from meeting their 
spending deadline. Cancellation of funds from these programs 
that are so critical to serving our most vulnerable populations 
is simply unacceptable.
    I am looking forward to hearing from our two panels of 
witnesses on the challenges involved in meeting Federal 
spending requirements for housing programs.
    I would now like to recognize our subcommittee's ranking 
member to make an opening statement. Mrs. Capito?
    Mrs. Capito. Thank you, Madam Chairwoman. Excuse me for 
being a couple of minutes late.
    I know that this is an issue in a lot of our fellow 
members' districts with the fast approaching September 30th 
deadline. So in lieu of giving an opening statement, I would 
just like to thank the witnesses for coming, and I thank the 
chairwoman for holding this hearing, and hopefully we can meet 
the challenges that many folks are facing across the country, 
in terms of spending or trying to find a way to meet the 
deadlines that are quickly coming upon them. Thank you.
    Chairwoman Waters. Thank you very much. Also, the gentleman 
from Missouri, you are recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. I don't have much 
of a statement. I can't say Missouri is not subject to the 
cancellation provision, but nonetheless, I am very concerned 
about this.
    The first HOPE VI project in the Nation was built in Kansas 
City during my term as mayor, and with all of the HOPE VI 
projects it could very easily be in the New York Times or one 
of the housing magazines because of the quality of the housing. 
It converted decrepit housing into affordable and attractive 
housing for low-income residents, and I think that if we have 
slow spending cities, if there is any way to work with them, we 
need to find it because to have any city in the country denied 
an opportunity to participate in the HOPE VI program, I think, 
is a very tragic possibility considering what that program can 
do and has done all over this country.
    So I am here in support of the Brown/Mica HOPE VI Amendment 
Act of 2008 in hopes that we can find a way to prevent any city 
in the country from falling victim to the cancellation 
provision. Thank you, Madam Chairwoman, and I look forward to 
dialogically becoming involved in this room.
    Chairwoman Waters. Thank you very much, and without 
objection, Representative Hinojosa will be considered a member 
of the subcommittee for the duration of this hearing, and I 
will recognize Representative Hinojosa for his opening 
statement.
    Mr. Hinojosa. Thank you, Chairwoman Waters. I am delighted 
to be able to participate for a while here in your 
subcommittee, and I want to personally thank you for your 
leadership and dedication to HOPE VI and for your great 
leadership and the work that you have done to help rural 
housing, which impacts a big part of my congressional district. 
I also thank you for helping our committee authorize the 
Housing Assistance Council, which is going to make a very 
significant difference and provide help to rural areas that I 
represent in South Texas. I assure you that I will help you 
authorize your Urban League legislation, because I know how 
important it is also.
    This hearing today is going to be very helpful to us in 
areas like I represent where we have such a large need for 
affordable housing, and I am interested in listening to our 
panels to see just how we can be of help to our constituents. 
And with that, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. Mr. Watt, without 
objection, you also will be considered a member of the 
subcommittee for the duration of this hearing, and I recognize 
you for 5 minutes.
    Mr. Watt. I thank the Chair for recognizing me, but I think 
I will pass and let you all get on with the hearing. I am 
interested in the subject matter and just came to hear the 
witnesses. Thank you.
    Chairwoman Waters. Thank you very much.
    I am pleased to welcome our distinguished first panel. Our 
first witness will be Ms. Dominique Blom, Deputy Assistant 
Secretary, Office of Public Housing Investments, U.S. 
Department of Housing and Urban Development. Thank you for your 
presence here today. Without objection, your written statement 
will be made a part of the record. You will now be recognized 
for a 5-minute summary of your testimony.

STATEMENT OF DOMINIQUE BLOM, DEPUTY ASSISTANT SECRETARY, OFFICE 
 OF PUBLIC HOUSING INVESTMENTS, U.S. DEPARTMENT OF HOUSING AND 
                       URBAN DEVELOPMENT

    Ms. Blom. Thank you. Good morning, Chairwoman Waters, and 
members of the committee. I am Dominique Blom, the Deputy 
Assistant Secretary for the Office of Public Housing 
Investments at the U.S. Department of Housing and Urban 
Development. Thank you for inviting me to testify today.
    The Department monitors and assists all HOPE VI grantees to 
enable them to implement the revitalization plans and construct 
units in accordance with their development schedules. Grantees 
awarded in Fiscal Year 2002 or later were required by Congress 
to expend their HOPE VI funds within 5 years of HUD's deadline 
for obligating grant funds. Under this requirement, it is the 
responsibility of each grantee to establish and implement 
realistic development schedules that allow them to complete the 
Federal components of their projects by this deadline or have 
the unused funds recaptured by the Treasury.
    My remarks today will focus on what the Department has done 
to assist the Fiscal Year 2002 HOPE VI grantees in meeting the 
expenditure deadline of September 30, 2008, and the current 
status of funds that remain unexpended as of June 30, 2008.
    The Department has taken numerous steps in notifying Fiscal 
Year 2002 grantees of their responsibility to meet their 
development schedules and the 5-year expenditure deadline of 
September 30th. The grant agreement that codified the funding 
relationship between each grantee and HUD clearly stated that 
all funds must be expended within 5 years of grant award. The 
letter from HUD approving the revitalization plans submitted by 
each grantee reiterated the language in the grant agreement and 
encouraged grantees to stay on schedule to meet the expenditure 
deadline. In site visits over the life of each grant, HUD staff 
also reminded grantees of this requirement and the 
responsibility to stay on schedule. If a grantee submitted 
revisions to the revitalization plan that altered the 
development schedule, HUD staff reviewed the schedule to ensure 
that the grantee would complete construction ahead of the 
expenditure deadline before approving the changes.
    On March 20, 2008, HUD issued a letter to all the Fiscal 
Year 2002 grantees with unexpended funds. In this letter, 
grantees were again reminded that all HOPE VI funds must be 
expended by September 30th. In response to this letter, 
grantees were required to state in writing that they would be 
able to meet the expenditure deadline. For those grantees that 
expressed concern about meeting the expenditure deadline, the 
Department assisted the grantee to develop a plan for 
completing construction and expending HOPE VI funds by the 
deadline. The Department also accelerated review processes and 
expedited approvals to put each of these construction and 
expenditure plans into action.
    Throughout this process, the Department was careful to 
exercise good judgment, not to take unreasonable risk, and to 
ensure that taxpayer dollars were used for eligible and 
feasible purposes.
    As of June 30, 2008, there is $78 million in unexpended 
funds across the 28 grantees awarded HOPE VI funding in Fiscal 
Year 2002. Based on grantee responses and the Department's 
monitoring efforts, we currently believe that there are 21 
grantees that will expend all their funds; 4 that are likely to 
expend all their funds; and 3 that are unlikely to expend all 
of their funds by the deadline. Of the 3 that are unlikely to 
expend their funds by the deadline, the Department estimates 
that the amount of funds at risk for recapture by the Treasury 
ranges from $200,000 to $2.3 million for an approximate total 
of $4 million.
    Beyond the Fiscal Year 2002 grantees, the Department is 
also assisting HOPE VI grantees awarded in Fiscal Year 2003 or 
later with their efforts to meet the expenditure deadline set 
by Congress. To this end, HUD issued a letter July 8, 2008, to 
all Fiscal Year 2003 grantees with unexpended funds that 
request information on their estimated timeframe for completing 
construction and expending all HOPE VI funds. If HUD determines 
that a grantee requires additional assistance to meet the 
expenditure deadline, selected Fiscal Year 2003 grantees will 
also be provided assistance from technical assistance 
contractors.
