Representative MORRIS. Without objection then the remainder of your statment will be made part of the record as if read in full, and you may comment on it as you desired.

Mr. SMITH. Thank you.

(The statement referred to follows:)

STATEMENT OF JOSEPH P. SMITH, Director, COMMUNITY DISPOSITION STAFF, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

The report of a study of the feasibility of a disposition program for Los Alamos, by a team in which I participated in June of 1961, included a recommendation that priorities be extended to multi-family buildings. During the hearings on the proposed Los Alamos amendment held here in April 1962, our witness expressed favorably the idea to establish multi-family buildings as separate sales units to the extent possible and feasible. Following enactment of the Los Alamos amendment, technical personnel from the Federal Housing Administration reviewed with AEC personnel the problems of establishing separate sales units and made certain recommendations for structural alterations and relocation of utilities which would be necessary to accomplish this. The AEC decision to split certain duplexes into separate sales units and not to split other duplexes or quadruplexes was made partially on the basis of these joint reviews and recommendations.

When the committee was considering the Los Alamos amendment, we commented on the proposal to extend priorities on multi-family buildings to cooperatives in part as follows:

"While we consider it possible to sell multi-family dwellings to cooperatives whose membership is made up of occupants, there are certain inherent problems which mitigate against such sales on a priority basis in Los Alamos. The demand by such purchasers may not be sufficient to make such a priority feasible. It would seem wise to determine the attitude of Los Alamos people toward this type of ownership as they become more fully conversant with the facts rather than make a positive determination at this time that sale of multi-family buildings will or can be made available on this basis. The services of our Agency will, of course, be available to furnish advice and assistance to Los Alamos people who may desire to explore this method of acquiring ownership of Governmentowned housing. We will work closely with the AEC in further study of this matter between now and the time Los Alamos properties are offered for sale." Following the enactment of the Los Alamos amendment to the Community Act in September 1962, which included Section 58, we did work closely with the AEC on this and other matters including our participation in activities of the Joint Community Transfer Council established early in 1963. In one of the early monthly meetings of this Council to which all Los Alamos citizens were invited to attend and the proceedings of which were broadcast by the local radio station, a representative of the Cooperative Housing Division of the Federal Housing Administration spoke at some length on the subject of cooperatives. From time to time following that meeting as much literature as could be obtained was available for distribution to interested persons. Every effort was made by members of our local staff to note the type and substance of questions received relating to the setting up and operation of cooperatives and to obtain answers to such questions.

Sales of Government-owned properties in the Los Alamos community began in November 1965 with the offer for sale of the 1,545 one and two family houses then classified for sale. By the spring of last year, the sales of houses had progressed to the point that the AEC and we began to make specific plans to offer multi-family properties for sale to cooperatives. A number of joint meetings were held, participated in by representatives of the FHA Insuring office in Albuquerque, to work out proper forms and procedures. An informational leaflet was distributed to all residents of multi-family buildings on August 31, 1966. During the summer of 1966, the Federation for Cooperative Housing established an office in Los Alamos manned by several representatives whom we understand are skilled at establishing and managing cooperatives throughout the country. The joint planning for the offer proceeded to the point where an offering date of October 21, 1966, was agreed upon. Well in advance of this offering date arrangements were made to have available in Los Alamos Mr. George Browne,

a representative of the Cooperative Housing Division of the FHA in Washington, D.C. Mr. Browne's schedule was well publicized in the press and over the radio. During the week of September 19, 1966, Mr. Browne was available during the day and in the evening for discussions with interested persons. We felt that through the efforts I have outlined we did the best we could to furnish information about cooperatives to Los Alamos residents.

As the October 21 offering date approached, it became obvious that a great deal of dissatisfaction existed among multi-family dwelling occupants mainly about the limited choice of either joining a cooperative or not and taking a chance on being required to vacate. Because of this and by mutual agreement with AEC and your Committee, we postponed indefinitely our October 21, 1966, offering.

In November 1966, we cooperated with the AEC by designating two representatives of our Department to serve on the committee established pursuant to your suggestion, Mr. Chairman, to study and recommend alternate methods for disposal of multi-family properties. The recommendations in the committee's report as rendered on March 30, 1967, are substantially the same as those incorporated in the proposed legislation. Assuming this legislation will be enacted, we will continue to be available to advise and assist the AEC in implementing the legislation by necessary revision of the Priorities Regulation published in 1963.

