Mr. Chairman, I am David Morton, the Executive Director of the Housing Authority of the City of Reno, Nevada. I have served in this capacity for eight-and-one-half years and have previously had the pleasure to be part of the administrations of Housing Authorities in Dallas and Nashville. Today I am testifying in my capacity as Vice President for Housing of the Public Housing Authorities Directors Association (PHADA). On behalf of PHADA's 1,650 housing authority members, I thank you for this opportunity to testify before this subcommittee. It is indeed an honor that brings with it the responsibility to articulate well both problems and suggested solutions for an industry that is at a crucial junction in serving the housing needs of millions of American families. This is what I will attempt to do here today.

Let me begin by saying that PHADA recognizes and appreciates the work of this committee and that of its hard-working staff on both sides of the aisle. A tremendous effort went into last year's attempt to get an authorization bill. While it is unfortunate that the endeavor was ultimately unsuccessful, we believe that in several important ways S. 462 represents a significant improvement over S. 1260. We appreciate many of the changes, including the revamped language on tenant rents, the streamlining of the agency plan requirements, the increased powers to receivers, the security and safety improvements, and the treatment of housing authority income, including that from joint ventures.

We are hopeful that, this year, the Congress may be successful in passing and reconciling its bills. During this time of increasing budget pressure, welfare reform, and devolution of authority, it is essential that the assisted housing industry be guided by prudent and sound authorizing legislation.

PHADA is preparing a page-by-page analysis of S. 462 and will forward that to you in the very near future. Unlike this testimony, that document will be quite detailed and will proceed in the order the bill is written. Today I will use a broader brush to speak more topically on the major issues which S. 462 addresses.

Goals of the Legislation

PHADA applauds the stated intent of this reform legislation. For too long, the federal government has attempted to oversee every aspect of public housing through detailed and complex statutes and regulations, as Section 2 of the bill notes. While HUD has made some progress, micro-management has become part of its culture and continues to be an obstacle -- even after the Department has reviewed and "streamlined" its many rules and procedures.

This degree of federal control totally misses the point that housing problems and their solutions are different in different parts of the country as well as among cities, suburbs, and rural areas. It makes no sense to us that the 50 percent of all HAs with less than 100 units continue to have to operate substantially the same as the largest big city agencies. It is critical that HUD use its shrinking resources more efficiently by targeting its attention to those agencies with serious problems.

At the same time, PHADA recognizes and supports the need for appropriate levels of public accountability for all housing authorities, regardless of their level of performance. Thus we will recommend in the section on performance measures, a stronger role for the Independent Public Audit (IPA). We believe that making better use of HUD's resources, the IPA, and maximizing the flexibility for agencies that perform well is the best way to consolidate and streamline operations, as well as reward tenants with increased opportunities as the bill intends.

Reforms Associated with the Appropriations Bills

One of the most critical reasons the industry needs an authorization bill is that, for the reforms in the recent appropriations measures to take root and have a real impact, they must be included in more permanent authorizing legislation. Too few housing authorities are implementing valuable reforms because of the temporary nature of their authorization. Getting some permanency of reform is one of PHADA's highest legislative goals.

PHADA has recently conducted a survey of its entire membership to determine the extent of use of the increased flexibility available to them in the areas of federal and local preferences, the fungibility of modernization and development funds with operating expenses, minimum and ceiling rents, and earned income adjustments. While we will forward you a complete report when it is done, several conclusions can already be made.

That PHADA received more than a 51 percent response rate, is itself an indication of how important housing authorities view the issue of increased local flexibility. While most industry practitioners and government officials believe that the federal preferences, combined with the Brooke amendment, have severely affected the income mix of developments and driven up subsidies, fully 43.5 percent of the respondents had not as yet effectively suspended the federal preferences. By a three-to-one margin, those agencies indicated that they had not changed their preference system yet because the suspension was thus far only temporary. We need an authorizing bill that permanently repeals federal preferences -- as in both S. 462 and H.R. 2 -- in order to increase the participation in this important flexibility

Likewise, while authorized through appropriations measures to implement ceiling rents as a way to retain working families, fully 61.0 percent have thus far declined to do so. While a variety of reasons are given for not taking advantage of this tool, its temporary nature is cited approximately twice as often as any other reason.

