[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
THE ECONOMIC DISASTER AREA ACT OF 2009
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 19, 2009
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-48
U.S. GOVERNMENT PRINTING OFFICE
52-405 WASHINGTON : 2009
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
C O N T E N T S
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Page
Hearing held on:
June 19, 2009................................................ 1
Appendix:
June 19, 2009................................................ 25
WITNESSES
Friday, June 19, 2009
Cardoza, Hon. Dennis, a Representative in Congress from the State
of California.................................................. 4
Costa, Hon. Jim, a Representative in Congress from the State of
California..................................................... 6
Johnson, Bill, Director, Alabama Department of Economic and
Community Affairs, State of Alabama............................ 11
Jones, Hon. Tommy, Mayor, City of Los Banos, California.......... 9
APPENDIX
Prepared statements:
Johnson, Bill................................................ 26
Jones, Hon Tommy............................................. 30
THE ECONOMIC DISASTER AREA ACT OF 2009
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Friday, June 19, 2009
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 1:25 p.m., in
room 2128, Rayburn House Office Building, Hon. Barney Frank
[chairman of the committee] presiding.
Members present: Representatives Frank, Waters, Watt,
Sherman, Moore of Kansas, Clay, Green, Kilroy, Peters, Maffei;
Bachus, Biggert, Hensarling, McCarthy of California, Jenkins,
and Lance.
Also present: Representatives Cardoza and Costa.
The Chairman. The hearing will come to order. Mr. Costa,
would you take the witness stand right in front of you please?
I'm sure Mr. Cardoza is on the way. I have explained to people
that we had the very solemn process of an impeachment opening
up. And so let me now officially begin this hearing. We are
joined by the senior Republican, Mr. Bachus.
The economic crisis that confronts us is nationwide, but it
obviously does not apply uniformly in the Nation. We are a very
large country with differing patterns of economic activity. And
there are places that have been hit unduly hard through no
fault of their own. The part of California represented by our
colleagues, Mr. Cardoza and Mr. Costa, has been hit as hard as
any. And we believe, many of us, that it is entirely
appropriate for us to recognize that we are one Nation and to
reach out.
There are programs that subsidize public transportation in
some parts of the country and other parts don't have it. There
are programs that provide agricultural subsidies for crops that
are not grown in much of the country. There are a variety of
programs that help people in distress when there are natural
disasters, we go to the aid of the people in that geographic
region. We have, for the people in the areas represented by
Representatives Cardoza and Costa, the equivalent of a
prolonged national disaster in its economic impact, and we
think it is appropriate of the Federal Government to respond.
So we have asked our colleagues to join us today because we
are having a hearing on legislation which they have drafted and
they prepared. And I can tell you that I have spoken with the
Speaker of the House and with the Secretary of HUD and others.
There was a wide recognition of the legitimacy of the points
that our colleagues have made and this is the beginning of a
process in which I hope there will be some response.
The gentleman from Alabama.
Mr. Bachus. Thank you, Mr. Chairman, for holding today's
hearing. And I welcome Congressman Cardoza and Congressman
Costa, two very capable Members of the House, and look forward
to your testimony. It is also a pleasure for me to welcome Mr.
Bill Johnson, who will be testifying on our second panel of
witnesses and welcome also back to the Financial Services
Committee. We had the honor of his expert testimony last year
at a Housing Committee hearing on the Gulf Coast Recovery
Effort. Bill has an impressive record of service to the
citizens of Alabama. In November 2005, Governor Riley appointed
Bill as director of the Alabama Department of Economic and
Community Affairs, ADECA. ADECA manages hundreds of millions of
Federal grant dollars each year with some 230 employees. He
also serves as the executive director of the Black Belt Action
Committee, State alternative for the Appalachian Regional
Commission, and State alternative to the Delta Regional
Authority. We thank Bill for being here and look forward to his
testimony.
The Economic Disaster Area Act of 2009 attempts to solve
the problem of rising unemployment and mounting declines in
home prices by calling on the Community Development Block Grant
program, CDBG, to set aside funds for economic disaster areas.
I certainly sympathize with my colleagues from California and
their efforts to address the financial hardships in their
congressional districts. And I know that they are sincere.
But I do have concerns that redirecting funds from the CDBG
program may have unintended consequences for the overall
program. CDBG funds are vital to the States. And finally, $1
billion in CDBG funds were made available by this year's
stimulus package. Unfortunately, expectations have not lined up
with reality when it comes to getting stimulus funds out the
door, and I know this is probably a problem in your districts
as well as mine.
In Mr. Johnson's testimony, he describes a process for
distributing stimulus funds and the time it takes for the money
to actually go to work in the local economies. I did vote
against the stimulus bill, because I truly believe there are
better ways to stimulate our economy. With that said, I would
like to commend officials back in Alabama, the Governor and Mr.
Johnson and others, for providing a dedicated Web site with
information about all the projects funded by the stimulus. And
some of these will obviously be of help.
I think it is important for taxpayers to know how their
stimulus funds are being used in real time.
So I thank Congressman Cardoza and Congressman Costa as
well as Mr. Johnson for their testimony and look forward to
hearing from them and our other witnesses.
The Chairman. The gentleman from California, a colleague of
our two congressional witnesses, is recognized for 2 minutes.
Mr. Sherman. Thank you, Mr. Chairman. Thank you for holding
this hearing. I have learned in my many conversations with Mr.
Cardoza and Mr. Costa what is happening in our Central Valley.
I would be aware of it without their input but they have
brought it home to me in example after example. I don't know
what is the right policy to do something about it. But I do
know that what has hit the Central Valley and other parts of
California and some other parts of the country is every bit as
great a disaster as the natural disasters that the Federal
Government has responded to in the past.
So I especially thank the chairman for holding these
hearings, and I yield back.
The Chairman. The gentleman from Texas for 3 minutes.
Mr. Hensarling. Thank you, Mr. Chairman. Thank you for
holding this hearing. I first want to commend my colleagues
from California. I have no doubt that their particular
districts have a lot of suffering, have a lot of human misery,
and they are putting forth a public policy that they think is
best to help their districts. I know it is a sincere effort.
They should be commended for it. I do have a number of
questions though about the approach and wonder if the approach
of the legislation is indeed the best.
Number one, unfortunately, in this economy, I don't believe
there is any one individual, one city, one county, or one
company that has a monopoly on human misery. Throughout our
entire economy, people are suffering. And although the
unemployment rate in these communities are higher than the
national average under this formula, I think the unemployment
rate that really counts is the unemployment rate in your
household, which doesn't necessarily know geographical
boundaries. That is where I believe that assistance should most
be focused.
We have to remember, I know this would enlarge the
definition of who could apply for CDBG funds. I know that, at
least initially, it doesn't perhaps add to the financial burden
of the taxpayer. But as I look at history as my guide, the more
people who qualify for the program, it is a matter of time
before the expense of the program is going to go up. And I look
around at $700 billion spent for the initial bailout money,
$1.3 trillion for the stimulus plan, $410 billion for the
omnibus, and now we have a proposed health care plan that could
cost $1 trillion, and we are looking at a Federal debt that
will increase three-fold, triple in 10 years, more Federal debt
than created in the previous 220, and at what point do you get
concerned that we are borrowing money from the Chinese, we are
borrowing 46 cents on the dollar, and we are sending the bill
to our children and our grandchildren.