    Thank you for the opportunity to discuss the status of the 
Fiscal Year 2002 HOPE VI grantees. As I mentioned earlier, the 
Department monitors and assists all HOPE VI grantees to enable 
them to implement the revitalization plans and construct units 
in accordance with their development schedules. As part of 
these efforts, the Department will continue to assist the HOPE 
VI grantees in meeting the expenditure deadlines that are 
mandated by Congress.
    I am happy to address any questions that you might have.
    [The prepared statement of Deputy Assistant Secretary Blom 
can be found on page 29 of the appendix.]
    Chairwoman Waters. Thank you very much. I will recognize 
myself for questions.
    I would like to reconcile the $78 million amount with the 
$4 million amount that you just indicated represents the three 
agencies that are unlikely to spend. What is the difference in 
these two figures and where does that come from?
    Ms. Blom. Based on the information that we have received 
from the housing authorities, as of June 30, 2008, there are 
$78 million of funds that are still remaining. But based on 
housing authority's responses, most believe they will be able 
to expend the funds by the September 30th deadline, that they 
already have construction under way, and it is just a matter of 
those housing authorities drawing down the funds in order to 
meet the September 30th deadline. However, there are three 
grantees who are unlikely to expend a maximum, we believe, of 
$4 million by the September 30th deadline.
    Chairwoman Waters. Let me just inquire of you, what is 
HUD's policy about initiating legislation with the Congress 
when you encounter a problem with the law that we have created? 
Obviously, natural disasters and other kind of unforeseen 
problems can occur which would fly in the face of the law.
    Do you think that you have any responsibility to say to 
Congress, ``I think we have a problem, and we would suggest, 
based on our information and our assessment that there needs to 
be a waiver or an extension of some kind given the difficulty 
that these agencies have faced, and we think that it is 
legitimate difficulty.'' Have you ever envisioned doing 
something like that?
    Ms. Blom. The Administration is currently reviewing the 
bill that has been introduced providing the 1-year extension, 
and that is currently under review particularly to assess it 
from a budget impact.
    Having said that, from a programmatic point of view, from 
the office that I sit in that administers the HOPE VI program, 
there is certainly a reality that many of the housing 
authorities faced with regard to natural disasters, with regard 
to the mortgage crisis, and with regard to unforeseen 
environmental concerns that had developed as part of their 
implementation of the HOPE VI revitalization plan. These are 
certainly legitimate concerns and challenges that were faced by 
the Fiscal Year 2002 housing authorities and, I believe, 
provide extenuating circumstances of why certain housing 
authorities are unable to meet the deadline of September 30, 
2008, for expenditure.
    Chairwoman Waters. Then the Department would support a 1-
year extension for funding year 2002 HOPE VI grantees that have 
encountered these cost increases and project delays as a result 
of natural disaster or the subprime mortgage crisis, as 
envisioned in this bill, H.R. 6347?
    Ms. Blom. The Department and the Administration have not 
developed a position yet on the bill. However, I can speak from 
my own personal perspective and of the Office of Public Housing 
Investments, which oversees the HOPE VI program, to certainly 
say that the reasons provided in the bill are legitimate ones 
for providing an extension for the HOPE VI grantees.
    Chairwoman Waters. And finally, let me just ask, despite 
the fact that you have done a review, and perhaps even provided 
technical assistance, and you anticipate that most of these 
housing authorities will be able to use their funds by the 
deadline, and you only encountered three that may not be able 
to meet the deadline, you do recognize that even with that 
review, that some that fall within the 25 probably will not be 
able to meet that deadline also, so this bill would cover all, 
not just three that are unlikely. You understand that?
    Ms. Blom. Yes, that the bill would cover those housing 
authorities that were affected by the mortgage crisis and by 
natural disasters, and it would certainly cover more than just 
the three housing authorities that we had immediate concerns 
about, and it would provide relief to those housing authorities 
that were funded in 2002 that are faced with the circumstances 
of the mortgage crisis and disasters.
    Chairwoman Waters. Thank you very much. Ms. Capito.
    Mrs. Capito. Thank you. Just so I understand here, there 
were originally 28 grantees in Fiscal Year 2002?
    Ms. Blom. Correct.
    Mrs. Capito. Correct. Okay. All of them have not expended 
all of their money by the end of--that is 28, right--21 will, 3 
are likely, and 3 are unlikely?
    Ms. Blom. Four.
    Mrs. Capito. So all of them are in this boat. Okay. I have 
a couple of questions. On the front end, when you grant in 
2002, what kind of vetting do you do for all of these? If all 
of these are falling within this category of not expending 
their money before the end of September, has there been a 
thorough vetting of where they are going to spend the money, 
when they are going to spend it, and how they are going to 
spend it?
    Ms. Blom. Absolutely. In the beginning of the grant 
process, we work with each of the housing authorities to 
establish a development schedule that is realistic, that will 
meet the September 30th deadline.
    Mrs. Capito. Then you keep following that from year to 
year?
    Ms. Blom. Absolutely. It is very important at the beginning 
of the grant program to get off to a good start. With that, we 
have onsite visits that are done within a few months of the 
grant being awarded, and we work with the housing authority to 
establish a schedule that is going to carry out for the life of 
the program.
    We also require the housing authorities to submit their 
first development proposal that is going to describe their 
construction plans within 12 months of receiving the grant, and 
then they must start construction within 18 months of receiving 
the grant--
    Mrs. Capito. Did they all start construction within 18 
months?
    Ms. Blom. All except for one, which was Fulton County, 
started construction within the 18 months. So we worked very 
diligently with the housing authorities to ensure that the 
requirements for the grant award were implemented and met, and 
then have been following the grants throughout the life of the 
grant cycle.
    Mrs. Capito. Okay. And then my next question is, we are 
sitting here at June 30th with $78 million unspent. According 
to your testimony, $74 million will be spent in 3 months. If it 
is spent, is it spent judiciously and on proper things, or is 
it people filling up the paper cabinet with copy paper just so 
they can have their $74 million spent, if you know what I mean?
    Ms. Blom. Yes, absolutely. I share your concern. And that 
is the reason why, for some of the grants, the funding will be 
returned, because we do believe that it is vitally important 
that taxpayers' money is used for feasible and eligible 
purposes, and that housing authorities are not undertaking 
activities that are high risk.
    As a result of that, we have worked with the housing 
authorities to develop what we think are realistic and feasible 
plans for expenditure of those funds, that protects those funds 
and has them used for eligible HOPE VI purposes, for 
construction of public housing units or for affordable 
homeownership units.
    Mrs. Capito. Well, regarding natural disasters, I certainly 
can understand environmental concerns elongating the project 
and also making it more expensive. I mean, that happens every 
day.
    But I do want to voice some concerns of the $74 million 
that are going to be spent in the next 3 months, and I guess I 
would be curious, my last question, if you could, without 
pointing a finger specifically at one project, if you could say 
in a general sense, where is the problem? Is it the problem at 
the local level that is not moving the projects forward quick 
enough, is it at the HUD management level, or is it at the 
beginning, which I was trying to get to in the beginning, that 
the projects were not ripe enough to really be ready for a 
grant in 2002, so consequently running into problems in the 
year 2008?
    Ms. Blom. I think that the major impediment to those 
housing authorities that have considerable funds remaining 
today happened in the middle of their grant cycle. It happened 
with unforeseen challenges that were faced, whether that was 
environmental in nature, you will hear potentially from Pete 
Gamble who will talk to you about eagles coming to the HOPE VI 
project and therefore causing a portion of their land to be 
unfeasible for construction.
    Another project that had planned to redevelop back onsite, 
but because of an airport expansion, was no longer able to 
build back onsite because of increased noise pollution.
    Certainly you are going to hear about the hurricanes that 
occurred in 2004 as well as in 2005, which increased 
construction costs and caused housing authorities in the Gulf 
to redirect their energies from building their HOPE VI projects 
to working on disaster related issues.
