[Senate Hearing 111-760]
[From the U.S. Government Publishing Office]
S. Hrg. 111-760
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2010
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
H.R. 3288
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2010, AND FOR OTHER PURPOSES
__________
Department of Housing and Urban Development
Department of Transportation
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.gpo.gov/fdsys
__________
U.S. GOVERNMENT PRINTING OFFICE
48-317 WASHINGTON : 2010
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COMMITTEE ON APPROPRIATIONS
DANIEL K. INOUYE, Hawaii, Chairman
ROBERT C. BYRD, West Virginia THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont CHRISTOPHER S. BOND, Missouri
TOM HARKIN, Iowa MITCH McCONNELL, Kentucky
BARBARA A. MIKULSKI, Maryland RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin JUDD GREGG, New Hampshire
PATTY MURRAY, Washington ROBERT F. BENNETT, Utah
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
DIANNE FEINSTEIN, California SAM BROWNBACK, Kansas
RICHARD J. DURBIN, Illinois LAMAR ALEXANDER, Tennessee
TIM JOHNSON, South Dakota SUSAN COLLINS, Maine
MARY L. LANDRIEU, Louisiana GEORGE V. VOINOVICH, Ohio
JACK REED, Rhode Island LISA MURKOWSKI, Alaska
FRANK R. LAUTENBERG, New Jersey
BEN NELSON, Nebraska
MARK PRYOR, Arkansas
JON TESTER, Montana
ARLEN SPECTER, Pennsylvania
Charles J. Houy, Staff Director
Bruce Evans, Minority Staff Director
------
Subcommittee on Transportation and Housing and Urban Development, and
Related Agencies
PATTY MURRAY, Washington, Chairman
ROBERT C. BYRD, West Virginia CHRISTOPHER S. BOND, Missouri
BARBARA A. MIKULSKI, Maryland RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota SAM BROWNBACK, Kansas
PATRICK J. LEAHY, Vermont LAMAR ALEXANDER, Tennessee
TOM HARKIN, Iowa SUSAN COLLINS, Maine
DIANNE FEINSTEIN, California GEORGE V. VOINOVICH, Ohio
TIM JOHNSON, South Dakota THAD COCHRAN, Mississippi (ex
FRANK R. LAUTENBERG, New Jersey officio)
ARLEN SPECTER, Pennsylvania
DANIEL K. INOUYE, Hawaii, (ex
officio)
Professional Staff
Alex Keenan
Meaghan L. McCarthy
Rachel Milberg
Jon Kamarck (Minority)
Matthew McCardle (Minority)
Ellen Beares (Minority)
Administrative Support
Michael Bain
C O N T E N T S
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Thursday, June 11, 2009
Page
Department of Housing and Urban Development: Office of the
Secretary...................................................... 1
Thursday, June 18, 2009
Department of Transportation: Office of the Secretary............ 45
Nondepartmental witnesses........................................ 73
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2010
----------
THURSDAY, JUNE 11, 2009
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:30 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Bond and Lautenberg.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. SHAUN DONOVAN, SECRETARY
opening statement of senator patty murray
Senator Murray. Good morning. This subcommittee will come
to order.
Today, this subcommittee will hear testimony from Secretary
Donovan on the Presidents fiscal year 2010 budget request for
the Department of Housing and Urban Development, and I want to
welcome the Secretary back to our subcommittee today.
HUD's many programs provide the resources and support to
help hard-working families achieve home ownership, maintain
safe and affordable housing, and access to services that they
need.
Today, as our Nation deals with the housing crisis and an
economic recession, this discussion takes on an added
importance. Foreclosures remain at record levels, fully 32
percent higher than this time last year. Meanwhile,
unemployment is approaching 10 percent, its highest rate in 26
years. As we continue to work through this economic crisis, we
can expect increasing demand on HUD's housing and community
development programs.
So I am pleased that the starting point for this discussion
is a budget that proposes substantial investments and
innovative approaches that will move our Nation's housing
policy forward. The budget proposes resources totaling over $46
billion, a 10 percent increase over the level of funding
provided in the fiscal year 2009 omnibus appropriations bill.
For the first time, since the subcommittee assumed
oversight of HUD, we are not starting from the position of
having to beat back proposals that would drastically cut
elderly and disabled housing, community development block
grants, and other key programs, and that is a welcome relief.
However, as Congress and the administration work to address
the housing crisis and turn this economy around, we need to do
more than maintain the status quo. HUD must demonstrate
leadership in developing solutions to stem the current
foreclosure crisis, strengthen the safety net for vulnerable
families who are hit by this recession, and preventing future
housing disasters. I am pleased that to date, Mr. Secretary,
you have shown the kind of leadership that this Department
really needs.
In February, Congress moved swiftly to pass the American
Recovery and Reinvestment Act which provided the investment
that was necessary to help get our economy moving again. Just a
week after that bill was signed into law, Secretary Donovan
worked to ensure that HUD allocated nearly $10 billion, or 75
percent of the funding it received under the act. So I want to
applaud your efforts and the staff at HUD for working to
allocate that funding so quickly.
These dollars are making a difference in my State. In
Yakima, Washington, funds appropriated for the public housing
capital fund are being put to use to rehabilitate housing and
are generating much needed job opportunities. In Spokane,
millions in funding has gone to eliminate dangerous lead-based
paint from low-income homes and protect young children from
lead poisoning. And I know that over the summer, as Recovery
Act spending is accelerated, we are going to see further
investments in providing safe and affordable housing throughout
the country.
But despite the positive signs that Recovery Act
investments are paying off, there is still significant work to
do. As the Secretary well knows, problems in the housing market
persist. In Pierce and Clark Counties in my home State, homes
continue to remain on the market for 12 to 14 months. So it is
really critical not just for the families facing foreclosure,
but to communities across the country that we find new ways to
boost the housing market.
To date, the HOPE for Homeowners program that was designed
to help families in danger of foreclosure has failed to make
the progress that we need. While originally projected to help
over 400,000 families, it has served fewer than 1,000 due to
investors' reluctance to participate. Recently Congress passed
legislation aimed at giving HUD additional tools to make its
program more effective. So I look forward to hearing from the
Secretary today how these programs can better assist our
families.
While I believe that the FHA has a critical role to play in
providing affordable housing options for our hard-working
families, I remain focused on ensuring the solvency of the
Mutual Mortgage Insurance Fund and protecting the interests of
our taxpayers. Mr. Secretary, you were here earlier this year
and we had a good discussion on the FHA, but that was before we
had the President's budget. I am pleased that the FHA's regular
sale and refinance program, the lion's share of the MMI Fund
portfolio, does not require a positive credit subsidy. The
fund's reverse mortgage, or HECM program, requires an
appropriation of nearly $800 million. So today, I want to
continue the important discussion about what the appropriate
role for the FHA to play is as we navigate this housing crisis.
As I mentioned, the President's budget includes important
increases. The funding levels requested for section 8 tenant-
based and project-based rental assistance programs represent a
total increase of nearly $3 billion over the levels provided in
the 2009 omnibus bill. These funding levels demonstrate a real
commitment to the more than 3 million elderly, disabled, and
low-income tenants these programs serve, and that is a
commitment I share.
In addition to increases in important programs, such as the
$550 million increase to the Community Development Block
program and an increase of over $115 million for homeless
assistance grants, the budget also proposes several new
initiatives. They include the Sustainable Communities
Initiative, which is a joint effort with the Department of
Transportation to facilitate integrated housing and
transportation planning, and the Choice Neighborhoods
Initiative, the Department's vision for broadening and
expanding HOPE VI program in integrating schools in a
neighborhood revitalization effort.
I do have some questions about the details of those
programs, but I want to commend the Department's efforts to
propose bold and ambitious ideas for rebuilding our communities
in the Nation.
Finally, I will have some questions for you, Mr. Secretary,
on your efforts to remake HUD into an effective 21st century
agency through the transformation initiative. When we first
met, we talked about the leadership necessary to improve and
strengthen HUD and its programs. So I support your efforts to
improve the Department's operations. But I am concerned about
the lack of detail in this particular proposal, as well as its
potential cost during the first year. So I look forward to
having a productive conversation about ways that we can achieve
our shared goal of creating a stronger and more efficient HUD
while maintaining this subcommittee's oversight role.
As I said before, in this recession, HUD is at the center
of the storm. With foreclosure rates skyrocketing and
affordable housing options increasingly scarce and the dream of
home ownership at risk for our working families, the budget
decisions and leadership at HUD are going to make or break it
for those most affected by this recession. That is why today's
hearing and discussion and working in partnership to promote
responsible and sustaining housing policies is so critical.
So with that, I will turn it over to my ranking member,
Senator Bond, who has been a great partner in working with me
on these critical issues.
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Thank you very much, Madam Chair, and thank
you. It is a real pleasure to work with you and to work with
the Secretary.
We welcome you, Mr. Secretary, for appearing again. We have
had very many constructive discussions, which I appreciate, and
certainly no one can deny that the Secretary is passionate
about housing and community development and is working hard to
make the Department, as you indicated, a very tough but
necessary task.
The Secretary has also been a key player for the
administration on tackling the ongoing mortgage crisis. With
your knowledge, skills, and experience in the private and
public sectors, it is important to get you out in the lead on
this issue.
I understand that one of the steps you have taken to
address future housing crises is rebalancing Federal housing
policy to place greater focus on affordable rental housing. As
you know from New York City, there is a severe lack of decent
affordable rental housing in our Nation, and unfortunately, the
Government's housing policy over the past two administrations
failed to correct the problem and ultimately contributed to the
subprime crisis by pushing home ownership on people who could
not afford the burdens of home ownership, thus making the
American dream the American nightmare and causing a nightmare
in our financial system. Affordable rental housing was short-
changed. That was a mistake and we appreciate your efforts to
correct the course.
The Federal Government has taken some extraordinary steps
to address the mortgage crisis and the credit crisis through
the Federal Reserve, Treasury, FDIC, and HUD. Despite these
efforts, Americans across the Nation and in my State of
Missouri continue to struggle to make their mortgage payments.
Housing prices continue to fall. Foreclosures remain unabated.
The rate of foreclosures has gone down, but it has come down
from a totally unacceptable rate to a very unacceptable rate.
With the country shedding hundreds of thousands of jobs every
month, the mortgage crisis has spread from subprime to prime or
traditional mortgages, hurting our economic recovery.
Recent data that I have seen indicates that prime mortgage
foreclosures are accelerating and rising in States where
unemployment is growing. We know that housing started the
economic crisis, which in turn resulted in massive job losses.
It now appears that job losses are contributing to the troubles
in the housing sector. I guess economists call this a negative
feedback loop. Whatever it is, it is very, very unfortunate.
Adding to the problem, rising mortgage interest rates
threaten foreclosure mitigation efforts, and our economy has
many homeowners unable to refinance their loans into ones with
payments they can afford. In other words, we are definitely not
out of the woods yet.
I raised with Treasury Secretary Geithner 2 days ago some
of the positive economic signs may be misleading, and I am
concerned that we may be seeing what they call on Wall Street a
dead cat bounce.
These challenges factor into my view that health insolvency
of the Federal Housing Administration, or FHA, remains at high
risk. You and I have discussed this concern many times,
including back in early April with the hearing on the FHA's
role. Nevertheless, I think it is important to repeat,
reemphasize, and discuss these concerns.
Specifically, FHA has been exhibiting troubling signs as
default rates have risen to the highest rates in several years.
Capital reserves have substantially declined, and the
foreclosures have accelerated. Perhaps the most visible and
troubling sign is the significant increase in foreclosures
since we know the Government is not a good landlord. When the
Government takes over properties, it typically leads to the
instability of communities and neighboring homes. Sadly, there
have already been reports of rising FHA defaults and
foreclosures in areas already victimized by subprime lending,
which are making problems much worse for the families and for
the entire communities in which they live.
Further, FHA remains vulnerable to fraud. It has been a
long-term problem. It has been well documented by the HUD
Inspector General. It has been a great area of concern to this
subcommittee. Senator Murray and I have worried about it, and
when Senator Mikulski and I had this portfolio, we worried
about it. This is not a new worry, but it is one which is, I
think, rising to the top.
You inherited the FHA problems, and to your credit, you
have acknowledged them and taken steps to address them. But
despite your best efforts, I fear the agency may be swimming
upstream as fraudulent activity in the mortgage industry is on
the rise. We are hearing more about loan originators who have
caused problems in the subprime area migrating to FHA as
business continues to expand. Regrettably Congress and the
White House have placed more demands on the agency that is
already understaffed, does not have the proper information
technology, the skills or proper controls in place.
That is why I continue to believe that FHA is a powder keg,
and a mixture of ongoing and troubling problems in the housing
market, FHA's internal problems, rising fraudulent activity,
and increasing political demands is an explosive combination.
If changes do not occur, the FHA powder keg could explode,
causing even more harm to taxpayers, communities, the economy,
and homeowners. In the current tenuous economic environment,
that is a huge risk to be taking.
A few other areas of strong interest to me, as you may
know, I am a longtime champion of HOPE VI, and I appreciate
your acknowledgement in your testimony. I am very interested in
working with you and my colleagues like Senator Murray, as well
as Senator Mikulski, on the program's future.
You have proposed to expand HOPE VI beyond public housing
through a new Choice Neighborhoods initiative. Since HOPE VI
got its start in St. Louis a number of years ago, we have seen
the program revitalize communities and families from the worst
public housing projects. Communities that were once a magnet
for crime and poverty are now catalysts for development.
Senators Murray, Mikulski, and I look forward to more
discussions with you and your staff on developing this
proposal. It is critical we continue to work on innovative
initiatives to tackle the cycle of poverty and distress that
afflict too many communities.
On homelessness, I thank you for backing the permanent
supportive housing approach that was included in the recently
enacted HEARTH Act. The permanent supportive housing approach,
which has been initiated through this subcommittee on
appropriations, has been embraced by providers, local community
leaders, and government officials as they have seen
homelessness reduced. I have seen it in Missouri, and I believe
the number is reflected across the Nation. These positive
results clearly demonstrate that the tragedy of homelessness is
no longer a hopeless situation when strong local coordination
and permanent supportive housing is utilized.
Finally, investing in rural communities also is important
to me. I continue to hear from many constituents who believe
that rural areas are not receiving as much attention and
resources as urban areas. Urban areas do not have a monopoly on
economic development and housing needs. That is why a number of
years ago, I created the Rural Housing and Economic Development
program. I am pleased the administration is not eliminating
this program but is aiming to augment its capacity to assist
rural needs through a new Rural Innovation Fund. I look forward
to working with you and learning more about the Rural
Innovation Fund.
I thank you, Mr. Secretary, for your hard work and
willingness to work with this subcommittee. We want you to
succeed and we look forward to continuing to work with you on a
challenge that is a significant one, but one we cannot afford
to lose.
Thank you, Madam Chair.
Senator Murray. Thank you very much, Senator.
Senator Lautenberg.
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. Thanks, Madam Chairman.
Welcome, Secretary Donovan. We are seeing each other, as
you are with other members, on a more frequent basis. That
tells you something about the view that we all have on what
kind of housing availability there is in the country. When we
look at it, in these days of job dislocation, the pain is felt
even worse regarding housing availability. You have got a big
job and I know that you are working hard at it. Unfortunately,
there is a lot of competition for funding, and this is one
place that really deserves as much as we can do.
Unemployment in New Jersey and across the country has hit
record levels. Families are finding it increasingly harder to
pay their bills, save for the future and afford their homes.
Instead of realizing the American dream of home ownership, more
than 60,000 households in New Jersey could see their homes
taken away this year.
In these difficult times, the Department of Housing and
Urban Development has a more important job than ever, has a
larger influence, I think on our living standard than it has in
decades. President Obama and the Secretary deserve praise for
acting quickly on these issues.
The economic recovery law, for example, included a
temporary increase in the Federal Housing Administration's
maximum loan limit in high cost metropolitan areas to help more
home buyers access FHA loans. The residents of 12 of our 21
counties in New Jersey are benefitting from this change.
But we have more work to do to help both homeowners and
renters to be able to keep a safe and affordable place to call
home. Many homeowners, as we already heard about here, owe more
on their mortgages than the home is worth, and they need help
at refinancing, gaining equity in their home, to get their debt
under control. And many renters cannot find a place where they
can afford the monthly bill.
In addition, we need to make sure that our Nation's public
housing authorities have the funds necessary with which to
operate and the resources to keep their properties safe. Public
housing is home to more than 1.3 million low-income families
nationwide. More than 50 percent of these households are headed
by seniors or people with disabilities. New Jersey alone has
more than 47,000 public housing units, and while the HUD budget
request shows a commitment to helping all Americans find and
stay in quality homes, it also cuts some critical programs,
particularly in the area of affordable housing.
So, Mr. Secretary, we look forward to hearing from you and
working with you to try and solve these problems that are so
deeply ingrained into the structure. But we have got to find a
way out. Thank you.
Thank you, Madam Chairman.
Senator Murray. Thank you very much, Senator.
Mr. Secretary, we will turn to you for your opening
remarks.
STATEMENT OF HON. SHAUN DONOVAN
Secretary Donovan. Thank you very much, Chairwoman Murray,
Ranking Member Bond, and members of the subcommittee. Thank you
for this opportunity to discuss the U.S. Department of Housing
and Urban Development's 2010 budget proposal.
I want to thank the subcommittee for its work as a champion
for HUD's budget this past decade, including its recent
extraordinary work securing almost $14 billion for housing and
urban development programs as part of the Recovery Act. As you
so kindly recognized, Senator Murray, we are moving very
quickly to get this money out, and I appreciate your
recognition of that. These funds are already at work helping
families find and remain in affordable housing, putting people
to work in green jobs, and stabilizing neighborhoods.
The 2010 budget we have provided for your consideration
will move us forward. With your support, what we have proposed
would ensure mortgages for up to 2.25 million families with the
Federal Housing Administration; provide housing counseling to
571,000 households; fund rental assistance for over 4.5 million
households; expand the supply of housing affordable to low-
income families by 306,000 units; and increase the capacity to
serve homeless individuals by almost 15 percent.
As you know, the Obama administration has already begun to
comprehensively address the housing and economic crises, and
this budget would advance that effort further. Already on loan
modifications, which you have mentioned this morning, and in
our efforts to stem the foreclosure crisis, extensive efforts
have begun to take hold. Almost 80 percent of all loans in the
country are now covered by our modification and refinancing
plan, Making Home Affordable, and just last week 30,000
modification offers were given to homeowners around the
country, bringing the total to over 150,000 modification offers
thus far. However, we do have, as you recognized, further work
to do around modifications and stemming the foreclosure crisis,
and I look forward to working with the committee to make sure
that we do that.
This budget requests the authority to complement those
efforts so that FHA and Ginnie Mae can match their expanded
roles, requesting loan guarantee levels of $400 billion for FHA
and $500 billion for Ginnie Mae. In 2010, HUD is projecting
that FHA will generate nearly $1 billion more income than will
be paid out in losses over the life of the loans. That is, we
project our 2010 business to be in the black.
We must also have better informed housing consumers, and
this budget requests $100 million for HUD's housing counseling
program, a $35 million increase over 2009.
Senator Murray, building off your leadership, HUD is
requesting funding to better protect consumers and taxpayers
against those who would seek to commit mortgage fraud. This
budget has over $37 million to combat mortgage fraud and
predatory practices, including improving FHA's data systems, as
Senator Bond talked about; quickly and effectively implementing
the new Secure and Fair Enforcement Mortgage Licensing Act, and
enhanced Real Estate Settlement Procedures Act requirements;
and increased funding for the Fair Housing Initiatives Program
and Fair Housing Assistance Program.
The second objective of the 2010 budget is to restore a
balanced housing policy. This budget proposal returns the
Federal Government to its leadership role as a catalyst for
expanding the availability of decent and affordable rental
housing, as you, Senator Bond, mentioned. The President is
proposing several key initiatives, including $1 billion to
capitalize the national Housing Trust Fund; full funding of the
public housing operating fund; 12 months of funding for
project-based, rental assistance; a $117 million increase in
funding for homeless programs; and $1.8 billion increase in
calendar year funding for the voucher program that will
preserve affordable housing for more than 2 million households
and give HUD and housing authorities new tools to more
effectively allocate budget authority in order to serve the
maximum number of households with the funding provided.
The third objective of the 2010 budget is to invest in
urban and rural communities. This involves full funding for
CDBG at $4.45 billion, a $550 million increase over 2009;
creation of two new competitive programs, the University
Community Fund and the Rural Innovation Fund; and creating a
$250 million Choice Neighborhoods program, as you have
discussed.
Choice Neighborhoods builds on the vision of Senators
Mikulski and Bond when HOPE VI was created 15 years ago, and
our experience with what has been most successful in that
program. As Senator Mikulski noted with the introduction of a
bill to reauthorize HOPE VI, ``Where HOPE VI has been most
successful, it has transformed communities and transformed the
lives of people living in public housing.'' Choice
Neighborhoods expands on the best practices of HOPE VI to
encompass not just public housing, but also privately owned
assisted housing and the surrounding neighborhoods of extreme
poverty. Choice Neighborhoods will create viable neighborhoods
with decent and affordable housing, improved access to jobs,
better schools, and increased public transportation
opportunities.
The fourth objective is to drive energy efficient housing
and sustainable, inclusive growth. The proposed $150 million
Sustainable Communities Initiative is intended to catalyze a
linkage between housing and transportation planning and support
development of new land use and zoning plans. Through the FHA,
the proposed $100 million Energy Innovation Fund would support
several pilot efforts in innovative communities to identify new
approaches for financing energy improvements in new and
existing housing.
Led by Deputy Secretary Ron Sims, we are proposing the new
Office of Sustainable Housing and Communities that will expand
our relationships with our Federal, State, and local partners
and coordinate HUD's programs to catalyze both sustainable
planning and greater energy efficiency.
The final objective of the budget is to transform the way
HUD does business. We need better data and research about our
existing programs and the housing market in general. We need to
be forward-thinking and use demonstrations to test ideas on how
to transform our existing programs so that they serve more
people with the same or less money. We need the flexibility to
target technical assistance where it is needed most, and we
must transform HUD's data systems, procurement, and hiring
practices to match our housing and community development
challenges going forward.
In sum, HUD's budget request is intended to result in
better programs that serve more people with fewer resources. In
particular, we propose a transformation initiative that would
permit HUD to set aside up to 1 percent of its total funding to
be used for four activities: next-generation technology;
demonstrations; research; and technical assistance. As
proposed, no more than 50 percent and no less than 10 percent
would be spent on each activity.
I truly appreciate the time of the committee and look
forward to your questions. Thank you.
[The statement follows:]
Prepared Statement of Hon. Shaun Donovan
Chairwoman Murray, Ranking Member Bond, and members of the
subcommittee, thank you for the opportunity to appear before you today
to discuss the U.S. Department of Housing and Urban Development's (HUD)
2010 budget proposal.
I want to thank the subcommittee for its work as a champion for
HUD's budget this past decade, including its recent extraordinary work
securing over $13 billion for housing and urban development programs as
part of the Recovery Act. Those funds are helping families remain in
affordable housing, putting people to work in green jobs, and
stabilizing neighborhoods.
HUD's 2010 budget proposal responds to the current crisis in our
housing markets, addresses the continuing affordable housing needs for
millions of families, and reestablishes HUD's partnerships with
struggling cities, counties, and States. But it goes beyond that, it is
a forward thinking budget with new ideas for driving energy efficient
housing, sustainable, inclusive growth, and revitalization of
neighborhoods of extreme poverty. This budget also asks the Congress to
invest systematically and predictably in the full-scale transformation
of the Department through targeted investment in activities and reforms
funded by the proposed Transformation Initiative.
The 2010 budget we have provided for your consideration will move
us forward. With your support, what we have proposed would:
--Insure mortgages for 2.24 million families with the Federal Housing
Administration;
--Provide housing counseling to 571,000 households;
--Fund rental assistance for over 4.5 million households;
--Expand the supply of housing affordable to low-income families by
306,000 units; and
--Increase the capacity to serve homeless individuals by almost 15
percent.
How can we achieve these goals?
As you know we have already begun to address the housing and
economic crises. The Making Home Affordable Program and Congress'
recent passage of the Helping Families Save Their Homes Act are
critical tools for preventing foreclosure; and as I noted in my
testimony to this subcommittee on April 2, FHA is playing an important
role at ensuring that credit remains available to million's of
households. Its market share has risen from 2 percent in 2006 to 24
percent at the end of 2008. This 2010 budget requests the authority
needed so that FHA and GNMA can match their expanded roles. This budget
asks for loan guarantee levels of $400 billion for FHA and $500 billion
for GNMA. In 2010, HUD is projecting that FHA will generate nearly a
billion dollars more income than will be paid out in losses over the
life of the loans. That is, we project our 2010 business to be in the
black.
We also want housing consumers to benefit from their housing
choices. One lesson from the events in the housing market of the last
few years is that home buyers and homeowners need education and
counseling both before and after they get a loan. Most important, when
borrowers start having a problem paying, they need advocates for their
interests early on in the process. This budget requests $100 million
for HUD's housing counseling program, a $35 million increase over 2009.
Senator Murray, building off of your leadership, HUD is requesting
funding so that it can use its programs to better protect consumers and
taxpayers against those who would seek to commit mortgage fraud. This
budget has over $37 million in initiatives to combat mortgage fraud and
predatory practices, including:
--Improving FHAs data systems;
--Quickly and effectively implementing the new Secure and Fair
Enforcement Mortgage Licensing Act (SAFE) and enhanced Real
Estate Settlement Procedures Act (RESPA) requirements; and
--Increased funding for the Fair Housing Initiatives Program (FHIP)
and Fair Housing Assistance Program (FHAP).
The second objective of the 2010 budget is to restore a balanced
housing policy. This budget proposal returns the Federal Government to
its leadership role as a catalyst for expanding the availability of
decent and affordable rental housing. In the first quarter of 2009, 33
percent of all Americans were renters. Most people in this room have at
some times in their life been a renter, and 66 percent of households in
poverty are renters. To again take a leadership role in ensuring
extremely low and very low-income households have quality affordable
housing in safe and opportunity rich neighborhoods, the President is
proposing several key initiatives, including:
--$1 billion to capitalize the Housing Trust Fund;
--Full funding of the public housing operating fund;
--Twelve months of funding for Project Based Rental Assistance;
--A $117 million increase in funding for homeless programs; and
--A $1.8 billion increase in calendar year funding for the voucher
program that will preserve affordable housing for more than 2
million households and give HUD and housing authorities new
tools to more efficiently allocate budget authority in order to
serve the maximum number of households within the funding
provided.
The third objective of the 2010 budget is to Invest in Urban and
Rural Communities. This involves:
--Full funding for CDBG at $4.45 billion, a $550 million increase
over 2009, and a legislative proposal to update this enduring
and valuable program so that it more efficiently and
effectively addresses the community development needs of the
21st century, including a provision to hold harmless funding
losses that might result due to a formula change;
--Creation of two new competitive programs, the University Community
Fund and the Rural Innovation Fund, that would build around key
institutional assets and test new ideas for addressing the
problems in distressed neighborhoods and rural communities; and
--Creating a $250 million Choice Neighborhoods program. Choice
Neighborhoods builds on the vision of Senators Mikulski and
Bond when HOPE VI was created 15 years ago and our experience
with what has been most successful in the program. As Senator
Mikulski noted with the introduction of a bill to reauthorize
HOPE VI, ``Where HOPE VI has been most successful, it has
transformed communities and transformed the lives of people
living in public housing.'' Choice Neighborhoods expands on the
best practices of HOPE VI to encompass not just public housing,
but also privately owned assisted housing and the surrounding
neighborhoods of extreme poverty. Choice Neighborhoods will
create viable neighborhoods with decent and affordable housing,
improved access to jobs, better schools, and increased public
transportation opportunities.
