These seven local agencies have projects in execution involving over $140 million of Federal grants. Only two agencies, Baltimore and Bristol, had experience with business relocation costs in excess of $25,000. Three firms were moved at a total cost of $92,154, more than the $75,000 that might have been paid to the firms if the $25,000 limitation applied. This amounted to 1.5 percent of the $58,762,000 capital grant total for these two communities and about 0.06 percent of the total grant funds for the seven communities. We believe the conclusion that an unlimited relocation payment provision would result in a disproportionate amount of funds being expended for relocation payments on the basis of the facts indicated is unwarranted. While both bills before this committee offer a remedy to the property owner, they would impose an added burden to the local communities which have long suffered a progressive erosion of their tax resources. As Mayor Collins pointed out in his testimony earlier this year to the Subcommittee on Executive and Legislative Reorganization of the House Committee on Government Operations: The financial resources of our cities have, with the passing of the years, fallen far behind their ever-increasing requirements. I think we need to be continually aware that the Federal Government has a corner on our tax resources and that the Federal tax base expands as the economy expands. We at the other end of the scale, of course, have had the reverse experience and are feeling the pinch more with each passing year. We believe there are alternative methods by which it will be possible to minimize the expenses to the Federal Government of excessive expenditures for business relocation. First, this could be accomplished administratively by requiring adequate justification for displacement in terms of the goals and objectives of the development for which the displacement would be required. If this type of justification is adequate for inclusion of a property in the acquisition program, we see no reason why it should not be adequate in terms of justification for relocation payments. Second, if the Congress feels that some limitation to the Federal participation is required, we believe that a limitation of $100,000 is more realistic. Finally, S. 1201 provides appropriate amendments to the Internal Revenue Code, the Small Business Act, the Social Security Act, and the Housing Act which we believe are essential to an equitable program for real property acquisition and relocation, and should ameliorate many of the problems confronting property owners and displaced persons. In conclusion, we wish to reiterate our support of the policies and objectives of the two bills and to express our hope that the limitation with respect to the relocation payments will be considered. We thank you again for this opportunity to present our views. Senator MUSKIE. Thank you very much, Mr. Drought. We appreciate your statement, sir. It is useful, and the points you emphasize will be particularly helpful. On the question of the limitation with respect to relocation payments, of course, the two questions that are involved are, first, whether or not the States and communities should share in the cost of the relocation payments. There has been testimony before the subcommittee that the States or the communities ought to begin to share in that, so there may be the question of compromising the varying points of view. Secondly, there is the question of whether or not there should be a limit at all for the relocation payments. And your suggestion that the limit ought to be $100,000 is more open to objection, on the basis of your own argument, than the $25,000 payment; is it not? In other words, the argument for raising the limit for relocation under all programs to $25,000 was that it would have a minimal effect upon the projected costs. Mr. DROUGHT. Actually, I think that we feel that where a firm has equipment and other assets requiring a move which would cost $100,000 or more, that such a firm is better equipped to withstand the burden of any additional costs than is the small business. That is the basis for suggesting the $100,000 limitation. Senator MUSKIE. You feel strongly that the relocation payments ought not to be counted as part of the projected costs to be shared, but that, instead, they ought to be picked up completely by the Federal Government? Mr. DROUGHT. This has been our position. Of course, Federal payments have been progressively going forward and we would prefer not to see this changed, simply because these communities would have a tremendous burden placed upon them. They do have more limited tax resources as time goes on. Senator MUSKIE. If they were included as a part of the projected costs, you still would have applicable to the community its share of those costs under the various formulas relating to Government contributions. Mr. DROUGHT. We do. Senator MUSKIE. If the costs of higher limits for relocation payments are minimal, as proportions of the total projected costs, why does that not have a bearing on the community's share