DOCUMENT RESUME RC 008 881 - ERIC · DOCUMENT RESUME ED 115 425 RC 008 881 TITLE The Future of Smalltown and Rural America: The Impact. ... Cochran, Clay L., Executive Director, Rural

DOCUMENT RESUME

ED 115 425 RC 008 881

TITLE The Future of Smalltown and Rural America: The Impacton Small Business. Hearings before the Subcommitteeon Small Business Problems in Smaller Towns and UrbanAreas of the Select Committee on Small Business,House of Representatives, Ninety-Second Congress,Second Session Pursuant to H. Res. 5 and 19, May 2,3, and 4, 1972.

INSTITUTION Congress of the U.S., Washington,- .C. House SelectCommittee on Small Business.

PUB DATE May 72NOTE 208p.

EDRS PRICEDESCRIPTORS

MF-$0.76 HC-$10.78 Plus PostageArticulation (Program); Business; Community Planning;*Economic Development; *Futures (of Society);*Government Role; Housing; *Legislation; PolicyFormation; Population Trends; *Rural Areas; RuralUrban Differences; Tables (Data)

ABSTRACTPrinted for use by the Select Committee on Small

Business (House of Representatives), these hearings present thetestimony of 23 individuals on "The Future of Smalltown and Rural.America: The Impact-on Sme-11-Bus4messm-he-14--bef-ore the-Sutcomaltteeon Small Business Problems in Smaller Towns and Urban Areas (May 2-4,1972). These hearings present testimony by representatives of the:(1) Appalachian Regional Commission (Executive Director;Intergovernmental Programs; and Federal Cochairman) ; (2) RuralHousing Alliance (Director of Information; Assistant Dirztor; andExecutive Director); (3) Department of Commerce (General Counsel andAssistant Secretary for Economic Development) ; (4) NationalFederation of Independent Business (Legislative Director andCongressional Liaison); (5) Department of Housing and UrbanDevelopment (Director, Office of Planning and Management Grants;Assistant Secretary for Community Planning; Director, Division ofUrban Growth; and Director, Office of Environmental Standards); (6)Member of Congress (Arkansas and Kansas); (7) National Association ofHousing and Redevelopment Officials (Executive Director and 2representatives); (8) Coalition for Rural America (Executive VicePresident; Associate Director; and a Professor); (9) Tennessee ValleyAuthority (Chairman of the Board) . Supportive information is providedin the appendices via letters, tables, maps, etc. (JC)

***********************************************************************Documents acquired by ERIC include many informal unpuhlished

* materials not available from other sources. ERIC makes every effort *'* to obtain the best copy available. Nevertheless, items of marginal *

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* of the microfiche and hardcopy reproductions ERIC makes available* via the ERIC Document Reproduction Service (EDRS). EDRS is not* responsible for the quality of the original document. Reproductions ** supplied by EDRS are the best that can be made from the original.***********************************************************************

NtiTHE FUTURE OF SMALLTOWN AND RURAL AMERICA:

THE IMPACTALT

SMALL BUSINESS "'5`m73,

HEARINGS-BEFORE- THE

SUBCOMMITTEE ON SMALL BUSINESS PROBLEMSIN SMALLER TOWNS AND URBAN AREAS

OF THE

SELECT COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVESNINETY-SECOND CONGRESS

SECOND SESSION

PURSUANT TO

H. Res. 5 and 19RESOLUTIONS CREATING A PERMANENT SELECT COMMITTEE

TOCONIATCT STUDIES AND INVESTIGATIONS OFTHE PROBLEMS OF SMALL BUSINESS

VOLUME 1

WASHINGTON, D.C., MAY 2, 3, AND 4, 1972

Printed for the use of theSelect Committee on Small Business

U.S. GOVERNMENT PRINTING OFFICE

(r) 78417 0 WASHINGTON : 1972

(4)C.)

SELECT COMMITTEE ON SMALL BUSINESSJOE L. EVINS, Tennessee, Chairman

TOM STEED, Oklahoma SILVIO 0. CONTE, MassachusettsJOHN C. KLUCZYNSKI, IllinoisJOHN D. DINGELL, MichiganNEAL SMITH, IowaJAMES C. CORMAN. California.JOSEPH P. ADDABBO, New YorkwiLLIANt L. ITUNGATE, MissouriFERNAND J. ST GERMAIN, Rhode IslandCHARLES J. CARNEY, OhioPARREN J. MITCHELL, MarylandBOB BERGLAND, Minnesota

JAMES T. BROYHILL, North CarolinaFRANK HORTON, New YorkJ. WILLIAM STANTON, OhioJOSEPH M. McDADE, PennsylvaniaMANUEL LUJAN, JR., New MexicoJAMES D. (MIKE) McKEVITT, Colorado

HOWARD GREENBERG, Staff DirectorIrt.r.nito V. OAKLEY, General CounselFIENRY A. ROBINSON, Deputy General CounselLESLIE IL PENNINGTON, Printing Editor

'MYRTLE RUTH FOUTCH, Clerk

JOHN M. FINN, Minority Counsel

SUBCOMMITTEE ON SMALL BUSINESS PROBLEMS IN SMALLER TOWNS. ANDURBAN AREAS

, MN-a KIX MN-MT:Things, ChairmanJAMES C. CORMAN, California FRANK HORTON, New YorkCHARLES J. CARNEY, Ohio WILLIAM STANTON, Ohio

DONALD B. Roe, Subcommittee CounselJOAN M. FINN, Minority Counsel

CONTENTS

Hearing dates: pageMay 2, 1972 1

May 3, 1972 71May 4, 1972 91

Testimony-ofArnett, Alvin Jones, Executive Director, Appalachian Regional

Commission 125Brown, Philip, Director of Information, Rural Housing Alliance 28Cochran, Clay L., Executive Director, Rural Housing Alliance 28

Prepared statement 32 -='Conroy, Jerry, General Counsel, Department of Commerce 91Gavin, James A., Legislative Director, National Federation of Inde-

pendent Business 72Graves, Clifford, Director, Office of Planning and Management Grants.

Department of Housing and Urban Development 101Hammerschtnidt, Hon. John Paul, a Member of Congress from the

State of Arkansas 6Ingraham, Page L., Intergovernmental Programs, Appalachian

Regional Commission 125Jackson, Samuel C., Assistant Secretary for Community Planning

and Management, Department of Housing and Urban Develop-ment 101

Maffin, Robert W., Executive Director, National Association ofHousing and Redevelopment Officials 52

Prepared statement . , - 55Mooney, Prof. Eugene L., Coalition for Rural America 7Motley, John, congressional liaison, National Federation of Inde-

pendent Business 71Paul, Robert, Director, Division of Urban Growth, Department of

Ifousing-and-Iirban-Development-- _ 1.41.

Podesta, Robert A., Assistant Secretary for Economic Development,Department of Commerce 91

Raphael, David, Assistant Director, Rural Housing Alliance 28Rockefeller, Hon. Winthrop, executive vice president, Coalition for

Rural America 7Sebelius, Hon. Keith G., a Member of Congress from the State of

Kansas 4Silverman, Jane A., National Association of Housing and Redevelop-

ment Officials 52Troilo, Art, Director, Office of Environmental Standards, Department

of Housing and Urban Development_.. 101Wagner, Aubrey J., Chairman of the Board, Tennessee Valley Au-

thority 82Whitaker, Constance, National Association of Housing and Redevelop-

ment Officials 52Whitehead, Donald, Federal cochairman, Appalachian Regional

Commission --- 125Wilson, 'Miss Augusta, associate director, Coalition. for Rural Amer-

ica 7

IV

Additional information:American National Standards Institute, Inc., letter to Hon. William L. PAge

Hungate, June 30, 1972 A65Coalition for Rural America:

"Why a Coalition for Rural America" 8"How Will America Grow? Directions for the Seventies" 13

Franchise Journal, article, "Small Towns Hunger for Fast Food"_ _ _ A3Housing Act of 1949, suggested amendments to title V 45Housing and Urban Development, Department of, "Status Report on

Recommendations Contained in HLD 1970 Study Report" 116House Small Business Committee letter to Hon. Aubrey J. Wagner,

Chairman, Tennessee Valley Authority, May 30, 1972 88Jackson, Samuel C., letter. to Hon. Hubert H. Humphrey 116Office of Management arid-Budget letter to Hon. John C. Kluczynski,

June I, 1972 . __. _ _____ ilRockefeller, Hon. Winthrop, answers to subcommittee questions 23Survey of Current Business article, April 1972, "Total and Per Capita

Personal Income, 1971" A6"State Projections of income, Employment and Population" A16

Tennessee Valley Authority ,Letter to Hon. John C. Kluczynski,June 13, 1972 89

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THE FUTURE OF SMALLTOWN AND RURAL AMERICA:THE IMPACT ON SMALL BUSINESS

TUESDAY, MAY 2, 1972

HOUSE OF REPRESENTATIVES,SUBCOMMIITEE ON SMALL BUSINESS PROBLEMS

IN SMALLER TOWNS AND URBAN AREAS OF THESELECT COMMITTEE ON SMALL BUSINESS,

TV ash,ing ton, D.C.The subcommittee met, pursuant to notice, at 10 :10 a.m., in room

2359, Rayburn House Office Building, the Honorable John Kluczynski(chairman of the subcommittee) presiding.

Present : Representatives Kluczynski (presiding), Corman, Conte,and Stanton.

Also present : Representatives Bergland and Hungate of the -!ullcommittee; Donald B. Roe, subcommittee counsel ; John M. Finn,minority counsel ; and Myrtle Ruth Foutch, clerk.

Mr. KLUCZYNSKt. The hearing will come to Order.The Subcommittee on Small Business Problems in Smaller Towns

and Urban Areas today commences hearings on the Future of SmallTown and Rural America : The Impact on Small Business.

Under the very capable leadership of our full committee chairman,Representative. Joe,,,L. Evins of Tennessee, our subcommittee has beenable to continue its work in the field of rural America. ChairmanEvins has been one of the most able and forceful spokesmen in theCongress to improveand enhance life in our countryside.

Our hearings today represent, an effort to determine the futureofSin aliTawnA-mericir.T-litiimptict---onsinall -businessesinruralareas is,__of course, directly related to the question of whether smalltowns are able to continue in existence.

The problems of rural areas have too often been ignored at theirexpense and that of the big city. Having the honor and privilege torepresent the 5th Congressional District of (Chicago), I havea deep commitment to resolving the plight of .metropolitan areas.Like many of my colleagues who also represent big cities, it is evidentto me that the dilemmas facing the countryside must, be properly dealtwith before we can adequately stem the difficulties of metropolitanareas. --

Reports have reached us that the Federal Government is lesseningits efforts to aid and assist Small Town and Rural America. I hopethis is not, the situation, and we look forward to testimony from fed-eral officials resassuring us that the Government is actually increasingits efforts to provide Americans living outside of metropolitan areasthe kind and quality of help that is so desperately needed.

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(The full statement of Chairman Kluczynski follows :)

OPENING STATEMENT OF HON: JOHN C. KLUOZYNSKI, CHAIRMAN, SUBCOMMITTEEON SMALL BUSINESS PROBLEMS IN SMALLER TOWNS AND URBAN AREAS

The Subcommittee on Small Business Problems in Smaller Towns and UrbanAreas today commences hearings on the Future of Small Town and RuralAmerica : The Impact on Small Business.

Under the very capable leadership of our full Committee Chairman, Represent-ative Joe L. Evins of Tennessee, our Subcommittee has been able to continue itswork in the field of rural areas. Chairman Evins has been one of the most ableand forceful spokesmen in the Congress to improve Ina enhance life in ourcountrysides. His efforts have gone a long way to Improving the entire Nationby revitalizing rural areas. Our Chairman is to be highly commended forhis concern and dedication, not only to his constituency, which he serves soadmirably, but to the people of smallt-Owns and rural'areas everY*liere, :-

Our hearings today represent an effort to determine the future of Small TownAmerica. The impact on small businesses in rural areas is, of course, directlyrelated to the question of whether small towns are able to continue in existenceand whether people living in rural areas can continue to reside in their presentlocation. There is an increasing concern over the problems faced by the Ameri-can countryside. TO percent of the Nation's population live on one percent of theland, but migration from rural areas to big cities continues, although at a lesserratestagnation exists in many parts of rural America stemming mainly fromlack of economic diversificationhealth and medical services are oftentime notadequateeducation and training fall short of desired goals, and so forth.

There is not time to list all the ills presently being encountered by rural areas,but we intend, during the course of these hearings. to explore some of the moreimportant and pressing problems. Specifically, we will study four basic areas:(1) the extent to which the Federal Government has responded to existing prob-lems confronting rural America , (2) the definition of existing and projectedProblems ; (3) the development of recommendations as to how the Federal Gov-ernment can best meet the needs of Small Town America ; and (4) the explorationof the casual relationship between domestic difficulties generally, and problemsconfronting rural areas.

The problems of rural areas have too often been ignored at their expense andthat of the big city: Having the honor and privilege to represent the 5th Con-gressional District of Illinois (Chicago), I have a deep commitment to resolv-ing the plight of metropolitan areas. Like many of my colleagues who also repre-sent big cities, it is evident to me that the dilemmas facing the countryside mustbe properly dealt with before we can adequately stem the difficulties of metropolitan areas.

Reports have reached us that the Federal Government is lessening its effortsto aid and assist Small Town and Rural America. I hope this is not the sitnaLion, and we look forward to testimony from_ Federal officials reassuring us thatthe Government is actually increasing its efforts to provide Americans living out.side of metropolitan areas the kind and quality of help that is so desperatelyneeded.

Mr. KLuczxxSET. I recognize the gentleman from Massachusetts, theranking member of this committee, Silvio Conte.

Mr. CONTE. Mr. Chairman, I want to join you in commending thechairman of our full committee, Mr. Evhis, for his support of thissubcommittee's efforts to spotlight the need to revitalize smalltownAmerica. That effort, of course, would bear little fruit without theactive leadership which you, Mr. Chairman, have also provided.

I need not refer to our past hearings to demonstrate the. importanceof your leadership. One need only note the outstanding caliber of thewitnesses that we will hear in these next few days to appreciate the in-fluence and sicrnificance of this inquiry. We are honored To have suchwitnesses as the former Governor of Arkansas, my good friend, Win-throp Rockefeller ; the Agriculture Secretary, Earl Butz, as well asmany other distinguished witnesses.

Mr. Chairman, you have already made clear why the subject of thesehearings is vital to all Americans. Unless we stem the tide of migra-

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tion to the cities, the quality of life for all Americans will suffer. Ouroverburdened cities can't adequately provide the services required to-day, much less accommodate new arrivals from rural areas, and thoserural areas will find themselves even more disadvantaged unless wecan help to generate new economic life there. I look forward to ex-amining what can be done to improve the situation during thesehearings.

Thank you, Mr. Chairman.Mr. KLUCZYNSKI. Thank you.The Chair recognizes the gentleman from California, Mr. Corman,

the ranking member of this subcommittee, and a very able and valu-able member. .

Mr. COR3IAN. Thank you, Mr. Chairman. I just want to join you andMr. Conte in .saying I think these hearings are extremely important.I come from a very large -city, Los Angeles, and we have all of the com-plex problems of suburbia, but all of us who came originally fromsmall towns recognize that there is tremendous value to being able toraise a family in a small town and that the Federal Government mustpay attention to 'what its programs do to either encourage or discour-tyre the vitality and health of small communities.1.Mr. KLucmcskr. Thank you. The gentleman from Ohio, Mr. Stan-

ton, would you care to make any remarks?Mr. STANTON. Thank you, Air. Chairman.It is a pleasure, Governor, to have you before our committee and,

Mr. Chairman, I did have a short statement of welcome for the Gov-ernor. With unanimous consent, I would like to have it put in the 7..ecordat this point.

Mr. limJczYNsKt. Without Objection, so ordered.(The statement follows :)

OPENING STATEMENT 11 r ME. STANTON

too want--telk.pressnry--appreelationtoyou,-Mr--Chairinan for_initiatingthese outstanding hearings, and I also want to welcome Governor Rockefeller_and the other fine witnesses we have before us today.

As a representative of a number of small towns in Ohio. this inquiry hasspecial importance to me. I am confident it will prove useful not only to myconstituents, but to many others from rural areas across the country. And, ashas been noted already, all Americans, both rural and urban, are now so inter-dependent that the future of smalltown America is of vital concern to everyone.

Thank you, Mr. Chairman.

Mr. Kta-czymik.r. The gentleman from Missouri, AL'. Hungate,although not a, member of this subcommittee, is nevertheless verymuch interested in the problems of rural America. He is a very dedi-cated member of our full committee and is chairman of the Environ-ment Subcommittee. Mr. Huncra te.

Mr. Iteso,vrE. Thank you, Mr. Chairman. I appreciate the Chair-man and members of the committee taking. up this problem. It is cer-tainly of vital concern to my district. I am very 'pleased to see Gov-ernor Rockefeller here and the man who brings him here, a very dis- ,tin.onished gentleman, Congressman John Paul Hammerschmidt.

Thank you, Mr. Chairma n.Air. KLUCZYNSKI. Mr. Berfd and, any comments?Mr. BERGLAND. Thank vein very much, Mr. Chairman. I am a fresh-

man member of this Congress, representing a rural district of Min-nesota, During my tenure, I have voted consistently to support pro-

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grams aiding the big cities of the United States even though I do nothave a big city in my district. I have done so because I firmly believethat a problem left untended in the cities of this country will soonaffect the bloodstream of the whole United States. The fact is thathalf the poverty in this United States is in the rural areas. My peo-ple don't march, they don't demonstrate, they suffer in silence, andthe problems of the rural areas have generally been overlooked in thebig city press. My people need help. I am convinced that the problemsof our cities will get progressively worse -until we find an effective wayto stern this aimless, aimless drift of people out of the rural areasstreaming into the cities searching for opportunities that are extremelylimited in the countryside. I am pleased that the hearings have been_scheduled today to focus attention on this very important questionof the rural areas.

Mr. KLuczyxsicr. Thank you.At this point we will insert the statement of Representative

Sebelius, without objection.(The statement follows :)

STATEMENT OF HON. KEITH G. SERELIUP, A MEMBER OF CONGRESS FROM THE STATEOF KANsAs

Mr. Chairman. T appreciate this opportunity to offer testimony regarding"The Future of Small Town and Rural America : The Impact on Small Business."

I would like to commend Subcommittee Chairman John C. Klnczynski andCommittee Chairman Joe L. EVHLS and the members of the Subcommittee fortheir leadership and dedication to solving small business problems throughoutAmerica.

There is no question of the urgent need for .action to revitalize mu ruralareas. The long-standing cost-price squeeze and the effects of inflation havecombined to force an ever-increasing amount of our rural citizens off of the.farm and out of our rural communities. We must provide adequate economic op-portunity for those of our citizens who prefer to live and enjoy the proven andtraditional way of life in our rural areas.

I think it is appropriate to focus attention on the Rural Job DevelopmentATtTif 1071. ThIspronosarirritilited trySenator James Pearson leas the Vipar-tisart support of 50 Senators and over 40 Representatives.

As principal sponsor for this legislation in the House of Representatives, I amhonored to have been joined by the following who are cosponsors of the RuralJob Development Act of 1911: Mr. James S. Abourezk, of_South Dakota ;Mr. Bill Alexander, of Arkansas; Mr. Mark Andrews, of North Dakota; Mr. BillArcher, of Texas; Mr. John N. Camp, of Oklahoma ; Mr. W. C. Daniel, of Vir-ginia ; Mr. William L. Dickinson, of Alabama ; Mr. Harold D. Donohue ofMassachusetts; Mr. John J. Duncan, of Tennessee; Mr. Bill Frenzel, of Minne-sota ; Mr. Don Fuqua, of Florida ; Mr. Seymour Halpern, of New York; Mr. OrvalHansen of Idaho: Mr. Michael Harrington, of Massachusetts; Mr. James F.Hastings, of New York ; Mr. Edward Hutchinson, of Michigan ; Mr. Ed Jones, ofTennessee; Mr. Peter Kyros, of Maine ; Mr. Arthur A. Link. of North Dakota ;Mr. Manuel Lujan, of New Mexico; Mr. Romano L. Mazzoli of Kentucky ;Mr. James A. McClure, of Idaho; Mr. John Melcher, of Montana : Mr. Clar-ence E. Miller. of Ohio; Mr. Wilmer Mizell, of North Carolina ; Mr. John T.Myers, of Indiana ; Mr. BM Nichols, of Alabama ; Mr. William R. Roy, ofKansas; Mr. William J. Scherle, of Iowa; Mr. Garner Shriver, of Kansas ;Mr. Robert L. SikeS. of Florida; Mr. Robert H. Steele. of Connecticut ; Mr. JohnTerry, of New York ; Mr. Charles Thone of Nebraska; Mr. Al Ullman, ofOregon ; Mr. Victor V. Vesey, of California ; Mr. Richard C. White, of Texas;Mr. Lawrence G. 'Williams, of Pennsylvania; Mr. Jim Wright. of Texas.; andMr. John M. Zwaeb, of Minnesota.

Every they we hear of the crisis in our .nation's cities. Crime escalates, pollu-tion threatens the health of urban life, complexities of everyday affairs multiply,and the quality of life in general continues to decline. No one disputes theseverity and crucial nature of the urban crisis, but there is another and equally

important related crisis in this country : The declining economy and erodedvitality of rural America.

These problem areas are distinct; however, in terms of cause and effect, theyare related. Over the past several decades, rising production expenses, highertaxes and declining farm prices have forced millions of farmers out of business,as well as the closing of many business establishments in rural communities.This coupled with the lack of adequate housing, educational opportunity, waterand sewer facilities, health card facilities, community services, and generaleconomic opportunity has created the tremendous population migration fromrural to urban America.

Into the cities have come the unskilled rural poor attracted -by. the lure ofeconomic advancement. Many gain, but a tragically high number do not. Insteadof economic salvation, too many of the rural poor, both White and black, findtenements, unemployment, welfare and the depersonalized, demoralized envi-ronments -of _the_ slum-ghetto..

Into the cities also come the young, the educated and the talented. They oftendo much better materially, but for this economic gain they pay the social costsof the loneliness of the crowd, the frustrations of congested streets and crowdedstores, the stultifying sameness of the bedroom suburbs, the loss of communityidentity, and the lack of contact with nature.

These overcrowded conditions in our cities have imposed impossible demandson urban resources to meet the requirements of transportation, education, wel-fare, crime control, pollution control, health care, public services, and housing.If answers are not found, the pressure of people against the resources andservices of our cities of the future may simply break them down.

In short, too many communities are underdeveloped. Too many of our metro-politan areas are overcrowded. This unequal distribution of population andeconomic activity will surely worsen unless we take strong positive action,

To-underscore; this fact, statistics show that even if today's rural populationwere doubled by the end of this century, there would still be up to 40 millionpeople added to the metropolitan areas.

Former President Dwight D. Eisenhower was one of the first to recognize thisproblem in the decade of the 1950's. His proposed solution include the locationof industry in rural areas and the possibility of creating new towns in thecountry. This proposal, in part, reached- fruition with the development of thenew pilot city, Tonathan, located 20 miles southwest of Minneapolis, With aneventual population of 50,000 as its target.

The former Secretary of Agriculture, Dr. Clifford M. Hardint in announcingthe creation of President Nixon's Rural Affairs Council, succinctly outlinedou -r- task- in-- sol -vitng the problems-of-rurat-and urban America Dr. Hardin said

"We have to make the whole of rural America more attractive, economically,culturally, and socially. We must expand opportunity not only for the tell millionfarm people, but for the other 45 million residents living in the countryside. Itis not enough that we think in terms of improving conditiOns and opportunityfor the people living today in rural America, and thereby stemming the flowof people to the cities. We must do much more. We must make it a matter ofnational policy that we create in and around, the smaller cities and townssufficiently good employment opportunities and ,living environments that largenumbers of families will choose to rear their children there."

The economic potential resulting from rural job development is tremendous.Recently a community in my Congressional District of Western Kansas revealedthe projected impact of 100 new jobs. In Hays, Kansas, according to the studs-tics 100 new jobs would mean : A population increase of 296 people, 112 morehouseholds, 174 total additional workers employed, 107 more registered passengercars. four more retail establishments, $300,000 more in annual retail sales,$270,000 more in bank deposits, and $590,000 additional personal income in thecommunity.

We must work together to find solutions to the dual crisis in rural and urbanAmerica.

When we speak of rural development we are, of course, talking about govern-ment action and What government can do for our citizens in relation to a specificproblem. I am also most concerned about a related problemwhat governmentis doing to citizens under the auspices of Federal assistance.

The number one issue of concern right now in my Congressional district is inregard to the Occupational Safety and Health Act of 1970. This legislation ismost representative of a Federal program designed to help and assist peoplebut whose practical application has opened up a box of arbitrary and unreason-

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able nightmares for the small businessman. The result has been that this actcould force many of our small businessmen out of business. - -

This glaring example of small business neglect by Congress and the Departmentof Labor is shockingly apparent in the requirements of this Act. The ridiculousand burdensome regulations that. have been imposed threaten the foundationof the small business community. Without sonic responsible relief throughaction by Congress on comprehensive reform. amendments and administrativeflexibility, we are facing a crisis of, business closures and unemployment in ourrural and small-town communities.

These individuals do not have the capital or the income to comply withregulations that were established for corporations and factory workers. Thisproblem is currently the number one concern in my district in Western Kansas.I am hopeful that this subcommittee will recommend positive action on H.R.13941 to provide sonic immediate and responsible relief.

The Federal government should provide services for the people as opposed toaetion thatis arbitrary and-restrietive. Recently, -a businessman in my districtin Western Kansas told me that it requires one week out of every month to fillout all. of the necessary forms and reports required by state and Federal govern-ment departments and agencies.

Instead of regulating the small business community, government should servethe businessman. This can be done through a small business coordination or"ombudsman" such as specified now by the Concerted Services Training andEducation Program. The CSTE Program is designed to coordinate all of theFederal services and programs designed to benefit the small businessman throughassistance and awareness. Though still in "pilot" status, I am hopeful this kindof program can truly mean Federal assistance and direct help to our rural areas.

As the principle sponsor of Rural Job Incentive and Development legislationwith Chairman Joe Evins, I also feel that a series of tax incentives as proposedby this legislation is most essential to rural redevelopment. We must providejobs and economic opportunity if we plan to stimulate business activity.

Another bill that is much overdue is the .Small Business Tax Simplificationand Reform Act of 1972. For too long the small businessman has been forced toshoulder a disproportionate burden of business taxation. It is time that we pro-vide tax- reform so that the small businessman has more dollars after taxes. Wemust reverse the trend that has seen business costs rising and income falling.

Again, I want to commend you for your. .forthright efforts to provide somemuch needed administrative and legislative relief for the smallbusiness com-munity, I am hopeful that these hearings will produce substantive recommenda-tions for the 92d Congress so that some meaningful relief and reform can beenacted to bedeilt the sunlit busineiannua

The future of the business community and the future of rural and smalltown America weigh in the balance.

Mr. ii-LrczyNsKi. The Chair now recognizes a gentleman, a verygood-friend of ours, Representative John Paul Hammerschmidt ofArkansas, to introduce the witness.

TESTIMONY , OF HON. JOHN PAUL HAMMERSCHMIDT, A MEMBEROF CONGRESS FROM THE STATE OF ARKANSAS

Mr. HAmmEaserrminT. Mr. Chairman, distinguished members ofthe committee.

It is a great honor and pleasure for me to be here to introduce thiswitness. agree with Mr. Conte, when he says that you have some out-standing witnesses, and the next witness is certainly one of them.

I know that many of you know him and he really needs no intro-duction. But for the record, I would like to make some brief commentsto tell you about his life of service.

I want to go back to .pre-World War II. He went into the Army 2years before the draft, and served C years. Ere went in as a private,came out as a lieutenant colonel. Amon,o. his decorations is the PurpleHeart. The reason. I go back that. far is that now, a quarter of a cen-tury later. he is still involved in the H.S. Infantry. To 1,, ing you up

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to date on what Win has been doing very recently, among his manyactivities, he has been deeply involved in establishing an infantrymuseum at Fort Benning, Ga. He is at the forefront of that movementin raising the multimilhons needed for the museum.

Win served 8 years as the Arkansas Industrial DevelopmentCommission chairman in Arkansas when he first went there. Thatactivity brought 600 plants, it brought 100,000 jobs, and Arkansas isstill feeling the benefits of his great leadership. Of course, later, hebe-caMe- the chief executive officer of the State and conducted-many -reforms-in government.

I know that your committee is well aware of the economic deveolep--ment-program -It- has in terrel ated. i nterests, and_particul}r1y_in_t is_subject matter, the future of small towns in rural America. Win helpedestablish the economic development district prOgram before the FDAAct of 1965. It merged so well into Arkansas' planning and economicdevelopment efforts that it is almost a pilot model for the-Nation now.

Your witness lives on a farm in the rural area. He hitS' been inArkansas for 20 years now. But he comes before you today wearinga different hat as the executive vice president of the Coalition forRural America.. It is my real pleasure to introduce to the committeethe former Governor of Arkansas, Winthrop Rockefeller.

Mr. Kura-Iris:am It is a pleasure to have you, Governor.You may proceed as you wish.

TESTIMONY OF HON. WINTHROP ROCKEFELLER, EXECUTIVE VICEPRESIDENT, COALITION FOR RURAL AMERICA, ACCOMPANIEDBY MISS AUGUSTA WILSON, ASSOCIATE DIRECTOR, AND PROF.EUGENE L. MOONEY

Mr. ROCKEFELLER. Thank you very much, John Paul.I would like to commend the chairman. You are having me today ;

I understand that you are having another of my tirothers, who is goingto give you his thinking. I am not suggesting that we necessarily al-ways agree. He is a very conscientious guy ; I commend him to you,and I commend you for asking him to testify.

But today I come before you and I am so happy to be with you andthe subcommittee. I am happy to have this opportunity to appear atthese hearings on a. matter which has concerned me for.many, manyyears, much of my adult life. My love and my concern for rural Amer-icais,evidenced by my having chosen to make my life's home in ruralAmerica; by becoming a cattleman and farmer in the State of Arkan-sas; by my serving two terms as Governor of that great State whichis predominantly rural; and now this same love and concern leads meto be here with you today to talk about those things which relate tothe Coalition for Rural America..

Thus, a personal and private commitment to rural America, coupledwith official capacities as a participant in the problems and concerns ofrural America for almost two decades, makes doubly pleasurable thisopportunity to appear before this subcommittee.

The Coalition for Rural America was formed in September of 1971for the following purpose as stated in its articles of incorporation :

"The purpose of incorporation is to advance the broad interest ofrural America defined as that part of the 'United States lying outside

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the major metropOlitan areas and embracing nonmetropolitan cities,towns, villages and the open countryside,"because there is so muchof it. "The Coalition is committed to the objective of balanced nationalgrowth in the United States. It recognizes that achievement of a higherstandard of living and an improvement in the quality of life for allAmericans, whether they live in our large cities or our countryside,can only be achieved through the pursuit of such a policy. The Coali-tion shall pursue its objectives by serving as a spokesman for ruralAmerica in the nation's councils. It is public advocate and public edu-cator, and it seeks to mobilize in 'a common effort all the many national,regional, State and local organizations and individuals that share itsgoal."

I could take more of your time, but I would like to include in therecord, if I may, a statement of what or why the Coalition for RuralAmerica is. If I may introduce that and save your time, I would liketo nut it in the record.

Mr. KurczYNsru. Hearing no objection, it is so ordered.Mr. ROCKEFELLER. Thank you, sir.(The information referred to follows :)

WHY A COALITION FOR RURAL AMERICA?

"The problems of urban life and rural life in America today are bound to-gether so tightly that the plight of the cities will be relieved only to the degreethat solutions are found to pressing rural problems. Call it "Rural Renewal" or"Rural Revitalization" or call it what you will. but the goal boils down to onethingwe must achieve a proper rural-urban balance of population, to ensurethe vitality and economic well-being of our total society.

"The glaring deficiency within our vast array of declared national goals,dealing separately with urban and rural problems, is that these goals have failedto consider the problems in their most interrelated sensethat is; the mi-gration of people. . . .

"To the extent that urban decay is a direct result of rural migration, it wouldseem that viewing these things jointly is the obvious approach to problem-solv-ing."Ironorable Winthrop Rockefeller, Governor of Arkansas . . at the GalvinBullock Forum, 1 Wall Street, New York City, November 28, 1967.

INTRODUCTION

Conceivably, an introduction to the Coalition for Rural America should beginwith a glossary. As times have changed so, dramatically, have the meanings ofcertain words rooted deep in our language. Perhaps no word offers its own morechallenging example of this change than "rural" itself.

Dictionary definitions of "rural" cling generally to that traditional pastoralsetting of yesteryear. Granting the niceties of nostalgia, these definitions holdlittle actual relevance to what life is really like for Americans living outside ofmetropolitan areas today.

Compounding the challenge is a profusion of governmental concepts whichrelate "rural" to such diverse measuring devices as village population, geographi-cal proximity to airline routes, annual income from farming, and so on. Suchbureaucratic gobbledygook results in, at best, confusion and, at worst, outrightsemantic deceit. As an illustration of the worst, national policy continues toequate the well-being of rural communities with the health of agriculture, Yetfewer than twenty percent of all Americans living outside metropolitan areas ac-tually live on farms ; and of those, few indeed depend solely on the land for theirlivelihood.

If "rural" is a problem semantically then so, obviously, is "urban". What is acity? Again governmental agencies do not agree. Depending upon whose criteriaget involved, the extent of disagreement can range to hundreds of thousands ofcitizens.

There are ninny other words that come to mind, and too often we find that al-though we are speaking the same language we are not conveying the same mean-ing. For the purpose of this document we are accepting the definition of rural

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America as follows: That ;Hirt of the nation lying outside tlA: major metropolitanareas and embracing nonmetropolitan cities, towns, villages, agriculture and theopen countryside.

Significant above all, the Coalition for Rural America does not presume todefine what is "the good life" for all Americans. This nation's promise to itscitizens is that each shall have the freedom to work toward a quality of life in-dividually chosen. In many wayssome shocking, others even more ominousbecause of the subtleties of changefreedom for-many Americans has been .sub-stantially eroded, and for future generations is threatened even more. Acknowl-edging the certainty of continued growth, we must accept the stark predictionsof what the character and quality of that growth will beif left unplanned tothe present course which -finds 93 percent of our national population jamminginto seven percent of our national land mass.

The Coalition for Rural America believes that these conditions can be reversedand solutions found, but only with vision, planning, national commitment, andaggressive leadership. We believe that the future vitality of America is de-pendent upon revitalizing her countryside, thereby creating an environment ofnew hope and opportunity for all our citizens, wherever they now may live.

BACKGROUND AND HISTORY

One hundred years ago we were a Nation 75 percent rural. Today we are a Na-tion 73 percent urban. Since the beginning of World War II there has been a netmigration from rural America of more than 25 million personsthis being oneof the largest movements of people in recorded history. Each year more than500,000 Americans from rural areas migrate to the big cities.

Should present migratory trends persist, the predicted growth in our na-tional population will exaggerate the demographic profile which has emergedfrom the past two decades. Experts are predicting that our population will reach300 million by the year 2000an increase of some 100 million persons. Based onwhat has gone before, most of these people will be settled in five small geographicalareas, with three-fifths of our population residing in four huge megalopoli. The450-mile strip from Boston to AN'a,' 'ugton already contains almost 40 millionpeople -1S percent of our national , opulation. This doesn't have to be so!

This gigantic exodus lies at the heart of many of our most intractable na-tional problems. Redress of the national imbalances created or exaggerated bythis migration is central to any solution of these problems.

There is at the same time an imbalance, between vision and reality, regardingrural areas in this country. Enshrined in the national consciousness is the visionof rural areas composed of gentle towns and small cities, intimate schools, quietchurches, peaceufl fields and mountains, rivers flowing in a world without timeor human misery. This vision of open spaces and winding roads, lakes and quietspots, beckons to vacationers, calls to the overworked and offers brief therapeu-tic relief to our families. But the dreary statistics of rurality stand in sharpcontrast to this image.

By some official definition, one out of every four rural inhabitants is poor.Rural unemployment rates are two to three times greater than elsewhere.30,000 rural towns have no water systems and 45,000 lack adequate sewer

facilities.Per capita, twice as many rural citizens suffer from chronic poor health

conditions, and twice as many die from accidents due to lack of emergencyhealth services.

Although 27 percent of the Nation is rural, only 12 percent of our doctors,18 percent of our nurses, 14 percent of our pharmacists and eight percent ofour pediatricians live and work in rural areas.

Some general propositions about American history underpin our regard for thepotential of rural America.

Our people aspire to a national society based on a high degree of personalcontrol by the individual over his personal environment. life circumstances anddestiny. Our national history and our constitution attest this goal. Americansociety is grounded on those traditional values of Western Civilization whichencourage the individual to exercise the greatest latitude for personal develop-ment consistent with the interests of all.

Most Americans would prefer to live out their lives in a non-megalopolitan en-vironment. Every recent public opinion poll on this subject bears witness to theseyearnings. This alternative can and must be made attainable by all Americans.Those who would must be permitted to live, work and raise their families in such

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surroundings, without foreclosing themselves or their children from a full meas-ure of the American experience.The potential to master our environment distinguishes this era in world his-

tory. That environment consists not only of clean air to breathe, pure water todrink, room to exercisebut also decent housing, good nutrition, useful educa-tion, vital health, just government, transportation, recreation, arts, even atti-tudes toward one another. Our environment thus envisioned is the sum of theseelements_of our culture. Achievements of civilization havebeen motivated by adesire for something more than bare survival-and have been produced by our bestpersonal, governmental and scientific efforts.

Our rural areas enjoy an abundance of the clean physical environment wewant ; they must be augmented by the abundance of the societal environmentwe crave.

Predictably we will proceed to urbanize-our rural areas. We must ensure thatthis process is planned, orderly, sensitive, constructive and beneficial to thenationa plah balanced for people.

'PRE INTERRELATED COMM UNITIES

The planned growth of rural America mist be designed for the dual benefitof rural and metropolitan areas. New opportunities created become viable alter-natives for the city dweller and rural citizen alike. While the Coalition forRural America's focus of attention is on rural areas, our concern is for the entirenation. Indeed, the massive out-migration from rural towns and farms has beena major producer of urban catastrophies. Insolvent and unmanageable, ourmetropolitan areas are infected with polluticin, crime, human miseryvirtuallyevery ill knowzi. to mankind's history, and some heretofore unknown. Even theperipheral suburbs, once seen as the oasis of escape, are inextricably caught inthese problems, and are themselves potentially ripe for deteriorating human andmaterial values.

As a viable Coalition our thrust must be affirmative and future-oriented. Com-mon experiences teach that an ethic of protest or negativism limits its own ex-ponents and invites the contempt of others. We are concerned with constructivelyinfluencing the practices of our society. We propose to contribute toward creativeaction in the furtherance of our central concernthe revitalization andyesthevitalization of rural America.

Complexities abound. Particularly problems and potentials in rural growth arepresented by the interdependence of commercial cities, industi'ial cities, ruraltrading centers, suburban complexes, rural countryside, and the fact that all areconstantly in transition. Acknowledging this, we must adapt our best intellectual,scientific and sociological capabilities to our objectives.

As suggested previously, the many governmental definitions of rurality reflectthat the concept of Rural America is amorphous. Both the United States censusdefinition and the Standard Metropolitan Statistical Area guideline definitionseem meaningful for some purposes and not others. These definitions are groundedon bare demographic criteria. Other definitions call be designed to suit particularpurposes. Rural areas may be defined in terms of entire states for purposes ofregional planning; in terms of population densities for particular types of pro-grams; in terms of economic criteria for business purposes; and in terms ofsocial, political, geographical, environmental or psychological conditions for yetother purposes.

We must be able to envision these divergent possibilities in order to operaterationally in this complex and dynamic field. Clarifying the goals of rural de-velopment, we must envision the kind of societal mix which the preponderanceof Americans desire, and determine the role of rural America in that context.it is essential to identify and comprehend the flow of events in our history, alongwith the cross-currents. We must then .be capable of devising alternatives thatwill alter traditional and current trends which are not compatible with our goals. '

Past efforts too often have been preceded by lack of knowledge, timid plan-ning and limited vision. The expenditure of billions of dollars and millions ofmanhours not only has not ensured constructive solutions, but in the guise of

-Illusory-progress-has -se rved-.fregently -to- perpetuate-social- problems,-wasterure and human bitterness.

Our total process must continue over time as we assess and reassess everydevelopmental stage in light of reality, and modify our fanciful expectations andactions. Hypotheses must be framed, and we must pretest our social proposals.That which is good can be replicated where appropriate. The dysfunctional, un-

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successful or negative can and should be discarded. This approach envisions

mobilization of many segments of our society. governmental and nongovern-mentalto accomplish the objectives sought. Above all, the precious human

values we seek to further must not be sacritieed or distorted. We .seek to enhance

the dignity of the individual American citizen, wherever he chooses to live.

A national consensus should he articulated. The Administration, the Presi-dent, must voice and move for implementation of a national rural America de-

velopment policy.That policy should be stated succinctly, possibly following these

lines: "The development of a supportive, vigorous nonmetropolitan environment

is essential to the healthy growth of America. As our people seek alternatives to

their present unsatisfactory lives, this choice must be available. To be a viable

choice that life must have an economic base, public services, a cultural attrac-tiveness, and continuing opportunities for sneceedng generations:"

Needs and national policies are the raison d'etre for governmental programs.National programs to revitalize rural areas can-only-be accomplished through

harmonious efforts by Federal, State tend Local governments. A higher degree

of coordination of governmental effort can be effected through re-examination

and modification of the systems which deliver governmental services to our com-

munities.The present configuration of Federal undertaking once again is being reviewed

to reorganize the agencies which administer categorical assistance programs.A variety of plans for restructuring the present chaotic Federal-State-Local

government delKery" system are being developed.New and different approaches for financing government services are being

proposed.The role of our rural areas in these proposals, and their relationship in the

American society which would consequently' evolve, must be clarified and

evaluated in light of our National rural area policy. Functional efficiency at

the Federal level to develop our rural areas is surely needed, but. it must be

matched by increased local capabilities, state responsibilities and regional

flexibility.We must devise, assist and support formulation of governmental innovations

which will further the objectives of the National Rural Area Development

Policy, more by pursuing new opportunities than by preserving lost eras.At no time would the philosophy of grassroots action be more meaningful and

productive than in this context. Those who are experiencing the frustrationsand the rewards of today's regrettably uncoordinated rural emergence have a

tremendous input relative to the maximizing of this, one of America's greatundeveloped assets. The leadership that exists should first be recognized and

appreciated 'and, second, be excited, inspired and motivated to redouble already

heroic achievements.FREE ENTERPRISE AS A SOURCE OF SOLUTION

The principles which infuse our efforts must encourage private initiative,

personal motivation and rational participation by each in accordance with his

capabilities. The ultimate of good government is to inspire and assist the efforts

of men of good will, working singly and in concert, to improve their world.Orderly growth on our vast countryside can be effected through planned exten-

sion of urban services to rural areas, development of existing small munici-

palities and creation of viable new communities. There are in existence literally

hundreds of Federal categorical assistance programs designed to aid rural areas.Too often the availability of Federal funds dictates the local "need", and

inadequate palliatives are constructed at great, cost. Tempting categorical

matching grants are used, sometimes deceitfully, in contrast to the wise use of

block grants or some possible form of revenue sharing. The entire approach

should be critically re-examined before new or bigger programs are instituted.Consistent with the Coalition's feeling that the whole Federal rural assistance

Program should be carefully restudied, the President's Commission on Popula-

tion Growth and the American Future in its recently released report and

recommendations emphasizes human resource development to improve the-quality-and_mobilit,y_potential of individuals. Similarly the report recognizes'the need of programs to develop and provide worker-relocation-counseling and,-,assistance to enable an individual to relocate with a minimum of risk anddisruption.

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Our economic system persuades men to their best efforts by rewarding theenterprise of individuals mid encouraging those who contribute to our progress.Economic incentives and cultural opportunities must be implicit to those whochoose to live in nonmetropolitan circumstances.Economically viable communities in rural areas promise to maximize themultiple incentives which motivate men. Public investment in the social infra-structure of roads, schools, and public facilities must be .employed to maximizethe private investments which produce homes, businesses, industries. and serv-ices. These coordinated investments, public and private, are the prime meansto the end of rural area development.Differentiated aroroaches will be required to stimulate the environmentalgrowth which produces a wide range of economic opportunities. Our rural areasare both undeveloped and under-developed, and development capabilities amongthem vary tremendously.A national economic growth policy must be framed frankly to maximizeprivate economic opportunities in our rural areas, and incorporate a searchingminimizing of our dependence on soft loan programs.The aims and objectives of rural America must be framed and articulatedin terms of national perspectives.To-be effective we must develop the competence to devise, recommend andsupport public policies and private efforts which tend toward realization of ourgoals.We must be able to create viable alternatives to those proposals which do notcontribute to constructive resolution of the problems of Rural America andthe Nation as a whole.The most scientific tools and our most sophisticated processes must be em-ployed to address the tasks we have set for ourselves.Most of all we must proceed upon a firm base of knowledgeknowing who weare, what we are about, where we propose to go and how we intend to get there.To get there, first, we need the services of an organization that can compile,coordinate, interpret and disseminate knowledge that is increasingly rapidlybeing developed ; second, the fruits of these efforts must be implemented bythe development of legislation in both the National and State legislative halls.The future of the Coalition for Rural America is clearly in the legislative field,creatively as well as analytically. It must proceed on premises at least as elevatedas those envisioned herein. To aspire to anything less would 'brand us unworthyof our heritage.

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How willAmericagrow?"Directionsfor theSeventies"

78-617 U - 72 - 2

Coalition forRural America

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Approaching her 200th birthday Americafaces serious questions about her futurequality of life. Semantically these questionshave been divided into two broad areasto problems of urban crush and problems ofrural decay. In truth both flow from a singlewellspring: Spectacular national growthunplanned.

Fifty years ago America was a nationhalf rural and half urban. Today, either pUr-suing opportunity or driven by necessity,93 percent of our people are jammed intoseven percent of our living space. In one450-mile strip alone from Boston to Wash-ington live almost 40 million people, 18percent of our national population.

The problems resulting from mass crowd-ing together are awesome and well knownslums, crime, pollution, blight . . . every illknown to mankind's history, and some nowidentifiable only with our times.

The crisis of urban America has vastlyovershadowed recognition of the needs ofrural America. Against the vision of openspaces and winding roads, quiet towns anda world at peace, the realities of rural Americastand in stark contrast declining job op-portunities, poor housing, inadequate medi-cal care, irrelevant education. Just as is urbanAmerica's promised quality of life rapidlydiminishing, so is the true quality of life inrural America.

Getting Destiny Back in Hand ...In a free nation governmental institutions, ofthemselves, cannot envision and executemajor societal changes. Our governmentmerely reflects changes and reacts to thedilemmas brought by change. So great havebecome the problems resulting from thephenomenon of our growth pattern in thepast half - century that government finds itself in a now constant state of ineffectual re-

:- acting. It can be fairly- said, as a result, that

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the destiny of American society is at leastmomentarily out of hand:

It is inconceivable that a nation so sophis-ticated in technology as to be wondering,almost literally, which Planet to aim at nextcannot find solutions to the problems of itsown people. America can solve these prob-lems. We have the wealth, the intellectualcapacity and the national will, but we havenot coordinated these resources in dealingwith the problems before us.

What We Have Lacked Is A Plan ...

The Coalition for Rural America has beenformed to advance the broad interests ofrural America, defined as that part of theUnited States lying outside the major metro-politan areas and embracing non-metro-politan cities, towns, villages, and the opencountryside. We do not propose that ruralAmerica can or should be restored as historyknew it. Least of all do we support unrealisticand cosmetic preservation, through Federalprograms, of rural communities where nolonger exists the required inner-vitality forhealthy community growth. It is our beliefthat the interests of rural America can beadvanced only through policies that recog-nize the achievement of an improved qualityof life for all Americans.

Such a quality of life in our convictioncan be ensured only through the creation ofa viable new environment on America's es-sentially unspoiled countryside an environ-ment of new hope and opportunity, of newchoice for America's citizens now and ingenerations to come.

The Coalition, which is non-partisan inits thrust, but has its greatest strength in thefact that it is bi-partisan, will pursue its objec-tives by",serving as a spokesman for ruralAmericd'In the nation's councils. It is publicadvocate and public eaucaior, and it seeksto mobilize in-a common effort all at the na-

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tional, regional, state and local levels whoshare its goal. We are aware of much whichis good and available. We seek to distill thebest of our national energies and thinking,and sell the collective product in the legis-lative halls of America, thereby molding thelimitless opportunities .before us as a freepeople.

As concerned Americans, to proceed onpremises less elevated than these wouldbrand us unworthy of our heritage.

Will you workto help planAmerica's destiny?To make maximum effectiveness of our con-cern for our national future it is essentialthat we talk and understand the same lan-guage. There is by no means a consensus oneven the most basic definitions in the prob-lems before us.

What is rural America?

What is a healthy community?

What makes up a viable environment?

How do we measure a "quality of life?"These and other questions are explored

in a working document which the Coalitionfor Rural America would like to send to you.We urge you to write for this document andbecome an associate in the efforts of theCoalition for Rural America.

Coalition forRural America

1001 Connecticut AvenueWashington, D.C. 20036

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The Coalition BoardHONORABLE EDWARD T. BREATHITTChairman of the Board(former Governor of Kentucky)HONORABLE NORBERT T. TIEMANNPresident(former Governor of Nebraska)HONORABLE WINTHROP ROCKEFELLERExecutive Vice President(former Governor of Arkansas)A B. PATTESONTreasurerWachovia Bank & Trust Company, N.A.

GLEN JERMSTADSecretary and Executive Director

GEORGE ABSHIERDirector, Community and Industry ProgramsOklahoma State UniversityJAMES H. ALDREDGE(former President of theNational Association of Counties)

ROBERT 0. ANDERSONChairman of the BoardAtlantic Richfield Company

ORIN E. ATKINSPresident and Chief Executive OfficerAshland Oil, IncorporatedHONORABLE JOSEPH W. BARR, JR.(former Secretary. PennsylvaniaDepartment of Community Affairs)HONORABLE DEWEY F. BARTLETT(former Governor of Oklahoma)DR. CHARLES E. BISHOPChancellorUniversity of MarylandHONORABLE JACK CAMPBELL(former Governor of New Mexico)HONORABLE L.ROY COLLINS(former Governor of Florida)

DONALD C. COOKChairman of the Board & PresidentAmerican Electric Power Company, Incorporated

DR. LAWRENCE DAVISPresidentArkansas A.M. & N. College

DR. CLAYTON C. DENMANPresident and Co-DirectorSmall Towns InstituteHONORABLE FRANK FARRAR(former Governor of South Dakota)

HONORABLE ORVILLE L. FREEMAN(former U.S. Secretary ofAgriculture)HERMAN GALLEGOSPresidentU.S Human Resources Corporation

G. B. GUNLOGSONCountryside Development Foundation, Incorporated

PAUL HALLPresidentSeafarers International Union

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H. L. HEMBREE, IIIPresidentArkansas Best Freight CorporationAARON E. HENRYClarksdale, Mississippi

HONORABLE PHILIP H. HOFF(former Governor of Vermont)W. WILSON KINGKinglore Farms, IncorporatedDON F. KIRCHNERPresidentPeoples Trust & Savings Bank

HONORABLE HAROLD LoVANDER(former Governor of Minnesota)DR. WINTHROP LIBBYPresidentUniversity of MaineERNE-ST T. LINDSEYPresidentFarmland Industries, IncorporatedHONORABLE JOHN McCLAUGHRYRepresentativeVermont General Assembly

HONORABLE ROBERT E. MoNAIR(former Governor of South Carolina)E. W. MUELLERPresidentAmerican Country Life Association-KERMIT OVERBYDirector. Legislation and Communications DepartmentNational Rural Electric Cooperative AssociationROBERT B. PAMPLINChairman of the BoardGeorgia-Pacific Corporation

CHARLES 0. PREJEANExecutive DirectorFederation of Southern CooperativesHONORABLE ELVIS J. STAHRPresidentNational Audubon SocietyMILES C. STANLEYPresidentAFL-CIO Appalachian CouncilJULIUS J. STERNChairmen of the BoardWood County Bank, West Virginia_JAMES L. SUNDQUISTSenior FellowThe Brookings InstitutionTHE RIGHT REVEREND MONSIGNOR JOHN GEORGE WEBERExecutive SecretaryNational Catholic Rural Life ConferenceCHARLES YOUNGPresidentE F. Young, Jr., Manufacturing CompanyGORDON ZIMMERMANExecutive SecretaryNational Association of Conservation Districts

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Mr. ROCKEFELLER. The Coalition for Rural America has a 50-manboard of directors, of which 11 are former governorsI have neverbeen able to find out whether we are six Republicans and five Demo-crats, but we are a balanced board, which includes these governors ofStates. It, is bipartisan, it is non-partisan. The other members of thisboard are representative of industry, labor, farm, private interests andordinary.citizens concerned with the-quality of life in rural America.Our membership will be representative of all segments of rural Amer-ica. Although we have been in existence only n very short time, theresponse to our efforts and proposals throughout the Nation has beentremendously encouraging.

I believe that examination of the working paper entitled "Why aCoalition for Rural. America," which I have just tendered into therecord, and you have been so kind as to accept as part of the record,will tell you a little bit more of the philosophic attitudes about why theCoalition for Rural America. Also I believe that the examination ofthat working paper will establish that Our central concern of the Coali-tion for Rural America closely parallels that of this subcommittee inits continuing concern with the problems of this Nation, as evidencedparticularly by its hearings and report, in 1967 and 1968, on small busi-ness in smaller cities and towns; and again by the committee's hearingsin 1970 onrural and urban problems of-small businessmen.

Mr. Chairman, you are to be commended for pursuing this inquiryat a time when maybe some people are faulted. But you are giying theleadership to solving what I believe is one of the most important ofour domestic problems.

I should like to make clear that the Coalition for Rural Americavigorously and enthusiastically supports the proposed 7 percent taxcredit for industries locating in rural America, as proposed in Houseresolution's introduced by Chairman Evins and others before the 92dCongress. Indeed, the Coalition's preliminary statement of goals and

\ objectives adopted in September, 1971, states specifically :In the consideration of President Nixon's proposals for establishment of

an investment tax credit, we will support amendments that will provide a dif-ferential in favor of enterprises that locate in rural areas and increase em-ployment of residents of areas where located, including the chronically under-employed and unemployed.

The Coalition for Rural America earnestly supports the assertionmade by Chairman Evins when, in introducing the Rural Develop-ment Incentive Act of 1971, he described an urgent need for programsto encourage greater development of our free enterprise system in oursmall towns and mral areas. To this we would add the strong beliefthat, along with new jobs and employment opportunities, Americanswho choose to live in rural areas should have the opportunity to secureownership of productive private property so that they too may ac-cumulate an estate, enhance the local tax base and be secure in theirown lives.

Evidence is accumulating that the Nation is commencing to turn itsattention to the development of rural America. The present configura-tion of Federal undertakings is once again being reviewed with aneye toward reorganization of those agencies which administer the manycategorical assistance programs designed to assist the rural. areas ofthis country. A variety of plans for altering the present governmentaldelivery systems is being developed. Several new and different ap-

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proaches for financing Federal Government services are beingproposed.

We all recognize that functional efficiency at the Federal level todevelop rural areas is surely needed, but this must be thatched byincreased local capabilities, State responsibilities and regional flexi-.bility and particularly planning. The Coalition for Rural Americaintends to examine very carefully these various proposals and evaluatethem in light of an appropriate future role for rural America, and the\larger American society into which we shall all evolve. These variousproposals must be closely examined in order to determine they are notmere cosmetic changes in organization charts of Federal agencies. Theymust be examined in terms of the fact that they are going to be perma-nent. So when we talk about Federal programs, we must not be talkingabout fool's gold ; we must be talking about that which will createa strong rural America. We assert the need for a national commitmentto develop the rural areas of this country. We do so in the belief thatrural America should present to every American citizen a viable alter-nativeyou will find one when my brother testifies. I believe we canpresent this viable alternative which every American citizen can choosein pursuing his private interests, his family concerns, and his personallife style. We believe that this national commitment should embody ata minimum a national policy statement and appropriate Federal pro-grams to implement that policy over the next decades.

I will not here burden the record with a reiteration of the longlists of present deficiencies in housing, health services, education,economic opportunity, and quality of life with whiCh the rural areasof this Nation are afflicted. These statistics are depressingly familiarto us all. Still by no means can the true quality of life be measuredby application of mathematical ratios or statistical profiles. Life, likethe environment that the ecologists describe to us, is all of a pieceand contains subtleties not reducible to mathematical formulas. TheCoalition for Rural America believes that a national commitmentto rural development must go beyond policy statement and govern-mental programs, and extend itself into the very lives of the indi-viduals who, in increasing numbers, are seeking their destiny in non-metropolitan areas of this Nation. I am going to repeat there thatit relates to the lives of people, not to formulas.

There is some evidence for the proposition that rural-to-metropoli-tan migration is waning. For this, I am happy. The 1970 census dataindicates that outmigration from-rural communities slowed from 4.6million during the 1950's to 2.4 million during the 1960's. Most of thepopulation losses during the past decade were in the Great Plainsand certain mountainous areas of the Far West. At the same time,population gains were being realized in the southeastern quadrant ofthe -United States, eastern Oklahoma and northern and western Ar-kansas. I am happy to say that my neighboring State of Oklahomaand Arkansas have a gain.

This information offers a potential blessing, if you will. It indicatesthat the tide of migration is changing, or maybe reversing in someinstances. But unfortimately, we do not know the reasons why : Whyare people moving, why are they note? That is why, Mr. Chairman,I am so glad that you are getting people together to talk about thisparticular thing.

The Coalition for Rural America believes that a serious and sus-taining research effort should be aimed at determining some of the

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critical information upon which any realistic national commitmentand programs must be based. We wish to know, for example, muchmore than we now know about those individuals who moved in the1960's and why? What were they seeking when they moved? Whatdid they find after they resettled? We feel it is imperative to knowfactors involved in their personal decisions as they sought. new oppor-tunities, new jobs, new homes- in other areas of the Nation wherethey had not lived previously. With such information it is reasonableto anticipate that we can discover the motivating influences uponwhich meaningful public and private programs can be based.

This committee has concerned itself with another major factor inthe economic development of rural areasventure capital. Indeed,the creation and expansion of rural small business often is directlyaffected either favorably or unfavorably by the availability of de-velopment capital: Your pending legislation looks toward inducingprivate investment to the larger task of rural. development.

The Coalition for Rural American believes that we need to knowmuch about the avdilability, the flow, the magnitude and managementof investment capital inside the United States, thus to determine howand to what extent the present capital circulation system can beutilized to the large social task of economic development of ruralAmerica.

Many studies reflect the availability of total investment capital,both public and private, but seldom is a study of capital flow related togeographic areas in the Nation. We would, hope to interest this com-mittee in concerning itself with these problems of research, particu-larly with regard to the need and availability of investment and devel-opment capital in rural America.

While the Coalition for Rural. America, is too young to have devel-oped a comprehensive program to recommend -to the Congress and tothe Nation, we do have sufficient insight into some of the problems ofrural Areas, the programs which the Federal Government now oper-ates, and proposals now pending to suggest certain aspects which mightbe profitably explored by this committee. Regretahly, we are not hereto give you all of the answers. But we do have the insight, I believe, indeveloping certain aspects.

This committee might well examine the possibility of expandingsome of the existing Federal programs which relate most clearly toeconomic development of rural areas, specifically the so-called 502program of the Small Business Act.. The apparent success of the localdevelopment company vehicle under the 502 program suggests thepossibility for a vital counterpart vehicle. The local development.company and the 502 program provide soft loan money to be used foracquisition of new plants and equipment for rural industries. Toooften, ho-.Sever, we have seen that this is not enough to assure creationor expansion of small business in rural areas. There is also the, vitalneed for working capital. This committee should explore the possibil-ity of legislation authorizing local investment companies as counter-parts to local development companies as a new source, of workingcapital, for rural small business development and ultimately, equityownership.

The almost unqualified success of the Federal guarantee programfurther suggests that such local investment companies should he backedby Federal guarantees. These. local investment companies, like their

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local development company counterparts, would be territorial. Unlikelocal development companies, however, the local investment companyshould be a profitmaking enterprise, its funds composed of federallyguaranteed private investment capital. There is no substitute for thehard business judgment of the private sector in evaluating the worthi-ness of a proposed small business venture. And I think that the localpriVate investor belongs in the picture with this cooperative, maybeguaranteed, program of the Federal Government.

The Coalition for Rural America believes that national rural eco-nomic development policy should not proceed upon political judg-ments concerning economic matters. Our conviction is that controland management of the local investment company should rest in thehands of the private sector within a structure of Federal rural policy.

The investment tax credit device has been utilized by this nation ina number of different contexts, both dome_stically and in develop-mental approaches abroad. The proposed Rural Development In-centive Act of 1971 would provide a system of tax incentives to en-courage commercial and industrial tax credit obtainable by industrywithin the rural context.

The Coalition for Rural America would like to suggest that thiscommittee also investigate the feasibility and consequences of a per-sonal investment tax credit to be earned by private individuals byinvesting their private capital in rural areas. You have available toyou statistics of the amount of money, for instance, going out ofAppalachia into other areas, not being reinvested. I think we needto push to encourage investment of Capital within our local areas.But that is an aside, and I think it is needed. The potential impactof such a program where the indiVidual would have some tax incen-tive, I think, is a very important aspect, to the involvement of ruralAmerica.

The Coalition for Rural America feels that before any new andsweeping rural economic development programs are implementedmuch more needs to be known about the relevance between ruraland urbanand to me, this is one of the major aspects in terms oforderly population growth within our Nation.