There is an even wider disparity with the use of granting additional adjustments in earned income. Only 94 respondents, or 11.4 percent, are giving these adjustments. Again, although a variety of reasons are given for not using this tool, the temporary nature of the authorization is cited more frequently than any other by just under a two-to-one margin.

I will have more to say on some of the specifics of S. 462 addressing these matters later in the testimony. The point here, however, is simply to underscore that year-to-year authorizations through the appropriations process are working in less than half of the cases. In this case, because of the impending financial constraints, a glass half filled with water is indeed one that is half empty. The industry, and more importantly, the families it serves, need a greater sense of permanency of reform.

Public Housing Agency Plan

While we have some concerns and recommendations for change, PHADA generally supports the improvements in S. 462 regarding the Public Housing Agency Plan. Our criticism of the provisions for the plan in S. 1260, and in the current House bill, is that the plan was too cumbersome and actually would have required HAs to provide more detailed information than in the current micro-managed system. Providing only the broad outline of the plan and subjecting the specifics to negotiated rulemaking is more consistent with the bill's goals of consolidating, streamlining, and giving added flexibility to agencies that perform well.

We remain concerned, however, about HUD's culture of micro-management and thus strongly recommend that, at least in report language, a primary principle governing negotiated rulemaking be that well-managed agencies be given maximum flexibility in the formulation of their plans. It should be stipulated that, for these agencies, self-certification of the existence of various aspects of the plan with verification provided through the IPA, meets the requirement of the plan. In addition we recommend that the report emphasize that the agency plan remain the main vehicle for articulation, review, and approval of future housing initiatives, rather than the establishment of a separate process outside of, and in addition to, the plan.

We are supportive of submitting a five-year initial plan, as provided in the bill, with subsequent annual plans to be filed. That an HA may comply with this section by submitting annual updates to the plan, instead of starting from ground zero each year, reduces the administrative burden of the process as well as redundancy. For ease of implementation, we strongly encourage the committee to consider a provision similar to that in H.R. 2 which would permit an agency's Comprehensive Grant Program, if eligible, to suffice for the first year of the five-year plan.

The association supports the provision of the plan that permits the Secretary to require additional information from those agencies at risk of being declared troubled as well as those that already are designated so. Requiring written approval for either approval or disapproval of the plan also seems sound to us. This is consistent with concentrating HUD's limited "overseer" resources where the problems have been identified. It is all the more reason to permit well-run agencies the discretion to certify, with IPA verification, the existence of as many of the plan elements as possible.

Therefore, we disagree with the level of discretion the bill would give HUD to provide for a more streamlined housing agency plan for high performing agencies. We believe that the "may" of this section should be changed to "shall." In lieu of this, we recommend that "shall" be used for "consistently high performing agencies," defined as those designated high performers for three or more consecutive years.

The same recommendation holds true for small agencies, i.e., those with 250 or fewer units of public housing, except those which are designated as troubled. Considering that these small agencies represent well over half of all housing agencies, it seems appropriate to have a streamlined plan as the norm, requiring more details only if the agency is troubled.

PHADA's membership supports resident involvement in the preparation of the agency plan. We also appreciate the replacement of the redundant "local advisory board" with a "resident advisory board" to assist with the development of the plan. The committee is correct when it asserts that the local advisory board is not needed as long at the plan conforms with the CHAS and/or consolidated plan.

The bill calls for a report made to Congress by the Comptroller General within two years of the date agency plans are required. The legislation stipulates that the report include a description of the results of the required audits and review, as well, any recommendation for increasing compliance by housing agencies with their plans. This seems appropriate to us but incomplete. We suggest that the report also include any recommendations for changes that would further enhance the efficiency and creativity of agencies submitting the plan without decreasing public accountability.

Income Targeting

We are convinced that the committee fully realizes the importance of the income targeting issue. A great deal rides on this issue. The federal government has recognized the sad reality that it will not be able to serve the housing needs of all of its citizens. Indeed, it helps only a minority of those in need. If housing authorities are to continue to serve the housing needs of their communities, they must be able to increase the income mix of their participating families. At the same time, housing authorities remain committed to serving the needs of poor families to the greatest extent possible.

PHADA is very strongly supportive of applying income targeting in a HA-wide manner, as opposed to simply new admissions or on a development-by-development basis. In the same way, the federal government must come to realize that in order to serve the poorest of the poor to any degree at all, housing authorities must survive financially. With ever-decreasing federal subsidy funding and growing modernization backlogs, the only alternative is to increase the economic mix of the housing for which HAs have responsibility.