I also wonder if all communities are created equal in the
responsibility in which they undertake, some communities may
have funded extra golf courses where some didn't. Should a
frugal community have to subsidize a nonfrugal community?
Again, I think there are better ways to promote hope, jobs,
and opportunity within our communities and within our country.
I look forward to hearing the testimony of our witnesses and I
yield back the balance of my time.
The Chairman. We will now begin with seniority as we do
around here when there is no other reason to pick with our
colleague from California, Mr. Cardoza, who has been a strong
advocate for effective action, both nationally and particularly
with the region he represents.
STATEMENT OF THE HONORABLE DENNIS CARDOZA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Cardoza. Thank you, Mr. Chairman. As I begin today I
would like to submit for the record two documents that detail
some of the challenges that are faced by my district.
The Chairman. Without objection, all material that any of
the witnesses wish to submit will be incorporated into the
record.
Mr. Cardoza. Thank you, Mr. Chairman.
Members of the committee, thank you for holding this
hearing and for having me here today. Generally when people
think of California, they think of Disneyland, the beach,
Malibu, San Francisco, Yosemite National Park. The Central
Valley of California and my district might be referred to as
the ``other California'' where we have drought stricken farms
and vacant homes. In place of movie stars and beaches, we have
block after block of abandoned buildings. You see one of those
subdivisions right here.
We are proud to grow more than half of the Nation's fruits
and vegetables and tree nuts. Every house that can afford one
still flies the American flag on the 4th of July. As many of
you have heard me say repeatedly, my district in central
California, in particular the communities such as Merced,
Modesto, Stockton and you will soon hear from the mayor of Los
Banos, need help. We needed help 6 months ago. We needed help 1
year ago.
What has been put forward to fix the rest of the country is
not enough to help us back home.
Just this week, the Brookings Institute released a study
that placed the three communities in or near my district among
the bottom 10 weakest performing metro regions nationwide. What
has become of our region of California is nothing short of an
economic disaster. I am here to ask you--no--I am here to plead
with you to provide the relief we desperately need. My
constituents have lost their homes. They have lost their jobs.
And they have lost their hope. They are looking to Washington
and all of you for help. We need Federal assistance, and we
need it now. When Hurricane Katrina devastated the Gulf Shore,
our Nation watched in horror as victims lost their jobs and
their homes.
Mr. Chairman, members of the committee, I have been saying
for quite some time that the devastation in my district is very
similar to that of Katrina, but was not caused by one extreme
event over the course of a couple of days. In the Central
Valley of California, we too have lost our jobs. We too have
lost our homes. However, there has been no rescue operation. In
fact, my constituents receive far fewer resources from the
Federal Government than almost any region of our Nation.
Regardless of whether your property ends up on the front
lawn due to a storm or to an eviction marshal, you are still
homeless and your property is still in the front yard. Can you
imagine your family is evicted from your home and your child
looks up at you and asks, Daddy where are we going to stay
tonight? And starts to cry when she sees her favorite baby doll
thrown out on the sidewalk. It is happening every day where I
come from.
Despite the collapsing economy and rising crime, higher
poverty levels in my district, the Central Valley receives only
half the national average of Federal dollars per capita.
According to the Census Bureau, in 2008, the Federal Government
disbursed an average of $8,475 per person across the country.
In my congressional district, we received less than half of
that. In Merced County, the number is 47 per capita, Stanislau
County received 45, and San Joaquin County received 48. We
can't cope with the situation that we have and not receive
additional help.
I understand, Mr. Hensarling and others, that our entire
Nation is hurting right now. I get it.
But the fact is, we are hurting much, much worse. When
Federal Government disaster designations are declared, it is
because the State and local governments cannot cope with the
devastation that has been left in the wake. That is exactly the
situation in our district. More than 13 percent of our
mortgages remain in foreclosure, with 3 cities in my district
having the 2nd, 4th, and 6th highest foreclosure rates in the
country. Home values have plummeted 42 percent in my
communities in the last year, the last 12 months, and nearly 70
percent since the high of 2005.
Despite the best efforts of the Obama Administration, our
homes are so far underwater that we don't qualify for
assistance. The 3 biggest cities in my district are in the top
11 nationwide for unemployment. My constituents, the ones who
still have work, make 33 percent less than the average American
worker. Small businesses and neighborhood restaurants which
were once packed with customers are now empty and shuttered.
Our longest-serving community bank was swept into the
foreclosure crisis and closed. On top of that, my dairy farmers
are in crisis and we have the worst drought in the country.
Chairman Frank, members of the committee, my district in
the San Joaquin Valley is on the brink of falling off the map.
I could stand before you and rattle off statistics all day, but
we have entered them into the record instead. Every single
economic indicator points in the same direction. California's
Central Valley is in economic free fall and economic disaster,
if you will.
In meeting after meeting, I have told my friends in
Congress that the solutions we have been pursuing simply aren't
working for areas like mine. Today I am presenting one of my
ideas of providing additional assistance to those who need it
most. And I am looking forward to hearing your suggestions for
ways to improve this idea and help me get it passed into law so
my communities and others like them around the country facing
dismal unemployment rates and alarming foreclosure rates can
get the help they need.
The bill we are discussing today seeks to create a
permanent program within CDBG that would provide an additional
safety net for the hardest-hit areas, cities and towns across
the country use CDBG funds to rebuild communities, create
economic development, provide housing to lower-income
individuals. While in my district like others like it, more
qualify as lower income communities than any place else. And
now the local governments, and you will hear from Mr. Jones,
are more cash strapped than ever. In his case, he is cut 50
percent of his budget. And in order for them to keep the doors
open, they need help.
I am going to truncate my remarks and just say that we are
looking for additional ways to fund CDBG money, not to cut
other people's funds. We are trying to figure out ways to be
creative in that. I am working with the chairman on those
questions.
Mr. Chairman, my district will not overcome this overnight.
It will take unprecedented action to help us rebuild and
recover. But on behalf of my constituents and from the bottom
of my heart personally, I want to thank you for the work that
you have done and for the assistance and the advice that you
have personally given to me. I am eternally grateful to you for
holding this hearing. I look forward to hearing from my
colleagues on ways we can improve this bill. And I look forward
to working with you as we hopefully schedule a mark-up, maybe
in July or when you can put it on your calendar. Thank you very
much.
The Chairman. Thank you, Mr. Cardoza.
Mr. Costa.
STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Costa. Thank you very much, Mr. Chairman.
I want to acknowledge the hard work that you and your staff
have done, both the Majority and the Minority members and
staff, to hold this legislation, this important legislation,
for the San Joaquin Valley that includes Congressman Cardoza's
district and mine and others that have been so impacted as a
result of a combination of factors.
Clearly on the outset of your comments, both the ranking
member and Mr. Chairman, you talked about the deep-felt
recession around the country, and that is obviously clear to
everyone. Every part of the country is suffering. But what you
need to know that I think makes it a bit of a distinction in
the case of the San Joaquin Valley, is three factors, a
combination of 3 years of drought combined with the fact of a
meltdown of the dairy industry and of housing foreclosures that
have led the Nation compounded together have created a
circumstance in which we have unemployment numbers that have
gone from the single-digit levels a year ago to now it is 16
percent, 18 percent, 20 percent.