    And lastly, the mortgage crisis. Over the last year or so, 
we have had construction lenders that have pulled out of HOPE 
VI projects, making the homeownership phase behind schedule as 
housing authorities have had to retool, either look for other 
lenders or look for other sources of construction financing to 
build homeownership--
    Mrs. Capito. Of the 28, how many would you say are 
influenced by the housing crisis, the last one you just 
mentioned, lenders pulling out?
    Ms. Blom. I know of the seven housing authorities that we 
have concerns about, about half of those are affected by the 
mortgage crisis, and I will be able to follow up with you in 
writing about an assessment about all of the 28 grantees and 
which ones would be affected by the mortgage crisis.
    Mrs. Capito. Alright. Thank you.
    Chairwoman Waters. Mr. Cleaver.
    Mr. Cleaver. Thank you, Madam Chairwoman. Ms. Blom, thank 
you.
    On page three of your testimony, in the third paragraph, 
you talk about the three housing authorities that you believe 
to be in trouble to the point that they will end up as victims 
of the cancellation provision. Can you give me the names of the 
three?
    Ms. Blom. Yes sir. The three housing authorities are 
Muncie, Indiana, East Baton Rouge, Louisiana, and Daytona 
Beach, Florida.
    Mr. Cleaver. Muncie, Indiana, Baton Rouge, and--
    Ms. Blom. Daytona Beach, Florida.
    Mr. Cleaver. Daytona Beach. Those are all class A cities, 
which, as I mentioned earlier, we did the first HOPE VI during 
my term as mayor, and most of these cities on here are class A 
cities, which means they have a housing department, and I am 
not sure what kind of technical assistance would matter to 
people with a housing department, and the problems that you 
mentioned, I am not sure that the technical assistance will 
clear up a problem of a delay based on the subprime lending 
crisis or even the Hurricane Katrina disaster, I am not sure 
what technical assistance would be needed. I mean, what kind of 
technical assistance do you provide somebody who is stumbling 
because of the lending crisis?
    Ms. Blom. For these housing authorities, the Muncie, 
Indiana, housing authority may need to return about $800,000 of 
its funds because of the mortgage crisis. They had planned to 
develop 44 homeownership units, but because a construction 
lender had pulled out, they had to retool, looking to the City 
for additional funds in the form of home funds, and are now 
planning on building the 44 units. However, it is dependent on 
spending the HOPE VI funds for infrastructure and getting City 
permits in advance of that.
    So in the case of Muncie, it is a question of, can the 
housing authority and the City work together to issue the 
permits and for the HOPE VI funds to be spent for the 
infrastructure portion.
    Mr. Cleaver. I am still not sure about the technical 
assistance. I am not sure in your answer you explained what the 
technical assistance would do for those cities, but wouldn't it 
just be easier to support a 1-year extension than to--if I were 
back in office, we have two former mayors here, if I were back 
in office and someone from HUD called and offered technical 
assistance for a problem that technical assistance won't 
correct, I am not sure that I would be happy.
    I mean, I didn't understand it. And it would seem to me 
that a more appropriate response would be a 1-year extension as 
opposed to saying, we will give technical assistance. I 
appreciated the answer you gave, but I still couldn't hear 
inside your answer what the technical assistance would do.
    Ms. Blom. The technical assistance that I referred to in my 
testimony is geared toward Fiscal Year 2003 and later grantees, 
because we believe that there is enough time with those 
grantees to have the technical assistance be meaningful.
    For those grantees that have their funds expiring at the 
end of September of this year, I agree with you, there is very 
little time left for the housing authorities to expend those 
funds, and technical assistance isn't the right answer. That is 
why we have not dedicated our HOPE VI contractor funds that 
dedicated technical assistance for the Fiscal Year 2002 
grantees. Instead, we have dedicated that for Fiscal Year 2003 
grantees and later.
    For the 2002 grantees, HUD staff has been working with the 
housing authorities to determine what the schedule can be and 
to revise the plans to create feasible options for expenditure 
of the programs--
    Mr. Cleaver. Pardon me for interrupting you, but my time is 
about up. It is up. Wouldn't it be easier to just have a 1-year 
extension?
    Ms. Blom. Again, for the 1-year extension, it would provide 
relief to those housing authorities that have faced the crisis 
of the mortgage subprime crisis, as well as hurricanes and 
other natural disasters, certainly.
    Chairwoman Waters. Thank you very much. Mr. Green.
    Mr. Green. Thank you. If Mr. Cleaver needs more time, I am 
willing to yield.
    Chairwoman Waters. Are you yielding time to Mr. Cleaver?
    Mr. Green. I will. Mr. Cleaver.
    Mr. Cleaver. Just one more question. Today my hearing is 
bad, I guess. I am trying to zero in on what--if we have a 1-
year extension, it would seem to me that the cities that were 
named, it would be infinitely better off, in terms of 
completing the HOPE VI application, getting everything here in 
Washington than having technical assistance offered. Baton 
Rouge, Louisiana, does have a housing department. They have the 
capacity to do this. The people in Baton Rouge woke up one 
morning and had their population doubled, with poor people 
coming in from New Orleans. So it seems to me that a year 
extension would provide them with a better opportunity to deal 
with this crisis than for HUD to offer technical assistance.
    Ms. Blom. And certainly a 1-year extension would provide 
those housing authorities with more time to be able to finish 
up their revitalization plans, yes sir.
    Mr. Green. Reclaiming my time, Madam Chairwoman, I would 
now yield 1 minute to Mr. Hinojosa, who has another hearing 
that he must attend right away, if I may.
    Chairwoman Waters. Mr. Hinojosa.
    Mr. Hinojosa. I thank you, gentleman from Texas. Thank you.
    I am delighted that I stayed to listen to your 
presentation, and I am pleased to hear that there will be help 
in time for those who are impacted directly by natural 
disasters such as Hurricanes Katrina and Rita. I represent 
counties in the Gulf of Mexico all the way to San Antonio and 
south to Edinburg.
    But what about those who were impacted indirectly? For 
example, we learned that the San Antonio housing authority, 
while not directly impacted by Hurricane Katrina, took in many 
Katrina evacuees, which affected its ability to focus on the 
HOPE VI grant. Houston and San Antonio, closest to my district, 
were recipients of many of the evacuees, and they stayed there 
for as much as 2 years. So what could you do for them?
    Ms. Blom. Are you asking, sir, in terms of the bill or in 
terms of--
    Mr. Hinojosa. The bill, in terms of the September 30th 
deadline. Could they have an extension so that they could use 
up their funds?
    Ms. Blom. The deadline of September 30th is statutorily 
established by Congress, so unless Congress provides an 
extension of that timeframe, the Department is unable to 
provide extensions to the housing authorities. In the case of 
San Antonio, we have been working with San Antonio for 
approximately the last 6 months, very intensively, to develop a 
plan for how they could spend the remaining funds, and we 
believe at this point that we have a viable plan for how the 
housing authority can complete the last remaining phases of 
their program, which includes a homeownership program as well 
as rental development of public housing, and that they will be 
able to expend their funds by September 30th.
    Mr. Hinojosa. I thank you, and I yield back. Thank you.
    Mr. Green. Thank you. I will be as quick as possible.
    Ma'am, thank you for coming this morning. Ms. McGraw, who 
is on the second panel, and if I am incorrect, I am sure she 
will have an opportunity to speak to what I am about to say, 
has indicated that HUD could possibly, through an act of 
Congress, be granted the authority to waive the 5-year rule 
which would allow for extensions.
    Would you support or oppose, or what is your position or 
HUD's position on Congress granting this type of authority for 
a waiver?
    Ms. Blom. The Administration is still reviewing the bill in 
terms of its impact on the budget.