Finding the right balance in income targeting is obviously key. To our knowledge, no one has as yet successfully surveyed the issue to identify an income target that optimally meets the needs of as many of the poorest of the poor as possible, while still permitting housing authorities to operate their agencies in a professional manner.

PHADA believes that targeting requirements should be fungible throughout the entire inventory of the agency's program. An HA should be allowed to distribute its targeting among all of its programs so that, in totality, it meets the overall goals called for in the legislation. This would allow a healthier demographic mix in public housing and ameliorate somewhat the economic and social ghettoization of the poor. At the same time, this would be balanced by more aggressive targeting of Section 8 to the poorest families, who could then choose more affluent neighborhoods, better schools for their children, better medical care, and so on. The important thing is this: the cause of better neighborhoods and more choice would be well served.

PHADA also strongly recommend that any targeting count as "very low income" any family that is working substantially full-time at or near the minimum wage. This distinction is critical to mitigate the unintended consequences of basing a system solely on median income. In all states, both the minimum wage and welfare benefits are uniform throughout the state, but they vary widely as a percentage of median income. In general, minimum wage is a higher percentage of local area median in less populated areas but can be significantly lower in metropolitan areas. The effect is that minimum wage working families in relatively poorer areas of the country would be denied housing, making it more difficult for local agencies to provide role models to others. At the same time, families earning significantly more "downstate" in an urban area are housed.

Our recommendation would correct this disparity. In addition, it is consistent with Congress' intent of giving working families more incentives to seek employment and move upward on the ladder to self sufficiency. It will also help housing agencies create better income mixes within their developments, something which all experts agree results in more stable and secure environments for the community.

Governance and Resident Members of the Board

PHADA has consistently advocated for resident involvement in housing authority operations that directly affect them. To that end the association has sponsored numerous resident initiative training workshops and was instrumental in the development of the 1990 Joint Declaration on Housing Authority, Resident, and HUD Partnership to Promote Resident Self-Sufficiency.

Board membership has historically been determined at the State and local level. Housing authorities are creations of the State. Local appointment of any qualified citizens, including residents, has been an important pillar supporting a balance of local independence and accountability. We congratulate the committee on not changing the manner in which board members are selected. PHADA is opposed to the politicization of the process that would come from resident elections to the board.

PHADA asks, however, that the bill be amended to automatically exempt all housing authorities with 250 or few units. Small housing authorities sometimes have more difficulty than others in finding sufficient number of citizens to volunteer to the board. Reminding small agencies that they should consider for appointment residents as well as other citizens is helpful. Requiring a small agency with few units to do so when no resident may be willing would be unworkable for those agencies.

Capital and Operating Block Grants

PHADA supports the concept of two block grants for the capital and operating needs of public housing programs with the reservation that such grants make it more expedient for the Congress to cut necessary funding, i.e., it leaves the "hard choices" to the local authority while the level of overall funding resides totally with the federal government.

We strongly support that the regulations and formulae for the grants be established in negotiated rulemaking. This serves to level the playing field somewhat within the industry itself and among the industry, Congress, and HUD. We recommend, however, that language be added to indicate that the base year funding of these two grants be comparable to the percentage of current related funding. Currently, operating funds are at $2.9 billion while capital funding totals $2.5 billion. The total of the two funds in now $5.4 billion. This coincides to a split of approximately 54 to 46 percent, operating to capital. To minimize the disruption that inevitably comes with such a basic change, the ratio should initially, at least, be similar.

We also recommend that the bill specify that the capital formula should take the modernization needs and backlog of all small HAs (those with fewer than 250 units of public housing) into account since those agencies do not currently receive comprehensive grant formula funds. Like their larger counterparts, small agencies need a steady supply of modernization dollars to upgrade their properties. Whatever new block grant formula is developed must take this factor into consideration.

We are pleased that the ability of the public housing agency to effectively administer the funds will be taken into account in the development of the formula, regardless the size of the agency. Only recently has HUD begun to move in that direction by deducting a percentage of modernization money from troubled and mod-troubled agencies for redistribution to other agencies. This is as it should be. Still, there continues to be too many examples of continuing to "reward failure" with even larger financial contributions. PHADA believes significant weight should be attached to the capacity factor of the agency.

PHADA supports the use of up to 20 percent of the capital fund for operating expenses, although the recent survey conducted of our membership brings up several concerns. Again, however, a more permanent authorization of this practice would encourage its broader use.