The fourth objective is to Drive Energy Efficient Housing and
Sustainable, Inclusive Growth. Housing and transportation costs now
average a combined 60 percent of income for working families in
metropolitan areas. Residential buildings account for 20 percent of
carbon emissions and transportation counts for one-third of carbon
emissions. Designing communities so people have the option to drive
less, have shorter commutes to work, shopping, and recreation, as well
as building and retrofitting homes to make them more energy efficient
is not just good for the environment, it also improves quality of life.
The proposed $150 million Sustainable Communities Initiative is
intended to catalyze a linkage between housing and transportation
planning and support development of new land use and zoning plans that
think forward to long-term sustainable communities. We are already
moving forward working with the Department of Transportation and the
Environmental Protection Agency to develop common principals for
livable communities. These partnerships are intended to maximize all of
our resources so the sum of our efforts is truly greater than the
whole.
Energy efficient housing is more affordable housing, yet our
financing tools have thus far largely failed to capture this obvious
trade-off between housing cost and energy efficiency. The proposed $100
million Energy Innovation Fund would support several pilot efforts
within FHA and in a few innovative communities in order to identify
strategies that can catalyze new approaches for financing energy
improvements in new and existing housing.
Led by Deputy Secretary Ron Sims, we are proposing the new Office
of Sustainable Housing and Communities that will expand our
relationships with our Federal, State, and local partners and
coordinate HUD's programs to catalyze both sustainable planning and
greater energy efficiency.
The fifth objective of this budget is to Transform the Way HUD Does
Business. We are asking for flexibility to transform the agency. This
housing and economic crisis has demonstrated huge weaknesses in our
Nation's ability to deal with changes in how our housing markets
operate and how we address the housing needs of our most vulnerable
citizens.
We need better data and research about our existing programs and
the housing market in general; we need to be forward thinking and use
demonstrations to test ideas on how to transform our existing programs
so that they serve more people with the same or less money; we need the
flexibility to target technical assistance; and we must transform HUD's
data systems, procurement, and hiring practices to match our housing
and community development challenges going forward. In sum, HUD's
transformation request is intended to result in better programs that
serve more people with fewer resources.
A recent study conducted at the request of Congress by the National
Academy of Sciences on HUD's research suggested that a dedicated set-
aside of funding was needed to support research and demonstrations at
HUD. We are requesting that the Congress accept this idea and go one
step further, and permit HUD to set-aside up to 1 percent of its total
funding, approximately $434 million, toward transformation. These funds
would be used for four activities: Next Generation Technology;
Demonstrations; Research; and Technical Assistance. As proposed, no
more than 50 percent and no less than 10 percent would be spent on each
activity.
The projects to which these funds would be committed will be
defined through a strategic planning process we are undertaking right
now, a process we want to engage you in as well. This process asks the
questions: What should our housing and urban development programs look
like 6 years from now? How can HUD manage its existing programs today
more efficiently and effectively?
While we are beginning this strategic planning process right now
with a target of October 2009 for a draft strategy, there are some
projects that clearly need to be done now. Activities we would
undertake include:
--Modernizing the FHA data systems to speed up processing and reduce
risk;
--Transforming and integrating the data systems for the Housing
Choice Voucher and multifamily assisted housing programs;
--Designing and developing the IT systems needed for implementation
of the HEARTH Act;
--Providing technical assistance that recognizes that in the real
world HUD's programs work together and often have common goals,
such as improving energy efficiency, and thus need TA that is
cross-program;
--Providing program specific technical assistance for such programs
as CDBG, HOME, homeless programs, Native American Housing
programs, HOPE VI as well as new programs such as Choice
Neighborhoods and the Rural Innovation Fund;
--Conducting research that addresses short-term need for information;
and
--Designing and implementing forward-thinking demonstrations that
will improve the effectiveness of and reduce costs in existing
programs, as well as test next-generation ideas. In 2010,
Transformation funds would be used to support the pre-purchase
counseling demonstration mandated in HERA. This demonstration
would test how effective different types of counseling are at
reducing default risk for buyers with low down payments. We
would also conduct impact studies of rent-reform that build off
ideas initiated but not yet studied as part of the Moving-To-
Work demonstration. Both of these demonstrations would test
ideas that could provide significant cost savings to the
Federal Government as well as potential benefits for families.
We will engage the subcommittee in the development of the plan that
specifies the research, demonstration, TA, and technology investments.
HUD is committed to work with the Congress to make grantees more
accountable for their efficient and effective use of these funds.
HUD is establishing a new Office of Strategic Planning and
Management to implement the strategic planning process, wisely allocate
Transformation Initiative resources, and oversee the overhaul of HUD's
hiring and procurement systems. The budget also proposes a new Chief
Operating Officer to guide the internal transformation of HUD's
operations.
I truly appreciate the time of the subcommittee and look forward to
your questions.
HOME PRICE STABILIZATION
Senator Murray. Thank you very much, Mr. Secretary, and we
will now move to the questions.
As I mentioned in my opening statement, HUD's budget
request comes in the context of a lot of ongoing challenges in
the housing and in the economic crisis. Increasingly we are
seeing our home buyers and our lenders turning to FHA in the
absence of available credit in the private market. You pointed
out in your testimony that FHA's market share has increased
dramatically over the last 2 years.
The President's budget is asking us to increase the FHA
annual loan volume guarantee limit to $400 billion. That is an
increase of $85 billion. That request seems to imply that the
FHA's market share is going to continue to grow in the next
year. Does that reflect a kind of pessimism that home prices
and credit markets are going to begin to stabilize in the
coming fiscal year?
Secretary Donovan. First of all, I want to be very clear.
Based on the latest trends that we have seen, where we do see a
stabilization in housing prices in many markets and in some
cases increases in volume of sales transactions particularly in
the hardest hit markets, we do continue to believe that we are
on track for a return of the housing market to positive growth
this year and hopefully even by the end of the summer. So it is
not reflective of pessimism.
The most specific thing that I think is affecting the
continued high volume of FHA is the lack of mortgage insurance
available in the market. That is the primary factor that is
driving the continued high volume of FHA business. As the
housing market recovers, we believe that it will take some time
for mortgage insurers to build back up their financial strength
and to be able to allow other lenders to fully enter the
market.
But I want to be clear. Our interest is not in having FHA
be the sole or one of the primary sources of financing. Our
interest is getting this housing market back on track, and we
welcome and will work with the private sector to get back into
lending as quickly as possible.
Senator Murray. Let me ask about the HOPE for Homeowners
foreclosure prevention initiative. That was originally expected
to serve about 400,000 families. As I mentioned, there are less
than 1,000 applications. Congress recently took actions to
modify that program to make it more effective. With these
changes, do you think that FHA will now reach its goal of
assisting 400,000 families?
Secretary Donovan. Two things I would say about that,
Senator. First of all, as you rightly recognize, there has been
almost no use of HOPE for Homeowners, just over 50 loans closed
at this point in the program. With the recent changes signed by
the President and passed by Congress, I do believe we will have
significant improvements in the program. We hope to have the
revised program up and running in the next couple months, and I
do think we will see significantly increased volume.
I think it is unlikely that we reach the 400,000 number,
and the reason for that is that when the HOPE for Homeowners
program was created, it was the primary alternative for helping
families at risk of foreclosure. As I discussed earlier, as you
know, we have since introduced the Making Home Affordable plan,
which has reached a scale, as I mentioned in my testimony, of
over 150,000 modifications just in the first few weeks, and we
expect it to continue expanding substantially. And so with
these other alternatives, I think it is unlikely that HOPE for
Homeowners reaches the 400,000, but obviously, we will keep the
committee informed as we do begin to see volume pick up once
the changes are introduced.
FHA CONCERNS
Senator Murray. Okay, I appreciate that.
I have long raised concerns about the solvency of the FHA's
MMI Fund and I want to make sure that our Nation's taxpayers
are not exposed to the elevated risk of re-default of these
already troubled mortgages. If HOPE for Homeowners or some of
these other foreclosure prevention activities do succeed in
bringing more distressed borrowers into the FHA's programs,
what safeguards are there to ensure that these foreclosure
prevention measures do not destabilize the FHA?
Secretary Donovan. So, two things about that. First of all,
thanks to the Congress and the changes that you have made, we
have been able to and do project a surplus for the main MMI
program and for FHA overall in this budget. There are two
primary things that are driving that that I think are important
to emphasize.
Congress' swift action to ban the seller-funded down
payment program alone, our estimates are, will improve the
performance of just 2010 loans by $2.5 billion. So that alone
has been a substantial help to improve the health of the fund.
Second, what we have also seen is that with the credit
crisis that has happened in the rest of the market, our average
credit scores within FHA have gone up by over 50 points over
the past year. So we are seeing, despite the troubles in the
market, an improved borrower profile across the board in FHA, a
substantial, substantial improvement that will help to keep the
overall fund healthy, we believe, for the 2010 loans.
Specifically on HOPE for Homeowners, two things I would
say. One is that there is a clear requirement for HOPE for
Homeowners. This is one of the reasons why I do not think the
volume will get to the 400,000. It requires a write-down of the
principal to a level that is sustainable on today's value, not
on original value, but on today's value. With hopefully being
at the trough as the program ramps up, we should see long-term
housing growth for those that will make those safer loans.
The other important point is that Congress wisely set aside
$300 billion at Treasury to fund any losses from the HOPE for
Homeowners program. So any losses there do not affect the
broader health of the MMI Fund. They are isolated to this fund
that has been established at Treasury and should not affect the
overall----
Senator Murray. What about the reverse mortgage, HECM
program, for seniors to reverse mortgage? For the first time,
the budget is seeking a positive credit subsidy of $798 million
for that. Does that positive subsidy requirement portion of the
MMI Fund portfolio raise concerns for you about the overall
solvency of the MMI Fund?
Secretary Donovan. It does not on the overall solvency.
First of all, HECM is a very small--very small--portion of the
overall set of programs, and even with that cost, our estimate
is that the loans made in 2010 will show a surplus of almost $1
billion.
Specifically on HECM, I would say two things. First is we
have tried in this budget across the board to be as clear and
direct and honest as possible about what we see going forward.
The HECM program is far more sensitive than traditional loan
products. It is much like an annuity, far more sensitive to
house values, and long-term house price growth. We have been, I
think, relatively conservative in the budget in projecting that
for the HECM program. So that is the first thing.
The second I would say is we do have options that I would
be happy to discuss with you as we work through the discussions
on the budget for changes to the HECM program.
Senator Murray. So some tools to make sure you have got
some control on it?
Secretary Donovan. Yes. We have not chosen to raise
premiums, given the stress that seniors are under right now,
but there are premiums, as well as loan-to-value and other
factors that we can make changes on that would eliminate that
need for the costs. Those are, obviously, choices about how
many seniors we want to be able to help versus the cost in the
program, and I think it is important that we have discussions
with the committee about that to make decisions.
Senator Murray. Good. Maybe you can get back to us on that
after the hearing and we can talk about that. I appreciate it.
Secretary Donovan. Absolutely.
Senator Murray. Senator Bond.
FHA SOLVENCY
Senator Bond. Thank you very much, Madam Chair.
We are trying to get some numbers here, and it looks like
our 302(b) allocation, which has just come down today, is not
going to support the HUD request. When you take out the
renewals, it is about $1.5 billion over the 2009 enacted level.
So we are going to have to do a lot of work in HUD and
transportation.
Speaking of the FHA problems, again, it was called to my
attention some research done by a New Jersey-based financial
data firm, SMR, and they gave St. Louis the No. 1 place for FHA
lending. The dollar volume from 2008 has quadrupled from $719
million in 2007 to $2.9 billion in 2008, and the analysis is
they are kind of the last man standing in the subprime space.
They are refinancing a lot of people who got subprime mortgages
from private lenders.
The analyst goes on to say the Federal Government might
just step back and say what have we gotten ourselves into. Here
is the point that concerns us. ``Whenever you see a lender
ramping up as quickly, there are often some mistakes made. When
you suddenly explode like FHA has, that's something to watch
for.''
While you came up with a mildly optimistic $1.7 billion
revenue generated by FHA on a book of business of $400 billion,
during our FHA hearing in April, the HUD Inspector General
responded to one of my questions on the need for taxpayer
bailout by saying, ``Based on the numbers we're seeing, I think
it's going in the wrong direction.'' And CBO projects a zero
credit subsidy rate on FHA programs.
So we are very much concerned about it, and is there
anything that you are doing or can do to mitigate the possible
need for additional funds to compensate for FHA losses? And if
the economy continues to deteriorate--and I know one of the
assumptions you built in was low interest rates, but it looks
like the markets and foreign governments are responding to our
fiscal policy by driving up interest rates. So we have got
another collision coming.
How confident are you that you will not have to raise
premiums or come to the taxpayer for assistance?
Secretary Donovan. First of all, Senator Bond, we have done
fairly extensive analysis of where the fund is today. Current
projections, not just for 2010, which are contained in the
budget, but for all FHA's current book of business to look at
the reserves, and while it is too early to say for sure where
we will end up in the re-estimate this summer, we think there
is a better than even chance that we will stay above the 2
percent reserve threshold in terms of that analysis. So that
suggests not just for the 2010 business but overall for the
portfolio that we are more than likely to stay out of a broader
need for any taxpayer funding.
Second of all, I do want to emphasize that while I have
reported on some of the positive trends, you talk, I think
rightly so, about the need to enhance FHA's fraud detection.
There is a range of things that we need to do, and I couldn't
agree with you more on that. And we are moving in that
direction.
We have established and sent out SWAT teams to lenders
where we see early evidence of defaults. We have asked for and
received, thanks to the Congress, increased authority to go
after bad apples. One of the problems that we have had is that
we have been able to debar companies, but principals have been
able to change their stripes, reestablish themselves in new
companies, and we did not have the ability to bar them until
legislation signed by the President just a few weeks ago. We
are implementing that now.
And one of the key things that we want to do with this
transformation initiative, the single biggest usage of funding
from that in our plans is to enhance FHA's systems. I cannot
stress enough that a systematic approach to fraud detection is
absolutely the direction that we need to go. I have detailed in
my written testimony much more about the kinds of initiatives
that we would want to pursue with the transformation
initiative, but that is the single most important that we want
to pursue.
Senator Bond. We agree with you on that, and I think I
mentioned previously the U.S. Attorney for the Eastern District
of Missouri, who has been aggressively prosecuting these fraud
cases. There are some bad apples that really need to be put out
of the business and in my view put out of circulation. That is
an added problem we do not need.
Secretary Donovan. If I could just add, thanks to you we
also, in the bill that I just talked about that gave the FHA
enhanced capacity, have significantly increased resources not
just with Ken Donohue, who I have been working very closely
with at HUD, our Inspector General, but also at the Department
of Justice, the Federal Trade Commission, increased authorities
and increased funding to go after exactly this kind of fraud.
SELLER SPEC FINANCING
Senator Bond. Let me move on. You mentioned the importance
of getting rid of the seller-financed down payment. I have long
warned about the no-down-payment option. There is another item
that I have noticed. In Canada, mortgage loans are recourse
loans, and they have not experienced anything like the same
type of problem experienced in the United States.
Going forward, is this something that--it is controversial
but we see what happens when people can buy a second home on
spec and walk away from it. Is it worth considering whether we
need to change the system and make mortgage loans recourse
loans?
Secretary Donovan. This is a proposal that I think is worth
some consideration as part of a much broader look that we are
going to do at the mortgage market. Obviously, our regulatory
structures have failed over the last few years to contain this
kind of lending process.
I think the concern that I would raise is that at a time
when the markets are fragile, that a major change like that
could be----
Senator Bond. I am not saying right now. We are scratching
and clawing to get out of this, but going forward--I do not
always trust regulators to avoid problems. I think that we
ought to have some standards in place that lessen the number of
people who can come close to the line. And I believe Canada
also generally requires a larger down payment, which all goes
back to the point that you emphasized and I emphasized that we
need to make good quality, affordable rental housing available
for people to have a good home until they can afford to buy a
home and do it without risking their credit or without risking
the viability of the community.
Thank you, Madam Chair. I have got a whole lot more to go,
but I want to hear from Senator Lautenberg.
Senator Murray. We will come back to you.
Senator Lautenberg.
Senator Lautenberg. Yes. Mr. Secretary, would the
elimination--I think that is a fair representation of the HOPE
VI program, its principal mission, revitalizing distressed
public housing with this new Choice Neighborhoods Initiative.
Now, recent estimates indicate there are still 80,000
distressed or severely distressed public housing units that
remain nationwide. Now, if HOPE VI is eliminated, is it
possible to have enough resources available to revitalize these
public housing units?
Secretary Donovan. Senator, I am glad you asked that
question because I want to be absolutely clear about this. The
Choice Neighborhoods proposal is in my view, quite frankly, a
celebration of HOPE VI, and it says it has worked so well that
we ought to think about expanding that model and making more
resources available.
But I want to be very clear as well. What we have proposed,
I think it is extremely clear to us, would expand resources for
housing authorities to continue to take on and accelerate the
efforts to revitalize troubled public housing. And here is why.
First of all, what we have proposed--this year $120 million
was provided for HOPE VI. We are proposing $250 million, so a
significant expansion of resources, first of all.
But even though we are opening it up to assisted housing,
we have looked very carefully, and not only is--there is three
times more public housing that is in troubled condition and
located in neighborhoods of high poverty than there is assisted
housing. So the expectation is that the large majority of these
resources would go to public housing, not to assisted housing.
The third thing that I would mention is that we are
proposing to make eligible privately owned housing as well. We
hear from housing authorities all the time that one of the
challenges they have is the inability to use HOPE VI to help
turn around privately owned housing that surrounds public
housing, whether it has been foreclosed or vacant or abandoned.
So we think we are actually not only giving housing authorities
more resources to do HOPE VI redevelopment, but actually
expanding the kinds of things that they can do as well. So we
believe strongly that this is, as I said, a celebration of the
model, not an elimination by any means of the program.
NEIGHBORHOOD DETERIORATION
Senator Lautenberg. We are pleased to see the expanded
amount of resources available, but that still falls short of
the need substantially. What do we do to encourage people about
their living standard that, as you just said, includes
deterioration in the neighborhoods around these places? How
many units will still be left in this distressed condition that
we have to pay attention to?
Secretary Donovan. Well, I think the good news on that is
that this proposal comes on the heels of a Recovery Act, thanks
to you, that made substantial investments in public housing
stock, $4 billion total of capital funding that I think will go
a long way to helping to ameliorate that. I do not believe we
are there yet. There are still significant needs in public
housing, but I think the combination of the significant
expansion in Choice Neighborhoods, as well as the $4 billion in
Recovery Act funding, is a very, very important down payment on
where we need to go with public housing.
Senator Lautenberg. We are still not at the goal line, and
we have to keep working on it.
Secretary Donovan. I would agree.
Senator Lautenberg. The economic recovery act raised the
maximum loan limit for FHA so that potential homeowners in high
cost-of-living areas like my home State could access FHA loans.
Do you support extending the increased maximum loan limit when
it expires at the end of this year?
Secretary Donovan. I would say, Senator, that it is too
early, in my mind, to give you a final answer on that. It was
extended really to make sure that we had expanded capacity not
just at FHA but also at the GSEs to serve a market, quite
frankly, that had disappeared when the credit crisis occurred.
I think we have to look carefully at how far the market is at
the end of the summer, at the end of the year, before making a
decision to extend it beyond the 1-year extension that was
there.
I do believe, as I said earlier, that FHA's purpose is to
work in concert with the private market to provide financing
where it is not available from the private sector, and I think
we need to look at the loan limits in light of where we are in
terms of that balance as we get closer to the expiration.
HOUSING COUNSELING
Senator Lautenberg. The prospects realistically are not for
lower prices. If the economic recovery takes hold, we are going
to see an increase in prices. We are now seeing an increase in
interest rates for housing loans.
So I wanted to discuss the counseling situation. The
President's budget increased funding for housing counseling by
$35 million, and this is a substantial increase in funding. The
demand for housing counseling is also far greater. Is the
funding request enough to meet the need for housing counseling?
How many people are we talking too currently, and will we have
enough money available to increase that availability, because
that is such an important part of people's emotional and,
obviously, financial condition.
Secretary Donovan. What I would say Senator is that while
it is a substantial increase, it would allow us to serve over
570,000 households with counseling next year. That alone is not
enough to deal with the current crisis that we have.
Importantly, we have two other sources of resources. One is
from Congress through NeighborWorks, there was an additional
allocation of, I think, $190 million last summer. That brings
the total to, I think, around $300 million, which has been an
enormous help. That is specifically targeted to foreclosure
prevention. Our counseling money is for broader purposes that
includes first-time home buyer counseling, post-purchase
counseling, et cetera. So it is very important to see it in the
context of the $300 million.
But even that I think is not going to get us there, and I
met with NeighborWorks the other day on this. Servicers have
agreed that counseling is an eligible expense, but we have not
seen a broad use of that authority to allow reimbursement of
foreclosure counseling. And I think if we are really going to
get to the scale we need to on this problem, we need to
encourage the servicers and work with the servicers to have
them expand their reimbursement of foreclosure counseling, and
we are doing that. I met with HOPE NOW just this week to
encourage them to do that, and they have reengaged with the
servicers to see if they can get them to more broadly
reimburse. And I think if we can do that, then we could
actually get to the scale that we need to really deal with the
full problem.
Senator Lautenberg. Thank you, Madam Chair.
HOMEOWNER BUYER TAX CREDIT
Senator Murray. Thank you.
Mr. Secretary, HUD recently clarified that participants in
the FHA program can use the $8,000 first-time home buyer tax
credit to defray closing costs or to increase their down
payment. That, we know, is going to enable more families to
afford housing and provide an important jolt to the housing
market.
Some people have proposed allowing the tax credit to be
used to defray closing costs for non-FHA products. Do you think
that monetizing the homeowner buyer tax credit can be effective
in helping to stimulate demand beyond the FHA products?
Secretary Donovan. What I would say on that, Senator, is I
think it would have some incremental benefit. I think it is
unlikely to have as much benefit as what we have done with FHA.
The reason for that, quite simply, is that today because of the
lack of mortgage insurance, as I talked about earlier, or the
limited availability of mortgage insurance, the down payment
requirements are quite large, and an $8,000 credit in that case
will have a harder time overcoming the barriers for first-time
buyers with the size of the down payment that they need in
general in programs.
That is why we focused in our guidance on FHA lenders where
we have a lower down payment requirement, as well as on State
housing finance agencies that I think have been some of the
most creative lenders to first-time buyers. And that is where
we do see a lot of the activity.
Having said that, I also think it is important to recognize
we did try to balance very carefully that we do not get back to
the point of having zero down payment loans. So our guidance is
unless you have an approved down payment assistance program
through a government entity or a NeighborWorks, you need to
have that 3.5 percent down payment even for the FHA loan. So we
really tried to make sure we are balancing the health of the
fund with the need to stimulate the market. I think we have got
that balance right.
Again, I think there could be some incremental benefit to
expanding it more broadly. There are private lenders that are
looking at that, but I just do not think it is going to have as
much boost as the FHA because of the down payment requirements.
SECTION 8 FUNDING
Senator Murray. Section 8 tenant-based rental, a critical
tool for a lot of our families today. At a time when this
economic recession is really hitting a lot of people especially
hard, I think that program is even more important than ever. In
order to continue this program, the President's budget included
$17.8 billion in total resources for the tenant-based rental
assistance. That is an increase of $1.8 billion over 2009.
Are you confident that the amount of funding is sufficient
to fund all of the existing section 8 vouchers?
Secretary Donovan. Based on our latest information, we are
confident. In fact, we based those estimates on the end of
December very latest leasing. And one of the reasons there is
such a significant increase is that we did see housing
authorities really increase their leasing late in the year,
which I think is a positive thing in terms of helping more
families in the economic crisis, and that led us to really
think that it was important to request a significant increase.
The other thing that is contributing to that is not just
vouchers that were outstanding at the end of December, but also
the significant number of vouchers that will be expiring for
the first time, whether they are tenant protection or
incremental vouchers that the committee has provided. I think
it is, obviously, critically important as VASH vouchers and
other vouchers start to expire that we ensure we have adequate
resources for those.
We have preliminary information from March 31, which shows
roughly level leasing from December. So we continue to believe
that that significantly increased number should be adequate for
next year.
The only other thing I would just mention--I do have some
concerns given the ramp-up in leasing that we saw late in the
year, that we may have some housing authorities that will have
difficulties this year during 2009 with the allocation. So I
want to make sure that our staffs are in contact about that to
make sure that we give you the latest information of what we
are hearing from housing authorities so that we are dealing
with the issues in 2009 and the ramifications it might have on
the 2010 budget.
VOUCHER SUSTAINABILITY
Senator Murray. Congress has struggled for a long time to
balance the need to serve as many families as possible with the
need to ensure that we are managing the growth in this
program's cost. We have taken several steps to provide
stability and consistency of the section 8 program over the
last few years, and we have seen an increase in utilization by
PHAs. It is good. More families are being served, but we have
to balance that with the costs in the future.
Can you describe for us what your long-term plan is for
ensuring that we are increasing vouchers at a level that we can
sustain in future years?
Secretary Donovan. Well, first of all, to be very frank,
one of the problems here is that you have not been able to get
good information from HUD, and we have not had the systems in
place to be able to give you that information. One of the key
investments that we propose to make with the transformation
initiative in the budget is to build a system that can
accurately provide you data on the budget costs.
We spent a lot of time. I probably personally spent 8 or 10
hours with budget staff as we developed this estimate, and I
believe we finally have good information for you this year. But
we need to go farther to have not just information that we are
getting today from March 31 leasing but have real-time leasing
information from around the country to be able to make sure
that we get the best information and can respond quickly to
trends that we are seeing to keep program costs under control.
So that is the first thing.
Second of all, there are many things about the voucher
program that require work by housing authorities--having run
the fourth largest voucher program in the country, I know this
very personally--that frankly are not necessary. And I think
the Section 8 Voucher Reform Act and other efforts to simplify
the program will go a long way. Things like seniors on fixed
incomes, not having to recertify them on such a regular basis
because we know that it is predictable, and focusing our
efforts on families that need to be recertified more often, a
whole range of other simplification of rent rules and income
rules and a whole range of things that could make the program
more cost-effective. That is the second thing.
Finally, I think one of the critical things is getting a
stable, predictable funding formula. We have attempted in this
budget proposal to make some of the fundamental changes that we
believe would make sense, provide the flexibility around unit
caps and other things that will allow housing authorities to
plan better and therefore be able to move their programs in the
right direction to stay within their budget caps.
So there is a range of things that are critical in doing
that. There is no one magic bullet there, but I believe with
those set of things, that we can get to a point where we can
keep voucher costs under control, we can serve more families
with less money, and get you the information that you need to
make decisions.
Senator Murray. All of those are important. We all want to
see the increased utilization. We want families to have this.
What we do not want people to have is the promise of vouchers
for a budget that in the future we cannot sustain, and we are
sitting at a town hall meeting and people are screaming that
their vouchers have been taken away. So we want to work with
you on this balance as we work through this.
Secretary Donovan. Absolutely.
Senator Murray. Senator Bond.
MORTGAGE INTEREST RATES
Senator Bond. Thank you, Madam Chair.