These areas of research could conceivably extend from significantcrossroads, reoi.eational areas, to viable towns, to small cities, countiesand even a regionalization of States. Why should I suggest the cov-ering of such a. diversity of areas? The answer I think is very simple.It's there that people live. And therefore, we must have a programthat is sufficiently flexible to accommodate people and their lives,their desires, and allow the people to work with and determine ourdestiny and what is going to be the quality of our destiny.

Mr. Chairman, in your welcomed letter, you invited comment aboutany area wherein the Federal Government might not have respondedconstructively to the plight of rural America. So as I close, I wouldlike to make reference to that. In this regard,, I have chosen to em-phasize my own long-time vigorous advocacy of the concept of reve-mi.o sharing. This concept is inherently fair, inherently sonnd andinherently wise. It is supported by the President, by the Governorsof the States and by many others. Perhaps the perfect forinula hasnot vet been found, but I urge diligent pursuit of the means by whichsignificant revenue sharing can be effectuated, thus affording theflexibility, and I will repeat the word "flexibility," because I think

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that is so important hereso badly needed by the States to solvetheir problems through innovative and creative State leadership.

I am compelled to urge consideration of broad re-evaluation andreform in our Social Security and Welfare programs. In our desireto fulfill with compassion and sincerit7 our role as, we might say,our brother's keeper, regrettablyand Y trust unwittinglywe haveresorted to material solutions to highly personal problems, therebyoverlooking that most precious of human traitshuman dignity. Soin terms Of where can the Federal Government become involved, thisis an area that I think it terribly important for further investigation.

Finally, I hardly need to bring to your attenion both the economicand sociologic impact of the Federal Interstate Highway program onthis great country of ours. That program has had tremendous impacton this nation of ours. What the future of the Highway Trust Fundis going to be, I don't know. I would be foolhardy to speculate. But Ican tell you that the impact of that which has happened with the Fed-eral Highway program to date can be expanded and do much for thegoals of rural America.

But in my concern for the .hetter life of all Americans, and as onewho is deeply grateful for that which rural America has given to meand could readily give to so many others, it is my sincere hope that thisdistinguished committee will give serious thought to the comparableimpact that Federal involvement in our secondary highway systemcould have on the making of rural Americathese great and all toooften misunderstood regionsa pleasant, dynamic aspect of this God-given bounty, the land that we love and of which we are so rightfullyproud. It should be made more available to many, many people.

So, Mr. Chairman, my emotion and my deep feeling for rural Amer-ica may have allowed me to talk too long. I would like to thank youfor the opportunity to be here and to LA you know that a transplantedYankee who is now, for 20 years, as Congressman Hammerschmidt haspointed out, so totally happy-luxural America, I am grateful indeed.

Mr. KLITCZYNSHL Thank you, Governor, for a great statement. Yourtestimony will be very helpful to the committee when we ,Sii; execu-tive session to issue a report to the Congress.

I have several questions to ask of you and time is running short, soI win have Mr. Roe, our Subcommittee Counsel, send these to yourstaff. I would appreciate the answers so we can have them for the rec-ord. You have had a lot of experience, you are a great man and, it isa pleasure to have you before this subcommittee. So if you will takecare of this and get the answers, we will put them in the record.

Mr. ROCKE1.11LLER. I would love to.(The information follows :)

RESPONSES TO QUESTIONS SUBMITTED BY THE, SUBCOMMITTEE TO THE HONORABLEWINTHROP ROCKEFELLER, FORMER GOVERNOR OF ARKANSAS

1. From your experience as governor of Arkansas, what do you feel contrib-utes most to industrial development in rural areas?

In industrial development for rural areas, one must start with what thepossible new industry will produce and the specific, precise elements that it willneedwater, power, transportation, communication, and raw materials.

The Arkansas industrial Development Commission, in the days when I waschairman, did an inventory of every community in the state of 2,500 or more,What did they have in terms of manpower, water, transportation, facilities, etc.?In the process of presenting these various towns to industry officials, we di&

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covered two additional ingredients for our inventory: recreational and culturalopportunities. The proximity of these latter two elements is particularly im-portant to those coming with a re-locating company and become important asthe horizons are broadened for those working in the plant.

One factor that has been particularly advantageous to Arkansas is its cen-tral location. New plants locating in our state are less than twenty-four hoursby truck from seventy-five million personsan excellent and economical marketpotential.

Lowpaying, labor-intensive factories came to our state first. During my yearsas governor, we sought higher-paying industry. Growth of the durable goodindustries resulted purely and simply from two things; one, we identified thetype of industry we would want and went in search of it; two, we createdtask forces in specific fields of industry. As an example, we have a task forceon metals that has studied the potential of bringing more forging tc the state.The aluminum industry gets a major portion of its domestic bauxite from Ark-anE.:..,1' earthbut only a fraction of it has been processed within our state. Weare now correcting the problem.

These task forces are comprised of specialists within an industry who canwin the confidence of other specialists. When a company is moving towardexpansion, we can present a package designed for their particular product.

In' short, industrial location requires determining your resources. deciding thekinds of industry you want and need, and forming groups that can discussthe particular problems of each specialized industry.

2. Would you like to comment on the "new communities" program administeredby the Department of Housing and Urban Development?

The concept of new communities is :in extremely exciting one to rue. Partic-ularly, I would like to see more research and effort directed toward true non-bedroom new communities. That is to say, I should like to see us locate areasof probable future growthareas still nearly virginand build strong newcores for future cities.

I believe with our corporate expertise as a nation we should be able to pre-vent the ill-planned, Mushroom suburban cities. With long-range planning, wecan create instead sensible, liYeable new cities.

3. On page five of your statement you talk about "cosmetic uhanges in organiza-tion charts of Federal agencies." Is it possible that the .President's proposed re-organization i8 merely "cosmetic"?

I have been impressed with the President's re-organization programparticu-larly with some of the later clarifications and re-structuring.

Nevertheless, no re-organization program within itself will solve the problemsof our government. The issue to which we Must address ourselves is the determi-nation of our basic national and priorities. Too often we feel that simplymoving a program from one department to another will solve a problem; but thiswill solve nothing unlessour total bureaucratic structure is built upon a well-articulated national policy. ProgramSmust reflect policy, not establish

4. On page six of your statement you ntentioned that a national commitmentmust go beyond policy and programs and extend itself into the te).y /ices of indi-viduals. Would you explain this in. more detail?

1Vhen I said that a national commitment must ge beyond policy and programs,I was expressing the concern that all too often our federal commitments havenot arisen front the people. Rather, they have resulted from positions to whichcertain officials think our nation should be dedicated. It is absurd to createnational commitments that have little indigenous understanding or support.

Mr. KLuczyNsict. The Chair would like to announce that due topressing business on the floor this afternoon, we will have to adjournthe hearings by 12:00 o'clock noon or as soon as possible thereafter.Each witness is requested to summarize his written statement within15 minutes. The full statement will be placed in the hearing record,.

Again, I want to thank you Governor, for that splendid testimony.At this time, T will yield to the gentleman from California, Mr.

Corman.-Mr,--CoumA N. Thank you, Mr. Chairman. I appreciate the shortage

of time. Yet it is a rare opportunity to have a witness who has had

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such wide experience and one who has touched on two very importantmatters that Congress is attempting to deal with..

First, as to revenue sharing. As you know, the Ways and MeansCommittee has reported out a bill in which the lion's ..share of themoney will bypass the States and go directly to the cities and towns andvillages of the country. It seems to me that any such plan weakensthe opportunity to use revenue sharing as a means of giving the Statessome incentive to innovate the reforms of which the Governor hasspoken. Would you care to comment as to the advisability of ourbypassing the States with the major portion of revenue sharing?

Mr. ROCKEFELLER. For now over 8 years, I have taken a strongposition. that this bypassing of States is wrong. I feel that the Stateand local governments ought to get closer together and not comesolely to 'Washington. So my concept of revenue sharing is that whereinthe State government and the local government can work out basicprograms together.

We have had occasions that are perfectly ridiculous. ,Nobody inthe bureaucracy in Washington, and I include my good Republicancolleague, John Paul Hammerschmidt, can be as close to the prob-lems.as that person who is charged with the responsibility of the ad-

.ministration of the programs. Therefore, when you talk about revenuesharing, reluctantly, I accept some of the concepts which allow ,mu-nicipalities, counties, and smaller elements of government to par-ticipate directly. But at least, we are moving in the right direction.Hopefully, a disi,inguished body like this body will find the flaws inwhat I am afraid is going to exist and ultimately will correct them.

Mr. CORMAN. Thank you, Governor.. I. keep hoping that we willnot legislate in that .field this year in the hope that we will do a betterjob next year. I appreciate your advice.

The other problem with revr.s.mie sharing is, as you know, we arein substantial deficit at the Federal level this year, yet we are goingto finance revenue sharing in one of three ways : Either by cuttingother programs, increasing taxes, or by further increasing the deficit.Would you have any suggestions as to which of those three would bethe better course?

Mr. ROCKEFELLER. Can I work backwards?Mr. CORMAN. Oh, yes, sir; We often do.Mr. ROCKEFELLER. I can start by saying that I think we have so

many local human problems that we need to cope with that theyought to have top priority. And I am not smart enough to suggestto you whether it is more important to go to the moon or do this,that, or the other thing. I do know that we have problems here andthat is why you are gathering together here to deal with local home

..problems. So I- would put my top priority on local home problemsand then I am not smart enough to tell you how to cut down in theother areas.

Mr. CoRmAx. Governor. I suspect you are considerably smarter thanthose of us who have to make the decision.

Just one final question : You have mentioned the dilemma of at-tempting to Yet capital investments in rural areas. It seems to me thatthe great problem with our tax structure has been that over the yearsin an effort to direct the investment of capital, we have given tax in-centives and once given, they are hard to reverse. As you know, in1926, we were afraid all of our Model T's were going to run out of

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gasoline and we gave some rather substantial incentives to the oilindustry. Then we found out we were not building enough apartmenthouses, so we gave further incentives. All down the line we have donethat. NOw the suggestion is that we give further tax incentives forinvestment in rural areas. Yet in doing so we are eroding our tax baseeven further.

I wonder if you think we might successfully get capital investmentin rural areas if we eliminated all these tax incentives and just left itto the sound judgment of the businessman to put his capital where itwill do him the most good ?

Mr. RocKEFELLEa. I could agree with you on the idea ; T do not thinkall of the growth of rural America is. going to relate to tax advantages"in this, that, and the other. We had a very interesting meeting of theCoalition for Rural America where it was pointed out that if youwere a small town banker, you could make 18 percent financing auto-mobiles, but you could only make seven percent, even with a guaranteedfederal loan, on financing agriculture. I think this is an area that weneed really to look very carefully into.

We need free enterprise involved. But free enterprise is going to fol-low the best return. And what we are looking at now is how do weget maybe an equity involvement in rural America, an equity we havelost? We have lost equity in the sense that people are moving off thefarms, people who are buying dr leasing apartments. We have lost atremendous number of those people who are equity owners.

I would hope that as a result of these hearings, we would find a newway of getting people interested in equity involvement in this tre-mendous undeveloped land of ours known as rural America.

Mr. COWMAN. Yes, sir. My point is that the tax code is in a real sensegovernmental interference with the investment of capital, because indoing so we almost insure greater returns in some kinds of investmentthan in others. I suspect that is one of the reasons why capital invest-ment in rural areas has dried up. We have given too many incentivesin the tax code to other kinds of- investments. "Would your purpoSe beserved if we just eliminated all of those artificial incentives and leftit to the sound business judgment of a man as to whether he is going toput his money in apartment houses or oil wells or new plant expansionor agriculture ?

Mr. ROCKEFELLER. Eugene caught that oil well comment.Actually, as far as I can see, what we need to work back toward is

getting more people involved in the responsibility of ownership, equity.There are 30-some odd million people in the United States that havesecurities of some sort. But that is way, way off. They do not go to theactual meeting of the stockholders or this, .tinut, or the other. When youcome back to rural America, you can begin to evolve a philosophy thatwill get people 'owners, in on the growth of our nation. The securities,I do not think, are the answer. I think there it has to be some waywhere, as I mentioned, like the investment corporation under SmallBusiness, where there is actual ownership and somebody who livesthere in that community is watching that enterprise.

Mr. Coam.,,N. Thank you very much, Governor. I appreciate yourresponse.

Mr. KLuczi-Nsiki. Mr. Stanton, any questions?Mr. STANTON. I just have one observation. Your testimony struck

home to me, because my district is about 80 percent rural. Your ob-

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servations concerning the highway trust fund were of particular inter-est to me. The State of Ohio has an interstate system, which is nowabout 95 percent complete. Then Ohio has a state highway system anda county highway system. In most counties, it is very adequate. Butat the township level our problems begin. The difficulty is that in Ohiothe township form of government, under our statutes, was set up onlyfor local control of government. The townships have no baSis for thecollection of money on which to take care of their highway systems.After the last frost, we have a short season before winter sets in again,and we do not have any solid base. We have no way of funding themaintenance of the lower echelon of connecting roads between smallertowns in my rural area. So I compliment you on the thought that at-tention should be given down to the smallest roads. Just in using thisone example, I think you have shown a thorough grasp on this sub-ject and I wish your organization the very best.

'Mr, ROCKEFELLER. Having a brother that has a certain responsi-bility in a large State, we get into this question of whether we candivert highway trust funds to rapid transit, to this, that, or the otherthing. And I do not think I can influence my brother. But I am con-vinced that as we talk here about developing rural America, I can giveyou one example of a city in Arkansas, El Dorado, where 26 indus-tries have come there with the idea of locating, but the highway sys-tem does not allow them to reach the interstate. And my brief referencehere was purely and simply to suggest that we have many. growthareas, economic growth areas, in rural Arkansas and in rural-Americathat, if we could devise a way of helping them get out, or get in, thenI think we can do a lot to create tax revenues. And these are tremen-dously important. But 26 industries visited that town and wanted tolocate there except for highways.

So as we move from the completion of our present interstate high-way systemI believe in rapid transit, I believe in all the other thingsthat go with it, but I am saying to you that I think we can producecreativity in rural America by the recognition of growth centers ifthey were properly served by good highways.

Mr. STANTON. Thank you, Mr. Chairman.Mr. KLIICZYNSKI. The gentleman from Minnesota, Mr. Berg land?Mr. BERGLAND. I have no questions. Thank you, Mr. Chairman.Mr. KLUCZYNSKI. Thank you again, Governor. It is nice to be with

you and I hope to be with you again on that poor farm of yours. Takecare of it, so I will be able to enjoy it on the next trip.

Mr. ROCKEFELLER. I am now starting something which you will lievery pleased with, Mr. Chairman, because of having been there. Be-cause of our pollution problems and this, that, and the other, we aregoing to put in a central sewerage system so that, we can recycle andconserve.

Mr. KLIICZYNSE.I. Thank you.The next witness is Mr. Clay L. Cochran, Executive Director of the

Rural Housing Alliance.

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TESTIMONY OF CLAY L. COCHRAN, EXECUTIVE DIRECTOR, RURALHOUSING ALLIANCE, ACCOMPANIED BY DAVID RAPHAEL, AS-SISTANT DIRECTOR, AND PHILIP BROWN, DIRECTOR OFINFORMATION

Mr. COCHRAN. Mr. Chairman, in the interest of time, if you willinsert my statement in the record, I will try to conserve time with myverbal remarks.

KLUCZYNSKI. Without objection, it is so ordered. Your preparedstatement will be made a part of the record and you may proceed as youwish.

Mr. COCHRAN. I have with me this morning our Assistant Director,DaVid Raphael, and our Information Director, Philip Brown. Ithought something might come up that they could handle better than Icould.

We appreciate your invitation to be here.The Rural Housing Alliance is a nonprofit educational organization,

funded initially by the Ford Foundation, to do research and educationon the problems of housing and community facilities in small townsand rural areas.

We have been in existence about 5 years with a small staff ham-mering away at these problems in an effort to find out the scope of them,because such amazing little attention has been paid to them. It was theresult of our First National Rural Housin g Conference, that our re-search director, Dr. Rucker, discovered that two-thirds of the substanand housing in the country is in small towns and rural areas. That facthas been available froni census data for years, but no one had troubledto highlight it and our announcement of it was greeted with ratherwidespread skepticism. Such is the nature of social belief when a factis unveiled which runs contrary to the "commonsense" of thecommunity.

All societies have their myths, ours no less then others. One of themwhich seems to run very strongly through the thinking in our societyis what we have come to tag as metropoliana, a kind of "metro" psy-chology which looks upon urbanization as inevitable and a social goodin itself. But more important is the accompanying presumption that ifurba.nization is good and inevitable, the more urbanization, the better.So the bigger the cities and the more sparsely settled the hinterland,the richer the nation. economically and culturally.

This state of social hypnosis has been carried to the point where it isdifficult for many people even to think about towns of 50,000 popula-tion or under and those of the strictly rural areas at all, except to con-demn deficiencies in humanitarian terms, and to try to devise somemeans for getting the miserable peasantry out there into the central citywhere, after some lingering in the ghettoes, they can look forward tothe joys of affluence in suburbia.

When you attempt to deal with problems of small towns and ruralareas, you encounter a kind of gray blanket through which you haveto struggle to get people to even discuss the problems in meaningfulterms. And it is in part this kind of social hypnosis that has permittedus to contrive such things as price control programs without any realregard for what they would do to population '!'distribution or the dis-tribution of good things in small towns and rural areas, because if a

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particular program resulted in the expulsion of people from rural'areas, it was presumed they were going on to a better life somewhereelse. Only when it began to appear (in recent years) that our con-tempt for the organic relationships between rural, small town, andmore urban areas was getting us into trouble did we begin to rethinkour way, or as Walton Hamilton wrote, "impose some direction onthe headlong course of events."

Another thing which has misled a great many people into a kind ofsecurity blanket of a different type is that most of us over the yearsbelieved that the Department of Agriculture, which is a departmentof agribusiness, largely, was really a department of rural affairs; thatis, that its research and concern was fdr all rural people. This issimply an assumption contrary to fact. The recent discovery thatthe Department is primarily preoccupied with the problems of com-mercial agriculture and the packers, processors, and so forth, doesnot mean that the Department has-suddenly changed. Over the years,there has really been considerably less than a department of ruralaffairs looking after rural people.

Thu basic using I am trying to say on metropoliana and USDA isthat more or less unconsciously, we have assumed that we were look-ing at development and change in the country in a balanced waywhen, in fact, we were preoccupied with he problems of the citiesand we operated on the false assumPtion that somebody was lookingafter the people in small towns and rural areas.

There is a, great deal we do not know about our society and the onereason we do. not know more about it is that we do not ask the rightquestionsla-the early years,in working with thiS program, as well asin other jobg, with Rural Electric Cooperatives, I kept raising ques-tions which only now are beginning to be raised in other places as towhat dove really know about the impact of Federal programs onsmall towns and rural areas? The answer is that we still do not know agreat aal about it, because implicitly, we did not ask.

In a recent publication by the Senate Committee on GovernmentOperations, we come as close to attempting to measure at least theexpenditures, if not the impact, of those expenditures of the FederalGovernment, on small towns and rural areas. But as I point out insome detail in my statement, the figures are pretty crude because wehad not asked the questions long enough before to begin to lay abasis for proper developmen4, of .figures. The results are shockinn-enough but if we begin to refine these- figures. I am convinced. tharithey will be even more striking, some of their findings being that ex-penditures for health services run four times as great in the metroareas, welfare payments four times as great, manpower training threetimes as great, on a per capita basis.

Now, with at least 25 percent of the national income of this emmtryunder the control of the Federal government, we simply cannot dis-regard the fact that Federal policies and Federal expenditures arendinn- to influence the distribution of population, income, everythingelse-. And we think there has been far too little attention paid to that.

In the area of community water facilities and sewer systems, thereis another commentary on small towns and rural communities. Threeyears ago, a survey showed that 32,000 rural communities lackeddecent water systems and 30,000 lacked adequate sewer systems. Thetotal cost of those today would run at least $13 or 14 billion, up from

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the $11 billion that was estimated 3 years ago. What are we doing tomeet this bathe need which is going to do more to determine whereindustry goes than any 7.5 percent tax gimmick ?

This year, we are putting $342 million into such facilities fromFarmers Home Administration. The President is withholding $58 mil-lion in grants. He says he will use most, but not all of them next year.At this rate, it will be well beyond the year 2000 before we catch upwith the need that existed in 1969.

Over a recent three year period, Farmers Home told 7,200 ruralcommunities to withdraw their applications for water and sewer,total $3 billion: The reason? No point in maintaining false hopesamong community leaders that loans and grants were going to bemade.

Adequate water and sewerage systems are something more than ameans of bolstering human pride. They are needed to protect the healthof citizens, to attract expanding industries, and to retain existing com-mercial establishments.

In the area of housing, on which we spend most of our time, it is notdifficult to chart the deficiencies in the programs over the years. In pub-lic housing, we have done a poor enough job since 1935, overall, withsomething. like a million units under management, but about 24 per-cent of those are in towns of 25,000 and below, the significance beingthat if 60 percent of the bad housing is in small towns and rural areas,we have put 24 percent of the only form of federally subsidized hous-ing which will reach the really poor in those areas.

In 40 percent of the counties, there is not even a public housingauthority and many of those who have such authorities have builtvery few units. One reason, of course, was that the subsidy from theFederal level was not deep enough, and with the Brooke Amendmentand other changes deepening the subsidy, it is possible that this willaccelerate a change already under way, that smaller towns and ruralcommunities will use public housing. But it is not likely that they aregoing to use much of it. There is a half billion dollars backlog already(several months ago) of requests for public housing funds; the Presi-dent has impounded about $100 million of the available funds and isobviously not very friendly to using public housing in meeting thehousing needs of people.

One of the reasons, of course, that state and local governments havebeen able to do less in these areas than they should have done has beenthe distorted system of priorities in the Federal Government in thelast 20 years, where we have poured enormous amounts of money intothings like space games and the military, leaving the burden of sup-porting education and local services -to State and local governments,whose revenues are not adequate to it. The result is something like ataxpayer's revolt. We go out to try Lo help a low income family get ahouse, even tinder the subsidized programs that the'Congress has voted,what do we find? That the taxes on a $15,000 house in the State ofNew Jersey are $750 a year, so that you could giVe many families ahouse and they still could not afford it. And there is no way out of that

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except for the Federal Government to begin to expend not just a littlebit, but a great deal more money in picking up the public burden ofsupporting those facilities -which the lo6u1, and state governments havehad to bear in recent years.

In the non-public housinn-,area, of course, the Federal Housing Ad-ministration is the oldest the agencies set up to improve employ-ment, priMarily. It never functioned much in rural areas. The savingsand loan associations, fairly old institutions, also functioned relativelylittle in small towns and rural areas. About the only- agency Which wasreally set up to serve these needs was the Farmers'Home Administra-tion.

Time prevents me from going into much detail on that, but basic-ally, the Farmers Home Administration is totally incapable of carry-ing its share of this load, primarily because, neither the White Houseno the Congress will support adequate administrative funds for theagency. Its capacity to lend teclmically is limited by a Bureau of theBudget ceiling oninsured loans. But in fact, the ceiling is imposed bythe iack of administrative funds to handle the. loans. And as a result,the housing need in small towns and rural areas goes largely unmet.

There have been improvements in recent years. The Congress hasextended the area of Farmers Home from towns with populations of5,500 to 10,000. We think the population maximum ought to be 25,000;and make some other changes, particularly in the farm-labor housingprogram.

Where do we go from litre' Before the House Banking and Cur-rency- Committee last year as a part of the study we did. we indicateda whole area, a shopping list of changes trying to evolve all of theexisting programs away from a kind. of pragmatic discriminationagainst small towns and rural areas. The Senate picked up relativelyfew of those and the House has not reported yet We are even dubiousthat you can revamp the old agencies to serve small towns and ruralareas. We really think the time must come, unless we are willing towait out the century for changes, that we make some kind of dramaticdeparture and create a new agency and give them a definite.time ,spanand say, go out and eliminate the rural slmns and provide decent wa-ter and sewer facilities here and. now, in much the same way that theCongress did on rural electrification 30 or 40 years ago.

We are pleased to be here with you today. We commend you forpushing these studies. because we are not provincial minded people.We do not think the hope of the world is in rural areas or big cattleranches or anything else, but that it does lie in a balanced distributionof population. The solution to that is that when the Congress does some-thing in one area, it does so taking cognizance of the fact that theFederal government is the biggest influence in the community and

anythinganythin the government ''Les or does not do affects the distribu-tion of population and the welfare of people.

(The statement of Clay L. Cochran follows :)

STATEmENT Crsy L. COCIERAN, ExEctrivE DIRECTOR, RURAL HOUSINGALLIANCE

I one played for u. while with the theory of economic determi-nism and could Make little out of -it. If 8uppties at best a muttiptensformuta who numerous terms are often evasive. Among these,individuals in strategic positions have their part in shaping thecourse of events, and the pevaiting intellectual climate has muchto do with enlarging or contracting the opportunity at hand . . .

I wonder . . . if the ealt-is for a program of -measures to be real-ized. That approach seems to me to have the static quality of anattempt to realize Utopia.. Is not the demand rather for taking anamateur /tint, in the role of the gods and attempting to 'impose somedirection upon the headlong course of events? The great need -is fora revival, of statecraft, a field in which inventions are even morenecessary than in technology. The art of politicsor rather of politi-cal economyis a craft of contriving and adapting 'measures to theever-changing needs of society.

Solutions have a way of becoming as obsolete as the problemswhich touch them off. The course of human events needs to be metwith series of ever new answers.

Mr. Chairman and members of the committee, we appreeiate your invitationto appear before the Subcommittee to comment on the future of small town andrural America, particularly the problems of housing and community facilities.

The Rural Housing Alliance is a nonprofit educational organization, fundedinitially by the .Ford Foundation. to do research and education on the problemsof housing and community facilities hi small towns and rural areas.'Rural Housing AM-al:cc,Purpose

RHA came into existence in la te 1909, its first hired staff becoming available inJanuary, 1907. For over a years WO have been trying to measure the dimensionsof housing, Water and sewer problems of small towns and rural_ areas, and (luringthat period, we have produced. a body of publications, which are a mixture ofSecondary research and efforts to guide the community in "hustling" the exist-ing housing system, (IS Well as making it aware of deficiencies in the existingprograms. (A copy of our most recent publications list is attached as AppendixItem A.)National .Rural Housing Conference

It is indicative not so notch our original. genius as of the prevailing intellec-tual climate" that we put together the First National Rural Housing Conferencein June, 1909. (with funds provided by the Ford Foundation) at which approxi-mately one hundred ea refnlly selected scholars, public servants, and leadersattempted to -bring the rural housing problem into focus and evolve meansfor dealing with that problem. (The Report of the Conference is entitled "Peo-ple Have A Right . . . To Decent: Housing" which has bad wide distribution. Acopy is attached for the Committee files.) It was in preparation or a workingpaper for this Conference that Dr. George Rucker "discovered" the grim factthat 2,f{ of the substandard housingis in small towns and rural areas. althoughthose same areas contain only about 30 percent of the population. r.1.)hat facthad been available from Census data for years, but no one had troubled to high-light it, and our announcement of it was greeted with rather Widespread skep-tiOsm. Such is the nature of social belief when a fact which runs contrary tothe "common sense" of the community is unveiled.

This recitation of a brief background is not designed as a public relationsannouncement for REIA, but rather to indicate a part of the nature of the prob-lem in meeting the needs of small town and rural people, i.e., a eondition of toonearly universal "disconcern."On the Nature of Reality Versus Mythology

All societies have their mythology. ours no less so that other and as thequotation from Walton Hamilton on the first page of this statement is intendedto indicate, a society which allows its mythology to remain static over long pe-

Walton Hamilton to Horace Gray, December 31. 1957. Excerpted from Volume r, Num-ber 1 of The Journal of the Unapplied Sciences, Winter, .1900, pp. 1S-19.

We generally define a small town ns our with a population of 25.000 or less. a definitionwhich is functional in our field because 25,000 seems to he a breaking point below whichmany of the existing housing programs function poorly, It at all. It is an arbitrary figurereflecting our experience.

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Hods with inadequate attention to reality gets,iu trouble. As Bernard Shawonce wrote, "People who believe absurdities commit atrocites" and so do gov-erfunents and societies,Metropo liana

Industrialization has created a "metro" psychology (metropoliana.) in thiscountry which looks upon urbanization as inevitable and a social good in itself,.but more important is the accompanying presumption that if urbaniztition isgood and inevitable, the more nrbanilation, the better, -ipso facto, the biggerthe cities and the more sparsely settled the hinterland, the .richer the nationeconomially and culturally. This.state of social hypnosis has been carried tothe point where itlis diffieuit for many people to even think about the problemsof towns of 50.000 and under and those of the strictly rural areas at all, exceptto condemn deficiencies there is humanitarian terms, and try to devise smilemeans for getting that miserable peasa,dry into the central city where theycan, after some lingering in the ghettos, look forward to the joys of aillueneeand culture of suburbia.

Given an implicit. tacit, or overt' devotion to the concept of inetropoliana. iu-div-iduals, organized groups and governments at various levels pursue policieswhich appear to be based on a common, scientifically bolwarked belief. We werepreoccupied with the problems of the cities, for it was there that the' future ofthe nation rested in terms of culture, power. prosperity, productivity . . youname it. When we sought to solve the most apparent rural problem, a disparityof income between rural and urban people, and did it by means of restrictingcrop production and rewarding volnme of output (and size of operation) whichmeant inevitably that millions of rural people would be forced' to migrate tothe cities, we slept comfortably at night, secure in the arms of ntetropollana,.In the absence of such security we might-have contrived to bolster the incomesand improved the living levels of rural people through something like the Bran-nan Plan and cooperatives and by extending the benefits of labor and welfarelegislation on an equitable basis to rural people, but given our version of a com-fort blanket we proceeded with a price support program which (coupled withchanges in technology) wrought havoc with rural life and the lives of millions ofrural people.

Only when it began to appear that our contempt for the organic relationshipsbetween, rural, and small town, and more urban was getting us in trouble, here andthere doubts began to rise as to whether we should as Hamilton said, attemptto "impose direction on the headlong course of events . . ."

The problems of small towns and rural areas are nothing new, Rural pop-Illa-tion has declined for decades, accelerating after the war; many small townshave declined or nearly disappeared, but they are not vanishing. Indeed in the1960's, of the 4,300 towns with population from 2,500 to 10,000, 72 per cent ofthem increased in population. Considering the discrimination they have suf-fered under Federal programs, this shows a heartening vitality.'

The poverty and lack of opportunity in rural areas relates in part to metro-polianti, brit it also reflects technological change and the American convictionthat big-ness and concentration of power are signs of progress and efficiency. (Thecapacity of people to distinguish between what Veblen called pecuniary efficiency.i.e., the capacity to ambush considerable quantities of loose cash and industrialefficiency, i.e., low real estate costs and quality production is ubiquitous . . .)Be that as it may, during these years, the eyes of the nation were fixed on thecities, and the Department. of Agriculture was busy, in the main, in looking afterthe interests of what has come to be known as the "agribusiness" complex,the eommercial farmers, packers, processors, etc. Contrary to general opinion,the Department's role as the champion of agribusiness is not new, and the failureto recognize this has meant that to the extent that we consmered the Departmenta department of "Rural Affairs", i.e., rural people we have been misled, and theresult has been a kind of intellectual vacuum. If the USDA, for which rendDepartment of Rural. Affairs, did not. care what was happening to small townand rural people, who did? The answer is very simple: Nobody much.

Liailcing at the Broader Pict arc of AM(TiCilib Life:For the most computerized people in the world, there is a great deal we do

not knowquantatively or qualitativelyabout our own country. One enters thearena as a champion of the rights of rural people to clean water, modern sani-

2The Census shows that number of towns under 1,000 grew from 9,836 to 0,870 In the1960's ; towns of 1.000 to 2,500 grew- from 3,416 to -3,515. Also 200 non-metro towns of10,000 to 50,000 grew by 15 per cent or awe compared to national average of 1:l per cent.

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tation disposal and deeent housing only to be challenged by the Knights Errantof Metropoliana and their neanderthal allies the Blind Yeoman- of the Free Mar-ket/Faith. We are told that the housing system serves the people if the peopleare. in the right place and have enough income, and if they are not, then. theyshofild beget themselves to the right places, i.e., "growth centers" (whatever theyare) or to the towns and cities. When we know that there are already hordesof people in those areas who lhae-miserably in poor housing or are supported bydegrading welfare programs' all we are offered by way of explanation is awave, now and then, of statistical incense but nothing more substantial.

The crude facts of the last decade have laid to rest the concept that the greatcities are the ultimate haven and refuge of the rural people who seek opportunity,but concepts like "growth centers" emerge as substitute mythsanything toavoid facing up to need here and now in small towns and rural areas. To

ichallenge the concept of "growth centers" today is considered irresponsible andunscientificalmost un- American.Lookin'y for the Facts

Reality must rest on facts, however evasive they may be, and when one triesto find out why some small towns and most rural areas haVe been decliningwhen there appears to be no satisfactory alternative location for their population,one encounters a faulty Mosaic of data which in turn is the product of pre-occupation with metropoliana, . . . In Hamilton's iN'ord:,; we encounter the "pre-vailing intellectual climate . . ." which has so much to do with "enlarging or con-tracting the opportunity at hand".

REIN has ascertained some of the facts on housing and community-facilitieswhich I wilt detail subsequently, but since our attempts to get a. hearing on nec-essary changes, innovations and modifications of existing legislation and policiesare so frequently countered by the myopia engendered by the mythology ofwetropotiana, let me dwell for a moment on the larger field.Government and Public Policy as Forces for Change

Intrinsic in the concept of metropoliana, is the belief that the nrivate marketand the private economy and technology are the moving forces in our society,and unless we are willing-to kill or cripple the golden egg laying goose, we mustadjust ourselves to the results. But this viewpoint is only a prejudice. The Fed-eral government (not to mention the states and other levels of government)controls something like 25 per cent of the income of the people of this nation,directly. and directs the expenditures or allocation of an indeterminate but largepercentage above that level. It follows that the pattern of Federal expenditureSand the nature of Federal policies in allocating funds and resources through sub-sidies and other devices like insured credit have a,greater effect ou the distribu-tion of income and population and opportunity than any other discernible factor.

Bence a counter to the magic of metropoliana, and its free market forces. isthe concept of government as a maker and director of ehatige. Whether popula-tion is pouring out of rural areas into "growth center"', the great; central cities,or suburbia or pouring in, Federal expenditures and Federal subsidies and othercontrivances are obviously a major factor influencing that flow.Deficiencies of Data Influonce Programs

Much of the data on our society are as metropoliana oriented as is policy. Fortifl. mple, figures on housing starts in small towns and rural areas are highly

deficient. little more than guesswork. Figures on unemployment are even worse. . . so it goes in many vital areas.

It is encouraging that more and more efforts are being made to ascertain theeeonomic facts of life in small towns and rural areas, but the very crudeness ofthe results is eloquent witness to lousy neglect. A recent publication by the Sen-ate Committee on Government Operations, December. 1071, entitled "The Eco-nomic and Social Condition of Rural America in the 1970's" is an ambitious at-tempt to analyze the distribution of Federal outlays among U.S. counties. Re-lying on the single most competent source of rural data, the Economic ResearchService of the Department of Agriculture, the results are pretty shocking, butthey a re also imprecise and incomplete.

Commenting in the LOW income Housing Bulletin, Dr. George Ruckersays:

This Indira ten no bias against welfare programsbat against many current welfarepolicies and aid levels.

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"For several years, the Office of Economic Opportunity has been compilingfrom the various .1rederal agencies data on their program outlays on a county-by-county basis. Last year, the Economic Research Service of the Department orAgriculture used the FY '70 data to prepare, for the Senate Government Oper-ations Committee, a study on "The Distribution of Federal Outlays Among U.S.Counties." The basic data leave much to be desired. Not all programs are reported,for one thing. (Public housing and rent supplements are prime examples. HUDSays that financial data on a county basis just aren't available.) Those that arereported are not necessarily handled on a comparable basis. (Figures for FHA'sinsured housing loan programs are on a "face value" basis, which is okay as ameasure of program level, but not exactly the same as the actual outlays oftax money.) Finally, it appears that many times the county figures are estimatesof pro rata shares, rather than actual figures.

"Having entered those caveats, the study at least reflects the Federal govern,ment's best guess as to how its activities are distributed, and that saws largelvconfirms the pattern of "metropoliana". Per capita income in no-metropolitancounties is more than $1,000 below that in methopol.itan counties and (perhapshi obedience to Matthew 25:29), the level of per capita outlays in those countiesis more than $100 less than in metro counties. The figures for the housing pro-grams (excluding public housing and rent supplements) work out to $91. percapita in metro counties, $40 per capita in non-metro counties, and only $35 percapita in the most rural counties."

The "Report Highlights" states that Federal spending on human resourcesdevelopment, education, health; welfare, vocational rehabilitation, manpowertraining and development are disportionally metropolitan. Expenditures forhealth services are four times as great, welfare payments 4 times as great, man-power training 3 times as great in metro counties as in non-metro areas.

Non-metro counties account for 66 per cent of substandard housing, but re-ceives only 16 per cent of Federal housing assistance.

Non-metro counties account for 50 per cent of all children between the agesof 6 and 17 in. poverty-level families, but, receive only 20 per cent of all Federalchild welfare service funds 24 per cent of ADC payments ; 26 per cent of Head-start and follow-through assistance, and a more "generous" 41 per cent of Fed-eral outlays for elementary and secondary education.

Eight out of every 10 Federal dollars spent on defense, NASA, AEC, a total of63.9 billion go to metro areas .

However deficient and incomplete the data are, they clearly indicate that theFederal government is a major force in allocating income to the metropolitanareas, and that the discrimination against the people of small towns and ruralareas is gross.Community FacilitiesWater and Sewer

The sad plight of the rural community water and sewer system developmentprogram is another commentary on the way small towns get the short end of thestick-. Three years ago a survey showed that approximately 32,000 rural 'com-munities lacked decent water systems and 30,000 lacked adequate sewer systems.The total cost of financing these systeins today_would run between $14 and $15billion.

What are we doing to meet this basic need? This year .approximately $342million is being provided by FliI4. The President is withholding $58 million ingrants. He says he will use most of the withheld funds 1973, but not all.

At this rate it will be well beyond the year 2000 before we catch up with theneed that existed in 1969. Over a recent three-year period the Farmers HomeAdministration told 7,200 rural communities to withdraw applications totaling$1 billion. Reason : No point in raising false hopes among community leaders.

But adequate water and sewer systems are something more than a means ofbolstering civic pride. These facilities are needed to protect the health of ourcitizens. to attract expanding industries and to retain existing commercialestablishments.Housing

Federal intervention. in the free housing market became effeftive. in early NewDeal days. Other than limited programs carried out by the resettlementistration and sub.aquent USDA agencies, the two major programs were publichousing and Federally insured loans, FHA. Originally the public housing pro-gram was a Federal. program, but a Supreme court decision compelled the Con-gress to rewrite the law which resulted in placing the initiative with local gov-

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ernment, which is another way of saying that it left the housing needs of thepoor up to the local government. Only about a million dwelling units have beenput under management since 1935 and only 255,000 of these or 24 percent are intowns of below 25,000 and below (1960 Census). In recent years there has beenan encouraging increase in the number of units built in rural areas, but it isapparent that a large percentage of these are for the elderly and that there isstill less than an obvious intent to meet the needs of other groups through publichousing.

The failure of local, state and regional governmental units to take advantageof the public housing program for their low-income population doubtlessly runs-to many factors almost 40 percent of all counties still have no public housingprogram and many of those who do have have built only a few units. One reasonfor this failure is obvious: the subsidies until recently have been, insufficient tohouse many of the really poor who tend to be concentrated in small towns and ,rural areas. Local governments could not afford or would not pay the additional

. subsidy. With the passage of the Brooke amendment the subsidy is deepened,but even today if a local government wishes to subsidize its poor people it willhave to dig into its own coffers which are already badly strained for other es-sen ti a l services.

Moreover, although there is a backlog of over a half billion in applications.'President Nixon has impounded nearly $100 million for meeting that need andshows,no indication of either releasing those funds or requesting more. Publichousing, the only program which has a subsidy large enough to meet much, ifnot all, of the needs of very low income people in rural communities is not pop-ular with the administration.Financial Pres. sures on State and Local Governments

It is necessary, Mr. Chairman, to point out that one reason many local gov-ernments cannot afford to Subsidize housing for their low-income people is the re-sult of the lopsided priorities for Federal expenditures for a generation whichhave resulted in funneling Federal surpluses into space and War games, into im-perialism if you please, leaving too much of the burden of supporting public serv-ices on state and local governments. It is not, possibly, that we could not have tit-forded more Federal assistance for housing in spite of the level of military ex-penditures, but we have also tended to use the Federal tax system as the keydevice to maintain prosperity, so that over and over in recent years when therewas an alleged need for a shot in the arm to the economy, that shot has taken theform of a tax reduction, usually weighted in the directions of the big corpora-tions and the upper income groups. This has cut sharply into the funds whichcould have been available .for social expenditures including housing. One Senatorestimates that for corporation taxes alone the loss through tax reductions, directlyor through increased loopholes or allowances have reduced Federal funds by $9billion for this year and $17 billion for nest year. These losses are from corpora-tion taxes comparing 1960 to current years.

As long as such Policies prevail, public housing is not going to be used on anyscale to remedy the scandal of rural housing.Non-Public Housing ProgramInsured Loans

The second major early program was the Federal Housing Administration un-der various names which estaloished some standards and insured loans by privatelenders to home builders. This fogram was conceived basically as a job creatingmechanism and it continued over the years as a. credit agency for -0) middle-in-come groups and (2) nonrural residents. Since FHA can insure loans only wherethere is a private lending agency to make the loans, this has meant that from thebeginning it' has an overwhelming, urban bias. By and large it has not functionedin small towns and rural areas, nor is it likely to. It is estimated that 14 percentof FHA assisted units are in nonmetropoll tan areas.

Savings and Loan Associations are also relatively hoary institutions aimed athousing financing, but here again we find that Savings and Loan Associations inonly half of the nation's metropolitan areas accounted for three-fourths of the.residential mortgages, leaving the remaining of one-fourth split between Savingand Loan Associations in the other Standard Metropolitan Statistical Areas andall nonmetropolitan areas.

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Farmers. Home AdministrationEarly FmHA housing programs. were either limited to farm dwellings, and

mighty few of them, or, under R.W;ettlement and FSA (predecessor agencies) tosome resettlement and farm labO,r community housing. The two latter programswere wiped out during the 1940s. The farm labor housing program was the mostcreative in our history and nothing like it was re-established until last year whenFinHA began to make 90 percent grants and 10 percent loans at one percent in-terest. In the interim we had lost virtually a quarter of a century in dealing withthe housing needs of the most exploited part Of the nation's workforce.

Beginning in 1961, the Congress authorinn FimiHA to administer a non-farmhousing program, initially with direct loans from the Treasury. This was an ad-mission that neither the HIID programs nor private lenders were adequate tomeeting the rural need. But direct loans have "budgetary impact" i.e. they tend tounbalance the budget of the Federal government. They are not any different infact from FHA insured loans, but under the primitive bookkeeping system of theFederal government they appear, it is asserted, to jeopardize the foundations ofthe republic. 'Ultimately the Congress shifted most of FmHA's housing loans fromdirect to insured. This was achieved at a great increase in the burden on thetaxpayer, but it reckoned with the taboo of budgetary impact and therefore re-ceived a modest blessing from the budgetary magicians.

The record of FmHA in making housing loans in recent years is impressive.The program started in 1949 and 1962 a relative handful of families, 32,000,had been housed with FmFIA assistance. By 1972 this figure had risen to 602,000.In 1973 the agency plans to loan $2 billion for housing, four times the amountadvanced in 1969.

But these statistics pale when you measure them against the real housingneeds of rural people. The Farmers Home program is falling far short of meet-ing the goals set by Congress in 1968. In 1971, for example, all of the housingprograms that involve subsidies fell short of meeting the goals, but none failedso miserably as Farmers Home. FmHA assisted starts and rehabilitations dur-ing 1971 were only 56 percent of what the Congress said was needed to erasebad housing, and the estimate of the Congress was very conservative.'

Also, while the dollars loaned are climbing, the number of houses bought,built or remodeled are actually declining. In the first six months of fiscal 1972the FmHA made 49,457 loans ; in the same period the previous year they made51.524.

Inflation is taking its toll. The average initial loan this year is $1,400 largerthan last.. In addition, it seems quite likely that FintIA will not lend all that is authorizedfor this year. The program level is $1.5 billion and as of December 31 the agencyhad loaned $665 million. In fiscal 1971 FmHA wound up the year with $94 mil-lion of authorized housing funds unspent. This year the amount left over maybe even greater. The prospect of the agency being able to lend $2 billion in 1973seems unlikely.

Despite the abolition of the above moderate FmHA loan program three yearsago, FinHA does not and cannot reach the really poor. The biggest subsidy it canoffer is one percent interest and that is not enough.

But the most serious drawback to FmHA'S housing programs is the deficiencyin administrative funds which limits the program in size and tends to compel' itto serve higher income families. And matters grow worse, . . .

The Changing Profile of FmHA's 502 BorrowerFigures on the characteristics of borrowers -under Farmers Home Adminis-

tration's homeownership program for low- and Moderate-income families inFiscal 1971 have recently become available. A comparison of these statistics with

4I don't think the Administration has ever divided the national housing goal betweenurban and rural, they did allocate it between HUD and USDA (in the 2nd AnnualReportlcalling for a total of 1.436.000 PrnITA units over the 1.0 years; 403.000 of themto be achieved In the first four fiscal years (thru FY '72). It is this goal that can he com-pared to the 273,000 starts and rehabilitations FraTIA expects to have thru thisthey are about s on target over the first four years, but that's in part because the goalsreport assigned them production they had virtually made for the first couple of years.Currently they are at about 60% or less of the assigned target and an averaging of thetotal assigned goal (rather than a rising production curve) would require 594,000 unitsin the first four years. or more than twice what they have 11111Tinged.

RFTA has not assigned units by agency but slam we think the total assisted housinggoal for small towns and rural areas shook] be 13 million instead of HUD's 6 million,FmFIA's portion should be more like 3.2 million instead of 1.5 million.

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those for 'Fiscal 196$ demonstrates the way in which rising housing costs havealready more than offset the effect of the interest credit program. The figures are

Fiscal year-1968 1971

Distribution of borrowers by unadjusted income (percent):Under $4,000 13.5 11.5$4,000 to $5,999 '37.1 25.4$6,000 to $7,999 42.9 38.0$8,000 and above 6. 5 25.1

Average unadjusted income $5, 793 $6, 464Average size of house:

Square feet of total area' 1, 375 1, 307Square feet of living area 1, 114 1, 078

Average cash cost of house $11, 068 $14, 235

As can be seen, despite the initiation in FY '69 of the interest credit program,allowing FinHA to reduce the interest rate to borrowers as low as 1%, theagency's ability to reach low-income families has lessened dramatically in thelast four years. The average income of borrowers went up my 11%; the proportionof borrowers with incenses of '$8,000 and above went from less than 10% to morethan 25%.

The figures on the size and cost of houses illustrate why. The average size ofthe house has decreased somewhat (living area by 3 %, total area by 5%), butthe cash cost has increased by almost 29%. In short, the subsidy provided byinterest credits has gone to the house and lot (or rather, to those who snake,market and finance them), not to the borrower.

The White House under three presidents, Kennedy, Johnson and Nixon hasstarved FmHA or administrative funds and in recent years aggravated that con-dition by imposing personnel ceilings. They are currently under orders to reducepersonnel by 5 percent below August 1971.

Moreover, the Congress. although slightly more generous, has not offset WhiteHouse penury and the program stumbles along at an unjustifiably low level.Improvements in Programs

The picture is not entirely black. The Congress has made some improvementsin housing legislation affecting small towns and rural areas in recent years.These include increasing the size of town Fm1.1A could serve from 5,000 to 10,000;providing technical assistance funds to promote.self-help housing by FmHA;dramatically improving the farm labor housing program as indicated earlier ;but with inadequate funds, often impounded by the President.4.-.Inboth FHA and FmHA the interest credit gimmick which makes it possibleto reduce interest to as low as one percent was approved, This appeared to bea step forward, a very expensive step to the taxpayer, but forward nevertheless.Unfortunately rising prices of land and construction are diminishing the benefitsto housing consumers.

It is really incredible that the Congress and the White House would rely on aninterest subsidy program along with insured loans that is as expensive as justgiving the homes away to the recipients, for this is the case if the subsidy isdown to one percent interest. The taxpayers are the victims of superstition inFederal accounting practices, and to the extent that the costs of the programs areincreased the poor fall victim at the same time.

These comments by no means exhaust the fund of criticism which can bedirected at existing .programs, but they give some indication of the inadequacy.Where Do We Go From Here?

It is apparent that we can take one of several roads from here into the future.We can stay on the one we are on and low income people in small towns andrural areas can wait 'til Kingdom Come.

We can, with White House consent and cooperation, greatly increase the useof public housing in meeting the need.

We can jigger the existing agencies, modify their authority, increase theirauthorizations and hope to evolute into something better. Attached. as` Item. Bis a shopping list of changes needed in housing law to help us along the road.The Senate has adopted six of these changes in its version of the Housing Billfor 1972, not very significant ones. The House has yet to report.

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But the changes in law, ate without much meaning as long as there is no dispo-sition on the part of the Congress or the White House to solve this problem .. .

-because 'it take-moner-Moreover, I- am-- very- -doubtful- tha we-canevolu te, flown .this road with the existing agencies.Evolution May Not Be The Way

There. has been increasing concern in recent years over the apparent inca pea cityor unwillingness of HUD to function outside metropolitan areas. One responsewas to establish the Office of Small Town Services in HTJD. This was hailed asa big step. Assistant Secretary Samuel C. Jackson wrote:

"The creation of the Office of Small Town SOyiees,Within HUD.'s Office. ofMetropolitan Development underscores our concern toward ensuring that thesmall community point of view and condition are fully recognied in developingpolicy and program decisions.

"Thus, the Office of Small Town Services serves as a central point in HUD forfocusing on the problems of smaller communities. . .."

That writing was published in July, 1909: Woe be unto the concerned smallcommunities, for in the interim the Office of Small Town Services has beendismantled.

At another point, Representative Wright Patman, concerned about the ruralhOusing problem proposed to create an Assistant Secretary of HUD to concen-trate on the problem. Secretary Romney countered by proposing to create a TaskForce made up of HUD and USDA/FmHA representatives to cope with theproblem. That Task Force prepared a rather comprehensive and candid reportIndicating that HUD had not been performing in towns of 25,000 and below,Same being no news to anybody outside HUD, but instead of plugging ahead oncorrective measures, the Task Force folded its bureaucratic tent and vanishedinto the night.

Congress in 196S approved Section 106 of the housing act providing, amongother things, for the development of an education, technical assistance and de-livery system for low income people, and could have been particularly vital torural people. Section 106(b) provided seed money and it has been used, but HUDsteadfastly refused to carry out the instructions in Section 106(a). We attemptedto get the program going; Senator Mondale, the original author of the language,did the best he could. The duplicity of HUD's lawyers overwhelmed us all. In1970 the section was revised and strong, clear report language was included inthe Senate report. It alstiliauthorized $5 million a year. What happened? The ad-ministration asked for no funds. Congress appropriated $1 million. The Presi-dent impounded the funds, ostensibly as a major weapon against inflation.(Laughter). Finally the funds were released and HUD issued Circular 4403.4 asguidelines. The guidelines prohibit grants to local organizations: They permitgrants only to those who give "technical assistance" to local groups. At the mo-ment there is a plethora of technical assistance available and an -almost totaldeficit of local administrative funds. Once again, HUD has refused to carry out.a congressionally authorized program. The pattern is obvious. HUD's whole his-tory is one of dealing with already established institutions whether they werehousing authorities or private realtors or lenders. It is incapable to comprehend-ing that there is a need for local housing delivery systems and going about thetask of developing them. Metropolianaand, in this case, an apparent dedicationto the presumed interests of private contractors. We are at a loss for any otherexplanation. We do not believe that the development of local or area housingdelivery systems will jeopardize private contractors; we think the opposite.that it will result in an upsurge of building activity in small towns and ruralareas, redounding to the benefit of all of the people, particularly the buildingcontractor and supplier. But for some reason this appears to be utterly incom-prehensible to HUD.The Need For. New Approaches Outside USDA And The Tower Of Babel (HUD)

We are increasingly convinced that if any dramatic progress is to be made inproviding small town and rural people with decent housing and modern waterand sewer facilities as well. as community facilities like clay care centers andother community buildings, that it must be done by an entirely new agency, an

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independent agency with no official ties to either the Department of Agricultureor HUD.'

Oul. experiences 'make us very dubious about the old agencies. They indicatethat it is possible that the Congress should create some new agency, possiblyalong the lines of S. 2S97 and H.R. 11974, creating an Emergency Rural HousingAdministration. This or some equally, dramatic action would constitute an openaffirmation of the intent of the Congress to solve this problem within a fixedperiod of time..'Summary Of The Emergency Rural Housing Administration

Any person is eligible for service who lives or desires to live in a rural areaor community and who cannot secure minimum housing facilities by any othermeans within two years. Rural area is defined as any "open country or any placeoutside a standard metropolitan statistical area," and small community is de-fined as a town of 25,000 people or less.

The EREIA would be an independent agency administered by a person ap-pointed by the President and approved by the,Senate. He would be instructed toaccomplish his task in 5 years. The Administrator would be authorized to hireemployees without regard to the civil service laws, to enable him to invole lowincome and minority people who are qualified but cannot breach the Chit Servicebarriers.

The agency can lend money to buy or rehabilitate houses, for ownership orrental, It can lend money at one percent for ownership and poStpone payment onhalf the principal, No eligible person can be required to pay more than 20 percentof his adjusted income for principal, interest, taxes and insurance but a family/nay pay more if it desires in order to be eligible for a loan. (Adjusted incomeis total income less 5 percent, less $300 for each member of the family and less$1.000 for any disabled or mentally retarded member.)

`The agency can buy land and develop it for housing. It can finance rentalprojects, water and sewer and other community facilities. In rental projects, noperson will be required to pay more than 25 percent of his adjusted income forthe total cost of rent, heat, water and electricity.

Any family renting from the agency will be permitted to buy the propertywhenever feasible.

Tile Administrator may enter into "area responsibility anTeements",with anylocal agency, meaning that a local agency can participate only if it agreeS to meetthe total need in its area. The ERTIA may furnish supplemental assistance toother programs, for example, it could supplement public housing or FarmersHome subsidies.

A dramatically important section provides that no eligible person shall be re-quired to relocate to facilitate economic development, meaning that no person canbe forced to move to please some planner who believes he should live somewhereother than where he wants to be, marking a pause if not not an end to thepropaganda for forcing people into so-called "growth centers".

The law would require that houses be built to last 50 years with minimummaintenance costs, and that the plans for housing and location shall be "devel-oped with the active participation" of the people to be. served. The Administratoris required to provide for the people with lowest incomes first, and provide themwith home ownership whenever possible as opposed to rent.'

The financing of the program- is in marked contrast to most other programswhich involve expensive subsidies to private lenders. 'Under this program, con-struction would be financed with Treasury credit N1,11101 is far cheaper thanprivate interest subsidies. The Congress-would appropriate $500 millidn a year(less any repaid funds) to finance administration and the retirement of debt tothe Treasury.

If such a bill were enacted, it should take us far clown the road. There areother measures needed. The Congress is going to have to face up to reforming

5 Mr. Chairman, I do not holieve that bigness (private or public) moans efficiency orpromotes democracy: The trend for years has been to consolidate one Federal agency afteranother into the major departments and another such drive is currently underway. HUDand HEW are Towers of ]label. far too hit: and full of different if not conflicting interestsfor effective administration, The Department of Agricolture Is overwhelmingly the Depart-ment of Agri-Business and the non-agribusiness agencies get the hind tit year after year.One eommentator recently said that If the trend toward consolidation continuos. ultimatelywe will have only one :Federal Department and then the President can abolish it and dothe Raper work In the White House. or I wo1)1(1 add, eontraet.,:ont the Federal governmentto one of the handful of bIg corporations who are rapidly achieving the same degree ofconcentration in the private sector. I suggest that it is time to break tip the big ones, inand ont of government.

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the tax system which rests far too heavily on low income people, particularlystate and local property taxes. It should long since have taken steps to recapturea large percentage of all unearned increment on land to put into a land bankingtrust :fund to lower or subsidize the cost Of land for building sites for home, pub-lic .Caeilities and parks.... The least yon :..an do is stop subsidizing land specula-tion with capital gains privileges, but it would be far better to capture some ofthose gains for a trust fund.

The solutions we thought we had to the housing problems a generation ago,and even more recently, are obsolete, made ineffective by time and vested interestsand -the changing nature of our economy. It is time for some new quest .ons andsonic new answers.

The future of rural areas and small towns are going to be very closely relatedto their ability to secure adequate decent housing, water and sanitation facilities.

We cornmeud you for pressing air inquiry into these problems as a means ofeliciting ideas and focussing attention on them.

Mr. KLuoz.vxkc.i..Let the Chair make an announcement.The Chair has just been informed that J. Edgar Hoover died in his

sleep last .night. We are all sorry to learn of this. Mr. Hoover has done.a wonderful job.

Mr. Cochran, we want to thank you for that wonderful testimony.We are proud to have you. We all know you are doing a Wonderfuljob and we are happy to have your testimony.

You speak of creating a new agency for rural America. Don't youthink that the problems of rural America can be solved by our presentagencies? Do we have to create a new agency?

Mr. CodunAN. Well, Mr. Chairman, I think as far as public housingis concerned, if there were a real effort on the part of HUT) or someother agency, even iiicluding 0E0, to push that program, and if itweren't for that half billion dollar backlog of applications, publichousing might be made to work. I think public housing could andshould be used in a lot of innovative ways. But outside that particulararea, you have CO turn to private loans, subsidized loans. In that area,neither the Congress nor the White House has shown any dispositionto rev up the old agencies and provide them with adequate funds andmake them function. There is usually so much resistance to the changesthat are brought about within the agencies that we sometimes think itwould just be better to turn over a new leaf and assign somebody thejob of going out there and utilizing all of the tools that are available.You do not abolish Farmers Home, you do not abolish public hous-ing. But hopefully, if there were enough support for a really new ap-proach, there would also be enough support to provide the housingassistance agencies with enough funds to meet the requests coming inout of rural areas. We would like to see a kind of whole-istic approachto the problems of the rural areas, rather than seeing agencies scatteredall over the lot and nobody carrying through or taking on the wholeproblem.

Mr. KtioczY.xsic.i. I guess that is the purpose of the legislationnow pending in Mr. Chet Holifield's Committee on Govermnent Op-orations.

Is that right, Mr. Gorman ?Mr. CORINIAN. Yes sir, I believe that is one of the objectives.Mr. Icr,uczyNsKr. I understand that bill Will be out in the next two

weeks, and of course, it may strongly affect. the Public Works Com-mittee. HUD already has a lot of their own problems with buildinghomes and everything. I am curious as to how they are going to buildroads.

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Mr. COCHRAN. Mr. Chairman, do You really believe that makingthe government ageneies bigger and' bigger and bigger is going tomake them function better and better and better?

Mr. KLUCZYNSKI. No. I have-been around long enough to know thatfrwhen we create a new agency with only 50 or 100 people, in 2 or 3 years

time, there are 20,000 to 30,000. Then we have to put up a new building.That is my experience with the Federal Government. You can believeme when I say that.

Mr. COCHRAN. They didn't function better, did they?Mr. KLUCZYNSKI. I do not think so, no. Absolutely not.Mr. Gorman, any questions?Mr. CORMAN. Thank you, Mr. Chairman.I certainly appreciate the testimony.One of the things I have been confused about and I wonder if you

would have any accurate statistics as to taking cities or towns of 50,000or less. Where do most of the people live who live in towns of thatsize? Do they in truth live in scattered rural areas or do they livein 'metropolitan areas as merely fragments of local government? Doyou have any. figures on that at all ?

Mr. COCHRAN. None I can conjure up. State that again briefly forme.

Mr. CORMAN. 'lake my own district. I have a city of 20,000 perTle.Now, my district is a suburb of Los Angeles. Those. 20,000 people

live in a very dense metro area. 'We have 78 cities in our county anda great nuw ber of them are 50,000 or under. It seems to me we makea mistake when we start trying to legislate relating to the size of thecity and think that we are extending aid out into the hinterland, whereyou have a city of 25 to 50 thousand and you have a little breathingspell of 10 or 20 miles, and then another city. Because most of thesecities, I believe, are clustered in counties like Los Angeles or Cook orsome other place around the country:I did not know if your organiza-tion had any statistics.

Mr. Comrim-N. Let us take a look at it, but one othe things I skimmedover in my speech here was when HUD and the USDA set up that taskforce R. couple of years ago to look into their services in rural areas,they drew a line at the same point we have over the years. That is25,000, because that is the town, not a nice little prosperous suburbof Los Angeles where HITD's insured loan programs do not functiontoo well, because the lending institutions are not there. But howeveryou draw that line at 50 or 25, how many are really a part of megalop-olis, I do not lmow.

Mr. CORMAN. At, either level, I would be interested in your findings.(Additional materials submitted by Mr. Cochran follow :)

While Farmers Home Administration legislative authority extends to townsof 10,000 and below, internal regulations provide that no such town can beserved if it is associated with a metropolitan or non-rural area. The regulationsare included in USDAFHA Administration Letter 54(444), dated May 3, 1971.

Two factors determine whether or not an extension of authority to 25,000will significantly affect the ability of Farmers Home and of the subsidizedhousing programs to reach an unserved population :

(al can freestanding. "rural" towns of 25,000 or lesS be served by existingprograms? Our testimony and our experience indicate that because of the sparse-ness of lending institutions and available credit in these towns, they cannotuse HUD programs, other than public housing.