We also support the additional language regarding direct funding of operating and capital assistance to resident management corporations under the conditions listed in the bill. We especially appreciate the provision that, if the Secretary provides such direct funding, the public housing agency shall not be responsible for the actions of the resident management corporation.

Revitalizing Severely Distressed Public Housing (HOPE VI/URD)

PHADA's membership has carefully watched the development and implementation of the Urban Revitalization/HOPE VI program. This program was developed to address the very real and urgent need to demolish the worst public housing and create new housing choices for low-income families. PHADA participated in the task force on distressed housing and supported the objectives of URD/HOPE VI. Even last year, PHADA recommended the continued funding of the program.

We would like to make it very clear, however, that we no longer support the continuation of the program. In our view, some of the grants have not been used wisely and some may have been awarded primarily because of politics. Specifically, we are aware that some HAs are spending well over $150,000 per unit to rehabilitate distressed housing -- several times the cost of either complete rehabilitation or private market replacement.

As noted in our testimony before your colleagues in the House, some HAs are not using grants just to replace housing, but rather to develop exotic mixed-use real estate projects of questionable value. In areas where the troubled public housing is sitting on top of desirable land, it may indeed be possible to attract private investment and support for mixed income and financed housing, but we strongly urge the Congress to take a good look at the federal share of the cost in proportion to the number of very low income families being served.

While some agencies, including some large ones, have used the grants fairly well, some of the largest grants have been made to housing authorities that are historically mismanaged, politically influenced, and PHMAP-troubled. A number have received substantial URD/HOPE VI grants just before or just after being seized by HUD or put into receivership. Several are classified as "mod troubled" because of their inability to administer their existing modernization program, and a number have very large backlogs of unspent mod money. Even if the plans are sound, we question whether it is wise to put such a substantial amount of modernization funds in the hands of those agencies who have shown they cannot manage the program well. This simply is not a prudent use of scant resources and has all the potential to hurt the industry in the public's eyes as much as run down housing stock does.

Rather than sunsetting the program toward the end of 1999, we recommend instead that funding for this purpose be folded into the general modernization account now. Housing authorities could then be permitted to use their CGP funds for purposes currently allowed under URD/HOPE VI, including demolition, replacement housing and mixed use development. At a minimum, Section 24(b) of the Housing Act should be modified to include as a factor for award the demonstrated capacity of the agency to carry out its plan.

Rent Setting and Reform

As you no doubt are aware, PHADA has supported, and continues to support, the repeal of the Brooke Amendment on the basis that it is not possible to serve only the poorest of the poor without increased operating subsidies. The chances of succeeding with the latter are widely viewed as nil. Some change is essential or HAs will not be able to continue even serving the current very poor in public housing, the quality of the housing stock will continue to decline, and problems associated with run-down public housing developments will grow.

While we favor the abolition of Brooke, we also realize that such abolition stands about as much chance as truly full subsidy appropriations. We therefore support the change in language to permit HAs to charge "up to" 30 percent of the adjusted income for rent. This would permit HAs to charge less rent under certain circumstances, and therefore, offer a more attractive deal to working families.

We have concerns about ceiling rents as described in the bill. The market value of housing bears no relationship to the authority's cost to operate the housing. Any system that pegs the ceiling rent above the market value will find no takers. Thus, we recommend strongly that the bill be changed to remove any reference to operating cost, including Section 103 b(2)(A)(I). The following provision "(ii)," which permits agencies, "in the sole discretion" the agencies include a deposit to replacement reserves in its calculation of its ceiling rent is an example of a sound management practice that, along with operating costs, would be considered when an agency decides whether or not to use ceiling rents and determine the level at which they should be set.

PHADA strongly supports providing incentives for residents to seek employment, but we believe the 18 month earned income exclusion is the wrong approach. An income disallowance for 100 percent of earned income for 18 months' rent for the next three years is not a substitute for true and meaningful rent reform. It is obviously being raised to attempt to encourage work and yet not require additional PFS subsidies. It is a well intended, but very mistaken move by Congress.

To exempt 100 percent of earned income for previously unemployed persons, including students, and others first entering the job market has limited benefits and will create huge morale problems for current residents who have been working all along and who would not be entitled to this grossly overly generous benefits. If Congress is insistent on proceeding with this approach, the same incentive and an actual cost saving to PFS would be achieved with only a 50 percent disallowance for 12-18 months with a phased in rent for the next three years. This would also not have the highly negative morale problem for currently employed residents.