as well as the Federal share? Mr. DROUGHT. I guess it does, but the interest of the community has always been in the direction of greater Federal participation in programs. At one time, I believe, it was suggested that renewal should be similar to the highway programs. Senator MUSKIE. You understand that all of these questions have to be considered, because whatever this committee recommends will have to be tested a good deal against the renewal program, and there are those who argue that the credit given to the community to cover its share of the projected cost is so generous as, in effect, to amount to a 100-percent Federal contribution in many projects. I am sure that you have an eloquent and, perhaps, adequate defense to that kind of attack, but this is the sort of thing that we get into and that we have to recognize in undertaking to recommend policies which move a little more progressively into these problem areas. Let me ask you this: What do you consider to be a legitimate moving cost in your practice in Boston? I notice that the cost in the Government's projects range from $25,290 to $75,930, for 666 businesses, which were relocated as of December 1964. What is the nature of the costs involved? Mr. DROUGHT. I would like to correct a statement that 660 businesses had relocation claims between $25,290 and $75,930. Only 14 firms had claims in excess of $25,000. We averaged something like $2,800 if we excluded those high-priced moves. Naturally, this is largely for the movement of equipment and stock. Congressman Widnall raised a very good point with respect to the replacement costs. And this is a very critical element. His suggestion that something should be done in this direction we support very strongly. Senator MUSKIE. In other words, the moving costs you are talking about are the conventional ones? Mr. DROUGHT. The conventional moving costs. I know of a hardware store that had to be relocated. They had to, in order to stay in business, a continuing business, to put in new shelving in their new location. This is not an ordinary projected cost. The total expense. is something in excess of $25,000. The eligible costs under the formula were only $8,000, so that that company, in order to operate continuously, was required to spend the difference without reimbursement. Senator MUSKIE. What was the nature of the business that involved the $75,000 one? Mr. DROUGHT. I do not know. Senator MUSKIE. It would help if you could give us concrete examples. Mr. DROUGHT. We will try to do so. Senator MUSKIE. I would be interested in knowning what the eligible and ineligible costs of relocating that business might have been and what proportion of the total of the $75,000 these costs were, and so on. Mr. DROUGHT. Yes. Senator MUSKIE. A few case histories of this kind would be helpful to us. We ought to have them; they will help us to prove our case. The traditional argument for limiting repayment to the conventional costs is that going beyond such costs opens the door to abuses. This. is always in back of it. I doubt very much that anyone would seriously argue that you can avoid completely the abuse that might follow if full compensation were made. Mr. DROUGHT. I think that the history of the relocation program and of the whole acquisition program through the urban renewal program has been completely without any kind of scandal at any point in time, and I think that this testifies to the sound administration practices, and we can see no reason why this should not continue. Senator MUSKIE. In other words, the same practices and the same mechanisms that you apply to avoid abuses in connection with the conventional moving costs, you think could be applicable to the now noneligible ones? Mr. DROUGHT. I do, sir. Senator MUSKIE. I have three other questions, Mr. Drought, that I will submit to you for supplementary written information. The responses will then be included in the record. Mr. DROUGHT. Very well. (The following letter dated July 19, 1965, containing the additional information requested and the replies to three questions, was subsequently received:) 51-896-65--14 BOSTON REDEVELOPMENT AUTHORITY, Hon. EDMUND S. MUSKIE, DEAR SENATOR MUSKIE: Reference is made to the questions submitted at the close of the testimony I presented to the Subcommittee on Intergovernmental Relations, July 13, 1965. For convenience, the questions will be restated and will be followed with a reply. Question No. 1 Are the procedures described in these sections consistent with most of the practices you now follow? For example, are property owners given an opportunity to accept an appraisal during a property inspection as provided in section 101 (a) (2)? Reply The procedures described in sections 101 through 106 are generally consistent with the practices followed by the Boston Redevelopment Authority with the following execptions: 1. Section 101 (a) (3). The Authority follows the practice described in this section in the acquisition of most residential property. In acquisition of commercial, industrial, and absentee-owned residential properties we have negotiated from a price other than the HHFA-approved acquisition price. If statutes required property owners to disclose information with respect to income, operating expenses, and other relevant data, we believe it would be possible to obtain more accurate appraisals on which to base an approved acquisition prices and that it would then be appropriate to offer the approved price to owners of all types of property. Authorization to acquire evidences of debt. The Authority does not acquire such interests since there is currently no statutory authority therefore. 