We were talking about simplifying the process, cutting the
red tape, and getting us better information. I can only say
amen and thank you. It is a long time coming, and we are
looking forward to it.
I meant to touch briefly on concerns I have. In the Making
Homes Affordable initiative, the administration projected it
would benefit 7 million to 9 million homeowners. Unfortunately,
the reach in benefit was linked to mortgage interest rates, and
with them hovering now around 5.5 percent and potentially going
higher, what impact do you see that having on the goal?
Secretary Donovan. Well, I think there are two different
issues there. One is around refinancings. Making Homes
Affordable projected 4 million to 5 million homeowners that we
would be able to help through refinancing for underwater
homeowners. For the vast majority of those, one-half a point or
one-tenth of a point change in interest rates is not going to
significantly affect the benefits of the program because those
are families that are, in general, at much higher interest
rates. But I do think it will have some marginal affect on the
number of folks that can benefit from that.
On the modifications, however, we still have the ability
under the program through modification to get an interest rate
down to as low as 1 percent, and that is independent of where
interest rates are today. So I do not think it will have a
significant impact on the modification portion of the program,
and in fact, I quoted that we had offered 30,000 modifications
last week. We expected to help between 3 million and 4 million
homeowners with the modification plan over 3 years. So if you
do the math, 30,000 in a week actually get us in that range
over 3 years. So we are starting to get to the kind of volume
that could get us to the scale, and I do not think on the
modifications in particular that interest rates will have a
significant effect.
Senator Bond. But I think, obviously, that is optimistic
that you will be able to continue. On the modifications, while
it is not in the budget, if you are lending out money at 1
percent and the Federal Government is borrowing everything that
is going out the door now, there is a hidden subsidy that,
fortunately, is not charged against our budget, and I guess we
should not raise it here. But it is going to go on the debt of
the Federal Government balance sheet.
Secretary Donovan. Most of the cost is actually absorbed by
lenders because we require them to take more than 50 percent of
the losses through the program. As you have said when we were
talking before, they should because the alternative for them is
foreclosure where there are significant losses.
Senator Bond. On these, are you giving them a soft second,
a second lien on the home so if it is sold for more than the
reduced rate, the lenders--to the extent that we are
subsidizing them, they ought to get some. Will there be a soft
second on the assumption that maybe the home prices will rise
again and they will be sold at higher than their reduced loan
rates?
Secretary Donovan. On the modifications, in fact, the loan
stays intact. So the full amount of the loan is there. So if
there is an increase--one more thing I would just say about the
cost of this. We are paying for our share of the program
through TARP funds. So we have already set aside $50 billion in
TARP funds, and that will not require new appropriations. So
that is already built into the cost of TARP. It does not have,
whether on FHA or any other Government program, an impact.
BUYERS TAX CREDIT
Senator Bond. Well, I am pleased to hear that because I
have been wondering. After we agreed to the TARP program to buy
troubled assets, I have seen us buying a lot of troubled banks,
troubled auto companies, and if you are finally buying down
some troubled assets, it is about time. We kept wondering where
it was coming from, and that was the whole reason to support it
in the first place. I have been extremely disappointed that
since we enacted it last year and this year, we have not been
using it for the purpose that it is being used.
Another question may be before us. As part of the stimulus
act, Congress provided an $8,000 tax credit for first-time home
buyers. There is a new proposal that would increase that to a
higher level at $15,000. There was a proposal to limit that to
buying homes out of foreclosure. What is your sense on the
impact this could have and whether that would help stop the
decline in home prices?
Secretary Donovan. Two things I would say. Obviously,
increasing the amount of the credit would bring more buyers in
but, obviously, at a cost. So Congress has got to weigh whether
that cost is affordable and whether it can be absorbed, given
all the other expenses.
The other piece of this that has been discussed is
extending it not just to first-time home buyers but beyond that
to any home buyer. I think the issue there is that while that
could have some incremental benefit, when you have an existing
home buyer who is buying a new home; you are selling a home and
buying a home. So it does not have the same kind of positive
impact on the market that a first-time home buyer getting into
the market from renting in the first case to absorb the
overhang of----
Senator Bond. Well, I agree with that. But is there any
wisdom in limiting it to foreclosed homes to try to save
communities?
Secretary Donovan. It is an interesting idea. I had not
thought about that before. We, obviously, have significant
resources from the Recovery Act through the Neighborhood
Stabilization Program from last summer that is doing exactly
that and trying to concentrate on neighborhoods with lots of
foreclosures. I think there is more we can do with our own
foreclosure----
Senator Bond. The city council members, the mayors are
saying what am I going to do with this community that has got
20 percent foreclosed? The retail businesses are shutting down.
That is causing further collapse, and they are seeing their
communities absolutely deteriorate.
Secretary Donovan. We should follow up because we are
releasing today the competition for $2 billion in Neighborhood
Stabilization funding that was in the recovery bill. We have
already provided Missouri significant funding from the $4
billion that was allocated last summer. But this is an
opportunity--this additional $2 billion--to really take those
efforts to the next level in St. Louis and a range of other
places. So we ought to follow up and make sure you have all the
information.
Senator Bond. Yes. Could we get information on that,
because it is not just limited to the major cities?
Secretary Donovan. Not at all.
Senator Bond. There are suburbs and rural areas.
Secretary Donovan. In fact, one of the things we really
want to encourage in the competition is that jurisdictions work
together across regional lines, including suburbs, rural areas.
So we are very interested in doing that.
HOMELESS VETERANS' NEEDS
Senator Bond. I am going to impose on the chair's time for
just one question we are both interested in. The President's
budget does not include additional HUD-VASH vouchers while the
President said he wants to have homelessness among veterans--
and Senator Murray and I are very interested in homeless
veterans. How are you going to address the needs of homeless
veterans, especially those with disability? What are your plans
there?
Secretary Donovan. I am very glad you asked this question
because I want to make sure I am very clear that I and the
President strongly support the VASH program and are working
hard to make it as effective as possible. Of the 10,000
vouchers that were allocated in 2008, 79 percent of those have
been issued. Over 40 percent of them are already leased. We had
some early start-up issues which basically the Veterans
Administration had to get case managers up and working before
we could get the vouchers issued. So now that those case
managers are in place, we have begun moving quickly to get the
vouchers out, and obviously, there is an additional 10,000 that
were allocated that we will be competing very shortly.
I would say a couple things about why we have not included
them in the budget proposal.
First of all, as I mentioned earlier, we were quite
concerned that given the leasing level in the overall program,
that we would need significant increased dollars. I think it is
an important conversation with the committee to understand what
is available for incremental vouchers versus supporting
vouchers that are already there. We, obviously, want to have
that conversation.
Also, I do have some concern that if we have multiple kinds
of vouchers within the program that we may create
administrative complexity for housing authorities. I think the
ideal situation from my point of view is that an experiment, a
model like VASH over 2 years that we can learn the best lessons
and then we could get housing authorities not just using VASH
vouchers, but using any of their vouchers to effectively serve
veterans. So I think the opportunity for us is to think of VASH
as a good model that can then be expanded to the entire voucher
program in a way that is as flexible as possible for housing
authorities in implementing it.
Having said that, we are very hard at work with the VA, in
doing that, we are issuing joint guidance with them. We are
actually holding a conference with them, our first conference
on HUD-VASH to make sure that implementation moves smoothly,
and I have been working closely with General Shinseki, now
Secretary Shinseki to make sure that it moves swiftly. I would
be happy to provide more details on it, but I do think it is a
very important conversation about what we do in the 2010 budget
that I look forward to.
Senator Bond. Thank you, Mr. Secretary.
COSTS RELATED TO TRANSFORMATION INITIATIVE
Senator Murray. Mr. Secretary, you mentioned getting
information more timely and accurate. That is a goal that I
obviously share. It is refreshing to hear that from you.
But I do need to signal to you some major challenges with
the transformation initiative proposal that you put forth.
Under this proposal, you would have the authority to transfer
up to 1 percent from all of HUD's programs to that initiative,
with a total cost that could reach $434 million. Given the
magnitude of that, this subcommittee needs more precise
information about what you would fund and at what cost before
granting HUD that kind of flexibility.
Your testimony this morning does outline some of the
priorities. Can you provide any more information to us about
how much you expect these initiatives to cost in fiscal year
2010, and will that $434 million be necessary this year?
Secretary Donovan. We do have more detail about those
initiatives, obviously, much more than is in my testimony. I
think we have started to provide some information to your
staff. I would be happy to provide more detail on that.
As I mentioned earlier, the single largest and most
important initiative is the FHA modernization. Our sense is
that the full cost of that, not the 1-year cost, but the full
cost of that, is in the range of $110 million to $130 million.
Senator Murray. Is this the next-gen technology?
Secretary Donovan. This is specific next-generation
technology for FHA. So that is one piece of the technology.
Senator Murray. Do you know how much that will cost?
Secretary Donovan. Total cost, between $110 million and
$130 million.
The other I think most important system investment that we
would want to make is for a new voucher system, as I mentioned.
The total cost--again not a 1-year cost, but the total cost of
that--our estimate is that is roughly $90 million to $110
million. Again, that is over multiple years.
Senator Murray. This year?
Secretary Donovan. That is over multiple years. These are
estimates for 5-year total costs for those systems.
Senator Murray. What we need to see for our oversight and
for our appropriations mark this year is what those initiatives
are going to cost this year, and what you are going to be
transferring this year for those programs.
Secretary Donovan. Absolutely.
If I could just make a comment about that, I clearly
recognize that we are asking for a flexibility that is quite
different.
FLEXIBILITY AND ACCOUNTABILITY
Senator Murray. No. We always get asked for flexibility,
but then we lose sort of where that has gone.
Secretary Donovan. I think we have absolutely got to
provide complete accountability to you to make sure, if we were
to move forward in this direction, that we are giving you a
plan that we are regularly reporting to you. I recognize that
that is a significant request.
My concern and one of the things that led to this proposal
is that I see, for example, a dramatic change in the housing
market where FHA does not have the ability to respond with new
fraud systems. There is a fraud system we simply could not buy
this year until the 2009 allocation came out that would have
allowed us to get started earlier. And there are unforeseen
things that happen because FHA is a market-oriented program.
So I would love to have more conversation with your staff
about it. What we are trying to figure out is how we can give
you the accountability that you absolutely should have while
also having the ability to respond quickly to changes and to be
more--another example I would give you.
We have many, many different technical assistance
categories in our budget that come just on a program basis, but
when I go out into neighborhoods, I hear, well, you have got
this Neighborhood Stabilization funding, but you have also got
your own FHA foreclosures and we cannot get technical
assistance in making those work together. So one of the things
we are proposing here is to have more flexibility to be able to
move technical assistance dollars across the agency so that we
are combining and bringing together our programs with technical
assistance that actually makes the most possible impact in
neighborhoods rather than just focusing on one program or just
focusing on another program.
So there is a range of places where I think flexibility can
help. If we can figure out a way that you get exactly what you
need in terms of----
Senator Murray. Well as you know, our role is oversight,
and we are always asked for flexibility, and then we get yelled
at for funds that were misused. So we need to come to an
agreement. What I would like to do is have your folks sit down
with our staffs on both sides of the aisle and walk through how
much you are asking for this year and where that flexibility is
and how you intend to use it and what the benefits are because
without understanding that, it is very hard for this
subcommittee to trust what happens, even though I have a great
deal of respect for you. It is just a history of this
subcommittee that we have seen before.
Secretary Donovan. Rightly so.
Senator Murray. So we need to know what the specific
amounts for this year, as we are allocating for a yearlong
appropriation bill, what the benefits are, and what kind of
flexibility you are asking for.
Secretary Donovan. Absolutely.
Senator Murray. Senator Bond?
Senator Bond. Thank you, Madam Chair.
I was sitting here making notes to myself as you went
along. I could not agree more with the chair that with
flexibility must come accountability. You tell us you are going
to take care of the VASH without having earmarks in it. Good
luck. That would be ideal. We will be watching and we want to
see how it works. I really think that better information is key
to that. I understand that the red tape and the hassle very
often really mess things up. So if you can do that that would
be fine.
On homeless, we want to see the idea of supportive housing
really which this subcommittee has pushed for a long time. It
is now in the law. It is critical. Some time ago, I helped
reactivate the Interagency Council on Homelessness because we
saw a lack of coordination. Are you getting that coordination?
Do we need to give it a kick with legislative language on the
interagency council? We have got to have all of the agencies
working together on this supportive housing.
Secretary Donovan. Senator, I could not agree more. An
update on that, we are interviewing candidates for that, to run
the interagency council. We have convened the first meeting in
the next 2 weeks with Secretary Shinseki. He is actually the
acting chair, and I will become the next chair for it. And our
initial focus in the first meeting will be on VASH and veterans
issues. I could not agree more that that is a critical place to
move forward our efforts.
Senator Bond. And it is not just for veterans. It is across
the whole area of homelessness.
Secretary Donovan. I would also add one of the most
important things you did, I think, in the Recovery Act was the
prevention resources, the $1.5 billion, that has really allowed
us to take our efforts to the next step in preventing
homelessness, and in particular, one of the barriers we have
had with VASH has been--whether it is a security deposit--there
are very small hurdles that, when you add up, can stand in the
way of a veteran being rehoused. This prevention money has been
very helpful, and we are using it in concert with VASH to make
it even more effective. So I thank you for that.
MORTGAGE LENDER REGULATION
Senator Bond. Well, I have got some rather open-ended
questions I will submit for the record, and you can, at your
convenience, reflect on the future of GSEs, the rural
innovation funds.
I want to ask a specific question. Mortgage issues I hope
will be considered as a part of regulatory reform. Last year, I
introduced legislation proposed by the Treasury for a mortgage
origination commission because what we saw in our State was
that the bricks lenders were pointing their fingers at the
clicks lenders, the people who issued loans out of savings and
loans and banks, at regulators. They did not always do a good
job, but the people who were sending in the super-sweet, no-
down-payment, low teaser rate loans over the Internet and the
fax--I have tried to be on a Do Not Fax List. I have got all
kinds of blocking devices on my e-mail, and they come in.
Somebody has got to regulate them.
Do you see a mortgage origination commission establishing a
State structure or some overall structure for regulating
everybody who is lending so we know who they are and what they
are doing?
Secretary Donovan. I think you have put your finger on one
of the fundamental problems with our current regulatory system.
We have different regimes for different kinds of institutions,
and the vast majority of these subprime loans came from non-
bank institutions that sort of fell through the cracks. So that
is absolutely a central piece of what we want to address with
our regulatory reform efforts. We expect very shortly to have a
full set of principles, including around mortgage originations
that would include clear consistency across the bricks and the
clicks, as you said. I could not agree more.
Senator Bond. That is critical from what we have seen. From
my own personal experience, I could have signed up for so many
1 percent no-down-payment loans if I had just responded.
Fortunately, I passed up the opportunity.
Low-income housing tax credit, we have heard that HUD may
be making changes that could affect eligibility of LIHTC
disaster credit projects especially in rural areas and/or for
our preservation deals for the LIHTC equity gap. Can you look
into this with Secretary Geithner to make sure we are providing
reasonable roles for disaster credit projects? There are
questions about it. We have tried to help the low-income
housing tax credit issuers like our MHTC in Missouri, and there
seem to be more glitches than progress.
Secretary Donovan. I would love to hear more about the
specific issues.
There are two different resources that were in the recovery
bill for tax credits. There was HUD's tax credit assistance
program and then Treasury has a trade-in provision. We looked
very carefully at whether the legislation allowed us to trade
in disaster credits, and Treasury's lawyers do not believe that
we have the authority to trade in the disaster credits.
But we took a step, which hopefully is very important. I
was in Iowa yesterday and heard that it is being very
effective. What we allowed was that if even $1 of regular
credits goes into a disaster assisted project, that that is
enough to allow our tax credit assistance program, which is
over $2 billion, to flow to that project. We have heard very
positive feedback from the housing authorities on that
decision, which we made just recently. But if there are
additional things that we need to do, my staff is actively
engaged with Treasury on this issue and I would love to hear
more details about what the problem is they are facing.
Senator Bond. The chair and I have worked on that in the
past. We think it is very important. That is one area where we
can get housing started, get jobs, and deal with the housing
problems that we have.
Again, I will submit for the record and your consideration
questions on how you are going to eliminate and consolidate 27
programs in the budget. I have a great interest in early
childhood development, and I would like to know how you are
assuring that in the assisted housing and in the public housing
there are programs available for these children and families in
those assisted and public housing to get the kind of early
childhood assistance that makes the parents better teachers of
their children and enables a better development for a free
formal education development of these children.
With that, Madam Chair, I have covered the things that we
need to cover publicly and we will await the responses from the
Secretary on the submitted questions.
HOMELESS CHILDREN HOUSING ISSUES
Senator Murray. Thank you very much, Senator Bond.
I just have one more comment. President Obama signed the
HEARTH Act, homeless reauthorization bill, into law. That
legislation requires HUD to develop rules and regulations
related to the treatment of homeless children. This is an issue
very close to me, and is near and dear to my heart. So as you
move forward with implementing that law, I just wanted to urge
you to work very closely with the Department of Education and
Secretary Duncan to make sure that we do get poorly housed and
homeless kids into housing and help them get the services they
need. I think this is a really important area of coordination.
So I am looking forward to hearing that you will work with him
and that we can hear more about this.
Secretary Donovan. I am very glad you mentioned it. It is a
very, very important issue, and I appreciate your leadership on
this. I have already begun meeting with Secretary Duncan and
his team on it. There were $75 million, as you know, in the
recovery bill at the Department of Education that we believe
can very effectively work with the $1.5 billion in prevention
funding that we have. We are in the process of drafting joint
guidance to go out to our entire continuum of cares and to
schools around the country to make sure that that gets
implemented in an integrated way, and I would be happy to share
that with your staff as it is being developed.
Senator Murray. Okay, very good. Just because a child does
not have an address does not mean they should not get an
education.
Senator Bond. And a shameless plug. Senator Murray and I
are sponsoring an Education Begins at Home Act to promote home
visitation and the Ready to Learn Act. So we have got different
hats on there, but we will be watching.
Secretary Donovan. There is nothing shameless in that plug.
That is a very important plug. Thanks.
Senator Murray. Thank you, Senator Bond.
ADDITIONAL COMMITTEE QUESTIONS
With that, the record for this hearing will remain open for
1 week so Senators can submit any questions for the record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Barbara A. Mikulski
HOPE VI
Question. HOPE VI successfully revitalized many of the most
severely distressed public housing projects. However, there is still a
lot of work left to be done. HUD's own numbers show that there are
169,498 Public Housing units that show signs of being severely
distressed.
Expanding Choice Neighborhoods to address problems with assisted-
housing as well as public housing may make sense, but we can't lose
sight of HOPE VI's original goal. Also, Public Housing Authorities
across the country have to be made confident that the goal of Choice
Neighborhoods isn't to push them to the side of the community
revitalization process, but to offer them additional resources and
tools.
What are your plans to make sure that the goals of HOPE VI are
accomplished and that revitalizing the country's most distressed public
housing continues to be a top priority for HUD?
Answer. The Department recognizes that a significant number of
public housing units remain to be redeveloped and this will continue to
be addressed in Choice Neighborhoods. Preliminary proxy indicators for
Choice Neighborhoods show candidate public housing units at a three
times greater rate when compared to candidate assisted housing units.
For example, using a REAC score of less than 80 in census tracks of 40
percent poverty or higher, the eligible units would be 241,997 of
public housing and 83,184 of project-based voucher. It is our
expectation that under Choice Neighborhoods, housing authorities will
continue to submit applications for the development of public housing,
perhaps in partnership with the local jurisdiction or with a private
owner of a distressed assisted housing project. The Department's goal
is to have as the lead applicant, the agency or organization most able
to ensure the success of the project.
In addition, the Department has provided housing authorities with
other avenues with which to redevelop public housing through the use of
Capital Funds, mixed finance development and the Capital Fund Financing
Program. Also, housing authorities have increased their development
capacity and ability to work with private developers to secure tax
credits and other funding that will help them redevelop distressed
public housing units.
The Department has and will continue to work with housing
authorities that have existing HOPE VI grants to ensure that these
grants are completed as expeditiously as possible. Another HOPE VI
competition will be conducted and additional grants made under the
fiscal year 2009 HOPE VI appropriation. As of March 31, 2009:
--One hundred and two of 246 grants have completed 100 percent of
their housing construction;
--A total of $5,183,300,118 HOPE VI funds expended out of
$6,014,958,067 awarded;
--The initial goal under HOPE VI was to redevelop the most severely
distressed (identified as 86,000 units). This goal has been
exceeded. While more needs to be done, this is impressive
progress.
CHOICE NEIGHBORHOODS/PROMISE NEIGHBORHOODS
Question. When I introduced language to re-authorize HOPE VI, I
formed a task force of experts to help figure out what lessons we could
learn from the program's early years. The first and most important
recommendation they made was that schools had to be front and center in
any redevelopment effort. This is a recommendation I agreed with whole
heartedly, and wrote into the HOPE re-authorization bill I introduced
last year.
I know that you share my belief that creating strong communities
requires strong schools, and I know that is why the administration has
said it envisions complimenting Choice Neighborhoods with Promise
Neighborhoods, a program in the Department of Education.
Can you provide some additional details on how the two programs
will interact? Why in your opinion is it so important for communities
to tackle education and housing transformation at the same time? Will
other strategies and approaches to education improvement be considered
in addition to Promise Neighborhoods? Choice Neighborhood grants are
anticipated to provide about $25-$35 million in funding. I know that
the President has requested $10 million for Promise Neighborhoods
planning grants this year. In future years, how much funding do you
expect individual Promise Neighborhood grants to receive?
Can you provide some additional details on how the two programs
will interact?
Answer. We expect there to be numerous linkages between the two
programs. The Department is already in consultation with the Department
of Education, in order to coordinate both of our efforts--along with
other critical Federal agencies and offices, including the Departments
of Health and Human Services, Justice, and the Environmental Protection
Agency. We are providing information to the Department of Education on
our existing HOPE VI PHA partners and sites to help them identify
potential opportunities for the first round of Promise Neighborhoods
planning grants.
The two programs will both employ a similar approach in many
respects. Grantees will form partnerships among local agencies and
private partners bringing together a variety of critical assets and
services. Choice Neighborhoods grants will require local partnerships
to include not only housing providers but city agencies across program
boundaries, local service providers and local businesses and non-
profits to find solutions for affordable housing, employment,
education, safety, transportation and other key issues. It is thus
likely that both the Choice Neighborhoods and Promise Neighborhood
local partnerships will include similar local collaborations.
Question. Why in your opinion is it so important for communities to
tackle education and housing transformation at the same time?
Answer. The Department recognizes the importance of your approach
in incorporating critical educational components in your proposed HOPE
VI reauthorization bill in the last Congress. Decent, safe and
affordable housing is linked with neighborhood and community. Where a
family lives dramatically affects their life opportunities. We cannot
break the cycle of poverty without good schools. From another
perspective, communities and cities themselves cannot attract residents
and businesses needed for revitalization without good schools.
Thus, the goal of Choice Neighborhoods is to promote neighborhoods
that are safe, free from crime and with access to good educational
opportunities as well as community facilities, institutions and
services. Education is at the center of Choice Neighborhoods. Local
partnerships will be required to include an education component to
cover a gamut of possible local approaches for early childhood
initiatives, health education, resources for parents, school
improvements and other education-related services.
Question. Will other strategies and approaches to education
improvement be considered in addition to Promise Neighborhoods?
Answer. Yes other strategies and approaches to education
improvement will be considered. For example, local collaborations to
include education components will be included in all Choice
Neighborhoods grants. Other strategies include providing after school
programs, childcare and supportive services for residents. These could
include early childhood initiatives, health education, resources for
parents, school improvements and other education related services.
Just as we are encouraging the Department of Education to focus
Promise Neighborhoods on neighborhoods that have already moved forward
with HOPE VI, a community that has already initiated or succeeded in
efforts to improve the educational opportunities for children in a
proposed Choice Neighborhood would be well positioned in their
applications for Choice Neighborhoods.
Question. In future years, how much funding do you expect
individual Promise Neighborhood grants to receive?
Answer. The Department of Education's fiscal year 2010 budget
request includes $10 million for Promise Neighborhoods for 1 year
planning grants. Each of these would be eligible for implementation
grants in later years upon successfully developing comprehensive plans
to meet established needs of children and youth in identified high
poverty communities. The size of future budget requests is yet to be
determined and is dependent on a number of factors, including the
lessons learned from the initial planning grants, analysis of
municipal, social and economic need, and the overall Federal budget
environment. That said, the administration is deeply committed to this
program approach and the overall request will be significant.
CHOICE NEIGHBORHOODS
Question. Choice Neighborhoods would expand eligible grantees to
include non-profit and for-profit developers. These developers will
naturally have different goals than Public Housing Authorities.
In some cases this may be good, especially if it leads to creative
solutions to community problems. However, I know you agree that Choice
Neighborhoods can't be a privatized HOPE VI. Both for the sake of the
residents and the community, we need to make sure that whoever receives
Choice Neighborhood funding is focused on the best way to revitalize
neighborhoods not increase their organization's bottom line.
If we expand eligible grantees to include non-profit and for-profit
entities, how do we make sure that Choice Neighborhood grantees put
communities and residents above profits or prestige?
Answer. The Department does not envision Choice Neighborhoods as a
privatized HOPE VI. As a result of the strong leverage and match
requirements that the Department envisions will be part of Choice
Neighborhoods, non-profit and for-profit developers will likely partner
with the local jurisdiction and/or housing authority. Without strong
local support, we do not believe a Choice Neighborhoods application
from a for-profit or non-profit developer will be successful at
securing significant funding on its own. A successful application will
require evidence of active resident and community participation prior
to the application submission. Post award, the provision of supportive
services to all residents affected by the Choice Neighborhoods plan
will be essential. These activities will not be able to take place
without the strong support of the public housing authority and/or local
government working closely with for-profit and non-profit developers.
As with HOPE VI, the most successful developments will be mixed-
finance, mixed-income developments with a strong private sector
component (in the lending, as a tax investor, often as the owner and
manager). Choice Neighborhoods will require even a broader
participation in the public-private partnership (wrapping in for
example the local government, the county social services, other Federal
agencies). It is possible that a non-profit developer or private owner
is the lead applicant, but in all cases there will be significant
public sector involvement.
______
Questions Submitted by Senator Patrick J. Leahy
HELPING FAMILIES SAVE THEIR HOMES ACT
Question. The President recently signed the Helping Families Save
Their Homes Act into law. Included in this law was a modification to
the Neighborhood Stabilization Program that provides flexibility in how
States receiving the all State minimum can spend their funds. The
Congressional intent behind this provision was to allow States to use
funds in areas where they might have a high number of foreclosures but
not necessarily a high percentage of foreclosures, and to have these
expenditures count towards requirements on spending in targeted
communities. When does the Department plan to issue guidance to States
on this provision and will it follow the Congressional intent behind
it?
Answer. The Department has developed and is in the process of
clearing a notice that will implement this provision. The notice will
follow the intent of the provision to provide flexibility to States
that received the minimum Neighborhood Stabilization Program (NSP)
allocation of $19,600,000. The notice will set forth simple criteria
for affected States to: (1) demonstrate they have addressed areas of
greatest need; (2) identify other areas of identified need; and (3)
allocate NSP funds to those areas consistent with those needs.