We fully support the creation of work incentives for all assisted housing residents. We just believe there are better ways to accomplish this objective. To that end, allowing HAs to design workable ceiling rents and significant earned income exclusions as part of their local plan will be much more effective. It should be remembered that residents will have a considerable amount of input in the creation of those plans, and that it is in the HA's best interest to create the best economic incentives possible for all working families, not just those who are now entering the ranks of the employed.

PHADA has also supported the use of minimum rents, not so much that its use represents significant increased revenues but, rather, that we recognize that a small contribution helps even poor families further value their home. There are also a number of income sources, e.g., the VISTA program, where the income is not counted toward rent. We believe that some small contribution toward their housing is appropriate. Also, a large number of families who claim to be living on $ 0 commit fraud. We are pleased that the bill permits housing agencies to make exemptions in cases of true hardship.

As you know, previous legislation has authorized housing agencies to charge up to $50 per month. This bill halves that maximum. HAs now use a minimum rent and a large portion of them have set their rent above $25. In PHADA's recent survey, 47.7 percent have set their minimum rent at $25. However, just over half (50.1 percent) have established rents in excess of $25. We therefore urge the committee to increase the allowable minimum rent to $50. Not doing so will not only cause approximately half of the public housing agencies to once again revise their policy, but will reinforce the disincentive to use any temporary authorizing measures in the future. As noted early on in our testimony, that disincentive is already high enough to dissuade the vast majority of agencies from taking maximum advantage of the current, but temporarily, authorized measures.

Troubled Housing Authorities

As illustrated in some of our comments in both the block grant and revitalizing distressed housing sections, PHADA remains concerned regarding HUD's efforts to address troubled housing authorities. We are generally supportive of the expanded powers described in Section 106. We think it is particularly helpful that the Secretary may, but is not required, to give troubled housing authorities one year for significant improvement. Some agencies have been troubled for numerous years and the bill correctly recognizes that it would serve no purpose to automatically extend their time for improvement by a year.

We also support the "shall" in the language regarding the Secretary's declaration of substantial default for agencies which have not demonstrated satisfactory improvement and the subsequent mandatory taking possession of, or petitioning for, a receiver. Reserving the decision of whether to establish a new authority to the Secretary appears to adequately safeguard the process, as does the effort to reconcile with contractors prior to contract abrogation as long as such an effort does not become a protracted endeavor.

Troubled housing authorities, large and small, continue to garner the highest level of public attention, as they should. Unfortunately, the vast majority of well-run agencies continue to suffer in the public and Congress' eyes as a result. Therefore, PHADA urges Congress to continue to support expeditious and decisive action to remedy the situation of troubled housing authorities. Fairness to the residents living in troubled agencies, to the taxpayer, and to well run housing authorities demands no less. This is why it is critical for HUD to concentrate its very limited resources -- including staff training -- on troubled agencies while providing increased flexibility with local accountability to others.

Demolition and Disposition, Vouchering Out Public Housing

PHADA supports the certification process as described in Section 114 of the bill. While most continue to have serious difficulty with the reliability of HUD's data systems, the language that the Secretary "shall" approve the application except in case where the certification seems "clearly inconsistent with information and data available to the Secretary" is consistent with the bill's goal of getting HUD out of the micro-management business.

We reiterate our concern made earlier in our testimony regarding the cost of some replacement housing. The Senate may wish to address this issue in Section 24(d) of the 1937 Act regarding replacement. We recommend language that indicates that, while replacement units should be able to be competitive with the market and may include amenities to that end, the total development cost of the replacements not exceed a reasonable level.

We have several comments regarding the mandatory assessment for voucher conversion which has to be completed within two years of enactment. While the contents of the plan may be doable for many medium and larger housing agencies, small HAs with very limited staff will find the plan a very difficult challenge. We therefore urge that small agencies (less than 250 units of public housing) be exempted from the mandatory assessment and, if not exempted, that the plan be significantly simplified and streamlined. Without such an exemption of simplification, small agencies could be unfairly impacted by the requirement. The option for streamlining the assessment or waiving any or all of the requirements is currently left to the discretion of the Secretary. We recommend that the statute waive the requirement entirely for small, untroubled agencies as well as consistently high performing agencies.