(b) Mr. Corman's question precisely, are there any people in freestanding(not suburban) towns of less than 25,000? We attempt to supply some evidencethat there are indeed.

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The statistics would imply that when a state is highly urbanized, such asCalifornia or New York-, the assumption that most towns of this size (10,000

, to 25,000) are suburbs is well-founded. But in other states with few metropolitancenters, more than half the towns of this size are freestanding and serve ruralareas. And in states with no real metropolitan area, virtually all the townsbelow 25,000 population are rural in character. But even the large urban stateshave a sizeable number of these towns, and a sizeable population in them.

(Statistical table follows :)SURVEY OF 9 STATES INDICATED THE FOLLOWING FIGURES FROM THE 1970 CENSUS OF POPULATION

Towns of 10,000 to 25,000

Outside SMSA's (rural)Within SMSA's (not

urbanized) Within SMSA's (urbanized)

State Number Population Number Population Number Population

Alabama 14 198, 891 2 25, 058 5 83,135California 19 286.475 21 317, 797 104 1 ,762, 150Florida 19 256,402 4 ' 59,267 33 572,025Minnesota__ _ ______ 11 ' 144;301 4 50,940 16 283,528New York 19 295, 876 5 79,994 84 .1, 314, 796South Dakota 5 66,629 0 0Tennessee_ 13 189, 240 4 60,499 3 46, 510Washington 13 202,833 0 12 211,759Wisconsin 10 149, 546 1 16, 555 19 290, 807

Note: The 1st column was compiled for 25 other States as well. In these 34 States alone, there are some 363 towns of10,000 to 25,000 population outside metropolitant areas, with a total population in these towns of 5,430,355.

Mr. ConmAx. Another thing I want to ask; it seems that we startedthe theory of farm subsidies to preserve the small family farmer. But.1 know one of my former constituents, John Wayne, gets about athifd of a million dollars a year, and he does live downtown. I amwondering if the family farmer would not be better off if we justdid away with that operation altogether ? Because at least his -bigcompetitor would not have his hand up to his elbow in the Federaltill.

Mr. COCHRAN. Well, over the years, coming out of a. basidally ruralcommunity, I was always sympathetic to the idea of trying to createsome kind of parity of income between rural people and urbanpeople. But it was obvious to me by the late thirtiesI was sitting in amigratory labor camp in the Rio Grande Valleythat the pricesupport program was expelling the tenant and sharecroppers in vastnumbers. It was redistributing population, not income, except up-wards to the landowner.

Over the years, I was always a supporter of something along thelines of the Braman plan so that we could put a floor under the pricesof farm income up to a certain point and then, if the big ones arereally that efficient, let them go. If they cannot produce without thesupport, then let them sell their land back to people who can.

We not only had a wrong-headed price support program, but youfrom. California laiow that for a while there after the war, we werebrining in n, half million braceros a year to beat down wages, whichmeant that the farmer who hired little or no hired labor was at aterrible disadvantage compared to the man who was enjoying anenormous subsidy. The discrimination has been there in many areasincluding the social security program. For 20 years, we have talkedabout saving the family farm and in one Federal program afteranother, we have undermined it.

Mr. COWMAN. I am wondering, if farm labor attains the samestrength that industrial labor has, that maybe that is our final answer?

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In other words; they are going to have to negotiate for their livingstandards with agribusiness, but if they are in a position to do iffrom a position of strength, then maybe the farm laborer has adecent living and a lot of people might rather be out there on aharvester than sitting in a plant screwing on bolts. But if he isgoing to get a dollar an hour on the combine and $4 an hour in thefactory, he is going to opt for that second job.

Mr. COCHRAN. Unless we contrive to give them some tax allowancesor something to offset

Mr. CORMAN. Oh, goodness, Why don't we take away all those taxallowances we have given those other folks?

Mr. CocuRAN.I was being sarcasticI am with you.Mr. CORMAN. I think we have been meddlino. too much with free.

enterprise with these tax incentives. We ought to get out of thatbusiness and let that hardheaded businessman put his money whereit will do him the most good without all this artificial tax incentive.

Mr. COCHRAN. I am for it WTe have just carried the use of the taxsystemwe just hardly have a tax system, anymore. WTe just have asystem of tax subsidies. That is one reason the Federal Governmentcannot finance the things it needs to do. WTe are busy subsidizing some-where all the time with funds that ought to be going into the Federaltill to be used for social services: I have no quarrel with your view.

Mr. CORMAN. I appreciate you I. observation and could not agree morewith it. Thank. you.

Mr. COCTIRA.N. Thank you.Mr. KrurczyNsfa. Do ,you have any questions, Mr. Stanton?Mr. STANTON. Just one question.Mr. Cochran, we are in the process of marking up the housing bill

on the full Committee. Have you been following that?Mr. COCHRAN. We have tried to, in the House committee, yes.Mr. STANTON. There was a title 5 in the bill for a long time which

would give local officials more say in where to put the real Govern-ment subsidized program. Today, as you say, public housing, as such,has a backlog, and. as we know, needs more money, but the big empha-sis has been on 235 and 236. There was some discussion of a

big5 in

which local authorities would have more control over where theseDQP.P7S went-T*4 your organization take a stand on it?

Mr, Coorni,--(to Mr. Brown). Are you familiar with this ?Mr. BROWN. No.Mr. COCHRAN. We are just ignorant on it. Title 5, we normally think

of as the Rural Housing Act. Is this another title 5 ?Mr. STANTON. No, it would not directly apply to rural housing, be-

cause it was an attempt by some of us on the committee. Today, in 235and 236, you have a combination of big builders and a FHA local re-gional director who determine where subsidized housing is going.

Mr. COCHRAN. Well, we are very interested but ignorant. Maybe wecan get back and learn something about it.

Mr. STANTON. T. am just curious.Thank you, Mr. Chairman.(The information follows :)

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SUGGESTED AMEND ENTS To TITLE V OF 'TILE: HOUSING ACT OF 1940( AS All ENDED )

SECTION 501

501(a) (1) after "Virgin Islands," insert "and the Trust Territories andGuam,"..

501(a)(4)(B) insert after last word "or if combined with a loan for improve-ment, alteration or repairs would likely cause a hardship for the applicant,a lid"

501(a) (4) (C) after "thereat" strike out ", and" and insert-in lieu thereof

501(a) (4) (D) delete.501(b) (2) strike out "Sections 502 and 504" and insert in lieu thereof "this

title".Add new Section 501,(e) "The Secretary shall establish a system of appeals

for applicants denied assistance under this title, insuring due process, and shalladvise every potential applicant of the procedures of said system, in writing.,in terms comprehensible to the applicant, at the time of the applicant's initialdiscussion with Farmers Home Administration Personnel."

Ada new Section. 501(f) "The Secretary shall facilitate the use of any federal,state or local program which can in any way be used to further the purposesof this title."

Add 91 ow Section 501(g) "The Secretary shall provide a system whereby bor-rowers under this title may make periodic payments for the purposes of taxes,insurance and such other necessary expenses as the Secretary may deem appro-priate. Such payments shall be held in escrow by the Secretary and paid 'out atthe appropriate time by him for the appropriate purposes. Such escrow accountsshall bear interest at the same effective rate as the borrower is paying and suchinterest shall be credited ,t0 the borrower's escrow account. The Secretary shallnotify a borrower in writing when his loan payments are delinquent."

SECTION 502

502(a) first sentence, after the words "with interest," where they first appear,strike out "giving due consideration to the income and earning capacity of theapplicant and his .family from the farm and other sources, and the maintenanceof a reasonable standard of living for the owner and the occupants of said farm,"and inserting in lieu thereof, "from income derived from any legal source,".

502(b) (i) after last word, adding, "provided that for any loan under this.title a member or an organization of an Indian Tribe or Nation living on landsheld in trust or otherwise restricted, will be required to give only such securityas he may have, if any :"

SECTION 504

.504 (a) is deleted and in its place is substituted, "in the event the Secretarydetermines that an eligible applicant cannot qualify for a loan under the provi-sions of Sections 502 and 503 and that repairs or improvements should be madeto a rural dwelling occupied by him, in order to make such dwelling safe andsanitary and remove hazards to the health of the occupant, his family, or thecommunity, and that repairs should be made to farm buildings in order to removehazards and make such buildings safe, the Secretary may make a grant or acombined loan and grant, to the applicant to cover the cost of improvements oradditions such as repairing roofs, providing toilet facilities, providing con-venient and sanitary water supply. supplying screens, repairing- or providingstructural supports, or making similar repairs, additions or improvements, in-cluding all preliminary and installation costs in obtaining central water andsewer service. No assistance shall be extended to any one individual under thissubsection in the form of a loan, grant or combined loan and grant in ex-cess of -$4,000. Any portion of the sums advanced to the borrower i:reated as aloan shall be secured and be repayable within 20 years in accordance with theprinciples and conditions set forth in this title, provided that a loan for lessthan $2,500 need be evidenced only by a promissory note. Sums made availableby grant may be made subject to the conditions set out in this title for theportection of the Government with respect to contributions made on loans bythe Secretary.

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SECTION 506

506(c) strike out the words "farm housing" and insert in lieu thereof, "ruralhousing" wherever it appears in the subsection.

506(d) is deleted and insert in lieu thereof the following : "(d) The Secretarymay carry out the research and study programs authorized by subsections (b)and (c) through grants made by him on such terms, conditions, and standardsas he may prescribe to latid-grant colleges' established pursuant to the Act ofJuly 2, 1S62 (7 U.S.C. 301 -30S) or through such other private or public organiza-tions as he may select."

506(e) strike out the words "farm housing" and insert in lieu thereof, "ruralhousing" wherever it appears in the subsection.

SECTION 507

507 insert after the words "concurrent resolution of Congress" each time itappears therein the following : "or during the period beginning after January 31,1955, and ending on August 4, 1964, or during the Vietnam era (as defined inSection 101 (29) of title 3S, United States Code)".

507 third sentence insert before the period at the end thereof the following :or era".

SECTION 508

508(b) is deleted and inserted in lieu thereof is the following : "(b) The Com-mittees utilized or appointed pursuant to this section may examine applicationsOf persons desiring- to obtain the benefits of Subsection 501(a) (1) and 501(a) (2)as they relate to the successful operation of a farm and may submit recommen-dations to the Secretary with respect to each applicant as to whether the applicantis eligible o receive such benefits, whether by reason of his character, ability, andexperience, he is likely successfully to carry out undertakings required of himunder a loan under those subsections, and whether the farm with respect to whichthe application is made is of such character that there is a reasonable likelihoodthat the making of the loan requested will carry out the purposes of this title.The committees may also certify to the Secretary as the amount of the loan."

SECTION 510

510 insert " (n)" after "Section 510. ".510 redesignate paragraphs (a)(g) as paragraphs (1)(7) respectively.510 redesignate subparagraphs (1) and (2) of paragraph (3) (as hereinabove

redesignated) a's subparagraphs (A) and (B) respectively. Add at the end ofa new Stamectinn 510(1)_ as follows "(b) That in any case in which a loan orgrant is made under this title with respect to real property, any individualadmitted to the practice of law in the State in which such real property is locatedand regularly engaged in ttfe practice of law 111 such State shall be eligible to dealwith the Secretary in any matter with respect to such loan as legal counsel forhe recipient of such loan.

SECTION 513 9

513 is deleted and substituted in its place is as follows:"See. 513. There is hereby authorized to .be appropriated to the Secretary

(a ) such sums as may be necessary to meet payments on notes or other obliga-tions issued by the Secretary under Section 511 equal to (i) the aggregate of thecontributions made by the Secretary in the form of credits on principal due onloans made pursuant to Section 503, and (ii) the interest due on a similar sumrepresented by notes or other obligations issued by the Secretary ; (b) not toexceed $100.000,000 for loans and grants pursuant to Section .504 during theperiod beginning July 1. 1956. and ending October 1, 1975; (c) not to exceed$200,000,000 for financial assistance pursuant to Section 516 for the period endingOctober 1, 1975; (d) not to exceed $5,000,000 per year for research and study pro-grams pursuant to subsections (b), (c), and (d) of Section 506 during the periodbeginning July 1, 1961, and ending October 1, 1975.: (d) such further sums asmay be necessary to enable the Secretary to carry out the provisions of this title ;and (f) such sums as may be required by the Secretary to administer the pro-visions of Sections 235 and 230 of the National Housing Act."

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SECTION 520

520 is deleted and substituted therefor is as follows: "As used in this title, theterms 'rural' and 'rural area' mean any place which is not contained within aStandard Metropolitan Statistical Area or any open country, or any place, town,village, or city which is within a Standard Metropolitan Statistical Area andhas a population of less than 25,000 persons."

SECTION 521

521(a) is deleted and substituted therefor is a new subsection as follows:-Sec. 521 (a) (1) Notwithstanding the provisions of Section 502, 504, 517, and515, loans to persons of low or moderate income under Section 502, 504 or 517.and loans under Section 515 to provide rental or cooperative housing and relatedfacilities for persons and families of low or moderate income or elderly personsand elderly families, shall bear interest at a rate prescribed by the Secretary atnot less than a rate determined annually by the Secretary of the Treasury takinginto consideration the current average market yield on outstanding marketableobligations of the United States with remaining periods maturity comparableto the average maturities of such loans, adjusted to the nearest one-eight of 1per centum, less not to exceed the difference between the adjusted rates deter-mining by the Secretary of the Treasury and 1 per centum per annum : Provided,that such a loan may be made only when the Secretary determines that theneeds of the applicant for necessary housing cannot be met with financial as-sistance from other sources including assistance under Section 235 or 236 of theNational Housing Act: Provided further, That interest on loans under Section502, 504 or 517 to victims of natural disaster shall not exceed the rate whichwould be applicable to such loans under Section 502 or 504 without regard tothis section.

"(2) When necessary in order to enable a person of low income to provideadequate housing and related facilities for himself and his family, the Secretarymay make or insure a loan under Section 517 and paragraph (1) of this sub-section on terms which, with respect to a portion of the loan not to excess50 percent for Section 502 and 515 loans and 90 per cent for 504 loans, may pro-vide that such portion-

"(A) shall bear interest after but not before it becomes due under clause(II) or is reamortized under clause (C) of this paragraph :

"(B) shall become due upon expiration of the amortization period or uponfull payment of the balance of the loan or in the event that without theSecretary's written consent or approval, the mortgaged property or any in-terest therein is transferred or ceases to be occupied by the borrower ordefault occurs with respect to any obligation under the loan or mortgage,whichever occurs earliest ; and

"(C) on becoming due, may be amortized for payment of principal andinterest in installments over a period not exceeding 33 years in the case of,sa. Section 502 loan, 20 years in the case of a Section 504 loan, or 50 yearsin the case of a Section 515 loan, from the date of the amortization agree-ment, if the Secretary determines that the borrower cannot obtain a re-financing loan from other sources upon terms and conditions which he couldreasonably be expected to fulfill and that the amortization is reasonablynecessary to carry out the purpose of the loan or to protect the Governmentagainst probable loss."

5 21( b) after the word "502" insert ", 504".521(c) strike the word "nonprincipal" where it appears, Strike the words

"interest due" where they appear and substitute in lieu thereof the word ''re-ceipts".

SECTION 52 3

523(b) (1) (B) insert after "hereof ;" in last linc' thereof the following: "Pro-vided that. the Secretary may advance funds under this paragraph to organi-zations receiving assistance under (b) (1) (A) of this section, to enable themto establish contingency land revolving accounts. Such advances shall be non-interest bearing and shall be repaid to the Secretary at the expiration of thegrant period of the organization :"

523(f) strikes "$5,000,000"-an'insert in lieu thereof "$10,000.000." Strike theyear "1973" wherever it appears and insert "1975" in lieu thereof.

Add new Section, 525 as follows: "Sec. 525(a) The Secretary may insuretitles to land which are otherwise uninsurable by private insurance companies

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4S

because of remote mastamling claims or encumbrances to enable eligible per-sons holding such land to benefit from this title.

(b) The'sSecretary may use funds from the Rural Housing Insurance Fundfor purposes of this section.

Add. new Section 526 as follows: "Sec. 526(a). The Secretary may makegrants to or contract with, public or private nonprofit corporations, agencies,institutions, organizations, and other associations approved by him, to pay partor all of the costs of developing. conducting, administering, or coordinatingeffective and comprehensive programs of technical and supervisory assistancewhich will aid needy low-income individuals and their families in benefitingfrom any federal, state or local housing program which could be used in ruralareas as defined in this title.

(b) The Secretary is authorized to make loans to nonprofit organizationsfor the necessary expenses, prior to construction, in planning, and obtainingfinancing for, the rehabilitation or construction of housing, and the acquisitionof land, for low-income families under any federal, state or local housing prograin which could be used in rural areas defined in this title. Such loansshall be made without interest and shall be for the reasonable costs expectedto be incurred in planning, and in obtaining financing for, such housing priorto the availability of financing, including, but not limited to preliminary sur-veys and analyses of market needs, preliminary site engineering and architec-tural fees, site acquisition, application and mortgage commitment fees, andconstruction loan fees and discounts. The Secretary shall require repayment ofloans made under this subsection, under such terms and conditions as he mayrequire, upon completition of the project or sooner, and may cancel any part orall of a loan if he determines that it cannot be recovered from the proceedsof any permanent loan made to finance the rehabilitation or construction of thehousing.

(e) There are hereby authorized to be appropriated for the purposes of sub-section (a), $10.000.000 for any one fiscal year, and for subsection (b), $20,000.-000. Any amounts so appropriated shalt remain available until expended, andany amounts authorized for any fiseal year under this paragraph but not appro-priated may be appropriated for any succeeding fiscal year.

fd) All funds appropriated for the purposes of subsection (b) shall bedeposited in a fund which shall be known as the Low Income Sponsor Fund, andwhich shall be available,without fiscal year limitation and be administered bythe Secretary as a revolving fund for carrying out the purposes of that sub-section. Stuns received in repayment of loans made under this subsection shallbe deposited in such fund.

EXPLANATION OF AMENDMENTS TO TITLE V OF TILE HOUSING ACT OF 1949

SECTION 501

501(a) (1). Expands the authority of the Secretary of Agriculture to enablehim to extend benefits under Title V to the Trust Territories.

501(a) (4) (B), (U), (D). Would allow the Secretary to refinance indebted-ness for eligible applicants when failure to refinance would likely result in theapplicant's loss of his necessary dwelling or essential farm buildings and thedebt to be refinanced is not held or insured by the United States or any agencythereof ; or it a loan for improvement, alteration or repairs is made, failure torefinance the prior debt would cause a hardship for the applicant.

501(h) (2). Extends the authority of the Secretary to make loans to ownersof leaseholds to all programs under this title.

501(c). A new subsection would require the Secretary to establish a systemof appeals whereby an applicant denied assistance would =be afforded a dueprocess hearing.

501(f). A new subsection would require the Secretary to facilitate otherfederal state or, local programs which, if used in'conjunction with Title V pro-grams, would promote better housing in rural areas.

501(g). A new subsection would require the Secretary to establish a systemof escrow accounts to enable borrowers to better budget for the payment of taxes,insurance, and other expenses. The Secretary is authorized to pay interest atthe same effective rate to the borrower as the borrower is paying on this loan.The subsection also provides that the Secretary shall notify a borrower in writingwhen his loan payments are overdue.

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SECTION 502

502(a). Would require the Secretary, in determining eligibility, not to dis-criminate as to the source of an applicant's income. Words deleted by thisamendment are intended to eliminate the practice of viewing a low-incomingperson's housing needs as a residuum of higher basic needs.

502(b). Authorizes the Secretary to take whatever security that is available,if any, for loans made under this title to members of an Inidan Tribe or Nationliving on reservation hind or similar land which is otherwise restricted.

SECTION 504

Expands the amount of a loan and grant or combination of the two for re-habilitation under this section to maximum amount of $4,000. It limits the termof the loan (with the exception of deferred principal payments under Section 521)to 20 years. it provides that loans of less than $2,500 need not be secured andshould he evidenced by a promissory note.

SECTION 500

J06 (c) and (c). Expands the Secretary's authority to carry out a program ofresearch, study, and analysis of farm housing to include all rural housing.

506((1). Expands the Secretary's authority to contract for research and studyprograms to any private or public organization.

SECTION 507

Expands the authority of the Secretary to grant a "veteran's preference" toapplicants under this title to include veterans of the armed services duringthe Vietnam era.

SECTION 50S

-508(b). Restricts the use of county committees, which primarily consist offarmers, to determine the eligibility and amount of loans of applicants for farmownership loans or other loans dealing with farming operations.

SECTION 510

Would add to the administrative powers of the Secretary the provision thatany licensed attorney regularly practicing law in the state where a loan or grantis made under this title may act as legal counsel for the recipient of such loan.

SECTION 513

Inereases from $50,000,000 to $100,000,000 the authorization for direct loansand grants under Section 504 and extends the authorizing period from October 1,1973, to October 1, 1975. Increases from $50,000,000 to $200,000,000 the authoriza-tion. for grants under Section 516 and extends the authorizing period fromOctober 1,1973 to October 1, 1975.

Increases from $250,000 per year to $5,000,000 per year for research and studyprograms under Section 506 and extends the authorizing period from October 1,1913, to October 1, 1975.

SECTION 520

Would expand the jurisdiction for Title V programs to include all areas out-side a Standard Metropolitan Statistical Area and any open county or places ofless than 25,000 persons within a Standard Metropolitan Statistical area.

SECTION 521

Would broaden and deepen the subsidy mechanism authorized by the Secretaryfor Section 502, 504 and 515 loans, insured under this Section, by allowing ITto 50 percent of the loan for 502 and 515 and 90 percent of the loan for $04 tobe noninterest bearing and nonamortizable for certain period of years. This de-ferred principal would become interest bearing and amortizable for periods of33 years for Section 502, 20 years for Section 504, and 50 years for Section 515,upon full payment of the nondeferred portion of the loan. The deferred portionwould also become due and payable in the event that the mortgaged property orany interest in the property is transferred or ceases to be occupied by the bor-

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rower or default occurs, Would provide that-the Rural Housing Insurance fundshall be reimbursed by annual appropriations by the amount that paymentsmade out of the fund exceed receipts paid into the fund.

SECTION 523

523(b) (1) (B). Provides that the Sec. retnry may provide loans from theSelf-Help Housing Land Development fund which are noninterest bearing torecipients of grants under this section who are providing technical assistancefor Mutual-Help Housing. These loans shall be repaid upon the expiration ofthe grant for technical assistance and are to be used as contingency land revolv-ing accounts to enable the grantees to acquire land or options to land, and dopreliminary development work such as engineering, surveying and otherwisepreparing documents for development loans, or in eases of small development todo all development work with such funds.

SECTION 525A NEW SECTION

Would authorize the Secretary to insure titles to land using. funds from theRural Housing Insurance fund which, because of remote outstanding claims orineuribrances on title, the owner thereof is unable to acquire insurance fromprivate title insurance companies.

SECTION 526A NEW SECTION

526(a). Would authorize the Secretary to make grants to or contract withnonprofit corporations, agencies, institutions, organizations, and other associa-tions to pay for the costs of providing programs of technical and supervisoryassistance which would aid needy low-income families in benefiting from anyfederal, state or local housing program in rural. areas.

526(b). Would authorize the Secretary to make seed loans to nonprofit or-ganizations for the purpose of covering necessary expenses prior to constructionwhich would be recoverable from permanent financing on the project. He is au-thorized to set the terms and conditions of such loans and may cancel any part orall of a loan which cannot be recovered from the proceeds of any permanentfinancing.

526(c). Would authorize $10,000,000 for any one year under subsection (a.)and $20,000,000 under subsection (b) and that any amounts appropriated shall re-main available until expended and any amounts authorized but not appropriatedin any year may be appropriated in any succeeding year.

526(6). Would establish the Low Income Sponsor Fund for any funds appro-priated for use under subsection (b) and provide that any funds therein shallbe available without fiscal year limitation and that sums received from repay-ment of loans from the fund shall be deposited in such fund.

Mr. IarczyNskt. Would you introduce your associates for therecord?

Mr. CocrrnAN. Yes; David Raphael and Phil. Brown.Mr, KE,TirzyNsia. Does the. gentleman from Minnesota have any

queStions or comments?Mr. BERGI.AND. Yes. thank you very much.

world like. to inform my colleague, from California and for therecord that T. can flatly predict that next year, there, is a group of uson the. Committee on Agriculture who will lead what may turn out tobe the Fiercest farm fight in, 40 years. The fact is that about 30 per-cent of the farmers in the 'United States produce and sell practicallyeverything sold on the market and receive the lions share of the farmpayments. Two-thirds of the farm citizens of this country have beenvirtually ignored since the inception of the farm policy of the UnitedStates and we intend to address ourselves to this need and introducesome basic changes that I think, Mr. Gorman, will cutoff John Wayneand his types at thee, pocketbook.

Mr. Cochran, i have. a question. I am not familiar with the author-ites of HUD with respect to the financing of housing in the smaller

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towns. Can you describe their authority briefly ? I am talking nowabout towns of under 5,000.

Mr. CocuRAN. Right. If you omit public housing, basically, HUDhas to rely on insured loans. As a buyer you have to find a lender anddo the paperwork and at some point in the process, FHA stamps, "wetake all the risk out of this." But if that private lender is not therefor you to borrow from, FHA cannot function. And that is the basic

-reason that they have never functioned much in towns of 25,000 andbeloW and in rural areas. They are entirely dependent on the presenceof the private lender. Whereas Farmers Home borrows money at thenational level, sells its security at the national level, and that countysupervisor out there can in fact make that loan as if he were a banker.He has control of money and can lend it to the family.

These are the two principal differences: One is the central source of-funds, so even though they are private funds and insured by FarmersHome, the lending authority is in the hands of the Farmers Homesupervisor.

The second vital difference, is that the FHA agent sits way offsomewhere in .

another town, sits there as a guarantor and a removerof risk, and he can function only if some private lender is there pre-pared to put up the money. But the Farmers Home supervisor is outthere in the fielda fact of tremendous importance to people in smalltowns and rural areas, because the private lenders are not there.

Mr. STANTON. Will the gentleman yield?Mr. BERGLAN 0. Yes.Mr. STANTON. I might add another critierion to that. As you say,

that goes back to political impact of the existing backlog. The Elderhave gone where the most political pressure, I think, was put to get theunits.

Mr. COCHRAN. Yon mean in 235, 236.Mr. STANTON. Well, any of them, almost.Mr. COCHRAN. You know, Farmers Home has a program comparable

to the 235, the interest-credit subsidy. But they handle that in a nor-mal procesS of borrowing money at the top and putting it out at thelocal level. I do not know about the procedures on 235, but presumably,they can only go where some private lender is willing to put them andwhere some private builder, probably on a fairly large scale, is willingto use them. So it is an invitation to what. you imply.

Mr. BERGLAND. Well, a problem has been called to my attention inthe district I represent, and I inn sure it is applied u.niformally acrossthe United States in that in some of the larger small towns, HUD hasfinanced buildings occupied by persons who qualify under the rentsupplement. They are residing in these apartment -like structuLes ata very nominal cost to them. Farmers Home, has been restricted to themuch smaller towns and we have a number of projects where they havefinanced housing, public housing, the low income. persons and qual-ify under this interest subsidy. Ilaye all instance in my district wherethe larger town has a HUD project and the cost to the tenant is from$90 to $40 per month, where 90 miles away, FHA was the only source.of credit available and the cost to the tenant in that interest-subsidizedprojectreject is $85 a month. There are people in the Farmers Home financedproject, that are trying to get out of there and-go into the bigger townbecause the rates are cheaper. This causes me great pain, because thismeans that eventually, that FHA-financed project is going to dry up

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and people do .not want, to stay there because they cannot afford itcompared with the HUD project some distance away. This tends todefeat the purpose, I think, that was intended when Congress enabledthis project, namely to allow people to live in a community of theirchoice, stay home. But this disparity causes people to drift into thebigger communities.

Mr. COCHRAN. This is the result of the implicit bias built into theprograms. You see, in this shopping list of new law I referred to here,we have been urging change. The difference in those rents is theability of rent supplements, which go beyond the 236 subsidy anddeepen subsidy Congress voted it for the cities and did not vote it forthe small towns and rural areas; that is, did not give it to FarmersHome.

The Senate bill includes rent supplements for Farmers T-Tome rentalloans for the .first time. If the House goes along, we. are going to elim-inate this one item of discrimination.

Mr. Bergland, the Housing laws are shot through with this kind ofdiscrimination and nobody calls attention to them. It comes to yourattention that people are encouraged to move out of a small town intoa bigger town because of a Federal subsidy. That is wrong. If theFederal Government is going to subsidze a family based on its income,that subsidy ought to be available from the countryside right up toNew York City. It makes no sense to apply it in different ways in differ-ent geographic areas. But this is one of the things which the Senatebill will correct and T. hope Mr. Stanton can persuade the House com-mittee to go along and that can be correctedespecially if you canmake it retroactive.

Mr. BEnar,AND. If there is anything I can do to help our colleaguefrom Ohio remedy this matter, I will certainly give him all the sup-port I can muster.'

Thank you very much. Mr. Chairman.Mr. KIOCZYNSKI. Thank you, Mr. Cochran, you have been a great

witness and it is ,a pleasure to have you before this committee. Youhave all the answers on you r ger tips.

Mr. COCHRAN. I wish we did. You keep digging for some, too.Mr. KL'OCZYNSKI. Fine. It is a pleasure. Thank you.The next witness is Mr. Robert Mann, Executive Director of the

National Association of Housing and Redevelopment Officials.I MIL' happy to have you with us. You may proceed as you desire.Do you have a prepared statement?

TESTIMONY OF ROBERT W. MAFFIN, EXECUTIVE DIRECTOR, NA-TIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFI-CIALS, ACCOMPANIED BY JANE A. SILVERMAN AND CONSTANCEWHITTAKER

Mr. MArprx. Yes, I have one. I believe it has been submitted.Mr. Kr,rczyNsro. Do you want to file it with the Committee for

therecord ?Mr. ATAFIN. I would ,be pleased to file it, Mr. Chairman.Mr. Knuoz-vwsKr. Would you introduce those beautiful ladies for

the record so we will know whom we have met this morning?Mr. MAFr.T.N. Mr. Chairman, we have something of a disadvantage.

I come with a twofold disadvantage. One is that historically, at

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least, our Association has not been clearly identified with small townsand rural areas; and number two, the two preceding gentlemen camewith a good deal more wisdom and experience in this field than I.So I thought I would counterbalance that by bringing with me twovery attractive ladies from our staff, Mrs. Silverman and MissWhitaker.

As I said a moment ago, the National Association of Housing andRedevelopment Officials is an organization which has as its membersindividuals and public agencies largely engaged in housing andcommunity development. This is as organization oriented towardurban and rural community development and rehabilitation and lowand moderate income, housing, and as such, of course, can speak withsome experience as to the utilization of these programs at the smalltown and rural. level.

I think it, is not often real Pzed, for example, that roughly 55 percentof all urban redevelopment projects' in the country has occurred incities of under 25,000: about TO percent, a little over, in cities of under50,000. And in the case of public housing authorities and .public housingprojects, if you will, over SO percent of the communities engaged inthis program are communities of under 25,000 in population. So infact, both of these programs have been utilized by small towns by mostdefinitions.

Now, one of the reasons for this, it strikes meand my own experi-ence goes to a small town in Oregon, the town of Springfield, which Iwill refer Lo in a moment as an exampleis that, many of the prob-lems which confront the large urban centers are problems that exist,to be sure, on a different scale. in small towns as well. Let me cite thecase of. Springfield, Oreg., and this is not an uncommon experience.

In 1950. Springfield had population of around 9 to 10 thousand,with a main street running along a Federal highway of 7 miles. Now.these very difficult and critical. physical structure problems of smalltowns are not unrelated to the problems with which this committee isconcerned principally with respect to the impact on small business,but in fact the total quality of life in these small towns. Many of thesecommunities have seen .fit to utilize, for example.. the urban renewalprogram. Let's take again the case of Springfield, Oreg.

In a town of something like 3 square miles in size, that town hadvery sizable, area that was literally. physically isolated by virtue ofchanges in the land use pattern. But in that area was a substantialportion of vacant land which could be made. available. for housing.They used the renewal program to provide a linkage between one pieceof town and the other and to provide sites for low and moderateincome as well as regular market ra to bmising, in addition to sewer andwater, street lights, a public park and other facilities.

Or take the town, and I hesitate to use just western examplesalthough my formal testimony recites examples in places like Monte-video, Minn., and othersbecause I do come from the West. But takea town like Merced, Calif. When Interstate 5, or old U.S. 99, was built.it was built just a short distance.fram the old 99 and the railroad and.like some central California towns, there was a short piece of land thatusually lay between the new highway alinement and the railroad orold highway alinement. In the case of Merced, they converted this landto industrial and warehousing use to serve the agricultural base uponwhich the community rested. And thus, it seems to me, they provided

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a new lease on economic life for that community. That story can beparalleled across the country in many of these small towns.

The very difficult physical structure problems brought about bychanges in transportation, changes in -life styles, changes in require-ments of housing stock and business locationall have m some degreeor another, had an adverse impact on the development small towns.These programs, the public housing program or the -Urban Renewal orCommunity Development program, have made some contribution tostrengthening the vitality of these communities. In recent years, forexample, in the urban renewal program, there has been a strong bentto turn that program into essentially a program which would providenew housing sites.

Now, for large cities, the need for commercial and industrial incen-tive programs, while very great, is not quite as critical as in the smalltowns. If you will look into the record of submission of applicationsfor these programs to HUD from small communities, you will find thata vast majority of them have sought assistance for industrial and com-mercial redevelopment. There is a very critical need in these communi-ties to provide a base around which the economic as well as the sociallife of the community can thrive. Urban renewal has been used andcan be effectively applied in these communities.

One of the things that occurred to me while listening to the testi-mony this morning is the possibility, the attractiveness, if you will,which small communities have to increasingly large segments of ourpopulation. I speak particularly here of the young people. Now, thismay sound as though it is a peculiar twist on a set of facts, but it is anobservation that I think has some merit.

My own familiarity with the young people, so many of whom wehave from time to time seen as adversaries, are seeking new ways toexpress their creative talents and to be productive in a very complexsociety. The small town offers an opportunity to enter into a thresholdbusiness, to utilize their creative talents. All you have to do is lookaround the Washington metropolitan area, for example. Go to Middle-burg. go to Boonesville, Harpers Ferry, Shepherdstown. Many of thecommunities around Washington are all linked in one way or anotherto this metro area, but each one of them performs a specialized eco-nomic function. Some of it is historical in terms of business activity,some of it is because some plants like the atmosphere of small commu-nity and their employees have housing to reside in. But others makethe choice to go there for very personal reasons, some of which arerelated to the opportunity to get into business for themselves at a lowercost. utilizing existing facilities or even building ones.

It seems to me, that one area that the Committee might explore is howeffectively small towns might be a major base from which to attractand encourage the participation of younger people, new people whowant to get into business, and thus in fact contribute to the number ofsound businesses while contributing to the development of creativetalent in this country.

My point in citing the communities around Washington also bearson what I think is a very critical factor in the committee's delibera-tions and one with which we should he greatly concerned. In trying tocite the Middleburgs and Shepherdstowns and Harpers Ferrys andso forth or the. Gaithersburgs, I am zimply trying to indicate that

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there is in fact a strong linkage between. in economic associationterms, the metro areas and the small towns. In fact, we are moving inmany directions: witness the emergence of regional housingties our regional con-urbanizations as distinct from megalopolises.The programs devised for the central cities or the urban centers arenot at all unrelated to the kind of programs that are available to thesmall towns, because in fact, both socially and economically. theseunitssmall towns and urban centers are linked together inextric-ably. So we would argue very strongly, Mr. Chairman, for this com-mittee to devote attention to the opportunities which small towns'nave for increasingly large numbers of onr population. both as reliefvalves for the concentration of urban populations, and also in theirown right as a style of life in which increasingly large numbers ofthe population would like to partake.

But we see. these problems of small towns not distinct from or. ifvon will, contrary to. or antagonistic to problems of urban develop-ment. We see them moving tocrether. The committee, I would think,would find it very lie4ful to explore the ways in which rural develop-ment programs and u:an development proF.rrams can be linked to-gether. Some of them, for example,, housing and community develop-ment. in fact already operate in those environments and have provento he a very useful tool.

That. is alt. Mr. Chariman. I will answer any questions.(The complete statement, of Robert. W. Man follows:)

STATEMENT GP Ra7;ERT jv. MAYFIN, EXECUTIVE DIRECTOR, NATIONAL A ssociwrioN OrHousrxo AND REDEVELOPMENT OFFICIALS

Mr. Chairman and members of the committee, my name is Robert W. Maffin,Executive Director of the National Association of Housing and Redisvelop-merit Officials (NAHRO), which represents local housing, urban renewal andcode enforcement agencies and administrators in communities of all sizesthroughout the country. I am here today to emphasize the role which housingand community developmPat programsparticularly urban renewalcan playin revitalizing many of the nation's small towns to make them viable economicand social communities.

Many people perceive urban renewal and other programs administered bythe Department of Housing and Urban Development as geared almost exclu-sively to the needs of large metropolitan areas and, particularly, to the largercities in these areas. This is a distorted pictureHUD-assisted housing pro-grams. particularly piddle housing, have long been a source of decent, safe andsanitary housing for the lower income families in small communities, and in-creasingly cal areas, through county and regional housing authorities.The number of county and regional housing authorities, which increased from3S1 to 53 in 1971, is a direct response to the housing needs of small towns andrural areas. Urban renewal has become an important tool for the redevelopmentand revitalization, both economic and physical, of ninny of our nation's smalltowns. 4 figure which might come as a surprise to the men,bers of this Commit-tee is that out of a total of 970 communities presently participating in the urbanrenewal program. 712 are located in cities of less than 50,000 population, and514 in communities of less than 25.000 population. The chart attached as ExhibitNo. 1 Elves more detail on small community participation in the urban renewalprogram. Also attached (Exhibit No. 2) is a chart which details the distribu-tion of local housing authorities by size of jurisdiction throughout the country;ST percent of all housing authorities are in communities of less than 25,000;and 25 percent of all housing units. Roth. of these examples contradict the pre-vailing image that these programs serve large city programs alone.

NAHRO's membership, traditionally oriented to recognize "urban" housingand community development needs, has over the past few years become increas-ingly committed to the necessity for action in rural areas. In its Program PolicyResolution for 1971-73 adopted in October, 1971 the .Associaton stlites: `"There

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is increasing recognition that one Ito using problem is not confined to the innercities of our metropolitan areas . . the situation of non-metropolitan Americais as serious, or more serious, than that of urban America . . . both urban andrural America stiffer from a lack of a national conunittment to make real thepledge of a decent home in a suitable living environment . . . even with sucha committment . . . the special needs and deficiencies of rural and small townareas- will demand certain special responses . ." NAHRO charges itself withmaking a special place in the NAHRO structure and services for rural and smalltown housing and community development needs, programs, and professionalpersonnel."

Expansion of activity among small conanunities and in rural areas by housingand community development programs represents a new phase in the evolutionof these programs. We are coining to a critical point of decision as to how torelate these programs administered by the Department of HUD with those hous-ing and conmainity development programs administered by the Department ofAgriculture, and other departments. The spread of population and the shiftingof economic activity to new geographic bases, have erased easily-identified ter-ritories which can be labeled "urban" or "rural". ire require the formulationof a "national development policy" ,.-hich will link both "urban" and "rural"development in a new relationship. NAHRO believes that one of the major tasksof the next few years is to identify the processes by which housing and com-munity development can lie extended to all areas of the nation through co-ordinated policies and administration.

Major legislation pending before the Congress in 1972 illustrates the changingpatterns of urban and rural community development programs affecting thesmall community. Under the legislation for "Special Revenue Sharing for UrbaneCommunity Development," the allocation of community development thuds tin-der a formula, rather than on the application of an individual conununity, in-volves a new and in some cases, uncertain status for small communities seek-in.. funds, both inside and outside standard metropolitan statistical areas.

Some small communities. for example, now active in the urban renewal pro-gram, have access only to .residual community development funds, after otherallocations have been made. NAHRO is strongly advocating a continuing accessto community development funds for all such active small communities. Inaddition, pending legislation on "Special Revenue Sharing for Rural CommunityDevelopment" also provides types of conununity development assistance forsmall coinmimities under 50,000 population ; in sonic cases, the same com-munities which are eligible for 'urban community development assistance. Thereare--o growing number of "conuminity development districts" undertaking phys-ical. development programs with federal assistance, covering jurisdictions alsoserved by urban renewal agencies administering community development pro-grams. These unclear relationships between programs must be analyzed andrestructured into a unified effort.

The importance of resolving the relationship among the federal assistanceprograms is Made clear by Professor E. L. Henry, Director of the Center forthe Study of Local Government, St. John's University, St. Cloud. Minnesota. in1d new book entitled "Micropolis in Transition". Professor Henry links thesnrvival of smaii communities to their ability to use federal community develop-ment assistance: "Cities that do not take advantage of federal and state pro-grains or fail in their efforts to do so may be doomed to decline. Those thatshow enough leadership to court federal programs and use them may prove tobe the future growth centers in a revived countryside."

The primary focus of our existing Housing anti Community Development pro-grams in smiler communities has beep : (1) revitalization of the emoniercial(-Tram': (2) upgrading the housing stock ; and (3) provision of land. for in-dustrial development. :In ninny communities notion in one area of communitydevelopment or housing has spurred new development in other sectors of thelocal economy. in others, more comprehensive programs have been used to pro-vide necessary relocation housing for those displaced from an urban renewalarea ; construct new housing, for all income levels of the population; reconstructand redevelop declining central business districts; rehabilitate sound emit-mercial and private structures; and coordinate the acquisition of land forfuture industrial development.

To illustrate the adaptability and flexibility of the community developmentand housing Programs in meeting the social, physical and economic needs ofsmall. towns, T would like to cite some examples of how these programs havebeen utilized and how they have effectively dealt with the Problems of loss of

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commercial and industrinldevelopment ; antiquated housing stock; declining taxbasc ; decreasing population and loss of job opportunities in small communitiesthroughout the country.

These examples come from articles in our monthly Journal of Housing, And inparticular the May, 1972 special feature of the Journal on small communities byMrs. Jane Silverman of our Journal staff. The full text of this special Journalfeature is attached as Exhibit No. 3 to our testimony.Harrison, Ark.

In 1901, Harrison, with ,a population of 7,000, became eligible for immediateurban renewal assistance through a flood disaster that virtually destroyed thedowntown area. The town begun rebuilding, with the federal government pay-ing three-fourths of the net project cost. Rejuvenation of the prime shcippingarea brought about a sense of civic pride and stimulated the economy. Harrisonbuilding permits totaled $5,43000 for 1903 and 1904. The downtown tax basewas increased and fire insurance premiums were decreased. (Journal of Housing,No. 5, 1965)Montevideo, Minn,

Montevideo is a community of 0.000 people 100 miles southwest of Minneapolis.Until the 1940's the city was the prosperous center of a rich agricultural region.However, after the Second World War growth Caine to a standstill: its businesscenter no longer met the modern needs of the area ; young people were migratingto larger urban centers ; and, with a declining labor market, new businesses andsmall industry found little to attract them to the town. .

In the early 1960's the town's leaders applied for an urban renewal programwhich was developed, not just to renovate the old, but to completely redesign andrebuild the town center.

The project was completed in early 1970 and the "Fiesta City Center" hasbecome the social as well as commercial center for the town. Other develop-ments have taken place in conjunction with downtown renewal: rechannelingof the Chippewa River to provide more land fur buQiiiPs4s expansion. a new truckhighway, an airport industrial park, a new county court house and city hall,new schools, new sewage disposal plant and a city-county therapy and re-habilitation center.

The urban renewal program has also spurred new economic development andinvestment. Electronic and machine parts industries have located in the town,bringing new jobs and new people. Area shoppers are returning and the townleaders are hopeful that -many of their young people will find opportunities intheir home area. (Journal of Housing, No. 9, 1970)Newton, N.J.

Newton, a town of 7,200, was confronted with a dual problem: an inadequateand deteriorating housing supply and a declining downtown shopping center.In the mid 1900's the downtown merchants attempted their own downtown."renewal" effort which met with marginal success, Many of the problems en-countered were due to the lack of eminent domain, funding and technical skill.This initial effort created a great deal of interest in the urban renewal pro-gram and in 1905 the town received a $1.8 million grant from HUD-for a resi-dential and commercial redevelopment program.

Since housing is one of the most serious problems facing the city, it has re-ceived top priority. The city will develop 232 units of moderate and middleincome housing. on urban renewal land near the downtown shopping area whichhas been sponsuced by a nral-nrofit group composed of local organizations. Thecity is also in Lime final stages of coMpleting a 100-unit Turnkey project whichwill consist of SO units for the elderly and 20 garden apartments for families.The project includes community facilities and outdoor as well as enclosed recrea-tion space.

The downtown area of Newton will also be drastically changed by the urbanrenewal program.

New offices for the local newspaper and county government are planned andseveral businesses have been relocated into more modern and attractive struc-tures. A major redesigning of the city's obsolete. traffic pattern is underway -aswell as a 90-car parking facility which will make the downtown area not onlymore attractive but more accessible for area residents.

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Napa and Willos,Napa, a city of 37000 near California's rich wine growing district, has made

rapid progress in taeir community development program. Only 19 months haselapsed from. the date of initial HUD funding in January 1970 to the date ofsale of the first parcel for private redevelopment in August 1971.

Unlike the other cities discussed here, Napa's interest in urban renewal grewout of one major incident; the threat on the part of the city's two major depart-ment stores to move unless the municipality provided more parking, a largercommercial area a more attractive physical environment. Once the deci-sion to undertake an urban renewal program had been made, the city' movedrapidly forward with the program, First year Neighborhood Development Pro-grain (NDP) funds totalled $1.95 million; the second year the. city received$2.25 million and will be applying for $3.9 million next year.

The 'first stage of Napa's NDP is concentrated in a nine-block area that willinclude a new facility for the two major department stores but also will pro-vide space for smaller shops and-250 off-street parking spaces. Development ofa mall for the Central Business District has been programmed for this year aswell, which will make the entire area a more attractive place foe commercialinterest as well as-shoppers.

The CBD renewal techniques undertaken in Napa are being tried in Willows(population 5,000) which recently began construction of its downtown mall ina project encompassing two city blocks. The one million dollar project willinclude 100,000 square feet of commercial space, free public parking and an openair, landscaped public plaza.Beacon, N.Y.

Beacon, New York (population 13,000) found itself bypassed by the techno-logical advances of the 20th Century. The community, about 60 miles up theHudson River from New York, had been an active riverport and industrialcenter in the late 19th and early 20th centuries. As rivers ceased to be a vitallink in the nation's counnercialnetwork and as new and cheaper labor marketsopened up elsewhere, Beacon's fortunes began to decline. The completion ofInterstate Highway S4, which bypasses the city, threatened to cut Beacon totallyout of the economic mainstream. Further, suburban areas near the city weregrowing rapidly and siphoned off many industrial and commercial tax ratables.As Beacon entered the 1900's, it was confronted with an obsolete housing stock,a declining economic base, and growing social problems.

Realizing that Beacon could only pull itself out of economic decline throughmassive investment that only HUD could provide, the city embarked on itsfirst renewal program. in the mid-1960's. The provision of adequate relocationhousing for the residents of the urban renewal area has been the majoremphasis of the program to date; with the development of 900 new housingunits in various stages of completion and planning.

Although new housing is the corner stone of the renewal program, Beacon hasmapped out ambitious industrial and commercial redevelopment plans. An indus-trial firm that has been in the city for many years recently moved out of itsantiquated plant into .a .modern, enlarged structure under the auspices of thererowal program. The city is also trying to refurbish its downtown and makeit competitive with outlying shopping areas through increased parking space,street improvements, acid more sites for stores and offices. The key to the down-town renewal plan is a new access road linking the city to the interstatehighway. Plans also include the development of park laud and improved wastedisposal systems. (Journal of Housing, No. 4, 1972).

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60

EXHIBIT NO. 2

LOW-RENT PUBLIC HOUSING: NUMBER AND PERCENT OF PLACES AND HOUSING UNITS REPRESENTED BY LOCALHOUSING AUTHORITY PROGRAMS, BY 1960 POPULATION OF PLACE, DEC. 31, 1970

Places with LHA programs Housing units

Population size group Number Percent Number Percent

Total 4, 399 100 1, 270, 007 100

1,000,000 and over 5 (r) 191, 547 15500,000 to 999,999 16 0 163, 223 13250,000 to 499,999 31 1 173,957 14100,000 to 249,999 82 2 142,126 1150,000 to 99,999 164 4 134, 769 1025,000 to 49,999 257 6 112, 011 910,000 to 24,999 531 12 123, 261 105,000 to 9,999 516 12 72, 715 62,500 to 4,999 646 14 60, 198 5Under 2,500 2, 151 49 96, 200 7

1 Less than 5 percent.

[From Journal of Housing, April 1972j

SMALL CITY, USA, is MAKING NEWS WITII HOUSING, RENEWAL, CODES, MODELCITIES PROGRAMS

(By Mrs. Jane Silverman, Editorial Assistant, Journal of Housing)

Even though they rarely capture the front page of newspapers or the primeslot on the 7 p.m. news report, small cities around the nation are making creative,often innovative, use of renewal, Public housing, code enforcement, and modelcities programs.

According to Professor E. L. Henry, director of the Center for the Study ofLocal Government at St. John's University near St. Cloud., Minnesota, there aremore than 18,000 small citiescommunities of 50,000 inhabitants or less strungacross America. Them JannNAL has been receiving reports from many of thesemunicipalities about their community development and housing activities andthis article features 10 examples of small city'prograins

A common theme binds these 10 cities together and is echoed by ProfessorHenry. whose center has produced a study of small cities entitle MicropolisTraiBiticm. That message is : "Cities that do not take advantage of federal andstate programs or fail in their efforts to do so may be doomed to decline. Thosethat show enough leadership to court federal programs and use them well mayProve to be the future growth centers in a revived countryside."

Each of these 10 cities has turned its future from decline to prosperity throughthe creative use of federal and state funds. Most of the entered the 19(30s feelingthe same social and physical burdens as larger urban areas ... albeit on a smallerscale : growing quantities of deteriorated housing, declining CBDs, obsolete trans-portation, even pollution and crime. These smaller municipalities were furtherhampered by the lack of two critical resources : staff and money.

Their stnall!less, however, proved to be the greatest asset these cities had.The problems they faced, though serious, were more easily defined.. Pressuregroups were less sophisticated and interests not as diverse as in larger urbanareas. At the same time, citizens could participate in planning and decisionsthrough town meetings, task forces, and even word of mouth in a way impossiblein tf Pig city. As a result, the residents of these small communities were wellinformed and had a real stake in the outcome of their community developmentprojects. Finally, since government in "small city, USA" tends to be less monolithicand complicated, public officials can often bring a fresh approach to slicingthrough red tape and expediting programs through cumbersome bureaucraticmachinery in federal agencies.

The Department of Housing and Urban Development is recognizing that smallcommunities have distinct characteristics in dealingwith federal programs andis evolving a set of policies to deal with this reality. HUD is now actively eneour-aging small city housing authorities to band together in regional agencies to hirestaff and resources and to work together cooperatively on tenant and managementservices.

In 1905. the JOURNAL published a special issue devoted to small city activitiesin housing and renewal (see 1965 JOURNAL No. 5) and more recently has featured

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stories about projects in such communities (see 1971 JOURNAL No: 6, page 284).JOURNAL coverage is only one example of NAHRO's continuing interest in "smallcity, USA." The NAHRO 1971-1973 Program Policy Resolution set forth threeproposals to reach rural areas and small towns (see 1971 JOURNAL No. 10, page535). These prposals included "an administrative structure ... geared to specialrural needs," field staff ; and a greater supply of mortgage credit for small cityprojects.

The cities discussed in this article, located throughout America, range in sizefrom 1300 to 35,000 inhabitants and in character from suburban to rural. Theirprojects are as diverse as a public housing program using modular constructionto a model cities economic development project concentrating on blueberry cropcultivation. They show a pulsing validity in Professor Henry's "revived country-side." "Small city, USA" is giving a new dynamism to community progress.

The Mexican-American community of Santa Fe Springs, a small city in Califor-nia, working first at odds with city hall and then hand in hand with it, havesponsored a community center so successful that it is receiving national atten-tion. Like Hillsboro, North Dakota (see page 175), Santa Fe Springs has beencited as an All-America-Cities award finalist, largely on the basis of its commu-nity facility.

The citizens of Santa Fe Springs are now extremely proud of their $300,000center, funded through a HUD neighborhood facilities grant and completed inlate 1969. They remember, however, that the building was once a source of acri-monious controversy in the town.

The story begins in 1962 when the city of Santa Fe Springs received a surveyand planning grant to develop a program for the "Flood Ranch" area, the sectionof the city, populated almost entirely by Alexican-Americans--known as a barrio:After much study and many reports, Santa Fe Springs signed a loan and grantcontract with HUD in 1967 and it was then that the controversy began. Sev-eral members of the community vociferously expressed their distrust of any ur-ban renewal plan. In the words of one citizen of the town, "they found it diffi-cult to believe that a government agency could work to their benefit." Specifically,the residents felt that the plan, which emphasized physical renewal, especiallyhousing, did not reflect any contribution from the residents themselves, nor did itnecessarily answer their needs, which involved as much social as physical re-newal. They organized first within the barrio and then city-wide to change theredevelopment plan. One tangible result of these efforts is the neighborhood facil-ities building, now the cornerstone of the renewal plan. The center first operatedin a temporary building and the city paid for the leasing, operation, and mainte-nance of the facility. In 1968, HUD approved the neighborhood facilities grantand the center was completed in November 1969.

The citzens recognized that to ameliorate their problems, social services wereas necessary as bricks and mortar. The neighborhood center offers 16 differentsocial, economic, educational, and medical programs. They include a manpowercenter ; a child guidance project ; a youth clinic offering counseling and medicalservice to young people ; an information and referral center for other local agen-cies ; and an array of educational and recreational activities.

The success of the neighborhood center has now moved the local residents .to-wards a greater acceptance of the urban renewal plan. They have joine0 togetherfor other causes now, including ecology, improved transit, and youth problems.The local citizens have endorsed the residential program for the area and manynon-Mexican-Americans are moving in, integrating it for the first time.

If the neighborhood center started out in controversy, the outcome has beenmuch greater and more positive than the mere building itself, according to themayor of the city, Ernest R. Flores. The main achievement, he feels, is an active,aware, and organized citizenry. Mayor Flores says : "In fighting city hall, thepeople of the barrio learned a lesson that the most expensive college educationcould not have taught them. They learned how to make the system work for them.They learned that not fighting city hell, but guiding city hall, moving city hall,using city hall, was the answer to the request for a better life."

As recently as 1968, the citizens of Hillsboro, North Dakota, a tiny city of1500 inhabitants, had no street signs to guide the postman in delivering the mail.The town also lacked sidewalks, curbs, gutters, and many other facilities inmuch of its residential section.

That same year, the city began participating in HUD's code enforcement pro-gram, one of the smallest municipalities in the nation to do so. According toGeorge D. Christians, the administrator of the code program, Hillsboro is "theonly city in North Dakota to have a FACE program." Now street signs ;lave

714-617 G - 72 - 5

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been installed and other improvements have been made; so the postman's roundsare much easier. Just in time, too, for Hillsboro will be receiving a very impor-tant letter any day. Because of its FACE program and the city's volunteer ambu-lance service, the community has been named one of 12 finalists in the NationalMunicipal League's All-America Cities Award competition. Santa Fe Springsis also a finalist in the contest, winners of which will be announced this spring.

The mini-city, incorporated in 1881 and located midway between Fargo andGrand Forks, lacks many of the problems associated with a larger metropolis, suchas air pollution and high crime rates. Nevertheless, it shares other worries withits larger urban neighbors. One of the most serious is dilapidated housing. Thecity-planning commission received funds to undertake a master plan under HUD's701 program in 1966 and the resulting document showed an accelerating growthin substandard housing, including a number of units without sewer and waterfacilities. "The improvement of housing became the primary objective of thecommunity," according to Mr. Christians, "since the plan showed that thiswas our greatest problem." .

A FACE program. funded for more than $500,000, was launched on May 1,1968 in the western area of town, the section that showed the most blight.About two-thirds of the 246 buildings iu the 36-block area showed some sortof code violation. Extensive inspections. and -reinspections were completed on allof the buildings and loans and grants were made available to residents for im-provements. In addition, the inspection team counseled home owners in con-tracting for rehabilitation work and ,in obtaining loans. When the program wascompleted in February 1971, the area showed substantial improvement and 95residential buildings had been rehabilitated at a.cost of $200,000.

HUD found the city's work so successful that it cited Hillsboro for anhonorable mention in its newsletter. More important, the federal governmentfunded the municipality for a second FACE program, initiated in December1970. To date, 54 of the 211 properties in the new 29-block area have been in-'spected. The city will soon submit an application for an NDP program in itsdowntown commercial area.

Public response to the code program has been very enthusiastic, according toMr. Christians. "Once the citizens became aware of the benefits, there hasbeen a tremendous demand." he says, noting that before the second campaignwas launched there were over 60 requests for inspections. "The nice part ofcode enforcement," he points out, "is that everyone benefits."

All-America- Cities awards are given to communities that make significantimprovements through citizen action. The residents of Hillsboro, eager to improveand modernize their community, enthusiastically joined with officials in thecode program and that is the key to its success, according to Mr. Christians. HeSays : "Regardless of the type of program, the federal government will onlybe able to do a small part of what is required. The citizens of the communitymust be willing to proceed with dispatch, vigor, and persistence if they areto reach their goals."

MODULAR UNITS BUILT FOR ITHACA HOUSING AUTHORITY

The housing authority of Ithaca. New York (population 26,000), home of Cor-nell University, is using modular building techniques to develop a housing projectthat can be put up quickly and within HUD's cost limits. The 54unit townhouseTurnkey development, built by Stirling Homex Corporation for $1,233,000 is forlow-income families and is one of five projects in the city's ambitious public hous-ing program, according to David S. Armstrong, execntiv director of the hous-ing authority. The city has gone far t"tvarcis meeting its goal of 300 units, set in1965. Since the first Turnkey project of 10 its for the elderly was bought bythe authority. in 1968, 275 units are in development and many have been com-pleted. The propjects are diverse: there is family and senior citizen housing,Turnkey and conventional, townhouse and highrise, modular and "stick" con-struction. They are stitched together by the city's scattered site plan to locatethe projects in.small groups throughout the community.

Mr. Armstrong first became involved with modular housing in 1968 when heattended several sessions on industrialized construction sponsored by CornellUniversity. A few years later, he hypothesized that modular units might pro-vide the answer to the authority's problem of building low-income units withinHUD's statutory room cost limits. The authority announced that they wouldaccept bids from both conventional and industrial housing firms for a projected54-unit project on Hancock Street. iu the northern section of Ithaca. Three gen-eral contractors and two modular housing enterprises submitted bids and only

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one, Stirling Home; was within the prototype cost limits. Their bid was accept-ed in June 1970 but, because of further HUD budgetary questions, negotiationsWere not closed for almost a year, in March-'1071. Occupancy is expected thisspring.

In addition to the modular apartments, the complex will also include a com-munity building with kitchen and meeting facilities, constructed by conventionalbuilding techniques, 'designed by the Syracuse architectural firm of Sargent,Webster, Crenshaw and Folley. The apartments, designed in colonial style,include 28 three-bedroom and 26 four-bedroom units, Stirling Homex puts in allplumbing, electricity wiring, and fixtures on the assembly line and delivers theboxes complete to the site. In addition to costing less, construction on the site canbe completed in about 90 days, according to the company.

The Hancock Street project is only one of the authority's five developments.Two small Turnkey projects were launched between 1968 and 1971; the first, a10-unit complex for senior citizens, was acquired in June 1968 ; the second, 16apartments for low-income families, was occupied in June 1971. In addition, theauthority expects to complete its 15-story highrise apartment building for theelderly this June and will begin construction of 30 more Turnkey units in April.

The public's reaction to the authority's activities has been mixed. There hasbeen resistance to location of the scattered sites in local neighborhoods. Appar-ently, residents fear a concentration of minority tenants near them and resent"that people on welfare are going to live in those beautiful units," according toMr. Armstrong. Public opinion about the new modular units has also been"Sorted," he says, "clue to the lack of knowledge about this type of construction."To counter criticism, both the housing. authority and Stirling Homex have comeforward to try to explain to the public what modular construction is.all about.Mr. Armstrong hopes to persuade Ithaca citizens that public housing is only partof a general neighborhood conservation program that will include rehabilitationand code enforcement, too.

Since the program first began, most of the icy public reaction has thawed.Mr. Armstrong attributes this success to a concerted effort and strong coopera-tion by the board of commissioners and the city government. As a result, thesmall city of Ithaca has a public housing program that much larger municipalitieswould be proud to sponsor.

NEWTON'S URBAN RENEWAL SOLVING HOUSING SHORTAGE

The year 1072-will be an especially active one for the town of Newton, NewJersey. This spring;- the small conununity of 7200 will complete construction ofa 100-unit Turnkey project for senior citizens and low-income families. By theend of the year, the town expects to have broken ground for 252 units of moderate-and middle-income housing in the city's Mill-Water urban renewal project, ac-cording to Paul Busch, director of the city's urban renewal program. He also saysthat Newton will be well under way with its commercial redevelopment by theend of 1972.

Newton still retains much of the old-fashioned charm . that dates from itsoriginal incorporation in 1864. The small city, which is the county seat of SussexCounty in the northwestern corner of New Jersey, is clustered around a pic-turesque town Square, nestled in the foothills of the Appalachians. The picturepostcard quality of the town, however, has masked some distubing trends: Yourhousing has increased in the older parts of town and the housing market, especial-ly for rental units, has grown tighter. The downtown shopping area, even withits charm, is lo Sing custoLoers to more modern facilities beyond the town'sboundaries.