I have a city in my district, Mendota, that has the highest
unemployment levels in the State, 42 percent unemployment; Fire
Ball, 38 percent unemployment; Delano, the home of Cesar
Chavez, with over 50,000 people and 4 high schools, has 34
percent unemployment. When one-third of the people in your
communities and a similar number in your counties do not have
jobs, that is depression numbers. We have moved from deep
recession in the communities that Congressman Cardoza and I
represent to depression unemployment numbers.
It is compounded because there are two major industries in
the valley, in the wonderful San Joaquin Valley that we are so
proud to represent. They are agriculture and housing, and they
are both in the tank.
I am sad to tell you these illustrations point out part of
the picture, and I have others that we could have brought of
food lines. Because of the drought, some of the hardest working
people you will ever meet in your life who would normally be
working today to put food on America's dinner table sadly are
in food lines, the irony of that because there is no water, no
water to grow food, without the ability to grow, we have no
jobs.
This bill would provide the President with the ability to
declare certain counties economic disaster areas. To be
eligible, the counties should have high rates of both
unemployment in the county and home value declines as
Congressman Cardoza and your staff have worked on this
legislation so well. These areas would be targeted for relief
for job creation programs, economic development projects,
rehabilitation of low-income housing units, helping to put
people back to work and to revive local economies. Congressman
Cardoza and I are here to fight for farmers and farm workers
and the farm communities of the San Joaquin Valley.
The ranking member noted about the impacts of the CDBG
funds. It is important to note that this legislation would not
rob other communities of their allocated funds. We obviously
are sensitive to the plights of this deep felt economic
recession around the country. But it would supplement them when
extenuating circumstances warrant this as in the cases of these
communities and other communities I would add in Detroit and
other places where it is similarly felt.
Economic disasters are no less devastating than a tornado,
a flood, or an earthquake. But I will tell you what is
frustrating for Congressman Cardoza and me. You see a tornado.
It is television friendly. It is sad. It is awful. You see a
hurricane as in New Orleans and people immediately see the
disaster. A 3-year drought is not television friendly. People
go, oh, well, you know, people are still there. Oh, yes, they
are there, but they don't have jobs and the communities suffer.
This is a powerful tool if this committee passes this
legislation for areas like ours where unemployment has shot
through the roof, the ability to undertake pending projects,
put people back to work, help them keep from losing their homes
under the foreclosure rates that Congressman Cardoza stated.
The Central Valley of California is not the only area that has
been ravaged by this nationwide recession. But we have
extenuating circumstances that we have described to you.
Counties in Michigan have also been severely impacted. But
it is important to note that all of our regions throughout the
country sometimes rely on one industry or another, and that is
the case for the San Joaquin Valley with agriculture and
housing. Local governments and State governments, particularly
in California, we know are in the tank. They need additional
support. And I think the Federal Government, just as I
supported the efforts with Katrina, supported the efforts that
have been devastated in the Midwest and otherwise, we want the
same level of support for the communities that we represent.
This legislation clearly is not a silver bullet. We have to
do a lot of other things. But it will go a long ways toward
helping deal with the regional economic challenges that we not
only find in our San Joaquin Valley, the farmers and farm
workers and farm communities that we are fighting for, but also
for economic challenges that are felt across the Nation.
Again, Mr. Chairman, and the ranking member, members of
this committee, thank you, thank you again for your
sensitivity, for your efforts to hold this hearing and to help
us help people whom we represent as we deal throughout this
great country of ours with the economic challenges that we face
today.
I would like to ask for the record to enter a University of
California Davis study that talks about and substantiates these
impacts.
The Chairman. Without objection, everything will be put in.
Thank you. I think we will excuse our colleagues now and call
up our second panel, and we will have a chance to ask questions
of them.
I say that because we have a chance to question our
colleagues during the time. We may lose our ability to do this
because of the impeachment so. Did you want to--
Mr. Bachus. I would like to say something.
Let me say this, both Members, and I mean this sincerely, I
am stunned by the testimony and by the mayor's testimony of Los
Banos. I acknowledge upfront that most of our hurricanes and
all of our tornadoes do not inflict this kind of damage on our
communities. This is an unbelievable thing.
The Chairman. It is the long-lasting duration. It is the
duration.
Mr. Bachus. This is the perfect storm. And so I want to
express to you, Devin Nunes, Congressman Nunes, with the
diversion of 500,000 what is it, a tremendous amount of water,
500 acre feet of water, my gosh which has dried out part of the
central valley, San Joaquin Valley, and both of you supported
his amendment. And I will say that actually personally to me--
had you voted against that, which caused an economic
devastation there, and then you come out and ask for this, you
know, I might have asked you about that. But you supported
that. That is causing some tremendous problems. So I just want
to commit to the chairman, now I don't know that it is this
legislation, but I want to commit to both you gentlemen and to
the chairman that this side of the aisle stands ready to work
with you.
Mr. Cardoza. Thank you.
Mr. Bachus. I am not just saying that. I sincerely mean it.
Mr. Cardoza. You always have, Mr. Bachus, and I appreciate
the friendship and the collegiality you are extending. We
wouldn't be here asking if it wasn't an absolute necessity. The
Central Valley delegation has a tradition of working together
across party lines to try and do the right thing for our
districts and what we believe is the right thing for our
country. And we embraced Mr. Nunes yesterday as we always do.
In the valley, that is our culture, and we just want to get it
right.
Mr. Bachus. Property values dropping 55 percent is just
incredible.
The Chairman. We want to move on to our witnesses, but I am
impressed that Mr. Costa and Mr. Cardoza and Mr. Nunes have
crossed party lines. Maybe one day they will cross ethnic lines
as well.
Mr. Costa. The Portuguese caucus.
The Chairman. Obrigado to my witnesses and we will call--
Mr. Costa. Oh, muito obrigado.
Mr. Cardoza. Muito obrigado.
The Chairman. We will ask Mr. Johnson to join Mayor Jones
at the witness table.
We have, as mentioned, Mayor Jones of Los Banos, and Mr.
Bill Johnson--who is here at the request the ranking member--
who is the director of the Alabama Department of Economic and
Community Affairs.
Let's begin with Mayor Jones.
STATEMENT OF THE HONORABLE TOMMY JONES, MAYOR, CITY OF LOS
BANOS, CALIFORNIA
Mr. Jones. Good afternoon, Chairman Frank, and members of
the Financial Services Committee.
I thank Congressman Dennis Cardoza for asking me to come
speak with you today because he is tired of my calling him
asking him for assistance for my community.
Hello, I am Tommy Jones, mayor of Los Banos. For those of
you who don't know where Los Banos is, we are the smallest town
of 36,000 in the heart of central California. We are the small
town that grew overnight to almost 3 times our size when
residents in San Jose and the South Bay discovered we had
affordable homes. We are the community that watched our home
prices escalate to the point many of our hometown residents
could not afford a house. We are the community that tried
desperately to stay ahead of the curve of the boom, tried to
charge the right fees so growth could pay for itself, and tried
to anticipate the what-ifs of economic change. And today, we
are the community that had made the LA Times, New York Times,
Small Biz Magazine and Wall Street Journal because we are the
hardest-hit community by this economic disaster.