PHADA supports the limited authority the bill would give the Secretary in approving or disapproving the conversion plan by authorizing disapproval only if the plan is "plainly inconsistent with the conversion assessment or if there is reliable information and data available to the Secretary that contradicts that conversion assessment."

Performance Indicators

The bill would modify the current Public Housing Management Assessment Program (PHMAP) realistically, in our view, regarding its treatment of "provided" versus "obligated" funds and "unexpended" versus "unobligated" funding.

It would also make several other changes. Two of the changes involve resident services. The first would rate HAs on the extent to which an agency provides effective programs and activities to promote the economic self-sufficiency of the tenants. That efforts to make opportunities available to tenants in this area are valuable is not a question. However, we do question if it is appropriate and possible for the agency to directly provide for such programs.

Most housing managers have neither the training nor the time to plan, execute, and evaluate direct social service programs. HAs can expect only a very limited amount of federal housing funds to be appropriated for such programs. At the same time, other government and private agencies specialize in the provision of social services. In our view, possibly in conjunction with the cooperation agreements referred to regarding welfare reform, an agency's efforts to link or have agencies bring services to residents could be more appropriately and reasonably assessed instead.

PHADA does not object to being assessed on the opportunities HAs provide to residents to be involved in the administration of public housing. However, we believe that it should be clarified that HUD should recognize that not all residents are experts in all areas of administration, just as housing authority staff do not possess such broad expertise. Not all residents or all resident organizations feel it necessary or appropriate that they not only pay rent but also work to administer their programs. Not unlike the situation in the private market, some renters expect that the rent they pay (even if below market) entitles them to a certain level of management expertise that would not require their involvement.

We also encourage the committee to modify the language of the security indicator to indicate that HAs will be assessed on their documented efforts to coordinate with local officials and tenants in the development and implementation of anti-crime strategies, rather than the degree they are actually able to coordinate. HAs can only attempt to coordinate and involve others, not assure such involvement.

PHADA also has a comment regarding the last indicator in the bill, i.e., "the extent to which the public housing agency successfully meets the goals and carries out the activities and programs of the public housing agency plan .... " Certainly agencies should be measured against their stated goals and objectives. The challenge will be, however, to do so without unintentionally encouraging agencies to develop plans that call for less than they might otherwise achieve. It would be indeed ironic that a high-performing agency would be penalized for not reaching high-set goals while a troubled agency would be rewarded for setting, and reaching, low goals.

We recommend that, to rectify this situation, that the Secretary be required, rather than permitted, to use a simplified set of indicators for not only small agencies, but high performing or consistently high performing agencies, as well.

Finally, we want to register our strong support for Secretary Cuomo's initiative regarding physical inspections of public housing properties. We believe he is correct when he observes that the current PHMAP system does not address the structural integrity of the buildings in which residents and their families live. This should be corrected. This initiative has received some scrutiny regarding the fact that on-site physical inspections also provide the Department with a means to verify certain PHMAP self-certifications. PHADA wishes to be on record as stating that such verifications will ultimately serve the housing industry's interests. False and inaccurate certifications, if they exist, should be discovered and remedied so that the public may have more confidence in PHMAP scores.

Consortia and Joint Ventures

PHADA applauds the committee for authorizing the establishment of consortia among two or more housing agencies at their option. Many small agencies, particularly in the south, are located closely together and can make good use of common resources by sharing them. This authorization permits this to take place.

The bill also prescribes that the Secretary shall specify minimum requirements relating to the formation and operation of consortia and the minimum contents of consortium agreements. In doing so, we believe it would be in everyone's interest to ensure the involvement of small housing authorities in the drafting of these regulations.

We applaud Section 120 which authorizes, with HUD approval, housing agencies to mortgage or grant a security interest in any public housing or other property owned by the agencies. This would go a long way to help housing authorities operate on a more level playing field with other entities and private businesses. The safeguards in the bill, i.e., that the terms be consistent with those of private loans and the private market, coupled with HUD's regulatory and approval power grants sufficient safeguards to protect the public's interest. We also support the language which authorizes HAs to form and operate wholly owned or controlled subsidiaries and to enter into joint ventures with others. Authorization for these types of activities is precisely the type of legislative action that is needed for housing authorities to exercise their creativity and leverage new resources at a critical time.

Finally, PHADA applauds the clarification that proceeds from entrepreneurial initiatives be used to support low income housing and that they shall not result in any decrease in funds provided to the agencies from the federal government.