GREEN RETROFIT PROGRAM
Question. The Department recently issued guidance on how to apply
for the Green Retrofit Program for Multifamily Housing funding that was
included in the American Recovery and Reinvestment Act. One of the
criteria used to determine eligibility for the program is the number of
units located at a project. Unfortunately in a rural State like
Vermont, the number of units required at some projects, such as section
202, immediately eliminates a majority of the projects in the State
from being eligible. What assurances can you provide the subcommittee
that the Department will show a commitment to assist communities in
rural areas, as well those in urban areas?
Answer. Under the Green Retrofit Program for Multifamily Housing,
the minimum number of units located in a project is used as an
eligibility requirement for two primary reasons: (1) to meet the
objectives of the Recovery Act to spend the funding for this program
quickly and efficiently, which supports larger projects, and (2) there
is limited set-aside funding to pay for due diligence data collection,
underwriting analysis and other functions necessary to make the grants
of loans under this program, and the per unit cost of these analyses
increases as properties get smaller; a detailed calculation to fully
utilize but not exceed the set-aside resulted in the final unit numbers
reflected in the Notice.
BOND ISSUANCE
Question. Last month HUD's Senior Advisor for Mortgage Finance
testified before the House Financial Services Committee that the
administration is developing a plan to help State Housing Finance
Agencies address their bond issuance and variable rate debt liquidity
challenges. Almost a month has passed since this commitment was made
and a plan has still yet to be released. When can Congress expect to
get more details from the administration about this proposal?
Answer. The administration has made considerable progress
developing the plan, but some legal issues relating to Treasury's use
of the limited authorities granted under HERA remain to be resolved.
Work continues with a sense of urgency, but staff resources are
strained due to the many issues Treasury has had, and continues to
address. We cannot give a precise date at this time but we are
committed to providing a viable appropriate plan and maintaining our
communication with the Congress.
MORTGAGE SERVICES ISSUES
Question. A number of my colleagues and I recently wrote to you
regarding the poor responsiveness of mortgage servicers to our
constituents who are attempting to modify their mortgages. Could you
update the subcommittee on what steps are you able to take to address
the concerns raised by our constituents who have been unable to access
answers or adequate help from servicers? Additionally, could you
provide for the subcommittee statistics on the numbers customers that
have utilized HUD-certified counseling agencies and have successfully
avoided foreclosure through the Hope for Homeowners and Making Home
Affordable programs?
Answer. HUD recognizes that more needs to be done to improve the
responsiveness and accountability of servicers participating in the
program so that additional homeowners facing, or at risk of,
foreclosure are contacted and assisted in a timely manner and has
played a lead role in pressing the servicers to do more.
Secretary Donovan along with Treasury Secretary Geithner sent a
strong letter to the CEOs of all participating servicers on July 9,
calling upon them to devote more resources to the program. We have
requested that servicers add more staff than previously planned, expand
call center capacities, provide a process for borrowers to escalate
servicer performance and decisions, bolster training of
representatives, enhance on-line offerings, and send additional
mailings to potentially eligible borrowers. The joint letter to
participating servicers also requested that the CEOs designate a senior
liaison, authorized to make decisions on behalf of the CEO, to work
directly with us on all aspects of MHA and attend a program
implementation meeting with senior HUD and Treasury officials on July
28, 2009. At that meeting, the administration asked servicers to
substantially expend servicer capacity, help promote transparency and
accountability at both the program and borrower level, and improve
borrower outreach and the overall borrower experience. Servicers in
attendance committed to significantly increase the rate at which they
are performing loan modifications and to reach a goal of half a million
modifications begun by November 1. We are on track to meet that goal.
After that meeting, the weekly rate of trial modification starts
increased by nearly 50 percent, from 22,000 to more than 30,000 on
average and a number of concrete steps have been taken or planned by
the administration.
Moreover, servicers participating in HAMP are now being held to
higher performance measurements. Servicer-specific performance details
were first published on August 4 and will be made publicly available on
a monthly basis. These performance metrics are likely to include such
measures as average borrower wait time in response to inquiries and
response time for completed applications. So far, the servicer-specific
data shows a wide range in terms of the performance of the various
companies that are participating in the program, and the expectation is
that, with the performance records now public, the servicers will be
more motivated to increase their efforts and raise the number of
borrowers they are assisting.
In addition, Freddie Mac has been assigned the role of giving a
``second look'' at the servicers' performance, as a further way of
measuring success, by reviewing applications to make sure that eligible
homeowners are not being denied. The ``second look'' program is also
examining servicer non-performing loan (NPL) portfolios to identify
eligible borrowers that should have been solicited for a modification,
but were not. We are working to establish specific operational metrics
to measure the performance of each.
The administration is devoting significant resources to helping as
many borrowers as possible submit all required documentation and
successfully convert their trial modifications to final modifications.
We are establishing denial codes that will require servicers to report
the reason for modification denials, both to Treasury and to borrowers.
The administration is also working with servicers and Fannie Mae to
streamline application documents and develop web tools, which can serve
as a centralized point for modification applications, and for borrowers
to check the status of their applications. In addition, we are
exploring a variety of mechanisms to further encourage and enable
servicers to leverage their relationships with nonprofits and other
entities to help expedite the processing and approval of modification
applications. HUD and Treasury are working to establish guidelines for
servicers entering relationships with trusted advisors who would guide
borrowers through the application process, help them prepare complete
application packages, and troubleshoot if the borrower appears to have
been improperly deemed ineligible for the program.
HUD has worked with an interagency team to establish a call center
for borrowers to reach HUD approved housing counselors, so that
borrowers are able to receive direct information and assistance in
applying for the HAMP program. The administration is continuing to
build capabilities of the HOPE hotline to escalate borrower complaints,
and link borrowers to HUD approved housing counselors.
Lastly, HAMP's design provides servicers with strong incentives to
make contact with distressed borrowers. The contracts signed by
servicers to participate in the HAMP requires servicers to use
reasonable efforts to contact borrowers facing foreclosure to determine
their eligibility for the HAMP, including in-person contact at the
servicer's discretion and require the servicers to screen all borrowers
for eligibility for a HAMP modification before proceeding to a
foreclosure sale. We are working to ensure to servicers follow the
requirements of the program.
Through 3 quarters fiscal year 2009, agencies participating in
HUD's Housing Counseling Program report 894,533 households receiving
default counseling. By comparison, after 3 quarters fiscal year 2008,
399,066 households had received default counseling.
Of that total for 3 quarters fiscal year 2009, results are known
for 398,087 households. The balance continue to receive counseling,
withdrew, or no outcome is yet known. The following results have been
reported:
--Brought mortgage current--34,908 (9 percent)
--Refinanced--10,640 (3 percent)
--Mortgage modified--105,001 (26 percent)
--Second mortgage--10,311 (3 percent)
--Forbearance agreement/repayment plan--59,770 (15 percent)
--Deed in lieu--2,982 (1 percent)
--Sold property, alternative solution--6,865 (2 percent)
--Pre-foreclosure sale--21,955 (6 percent)
--Mortgage foreclosed--12,777 (3 percent)
--Counseled and referred to emergency assistance--70,458 (18 percent)
--Partial claim loan from FHA lender--2,072 (1 percent)
--Bankruptcy--29,540 (7 percent)
--Debt management plan--13,764 (3 percent)
--Counseled and referred for legal assistance--17,044 (4 percent)
--Total with results: 398,087
______
Questions Submitted by Senator Arlen Specter
SECTION 108
Question. The President's fiscal year 2010 budget request proposes
to eliminate the section 108 Loan Guarantee Program. I am aware that
this program has been successfully utilized in my home State of
Pennsylvania. According to the Department of Housing and Urban
Development's (HUD) Web site on the section 108 program:
``This makes (section 108) one of the most potent and important
public investment tools that HUD offers to local governments . . . Such
public investment is often needed to inspire private economic activity,
providing the initial resources or simply the confidence that private
firms and individuals may need to invest in distressed areas.''
Could you please comment on why HUD decided to eliminate this
important program? And if it is eliminated, will any of its activities
be assumed by other HUD programs? If so, please explain.
Answer. The Department has not requested budget authority to cover
the credit subsidy cost for the section 108 program. However, the
Department has proposed that section 108(m) be amended to allow HUD to
charge borrowers a fee in an amount sufficient to reduce the program's
credit subsidy cost to $0. If such legislative change is made, States
and localities will still be able to receive loan guarantees under
section 108 upon payment of the loan guarantee fee. However, if the
legislative change is not made and no credit subsidy is appropriated,
HUD would be unable to guarantee loans made to States and localities.
In such case, States and localities will be able to use their CDBG
funds for activities that are currently eligible under section 108 but
they will not be able to leverage their programs up to five times as is
now possible by using section 108.
FISCAL YEAR 2010 BUDGET REQUEST
Question. The President's fiscal year 2010 budget request for the
Department of Housing and Urban Development (HUD) proposes $46.388
billion, an increase of $4.511 billion (10.8 percent) over comparable
fiscal year 2009 levels. The American Recovery and Reinvestment Act
(2009 stimulus) provided an additional $13.61 billion in funding for
HUD projects and programs. Based on these increases, it is unlikely
that HUD will be able to perpetually receive funding of this magnitude,
year after year. What is your plan to scale back HUD programs and
projects when stimulus funds eventually run out?
Answer. The stimulus funding of $13.6 billion provided under the
American Recovery and Revitalization Act when added to the fiscal year
2009 regular appropriation totals $55.6 billion. In essence, the
Department has already addressed the post-ARRA trajectory of our budget
by requesting a net discretionary total of $46.3 billion in fiscal year
2010 which is $9.3 billion below the combined regular appropriations
and ARRA funding provided in fiscal year 2009.
As you know, the fiscal year 2011 executive budget process is in
its early stages and the Congress has not yet taken final action on our
fiscal year 2010 request. The fiscal year 2011 departmental budget
deliberations will address across the board Government guidance
provided by the President through the Office of Management and Budget
and will of course be cognizant of the need to reduce the deficit and
carefully prioritize all spending requests. The Department will
prioritize requests while addressing national needs and program
effectiveness and we will provide detailed support for all of our
budget requests. The Department will ultimately work in partnership
with the Congress to determine the fiscal year 2011 budget as well as
the direction of housing and community development policies as we look
forward to the future.
AMERICAN RECOVERY AND REINVESTMENT ACT
Question. The American Recovery and Reinvestment Act (2009
stimulus) provided $13.61 billion for HUD projects and programs. And to
date, approximately $10 billion in funds have been awarded and/or
announced. However, it is my understanding that less than $1 billion of
these funds have actually been spent. When do you anticipate the
remaining funds will be awarded or spent? And is there anything that
you can do to speed up HUD's recovery plan?
Answer. The American Recovery and Reinvestment Act of 2009 provided
$13.625 billion to HUD. As of September 11, 2009, $9.82 billion has
been obligated and $1.46 billion has been outlayed. Of the $9.82
billion in obligations, approximately $5.4 billion is formula and block
grant funds. Some discretionary grants funds have not been obligated
due to ongoing program competitions.
HUD remains committed to obligating and expending Recovery Act
funding in a timely manner in compliance with applicable laws and
regulations. The Department is proceeding according to its ARRA
spending plans. Weekly financial and program activity updates are
posted at HUD's Financial and Activity Reports on the Recovery.gov Web
site at: http://www.recovery.gov/?q=content/agency-
summary&agency_code=86.
PUBLIC HOUSING CAPITAL FUND
Question. The President's fiscal year 2010 budget request for the
Public Housing Capital Fund is $2.24 billion, which is $206 million
less than the fiscal year 2009 level. It is my understanding that HUD's
justification for this reduction in funding is based on the $4 billion
appropriated for the Capital Fund in the American Recovery and
Reinvestment Act (2009 stimulus). Therefore, notwithstanding this $206
million decrease in funding for fiscal year 2010, do you still feel
that the HUD will be able to adequately reduce the substantial backlog
of public housing capital improvement needs and continue to modernize
public housing developments by utilizing stimulus funds?
Answer. The fiscal year 2010 budget request in addition to the
funds provided in the American Recovery and Reinvestment Act of 2009
(Recovery Act) will assist PHAs in reducing their backlog of capital
needs.
To date HUD has obligated $3 billion by formula and the remaining
$1 billion is being awarded competitively, and will be obligated by the
statutory deadline of September 30, 2009. The economic impact from this
stimulus funding will help meet a significant portion of the capital
improvement needs at public housing developments.
The overall level of funding requested in fiscal year 2010 would
provide resources to address the estimated $2 billion annual capital
accrual needs of the public housing inventory, resulting from the 1998
modernization needs study conducted by the Department. Since that time,
the backlog of capital needs for public housing has been reduced
through demolitions of more than 190,000 units of the most distressed
public housing stock as well as modernization and redevelopment of
thousands of units. In fiscal year 2007, 85.7 percent of public housing
units met HUD's physical standards, as opposed to 82 percent in 2001.
The fiscal year 2010 operating subsidy budget request will reduce the
need for PHA's to transfer capital funds modernization funds to
subsidize public housing operations.
As part of the fiscal year 2010 budget, the Department has proposed
an examination of a project based voucher model that could possibly
provide more opportunity for innovation and private investment. Lastly,
the Department is in the process of conducting a new capital needs
study to obtain a current estimate of the public housing backlog.
ENERGY INNOVATION FUND
Question. The President's fiscal year 2010 budget requests $100
million for the Energy Innovation Fund, a new program aimed at
incentivizing energy efficient housing. Can you discuss how this new
program will be implemented, why retrofitting existing homes have been
slow to materialize thus far, and how HUD plans on overcoming the
difficult challenge of promoting ``green construction'' in our Nation?
Answer. A January 2009 survey by the Yale Project on Climate Change
and George Mason University's Center for Climate Change Communication
of 2,164 American adults found that substantial numbers of households
would like to make energy-saving home improvements, but probably will
not because in many cases they can't afford to, or because they don't
know how to \1\--i.e. they lack the resources to finance the
improvements, and they don't have sufficient information. The study
notes that ``while many inefficient heating and cooling systems are
currently installed in American homes, and thus wasting energy and
money, it will take several decades to turn over this stock, unless
there are innovative Government programs to accelerate this
transformation.'' This may require a ``different financial model'' to
help more households take these actions.
---------------------------------------------------------------------------
\1\ Yale University, George Mason University, Saving Energy at Home
and on the Road: A Survey of Americans' Energy Saving Behaviors,
Intentions, Motivations and Barriers.
---------------------------------------------------------------------------
The proposed Energy Innovation Fund is designed to expand the
availability of financing to help catalyze the retrofit/renovation
market. Barriers to implementing successful finance programs include:
lack of consumer awareness of the benefits of energy efficiency,
relatively low energy prices, lack of capital available to fund
programs, as well as lender or investor disincentives, such as high
transaction costs for program implementation. Financing energy
efficiency through the mortgage program presents additional challenges:
the fact that energy improvements are not fully reflected in home
appraisals and the difficulty of incorporating the energy audit and
related technical services in the home buying process.
Effectively organizing institutions and capital markets to overcome
these challenges requires a comprehensive approach, that includes
streamlining existing programs, providing consumers with better
information, and expanding financial incentives for homeowners or home
buyers to invest in energy efficiency. In this context, the goal of the
Energy Innovation Fund is to develop and implement new and innovative
uses of Federal resources to dramatically increase the scale of private
sector investment in upgrading the energy efficiency of existing homes.
HUD's fiscal year 2010 proposal, Energy Innovation Fund envisioned
(1) $50 million in competitive grant awards to support local energy
funds, and (2) another $50 million to support expanding FHA Energy
Efficient Mortgages for single family homes ($25 million), and
incentivizing energy efficiency through FHA multifamily mortgage
programs ($25 million).
Only the second part of HUD's request--$50 million for single
family and multifamily energy efficient mortgages--was funded by
Congress. HUD is currently developing a detailed implementation plan
for these funds.
HUD is planning to implement the single family Energy Efficient
Mortgage pilot program in four pilot sites, each served by one of HUD's
four Homeownership Centers (HOCs) and where HUD's regional office has
indicated a strong interest in promoting and implementing a pilot
program in their region.
--The pilot sites will be selected on the basis of both local
interest in, and capacity to implement the pilot program, as
well as the potential for leveraging additional State or local
funds to write down interest rates or outreach, marketing or
program implementation costs.
--Generally, the funds will be used to provide an incentive for home
buyers, averaging $2,000 per home, to include energy efficiency
in the mortgage in the form of a reduced Mortgage Insurance
Premium (MIP), or by paying for all or some of the cost of an
energy audit.
The multifamily program will provide lower mortgage insurance
premiums in conjunction with reduced application fees for projects that
apply for one of several FHA multifamily mortgage insurance programs.
HOPE VI
Question. The President's fiscal year 2010 budget does not provide
funding for HOPE VI, but instead proposes $250 million for the
Neighborhood Choice Program to revitalize severely distressed high
poverty neighborhoods. It is my understanding that this initiative
extends neighborhood transformation efforts beyond public housing, and
attempts to link early childhood innovation and school reform with
housing interventions. Can you please comment on why HUD feels that
there is a need to broaden this program beyond public housing? And is
HUD concerned that a larger pool of eligible applicants will decrease
the funds available to public housing agencies, thereby making it
increasingly difficult for them to meet the challenges associated with
severely distressed public housing units?
Answer. In Choice Neighborhoods, the Department is broadening the
HOPE VI program to include a broader neighborhood focus that allows for
redevelopment of a broad range of distressed property. This can include
distressed public housing, distressed privately owned assisted housing,
and other distressed properties in the neighborhood, including
foreclosed properties. Private or HUD-assisted properties across the
country that are vacant or distressed create a blighting influence on
the surrounding community. Some HOPE VI sites have already taken this
broader neighborhood approach and have included the redevelopment of
foreclosed HUD-assisted property. One example is Wheeler Creek in
Washington, DC where a foreclosed and vacant FHA high rise was
demolished and redeveloped in conjunction with the HOPE VI
revitalization plan. At other HOPE VI sites, such as Coliseum Gardens
and Mandela Gateway in Oakland, CA the housing authority worked with
the city of Oakland and private and non-profit developers to buy vacant
and distressed commercial and residential properties around the public
housing site and incorporated the additional land into the HOPE VI
revitalization plan.
In these difficult economic times neighborhood resurgence is
fragile. The revitalization gains we have made at many HOPE VI
locations can be strengthened by further bolstering other surrounding
properties and deepening community services and anchor institutions.
With Choice Neighborhoods, local jurisdictions can now choose their
most pressing priorities. Since there remains a large inventory of
distressed public housing, we believe that many applications will still
address those needs in the context of a neighborhood-wide reinvestment
plan. In addition, HUD has provided additional mechanisms for housing
authorities to revitalize distressed public housing through the use of
Capital Funds, the Capital Fund Financing Program, and mixed finance
development.
The Department incorporates e4ducational components in the
initiative because along with decent, safe and affordable housing, good
schools are necessary to break the cycle of poverty. Community
revitalization and attracting residents and businesses require good
schools. The Department is consulting with the Department of Education
and will coordinate efforts with other critical agencies and offices
including the Department of Health and Human Services, Justice and the
Environmental Protection Agency. Local collaborations with an emphasis
on educational opportunity will be a key component to achieving
success.
______
Questions Submitted by Senator Christopher S. Bond
HOPE VI
Question. Expanding the benefits of HOPE VI beyond public housing
has merit and deserves serious consideration. We have had some initial
discussions about this issue and I want to continue them with you and
your staff.
Can you lay out some general principles that should be considered
for your ``Choice Neighborhoods'' initiative?
Assuming this initiative is not authorized, are there incremental
steps that we could take beyond simply extending HOPE VI in its current
form for 1 year?
Answer. The general principle underlying the Choice Neighborhoods
proposal is that targeted revitalization that is concentrated and
coordinated can break the cycle of concentrated poverty and provide an
opportunity rich environment so poor families and children can have
safe neighborhoods, quality education, and access to good jobs.
To be successful, however, requires several concurrent actions:
--The Right Location.--The Choice Neighborhood initiative would
target neighborhoods with (i) a concentration of poverty, (ii)
a concentration of distressed housing whether public, assisted,
or privately held, and (iii) the potential for long-term
sustainability because of the proximity to community anchors
such as educational institutions, employment centers,
hospitals, transportation, parks and other community assets
that positions the neighborhood as a desirable place to live.
--Real Educational Opportunity.--Choice Neighborhood applicants will
need to demonstrate that their plan includes a linkage to
quality education for the children of the current and
revitalized neighborhood. This could include a school
transformation in the target neighborhood as well as linkage to
the Department of Education's Promise Neighborhoods, among
others.
--A Market Driven Strategy That Provides Quality Housing Choices for
Current Residents.--Choice Neighborhoods involves ensuring that
the existing residents are given adequate services and
resources to maximize their success during the revitalization
period and that they are afforded the post-revitalization
choice of where they think their family will be most happy and
successful. It also means that the revitalization strategy
should be designed appropriate to the local housing market,
which could include both higher or lower density housing on-
site, off-site development in some markets, project-based
assistance, and tenant based assistance.
--Coordination.--Choice Neighborhood applicants will need to
demonstrate significant coordination among local agencies and
the marshalling of resources from multiple sources, potentially
including support from the Departments of Education, Labor,
Transportation, Health and Human Services and the Environmental
Protection Agency.
The Department has taken incremental steps to emphasize these
principles through the current HOPE VI program, which is reflected in
the fiscal year 2009 HOPE VI NOFA. However, the current HOPE VI program
is limited to addressing only distressed public housing in
neighborhoods which could also benefit from a larger scale neighborhood
reinvestment strategy.
HOMEOWNERSHIP TAX CREDIT
Question. As part of the stimulus act, the Congress included a new
$8,000 tax credit for first time homebuyers. This program was created
by my colleague, Senator Isakson.
First, what are your views on the program and its impact on
housing? Has it helped boost housing sales?
Answer. The program has not been in effect long enough for us to
evaluate its performance. We have certainly heard anecdotally that it
is a difficult program for first-time homebuyers to use, because they
most often need assistance with their downpayment. With the tax credit,
the homebuyer must execute the sales contract to qualify for the refund
from the IRS, which only makes sense. However, the refund from IRS
takes time and most often cannot be processed prior to closing on the
home financing, so the borrower must first come up with their own
downpayment funds. To do this, FHA will allow downpayment assistance
provided by governmental entities, in the form of a loan to the
borrower.
Question. Second, do you believe that the credit should be
extended? Do you believe that a higher level tax credit, such as
$15,000 as originally proposed by Senator Isakson, would have
measureable impact on home purchases?
Answer. As we have mentioned above, the program has not been in
effect long enough for us to evaluate its performance. Since it is
still too early for us to have either the experience or data necessary
to support any change, a higher amount of credit may not be worthwhile.
Perhaps better results could be achieved with just a different delivery
mechanism.
Question. Finally, you recently announced changes that will
monetize the tax credit so that it can be used as a bridge loan for
downpayment purposes. Given the history of no downpayment programs,
such as the seller downpayment program, and FHA's long-standing
management and oversight problems, I have strong reservations about
this program.
Answer. FHA will only permit the governmental entities, which are
authorized by law to offer downpayment in the form of loans, to offer a
borrower the ability to borrow funds and repay with the tax credit
refund from the IRS. FHA will also permit FHA-approved entities to
offer an FHA borrower an ``advance'' on the tax credit refund to help
pay for closing costs--but NOT a downpayment--to assist with the
purchase transaction, but only for a limited fee.
Question. How are you ensuring that you will not repeat some of the
pitfalls of the seller downpayment program that caused substantial
losses to FHA?
Answer. Because FHA does not permit any entities, except those
already authorized under the National Housing Act, to provide funds
towards the downpayment, there is really no comparision to the previous
seller-funded downpayment assistance arrangements.
Question. How does the performance of Government downpayment
programs compare to subprime or the seller downpayment program? How do
loan programs that provide downpayment assistance in general compare to
those loan programs that do not provide downpayment assistance?
Answer. There is really no comparison between the programs, because
the tax credits cannot be used for the downpayment.
HOMELESSNESS
Question. One of the challenges that communities are having is
figuring out how to better use HUD's main housing programs to help end
homelessness.
How will the Department's proposed ``Transformation'' initiative be
used to help communities better use all of HUD's resources to help
prevent and end homelessness?
Answer. In its homeless programs, HUD has been strongly encouraging
communities through its Continuum of Care competition to utilize
mainstream resources to develop comprehensive packages of housing and
service options to meet the needs of homeless individuals and families.
Internally, HUD is working through the Transformation Initiative to
ensure that all programs are better responding to the needs of very low
income and homeless persons. Transformation Initiative funding will
provide four key elements--research, technical assistance,
demonstration funding and IT funding all of which can build on research
and models that proves what works to reduce homelessness. The
Department is focused on adding to the effectiveness of our rental
assistance proposal and understands that they are substantial
contributions to reducing and preventing homelessness. In addition, HUD
is developing better ways to ensure that communities receive the
technical assistance resources needed to serve these populations and
carry out its vision.
GSES
Question. The future of Fannie Mae and Freddie Mac remain uncertain
at this point but I am interested in hearing your views.
What are your views about the future of Fannie and Freddie? If
Fannie and/or Freddie continue to exist in some form, what are your
views on reconciling the conflicting goals of private profits and
public good? How important are the mortgage GSEs in carrying out
Federal housing policy?
Answer. As you know the Department previously had an oversight role
in terms of the activity of Fannie Mae and Freddie Mac with an emphasis
on supporting affordable housing but subsequently this year, Congress
enacted a new oversight organization for these two GSE's. In addition,
the Department would be only one of a myriad of key actors in the
administration who would forge policy and legislative recommendations
in this area. At the present, Fannie Mae and Freddie Mac are crucial
participants in stabilizing the housing market as well as the macro-
economy. The issues you raise in your question are among the essential
questions and they have a long history of unresolved debate within the
Congress and with various administrations, all of which speak to the
complexity of the issues. These issues will need a great deal more
research and debate and will need to be further informed by how events
work out in the near and mid-term as well as by testimony and advice
yet to be received from experts in the financial and housing fields.
The administration will partner with the Congress and industry and
other groups to reach the right policy mix on the future of the housing
GSE's.
RURAL INNOVATION FUND
Question. As I mentioned in my statement, investing in rural areas
are very important to me and my constituents.
Can you elaborate on your thoughts on the new Rural Innovation Fund
and how it will better meet the needs of rural areas compared to the
Rural Housing and Economic Development program?
Do you intend to submit authorizing language for the program?
Answer. The Rural Innovation Fund (RIF) will use States and
federally-recognized tribes as laboratories of innovation for
addressing housing needs in communities with populations less than
2,500. HUD anticipates that partnerships of States or tribes with local
governments and non-profit organizations, through a competitive process
that requires coordinated planning, will be the key to innovation and
collaborative successes in addressing local housing needs, including
energy efficiency and other aspects of sustainability.
Relative to the Rural Housing and Economic Development, RIF would
be targeted toward areas of concentrated rural housing distress and
community poverty that have good prospects for sustained viability
through bold strategies and a one-time Federal investment. RIF will
enable rural communities to transform in response to ongoing changes in
the structure of agricultural production, expanding metropolitan
influences and digital connectivity. The emphasis on State-local
partnerships and coordinated planning to leverage local assets will be
key to its success. Through its proposed Transformation Initiative, HUD
will study the effectiveness of varying RIF-funded strategies to assess
their success and factors affecting their ability to be replicated in
other communities.
HUD will submit authorizing language for the program.
REORGANIZING
Question. Reorganizing and modernizing HUD is long overdue and I
commend your focus on it.
