Box 5, Folder 5, Document 30

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Box 5, Folder 5, Document 30

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September 30, 1969




The Problem

The Neighborhood Development Program (NDP), which was
launched under the last Administration upon passage of the 1968
Housing Act, has generated a demand for funds which far exceeds
the money that can be made available for the program, =

Approximately 1,200 communities are presently participating
or have applications pending in the urban renewal program, of
which NDP is a part, About 300 cities have submitted, or are
on the verge of submitting, NDP applications, The estimated
requests for funds from these 300 cities for this year threaten,
and by 1971 would clearly exceed, the total amount of money
‘available for the entire program, even if no renewal activities
are funded in any of the other 900 non-NDP communities.

In part, the large demand for NDP stems from the fact
that when the program was launched and the cities were encouraged
to file applications, they were given no limitations, nor were
they given reason to think their full funding expectations would
not be approved,

This Administration has thus been confronted with a
present and potential demand for NDP which has made it essential

to impose management controls on NDP funding.

The Administration's Position

The Administration firmly supports the NDP concept. The
program is a valuable and flexible tool to aid cities in
achieving their renewal objectives. The NDP is designed to
make it possible to take rapid action on urgent needs and to
take immediate advantage of available development opportunities
within the boundaries of one or more renewal project areas in
a given community.

The Department firmly believes that the management controls
imposed on NDP funding will preserve the NDP concept, fund as
many city programs as possible, and deal in-a responsible manner
with the funding crisis facing the program.
The imposition of controls at this time is necessary
because the Department has no right and no intention of
starting--as some have advocated--a larger program than can .
be funded, with a hope or wish that Congress will make the
kind of rapid and major change in renewal funding levels that
would be required.

Moreover, the Administration has _a deep sense of responsibility
to the residents of program:areas to avoid any further perpetuation
of false expectations and promises which, based on the facts
known today, have little or no hope of fulfillment. This is a
practice which has understandably embittered many neighborhood
residents in the past. :

Availability of Funds

The problem begins with the basic fact that the total
amount of money that will be available for all renewal, including
NDP activities, is likely to range between $850 million and
$1 billion for FY 1970.

The last Administration requested $1 billion in the budget
it submitted in January 1969 for Title I urban renewal funding
in FY 1970. Shortly after coming into office, this Administration
submitted a request to Congress for the exact same amount.
The House-passed appropriations bill cut that figure to $850
million, and Secretary Romney has strongly appealed to the
Senate for a restoration of the full amount. Even if the Senate -
approves a higher figure, it will still be subject to adjust-
ment in conference with the Heuse, which will meet to resolve
differences between the Senate and House passed bills.

Out of whatever sum Congress appropriates, the Department
must give consideration to a wide range ‘of needs in addition to
NDP applications. The Department is faced with: regular urban
renewal project applications from both NDP and non-NDP communities;
requested increases for on-going renewal projects; and applications
for such related programs as code enforcement, demolition,
interim assistance in blighted areas, assistance to certified
areas, and community renewal programs. ,

At the present time, the pipeline of pending applications
for everything excluding NDP totals approximately $1.4 billion.

_ It should be noted that shortly after the NDP legislation
was enacted, the impending financial squeeze became apparent
to the Bureau of the Budget under the last Administration. As
. @ consequence it placed hard and fast limitations on the program
in December 1968, in order to avoid an escalation of hopes and
expectations that likely could not be funded. This resulted ©
in the funding of only 35 cities in FY 69.

Nature of the Competing Demand -

To help understand the problem facing the Department at \
the present time, it is necessary to look at how the Funds
available in 1969 were actually spent:

Needed increases for on-going renewal

projects that were started in prior

years, and have incurred increases in

land and development costs above the

original estimates: $409 million :

Approval of new projects in cities

which have previously participated

in the program as well as in communities

seeking assistance for the first time: $465 million

Approval of such related programs as

code enforcement, demolition, interim

assistance in blighted areas, certified

areas, and the Community Renewal Program: $105 million

Approval of lst year NDP action program
in 35 cities. (Represents the net amount
of funds from the FY 1969 appropriations.
- In addition, the lst year NDP action programs
for these cities utilized $210 million,
which the cities elected to transfer for
that purpose from funds already under
contract or reservation.) $100 million (net)

.The above breakdown indicates the nature and dimension of
the competing demand for the renewal dollar. While the
Department plans to introduce policies and practices that will
reduce the amount required for increases for on-going projects,
this will necessarily be a gradual process that will not
release significant sums of money for other purposes in the
immediate future. With respect to the other components in the
overall breakdown, the rates indicated above are likely to
remain approximately the same, so long as NDP remains an
optional rather than a mandatory approach for the cities.
Congress established NDP as an optional program, and this
Administration intends to preserve that free choice, without
pressuring or coercing any community into adopting one approach
over another.

The Demand for NDP Funds

In addition to the problem caused by all the competing
_demands for renewal funds, the NDP itself has unleashed a
rapidly escalating demand for funds, which this year threatens,
“and by 1971 would clearly consume all available funds, leaving
nothing for the 900 non-NDP communities.

The following table shows the projected demand for NDP
funds. It does not include any estimate of demand for any
communities beyond the 322 which have already submitted, or are
on the verge of submitting, NDP applications:

(Figures in millions)

‘Catepory _ 1970 1971
35 cities already approved $375 $3751
287 applications pending or 9

under active preparation $858 $892

$1,233 $1,267


1, Assumes no rate of increase over 1970 level of
requests, even though the 1970 request represents
_@ 22% increase over the $310 million gross level
undertaken in 1969,

2. Includes $317 million of net new funds from FY 1970

appropriations, and $541 million which the cities
propose to transfer to NDP use from funds already
under contract or reservation.

Prospects for Recapture of Funds

At the outset of NDP, it was hoped that significant sums
of money would be returned to the Department to permit funding
of other NDP applications, through the relinquishment by the
cities of funds already under contract or reservation which
were in excess of the amount needed to fund the community's
lst year NDP action program. This expectation proved illusory.

Of the first 35 cities approved-for NDP, only 11 released
more than they required just’ for their lst year NDP action
program. In fact, on balance, thé 35 cities required $100
million from FY 1969 appropriations, in addition to the $210
million they elected to transfer for NDP purposes from funds
already under contract or reservation.

Thus there is little reason to expect that the NDP's will
be a source for the recapture of funds in the future.

Basis for New NDP Controls

In an effort to preserve the NDP concept and its value as
a flexible tool, the Administration has rejected arbitrary
controls over the program, such as a $1 million ceiling or a
20-acre limitation on the size of any program. Guidelines
covering the management of NDP applications will be forthcoming.


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