Welfare Reform, Community Service, and Self Sufficiency Initiatives

Section 110 of the bill addresses work requirements and cooperation agreements with welfare programs. There is no question that the impact of welfare reform is yet to be seen and evaluated and that all assistance programs should work together whenever possible to deliver the best service at the lowest possible cost. PHADA is in support of that goal.

The bill would mandate that, "to the maximum extent practicable," HAs enter into cooperation agreements with other agencies, "as may be necessary" to provide for such agencies to share service and income information and to deliver self sufficiency services to public housing welfare recipients.

Without significant changes in existing laws and practices that govern state and local welfare agencies, it seems doubtful to us that such efforts will bear much fruit. Since Operation Bootstrap and its successor, Family Self Sufficiency, housing authorities have met with mixed success in successfully engaging social service agencies. While such cooperation agreements may be highly desirable and actually lift some of the direct-service provision responsibility from the housing agency, it is doubtful to us that this bill language will guarantee any significant improvement. What is needed -- perhaps in the form of a welfare reform amendment -- is concurrent legislation to mandate that such agencies cooperate with housing authorities.

Additionally, Section 12(d)(2)(C) on confidentiality, as worded, will likely work against the cooperative relationship. It says that the paragraphs mandating the cooperation agreements "may not be construed to authorize any release of information that is prohibited by, or in contravention of, any other provision of Federal, State, or local law." We suggest that unless welfare agencies are clearly protected and authorized to exchange information of a relevant nature with housing agencies, little information will be shared. This would seem to indicate that changes in federal privacy legislation are required if housing authorities' efforts will be rewarded with any significant results. This may prove particularly important to implement the very welcome section in the bill that prohibits any relief in rent after welfare payment reductions as the result of non-participation or non-compliance with welfare requirements.

With regard to the eight-hour work requirement, PHADA believes it is no longer needed because of welfare reform. Under that statute, virtually every resident who is not already employed will be required to perform some type of work in return for public assistance.

If this provision is retained, the Secretary should be required, rather than merely given the discretion, to exempt adults who are already receiving vocational training or otherwise meeting work, training, or education requirements of public assistance, S. 462 should require HUD to do so. Similarly, persons over 62 and those with disabilities should be automatically excluded from the work requirement.

If the work requirement is retained, provision should be made for residents to self-certify participation and housing authorities should receive some protection of liability for injury to residents engaged in the work.

Security and Drug Elimination

The bill makes some improvements in the area of security and drug and crime elimination. Our statements regarding the PHMAP indicator notwithstanding, the addition of such an indicator, similar to one currently in effect, will contribute to improving the overall safety of housing developments. Housing agencies are highly motivated on this issue not only because they are committed to their responsibility to provide a safe environment to their residents and the surrounding community, but also to their staff.

We applaud the authors of the bill for stating clearly that the number and location of police officers in public housing developments -- as well as the manner in which they are charged rent -- is left entirely to the discretion of the housing authority.

An additional significant aid is the restriction placed on the admission and/or continued occupancy by those with drug and criminal histories or those whose use of controlled substances or abuse of alcohol is likely to deny the right of others to enjoy a secure and peaceful environment. As you are aware, legislation from the last Congress enabled housing agencies to access the National Criminal Information Center for criminal records. While that was the intent of the bill, that access has not as yet materialized. The quest for such information would be greatly assisted by statutory language permitting the Office of Personnel Management to act as the HA agent in receiving and distributing the NCIC information.

PHADA supports the elimination of most set-asides and separate programs. The one clear exception is the Public Housing Drug Elimination Program (PHDEP) or its equivalent. Since its initiation during the Kemp era, PHDEP has been a proven deterrent to drug and crime related activity in and near public housing developments. This program works. The issue is serious. Let's continue it on an ongoing basis.

Rather than a formula distribution of funds to all housing authorities regardless of need, desire, or capacity to use the money well, PHADA advocates that funds be distributed on a formula which considers both the need and the capacity of the HA to carry out the plan. A formula grant that includes all 3400 housing agencies, whether or not they have ever documented a drug problem would destroy the drug elimination strategy in any individual HA by radically diluting the total resources available. Small authorities would be given so few funds that they would have no practical possibility of a program at all, even to the point of paying a single policeman or youth worker.