Besides funding resources, what else can we do to help you succeed
while ensuring appropriate controls to avoid some of the abuses of the
past?
Do you anticipate that your reorganization of HUD will include
changing the structure of the organization to break down some of the
silos that exist between such offices as public housing and community
development?
Due to concerns about HUD's approach to staffing, the Congress
directed the National Academy of Public Administration (NAPA) to
evaluate HUD's ability to develop appropriate staffing requirements.
NAPA recommended that HUD adopt a management approach that bases staff
estimates and allocations on the level of work and the specific
location where it is to be performed. HUD committed to NAPA's
recommendation by developing its ``Resource Estimation and Allocation
Process'' (REAP).
How will you ensure that HUD staffing levels and allocations match
program needs so resources are not misallocated as they occurred
several years ago? Are you implementing the REAP process?
Answer. Congressional support of HUD's fiscal year 2010 budget--
which proposes to put in place systemic reform and policy innovation,
as well as new kinds of partnerships and collaboration--is instrumental
in helping the Department succeed. In particular, congressional
acceptance conceptually, in addition, of course, to an appropriate
level of funding, to HUD's Transformation Initiative is essential. The
Transformation Initiative's comprehensive approach--via research and
evaluation, major demonstrations, enhanced technical assistance and
capacity building, and next generation technology investments--in
addressing operational challenges arising from internal resources and
structural constraints will help build bridges between the silos that
exist, often for legitimate reasons, as the Department addresses
housing and urban development problems facing this Nation.
Additionally, two major organizational changes--creation of a Chief
Operating Officer (COO) position and an Office of Strategic Planning
and Management--are proposed to implement the broad transformation and
renewal of the Department. The COO, operating within the Office of the
Deputy Secretary, will ensure strategic and collaborative
decisionmaking within HUD's operations. The new Office of Strategic
Planning and Management will reinvigorate the strategic planning
process, streamline program and support functions, and create ownership
and accountability for performance across the Department.
Integral to these efforts is the Resource Estimation and Allocation
Process (REAP) methodology, which helps the Department estimate its FTE
needs and their distribution. REAP was implemented in 2000 and
continues in operation. Initially conducted from June 2000 through
December 2001, REAP baseline studies covered the entire Department.
REAP refresher studies began in June 2003 and were completed in
November 2004. The REAP baseline is updated periodically based on
changes in organization, operating processes, and legislation/
regulations. REAP's estimates are based on workload requirements and
REAP is one tool the Department employs to ensure that HUD staffing
levels and allocations match program needs and resources are not
misallocated.
ELIMINATING AND CONSOLIDATING PROGRAMS
Question. The budget request proposes to eliminate or consolidate
27 HUD programs. First, how much money do these 27 programs represent
on an annual basis?
Answer. In its fiscal year 2010 budget request, HUD proposes to
eliminate or consolidate 27 programs. A list of the programs is copied
below and was published as appendix B in HUD's 2010 budget overview
document in May 2009. Fourteen Technical Assistance, Demonstration and
research programs are proposed to be consolidated in the Transformation
Initiative. Four university programs are proposed to be consolidated in
the CDBG University Community Fund. Five line items are eliminated but
remain an eligible use of funding. Credit subsidy funding for section
108 is proposed to be eliminated but not loan guarantees. The American
Dream Downpayment Initiative and Brownfields Economic Development
Initiative Programs are proposed to be eliminated. The program
eliminations are not large amounts of funding but this effort
streamlines and improves the efforts of the Department. The fiscal year
2009 funding for eliminated programs totals $16 million but this amount
does not reflect the overall prioritization of resources embedded in
the total budget request.
Question. Second, if you are able to accomplish this, how many
programs will the Department still have on its books?
Answer. If enacted as requested, HUD will have 27 appropriation
accounts not including the proposed Transformation Initiative.
Question. Finally, to what degree are you and others in the
administration looking across agencies to consolidate or eliminate
duplicative programs?
Answer. HUD is actively seeking ways to expand interagency
cooperation and to more efficiently and effectively provide services to
the public. For example, HUD is working closely with the Department of
Veterans Affairs to ensure affordable housing for veterans and is
developing new efforts in cooperation with the Departments of
Transportation, Energy and the Environmental Protection Agency to
promote affordable, livable and sustainable living environments. HUD's
proposed Sustainable Communities Initiative is an integral part of this
cooperative effort.
FISCAL YEAR 2010 BUDGET PROGRAM ELIMINATIONS/STREAMLINING/CONSOLIDATIONS
[HUD's Fiscal Year 2010 Budget Eliminates or Consolidates 27 Programs]
------------------------------------------------------------------------
Program Reform Step Taken
------------------------------------------------------------------------
American Dream Downpayment Initiative..... Program eliminated
Section 108............................... Funding eliminated
Brownfields Economic Development Funding eliminated
Initiative.
Tribal Colleges and Universities Program.. Consolidated to University
Community Fund
Historically Black Colleges and Consolidated to University
Universities. Community Fund
Hispanic Serving Institutions Assisting Consolidated to University
Communities. Community Fund
Alaska Native and Native Hawaiian Serving Consolidated to University
Institutions Assisting Communities. Community Fund
Public Housing Capital TA................. Consolidated to
Transformation Initiative
Native American Block Grant TA............ Consolidated to
Transformation Initiative
Native American TA........................ Consolidated to
Transformation Initiative
Native Hawaiian TA........................ Consolidated to
Transformation Initiative
Section 202 TA............................ Consolidated to
Transformation Initiative
CDBG TA................................... Consolidated to
Transformation Initiative
HOME TA................................... Consolidated to
Transformation Initiative
HOME/CHDO TA.............................. Consolidated to
Transformation Initiative
HOPWA TA.................................. Consolidated to
Transformation Initiative
Elderly Leverage Financing Demonstration.. Consolidated to
Transformation Initiative
Disabled Leverage Financing Demonstration. Consolidated to
Transformation Initiative
Nation's Veterans Demonstration........... Consolidated to
Transformation Initiative
Partnership for the Advancement of Consolidated to
Technology in Housing. Transformation Initiative
Homeless Assistance Grants--Evaluation of Consolidated to
Demonstration Program. Transformation Initiative
Homeless Research......................... Consolidated to
Transformation Initiative
Public Housing Resident Opportunity and Line item eliminated; now an
Supportive Serv- ices. eligible use of funds under
another program
Elderly Conversion to Assisted Living/ Line item eliminated; now an
Emergency Repairs. eligible use of funds under
another program
Elderly Housing Planning Grant............ Line item eliminated; now an
eligible use of funds under
another program
FHEO Limited English Proficiency Program.. Line item eliminated; now an
eligible use of funds under
another program
Office of Healthy Homes/Communication and Line item eliminated; now an
Outreach to Potential Applicants. eligible use of funds under
another program
------------------------------------------------------------------------
EARLY CHILDHOOD DEVELOPMENT
Question. Early childhood development has been a strong interest to
me for several years and I have initiated and supported a number of
efforts to raise awareness and provide resources for this critical
need.
While the Federal Government and others have provided resources to
help operate early childhood development centers and programs, I have
heard that there are significant needs for capital funding to help
build, retrofit, or repair early childhood development centers.
There is interest among some in Congress to establish a new program
at HHS to provide capital funding for these centers.
Is there a need for those families being served by HUD programs for
capital funding for childhood development centers? How is HUD
addressing early childhood development needs--both capital and
operating--for the families it serves in Public and Assisted Housing,
and projects that serve the homeless?
Answer. Homeless Assistance Grants.--HUD's homeless programs
currently allow communities to prioritize projects in their annual
Continuum of Care applications based on stated needs in the community.
These needs may include specific projects for childhood development
centers that serve families who are homeless or may include supportive
service funds for child care related services as part of a larger
overall budget for a housing program serving families with children.
Because HUD's focus has been on the development of housing for homeless
persons, capital needs for childhood development projects are not
generally part of a community's application. However, this does not
mean that the need does not exist in the community or that a source for
capital funding for these projects would not be beneficial to
communities. On the contrary, homeless families often report child care
as a barrier to maintaining affordable housing. Questions regarding
child care and childhood development are included in the most effective
assessment tools used by programs that serve homeless families.
Communities are strongly encouraged to meet local childhood development
needs by using other mainstream resources available for this purpose to
assist homeless families.
CDBG.--Both the construction and operation of childhood development
centers is an eligible activity under the Community Development Block
Grant (CDBG) program. Construction can include new facilities as well
as the rehabilitation of existing structures for use as childhood
development centers. CDBG funds can also be used to acquire properties
for such purposes either through purchase or long term lease. In
addition, operating costs can be paid as an eligible public service
under CDBG. The following table indicates the CDBG amounts that
grantees have identified as having been expended for these and related
purposes for fiscal year 2008. These amounts likely understate CDBG
contributions to these activities as grantees may identify such costs
as general public facilities and public service activities or the child
care component may be part of a community center.
----------------------------------------------------------------------------------------------------------------
Abused and
Child Care Youth Centers Neglected Child Care
Fiscal Year Facilities and Facilities Children Services and
Construction Facilities Operation
----------------------------------------------------------------------------------------------------------------
2008.................................... $12,944,196.69 $12,815,438.05 $1,898,493.86 $20,273,143.06
----------------------------------------------------------------------------------------------------------------
SUSTAINABLE COMMUNITIES
Question. Your Sustainable Communities initiative seeks to link
housing and transportation by working with the Department of
Transportation (DOT) and EPA. Can you elaborate on your long-term
vision for this initiative? How will this be effectively coordinated
among the agencies?
What role will the White House play in this initiative? Why is only
HUD providing money for this initiative? Do you anticipate that the
other agencies will provide funding?
Will the other agencies try to link up existing programs to the
Sustainable Communities initiative? For example, DOT's Transportation,
Community and System Preservation Program was established several years
ago to help States and local governments accomplish ``smarter growth,''
more compact development.
Answer. HUD's Long-term Vision.--Our long-term vision is to create
a new paradigm of coordinated housing and transportation investments in
local communities, that will lower the combined cost of housing and
transportation for households and support a wider range of housing
opportunities near transit. Through the Partnership for Sustainable
Communities HUD, EPA and DOT have jointly adopted six sustainability
principles which embody this vision. HUD is committed to mainstreaming
these principles wherever feasible into the Department's policies and
programs, through its existing competitive and formula grant programs,
its mortgage financing programs, as well as through its rental
assistance programs.
In addition to these on-going programs, we have proposed several
place-based initiatives that provide opportunities for making
communities more sustainable, affordable and livable. These include
HUD's proposed Transforming Rental Assistance initiative, Choice
Neighborhoods program. These place-based initiatives will require
cross-departmental collaboration in order to take advantage of the
expertise that lies in several program offices and ensure that funds
from one program are designed to be leveraged by another. Ultimately,
HUD is seeking to establish new or improve existing programs that
provide consistent and continuous support at the building,
neighborhood, community and regional scales.
Coordination With Other Agencies.--As you know we have created a
new Partnership for Sustainable communities with DOT and EPA. This has
been an extraordinarily productive relationship. We have formed a
collaborative leadership team that meets at least weekly to manage and
guide the activities of the Partnership and to build a shared
understanding of the goals of this initiative. The three agencies have
adopted a joint work plan, and will continue to meet regularly to set
priorities and coordinate activities. Deputy Secretary Ron Sims has
also convened regular meetings of senior agency leadership to ensure
that principals are guiding the partnership.
We will continue to work in interagency teams to allocate
discretionary funding for planning grants, technical assistance and
capital grants (see response to the following question for more on our
approach to managing funding). We also intend to work together to
support a shared ``one-stop shop'' to assist State, regional and local
stakeholders in identifying potential Federal funding sources to plan
and implement sustainable and livable communities principles.
Coordination With the White House.--We are working closely with the
White House Office of Urban Affairs, and other key White House offices,
including the Council on Environmental Quality, the National Economic
Council, and the Domestic Policy Council, to ensure that the
Sustainable Communities Initiative is supportive of and coordinated
with other administration priorities.
Funding From Other Agencies.--This is a question best addressed to
the other agencies, but we are optimistic that HUD funds will be
matched by DOT and EPA for livability and sustainability initiatives in
future years.
Will the other agencies link existing programs to the initiative?
We're very pleased to see that this is already happening.
HECM
Question. The administration's request for about $800 million to
make up for projected shortfalls in the Home Equity Conversion Mortgage
(HECM) program marks the first time in the program's history that the
program will need a taxpayer-funded bailout.
Treasury's Comptroller of the Currency recently warned that tougher
oversight for the program may be needed and stated in a speech that the
program had ``some of the same characteristics as the riskiest types of
subprime mortgages--and that should set off alarm bells.''
Do you agree with the Comptroller's views?
What administrative and regulatory steps are you taking or planning
to take to prevent potential fraud in the HECM program?
Answer. The Comptroller's concerns are NOT applicable to FHA's
reverse mortgage program, which is very tightly regulated. The
Comptroller was expressing concerns about proprietary reverse mortgage
programs. Furthermore, the FHA HECM program has no characteristics that
are similar to subprime loans.
We are discussing a variety of innovative changes to the program--
not based on the Comptroller's comments, per se, but on our own
experience. For example, we will be proposing that lenders perform a
financial assessment of all borrowers considering a HECM, to ensure
that the proceeds from the reverse mortgage are adequate to meet the
borrower's financial needs, including any routine and recurring
obligations, such as tax and insurance payments. If the HECM and other
sources of income are NOT sufficient, the lender and borrower will have
several options to consider before determining that the HECM may or may
not meet the consumer's needs. We are also considering some changes to
the HECM counselor and HECM appraiser selection process, to assure that
there are no conflicts of interest between or undue influence placed on
the individuals who serve as meaningful risk controls within the
origination process.
______
Questions Submitted by Senator Susan Collins
TENANT-BASED SECTION 8
Question. The Tenant-Based section 8 program is an important
affordable housing program that provides vouchers to low-income
families, seniors, and disabled individuals, helping them to meet the
cost of safe, decent housing. Unfortunately, nearly all housing
agencies across the State of Maine have stopped accepting applicants
for section 8 vouchers due to extended waitlists, which, on average,
are experiencing at least a 1 year wait, and in some cases have reached
a 5 year wait.
I have consistently supported increased funding for the section 8
program. We face a renewed sense of urgency to adequately fund this
program, however, as the housing crisis and economic recession have
left more and more individuals and families in need of assistance.
During this critical time in our economy, what steps does the
administration plan to take to meet the growing need for housing
assistance?
Answer. The 2010 budget reflects a commitment to maintain leasing
levels as of December 2008 by requesting a net increase of $1.2 billion
above the 2009 enacted amounts. In fiscal year 2009, the Tenant-Based
section 8 program is about 31 percent of HUD's total Discretionary
budget authority. The 2010 budget request allows Public Housing
Authorities (PHAs) to better utilize their funds to serve more families
by improving the allocation formula to reflect the most current costs
and by offsetting allocations based on unused balances and reallocating
funds to PHAs based on need to ensure that families receiving
assistance are maintained as of December 2008.
The Department is aware of long waiting lists among PHAs due to a
decreasing attrition rates among program participants reflecting a weak
economy which means less families are leaving the program compared to
prior years. However, with the proposed budget increase in 2010, the
Department will fund the renewal of about 57,000 incremental vouchers
provided through various appropriation bills between 2008 and 2009.
This will allow PHAs to lease additional units through special purpose
vouchers. The administration intends to renew all special purpose
vouchers and keep them in use for their original purposes.
HOMELESSNESS IN RURAL REGIONS
Question. The current state of our economy has caused a significant
increase in the number of people staying in shelters. In 2008, Maine
experienced a 13 percent increase in the number of shelter beds filled
per night over the previous year and the numbers continue to rise. With
section 8 waitlists closed and the housing market in crisis, people are
left with few options for affordable housing. The unavailability of
affordable housing is even more concerning in rural areas where there
are considerably fewer shelters. In these situations, people and
families often sleep in cars or reside with friends. What efforts does
this administration plan to take to address the increasing number of
people staying in shelters? How will the administration meet the needs
of homeless populations in rural regions?
Answer. Through implementation of the Homelessness Prevention and
rapid Re-Housing Program (HPRP) funded as part of the American Recovery
and Reinvestment Act of 2009 (Recovery Act), HUD is providing an
unprecedented level of resources to prevent and end homelessness for
individuals and families in local communities. This 3 year $1.5 billion
program--allocated to 540 States, cities and counties--allows for two
new types of interventions: prevention for those who are imminently at
risk of becoming homeless and rapid re-housing for those already
experiencing homelessness. Grantees are required to determine, based on
local needs, how much of their allocation should go to each type of
intervention and design programs to meet the needs identified. These
types of interventions are flexible in nature, and will be especially
important to rural communities where shelter capacity is often low. For
example, a rural community may use a large proportion of their funds to
prevent homelessness by providing short- or medium-term rental
assistance and services to families on the verge of homelessness
because a head of household has lost his or her job. This will
alleviate pressure on the shelter system by helping to keep families in
their homes.
In the longer term, HUD is also in the process of developing
regulations based on the new Homeless Emergency Assistance and Rapid
Transition to Housing (HEARTH) Act, which consolidates and restructures
HUD's homeless programs. In the new legislation, both prevention and
rapid re-housing are eligible activities. HUD expects that, as HPRP
begins to close out to meet the statutory 3 year expenditure deadline,
the new HEARTH programs will be in place to allow communities to
continue appropriately scaled versions of the prevention and rapid re-
housing programs started under HPRP. Importantly, the HEARTH Act
creates a new Rural Housing Stability program. This program will bring
particular attention and resources to rural areas to prevent and
confront homelessness. The HEARTH Act homelessness programs will
provide communities with much-needed flexibility to assist families and
individuals in a variety of homeless and near-homeless situations.
SUBCOMMITTEE RECESS
Senator Murray. This subcommittee will stand in recess
until Thursday, June 18, when we will take testimony from
Secretary LaHood.
[Whereupon, at 11 a.m., Thursday June 11, the subcommittee
was recessed, to reconvene subject to the call of the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2010
----------
THURSDAY, JUNE 18, 2009
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:34 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Specter, Bond, Alexander, and
Collins.
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
STATEMENT OF HON. RAY LAHOOD, SECRETARY
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. The subcommittee will come to order.
Senator Bond got the message on what to wear today. I see the
Secretary and Senator Collins. I did too and I chose not to,
just so you know.
Welcome to all of you. Welcome Secretary LaHood. Thank you
so much for being here today.
In April of this year Secretary LaHood testified before
this subcommittee about the American Recovery and Reinvestment
Act. And I'm excited to say that billions of dollars included
for transportation projects are now flowing into our
communities across the country. In my home State of Washington
over $500 million is beginning to move into projects from
Seattle to Spokane creating jobs and boosting our economy.
Today though, we are going to focus on the President's
fiscal year 2010 budget request for the Department of
Transportation which is critical as we face the challenge of
rebuilding our country's transportation infrastructure. And I
am glad to see that the President's budget request reflects a
renewed interest in improving the entire transportation system.
And it recognizes that it takes many different modes of
transportation to create an integrated national system.
The President's budget request includes: More than $51
billion for highways and transit; $1 billion to continue the
investments in high speed rail that were started in the
Recovery Act; $3.5 billion for airport investments; $1.5
billion for grants to Amtrak; $175 million to protect essential
air service for smaller communities across the country; and $15
million for a new initiative within the Department of Homeland
Security to improve the security, efficiency and capacity of
our Nation's ports and waterways.
I also want to acknowledge the work that Secretary LaHood
is doing in coordination with Secretary Donovan at the
Department of Housing and Urban Development. Their partnership
is an important first step toward helping communities make
vital connections between workplaces, family homes and
neighborhood schools. And although I'm glad to see important
investments being made in the President's budget, I am also
painfully aware that we have tough questions to answer this
year.
We cannot face these challenges with ideas alone. We must
start talking about concrete, realized solutions. The most
pressing problem we face today is the looming bankruptcy of the
Highway Trust Fund. The Trust Fund needs an estimated $5 to $7
billion before August of this year or we may see transportation
projects come to a standstill, State budgets will be thrown
into crisis and thousands of family wage jobs will be put in
jeopardy.
In addition the Highway Trust Fund needs another $8 to $10
billion to support transportation programs through fiscal year
2010. As this subcommittee develops its bill for funding
programs at the Department of Transportation we cannot allow
the stability of the Highway Trust Fund to be called into
question. Its stakes are too high for our States, our
communities, families and commuters.
Yesterday the Department announced a general framework for
extending transportation programs for 18 months, enacting major
reforms to those programs and ensuring the short term solvency
of the Highway Trust Fund. By offering this framework the
Department's announcement is a step in the right direction.
However, critical details are still missing and the Department
has not yet offered specific ways to replenish the balance of
the Highway Trust Fund.
Furthermore the Department's announcement offers very
little insight into how it proposes to use cost benefit
analysis, focus investments in metropolitan areas and promote
this concept of livability. Although the Department is
interested in tying together a short term fix for the Highway
Trust Fund with reforms to our transportation programs, I do
have some very serious concerns about that approach. I do not
oppose on principle the effort to improve Federal
transportation programs, but I don't want to allow debates over
those reforms to prevent us from saving the Highway Trust Fund
in a timely manner.
The time has come to discuss specific solutions to the
short fall. And these discussions will require Congress to work
closely with the administration. But this work requires more
clarity and better communication than we've been getting so
far.
Another area of concern for this subcommittee is the safety
of our air transportation system. Although air transportation
continues to be one of the safest ways of traveling, the crash
of Colgan Flight 3407 is a reminder that the regulations,
inspections and procedures of the Federal Aviation
Administration are all in the service of protecting human life.
The FAA recently announced it is requiring its safety
inspectors to focus their efforts on determining if regional
air carriers are complying with Federal requirements for pilot
training. But the crash near Buffalo, New York raises important
questions about FAA requirements related to pilot fatigue and
qualifications and about the relationship between legacy and
regional air carriers.
I know earlier this week the Department and the FAA
gathered representatives from air carriers and other industry
groups to participate in a summit on airline safety. That
summit was designed to address many different aspects of
aviation safety. And I will be interested to hear what the
Secretary has learned from that meeting.
Finally, I want to express my concern about the
administration's proposal for a national infrastructure bank.
Investing in our infrastructure is critical. But we need to
ensure that it is financed responsibly. Whether this bank is
requested from funds appropriated by this subcommittee or
included in a proposal for the reauthorization for service
transportation programs, I think there are a lot of unanswered
questions that need to be addressed.
Again, Secretary LaHood, thank you so much for appearing
before us today to provide some additional detail and insight
into the President's budget request. And with that I will turn
it over to my partner and ranking member, Senator Bond for his
opening remarks.
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Thank you, Madam Chair. And I agree with the
concerns you raised. I welcome an old friend, Secretary LaHood.
I thank him for appearing again before our subcommittee and
taking on this very challenging project as we both agree. I
think it is wise as a fellow Midwesterner that he knows in hot
weather these suits are much more comfortable. And we don't
demand adherence. That's the beauty of the two party system,
some wear suits and some--anyhow.
To be serious, Mr. Secretary, there appears to be a
troublesome communication gap between the administration,
Department of Transportation, OMB and the Senate. We're hearing
about major policy initiatives after they've been reported
without a heads up from the Office of Governmental Affairs,
policy or public affairs. In fact the general public had access
to the information before many of us did.
In most cases however, we're not hearing anything
substantive regarding the transportation budget from the
administration. They're going to make--they're going to do all
these wonderful things without raising gas taxes, without
raising taxes, with no information from OMB how it might be
paid for, and that, I might add, with no policy guidance or
direction from the Department.
The budget submission that we're trying to work with, as I
have indicated to you, lacks some very important details. We
don't know how to put this baby together. Because we don't know
where the numbers are or how it's all going to work.
We know the devil is in the details in all these things.
But these are really big details when a major policy
implications for the Nation and we're running out of time to
get the answers we need. In fact we will be getting our 302(b)
allocations today which will dictate what this subcommittee can
or cannot fund.
And I'll tell you the prospects do not look good. I don't
see how we, from what I think we're going to get, I don't know
how we can do what we have to do. But we need some guidance
from you.
The budget has, before, has the same boiler plate language
for FHWA, Federal Motor Carrier Safety Administration, FMCSA,
National Highway Safety Administration, NHTSA and the Federal
Transit Administration, FTA. The language reads, ``The
administration is developing a comprehensive approach for a
surface transportation authorization. Consequently the budget
contains no policy recommendation for programs subject to
reauthorization including Federal aid highways. Instead the
budget displays baseline funding levels for all surface
programs.''
As we've discussed we got to find out from OMB what these
decisions are. And we hope that you will be able to get those.
And we will be able to get those shortly. So we can begin work.
I know there are many difficult transportation challenges
facing the Nation. But we can't refuse to deal with them or put
off the tough decisions because we've got a schedule that we
have to meet for this fall. I say only have facetiously that
footnote to the boiler plate the budget documents should say,
we still don't know how to pay for highways.
Getting the $36 billion in general funds is probably not
going to happen. And the highway number is likely not to be
baseline funding from what we know at this point. I hope that
will change.
We've been given some other important information since
receiving the budget. And that's not good news. The trust fund
is going bust, not just for 2010, but for 2009.
Three weeks after getting the budget staff got a briefing
that the numbers in the budget for the Highway Trust Fund
needed to be updated due to climbing cash balances in the
Highway account of the Highway Trust Fund which will cause the
fund to run out of money to handle day to day reimbursements.
The Highway Trust Fund is now scheduled to fall below $4
billion around July 3. And DOT has determined that at least a
$4 billion balance is needed in the Highway account to manage
cash flows.
Sometime in the near future we're told DOT will give the
State departments of transportation 8 weeks' notice of a change
in reimbursement policy with a balance falling below zero in
mid August. It won't be possible for us to complete our bill
and conference by that time. So some solutions have to begin to
be debated right now.
Everybody said we wanted to get jobs which were shovel
ready. And I was very disappointed that the stimulus package
that I felt was flawed and could not vote for did not deal with
the rescission in highway funding, that $8 billion rescission.
And the shortfall is something that if you want shovel ready
projects there's nothing like contracts that have already been
completed the environmental work, the preparation to keep
people working. We should have been continuing to build
highways.
In testimony before our House counterparts on June 4, you
testified you're working on solutions to fund $5 to $7 billion
that will be paid for with offsets. I'd be interested to see
what OMB comes up with since that time as well as what the
administration believes it will need to do to meet the
projected $8 to $10 billion shortfall for the Highway Trust
Fund in 2010. As I said we'll be voting on allocations later
today, a 302(b) allocation in BA and outlays will at this point
not sustain your requested level of general funds at $36
billion with all of the other expected priorities of the bill.
Another problem I've been talking about and I've asked you
about it. Our April 30 hearing on the American Recovery and
Reinvestment Act is the rescissions as I mentioned. They'll be
September 30; they'll be a looming $8.7 billion if nothing is
done.
Highway funds we thought were going to ARRA to create job
stimulation. But without solving the rescission problem there
will be massive losses of jobs in the late summer when we need
to be putting those projects to work, creating and continuing
those jobs and building the highways we badly need. FHWA has
helpfully advised our staff that, ``This is a very complicated
rescission to calculate. And FHWA staff is working hard on it.
Although we know the total amount to be rescinded from each
State, we still cannot determine the programmatic distribution
which many of you want to know.''
In other words the Department does know how to make the
rescissions or whether they can make rescissions called for or
if there's going to be a fix. This is information I hope we
will be able to get from OMB. So we can move forward.