One in every five homes in Los Banos is either in
foreclosure, has been foreclosed upon, or is about to go into
foreclosure. Our unemployment rate is over 21 percent. The
foreclosure rate is so high that when we applied for COPS
funding, the Federal office called to see if we had made a
mistake on our application. We didn't.
We are small town America facing an extreme financial
hardship, and as mayor and keeper of my City, I am here to ask
for help. The Economic Disaster Declaration is a tool for
cities like Los Banos who on the surface may appear healthy but
in reality are suffering from an economic crisis as disastrous
as Hurricane Katrina.
Let me see if I can paint you a picture of what it is like
in our community. We sit in the middle of cotton and tomato
fields. Up until 10 years ago, most of our residents were in
one way or another connected to agriculture, education, or
government. Today, a large portion of our community drives more
than an hour or an hour-and-a-half to the South Bay to work.
Since the bust in the economy, many of those drivers have been
laid off and with those layoffs came the loss of their homes.
Loss of homes has meant an increase in our homeless; our
homeless shelter now serves entire families two meals a day.
Loss of homes has meant a steep decline in property and sales
tax. Loss of sales has meant the closing of long-lived and new
businesses in and a decline in police and fire services because
of a loss of tax revenue.
But it doesn't stop there. As I mentioned, we are an ag-
based community. We are one of the communities faced with water
shortages for our farmers. Water shortages mean less fields are
planted. Less fields planted mean layoffs of farm laborers.
Layoffs mean loss of homes. You see where I am going with this.
Our building construction community is now unemployed.
Our banks have stopped lending. Commercial projects are
currently stalled because they cannot get additional bank
lending, even those companies that have perfect credit and have
been in business more than 10 years. As a City, we have no
money to assist.
And I am still not done. Wednesday night, we were to
approve our fiscal year budget. This year's budget was based
upon a 35 percent reduction in property tax; 35 percent. This
is on top of last year's decrease of 15 percent.
But here comes the kicker. Before the Council meeting
started, we received word from the County of Merced that our
property taxes had not dropped 35 percent as predicted, but an
unprecedented 55.27 percent. That means our staff will have to
cut an additional $450,000 from the general fund.
We have already had to cut law enforcement and fire
positions. We have laid off personnel to the point those still
employed look frazzled from the workload. We have reduced
services, supplies and stopped future projects because we were
out of money, and now we have to try to find another $450,000
in cuts.
Our sales taxes are down. We lost two car dealerships last
year. Our property tax is 55 percent below what it was last
year. One in every five homes is in foreclosure. Our
unemployment rate is more than 21 percent. Our homeless
population now includes complete families. We need your help.
Our community, our county, tends to get overlooked. We are
rural. We are small. We are laid out between wetlands and ag
lands. But our needs for our citizens are not any smaller than
the needs of those who have faced hurricanes or floods. We
cannot provide enough fire and police to protect our citizens,
but we may not qualify for COPS funding because we don't have
the same large crime statistics as cities like San Francisco,
Oakland, or Chicago.
We have the highest foreclosure rate in the country but did
not receive Federal stimulus dollars because of the HUD
formula. Instead, we had to wait for the States's allocation,
and I might add, we are still waiting.
This is why I am here, to plead, to beg, and to pray for
the Economic Disaster Declaration legislation. We need help.
And we need it now. Our businesses cannot qualify for loans
even though they have been in business 10, 15, even 20 years.
CDBG funding given to our area because of our plight would
provide them an opportunity to keep their doors open and stop
the hemorrhage of unemployment. CDBG funding to assist people
purchasing homes would help decrease the number of vacant
neighborhoods and crime associated with those vacancies.
Please think about Los Banos when you look at this
legislation and think again about our numbers; in just 2 years,
a 70 percent decrease in property tax; more than 21 percent
unemployment rate; and 1 out of every 5 homes in foreclosure.
This Wednesday marked a day when our City had to face the
fact that we have no place else to go. We have bottomed out.
Without your help, without a tool such as the Economic Disaster
Declaration, what will cities like Los Banos do?
I am Tommy Jones, mayor of Los Banos, and on behalf of my
community, I am asking you to vote yes for this legislation.
Please give our community a chance.
And let me close with this. The last election was probably
the greatest election that I have considered in my lifetime,
being a young boy who grew up in the South where going through
back doors was common, been a young man coming from my second
tour of Vietnam and coming home with my friends, and I was not
allowed to go into the same place that they were. I know what
it feels like to be a second class citizen. But the citizens of
my community now are experiencing that. And they are begging
and praying for your help. Thank you very much. Thank you so
much.
[The prepared statement of Mayor Jones can be found on page
30 of the appendix.]
The Chairman. I invite our colleague, Mr. Cardoza, to join
us, there being no objection, on the platform if he would.
STATEMENT OF BILL JOHNSON, DIRECTOR, ALABAMA DEPARTMENT OF
ECONOMIC AND COMMUNITY AFFAIRS, STATE OF ALABAMA
Mr. Johnson. Mr. Chairman, Congressman Bachus, I want to
thank you for the opportunity to be here today to speak on this
economic disaster legislation relating to the Community
Development Block Grant program.
I also want to thank Representative Cardoza for proposing
it.
There is no question that the economic devastation that we
are seeing in this country is unprecedented, and it is
incumbent on us as Representatives of Federal Government, State
government, and local government to look everywhere we can to
try to find solutions for these very pressing problems that are
facing our communities now.
As I hear the statistics that Mayor Jones and
Representative Cardoza are relaying from California, I can't
help but be astounded and shocked at the sheer depression that
is hitting the area. And I want to say, my heart is out to you.
We have been fortunate in Alabama. We have had a number of
industries locate and the pressure and the momentum of that has
kept up our economy and our home prices somewhat, but we are
not an island. Our folks are suffering, too.
In my position with this agency, the Department of Economic
and Community Affairs, we represent, we have a number of
funding streams that go out, and I am hearing, daily,
continually, from constituents, homeless shelters, that their
client base is going up, and their contributions are going
down. Nonprofits, domestic violence shelters, the pressure of
the stress from these financial situations is affecting our
families and increasing domestic violence. There is virtually
no segment of our society that is not touched by this. And I
want to say I appreciate your looking at trying to do
everything we can to address this situation.
As recently as just before we walked in, Congressman Bachus
and I were talking about a large homeless shelter housing over
300 women in Birmingham, the Lovelady Center; 40 children who
live there, struggling to get by, may have to close the doors,
trying to find additional money out there to help them to stay
open. So really we are in very desperate times.
I want to reference also, I take the points that there has
been a lot of help through CDBG for the disasters that have
happened in other parts of the country. And we have benefited
from some of those funds used that way. After Hurricane Ivan
and Hurricane Katrina, we received supplemental Community
Development Block Grant money. And we appreciate that.
I do however want to say that some 3 years after Katrina,
we still have folks living in FEMA trailers, even though we
received Community Development Block Grant funds to help build
housing. And really what I want to share with you all today is
not, you know, any for or against the Community Development
Block Grant legislation here, but just some of the challenges
with trying to solve problems with the Block Grant funds in
general.