    Having said that, from a programmatic point of view, and in 
my opinion, the 1-year extension would provide relief to the 
housing authorities to enable them to complete their 
revitalization plans.
    Mr. Green. She also indicates that Congress could consider 
allowing communities or agencies to use these funds for similar 
projects or similar purposes. What are your comments on this, 
please?
    Ms. Blom. Unless Congress were to change the use of the 
funds, the remaining funds would still be used for HOPE VI 
eligible purposes, so it would have to be used for the 
development of affordable homeownership units or for public 
housing units that would serve families under 80 percent of 
median income.
    Mr. Green. My time is up. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much. Mr. Lynch.
    Mr. Lynch. Thank you, Madam Chairwoman, and thank you for 
holding this hearing. I also thank the ranking member.
    Madam Secretary, we are doing a delicate dance here. We 
have been trying to ask, is it HUD's position that you support 
the 1-year extension?
    Ms. Blom. I appreciate very much that you understand that I 
am doing a delicate dance here. The Administration and the 
Department do not have an official position yet on the bill. 
But from a programmatic point of view, I realize that a 1-year 
extension granted to the housing authorities would provide them 
relief.
    Mr. Lynch. I know you know that it would be helpful if we 
had the 1-year extension. The problem is that the Department 
hasn't taken that official position, and that is not happening. 
And you are saying Congress has that power. The executive 
office as well, especially in matters brought to this point by 
Hurricane Katrina and other unforeseen disasters, the President 
in the immediate days following Katrina, suspended the 
prevailing wage act by executive order, stepped in and said the 
greatest danger to this area of the country is that these 
people are going to make too much money, these people who are 
repairing this housing. So he suspended the minimum prevailing 
wage in that area.
    Certainly there is a great opportunity here for the 
Administration to provide this 1-year extension. It provides 
the opportunity for HUD to step up and say this is something 
that we should be doing. Are you making those recommendations 
to the Administration, that they should indeed give this 1-year 
extension?
    Ms. Blom. I think from a programmatic point of view, the 1-
year extension makes sense. I think from an Administration's 
point of view, it is a much larger issue than just HOPE VI, 
that the statutory requirement for expenditure covers not just 
the HOPE VI program, but other programs, and the Administration 
is reviewing the bill in the context of all programs and what 
it would mean for there to be extensions provided on 
expenditure deadlines.
    Mr. Lynch. Okay, I understand. I am not going to ask you 
that question again because you have been asked it 3 or 4 times 
already and have just not been really helpful with your 
response. Let's move on.
    There is another area that I am becoming concerned about. I 
am hearing from a lot of our affordable housing developers, and 
this is ancillary to what you do. In the past, a lot of our 
affordable housing projects have been financed by tax credits 
where we have corporations that want to shelter some of their 
profits, and so by buying these affordable housing tax credits, 
they can make out at the end of the year on their taxes. And it 
is a great incentive and I support the program.
    However, unfortunately in this kind of economy, we don't 
have a lot of corporations that need to acquire losses. They 
have losses of their own. And so the need to shelter profit has 
diminished greatly in this current environment, and so tax 
credits remain unpurchased.
    So we are seeing this across the country, without 
limitation to any region, that tax credits have remained 
unpurchased and so people aren't able to put that patchwork of 
deals together to get this stuff going. Is there anything that 
HUD has seen that might help us in trying to figure out how to 
deal with this? Are there other alternatives that you have 
thought of that might help us incentivize, re-incentivize the 
development of affordable housing through the tax incentive 
framework?
    Ms. Blom. What we are seeing as part of the HOPE VI 
program, in relation to tax credits, is that the tax credits 
are being still bought by large firms through syndications. 
What we are seeing, however, is that the equity raise per tax 
credit has been reduced. So whereas 3 years ago, tax credits 
were selling at anywhere from $.95 to the dollar up to $1 and 
even over, what we are seeing today are tax credit raises in 
the low 80s, mid 80s cents on the dollar. So while we are still 
able to fund the HOPE VI projects through tax credits, the 
amount of equity that is being raised is less.
    As a result of that, housing authorities have been seeking 
other sources of funds, either through the city or other 
mechanisms, or unfortunately they have had to, at times, reduce 
the scope of their project to now fit the new budget.
    Mr. Lynch. Okay. Well, that was helpful. Any other 
strengthening of that framework would be appreciated. Thank 
you, I yield back.
    Chairwoman Waters. Thank you very much. Mr. Ellison.
    Mr. Ellison. I will pass, Madam Chairwoman, at this time.
    Chairwoman Waters. Thank you. Mr. Watt.
    Mr. Watt. Thank you, Madam Chairwoman.
    Let me take one more slightly different swipe at the 
question you have been asked 3 or 4 times and managed to dance 
around gracefully, I might add. Does the Administration 
anticipate coming out with a position on the proposal? And if 
so, when?
    Ms. Blom. My hope is that the Administration does have a 
position on the bill--
    Mr. Watt. You are dancing on that one now when you say 
``hope.'' Do you anticipate, is the Department encouraging the 
Administration, I don't know who the Administration is, maybe 
that is the Department. Is it the Department, is it the 
President, is it the Vice President, as the world believes that 
he is controlling everything. I mean, who would make that 
decision?
    Ms. Blom. The Department is talking with OMB with regard to 
the bill, and we are formulating a position on that.
    Mr. Watt. And you expect to have a position at some point?
    Ms. Blom. Yes, sir.
    Mr. Watt. When?
    Ms. Blom. I was hoping it would be ready by today, so I am 
hopeful it will be ready in the next few weeks.
    Mr. Watt. Alright, enough on that. I am actually interested 
in another, slightly different issue. I assume the law that we 
passed covered only unspent money starting in 2002 and going 
forward, but the last time that we dealt with this subject, we 
determined that there were substantial amounts of unspent HOPE 
VI money prior to the funding year 2002. Is that still the 
case?
    Ms. Blom. There are still some funds for the older 
grantees. There is approximately $900 million of funds across 
all housing authorities that remains unfunded--
    Mr. Watt. And what is HUD doing about that? How far does it 
go back?
    Ms. Blom. It goes back to, 1993 was our first year of 
funding--
    Mr. Watt. So that is from 1993 up to 2002, and then your 
testimony today is 2002 forward. Is that right?
    Ms. Blom. That is correct.
    Mr. Watt. Okay. So how much money did you say that is?
    Ms. Blom. About $900 million remains unfunded, but that 
also includes funds for housing authorities that were funded in 
2006 and 2007. The group of--
    Mr. Watt. Wait, wait, wait. I thought you just said that 
that cut off at 2002?
    Ms. Blom. I am sorry if I misstated that. The $900 million 
of funds covers grantees funded from 1993 up to the present.
    Mr. Watt. Okay, so what part of that would be prior to 
2002? I mean you gave us the information. I guess we could 
subtract out what you testified about 2002 forward, but that is 
not--well, tell me what the figure is prior to 2002.
    Ms. Blom. Certainly. The Director of the program, Sue 
Wilson, is tallying up right now behind me what the totals are 
from 1993 through 1999--
    Mr. Watt. It is a lot more money than from 2002 forward 
though, isn't it?
    Ms. Blom. We are doing the math--
    Mr. Watt. I guess, let me get the bottom line before my 
time runs out. What is HUD doing about that arrearage, because 
there were a number of us who were substantially concerned 
about that. That is why we wrote this provision into the law, 
for housing authorities to make prompt disposition of funds 
from 2002 going forward. And we got a commitment, we thought, 
from HUD at that time that they were going to make an 
aggressive effort to deal with the money that was still in the 
pipeline prior to 2002.
    In fact, I remember the Secretary promising us in response 
to a question that I asked that we was going to give us details 
on each one of those housing authorities, the amount 
outstanding, the status of that. I don't think we ever got that 
that I am aware of. Are you doing anything about that money 
that is in the pipeline?