In 1066, the downtown merchants launched their own self-help renewal effort,without the benefit of federal funding. Called Project 66, the businessmen re-novated five older commercial buildings. It was only a marginal success, accord-ing to Mr. Busch, because the group lacked the power of eminent domain, suf-ficient funding, and technical skill.

In 1967, the city decided to try a different approachthe federal urban renewalprogram. That same year they received survey and planning money from HUDand the following year were funded for a 1.8 million dollar program that willinclude both residential and commercial redevelopment.

Housing. which is one of the most serious problems facing the small city, wasattacked vvith gusto by Newton. On urban renewal land near the downtown shop-ping area, the city will develop 232 units of moderate- and middle-income apart-ments, sponsored by a nonprofit grout) composed of local organizations. The 5.6

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dollar project has already received seed money from the New jersey,De-I:urtment of Community Affairs and expects a mortgage commitment from thestate housing finance agency within the next few months. The design of the hous-ing project retains the intimate quality that characterizes the city. Is fourhighrise buildings sit admidst clusters of townhouses on a site landscaped to em-phasize the sloping terrain and the small creek flowing near -the project. A newstreet alignment will draw the project closer to the downtown area, The develop-ment will provide units at all income levels, thus serving a wide spectrum of thecity's housing needs; middle-income apartments, financed through the state hous-ing finance agency ; moderate-income units under the federal Section 236 program ;a share of low-income units, funded through HUD's rent supplement activities.'One-of the highrise towers will probably be reserved for senior citizens; the otherapartments will be for larger families.

The city's other housing effort is well underway, with the project expectedthis spring. It is a 100-unit Turnkey project developed by Leon Wiener Associates,The public housing development will consist of SO efficiency and one-bedroomapartments for the elderly in a highrise, surrounded by 20 townhouse apartmentsfor families. The project includes community facilities and outdoor as well asenclosed recreation space.

= Through urban renewal, the downtown of Newton will also get a new look.Several businesses have already been relocated into more modern premises. Thetown plans to build a 90-car parking facility, as well as new offices for the localnewspaper and the county government. It will make major improvements in theobsolete traffic patterns in the downtown Area.

Mr. Busch feels that one reason renewal has worked thus far in_ Newton isbecause of the compact, efficient municipal government. He, for example, is boththe executive director of the renewal program and the housing authority. Thecity is adininistered by a professional city mar,Iger. The town council, whichserves as the LPA, consists of five elected non-partisan members who have astrong rapport with the manager. According to Mr. Busch, "local politics is onea the greatest factors in determining whether urban renewal will work." Theabsence of strong partisan political pressure, he contends, is one reason why theprogram has been effective in Newton.

Even though Mr. Busch is a full-time employee of the city, be has used outsideprofessional help extensively because of the complexities of the federal and stateprograms that are funding the town. He-feels that most small communities, witb.limited staff, do not have the capacity to work effectively with the many levels ofpublic funding 'necessary to redevelop a town without technical help from spe-cialists in housing and renewal. The city's planning consultant, Alvin E. GershenAssociates, rewrote the urban renewal plan twice : it started out as a conven-tional project ; was converted to an NDP ; and, because of lack of funds, revertedback to a conventional project. The firm has guided the housing program not onlythrough HUD red tape but through difficult and lentghy negotiations with thestate government.

Newton's urban renewal and housing programs have taken several years toshow results, largely because both HUD and the state government fire more gearedto serving big cities than small communities, according to Woody :farmer, whorepresents the Gershen firm in Newton. Still, this small city has made an aggres-sive start in tackling its problems by using big city programs to serve small cityneeds.

FULTON HOUSING AUTHORITY ACTIVE IN LOCAL PROGRESS

The housing authority of Fulton, Missouri has long been the leader in that com-munity for More and better housing. Last fall, the authority completed 100new units. bringing the public housing total in Fulton to 174 apartments; now theagency is working with a noTrofit sponsor to develop moderate-income units. InFulton (population 12.972), thte housing authority is involved with day careprograms, health facilities, institutions, employment, even parks and recreation,to promote improvements of all sorts in the city. According to A. Bruce Musick,the executive director ()1 the Fulton housing authority and one of NAHRO's mostarticulate spokesmen for Small city housing programs, "the local housing au-thority does function as a dominant force in community-wide planning coveringPrograms aimed at focusing remedial action on the city's housing problems."

Fulton is a good example of a growing, prospering znicrocity. It is the home oftwo colleges and two state institutions. It is far enough from big cities to be anindependent entity ; close enough to them to be readily accessible. Fulton bas asubstantial economic base of its own. It has gained, not lost, population in thelast 10 years.

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Like other microcities, Fulton is also feeling the pinch of big city problems.When the housing authority -was first -established 12 years ago, 34 percent of thecity's housing stock could be classified as dilapidated or deteriorated, according toMr. Musick. Most of this substandard housing was for rent, in sections of thetown occupied by minority group members. Though new construction was flourish-ing, it was producing housing for middle- and upper-income residents. For the low-income tenant in Fulton, housing was limited and the market was tight.

Enter the housing authority, which was created in 1959, after community lead-ers urged a strong low-rent housing program. The authority started with 58units and added 16 more. Until 1971, it operated a total of 74 apartments in thetown.

In the fall of 1971, the authority opened 100 more units, 50 of which weredesignated for senior citizens. The new project sits on land given to the munici-pality by Westminster College and represents what is, in effect, a renewal effortby the authority. The site, which was once a clay pit and a garbage dump. hasbeen developed into a public park and lake, financed by close to $75,000 inmunicipal funds. The public housing units flank the park in two groups. Theproject also contains a community center that is used for senior citizen andyouth activities, in-service training conferences for housing authorities through-out. the state sponsored by the state department of eoimnunity affairs, and foreducation and recreation programs run by Westminster College and local groups.The center is sponsored by the city of ;Fulton and administered by the localparks and recreation commission.

Fulton'S public housing units have been clustered in six sites around thecity. Mr. Musick feels that the authority's conscious effort to select lots in bothundeveloped areas and areas which were slum-like in characte.r" has had "atremendous impact upon the community ... in significant upgrading of surround-ing areas."

The housing authority has ambitious plans for the future. It is one of themajor participants in a study of municipal services in 'a severely blighted areaof Fulton. The study, financed by-a private foundation, will map out an actionprogram for the neighborhood. If the program is funded, the housing authoritywill become involved in developing day care centers, health facilities, jobtraining programs, physical improvements, and park facilities.

The authority is now assisting the Ecumenical Ministries, st nonprofit groupin developing SO units under the HUD Section 236 program. They are also work-ing hand in hand with the Missouri Association of the Deaf to plan a retire-ment center in Fulton. The complex would contain a nursing home and housingunits.

The authority has involved the public in its program from the very beginningwhen the agency was first established. Then, local leaders candidly made an ob-jective study of the community's housing needs, which showed the necessity foran aggressive program. As a result, the Fulton housing authority has enjoyedstrong community endorsement for its programs, including the support of thechamber of commerce, churches, municipal agencies, institutions, schools, andservice clubs. "It is this kind of community support," according to Mr. Musick,"that must be developed in a small authority if it is going to succeed."

.Musick feels that a small municipality is often at a. distinct advantageover a large city in running a public housing program because "the social andeconomic fabric of a small community, generally speaking, is more stable thanin the large cities." He points out that in Fulton, "the tenant body is 'Cosmo-politan." Even though all the residents are low-income, they represent a cross-section of the community. "Where this is true," Mr. Musick maintains. "a smallauthority operates at a distinct advantage."

TWO CALIFORNIA CITIES UNDERTKNIE CBD RENEWAL

Two small cities in CaliforniaNapa (population 35,000) and Willows (popu-lation ;7000 ) are regenerating their downtown business districts through urbanrenewal. Their CBD efforts "could Well provide the inspiration needed by othersmall cities to reverse the decline of downtown commercial areas," according toRichard A. Oliver, executive director of the Napa Community RedevelopmentAgency. Both cities give plaudits to HUD's interest and attention ; yet one issharply critical of HUD's policies towards small cities, while the other is not.

Napa, which is the gateway city to California's rich wine growing district,faced imminent commercial decline in 1965 when the two department stores re-maining in the city threatened to move out Unless the municipality provided

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more parking, larger commercial area, and a more attractive physical environ-ment, Since.1965 the city .11110 . been toying with the idea of a downtown moderni-zation program, recommended by planners and the local citizen advisory group.but it was not until December 1969 that an urban renewal plan, developed with701 funds, was unanimously adopted by the city council. Once the decision tobecome involved in urban renewal was taken, Napa moved rapidly forward withits program: less than two years after initial funding, parcels were being soldfor redevelopment and renewal was on its way, The city applied for NDP fundsfor its first action year in the amount of 1,95 million dollars. The communityis now in the midst of its second year of NDP funding, for 2.25 million dollars,and will be applying for a third action year allocation of 3.9 million dollarsshortly.

Napa has now signed leases with the two major department stores that hadthreatened to leave the area and ground was broken in the fall of 1971 for theconstruction of a new store for Carithers, one of the major retailing tenants.The first stage of Napa's NDP project is concentrated in a nine-block area thatwill include not only new facilities for Carithers and its competitor, Mervyn'sbut space for smaller shops and 250 off -street parking slots. The city has alsocompleted construction of the first portion of n semi-mall in the downtown andwill begin building the second section this spring. Deveopment of ti..fullrscalemall for the CBD has been programmed for this year as well.

City officials feel that the streamlined municipal government is one importantfactor in their success. The director of the city's department of planning andcommunity development is also executive director of the renewal agency. Thecity council not only acts as the redevelopment agency, but also as parkingauthority and housing authority, too. In this way, there is a great deal ofcoordination between the city officials and agencies involved in Napa's redevelop-ment projects.

Mr. Oliver also credits the involvenient of the city in the NDP program formuch of the downtown renewal progress. As a result, Napa, has gotten its com-munity development program under way in an extremely short time spanonly19 months elapsed from the date of initial HUD funding in January 1970 to thedate of sale of the first parcel fOr private redevelopment in August 1971. Mr.Oliver feels that NDP "enabled the Agency to rapidly execute the first phase ofredevelopment in the nine-block Action Area. .. Such progress could never havebeen accomplished under the conventional urban renewal process."

Willows: The CBD renewal techniques being tried in Napa are being echoedin another small California city, Willows, which recently began construction ofits downtown mall in a project encompassing two citthlocks. The MendocinoGateways Project, as Willows' renewal effort is called, will eventually involvemore than one million dollars of federal and local funds. It will include 100,000

.square feet of commercial space, developed by Art International of Sacramento;free public parking ; and an open air, landscaped public plaza.

In 1965, the citizens of Willows asked the state department of housing andcommunity development to study and make recommendations for the city's im-poverished CBD. In 1966, Willows created an EPA and applied for survey andplanning funds from HUD. In June 196S, part one of their loan and grant applica-tion was approved. It was not until early this year that work began on the mall.

Willows has proceeded with demolition in the downtown area in a novel fash-ion. The division of fire service training in the California State Department ofEducation has been using the buildings for fire fighting practice for more than 200trainees, thus demolishing them at little cost to the city.

The Willows project has taken more than twice as long as the Napa effort toget off 'the ground. Floren V. Boone, director of the Willows Community Redevel-opment Agency, feels that much of this problem lies with HUD. According to Mr.Boone, "one of 'the great difficulties of the small communities is adapting to aprogram designed for the metropolitan city." He feels that it is unrealistic toexpect Willows to have the same problems and to he subject to the same proce-dures as much larger cities, like San Francisco and Sacramento.. Small communi-ties, he says, involve total renewal. Unlike larger 11171)1111 areas, it is difficult toisolate one small sector of blight for redevelopment. "for what you do in any geo-graphical area has an overall effect on the community and its people."

Between Willows and Napa lies a population spread of 30,000 people, and thismay account for the differences in .the administration of their renewal efforts.HUD's definition of a small city is a community of 50.000 inhabitants or less, butaccording to, Mr. Bernie, "there is less of a common denominator between the10,000 population and 50,000 population than exists between the 50,000 population

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and 500,000 population of cities." He feels that HUD has been very cooperative inthe Willows project, but points out "that alone is not the solution small com-munities need a program oriented to their needs and circumstances."

HOPKINS, MINNESOTA, USES NEW RENEWAL TECHNIQUES

Hopkins, Minnesota, a small city of 13,00010 miles from Minneapolis, is thefirst Minnesota municipality to use a technique for funding urban renewal proj-ects, passed into law by the state legislature over two decades ago. Called the"local approach to urban renewal," according to Terry Novak, city manager ofHopkins, the idea enables a community to finance projects through tax incrementsinstead of by using federal funds. Hopkins is also one of three municipalities inMinnesota to be given powers to declare land "development districts" for the pur-pose of renewal.

The city has already financed a 161-unit, 11-story apartment building in itsdowntown using the tax increment concept. Construction of the 2.5 million dollar,Section 236 project began in April 1971. In March of the same year, Hopkins brokeground for 2.2 million dollars worth of senior citizen housing. The city is now inthe process of developing land in the downtown as a parking lot, using the devel-opment district concept.

The tax increment funding legislation was promulgated in Hirt Minnesota Re-newal Statute MSA 462 as long ago as 1949; yet. Hopkins is the first municipalityto take advantage of the law. Tax increment financing enables a community tofund urban renewal through a source other than the limited federal dollar re-.newal pool. The key is "tax anticipation borrowing," according to Mr. Novak. By,._this he means that the redevelopment agency can "borrow money to finance the`write-down' and repay that money over a period of years from the increasedproperty tax proceeds derived from the new development on the site." The localschool district, which shares 65 percent of the local taxes, will receive the in-creased proceeds once the renewal bonds have been paid off. In the meantime, thecity and the School district will continue to be paid the tax revenues that they hadbeen receiving before the improvements were made.

Hopkins has used the tax .increment technique together with a second tool. thedevelopment district, to accomplish its renewal goals. The city, eking with Minne-apolis and Robbinsdale, was empowered to establish development districts by the1971 Minnesota legislature. Such areas are separate from federal renewal projectdesignations and need not be declared blighted, an important psychological advan-tage, according to Mr, Novak. Ae'nrding to the law, cities can condemn land indesignated development districts for parking structures, pedestrian walkways,underground concourses, and 'special lighting systems, Hopkins is using its firstdevelopment area for a parking lot to serve the downtown business district andthey-are financing the project through tax increment funding.

Mr. Novak feels that these tools give Minnesota communities a valuable alterna-tive to the federal urban renewal program. Since renewal dollars are limited, taxincrement funding enables municipalities to take advantage of a new financingsource. It also frees communities from time consuming federal negotiations andapprovals. According to Mr. Novak, if the city's Section 2.36 housing project hadbeen funded through the renewal program, Hopkins would barely be past the sur-vey and planning stage now. Instead, they are well on their way toward a brandnew building.

MODEL CITIES REVIVES RURAL GEORGIA COMMUNITY

Alma, a tiny rural community of 3700 Inhabitants on Georgia's coastal plain, isa model city in more ways than one. It is the smallest community in the nation tobe chosen for the model cities program end. along with Bacon County, in which itis located, the only county-wide program in the United States. It was one of thefirst municipalities in the country to Sponsor a congregate housing facility withpublic housing funds (see 1967 JOURNAL No. 9, page 511). Alma not only has amodel cities program but also urban renewal, 'neighborhood facilities, and publichousing, not to mention funds from many non-HUD sources. The purpose of allthis activity, local officials claim, is to reverse the town's declining populationtrend and to literally keep Alma's citizens "down on the farm."

One reason local residents have been leaving this rural community is that eco-nomic opportunities appear greater elsewhere. Tf the Alma model cities programhas its way, that won't be true in the future. Capitalizingoathe county's fertilesoil, model cities has granted *25,000 to a local group, the Georgia Blueberry Asso-

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ciation, to develop 2000 acres for cultivation in Bacon County by 1980. This pro-gram alone could yield the participating farmers up to $500 an acre. In the fall of1971, the Economic Development Administration nounced that it would preNdde$343,200 to supplement model cities funds for a 200-acre industrial park. In thesummer of the same year the Federal Aviation Agency announced that it wouldprovide over $100,000 to finance 50 percent of the cost of an expanded Alma air-port ; model cities and state funds will provide the other half.

When the Senate rural development agriculture committee toured the nation inthe summer of 1971, they were greeted by devastating poverty and acute economicdepressiod at most of their stops. When they reached Alma, however,' * *posed of local church leaders and bankers, has received HUD approval for 12units of middle-income garden apartments on a 5.2 acre site. Construction ofthe units recently began.Both of these two housing efforts were financed in part through the city's urban

renewal program, which wrote down acquisition costs and helped pay for siteimprovements. Forrestal Heights is located in the city's first urban renewal pro-ject area. The LPA, faced with serious relocation problems, took advantage ofHUD's "early land acquisition" program. They developed a site that had a lightrelocation load and built the Forrestal Heights project on it. Now they will usethe public housing units to releetitelainilies from the rest of the renewal area.

Relocation has been an important component of the Beacon renewal program.When redevelopment began seven years ago, there was no subsidized housing atall in the city. Surveys showed, however, thatmany families, a large proportion ofwhich are black, could not afford market rents for apartments in the area. Ray-mond, Parish and Pine, the planning consultants advising the city, made clearthat without a comprehensive housing program for Beacon, renewal .could notproceed.

Forrestal Heights and the Unity Interfaith Housing Corporation are the firsttwo such housing efforts. The city wants to provide "the broadest possible spec-trum of relocation housing," according to Mr. McGill, and they are planning 30townhouses under Section 235, as well as nusubsidized units and single-family lotsfor families wishing to build their own homes. All in all. the redevolpment agencyhopes to develop over 900 new housing units in their first urban renewal effort.The city has aLso been working with the state Urban Development Corporationto build 190 middle-income apartments on a site overlooking the Hudson River andto develop 50 acres of surplus institutional land in the city for housing andindustry.

Although new housing is the cornerstone of the renewal program, Beaconhas mapped out ambitions industrial and commercial redevelopment plans. Anindustrial firm that has been in the city for many years recently moved out ofits antiquated plant into a modern. enlarged structure under the auspices of therenewal program. The city is also trying to refurbish its downtown and make itcompetitive with outlying shopping areas through increased parking space, streetimprovements, and more sites for stores and offices. The key to the downtownrenewal plan is a new access road linking the city to the interstate highway. Plansalso include the development of park land and improved waste disposal systems.Construction is now under way on the renewal project.

Beacon's success can probably be attributed to an active and aggressive cityleadership that includes not only elected officials but appointed staff as well. Themunicipal. government .reflects a bipartisan and especially representative ap-proach. The mayor and the chairman of the renewal agency are from opposingpolitical parties. Many of the renewal officials are black. giving this large segmentof the city's population an identification with the program. The renewal boardreflects a cross-section of the community. 'his strong public representation in allphases of government is one reason why Mr. McGill feels that the renewal pro-gram, resisted at first because of fear of federal intervention, has been givenenthusiastic acceptance now. He points out that "in the early stages of our pro-gram there was an agreement by civic leaders that there were compelling reasonsto save the old city."

Beacon had learned several important lessons from their experience. They sawthat renewal is an extended process that works best when there, is "longand personal attention to every detail," according to Mr. McGill. The importanceof details is reflected not only in their successful relocation program but alsoin their insistence on high architectural quality in all new housing.

The city also learned that it is best to tackle difficult problems directly andthat they cannot be swept away. Only when the redevelopment agency met therelocation problem head-on, was it able to deal with it effectively. Relocation

1.Exhibit, as submitted. Ed,

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opened up another serious itl:ille -racial discrimination, ,which the renewalofficials also attacked forthrightly. Beacon has tried to disperse housing sitesand to mix Units by income, age, and race. Now black families are purchasinghomes in white sections of the city and the Forrestal Heights project, whichreflects a mixture of age and racial groups, is so far working outsuccessfully.

The Beacon renewal agency discovered "that fear of the unknown"- is often adominant problem in a small community, according to Mr. McGill. The For-restal Heights project includes the city's first high rise: a 10-story structure.Resisted at first, the attractiv building is now a source of pride to thecommunity.

The "ruggedly individualistic citizens of Beacon," as Mr. McGill characterizesthem, were also leery of the unknown of involvement in federal programs. Ittook courage and effort for the city fathers to persuade them that the alterna-tive to public help could very well be rising taxes, which nobody wanted.According to Mr. McGill, "Beacon's experience has shown that only throughtaking advs.ntage of every federal and state program can the required level offinancing be made available," to give small cities their needed rebirth and makethem once more a part of the economic mainstream.

Mr. KLUCZYNSKI. Any comment, Mr. Corman ?Mr. CORMAN. I have just one question to ask.Do you have any figures as to where most of those municipalities of

50,000 or less are located? Are they in metro areas or nonmetroareas?

Mr. MAFFIN. I would suspect in the total aggregate they wouldbe outside the standard metropolitan statistical areas. I am talk-ing about under 50,000.

Mr. GORDIAN. In population. In other words, taking all of the peopleof the United States who live in municipalities of 50,000 or less, youthink that more of those would live in nonmetro areas?

Mr. 1MAFFIN. As units of government, yes.Mr. GORMAN. I am thinking about in total population ?Mr. MAFFIN. In total population, I would suspect that the SMSA's

act for around 65 or 70 percent of the population. The central cities,of course, are a predominant percentage of that number.

But I believe, if I understand your question of cities under 50,-000, just in sheer numbers, probably more of them would live in cit-ies of under 50,000 in the SMSA's, than live outside. I would not swearto that. But in terms of numbers of units of government, obviouSlynot.

Mr. CORMAN. Thanuk you very much.Mr. IITTNGATE. No questions, Mr. Chairman.Mr. BERGLAND. No questions, Mr. Chairman.Mr. STANTON. No questions, Mr. Chairman.Mr. KLUCZYNSKI. Thank you. It has been a pleasure to have you

before this committee. Your testimony will be very helpful to uswhen we have our executive session.

Mr. MAFFIN. Thank you very much, sir.Mr. STANTON. Mr. Chairman, I would like to point out that this

is especially good 'testimony here and it is in contrast with theprevious witness.

Mr. KLUCZYNSKI. We will have the members of the subcommitteeread that and make sure they know what your positions are.

Thank you ever so much for being with us.

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Mr. James Gavin, executive director of the National Federationof Independent Businesses will appear tomorrow morning beforethis committee.

We will recess until 10 o'clock tomorrow morning.Thank you for your cooperation.(Whereupon at 12 noon, the subcommittee recessed to reconvene

at 10 a.m., Wednesday, May 3, 1972.)

THE FUTURE OF SMALLTO1VN AND RURAL AMERICA:THE IMPACT ON SMALL BUSINESS

WEDNESDAY, MAY 3, 1972

HOUSE OE REPRESENT2,TrvEs,SUBCOMMITTEE ON SMALL BUSINESS PROBLEMS

IN SMALLER TOWNS AND URBAN AREAS OF THESELECT COMMITTEE ON SMALL BUSINESS,

Washington, D.C.The subcommittee met. pursuant to recess, at 10 :05 a.m., in room

2359, Rayburn House Office Building, Hon. John C. Kluczynski(chairman of the subcommittee) presiding.

Present: Representative Kluczynski.Also present.: Representative Hungate of the full committee; Don-

ald B. Roe, subcommittee counsel; John M. Finn, minority counsel;and Myrtle Ruth Foutch, clerk.

Mr. KurczyNs.K.1. The hearings will come to order.The Subcommittee on Small Business Problems in Smaller Towns

and Urban Areas today continues hearings on the future of small townand rural America, the impact on small business.

We were all extremely sadden to learn of J. Edgar Hoover's deathyesterday. It is my information that the Speaker has invited Mem-bers to be present at the Capitol this morning for special ceremonies.Our first scheduled witness this morning, Hon. Earl L. Butz,Secretary of the Department of Agriculture, has also informed usthat the White House has requested his presence at the Capitol.

Therefore, today's hearings will be postponed until a date to beannounced.

However, since two of our witnesses are already here, we would liketo receive their written statements for the record.

The first witness this morning will be Mr. Gavin, the legislativedirector of the National Federation of Independent Business.

We are sorry that we were not able to hear Mr. Gavin yesterday.Is Mr. Gavin here?

TESTIMONY OF JOHN MOTLEY, CONGRESSIONAL LIAISON,NATIONAL FEDERATION OF INDEPENDENT BUSINESS

Mr. MOTLEY. I am John Motley, congressional liaison for the Na-tional Federation of Independent Business. Mr. Gavin was unable tobe here, and I am representing him.

Mr. Kluczyxsia. I understand Mr. Gavin has a prepared state-ment. Hearing no objection it will be made a part of the record in itsentirety.

(71)

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(The statement referred to follows :)

STATEMENT OF JAMES A. GAMIN, LEGISLATIVE DIRECTOR,NATIONAL FEDERATION OF INDEPENDENT BUSINESS

Mr. Chairman and distinguished members of the Committee. I am James A.Gavin, Legislative Director of the National Federation of Independent Business.In behalf of our 310,000 member firms across the country, I wish to thank youfor this opportunity to testify on the future of small, independent business inrural America.

The National Federation of Independent Business, founded in 1943, has growninto the largest single member business organization in the United States. Ourmember firms represent a true cross section of the nation's small business com-munityretailing, wholesaling, manufacturing, contract construction and theservice trades.

Small business, I'm sure everyone present would agree, plays a vital role inthe American economy. A graphic demonstration of this can he obtained by ex-amining the important part played by N.F.I.B. members in the economies of thevarious states represented by the members of this Committee.

In those 17 states the Federation has 157,152 member firms. They employ1,135,676 people and have average gross lfinnual sales of approximately $25.9billion. A state-by-state breakdown of these figures is attached for the Com-mittee's appraisal.

THE RURAL CRISIS

During a more simplistic era of-America's past, one of her greatest philosophersand statesmen, Thomas Jefferson, could look at the nation he had helped to createand confidently remark that the basis of her present and future success was the"yeoman farmer." Ile viewed this hardy class as the. social and moral fiber ofthe nationits guarantee against the spread of the decay and decadence thatinfested the moribund society of the Old World.

What Jefferson saw was a self-sufficient, rural society. Its basis was cheap,plentiful land, which allowed its members to control the means of production andthe Wealth created by their labor.

Of course, our third President was not able to foresee that the American In-dustrial Revolution, the ultimate source of our wealth and power, would dras-tically rechannel the course* of national development. It caused fundamentalShifts in the pattern of growth, and' had a profound effect upon the social, po-litical and moral attitudes of its people.

The rapid and uncontrolled industrial development of the United States was asevere blow to the pride and economic well being of its rural inhabitants. Withina short time it had transformed the landscape and quickened the pulse of thenation. It sired the birth of massive urban centers, elicited dismay and marvelover the efficiency of its assembly lines and glorified those who kept them welloiled. and running. But, at the same time. it demeaned the rural American as ahayseed and transferred his political and economic power to a relatively smallgroup of successful entrepreneurs. In short, it replaced Jefferson's "yeoman"farmer" with the business orientated heroes of Horacio Alger.

Rural America's answer to this threat was Populisma socio-political move-ment that looked back to the "good old days" for its inspiration. But Populism,which was more of an emotional crusade than a well organized political campaign,could not muster the strength needed to halt the march of progress. During itsshort lifespan it raised the eyebrows of a few politicians, but it soon

-disappeared from the political scene without noticeably altering the process ofindustrialization.

Dismayed by their own weakness and inability to change this situation,rural Americans despaired, and helplessly sat back to watch as a dangerous.phenomenonoutmigrationgradually altered the basis of their lives andlivelihoods.

The corporate policy of the day tended to concentrate the nation's major in-dustries in a few economically advantageous areas, and, as this trend continued,good jobs in rural America grew scarcer and scarcer. Soon, young men andwomen began to realize that it was impossible for them to make a decent livingin the countryside, so. they began to move to the city in increasing numbers in thehope of securing steady, well paying employment.

This flow of young adults into our urban centers has continued unabated overthe past century, but in recent decades it has reached crisis proportions, seriously

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eroding the already weakened balanced between urban and rural life and threat-ening the very fabric of American society.

While the population of the United States has doubled since 1900, and that ofour cities has grown by approximately 350%, vast stretches of rural Americahave been steadily depopulated. According to the latest census, over one half ofall the counties in the United States lost inhabitants during the last decade. In1950, 36% of the nation's population lived in the countryside ; by 1960 this haddropped to 30% ; and by the end of the last decade it stood at only 26%. The 1970census also gloomily points out that nearly 74% of our citizens live on only 2%of our land.

A more detailed examination of these statistics will clearly show that the ruralcrisis is much more ominous than it appears on the surface. Numbers alone do nottell the full story, because those that are migratingthe young adultsare itslifeblood and its future. Since 1945, over twenty-six million young Americanshave deserted the rural. areas of the country to seek a better way of life in oururban centers. Some of them, undoubtedly, were bored with their small town.agrarian existence, but the majority simply realized that the economic facts oflife left them no choice.

This distressing situation is attested to in a letter N.F.I.B. received from aconcerned Young man in Utica, New York. He writes:

"I live in a town, though not that small, that is definitely plagued by thiscondition. There is no industry ; young men and women leave the area by thedroves upon the completion of high school, mostly because there are no jobs andlittle hope of Misiness opportunity.

"I am 24 years old, a college graduate, and like the others will soon be forced toleave the area. I don't wish to do this, as I believe the central New York area hastremendous potential, and I really love it. I want to stay and I want to start myown business, I have several ideas, but 1 am running into many problems thatseem insurmountable."

A recent article in U.S. News and World Report quotes another young, collegestudent from Cumberland, Maryland, in much the same vein, He said "I wasborn and raised here. But there aren't any jobs. if I could find work, I'd like tostaybut 1 can't, I'll have to leave."

The older residents of rural America are also very coneerned about the con-tinued exodus of their children to the cities. A mother of six from Wisconsinwrites that she, "would like to know what it is all about. I have three childrenwanting to leave and three already gone." And an N.F.I.B. member from ruralMississippi flatly states that, "many young people have to leave our area eachyear because of a lack of job opportunities. Most of them would prefer to stay in arural type area." -

The real tragedy of this deplorable situation is that most of these youngmigrants simply do not want to leave their friends and families. And once theyexperience the impersonality of city life, with its crime, pollution and over-

.

crowding, they long to return to the fond memories of their childhood an0adolescence.

This desire is expressed aptly by a young couple from Allen Park, Michigan.who write :

"We are from a small town in south central TexasThree Rivers. We left be-cause jobs and money were more- plentifid elsewhere. We would very much liketo go back and settle there if possible."

The same sentiments are contained in a letter from a ,young man from CorpusChristi, Texas, who write N.F.I.B. that he worked "for a very large corporation"and was "concerned about the exodus of young people to the cities" He intendsto go "back to a small town and start a business."

Many older migrants arso have the same desire. A New Mexico man wholeft his home town some time ago comments :

"I grew up in a small farming area town in Kansas. I left my home townbecause of the lack of opportunities there in the late 19,50's.

"However, I would like to return now, if there are any chances of earninga living for my family."

Rural outinigration has been a very personal and sorrowful experience forcountless thousands of American families, but, unless the flow is stemmed soon,the hardships and broken homes it created in the past will be insignificantin comparison to its future impact, Recent predictions of the nation's futuregrowth pattern pessimistically point out that by the year 2000 nearly one hundredmillion more Americans are expected to move into our already overcrowdedcities.

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This phenomenon, which by itself is frightening, has and will have profoundand far reaching effects upon all aspects of rural life.

The most obvious is that rural communities will be faced with the nearlyimposSible task of satisfying increasing demands for more adequate !SeCialservices with the revenues they can squeeze out of a continually shrinkingtax base. Their residents, who have long endured the hardships of an agrarianbased existence, are becoming more and more impatient, especially when theycompare their life style with that of their urban neighbors.

Such common urban services as running water, electricity, sewers :Ind decentpublic transportation are undreamed of luxuries in rural America. In addition,much of its housing is suhstandard, and, because of exposure to the elements,badly in need of repair.

Rural poverty is also a serious problem. Although only a quarter of theU.S. population lives in the countryside, half of the nation's poverty-strickencitizensabout 14 millionreside there. In the cities, one person in eight ispoor ; in the suburbs, one in 15; but in rural America, the figures are 1 outof every 4. At the same time, the rate of unemployment in noinnetropolitanareas often exceeds by two or three times the rate in urban centers. And, whenjobs are available, they pay less.

There is also a severe shortage of skilled professionals--doctors, teachers,dentists and lawyersin rural America. Minimum levels of health care andeducation are becoming increasingly difficult to maintain, as the college trainedsons and daughters of farmers and small town residents seek their fortunes inan affluent. suburbia.

In addition to this already heavy burden, rural America is now attemptingto weather a new crisisone that seriously threatens the very foundation ofits economic existence.

Over the past quarter of a century the family farmer has been slowly, butsteadily, losing ground in' his fight against nature, inflation and a determinedcorporate policy. In 1945, there were approximately six million farms in theUnited States, but by 19719' there were less than three million in operationa decline of over 50%. During the same period, nearly 70,000 family farmerswere forced to give up their livelihoods each year, adding their weight to thesteady flow of people from rural to urban America.

The economic structure of rural America is based. to a great extent, on agri-culture, and the distribution of wealth is closely related to the number of farmsin operation. As one N.F.I.B. member from Rose Creek, Minnesota, puts it,"When agriculture does well it seems our whole economy prospers. The farmdepression is driving many small businesses, and even larger manufacturers,out of business, or, forcing cutbacks."

This trend toward fewer and fewer family farms must be halted. If it isnot, rural America will turn into a corporate wasteland.

The economic pressures caused by all these faCtorsoutinigration, a shrinkingtax base, and the decline of the family farmpose a serious threat to theviability of rural and small town..independent business. They have created acustomer drain, causing many small firms to close their doors forever. It isno quirk of fate that nearly 73% of all the business failures in the UnitedStates during 1970 occurred outside the nation's metropolitan areas.

This situation is dramatized by an N.F.I.B. member from rural Texas, whowrites :

"Our area where we now live is in need of some kind of industry. I knowfor a fact from talking to the great majority of business people here that theyare willing to work and cooperate in every possible way to bring any kind ofindustry into the area This rural area town 'needs this badly, if somethingis not done soon, in the next decade, I'm afraid it will not be able to survive."

In every section of the country concerned communities. like the one in Texas,are trying desperately to find a solution to the same problem. As more and morepeople leave the land, their economic base shrinks, forcing local businesses totighten their belts. Margins are cut and payrolls reduced, adding the final linkto the vicious cycle of decline.

Businessmen realize that their communities 'mist change their economic baseto survive, but this is easier said than done, because the same factors that causedthe problem make it even more difficult to solve. Executives of corporations some-times practice philanthropy, but they are extremely reluctant to locate newplants in depressed rural areas. Lack of tran.mortation, and inadequate supplyof trained labor and many other disabilities simply make such a move poorbusiness,

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TUE URBAN tmeAcT or' THE RURAL cams'

Mr. Chairman, while it is not completely germane to the Committee's inquiry,the Federation feels that a brief discussion of the urban impact of rural outmigra-tion will help place the entire subject in a clearer perspective.

'While the rural problems resulting from this massive population shift havelong been apparent, the seriousness of its urban impact has just recently emergedwith a shattering effect. During the past few years the plight of the nation'smetropolitan centers has been widely publicized, and Congress has devoted agreat deal of its time and energy to the difficult search for a viable panacea.

America's cities, once the marvel and envy of the western world, are in serioustrouble. They are plagued with crime, pollution and overcrowding, and many ofthem are saddled with huge deficits, with little Or no prospect of ending the flowof red ink, simply because their outlays for vital community services far exceedtheir ability to raise revenue.

Natural growth can be blamed for part of their dilemma, but the real culpritis uncontrolled industrial development. It has deprived the nation of sorelyneeded economic balance, and opened the floodgates of rural outmigration. Oururban centers have literally been forced to absorb and assimilate millions ofyoung, unskilled migrants, and the rising cost of providing them with adequateeducation, housing, transportation, health care and welfare benefits has pushedthem to the brink of financial disaster.

Recent studies of the effect of this migration on ninety-four large U.S. citiesclearly shows that its cost is appalling. In 1960 alone, before the inflation of thelast decade, this phenomenon placed a. net burden of at least $2.5 million on eachof these cities. The median net cost per migrantto provide him with communityserviceswas NINE times greater than per city resident. In many cases, urbangovernments can never recoup these losses, because the migrant, after becomingdiscouraged by the lack of opportunities in a particular city, simply moves on totry his luck in another.

Because of this obvious interaction, the Federation feels that the problemsof urban and rural America are inseparable. And, we strongly believe that the rootcause of the former can be found in the economic dislocation that is occurring inthe latter. Therefore, we are convinced that any attempt to serve the urban crisisis doomed to failure, unless some way is found to arrest the flow of migrantsfrom rural America.

SOLUTIONS

The Negative ApproachThe National Federation of Independent Business is, and has been for some

time, deeply concerned about the plight of rural America. Over the years wehave invested a good deal of time, money and effort in the search for a viablesolution to this dilemma, yet, even during periods of complete frustration, wenever gave up hope in the ultimate success of our cause. Because of this, we findthe recent negative approach espoused by The Commission on Population Growthand the American Future totally unacceptable.

The Commission's recommendation, contained in Part III of its report, Popu-lation and the American Future, is as follows:

"In chronically depressed areas, it may sometimes be true that the prudentcourse is to make the process of decline more orderly and less costlyfor thosewho decide to remain in such areas as well as for those who leave.. . . In thatevent, the purpose of future investment in such areas should be to make thedecline easier to bear rather than to reverse it."

Although the Commission's Report qualifies this position by establishing thefeasibility of economic development as a criterion, it is defeatist in attitude andextremely depressing. It makes several suggestions aimed at improving the lotof those who are forced to move to find work, which is good, but, in the samebreath, it accepts rural outmigration its an unalterable fact, which means thatit has found no solution for the problem. Instead, it is content to offer halfwaymeasures to ease the impact of dislocation, a stand that does nothing to headoff the growing crisis.

Only once, when it states that, "a superior approach may be to create new jobsnearer to or within the declining rural areas," does the Report come anywherenear recognizing the heart of the problem. But, then it turns right around andsuggests that this expanded employment should be concentrated. "in urban placeslocated within or near declining areas," and that these centers should have."a demonstrated potential for future growth." a policy which it admits, "couldinadvertently produce overurbanization." "Overurbanization" is already a seri-

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ous problem in the 'United States, so why even suggest a policy that could eventu-ally make it insolvable?In the Federation's estimation the Report of The Commission on PopulationGrowth and the American Future leaves a great deal to be desired in its analysisof the rural crisis. Not only does it fail to address itself to the proper questions,

but its suggestions are negative in nature and, in many instances, self-defeating.In addition, it offers absolutely no hope at all to those rural inhabitants whowish to remain on the land where they were born and raised.Positive Approaches

Balanced development has always been a primary concern of rural residentsand the legislators who represent them in Washington. But, Until recently, theyhave had to wage a very lonely tight in the halls of government, because otherspecial interests, including business and labor, failed to realize the growingmagnitude of the rural crisis.A sign of the changing atmosphere in the nation and its capital is the recentformation of the Coalition for Rural America and its sponsorship of the uniqueAd Hoc Committee. The latter is a discussion group that shares similar interestswithout any formal affiliation to the Coalition. It includes not only the Federa-tion, but the AFLCIO, NFO, Independent Bankers and a host of other diverseorganizations.Significant also is that rural problems are receiving more and more attention

from urban Congressmen. Many of them are beginning to realize that. the ulti-mate cause of their own District's problems lies outside the city's limits. Thisis vital, because- their cooperation is necessary for passage of any importantreform legislation.During the last few sessions of Congress, many members of both the Houseand the Senate have introduced bills aimed at correcting the problems ofrural America. All of these proposals, from rural revenue sharing to a rural

development bank, are positive in their approach and, as, such, are commendable.But, all of them, without exception, simply don't go far enough. They deal withthe visible symptoms of the disease, rather than with the. disease itself.A good example of this is the recently passed Rural. Development Act. Itsprimary goal is to reduce the impact of inadequate community and socialservices in declining rural areas by increased funding of tested Federal pro-grams. While this is needed to ease the hardship of rural living, it does littleto attack the cause of these inequitiesan insufficient and continually shrinkingtax base.

The only way to accomplish this is to first, halt, and then, reverse the flewof out-migration. While this will not be an easy task, it is not impossible, andit behooves us to realize that we cannot expect an overnight change in a situationthat .we have allowed to develop uncontested for more than a century.

The economic base of rural America must be altered and strengthened, andwe must actively seek the balanced development that is needed to make thisa reality. As a first step in this direction, we must dedicate the nation's resourcesto the creation of steady, well paying, jobs in our nonmetropolitan areas.

Jobs are the key. Without them, millions of young, rural Americans will beforced to move to our cities to find satisfactory employment.

If we do not provide them with jobs, we will not have to worry about improv-ing rural housing, sewerage, transportation, education and medical care, be-cause. eventually, there will be very few residents left to take advantage ofthese benefits.

The creation of employment opportunities in these economically depressedareas is a difficult challenge, simply because knowledgeable businessmen areextremely reluctant to take the enormous risks involved in this type of aventure. In other words, they have to have some reasonable assurance thattheir efforts will stand at least a 50-50 chance of success.

Yet, even though they are presently faced with many trying obstacles, suchas, poor transportation and services, an unskilled labor force and inadequatefinancing, many established firms and individuals are seriously consideringmoving to rural locations. A prime example of this trend is Waveline, Inc.,an electronics firm in West Caldwell, New Jersey. Its President writes :

"Waveline. Inc., a manufacturer of electronic equipment is seriously con-sidering a move to a new location. We are currently located in an industrialarea about nine miles northwest of Newark, N.J.

"Although several possible locations have been examined, we are also con-sidering rural re-location ..

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"Wave line operates in two locations, the second being Cheshire, Conn. witha total employment of 225 persons. Annual volume is in excess of $3,006,000."

The impact of a company the size of Wave line re-location in a rural townwould probably mean the difference between continued-decline and survival.It would create 391 new jobs, 252 new households and enough business for ninenew retail establishments. Population would increase by 666, personal incomeby 1,341,000, bank deposits by $607,000 and retail sales by $810,000. In addition,the community's economic base and tax structure would be significantly changed,enabling it to provide more services for its residents.

Although less startling, there are other examples. A contractor from metro-politan New York, writes :

"Right now I am in industrial and commercial building doing most of mywork on Long Island.

But not enjoying it to the fullest, I have talked to my family about leavingLong Island and starting somewhere else.

"I would like to start a business in the country, this is why I am writing andasking you for your help and advice."

And a former salesman for an international corporation declares :"I have been doing my utmost to locate an existing business to buy in a rather

small Michigan town . . . So far this has been easier said than done, though I'llkeep at it until I find what I think I'm looking for.

"Spent twelve interesting years in international sales and marketing manage-ment. Made more than a good living at it, but found that the more I traveled,the more I needed to travel. Always did want to own and operate my ownshow ; saved my bonuses, burned by passport and resigned by job. That waslast March, and I'm still looking for a business.

These are just a few of the many thousands of requests that NFIB has receivedconcerning the opening or relocating of businesses in rural America. (A selectivelist of some of these firms appears in Appendix II.) Because of this, we stronglyfeel that balanced industrial development is a feasible solution to the urban-rural crisis. All that is needed is time and a conunitment by Congress to give thesewilling business people a reasonable chance of success.

The means for acheiving this goal, the Rural :Tob Incentive or DevelopmentAct (H.R. 5190 and H.R. 5603, respectively), has been before Congress fora number of years. Its chief sponsors are Congressman Keith G. Sebelius, ofKansas, and the esteemed Chairman of this Committee, Congressman Toe L.Evins, of Tennessee.

Basically, this legislation attempts to give a new enterprise locating in ruralAmerica a reasonable chance for success. It balances the heavy risks involvedin this decision with tax incentives designed to assist it through those firstfew critical yearsa period that usually make or breaks a new business. Thelogic behind its approach is based on a proven principlethat tax policy does,in fact, influence the course of business investment.

With this in mind, it seems to provide a judicious blend of private initiativeand public responsibilty.

This approach also has the Added attraction of being negligible in cost: Itrequires no new massive outlays of Federal tax dollars. Instead, the availableevidence strongly indicates that these new businesses, along with the jobs theywould create, will provide the"United Stated Treasury with a net revenue gain.Granted, those firms that are eligible will take advantage of these tax incentives,but this should not place a drain on the Treasury, because they are now non-existent. The Treasury cannot lose what it never had.

The bill, as now written, also provides-Safeguards for urban jobs. It clearlystates that no company can qualify for these tax incentives if it diminishesoperation or employment in an existing location by opening a branch or build-ing a new facility in rural America.

Although this worthwhile legislation has been before the Congress for severalsessions, it has just recently received the attention it merits Almost a year agothe Federation with great success, mounted a campaign aimed at increasingCongressional awareness of the bill. To date, it has attracted the support of 198Members of the House and 58 Senator, but, unfortunately, the Committee onWays and Means has not held hearings as yet. We hope they will be ableto do so in the future.

NFIB, its member firms. and the small business community have long sup-ported and shown a strong preference for the tax incentive approach to ruraldevelopment, and a recent survey of the Federation's Advisory Council enforcesthis stand. The tabulation shows that 95% of the respondents support this legis-

78-617 0 - 74 - 6

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!talon. In addition, 90% of them state that they would not object to the newcompetition created by the hill as long as new jobs came into their area. Thequestionnaire also explains that additional employment .would probably meanhigher taxes to pay for expanded community services, and, somewhat surpris-ingly, almost Sl% answered that they felt this would be acceptable.

A. few sample comments from the businessmen participating in the survey willemphasize how strongly they feel about this legislation.

A small stationer from Alaska writes :"In my opinion, this is the best thing along this line that has been presented.hope it passed so we can show them how free enterprise can solve some of our

problems if given an opportunity."-The owner of a fuel oil distributorship' in Goldsboro, North Carolina, declares :"This makes more sense to me than any program introduced to date to more

equitably spread our population and reduce the urban inner-city problems. Itappears logical that the large pollution centers would be helped and the welfarerolls diminished by a de-centralization of industry. At the same time this legisla-tion would provide a larger tax base. for many small towns to handle local prob-lems that might occur."

Somewhat in. the same vein, the Vice-President of a Iowa bank writes :"I believe all, efforts should be expended to improve areas in 'Rural America' --

so industry would.be encouraged to locate away from metropolitan areas. Peoplewould then be encouraged to locate away from metropolitan areas. People wouldthen be encouraged to move to rural areas, where jobs would be available. Thiswould certainly tend to relieve some of the pressures in the highly populated areasand everyone would benefit."-

The owner of a concrete product manufacturing plant in upper New YorkState Comments:

"This certainly would he worth trying. Young .people are leaving rural areasdue to lack of jobs, Many small stores are closing up due to people moving closerto the cities to find work.

The president of a small service firm located in Michigan says'-I believe our Federation is on the right track in pushing the rural develop-

ment concept. The midwest region of the U.S. has been economically under pres-sure and programs like the Ùpper Great Lakes Regional Commission' have beengrossly ineffectivethey only produced 'studies and books' to my knowledge. ThisRural Development is a forward-looking approach to the solution of many of ourproblems, i.e., crime, unemployment, pollution, etc."

A New Mexico retailer reports:"Some aspects t' the .E(.;%. ins bill have already been instituted by communities

of New Mexico att1 It will al,,,Autely work even in this and other states, if Con-gress %yin only enact legislathm and give it it chance."

And finally, a Texas banker has no doubt that this tax incentive approachwill work, commenting-ma local effort as follows :

In 196S, fifty-six local businessmen each invested in a local industrial corpora-tion. Each man purchased $1,000 in stock and the money was used to purchaseland and construct buildings for new industries. The local banks, the local savingsand loan, and the Small Business Administration participated in these loans. Todate we have three new industries employing 150 to 175 local people."

Mr. Chairman, we submit that if the preceding continents illustrate anything, itis that America's rural businessmen are deeply concerned with the economicplight of their communitiesconcerned enough to willingly shoulder their shareof the cost of revitalizing them. But they cannot do it alone, so we strongly urgeyou to recommend to 'our colleagues immediate consideration and passage ofthe Evins-Sebelins bill.

A BRIEF SUGGESTION

Mr. Chairman, as a short footnote to our main testimony, the Federationwould like to note, for the record, that there are three executive offices, ten cabi-net departments, twenty-one independent agencies and eight special commissionsparticipating in or administrating Federal programs to assist rural America. Thisis a commendable effort, bat, unfortunately, it is largely ineffective, because ofduplication and a lack of eoordination or cooperation among these groups. In fact,red tape is so thick at times that a hard pressed community can be left to fend.for itself while bureaucrats discuss interdepartmental jurisdietion and procedure,

feels that there is a relatively simple way to correct this distressingsituation, and we, therefore, strongly urge this Committee to recommend in itsreport the creation of an Office of Rural Services to coordinate the Federal effort.In other words, there is need for it clearing house type operationone that woulddisseminate information on rural-oriented programs and then assist communitiesto decide which approach is best suited to their particular needs.

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The National Federation or Independent Business considers it a priVilege tohave had the opportunity to appear and testify before this distinguished Com-mittee. We stand ready to be of assistance at any time in our mutual etTorts onbehalf of small business.

Mr. Chairman, should there be any question from the Committee regardingmy testimony, I shall be happy to try to answer them.

Thank you.APPENDIX I

Totalmembers

Number ofemployees

Averagegross sales

California 28, 137 176, 796 $4, 460, 860, 000

Colorado 5, 327 29, 253 626, 605, 000

Illinois 9, 276 58, 751 1, 348, 012, 500

Iowa 8, 306 56, 321 1, 411, 395, 000

Maryland 3, 093 21, 478 638, 540, 000Massachusetts 8, 103 82, 872 1, 746, 427, 500

Michigan 12, 691 84, 567 1, 730, 525, 000

Minnesota 8, 357 77, 607 1, 775, 540, 000

Missouri 6, 866 44, 916 1, 035, 722, 500

New Mexico 1, 849 15, 292 320, 027, 500

New York 19, 511 116, 106 2, 752, 967, 500

North Carolina 7, 087 57, 367 1, 205, 540, 000

Ohio 13, 139 102, 847 2, 048, 640, 000

Oklahoma 6, 510 35, 676 , 885, 590, 000

Pennsylvania 12, 031 105, 214 2, 324, 555, 000 IRhode Island 1, 078 11, 336 164, 340, 000

Tennessee 5, 791 59, 277 1, 370, 125, 000

Total_ 157, 152 1, 135, 676 25, 845, 412, 500

APPENDIX II.--FIRMS AND ORGANIZATIONS INTERESTED IN RURAL JOBDEVELOPMENT

Allied Biocide, San Diego, Calif.I3obsen Building Co., Oceanside, N.Y.Burlington Clinic, Burlington, Ind.CCB Electronics, York, Pa.California Farmer, Fresno, Calif.Communitarian, Providence, R.I.County Electric, South Egremont, Mass.Elliott-Newton, Inc., Sikeston, N.Y.Entertainment Products Group, Ba-

tavia, N.Y.Farmer Land Exchange, Shawnee, Okla.First City Mortgage Co., Dallas, Tex.First Presbyterian Church, Ferriday,

Let.Geyer and Hollister Assoc., Delmar,

N.Y.Harrison News-Herald, Cadiz, OhioHendricks Products, Reno, Nev.Holmen-Halfway Creek Lutheran

Church, Holmen, Wis.Home Mart, Rolling Prairie, Ind,Inter-Lakes Community Action, Inc.,

Madison, S.D_J, Elliott Lonnand Assoc., Baton Rouge,

La.Karfax Industries, Scotia, N.Y.Kesel Assoc., Rochester, N.Y.Luzerne County Planning Commission,

Wilkes-Barre, Pa.Marquette Medical Center, Marquette,

Mason County indusi Hal DevelopmentCorp., Ludington, Mich.

Memorial Hospital, Uvalde, Tex.Mid-South Supply Corp., Monroe, La.

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Afohawk Valley Community College,Utica, N.Y.

Noranda Alumiumn, Inc., New Madrid,Mo.

North Carolina State University,'Greensboro, N.C.

Ohio Power Co., Minerva, OhioOhio State University, Canfield, Ohio.Paterno Pro Hardware, Lamoni, Iowa.P.R.I.D.E. in Logan Comity, Logan,

West VirginiaProperty Management Consulting, Palm

Springs, Calif. _-

Queens Devices, Inc., Long Island City,

Rensselaer Polytechnic Institute, Troy,N.Y.

Scholia rie County Community ActionProgram, Richmondville, N.Y.

South Central Arkansas Community Ac-tion Authority, Camden, Ark.

The Williams Company, Stone Moun-tain, Ga.

Union Rural Electric Association, IncBrighton, Colo.

University of Kentucky, Lexington, Ky.University of Maine, Orono, Me.Vinton County Industrial Development

Committee, McArthur, OhioWashington County Board of Super-

visors, Fort Edward, N.Y.Washington State University, Pullman,

'ashingtonWaveline. Inc., Caldwell, N.J.Wendell' Tires, Studio City. Ga.Wilson Building Contractors, Muncie,

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APPENDIX 111.S PPORTERS b' TILE RURAL Jon INCENTIVE/DEVELOPMENT ACT

ALABAMASen. AllenRep. Bevil lRep. DickinsonRep. NicholsRep. Flowers

ALASKASen. GravelSen. StevensRep. Begich

ARIZONASen. FanninSen. GoldwaterRep. Udall

ARKANSASRep. PryorRep. Alexander

CALIFORNIASen. TummyRep. GubserRep. VeYseYRep. .JohnsonRep, WaldieRep. LeggettRep. ClausenRep. TalcottRep. SchmitzRep. McFallRep. TeagueRep. GoldwaterRep. B. WilsonRep. Van Deerlin

Sen. DominickSen. AllottRep. McKevittRep. Brotzman

Spn. RibicoffRep. Steele

Sen. ,BoggsRep. du Pont

Sen. GurneyRep. FuquaRep. SikesRep. Haley

COLORADO

CONNECTICUT

DELAWARE

FLORIDA

.GEORGIARep. BrinkleyRep. Hagan.Rep. StuckeyRep. MathisRep. Thompson

HA WAITlien. Inouye . --Rep. Matsunaga

IDAHOSen. ChurchRep. HansenRep. McClure

ILLINOISSen. PercyRep. .KluczynskiRep. :Findley

Sen. IlartkeRep. HillisRep. MyersRep. ZionRep. LB DC1 grebeRep. RoushRep. HamiltonRep. Bray

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Sen. MillerRep. ScherleRep. Culver

Sen. PearsonSen. DoleRep. Sebeli usRep. WinnRep. RoyRep. Shriver

INDIANA

IOWA

KANSAS

KENTUCKYSen. CooperRep. MazzoliRep. PerkinsRep. StubblefieldRep. SnyderRep. CarterRep. Natcher

LOUISIANARep. Ca tleryRep. WaggonnerRep. Boggs

Rep. KyrosRep. Hathaway

Sen. BeallRep. Byron

MAINE

MARYLAND

MASSAOHUSETTS

Rep. HarringtonRep. DonohueRep. HicksRep. BurkeRep. MacdonaldRep. Boland

MIOHIGANSen. HartRep. CederbergRep. HutchinsonRep. HarveyRep. EschRep. BrownRep. RuppeRep. Vander JagtRep. G. FordRep. RiegleRep. McDonald

'MINNESOTA

Sen. MondaleSen. HumphreyRep. NelsonRep. Quie__.Rep. BerglandRep. ZwachRep. Frenzel

MISSISSIPPIRep. GriffinRep. ColmerRep. Montgomery

MISSOURISen. Ea gletonRep. BurlisonRep. HullRep. HungateRep. 'chordRep. Randall

MONTANASen. MansfieldRep. Melcher

NEBRASKASen. CurtisSen. HruskaRep. McCollisterRep. ThoneRep. Martin

NEVADASen. BibleSen. CannonRep. Baring

NEW HAMPSHIRE

Sen. McIntyreRep. Cleveland

NEW JERSEY

Rep. HelstoskiRep. HowardRep. RoeRep. ThompsonRep. Forsythe

NEW INIEXIGO

Sen. MontoyaSen. AndersonRep. LujanRep. Runnels

NEW YORE:Sen. JavitsRep. HalpernRep. KingRep. RobisonRep. TerryRep. ScheuerRep. HastingsRep. HanleyRep. KempRep. FishRep. HortonRep. PodellRep. Stratton

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Rep. LentRep. RangelRep. GroverRep. BrascoRep..ConableRep. SmithRep. Rosenthal

NORTH CAROLINA

Sen. JordanRep. HendersonRep. BroyhillRep. JonesRep. MizellRep. LennonRep. Taylor

NORTH DAKOTASen. YoungSen. BurdickRep. LinkRep. Andrews

OHIORep. MillerRep. Stanton, J. W.Rep. HarshaRep. AshleyRep. Latta.Rep. SeiberlingRep. Powell

Sen. HarrisRep. AlbertRep. SteedRep. Camp

OKLAHOMA

OREGON

Sen. HatfieldSen. PackwoodRep. UllmanRep. Wyatt

PENNSYLVANIASen. ScottSen. SchweikerRep. McDadeRep. WilliamsRep. NixRep. JohnsonRep. CoughlinRep. ClarkRep. RooneyRep. FloodRep. EshlemanRep. WhalleyRep. SaylorRep. YatronRep. Goodling

RHODE ISLAND

Rep. St Germain

SOUTH CAROLINASen. HollingsSen. ThurmondRep. GettysRep. McMillanRep. MannRep. Dorn

SOUTH DAKOTA

Sen. McGovernRep. Abourezk

TENNESSEESen. BrockSen. BakerRep. EvinsRep. JonesRep. QuillenRep. BlantonRep. DuncanRep. FultonRep. BakerRep. Kuykenclall

TEXASSen. BentsenSen. TowerRep. WrightRep. PriceRep. WhiteRep. ArcherRep. PickleRep. FisherRep. de la GarzaRep. Purcell

UTAHSen. BennettSen. MossRep. McKay

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Sen. AikenSen. Stafford

VERMONT

VIRGINIASen. SpongRep. BroyhillRep. DanielRep. DowningRep. RobinsonRep. Wampler

WASHINGTONRep. AdamsRep. McCIormack

WEST VIRGINIA

Sen. RandolphRep. StaggersRep. SlackRep. Heckler

WISCONSINSen. NelsonSen. ProxmireRep. O'KonskiRep. ObeyRep. ThomsonRep. SteigerRep. Zablocki

WYOMINGSen. HansenSen. McGeeRep. Roncalio

Mr. KLuczyssmi. Thank you, very much.Mr. KLucz-v.wsKr. The next witness will be Mr. Aubrey J. "Wagner,

Chairman of the Board of the Tennessee Valley Authority.Red, it is a pleasure to have you before us again, and the floor is

yours. And you may proceed in any fashion you wish.Do you have a prepared statements

TESTIMONY OF AUBREY J. WAGNER, CHAIRMAN OF THE BOARD,TENNESSEE VALLEY AUTHORITY

Mr. WAGNER. Yes, Mr. Chairman. I have a prepared statement.Mr. Kluczi-xsiii. "Without objection it will be made a part of the

record in its entirety.(The statement referred to follows :)

STATEMENT OP AUBREY J. WAGNER, CHAIRMAN OF THE BOARD, TENNESSEE VALLEYAUTHORITY-

I appreciate the opportunity to appear before this Subcommittee to discussTVA activities as they relate to the economic strength of rural and small townAmerica.

The Tennessee Valley region, which includes both the Tennessee River water-shed and the areas outside it in which TVA power is distributed, encompassesan area of about 80,000 square miles of which about half is occupied by thewatershed. The region is larger than the combined size of the States of Vermont,New York, New Jersey, Delaware and Maryland. It contains only seven citieshaving populations of more than 50,000 people. According to 1970 figures, 46 ofthe 201 counties in the region have !rides with populations in excess of 10,000people. Within the Tennessee River watershed there are only three cities withpopulations of more than 50,000 people and 89 percent of the Valley's citizenslive outside of these cities.

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Population of the region grew by about 9 percent during the 'past decade.The distribution of this growth within the region occurred as follows:

The 7 counties having cities with a population of more than 50,000 people in1960 experienced a population gain of 14 percent.

The 30 counties with cities between 10,000 and 50,000 people in 1960 experi-enced a gain in population of 34 percent.

The 84 counties with cities between 2,500 and 10,000 people in 1960 experienceda population drop of 1 peromt.

The 80 counties having no city as large as 2,500-people in 1960 experienceda population drop of over 18 percent.

During the decades of the 1940's and 1950's more than 1.3 million peoplemieated from the Tennessee Valley region. The rate of net outmigration has

.0 slowed considerably during the 1960's with only about 120,000 more peopleleaving the region than moving to it. From the standpoint of the work force,recent figures indicate that there has actually been a reversal in the migrationpattern : there is now a net in-migration of workers to the region.

Outmigratibifiluring the 1960's was inversely correlated to population density.Counties in which there was no city with a 1)opulation of more than 2,500 experi-enced nearly a 10 percent net outinigrati. n rate, which declined to virtuallyzero in counties with cities in the 10,000 to 50,000 population bracket. Countieswith cities over 50,000 people experienced a 1.2 percent net in-migration.

It is apparent from these statistics that the Tennessee Valley is not unlikemany other areas of the country which are experiencing population declines andsubstantial outmigration rates in the more depressed rural areas. The regiondiffers from most others, however, in that it is experiencing both the greatestgrowth and the highest rate of growth in its smaller and medium-sized townsand their environs rather than in its largest cities. According to availabledata, 63 percent of the increase in nonfarm employment in the Tennessee Valleyregion between 1967 and 1969 occurred outside of metropolitan areas.Wationally,the increase was only 21 percent. TVA believes that these types of growth patternsare healthy and should be fostered. Encouraging growth within small andmedium-sized towns in rural areas not only strengthens them economically buttends to relieve pressures in metropolitan areas. In human terms, it means thatworkers in an industrial society can live in pleasant, uncongested surroundingswith ready access to natural amenities and recreation opportunities rather thanin the slum congestion that has too often accompanied industrial employment.TVA has developed a number of projects and programs which have as theircentral purpose the improvement of economic conditions and the quality of life inrural areas. We believe these actions have contributed to the strong growthrates in the smaller and medium-sized towns in the region.