The Block Grant program, there has not been virtually any
city or community or citizens of any community or city that
have not benefited from this program over the decades it has
been in existence. It is a program with a lot of safeguards in
place. Very little of the money goes the wrong way.
The problem with that is there are also a lot of strings
attached to it, a lot of onerous regulations that make the
implementation of this program very hard to do and for short-
term fixes. As I said, we still have, 3 years later, folks
living in FEMA trailers. And we are still short $100 million to
having enough money to help everybody who was affected on the
Coast. And so the challenge of trying to use the Block Grant
program is one that I think, as you go down this path of trying
to see what you can do to declare certain areas economic
disasters and use this particular program to help folks, the
main thing that I would ask that you focus on is how can you
speed up the implementation of the program.
There are some requirements that, after doing this program
for 6 years, I did not realize were imposed on us. I had an
hour-long meeting with the State examiners yesterday because
our folks apparently didn't fill in a box that even the
examiners didn't know what the box was for, right on a
Community Development Block Grant report. It is Form 60002.
Whatever it is.
But this is one of the onerous regulations. It slows up.
When you are asking for help, if this legislation gets passed,
you are going to want to see something in 3 months or 6 months.
Your folks are going to be expecting that, Mayor.
And I know after the hurricane, our folks were expecting
it. And it is embarrassing 3 years later to still be trying to
help folks with funds that are sitting in the bank and yet not
be able to get out there and help people.
I literally, within the last 2 months, went down to the
coast to Ms. Darlene Culpepper who is in a wheelchair because
of diabetes, living in a FEMA trailer, you know, still sick
from the fumes of the FEMA trailer because we cannot get her
help. So these are the challenges.
The block grant program, as I said, has been a tremendous
asset for the citizens of this country. But it is designed for
very large--well, what has happened over the years is, because
of the onerous regulations, the investments have tended to go
to very big water and sewer type projects where you have like a
single project that it is easy to report on these different
requirements.
When you start trying to use this program to do small
projects, employ lots of people, it becomes very onerous to try
to do this. Think about if you do a $400,000 sewer project, it
is easy to figure out what you need to report, how many
employees, things like that. Think about trying to build a
house on a small lot, one house; it is very onerous.
And if you can look at this as you are looking at this
legislation, obviously your folks if this passes, they are
going to want to see something happen very soon. And it is
going to be very difficult and possibly embarrassing a couple
of years later if we have not addressed these onerous
regulations that hamstring what I think this great program is.
I see that I am out of time, so, Mr. Chairman, I turn it
back to you.
[The prepared statement of Mr. Johnson can be found on page
26 of the appendix.]
The Chairman. Thank you, Mr. Johnson, you did very
concisely and sensibly sum up the dilemma.
On the one hand, we worry about abuse. And sometimes you
can tighten it up too much. It is true that one of the great
things about the CDBG program is there is always very little
scandal connected with it when people talk about abuses. But it
may well be that we have gone too far.
And I will say this, when I was first on this committee in
1981, 1983, the City of Fall River, Massachusetts, had gotten
some flexibility in CDBG funding, letting them be much more
flexible with City services. And they wanted that preserved. I
offered to do that for a lot of the cities, and frankly, at
that point, a lot of the city officials said, no, do not do
that because we don't want to have more claimants. The more you
open it up, the more people are going to come to us. So the
City of Fall River, Massachusetts, continues to have written
into the law at the time a degree of flexibility a lot of
others don't.
So I very much agree with that. And it is not a free gift
necessarily. But it is important.
I would also say to both of you this, I think when you are
talking about housing, there are two levels at which you have
to address this. One is aid to the municipalities. I know we
say there are some partisan differences on this, and I know
people talk about the niceness of tax cuts, but I first went to
work in politics in 1967 in a campaign for mayor, and I have
been watching it, and in 42 years, I have never seen a tax cut
put out a fire. There is a level of public service that it
seems to me we need to provide, and we have to be honest and
say, at some point you have to come together and provide the
revenue to do it. We don't want to put it on the deficit.
But in addition, there are some things we need to do, and
it is at two levels, and again, Mr. Cardoza has been the
leading advocate in Congress to make this point joined by Mr.
Costa and others; it is the foreclosure crisis, and that
requires us both to provide the kind of funding that would help
the municipalities and the States meet public needs. But also
we have to improve our ability to help people avoid foreclosure
as long as individuals are losing their homes. And of course,
it is not just the individual people who have said to us, well,
why do you use public money to stop foreclosures? People made
the loans; let them live with the consequences when people took
out the money.
But as you point out, Mayor, the damage from foreclosure
happens in concentric circles. The individual who loses the
home is the first victim. But the neighborhood is a victim from
having the vacant property, and the municipality because the
property that used to pay taxes now eats taxes. You are going
to send out the police and the fire and the water department
and the sanitation department and the building department.
So what I am hoping to work on is a dual effort, one that
provides some more resources to the governments but also to do
more about forestalling foreclosure, because as people have
noticed, we have another wave of foreclosures coming; people
who took out conventional loans that were perfectly sensible
and responsible and well documented when they took them out,
but who are now encountering a degree and duration of
unemployment that wasn't anticipated along with the drop in
property values that keeps them from being able to refinance.
So we are looking at a program that would provide some kind of
temporary help to people whose problem is not that they can
never pay that mortgage, but that they can't pay it while they
are out of work. And that is another area that we are working
on that I worked on with Mr. Cardoza.
That is really all I want to say. I have no questions.
Usually you ask questions of people you disagree with. I don't
disagree with you, so I have nothing to ask you.
Mr. Bachus.
Mr. Bachus. I am going to ask two questions but not because
I disagree with anything you have said.
The Chairman. Well, you are better at being agreeable than
me.
Mr. Bachus. Mayor Jones, I found your testimony very
compelling.
And I thank you for coming to Washington to share your
story and express the hardships your community is facing.
You mentioned you grew up in the South. My father was a
contractor in Birmingham, Alabama. And one thing, when you hear
the word Birmingham, Alabama, obviously, that carries some
connotations. But I am proud of my father because he was the
first, or one of the first contractors in Birmingham to step
across the color line and hire black subcontractors. And his
jobs were vandalized. But I can tell you that we have come a
long way in Birmingham. And you know, we obviously as a country
have come a long way. And I think last November was a testimony
of that.
I appreciate you sharing your stories about the hardships
of your communities, and it is nothing but a nightmare, I must
say. Is Los Banos eligible to receive moneys from the States
CDBG program? And you testified you have not received those
yet?
Mr. Jones. We are eligible. The problem came down--with the
CDBG funds, we have received some. The problems with the home
stabilization program was it had to be 15 percent below market
value, where our property has already fell 75 percent. So
imagine 15 percent, that meant the money we could not use it;
we would have to end up sending the money back to the State. So
being the worst-hit area in the complete country, we couldn't
even use the money which it was mainly I think was meant to
help.
Mr. Bachus. That is a shame. And as I said, I would be glad
to work with this committee and with your Congressman, and
Congressmen Costa and Cardoza.
I appreciate both of you all bringing this to our
attention.
Mr. Johnson, you mentioned Alabama has received $7 million
in stimulus. You mentioned that in your prepared remarks, but I
think appropriately you responded, and I think in very good
terms, about what they might face. What is the status of the
money that Alabama is to receive? How much has been allocated?