    Ms. Blom. Yes we are. In--
    Mr. Watt. Tell me what you are doing, and I will shut up.
    Ms. Blom. To answer your first question, the amount of 
funds that is still remaining for those housing authorities 
that were awarded funds in 1993 to 1999 is approximately $500 
million. Those funds--
    Mr. Watt. You mean to 2002?
    Ms. Blom. Yes, sir. To 2002.
    Mr. Watt. Not 1999.
    Ms. Blom. Correct.
    Mr. Watt. From 1993 to 2002. That is the figure you are 
giving me?
    Ms. Blom. That is correct, sir. I apologize. There is about 
$80 million still with the 1994 grantees, and let me tell you a 
little bit about the 1994 grantees. Those group of housing 
authorities--
    Mr. Watt. My time has actually expired. I think since this 
is not the subject of the day, and I am not even a member of 
this subcommittee officially except--
    Chairwoman Waters. Unanimous consent for another minute; I 
am interested in this.
    Mr. Watt. It might be better to get this in writing from 
HUD because--I mean, there was a reason we put this provision 
in the new law, and I think, while I am extremely supportive of 
extending it for one additional year or even longer for those 
areas that were impacted by the hurricanes, there is also a 
very good reason to be more aggressive in pushing housing 
authorities to use the funds that go back historically because 
if they are not going to use them, then somebody else could be 
using them to provide housing in their communities. And from 
1993 to now 2008 is, my math is not good, but that is a lot of 
years, so if you could just provide this to us in writing as 
the Department said it was going to do one time before, I think 
that would be really helpful to the committee.
    Ms. Blom. Yes, we will certainly do that.
    Mr. Watt. Thank you, Madam Chairwoman.
    Chairwoman Waters. You are certainly welcome, and I would 
like to thank our witness, Ms. Dominique Blom, for appearing 
here today, and let me just say, we see a lot of 
representatives from HUD. Not all are straightforward and have 
the information at hand as you have had, and we thank you for 
your testimony here today.
    The Chair notes that some members may have additional 
questions for Ms. Blom which they may wish to submit in 
writing, so without objection, the hearing record will remain 
open for 30 days for members to submit written questions to 
this witness and to place the responses in the record.
    This panel is now dismissed and I would like to welcome our 
second panel. Thank you very much, Ms. Blom.
    Ms. Blom. Thank you.
    Chairwoman Waters. I am pleased to welcome our 
distinguished second panel: Ms. Vivian Bryant, executive 
director, Orlando Housing Authority; Mr. Joyours ``Pete'' 
Gamble, executive director, Housing Authority of the City of 
Daytona Beach; Ms. Nancy McGraw, managing director, Eastern 
Region, Corporation for Supportive Housing; and Ms. Robin 
Keller, vice president of affordable housing development, 
Volunteers of America, testifying on behalf of the American 
Association of Homes and Services for the Aging.
    Without objection, your written statements will be made 
part of the record.
    We will now recognize our first witness, Ms. Vivian Bryant, 
for 5 minutes, for a summary of her testimony.
    Thank you very much.

STATEMENT OF VIVIAN BRYANT, EXECUTIVE DIRECTOR, ORLANDO HOUSING 
                           AUTHORITY

    Ms Bryant. Good morning, Chairwoman Waters, and members of 
the committee. Thank you for inviting us to provide this 
testimony.
    The project that I will discuss is the Carver Court 2002 
HOPE VI grant. Carver Court was built on a landfill in 1945. It 
was 160 units on approximately 17 acres of land. In 1960, 
approximately 52 more units were added to the site, which 
brought the total number to 212.
    The buildings started to sink because the ground underneath 
began to settle, and by 2001, we only had 148 units that were 
still available to be occupied. The United States Department of 
Housing and Urban Development authorized us to relocate the 
tenants and to demolish the building in 2001, and by 2002, the 
building had been demolished--there were 35 buildings.
    The 2002 grant was for $18,084,255 and we had a deadline of 
September 30, 2008, to complete the construction. The 
development was phased into seven different phases, the first 
one being the infrastructure, then offsite improvements, an 
offsite homeownership program, an onsite homeownership program, 
64 elderly public housing units, 56 family rental units, and a 
community supportive services program.
    The original plan had to be revamped because of the impacts 
that we had from several areas. The first impact was that the 
Orlando area was impacted by three named hurricanes in 2004--
Charlie, Jeanne, and Francis. A result of those hurricanes--and 
the three hurricanes were in a 5-week period, and the area was 
considered a total disaster and was declared a disaster by FEMA 
and the President.
    As a result of those hurricanes, we had skyrocketing costs 
of construction and a decrease in the median incomes for the 
total area.
    A third impact was that we found we had impacts on the 
soil. As indicated, the property project had been built on a 
landfill, and while we were installing the infrastructure, we 
found that there was some contamination in the soil. It took us 
27 months of working with the Florida Department of 
Environmental Protection to get an approved plan for removal of 
the debris and the impacted soil. As a part of that 
remediation, we removed 38 million pounds of soil. We had to 
put back 18,000 pounds of new soil, and we had to add 2 feet of 
new soil throughout the whole site in order to comply with the 
plans for the Department of Environmental Protection.
    They did allow us to move forward with the construction, 
but it changed the way we had to look at the site. The 
remediation cost $4.5 million. We received funds from the City 
of Orlando, which gave us $1 million, but we had planned to 
provide 50 homeownership units offsite for low-income home 
buyers. Because we needed that $2 million in order to overcome 
the impacts, we had to abandon the offsite plan and just 
provide the housing onsite.
    At this point, we have about $11 million still at risk. We 
had to apply for tax credits for the remainder of the property 
and if we are not allowed to--if the money goes away September 
30th and we don't spend it, those tax credit dollars will be in 
jeopardy because the HOPE VI funds were used to leverage the 
tax credits.
    HUD has been helpful with us in expending the funds, they 
have suggested ways that we could be able to move the project 
forward, and provided assistance with expeditiously approving 
our waivers--approving budget revisions.
    Thank you.
    [The prepared statement of Ms. Bryant can be found on page 
32 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Next we will hear from Mr. Joyours ``Pete'' Gamble.

   STATEMENT OF JOYOURS ``PETE'' GAMBLE, EXECUTIVE DIRECTOR, 
    HOUSING AUTHORITY OF THE CITY OF DAYTONA BEACH, FLORIDA

    Mr. Gamble. Thank you, Madam Chairwoman.
    The Daytona Beach Housing Authority, in the Year 2002, was 
awarded a grant of $17,242,383. To date, we have expended 
$14,750,317, which leaves us approximately $2,492,066 left. 
Over the course of implementing our HOPE VI we have run into 
the same difficulties as the Orlando Housing Authority.
    We are approximately 50 miles from Orlando, situated right 
on the ocean. Orlando was hit by three hurricanes in 2004. 
Daytona Beach was even luckier; we got four.
    In addition to the four hurricanes that we received in 
2004, as it turns out, the very next year, 2005, we had an 
eagle set up on one of our sites as we were just beginning 
construction. Because the eagle was declared a endangered 
species, we had to stop all work, which ended up costing the 
housing authority somewhere between $4.5 million and $5 million 
in work and costs that had to be completely redone. We had to 
completely re-lay out our site to set aside a portion of that 
property for the eagle. Even though the eagle has been taken 
off the endangered species list, there are some laws that are 
still in place that force the housing authority to continue to 
set aside that property, so we had to go ahead and build a site 
based on the design laid out to set aside property for the 
eagle.
    HUD has been very, very helpful throughout the entire HOPE 
VI effort. I have met with them at least yearly here in 
Washington and we have monthly teleconferences with both the 
headquarters office and our field office in Jacksonville.