Mr. SMITH. There is one more portion of the statement I would like to read for the record at this point.

Our staff in Los Alamos-and incidentally we have people who also worked in the program at Richland, Wash., and I myself was associated with Richland as well as Oak Ridge, Tenn.-we, of course, are always available to advise the occupants of multifamily dwellings and other interested persons on procedures for acquiring properties under various types of ownership, cooperative as well as individuals. partnership or joint tenancy. Our assistance will be extended within the limit of our ability to furnish it.

I should like to comment on some suggestions we have had from local residents that HUD should furnish all legal assistance necessary whether it be in the formation of a cooperative or other form of ownership. We do prepare deeds and other closing documents at no cost to the purchaser. The charge for processing an application for FHA mortgage insurance is substantially lower than that paid by purchasers normally. This is because the appraisal of these properties has already been paid for.

Beyond this point I should like to suggest that local non-Government counsel be consulted if legal advice is desired by the residents in connection with the actual formation of a cooperative partnership. corporation, association, or other form of ownership. Local attorneys have a better knowledge of State laws applicable to these situations. We do expect to provide services to purchasers of multifamily buildings, at least to the same degree provided purchasers of single family and duplex houses.

This concludes my prepared statement.

Representative MORRIS. Thank you, Mr. Smith.

Mr. Smith, we are going to submit to you some written questions and we would like to have you respond in writing to the committee. We would like these also to be made available to the public and to the press--both the questions and answers. (See app. 5, p. 181.)

PERFORMANCE OF LEGAL WORK FOR PURCHASERS

Senator BENNETT. Mr. Chairman, you have raised a very interesting question at the end of your statement when you report to us that certain prospective purchasers have indicated they would like you to take over all of their legal work, particularly in the formation of cooperatives and corporations. Under the law which created HUD, do you have the power to render that kind of service to individuals? Mr. SMITH. I am not sure, Senator Bennett. However, as an attorney myself, I would say that the attorneys on our staff are attorneys representing the Government's interest and to expect them to represent the other party to a transaction, I think would put them in an untenable position.

Senator BENNETT. It would put them in a conflict of interest position.

Mr. SMITH. Yes, sir.

Senator BENNETT. Which is prohibited not only under the canons of the legal profession, but by law.

Mr. SMITH. That is correct, sir.

Representative HOSMER. Mr. Chairman.

Representative MORRIS. Congressman Hosmer.

Representative HOSMER. I have no particular objection to leading Los Alamos along by the hand in the transition, but I don't think we ought to pick people up and snuggle them in our arms. The people out here wanted this transition from a government town to a private town. Certainly they must have realized there were certain obligations and expenditures involved. When they expressed the desire for the town they must have accepted the obligations involved in this type of ownership. If they want it, the cost of ownership is something the owner should expect to pay.

If there are costs involved in forming a cooperative and so on, I can see no point in the Government competing with private law firms over this. I don't think anybody reasonable should expect it.

Representative MORRIS. Any further questions?

Thank you, Mr. Smith.

I wish to acknowledge the presence of a very able officer of the Federal Housing Administration, Mr. Roy Walker of Albuquerque.

Mr. Walker, do you have any comments you would like to make for the record?

Mr. WALKER. Thank you, Mr. Congressman. I do not have any remarks. I am just here to answer questions if I can be of any assistance. Representative MORRIS. Thank you. We will now go to our schedule of public witnesses, taking them in the order they contacted our counsel.

We will take first the representatives of the Los Alamos Community Homes, Inc., Alan Rawcliffe, Barbara Hoak, and Philip Thompson. Are these individuals present in the hearing room today?

[The witnesses indicate their presence in the audience at this point.] Representative MORRIS. Will you come forward, please?

Representative HOSMER. Are you all going to speak or is one the spokesman for the group?

Mr. THOMPSON. I have some comments and they would like to speak themselves also.

Representative HOSMER. Why don't you have your colleagues come up and sit with you?

Senator BENNETT. You can all come up together.

Representative MORRIS. Will each of you identify yourself for the reporter, please.

Mr. RAWCLIFFE. I am Alan Rawcliffe.

Mr. THOMPSON. My name is Philip Thompson.

Mrs. HOAK. I am Barbara Hoak.