Mr. Johnson. We have received all the applications for the
CDBG stimulus funds. And we are in the process of posting the
preliminary awardees. There is a period that, there is a public
comment period, and then HUD will come back and either approve
or disapprove the awardees. We are getting them out as fast as
we can.
Mr. Bachus. But it hasn't been distributed yet? It is not
out there?
Mr. Johnson. No, sir.
Mr. Bachus. I will yield any time I have left to
Congressman Cardoza.
The Chairman. We will recognize our colleague from
California now. It is only 5 minutes.
Mr. Cardoza. I thank the chairman.
And I thank Mr. Bachus.
And I think I can't embellish any greater on what Mayor
Jones has said, and I think the words of Mr. Johnson are
incredibly applicable: When there is a natural disaster, and
the whole premise behind the Federal Government acting is that
State and local authorities don't have the resources to deal
with the crisis, and so, we expect that money not only to
eventually get there but to get there in a manner befitting the
fact that this is a crisis and people need immediate help.
And we have to have safeguards, and those safeguards have
to be put in place quickly enough that the purpose for
expending the funds doesn't get lost.
In the Neighborhood Stabilization Fund money, first of all,
Maxine, Congresswoman Waters, and this committee did a fabulous
job trying to get those funds. They were important concepts.
And the reality is Merced County, the hardest-hit county,
as you have heard, is still to receive those dollars. And so
there have been challenges. We couldn't apply directly because
we weren't big enough. And then the State application was
rejected initially, and it had to be reworked.
And frankly, the allocations to our State were less than
other States that had this issue. And the State action just got
approved, and the money is still--the checks are still in the
mail. And that is a year after this committee's work and
intention to do this. And we can't let that happen if we do
this program.
I thank Mr. Johnson for his testimony. He is dead on.
And thank you Mr. Bachus for bringing him up here to do it.
The Chairman. The gentleman from California, Mr. McCarthy.
Mr. McCarthy of California. I thank the chairman and I also
want to thank Mr. Cardoza and Mr. Costa, because, Mr. Mayor, I
come from just down the road from you. I represent Kern County
which, we are all in the Central Valley together.
My district in Kern County has more than 15.9 percent
unemployment as well. And what you talked about today is true.
I was just on, before I was flying back last weekend, on the
Yahoo page, and they had up there the top 10 cities that would
recover the fastest and the top 10 cities that would have the
slowest recovery. I was sad to see when you went to the lowest,
they were all through the Valley, and we know the challenges
that we have in housing, and I appreciate Mr. Cardoza bringing
this bill forward. But we also have other challenges as well,
and some of them come within the environmental aspect,
especially when it comes to water, knowing Los Banos and the
bread basket of America, people don't realize what this valley
produces.
One, I would like if you could touch a little upon the
flexibility that this bill would allow and the challenges you
have, but also let's allow this Congress to understand that
this is isn't our only challenge. We may get these houses back,
but we have to have people able to live in them; that our
double-digit unemployment, there are cities with 40 percent
unemployment, that the idea that there are certain restrictions
that shut those pumps off from pumping water. Not only does it
hurt our valley; it will hurt this Nation when it comes to
feeding this Nation and feeding the world. And we will
dependent on other places, and the price will continue to rise.
But maybe as a mayor, you can touch on where the food banks
are at, where the number of lines are showing up, where these
people want to work in your city but because of manmade
decisions we are not allowed to?
Mr. Mayor?
Mr. Jones. As I said, when you see the lines for the
people, homeless people; during the day, I am a teacher. And
when I see the kids come to me crying because they are put out
of their houses. Their parents cannot work; they are
unemployed. And then as we realize it is because of there is no
rain, and there is no water, and they cannot plant crops.
These are the hardest-working people in our complete
Nation. They are unemployed. Their kids come with no place to
stay. Many of them are sleeping in cars with their families.
That is how desperate the situation is.
And for water, we had a water march which we marched and we
talked about just how desperate the situation is, how badly we
need water. The farming community is dying. And that is the
hardworking people who are working who cannot get water. They
cannot grow the crops.
The bad thing to look about this is, eventually, if we do
not have a water master plan, if we cannot get water for the
State to grow this food, will our food have to come from other
countries? Will that food come in contaminated? How far will we
go before we make a decision that it is very important to have
our food grown in America?
If you think foreign oil is expensive, try foreign food.
Mr. McCarthy of California. I thank you, Mr. Mayor. I was
just reading the headline where--many of you know where
California is financially and one of the biggest deficits we
have ever faced and the challenges where we had this special
election, and we are going through that process.
And the Governor was recently in Fresno, another city
within this valley. And he went to talk about the budget, and
there were a number of mayors there, a number in the City, and
they said, stop talking about the budget. Talk about our number
one problem: the water, creation of lack of water,
deteriorating the valley, the reason we have the high
unemployment, the reason we have the housing and others.
So, one, I want to applaud Mr. Cardoza for his work not
only on this but on the water issue as well and Mr. Costa, but
Mr. Mayor, I appreciate you continuing to help educate as you
move this bill and work on it.
Also, for people to buy that house, we have to have water
to grow the fields. And it is a fundamental issue that
throughout this Valley for this Congress to know that lots of
times when people think of California, they think of San
Francisco, Los Angeles, and San Diego. They do not realize the
value of what is within the Central Valley and how far behind
we are and the statistics that show we will come out of this
later than the rest of this Nation. And a lot of this problem
is done by manmade. If we can have a waiver when you talk about
some environmental issues, and we can put people before fish,
it would go a long way.
I yield back.
The Chairman. The gentlewoman from California.
Ms. Waters. Thank you very much, Mr. Chairman. I thank you
for basically the way that you pay attention to the Members and
try and help work through their problems no matter how
difficult they may be. I really appreciate that.
And for our witnesses who are here today, I thank you for
the time that you are giving to deal with these, what almost
seem intractable issues in your area. I am from California. I
just met with Zoe Lofgren. We were on the telephone with John
Burton and Roy Brown and some of the others, talking about,
what can we do to bring more people together to talk about how
we are going to deal with this $25 billion budget?
We think that it is--we know it is an extremely difficult
problem, and it is going to impact these areas even more. The
cutbacks that are being anticipated are just awesome. And we
are talking about, about 2 weeks out, when we won't be able to
pay the bills and the salaries, etc, etc.
So I am particularly sympathetic to those areas which are
in real economic disaster even before the negative impact of
the budget is going to hit on those areas, and of course, the
water problem has been mentioned here. That has been something
that the Valley has been concerned about for a long time, and
the need to come up with water policy in California that is
going to serve the farm community, etc.
So all of these problems are very, very difficult. You have
a Member of this legislature, of this House, who works full-
time at trying to come up with answers. And that is what this
Economic Disaster Area Act is all about, a creative way to try
and deal with problems that we have not been able to impact
with all of the work that we have done. We thought at one point
that the Neighborhood Stabilization Act was going to be
extremely helpful. We recognize the problem that you are
confronted with, the size of the area that you are dealing
with. And what we will do is continue to work with your Member
and do everything that we can to deal with, not only the
foreclosure disaster, the unemployment, all of that, that is
confronting your area maybe in even harsher ways than it is in
other areas. So, again, I see what the attempt is here. We
understand it and the discussion about the use of CDBG. And I
will work with Mr. Cardoza to do everything that we possibly
can to lend some help.