One of TVA's major efforts in the strengthening of small towns is its Townliftprogram. The program is designed to revitalize existing communities so that theymay be more attractive and satisfying places to live and work. It places a heavyemphasis on TVA's role as a conduit for technical information to the communitiesinvolved, but relies on the communities themselves to implement the neededchanges. TVA provides technical assistance both by making available the servicesof its .community and regional planners, economists, architects and engineersfor preliminary planning, and by advising community leaders of other availablepublic and private assistance sources.

Each community has its own 'problems. In some cases the downtown area may$ be deteriorating, in others traffic congestion may be serious and in some there

may not be sufficient industrial areas available to attract new employmentsources. Since 1964, when the Townlift program was initiated, TVA has discussedprospective Townlift programs with sonic 90 communities in the region and todate 15 of them have undertaken Townlift projects.

Pulaski, Tennessee (population 6,989) was one of the first cities to participatein the Townlift program. Its initial project was to refurbish the city square.Subsequently a program of individual storefront remodeling, interior renova-tions and relighting has been undertaken by local merchants and the countycourthouse which occupies the center of the square has been completely land-scaped. Local action of this kind builds enthusiasm that triggers other actions.In 1967, the city sponsored a community-wide beautification survey which re-sulted in a number of local beautification projects; including one which wasawarded a HUD open-space utilization demonstration grant..

Between 1967 and 1911, 16 new plants or plant expansions were announcedfor Giles County, in which Pulaski is located. When completed they will representan investment of over $12 million and provide 930 industrial jobs. Per capitaincome in Giles County increased by 65 percent between 1965 and 1969 as against43 percent for the Tennessee Valley region and 34 percent for the Nation.

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A considerably broader Town lift program was initiated in Oliver Springs,Tennessee (population 3,405) in 1967. This southern Appalachian communityhas declined over the years as a result of reduced mining activity in the areaand periodic flooding. Working with TVA the community prepared a comprehen-sive redevelopment plan which included a local flood control project, high-way improvements, a park, a swimming pool, a waste water system, and a publichousing project. A. summary of the program and the various funding sourcesinvolved is attached to may prepared statement. Major TVA. participation atOliver Springs, apart from the planning assistance, involved the construction ofIndian Creek Channel which was completed in 1970. The growth of this com-munity since its Town lift prograM began has been remarkable. A new conummitybank has been built, three new residential subdivisions have been started, and 30of the 165 new homes proposed for construction have been completed. Most im-portant, a "can-do" enthusiasm and a renewed local involvement is communityaffairs has replaced the frustration and hopelessness that frequent floods andeconomic depression had created.

TVA's Office of Tributary Area Development is also involved in programs tohelp stimulate the economy of rural areas in the Valley. Under this program TVAcooperates with state agencies and citizens' development associations organizedOn the basis of sub-regions within the Valley. Initially the local citizens are en-couraged to make a resource inventory covering the entire area to determineboth what assets they have to work with and what their major problems are.Then plans are formulated to identify ways in which local resources might bemore effectively utilized. In some cases these plans have identified. water re-source projects as being keys to the development of a region; in other cases dif-ferent types of investment, public or private, have been identified as of first .im-portance or as essential companion elements.

In the Elk River area, for example, TVA. constructed the 10,700-acre TintsFord Reservoir which was impounded in the late 1970. During the early planningfor this project the Tennessee Elk River Development Agency (chartered underState law) and TVA worked closely together to identify opportunities whichmight maximize the economic contributions of the reservoir to the area. Althoughthe reservoir has been in existence for only a little over a year, a privatelyfinanced $3 million resort and recreation complex is now nearing completion.On the shores of the lake, residential development is underway and plans forprivately developed marinas, campgrounds and other\ recreation facilities areactively being pursued,

In the five Yedrirfollowing the start of construction on Titus Ford Dam, in-dustrialfirms announced plans for eleven new or expanded facilities in thereservoir area. These facilities will involve an investment of more than $4.2million and provide employment for nearly 500 people. A number of nearby com-munities have undertaken improvements in their business areas and several ofthem are working together on studies for area-wide water and sewer service.

Another type of Tributary Area DeVelopment project is underway in Lee.Wise, and Scott Counties in southwest Virginia. This is an area of small farmsand relatively high unemployment and underemployment. It is typified by steepterrain and virtually no flood-free level land on which substantial industrialdevelopment could occur. Following much the same pattern as in Oliver Springs,TVA assisted the local multi-county agency in marshaling the necessary financialand technical assistance to develop an industrial park at :Duffield. TVA. con-structed a channel to provide flood protection at the industrial park site anddevelopment of the site is being undertaken with other federal, state, local andprivate funds. Perhaps the most significant element of the Duffield project is thesuccessful cooperation among three counties and a city to develop a mutuallybeneficial project which could not have been undertaken by any of them in-dividually. This is a feature of the Tributary Area Development program onwhich we place considerable emphasis.

In addition to projects such as those I have described, the Tributary AreaDevelopment program includes a wide range of activities designed to improvethe quality of life in rural areas. These include technical assistance in the devel-opment of solid waste collection and disposal systems and junk-car removalprograms, and assistance to local education leaders and government officials inimproving the quality of their services and the efficiency of their operations.

The projects and' programs I have just described have been developed dur-ing the past decade or so. In addition, we are studying new ways in which wecan help to both strengthen the economy and improve the quality of life in theTennessee Valley region. Two such programs involve what might broadly becalled new communities.'

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One, Timberlake, is being Planned for development along the left bank ofTellico Reservoir, on which construction began in 1967. Tellico Reservoir pre-sents an unusual opportunity for major industrial and recreational developmentwhich is expected to create some 25,000 jobs. Recognizing the possible dangersof instant urban sprawl which might result. TVA has worked closely withlocal units of government in planning for residential development and for urbanand governmental services. This planning showed the need for a sociallybalanced new community of 50,000 people, planned to the highest developmentalstandards, offering a wide range of amenities, and closely linked to the sur-rounding rural area. TVA and the local units of government envision Timber-lake serving as an urban center with strong educational and government servicelinks to the surrounding area. A map showing the results of this planning effortis attached to my prepared statement. The three project area counties havebegun to explore means of cooperatively improving their education services andtwo of them have formed a joint urban services system which is in the processof establishing a water system and which later will provide sewer and solidwaste services to the area along with possible industrial environmental pro-

*. tection services.The other new community type development is quite different, encompassing

an area of some 1,000 square miles which includes over a dozen conununities.A few years ago several interested-groups in this Lower Elk River area becameconcerned with the Population and economic decline of the rural parts of thearea as Nvell as with the loss of job opportunities for ninny people who wantedto continue to live there. The group also recognized the environmental problemsassociated with developmental programs relating to such areas. After discus-sions with TWA, the group (anie up with a proposal for the redevelopment ofthe area that would provide a new alternative mode of rural living to workersin the towns and in the hikhlrowth centers that border the area. Developmentwould be designed to presenT the openness and the rural atmosphere yet pro-vide a high level of services and amenities. As an example of the directions inwhich these local rural-oriented groups are moving, your Committee may beinterested in this particular group's stated goals for its area :

1. Provide a range of choices in living conditions in the area by :a. Upgrading existing urban centers Pulaski (Pop. 6,980), Fayetteville

(Pop. 7,030), Athens (Pop. 14,360)c. Developing new rural neighborhood communities (size about 2,500

people)2. Maintain the natural beauty and openness of the area3. Improve job opportunites in existing towns and provide for ready access

to jobs outside the area4. Provide housing. for a full range of social, economic, and racial groups.TVA is working closely with the residents of this area in the development of

what we hope will be a model for many similar areas throughout the country.In conclusion I have several observations. The statistics I discussed at the

beginning of my remarks indicate that the TVA region is experiencing ruraland small-town growth patterns quite different from the national norm. We havegreat optimism about the ability of the region to sustain this type of growth,and about the new.. opportunities it offers for an improved life-style in an industrialsociety. We see a need to continue and expand our efforts to encourur

The types of activities we engage in involve close working relationships withState agencies lurid with citizens groups and planning and development units atthe grass-roots level. In some cases a substantial federal investment is involved,

4. but in many others the price tag is quite low. Often a stagnant or deterioriatingarea. can change dramatically through modest federal efforts which provide thetemporarily needed skilled personnel. and the necessary initial guidance to trans-late the desire for a better community into a reality. Onee the initial impetus hasbeen 'provided, we have found that local leaders have a remarkable ability tosustain and expand such efforts.

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We have been asked to give our views on the parts of the report of the Com-mission on Population Growth and the American Future that deal with thefuture of depressed rural areas.

As I mentioned earlier, the growth patterns in the Tennessee Valley regiondiffer from th,e national norm in that rural counties with cities in the 10,00050,000 population bracket are experiencing very good growth rates. In our view,the growth center concept described in the report should be expanded to includethe smaller cities such as those that are doing so well in our region. The reportalso states that it might be prudent to plan for the decline of certain decayingrural areas. In some cases this might be the best course, but we believe carefulconsideration should first be given to the use of the types of projects and pro-grams I have described. We believe that such investments provide a very sub-stantial return. They help improve the quality of life now available in ruralareas. They provide needed alternatives to the congestion problems inherentin a metropolitan life style. And, perhaps of greatest importance, they helpreduce existing pressures on troubled metropolitan areas.

I appreciate this opportunity to present TVA's views.

TOWNLIFT PUBLIC PROGRAM FUNDING, OLIVER SPRINGS, TENN.

Project Cost Source of funds Status

Indian Creek Channel $1, 770, 000 TVA Complete June 1970.Public housing 1, 600, 000 HUD

_Burney Ave. (27 units) Occupied June 1970.Tri-County Blvd. (48 units) Construction start February 1972.

Wastewater system 2, 288, 000

Plant Complete June 1970.Collection system Under construction.

1,319,000 HUD208,000 FWPCA126,000 ARC85, 000 WPCTN

550,000 Oliver Springs

Arrowhead Park 150, 000 Application funded April 1972.

75,000 HUD75, 000 Oliver Springs

Municipal swimming pool 75, 000 Application funded April 1972.

37,500 HUD37,500 Oliver Springs

Wartburg Bridge 150,000 State highway Opened December 1969.department.

Kingston Ave. Bridge 150,000 TVA Opened July 1970.State highway 61, bypass 3,500,000 State highway Construction start 1973.

department.

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Mr. KLUCZYNSKI. And you understand the situation this morning.I am sorry that we do not have a good attendance here this morning.We are all interested in that great agency, the Tennessee ValleyAuthority. And we are very, very happy to have yOu- before thecommittee.

We have many questions that we would like to ask you, but wecannot do it this morning. So we will appreciate it if you will answerour questions for the record.

Mr. WAGNER. You will give us questions and ask that we submit theanswers in writing?

Mr. KLUCZYNSKI. Yes.Is there anything you want to say to the subcommittee?Mr. WAGNER. I want to say that we do appreciate the opportunity

to appear before you. And this is certainly a very important seriesof hearings that you are embarked on. We know of your interest inthe area. Anti we recall the visits that you have made to the TennesseeValley and your interest in the rural development activities that aretaking place there.

I think the only thing that I might say is that in the TennesseeValley, somewhat different than the rest of the Nation, our greatestpopulation growth is taking place in the smaller towns and the ruralcommunities, largely based on the fact that there are a great manycitizen organizations there which are looking at the resources thatthey have to work with, and they are attracting industry to theirareas, and as a result, jobs and economic growth that are suited totheir particular circumstances. And the details of this and some exam-ples are given in my prepared statement.

Mr. krxczy.NsKi. Thank. you.I have been there several times. And I always got that southern

hospitality. And I have always been happy and proud of the Ten-nessee Valley Authority.

Gentlemen, you understand the situation this morning. I am verysorry, but we just cannot go on. I don't want to call the witness backtomorrow. So, we will let him go back and take care of the TVA.

Mr. WAGNER. Thank you.Mr. IsauczyNsKt. As I said before, we will send you the questions,

hoping to have the answers for the record.Mr. WAGNER. Thank you.(The questions and answers follow :)

SELECT COMMITTEE ON SMALL BUSINESS,HOUSE OF REPRESENTATIVES OF THE UNITED STATES,

Washington, D.C., May 30, 1972.Hon. AUBREY J. WAGNER,Chairman, Tennessee Valley Authority,Knoxville, Tenn.

DEAR Mn. CHAIRMAN: This is in reference to the recent hearings by our Sub-committee on the future of small town and rural America. As you know, I indi-cated that we would appreciate your answering some questions for the record. Iant sorry tkat-we were not abie to CORiplete the hearings as scheduled.

The Subcommittee understands that duringthe current fiscal year, the Tennes-see Valley Authority has expanded its Agricultural Projects "program planningand analysis" to include "indepth studies of rural-urban migration and the de-velopment of plans to improve rural resources development".

1. How are these studies being conducted?2. How many personnel are being utilized for this purpose?3. 'What is the status of these studies?

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4. When will they be made public and published?Your early attention to the above will be most appreciated.With warmest personal regards and best wishes, I am

Sincerely yours,-JoHIN.; C. KLUCZYNSKI,

Chairman, Subcommittee on Small Business Problems -in Smaller Townsand Urban Areas.

TENNESSEE VALLEY AUTHORITY,Knoxville, Tenn., June 13, 1972.

Hon. Joan C. KLuczyxsaa,Chairman, Subcommittee on S'niall Business Problems in Smaller Towns and

Urban Areas, House of Representatives, Washington, D.C.DEAR MR. KLUCZYNSKI This is in response to your letter of May 30 requesting

information about studies of rural-urban migration conducted in connection withs

our Agricultural Projects "program planning and analysis." This activity is con-ducted primarily to improve data for planning TVA's regimuil agricultural re-source development programs. For these and other development programs, wehave for many years studied various aspects of rural-urban migration. We recog-nize that the =Serials TVA uses for internal planning are often useful to others,and in some instances the results are published or prepared in written form suit-able for distribution to agencies and individuals Outside TVA.

Our labor mobility studies are based on the 1-percent sample of the "Old Ageand Survivors Disability Insurance" (OASDI) data file -from the Social SecurityAdministration's Continuous Work History Sample. The file consists of data forstates and counties for the years 1957 through 1968 on an annual basis and in-cludes both the employee-employer file and the self-employed file. TVA has mergedthese two data files for the entire United States.In this respect our data file isunique. As a result, the movement of workers and self-employed persons and theirclassification by industry of employment, geographic location of employment, age,sex, race, and income can be traced. We have recently received data for the firstquarter of 1970. This information, along with data for the first quarter of otheryears, is being used mu a study that examines the growth of the labor force by age,sex, race, income, industry of employment, and location of employment for theTennesee Valley region and the Southeast for-the periods 1960-1965 and 1965 -1970. Results from the study will be presented later this month at a symposiumentitled "The Labor Force: Migration, Earnings, and Growth," which is being co-sponsored by TVA and the Social Security Administration (SSA). We plan topublish the proceedings of this symposium.

In 1972, 2.8 man-years of time were budgeted to the entire activity"pro-grain planning and analysis." Within this program category, one-half man-yearof professional and one-half man-year of clerical time were devoted to socialsecurity data studies in the Division of Agricultural Development. In addition,other TVA staffs provided. limited assistance in the form of supplemental data,review, and analysis.

Several sutdies have resulted from this activity. The completed studies includefour that have been published and three papers that were presented by theirauthors at meetings of regional scientists and similar professional organizations.One of these will be published in the 1972 proceedings of the Southern RegionalScience Association. Mention has already been made of the study, nearingcompletion, that will be presented at the TVA-SSA-sponsored symposium. Otherstudies related to rural-urban migration are planned.

A list of the migration studies we have undertaken is enclosed. Copies ofcompleted studies are made available to interested organizations or individualsupon request. To date, several hundred copies of the published reports andpapers have been distributed. In addition, our computer processing and program-ing of the data have enabled us to provide computer programs and data onmagnetic tapes to meet the research needs of such organizations as regionalplanning conunissions, university research bureaus, and others.

Sincerely yours,AUBREY J. WAGNER,

Chairman.

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LABOR MOBILITY STUDIES BT TVAPublished Studies

Movement of Labor Between Farm and Nonfarm Sectors and Multiple-Job-holding by Farm Operators in the Tennessee Valley, Bulletin T67-4AE

Mobility of the Tennessee Valley Labor Force, 1957-1963, Bulletin Y-23Contribution of Farm Labor to the Nonfarm Labor Force in the Tennessee

Valley, 1960-1965, Bulletin Y-24Metropolitan Labor Force Migration in the Southeast, 1960-1965, Bulletin

Other Studies ContptetedMovement of Labor Between Farm and Nonfarm Sectors of the Tennessee

ValleyThe Mobility of the Tennessee Valley Employed Labor ForceSome Policy Implications of Labor Mobility in the South With. Special Re-

ference to the Tennessee Valley RegionStudy in Progress

Reflections on .the Future Growth of the Southeast

Mr. KLuczrNsKi. The hearing is adjourned until tomorrow morn-ing at 10 o'clock.

(Whereupon, at 10:15 a.m., the hearing was recessed, to reconveneat 10 a.m., Thursday, May 4, 1972.)

Completed or scheduled to be completed in fiscal year 1972.

5

THE FUTURE OF SMALLTOWN AND RURAL AMERICA:THE IMPACT ON SMALL BUSINESS

THURSDAY, MAY 4, 1972

HOUSE OF REPRESENTATIVES,SUBCOMMITTEE ON SMALL BUSINESS PROBLEMS

IN SMALLER TOWNS AND URBAN AREAS OF THESELECT COMMITTEE ON SMALL BUSINESS

TV asking ton,D.C.The subcommittee met, pursuant to recess, at 10 a.m., in room 2357,

Rayburn House Office Building, Hon. John C. Kluczynski (chairmanof the subcommittee) presiding.

Present : Representative Kluczynsld.Also present : Representatives Bergland and Lujan of the full com-

mittee; Donald B. Roe, subcommittee counsel ; John M. Finn, minoritycounsel; and Myrtle Ruth Foutch. clerk.

Mr. KLuczyNsKi. The hearing will come to order.Today we continue with our hearings on the future of smalltown

and rural America.Witnesses this morning will include the Honorable Robert Podesta,

Assistant Secretary for Economic Development, Department of Com-merce; the Honorable Samuel Jackson, Assistant Secretary of HUD;and Mr. Alvin Jones Arnett, Executive Director, Appalachian Re-gional Commission.

Before calling our first witness I would like to announce that wewere unable to complete our schedule of witnesses yesterday. This wasdue to circumstances beyond our control. However, the hearings maybe resumed within the next few weeks in order to complete the testi-mony.

And as you know, we were supposed to have the Secretary of Agri-culture yesterday morning, and we had to postpone that until a futuredate. The committee will be very happy to hear the testimony of theSecretary.

And now our first witness, the Honorable Robert Podesta, AssistantSecretary of EDA.

Bob, you have the floor now. It is up to you, and you may do itin your own fashion. You have been a very good friend of mine formany years. You are doing a wonderful job, and I hope you willcontinue. It is nice to have you here before this committee.

TESTIMONY OF ROBERT A. PODESTA, ASSISTANT SECRETARY FORECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE, ACCOM-PANIED BY JERRY CONROY, GENERAL COUNSEL

Mr. PODESTA. Thank you, Mr. Chairman. Maybe I had better quitwhile I am ahead.

(91)

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Mr. KLUGZYNSKI. Mr. Berg land. 0

Mr. BERGLAND. Mr. Chairman,- before Mr. Podesta begins, I wouldlike to compliment him and his agency on its activities in about 20counties in the district I represent. They have done a marvelous jobin helping people who without their help would probably have beendriven out of the rural areas into the cities which are already: over-crowded.

Thank you for our able administration.Mr. PODESTA. Thank you.Mr. KLuczyNsiii. Mr. Luj an ?Mr. LusAN. Mr. Podesta knows that in our district we have a lot

of contact-with-EDA.--Andit-isone-of_the a ffencies that we...reallyfeel._that we can go to for help. We want to thank you for all you have donein our area.

Not only in the small towns, but in the Indian reservations, EDAhas been very helpful to us.

Mr. PODESTA. Thank you, Mr. Luj an.Mr. Chairman, I must start by saying that it is very gratifying to

hear the people with whom we work say that we are responsive andat times helpful. And I appreciate the chance to be before the sub-committee and to present the views of the Department of Commerceand of the Economic Development Administration on our economicdevelopment efforts relating,to rural America and smalltown Amer-ica, and the impact of those efforts on small business.

The primary ingredients of the EDA program to fight problems ofunemployment and low income are public works grants and loans,business. loans, technical assistance and planning and, pursuant tothe 1971 amendment to our act, a public works impact program.

Although EDA does not have a specific mandate to concentrate onrural and smalltown America, many of the areas designated pursu-ant to our act are in that area. We have aided these areas and welave made-a beneficial impact on them and their small businesses Ourfigures show that through fiscal year 1971, 85.4 percent of our publicworks moneys were marked for expenditure for such areas. This hasamounted to $893,140,000 since EDA's inception in 1965. Since 1965,$253,025,000 in business development funds has been advanced in suchareas which amounted to 89.3 percent of total funds available in thiscategory. 98.2 'percent of our planning grants, $25,108,000, since 1965,has gone to non-SMSA's, 'those parts of the country with which thiscommittee is concerned. And 47.8 percent or $30,871,000 of EDA'stechnical assistance moneys has been spent in these areas in the sameperiod of time.

Let me break down the figures in a different way. Since the begin-ning of 11`., DA_ in 1965, through June 30, 1971, we have provided toareas with.populations of 50,000 or less, which can be categorized assmalltown America, 2,385 public works and business loan projects.Total EDA investment in these projects has been $1.1 billion or about90 percelit of all our public works and business loan funding. It isestimated that this has triggered about $2.2 billion of private invest-ment. Public facility loans and grants have provided the basic in-frastructure which must be present in rural and small town Americato attract private capital investment in industrial and commercialenterprises. EDA funds have made it possible for many of these smalltowns to develop industrial parks; to construct needed access roads for

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the movement of goods and personnel; to construct regional technicalskill centers for training of the labor force; and, otherwise to makethe communities more attractive to industry. The returns on the basicinvestments in needed public facilities are very satisfactory. Ourevaluations show that for every $'29 of EDA public works funds,one new job is created in new and/or expanding businesses.

One of the principal strategies used by EDA in assisting ruralareas in the "growth center" approach. This approach calls for theselection of a growth center, a small town, or city not over 250,000 inpopulation, located within an economic development district or rede-velopment area and ansintegral. part of the overall ccono-,s. develop-ment plan for that area. or_district... lirinjacting.strong assistance. atthe growth center, we hope. to push it into an economic upswing whichwill diffuse itself throughout the area or district and, provide analternative to migration that might otherwise go to urban areas. EDAhas invested more than $201.8 million in growth centers.

makes many loans to small businesses -which are ineligiblefor SBA loans. We also feel that loans we make to larger companieslocating; in rural or smalltown America create a climate in which manysmall, businesses, either local subcontractors or the community's gen-eral businesses, benefit. We have examples where such loans havecreated substantial direct nonseasonal employment; increased theproperty tax base; and allowed the conummity to upgrade its socialservices.

Now, I would like to tell you how we help smalltown and ruralAmerica in identifying its problems.

The technical assistance program has responded to a variety of re-quests from units of local government and nonprofit local develop-ment corporations to examine the feasibility of exploiting naturalresources such as mineral, timber; and agricultural production and hasundertaken preliminary examination of rural. industrial location de-velopment. Some of these latter have involved the rens_of surplusmilitary establishments and the assessment of the economic potentialof interstate highway interchange locations and airport related indus-trial growth.

Of particular importance has been examination of industrial po-tentials of sites on existing navigable waterways and of newly con-structed aids to navigation.

The technical assistance program has also assisted in the establish-ment of resomce centers at many universities located in or near con-centrations of low level or declining rural. business activities.

The adverse social dynamics of rural areas require continual studyof the problem in any given place, isolation of its elements and plan-ilia!, for and providing, meaningful solutions.

First, we recognize the siiificance of regional migration flows andsupport. a number of research projects to ithUtify and explain thesemigratory flows. This research has helped to pinpoint the nature ofthe flows of people among the various places of our Nation and thedemographic. composition. of these migratory (lows. That is. we at-tempt to identify which people are more likely to move and to whichplaces they are likely to go.

ET)A. also studies the relationships between cities as well as amongthese cities and the rural areas of America. It has been possible toclassify cities according to their surrounding uthan places and rural

G17-72V01. 1-798

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hinterlands by the economic. functions they perform. re-lated to the role of growth centers as pregenitors of region4 cm-1,9111)cdevelopment and helps clarify the role of growth centers in regional.development -programs.

Second, EPA -has undertaken an industrial location planningsystem intended to develop information about thin industrial, reso weerequirements of growth manufacturing industries and compare theserequirements with the resources availabilities EDA's redevelop-ment areas and groWth centers. Areas which, experienced the specificmatching of these resource demands with resource supplies, couldthen go directly to manufacturing industries which might be attracted

-to them were they aware of their e.x:istence.It is 'amazingto digress for a. miunte from nay prepared state-

menthow many i)laces in rural America are so small that they simplydo not have the expertise or the tools available, to find out who they-would go to to attract people. They don't even know the first step. Andwe try to help them do that.

So that industries in search of new industrial sites would be in.:formed about the attractiveness of these redevelopment areas andgrowth centers.

One example. Most people think that businesses are turned on byrailroads. Some of them are. But since the highway systemwhich Iunderstand the Chairman has some interest inhave been in place,railroads have lost their importance as a number one reason why some-one would no someplace. And we established that by going out andactually talking about something, asking what ftL:tors are important.,water, people and so on.

Third, we have funded research on some broader policy questionsincluding analyses of the regional effects of the family assistance planas well as the regional impact of introducing either general or special'revenue-shr.... in a programs. For example, EDA is studying how migra-tion andla-Tor force participation rates, partim-larty-munng .conda,ryworkers, are likely to be affected by some national family incomeminimum. EPA-supported research is also looking into the net effectof introducing revenue sharing in place of expanded categoricalgrants-in-aid programs with various revenue raising tax programsbeing used. to fund the revenue-sharine. program.

I believe I can say unqualifiedly, Mr. Chairman, that EPA hasunder constant scrutiny many of the problems of rural and small town.America. We, are trying within our legislated responsibilities, torespond to those _problems. We know we have a good deal to learneven vet, about the potential inherent in the tools we now have. Butwe. mean to continue our efforts, .continually evaluate results, and,wherever possible. make the changes necessary to do what we like todo best: to help people who help themselves especially in rural andsm al 1 t o wn _America.

Thank you.Mr. Knerczy-ssicr. Thank you, Mr. Podesta.Do you see the growth center approach as a means to stem the tide

of migration?Mr: Poor.sm. Yes, we do. I will give you. my personal assessment

of that, Mr. Chairman.The growth center idea really didn't grow up in this country, it

grew up abroad. They are called growth polls in Europe. In my job

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I found nlysell a nieniber of the Committee of the OECDO RegionalEconomic Development. And 1. have discovered that this idea is a basicidea.

Now, if you read the paper this morning far enough you would seethat in Brittany at the moment there is a strike. They had ff regionalgrowth center theory, and they tire having trouble with it.

So, let me preface my answer by saying, there are great differencesof opinion about what the size of a..growtr center should be. Our legis-kition- says it can't be over 250,000 people. But some of our resourcegrants come back and say, a growth center can't be under .250,000people.

Now, my aSSistant,Mr-Blountotho is a p ro op, Li v i ngstan, sait grew from 1,500 to 24,000, and in his book that is a growth center.

So, we think it does work. We think it doesn't work in the classicway that some people think it, should. In other words, you have a dis-tricthere is a distressed area, there is a growth center there, put yourmoney there, and these, people instead of going to the ghetto in Chicago and New York will stop off there. And they tend to measure the-growth center by how many guys really got jobs. And it is too earlyto prove that that really happens. We really wonder whether that isthe way you should measure it or not.

So, our answer is yes, the expert has some promising results, butthe returns are not in on growth studies.

KLUZYNSICT. What studies do you have underway now inregard to rural development?

Mr. Pon sm. We have a whole catalo! of them which I would liketo supply for the record, and specifically ghat we are doing.

A. Ir. Iil-uzyxsxf. I would appreciate it if you would supply thatfor the record because I would like to have it. I nm sure that themembers o1 this committee are very much interested in that.

It is a pleasure for me to have you before this committee. And Iwant to complimentyou for -the sp1efidid4ob_youllavn done -Anytime I want any information I call there, and within live minutesI have the answer.

Mr. PormsTA. Mr. Chairman. .% was derelict in not introducing mychief counsel, Jerry Conroy. He is a graduate of Notre Dame andGeorgetown University. And we middlewesterners doitt mind himcoming clown to Georgetown.

Mr. Kirczvxsra. What is the name ?Hr. PODESTA, Conroy.Mr. Ictx-czvxsiu. I thought they \vete all Poles and Lithuanians

there at :Notre Dame, and that is why they had such a good foothallteam.

linouxo. Notre Dame at one time had a Norwecrian footballcoach Mr. Chairman.

Mr. Kprczvxskt. I heard about that.1 am happy Mr. Berg:1'11d and Air. Lujan are hero today. I *hap-

Ilene& to be in Mr. Lajan's hart of the country last summer and he-is doing a marvelous job out there. So, you must be all right to hepraisedloy both a, Democrat and n Republican.

Any questions or. comments. Mr. Berri andMr. BEnor,xxo, Yes, I have a couple of questions, Mr. Chairman.Mr. Secretary, the public works impact program is relatively new.

What is your authorization in terms of money ?

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Mr. PonEsTA. Jerry, what is the authorization ? I know the dollarsyou have.

Mr. BERGLAND. How much money do you have. let's put it thatway.

Mr. (oxnoy. We are authorized to spend up to $50 million.Mr. PonEsTA. This year, fiscal '72.Mr. BERGLAND. Has that money been appropriated ?Mr. 0):NIZOY. Our authorizations and our appropriations are so

-intermingled in this public works impact program that it is hard, togive yOil all ordinary straightforward answer. We are authorized tospend between 25 and 35 percept of our appropriation. Our appropri,at-ion is-about-$106..niillion.. So, Aracanspenelup

Mr. PonEsTA. What happened is, the appropriation in Title 1 is$106 million. The language said, you Inlist, spend no. less than 25 ormore than 35. And then there was a supplemental. The net result isthat we have $50 million to spend in fiscal. '72. In our fiscal '73 budgetwe have 'asked for, assuming it is a level budget, the 25 percent, whichis what the. Congress told us to do. So, we have spent, I think, obligatedjust a hit under $50 million, which is all we have for this fiscal year.And beginning:July 1 we will have $27 million to spend on these kindsof projects.

Mr. BEact,Axn. Do you have any idea how many projects have beensubmitted for approval under this Title beyond what you have beenable 70 .!$Ithorize?

, OooEsTA. lie have authorized 204 in 49 States, I know thatnumber. .But I would say I can find out the exact number, .but it isalso a difficult answer to give you exactly, because it is misleading.We intendedhe public works project is what we called it. It is adifferent. word than accelerated public works, because that is an in-flammatory word which people are against even before they know whatis means. But we called it public works impact projects, PW11). Thatineauft-our area, Podest4f,--wantsifistant-proce.ssing war ted_to callit WHIP, which would be the White House impact Project, but theywon't. let me get by with that.

What we set out to do was to see whether you really could putpeople to work with accelerated public works. When I testi fi A. againstaccelerated public works I was very unhappy with the backup of theopinions expressed. And with the full approval of the White House

--we set out to see what would happen if we really tried to short circuiteverything. You can't short circuit the environmental impact States.We got by with that. We had so many coming in that we picked onewhere it wasn't a factor. That may not be fair, but we-were 'tryingto put people to work in immediate useful work, which turned out tohe construction. The he thing about the. legislation is that it did notrequire an overall. economic development plan, which is usually thething that people don't understand.

The area becomes eligible, it. is designated, and then they say, whereis the project.? YOU come up with an economic development man andhere is the money to put it. together but it takes a long, time, and peopleget frustrated. So, in this ease you don't have to. So, if the projectsare on the. shellwe wrote some very rigid guidelines, in other words,when did you get going on this thing, When did you start, when didyou break ground. And in order to do thatI am backing into ananswer to your questionwe said, crane on, bring them in. -,So ordiwilily we wouldn't have encouraged that many. But we hurl to sort.

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them out as they came in and as they fitted the specification. So, Ithink at one time we had almost $85-million worth when we said,don't take any more applications. And so that is about it.

The actual number of applications we have is a figure we can sup-ply. But in\dollarsincidentally, these turned out to be. rather smallprojects. We couldn't spendeverybody wants. to build a dome sta-diuln. And what,I said, Mr. Chairman, to one guy, I said, "I have got16 tickets to the Chicago Bears, and if we are going to build a domestadium. you know where I am going to bni]cl

But we couldn't respond to a dome staditun with that amount ofmoney. That would take over $50 million. But I think the averageproject-turned oat .to-be under $300,000.- We put ft blItit S6D0,00-0because we didn't have very 'much money and we wanted to spreadit out.

.N fr. 13 I.:MLA:cll. Did you get the instant results you were after ?Po.DEsT.. We are measuring that now. Our target was to break

ground by February 15 with the first $27 million that we had. Weactually broke ground on the first project on January 6. But someprojectsand one in the District which we are very anxious to doover at .Anacostia, and which the Mayor is very anxious to do, hasbeen on the planning shelf for 6 years, and he has never been ableto get the money. It is in an area of very high unemployment whereall the public housing is. It is a recreation center. And he warts tobreak ground and I want to break ground. But it includes a p.yrima-shun. and it is too siuttill. The kids say, why can't wehave it reularg.y.zunasium ? T was a basketball player one time when you didn't haveto be G feet 9 to play and I (11.1 understand Why they want a b.ig one,.Who wants to play on a small floor ',,die.n, you can build a bigp.er one?

We are -investigating the job, and we expect to be able to reportto the Office of 'Management and Budget and to the Congress exactlywhat happened. But it is too early in the ball game to say now.

Itman..N...N-u.-On.e last-question: icl-thrttlurs----ro yourregular .EDA. grants for public facilities.

Is it necessary that a community be within one of the economicdevelopment regions before -you can approve, such a request ? Not allStates have these economic development districts.

Mr. PODETA. Economic development regions.The District thing says. you can put counties together, but at least

two of them must be eligible areas. And then you can put a, growthcenter outside of 'there, and we can put our money in the growth cen-ter or in the growth spots. And if it should be someplace else, NV,' can'tdo it. We have suggested to the legislative people that maybe we oughtbe able to put a .project 5 miles down the road. where there maybe a railroad or something else that will. have the same thing. Theresult of this restriction is that we. have got some very funny-lookinggrowth centers. because obviously you have got to put a project overthere, and we extend the boundaries if we. arc .convinced that it is agood project. but that is a bad way to run a railroad.

So, the 2.11SW Or is that. with everything but our title. III money,which is the technical assistance money, you actually have to be eli-gible. With the title ITT money there is a clause which says,' "Whereasthe Secretary decides." That is how we get into the cities.

Secretary Jackson will tell his problems as compared to ours. Wework very closely toegther, as T am. sure. he will tell yon, in somethingthey would love to do and we are able to respond to.

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Mr.-BERG:LAND. I would like the record to show that as a conse-quence-of the programs of the Economic Development Administrationno less than 5,000 new jobs have been created in my district withinthe last 10 years. Without these services there would have been 5,000more families crowded into the cities against their will. I commendthe Secretary and the agency. And I only wish they had 10 timesmore money.

Thank you, Mr. Chairman.Mr. KLEtZYNSKI. Thank you.Mr. Lujan?Mr. LIT,TAN. Thank von. Mr. Chairman.I am sorry that rdon't have figures to give as to how many jobS have

been created. but I can tell you that there have been plenty.One of the areas that I thought was excellent for aiding small busi-

nesses was mineral resources. You mention that at page 3 of yourstatement.

Can yOn give me some. examples of what you might have found orwhat we can do? We have a lbt, of public land that I think could beused to the advantage. of small business.

Mr. PODESTA. Alt". 1.41.1jall, I wish I was more of an expert on that.And I also wish. I had with me my public works chief, George Karras,who would know about, that, who was here when I got there, and I amglad he staycd.

Of coarse. it is a romantic business, the mineral business. Some peo-ple coming in are going to discover uranium and titanium. We haveto sort it out to find the immediate impact. What I would like to do toanswer your question exactly is to come up with some examples asto what we have done and what we have been frustrated in trying todo.

Mr. f-,TAI.c. -Would. you have George do that?_Mr. P_on-EsT.A.__KSJIM.

Mr. Lc.TAx. Getting back on. the question of economic <1,i-rolVtli. cen-ters. the 250.000 population figure seems to cause us some problemsaround the country. Specifically let me ask you. if it would he possible,in a county with disadvantaged areas and a city, which may not qualifyas a disn dvantasTO areais that a proper term ?

Mr. Ponssm. Tt is as good as any other.Mr. Lcii-Ax (continuin.a). Is it possible, then, to create an economic

district. sat, of surrounding three counties plus the part of this par-ticular comity ifiThimstion outside, of the city limits designating onlythe city as the growth center and the outlying areas as underdeveloped?

Mr. PODVzTA. Let. me give von some background comments, and thenI will ask Jerry Conroy to talk about what is possible.

Tinder the legislation as amended a year ago there is a special im-pact program. so that we can go in and carve out places within a city.

For example, the Stockyards has lone been an area that. originallywas under something called a sudden and abrupt rise in unemploy-ment. when the packing industry ;hist picked up and went someplace.The Brooklyn Navy-Yard is another classic one when the Navy closedit up 'But nor.- in the lower Fn' Side of '.7-ew York, and what we Callthe Mid-wesf impact area in Chicago, which is the place where thebiiran2-s, took place after the 1m-fortunate event of Dr. King's death,we have carved out a place within a city. And one of the thingsthefirst district that we have ever had "-ith a big city that has just been

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desimated is Seattle, Seattle itself is a major disaster area employ-mentwise. But there are counties around there, and it is the only dis-trict that we have got with a big city in it. That has only been desig-nated for a year, and we were watching it with interest.

Jerry, would you say that is possible?Mr. CONROY. ."es. that is possible. But you have to recall that the

economic development districtswe only work in two areas. One is theredevelopment area inside the district. And the second is the growthcenter, which is the economic development center, in the language ofour act, outside. the redevelopment area.

So, we would be, of course, empowered to work inside any redevel-opment-area in any eity.inthere-regardless of its size; or -regardless ofits relative im.poverislunent if the statistics for the whole redevelop-ment areas show that we ought to he there.

The incentive, you see, is to designate growth centers outside of theimpoverished county, so that we are empowered to work both in theimpoverished country and in a, neighboring relatively healthy area.

Mr. ta-,TA.x..The only thing that causes the problem with this growthcenter is that if you were to put the whole county into the economicdevelopment district, the entire county would exceed the 250,000 limit.The city is juist a hair below 250.000. We are looking for a plan,frankly, to get the entire county into the economic development dis-trict. Maybe we ought to pursue. it a little further. The specifie example

..that I am referring to, of course, is Albuquerque, which is just below250,000. But Bernalillo County is somewhere around a third of a mil-lion. So, we have three counties around it, with perhaps 230,000 to250,000 in each one of the counties. And Ave are now trying to makean EDA district.

Mr. PookSTA. One of our prob.-terns that is constantly on the tableis that everyone wants their place designated as eligible for our aid.One congressional friend of ours is constantly keeping up with new-formulas It is' very clear that-the result of each of them is to make thewhole State I will suggest that the more places that becomeelicriblee and the more we fight for our fair share. of the allocation. thez,-less effect we can have. And especially in the growth center, that is avery difficulteveryone wants to be known as a growth center. If Iran A. city I would want my city to be known as a growth center.

And the designation of growth centers to keep them within a limitthat we ran really do anything with is a very important thing. Wedon't think we are very good at it, although our evaluation shows thateven without. the seient: tic analysis we did pretty good at picking them.Some of our growth centers, however, did not grow in the last. census,between- IMO and 1970. And maybe a growth center is only a placethat doesn't go down as fast. as someplace else.

Where you think they are supposed to increase in population, someof our growth centers went down, not very many of them, but somedid.

Mr. Tars.vN. It would seem that we would want just the opposite. Iwould think that from this central city we would want. to expand theeconomic opportunities out into these counties that don't have thoseopportunities, rather than have those people. come into the growthcenter.

Maybe we are approaching it on the wrongbasis.

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Mr. PooEsm. You, also have to find out What would work, whatmakes business, what turns business-on, would they in fact go intoareas that have so little natural resources that you can pour money inthere and still nothing will happen. This is a worrisome thing for us,because thoSe people are still in trouble and we still want to addressthem, but it is no use pouring your money into someplace where youcan't see any visible result. And we are struggling with that problemall the time.

Mr. Ticjwx. Thank you, Mr. Chairman..Mr. Kr,rczy-xsKt. Mr. Roe.Mr. Rom T. will be very brief.One, question, Mr. Secretary. As you mentioned in answering Mr.

every Congressman would like to have part of his area de-cleared a district so he can 'receive assistance. I wonder i f some of theother agencies of the Government. also are relying primarily on EDAassistance? am especially referring to the recent GAO report whichindicated that more effective use could be made of program rem' rces toalleviate unemployment. I was wondering if you might have somecomments, sir, on how you feel about the findings of GAOthatthe. interdepartmental agreements between Agriculture, Commerce.mid HUD are. perhaps not insuring the legislative intent of avoidingEI)A's putting money in before other agencies should.

Mr. PonEsrA. Mr. Roe, I wonder if in satisfaction of that questionI could insert in the record the reply to Mr. Staats in that area, whichis rather complete and gives it chapter and verse on our response tothose comments?

Mr. RoE. Fine.. Basically does EDA_ feel that it. is without legislativeauthority to do what GAO recommends, is that the implication.?

Mr. PonEsrA. I am going to ask Jerry to answer that.But in general what they said was that people were playing games

with. us. since they knew they-l-ad the money but they wouldn't put_that money in it. We don't really think that is happening.

Jerry?Mr. CoNnoy. Mr. Roe, we have taken- the position and I think it

is a correct. onethat the legislative admonishment is rather to the'other agencies not to pull. out, because EDA is authorized to go in,rather than, as might be suggested by some others, that we could notgo in where someone else could. So we. have checked, and if we findsoineone else that will do the project, we would be very glad to spendour money elsewhere. But if we have a situation where someone hasthe power to do the project, but for some reason is not going to do it,and we feel that the economic development of this particular area re-quires that expenditure. right now, we would go ahead and make it.And that has been. the interpretation

Mr. RoE. You feel the responsibility should be on the other agenciesrather than EDA?

Mr. CONEOT. Yes, sir.Mr. ROE. You don't want. to abandon an area simply because some-

one else can do it.?Mr. CoNnov. Exactly.Mr. PonEsrA. I say can, but may not be able to, because they have

--run out of money.Right here in-the district, for example, we are mixed up with: a

mentally retarded children's center. We broke ground on it recently.

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TIE W has money for mentally retarded, but they only have $100,000for the whole District. And furthermore, they couldn't put the brickand, mortar in. We could:,-And it has been not only providing jobsfor people, but also helping retarded children and training people tobecome experts in that area. And we were able to justify it on economicgrounds.

Mr. ROE. Thank you, Mr. Secretary.Mr. Chairman, may we insert, that reply in the record where he

explains fully their position on this-matter?Mr. lilt-czyNsKt. Yes. I are sure that some of the members who

--planned be here- this- morning -and- c-ould not make it on account ofother pressing commitments, would like to have the information youcan give us. We have some questions we would like to send to you,and we would appreciate it if you would provide the answers. Andthey will be made a part of the record..

Mr. Podesta, thanks for being here. We appreciate your testimonythis morning and I know it will be very helpful! to the,committee whenwe sit in executive session.

(The questions and answers referred to may be found in the com-mittee files.)

Mr. Krxcz-v-NsKr. The next witness is the Honorable Samuel C.Jackson, Assistant Secretary of the Department of Housing and UrbanDevelopment.

I want to thank you, Mr. Jackson, for being with us again, and foryielding your time to our good friend, Mr. Podesta, who has to getout of town.

So, it is a pleasure to have you before this committee again. And Iblow, you are. going to continue to do the splendid job that you havebeen doing and that you will give us the wonderful testimony that weare expecting.

So y on-may proceed-as-you desire.

TESTIMONY OF SAMUEL C. JACKSON, ASSISTANT SECRETARY FORCOMMUNITY PLANNING AND MANAGEMENT, DEPARTMENT OFHOUSING AND URBAN DEVELOPMENT, ACCOMPANIED BY ROB-ERT PAUL, DIRECTOR, DIVISION OF URBAN GROWTH; CLIFFORDGRAVES, DIRECTOR, OFFICE OF PLANNING AND MANAGEMENTGRANTS; AND ART mono, DIRECTOR, OFFICE OF ENVIRON-MENTAL STANDARDS

Mr. -TAcKsoIx. Thank you. Mr. Chairman.I want to introduce the people I have with me this morning. Mr.

Robert Paul on my immediate right, who is the director of our Divisionof Urban Growth. And T also have Mr. Clifford Graves, who is direc-tor of our office of Mannino. and Management Grants. And Mr. ArtTroilo, who is our director of the, Office of Environmental Standards.

Arr. KiUCZYNSKT. It is nice to have you with us.You may proceed.Mr. .T:\ caso-s. Mr. Chairman and members of the subcommittee, we

appreciate the opportunity to meet with you again and present some ofour ideas and views on the future of Small Town America and how theDepartment of Housing and 'Urban Development can best help meetthe particular problems of small business in rural areas.

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When I testified before your subcommittee 2 years ago I statedthat our Department's policy on small towns reflects two basic con-cepts : (1) the importance of small towns and the vital part they playin American life iind national growth; and (2) the necessity of pro-viding the fullest possible assistance and support to local govern-ments as they work to meet the needs of their citizens.

These concepts are the foundation of HUD's basic commitment tothe whole issue of the. overall health. of communities and the criticalfactorslike housing,.planning, and public facilitiesthat ultimatelydetermine how- well any community unctions, what kind of a place it isto lire and -work in and how the people_ who. .are.thera fect.abont. it..

Too few people realize the importance of these factors in determin-ing the quality of both business and social life, in a conminnity whetheritbe in the center of a metropolitan area or a small, rural_ town inKansas.

I wanted to stress this point at the outset becanse of our convictionthat we really can't separate 'the problems of center cities from isolatedsmall towns. An eminent urban economist pointed out a few days agothat he had concluded that these are the two real trouble spots in oursystem of cities and that in many ways these problems were morealike than differentthey a pc both economically depressed, are losingpopnlation and are inhabited by a special group of disadvantagedpeople who badly need a scarce resourcejobs appropriate- for rela-tively unskilled. workers. Another common prohlem for small ruraltowns and center cities is the difficulty of retaining and attractingbusiness activity.

I mention these links between rural towns and center cities becausethey related directly to the objectives listed in your invitation to appearbefore your subcommittee. They also underscore the sonndness of thePresident's recommendation for the creation of a new Department ofCommunity Development

By bringing together programs concerned with community develop-mentphysical, social, and institutionalthe new Department wouldmove beyond fragmented Federal programs administration. Equallyimportant, it could move toward a c,ommunitv-oriented approach toprobleMs. For the,first time, there would be a. Federal department hav-ing the ability to respondin a coordinated mannerto local com-prehensive community improvement programs.

And for the first time there would be a Federal department of broadenough scope to help State and local governments, private organiza-tions, and the, citizens themselves to 'participate jointly and activelyin developing these local programs. This means participation in artic-ulating goals, setting priorities, and devising the best ways and meansof improving not only the physical, but also the economic and social,environment of all our communities, from the smallest village to thelargest metropolis.

As your committee, lmows, the. establishment of a Cabinet-level.Department of Housing and Urban Development was aimed towardthis same goal. HUD's creation raised to Cabinet-level. status the na-tional concern !About our cities and towns, both large and small. TheDepartment now has jurisdiction over inany.community- oriented pro-grams. It was certainly a move in the right direction. But it took usonly part way.

The problems of growth and development in rural, urban and sub-urban communities are closely inter_ ;bated. Yet, to give but one ex-

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ample from among many, communities in rural, areas and depressedregions must still seek help among three different departments forthe plaiming and construction of their public facilities.

The Department of Community Development, because of its broadyet unified scope, could. better serve our communities, regardless oftheir size. And the President and the Congress would surely find it amore useful source of information and advice to them as they attemptto shape a balanced national growth policy, concerned withto usePresident Nixon's words in this '1970 state of the Union message:"the farm as well as the suburb * * * the village as well. as the city

*. * the building, of new cities- and the rebuilding of old ones."We feel that the proposed Department of ComminfitYThvelopment

would be particularly effective in deliverinr assistance to smallertowns in rural areas. As the series of congressional hear'ing's on ruraldevelopment has clearly shown, the fragmentation of Federal effortshas been a major barrier to effective planning and coordination. Thisfragmentationparticularly when combined with the complexitiesof Federal grant programs and the sheer difficulty of filling out theapplicationhas. in too many cases, virtually cut small towns offfrom Federal help. By gathering the principal Federal programswhich support community development within a single :Departmentand providing an. extra impetus with, revenue sharing, we will be ableto start the -well-coordinated campaign we need to insuive that theFederal dollars have a real impact on rural community development.

In the meantime, though, BUD has moved on its own to strengthenour prn<ram activities in small towns and rural areas to pursue broadcommunity development planniim. in such fields ns housing, trans-portation and community facilities. During fiscal year 19i1 alone,comprehensive planning grants were distributed to 155 rural districtscoverind. 791 counties in 34 States.

--Our-1311(1getrequest tiorfiscaLyear 10:7_3_wonld increase planninggrant assistance for counties and small cities to $15,500,000 almostdouble the $8 million spent in fiscal year 1971 and a substantial increaseover the $12 million of fiscal 1972.

The Nation's smaller Communities and rural areas participatewidely in. the Department's various community facilities assistanceprograms. For example, 929 water and sewer grant projects. repre-senting 50 percent of all such projects funded by HUD since the. pro-gram began, are located in rural areas.

We are also proud of the record we have made in improving housingin rural areas although it is clear that rural areas still have a dispro-portionate share of the Nation's substandard housing. However, thesituation has improved quite dramatically in the last decade. For ex-ample, in 1960, there were 6,748,900 substandard housing units outsideof standard metropolitan statistical areas (SMSA's) ; by 1968, thisnumber had dropped to 4,130.000, a decrease of almost 40 percent. Br1070 the number of units outside SMSA's which lacked some or allplumbing facilities (such units account for most of the substandardunits in rural areas) had dropped to 3.053,000.

The existing programs of this Department and the Department ofAgriculture have played an important role in bringing about thisimprovement. Of the 4.4.600 new units started outside of SAISAis in1970, 57,180 were subsidized under the Department of Agiculture'sprograms for low- and moderate-income families. In addition 11,640

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units were rehabilitated tinder ITSD.A. subsidy programs. In the same,year. 103,727 units outside. SNISA.'s had mortgage loans insured bythis Department. and over 50.000 of these were subsidized. In addi-tion. over 33,000 public housing units outside SMSA's were placedunder annual contributions contracts in fiscal year 1971. This rate ofsubsidized housing production in rural areas is steadily increasing. in1972 for example,-the Department of Agriculture, expects to subsidiZeabout 103,500 new or rehabilitated units or over 21/2 times as manyunits as in 19f0.

One of the most interesting projects we have underway is to dam-.onstrate how rural electric, cooperatives can stimulate construction oflow- and moderate-income housing. The Basic Electric Power Cooper-ative of Bismarck, N. Dak., has done an outstanding job in showinghow the co-ops can be a catalyst in creating multicounty housing au-thorities, building under a variety of Federal progi:ams and generallyshoving how to use the. strength of their organization to overcome theinadequacies of rural housing.

The first. HUD new community development projectJonathan,20 miles southwest of Minneapolis in rural Carver County.

Jonathan is actually a major expansion of the small town of Chaska.Parenthetically, Mr. Chairman, I notice that Chaska is a. town of 2,500people. Ender the new community program it will be increased to acommunity- of about-50,000. We have recognized that our rural areashave a potential for new community development that offers a veryattractive alternative to both metropolitan congestion.and suburbansprawlparticularly when the new community can use an existingtown as a base on which to build. The new community of FlowerMound, Tex., is another example of this technique.

My basic point is that many people think of us as being orientedonly to big-city problems. Perhaps it is because our name refers tourban development, instead of the more appropriate communitydevelopment. Our deep concern with the critical problems of largecities and metropolitan areas is widely known. Much attention hasbeen piven to our many efforts on their behalf and the severe diffi-culties that they continue to face. Much less is known about our pro-grams as they apply to small communities in rural areas.

We feel that we have effectively increased the attention and directassistance we are giving to small communities. The most significantstep has been the receat decentralization of authority to the Depart-ment's new system of area offices. For the first time, the smalltownmayor will be able to get direct answers to his questions without hav-ing to wait for a reply from Washington. With community develop-ment revenue sharing becoming a distinct possibility for next year wewill be able to take another giant step in reducing the redtape thathas been so burdensome to smaller communities who have found itvery difficult to use available, funds for their highest priority projectsbecause they have been locked into the restraints unposed by cate-gorical grant programs.

These two factorsthe. flexibility that Congress is prodding andour new organization which lets decisions be made quickly by local.program manap-ers who are personally familiar with a commnnity'sneedswill enable its to provide more and better assistance to thesmaller towns that are of most concern to your committee.

I wish to assure the subcommittee that TIUD's interest and con -cern with smaller communities has not diminished even though the

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staff office. of Small Town Services functions has been subsumed bythe Division of Intergovernmental Relations in my immediate office.There was a. time when program decisions were made in Washingtonand smalltown clients had to either rinike a long trip or overcome thehurdles of correspondence to get information on HUD programs.

With our recent decentralization of -authority to the fickl,- this roleof the Washilkwton. "ombudsman" for small towns changed and theobvious answer was to build small .town concern into the clay -to -dayoperations of our area offices.

The results have been most encouraging. Now our program man-agers are able to talk directly with the mayors who have the problems.Our field representatives are able to become personally acquainted withthe communities' needs and most important, are able to offer the ftill-raange of HUD assistance including housing programs. Probably themost frustratinp problem for small towns in the past was having todeal with different peopletoo often in Washington--for every differ-ent program, making it almost impossible to count on effective coordi-iiation within HUD.

We have also been able to build small town concern firmly into HUDpolicy because of congressional action in the past two years. For ex-ample, the 1970 Housing and Urban Development Act directed that ourprograms specifically address the problems of slower growth in ruralareas, declining farm population and the subsequent, migration to cities.By incorporating these considerations into the clay -to -day operationsof the responsible operations we are convinced that we can do it betterjob of carryin!) out the suggestions of your subcommittee.

My :immediate staff is charged with the Washington responsibilityfor the functions of the former officeanalyzing the problems of smalltowns and rural areas, recommendations for coordination of all De-partment programs in support of small towns mid serving as the pointof contact with other agencies on small town and rural problems. Partof my personal responsibility is to represent Secretary Romney onjoint HUD-Agriculture committees on rural development and hous-ing. It is frankly difficult to forecast, the scope and direction of ourrural and small community concerns next year. We, too, are awaitingfinal congressional action on the rural development Program.

We are about to launch a series of conferences whose goal is tostrengthen the role of the nonmetropolitan associations of govern-ments in dealing with critical rural and small community issues. It isour intention that these conferences become a forum for presentationof the concerns of States and nonmetropol itan agencies, as well as forthose of the Federal and other local. agencies whose programs focus onrural and semi-rural issues of growth and economic development. Weintend for these conferences to be the focal point of a larger effort toimprove the capability of these organizations to carry out their mis-sion. Both our central office intergovernmental relations division and.our regional office staff ll I ICo tOrpa'''Ils re involved in support for theseconferences. The section of most States and scheduling of firm datesshould he completed within the next hew days.

In your inviation to appear before the Committee you indicated-that the members of the Subcommittee are interested in the new re-port of the Commission on Population Growth and the AmericanFuture. Frankly, we have not been able yet to make a detailed review,of the Commission's report and are consequently not able yet to makeany informed comment on the Commission's conclusions. We are ex-

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tremely interested, however, in any testimony or statements submittedto your subcommittee on the potential impact of the Commission'srecommendations on our present rural community programs. I cansay without .hesitation, however, that our interest has not lagged inmaintaining the viability of small towns and the unique contributionsand opportunities that they provide. We -are deeply committed to a-policy of balanced national growthgrowth. that is distributed amongboth rural and urban areas.

Mr. Chairman, we appreciate this opportunity to appear beforeyour subcommittee again and will be glad to answer any questions.

Mr. KrurczYNsKi. We are very glad to have you. And that is avery fine statement.

Mr. Secretary, this subcommittee recommended that you expandthe Office of Small Town Services, and now you have abolished it.Why?

Mr. JACKSON. Mr. Chairman, the functions of the Office are con-tinued in terms of policy development here in Washington. The roleof the Office at the time that we testified before you, and you madeyour recommendations, two years ago was to serve as an ombudsmanwithin the various offices of HUD here in Washington in helpingsmall towns to run through the maze of many separate programs thatwere fragmented within the Department. I think it did a fine jobin that regard. Decisions were being made here in Washington, andapplications were being processed here in Washington. WTe no longerdo that here in Washington now, Mr. Chairman. We have decentral-ized all the program processing and all the decision making for theprograms to offices within each state. WTe call these offices area offices.SO, there no longer is any role for the office to play here in Washingtonbecause the functions that it performed are not here. They are now inthe various offices in the state. Each area director has people whd makefar more ombudsman services available to the small towns directlywithin that state. So since the mayor and the officials of small townsno longer have a need to come to Washington to present their appli-cations or to have decisions made upon them, then the ombudsmanrole of Small Town Services Office is not needed here.

We retain the function, liov,-ever, of the Office of assuring that everyprogram has within its policy and its operation the special concerns ofsmall town and their needs, and that it will respond to those needs inprogram administration.

Mr. KurczyNsK.t. I served in the legislature in Illinois for a num-ber of years. And coming from a big city like Chicago, having beenborn and raised in a big city, I have learned a lot about these smalltowns, country towns While I was in the State Legislature. I remem-ber that when we tried to introduce some legislation they would say,be careful of that city slicker. I always believed that clown State heededChicago and we needed down Statethe farmer needed the city slick-ers, and we also needed -the farmers.

All my life, and in all my days of legislative duties, I supported thefarmers. And I was always happy to do that

Mr. Secretary, do you honestly feel that we can solve our ruralproblems by creating an even larger bureaucracy?

Mr. 3-AcKsoN. Yes, Mr. Chairman, I think we will be able to do amuch more effective job of solving the rural problems in that way. Thereason, Mr. Chairman, is that people who leave the rural areas and

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small towns and go to the cities are attracted by what they believeexists there. The relationship betWeen the draw and attractiveness ofthe large cities with their variety of lifestyles, and a better economicbase in most instances, permits the interest groups that support theseparate interests of small town and rural people and those in the.citiesio engage in.a kind of .coinpetition for Federal_ resources, for theskills available, and grantsmanship to secure federal resources, thatputs the small towns in rural America at a great d;tsa,dvantage. Whatwe are seeking to do is to have a single department that is concernedwith the function of community development.

The truth of the matter is that the needs of communities in orderto develop are basically the same. The differences, of course, are im-portant, and the program administration should, of course, reflect thosedifferences. But an economic system is an economic system. And theelements of it are the same for large cities and suburban communitiesas for rural communities. What we have to do is to remove the dis-advantages that one community may have as against the other be-cause of either superior knowledge or superior staff capability to takeadvantage of the programs, and because of the inconsistencies thatfragmentation of administration permits.

Mr. KLUCZYNSICI. Well, you are doing a good job.Mr. JAC KSON. Thank,you, Mr. Chairman.Mr. Elta.zyxs.K.f. Your Secretary of HUD was in to see me last

week. Ile came in to explain the proposed new Department of Com-munity Development. I am still studying that. I don't know whatthey are tv.cing to do in this reorganization. But I will assure youthat Big Iglu will be right on the job when that bill conies up onthe 15th of May.

Mr. Bergland, I am sure you will want to ask some questions of agentleman who is trying to do a wonderful job. And you remember,he appeared before this committee sears ago.

Mr. BEnorAsn. Thank you,_Mr, Chairman. T. do have a. few questionsto ask of the Secretary.

On page, 4 of your statement you referred to planning grants. In yourcriteria do you have a population number that governs the communi-ties eligibility? For example, do you plan with communities thatare very, very small. or do you confine your planning grants to growthareas, or just what kind of a plan do you have?

,TAelioN. Section 701 of the 1954 ITousing, Act, with all of itsamendments, Mr. Chairman, is the.program Unit we are re-

ferrinp. to. And within the industry it is called' the 701 program. Ithas been available to assist small towns and communities of under50.000 in population clown through the years.

Mr. Bnizar,AND. Would that include a town of 2,500?Mr. JACKSON. Yes, it would.Now, the law provides that communities of less than 50.000 receive,

their assistance through a State planning agency, which. in turn pro-vides additional, assistance from the State, and helps provide I he on--going planning assistance for the small town, The smaller conmmuitiesobviously do not have the professional staffs to actually do Ow phin-fling. themselves. So. what .-renerally happens is. they make then' needsknown to the State planning office. And the. State planning office inturn, either through its own staff or through the luring of plannihr,consultants. assists that town in preparing a plan for its needs. Most

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often it is a, water and Se.Wel. program, or it is tying in a State, trans-portation system to the local transportation needs, or it may be plan-ning for housing, or tying in the housing needs of that small townwith those of the county, or a multicounty housing authority. So, thiskind of planning does go on, and it is available to small towns as wellas to the larger communities.