Representative MORRIS. Mr. Thompson, are you going to be the first spokesman?

Mr. THOMPSON. Yes.

Representative MORRIS. Proceed please.

Do you have a written statement and copies of it available?

Mr. THOMPSON. Yes, sir. I have two written statements, which you have, I believe, and then I have some other comments to make. (See pp. 29 and 36.)

Representative MORRIS. Are you talking about these two letters under date of August 8, 1967, when you say written statements?

Mr. THOMPSON. Yes, sir. One is from the Cooperative League and one is from the Foundation for Coperative Housing.

Representative MORRIS. The Cooperative League of the United States and the Foundation for Cooperative Housing?

Mr. THOMPSON. Yes, sir.

Representative MORRIS. Will you describe these organizations for us please and tell us what connection they have with Los Alamos Community Homes, Inc.?

Mr. THOMPSON. The Cooperative League would, of course, have no association in Los Alamos at all.

Representative MORRIS. What is it?

Mr. THOMPSON. The Cooperative League is composed of all kinds of properties in the United States, and one of their members would be the National Association of Housing Cooperatives. The Cooperative League maintains an office in Washington and it is interested in cooperative housing matters.

The Cooperative League is composed of cooperative associations who are interested in protecting the interest of consumers and the residents, the actual occupants of multifamily units in Los Alamos would be considered consumers. They are the ones, if these multifamily units were part of a cooperative, who would benefit from the cooperative techniques of ownership.

This would be the interest of the Cooperative League in making its point of view available to the committee and reviewing the entire matter on behalf of the Los Alamos Community Homes cooperative and for FCH which was retained by Los Alamos Community Homes to organize the complexities of a housing cooperative.

FEES PAID BY LOS ALAMOS COMMUNITY HOMES, INC.

Representative MORRIS. What fee does the Foundation for Cooperative Housing charge Los Alamos Community Homes, Inc., if any? What is your financial relationship?

Mr. THOMPSON. The fees that are paid to the Foundation of Cooperative Housing subsidiary-FCH Services, Inc.-are those that are provided or permitted within FHA regulations under section 213. These fees are actually determined by FHA and in this case would be determined by FHA in Albuquerque.

Usually these fees would be a total fee of 3 percent of the entire mortgage for marketing, legal, and organizational expenses.

Representative MORRIS. Would you repeat that, please? I didn't understand. The fees would be 3 percent of what?

Mr. THOMPSON. You see, these are actually set by the local FHA regional office.

Representative MORRIS. In other words, Mr. Walker's office in Albuquerque would set the fees.

Mr. THOMPSON. They would make the final determination, that is

correct.

Actually there would be some leeway depending on the experience of the local office. This would be for marketing in terms of educational material, all office work, and staff processing and marketing, and of course, taking care of all the legal aspects of closing of the cooperative and organizational expenses.

Senator BENNETT. Mr. Chairman, I think the witness has misunderstood your question.

I understood your question to be what financial responsibility or obligation does the Los Alamos Community Homes, Inc., owe to the Foundation for Cooperative Housing because it is a member of that group, and not what fees it charges the people it serves. Do you pay any dues or fees?

Mr. THOMPSON. At this time?

Senator BENNETT. At any time.

Mr. THOMPSON. FCH would be a subsidy of the Foundation and would be the working arm here. We would be employed by the Los Alamos Community Homes.

Senator BENNETT. You are still missing my point. You have an organization you call the Los Alamos Community Homes, Inc.? Mr. THOMPSON. Correct.

Senator BENNETT. Which you say is a member or has some relationship with a national organization called Foundation for Cooperative Housing.

Mr. THOMPSON. No. Los Alamos Community Homes would be an independent corporation, entirely independent. They would at their own discretion hire FCH or hire somebody else, if they wanted to hire anybody.

Representative HOSMER. What is it you hire them for-management advice, counsel in drawing papers?

Mr. THOMPSON. Because cooperatives are a little complex, normally you would hire them to organize the cooperative. After a cooperative is in existence and actually operating, you would have a management firm. FCH also provides those services.

Representative HOSMER. IS FCH a profit or nonprofit organization? Mr. THOMPSON. I don't understand the question.

Senator BENNETT. Does it exist to make a profit or is it so-called nonprofit ?

Mr. THOMPSON. Los Alamos Community Homes is nonprofit.

84-223-67-3