    The big thing that hit us, as I mentioned, was the $4.5 
million to $5 million cost that hit us because of the storms 
and the eagle, was that we had to pull all of our HOPE VI staff 
to assist our residents during the storm. Our entire 
administration office was under water.
    We had to move--fortunately, the Hearst Argyle family, 
which owns the local network, was able to put us up in their 
building, and so we are currently still there and we had to 
stop all work on HOPE VI to assist those residents who were 
being affected by the storms, the waters, and things of that 
sort.
    Our specific administration office was under approximately 
1 to 1\1/2\ feet of water, and so we had to totally relocate. 
Many of our files were destroyed or damaged from the storm 
water, the roof was ripped off of our administration building, 
as well as two of our high rises that we have, so we had to 
spend our efforts trying to take care of those residents that 
we already had rather than trying to relocate--
    Everything basically came to a standstill on HOPE VI. We 
had to re-lay out our sites and also look at the design. We 
started out with masonry construction and we went to wood 
because of cost. The cost of concrete, for example, went up 
about 35 percent, which caused the cost of our buildings to 
increase significantly, so even though we were able to build 
the same number of rentals, we were unable to use the 
additional monies that we had originally set aside for 
homeownerships because we had to take those monies and put into 
the rentals to be able to complete those to take care of the 
clients that we were going to be relocating.
    To date, we feel that we have done an excellent job. We 
have the $2.4 million that is left, we have discussed with the 
headquarters assisted, we have submitted an application for an 
endowment to try and meet the deadlines of September 30th. That 
is approximately $1 million. The endowment would allow for 
social services, if you will, and so we are looking at carrying 
on those social services for many years after the HOPE VI 
completes, so that is where we stand at this point.
    I will be happy to answer any questions that you might 
have.
    [The prepared statement of Mr. Gamble can be found on page 
36 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Next, we will hear from Ms. Nancy McGraw.

 STATEMENT OF NANCY McGRAW, MANAGING DIRECTOR, EASTERN REGION, 
               CORPORATION FOR SUPPORTIVE HOUSING

    Ms. McGraw. Chairwoman Waters, Ranking Member Capito, and 
members of the subcommittee, good morning.
    My name is Nancy McGraw, and I am the managing director for 
the Eastern Region for the Corporation for Supportive Housing, 
CSH. I appreciate the opportunity to testify on CSH's views of 
and experience with Federal spending requirements and housing 
and community development programs, and how it might impact 
programs beyond HOPE VI.
    CSH has unique experience as a national organization that 
for the last 17 years has helped communities build permanent 
supportive housing to prevent and end homelessness.
    My testimony today will describe the difficulties homeless 
assistance grantees typically encounter in spending grant funds 
and how CSH and the providers we work with address these 
challenges. I will describe our industry's need for flexibility 
and technical assistance to put together complex projects to 
benefit people in very precarious life situations.
    Regarding the specific issue of the Federal statute that 
mandates the recapture of funds 5 years after appropriation, I 
would suggest that this limit has both positive and negative 
aspects. CSH agrees that it is good government to ensure that 
appropriated funds are put to use within a reasonable 
timeframe, and that 5 years of availability for obligation is a 
good expectation that fosters accountability.
    We would also encourage the subcommittee to consider that 
reasonable and legitimate delays are commonplace and that 
properly applied, flexibility such as granting the Secretary 
the authority to waive the 5-year rule would likely benefit all 
stakeholders.
    While the supportive housing industry is still relatively 
young, extensive data shows that the combination of permanent 
supportive housing, permanent housing and services, is an 
effective method for helping hard-to-serve individuals find and 
keep places to live. The bottom line is that we have come a 
long way in a short period of time.
    Nevertheless, creating permanent supportive housing is a 
very complex process. All stakeholders are becoming more 
comfortable with it, but I would suggest that supportive 
housing production requires even more sophistication than 
typical affordable housing industry and may therefore be more 
susceptible to delays in spending funds.
    Some of the complicating factors include that supportive 
housing production requires partnerships between housing and 
service providers. This housing requires not only capital 
funding but also securing operating and usually scarce service 
dollars. The number of sources can easily reach 7 to 10 or 
more.
    Financing is often leveraged and layered, yet there are 
very few places where all the financing can be assembled 
simultaneously. This results in needing to cobble together 
funding sources, often over several years.
    Acquiring the proper location for permanent supportive 
housing can be difficult due to zoning and planning board 
requirements as well as NIMBYism. Siting woes can escalate into 
lengthy review processes as well as lengthy legal challenges.
    Based on our experience as a community development 
financial institution through which we have made over $160 
million in loans and grants, I can offer an example of these 
challenges.
    In 2001, we made a predevelopment loan to Citizen's Housing 
Corporation to create a 40-unit project in Marin County, 
California. The project had very complex financing, over a 
dozen sources, including McKinney Vento homeless assistance 
grants, involved a zoning change, and it was a historic 
rehabilitation. We stuck with the project as it encountered 
delays and ended up amending the term of this loan 5 times 
based on our assessment that it continued to be a viable 
project worthy of the risk.
    I am happy to report that with some flexibility and 
perseverance we were recently repaid, and the project is in 
construction.
    My written testimony describes several other ways that CSH 
has worked with the partner agencies and with HUD to overcome 
some of the difficulties in putting together projects in a 
timely manner.
    I should note that the HUD SNAPS office should be commended 
for proactively identifying grantees that were vulnerable for 
recapture. HUD has worked with CSH and we have been successful 
in resolving the status of more than 700 unobligated McKinney 
Vento grants, which resulted in 629 grants representing over 
$270 million in funds being obligated before their recapture 
deadline, and 82 grants being de-obligated for a total of $19.6 
million being recaptured to Treasury.
    I will reiterate that we understand the rationale. We would 
like to request that Secretary have that waiver authority or to 
allow communities or HUD to re-use the recaptured funds.
    Thank you.
    [The prepared statement of Ms. McGraw can be found on page 
52 of the appendix.]
    Chairwoman Waters. Thank you.
    Next, we will have Ms. Robin Keller.

STATEMENT OF ROBIN KELLER, VICE PRESIDENT OF AFFORDABLE HOUSING 
 DEVELOPMENT, VOLUNTEERS OF AMERICA, ON BEHALF OF THE AMERICAN 
        ASSOCIATION OF HOMES AND SERVICES FOR THE AGING

    Ms. Keller. Chairwoman Waters, Ranking Member Capito, and 
members of the committee, the American Association of Homes and 
Services for the Aged and Volunteers of America would like to 
thank you for the opportunity to testify on the impact of 
Federal spending requirements on HUD supported programs. The 
members of AAHSA serve as many as 2 million people every day 
through mission driven not-for-profit organizations dedicated 
to providing the services people need when they need them in 
the place they call home.
    I am Robin Keller and I am vice president of affordable 
housing at Volunteers of America. I have been actively involved 
in the section 202 program for more than 20 years. I am also 
responsible for the development of the section 811 program for 
organization.
    Volunteers of American is a national nonprofit faith-based 
organization dedicated to helping people rebuild their lives 
and reach their full potential. In addition, we are also one of 
the Nation's largest providers of affordable housing for 
elderly, families, and disabled.
    We currently have sections 231, 202, and 811 projects in 
operation. We have been funded for an additional 13 projects 
which are in various stages of development. The section 202 
program, like its companion, the section 811 supportive housing 
for disabled program, are outstanding examples of public/
private partnership that maximize efficiency and quality in 
Federal programs.
    When a project opens, the commitment for that unit of 
housing is for 40 years. However, in recent years, the section 
202 program has come under increased scrutiny for pipeline 
delays.
    In its annual budget proposals, the Administration has 
recommended cuts to the program based in part on the argument 
that new programs take too long to move to construction and 
that funds are not expended in a timely manner. HUD's 
guidelines propose that a project reach initial closing within 
18 months.