2. Section 104. 3. Section 105. Expenses incidental to transfer of title to the United States. The Authority makes no reimbursements except the pro rata share of property taxes in the manner indicated in subparagraph (3) of this section 105. 4. Section 106. Litigation expenses. ment for litigation expenses at this time. Question No. 2 The Authority makes no reimburse At present, do your procedures provide for at least 180 days' notice before a person is required to move from a dwelling, business, or farm operation as the result of a federally aided project? What is the average amount of time between when an owner is notified that his property will be taken or a tenant is notified that he is to move, and the time when a dwelling or business building must be vacated? Reply At the present time property owners are given from 6 months to 21⁄2 years' notice that their properties are to be acquired except where land is acquired under the "early land" provisions of the urban renewal program. However, at no time is a property owner required to surrender possession in less than 180 days. On the average owners and tenants are notified they must move between 9 and 12 months in advance of the date the authority seeks possession of the property. Question No. 3 When you testified last year before the House Select Subcommittee on Real Property Acquisition, you indicated that you had just begun to authorize the initial offer for property acquired to be the amount approved by HHFA as a maximum acquisition price. This is the same procedure described in S. 1201 in section 101 (a) (3). Would you please tell us how this program has worked for the Boston Redevelopment Authority. Has it succeeded in reducing the number of cases brought to litigation? Reply As indicated in the testimony before the House Select Subcommittee on Real Property Acquisitions, the Authority has adopted the full and fair price system in the acquisition of residential properties. This program was initiated a year ago, and we believe it is meeting with success. The number of cases brought to litigation has reduced somewhat. We believe, however, that a program of this nature requires time to develop public understanding, confidence, and acceptance. We anticipate a greater reduction in the number of cases brought to litigation in future. Attached are the data which you requested concerning the 14 business concerns with relocation claims in excess of $25,000 which have been relocated from the Government center project in Boston. You will note that there are several disallowances for self-moving expenses. In these cases the claims for moving expenses exceeded the amount of a bid price by a commercial mover. Copies of the regulations promulgated by the Attorney General of the Commonwealth of Massachusetts will be forwarded as soon as these are available. The Attorney General's office has assured me these will be forwarded immediately. I trust the above will provide you with the information you have requested. If I may be of any further assistance, please do not hesitate to call upon me. Sincerely yours, JAMES DROUGHT, Assistant Administrator for Development. GOVERNMENT CENTER PROJECT, MASSACHUSETTS R-35 BICKNELL & FULLER PAPER BOX CO. From: 50 Chardon Street, Boston. To: 161 Prescott Street, East Boston. This business manufactures paper boxes, cartons, and corrugated containers, and has been in operation since 1855. Their plant occupied approximately 12,000 square feet of space with approximately 100 tons of machinery and equipment. In order to avoid a complete shutdown, this relocation was scheduled to be made over a 2-month period. 1 Reduced in compliance with regulations limiting self-move expenses. 2 Reduced by amount of work not completed. FEDERAL LIQUORS, LTD. From: 54-58 Chardon Street, Boston, 55-57 Pitts Street, Boston. To: 15 Monsignor O'Brien Highway, Cambridge. The above business conducted a rectifying and bottling plant in a four-story building which enabled the use of an inexpensive gravity-feed method of production. The business moved to a one-story building making it necessary to readapt to a more complex piping system involving the use of pump starters, interlock switches and generally a more sophisticated method of processing. 1 Reduced in compliance with regulations limiting self-move expenses and refurbishing personal property. 2 Cost of new equipment and associated installation charges disallowed. Cost of new equipment and associated installation charges disallowed and all real property improvement disallowed. |