Now I also understand that funding for high speed rail at
$1 billion over the next 5 years is the highest priority for
the Department and the administration to supplement the $8
billion in ARRA funding already. The high speed rail guidance
that was recently announced has little to spell out how the
additional funds will be used. And what the goals for a
national rail plan due out in October this year, will try to
achieve in terms of a vision.
GAO has reported it is continuing to work on high speed
rail oversight. In testimony before the House Appropriations
Committee, GAO said, ``High speed rail does not offer a quick
or simple solution to relieving congestion on our Nation's
highways and airways. High speed rail projects are costly,
risky, take years to develop and build and require substantial
upfront public investment as well as potentially long term
operating subsidies.''
GAO goes on further to say that there are potential long
term benefits of high speed rail. However determining which of
any of the proposed high speed rail projects should be built
will require decisionmakers to be able to determine a project's
economic viability. Meaning whether the total social benefits,
offset or justify it, total social cost and what the relative
benefits and costs of the alternatives will be.
I will apologize because in the first round of questions
I'm going to have to go to an Energy and Public Works mark up
this morning which is considering a Clean Water Act amendment
proposal that will eliminate the navigable waters limitation on
the reach of corps of engineers and EPA guidelines over waters.
As a result if this is passed and I have grave concerns about
it. It will mean every pond and every puddle in the United
States will be subject to Federal guidance.
Every time we have a heavy rain storm the terrace behind my
garage in Missouri floods. And I have to get a sump pump to
pump it out. Now will I have to get an EIS to pump out that
pond that develops?
Senator Murray. Are there fish in it?
Senator Bond. Pardon?
Senator Murray. Are there fish in it?
Senator Bond. No, mosquitoes. And that's why I need to pump
it out. But the problem is if this goes through every single
puddle that a high speed rail project crosses will have to get
an EIS.
That can add 10 years to a major high speed rail project.
It's just a suggestion that we might want to consider when
voting on it. Anyhow I digress.
My concern is that there is not sufficient funding, truly,
to reduce congestion on our Nation's highways and airports. If
as the current guidance outlines, the money goes to so many
different projects. We'll be spreading the money so thin and
wide we'll have nothing to show for it. Frankly, what will an
additional $1 billion per year in grants do that the previous
$8 billion did not?
Has the administration determined how the question of
operating assistance will be addressed on these projects? We
should not be paying to build it and then paying a heavy load
continually to operate it. There should be conditions on grants
to those communities on who and how they plan to pay for
operating high speed rail in order to use these tax dollars.
And another major issue that's a real problem in my State
with regard to Mexican trucks. We have discussed this. And I'm
awaiting additional information from the Department on what, if
anything can be done about the Mexican Government's retaliation
over the terms of NAFTA on tariffs to the tune of $2.4 billion
of U.S. agricultural and manufacturing exports.
As you know, Mr. Secretary, over $1.5 billion in
manufactured products and $900 million in agricultural products
are impacted by the retaliation. This is something I warned
about unsuccessfully every time we've had this debate. It was
forced through, signed into law.
And the Mexican Government took the steps that they were
totally authorized to take. And according to pork producers the
retaliation puts over 12,000 ``Ag'' jobs and 14,000
manufacturing jobs at risk. We need to know if their plans to
live up to the terms of NAFTA and open the border.
Turning to aviation, I am pleased to see that the airport
improvement program is funded at a level that is both realistic
and sufficient to fund the Nation's airport construction needs
which is welcome change from the past administrations, both
Republican and Democrat. Unfortunately the good news ends there
with increased funding needs for NextGen, a new contract
pending for the air traffic controllers and further issues
being exposed in the area of aviation's safety. There are a
number of top budgetary choices and policy challenges facing
the Department.
Mr. Secretary, as you can see we really need some realistic
decisionmaking, especially in regards to highways and
rescissions. We're not likely to have the funds we need to meet
all the Department of Transportation and Department of Housing
and Urban Development needs. But the more we work together with
the various authorizing committees and the administration in an
open, bipartisan manner, the more likely we'll find those
solutions.
After all transportation is something that both parties
recognize is good for the Nation. And we want to have good
common sense solution. Our transportation infrastructure like
our highways, roads and bridges are the life blood of our
economy, the key to future economic growth and economic
recovery. We can't afford to pass the buck because solving
these problems is critical to creating jobs, safer travel and
economic development.
I thank you, Madam Chair. I apologize for the length of the
statement. But I wanted to lay out these concerns. Thank you
again, Mr. Secretary for being here.
Senator Murray. Thanks very much, Senator Bond. Senator
Collins.
STATEMENT OF SENATOR SUSAN COLLINS
Senator Collins. Thank you very much, Madam Chairman. First
let me commend you for allowing your good taste to overcome
peer pressure.
Senator Murray. Absolutely.
Senator Collins. To wear a seersucker suit today. That is
impressive as well.
Senator Bond. Now that you bowed to peer pressure.
Senator Collins. I did indeed.
Senator Bond. That's good.
Senator Collins. Let me say to you and Senator Bond that I
am delighted to be a new member of your subcommittee. And I
look forward to working with both of you on transportation
issues and the other important jurisdiction of this
subcommittee.
Maine, like most States has a long backlog of deteriorating
roads and bridges. And I was delighted a couple of weeks ago to
meet with the head of a road construction company from Maine
who told me that as a result of the stimulus bill there are 100
people working doing repaving who otherwise would not have
jobs. So I believe we're seeing some early, very positive
results of the stimulus package with regard to infrastructure
improvements that are so needed.
Nevertheless as both the chairman and the ranking member
have pointed out, there is an awful lot to be done. I'm eager,
Mr. Secretary, to have you come to Maine and to visit the
University of Maine. And see the work that's being done on
composites to be used to build bridges that will last longer
and offer other advantages.
I'm also pleased that the administration has provided a
substantial increase in the essential air service funding. This
program is critical for smaller rural States, like Maine, to
ensure that the rural regions receive commercial airline
service. There are many other important issues that we will
discuss today. But I want you to know, Mr. Secretary, that the
number one transportation issue in my State is that of truck
weights. And I look forward to discussing that issue further
with you.
Again, Mr. Secretary, I couldn't help but think how
different it must be for you to be sitting on that side of the
dais. And I think we're very fortunate to have an individual
with your background and understanding of Congress in such an
important role in President Obama's cabinet. Thank you, Madam
Chairman.
Senator Murray. Absolutely. Thank you very much, and
Senator Alexander, opening statement.
STATEMENT OF SENATOR LAMAR ALEXANDER
Senator Alexander. Thanks, Madam Chairman. Welcome, Mr.
Secretary, look forward to working with you.
I wanted to just call to your attention. The other day they
shut down an 8 mile section of Interstate 40 in Knoxville, one
of the most heavily traveled interstates in Tennessee for 14
months. And they fixed it.
And usually it would have taken 3 to 4 years. It was called
a Smart Fix program. And it was an example of more efficient
use of our highways. And we'll have a chance to discuss more,
but one of the thoughts I've had for a few years is why don't
we have a Federal rating for highway use efficiency?
When we rate cars, you know, by fuel efficiency. And one of
your predecessors told me that 40 or 50 percent of our traffic
jams are caused by the inefficient use of highways by, you
know, trying to fix them at 4 o'clock in the afternoon or
wrecks that don't get pulled off the road. I think if you had,
Senator Bond and I have both been Governors.
I think if you had a list of States 1 to 50 rated based
upon their highway efficiency use and Tennessee were 50,
somebody could get elected Governor just based on that. And you
might see some changes in it. So it's just a thought I have.
I look forward to talking with you. And I appreciate the
chance to make a comment.
Senator Murray. Thank you very much. Mr. Secretary, with
that we will turn it over to you for your opening remarks.
STATEMENT OF HON. RAY LAHOOD
Secretary LaHood. Madam Chair and members of the
subcommittee, thank you for the opportunity to discuss the
administration's fiscal year 2010 budget request for the U.S.
Department of Transportation.
The President seeks a total of $73.2 billion in budgetary
resources. This funding level supports the President's
ambitious agenda for revitalizing and enhancing our national
transportation infrastructure. It's essential that we continue
to invest in these assets to keep our highways and rails in
good repair, keep our freight and maritime shipping lanes open
and keep all modes of transportation operating as efficiently
and safely as possible.
Safety always has been and must continue to be our chief
concern. That's why over one-quarter of the Department's total
budget request supports transportation safety. I want to
highlight the President's fund request for some of our critical
modes.
First, high speed and inner city passenger rail: As you
know President Obama and Congress have made a historic $8
billion investment to jump start new rail corridors around the
Nation. The President's budget proposes to fund a 5 year, $5
billion high speed rail State grant program.
This represents a major commitment by the Government to
offer the traveling public a safe and sustainable alternative
to driving and flying. The budget also includes $1.5 billion in
grants to support Amtrak. When this is combined with the $1.3
billion provided in funding through the Recovery Act, Amtrak is
poised at last to address its long standing capital needs.
With respect to aviation, the President's budget requests
nearly $16 billion for the Federal Aviation Administration.
This level will enable us to fund the FAA's highest priorities
including $865 million to keep NextGen air transportation
moving forward. With these resources FAA will also be able to
fund additional air traffic control positions and invest in
nearly 3,500 airport infrastructure projects at 1,500 airports.
The maritime industry also plays a vital role in our
economy with nearly half of all U.S. foreign trade by value
traveling by water. The President's budget seeks $346 million
for the Maritime Administration. This includes $15 million for
a new Presidential initiative to enable MARAD to work with the
Department of Homeland Security on modernizing our inter mobile
freight and infrastructure links that tie ports, highways and
rail networks into a seamless transportation network.
I'm confident that the President's transportation budget
for 2010 will help our Nation continue to develop our most
vital transportation assets for the 21st century. Nevertheless
one of the most significant challenges our Department faces
going forward is the ability to identify sufficient resources
to meet our goals. And provide the American people with the
transportation system they need and deserve.
I'm grateful to Congress for providing more than $48
billion in transportation funding through the American Recovery
and Reinvestment Act and proud of our tiger team effort in
implementing the provisions in the Recovery Act. By working
across organizational boundaries the team has been successful
in meeting the Congressional deadlines. Every deadline has been
met that was put in the law; the historic investment is making
it possible for thousands of transportation projects around the
country to get underway.
As a direct result we're helping to save or create good
paying jobs that so many families and communities need right
now. And we're rebuilding, retooling and revitalizing our
airports, roads, bridges, ports, transit systems and more. But
we must also recognize that the two primary funding sources the
Department has long relied on fuel tax and airline ticket taxes
are no longer sufficient.
As you know last year the Highway account of the Highway
Trust Fund required an $8 billion cash transfer from the
general fund in order to remain solvent. The current reduction
in economic activity has made the problem of sustainability
even more serious. We remain at risk for yet another cash
shortfall in the Trust Fund as soon as mid to late August.
The administration has inherited a system that can no
longer pay for itself. Clearly we cannot continue on this path.
Therefore we're proposing an immediate 18-month Highway
Reauthorization that will replenish the Highway Trust Fund.
Critical reforms are needed as a part of this process to
help us better invest, to make better investment decisions
including focusing on smarter investments in metropolitan areas
promoting the concept of livability to more closely link home
and work. I urge Congress to pass this measure before the
August recess so that States do not risk losing the vital
transportation funding they need and expect. I assure you we
are working on a long-term solution.
PREPARED STATEMENT
We're pledged to work with you and every Member of Congress
on the full reauthorization that best meets the needs of the
country. And I'm confident we'll find the necessary solutions.
Thank you for the opportunity. I look forward to your
questions.
[The statement follows:]
Prepared Statement of Hon. Ray LaHood
Madam Chairman, members of the subcommittee, thank you for the
opportunity to appear before you today to discuss the administration's
fiscal year 2010 budget request for the U.S. Department of
Transportation. The President's request totals $73.2 billion in
budgetary resources, which will support major investments in
transportation nationwide that are vital to the health of our economy
and the American way of life.
The President's budget continues record level investments in our
Nation's transportation infrastructure. At the same time, the budget
reflects the growing recognition that traditional gasoline taxes and
airline ticket taxes, two of the major sources of funding for the
Department's surface transportation and aviation programs,
respectively, are outdated and not adequate to support 21st century
transportation needs.
On February 17, 2009, President Obama signed into law the American
Recovery and Reinvestment Act of 2009. I want to thank Congress for
providing more than $48 billion in vital transportation funding to both
help bring about economic recovery and make lasting investments in our
Nation's infrastructure. This is both an investment in our
transportation infrastructure and in jobs for Americans. The resources
made available from the general fund for transportation infrastructure
in the Recovery Act will help to rebuild, retool, and revitalize the
vast network of roads, tunnels, bridges, rail systems, airports, and
waterways that we have long depended on to keep the economy moving and
growing. I am very proud of our TIGER Team effort in implementing the
provisions in the Recovery Act. By working across organizational
boundaries, the Team has been successful in meeting the Congressional
deadlines.
America's transportation systems are the lifeblood of our economy,
and when properly maintained can be a catalyst for economic growth.
These systems allow people to get to jobs and allow businesses to
access wider pools of labor, suppliers, and customers. The ability to
move freight efficiently will be critical to our economic recovery.
Without efficient transportation routes, economies stagnate. We need to
protect, preserve, and invest in our transportation infrastructure to
ensure that it can meet our present and future demands.
Above all, we must make our transportation systems safe; where
public safety is concerned there is no room for compromise. Over $18.5
billion, or one-quarter of the total request for the Department, will
support transportation safety. I am mindful that safety--on the road,
on the rails, in the air, and on the water--has always been, and must
continue to be, the central focus of the Department.
SURFACE TRANSPORTATION PROGRAMS
The Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU) expires on September 30, 2009. The
administration is developing a comprehensive approach for surface
transportation reauthorization. Consequently, the budget contains no
policy recommendations for programs subject to reauthorization,
including those for the Federal Highway Administration, the Federal
Motor Carrier Safety Administration, the National Highway Traffic
Safety Administration, and the Federal Transit Administration. Instead,
the budget displays baseline funding levels for all surface
transportation programs.
An overarching concern for surface transportation funding is the
status of the Highway Trust Fund. The funding levels set in SAFETEA-LU
for fiscal years 2005 through 2009 were designed to spend down the
accumulated balance in the Highway Account of the Highway Trust Fund.
This has left the Highway Account unable to sustain spending from
current highway programs into fiscal year 2010. The sustainability
issue became apparent when in 2008 the Highway Trust Fund required an
$8 billion cash transfer from the general fund in order to remain
solvent.
The current reduction in economic activity has only exacerbated the
problem of sustainability for fiscal year 2010, and we remain at risk
of yet another cash shortfall later in fiscal year 2009. At my
direction, the Department has shared our internal projections on the
status of Highway Trust Fund with you and your staff. As you all know,
DOT's highway programs continue to pay out more than the receipts
coming into the Highway Trust Fund.
To highlight the growing imbalance between projected Highway Trust
Fund revenues and baseline spending, the fiscal year 2010 budget
includes lowered Highway Trust Fund funding levels for certain programs
(i.e., Federal-aid Highways and Transit Formula and Bus Grants). Such
funding reductions would be necessary to maintain positive annual cash
balances. For these programs, the budget also includes discretionary
budget authority appropriated from the general fund equal to the
difference between the baseline funding and the lowered Highway Trust
Fund funding levels.
Under the funding scenario presented in the fiscal year 2010
budget, the Federal Motor Carrier Safety Administration and the
National Highway Traffic Safety Administration would be funded entirely
from the Highway Trust Fund. The split between trust fund and general
fund expenditures in all accounts funded by the Highway Trust Fund is
for presentation purposes only and not a meant to be a policy
recommendation on the part of the administration.
Using the Federal Highway Administration as an example, the
baseline funding level presented in the fiscal year 2010 budget is
$41.8 billion, a 1 percent increase from the amount provided by
Congress in the fiscal year 2009 Omnibus Appropriations Act. However,
the Highway Trust Fund can only support an estimated $5.7 billion in
contract authority, and an equivalent obligation limitation. The
balance--$36.1 billion--is assumed to be provided from a new
discretionary general fund appropriation.
Does this mean that we will have a $36 billion shortfall in the
Highway Account of the trust fund in fiscal year 2010? No. During any
given year, most of the payments from the Highway Trust Fund are for
funding commitments that were made in previous years. By fiscal year
2010, the majority of revenues that will be deposited into the Highway
Trust Fund will be needed to cover cash outlays from those prior-year
commitments.
The President's fiscal year 2010 budget reflects the fact that over
the long term, we will need to identify a new funding solution to
ensure that we continue to meet our Federal surface transportation
infrastructure investment needs. However, I need to emphasize that this
budget is a ``placeholder'' and this presentation does not reflect the
administration's recommended funding levels or approach for the next
surface transportation reauthorization.
The administration inherited a difficult problem--a system that can
no longer pay for itself. There simply is not enough money in the
Highway Trust Fund to do what we need to do. The fiscal year 2010
budget frames the challenging spending decisions facing policymakers.
Clearly as we approach the reauthorization of surface transportation
programs, we will need to think creatively as we search for sustainable
funding mechanisms.
I want to assure you that we will soon have a plan to address the
potential Trust Fund shortfall this summer. We believe very strongly
that any Trust Fund fix must be paid for. We also believe that any
solution must be tied to reform of the current highway program to make
it more performance-based and accountable, such as improving safety or
improving the livability of our communities--two priorities for me.
FEDERAL AVIATION PROGRAMS
The Federal Aviation Administration is in a similar situation as
DOT's surface transportation programs in that its current authorization
also expires at the end of the current fiscal year. The Vision 100--
Century of Aviation Reauthorization Act originally expired at the end
of fiscal year 2007, and since that time the Federal Aviation
Administration has been operating under a series of short-term
extensions. Current aviation taxes and expenditure authority are
authorized through September 30, 2009.
The Airport and Airway Trust Fund provides all of the funding for
the Federal Aviation Administration's airport improvement, facilities
and equipment, and research and development activities, as well as
approximately 70 percent of the Federal Aviation Administration's
operations. As of the end of the current fiscal year, DOT estimates
that the Airport and Airway Trust Fund will have a cash balance of
approximately $9.5 billion and an uncommitted balance of $929 million.
The uncommitted balance takes into account the amount of cash needed to
cover commitments that have already been made. As such, the uncommitted
balance is generally used as an estimate of available resources for new
commitments. The fiscal year 2010 budget projects that the uncommitted
balance will drop to $334 million by the end of fiscal year 2010.
Although the budget estimates a small uncommitted balance in fiscal
year 2010, the end of year 2010 cash balance is estimated to be $8.75
billion and the Federal Aviation Administration will have more than
sufficient resources to implement its programs in fiscal year 2010.
The President's budget requests nearly $16 billion for the Federal
Aviation Administration in 2010. The budget also assumes some basic
elements of a reauthorization proposal. The current financing system is
based largely on aviation excise taxes that depend on the price of a
passenger's airline ticket rather than the actual cost of moving
flights through our Nation's aviation system. Starting in 2011, the
budget assumes that the air traffic control system will be funded with
direct charges levied on users of the system. While the budget does not
include a detailed reauthorization proposal, the administration
believes that the Federal Aviation Administration should move toward a
model whereby the agency's funding is related to its costs, the
financing burden is distributed more equitably, and funds are used to
pay directly for services the users need. The administration recognizes
that there are alternative ways to achieve its objectives, and wants to
work with Congress and stakeholders to enact legislation that moves
toward such a system.
Unlike the budget presentation for surface transportation programs,
the fiscal year 2010 budget request of nearly $16 billion for the
Federal Aviation Administration is not a ``placeholder'' and, in fact,
would fund the Federal Aviation Administration's highest priority
requirements.
The request includes $865 million for the Next Generation Air
Transportation System (NextGen)--an increase of close to $170 million
from the fiscal year 2009 enacted level. NextGen is an evolutionary
process that will transform the way the national air transportation
system operates. The outcome will be reduced congestion and delays,
improved safety, and reduced noise and emissions.
In addition, the budget request includes funding to increase the
number of air traffic controllers by 107 and the number of safety staff
by 36. This will improve the Federal Aviation Administration's safety
oversight function and meet its current need to continue to hire a new
generation of air traffic controllers in advance of the anticipated
retirements.
The budget request would provide $3.5 billion for the Airport
Improvement Program. This level of funding will support an estimated
3,500 infrastructure projects at an estimated 1,500 airports, including
the rehabilitation and maintenance of existing infrastructure,
compliance with design standards, and improved airport capacity.
HIGH-SPEED AND INTERCITY PASSENGER RAIL
In the 20th century, the United States built highway and aviation
networks that fueled unprecedented economic expansion, fostered new
communities, and connected cities, towns and regions.
The President's fiscal year 2010 budget proposes to help address
today's transportation challenges by investing in a world-class network
of high-speed passenger rail corridors that connect communities across
America. Building on the $8 billion provided for high-speed rail in the
American Recovery and Reinvestment Act of 2009, the President's budget
proposes to fund a 5 year, $5 billion high-speed rail State grant
program. This represents a major commitment by the Federal Government
to provide the traveling public with a viable alternative to driving
and flying.
The budget also includes $1.5 billion in grants to support the
National Railroad Passenger Corporation (Amtrak)--$572 million for
operating grants and $930 million for capital and debt service grants.
When combined with the $1.3 billion in funding provided for Amtrak
under the American Recovery and Reinvestment Act, the fiscal year 2010
request will allow Amtrak to begin to address some of its long-standing
capital requirements.
MARITIME PROGRAMS
The U.S. maritime industry plays an important role in today's
global economy. In terms of the value of cargo, more than 48 percent of
U.S. foreign trade and 6 percent of our Nation's domestic commerce
travels by water. The fiscal year 2010 budget request includes $346
million for the Maritime Administration. This request fully funds the
Maritime Security Program at $174 million and provides $153 million for
Operations and Training, including a $12 million increase for the U.S.
Merchant Marine Academy for operational and capital improvements.
In fiscal year 2009, the Maritime Administration took positive
steps to address and remediate certain internal control issues related
to budget implementation at the Academy. These steps include
significant financial management reforms at the Academy and technical
assistance for new Academy leadership. I have also directed MARAD to
establish a ``blue ribbon'' panel of experts who will examine and
report to me on the Academy's long-term capital improvement needs.
The budget also provides an increase of $15 million under MARAD
Operations for a Presidential initiative to support integrated planning
with the Department of Homeland Security for development and
modernization of intermodal freight infrastructure that links coastal
and inland ports to highway and rail networks.
The fiscal year 2010 request for the Saint Lawrence Seaway
Development Corporation includes nearly $17 million for agency
operations and fully funds the second year of the Seaway's 10-year
Asset Renewal Program.
Before I conclude my testimony I also want to mention two other
notable items in the President's fiscal year 2010 budget request for
DOT. This request will enable the Pipeline and Hazardous Materials
Safety Administration to fill 18 additional pipeline safety inspection
and enforcement positions. This will bring the total number of
inspection and enforcement positions up to 135 in fiscal year 2010,
meeting the target in the Pipeline Inspection, Protection, Enforcement,
and Safety Act of 2006.
Finally, the administration is committed to maintaining small
communities' access to the National Airspace System. The budget
provides $175 million for the Essential Air Service (EAS) program to
fulfill current program requirements as demand for subsidized
commercial air service increases. The budget drops an earlier proposal
to restructure the eligibility criteria for airports to receive EAS
funding, but also acknowledges that the program design must be updated
and made more cost effective. The administration is committed to
working with Congress to develop a more sustainable program that will
provide better value for passengers and the American taxpayer.
Thank you for the opportunity to appear before you today to discuss
the President's fiscal year 2010 budget proposal for the Department of
Transportation. I believe that this proposal offers bold initiatives
and charts a new course for transportation infrastructure investment in
the United States over the years to come. I look forward to working
with Congress and transportation stakeholders to make this reality.
I will be pleased to respond to your questions.
HIGHWAY TRUST FUND
Senator Murray. Thank you very much, Mr. Secretary. Let me
just say that as you know most of the spending that comes out
of the Highway Trust Fund over the coming year is going to be
used to reimburse our States for projects that they actually
developed a year or so ago. So basically most of today's
spending from the Trust Fund was committed a long time ago.
We need to fix the Highway Trust Fund to make good on those
commitments that are now already out there. Our home States
have been spending their own funds on these eligible
transportation projects with the assurance that they're going
to be reimbursed. So if we don't make good on our promise than
we're going to throw our States into a financial crisis right
when many of them are already facing really distressful times
during this economic recession.
Now I just heard you testify that it's necessary to include
reforms to the transportation programs as part of the
legislation to fix the Highway Trust Fund before the August
break which I think we've got 5 weeks left of session to do
that. Those reforms are important. They affect future decisions
about transportation projects and not just the reimbursements
that are going to occur over the coming months.
So let me ask you why is it necessary to reform the
transportation programs in order to save the Highway Trust Fund
over the short term?
Secretary LaHood. We at least need to have a discussion
about this. Our priority is to work with OMB and the Congress
to find the money to plug the Highway Trust Fund for the next
18 months. During our discussions we should at least talk about
the way forward and begin discussions about some reforms.
Our priority will be to work with all of you to plug the
Highway Trust Fund, to find the money to do it and to pay for
it. We'd like for part of our discussion to be about reforms
because we know that over the next 18 months as we work with
Congress, we're going to be talking about reforming the
transportation program.
I want to be clear on this. We're going to work with all of
you to find the money to plug the Trust Fund, to pay for it.
Senator Murray. OK.
Secretary LaHood. During our discussions we'd like to talk
about reform.
Senator Murray. OK. But one of my concerns--and you're
raising some interesting points about transportation and
supporting livable communities. It sounds good.
But those are major reforms to our transportation system
that you're asking us to define in a few short weeks of
Congress and pass by August to get the Highway Trust Fund
fixed. So I mean, do you think Congress can enact major reforms
in the 5 weeks we have before the end?
Secretary LaHood. From the day that the President was sworn
in on January 20 through February 14 the Congress passed a $780
billion Economic Recovery Plan. The answer is that we can have
discussions. Whether we can get to the point where we can
include these as a part of our fix for the Highway Trust Fund,
we'll have to see.
Senator Murray. But here's----
Secretary LaHood. Madam Chair, let's throw it out there and
see if we can have a discussion. That's all.
Senator Murray. Yes. I think discussions about how we
reform our transportation system are important. But as a
realist I know that we've been sent a judicial nominee. We have
appropriations mark ups to get out. The President wants us to
do health care reform. And we basically have 5 weeks of
session.
So I'm very concerned that the Highway Trust Fund being put
into the mix of some major policy discussions won't see the
light of day. And what we'll end up with is our States who are
waiting for this money will get caught in that. And that's what
I'm asking you to understand.
Secretary LaHood. Our No. 1 priority is to fix the Highway
Trust Fund, to pay for it, to find the money. Along the way
here if we can have discussions about these other things, I
think we should.
Senator Murray. Conversations are great. Passing
legislation is hard. I just want to make sure we're all
committed to getting the Highway Trust Fund fixed by August.
Secretary LaHood. You have my commitment to do that.
Senator Murray. OK. Thank you. I appreciate it.
And the conversation is important. But I am concerned about
some of the lack of details from your announcement. You're
offering a general framework for us. But we can't wait very
long for a proposal.
So can you explain to me how we would fix the Highway Trust
Fund? Whether the fix would be paid for and how we'd pay for
it? Is that part?
Secretary LaHood. The fix will be paid for and our staff is
working with OMB to----
Senator Murray. Can you tell us when we'll see a proposal?