    However, GAO's report in 2003 shows that actually 73 
percent of the projects in 2003 and prior to that year had not 
reached initial closing in 18 months. Arthur Andersen did an 
independent report that showed that the number was closer to 25 
months, and AAHSA did yet another survey of its members showing 
that timeframe was around 37 months.
    The difficulties that sponsors have in spending the award 
funds are basically two factors, and I am sure it is two 
factors you hear all the time, and that is time and money.
    In the 1970's, 1980's, and most of the 1990's, when HUD 
funded a project, HUD funded the project. There were sufficient 
funds to build that facility. However, funds are increasingly 
decreasing and sponsors are forced to find outside funding to 
fill that gap.
    In 2003, I testified on behalf of Volunteers of America 
before the Senate Aging Committee and noted that approximately 
90 percent of our projects were requiring additional money due 
to insufficient funds allocated at the time of award. Today, 
that number is 100 percent.
    Like most sponsors, once we receive the award, we have to 
find additional funding sources to fill that gap, and that puts 
developers like Volunteers of America at the mercy of the 
application timelines and funding cycles of other agencies, 
specifically the two major funding outside sources are CDBG and 
HOME, both of which come from HUD, and also Federal Home Loan 
Grant, Home Loan Bank, and other foundations.
    A major problem is that the regional cost that HUD 
announces for the funding cycle isn't sufficient to build the 
project. The applications are due tomorrow, and to give you a 
quick example, I contacted the Los Angeles HUD office 
yesterday. Because the NOFA this year shows that there is 
$58,300 to build a new unit of housing, plus a high cost factor 
for Los Angeles of 249 percent. That equates to $145,000 a unit 
to build a housing.
    So I asked HUD yesterday, the last section 202 that you 
closed, what did it cost to build that? They closed a project 
in March, and it cost $149,000 in March, but they are putting 
$145,000 on the table today. So already today, there is a 
$4,000 per unit shortfall, and the project won't be built for 
another 3 years.
    So once you add all the increased costs--labor, 
construction, and land on top of that--there is a huge 
shortfall. That particular project had a $1.9 million 
shortfall. So the amount of time that it takes to get through 
zoning, permitting, building permits, and HUD processes adds to 
the timeframe to get the projects developed.
    If HUD puts sufficient funds on the table, the cost would 
dramatically decrease because we could develop the projects. We 
wouldn't be spending our time trying to apply for CDBG and HOME 
funds that all the other agencies are also applying for.
    And my basic recommendations are that HUD should adopt 
realistic funding levels for the construction of new units and 
fund the projects accordingly. That would eliminate months and 
months of processing and reduce the overall cost for the 
development of the project.
    They should also remove any provisions that cancel funds, 
except for delays that were caused outside the sponsor's 
control--excuse me, within the sponsor's control. In the rare 
case where you have to pull funds because the sponsor either 
gave it back or just couldn't produce, then the money should 
stay with the section 202 program and not be returned to 
Treasury.
    And they should remove any provisions that penalize 
sponsors when you score future applications. If a sponsor has 
to have amendment money or it takes too long, then points are 
taken off for future applications when they go to process for 
the new funding rounds, yet HUD didn't give you enough money to 
build the project in the first place.
    Our service to the elderly community is based on our 
expertise and excellent partnerships with Federal, State, and 
local governments, and we look forward to a strong partnership 
with the U.S. Congress and this subcommittee to provide 
solutions that benefit those in need.
    I thank you for the opportunity to testify and I look 
forward to answering any of your questions.
    [The prepared statement of Ms. Keller can be found on page 
40 of the appendix.]
    Chairwoman Waters. Thank you very much. I now recognize 
myself for 5 minutes for questions.
    I would like to begin with a statement. We held this 
hearing today because of the very, very reasonable and logical 
request from Ms. Bryant and others about the problems that are 
confronting Orlando and other communities, and I think that the 
information that we have heard today certainly supported by 
many of us who understand that there are just unavoidable 
delays in trying to construct these projects. As a matter of 
fact, I have heard some additional delays today that I never 
thought of. I never thought that an eagle could cost us so much 
and create such a delay.
    But I am very, very sympathetic to all of the information 
that I have heard here today, and I am convinced that based on 
the testimony we heard from HUD, that our witness here today 
also is sympathetic and is waiting for the bureaucratic 
response from HUD to support this bill, and I just anticipate 
that we will get that support. I may be speaking out of turn, 
but that is what I anticipate.
    However, I think you have raised additional questions here 
today, not only about extending the length of time to complete 
projects, but you really do raise questions about whether or 
not there should be some flexibility in the law that would 
allow HUD to make decisions based on very real problems without 
us having to go through additional delay in getting the waiver.
    I, too, would question some of what Mr. Cleaver alluded to 
today about technical assistance. We didn't talk about it a 
lot, but we will address this issue with HUD.
    One of the things some of our members have real problems 
with is spending a lot of money on consultants when it doesn't 
make good sense to do so, and we don't know if this is the case 
or not, but we certainly don't want consultants to substitute 
for extensions that certainly are needed, and we do believe 
that when the projects were initially agreed upon, that 
evidently you showed the expertise and a plan that was 
acceptable, which shows that you can, in fact, complete these 
projects given you are not interfered with these unavoidable 
delays.
    So I for one am certainly supportive and would hope that 
this committee would join with me in moving very quickly to 
take this bill to the Floor, and also would hope that we could 
get the support from both sides of the aisle to place it on 
suspension so that we do not delay in getting these waivers.
    With that, I will yield to our ranking member, Mrs. Capito.
    Mrs. Capito. Thank you, Madam Chairwoman, and I too would 
support this bill on the Floor and for suspension to help gain 
the flexibility that I think has been demonstrated through your 
testimony.
    Help me out here with the financing. Ms. McGraw, you 
mentioned that there is a layer of financing on all these 
projects, and Mr. Gamble, I believe your project was $17.2 
million HUD. What other funding sources beside HUD sources, 
because Ms. Keller mentioned CDBG and HOME, is there private 
financing? And Mr. Gamble, maybe you could then say how the 
rest of your project was--
    So Ms. McGraw, if you would start talking about the 
layering, and then Mr. Gamble, give me a real life example.
    Ms. McGraw. Absolutely. The financing layering for 
supportive housing tends to include McKinney Vento funding--
    Mrs. Capito. That is HUD, right?
    Ms. McGraw. HUD funding. It will also include some HOME 
being administered locally. Low-income housing tax credits are 
used very often.
    Then on the operating and service side, those funds may 
come from local sources like a department of mental health or 
AIDS services or--
    Mrs. Capito. But those can't be construction funds?
    Ms. McGraw. Excuse me?
    Mrs. Capito. Those aren't construction funds.
    Ms. McGraw. For service funds, not for the construction. 
The construction funds may also come from a local bond 
initiative or a local housing trust fund.
    Mrs. Capito. Generally speaking, are those funds phased in 
over a 5-year period, McKinney Vento or HOME, or are they year 
to year? I am trying to get a feel, is that the reason the 
Federal funding might be stacked up in the back end, or is it 
because everything else has to be expended first, and is that 
the case here?
    Ms. McGraw. It is actually an issue of acquiring the 
funding before you can even start to spend it. So for 
supportive housing projects, they may acquire the McKinney 
Vento or HUD funds first. They may acquire them a little bit 
later in the process, but in order to actually start the 
project, they will need to have secured funds for the majority 
of the capital before they even get started, so it doesn't even 
get to the question of which money they spend first.
    Mrs. Capito. Okay.
    Ms. McGraw. Once they assemble it and then can spend it, 
they can spend those funds simultaneously.