Let me just ask before my time is up, Alabama, I remember
that, while a lot of attention was on New Orleans and
Mississippi, that Alabama was not being paid enough attention
to. How are things going? Did you get your fair share of the
CDBG money?
Mr. Johnson. I appreciate you asking that question,
Representative Waters.
We are still struggling. We still have a lot of folks
suffering in Alabama, and obviously most of the devastation
happened in Mississippi and Louisiana. But I asked my staff
right before I flew up here, how much were we short still for
getting everybody, not better than they were but just back to
even, you know, the low conditions they were in?
And we are still short $100 million. I would like to
respectfully ask, as you all move forward and consider, if it
comes up in any way, as I have said, I visited folks just
recently who are still living in FEMA trailers there, and we
would greatly appreciate any assistance, we surely would.
Ms. Waters. Mr. Chairman, I think we need to go back to the
Gulf Coast. We need to go back to Mississippi, Louisiana, and
Alabama and follow up on what has been done, and the money that
we allocated, how it has been used, and that money that didn't
get there yet, I think there may be still some resources that
you, as you say, you know they are due to you, but we need to
see what we can do to expedite it.
The Chairman. Will the gentlewoman yield?
I think we talked with Members on the other side of the
aisle as well. There isn't any reason why FEMA should still be
in the housing business years after a disaster. They are an
emergency entity. HUD has the housing jurisdiction. And I have
spoken to the chairman of the Committee on Homeland Security,
Mr. Thompson, and the chairman of the Committee on
Transportation, Mr. Oberstar. We need to reallocate this so
that at some point after an emergency, the housing agency steps
in, and part of the problem is there aren't clear lines of
authority there.
At this point, we have no questions here.
The gentleman from North Carolina just announced that
within 10 or 15 minutes, we will have 4 votes on impeachment,
and I do not think it would be reasonable to expect people to
come back after that, so we will have a chance to do another 15
or 20 minutes of questioning, and that will probably end the
hearing.
The gentleman from North Carolina.
Mr. Watt. Mr. Chairman, I won't take my entire 5 minutes. I
just want to compliment Mr. Cardoza and Mr. Costa for bringing
this matter before us, and express appreciation to the chairman
for convening and accommodating Members who obviously are in
distress and whose districts are in distress, not that all of
our districts are not in distress, but there are relative
degrees of distress.
The one question I had, Mayor Jones, was I heard
Representative Cardoza say that the Community Stabilization
monies are finally coming through or have wound their way
through the process. What was the amount of those? And will
those be able to be used to address any of the water concerns
that have been raised here? How are you planning to use those?
Mr. Jones. Well, first of all, the amount for the
Neighborhood Stabilization program was $2.4 million. But the
problem was it had to be 15 percent below market rate. And our
values have lost so much, we find it almost impossible to use,
and we will have to return the money. And we are probably the
worst hit community in the complete Nation, and we will not
even be able to use the funds with those rules.
Mr. Watt. You mean, it was designated? I am not sure I
understand why you wouldn't be able to use it.
Mr. Jones. Because a stipulation was put on by the State
that it had to only go to purchase homes that were 15 percent
below market value. Our houses have fallen almost 70 percent in
value already.
Mr. Watt. So that was a State stipulation. Okay. How would
you address this water issue? I guess that would be the other--
maybe I should be addressing that to Mr. Cardoza, whether there
might be ways that we could work with him to pursue that,
because it sounds like that might be a longer-term solution to
really create jobs and create employment, whereas CDBG money
might not serve that long-term purpose. It would serve a
purpose, no question about that.
Mr. Cardoza. Would--
Mr. Watt. I yield to the gentleman.
Mr. Cardoza. I thank you, with the chairman's ability to
let me take the yield here.
Mr. McCarthy has mentioned that there are a number of
things that we are working through, and we need a dialogue to
deal with it. We are working with Secretary Salazar. We are
hopeful on those fronts. And yesterday on the Floor, we were
attempting to deal with it one way. There are other ways we can
work it, and we will pursue every avenue.
I think the reality, though, and the reason why we proposed
the CDBG issue today is, without additional water, without
court intervention, we are dealing with legal ramifications of
Federal law. Without many different changes and without some
direct assistance, there will be no way for us to get off the
ground. And Mr. McCarthy is absolutely right; the new
projections show us returning back to normal years after the
rest of the country gets back on its feet.
Mr. Watt. Well, I will certainly continue to work with your
Representatives, Mayor Jones, and be as supportive as I
possibly can. We have been hit pretty hard in North Carolina,
too, so I can--and I have some rural parts of my congressional
district that are suffering, but I am not sure to the extent
that you have described today.
So, Mr. Chairman, I yield back.
The Chairman. With the indulgence of the members, the
gentleman from Michigan has been here from the start. And if
there is another area of the country that has taken a very big
hit, it is Michigan. So, with the members' indulgence, I am
going to recognize our colleague from Michigan, Mr. Peters, for
5 minutes.
Mr. Peters. Thank you, Mr. Chairman.
I appreciate you yielding the time.
And I would like to thank both Mayor Jones and Director
Johnson for your testimony here today, and particularly thank
Congressman Cardoza for your work on this bill. I couldn't
agree with you more, that for many communities, communities
that I represent as well in Michigan, the effect of this
economic crisis is indeed just as disastrous as a flood or a
hurricane.
Michigan has had one of the highest foreclosure rates in
the country for years now, not a recent phenomenon but for many
years, and the rate of foreclosure in the Detroit metropolitan
area has been consistently in the top 10 in the Nation.
However, unlike some other areas where the foreclosure rate is
due primarily to a burst in the housing bubble or steep
increases in housing prices, the foreclosure problem in
Michigan has been primarily caused by very high levels of
unemployment.
From May 2008 to May 2009, the State of Michigan has lost
more than 300,000 jobs. And the unemployment rate now for the
entire State is at 14.1 percent, the highest in the Nation. The
University of Michigan economists have predicted that Oakland
County, which I represent, is going to lose another 25,000 jobs
this year. In fact, just about 3 weeks ago, we had the
announcement from General Motors that 3 plants are being closed
in my district, 7,000 jobs just in those 3 plants, not
including the auto suppliers and all the other jobs.
So I know that this committee and the Obama Administration
have come up with a number of very important housing programs
to help homeowners who are facing foreclosure because of
housing price declines, but I am worried that not enough is
being done to help communities and families who are affected by
the foreclosure crisis in places like Michigan where the
biggest contributing factor is not subprime mortgages or
balloons coming due but simply a lack of jobs. So that is why I
am certainly very supportive of the efforts of this bill and
Mr. Cardoza's efforts to target more government assistance to
those areas that need it most.
I do have some questions about the formula, if I could get
Mr. Cardoza's attention, please. A formula in this bill is that
while most congressional districts in Michigan would likely
quality of life under the criteria that you have chosen, there
are other districts in Midwestern States, like Ohio, Indiana,
and Illinois, that may not benefit despite the fact that they
have also been impacted a great deal as a result of dislocation
in this economy and rising unemployment rates. They have lost
jobs, and foreclosure rates are in the top 10.