Mn.13Eia:LANo. So the tech.Mcal- assistance for planning is providedby the State planning agency'?

Mr. .TA.c-ii-sox.. Either that or by .providin private consultants tothe city

Mr. BEnciAxb, Further, on page 4 von talk about, 805 water andsewer grant prOjects have been. approved in rural areas. Here again,is there a population criteria involved? My experience: has been. that"MD tends to confine its activities in this area to the larger town,.

JAi.csox. Mr. Chairman: by statute we are not limited at allin where we would make our grants available. By agreement withthe Department of Agriculture, Which has a statutory Inuit on theirprograms, we do coordinate closely. Prior to 1071 when the le isla-tion for the Department of A _.,,-rictiltirre limited its participation of itsprograms in communities of 5,500 or less, any application for a grantthat came, in to us from a community of 5,500 or less, was transmittedto the Department, of Agriculture for funding. We did. fiord com-munities of 5,500 or loss when it was in an urbanizing area, andin even a smalle'r community that' was growing say, from 3,000 to10.000 because, of some development activities 'there. In sonic caseswe would make a combined grant with Agriculture or EDA. There,are several. instances of that occurring. Rut in communities of 5,500 orless, prior to 1971 we generally deferred to the Department of Agri-culture in our grants.

Now, in 1971 the Public Facilities Act for the Department of Agri.culture was amended, increasing their authority to towns of 10,000,

they do business now in connmmities up to 10,000. While we havenot discontinued doing business in towns with population of betweenfive, and ten thousand, ire are deferring to the Department, of Agri-culture to give them the 'first opportunity to participate in communi-ties of five to ten thousand:

Now, when T. mentioned rural water and sewer projects funded byIITD, you must understand that that what we are saving. Mr. Berg.laud, is that almost. hal f .-)1 all the projects funded by IIITD since 1965in its water and sower program have gone to cities of 10.000 or less.

Mr. lirmouxn. 13ut they will be in communities of 5.000 or morebecause of your agreement with the Farmers Home Administration?

Mr. :1-AriKsox. In inost instances that would be true.Mr. I3Enor,xxo. I>o you know offhand. does the. Farmers 1 fome.

min istration of the Department of Aoiculture have the same generalau tliority to cost slat re in these projects as you have?

-Arr. ;TA cKsc.x. Mr. Paul, can von answer that?Mr. PATTI,. It is somewhat different, Mr. Bergland. They do have an

option there where they can give a combined grant and loan. Theyare somewhat more flexible than we are 'for small communities, andthat is one advantage oh their pi.ogram. Ours are pretty in rich 50-pc r_cent grants, but Farmers Home can make loans over that. Aside fromthat their authority is about the same.

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Mr. BERqt..v2:1). In my district the FHA. has confined its programsexclusively to loans. hear complaints that the larger grants areavailable to the cities are not available to the small towns.

Mr. PXUL. I suspect it is not in the basic legiSlation, Mr. Congress-man. probably just the current budget situation.

Mr. Bynan.Axo. Is there anything i.11 the works around here to remedythis inequity ?:

JAcKsox. While I am not an authority on the legislation Which--just passeethe House and the Senate, I ant sure that you are awarethat the President's rural. conl!irallity deVOlOpMellt revenue Sharingbill is now in conference. The rural development bills would ex-pand greatly the ituthority of the Department of Agriculture tomake loans in smaller communities and to make grahts in smallercommunities to assist them in connnimit facilities do'.elopment.

Mr. BIERGLAND. I was an author of that bill, and I served on a com-mittee that heard it. I am just wondering if we are going to be able toprovide FHA with the same kind of authority that yoir have. I thinkso, but I wanted to get another expert opinion.

Mr. d'AoksoN. I must say, Mr. Bergland, that I do not considermyself to be an expert on that bill. I read the earlier draft on it, but Ihave not react the version that passed the House and Senate. I haveread summaries of them. but I have not studied the two bills withthe kind of care I would like. to in order to give a legal opinion.

mr. BERGLAND. Ou .page 5 I think theremay be a typographical error.On line 3 you say : -There were 6,748 substandard housing units out-.side standard metropolitan areas (SMSA's) ; by 1.96S, this numberhas dropped to 4,130,000."

Mr. ;JACKSON. I read into the record 6,748,000 substandard housingunits.

Mr. B.Enor...xxn. Thank you, Mr. Chili rm an.Thank you, Mr. Sec reta rV.Mr. KLUCZYNSKI. Mr. floe?Mr. RUE. Thank von, Mr. Chairman.Mr. Secretary, following tip for a minute Mr. Berghtnd's questions

about your statement on. page 4 about. SOS water and sewer projects,that 805 is this year?

Mr. .T.AcKsox. That is since 1965, when that water and sewer pro-gram was started, 4'2 percent of the program activity was in cities of10.000 or less.

Mr. ROE, in 1969 the chairman of this full committee. Arr. Evins,Chairman Elticzynski, Wright Patman, and a number of people hada number of comments placed, of course, in the Congressional Recordconcerning the Office of Small Town Services. And there appeared anarticle in the Nation's Cities magazine that was placed in the recordentitled c'IITTD's Concern for Small Towns,. Office of Small. TownServices. Promotes Better Communities." I believe, von. were the authorof that article. Mr. Secretary. in which yoll stated that "the creationof the Office of Small Town Services within IITTD's Office of Metro-politan Development underscores our concern toward insuring thatthe small community point of view and condition axe fully recognizedin develoni no. policy and pro cram decisions."

Now that we no longer have that office. has HUD abandoned itsconcern toward insuring the small community point of view?

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Mr. JACKSON. On the-c-ontrary, Mr. Roe, we have stepped up ourexpression of our concern. We: did that directly by the establishment ofour area offices.

Keep in mind that the most disadvantagethis thing that we could doto small towns was requiring them to have to come to WaShington,or to have to negotiate witl-LWashington in competition With thebig towns in having their projects approved. They did not havethe-eitpability in most instances of completing their applications, theydidn't even know what to apply for in most instances. The Office OfSmall Town Services, which I was very proud of administering,served as an ombudsman for small towns when the application weretiled herd and processed here and decisions made on them here. We nolonger do anything like that in Washington any more. So the needfor the office is not. here in Washington. The need for the offices isdown in the States where the work is accomplished. And so what wehave done.-now is to establish program managers who have under theireontrol all of the proga.ms of the Department, housing, planning,urban renewal, model cities activities, all of it now is tinder programmanagers that operate within the State. And as program managersthey can be so much closer to the mayor of the sin IIa.. town. Theprogram manager has in his staff a community development repre-sentative who goes to the community and calf on them and says, now,here are the conuminity development programs we have available toassist you, here is how they work. here is how you apply for them.He, has a. community planning and Management representative, andthat representative goes riolit, from that of in that State and sitsdown and discusses with the mayor of the small. town, here are theplanning. programs available, here is how we can help you build staffcapability, improve the management process or the decisionmakingprocess m your community.

So. rather than having them come to Washington or having ourstaff .from Washington going out. to the small town, we, have the samekind of people who are available with the decisionmaking authorityright in the State. And. so we have increased our concern for smalltowns by making the Service more availa.ble, to the small towns andincreasing the authority of those who are there, to respond to theirneeds.

Mr. R. Reviewing just briefly the track record of the Office ofSmall Town Seryiees. I believe the office was subsequently changedfollowing our previous hearings, or at the time of those. hearings2 years wzo, into the Office of Small Towns Services and Intergovern-mental Relations. And then it was further reorganized into the Officeof State and Local Management- .assistance. That doesn't exist, anymore, does it, the Office of State and Local Management Assistance?

Mr. ,TAcKsoN-. NoAfr. lion;. What h am getting at. Mr. Secretary, is that.the office

started out as something working for small towns exclusively in the.Department, and now it has been feorganized to be combined on yourarea level, which efforts for the most part are located in large cities,so that there is no such small town program any more. You now haveeveryone workino. On everything, is that right?

Mr. J.wrcsox. Mr. Roe. let me restate the chronology. It is time thatwe had an Office of Small. Town Services prior to 1970 that just con-cerned itself with being an ombudsman for small towns. But I thinkyou have to keep in mind that this was more illusory than it was real_

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Mr. RoE. You :man that office didn't really do anything?Mr. JACKSON. .No I didn't say that. But at that time it had three

people assigned to it. And it did a fantastic job with such thin re-sources of making available to small town officials knowledge ofwhat our program activity was all about and how they would goabout-using, our programs..It also served. as a point. of _referencein the Department for people to contact. And then we also re-viewed the circulars of other program agencies to make sure thatthey were responsive to the needs of small towns in the developmentof the circulars and policies.

Now, what we wanted to do was to make the service that we pro-vided to small towns more a reality by having people available to givetechnical assistance as well. as to be sort of a clearing house for ideas.So, we made the Small. Town Services Office a division of a largeroffice called Small. Town Services and Intergovernmental Relations,and then of the State and Local Assistance office.

So,. there was not just three people who are responsible, then, forhandling an information service- for small towns, but I think I hired30-some people whose concern was how you make government workbetter and make the programs of our Department more responsive.So, we had people then who could actually go down and spend 4 or5 clays or 2 or 3 weeks with. the mayor of a small town and give themtechnical assistance in addition to sharing information. We have cloneeverything from helping them to organize their governments tohelping them to learn the functions of their job.

There are several small towns under the arrangement we had in1071. that said they needed to have technical, advice on how to set uptheir bookkeeping systems, and so-;on, because in those days the Stateswere not providing that kind of assistance. So we then expanded thecapability of the office by taking it in effect from an office of threepeople to an office of approximately 30 that was concerned with thecoordination of programs between State and local governments andthe Federal Government, and by providing technical assistance tothem.

Mr. RoE. Those 30 people aren't there any more. -Where are theynow

Mr. JACKSON. Those 30 people are in a combination of places. Someof them are vet in Washington. And they continue to carry out theresponsibility of concern for small. town services in their currentassignments. But they only deal with that portion of that assignment

s' that was policy development, such as the review of circulars andpolicies to assure that they reflect a concern for small towns. That isthe only part of the work that is a central office's responsibility.

The bulk of the work and thus the bulk of the people, is now inour area offices, because that work %Orieh dealt with assisting them inapplication development, understanding what programs are available,coordinating the programs one with the other, and providing technicalassistance to assist them in carrying on their activity., -.is now clone inthe area office.

So, it is closer to them, there are more people doing it, and it isbeing done far better.

Mr. RoE. But it is now spread out so that in your area officeIbelieve you have an area office in Nashville?

Mr. JAcKsoN. No; the area office is in Knoxville.

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Mr. Rot:. In Knoxville. And you have your staff in that particularoffice who handle programs-not only for metropolitan Knoxville, butfor the outlying counties in eastern Tennessee. I am xvonderino

Arr. JACKSON. Keep in mind, there were only three poeple for the entire Nation initially, Mr. Roe.

Mr. Ron, But that had to do with planning, is that correct?Jscks-ox.- No ; the office never Was linfited to planning. The office

also served as an ombudsman for all HUD programs. It went evenbeyond that after we expanded into the Office of State and Local As-sistancei and even assisted them in other Federal programs in otherFederal--Departments. So there were three, initially for the entireNation..T

Mr. Ron. And this committee recommended that this be expanded?Mr...iXcKsox. And we went to 30. It was again the entire Nation.Now, one might say that we have thousands of people doing this now

in every State in the Nation.Mr. ROE. Not on small towns especially, though.Mr. JAcKsox. But the point is, what they are delivering is the same

service the small towns need. And what they do now and what theycould not do prior thereto, Mr. Roe, is actually be within the State andavailable to sit down and have discussions on a regular basis, and havethe authority to act. You see, the small town services office was just astaff function and it had no program authority to do anything. Andnow when they Lro out these are the people who actually process theapplication. nese are the people who actually make the decision onthese projects. So they are getting faster service, they tire getting moreservice, and they are getting better service.

Mr. ROE. The metropolitan area is not getting a higher priority forapplications?

Mr. JAcicsox. Absolutely not. If Congress had a committee that con-cened itself just with the problem of central cities, they would be mak-ing the same complaint that we are giving entirely too much attentionto the small communities of America. The truth of the matter is thatwhile we indicated 43 percent of HUD-supported water and sewerprojects are in cities of 10,000 or less, you will find that nearly 75 per-cent of all the water and sewer projects that we have assisted are inCities of 25.000 or less.

So, our Department is not at all one that is a big city program. Thebulk of our moneys go to the rank and file of communities in America.of 25.000 or less.

Mr. lion. Mr. Seciietary, the Senate Committee on Agriculture andForestry in a recent~ 'report on the economic. and social conditions ofrural America stated that whole nonmetropolitan communities ac-counted for two-thirds of all substandard housing units in 1968, theyreceived only 10 percent of all housing assistance. 'ft looks like the ruralareas, although they have the greatest number of substandard housingunits, are getting the least amount of Federal outlays.

Mr. JAcKsox. I really don't know what they mean by 16 percent ofall assistance. Do they mean 16 percent of all imp assistanceprograms?-Mr. Ron. All housing. assistance, -feleral outlay.Mr. JAcksox, Housiir. assistance is a word in the liousing industry

that generally refers to all those. programs in the Department of l[ITDwhich provide assistance. it could be the low and moderate income

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housing, or section 23:1, or 2:1(i, or the rent supplement. And that wouldprobably be, correct, if they are using housing assistance in that way.But then you ha ve to add to that the activity of the Department ofAgriculture rural housing program, as well as the Veterans Adminis-tration program that also operates in the rural Field. You see, we eachyear make a portion of .our 235 and 236 progra m funds to the Depart-ment of Agriculture to administer for us so that, people in the ruralareas can also have the same kind of programs that exist iu the&USA's. I don't know if that is exactly what they are talking about,but lfit:ffc of all ITUD housing assistance may very well be correct..Butif so, then von would hare to add to that the housing program activitiesof the other departments of the federal government.

Mr. RoE. One of our previous witnesses on Tuesday, Mr. ClayCochran, front the Rural Housing Alliance, in talking abort FHA.said:

liince PITA can insure loans only where there is a private lending agency tomake the loans, this meant that in the beginninn. it hail an overwhelming urbanbias. By iaml,large it dO0§ not, function in small towns or rural areas, nor is itlikely to. it is estimated that 1 -1 percent of FHA assistance units are in non-metropol itan a rens.

Arr. ,TArictsox. That. is what. I thought they were referring to, this11 percent, according to Clay Cochrane. Ile helps us quite a bit inunderstanding the program needs for rural housing. And we consultwith him from time to time in that regard.

I think that, you will recall, Mr. Roe, that. Secretary Romney andSecretary lard i n, who at that time was Secretary of Agrieulture, pur-suant to some interest expressed by Chairman. Patman and SenatorSparkman, developed a joint report on the rural housing needs ofAmerica. The. two agencies studied the rural housing program. I servedas the chairman of that group interagency committee on housing. Wealso had 0E0 participating with us in that. At that time ire studiedwith great care the problems associated with expanding the deliveryof housing to rural America. And what Clay Cochrane refers to there

one of the findings that we made in that report. There is no questionbut that the housing pro<-rams of the Department of Housing andUrban Development depend upon two basic considerations that do notexist for the most pant in rural America. One is the inadequacy of themortgage hank or savings and loon credit institutions that are themajor ori,,,inator of housing activities for the HUD type housingprograms: and two, the relatively small mass market aggregationcapability. The. average builder in rural America builds six to 10houses a year. The average builder who builds under our programswould build. substantially more. than that. Rural builders have diffi-culty expanding production. The market is so fragmented in therural aroas, there are relatively few credit institutions in the ruralarea for housing and mortgage activities. The small town bank gen-erally does not have a mortgage department, and it takes people withskill to use those programs. It is exactly for those reasons that Con-gress has proposed to expand the rural housing program to recognizethat another type of credit institution wits needed in the rural area.

sow, I think again that this supports the President's wisdom ininitiating the effort to establish the Department of Community Devel-opment. This would go a long ways toward permitting us to extendthe kind of credit institutions that exist in the urban areas to the rural

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areas, because we Can provide, strong program linkages. We can thenbegin to talk about aggregating markets between the urban and non -urban areas where we cannot do so now. It would be extremely dif-ficult to attempt to do that now because of the different kinds ofcommitments.

Mr. Rou. Aren't on going to end rip in the proposed new Depart-ment of Community D'evelopment- with having the rural and smalltowns efforts actually swallowed up'? It appears to be very similar towhat this Committee has been fighting against for a long time, inregard to,,keeping the independence of the SmaiI Business Administra-tion. The Department of Commerce has shown a desire to have SBAin their Department. And can we see what is going to happen to smallbusiness, it is going to get lost in the. shuffle.

Don't we have that same situation here in terms of rural Americain :TILED?

Mr. JAcKsox. Absolutely not, for several reasons. One, the combina-tion of the housing administrations into one department would noteliminate, the specific authorities for rural areas. So, that would notchange.

And two, -what you really. are picking up is the coordination be-tween the programs so that they can mutually support each other in afar more effective. wav than they do how.

And thirdly. I could that. you then begin to recognize the inter-relationships between these problems and the internal. migration inthe country from the rural areas and small towns to the central city.

Now, if we ever are going to make sense out of a, national growthpolicy, if we are ever going to develop a rational approach to

a. high quality of life for our citizens in all communities in Amer-ica, we need to have one department which is developing the na-tional policy the President and the. Congress need for an effective pro-

,,gram. Otherwise, by nature it will be a fragmented policy. And aslong as it is fragmented you are going to have disparities between thequality of life in different communities, and you will keep the ruraland -urban areas from sparring with each other, not only in the federalCongress. but also in the State legislatures and in county commissions.' e simply must discontinue this polarization that is shaping legisla-tion, and the response of government, to the needs of all communities,as each tries to outgrantmanship the other for limited state, local andfederal tax. dollars. 'We think that a rational approach to this problemwould be to have, them an organized department with clear lines offunctional activity. And then you can administer the pOoaMS totake into consideration the shifts in population, the g.rowth centerconcept. that Secretary Podesta talked about earlier this morning. andthe interrelationships of these activities that are so essential for deliv-ering resoureezi to meet all community needs.

Mr. Rah. On June 19, 190, Chairman. Evins inserted in the Con-gressional Record a press release by HUD in regard to a study bythe Jacobs Co., on small town problems and needs related to MID pro-grams. T. believe that report -was issued and recommendations were-made. -Whatever happened to those recommendations?

Mr. JACESON. That was a Very fine report. Mr. Roe. As you know,I supervised the development of that contract by the Jacobs Com-pany and its implementation. And they did a very fine job for us. Thatreport and the findings and recommendations were made available toeach Assistant Secretary as they related td`his program area.

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Mr. ROE. It never was published. though, was it?JxeicsoN. I believe it was publiShed, wasn't it?

Mr. Parr.. Yes, it was published.Mr. JACKSON. At least we released the findiiTs of it. It served to

permit each Assistant Secretary of each program area to study hisOwn pi gran activity .iii the light Of the findings of the Jacobs- Com.pany, It also specifically gave us a feeling that the problems were soimmense at the small town level, that it would be far better to havemore people available to assist the local level than to have a few peopleavailable to assist them in Wasliinp-ton.

So, the study helped ns in reaching the conclusions that justifiedthe reorganization we spoke of earlier. I don't want-to suggest that wewould not have reorganized had the study not' been done. But T amsaying that the study confirmed the existence of problems of suchmagnitude that more people were needed at a closer level to respondto those needs.

Mt. Ran. What happened to all the recommendations in that re-port? Have they been implemented?

Mr. J'AcKsoic. Those recommendations. as I indicated, were madeavailable to the various Assistant Secretaries.

Mr. ROE. And that is all'?Mr. JAcksoN-. ..!..nd also to the Secretary and Under Secretary. And

they were used to assist us in looking at our program activities to makesure that. we responded to their needs.

Now, perhaps I should insert into the record a copy of a letter thatwas sent to Senator Humphrey in response to a. letter that he wrote.to Secretary Romney on February 28 that asked the same cistion.And we responded to that. And, Mr. Chairman, you would permit,I will read if.

Mr. Krxezy-N--siu. Without objection.Mi. JAcKsox. It is a three paragraph letter. I will read it for the

record.It says :DEAR SENATOR HUMPHREY : Secretary Romney has asked that I respond to

your February 2S, 1972 letter concerning the Tune 1970. Study of Small Com-munity Needs as Related to Federal Housing Community Development Assist-ance.

You will find enclosed a special analysis of the followup taken by HUD onthe 25 specific recommendations contained in the subject study. Additional ad-ministration initiatives bearing favorably upon the future of rural and smalltown development have been put forward in the February 1. 1972 program onRural Development submitted to the Congress, and in the President's proposalto create a new Department. of Community Development.

With respect. to the question raised in your final paragraph, the folio of con-cerns for small towns and nonmetropolitan matters is now carried in the Office.of Planning and.Management Assistance under the Assistant Secretary for Com-munity Planning and Management. I want to assure you that there has been nodiminution of RUM interest in delivering its programs and services to thesmaller communities of this nation.

And I signed the letter.I callit-to your attention, i-N-t. Roebecause Secretary Romney serves

on the Domestic Council, as you know. And the Domestic Council re-ceives recommendations from all. of its members on all of the programactivities under consideration. He made recommendations to the Coun-cil, and served on the particular task force on rural community devel-opment, as well as being chairman of the urban community develop-

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ment. And many of the recommendations he made included the con-cepts recommended to us in the Jacobs report.

Mr. Roe. You mentioned in that letter, I believe, that you attachedwhat happened to the recommendation.

Mr. JAcKsox. Yes. We will supply that for the record..Mr. KLU NSICCZY.T.. Without objection it may be received.

(The document referred to follows :)non. nuilEir HumefraEY,.Chairman, Subcommittee on Rural Development, Committee on Agriculture anti

Forestry, U.S. Senate, Washington, D.C.DEAR SENA'ron HUMPTIREY : Secretary Romney has asked that I respond to

Four February. 25, 1972, letter concerning the June, 1970, "Study of Small Com-munity Needs as Related to Federal Housing and Community Development As-sistance." You will find enclosed a special analysis of the follow-up taken by11W) on the 25 specific recommendations conta Med in the subject study.

Additional, Administration initiatives beacing favorably upon the future of ru-ral and small town development have been pu0forward in the February 1,1.972,Program of Rural Development submitted to the Congress, and in the Presi-dent's proposal td create a new Department of Community Development.

With respect to the question raised in your final paragraph, the portfolioof con-.f.01.' small towns and non-metropolitan matters is now carried in the Office

of Planning and Management Assistance, limier the Assistant Secretary forCommunity Planning and Management. I want to assure you that there has beenno itiminution of HUD's interestdir delivering its programs and services to thesmaller communities of tins nation.

Sincerely,SAMVEL C. JACKSON.

(Enclosure.)

STACS REPORT ON RECOMMENDATIONS CONTAINED IN 'HUD 1070 STUDY REPORT:"SMALL Tows PROBLEMS AND NEEDS AS RELATED To HUD Pam-Luis"

(By the Jacobs Co., Chicago, Ill.)BACKGROTIND

In June 1969, the Department awarded a one-year research contract to the,Jacobs Company, Inc., of Chicago, a management consultant firm in publicadministration and finance, to study small community needs and make recom-mendations for adapting or developing .EIUD and other Federal programs toeffectively meet these needs.

This undertaking was part of the Department's Small Town Services Pro-gram on-going mission to sharpen LIF_D's focus on less populous communitiesand to improve delivery of program aid funds and technical assistance to smalltowns. The study was conducted under a contract monitored by the Office ofSmall Town Services (subsequently changed to Office of Small Town Servicesand Intergovernmental Relations.) in February. 1971, the mission_ of theseorganizational units was incorporated into a new Office of State and Local-Management Assistance.

As part of this project, a sub-contract study on minority group needs andproblems in smaller communities was prepared by Roy Littlejohn Associates.Washington, D.C. Major emphasis was placed on the housing situation Ofminority groups in smaller communities with special reference to equal oppor-tunity, availability of public services, and local leadership.

GENERAL

The final report of. this $150,0(X) study effort was submitted to 1-11.-D by thecontractor and sub-contractor in. July 1970. It consisted of three volumes:

Volume IStudy Design, Analysis, Conclusions and. Recommendations"SmallCommunity Needs As Related to Federal Iloustng mid Community DevelopmentAssistance"

Volume IICommunity ProfilesVolume IIIMinority Group Needs in Small Communities (Roy Littlejohn

Associates, Inc.)

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Departmental briefings on the various study findings and recommendationsWere conducted for all departmental Assistant Secretaries and key staff mem-bers shortly after the final report was submitted by the contractors. Also, theOffice of Small Town Services and Intergovernmental Relations followed-upwith selected program directors to discuss in detail the study recommendationsdealing with specific program areas and explore various follow-up alternativeactions. These include:

-Comprehensive Planning Assistance ProgramWorkable ProgramEqual Opportunity ProgramPublic Facilities Loan ProgramUrban RenewalHousing Production and Mortgage Credit ProgramsNew CODIMUllity Development Program

Departmental activity in follow-1m to this repori, with other Federal a.gencies,states, area development districts, loealities, the private sector, etc. by HUD'sstaff unit concerned with smaller community and non-metropolitan matters hasbeen limited. The Report has been treated as an interna I. document and its findingsand recommendations have not been widely. released.

The study examined a representati7e sample of smaller communities withpopulations under 50,000 to identify their physical, social ;Ind governmentalneeds. The information contained in forty community profiles developed to assess-HUD program delivery :.tad recommend specific improvements have, been dis-seminated to the communities concerned as well as to HUD field staff. Reactionto dare, to the community profile analysis format.. has indicated that both HUDand smaller communities would benefit if comprehensive Community ProfileAnalysis guidelines were developed and available for wide use by other smallercommunities and MTH program review officials. Development of information pro-files, such as those in the study can provide a new perspective on particular smallcommunity or area-wide needs.

Thecommunity profile format calls for and outlines essential elements for thecomprehensive diagnosis of a smaller communityeconomic, physical, social andgovernmental aspects. It can he utilized as an analytical or management tool byHUD program officials (particularly at the Area Office level), states, area-wideagencies, and the small town itself for assessing local problems and needs and-identifying specific solutions. This vehicle provides a comprehensive approach toviewing the smaller conummity and can supplement data required in Federaland State' program a iil applications.

This study report contained a number of specific recommendations for strength-ening HUD and related program assistance to smaller communities. These recom-mendations to improve the delivery and service of HUD programs were groupedunder the following major headings :

Modification of Existing Federal ProgramsRecommendations for New ProgramsAdministration of Federal ProgramsState Assistance to Small C,mmunitiesGrowth of Regional Agencies

The current status as to major implementation actions considered, planned,.or taken for each of the specific study report recommendations follows:

I. MODIFICATION OF EXISTING FEDERAL PROGRAMS

Comprehensive Planning Assistance Program.Recomnirmdation 1: "The community planning process Should be reoriented'

and divided into two distinct parts : (a) preparation. of n preliminary plan whichNvould include an overall analysis of the community formulation of long-rangeobjectives and goals, establishment of priorities and preparation of a work pro-gram to Carry them out ; and (b) detailed studies of major subject areas identifiedduring the preliminary plan and included in the work program."

This recommendation is folly implemented with procedures spelled out in1117D's 701 Program Handbook.

Recommendation 2: "The preparation a.nd adoption of a preliminary planshould be prerequisite for all HUD public housing and community developmentprograms."

This has become essentially a reality through. the Area-Wide-Planning require-ments and the Workable Program requirements (for community developmentprograms), which have been issued by the Department since the submission of

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the Jacobs report. Additional requirements have been levied through issuance ofproject selection criteria to our Regional and Area Offices.

Recommendation 3: "Requirements should be formulated by HUD to requirethat applicants for "701" funding submit evidence that responsibility for imple-mentation of the plan has been assigned to a specific individual on the city staffand professional assistance in implementing the plan will be available from eitherthe city staff, county, .regional or state planning agencies, or a private consultingfirm."

Provision has been made for this in the Department's 701 Program Handbookby requiring that the planning process be linked directly to and be responsive tothe chief locally elected official. The intent is to link the planning to implementa-tion through the chief executive, as he is responsible for development decisions.The assurance of professional assistance in implementation is not a requirement.However, we strongly encourage st:ch assistance through state services and theprovision of continuing professional services being available through area-wideplanning agencies.

Recommendation 4: "Activities eligible for funding the Comprehensiv- Plan-ning Assistance program should be expanded to provide specifically for c.,ntinn-ing professional planning assistance hi administering local plans,"

States are being encouraged to allocate 701 program funds received for plan-ning assistance in smaller communities (under 50,000 population) to providecontinuing type and/or full-time planning services. Increased emphasis is beingplaced to establish sub-state planning and service districts in order that localgovernments inny share a col-ninon professional staff and obtain needed services.

Recommendation 5: "The preparation of area-wide rather than individual COM-inunity- comprehensive plans should be encouraged for small, non-metropolitancommunities (generally under 25,000 population)."

This is now being done through Pa.rt IV, OMB Circular A -9 as revised Febru-ary 9, 1971. This Circular furnishes guidance to all Federal agencies for im-proved*cooperation with state and local governments through coordination ofplanning in-multi jurisdictional areas. Common or consistent planning and de-relnpment districts or regions are encouraged and procedures for bringing thisabout with a state input, have been spelled out.

HUD, in administering the Comprehensive Planning Assistance grant pro-gram. is actively encouraging such action on the part of. states. To date, approx-imately forty states have delineated and are establishing sub-state districts.During FY 1971. $3.4 million in comprehensive planning grants by MID wereawarded through the states to 155 non-metropolitan districts coveriog 7f,i coun-ties in 34 states. This compares with $1.4 million awarded to 01 districts in 18states during FY 1969, the first year this program was funded. During FY 1972the number of non-metropolitan areas funded and the total dollars allocated willbe above the 1971 level.The Workable Program For Community Improvement

Reeommenti a ion G. "The requirement for fl workable program for commu-nity improvement as presently constituted 'should he discontinued. However,the adoption of codes and establishment zuf :In effective codes enforcementprogram sbnuld continue to be required prior to the acceptance of an applicationff.- whim renewal programs."

Rather than discontinuing the Workable Program for Community Improve-ment as presently constituted. we have endeavored to improve the administra-tion of this program. The Workable Program represents a means by whichcommunities of all sizes and discipline their development. It serves on an overallbasis as a vehicle to identify community needs, provide a plan for meetingthese .needs. ideolify resources available to meet these r,cols and establish.priorities. it is a major tool for directing local programs, i-sff and other re-sources to meet basic hucal policy and improve flue quality Of local governmentand development. The application documents the room.' of past accomplishments:old sets fnr!Th a course of .fian c, actions sshich ,-crve to prevent andeliminate shuns and Night. The Wnricalile Program is the, locality's program.prepared by local officials, with citizen involvemkt in its development andimplementation. In itself the applicatinn presents a disciplined approach tooveremning local problems. impeding sound comnu development and itserves to aid ITFD administrators in assessing a ennumnnity's performance.

As a result of new approaches introduced to strengthen the administrationof the Workable Program, eonsiderable progress has been made in rechwingprocessing time of applications fur certification and recertification. Effortsare continuing to effect more expeditious handling of community applications.

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The smaller workloads by reason of the elimination of the Workable Progranirequirement for public housing and Section. 221(d) (3) permit HUD staff to.-devote more time to providing technical advice and assistance to communitiesand to achieving generally unire effective administration of the WorkableProgram.

Further with the .11'.'D decentralization to Area and Regional Offices, HUDstaff have been brought into much closer contact with localities. The HUDfield staff is now in a much better position to provide technical assistance tocommunities and also in a better position to evaluate local needs and accom-plishments. An extensive training program has been undertaken for fieldoffice staffs in all aspects of Workable Program administration. The trainingactivity is a continuing effort that includes Regional assistance to Area Staffas well a:: special training, such as the HUD Codes Workshop that was con-ducted in Grafton, Illinois from March 5-10 for HUD Code Specialists throughthe Nation.

Recommendation 7: "A Codes Improvement Program specifically designedfor communities of 25,000 and under should be created to assist cities of thissize in the adoption end !inflating of codes, and in the establishment of a codesenforcement program. The program should be administered by the states. Tech-nical assistance should he available to aid communities in code preparationand the training of inspectors. Financial assistance should be provided bystates to finance the cost of hiring inspectors to implement the codes enforcementprogrm."

A specific "Codes improvement Program" designed for communities under25.000 population has not been fully developed yet. but a numbe of relatedactivities have been started or are scheduled. Organizationally, }IUD hasestablished new Regional and Area Offices which are desipmed to work moreclosely with nil communities in the &Ye/opt/milt of effective local programs ofcommunity improvement. including codes adoption and codes administration.Codes specialists based in the HEM Area Offices arc specifically charged withthe responsIbilitm of providing technical assistance and guidance to smallercommunities in the development and administration of active and effectivelocal code adoption and code enforcement programs. Currently, the Departmentis preparing "A Guide for Code Adoption and Code Enforcement Under theWorkable Program for Community Improvement." This manual will he spe-eitleally designed to assist small communities in the adoption of local codesand the development of active and effective code enforcement programs. Pub-lication of this Guide is oolcipated by June 30, 197:1 it will be part of acontinuing effort to provide useful technical guidance to smaller communities.

States are being encouraged to initiate training programs for local code inspec-tion. Federal assistance is available for this purpose under HUD's Title VIIICommunity Development Training Progrnca- Ftftleral funds for the training oflocal inspectors to be employed in Concerdirated Code Enforcement Projects arealso available to local governments under HUD's Section 117 program. Also. StateCommunity Development Services may lie developed by states under Section 701Planning nr:;1 Management Assistance to expand the technical assistance avail-able to local officials.Tevhnie,71 ARRistanee to Small Communities

Rerommen dation 8: "Technical Assisfbnce and Community Development Train-ing programs should be substantially. Increased and used primarily to assist cora-mimities of 25,000 population or less."

HUD's Comprehensive Planning, Program grant funds flowing through thestates enable small towns and rural areas to pursue broad community develop-ment planning in such fields as housing, transportation, human resources, andcommunity facilities. For example, during FY 1971 alone, approximately 50 per-cent or S25 million of the 701 Program funds went for community developmentplanning in areas with population under 50,000.

A substantial portion of HUD's Community Development Training Programfunds (Title VIII of the Housing Act of,1964, as amended) are utilized for thetraining of officials from small communities and rural areas. These officials mayalso send staff, tuition free, to workshops conducted jointly by HUD and theT.S. Civil Service Commission on a nation-wide basis in employee development

and training. HUD is also sponsoring. under contracts with Temple and ShawUniversities, and the National Urban League. a series of workshops in housingmanagement and community services. oven tuition free to small town and ruralhousing authority staff. Technical assistance services in training, manpower

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development, and university curriculum development may he secured from HUD'through its newly established Area Offices as well as the Regional and CentralOffices. Also, a new manpower workshops program for local officials will be heldin the Summer of 1972. Attendance will be free, and approximately 6,000 officialswill be invited nation-wide.Housing Programs

Recommendation 9: "HUD should_ conduct a Study of the present methods forattracting developers and financing for subsidized housing programs to determinewhether other mechanisms would be more effective in increasing the use of theseprograms in small communities."

The recommendation was essentially bacsil upon the relative little use of HUD'svarious housing programs in the small communities surveyed during the study.particularly those communities situated in a rural setting. HUD administers itsvarious housing programs in towns of all sizes and types and in both urban andrural settings. During fiscal years 196S-1970. an annual average of approximatelyten percent of the housing units which received assistance through HUD's FHAmortgage insurance prograMs or through the low rent public housing programwere located in rural areas (defined as non-metropolitan counties having no citywith a population of 25,000 or more).

The ratio of housing built in small towns and rural frreag to all assisted housingremained relatively stable during this three-year periedat ten to eleven per-cent. The 122,200 single-family homes built in rural areas represented about ninepercent of all [IUD FHA-insured home mortgages. The proportion of public hous-ing units located in smaller communities comprised one quarter of the nationaltotal. with one-sixth of all IIUD aided public housing units provided to com-munities of ander 10,000 population. The greatest increase in activity. however,has been in .the constr-notion of FHA-insured multi-family projects. FHA multi-family units built in rural areas increased from about seven percent to ten per-cent of the national total over the three-yea interval (190S-1970). Multi-familyconstruction increased more than night peiTent from 7,200 units in FY 1909 to

.13.200 units in .1'11 1070. These recently compiled figures clearly indicate thatmany rural communities across the Nation do find HUD hohsing programsespecially suitable to meet their needs.

HUD and the I' S. Department of agriculture. recognizing the interrelationshipof their respective housing programs as they serve rural small towns, regularlycooperate to deal with mutual problems of housing policy and program adminis-tration. Two years ago, this cooperation was formulied by the organization of aHUDUSDA Rural Housing Coordinating Group to focus on increased housingfor rural areas. A major concern of this continuing inter-agency effort, which hasbeen broadened to include 0E0. is the implementation of specific program recom-mendations to improve and increase housing program delivery in smaller. non-metropol i ta n communities under 25.000 population.

The President's proposed executive agency re-alignment calling for a Depart-ment. of Community Development provides a single Hom;ing Administration builtaround the housing production and management functions now in Fyn and therural housing programs of the Farmers Home Administration. This would permitfor more effective coordinniiosa of these rural and urban housing programs with'better sevicr resulting for hoth and rural small towns.Tratcr, sewer. and waste treatment »ograntx

.Recommendation 10: "The Water and Sewer Facilities Grant and Loan Con-solidation Act of 1909 providing for HUD responsibility for administering for allwaste treatment NvorkR should lie enacted by Congress. The Economic Develop-ment. Administration and the Appalachian Regional Commission should retainauthority to ma ke supplemental. grants."

This recommendation for grant and loan consolidation calls for Congressionalaction. The four Federal agencies administering water-sewer programs (HUD,Environmental Protection Agency. EDA. and Agriculture) have set up an inter-agency committee to study various ways to coordinate all aspects of these Sepa-rately authorized Federal water-sewer programs. A friar -wa v agency agreementfor uniform planning regnirements was developed dnring1971. To date, HIM and.EPA have signed this agreement, drafted and approved by the full Inter-AgencyColn iii i fire.

New Communities ProgramRecommendation. 11: "HUD should encourage the development of new com-

munities in non-metropolitan areas. Such communities preferably should be eon-

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structed around existing seed communities with growth potential. Federal andstate officials should identify potential seed emnmunities through study tech-niques similar to those used in this study."

The New Community Development Corporation Board has promulgated a policywhich would give priorities to types of new communities, such as small towngrowth centers. which are under-represented in the list of applications andpre - application proposals received to date.

Measures.have been taken to encourage or assist several major free standingnew communities in non-metropolitan areas which should have good chance ofsuccess. The 1.7rbau Planning Assistance program has been used to assist theState of North Carolina in undertaking the necessary regional and local plan-ning for Soul City, to be located in depressed Warren County. The developer hassubmitted an application. to HUD for guarantee assistance for this project, andis completing arrangements for the required equity investment, A pre-applica-tion proposal has also been submitted, with HUD encouragement, for a newcommunity of -Midland. Kentucky, winch is a free standing new community to bebuilt around a proposed multi-million dollar Corps of Engineers Dam and ForestService recreation facility. In addition, another pre-application has been sub -nutted for Brier Hill, a free standing new community proposed for developmentin Fayette County. Pennsylvania.

The developer plans to attract industry to Brier hill which is located in anargil where there is substantial unemployment.

An initial planning study grant has been compieted for Pattonsburg, Missouri,to demonstrate how a small town could become a new connr-''y. The town hasmade initial contact with a qualified developer to undertake a new communityon the location near the Corps of Engineers reservoir which will force it to move.The Department is continuing to provide encouragement and assistance so thatthis project can move front.initial feasibility stages to a Title VII New Com-munities Program appliCation. Two other pre-applications for small town growthcenters in Arizona and FlOida respectively are in the initial stage of review.

HUD has encouraged states which have expressed interest in balanced 'growthstudies and the creation of state or local development corporations which canactively undertake now communities. including those developed in conjunctionwith small towns in non-metropolitan areas. However, few states have followedthe lead of New York in creating strong deVelopment corporations. Severalstates, such as Cali fornM, Michigan, Pennsylvania and Ohio are consideringsimilar state legislation.

Although it is recognized that our non-metropolitan areas and small townshave n potential for new. town development, there are several key problem areas,however. in implementing these broad policy guidelines. First, small town growthcenters often would have difficulty in qualifying for Federal assistance becauseof the lack of capability of these small towns to plan something so complex as anew- community. The developer obviously must have the financial, technical, andadministrative ability and background appropriate to the size and complexity ofthe project. Secondly, the creation of a job base is obviously critical to the eco-nomic feasibility of non-metropolitan new towns. However, it is virtually alwaysdifficult to obtain _commitments from industry and other primary employers tolocate at the new town site at an early stage when financial commitments musthe entered into, pi, ices a high priority on this type of new community andwill continue to work with and encourage small towns with the potential fornew community development.

II. RCOM M EN DATION S FOR ict w P ROG RA MS

SM (In Community 1)orelop01e111 Prof/himRecommemlution 12: "A Small Community Development Program should

be established as a demonstration .program for non-metropolitan communitiesof 15.000 population and under which would provide grants of no to 100 percent,),to finance needed eommunity development projects and programs. Eligibility ina program would he limited to those communities with future growth potentialthat could show limited local resources to finance the programs on their own."

With the exception of )hciion projects supported by Model Cities Programsupplemental funds, no program authorization exists under eurrent legislation tomake 100 percent grants to finance conmumity projects and programs in nqn-metropolitan communities of 1.5,000 population and under. It should be. notedthat of the 150 Model Cities program communities, eight of the communitiesparticipating are under 15,000 population.

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Enactment of the President's proposed rural development special revenue shar-ing would permit full funding by communities of needed community developmentprojects and programs.Public Facilities Program

Recommendation 13: "HUD should establish a program designed to providegrants of fifty percent to communities under 15,000 population for the construc-tion of administrative and public safety facilities. Supplemental assistance up toan additional thirty percent should also be allowed in eases where more thanone of the local governments in a .community join together to construct a commonfacility."

HUD has no legislative authority for a program of this type. Enactment, of-the President's proposed general and special slatting measures will provide newand unrestricted funds to be used us the states and beauties deem appropriate.

M. A DMINisrmerioN o' FEDERAL PROC It AA1

Small Tama Services ProgramRecommendation 14: "The functions and responsibilities of the Small Town

Services program should continue to involve four major nrogram areas: (a)informational assistance; (b) general assistanceand advice; (c) interagencycoordination ; and (d ) research."

Recommendation 15: "The Small Town Services program should be augmentedin order to be more effective in assisting small communities. Consideration shouldbe given to the establishment of the program function at the regional level."'

Recommendation 16: "The Small Town Services program should take the leadresponsibility in urging the development of a small community data system.based upon the small community profile methodology designed for this study."

The community profile format calls for and outlines essential elements forthe comprehensive diagnosis of a small community economic, physical, social,and governmental aspects. The study report points to the potential of utilizingthe small community profile as an analytical and technical/management toolby HUD program officials (particularly at the Area Office level), states, a tea-wide agencies as well as the small community itself for assessing local problemsand needs and identifying specific solutions. The profile methodology providesa comprehensive approach to viewing the small community and often supple-ments data required in HUD program applications. Comments received from,HUD fiel.1 officials indicate a diveisity of uses for a comprehensive CommunityProfile; e.g., supplemental and supportive to narrower program profiles, addi-tional substantiation for both program and project needs useful to programmanagers and their teams in working with a community. a guide for governmentofficials at all levels. and a fully documented statement. of problems and needsas well as local resources available.

The Community Profiles developed by the study have been distributed toeach Regional Office as well as to each of the respective mayors for their useand comment. To date, both the written and verbal responses indicate thatboth communities and HUP would benefit if comprehensive Community Profileguidelines were developed and issued.

Also, a, technique to utilize- the community profile rni.lhodology is spelled outin the report. A "Classification Rani:lag of Small Communities" based upon afactor analysis process can provide a HUD program administrator useful in-formation in considering a community's grant application. He can use thefactor analysis data as a tool in making his judgment between applicationfor aid, It enables him to select that application that, presents the highestindication of success, based on past performance of that community in handlinggrants or other factors shown on the chart.

RecommPndation 17: "The Small Town Services program should concentrateits efforts On communities of 25.000 population or less."

The Small Town Services Program, located in the Department's Office ofState and Local Management Assistance, is assigned the mission to providean improved focus and increased assistance for meeting small town honsing-and commithity development problems and needs. One of its major functionsis to provide staff support and technical assistance in identifying and analyzingthe special housing and community development problems and needs of small'towns and rural areas, and recommend appropriate action. A regional counter-part staff to serve as a focal -point. for small town services and non-metropolitandevelopment matters has been provided In each of the Department's ten regional'offices.

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Although no formal policy has been established to focus on problems of com-munities under 25,000 population, the activities of this Office have been soaddressed. For example, HUD's participation with USDA and 0E0 in developingand implementing improved rural housing programs, cited earlier in this report,is an example of the focus being placed on rural areas and communities under25,000 population. Also, the efforts of this program have been concentrated onstimulating-, monitoring and evaluating various demonstration efforts and studiesthat deal with the problems and special needs of the smaller communities of25,000 population or less.Program Application Reviews

Recommendation, /S: "HUD field offices should be instructed to conduct pre-application conferences with committees especially for major projects such ashousing, urban renewal and water and sewer, prior to submittal 3f formal appli-cations for funding. Conferences should be held in the applicant community andnot at the HUD field office."

Since the completion of this study report, the Department has established 43Area Offices, throughout the nation, having comprehensive program review andapproval authority. The procedures in effect or ill the process of being updatedcall for a conference with each community prior to the submission of a formalprogram application. The decentralized Area Office structure facilitates the useof the pre4ipplication conference technique in all instances where the communityis the applicant.

With reference to applications for housing projects, other than public housing,these are usually submitted by private ;Tensors and are expected to comply withthe planning requirements of the local authorities. To invite small town officialsto sit in at a pre-application conference on such numerous housing project appli-cations would result in further delays and reduction of the volume of housingproduced in smaller ..commitni ties.

HUD field offices are now negotiating "annual arrangements" with selectedindividual communities, packaging Community Development and other HUDaids in a coordinated series of programs 'most appropriate to meet locally-definedProblems and priorities. This negotiation process enables the discussion of suit-able programs with community elected officials prior to the filing of formal appli-cations. Further, HUD is now developing a Project Selection System for .Com-munity Development Programs which would enable a rirD judgment as to acommimity's eligibility and priority for community development funds beforethe submission of detailed technical information is required. This would avoidthe burden, particularly onerous on a small community, of preparing such infor-mation for projects which cannot or twill not be funded.

Iv. STATE ASSISTANCE TO SMALL COMMUNITIES

Expansion of State Role in Assisting Small CommunitiesRecommendation 19: "The Federal Government should continue to encourage

the estilluishinent of Offices of Community Affairs in states which do not havethem."

Recommendation 20: "The Federal Government 'should encourage states toassume greater financial responsibilities for assisting small communities in suchareas as technical and planning .assistance, housing, urban renewal, and otherprograms aimed at rebuilding and revitalizing small communities."

A major vehicle to achieve these objectives is the President's proposed programfor general and specific reveille sharing. Through a general revenue sharingand six special revenue sharing proposals, states and local governments will re-ceive substantially automatic a'iocations of funds and thereby be given a fullshare, in the task to chart the nation's growth and development. :In snnport ofthese revenue sharing proposals, a new and broadened program for Planning andManagement Assistance to states, to area-wide agencies, and to localities wasrequested for FY 1972 ($100 million requested $00 million appropriated). Thisgrant program wilt enlarge the 701 Comprehensive Planning Assistance Programobjectives by providing broader and more flexible state support for local govern-ments to build their capacity to govern effe,:tively. Emphasis is planned on thedevelopment and use of comprehensive manaement (not planning) processes.

Also, through use of funds under Section :11(b) of the Demonstration Citiesand Metropolitan Development Act of 1966, FYUTD has helped to support ten statetechnical assistance offices concerned with s.tiii-ogthening the capability of localgeneral purpose government and relating sta ti:4nning and service delivery sys-

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terns to locally-determined plans and priorities. In the State of Texas, such HUDsupport helped provide the stimulus for the creation of a cabinet-level departmentof community affairs.State Encouragement of Small Community Consolidation,

.14ccommentlation, 21: "The Federal Government should urge states to stronglydiscourage the further proliferation of municipalities and provide financial andother incentives to encourage either municipal consolidations or the transfer ofarea-wide functions to regional agencies."

Increased emphasis on the creation and support of area-wide planning andservice districts to identify problems and priorities, and mobilize available re-sources is, underway. Multi-county districts afford a new focusing device toachieve more flexible and responsive smaller cornnu and non-metropolitangovernmental institutions and services. During FY 1971, $3.4 million in compre-hensive planning grants were distributed by HUD, through the states, to lognon-metropolitan districts in 34 states. This is compared with $1.4 million awardedto 61 districts in 13 states during FY 1969, the first year this program wasfunded. As of June 30. 1071, 3S states In officially delineated area-wide plan-ning and development districts: The potential of the regional or area-wide agen-cies approach to provide new direction and solutions for small community con-solidation or coordination is still largely untapped.

The Department has supported through its 701 grant program and Researchand Technology program various efforts designed to achieve community con-solidations and area -wide improved public services. For example, a Research and'Technology grant has been made to Technical Foundation, Inc. of the West Vir-ginia Institute of Technology. designed to improve public services in some thirtyrural communities in the Upper Kanawha. Valley of West Virginia.

V. TIIE GROW I'II OF REGIONAL AGENCIES

Recommendation, 22: "I1TJI) should recommend to the Bureau of the Budgetthat it 'should actively encourage state governments to impleinent provisions ofthe Budget Bureau directives providing for common or consistent planning, anddevelopment districts at the regional level. If conformance is not forthcomingwithin a reasonable amount of dine, other means should be considered to producecompl in nee."

Recommewlatim 23: "Hun should urge the states to delegate resnonsibility forproviding better coordination and the common use of resources where feasiblein each regional planning and development district to one of the local participatingagencies. The non-metropolitan planning, district or COG should be consideredfor assumption of this role. Ultimate responsibility for coordination, however,should remain with the states.''

These recommendations are being implemented by the Department primarilythrough the revised Comprehensive Planning Grant Program Draft Handbook,dated Septbmber 1971. Program policy is that whenever possible local assistanceand services should be provided through area-wide mechanisms, so as to gain thebenefits of a more desirable scale of economy possible with a common or sharedprolemional. staff at the a.reawide level. Also, the Office of Management andBudget through its revised OMB, eirenlar A-95, dated February 9, 1971, spellsout guidelines for achieving improved cooperation with state and local govern-ments through regional planning and service districts.

In summary, much useful data on smaller community development with recom-mendations was presented by this study report. The Department has utilized andplans to further consider the report findings. recommendations, and their impli-cations for achieving sound small town development.

NOVE \HIER 1971/Revised MAncn 1972/FCD.

Mr. 1-Zon. That is all. Mr. Chairman.Mr. KLUCZYNSKI. Mr. Finn.Mr. FINN. Mr. Chairman, I have no questions. I just want to make

a short statement to explain the absence of the two minority membersof the subcommittee.

I wanted to assure you that Arr. Stanton and Mr. I-Tor-ton are bothinvolved with matters closely involved in what you are doing thismorning. Mr. Stanton is involved with the housing bill markup, and

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:Mr. Horton is involved with the Government Operations Committee,in the markinp. up of the lerrislation in the Department of CommunityDevelopment. And I am sure tliey7;would have liked to have been hereotherwise. -

Mr. JAcksox. Thank you very much. We have great respect fortliem, and we know how they support our programs.

my. Kt-Aron:Ns:1u. I want to thank you for the splendid testimony.It is always a pleasure to have you before this committee. And thanksagain for the splendid cooperation.

Mr. JAcKso-.N. Thank you very much.KLITCZI NSKr. The nest witness will be Mr. Alvin .Jones Arnett,

Executive Director, Appalachian Regional Commission.

TESTIMONY OF ALVIN JONES AR-NETT, EXECUTIVE DIRECTOR,PRESENTING STATEMENT OF DONALD WHITEHEAD, FEDERALCOCHAIRMAN, APPALACHIAN REGIONAL COMMISSION; ACCOM-PANIED BY PAGE L. INGRAHAM, INTERGOVERNMENTALPROGRAMS

Mr. AnNE17. Mr. Chairman and Mr: Bergland, the statement is thatof Donald Whitehead, the Federal. Cochairman of the AppalachianRegional Commission. am the Executive Director.

Accompanying me is Mt. Page Ingraham, who is Director of Inter-governmental. Programs at the Commission.

Mr. Chairman: it is a pleasure for me to appear before this commit-tee which is considering major Federal policies and programs relatingto rural areas and their implications for small business. The Appa-lachian Regional Commission, since its establishment more than 6 yearsago, has been vitally concerned with the problems of rural areas andago,

need for economic development.The region has a network of small- and medium-sized communities

and cities with only one major metropolitan area, that being; Pitts-burgh. Central Appalachia., consisting of portions of Kentuck3r,- West

Virginia, and Tennessee, has one of the largest concentra-tions of rural poPulation anywhere in the countryin fact it is oneof the densest in the United States. In the south..-,ra part of the region,an agricultural economy is being increasingly affected by industrializa-tion and urbanizat ion while in the no,. a coal-steel-railroad economyis .-hifting to new types ui. Manufacturing and service employment.IVe have been -faced with the problems of change in rural areas andin small and large business which have had a profound impact onthe region.

One of the major characteristics of an area experiencing difficulteconomic growth problems is the special impact on small businesswhich serves local 111 arkets and on rural areas where it becomes difficultto provide an adequate level of health, education, and other services.The findings of some recent studies, for example, illustrate the extentof the slack that exists in service and retail employment. It wasfound that an increase in industrial jobs does not necessarily resultin a corresponding increase in service and retail employment, thismeaning in small business jobs. This would indicate that existingservice and retail establishments are operating below capacity andtherefore receiving less return than they should. Another indication

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.of the particular impact on small business is the active and predomi-nant participation in local industrial and development, organizationsby small businessmen. They know that their future depends on con-tinued growth of the economy. Their livelihood is fixed by the localmarket and they need a growing population and rising income level.

Another major characteristic of areas lacking adequate economicgrowth is the disparity that exists between services and facilities avail-able. in the rural areas and those in urban areas.

These disadvantages in educational and medical facilities and serv-ices, housing, living standards and personal income are marked. Rural.governmental institutions may be unable to respond and provide thetype of public services required. The small local governments arefrequently not equipped to undertake the planning and developmentactivities necessary to overcome their handicaps.

Our activities under the Appalachian Program have borne out thisikxperienee and have shown that the best way to aid rural. areas andsmall business is to undertake a. combined urban and rural develop-ment program for the total economic growth of an area. The decisionto focus on total economic development. broadly construed, has al-lowed the Commission to concentrate limited resources where theywill have the greatest impact while still responding to those needs ofpeople which affect economic growth.

Focusing on total economic development led to the adoption by theCommission of a policy which emphasizes the concentration of in-vestments in areas with growth potential or in areas having a sub-stantial impact on a growth area. The policy recognizes that it maybe necessary. to provide health and education services in other areasso that the people in more isolated regions, who cannot be servede-ffeetively by facilities in a growth area, may nevertheless, receive thehealth and education services they need in order that they may par-ticipate more effectively hi soeigtpand the economy and thereby con-tribute to the economic growth-Of -the area. By concentrating majorinvestments at selected locations it is possible to provide the necessarylevel of services readily accessible to the surrounding rural hinterland.Only by the effective application of.sta a policy will it be possibleto encourage centers which provide a level of services sufficient toprovide an alternative to continued migration to major metropolitanconcentrations. Such a policy can contribute to a more "balanced"national developmentan increasingly sought-after objective.,A number of Appalachian programs illustrate the impact of a

total development policy for both urban and rural areas. The localdevelopment districts, which cover most of the Appalachian areaant:' by the way. our Appropriations patronMr. Eyinssmiles down,if only from a portraitthis-area covers the mountainous region fromSchoharie County in. New York to Kemper County in Mississippi, itrims down the ridge of the Appalachian Mountains. So, it extendsalmost from New York City to the Gulf of Mexico, with roughly 20million people. These local development districts which cover mostof the Appalachia.n area, are an organizational embodiment of thisrelationship. The planning and development districts provide anarea-wide forum within which rural and urban, public and privateinterests can jointly develop programs to provide necessary servicesand foster the economic growth of the area.

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Although the district organizations take a variety of forms. theyhave in common a multi-county, multi-fuctional approach with pro-visions for the participation of local governments and private citizensfrom their. area,. You will want to contrast with what Mr. Podestasaid earlier about, the 250,000 limit for the EDA districts. Ours haveno such limitations. Ours have to be multicounty and multifunctional:They carry on a wide and varying range of activities including: Plan-ning for aettivide, development; assistance to local governments andothers in the de,.ch)pment of proposals for joint programs and proj-ects and funding them; research and studies of iireawide resources,problems and potentials; tecimical planning and research assistance:review of grant-in-aid proposals; assistance and encouragement forcompanies and :industries seeking to locate in the area; and, fosteringareawide cooperation and local cost-sharing of services. Local devel-aliment districts we liken to 1.1. barn raising. It is simply the coming to-gether of three, four, five, as many asthe largest district is 10 comi-ties. isn't it?

Mr. INGRATIAM: About that, yes.Mr. AT NETT. It's simply the pooling of small counties, tax-pobr

counties, to develop those areas. which done singly they could neverdo. And coming together they sire able to have vocational schools, areahospitals, and area airports. The districts in on the scene at the pointwhere they can be iIistruniental in developing programs and projectswhich will contribute to ecdnomic growth while providing the neces-sary services for both urban and rural people within the district.

Local development districts in a number of States have been particu-larly active in specific development, programs and activities -withintheir districts. They have frequently worked closely with industrialdevelopment and tourist promotion- groups, although we are prohib-ited by law from actually going after industry, that is, we cannotproselytize, we cannot pirate. There is also an admonition in our lawthat says we cannot fund production enterprises, that is, we cannotprovide startup money for industry. We have no business loans.

The districts provide a -unique opportunity 'for urban and ruralareas and representatives of government business and local citizensto work together in. pooling the available. resources.. Most frequentlythe districts serve a the facilitating agencies through which groupsand resouc can be brought together, programs can be developed, andavailable assistance and resources can be most effectively used.

There are innumerable examples of the, ways in which the dis-tricts -have, contributed to the potential for economic development.I will mention only a few. The Duffield Industrial Center is being con-structed along !In Appalachian Development Highway Corridor in theLenowisco Local Development District in Southwest Viroinia. Itillustrates the effect that, a local development district and high-way corridor can have on the economic potential of an area. The project,was located in one county and receives support from two other coun-tierte,cause of its contribution to the whole, area. The local fundingwas combined with funding, projects, and technical assistance fromthe State of Virginia, the Economic Development Administration,the Appalachian Regional. Commission, and Tv-A. .

Several local development districts have been instrumental in as-sisting in the establishment of small business investment companiesto bring additional capital into their area. One of the recurring prob-

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lems in the Appalachian. Region has been the lack of adequate in-vestment and development capital and the SBIC's, with the- sup-port of local business, can help to fill this gap.

If I may add here, we did a study in 1969 that indicated that Ap-palachia was a capital export region, that is, the bankers wouldrather put their money in Treasury notes in San Francisco thaninvest in mortgages in Magoffin County, Ky. We have indications nowthat that has turned around. And that we are going to check, in fact,by roing back and reassessing the situation, whether indeed Appa-lachia continues to be a capital export region. We are hoping that those1969 findings are indeed no longer so.

The Appalachian development highway systemand if I may addhere, the Appalachian program has been popularly characterizedas a highway program, a system of 2600 miles of highways whichhas been designed to interlace Appalachia. If you will look at theinterstate system you will see that it well serves Washington, D.C.and St. Louis, and that when 1-64 is built you an whip through Ap-palachia quite speedily. But for the people in Bluefield and Beckleyand those other folks. in West Virginia, the interstate highway systemis indeed a very limited access highway system. The 2600 miles, in themain, an interstate standard system has been designed to interlacethose interstate :roads in West Virginia, East Kentucky, Tennesseee,and so forth. That system now provides a prune example of a programwhich is designed to support a total economic development policyaffecting both urban and rural areas. It is almost the backbone uponwhich the Appalachian program hangs.

The system links the major population centers of the Regionand serves the dual purpose of enhancing their potential for develop-ment and making them more accessible as service centers for the sur-rounding rural areas. New industrial locations within the Region il-lustrate the effect of this policy. Forty percent .of new enterpriseslocating in the Appalachian Region within the last five years havelocated within ten minutes of development corridors and seventy-fivepercent within a half an hour of thecorridors. But the corridors andaccess roads not only serve a direct industrial location purpose. Theyalso contribute to the success of another aspect of the economic growthpolicy. They can make specialized and more sophisticated health andeducational services and facilities more generally available and ac-cessible.

In Appalachia, among the other problems, we have a terrain prob-lem. Ground that it takes us 30 minutes to cover in the flat land takesan hour and a half to cover in East Kentucky. And this affects thehealth delivery system, the 'Mutational system, and every other en-deavor that you try to plant on the landscape out there.

We are currently embarked on two new efforts to permit the Regionito further capitalize on its highway investments. A new highway de-

velopment planning program has been estabilished by the Congressthis past year with the objective of as sting member States in pre-paring action plans

theprograms that reinforce transportation in-

vestments, while at the same time protecting highway capacities andenhancing highway safety. This type of planning will help to identifyfeasible development, industrial commercial, and residential,at specificsites and prepare development programs. It will provide the potentialfor a development link between urban and presently rural areas. And

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there you will notice another link between what Secretary Jacksonjust said a ieW moments ago.