    Mrs. Capito. Okay. Mr. Gamble, what was the layering of 
funding in your project? I know it is ongoing.
    Mr. Gamble. Mrs. ``Capito,'' is that correct?
    Mrs. Capito. It is ``Capito,'' but that is okay.
    Mr. Gamble. The 1.7, what we did, we went out and we were 
able to achieve two tax credit awards in 1 year, which is kind 
of unheard of in the State of Florida, and especially for a 
housing authority to get--somehow, there is this belief that 
somehow housing authorities shouldn't be in the tax credit 
business. But we were able to get tax credits to supplement the 
funding for our construction.
    In addition, we were able to get the City of Daytona Beach 
to contribute $1.6 million for all of the infrastructure work. 
The County of Volusia, which is where Daytona Beach is, also 
contributed funds.
    Things like licensing permits, which can be very expensive 
costs, were being waived or have been waived for the 
construction, and so you add those type things together and it 
comes to a pretty significant amount of monies that we were 
able to achieve.
    In addition to just the, I refer to it the sticks and 
bricks or the mortar, we were able to get agencies in the area 
to provide services, and the number I am going to give is over 
two HOPE VI programs, so between the two, the total package 
adds up to close to $200 million worth of additional dollars 
that were able to come into the program.
    Mrs. Capito. Okay, so just quickly here, on the 
construction side, of the total construction cost, what was 
that number, of this project? Is it $20 million?
    Mr. Gamble. The total construction cost is probably closer 
to about $33 million.
    Mrs. Capito. So the HUD funds here, the HOPE VI funds, are 
basically about half?
    Mr. Gamble. Yes.
    Mrs. Capito. Alright, thank you.
    Chairwoman Waters. Thank you very much. Mr. Cleaver.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Ms. Bryant, on page three of your testimony, you talk about 
the unexpected need for removal and remediation of impacted 
soil. When this project first began, was it designated by HUD 
as a brownfield?
    Ms. Bryant. No, it wasn't.
    Mr. Cleaver. Well, did you have HUD approval to begin 
construction on this site?
    Ms. Bryant. Yes, we had done phase one and phase two 
environmentals, and those environmentals showed that there 
wasn't any concern. In fact we had done a couple of them, and 
it wasn't until we started to remove the debris underneath that 
we found that there was a problem. We believe that it had, in 
the 1920's, been an oil gasification plant or something near 
that was dumping there, but all of our preliminary and due 
diligence test showed that the site was okay.
    We didn't qualify for a brownfield, and I don't recall why 
right now but I know we did look into it, and it was not 
designated as a brownfield.
    Mr. Cleaver. So it was approved by the State environmental 
protection and HUD?
    Ms. Bryant. Yes. Our remediation plan was approved.
    Mr. Cleaver. How much has that cost you?
    Ms. Bryant. $4.5 million in additional costs.
    Mr. Cleaver. And those dollars were actually grated by non-
governmental entities?
    Ms. Bryant. Well, the City gave us approximately $1 million 
and--
    Mr. Cleaver. Of CDBG?
    Ms. Bryant. I have forgotten which funds they were, but 
they did provide $1 million to assist us.
    And then we had abandoned--we had already begun to 
implement our offsite strategy of providing second mortgages 
for homebuyers to purchase homes, and we had nine in the 
pipeline. We had wanted to do 50, but HUD approved for us to 
use the additional monies, the monies that would have paid for 
the additional homebuyers, to use that onsite, so that gave us 
an additional $2 million. And then as fate would have it, the 
Florida Department of Transportation purchased 16 of our units 
and we received $4 million from them, so we used $1 million 
from that to make up for the difference.
    Mr. Cleaver. Now, you know what this new legislation that 
we are discussing is aimed to do?
    Ms. Bryant. Yes.
    Mr. Cleaver. Do you believe that you can spend your HOPE VI 
dollars by September 30th?
    Ms. Bryant. If we have complete cooperation--what we had to 
do was, we had to seek tax credits because of the problems that 
we encountered, and the--
    I misstated, it is not $11 million, we spent $11 million, 
we have about $6 million, $6.9 million that we still have to 
spend. And our strategy is to provide a bond redemption for 
about $4.7 million, which is where we would use the HOPE VI 
funds to pay off the bonds, and then we have on another 
project, phase F, we will spend about $1.6 million.
    So what we have in jeopardy, if those strategies work, is 
$579,000. But if we are not able to use those funds to pay down 
the construction and the bonds, then we will have about $6.9 
million that we will lose.
    Mr. Cleaver. Do you need a consultant?
    Ms. Bryant. No. We have had technical assistance from HUD 
and they have expeditiously worked to try to make this plan 
work for us and--
    Mr. Cleaver. Okay. Mr. Gamble, do you need a consultant?
    Mr. Gamble. At this point, no, we don't need a consultant.
    Mr. Cleaver. I have been so frustrated today trying to find 
out why we have put money aside for consultants, and based on 
the fact that I was mayor and did run a housing authority, I 
can't understand what we need consultants to do. And so since 
the two of you are directly impacted, I thought maybe you could 
help us find out the value of some technical assistance at this 
point. Can you speculate?
    Ms. Bryant. A consultant could help us with strategies to 
spend the monies. At this point, we are so close to the 
deadline that we just need some assistance with being able to 
get these monies expended within the deadline, and to make sure 
that we are able to get the HOPE VI funds spent upfront. And 
HUD has been working with us to do that. In fact, they informed 
us we have two approvals that they have made just yesterday.
    Mr. Cleaver. Ms. McGraw, are you going to shed some light 
on this?
    Ms. McGraw. I would like to.
    Mr. Cleaver. Thank you.
    Ms. McGraw. I do think that when you only have a couple of 
months left, there is not a lot that a consultant could offer 
that you haven't already thought through, but if you can go 
back further, when we have worked with HUD on the unobligated 
grants, we started about 9 months ahead of time and reached out 
to those, and you will see that we had a tremendous amount of 
success. That work was not extremely elaborate technical 
assistance, it wasn't very deep technical assistance, but it 
did enable the groups to make sure that they had all of their 
funding resources lined up and that they would be able to 
obligate and meet the technical submission requirements for 
HUD.
    I think that going back even further, we have been 
successful in offering technical assistance before grantees 
even apply. After they apply for HUD resources to help them 
assemble the other financing that they would need and 
understand how much funding they need, what do they need to put 
together, and how to do effective project management.
    There are, beyond government agencies, a number of 
nonprofits that are administering and seeking funds, and so I 
think the nature of the technical assistance certainly varies 
depending on how sophisticated and how much they have worked in 
that area.
    Mr. Cleaver. Thank you. We had a section 202 project 
submitted in my congressional district, and it was turned down, 
and then HUD told the applicant that they needed to hire a 
consultant and gave them a list of three. Needless to say, the 
following funding cycle, the Harvest Church received the 
section 202 grant. I am just always interested in these 
consultants and why they are necessary, especially at this 
short period of time.
    So I do have some other questions, but I appreciate the 
candor that you presented in your comments. Thank you.
    Chairwoman Waters. Thank you very much.
    There are no other members present who raised questions of 
this panel.
    I would like to thank the panel for being here today, for 
taking time from your schedules to come and place on the record 
the difficulties that you are having in spending the money in 
the short period of time that you have left. I think that the 
obstacles that you have been confronted with are understood by 
us, and your reasons for wanting to get our assistance are very 
logical, and again, I think you will get that support from this 
committee.
    With that, 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, this panel is now dismissed.
    Before we adjourn, without objection, the written statement 
of the Cherokee Investment Fund will be made a part of the 
record of this hearing.
    Thank you. The hearing is adjourned.
    [Whereupon, at 11:13 a.m., the hearing was adjourned.]


                            A P P E N D I X



                              July 9, 2008


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