Is there any effort to refine some of those criteria? And
certainly I would like to work very closely with your office in
refining some of the criteria to make sure areas in the
Midwest, like Michigan, that may have had a longer experience
of decline in housing prices and not the steep drop, but
nevertheless they are suffering a great deal, would qualify?
Mr. Cardoza. If the chairman would let me respond?
The Chairman. Absolutely.
Mr. Cardoza. I totally agree with the gentleman. And my
purpose today, we purposefully labeled it a discussion draft
because, frankly, we don't know the best way to do this.
We want to include the communities that need to be
included. Certainly, we don't want this to become a grab bag,
but we want it to be focused on the areas that are most in
distress. And yet, we wanted to get--because I don't want other
areas to be like ours that have been waiting for 3 years to get
the recognition.
And so we have not come up with the perfect method to
allocate the dollars, and we really leave that--we had to put
something in the bill to start the discussion, but I am going
to leave it to the chairman and this committee to figure that
out, because these are tough challenges and money is finite
around here. So I thank the gentleman for his question.
Mr. Peters. Thank you for the response. I look forward to
working with you.
And, Mr. Chairman, as we refine some of the criteria, I
appreciate that effort.
The Chairman. The gentleman from California, it was his
idea. We all have a lot of ongoing responsibilities. Our staff
was glad to work with him, and this needs some further
refinement. We will need a decision at some point from somebody
as to what resources are available, and then once we know that,
we will try to divide them up.
I have said, and I have mentioned it to others, that one
potential source for some help here, we are getting TARP funds
repaid at a faster rate and in more dollars than we thought. We
are getting a profit on the TARP funds to some extent from
interest and dividends, and I am exploring what we might do to
deal with that. And I think there is some economic justice in
taking the money that originally went to keep the banks
functioning and dealing with some of the problems that the
banks caused.
Let me just say, at this point, I think we will be able to
accommodate our other three members when the vote starts. We
will try to do that, if everybody sticks to 5 minutes. The
gentleman from Kansas.
Mr. Moore of Kansas. Thank you, Mr. Chairman.
I will be very brief. And I apologize to the Chair, to the
members, and to the witnesses for being tardy in getting here.
But I have read the statements of the witnesses, and I
certainly agree with my colleague who talked about not only the
situation we are facing in our country, but in California,
Alabama, and Michigan, there has certainly been a
disproportionate share of suffering there as a result of some
of what has happened.
And I will just say that I want to work with my colleagues,
too, to make sure that the people who have suffered mightily
receive some additional help, because the unemployment rates,
the foreclosure rates that you all have talked about, are
something that is not sustainable. So we need to make sure that
we take care of the people who suffered the very worst in our
whole country, but the people--additional help for those folks
who have suffered the worst. And I am going to, Mr. Chairman,
with your permission yield back my time to the other members
who were here and heard the testimony of the witnesses.
The Chairman. I thank the gentleman.
The gentleman from Texas, and then we will get to the
gentlewoman from Ohio.
Mr. Green. Thank you, Mr. Chairman. And I will probably
yield back time as well.
I want to apologize for my late arrival. I have been in
Homeland Security, and we have had a markup all day today.
I support the concept of an economic disaster area. I think
that it provides us an opportunity to focus on giving to areas
of the country that are in dire straits. There may be some
things that we need to do to tweak it, but the concept seems to
be pretty sound. We know that there are people who need help.
This becomes a vehicle by which we can accord the help that is
needed. So if we need to tweak it, I say, let's tweak it. But I
don't think we should abandon the concept. And I yield back the
balance of my time.
The Chairman. The gentlewoman from Ohio.
Ms. Kilroy. Thank you, Mr. Chairman.
And thank you, Mr. Cardoza, for putting this issue before
us. I also want to thank the witnesses for taking your time to
travel here to present the information, to let those of us from
other parts of the country understand what is going on in your
world.
I am from Ohio, and like the gentleman from Michigan, Ohio
also has experienced a decline. But unlike maybe different from
the sun coast or the central coast, or not caused by a
hurricane, not caused by boom or bust, but really a longer and
slower but nevertheless very significant decline, decline in
jobs from the steel industry from a number of years back, now
being hit hard with the auto industry. And, frankly, a
migration in many instances of people leaving the State in
search of other opportunities and a high unemployment rate and,
in my community, an extremely high rate of foreclosure.
Communities like Cuyahoga County, the City of Cleveland, home
prices are incredibly low. And foreclosed properties are
bringing down that; we are in that concentric circle problem
that the chairman described.
So I am glad that we are thinking about this and trying to
figure out what the best vehicle is to provide help to the
communities that need it. And I am glad that you helped me
understand what is going on in your community.
I yield back.
The Chairman. I thank all the members. We are taking this
seriously. We have a money problem, and that is why I mentioned
taxes before. The problem we have is there are a lot of good
reasons. To spend some of the money makes people nervous.
Raising the deficit makes people nervous. We are in the classic
dilemma here which was first expressed to me 40 years ago by an
older politician in Boston who was surprised at my naivete of
what I thought was an inconsistency. And he said, ``Hey, kid,
ain't you heard the news? Everybody wants to go to heaven, but
nobody wants to die.'' Spending the money is going to heaven;
finding it is dying. But we are going to make a serious effort
to do this. There is TARP money. There are other sources of
funds.
The gentleman from Alabama correctly pointed out, we are
talking about something of limited duration. My sense would be,
and it is certainly the hope, and there are problems with those
parts of the country that may get it slower but that, by the
end of 2010, we should be looking back on this. So we are
probably talking about something of the duration of less than 2
years. And, as I said, it has two components: as aid to those
areas of government that have a problem; and as aid to the
individuals in the foreclosure, as Mr. Peters and others
mentioned. We will try. We will be working on trying to see if
there is an allocation we can work with. Mr. Cardoza and others
have taken that issue. The gentleman from Alabama was being
very forthcoming in his bipartisanship here. And I think you
will have a sincere effort.
And let me just say this to you, that I counted about 15
members who were in and out. It is Friday afternoon, and we
have other things to do, but I will tell both witnesses you
have not wasted your time by being here, and there are staff
members here as well. You have made an impact, and I promise
you that there will be some serious follow-up.
The gentleman from Alabama.
Mr. Bachus. I would like to make two points. One is that,
as we do this, if as we expand that definition or the criteria
and make it more inclusive, it actually will diffuse it more.
And so sometimes I think it is more practical to concentrate
it.
The Chairman. If the gentleman would yield, it will take
some constraint. Nobody in America is dancing these days about
the economy, but I think it is going to be incumbent on some of
us to recognize that some places are hit much harder than
others and hold back and defer.
Mr. Bachus. Particularly when, in this situation, you have
a whole valley, and it is a drought, and it is a series of
things.
And, second, I will say, I think this is somewhat analogous
to when we all were on TV, and we saw New Orleans and what was
happening. We felt, my gosh, you know, that can't happen here.
In this, you know, unfortunately for you, the TV cameras are
not trained there every day. I think if they were, people would
be demanding a solution.
The Chairman. With that, the hearing is adjourned.
[Whereupon, at 2:44 p.m., the hearing was adjourned.]
A P P E N D I X
June 19, 2009
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