Secretary LaHood. Very soon.
Senator Murray. OK, because obviously recess is fast upon
us. So I'm very concerned about that. So as soon as we----
Secretary LaHood. I take your point.
AVIATION SAFETY
Senator Murray. OK, very good. Let me ask you about the
Colgan air crash.
The Department has taken a number of actions to improve
aviation safety. And I know you've pulled together some
meetings with representatives to talk about safety
improvements. I know we've been promised that we're going to
see some drafting on new rules on flight time, pilot flight
time, that are based on scientific research. And the Department
is talking about relying on voluntary actions from the
airlines.
Do you think that voluntary actions will get us to where we
need to be?
Secretary LaHood. Well, let me first say that we have
probably the most qualified FAA Administrator in the country.
Randy Babbitt is superb, experienced, a 25 year pilot,
commercial pilot, businessman and former President of the
Airline Pilots Union. Nobody knows these issues better than the
FAA Administrator.
The meeting that we held at the FAA a few days ago had an
overflow crowd. We had people that wanted to come and we just
didn't have room.
These folks came up with very, very good suggestions. Randy
made it very clear and I made it very clear to them that we
want to work with the airlines. We want to work with the pilots
unions. We want to work with everybody.
We're not going to sit around on our hands and wait for
something to happen. If things don't happen quickly we're going
to take action either by suggesting legislation to Congress or
by rule making.
Senator Murray. OK.
Secretary LaHood. We're not going to wait until January
until the NTSB makes its report. We're going to give them a
little time here to think about some of the things that were
suggested and recommended. I guarantee it.
We're going to take action. Safety is our No. 1 priority in
all of our modes.
MEXICAN TRUCKS
Senator Murray. OK, very good. And just real quickly in my
last few seconds, Mexican trucks?
We have been working on this subcommittee long and hard on
this. Senator Bond mentioned it in his opening remarks. The
punitive tariffs are impacting everybody right now.
Can you give me a quick update on where the
administration's progress is on developing a plan?
Secretary LaHood. We are making the final tweaks to the
proposal. It involves a lot of different agencies. It involves
agriculture, transportation, the State Department. There are a
lot of players here.
We're putting the final tweaks on it and we hope to begin
to meet with you folks and your staff to explain what we've
tried to do collectively to address the issues that many
Senators expressed to us about their concerns about safety and
the Mexican truck program.
Senator Murray. OK. Well we hope to be able to mark up our
bill fairly soon after the July recess. So hopefully we can get
it before then so we can get this resolved. Thank you.
Senator Bond.
Senator Bond. Thank you, Madam Chair and Mr. Secretary. I
second the questions that the chair asked. And I won't go into
them here. But you and I have had a discussion about the
funding.
On Mexican trucks I would point out that this subcommittee
has in the past put all kinds of safety requirements and safety
standards and guidelines and inspections on the Mexican trucks.
From what we have understood they have met every single one of
those tests. And now it would seem to me that the negotiations
would have to be with our partner to the South on what we can
do since we have violated the terms of agreement of NAFTA.
And it's wonderful that all the agencies are talking to
each other. But the problem is we have to resolve the dispute
with Mexico. Is that--is the Government of Mexico involved in
the discussions?
Secretary LaHood. I met with 28 Members of Congress to try
and discern what it takes to get Senators and House Members to
the notion that we can develop a very safe program. I heard
lots of good suggestions and recommendations and lots of ways
to measure safety.
We've included those in our proposal and very soon you'll
be seeing that. Frankly, we have not shared that with the
Mexican Government.
It's an internal document based on conversations and
recommendations that we got from Members of Congress who
frankly didn't like the program, but we have not shared it with
the Mexican Government if that's what you're asking me.
HIGHWAY TRUST FUND
Senator Bond. Well we have for 3 years put mores to every
good idea that we've got and we put on it. And to my knowledge
they've done enough. Some--if people don't like the program
they're going to have to explain it to the 25,000 American
workers who are going to lose their jobs.
But moving onto the Highway Trust Fund, if there's a fix
are you--do you agree with the current Highway Transit split,
80/20? And I would ask you, the budget has assumed a $36
billion general fund appropriation for highways. Are those
funds going to be used for title 23 eligible activities only
like the trust fund dollars?
Secretary LaHood. The fix is going to be for highways and
transit. Is that what you're asking?
Senator Bond. Yes. I mean is there a separate--are you
going to keep the same splits?
Secretary LaHood. Yes, sir.
Senator Bond. Or are you going to have different funds?
Secretary LaHood. No, we're going to fix both and the
formulas. We're not going to change those.
Senator Bond. ARRA provides 10 percent for operating
assistance on transit. Is it going to be the policy of the
administration to support operating assistance in the future?
Secretary LaHood. The supplemental bill that is pending now
in the Senate includes a provision that allows for 10 percent
to be used for operating. If you all pass that and the
President signs it, it will be the law.
Senator Bond. Going forward are you recommending because if
you start--if we start subsidizing operating assistance we're
going to have to have a whole lot larger budget allocation than
we have. That's the thing I'm worried about.
Secretary LaHood. We're going to follow the law. In the
supplemental there's a provision that allows for money to be
used for operating.
When I've testified before Congress before I've said I'm
open minded about this. It makes no sense to send money out to
these transit districts to buy buses if there's nobody there to
drive them or there's nobody there to operate the transit
district.
The House has spoken on this, eventually I think you all
will and if the President signs it, it will be the law. We'll
follow the law.
HIGH SPEED RAIL
Senator Bond. Well, I have some other questions about the
burdens. For example, on the high speed rail strategy the--we
need some guidance on there. Without some guidance from the
Department I'm concerned we could end up in an unfortunate
situation where States in each rail corridor go down their own
way creating operating inefficiencies, greater operating and
maintenance costs.
And are there steps you can then take to assure that there
is a process for developing common specifications. For example,
for rail locomotives latest technology and what can the
Department do in the short term to encourage American companies
to invest in locomotive manufacturing and renew a domestic
manufacturing capability?
Secretary LaHood. We put guidance out yesterday for all
those that have high speed rail interest. We think it's very
good guidance. We think it really gives people an opportunity
to see what we're looking for.
We have set a deadline for September to receive
applications. We'll review those and then we'll determine how
the money is going to be spent.
This money is going to be spent correctly. And according to
the guidance that we have given to people. We developed the
guidance after traveling around the country and holding, I
think, 11 or 12 regional meetings and inviting all the high
speed rail enthusiasts to come to Washington and meet with the
Vice President and myself.
We've had lots of meetings on this. We think we're headed
in the right direction. But I want to assure you that the $8
billion will be spent correctly to really jump start our
opportunities to have high speed rail.
AIR TRAFFIC CONTROLLERS
Senator Bond. We want to make sure that there's guidance
there to assure that it's spent wisely.
Mr. Secretary, I know the top priority is to settle the
dispute between the air traffic controllers and the FAA. I'm
concerned about what the dollar cost of it because there's
nothing in the budget for it. And I just got some figures that
of the 74 of the top 100 controllers earn more than the Vice
President of the United States and the Speaker of the House.
Now maybe they're worth more than that. But of the top
1,000 contributors, 300-411 earn more than $198,000 which is
more than a Cabinet Secretary, you make, Majority and Minority
Leaders of Congress. And I just wonder if you're going to be
able to meet the needs if those salaries continue to go up.
Secretary LaHood. Well just by way of background for the
subcommittee, we have engaged Jane Garvey to lead the
negotiations. Two mediators have been hired.
They've closed out many issues and they're very close on
several others. The final issues will be salaries and vacation
and those kinds of things.
We're working with Jane and her team on what it's going to
cost to really get into an agreement with the controllers.
We're closer than we've ever been and this process has worked
very well.
Senator Bond. Thank you, Mr. Secretary. I thank the chair.
If you'll excuse me I have some votes to go take in another
committee.
Senator Murray. Alright, Senator Collins. Thank you very
much, Senator Bond.
Senator Collins. Thank you, Madam Chair. Mr. Secretary, I
want to associate myself with the question that Senator Murray
brought up about the safety of regional carriers. In my State
even the largest airports in Bangor and Portland are primarily
served by regional commuter airlines.
In fact, in Bangor, almost 80 percent of the passengers are
being carried on commuter airlines. Even in Portland our
largest airport, it's more than 71 percent. Do you anticipate
the administration presenting a plan to ensure the safety of
commuter airlines?
Secretary LaHood. Yes and very soon. Again, after our
meeting Randy Babbitt will be traveling around the country and
visiting with people who could not come to Washington. He's
going to do that very quickly.
I had a conference call for over an hour with the family
members of those that perished in the flight in Buffalo. They
offered me some very good suggestions and recommendations. When
Randy gets back from this little regional tour that he's going
to be on and after we assess whether the airlines and the
pilots are going to be able to comply with some of the things
that were recommended, we will have a good report with good
recommendations about whether we think there should be
legislation or rule making or if some of these things are going
to be done voluntarily.
We have to assure the flying public that when they get on a
commuter airline, it's safe and that the pilots that are flying
them are well trained and well rested. That's--it's the bottom
line. We're committed to doing that.
TRUCK WEIGHTS
Senator Collins. Great. Thank you. I appreciate that
commitment.
I mentioned in my opening statement that the biggest
transportation issue in the State of Maine has to do with truck
weights. And I want to give you a little more background on
that issue. Right now trucks weighing up to 100,000 pounds are
permitted on the interstate highways in New Hampshire,
Massachusetts, and New York as well the Canadian provinces of
Quebec and New Brunswick.
But when they are traveling through Maine they're only
allowed on Interstate 95 from the New Hampshire border until
they get to Augusta, Maine. Interstate 95 continues another 200
miles in Maine up into Aroostook County to Houlton. The result
is that the heaviest trucks are forced to leave the Interstate
and travel through small villages, through downtown Bangor.
In the last couple of years there have been two fatalities
in Bangor involving heavy trucks that have been trying to
navigate through busy downtowns or on rural roads and
neighborhoods. This just doesn't make sense. The State police
have implored us to fight for an increase in the weight limit
because they believe that it will reduce the number of
accidents.
The State legislature has passed a resolution with the
support of the Governor and the entire delegation urging
Congress to address this issue. This is bicameral, bipartisan.
Everyone is for it.
And unfortunately we've had a great deal of difficulty in
trying to correct this disparity. As you can imagine this is
also a big economic issue. There's more wear and tear on
secondary roads in our State because of the heavy trucks.
It's a commerce issue when trucks traveling from Canada
down through Maine have to carry lower loads. It's an energy
issue as well because we're putting more trucks on the road. I
realize that this requires a legislative fix, but I would ask
today that the Department work with Maine officials on both
sides of the aisle, State and Federal, to help us develop a
plan to remedy what is a serious safety and commerce issue. So
I'm asking you today if you will help us address this important
issue.
Secretary LaHood. I certainly will and we're looking at
this in the Department. When I was in New Hampshire and Vermont
recently to announce some road projects with Senator Sanders in
Vermont and Senator Shaheen in New Hampshire, people raised
this issue with me and both the Senators also raised it with
me.
I know it's a very, very critical issue and we will work
with the Congress on the way forward to try and find the right
fix for it.
Senator Collins. Thank you very much, Mr. Secretary. Thank
you.
Senator Murray. Thank you very much. Senator Specter.
MAGLEV
Senator Specter. Thank you, Madam Chairwoman. Mr.
Secretary, thank you for taking on this important, tough job.
Thank you for your trips to Pennsylvania, including Cumberland
County last week.
There is considerable public interest, as you know, on
using the Stimulus funding and getting into action. And that
issue becomes more sharply focused as you see the public
opinion polls expressing concerns about the deficit and the
national debt. And I think the public concerns would be allayed
to some extent, although it's a mounting problem from what I
sense in my State and nationally be allayed to some extent if
the funds were allocated and people could see some results from
them.
Let me thank you for your prompt action in releasing the
$950,000 from the Federal Highway Administration to the Federal
Railway Administration. That is very, very helpful on the
MAGLEV. Pursuing MAGLEV there has been appropriations of $45
million for the eastern part of the State which could be
awarded to MAGLEV.
That appropriation was made sometime last spring, the
spring of 2008. And there has been concern about matching funds
from Pennsylvania on the 20 percent. But I would ask you to
take a look at that to see if some of it could be advanced to
the extent we can get those matching funds.
Because I think Governor Rendell would be anxious to move
ahead. And the work on the robotic arms to construct it could
begin. So if you would take a look at that.
Secretary LaHood. Yes, sir.
Senator Specter. I would appreciate it.
Secretary LaHood. I'll do it.
Senator Specter. There's a different MAGLEV low speed from
the University of California which is south of Pittsburgh. And
there is $1.5 billion in the stimulus package which could be
allocated. And that project is looking for $200 million to move
ahead.
And that would come in the category. And I know how much
you have on your plate and how many items you have. But if that
money could be forthcoming, people could see where it is going.
The trip you made to Cumberland County was very helpful
because they see a bridge being constructed. Secretary
Napolitano was at the Philadelphia airport on baggage handling
for explosives. They can see $26 million. So there again, it
would be very, very helpful.
One of the key rail projects in Pennsylvania is Schuylkill
Valley Metro which would run from center city Philadelphia to
Reading and would take an enormous amount of pressure off the
Schuylkill expressway. And that's a virtual parking lot. And we
have scaled that back from some $2 billion using existing lines
to a much, much lesser figure. But it's still a problem of
getting it lined up with a local match.
There is $24 million which would lapse on September 30. And
I would ask you to take a personal look at that, not to
reprogram it because that program is alive. It's been a long
time in coming.
But some think it would be enormously important. And even
when we're trying to take people off the highways and OPEC oil
and pollution and all the rest of it because that I'm
determined to see that happen and so is Senator Casey and so is
the Pennsylvania delegation.
Secretary LaHood. I'll look into it and get back to you.
[The information follows:]
DOT is waiting for the fiscal year 2011 appropriations bill
to determine the status of the funds earmarked for the
Schuylkill Valley project.
HIGH SPEED RAIL
Senator Specter. OK. I'd appreciate that. There's another
rail line, Scranton to Hoboken, which would enable some
tentative plans for a Wall Street West to be constructed in
Northeastern Pennsylvania to take the pressure off of Wall
Street into Manhattan. And the concerns which have been
expressed in having all of those very important records and
matters in one concentrated spot in light of what happened to
the Trade Center.
I'm not looking to make any predictions or say anything
which would cause something to happen. But it's a target area.
And there is now a 30 day public comment period on the
environmental review.
And when that finishes it would be very helpful if there
was a response from the Department of Transportation on the
next step moving forward. I've given you quite a laundry list
here, Mr. Secretary. But you've got some of the really critical
projects as they affect transit.
Let me ask you--give you a chance to respond a little bit
as to what you see with the $8 billion on high speed rail. That
is an item which would be very beneficial on the Philadelphia
to Pittsburgh run.
Where do you see the allocation of funds coming on that?
Secretary LaHood. We put the guidance out yesterday and
it's up on our Web site so everybody can see it. We know that
all the real enthusiasts have already read it. Some are putting
together their applications right now for funding.
I believe that by September we will receive applications.
Some will come from a State, and some will come from regions,
multistate regions. I know that Governor Rendell is very
interested in this program. He's attended every meeting that
we've ever had on high speed rail whether it's here in
Washington or in Pennsylvania.
I think he and his team will be very aggressive in putting
together a proposal that will comply with the guidance that we
put out yesterday. This idea that $8 billion may not be enough
I think is nonsense. It's 8 billion times more than we've ever
had at the Department.
It also is the first time in the history of the country
that anyone has paid attention to high speed rail to this
extent. I guarantee you this when President Eisenhower signed
the interstate highway bill all the lines weren't on the map
and all the money was not in the bank.
We're starting and this is a very good start. With your
help over the next 5 years and with another $5 billion, we're
going to help people in America realize their dreams. We will
also answer the question for people who travel abroad to Spain,
Europe or Asia and come back having ridden on 250 mile an hour
train. Why don't we have it in America? Because it's never been
a priority.
It's a priority for the President. It's a priority for the
Congress who put $8 billion in the bill and we're going to make
it happen.
Senator Specter. Good. Senator Kerry and I had put in the
bill some time ago for $15 billion. And there's a lot of
interest in the Congress. And we will back you up.
My final comment is another thank you on my list here. We
got $8.5 million for a transit station for Southeastern
Pennsylvania Transit Authority in Croydon, Pennsylvania. And we
had a ground breaking on that facility.
And that again was very helpful because it shows the people
that the monies allocated to the stimulus package are being
spent for a useful purpose. And the more of that the better to
give some public confidence when they're looking at a deficit
or looking at a debt that there's a real purpose behind it. And
they're getting something for their money, so again, my thanks
on that item.
Secretary LaHood. Thank you, sir.
Senator Murray. Thank you very much, Senator Specter.
Senator Specter. Thank you.
ERAM PROGRAM
Senator Murray. Mr. Secretary, I wanted to ask you about
the ERAM program. It's an essential part of FAA's air traffic
control system. It's the program that replaces outdated
software that is used to manage our air traffic at high
altitudes.
And until recently that program has been operated on budget
and ahead of schedule. But this year the aggress for that
schedule that the FAA set for the program slipped a bit. Now
the FAA is saying this program is still going really well. And
it can be used to control traffic this year.
But I want you to know I hear a very different story from
the air traffic controllers who are in those facilities and
testing that software. They tell me that ERAM is not
operational and the schedule is unrealistic. Can you explain to
me the different levels? Are you hearing that from air traffic
controllers?
Secretary LaHood. Every time that I travel around the
country I do visit air traffic control towers. I get an earful
from the folks that work there. I've not heard about this.
Randy Babbitt's No. 1 priority is safety and that's the
reason we had the safety summit. Prior to the Buffalo crash we
would always say our No. 1 priority is NextGen, getting these
TRACONs to a level where we have very capable people working as
controllers in these TRACONs. We want to give them the best
equipment possible.
I will look into that issue. As I said I've been all over
the country and I've not heard about it.
I'll start asking the question when I go visit.
Senator Murray. OK. I'd appreciate that. And if we could
follow up with you on that----
Secretary LaHood. Right.
Senator Murray. With some of the concerns we're hearing.
Secretary LaHood. Sure.
ADSB TECHNOLOGY
Senator Murray. That'd be great.
The FAA has also been highlighting ADSB as a centerpiece of
its modernization efforts. That's the program that will allow
the agency to replace its radars with the satellite based
technology. Now the FAA has mandated that the airlines equip
their airplanes with ADSB technology by 2020.
I don't believe that mandate will be a success unless the
airlines themselves see the benefit of investing in ADSB. And
that means the FAA has to be able to change its regular
operations to make use of that technology. Can you talk to me a
little bit about what the Department is doing to make the case
for equipping planes with the ADSB?
Secretary LaHood. I've personally had discussions with the
airline industry and I know that, again, this is a priority for
Randy. He understands this probably as well as anybody because
of his pilot experience.
We've had some discussions with our friends at the White
House about this in terms of what it's going to cost to
implement a program like this. We realize that it's a very
costly program.
I just read recently where United just ordered a whole
bunch of airplanes from Boeing. They're going to obviously be
equipped with the kind of equipment that is going to be
necessary to connect with what we're going to be putting in as
our new NextGen equipment. We're going to work with the
airlines on this.
They want us to be helpful because this is a very costly
thing for them and they're not exactly making a lot of money
right now, as you know.
Senator Murray. Right. It's a very tough time.
Secretary LaHood. Right.
LIVABLE COMMUNITIES INITIATIVE
Senator Murray. OK. I wanted to ask you, separate from the
Highway Trust Fund that we talked about earlier. I want to ask
about the Livable Communities Initiative.
And I really do want to acknowledge your work in reaching
out to Secretary Donovan from HUD and Administrator Jackson
from EPA. I know that earlier this week all three of you
unveiled a set of six principles for the administration's
livability initiative. And as part of that you said that it
needs to be easier for local and regional governments to
coordinate housing and transportation planning.
The authorizing committees I know are working on drafting
bills for the next surface transportation authorization. If we
want this new legislation to be informed by the Livability
Initiative we've got to move very fast beyond the general
principles and see some of the specific changes. And I wanted
to ask you when you thought we could hear from you about some
of the barriers in Federal law to integrated housing and
transportation planning.
Secretary LaHood. I think very soon. Our staffs have been
meeting and I think we're putting together proposals right now.
Within the next 30 days or so we can have what we're really
putting on paper in terms of our opportunities to work with HUD
and to work with EPA and to figure out what barriers exist and
what changes need to be made in any kind of legislation.
Senator Murray. OK. I'm very much looking forward to seeing
what you have----
Secretary LaHood. Great.
Senator Murray. In terms of specific proposals on that.
Secretary LaHood. I appreciate your support on this too.
WATER TRANSPORTATION
Senator Murray. OK. And I want to ask you about water
transportation. Our ports and waterways provide a great
opportunity for both freight and passengers to get traffic off
our roads. This is something we know well out in the Pacific
Northwest with the Columbia River System and Puget Sound.
So I'm really pleased that the administration is showing an
increased interest in the maritime sector. One indication of
this is the President's proposal for a new joint initiative
with the Department of Homeland Security to increase security
capacity and efficiency of our Nation's ports. It's a proposal
that will develop the Nation's inner mode of freight
infrastructure by linking our coastal and inland ports to
highways and rail networks.
Can you talk to me a little bit about that this morning?
And tell me what you see and envision?
Secretary LaHood. We need to make sure that the ports are
secure. Congress has given us some directives on this.
In order to comply with what we believe are opportunities
to secure ports and to make sure that things that move in and
out of ports are what they should be and that they don't cause
a threat to people that live in those areas, we are combining
our efforts with Homeland Security. We've put money in the
President's proposed budget to deal with that.
This administration and the Department are taking a great
deal of interest in ports. The $1.5 billion in discretionary
money, if you look at the guidance that we put out, will create
some opportunities to enhance ports around the country to do
exactly what you were saying initially in your statement here.
We also are going to highlight the idea of the Marine Highway
which can relieve congestion certainly all along the area where
you live and the State you represent, all along that coastline
where there are ports all along there.
It's not only making sure that they're secure, that they're
safe, that what comes in and out of there is checked properly,
but also to highlight the importance of their expansion and
using the Marine Highway as another alternative to relieve
congestion on land.
Senator Murray. Well as part of that we're very acutely
aware in my State and several other States about the ability of
our ferry system to get people off of roads. And I wanted to
know if you thought that the next authorization, if you'll
support me in helping make our ferry system better supported
within the authorization.
Secretary LaHood. Absolutely. The money that was in the
economic recovery for that program is well over subscribed.
There's a lot of interest in this. There's no question about
it.
Senator Murray. That is not surprising to me. And I think
that helps make our case.
Secretary LaHood. Right.
Senator Murray. That there's a capacity out there that if
we invest----
Secretary LaHood. Exactly.
Senator Murray [continuing]. That will really help us out.
Mr. Secretary, you've been very kind to answer a number of
questions this morning. We have a number of other Senators who
were not able to be here today who want to submit questions to
you including Senator Byrd who is unable to be here. But he
asked that we submit questions on his behalf.
Secretary LaHood. Certainly.
Senator Murray. So I will do that for you.
ADDITIONAL COMMITTEE QUESTIONS
And the record for this hearing will be open for another
week so that Senators can submit questions for the record. And
again, Mr. Secretary, thank you so much for being here today.
Secretary LaHood. Thank you. Thanks for all your support
for all of our issues too. We really appreciate it.
Senator Murray. And we're looking forward to seeing you out
in my State to see some of this on the ground or water.
Secretary LaHood. Yes. We'll be there. Thanks for your
leadership.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Robert C. Byrd
Question. Mr. Secretary, on February 26, 2009, you and I met in my
office to establish what I had hoped to be a positive working
relationship. During our meeting, I strongly emphasized the importance
of providing funding to complete the Appalachian Development Highway
System (ADHS), noting that finishing Corridor H was of great interest
to me and my constituents. You indicated enthusiastically that you
would work with me and West Virginia transportation officials in this
regard.
Knowing full well that West Virginia Governor Joe Manchin also
recognizes the importance of completing Corridor H, I was not surprised
when he advised you in a March 2, 2009 letter of his intentions to make
$21 million available from the American Recovery and Reinvestment Act
(ARRA) for several Corridor H contracts. Soon after his letter was sent
to you, two news stations aired one-sided stories about Corridor H,
ridiculing the State's efforts to complete this project. Much to my
dismay, and that of the thousands of West Virginians who have been
patiently waiting for the promise of this highway for nearly half a
century, State officials suddenly, and with little explanation,
redirected the $21 million toward other projects, letting an
opportunity to make significant strides on this project go by the way
side.
Mr. Secretary, I have a copy of the March 18, 2009 letter that
State officials sent to your office indicating that the State made a
decision to divert funds from Corridor H on its own accord. However,
rumors abound in my State that someone from the administration
contacted WVDOT officials to strongly recommend that stimulus funds for
Corridor H be directed elsewhere in light of the recent news stories.
Mr. Secretary, I would like to know, for the record, did you, a
member of your staff, or any other official of this administration
contact officials of the West Virginia Department of Transportation to
suggest that the $21 million in ARRA funds originally intended by the
State for Corridor H be redirected toward other projects as a means to
downplay the impact of the recent news stories about Corridor H?
Answer. The West Virginia Division of the Federal Highway
Administration (FHWA) has worked very closely with the West Virginia
Department of Transportation (WVDOT) during the planning, programming,
design and construction of projects funded by the American Recovery and
Reinvestment Act (ARRA). Initially, the WVDOT included the subject $21
million Corridor H project as a candidate for ARRA funding. During the
programming and evaluation of candidate projects, it became clear to
WVDOT that other ``shovel ready'' projects were better candidates for
ARRA funding. The specific issue of concern was that the contract,
which involved the construction of two bridges on new location, would
not immediately provide transportation benefits since subsequent
construction providing highway linkage to the bridges had not been
funded at that time. The delivery of immediate transportation benefits
was an important criterion that WVDOT applied in its selection of ARRA
projects. All other large corridor expansion projects receiving ARRA
funds in West Virginia met the goal of providing ``usable highway
sections'' immediately upon their completion.
This decision in no way reflected a shortcoming on the part of the
project; rather, it reflects the challenges of constructing major
facilities such as Corridor H in West Virginia's difficult topography.
It is not uncommon for a phase of a complex project to be available to
the traveling public only after subsequent funding allows for the
completion of a ``useable section'' of roadway. In this case, the WVDOT
identified alternative funding that could easily be used to ensure that
the project was constructed within almost the same timeframe.
Question. Mr. Secretary, I am also concerned that the
administration, in its fiscal year 2010 budget request, offered up for
cost-saving purposes the $9.5 million I added to the fiscal year 2009
Omnibus Appropriations bill to advance construction of Corridor H. This
action has sparked widespread panic throughout West Virginia, with
newspapers reporting that the administration has cancelled the project
outright. I will quote from the most recent editorial from the
Charleston Gazette, ``Now the Obama administration wants to cancel the
rest of Corridor H. The White House's 2010 budget supplement marked it
for elimination even though President Obama otherwise champions
stimulus spending for construction jobs to help overcome the recession.
Why does the White House want to erase these jobs and deny West
Virginians better transportation?''
Frankly, Mr. Secretary, I ask myself the same question. Corridor H
has been designated as a nationally significant highway, is clearly
authorized, construction is progressing based on available funds, and
is poised to serve as national security evacuation route in the event
of a catastrophic event in the Washington, DC region. The mountains of
West Virginia, while beautiful and majestic, make it extremely costly
and difficult to build modern highways in the State. Formula monies
just don't get it done when it comes to people's safety and livelihood.