The development of viable, economically feasible, rural trans-portation systems is another particularly challenging.aspect of theeconomic growth policy described. Rural transportation systems canprovide, a vital link in making health and education services avail-able and in providing access to stores, shopping, centers, and jobs.Howeve, we have found that the economics of rural systems presentmajor problems which require imagination and dedication to solve.We are only beginning to explore the possibilities in this area ofdevelopment. We are working with several local development dis-tricts to assess their problems and potential and undertake demon-strations designed to test various cooperative approaches to ruraltransportation.

A second major element of the regional economic growth policywas the decision to assist in providing-health and education servicesand facilities on a broad area-wide basis so that they would be avail-able to those, who needed them regardless of where they live. Thebasis for this decision was the need to- equip the residents of Appa-lachia to participate productively in society and the economy as in-creasing opportunities became available. within Appalachia. or else-where for those who chose to leave. Meaning, in. the Appalachianghettoes of Chicago, for instance. you should not have a large streamof people coming in from East Kentucky, now, to people those ghet-toes. If indeed they do choose to go to Chicago, or to Minn. apolis, orwhat have you, they should be able to compete on an equal footingbecause of the technical and vocational educational .plant and Sys-tem that we have set in place in Appalachia over the past five years.

As my earlier reference indicated. the local development districtsand other area-wide agencies. particularly health demonstration coun-cils and regional educational service agencies which receive assistancethrough the-A-ppalachian Program, playa vital: role in the successof area -wide efforts. Iris-Within the district and regional agencyframework tluit services can most effectively be made available tothose who need them in outlying- rural areas. A number of examplesof the potential presented by-this approach could be described. andT will confine myself to just a couple.

The provision of health services throughout their area has been amajor (Neel-ire of the health demonstration programs. This has in-cluded the addition of more senility accessible new clinics and the useof mobile equipment. They have also included home health services asan alternative to acute care bed service and have focused on dentalservices for school -age children.

A major locus of the education program has been to improve voca-, tional and technical education. throughout the area. A. specific ob-

jective u-as to increase the relevance of education to jobs available inorder to better meet Appalachia's manpower needs. A significant con-tribution of the program has been its emphasis on relating the coursesof instruction to the actual job mirkpf. Studies show that in 1066npnroximatelv (12 percent of those taking vocational training in Ap-palachia were stnaving for occupations making up only 5 percent ofthe -lob market. That means that 57 percent of the kids in vocationalschools were being trained for the welfare rolls.

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Now, SO percent of all students in Appalachia-assisted schools aretraining for job opportunities reflecting national, regional, and sub-regional emPloynient projections.

The regional education service agencies make it possible for a num-ber of school districts to join together in area cooperatives to sharethe costs of certain types of school services, teaching capability, andoccupational information .and guidaiwe'that they could not, have af-forded if they went at it alone. The- comparison here is like a con-solidated high school. Rather than consolidating bricks and mortar weconsolidate services over several counties, special art teachers, Frenchteachers, special reading programs, and what have, ymi.

'Let me emphasize again the nerd to view urban and rural develop-.ment as part of a total growth policy. Looking at rural areas in isola-tion or at only one -facet of industrial and commercial growth willnot suffice. Let me illustraterEarly in the last decade, Kaiser Alumi-nim a very public minded company, located a plant employing over3,000 persons in one of the Appalachian States. It was assumed thatthis would have a major effect on the future of the area. However, infart, employees commute, to that plant from 27 counties in two States.The impact of the payroll is so dispersed that it has not contributedto the location of needed health, education. and public facilities with -in the area. Although the plant provided much needed employment:7aslocation resulted in less than maximum impact, and this is where wecome to the problem. o f growth centers.

We have to be concerned with a, multiplier effect of whatever we do.We have to do those things that will call in, or draw in, or serve, as,a lodestone for additional investment: We have to deal in concentra-tion. And there, is r critical massthere is that threshold levelwhere, in putting together health activities, educational activities,transportation systems or what have you, things start to click. Rostowused the term "takeoff point". And there is that It is not a readilydefinable and identifiable point. But there is a place at which towns,localities. do indeed take off.

What happened in this Kaiser location is that the effort becamesort of diffused, you had a plant there. and the people commuted infrom as far away as GO or 70 miles to work in that plant.

In conclusion. our experience has shown that the, problems of ruralareas and small businesses in regions lacking adequate economico-rowth are but one aspect of the total social and economic structure.Small businessman operate at less than adequate levels and ruralareas are, not provided with needed services, facilities, and oppor-tnnities when the potential for growth is lacking, and they are iso-lated from an area providing such a, potential. The total economicwelfare of an area, both urban and rural, and small, medium, andlarge businesses, must be considered.

Let. Me, urge then'. that the problem of small. town and rural Americain relation to small businesses be viewed in the broader context of acoordinated growth policy addressed to both urban and rural areasso that a level of services and facilities necessary to inidergird eco-nomic growth can be provided. We. can thereby develop alternativesto continued conc.entmtion of more and more people in larger andla rger inetropoli tan areas.

Thank you.

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Mr. BERGLAND (now presiding). Thank yeaf very much, Mr. Arnett,for a comprehensive and rather encourkiing report.

Could you state for the ben.eit of this committee and the record.how many regional commissions are now in existence in the UnitedStates?

Mr. ARNETT. Well, there is only one like ARC There are five oth-ers, the, so-called title V Commissions, one for the New England Re-gion, one for the Coastal Plains. one for the Ozarks, and one wherethe four corners out in 'Utah, Arj.zona, New 1114.ico and Coloradomeet, and-the Upper Great Lakes.

Mr. BEncLAND. To what extent do they differ from yours? In thatthey are authorized under title V, are they more limited than yours?

Mr. ARNETT. They are limited principally by money and operation.Whereas we operate on a budget, for instance this year of $302 million,they operate on a level of about $4.5 million a year, I believe. Andthey also operate within the Department of Commerce, whereas Mr.Whitehead, whose statement 1: read here, represents the President andreports directly to him. The Appalachian Commission is indeed a fullpartnership between the 13 Appalachian States and the Federal Gov-ernment. Mr. Whitehead's opposite number for this 6-month period,the States co-chairman. is Governor Holton of Virginia. For fire next

months. after July, it will be Governor Carter of Georgia. TheCommission operates that budget of $302 million, which breaks clown$.180 million for highways, and $122 million this next, year for non-highway, health, education, airports, and what have you. It also oper-ates the program with a staff that is sort of an institutional her-maphrodite. neither State nor Federal, 105 people paid 50 percent bythe Federal Government and 50 percent by the State. That is the onlyplace that that takes place in the Government.

Mr. 1.3Enotaxn. It is apparent that chairman Evins. through hispower_ on the Appropriations Committees, has served the Appa-lachian Regional Commission.

Mr. ARNEY.r. That is right.Mr. BERGLAND. Would you describe. for me, not being familiar with

it, what your regionaland may I say that most of the district I rep-resent in Minnesota is covered by the Upper Great Lakes Commission,and I am encouraged by what they have, started, they have justbegun some. clay I hope they will be able to be effective as you havebeen in serving your area but can you tell me how the AppalachianDevelopment Highway System operates? Do you have highwaymoney?

Mr. ARNETT. Yes, sir.Mr. BE-noLAND.Do you complement the Federal interstate highway

system?Mr. .A.RNErr. Yes. The highway system was designed in 1065, in-

deed, to complement the interstate highway system. Our highways arenot built with interstate higliway trust fund moneys, the moneys come.directly from the general revenue, right out of an appropriation. Ithas run over the past. 3 or 4 years roughly at this S1S0 millionficrure that we are at this year. Roughly 30 percent of the system iscompl eted. is in place.

One of the glorious stories that we can tell is that there has beensome rather fantastic industry location along those highways. We have

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a rather poor county just a short way from the county that I was bornin in East Kentucky, Wolfe County, at. the continence of an Applachiacorridor and another good highway where Control Data has estab-lished a plantemploying better than 300 people. At the confluence ofanother, American Standard has established a plant employing betterthan-100 people to do some rather sophisticated plumbing work. Bette!than -100 plants have located at or near those highways since we startedputting them down out there. And \\ c are still probably four yearsaway :eroin completion of the.system.

don't know whether yon hare ever driven on _a -West Virginiahighway or not.

Mr. li-EneLAND. I have 12 years affo. And I vowed I would never goback.

Mr. AnxErr. It is mucli like that now. But what we are really doingis straightening out the hairpin turns so that you can get from Mor-gantown to Charleston and Charleston to Romney easier and faster.One of the things that really held us back was that larffe trailer trucks,large over the road trucks, could not negotiate. those highways. One ofthe major east-west hiffhways, for instance, from here to Cincinnatiis route 60. _Viul it you get on route 60 between White Sulphur Springsand Charleston, \Vest Virginia,von are going to Meet yourself comingthe other way an 1111 awful lot 'of those. turns. And it is.straighteninffout those roads------for instance, for an area of Ohioand for thosewho are worried about Appalachia. Ohio; Appalachia., Mississippi;and Appalachia, New York, when we think about Appalachia weordinarily think of east Kentucky and southwest Virginia, West Vir-ginia and east Tennessee, just the nice hard concerns. But the regiondoes extend over a thousand miles from .Schoharie County to KemperCounty.. But at any rate, the program, those things that we do inhealth and education, pretty well hang on that transportation system.

One of the problems that we have in Appalachia is doctors. Theaverage age, of our doctors is about 57. Up until just recently therewere no young doctors coming in to replace them. Our medical. schoolstend, like, all medical. schools, to turn out. all sort of specialists. Thereis a bias in medical schools against turning- out a black bag medical.man. Once he -gets out of medical school, if he doesn't have thoseffleamiii,ff buttons to push, he is not considered to be 'in medicine. Andone of, the things that. We have done is put together groups. Thebiggest problem with gettinp a young doctor in Appalachia is pro-fession-isolation. The -University of Kentucky now has established aDepart lent of Conmumity Medicine. For that course, 6 weeks or 0weeks. whatever the boys have to spend in that course, they go toHarlan and Hazard and Whiteshury. Ky. And. there are field proc-essm. s out there. that the. Appalachian Commission funds.

Some of the fellows have become smitten with that part of the worldand the need out there. And what they really like is knowing that theycan g,o to Dr. Steinmanthey have a professor there to relate to, eventhough they are 100 miles into the hills from the university. But it isthat. with extended, care units. and hospitals and emergency care fa-cilities, ambulances, and so forth, that we could not make work unlesswe had a decent. high-way system.

For critical cases they can get on one of our highways and have thepatient into a comprehensive hospital in Lexington in an 'hour or anhour and 15 minutes, And before these highways went down it was

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just unthinkable to even consider something like that. But now all ofa sudden you can refer out and radiate out those things that weretightly held.

You 1itow, the insulation and the isolation that was there has sortof been exploded by the highway system.

And one of the things that we sort of rook on frontally back in 196is, we were asked, 0..K;, are you trying to keep the Appalachians inAppalachia., keep them from going to the Toledo's and the Youngtown's and the A! iron's or what have you. Or should it be ARC policyto train them. so that they can compete with the kinds from Youngs-town and Toledo, and so forth, if indeed they, do, choose to go there ?We sort of answered it both, -ivitys. If they do want to stay in jlppalachia, let's make that existence as good as possible for them by de-,eloping these vocational schools and hospitals, and the other

amenities, the urban ainenities.And this is where we come to critical mass. You just can't plop down

hospitals at every little Ipswiteh. One of the problems that we havenow is that you can't sewer every little hollow _hamlet. Appalachia is avery densely populated place, but most of the towns are 1,100, 1;700,,;100. You would in e ITect do strip mining to lay clown sewer pipe ifyou tried to sewer them all.

Butt he decision was made earlier that we will not develop a policytOStalld in the way of out-migration. It is just that if the decision ismade to out-migrate then those kids will be just as well equipped asanybody so that they will not be a 'burden.

And this is how we have operated for the past 6 years.Mr. IlmaiLAxo. Would you describe the extent to which you use thiS

mobile equipment in health. are delivery?i,k3iNETT. Well, there will be even more of it coming. PartiJarly

for black lung. The care of kids' teeth has been a very difficult prob-lem in A.pparachia. We have had .mobile dental units operating par-ticularly in central Appalachia. Even in east Tennessee each sum-mer we use a TVA multiphitsic screening unit that they lend to us.And the Appalachian Commission, in cooperation with VanderbiltUniversity Medical School. goes into the Jell ico area of east Tennessee.Clearfield, and puts on health fairs. There is a great nutritional prob-lem. out there, and a 'fantastic educational problem, particularly withmothers. And we simply try to carry the message, there is a betterway to feed your kids more nutritionally, hero is a better way tocure for their 'bodies and minds. It is a very subtle thing that we do. 1,Vedon't hit them over the head with a bludgeon.

One of the things that we are doing in this regard is that we haveput clown an educational television network in Appala(.hia, becauseyou cannot have centers for everything. For instance. it way hardto have a 'Flemish-at program. in. Appalachia just because of the dis-persion. You had a lot, of people, but not in those tight little centers.One of the ways we accommodated that was a Itomestart program.That was born at ARC. The I-Tomestart program has moved to fIEW.and it is now a national program. It is one of the many wehave given birth to.

Wien Mr. Jackson was here, I was struck byyou were mentioningFT-TA and the dearth of FHA subsidized loans in, the rural tu..eas.You know, in West, Virginia it amounted to less than one percent in1966 I understand. There was no activity to speak of at all. And there

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was a, fellow who came to the Commission out: of the University ofNorth Carolina. School of Regional Planninp. named Fran Noravitz.And he had a. gerth of a great idea. He said : "There is all sorts ofconstruction money, all sorts of federal subsidies, but what you don'thave in a rural area is a way to get to that money. You don't have landlawyers, you don't have real estate. attorneys, you dont ha ve architects,you don't have mortgage bankers, In other words, you have nobodyto really package tins. And there is no practical way to get to themoney that you know is there."

Fran, in 1967, I guess was successful. And a new program. welledup out of the bowels of the Commission. It is now Section 207 of theAppalachian Act.

A year later, I think, it became Section 206 in the National HousingAct.

One of the things we do' is serve as a national laboratory. It is easyto try things in this concentrated area, and then spin them off. Forinstance, in our first year we had priority money for severing andwatering. That was back in the days of the FWPCA. before it be-came FIVC.A. We were instrumental, with a little bit of proselytingand cajoling on the Hillwe said, we -don't really need to attend tothe sewering and watering of every little Appalachian hollow if thisagency has enough money to do it. As a. consequence, a nice sizableappropriation came. And there was no reason for us to have this pro-gram. So we spun that one off.

When the Marshal College crashyou recall that, in Huntington,West' Virginia, when it took out the football team over there? Land-ing in most Appalachian airports is like landing on an aircraft car-rier. You would think those guys would get hazardous duties pay orflight pay just for coming into Charleston. Beckley, Huntington, andso forth. Those airports in the main ale without approach instrumentsincluding ground radar. And here you are 3,000 feet up in the air, andeven on a clear day the aircraft just seems to lower its wheels withoutdescending and lands. There aren't too terribly many clear clays be-tween. October and May. For instance. yesterday was a cloudy day,and all air activities closed down in West Virginia. There were Gov-ernors who got trapped in White Sulphur Springs, they could not getout because of the foul weather.

A special program has been developed to enhance the safety ofthose airports through the Appalachian program. Companies will notcome in because they cant get management personnel in there exceptby long, horrendous car-iades. They have -no trains any more to speakof. And they won't take atus. So, unless we upgrade those airportswe have a terrific problem.

Mr. REtzarNo. Counsel; any questions?Mr. ROE. Thank you. Mr. Chairman.Let's get back to what Mr. Berland was talking about earlier in

reard to the various regional commissions or similar organizationsin the country. I think the Appalachian Regional Commission is avery good example of what this type. of organizational structure cando in rural America. I would like your comments on whether our-approach to rural America and its problems can probably be met with atremendous amount of success by using this Commission approach. Inother words, you have outlined here in detail the great number ofachievements of the Appalachian Regional. Commission. Why couldn't,say, the .rpper Great Lakes Council and others be expanded, perhaps,along this same line, and furnish the same kind of programs?

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Arr. ARNEIT. I am an awfully biased witness.Mr. Rou. I would like your honest opinion.Mr. AnNun-r. That is what you will get. I guess Secretary Podesta

used the word "coordinating" when you asked him about the GAOreport. You don't coordinate without money. That is the crux tocoordination. Whoever has the money coordinates, it is just as simpleas that.

In the Upper Great Lakes you don't. coordinate much with $4.5million. It is money that is in such a .miniscule denomination that youcan't even concentrate it and get an impact.

One of the other problems with the title V approach in my biasedopinion is that you have it seated in, couched in, a department.Secretary Jackson spoke about DCD. As you know the AppalachianCommission is not a party to that. There was a special reonest to pullARC out of a community development bill. We. thought that it wouldstrap us. The 13 Governors thought that it would have an inhibitingeffect. I wouldn't even deign to speak to the pulling together of otherprograms. But you almost ha VC talook upon the Appalachian programsort of as the Federal grant-in-aid system in mierocism. We are every-where. It is a piece of preferential treatment, just as Mr. Podesta said,about those EDA investments. It is not in lieu of or in substitution ofother agencies' money, it is over, on top of. And that is exactly whatthe Appalachian program is.a.lt about. It is a piece of preferentialtreatment, to bring that lagging area up to a place where it is not adrag on the nationalreconomy.Hopefully. we will reach at some pointwhere Appalachia does not pull down G'.NP.

Mr. h.01,2. This could be put throughout the country, could it not?Couldn't you divide the whole country into rural areas outside theSMSA's?

Mr. A.nxErr. You have the beginning of a Blatnik bill on this side todo rouclily that. You have the Montoya bill on the Senate side to doroughly that. I indicated that the staff was an institutional her-maphrodite. There are advantages in that. The most important devel-opmental decision that. any government unit can make. is made atand that is the allocation of moneys. If you. don't have that decision youreally don't have much.

Mr. RoE.And your Commission is the only one that has it?Mr. ARxm'T. That is right.Mr. Ron. Not even the Ozarks Commission?Mr. Anximr. No. The appropriation comes to the President for ARC,

and he delegates to his manDon Whiteheadthat amount of money.And there are all sorts of programs. There is a slug of money set aside.for vocational, educational, and another piece for airports. anotherpiece for supplementals, another piece for health, and another forchild development, and so forth. But once you get beyond those pro -Lirum areas, the.. Governors and the Federal cochairmen come to-ptner, and together they allocate their money. And the. sense of regionalism and give and take is there. For instance, a particular Stateneeds a thrust in vocational education. some of the other States willtrade moneys with them so that they can have sonic other kind of moneythat. they .mighthave. a greater need for:

For instance, if Pennsylvania now has its landscape pretty wellfilled, with vocational schools. Maybe the greater need for them now. isfor supplemental funds, the sort of omnibus money, the 214 money, we

1 0

136

call it, that we can put on top of other funds. They have reached thatlevel of need so that they have to be flexible, they have to be able topop a hospital here or an airport them. That flexibility does not comewith the arrangement that you now have .under title V. For all in-tents and purposes it is a departmental program within the Depart-ment 'of Commerce:-Youlust-don't get that give and take and headbanging and tradeoff you have the parties coming together asequals. And this is exactly what the States and Federal Government doat the Appalitchinh Commission.

Mr. Roc. Just one short-question, if I may, Mr. Chairman, and thenI will conclude.

Have any of your funds been placed in budgetary reserve and im-pounded by OMB?

Mr. Anxgrr. Only a special piece of airport moneyand it was notan appropriation, it was a contract authority.

Mr. -ROE. But your appropriated funds have been untouched?Mr. ARNETT. Untouched.Mr. ROE. And you have been able to administer those ?Mr..AnNETT. That is right.Mr. Rot:. Thank you, Mr. Chairman.Mr. BnizonavxD. Mr. Film ?Mr. FINN. Just. a couple of questions, Mr. Chairman. And, of course,

I want to make a littleI support the shock that conies to someone from an urban area in

driving to West Virginia. I .vas fortunate enough to work fora Federaljudge in West Virginia for a-couple of years. I lived in Elkins. Every-thing was so favorable with the job that I arranged nearly all of itby telephone, with an interview elsewhere. It was it shock to my wifeand I when we headed east to Elkins.

Mr. AR-NETT. You were in the beautiful part of the State.Mr. FINN. This was the southern part of it. I have not been back

since 19.67. I am delighted to hear that road development is going on.It is such a beautiful area that it seems to me it would have fantasticpotential for tourism. I wonder if you could give me any statistics ormeasurements on any growth that you have seen in tourism in respectto road development?

Mr. Auxin-T. Yes, indeed. In fact, what we could do is give you thepiece on that that we supplied for Chairman E vins at the Appropria-tions hearing, we -would be -Very happy to. For instance, you were inthe area of Davis, West Virginia, where there is a ski resort now. Assoon as it is completed, highway corridor H, you can get out of hereon Route 66 at the Beltway and go screaming into Parl':ersburg, WestVirginia., no more to and froing on narrow West Virginia highways.And this highway is well underway also.

Mr. Fixx--. When you were talking about airports, too, you remindedme of the' little airport outside of Elkins where on occasion they calledfor people throughout the community to bring-out their cars to turnthe headlights on the runways.

Mr. ARNETT. That is right, and light up therunway.The President went over there for the Forest Festival, and landed

a.t Elkins. And I understand the screams can still be heard from thetires on the plane trying to keep from. going over. They had to take asmall plane. I was amazed that they didn't take a helicol)ter. But theElkins airport is dilficuilt.

141

137

Mr. FINN. Can you help me a little bit with understanding thestatistics on page S, where you talk about the vocational tra,ming.Earlier you mentioned people being trained for occupations making uponly 5 percent of the job market.

Would that be the local job market?Mr. ARNETP. Local and national. What had happened up to that

point in vocational education is that they were mostly agriculturalstudents. And there just aren't that many agricultural jobs; less than5 percent in those particular callings. The fellows were agriculturalmechanics, fixing tractors; and they were in landscaping, and this,that, and the other thing. And you have to remember, vocational edu-cation, just until the last 5 years or so, has been pretty well con-trolled by the agricultural interests. The ouys who went to vocationalschool in the -main wore FFA. jackets, and the girls were all in homeeconomics.

Now, for instance, the closest county in the Appalachian Region tous here is in Washington County, Md.. Hauerstown. just as you beginto hit the mountains out there. The Washington County area voca-tional school has courses as sophisticated as magnesium welding. Andthe guys are employed at Sparrows Point, they leave Hagerstown,and they are well equipped for good jobs at the shipyards, and whathave you. And they have a food course out there. They have graduatedthree classes and most of those three classes has been hired by Stauf-fers, the fancy WI:limier concern, and all of them have 'very line jobsnow.

Mr. BERGLAND. I am confused. May I introduce a point here?You are preparing these young men for out-migration?Mr. .1-11INErr. No, I say either for out-migration or for staying at

home.Mr. BERGLAND. Earlier in your testimony you indicated that part

of your thrust was to prepare people to go-out and be fit to competeWhen they went.

Mr. AnmErr. That is right.Mr. BERGLAND. Is this kind of a central theme of your undertaking,

or is this a.parallel part of your program designed to, to prepare forout-migration on the one hand and on the other to prepare them foras many jobs in the community as possible.

Mr. ARNIM% Parallel trackson the one hand we hope to,.,so en-hance the attractiveness of Appalachia that those industries will comein that indeed are coming in, and the folk that we do train there wiltstay. But if they choose not to say, then they can go to the Baltimoresand what have you. Out - migration, by the way, between 1950 and1960 was 2 million Appalachians out-migrated, the most massivestream of humanity to move in the -United States in a given decade.And I was one of them. I came out of Appalachia in that decade. Inthe decade 1960 to 1970 that level was reduced to 1 million. And wehave estimates that in the last couple or 3 years we are in equi-librium. And if we can improve that in the next couple of years, wehave really done something.

Mr. ROE. But you may get to the point where there is nobody leftto migrate out ?

Mr. ARNETT. I am speakinp. in raw numbers, 2 million 1950 to1960, 1 million 1960 to 1070. But as we (Yet toward 1070in other

142

138

worth, 1968, 1969, and 1970, there has been little out-migration. Bythe way, there has been a great deal of in-migrationthe in-migrationwas off settino. the out-migration.

Mr. FINN. is the population now increasing, or is it stable?Mr. AR NETT. The population of. the entire region, J.-suppose, was

essentially stable.Mr. INGRAHAM. That is somewhat misleading, because in the south-

ern part, the southern crescent, yOu are havino. some reakgrowtgrowingsome of the most rapidly growin centers.

havingthe totarfigure

doesn't tell you much because of the different population:Th,Mr. FINN. West Virginia has lost a great deal. Is that still theascir2_Mr. AR NETT. It isn't losing as much. It has definitely slowed.Mr. FINN. 1 think you mentioned that 400 plants have come in in

some recent period and located at the confluence of these roads. Youtalked about the unfortunately less than maximum impact of theKaiser Aluminum plant. Is that because of its location?

Mr. ARNETT. It was not located in the right place.Mr. FINN. Can you tell us where it was located?

IMr. ARNETT. t was located near Ravenswood, W. Va.This gets to the thing of what is a growth a ma. And you raise all

sorts of questions that have not been answeredwhere.is that take-off point, where do you reach the point of critical mass. The Kaiserlocation is an extreme example of what happens when you bring ina plant with that number of jobs; 3,000 jobs in one plant in Appalachiais a sizable plant.

Mr. FINN. The big problem is maybe its size, perhaps, rather thanthe location?

Mr. AnxETT. Had it been at Parkersburg, up the river a little bit,for instance, it would have had a much greater impact, we think. Imentioned diat Kaiser was a phenomenally community-minded com-pany. 1 wish I could remember his namehis last name was Cunning-ham, a vice president of Kaiser. He found that the school bus routes inJackson County had not been changed in 20 or 25 years: They were stillgoing up hollows where there were no school kids any more. It wasjust habit. lie changed the school bus system and a lot of other things.But had that kind, of effort been in a location where you would havehad a greater number of other activities of that sort, then the maxi-mum effect would have taken hold, it would have taken off. It is justsort of like plopping a plant in a desert. I am sure the analogy wouldprobably be something like White Sands and sonic of those NASA.installations that are so far away from communities that they are self-contained, sort of like a military base. It means nothing to a miner,for instance. to drive 25 or 30 mites a day to a mine head. It meantnothing to the workers here to drive 40 and 50 miles to a nice job atKaiser. The needed critical mass never occurred.

Mr. FINN. Thank you. That is all. I have.Mr. Rm. Mr. Chai rinan, just one thing.On page 2 you talked about the findings of recent studies. Could you

supply copies of those studies for the record?Mr. AnNErr. Sure.Mr. HOE. Would that be all right, Mr. Chairman?Mr. BERGEAND. Fine we will. receive those fur the record at your

con ye ni c(The, studies referred to are reWined in the subcommittee file.)

14

139

Mr. BERGLAND. Thank you very much, Mr. Arnett. I extend my eon-crratulltions to Mr. Whitehead and your folks for doing what thinkInis a remarkable job in an area that had been given up on by some folksin the country a lew years ago.

The meeting. will stand adjourned, to be reconvened at the call ofthe chair.

(Whereupon; at 12:80 p.m., May 4, 1972, the meeting was adjourned,subject to Call of the Chair.)

144

APPENDIX

EXECUTIVE OFFICE OF THE PRESIDENT,OFFICE OF MANAGEMENT AND BUDGET,

TVashington, D.C., June 1, 1972.Hon. JOHN C. KLUCZYNSKI,Chairman, Subcommittee on Small Business Problems in Smaller Towns and

Urban Areas, House of,1?epresottatives, 'Washington., D.C.DEAR MR. KLUCZYNSKI : In response to your recent letter, enclosed is a listing

of budgetary reserves of funds, some part of which is intended for programs insmall towns and rural areas.

With some exceptions, enacted appropriations, limitations, and other fundsthat we are required to apportion do not identify the programs, activities, orportions specifically applicable to small towns and rural areas. To provide anoperational basis for constructing the requested list, we therefore found it nec-essary to apply some arbitrary rules. For example, the items listed cover entirereserves of appropriations or other budget accounts; it is not possible to sub-divide within an account. Similarly, we have not listed programs that are na-tional in scope, and that affect small towns or rural areas only i!,cidentally, be-cause it is not possible to identify the amounts applicable to various regions orareas under such national programs. The programs that are listed are limited tothose which impact predominantly rural areas or small towns. As a result, someportions of the amounts listed may not be intended for small towns or ruralareas. Conversely, some specific portions of other programs may be intendedfor small towns or rural areas but are not included here.

Governmentwide, budgetary reserves are largely temporary deferrals made inthe.. course of routine financial numagement pursuant to the requirements of theAnti-Deficiency Act (31 U.S.C. 665). They could not be used immediately evenif released. Similarly, most of the current reserves in programs intended forsmall towns and rural areas are in this category. These reserved funds either(1) are clearly in excess of Immediate -needs, (2) are being temporarily heldawaiting the outcome of pending Congressional action that could affect their use,or (3) are being withheld consistent Mth Congressional action. They are listedin Enclosure 2 together with annotations to explain reasons for each of thecurrent reserves.

In addition to these routine reserves, there are four programs (one involvingseveral accounts) for which the currently reserved funds could be used if re-leased now ; your letter mentions two of these. These reserves are listed in En,.closure 1 and are all scheduled for release after June 30, 1972.

I hope this information will be useful to your committee.Sincerely,

(Signed) GEORGE P. SHULTZ,Director.

Enclosure,(A1)

78-617 0-72vol. 1-10

A2

ENCLOSURE 1

FUND S IN RESERVE FOR REASONS OTHER THAN ROUTINE FINANCIAL ADMINISTRATION IN PROGRAMSINTENDED PREDOMINANTLY FOR SMALL TOWNS AND RURAL AREAS

[In thousands of dollarsf

Account

Date oforiginal Initial Releasesreserve amount Currentaction reserved Date Amount reserves

Department of Agriculture:Farmers Home Administration:

Water and sewer. grants Sept. 9, 1971 58, 000 58, 000Rural Electrification Administration:

Electric and telephone loans do 221, 900 Jan. 17, 1972 114, 900 107, 000Soil Conservation Service: Employ-

ment reduction savings pursuantto President'sdirective of Aug. 15,1971(6 accounts) Mar. 6, 1972 8, 000 8, 000

Department of Housing and Urban Devel-opment: Community planning andmanagement-New communitiesassistance grants Sept. 10, 1971 5, 000 5, 000

ENCLOSURE 2

FUNDS IN RESERVE FOR REASONS OF ROUTINE FINANCIAL ADMINISTRATION IN PROGRAMS INTENDEDPREDOMINANTLY FOR SMALL TOWNS AND RURAL AREAS

iln thousands of dollarsf

Account

Date uioriginal Initial Releasesreserve amount Currentaction reserved Date Amount reserves

Department of Agriculture:Farmers Home Administration:

Farm labor housing grants... __ Aug. 13, 1971 2, 963 Apr. 7, 1972 2, 963 0

Mutual and self-help housinggrants do 729 1 729

Direct loan account: Farmoperating loans (limitation)._ Sept. 9, 1971 87, 453 Apr. 5,1972 38, 000 2 12, 453

May 25, 1972 37,000Animal and Plant Health Service

(Originally apportioned to ARS onSept. 9, 1971, before the reorgan-ization which created APHS. Afterreorganization this program wastransferred to APHS.) Dec. 30, 1971 3, 500 Feb. 8,1972 705 12, 049

Mar. 28,1972 526Apr. 28, 1972 220

Agricultural Research Service:.

Construction Sept. 9,1971 1, 570 Dec. 13, 1971 1, 500 3 70

Special foreign currency pro-gram Aug. 30, 1971 352 1 35 2

Cooperative State research service__ Sept. 9,1971 4,600 Feb. 24, 1972 4,500 0

Extension Service Sept. 9, 1971 2, 000 Mar. 28, 1972 2, 000 0

Consumer and Marketing Service:Perishable Agricolti.:;c1 Com-modities Act___ June 24, 1971 14 Mar. 6, 1972 13 4 1

Consumer protective marketing, andregulatory programs do 1, 011 do 161 1 850

Foreign Agricultural Service: Sala-ries and expenses, special foreigncurrency program Aug. 13, 1971 3, 087 Apr. 27, 1972 3, 087 0

Forest Service: Expenses, brushdisposal July 1, 1971 10, 617

Dec. 6, 1971 4 13, 170Mar. 3, 1972 3 13, 303 1 13, 303

Restoration of forest lands andimprovements July 1, 1971 11 Dec. 3, 1971 5

Feb. 15, 1972 6 0

Forest fire protection do 80Nov. 2, 1972 4 115 1 115

Forest roads and trails Sept. 3, 1971 401, 869Mar. 2, 1972 4 402, 040 4 402, 040

See footnotes at end of table.

146

4

A3

Date oforiginalreserve

Account action

Initialamountreserve

ReleasesCurrent

reservesDate Amount

Forest protection and utilization:Cooperative range improvement... Sept. 9, 1971

Agriculture Stabilization and Con-servation Service: Rural environ-mental assistance program do

Commodity Credit Corporation:Administrative expenses Aug. 13, 1971

I, 910

55, 500

2, 814

Mar. 10, 1972

Jan. 11, 1972

Mar. 6, 1972

1,

55,

2,

286

500

814

1 624

0

0

Amount shown here is in excess of current estimate of 1972 needs. If conditions change and the funds are needed,apportionments will be made.

3 Amount reflects balance of limitation held pending demonstration of the need for funds (legislation authorizing insuredloans is pending, having passed each House as part of other bills).

Represents residual amount of appropriation for planning that is not required for that purpose. Apportionment awaitsadditional appropriation for construction.

4 Revised total.5 Reserve reflects amount of available contract authority above the obligation program that was approved and financed

by the appropriation Congress enacted to liquidate the obligations.

[From Franchise Journal, January 1972]

SMALL TOWNS HUNGER FOR FAST FOOD

It is Saturday night in Smalltown, USA. The day's work and trading are overand young field hands, mechanics, clerks, waitresses, students and other teen-agers with no visible means of support but money in their jeans, hop into theirown or their friends' wheels and begin their weekly quest for the action."

More often than not, the search leads them past the city limits (Welcome toSmalltown, pop. 10,110) and down the blacktopped highway to a larger town orcity where they spend the money they earned in Smalltown. Many remain inthe larger communities to find jobs that pay more and promise more opportuni-ties than those in Sinalltown.

Meanwhile, as the sidewalks are being rolled up, the leading businessmen ofSmalltown huddle over coffee at the drugstore and hash and rehash the town'smost pressing economic question: "How do we encourage our youngsters tospend their money in Smalltown?" And, in less materialistic terms: "How dowe encourage our youngsters to stay in Smalltown and contribute to the growthof the community?"

The answer is usually the same : Smalltown needs new businesses which caterto the youthful consumer's leisure dollars. The town badly needs a new movietheater to replace the one that was destroyed by firefour years ago. It needs amodern bowling alley to replace the four lanes in a dingy pool hall across thetracks. But most of all, Smalltown desperately needs a modern restaurantfacility, a combination carryout and sitdown unit which would offer a morevaried and exciting menu than the old and cramped cafe on Main Street.

Smalltown, of course, is a composite, a composite drawn from the results of aJournal survey of the fast food market, where the units are and, more important,where they aren't.

The survey showed that, with a couple of notable exceptions, most fast foodfranchisors have completely missed the boat by failing to penetrate a wide-openmarket in cities and towns of 5,000 to 40,000 population. They have, instead,concentrated their efforts in the larger metropolitan areas to such an extentthat many of the major cities are over-saturated to the point that "franchiserow" has become an eyesore to the city and a dollar drain on the franchisor.

That there is a market going begging in the smaller cities and towns can besurmised by the response the Journal received from questionnaires sent to 1,087chambers of commerce in 41 states. Of that number, 769 chambers, or 71 per cent,repliedand replied promptly and positively.

Of jthe 769 returns, 628, or 82 per cent, stated there was a definite marketpotential for a fast food restaurant or restaurants. One chamber manager in aresort city whose winter influx swells its population to over 20,000 noted: "Pleasehurry; we have the potential, but must now go to neighboring cities." The cityhas no fast food takeout restaurants, franchised or otherwise.

A4

A breakdown of market potential by population shows the greatest need (26per cent) in the cities of 10,000 to 19,999 while the least potential (14 per cent)is in the cities with a 20,000 to 40,000 population. Towns of 5,000 to 6,999 and7,000 to 9,999 showed a potential of 22 and 20 per cent respectively.

Eleven per cent of the cities and towns surveyed had no national or regionalfranchised fast food restaurants. Again, the smaller communities showed themost need (six per cent) while the larger ones showed the least (.5 per cent),

An interesting facet of the survey was a partial profile of how four majorfranchise chains, Kentucky Fried Checken, McDonald's, Dairy Queen and A & Whave selected and concentrated upon certain population levels in which to mar-ket their products (see accompanying chart).

Equally interesting is the plight of towns of 5,000 to 6,999 population whichare homes of universities, colleges, junior colleges or vocational /technical schools.Of 130 such communities surveyed, 13 had no franchised fast food outlets andanother 13 had only one (see accompanying chart).

Again, taking KFC, McDonald's, Dairy Queen and A & W as representativeoperations, A & W and Dairy Queen predominate in the smaller towns witheducational facilities and KFC is making inroads into the 7,000 to 9,999-popula-tion college towns. KFC and Dairy Queen have the lion's share of the market inthe 10,000 to 19,999-population college towns while McDonald's concentrates itsactivities in the more populous cities with educational facilities.

The results of the Journal survey were not surprising to anyone who hastraveled across America by car. He is confronted by a feast or famine situation.In the large cities he is all but overwhelmed by the proliferation of fast foodrestaurants offering almost everything under the sun. But woe to him who findshimself in the average small, isolated town at dinner time.

What is surprising to some is. that the majority of the small towns surveyedcould support fast food restaurants tailored by the franchisor to the populationof the town. In this the age of the mini and the micro, it is incredible that moremajor franchisors have not come up with "mini units" to cash in on the all butuntapped market outside the major metropolitan cities.

Judging from the notes and additional material enclosed in the survey re-turns, Smalltown, USA, has the real estate, the investors the-management andlabor pool and, most important, the urgent need for modern, efficient fast foodrestaurants. Filling this need could touch off a second and even more dynamicdecade in franchising.

lot

A5

Penetration of fast food outlets in cities and townswith educational facilities

(University, College, Junior College, Vocational/Technical School)

5,000 7,000 10,000 20,000Population 6,999 9,999 19,999 40,000

number of number of number of number of number ofrestaurants cities cities cities cities

0 13 3 1 01 13 1 2 1

2 5 7 14 1

3 9 14 34+ 4 16 23

Market penetration of McDonald's, Kentucky Fried Chicken,Dairy Queen and A & W by population and regions

5,000 7,000 10,000 20,000Total U.S. 6,999 9,999 19,000 40,000 Total

KFC 33 60 169 144 406McD 5 5 32 66 108DQ 101 110 187 134 532A&W 39 51 92 70 252

N.E. U.S.KFC 1 1 6 2 10McD 0 1 6 3 10DQ 2 1 7 ,.

1 11

A&W 1 1 1 1 4

South U.S.KFC 22 30 83 60 195McD 3 3 16 34 56DQ 42 36 67 54 199A&W 3 5 17 12 37

West U.S,KFC 8 . 21 51 60 140McD 1 5 18 24DQ 47 51 77 61 237A&W 23 26 41 .39 129

Midwest U.S.KFC 2 9 30 20 61

McD 1 1 5 13 20DQ 10 20 37 17 85A&W 12 19 33 16 80

14

(From Survey of Current Business, April 1972]

TOTAL AND PER CAPITA PERSONAL INCOME, 1971*

(By Robert B. Bretzfelder)

CHART 9

Regionig Pertain' -IACOMO

home Ras. Ahmed le At Iteliees Ski theTray of the Armies Ii,Lits 1970

Rollin !AA iEis gm,* stint everegi,Prcent iv-)9707 pe -101,

0 2 4 6

Nay Mountihe

Great takes

Southeast

Southwest

United States averap

UNITED STATES

Regions with pins below the national average

Far West

New England

Mideast

U.S. Department et Commerce, Bureau of Economic Analais 72-4-1

The estimates of State personal Income were prepared in the Regional EconomicsDivision by Q. Francis Dallavallm Gordon Lester, Jr., and Steven Johnson.

(A6)

1uu

-a

A7

Total personal income in the Nation rose 6% percent last year, with gaing of5% percent or more in each of the eight regions and at least 4% percent, in allbut one of the States. Nationally, consumer prices rose a little more than 4 per-cent. The personal income gain in all regions and in 49 States and the Districtof Columbia exceeded the increase in consumer prices so that the real purchaSingpower of consumers apparently increased at least moderately. The one excep-tion was the State of Washington, where income rose 41/4 percent, about the sameas the rise in consumer prices. (Of course, there were areas with4n States whereincome changes were so small that real incomes failed to rise.)

On a per capita basis, the largest gains in current dollar personal incomeranging from 8 to 13 percentwere in North Dakota, the District o.f Columbia,South Dakota, Arkansas, New Mexico, and Arizona. For the Nation as a whole, percapita personal income was up 51/2 percent from 1970 to 1971. In 44 States and theDistrict of Columbia, per capita income rose at least as much as national con-sumer prices. in Minnesota, New Hampshire, Connecticut, Alaska, Washington,and Montana, however, the gains in per capita income were at best about equalto the advance in consumer prices.

1970-71 CHANGE IN TOTAL PERSONAL INCOME

The regions with the largest gains last year in personal income were the RockyMountain (81/, percent), Southeast (81/4 percent), and Southwest (7% percent).All three regions had very large gains in construction and Federal civilian pay-rolls. The Rocky Mountain region also had gains in manufacturing payrolls thatwere above national average, and the strength inthese basic industries led tolarge advances in a variety of local service industries, including wholesale andretail trade, the finance, insurance, and real estate group, and the transporta-tion, communications, and public utilities group. In the Southeast, there werelarge, gains in farming, raining, and manufacturing, and sizable advances in manyservice-type activities. In the Southwest, there were also large gains in miningand in local service-type industries.

Incothe increases were equal or close lo the 6% percent national average in thePlains (6% percent), Great Lakes (61A percent), Far West (61/2 percent), andMideast (6% percent). The gains in all four regions were fairly evenly spreadamong major income components, but there were particularly strong increases infarming in the Plains and in manufacturing in the Great Lakes.

New England's income increased 5% percent in 1971the only regional gainwhich was well below the national average. -Manufacturing wage and salarypayments and income from farming declined, and income from most service-typeactivities went, up less than in the Nation as a whole.

Table 3 shows for each State and region the percent change from 1970 to 1971in total personal income and in earnings from major industries.State patterns

UP

0710

ST

AT

ES

14.1

31

033

14.5

00

WM

13.

1004

4.41

1

r;fa

13,1

00-0

3,10

1

13.3

0043

.591

= U

N03

1 33

.300

I 1

4,79

7

rn,

444

iOC

Ky

0003

1

US

flt.d

,

A...

.-

s qu

i

3 .0

36

.1

14 7

05I

1413

*-4

.

Unn

s40

,1S

tres

sag

570

514

"4,0

00

.(1S

OU

T

301

3,21

111

"v"

u12

270"

3.0

55

7704

414

461

,430

,

11 I

1111

1

13 7

2413

,451

0,70

3

13.4

11

Fr

Mr

Gra

NS

mel

l$6

610

17n1

(061

.04

!Aar

11,0

30/1

0 V

IM00

3011

3,

Eas

t 1,4

0

A9

The States with the largest 1970-71 personal income gains, ranking from 9 to 14percent, were North Dakota, Arizona, Arkansas, New Mexico, South Dakota,Nevada, Colorado, Tennessee, Utah, South Carolina, and Kentucky. In these 11States, increases in earnings frOm most industries tended to be well above thenational average. Manufacturing earnings increased at least 4% percent in eachof these States, compared with a national advance of 2 percent. Among other basic.industries, the gains in farm income were %ve:1 above the national average in eightof the 11 States and the gains in Federal payrolls were %veil above average inseven of the States. Construction payrolls increased more than the national aver-age of 5 percent in all 11 States, and there were gains of 15 percent or more in sixStates. Reflecting these advances, most of these 11:States had gains well aboveaverage in the finance, insurance, and real estate group, in the transportation,communications, and public utilities group, wholesaile andretail trade, and serv-ices. Personal income in the District of Columbia was up by more than 91/1 percentlast year, largely because of an advance of more than 10 percent in Federal civi-lian payrolls.

At the other end of the scale, last year's income advance was relatively weakranging from 41/4 to 0 percentin Maine, New York, Pennsylvania, Minnesota,Ohio, Rhode Island, Montana, Connecticut, and Washington. Farm income was offin seven of the nine States, and manufacuring payrolls were weakoff moderatelyor up only a littlein eight. Declines in manufacturing payrolls played the keyrole in the weakness of overall income in Washington, Connecticut, and Min-neSota, while the very small size of manufacturing gains limited the overall in-come gain in Pennsylvania and New York.

INCOME CHANGE, FOURTH QUARTER 1970 TO FOURTH QUARTER 1971

A clear picture of the 1971 economic recovery and advance can be seen in theregional and State inome changes from the fourth quarter of 1970 (the cyclicallow point) to the fourth quarter of 1971; the latter is the most recent quarter forwhich State income estimates are available. Tu addition to the economy's recoveryfrom the recession low, factors influencing regional income developments over thisfour-quarter span included : (1) recovery from the auto strike of late 1970; (2)a sharp rise in farm income reflecting an increase in farm prices and a muchlarger volume of marketings, particularly from the bumper crops of corn andgrain sorghums ; (3) a small decline in minning payrolls because of the strikesin the coal industry during the fourth quarter of 1971.

As chart 9 shows, from the fourth quarter of 1970 to the fourth quarter of 1971,income in the United States rose 71A percent. Gains well above the national aver-age were scored in the Plains (93/4 percent), Rocky Mountain (8% percent),

A10

Table 1.-Personal Income and SelectedComponents, IV 1970-IV 1971

(Percent change)

T01111personalincome

Wages andsalaries inmanufactur-leg, mining,

farming,and farm

proprietors'income

Allother

United Stales 7. 5 6.9 7.7North Dakota 20.0 124.0 7.

Nebraska.... . .......... 16.1 50.0 8. 1

Arizona 13.9 14.1 13.11

Arkansas_ .. .. ..... . 13. 1 25.8 8.0Michigan ... .. 12. 0 21.1 7.0South Dakota_ ... ... 11.8 27, 1 7.7

11,11 23.8 7.4New 5-lexica-.... 10.7 10.8 111.0

South Carolina.... ... ... 10. -1 10 4 10.4

Idaho__ 10.2 12.1 9.3Utah 10.11 4.6 11.1

Hawaii 9. 9 11.3 9.7Oregon 9. 7 10.4 9.6Oklahoma 9.4 II. 6 8.11

Indiana 11.4 ' 04.8 6.ETennessee_ . --------------- 3 9.

Wyoming._ 9.3 5.7 9.5Kiinsas 9, 2 17.2 7. C

,,O0.2 13.3 8.1

Tfel aware.. .. 8. 8 13.8 6.7Florida_ .. 8. 7 11.3 8.4Minnesota.. 8. 6 12.6 7.4Virginia 8. 6 3. 1 9.E

Nevada 8.6 2.8 9,

Alabama_ 8.2 5.8 9. C

Colorado____ . ..... .. 8. 2 5.4 8.11

Mississippi 8. 1 6. 4 8.8Maryland 5.0 -.3 9.3District of Colttinbia__ . 7,7 5.3 7.9Kentucky ... ... .. 7.4 6. 0 7, 6

New Hampshire._ .... 7. 3 4.9 8. C

North Carolina 7, 3 5. 1 8. 3

Ohio 7.2 7.0 7.11

Maine 7.2 -1.3 8.1Illinois_ _ ....... ... .. ._ 7. 0 7.4 6.0Wisconsin 7. 0 6.2 7, 4

California 7.0 3. 8 7, 7

Louisiana.- .. . . ...... 6.9 1. 6 8.2Massachusetts. ..... . . 6. 6 1.6 7.9Rhode island 6.8 4.3 7.2Pennsylvania 6.5 1.4 8.3Texas 6. 5 -4. 4 9.3Montana .. . ... 6.4 -1.8 8.35 fissouri .. . .. ... 6. 3 8.4 5.7Vermont 6.2 2.2 7.11

New .fersey 5. 8 2, 1 r, iNew York__ ... .

_ _o .., 1.0 1,0

Alaska . .. . 5.2 -11.1 0. 5

Connecticut. 5. I -1.5 7.4Washington 4.9 0.11 6,0West Virginia 1.7 -12.8 7,3

Cbt'fliCietit of variation 83.6 185. 1 17,6

Plains 5.7 15.3 0.5Rocky Mountain_ _ . 8. 7 5.7 9.3(irent Lakes.. 8. 4 II. i) 7.0Southeast S. 3 7. 4 8, 6

Southwest 8. 0 0. 3 9, 9

Far West_ _. ........... 7. 0 3.8 7.6

New E it gland 11.2 1. 1 7, 7

Mideast. 6. 0 1.9 7.

Coefficient of variation 15.4 98.4 15, 8

Source: U.S. Department t of Commerce, Bureau ofEconomic Analysis.

I

All

Great Lakes (8% percent), and Southeast (81/, percent). Farm income increasedin all four regionssharply in the Plains, Southeast, and Great Lakes, and moremoderately in the Rocky Mountain region. Reflecting both the rebound from theauto strike and the general economic recovery, manufacturing payrolls rose morethan 10 percent in the Great Lakes, a gain twice the ikational average. The South-east had a large gain in total personal income even though mining payrolls wereoff sharply. There was a large advance in the region's farm income and above-average gains in Government payrolls--an important income source in theregionand in a wide variety of local service industries.

Gains in the Southwest (8 percent) and Far West (7 percent) were fairly closeto the national average advance. Income gains in New England (6% percent) andthe Mideast (6 percent) were well below average. In the latter two regions, manu-facturing and construction payrolls showed only small increases and advancesin many service-type industries were well below the national average.

In 10 of the 11 States with the largest income gains, raining from 10 to 20percent, there were very big increases in farm income; in the 11th Michiganthe key was the sharp recovery in manufacturing payrolls following the autostrike and their further advance during the year. (See table 1.) At tile other endof the scale, Income rose by 6 percent Cr less in six States. In all six, manufactur-ing payrolls either rose little or declined somewhat. The smallest advance was inWest Virginia (1% percent), reflecting a sharp drop in mining payrolls becauseof the coal strikes.

Mining payrolls declined also in Virginia, Pennsylvania, and Kentucky, appar-ently because of the coal strikes, but other income components increased suPl-ciently to offset the loss from mining, and personal income in allthree Statesadvanced at a pace close to the national average.

Percent changes in personal income income in each region and State from thefourth quarter of 1970 to the fourth quarter of 1971 are shown in the last columnof table 2.

Tab

le 2

.-T

otal

and

Per

Cap

ita P

erso

nal I

ncom

e, a

nd Q

uart

erly

Tot

al P

erso

nal I

ncom

e, b

y St

ates

and

Reg

ions

Tot

al p

erst

nal

inco

me

l Per

cap

ital p

erso

nal i

ncom

eQ

uart

erly

per

sona

l inc

ome

Mill

ions

of d

olla

rsD

olla

rs',M

illio

ns o

f dol

lars

, sea

sons

I y

adju

sted

at a

nnua

l rat

esP

erce

ntS

tate

and

reg

ion

chan

ge__

___,

,,_._

__IV

197

0-19

7010

71IV

197

116

6819

6919

7019

7116

6819

69.1

970,

1971

__...

...

III

Ill1

IVII

IIII

IV

lolle

d S

late

s68

4, 7

46 7

45,6

69 7

98, 9

4985

3, 5

053,

436

3,70

53,

920

4, 1

3877

9,75

2 79

8,77

780

5, 0

97 8

12, 1

6782

9,62

0 84

9,68

4 86

1, 2

33 8

73, 4

81

New

Eng

land

43, 5

1947

, 240

5p, 7

8853

,730

3,74

04,

ON

4,27

84,

469

49, 3

6650

, 594

51, 2

2151

, 977

;52

, 212

53, 1

8154

,315

55, 1

916.

MIII

IIC2,

778

2, 9

973,

235

3, 4

292,

794

3, 0

213,

251

3, 4

193,

155

3, 2

463,

254

3, 2

613,

351

3, 3

823,

442

3, 5

197.

New

Ham

pshi

re2,

301

2, 4

872,

660

2, 8

263

245

3 43

43

585

3, 7

082,

110

82,

6)

2, 6

702

700

2, 7

362

810

2, 8

602,

897

7.

Ver

mon

t _ ,

. - .

. . .

. . .

. . .

.. .

. , .

.1,

301

11,

425

1,54

51,

6.54

3,01

53,

261

3,45

73,

610

1,50

51,

541

1,55

81,

580

1,60

61,

644

1,68

71,

678

6.

Mas

sach

uset

ts'

21, 1

3522

, 995

24, 8

5126

, 404

3, 7

624,

070

4, 3

614,

786

24, 1

,46

24, 1

686

25,1

180

'25,

612

25, 5

7126

, 072

26, 6

8327

, 291

6.

Rho

de Is

land

3 28

03,

462

1 71

13

914

3, 2

583,

714

3 90

24,

077

3, 6

023,

694

3, 7

573,

790

.3 7

083,

848

3, 9

714,

040

6.

Con

nect

icut

.12

, 716

13, 8

7414

, 786

15, 5

034,

290

4, 6

254,

865

5, 0

3214

, 450

14, 7

6514

, 922

15, 0

0515

, 150

15, 4

2515

, 672

15, 7

665.

lidea

st15

2,89

317

6,36

018

9,76

3 20

1,68

13,

885

4,18

84,

464

4,70

518

4,59

918

9,44

119

1, 9

3819

3,07

419

7,13

8 20

1,02

120

3,89

4 20

4,67

26.

New

Yor

k75

, 310

81, 2

0587

, 111

92, 3

354,

172

4, 4

854,

771

5, 0

2184

, 948

86.0

6388

, 048

SA

, 486

90, 5

5792

, 173

93, 4

4693

, 162

5.

New

Jer

sey

28, 0

5230

, 498

33, 0

8535

, 271

4, 0

054,

298

4, 5

981,

832

31, 8

5032

, 849

33, 6

2534

, 017

34, 3

0734

, 916

35, 8

5636

,004

5.

Pen

nsyl

vani

a.39

, 914

43,2

6846

, 329

49,0

253,

400

3 68

53

921

4,12

745

,842

46,2

0646

;820

46,1

137

47,9

1448

,878

49,3

3249

,976

6.

Del

awar

e2,

0.5

02,

246

2, 3

832,

550

3, 8

394,

159

4, 3

324,

570

2, 3

22'2

, :18

82,

383

2, 4

362,

512

2, 5

572,

48-

22,

650

H.

Mar

ylan

d14

, 032

15, 4

05P

I 7W

.118

055

3 67

83,

983

4, 2

644,

514

16,'1

4^_

16, 8

3418

:106

17, 1

1317

, 507

17, 9

9218

, 241

18, 4

898.

Dis

tric

t of C

oltim

Iiri

3, 5

353,

739

4, 0

674,

446

4, 5

444,

907

5,40

176,

000

'3, 9

454,

141

4, 1

196

4, 0

854,

341

4, 5

054,

537

4, 4

007.

:rea

l lak

e.14

4, 5

3015

6, 9

1816

1, 6

6717

5, 3

573,

646

3,93

24,

079

4,30

616

1,12

316

1, 2

2116

6,12

016

6,50

117

0, 1

6817

4, 8

2317

5, 9

3618

0, 4

998.

3.1

ichi

ga 1

132

, 260

35, 0

7836

, 124

38, 8

413,

710

3, 9

954,

058

4, 3

1735

,401

36, 5

2736

, 570

35, 9

9637

, 636

38, 6

6438

, 766

40, 2

9812

.

Ohi

o37

, 001

40, 3

0142

, 382

44, 7

753,

519

3, 8

153,

965

4, 1

5441

, 672

42, 2

2942

, 778

42, 8

5043

, 412

44, 7

22' 4

5, 0

4845

, 920

7.

Indi

ana

17, 3

15la

, 909

19, 6

7020

, 952

3, 4

003,

604

3, 7

793,

973

19, 3

4419

, 664

19, 6

2919

, 861

20, 0

0620

, 928

21, 0

3221

, 752

9.

Illin

ois

43, 7

4247

, 248

50, 1

3153

, 422

3, 9

784,

280

4, 5

014,

772

40, 4

1449

, 492

50, 4

8451

, 131

52, 4

0853

. 156

53, 4

312

54, 7

227,

Wis

cons

in14

, 211

15, 2

9216

, 351

17, 3

663,

271

3, 4

933,

688

3, 8

8015

, 992

16, 3

0916

, 459

16, 6

4116

, 616

17, 3

5317

, 683

17, 8

077.

lal n

o52

, 146

2,6,

000

00,4

7161

,592

3, 2

503,

509

3, 6

953,

904

59, 8

9360

, 712

60, 5

1160

,774

62, 1

8263

, 800

65, 4

4366

, 643

9.

Min

neso

ta12

, 235

13, 5

2614

, 580

15, 4

243,

304

3, 5

993,

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3, 9

7414

, 407

14, 7

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, 580

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, 630

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Iow

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9, 9

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11, 0

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3,53

43,

681

3,87

610

,480

10, 5

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; 253

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3,47

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134

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.

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th D

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866

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165

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102

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032

2,06

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180

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542,

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2, 3

2011

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rask

a _

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315

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045

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606

3, 7

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138

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707

5, 5

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548

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892

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442

16.

Kan

sas

7, 5

008,

123

8, 5

989,

234

3, 3

893,

633

3, 8

251,

090

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758,

436

8, 6

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833

8, 8

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963

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646

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319

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25, 1

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636

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773

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434

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658

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, 206

57, 8

53

3, 3

003,

506

8, 1

368,

548

h, 5

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525

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596

40, 0

7930

, 618

3, 1

283,

394

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213

3, 2

163,

581

3, 8

716,

206

6, 3

666,

476

3,51

53.

724

17,3

5817

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17,8

01

3, 3

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[From Survey of Current Blisinees, April 1072]

STATE PROJECTIONS OF INCOME, EMPLOYMENT, AND POPULATION

(By Robert E. Graham, Jr., Henry L. DeGraft, and Edward A. Trott, Jr.)

The State projections presented here are one product of a joint pro-gram undertaken in 1964 by the Bureau of Economic Analysis of theDepartment of Commerce and the EconomicResearch, Service of theDepartment of Agriculture to provide economic data for use in wa-ter resources development planning. The program was initiated atthe request of the Water Resources Council and in large part fundedby the U.S. Army Corps of Engineers, the Bureau of Reclamation,and the (then) Federal Water Quality Control Administration.Later this year, the Water Resources Council will publish a five-volume set of economic projections covering 173 economic areas, 206water resources planning areas, and the 50 States.

The projections were prepared in the Service Branch. RegionalEconomics Division of BEA by Lyle Spat; Steven-Txaneff, EleanorCurry, and Tasie Anton under the general supervision of Henry De-Graff, Chief of the Service Branch, and under the direct supervisionof Edward A. Trott, Jr. Lowell Baby, Assistant Chief of the Division,was responsible for the projections of the national aggregates whichformed control totals for the geographic disaggregations. Computerprograming was done by David Cartwright and Evelyn Richardson.Many others in the Division played an integral role by furnishingthe economic measures requisite to the projections and by developingcertain of the analytical techniques used.

BEA wishes to acknowledge the assistance of the Economic Re-search Service, which prepared the agricultural income and employ-ment components of the State projections.

The State estimates of total and per capita personal income in thisreport differ from the State series regularly 'published in the Augustissue of the Survey on two counts.

First, these estimates are expressed in dollars of constant (1967)purchasing power, whereas the regular State income series is ex-pressed in current dollars.

Second, as with the regular State income series, the data in thisreport reflect the State of residence of the population and of incomerecipients and employees, but there is one major exception: the earn-ing data in table 6 reflect the State in .zoltich, earnings recipientswork. The earnings data are presented on a where-worked basis be-cause in water resources planning this is the preferred concept. Also,data with which, to adjust earnings in each industry from a place-of-residence basis are not available. Such an adjustment has been madefor total income, however.

The Bureau of the Census '-ablishea "Preliminary Projections ofthe Population c,1 5.1!ates: 1975 to 1990" in March iff72 as CurrentPopulation, Reports, Series P-26, No. 477. Those projections arebased on various asst!mptions about future patterns the compo-nents of populationchange (fertility, mortality, interstate migration,and net immigration from abroad). The assumptions, are entirelydemographic; no specific assumptions were made about economicfactors which, could influence future trends in the demographic com-ponents of population change. In the projections presented here, theemphasis is on economic projections, mainly personal income, andthe population projections are essentially a by-product of the in-come and employment projections. In general, thc State populationprojections presented here are reasonably close to those of the Cen-sus Bureau.

(A16)

All

This article presents projections of personal income, employment, and pop-ulation, by States, for 1980 and 1990, These projections, as with all efforts to lookinto the economic future, are based upon an extension of past relationships. Themethodology used for these projections has four characteristics which distin-guish the results from those of a simple linear extension of trends at a summarylevel.

First, the basic projections were made for 173 economic areas into which BEAhas divided the country, using criteria that make the areas especially suitablefor economic projection and analysis. The projections for areas that cross Statelines were disaggregated into the State segments required for reaggregation toState totals.

Second, the economic area projections were made within the framework of pro-jections of the overall U.S. economy. Projections of population, employment, andincome were made first for the Nation, then disaggregated-geographically.

Third, the projections are based on the assumption that people migrate to areasof economic opportunity and away from declining areas. Accordingly, projectionsof area income and employment were prepared first, and projections. of area in-come and employment were prepared first, and projections of area population de-rived from them.