Distribution on the basis of need should be the highest, but not the only, criteria. HAs which have a higher than average crime rate and have demonstrated their ability to craft and carry out effective programs, should receive a high ranking in the funding distribution than those with greater need but inadequate management abilities.

Unlike the current process in which HUD determines need based solely on murder and robbery statistics, the Uniform Crime Report (UCR) of the FBI should be used as it better demonstrates the need for crime intervention funding. While the UCR covers broader areas than public housing developments, it is more accurate, objective and reliable then HUD's system and is reflective of the fact that drug-related crime is often present in many different types of criminal acts.

We strongly advocate for grants of longer duration. The primary reason for this is not because the application process is so onerous (it is), but because the predictability of funding is essential to the success of the plan. Agencies planning one or two years at a time are severely limited as to the types of programs and the qualifications of the personnel who can be employed to run them. PHADA suggests five-year funding cycles with annual updates.

We recommend a two-tier system for distribution of available funds; one that provides adequate funding to both large and small HAs to effectively combat crime. We suggest a 75-25 percent split between large and small HAs. However, small HAs that can demonstrate that they meet or exceed the average crime rate via the UCR of the larger agencies should be allowed to receive increased funding from the larger pot. PHADA's research has consistently shown that between 160 and 200 small agencies have crime rates that would qualify them for the larger formula distribution. This demonstrates that many small agencies, particularly those along drug distribution routes, do indeed have problems at least as severe as agencies in larger cities. Often their need is compounded by having fewer law enforcement resources available on an ongoing basis.

Tenant-Based Housing Assistance - Title II

PHADA is supportive of many of the key changes in providing tenant-based assistance. We particularly appreciate the flexibility of a payment standard between 90 and 120 percent of the FMRs. However, we remain concerned with the broad discretion given HUD in reviewing the payment standard in use by an HA. What is "a significant percentage" as it applies to those paying more than 30 percent of their adjusted income for rent? This language seems vulnerable to the changing political philosophies of the Secretary of any particular administration. The provision prohibiting the tenant portion of the rent exceeding 40 percent of their income upon admission seems to provide enough protection against gouging to permit further limits to the Secretary's discretion in this regard.

As in public housing, PHADA enthusiastically endorses stricter guidelines for participation in the program regarding past criminal behavior, current use of illegal substances and abuse of alcohol, or eviction for serious lease violations. The ability to access records, criminal and treatment, is essential for housing authorities to make an informed decision. This is easier said than done. For example, even though last year's Extender Bill mandated those housing authorities have access to the national criminal record database, it has yet to happen because bureaucratic resistance and pressure from interest groups. That same acts stipulated that the Legal Services Corporation could no longer spend either public or private funds to defend eviction actions against those charged with drug-related and other criminal crimes. In our opinion, the recently published final rule subverts this intent and permits inappropriate involvement. We use these as examples only to illustrate the important of unequivocal enabling legislation.

PHADA is concerned about the provisions associated with assisting in negotiating rent on behalf of a family and suggest that, at a minimum, the "shall" be changed to "may at the request of a family .... " Housing authorities possess no specific negotiating expertise and many line workers have only limited knowledge of what rent may be "reasonable." Further, this provision seems to usurp the self-sufficiency and responsibility of the family. PHADA respectfully suggests that this provision be deleted from the bill.

Again, as in the case of public housing, PHADA strongly supports the repeal of federal selection preferences and the authorization for local preferences.

We support the changes that the bill would make to portability, particularly the establishment by HUD of a central pool for compensating agencies that issue vouchers to families that move into or out of the jurisdiction. The cumbersome process used these past years by which one agency pays the subsidy and then bills and collects from the other has been proven to be inordinately time consuming and cumbersome. We also support the prohibition of assistance under portability when a family moves out of one unit in violation of the lease in order to be assisted in another.

Summary

Mr. Chairman and members of the committee, I sincerely appreciate the opportunity to testify before you. The challenge you face to consolidate, streamline, and improve the delivery of scarce housing assistance in a time of ever more demanding budget pressures is neither small nor enviable. It is, however, necessary.

I urge you in the strongest possible way to follow through with your goal of deregulating and decontrolling public housing agencies that do their job well, keep them accountable through defined performance indicators and independent audits, and free HUD to use its resources largely to address the problems of troubled housing agencies.

This concludes my formal testimony. As always, PHADA remains committed to working with your committee to get the best bill possible. I would be happy to answer any questions.