I make no apologies in my efforts to advance a project that was
promised over 40 years ago and that will result in improved freight
flow for this region of the country, and improved safety and enhanced
economic development opportunities in West Virginia.
Mr. Secretary, this country made a promise to the people of
Appalachia in 1965 to open up regions of isolation with a modern
highway system. The recent actions of this administration are clearly
contrary to that commitment. What may I tell my constituents is the
official position of this administration with regard to completing
Corridor H?
Answer. I can assure you that this administration is fully
committed to completing Corridor H and to fulfilling the promise made
to the citizens of Appalachia back in 1965.
As evidence of that commitment, I would like to report on the
efforts of our Division Office in West Virginia that works locally with
the WVDOT to advance the construction of the Appalachian Development
Highway System (ADHS).
The Division has worked diligently with the WVDOT to ensure that
ADHS dollars are programmed and obligated promptly as they become
available.
The Division was directly and intimately involved in the
negotiation of the settlement agreement executed in 2000 that allowed
construction work to resume on Corridor H after all work was halted by
the lawsuit filed by Corridor H Alternatives. Our Division Office has
and will continue to diligently monitor, manage, and implement the
ongoing requirements of this agreement, which serves to help safeguard
the continued progress of the project from additional legal challenges.
When Governor Joe Manchin III began his term, he promised to focus
the efforts of the WVDOT on a limited number of major corridors,
including Corridor H, Corridor D, the Mon-Fayette Expressway, WV Route
9 and U.S. 35. This focus by the WVDOT has, in turn, enabled our office
to also focus the efforts of FHWA staff in helping to complete these
corridors. The Division created a new position dedicated exclusively to
the completion of these major corridors.
The WV Division of FHWA along with the Appalachian Regional
Commission (ARC) and the WVDOT provided technical assistance and
support at the recent Corridor H Celebration Event in Moorefield on
September 17, 2009. This event served to update the public regarding
the progress and future plans for completing the Corridor.
Importantly, our WV Division has worked closely with WVDOT and the
ARC to identify potential innovative financing techniques that can
accelerate the delivery of remaining Corridor H construction. ``Advance
Construction'' authorizations are now used where appropriate to give
contracts a ``running start'' using State funds which are then
converted to Federal funds.
CONCLUSION OF HEARINGS
Senator Murray. Thank you. The subcommittee will stand in
recess, subject to the call of the Chair.
[Whereupon, at 10:43 a.m., Thursday, June 18, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
MATERIAL SUBMITTED SUBSEQUENT TO THE HEARINGS
[Clerk's Note.--The following testimonies were received by
the Subcommittee on Transportation and Housing and Ubran
Development, and Related Agencies for inclusion in the record.
The subcommittee requested that agencies and public
witnesses provide written testimony because, given the Senate
schedule and the number of subcommittee hearings with
Department witnesses, there was not enough time to schedule
separate hearings for these witnesses.]
Prepared Statement of the American Public Transportation Association
INTRODUCTION
Madame Chairman and members of the subcommittee, on behalf of the
American Public Transportation Association (APTA), we thank you for
this opportunity to submit written testimony on the fiscal year 2010
Transportation and Housing and Urban Development Appropriations bill as
it relates to Federal investment in public transportation and high-
speed and intercity passenger rail.
ABOUT APTA
APTA is a nonprofit international association of nearly 1,500
public and private member organizations, including transit systems and
high-speed, intercity and commuter rail operators; planning, design,
construction, and finance firms; product and service providers;
academic institutions; transit associations and State departments of
transportation. APTA members serve the public interest by providing
safe, efficient, and economical transit services and products. More
than 90 percent of the people using public transportation in the United
States and Canada are served by APTA member systems.
FISCAL YEAR 2010 FUNDING FOR PUBLIC TRANSPORTATION AND INTERCITY RAIL
PROGRAMS
I appreciate the opportunity to comment on fiscal year 2010 funding
for the Federal transit program and intercity and high-speed passenger
rail. As your subcommittee works to approve the fiscal year 2010
Transportation and Housing and Urban Development Appropriations bill,
we urge you to provide no less than $12.4 billion for Federal public
transportation programs. This level is consistent with APTA's
recommendations for fiscal year 2010 under the next surface
transportation authorization bill.
We also ask that you provide full funding for all rail programs
authorized under the Passenger Rail Investment and Improvement Act
(PRIIA) of 2008, including $300 million for Grants to States for
Intercity Rail, $300 million for the High Speed Rail Corridors program
and $50 million for Intercity Rail Congestion Grants. In addition, APTA
urges the subcommittee to fund the Rail Safety Technology Grants
program at a level significantly higher than the $50 million authorized
in PRIIA, to assist with the implementation of positive train control
systems. Finally, we encourage Congress to provide an additional $1
billion in fiscal year 2010 for high-speed rail, consistent with the
President's budget request.
We appreciate the support transit has received in Congress and
throughout the country in the past year. Investment in public
transportation and high-speed and intercity rail has been widely
regarded as an effective way to create jobs and spur economic growth.
Funds provided through the American Recovery and Reinvestment Act
(ARRA) of 2009 have already allowed public transportation systems and
equipment manufacturers to begin putting thousands of people to work
and to also begin to address the enormous backlog of capital investment
needed to maintain and expand transit systems nationwide. More
Americans are using public transportation and still more will use
public transportation if we continue to invest in maintaining,
improving and expanding existing systems. In 2008, Americans took 10.7
billion trips on public transportation--the highest level in 52 years--
despite falling fuel prices in the second half of the year and rising
unemployment, both of which generally result in ridership declines.
We have decidedly mixed reactions to the administration's budget
submission for fiscal year 2010. APTA was pleased the administration
recommended $1 billion for high-speed and intercity passenger rail, but
disappointed with the recommendations to provide only a small increase
for the Federal transit program and to reduce funding for transit
security. We understand the administration's proposal for transit
programs leaves room to increase transit funding under a multi-year
authorization bill, but we believe increased Federal investment in
public transportation is critical to continued growth of transit
ridership, therefore, we urge the subcommittee to increase the fiscal
year 2010 appropriation for the Federal transit program to $12.4
billion, as requested in our testimony. Finally, while we recognize
this subcommittee does not have jurisdiction over transit security
funding in the Department of Homeland Security program, we urge
Congress to reject the administration's proposal to fund the Rail and
Public Transportation Security Program at $250 million. This amount is
less than the fiscal year 2009 level of $400 million, and far less than
the $900 million authorized in fiscal year 2010 under the 911
Commission Recommendations Act.
FUNDING FOR FEDERAL TRANSIT ADMINISTRATION PROGRAMS
APTA urges Congress to provide $12.4 billion in fiscal year 2010 to
fund public transportation programs under the Federal Transit
Administration (FTA). As you know, the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)
expires at the end of the current fiscal year. For the next
authorization bill, APTA has developed a set of recommendations for
Congress that calls for a significant increase in Federal investment,
along with some modification of existing programs and the creation of
several new programs.
APTA's recommendations were developed over the course of more than
a year, and represent a consensus among large transit agencies, small
transit agencies and the public transportation business community. In
addition to seeking an increase in funds, we recommend several key
changes to the basic program structure. These changes will help
streamline the Federal transit program, reduce administrative burdens
on transit agencies and help speed project delivery. In addition,
program modifications reflect an agreed-upon equitable distribution of
funds within the transit program to communities across the country.
Specifically, APTA recommends the following program modifications:
--Bus and Bus Facilities Program.--APTA recommends modifying the
current program to create two separate categories of funding.
Fifty percent of funds should continue to be distributed as
discretionary grants, while the remaining 50 percent should be
distributed via a formula that is based on bus formula factors
under the urbanized and rural area formula programs. This will
allow all transit agencies to address their rolling stock
needs, while maintaining the ability to seek additional funds
through a discretionary grant program. Funds under the formula
or discretionary categories could be used for eligible
activities under current law.
--Fixed Guideway Modernization Program.--APTA proposes replacing the
current seven-tier program with a simplified two-tier program.
The first tier would be reserved for current recipients, using
formulas under the existing seven-tier program to create a base
amount. This formula would be used to distribute 50 percent of
the overall program growth each year. The second tier would
distribute the remaining 50 percent of annual program growth
among existing and new qualified recipients via a formula that
is based on the rail tier of the urbanized area formula
program. This modification would hold existing recipients
harmless, while allowing for the addition of new fixed guideway
systems into the program that meet the 7 year minimum age
requirement.
--New Starts and Small Starts Program.--APTA recommends a number of
changes to the New Starts and Small Starts program to
streamline the process and speed project delivery. These
include the creation of a streamlined rating system for all
Small Starts projects, re-establishment of an exempt category
of New Starts/Small starts projects that require small amounts
of funding, streamlining the review and approval process,
reinforcement of the full range of factors for consideration
for the New Starts rating process, and the re-establishment of
the Program of Interrelated Projects provision of Intermodal
Surface Transportation Efficiency Act (ISTEA).
--Workforce Development.--APTA recommends an increased focus on
workforce development to address significant needs to attract
and train the next generation workforce for public
transportation. This includes the expansion of on-going
programs, such as the Transportation Learning Center and the
National Training Institute, the creation of a network of
regional transit training centers, and the eligible use of
urban and rural area formula grants for training activities.
--Urbanized and Rural Area Formula Programs.--APTA urges the
continuation of the Large Urbanized Area, Small Urbanized Area,
and Rural Area formula programs in their current form,
including the continuation and expansion of the Small Transit
Intensive Cities program. In addition, APTA recommends that
public transportation systems in urbanized areas of more than
200,000 population which operate less than 100 buses in peak
operation should be eligible to use formula funds for operating
purposes. In addition, APTA recommends the elimination of the
High Density and Growing States formula, and distribution of
these funds under the existing urbanized area and rural area
formula programs.
In addition to these program modifications, APTA recommends
creating the following programs:
--Coordinated Mobility Initiative.--APTA recommends the creation of a
single program to replace the current Job Access and Reverse
Commute (JARC), New Freedom Initiatives (NFI), and Elderly and
Disabled Programs. This new program would combine funds
available for the three existing programs and distribute them
to States and urbanized areas via a formula, taking into
consideration all factors contained in the abovementioned
programs--population of elderly people, population of disabled
people, and Temporary Assistance for Needy Families (TANF)
eligible population. Requirements for the locally developed
coordinated human services transportation plan would be
maintained and designated recipients eligible under the
existing JARC, NFI and Elderly and Disabled Programs would
still have the ability to distribute funds to carry out
previously eligible projects. Current eligibilities and
requirements for the respective programs should be retained
under the combined program.
--Clean Fuels Aging Bus Replacement Program.--APTA recommends the
creation of a new program to provide funds to assist transit
systems with replacing aged rolling stock with new clean-fueled
vehicles. Funds would be distributed to designated recipients
via a formula based on the relative share of the total cost to
replace vehicles that exceed 125 percent of the FTA standard
for replacement.
To fund FTA programs, APTA urges no less than $123 billion provided
over a 6 year period, with the $12.4 billion for fiscal year 2010
representing the first year's installment of public transportation
investment. Ultimately, growing FTA programs to levels recommended by
APTA by fiscal year 2015 will help meet at least 50 percent of the
estimated $60 billion in current annual capital needs and support the
projected doubling of ridership over the next 20 years. To achieve
sufficient balances in the trust fund and to accommodate increased
investment, APTA recommends an increase in the motor fuels user tax to
at least a level that restores the purchasing power to 1993 levels (the
year of the last increase) and indexing the tax to future inflation.
Failure to invest in transit now will result in an inability for
transit systems to meet demand in the future.
In recent years, Congress has consistently increased investment in
public transportation. We urge you to not only continue this pattern,
but to increase Federal transit investment by 20 percent annually, in
order to create a more efficient and more effective public
transportation network. We believe that Congress must act to address
the capital investment needs of transit systems while also creating
jobs, reducing emissions, and improving the quality of life for all
Americans.
PASSENGER RAIL INVESTMENT AND IMPROVEMENT ACT OF 2008
We also urge Congress to fully fund intercity and high-speed
passenger rail programs authorized under the Passenger Rail Investment
and Improvement Act (PRIIA) for fiscal year 2010. This legislation,
combined with funds provided in the American Recovery and Reinvestment
Act (ARRA), provides a real opportunity to advance and improve
passenger rail service in the United States. Specifically, we urge the
subcommittee to provide the authorized amounts for the following
programs:
--$300 million for the State Capital Grant Program for Intercity
Passenger Rail (sec. 301) to provide grants to States to pay
for capital costs of equipment and facilities necessary to
provide new or improved passenger rail service;
--$300 million for grant to States or Amtrak for the High Speed Rail
Corridors Program (sec. 501) to finance the planning, design,
and construction of 11 high-speed rail corridors;
--$50 million for Congestion Grants (sec. 302) to invest in passenger
rail in highly congested areas;
--$2 million for the Operation Lifesaver Program (sec. 206) for
grants to carry out a public information campaign to promote
safety at rail-grade crossings;
--$3 million for Federal Grants to States for Highway-Rail Grade
Crossing Safety (sec. 207); and
--$5 million for Railroad Safety Infrastructure Improvement Grants
(sec. 418) for safety improvements to rail infrastructure and
the establishment of quiet zones.
Finally, APTA requests that your subcommittee fund the Railroad
Safety Technology Grants Program (sec. 105) at a level significantly
higher than the $50 million authorized amount. PRIIA requires commuter
rail operators implement positive train control (PTC) systems by
December 31, 2015. Our Nation's commuter rail systems are committed to
comply with this requirement and implement these critical safety
upgrades, however, the technology for efficient and interoperable PTC
systems is still under development, and the cost for implementing PTC
is substantial. Adequate funding will help ensure that these important
safety improvements are implemented within the required timeframe.
HIGH-SPEED RAIL INVESTMENT
We thank Congress for investing in high-speed rail development
under ARRA. The $8 billion appropriated is a great start and we urge
Congress to continue this effort by investing another $1 billion in
fiscal year 2010. In addition to the amounts authorized in ARRA and
PRIIA, the administration has proposed adding $5 billion over the next
5 years for a high-speed rail program. This increased investment is
critical to initiate a long-term Federal commitment to providing a
sustainable alternative to flying or driving. An effective high-speed
passenger rail service throughout our Nation would increase the overall
benefits of public transportation and its contribution to national
goals of reducing dependence on foreign oil and alleviating congested
roadways and airways.
CONCLUSION
I thank the subcommittee for allowing me to share APTA's views on
fiscal year 2010 public transportation and high-speed and intercity
rail appropriations issues. We look forward to working with the
subcommittee to make the necessary investments to grow the public
transportation program. We urge the subcommittee to invest in making
commuter, intercity and high-speed rail safer and more available by
fully appropriating the funds authorized in PRIIA. Finally, we support
the efforts of Congress thus far to invest in a sustainable high-speed
rail system and encourage your subcommittee to continue building upon
the foundation established in ARRA. It is an exciting time for public
transportation and a critical time for our Nation to continue to invest
in transit infrastructure that promotes economic growth, energy
independence, and a better way of life for all Americans.
______
Prepared Statement of the American Psychological Association
The American Psychological Association (APA), a scientific and
professional organization of more than 150,000 psychologists and
affiliates, is pleased to submit testimony for the record. Because our
behavioral scientists conduct research funded by, or that informs
programs at, the Department of Transportation (DOT) and the Department
of Housing and Urban Development (HUD), APA will address the proposed
fiscal year 2010 budgets for both of these agencies.
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
The Federal Aviation Administration (FAA) supports and applies
psychological research to the benefit of every sector of the National
Aviation System (NAS). Coordination of that research occurs through the
Air Traffic Organization's Planning Research and Development Office and
through the Associate Administrator for Aviation Safety. APA is writing
to request full support for FAA's research and development budget and
to highlight human factors research programs and issues that are
critical to on-going or planned enhancements to the NAS. Much of the
research is subsumed under the heading of Aerospace Human Factors and
is conducted at, or supported by, the Civil Aerospace Medical Institute
(CAMI) across seven broad categories: Advanced Air Traffic Control
Systems, which evaluates the effect of new technologies on air traffic
controller (ATC) performance and workload, as well as studying
communication between controllers and aircrews; Flight Crew Performance
Assessment, which evaluates the effect of advanced flight deck
technology on general aviation aircrew performance; Behavioral
Stressors, which examines environmental and individual stressors on
aircrew and ATC performance; Individual and Team Performance
Assessment, which examines the cognitive strategies and processes used
in skill acquisition for effective training programs; Organizational
Effectiveness, which evaluates the relationship between psychological
variables and the work environment, as well as the effect of
organizational innovations; Personnel Selection, which evaluates the
relationship between human abilities and job performance and develops
test instruments to optimize selection; and Simulation and Re-Creation,
which provides controlled environments to evaluate the performance of
aircrews and ATC personnel. APA fully supports the fiscal year 2010
budget request for Aerospace Human Factors.
In addition, a tremendous amount of human systems integration
research is needed for the safe and efficient implementation of the
Next Generation Air Transportation System (NextGen). APA fully supports
the observations, findings and recommendations of the Subcommittee on
Human Factors of the FAA's Research, Engineering and Development
Advisory Committee (REDAC) as outlined in REDAC's report to the FAA
Administrator on October 17, 2008. The subcommittee observed that while
human factors personnel have demonstrated high levels of collaboration
and cooperation across the Aviation Safety and Air Traffic
Organizations within FAA, continuing that level of cooperation will be
critical to successful NextGen implementation. The subcommittee
produced four findings and associated recommendations. First, recent
planning for NextGen has focused primarily on equipment acquisition,
insufficiently addresses human-related issues and requirements, and
needs to place greater emphasis on human systems integration. Second,
human factors resources (both personnel and funding) in the Aviation
Safety and Air Traffic Organizations are insufficient to carry out the
range of activities required to adequately support NextGen development
and implementation. Third, Post Implementation Review of new NextGen
technologies may reveal significant human factors findings, but without
a clear path to feed those findings forward to benefit other NextGen
programs. Fourth, the NextGen management structure should be revised to
ensure that cross-cutting human factors (system integration) issues are
recognized and addressed.
External auditors and end-users have also raised concern about the
need for added attention to human factors research within NextGen. In a
hearing on March 25, 2009 before the Senate Committee on Commerce,
Science and Transportation, Dr. Gerald Dillingham, representing the
Government Accountability Office, addressed ongoing research needs.
Among those scientific priorities for NextGen he highlighted the need
for human factors research and voiced concern about the diminished role
NASA was playing in that effort.
``Human factors research explores what is known about people and
their abilities, characteristics, and limitations in the design of the
equipment they use, the environments in which they function, and the
jobs they perform. Compared with the current ATC system, NextGen will
rely to a greater extent on automation, and the roles and
responsibilities of pilots and air traffic controllers will change. For
example, both pilots and controllers will depend more on automated
communications and less on voice communications. Such changes in roles
and responsibilities raise significant human factors issues for the
safety and efficiency of the national airspace system. Until fiscal
year 2005, NASA was a primary source of Federal aviation-related human
factors research, but NASA then began reducing its human factors
research staff, reassigning some staff to other programs and reducing
the contractor and academic technical support for human factors
research. According to NASA, human factors research continues to be a
critical component of its aeronautics research program, although its
work is now focused at the foundational (earlier-stage) level. FAA
plans to invest $180.4 million in human factors research from fiscal
year 2009 through fiscal year 2013. It remains to be seen whether or to
what extent FAA's research and development, which is typically more
applied than NASA's, will offset NASA's reductions in human factors.''
During a hearing held May 13, 2009 before the Senate Committee on
Commerce, Science and Transportation, Subcommittee on Aviation
Operations, Safety and Security, Patrick Forrey, President of the
National Air Traffic Controllers Association (NATCA), one of the
principle end-users of a modernized air transport system, likewise
highlighted human factors issues.
``Several of NextGen's proposals raise serious concerns regarding
human factors, including the increased complexity and safety risk
inherent in a best equipped, best-served policy. These issues must be
addressed during the development stages in order to avoid delays, cost
overruns, and safety failures.''
These concerns would appear to dovetail well with resource
allocations itemized in the FAA's fiscal year 2010 budget submission
which called for substantial increases in NextGen Human Factors
Research across two domains: Controller Efficiency and Air/Ground
Integration. APA fully supports the $11.7 million and $7.7 million
requested for these programs respectively, as described in the 2008
National Aviation Research Plan (NARP). However, APA is concerned that
these large increases not come at the expense of other critical human
factors programs, including Flightdeck/Maintenance/System Integration
Human Factors and Air Traffic Control/Technical Operations Human
Factors, which are both slated for only marginal increases as described
in the NARP.
Federal Motor Carrier Safety Administration
APA is concerned that the Federal Motor Carrier Safety
Administration (FMCSA) adopted an hours of operation rule for
commercial drivers in November 2008, 9 days after the last election
that essentially left unchanged the rule that had been adopted in 2004.
The 2004 rule was successfully challenged twice in Federal court on the
basis that FMCSA did not properly account for the health consequences
of permitting commercial drivers to drive 11 hours at a stretch rather
than the formerly allowed 10 hours of driving. While the American
Trucking Association supported the rule, many members of Congress,
unions and advocacy groups have called the extended hours dangerous.
While the Department may choose not to reopen a discussion of this
rule, APA urges the subcommittee to provide an increase of $2.5 million
for additional safety research, particularly to help develop model
health and wellness programs for commercial drivers, which have been
identified by the National Academy of Sciences as the most promising
way to assist in the reduction of commercial driver accidents and
fatalities.
National Highway Traffic Safety Administration
APA applauds the leadership of this subcommittee for requesting
that the National Highway Traffic Safety Administration (NHTSA) prepare
a report to consolidate current knowledge on driver distraction for use
by policy makers. The request was included in the reports that
accompanied the fiscal year 2006 Appropriations Act, Public Law 109-
115, and was meant to assist Federal, State and local governments in
the formulation of effective policies, regulations and laws. NHTSA
followed through, and the report, entitled ``Driver Distraction: A
Review of the Current State-of- Knowledge,'' was submitted to the
subcommittee in April 2008, and was made public at that time. APA
members reviewed the report and commended the Department for the
preparation of a very comprehensive and highly professional review of
the state of knowledge. This is an important baseline and helps policy
makers better understand the likely effectiveness of proposed
interventions. The report also helps identify gaps in current
knowledge. Following the release of the report, NTSHA began to develop
an Action Plan to identify the important next steps in both research
and public policy outreach to address the problems caused by distracted
drivers. We recommend that the subcommittee request a briefing from the
Department on the content of the status of this Action Plan and support
its implementation through the fiscal year 2010 budget.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Homelessness Prevention Fund
At a time of critical challenges in the U.S. economy, homelessness
is reaching epidemic proportions. Among the most impacted are families
with children, single adults, and youth who for various reasons no
longer have places to live. While homelessness has historically been
associated with long-standing poverty, increased layoffs, mortgage
foreclosures, evictions and the inability to obtain credit is resulting
in the loss of housing among working and middle class individuals, as
well as those living in poverty.
The stressful events leading to homelessness and the emotional
hardship that accompanies being displaced from homes, neighborhoods,
schools, and social supports has serious long-term mental health
implications for adults and children alike. While homelessness has been
associated with chronic and severe mental disorders, more commonly, a
convergence of risks, vulnerabilities and events results in people not
having the ability to afford or maintain housing. Many homeless adults
experience the long-lasting, deleterious psychological effects of
childhood trauma, physical and sexual abuse, and violence. Homeless
adults have difficulty gaining access to medical and psychological
treatment, and often use emergency centers at hospitals or temporary
shelters to meet their needs.
APA urges Congress to continue to support the Homelessness
Prevention Fund at the Department of Housing and Urban Development
which re-houses homeless persons and families who enter shelters, and
expands efforts to prevent homelessness among those facing a sudden
economic crisis.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Alexander, Senator Lamar, U.S. Senator From Tennessee, Statement
of............................................................. 52
American Psychological Association, Prepared Statement of the.... 76
American Public Transportation, Prepared Statement of the........ 73
Bond, Senator Christopher S., U.S. Senator From Missouri:
Opening Statements of........................................ 3, 47
Questions Submitted by....................................... 37
Byrd, Senator Robert C., U.S. Senator From West Virginia,
Questions Submitted by......................................... 69
Collins, Senator Susan, U.S. Senator From Maine:
Questions Submitted by....................................... 43
Statement of................................................. 51
Donovan, Hon. Shaun, Secretary, Department of Housing and Urban
Development.................................................... 1
Prepared Statement of........................................ 9
Statement of................................................. 7
Lahood, Hon. Ray, Secretary, Department of Transportation........ 45
Prepared Statement of........................................ 54
Statement of................................................. 52
Lautenberg, Senator Frank R., U.S. Senator From New Jersey,
Statement of................................................... 6
Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions
Submitted by................................................... 31
Mikulski, Senator Barbara A., U.S. Senator From Maryland,
Questions Submitted by......................................... 29
Murray, Senator Patty, U.S. Senator From Washington, Opening
Statements of.................................................. 1, 45
Specter, Senator Arlen, U.S. Senator From Pennsylvania, Questions
Submitted by................................................... 34
SUBJECT INDEX
----------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
Page
Additional Committee Questions................................... 29
American Recovery and Reinvestment Act........................... 35
Bond Issuance.................................................... 32
Buyers Tax Credit................................................ 22
Choice Neighborhoods............................................. 31
Choice Neighborhoods/Promise Neighborhoods....................... 30
Costs Related to Transformation Initiative....................... 24
Early Childhood Development...................................... 41
Eliminating and Consolidating Programs........................... 40
Energy Innovation Fund........................................... 35
FHA:
Concerns..................................................... 13
Solvency..................................................... 14
Fiscal Year 2010 Budget Request.................................. 34
Flexibility and Accountability................................... 25
Green Retrofit Program........................................... 32
GSEs............................................................. 39
HECM............................................................. 43
Helping Families Save Their Homes Act............................ 31
Home Price Stabilization......................................... 12
Homeless:
Children Housing Issues...................................... 28
Veterans' Needs.............................................. 23
Homelessness..................................................... 38
In Rural Regions............................................. 44
Homeowner Buyer Tax Credit....................................... 19
Homeownership Tax Credit......................................... 38
HOPE VI......................................................29, 36, 37
Housing Counseling............................................... 18
Mortgage:
Interest Rates............................................... 21
Lender Regulation............................................ 27
Services Issues.............................................. 32
Neighborhood Deterioration....................................... 17
Public Housing Capital Fund...................................... 35
Reorganizing..................................................... 39
Rural Innovation Fund............................................ 39
Section:
108.......................................................... 34
8 Funding.................................................... 19
Seller Spec Financing............................................ 16
Sustainable Communities.......................................... 42
Tenant-Based Section 8........................................... 43
Voucher Sustainability........................................... 20
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Additional Committee Questions................................... 69
ADSB Technology.................................................. 67
Air Traffic Controllers.......................................... 62
Aviation Safety.................................................. 59
ERAM Program..................................................... 66
Federal Aviation Programs........................................ 55
High Speed:
And Intercity Passenger Rail................................. 56
Rail.........................................................61, 65
Highway Trust Fund...............................................57, 60
Livable Communities Initiative................................... 67
MAGLEV........................................................... 64
Maritime Programs................................................ 56
Mexican Trucks................................................... 59
Surface Transportation Programs.................................. 54
Truck Weights.................................................... 63
Water Transportation............................................. 68
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