Fourth, projections of income and employment were prepared forwere

of asmany as 39 industries in each of the 173 areas. Various methods were used tomake the projections, depending upon the individual industry's role in the area'seconomy, However, the methods used insure that in each of the 173 areas theindustrial composition of projected income and employment constitutes an econ-omy with an internally balanced structure. The fact that the projections wereprepared in industrial detail makes it possible for the projected economic pathof an area to depart substantially from past trends.Nature of the projections

These projections are intended to be a best estimate of what can be expectedIf there are no policy or program changes of unusual nature or magnitude, suchas the establishment of a large number of "new towns". The projections are nei-ther a goal for nor a limit upon any given region's future economic activity. Theycarry no connotation of desirability or undesirability.

Projections of this type can be useful in the assessment of future public andprivate demands for goods and services. These include, for instance, demands forphysical capital related to energy and water resources development and pollu-tion abatement, as well as needs for teachers, policemen, doctors, and workersin other public and private service capabilities.

The projections also permit developing problems such as excessively slowgrowth or low per capita incomes to be foreseen, so that corrective policies can beadopted.

Furthermore, the projections can provide a framework for program evalua-tion purposes. If a remedial or developmental program is considered for an area,the projected economic activity in the area can be modified to reflect the expectedeffects of that program. Comparison of the modified projections with the baselineprojections provides a quantitative measure of the effects of the program, posi-tive or negative, in each region affected.

The first part of this article summarizes past and projected changes in Stateincome, employment, and population. Following that, there is a description ofthe concepts and methods used in making the projections.

CHANGES TN TOTAL PERSONAL INCOME

Personal income in the Nation (expressed in 1967 dollars) is projected to in-crease from $690 billion in 1969 to $1,663 billion in 1990, a rise of 141 percent.State percentage increases range from a low of 93 percent in South Dakota to ahigh of 213 percent in Nevada, with the increase in 25 States faP4ng within 10percentage points of the national average.

The largest absolute increases are projected in California .and New York. InNew York, the large size of the increase$94 billionis mainly a function of thepresent size of that State's economy, for the projected percentage increase is only1:2.5 percent, compared to 141 percent nationally. California's projected increaseof $123 billion reflects not only the large present size of the California economybut also a projected growth of 159 percentfifth largest in the Nation.

Other large gains, ranging from $46 billion to $56 billion, are projected inMichigan, Pennsylvania, Ohio, Illinois, and Texas. The size of these gains is

78.617 0 - 7'2 - 11 1E4,

A18

mainly a reflection of the size of the economies of these States. At the otherend of the scale are increases ranging from $1 billion to $2 billion in Vermont,North Dakota, South Dakota, and Wyoming. The smallness of these advancesmainly reflects the smallness of the States' economies, although there is alsothe factor- that projected growth rates are below average except in Vermont.

From 1929 to 1969, there was a pronounced shift in the distribution of per-sonal income from the northern and central areas of the country to the south andwest. In 1929, the residents of the New England, Mideast, Great Lakes, andPlains regions together received 73 percent of the Nation's total income ; in 1969,their share was 59 percent. The Southeast, Southwest, Rocky Mountain, and FarWest regions received 27 percent in 1929 and 41 percent in 1969.

The summary data in table 1 show that the shift was milder in the 1950-69 span than in 1929-50, and that a further moderatiton is projected for 1969-90.

1 G1.0

A19

Table 1.- Regional Shares of Personal Income and of Population

1929 1950 l 1960 I 1990 tPercent change In share

1929-50 1950-09 I 1960-90

Personal income

Northern and central regions. 72.11 13.tt SIAS 51.11 -12 -I -a

New England 6.22 6.56 6.31 6.27 -20 -4 -1Mideast 32, 11 26.06 23, 64 22. 04 -19 -0 -4Great Lakes 23, -62 22. 38 21, 04 20.86 -5 -6 -1

Plains 6.93 8. 86 7. 62 7. 22 -1 -14 -5

Southern and western regions 27.12 36.14 41.37 43.02 33 14 4

Southeast 11.63 15.22 17, 35 17.91 31 14 3

Southwest 4.96 6.54 7, 10 7, 24 32 9 2

Rocky Mountain 1.89 2. 24 2, 10 2. 14 19 -4 -1Ear West 8.63 11.30 14. 17 15.12 31 21 7

Population

Northern and central regions 61.42 57.73 54.58 53.81 -6 -5 -1

New England 6.68 0. 13 3. 82 5.08 -8 -5 3

Mideast 23.17 22. 21 20.90 20.50 -4 -.6 -2Great Lakes 20.66 20,10 19.82 10.89 -3 -1 0

Plains 10.89 0,29 5.04 7.51 -13 -14 -7


Southeast 22. 30 22. 30 21.59 21. 16 0 -3 -2Southwest 7.38 7.53 8. 12 6. 13 2 8 0

Rocky Mountain 2, 30 2.45 2. 36 3 7 -4Far Wes 0.67 0.33 12.74 13.93 40 31 9

1, Alaska and Hawaii Included In southern and wester,' total.2. Percent changes calculated from data carried to one n ore decimal than shown.3. Alaska and [[await are excluded from 1029 data. To ClehleVe comparability, they were excluded from 1950 data In cal-

culating percent change for 1929-50 period.

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A22

The table shows each region's share in the Nation's personal income in 1929,1950, 1969, and 1990, arid the percentage changes in these shares. The size ofthe percentage change in a region's share reflects the size of the gap betweenthe growth rate of income in the region and the growth rate in the Nation asa whole.Historical income changes

The 1929-50 shifts in the geographic income distribution wriien are snown tryStates and regions in table 3, reflect several principal factors : the growth ofthe western areas of the country in their role as economic frontiers ; the absorp-tion into the main-stream economy of much of the historically underused laborforce of the Southeast. especially under the impetus of the demand caused byWorld War II; the establishment of many military installations and their as-sociated civilian activities in the south and west during the 1940's; the manyState efforts at industrial development which resulted in increased industrializa-tion through much of the south ; and the large increase in agricultural incomeduring the 1940's.

The slowing of the shift in the 1950-69 period also reflects a variety of factors.Federal Government payrollsmilitary and civilianwhich had played soprominent a role in the economic growth of the south and west during WorldWar II grew at a rate only slightly above average over the next two decades. Incontrast, State and local government and service payrolls surged ahead in a"catchup" phase. Because the geographic distribution of the latter is muchmore in proportion to overall economic activity than is the distribution of Federalpayrolls, their effect on income growth in 1950-60 was comparatively uniformacross the Nation.

Agricultural income, which had risen sharply during the 1940's under thepressure of increase domestic and foreign demand, declined during the 1950'sand rose only a little during the 1960's. This sluggish performance significantlyslowed income growth in the south and west.

Income from textile manufacturing, which is of major importance in the in-come structure of the Southeast, declined during the 1950's and registered a ratenf . increase during the 1960's less than that of other industries. This limitedincome growth in the Southeast.

The slowing of the income shift to the south and west, as a result of the factorscited above, was mirrored in a slowing of the shift away from the north andeast. Another relevant factor is that New England's share of the Nation's in-come dropped sharply during the 1940's but only slightly during the 1950's and1960's as its economy shifted away from textiles and leather and into faster-growing nonautomotive transportation equipment, research and development,and educational activities. Also, as the national economy experienced the inflation-ary pressures of the latter part of the 1960's, the economic resources of all re-gions were used at near-capacity rates and this tended to diminish differencesin regional growth rates.

Two exceptions may be noted to the historical pattern of deceleration in ratesof change of regional income shares. The Plains' share showed a slight per-centage decline in the 1930's and 1940's but the largest decline of any regionin 1950-69. In the Rocky Mountains, a sizable increase in the 1930's and 1940'swas followed by a moderate decline in 1950-69. In both regions, overall incomegrowth was relatively slow in the 1950-69 period, reflecting the decline ofagricultural income from its highs of the late 1940's and early 1950's.Projections: regions with rising shares

The projections, shown in summary in table 1 and in detail in table 6, indicatethat the Far West, Southeast, and Southwest will continue to increase theirshares of the Nation's personal income. However, as shown in table 1, theirshares will grow at rates only about one-third as fast as in the 1950-69 period.An important factor in this slowdown is that Federal payrolls are about twiceas important in these three regions as in other areas and contributed greatlyto the above-average income growth of these regions in the past, but are pro-jected to be a slow-growth income source in the 1969-90. period. Military strengthis held constant for the projections and military payrolls increase only as aver-age military pay increases. Also, Federal civilian employment and payrolls riseat about the same rate as other types of employment and income.

Farm income, though greatly diminished as an income source throughout theNation, is still nearly twice as important in the Southeast and Southwest asin the rest of the country. Because of this, the relatively slow growth projected

A23

for farm income over next 20 yearsonly two-thirds as fast as income fromnonfarm industriesiS another factor tending to dampen projected incomegrowth. in these two regions.

Nevertheless, income in the Southeast, Southwest, and Far West is projectedto grow faster than the national average in 1969-90. This is largely because ofcontinued rapid growth in manufacturing in most States of these regions (table6). In the two southern regions a "catchup" expansion in service industries, rep-resenting a -maturing or upgrading of the economic: structure, is an additionalfactor, Also, in States such as Florida, Arizona, and California, immigration ofretired persons is expected to boost personal income. However, because theincome of a retired person is generally less than that of a wage earner or self-employed individual, growth of per capita income in "retirement areas" will bedampened.

Six of the 10 States with the largest projected percentage gains in incomeare in the Southeast, Southwest, or Far West. These are Tennessee, Florida,Virginia, Arizona, California, and Nevada. The other four are Utah and Colo-rado, in the Rocky Mountain region; Maryland, in the Mideast; and Alaska,not classified in any region because of its geographic separation from otherStates.Projections: regions with declining shares

Over the long run, income growth in the Rocky Mountain region has beenabove the national average. However, this pattern was reversed during the1960's as a result of agricultural developments, which dominate the growthrate of income in Montana, Idaho, and Wyoming. The 1969-90 projection putsincome growth in the region slightly below the national average, so that theregion's share of the Nation's income drops slightly. Income from agriculture inMontana, Idaho, and Wyoming is projected to grow at a much slower pace thanincome from nonfarm industries.

In Colorado and Utah. however, a number of manufacturing industries .areprojected to expand at above-average rates, and metropolitan areas are attract-ing a variety of economic activities that serve areas outside of the two States.As a result, these two States rank ninth and tenth in the Nation-in fthe projected rate of income growth.

The projections show continued downtrends in the share of the Nation's incomegoing to the Mideast, Great Lakes, Plains, and New England regions.

The large, economically mature, Mideast region sustained the largest per-centage decline in share in 1929-69 and is projected to experience the secondlargest decline over the next 20 years. The situation is a reflection of both theage and the economic maturity of the region, and it is not possible to singleout one or two industries as responsible. Income from most industries is pro-jected.to grow at slightly below-average rates. This is due partly to the shift ofcertain market-oriented industriesthose that tend to locate where the popula-tion is concentratedto faster-growing areas in the south and west. Anotherfactor in the lag of the economy of the Mideast is the development in the newerurban centers of the Nation of many of the financial, wholesale, and communi-cations services previously performed in the large cities of the Mideast.

Projections for two States of this region, Delaware and Maryland, are counterto the regional trend. Income in these States is projected to rise at above-averagerates. Tins continues the long-term income trend in these two States, whoseeconomic growth patterns tend to be more like those of the States to the souththan of those to the north. In both States, manufacturing provides the majorstimulus to projected groWth.

The Great- Lakes region has a large industrial capacity with emphasis ondurable goods production. Over time, there has been a gradual shift in the shareof durable goods industries away from the Great Lakes. This tends to leavesome excess labor and plant capacity in the region which can be drawn rapidlyinto production. This excess was drawn on during World War II, in the postwardurable goods boom, and again during the Korean and Vietnamese wars, resultingin surges of income in the region that interrupted the secular downtrend. ShouldSuch developments occur in the future, they would again interrupt the projecteddowntrend,

The projected decline in the Plains' share of the Nation's income is solely areflection of the dominant role of agriculture in that region. The share of agri-culture in "export" industry earnings in the Phiins is 26 percent, approximatelythree times its share nationally. "Export" industries, those that sell a large shareof their output to other regions, are especially important in the economic growth

A24

of a region. With farm Income nationally projected to rise only 10 percent be-tween 1969 and 1990, in contrast to ii doubling of income from nonfarm "export"industries, income growth in the Plains is obviously limited. The projected1969-90 decline in the Plains' share of income is much milder than the 1950-69decline. This reflects the reduced importance of agriculture in the economy ofthe region. In 1950, agricultural income accounted for more than half of theincome from "export" industries in the Plains, in contrast to 26 percent in 1969.

The income growth lag in the Plains is concentrated in Iowa, North andSouth Dakota, and Nebraska, States where farm income makes up from 38 to60 percent of "export" industry income.

New England's share of the Nation's income has been declining over the longrun, but the shrinkage began to slow as early as 1950, as the region lost muchof its textile and leather manufacturing industries. By the 1960's the region'sincome growth lagged only slightly behind the national rate, and its projectedgrowth from 1969 to 1990 is not significantly different from that of the Nation.Projected growth for the three northern New England States is above average.In Maine and Vermont, the margin is slight; in New Hampshire, it is substan-tial. New Hampshire's projected gains are concentrated in trade and the servicesand are due in large measure to the direct and indirect effects of the State'sgrowing recreation-oriented industries.

EMPLOYMENT PROJECTIONS

Employment projections are shown in table 6. Employment estimates coveringthe entire Nation at the local area level are not available at this time for yearslater than 1960. Because of this lack of data, state employment has been pro-jected only on an all-industry basis. Projections of local area employment inindustry detail will be made upon completion of a local-area employment seriesnow being prepared by BEA on a place-of-work basis. Meanwhile, the industryearnings components of personal income can serve, at least in limited degree,most uses for which industry employment figures are desired.

In general, projected changes in total employment by State are closely cor-related with those in total income. Minor differences between the behavior ofprojected employment and of projected income are caused by the concentrationof retired persons, together with their income, in certain areas and becausetransfer payments and property income expand in some areas at rates that differfrom the rate of employment increase.

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A27

POPULATION PROJECTIONS

As described in the section on methodology, changes in area population areprojected as a function of changes in area employment, with special adjustmentsmade for "retirement" areas. Because projected employment changes are re-conciled with projected changes in earnings of employees, and because earningsform the bulk of personal income, there is a strong correlation between, theprojected ehanges in population and those in income.

As with the income projections, the projected population movements are gen-erally in line with past trends. The only significant exceptions are in NewEngland and the Rocky Mountains (table 4),

New England's population is projected to rise at an above-average rate. Theregion's population growth was below average during the 1940's and 19150's, whenthe region was falling behind national growth rates in most economic measures.During the 1960's, when economic growth in the region nearly equaled that inthe Nation, population growth was only slightly below average. During the1970's and 1980's the region's population growth is projected to exceed thenational rate by a small margin as people are attracted to the above-averageeconomic opportunities of the region.

In the Rocky Mountain States, where population growth was above averagefrom 1929 to 1969, the projections call for growth slightly below average overthe next two decades. This stems from the relatively slow growth projectedfor agricultural income in Montana, Idaho, and Wyoming. Slow income growthmeans fewer economic opportunities, which mean less immigration and some-times even net outmigration of population. Population projections for IndividualStates are shown in tables 4 and 6.

PER CAPITA INCOME

In general, regional population and income growth rates both tend to deviatefrom the national average in the same direction, although the magnitudes ofthe deviations may differ a good deal (table 1). However, the observed tendencyfor regional per capita incomes to converge toward the national average meansthat some divergence does occur between trends in an area's population and inits personal income. The degree of this divergence appears to be correlated withthe level of per capita income. Thus, in regions with above-average per capitaincome, the population growth rate tends to exceed the national average by awider margin than does the personal income growth rate. In areas with below-average per capita income, population growth relative to the national averageis slower than personal income growth relative to the national average.Under both conditions, the per capita income of the region moves toward thenational average. The most striking examples of this occur in the Southeast andFar West (table 2).

17i

A28

Table 2.-Itegiona! Per Capita Personal Income

Percent of national average Perceintvil,anational

Inaif,.z relationerratudea t to

1020 1950' I, 1969 1090 1 1029 -503 1950-09 1989-90

Northern and central regions 118.85 110.60 107.40 105.69 i -7 -3 -2Now England 123.11 108.07 108.20 101. 07 I -13 1 -3Mideast 138.55 117. 34 113.23 110,'23 -IS -4 -3Great Lakes._ 114.20 111.28 106. 24 104.57 -3 -5 -1Plains Si. Oct 05, 40 04.58 06. 14 110 -t


Southeast 52. 19 65.28 60. 24 64.55 31 18 6Southwest 67.21 56.68 87.50 60.07 20 1Rocky MountainFar Kest

SO. 05129.20

97. 3812007

87.117111.53

90.62106.58

14-8

-10 3-3

I. Masks and Bowan included In southern a Id westcri total.2. Percent changes calculated from data card d to one more decimal than shown.3. Alaska and Bowan are excluded front 11P9 data. to achieve comparability, tney were excluded from 1950 datain calculating percent change for 1929-50 period.

In the Southeast, personal income growth far outpaced the national averagefrom 1929 to 19W, but population growth was below average (table 1). As aresult, per capita income in the region rose from 52 percent of the nationalaverage in 1929 to 80 percent of it in 1969 (table 2). In the Far West, bycontrast, income growth was well above average from 1929 to 1969 but populationgrowth exceeded the national rate by an even greater margin, and per capitaincome in the region fell from 129 percent of the national average to 112 percent.

Continued convergence of per capita incomes is projected for 1969-90. Thiscan be seen in summary in table 5 and in detail in table 6.

CONCEPTS AND :METHODOLOGY

The projections presented here are based on an extension of past relationshipsbelieved to have relevance for the future. The choice of relationships to be ex-tended and the methodology for extending them are based on assumptions, someof which are stated explicitly and some of which are implicit in the projectionmethodology. The assumed. conditions are those believed to have the greatestprobability of realization. Thus, the -projections represent. an attempt, imperfectthough it may be, to forecast the economic future.

In general, long range projections are more likely to prove wrong than arethose made for short periods, and projections in detail are more likely to provewrong than those of broad aggregates. Accordingly, projections for 1990 areprobably less reliable than those for 1980; projections for a specific industryin a specific region are probably less reliable than those for the same industrynationally ; and earnings projections for a specific industry are probably lessreliable than those for total earnings or total income. By the same token, aprojection of the labor force at the national level for 1990 is probably quitereliable because that labor force will be drawn almost entirely from to populationthe size and age distribution of which are known, though projected participationrates may be wrong. However, a projection of the 1990 labor force in a givenState is related not only to the current State population but also to futureinterstate migration, and is therefore much less reliable than the nationalprojection.Assump tinns

The projections are based on Milgrim_ or secular trends and ignore the cyclicalfluctuations which characterize the shortrun path of the economy. The generalassumptions that underlie the projections are as follows:

(1) Growth of population will be conditioned by a decline of fertility ratesfrom those of the 1962-1965 period.

(2) Nationally, reasonable full employment, represented. by a 4 percent un-employment rate, will prevail at both of the points for winch projections aremade : as in the past, unerriployment will be disproportionately distributedregionally, but the disproportion will he diminishing.

(3) At projection dates, there will be no direct effects on the projections due toforeign conflicts.

1 2

A29

(4) Continued technological progress and capital accumulation will supportat growth in private output per manhour of 3 percent annually.v(5) The new products that will appear will be accommodated within the

existing industrial classification system, and, therefore, no new industrial classi-fications are provided.

(6) Growth in output can be achieved without ecological disaster or seriousdeterioration, although diversion of resources for pollution control will causechanges in the industrial mix of output.

(7) The composition of personal consumption will continue to change.The regional projections are based on the following additional assumptions:(1) The factors that have influenced historical shifts in "export" industry loca-

tion will continue into the future but the sharpness of the shifts will diminish.(2) Trends toward area self-sufficiency in local-service industries will continue.(3) Workers will migrate to areas of economic opportunities and away from

slow growth or declining areas.(4) Regional earnings per worker and income per capita will continue to con-

verge toward the national average.(5) Regional employment/population ratios will tend to move toward the

national ratio.Projection procedure

The State income and employment projections were made in six major steps.First, total national population, employment, GNP, personal income, and earn-

ings were projected. Second, the projected national output, employment, andearnings were broken down into industry detail on the basis of projected trendsis industry shares of the national totals.

The third step was to allocate the projected industry totals of employment andearnings to the 173 economic areas into which BEA has divided the country. Themethodology of this step for each area's "export" industriesthose that mainlyproduce goods and services for export from the area to other areaswas differentfrom the methodology for the area's-- other industries, i.e., its "residentiary"industries. Basically, however, earnings and employment in both types of indus-try were projected by extrapolating past trends. The nonearnings components ofpersonal income were projected for each area by a method similar to that usedfor residentiary industry earnings.

The fourth step was to derive area population totals from projected areaemployment.

The fifth step was necessitated by the fact that many of the 173 BEA economicareas cross State boundaries. In those cases, it was necessary to divide theprojected area figures into State segments. Sixth, the area projections wereaggregated to State totals.

The projections procedure is by no means entirely mechanical : At variouspoints in the process, it is essential that judgment be brought to bear, both inestimating the future rate of change in the industrial composition and locationof output, and in checking the consistency of the projections. In particular, withemployment and earnings projected separately, it is necessary to review for rea-sonableness the implied industrial and regional patterns of earning; per worker.

The decision to derive regional projections through the disaggregation of na-tional totals instead of through the independent projection of each componentin each region is based on the assumption that the larger the economic area, themore adequate and reliable are the available statistical measures and the morereliable are the projections that can be made. This assumption applies also in thedecision to derive projections of industrial detail at the national level by firstprojecting national employment, output, and earnings and then disaggregatinginto national totals for individual industries. Of course, it should be obvious thatthe disaggregation approach is also subject to substantial erroras is anyprocedure for forecasting the economic future.Gross national product

The initial step in preparing the national projections ivas the projectionof the gross national product. This was done by multiplying projected man-hours worked by projected output per man-hour. The variables which enteredthe determination of man-hours worked include the working age population,labor force participation rates, general government employment (civilian andmilitary), and hours worked per year per man.

The Bureau of the Census has made several different population projections,with the birthrate assumption the varying element. In light of all the factorsthat could be ascertained in mid-1969, when the decision was made regarding

A30

the projected population to be used, the "C" series was selected. Of the fiveCensus Bureau projected population series, this one has the second fastestgrowth rate. It assumes a total fertility rate of 2,787 births per 1,000 womenin 1990, which is below the rate of 3,300 in 1962-65, but above the rate of2,111 per 1,000 which would maintain a constant population, and above thepreliminary 1970 rate of 2,472. The "C" series shows national populationincreasing from 203 million in 1970 to 270 million in 1990, or about 33 per-cent. The "E" serieff, -which projects lower fertility than the "C" series andfor that reason would be the choice of many persons today, is only 4.4 per-cent lower than the "C" series in 1990.

The working age population, labor force participation, unemployment rate,and hours worked per man per year were each projected separately and thebest available expertise was utilized in each case. The population of workingage is, of course, a subset of the total population ; the labor force was de-rived by applying age- and sex-specific participation rates developed by theBureau of Labor Stastistics to the working age population. A 4-percent un-employment rate was adopted as representing full employment nationally.House worked per man per year in the private economy were projected todecrease by 0.25 percent per year, compared to the post-World War II averagedecrease of 0.4 percent per year. The slower rate assumes that the "easy"reductions in hours of work have already been made.

Output (real gross product) per man-hour in the private economy increasedat a compound annual rate of 3.2 percent from 1950 to 1968. The projectionputs productivity growth at a compound annual rate of 3 percent from ,1968to 1990. The projected rate is somewhat lower than the 1950-68 rate toallow for the fact that some part of the productivity growth in 1950-68 wasattributable to a massive movement from farm to nonfarm work which can-not be repeated on a similar scale in the future. There is a variety of opinion onthe merits of using the 3-percent rate ; some forecasters would lower the pro-jected rate still further because of the projected shift' in work force distribu-tion away from higher productivity manufacturing to the lower productivityservice industries.

Private gross product was projected by multiplying private man-hours byoutput per man-hour in the private economy. Constant dollar governmentgross product was projected in accordance with conventional national incomeand product accounting proctice as the number of general government employeestimes average compensation in the base year.

The sum of projected private and projected government gross product isprojected constant dollar GNP, which grows at a compound annual rate of 4percent between 1968 and 1990.

Since measures of gross regional product have not been constructed, it wasnecessary to translate GNP into measures which could be prepared regionally.Personal income and earnings

The measures chosen for this purpose are personal income and its earn-ings-of-persons component (the sum of wages and salaries, other labor income,and proprietors' income). The. choice rested on three considerations. First,personal income has a comparatively constant relationship to gross nationalproduct ; second, its regional location is clear and can be measured withcurrent data sources; and, third, the methodology for preparing regionalestimates of personal income had already been developed.

Projected personal income was derived from the relationship betweenconstant dollar personal income and constant dollar GNP. A function wasfitted mathematically to past values of the income/GNP ratio and extendedto 1990. The projected 1990 ratio was applied to projected GNP to derive projectedpersonal income.

In a similar manner, the ratio of earnings of persons to total personalincome was projected and applied to projected personal income in constantdollars to projected earnings in constant dollars.Industry detail.

The projected values of three national aggregate measures were disaggregatedindustrially. The three measures are gross product (which at the industry levelis gross product originating, or GPO), earnings of persons, and employment. Thedisaggregation was into the 37 industry groups for which local area data onearnings and employment are available. (When the final projections were as-sembled at the State level, the 37 industries were combined into 28.) The dis-aggregation was done by extrapolating 1948-68 trends in the industrial compo-

1

4

A31

sition of gross product, earnings of persons, and employment ; that is, each in-dustry's share in total GNP, total earnings, and total employment was extrap-olated and applied to the projected all-industry totals of GNP, earnings andemplOyment.

The resulting projections of GNP, earnings, and employment for each industrywere then reconciled. The reconciliation focused on two major considerations.First, projected industry GPO, earnings. and employment were examined in thelight of historical trends in the relationships among earnings per worker, GPOper worker, and earnings as a percent of gross product. Second, those ratio re-lationships for each industry were reviewed in the light of the'corresponding all-industry ratios, to judge how well the projected data adhered to the empiricalobservation that interindustry differences in darning per worker and GPO perworker diminish over time.

The national projections of industry employment used the data on "personsengaged in production" that-are calculated by BEA as an adjunct to the nationalincome and product accounts (table 6.6 in July issues of the SURVEY) . These dataare conceptually consistent with the series on gross product originating andearnings. However, the "persons engaged in production" series is not availableon a regional basis. The only employment data with adequate industrial detailnow available for local areas are from the decennial censuses of population. Itwas necessary, therefore, to convert the projected national industry employmentto the Census employment concepts. This was done by first eliminating govern-ment workers from the various industries. The resulting 1960 Census employ-ment figures for each industry were then extrapolated forward by the projectedchange in the "persons engaged" series (1970 Census employment data are notyet available for all States). Independently projected estimates of governmentemployment were then added to projected private employment in the appro-priate industrie8 to yield national totals of employment for distribution toeconomic areas.Economic areas

Once projections had been made at the national level for output, earnings, andemployment by industry, the next step was to allocate the national industrytotals to subnational areas. This was done using the 173 economic areas intowhich BEA has divided the country as part of its program of regional measure-ment, analysis, and projection. Each area has an urban center and surroundingcounties where economic activity is focused, directly or indirectly, on theactivity of the center. Each area combines place of residence and place of workas nearly as possible so that there is a minimum of commuting acros areaboundaries.

Each economic area has two types of industries. The "expert" industries pro-duce goods and services that are for the most part exported to other areas, pro-viding the earnings with which the area purchases the specialized goods andservices of other areas. "Residentiary" industries produce most of the servicesand some of the goods required by local business as intermediate products andby the household sector. Each economic area approaches self-sufficiency with re-spect to its residentiary industries.

There is general similarity among economic areas in the interindustry rela-tionshipsamong "export" and residentiary industrieswithin each area More-over, these interindustry relationships within areas exhibit substantial stabilityover time, although they do change as a result of secular trends and develop-mental thresholds (points at which local markets for intermediate or consumerproducts become large enough for local production to supplant all or a portion ofimports). These characteristics of similarity and stability make the BEA eco-nomic areas superior for projection purposes to otheirgeographic areas delineatedin accordance with noneconomic criteria. For example, the relationships amongindustries located within a single county may appear to be meaningless and ran-dom. Such relationships would acquire meaning, of course, if data were avail-able on the county's imports and exports so that total input requirements of eachlocal industry could be calculated. Use of the BEA economic areas for projectionsand analyses makes it unnecessary to have such data for residentiary industries,though export-import information is still needed for the "export" industries.Local area economic measures

The local area economic measures used in the projections are population, totalpersonal income, earnings by industry of origin, and employment, by industry.

Estimates of total personal income, earnings by industry, and the non-earningscomponent of personal income in each SMSA and non-SMSA county have been

A32

prepared by BEA for 1929, 1940, 1550. 1959, 1962, niul annually from 1965 for-ward. These were aggregated to tne 173 economic areas. Estimates of employ-ment by industry for the 173 areas were based on the censuses of population for1930, 1940, 1950, and 1960. Estimates for 1962, 1965, and 1966 were made bymoving the census data forward from 1960 with employment data from CountyBusiness Patterns, supplemented by data from the American Railroad Associa-tion, the American Hospital Association, the Social Security Administration,State employment security agencies and several economic censuses. Becausethere is very little commuting across economic area lines, the census-based em-ployment data for 'economic areas, which reflect residence of the employees, arecompatible with the area earnings data, which reflect place of work.Economic area projections: ".Export" industries

Projections of employment and earnings in "export" industries were made,industry by industry, for each economic area, on the basis of projections of thetrend in the area's shares of total national employment and earnings in eachindustry. The trend in the share was projected into the future by fitting a leastsquares regression line to the'logaritluns of the historical values of the share andthe logarithms of time and extending this curve to 1990. The projected sharesderived in this manner were modified judgmentally in some cases, mainly wherenatural resources were expected to be depleted or where the historical data ap-peared weak or in error. The projected area shares, after being forced to total100 percent, were applied to the appropriate national totals to get projected abso-lute values.

Earnings and employment in each of the "export" industries were projectedindependently for each economic area. Then, projected earnings per worker werecalculate.41 for each industry in each area and expressed as a percent of nationalearnings per worker in the industry. These ratios were a means of discoveringinconsistencies between projected employment and projected earnings. WhenInconsistencies occurred, the data were reviewed in the light of information fromother sources and the two projections were reconciled. in some instances, thisreview pointed clearly to the need fora change in either projected earnings orprojected employment, but occasionally compromise was necessary and both wereadjusted.Economic area projections: Residentiary industries

Projected area earnings in each residentiary industry were derived from thefollowing relationships: (1) The projected regional location quotient (LQ) forthe industry, i.e., the ratio of the industry's share of total area earnings to theindustry's share of total national earnings; (2) the projected national ratio ofearnings in the industry to total national earnings ; and (3) projected earnings intotal "export" industries in the area.

The area LQ's for each residentiary industryitem (1) abovewere projectedas follows. Analysis of changes in the area LQ's of individual residentiary indus-tries from 1950 to 1969 showed that economic areas trend toward self-sufficiencyin residentlary industries, i.e., IQ's trend toward 1.0. Analysis also showed thatthe slope of the trend depends upon the magnitude of the T.Q.From this analysis,trend values for change in LQ's were set for several different ranges of LQ value.These trend values were then applied to the LQ of each residentiary industryin 1969 and projected LQ's were determined for 1980 and 1990.

The projected national ratio of earnings in each residentiary industry to totalnational earnings (item 2 above) was calculated from the national industry earn-ings projections that were mentioned as the second step of the overall projectionsmethodology.

Item 3 was derived by summing earnings of "export" industries alreadyprojected for each economic area.

Projected earnings for each residentiary industry in each area were derivedas follows: First, the projected LQ for each residentiary industry (item 1) wasmultiplied by the projected national ratio of earnings in that residentiary in-dustry to total national earnings (item 2). This computation gave the projectedshare of the residentiary industry in the area's total all-industry earnings.These shares were summed for all residentiary industries in the area. Sub,tracting the sum of residentiary shares from unity gave the "export" industryshare. The division of this share into the projected absolute value of "export"industry earningsalready calculatedyielded projected total all-industry earn-ings for the area. To this total was applied the projected share of each residen-tiary industry in the area's total all-industry earnings (the product of items 1and 2) to obtain the projected absolute value of earnings in each residentiary

1 7 6

A33

industry in each arca. The sum of the area. values for each residentiary industrywas forced to equal the previously projected national total for the industry,thereby keeping the projected series within the framework of the nationalprojections.

A comparable procedure was used to project residentiary employment by area.As in the case of the "export" industry projections, projected residentiary em-ployment and earnings were reconeiled.

Certain industries are classed as residentiary in some areas and "export"in others. For example, in one area hotels may serve principally the businesscominunity and local residents while in another, such as Las Vegas, they mayprovide recreation for visitors and so form an "export" industry. Similarly, inone area printing and publishing may involve only local newspaper publishingand local business printing whereas in another area it may serve a nationalmarket through book and magazine publishing. In each area, employment andearnings in such industries were projected in accordance with each industry'scharacter in that area. This procedure necessitated a break of the projected na-tional totals for these industries into that portion to be treated as "export" andthat as residentiary.

Total earnings, the sum of "export" and residentiary industry earnings, makeup about SO percent of total personal income. To complete the projections, prop-erty income, transfer payments.. and contributions to social insurance (whichare netted out of personal income) were projected by a modification of the pro-eedure used for residentiary industries.Population projections

The natural increase in population in an areabirths minus deathscan be-projected quite accurately when the -national fertility rate is assumed. Thecritical element in a local area population projection made within a given. na-tional population total is interarea migration. As previously noted it was assumedin these projections that the major 'motivating factor in migration is economicopportunity except in a few areas which attract an especially large number ofretired persons. Accordingly, changes in area population were projected as afunction of changes in area employment.

Historically, there has been some variation among areas in the ratio of popu-lation to employment because of differences in unemployment and in labor forceparticipation. The projection 'technique recognizes these differences but assumesthat they will gradually disappear. (Ns stated in the summary of assumptions,4 percent unemployment was assumed nationally but not In each area separately.)

The projected increases in employment were translated into population changes.by applying the projected national population/ employment ratio to area changesin employment. In areas where retired persons comprise an especially large pro-portion of the populationand measured labor force participation is unusuallyibwthe retirement population is projected separately from the remainder.

Historically, area per capita incomes have converged slowly toward the na-tional average, and the projected area per capita income derived from projectedpersonal income and projected population were analyze. vith this in mind. In afew eases, the behavior of projected per capita income suggested need for re-examination and sometimes modification of the projected components.State projections

The final step in deriving State projections was to separate into State segmentsthe projections of income, employment, and population for those of the 173BEA economic areas that cross State boundaries. State totals could then beCalculated. The separation of area data into State segments was done by project-ing each State's share of the area's population and of the area's income andemployment, industry by industry, on the basis of historical trends in shares,Projected State shares were applied to arca totals of income, employment, andpopulation to obtain absolute values for each State segment. This procedurewas applied to both "export" and residentiary industries, as the disaggregationof, area totals into State segments invalidated the functional relationships be-tween "export" and residentiary industries that hold for economic areas and thatcan be used at that level to project residentiary industry activity from "export"industry activity.

7114,17 0 - 72 - 12 17?

Tab

le 3

.-T

otal

Per

sona

l Inc

ome,

by

Stat

e an

d R

egio

n, f

or S

elec

ted

Yea

rs, 1

929-

1990

Sta

te a

nd r

egio

nM

illio

ns o

f 196

7 do

llars

Per

cent

cha

nge

Per

cent

of U

nite

d S

tate

s

1929

1940

1950

1959

1969

1980

1990

1929

-69

1960

4919

69-9

019

2919

6919

90

Jaile

d S

late

s

iew

Eng

land

Mai

neN

ew 1

I an

ipsh

ire:V

erm

ont

51as

sach

uset

tsR

hode

Isla

nd..

Con

nect

icut

4ide

aat

New

Yor

k.

New

Jer

sey

Pen

'lul

l:Mil/

L.__

.....

Del

awar

e__

,M

aryl

and

Dis

tric

t of C

olum

bia

:rea

l Lak

es

Mic

higa

nO

hio

Indi

ana

Illin

ois

Wis

cons

in

'lain

.

Min

neso

taIo

wa

Mis

sour

i

Nor

th D

akot

a__

Sou

th D

akot

aN

ebra

ska

.K

ansa

s

177,

503

14,5

96 084

662

464

7, 9

761,

232

3, 2

79

57,0

05

20,3

157,

665

15,6

10

605

2, 6

17I,

291

41,9

33

7, 8

8110

,714

4,10

3

15, 0

834,

153

15,8

44

3, 2

032,

998

4,73

1

509

596

1, 7

112,

096

196,

422

15,8

67

1, 1

0070

746

1

8, 4

651,

336

3, 7

99

60,2

03

20,4

768,

565

16,1

13

692

3, 2

772,

078

44.6

30

9, 0

3911

,502

4,74

9

14, 9

804,

361

16.3

46

3, 7

093,

203

4, 9

64

647

580

I, 44

2I,

901

313,

569

20,5

78

1,50

097

158

6

10, 5

63I,

741

5, 2

16

81,7

10

38,4

2112

,329

22,3

41 944

5, 2

052,

470

70,1

71

15, 0

3617

,843

8,27

7

22, 0

08'7

, 008

27,7

U

5, 8

335,

378

7,82

7

1,07

91,

123

2, 7

293,

815

432,

349

27,5

61

1, 9

231,

403

760

13, 7

112,

085

7, 6

79

107,

613

99,1

3217

, 894

27,8

63

1,35

17,

867

2, 5

16

94,2

07

19, 7

4324

, 858

11,0

40

29, 1

109,

466

34.1

44

7, 6

776,

006

10, 1

02

1,07

31,

107

2, 1

175,

062

689.

626

43.4

66

2, 7

672,

306

1,32

1

21, 0

483,

256

12.7

08

163,

218

75,3

8829

, 079

40, 0

01

2,05

514

, 206

3, 4

90

145.

191

32,4

3137

, 187

17, 4

78

43,6

3214

, 243

52.4

08

12, 4

679,

143

14, 9

00

I, 71

61,

848

-4,8

457,

500

1,11

5,89

8

70.0

57

4, 4

703,

789

2, 1

57

33,9

866,

177

20, 4

78

257,

797

117,

409

44, 4

7463

,263

3,45

424

, 330

4,80

7

234,

653

53, 0

8561

, 240

28,5

73

68, 8

8222

, 871

82,3

09

20, 2

0713

, 396

25, 3

56

2, 4

562,

599

7,09

6II,

199

1,66

3,43

9

104,

352

6, 7

551,

810

3, '2

49

60, 2

437,

645

30,6

86

375.

120

169,

438

65, 8

1391

,344

5,26

737

, 668

6, 2

98

346,

079

78, 7

8891

,029

43,0

05

100,

167

33, 8

89

120,

153

30, 3

9019

,235

37,3

13

3, 3

723,

559

10, 1

0816

, 176

259

191

181

248

186

164

164

289

186

157

266

156

306

443

170

246

312

247

326

191

' 243 23

1

9.69

205

215

237

210

183

258

120

111 84

137

125 99 87

145

100 96

128 79

118

173 41

107

116

108

111 99

103

89 114 70 90 59 ez 78 97

141

140

144

152

146

139

135

140

130

125

134

128

156

165 80 139

143

145

146

128

138

129

144

110

150

97 93 109

116

100,

00

8.22 .5

5.3

7.2

6

4. 4

9. 6

91.

85

32.1

1

16. 5

24.

328.

79 .29

1.47 .73

23.6

2

4. 4

46.

042.

31

8.50

2.34

8.93

1.80

1.69

2.66 .29

.34

.96

1.18

100.

00

6.30 .4

0.3

3.1

0

3.01 .4

71.

85

23.6

7

10.9

34.

07

5.80 .30

2.06 .5

1

21.0

5

4.70

5.39

2.53

6. 3

62.

07

7.60

1.81

L33

2. 1

6

.25

. 27

.70

1.09

100.

00

6.27 . 4

1.3

5.2

L

3. 0

1.4

f1.

61

22.5

1

10. 1

13.

9f

5.4i .3'

2.22

1

.3E

20.8

1

4. 7

15.

412.

51

6. P

2.0'

7.2

1. 8

:1.

11

2.2, .7 .2 .6

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360

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531,

231

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02,

442

671

24, 2

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886

57, 0

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5,28

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431

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914

4,17

6

2,5.

504,

518

2, 2

86

21,9

31

3, 1

7314

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1,22

52,

571

6, 6

38 761

784

391

3, 0

29I,

414

37t7

3

4; 5

192,

794

909

20, 3

51 418

1,03

1

r

61a

9140

2-1

323 50 61 48 67

362

30 12 74 4

82 92 140

307

32 58 .48

116

106

217

116

118

442

258

n.a.

11.5.

18 24 22 32 138

'13 33

5

43 14 43 46 131 42 17 20 13 64 51 74 41 35

201 86 120

48

31 39 10 23 35 27 27 36

48 21 16 24 19 34 25 35 22 47 29

SII 19 39 35 46 35 35 86 48 41 39

22.3

0

2.00

1. 4

12.

14

2, 1

42.

571.

43

2.38

1.19

2.17

1.64

1.71

1.52

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1.95

4. 7

2

. 34

. 35 M .43 37 .18

. 83

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7

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8

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4.54

n.a.

n.a.

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71

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6

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CAD

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2.36 .28

.29 14

1.12 . 5

2

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3

1.68

1.04 . 3

410

.88 16

na. N

ot a

vaila

ble.

Sour

ce: U

.S. D

epar

tmen

t of

Com

mer

ce, B

urea

u of

Eco

nom

ic A

naly

sis.

Tab

le 5

.--P

er C

apita

Inc

ome

by S

tate

and

Reg

ion,

for

Sele

cted

Yea

rs, 1

929-

1990

Sta

te a

nd r

egio

n96

7 do

llars

Pcr

cent

cha

t ge

Per

cent

of U

nite

d S

tate

s

1929

1940

1950

1959

1969

1980

1990

1929

-69

1950

-69

1969

-90

1920

1960

1990

Uni

ted

Sta

tes_

..1,

458

1,48

32,

065

2,44

13,

416

4,76

54,

114

134

6581

100

100

IS

New

Eng

land

...1,

795

1,87

82,

209

2,64

13,

696

5,01

26,

166

we

6775

123

100

II'M

aine

.,. I

, 234

1, 2

051,

636

2, 0

102,

789

3, 9

375,

209

126

7087

SS

82

8.

New

I I i

hnos

hire

.....

1,41

71,

436

1,82

62,

353

3,17

14,

421

5,85

612

474

8597

M9

Ver

mon

t.

I, 29

31,

269

1,54

71,

963

3, 0

004,

207

5,54

713

394

8489

889

Ni L

issa

elIt

iset

ts,..

...1,

886

1, 0

607,

754

2.69

03,

723

5, Il

l6,

516

9765

7512

910

910

Rho

de Is

land

_.

.I,

801

I, 85

82,

219

2,43

33,

462

4,76

56,

166

9357

7712

410

2le

Con

nect

icut

2,05

72,

224

2,58

73,

044

4,23

95,

603

7, 1

0610

664

6814

112

411

Mid

east

....

2.02

0-1

,985

2,42

32,

817

3,86

85,

307

6,79

791

8076

139

113

11

New

Yor

k..

2,40

92,

191

2,58

53,

005

4,16

95,

613

7,10

573

6171

165

122

11

New

Jer

sey_

_I,

022

5,05

12,

511

2,97

53,

939

5,48

07,

030

105

5678

132

115

II..

Pen

nsyl

vani

a1,

605

1,02

82,

126

2,48

03,

403

4,70

96,

115

112

6080

110

100

9

Del

awar

e...

2, 1

442,

571

2, 9

424,

063

3,78

45,

793

6,72

176

2978

147

IllIt

.

.5.1

aryl

atul

1,61

41,

782

2,27

02,

5411

3,65

65,

196

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1712

765

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107

10.

...

....

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Dis

tric

t of C

olum

bia.

2,67

33,

012

3,06

53,

306

4,57

56,

433

8,32

671

4982

183

134

13

3rea

t Lak

es.

...

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1,66

51,

670

2,29

82,

622

3,62

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5,03

86,

466

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410

i10

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chig

ait..

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644

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124

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113

108

ICC

M)

1,61

71,

660

2,23

62,

570

3,50

94,

865

6,23

211

757

78III

103

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dian

a1,

772

1,38

32,

086

7,39

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389

4,73

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111

166

6280

8799

9

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cOns

lit1,

983

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151,

895

1,38

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519

2,03

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915

2,43

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1064

3,24

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472

4,57

87,

015

5,97

210

013

057 59

77 8413

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695

11 9

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970

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73,

230

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95,

921

170

6484

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in n

esO

ta1,

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1,37

91,

546

2,28

13,

310

4,64

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085

166

7084

8597

low

s ..

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l iss

ou r

iI,

219

1,30

61,

263

1,31

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049

1, 9

742,

201

7,37

23,

2.5

1

3,20

74,

442

4,58

85,

799

5,97

516

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659 62

78 8684 90

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th D

akot

a..

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855

7,74

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735

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882

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th D

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62,.

8559

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....

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rask

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1,09

61,

063

2,05

71,

991

2, 2

312,

344

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3, 3

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4,72

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10

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Sout

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exic

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tana

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yom

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t. ...

. ...

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ton

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gon,

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ada

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nia

.

.....

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ska

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aii

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852

1.41

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790

2,74

13,

936

899

1, 1

511,

654

1,09

93,

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052

1, 0

111,

465

1,78

92,

512

814

798

1,35

41,

753

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775

841

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730

2,65

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756

556

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720

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3,87

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817

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051

1, 0

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274

1, 7

672,

186

3,10

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204

666

700

1, 2

141,

654

2, 4

513,

629

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358

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7385

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546

1,88

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656

633

638

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555

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960

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989

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772,

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081

I, 8

612,

161

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787

938

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165

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263

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331

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2,48

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424

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125

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n.a.

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a.1,

912

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830

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573,

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1

4,19

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257

3.84

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131

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102

3,78

54,

243

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992

5.26

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5,01

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466

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85,

388

5, 6

1"5,

13.

1

5,23

2

5,84

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93.9

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5, 1

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271

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6

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555,

499

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4

4,42

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093

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2

5.34

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575

5, 1

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336

5,58

85,

438

5, 0

105,

5,1

7

5, 9

375,

259

6,69

5

6, 4

475,

820

6, 4

896,

823

7,32

96,

640

260

9491

5280

85

243

8289

0095

216

496

7480

227

9703

5678

83

242

300

354

300

ISO

268

266

210

279

205

204

207

236

147

1.12

133

167

114

142

140

102

133

129

109

89

n.a.

n.a.

9306

5378

84

9391

4781

8510

507

3874

81

103

8550

8587

7677

7491

8910

299

4672

79

109

104

4164

7272

9259

7883

110

0343

7075

6784

6788

89

8187

6484

87

6483

6889

00C

AD

6396

5477

84C

C)

6576

8489

87

4986

8588

91

2988

8585

8855

8171

8181

3183

9788

89

5784

9194

96

5300

79SI

85

5376

129

112

109

5778

106

106

105

4679

9894

3968

127

113

105

5375

141

111

111

1987

n.a.

115

119

100

73n.

a.11

210

8

ILL

Not

ava

ilabl

e.N

OT

..--

Rat

ios

wer

e ca

lcul

ated

fro

m u

nrou

nded

dat

a.

Sour

ce: U

.S. D

epar

tmen

t of

Com

mer

ce, B

urea

u of

Eco

nom

ic A

naly

sis.

A40

The historical income estimates for SMSA's were done for each SMSA as awhole and not-for the component counties of the SMSA's. AccOrdingly, for the27 SMSA's that cross State boundaries arid therefore had to be disaggregated,special State breakdowns of the income components were prepared for 1969. Thepercentage distributions derived from these breakdowns were used to disaggre-gate the projected income of each such SMSA into State segments.

The BEA figures on total and per capita income by State are expressed ona residence basis. In most States, however, the income figures would be differenton a where-earned basis because there is commuting across State boundaries. Thedata that are used for adjusting the State income series to a residence basis(for the basic data are on a where earned basis) are statistically weak and noattempt was made to project such adjustments directly. Instead, per capita in-come in each State was projected as a function of national per capita income,and multiplied by projected State population to give projected total personalincome by State.

This procedure resulted in total and per capita State income being measuredby place of residence. State earnings, however, were measured by place of workwith one major exception: earnings of government workers reflect place of resi-dence in both the histori7il and projected series. Thus, the difference between aState's total income and total earnings in table 6 is the sum of property incomeand transfer payments, less personal contributions for social insurance, plus animplicit commuting adjustment. It should be noted that because of the nature ofBEA economic areas, total income in them is the same whether measured byplace of work or place of residence. Accordingly projected per capita income ineconomic areas is calculated directly as the quotient of total income and totalpopulation.

The earnings data in table 6 are shown on a place-of-work basis for tworeasons. First, there is no information currently available that could be usedto adjust satisfactorily the earnings data to a place-of-residence basis. Second,in most uses to which the income projections will be put, earnings serve betteron a place-of-work basis and total and per capita income are preferred on aresidence basis.

Because the geographic area of the District of Columbia is quite small incomparison with that of the States, and because its future population probablydepends upon the resolution of various problems more social than economic,no attempt has been made to project its population. Instead, the 1970 Censuscount has been held constant throughout the projection period. Earnings ofpersons working in the District and total personnel income of the constant resi-dent population are projected for the District of Columbia in the same manneras for the States.

184

Too

le 6

.-1'

ov:d

atio

n, 1

.2tr

iplo

:rnr

ent,

Pers

c na

l Inc

ome,

nod

Ear

ning

s by

Iro

lust

ry, 1

1 Sl

ate

and

Reg

ion,

Sel

ecte

dY

ears

195

0-19

90

Uni

ted

Sta

tes

New

Eng

land

Lbw

7950

1952

1069

1999

.19

5019

5919

6919

8019

00

1P

opul

atio

n, m

idye

ar2

Per

cap

ita in

eoni

t 010

67-

..

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er c

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inco

me

rela

tive

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ow! e

mpl

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mpl

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S 9 10 12 13 14 15 16

Tot

al p

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nal i

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re, f

ores

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and

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001,

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Tab

le (

I.-P

opul

atio

n, E

mpl

oym

ent,

Per

sona

l Inc

mne

, and

Ea

go b

y In

dust

ry, b

y S

tate

and

Reg

ion,

Sel

ecte

d Y

ears

195

0-19

90

Mai

neN

ewH

amps

hire

Ver

mon

t1.

111f

_ __

___-

__19

50

__19

59

_ __

_

1969

1980

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9019

5019

5919

6919

801

1990

1950

1959

1969

1

1980

1

1990

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000

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00d

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01,

130.

000

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300

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696

ISO

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312,

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589,

800

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200

68,5

1812

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645

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4,80

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, 270

72,0

4113

1,75

925

3, 8

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4,30

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7781

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69,2

3481

, 700

109,

900

10,7

0150

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47,3

1658

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003,

969

14, 6

1610

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12,5

9916

,200

40

Tab

le 6

, -Po

pula

tion,

Em

ploy

men

t, Pe

rson

al I

ncom

e, a

nd E

arni

ngs

byIn

dust

ry, b

y St

ate

and

Reg

ion,

Sel

ecte

d Y

ears

195

0-19

90

Line

Mas

sach

uset

tsR

hode

Mea

d

1550

1959

1969

1980

1990

1950

1959

I

1960

I

1913

019

90

,93 4 5 6 8 10 11 12 13 14 15 16 17 18 IS 20 21 2322 24 25 26 27 23 29 30 31 32 33 34 35 36 37 38 39 40

Pop

ulat

ion,

mid

year

.. __

____

____

___

Per

cap

ita in

com

e (1

967

4)P

er c

apita

inco

me

rela

tive

(U.S

.=1,

00)

Tot

al e

mpl

oym

ent..

Ent

plo

ymen

t/pop

ulat

ion

ratio

Tot

al p

erso

nal i

ncom

e __

____

____

____

____

_.

Tot

al e

arni

ngs

Agr

icul

ture

, for

estr

y an

d fis

herie

sA

gric

ultu

reF

ores

try

and

fishe

ries

Min

ing

Met

al.

Coa

lC

rude

pet

role

um a

nd n

atur

al a

sN

onm

etal

lic, e

xcep

t fue

ls.

Con

trac

t con

stru

ctio

n

Man

ufac

turin

gF

ood

and

kind

red

prod

ucts

Tex

tile

mill

pro

duct

sA

ppar

el a

nd o

ther

fabr

ic p

rodu

cts

Lum

ber

prod

ucts

and

furn

iture

.. ...

......

_

Pap

er a

nd a

llied

pro

duct

s_ _

Prin

ting

and

publ

ishi

ngC

hem

ical

s an

d al

lied

prod

ucts

-

Pet

role

um r

efin

ing_

Prim

ary

met

alF

abric

ated

met

als

and

ordn

ance

.M

achi

nery

, exc

ludi

ng e

lect

rical

Ele

ctric

al m

achi

nery

and

sup

plie

sT

otal

mac

hine

ry (

1950

onl

y)M

otor

veh

icle

s an

d eq

uipm

ent

Tra

ns. e

quip

., ex

cl. i

ntr.

veh

sO

ther

man

ufac

turin

g.

Tra

ns.,

com

m. a

nd p

ublic

util

ities

Who

lesa

le a

nd r

etai

l tra

deF

inan

ce, i

nsur

ance

and

rea

l est

ate

Ser

vice

sG

over

nmen

tC

ivili

an g

over

nmen

tA

rmed

For

ces

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015,

117,

000

2,25

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680

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1.10

1,84

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723

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0

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54,0

003,

723

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005,

111

1.07

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27, 9

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510

1.06

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2

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0732

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857,

000

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0034

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0

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000

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02

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K 0

001,

765

1.00

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200

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100

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nds

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967

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rs

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men

t, Pe

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1990

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C

Tab

le 6

.- P

opul

ati l

lll ,

Em

ploy

men

t, Pe

rson

al I

nc!,

and

Ear

ning

s by

Ind

ustr

y, b

y St

ate

and

Reg

ion,

Sel

ecte

d Y

ears

.195

0-19

90

Line

Wis

cons

inP

taih

s

1950

1959

1969

1980

1990

1950

1959

1969

1980

1990

4 5 6 7 9 10 11 12 13 15 16 17 IS '20

21 5 24 25 26 27 2.8

29 30 31 32 33 34 35 26 37 38 39 40

Pop

ulat

ion,

mid

year

Per

cap

ita in

com

e (1

967

8),

Per

cap

ita in

com

e re

lativ

e (

U.S

. =1,

00)

Tot

al e

mpl

oym

ent

.__

____

___

.

Em

ploy

men

t/pop

ulat

ion

ratio

Tot

al p

erso

nal i

ncom

e

Tot

al e

arni

ngs

Agr

icul

ture

, for

estr

y an

d fis

herie

s ...

......

..A

gric

ultu

re ..

For

estr

y an

d fis

herie

s_._

M M

ing

.M

etal

Coa

lC

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pet

role

um a

nd n

atur

al g

as ..

,.go

nmet

allic

, exc

ept f

uels

__C

ontr

act c

onst

ruct

ion_

.

Man

ufac

turin

gF

ood

and

kind

red

prod

ucts

Tex

tile

mill

pro

duct

s ...

......

. ..

.

App

arel

and

oth

er fa

bric

pro

duct

sLu

mbe

r pr

oduc

ts a

nd fu

rnitu

reP

aper

and

alli

ed p

rodu

cts

Prin

ting

and

publ

ishi

ngC

hem

ical

s an

d al

lied

prod

ucts

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role

um r

efin

ing

Prim

ary

met

als

Fab

ricat

ed m

etal

s an

d or

dnan

ceM

achi

nery

, exc

ludi

ng e

lect

rical

Ele

ctric

al m

achi

nery

and

sup

plie

sT

otal

mac

hine

ry (

1950

onl

y)M

otor

veh

icle

s an

d eq

uipm

ent

Tra

ns. e

quip

., ex

cl. m

fr. v

ehs

Oth

er m

anuf

actu

ring

Tra

ns..

com

a, a

nd p

ublic

util

ities

N' h

oles

ale

and

reta

il tr

ade

Fin

ance

, ins

uran

ce a

nd r

eal e

stat

eS

ervi

ces

......

......

......

....

......

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over

nmen

tC

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an g

over

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3, 4

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357

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tr.

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Tab

le 6

.- P

opul

atio

n, E

mpl

oym

ent,

Pers

onal

Inc

ome,

and

Ear

ning

s by

Ind

ustr

y, b

ySt

ate

and

Reg

ion,

Sel

ecte

d Y

ears

195

0-19

90

Lin

e

1050

I19

59

Nor

th 1

)ako

ta

1969

1980

1900

Sou

th Ik

kola

1950

1959

1969

1960

1990

1 3 4 5 6 7 8 10 11 12 13 14 Is 10 17 18 19 20 22'21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Popu

latio

n, m

idye

ar.

1'er

cap

ita in

com

e (1

967

8)--

...

Per

capi

ta in

com

e re

lativ

e (1

.'.5

=1

00).

....

..q'

otal

em

ploy

men

tE

mpl

oym

ent /

popu

latio

n ra

tio.

.

Tot

al p

erso

nal i

ncom

e.

Tot

al e

arni

ngs

Agr

icul

ture

,fo

rest

ry a

nd f

ishe

ries

.. _

Agr

icul

ture

Fore

stry

and

fis

heri

esM

inin

gM

etal

Coa

lC

rude

pet

role

um a

nd n

ail r

id g

asN

onm

etal

lic, e

xcep

t fue

ls...

....

......

......

..C

ontr

act c

onst

ruct

ion.

:Man

ufac

turi

ngFo

od a

nd k

indr

ed p

rodu

cts

Ten

th!

- m

ill p

rodu

cts

App

arel

and

oth

er f

abri

c pr

oduc

tsL

umbe

r pr

oduc

ts a

nd f

urni

ture

Pape

r an

d al

lied

prod

ucts

Prin

ting

and

publ

ishi

ngC

hem

ical

s an

d al

lied

prod

ucts

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oleu

m r

efitt

ing

Prim

ary

met

als

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icat

ed m

etal

s an

d or

dnan

ceM

achi

nery

, exc

ludi

ng e

lect

rica

lE

lect

rica

l mac

hine

ry a

ndsu

pplie

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10 11 12 13 15C

D16 17 18 19 20 21 24 23 26 27 20 30 31 32 33 34 35 36 37 38 39 40

Tab

le 6

.- l'

opul

at"

, Em

ploy

mt t

at, P

erso

nal I

nc, n

itE

arni

ngs

Ity In

dust

ry, b

y S

tate

and

licg

ion,

Sel

ecte

d Y

ears

195

0-19

90

Line

1950

1059

Loui

sian

aA

rkan

sas

1969

1980

I

1990

1950

1959

1960

1980

1990

4 5 li 9 12 13 14 15 16 17 18 20 21 2322 24 25 20 27 30 31 32 33 34 35 36 37 39 39 40

Pop

ulat

ion,

'mid

year

..

.

Per

cap

ita in

com

e (1

967

9) .

._

...

l'er

capi

ta in

com

e re

lativ

e (

(`.0

.= 1

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...

Tot

al e

mpl

oym

ent

..

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1111

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opt)

illtiO

lt II1

li0 .

.

Tot

al p

erso

nal i

ncom

e

Tot

al e

arni

ngs

...

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ult t

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fore

stry

and

fish

erie

s.

Agr

icul

ture

._

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Fol

estly

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duct

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and

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..

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Tab

le 6

.-,-

Pop

ulat

ion,

Em

ploy

men

t, P

erso

nal I

nc

Line

, and

Ear

ning

s Y

Indu

stry

, by

Sta

te a

nd R

egio

n, S

elec

ted

Yea

rs19

50-1

990

New

Mex

ico

Arla

ona;

1950

1959

1969

1480

1990

1950

1959

'196

919

8019

90

3 4-

5 6 9 to 11 12 13 14 16

17 18 19 20 21 22 23 24 25 26 27 29 30 31 32 33 31 35 36

37 38 39 0

Pop

ulat

ion,

mid

year

Per

cap

ita in

com

e (1

067

5)-

Per

cap

ita in

com

e re

lativ

e (1

1.S

.,---

1.00

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otal

em

ploy

men

t...

.

lam

plo

ym e

n I./

popu

latio

n ra

tio_

-.

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al p

erso

nal i

ncom

e.,

..

Tot

al e

arni

ng.

_ ..

Agr

icul

ttn e

, for

estr

y an

d fis

herie

s...

Agr

icul

ture

For

estr

y an

d fis

herie

sSliming...

.. .

Met

alC

oal.

Cru

de p

etro

leum

and

nat

ural

gas

..

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met

allic

, exc

ept f

uels

..

Con

trac

t Con

stru

ctio

n..

.....

Man

ufac

turin

gF

ood

and

kind

red

prod

ucts

..__

.

Tex

tile

mill

pro

duct

sA

ppar

el a

nd o

ther

fahn

emro

duct

sLu

mbe

r pr

oduc

ts a

nd fu

rnitu

reP

aper

and

alli

ed p

rodu

cts

Prin

ting

and

publ

ishi

ng...

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mic

als

and

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d pr

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g.. .

......

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t ary

Met

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ricat

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ludi

ng e

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rical

Ele

ctric

al m

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and

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sT

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hine

ry (

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veh

icle

s an

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ent

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ns. e

quip

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hole

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and

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nd r

eal e

stat

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