Senator BENNETT. We are not talking about that. Mr. THOMPSON. FCH, as a hired firm, of course, would like to make a profit. Nationwide we don't. You can check this out in Washington with our local counsel and our home office. We would like to make a profit. Representative HOSMER. Is it a corporation? Representative HOSMER. Does it have stock? Mr. THOMPSON. Not public stock. The FCH company is a wholly owned subsidiary of a foundation. Representative HOSMER. What foundation? Mr. THOMPSON. The Foundation for Cooperative Housing. Senator BENNETT. Is the Foundation for Cooperative Housing a nonprofit organization? Mr. THOMPSON. That is nonprofit; yes, sir. Senator BENNETT. Then it has a profitmaking subsidiary, which serves you, which is a corporation? Mr. THOMPSON. We are putting a lot of time on this, but it may be necessary. The subsidiary, which would be FCH Services, Inc., would be a profitmaking company. The foundation would not. Los Alamos Community Homes would be an entirely different entity with no responsibility whatsoever to the foundation or to anybody else. It is an independent organization. Senator BENNETT. You hire them and pay them a fee. Mr. THOMPSON. Los Alamos Community Homes would hire us and pay us a fee so long as they saw fit. Senator BENNETT. I am talking about you. Did you hire the profitmaking subsidiary to help you organize and to provide you with management advice, and did you pay them a fee? Mr. THOMPSON. Maybe we should get our relationship a little bit clearer here. I am with the FCH company. Senator BENNETT. Okay. Mr. THOMPSON. Los Alamos Community Homes has entered into a contract with us. That is correct. Senator BENNETT. And you expect to derive a fee from that contract? Mr. THOMPSON. If and when there is a cooperative formed, we would expect to get a fee, that is correct. Senator BENNETT. But you don't charge anything for your services short of the time they actually organize. Mr. THOMPSON. That is correct. There is no money expended at this point. We do have some deposits, but they are fully refundable. Representative HOSMER. You and other persons make your living by working for this Mr. THOMPSON. I do. The people here (referring to Mr. Rawcliffe and Mrs. Hoak) and other people who are on the board of directors of Los Alamos Community Homes are residents actually of Los Alamos. They are people who live in the multifamily units we are discussing today. Representative HOSMER. But you make your living working for- Representative HOSMER. Thank you. Representative MORRIS. Will your furnish the subcommittee with a list of the officers and directors of FCH, please? (See p. 32.) Mr. THOMPSON. Perhaps it would be appropriate for me to make copies of all previous submissions that we presented to the prior hearings of October 25 and January 11. I think this would cover it in detail. Representative MORRIS. We already have that. Is a list of the directors and officers of your corporation in that record? Mr. THOMPSON. I am sure the five members of the board of directors are listed in that voluminous material. Representative MORRIS. If it isn't, would you make that available to the committee? Mr. THOMPSON. Certainly I will. Representative HOSMER. Does your company have a brochure of some kind? Mr. THOMPSON. Yes, sir, I have some in my car. Representative HOSMER. Would you submit a brochure to the committee for its files? (On file in the Joint Committee's offices.) Mr. THOMPSON. I might comment also that the members of the board of directors who, of course, work at various jobs in Los Alamos will try to be present so you may question them. The two people who are present with me today are members of the Los Alamos Community Homes. They are not on the board of directors. The board members will try to be present if they can possibly get away from their jobs. Representative MORRIS. I assume since Mr. Rawcliffe and Mrs. Hoak are here they speak for the Los Alamos Community Homes, Inc. Mr. THOMPSON. That would be correct. Representative MORRIS. Whether they are members of the board of directors or not, they are speaking for the organization. Without objection the two letters of August 8, 1967, one from the Cooperative League of the United States signed by Mr. Southard, and the other from the Foundation for Cooperative Housing signed by Mr. Campbell will be made a part of the record. You may proceed. (The correspondence referred to follows:) THE COOPERATIVE LEAGUE OF THE U.S.A., Re August 11, 1967 hearing on bills to change procedures for sale of multi-family apartments at Los Alamos. LEONARD M. TROSTEN, Esq., Staff Counsel, Joint Committee on Atomic Energy, Congress of the United States, Washington, D.C. DEAR MR. TROSTEN: Last January, 1967, we had the privilege of submitting to Franklin N. Parks, Esq. a letter setting forth our views on the disposition of the apartment houses at Los Alamos to Section 213 housing cooperatives. In connection with the hearing scheduled for August 11, 1967, which will concern bills scheduled to change the procedures for such sale, we would like to add the following brief comments: 1. Removal of priority for Section 213 housing cooperatives. We regret that the Report of the Committee on Disposal of Multiple-Family Housing at Los Alamos, and the proposed bills both have eliminated the priority to purchase which the present legislation accords to housing cooperatives. The difficulties which concerned the Committee would be eliminated by two provisions in the bills, namely: (a) that the cooperative need only obtain priority interest of 70% of the occupants of an apartment house in order to obtain the priority to purchase it; and (b) that a nonacquiring occupant of a housing unit may obtain a 15 months lease. The addition of these two provisions would make it easier for the housing cooperative to obtain title to an apartment house being sold by the AEC; and at the same time, it would minimize dislocation of nonacquiring occupants. This disposition of the apartment houses to Section 213 cooperatives, as priority purchasers, would be in the best interests of the AEC and of the U. S. Government. Committee's report mentions (p. 26) the possible later problem to occupants in Los Alamos of unreasonably large rents. The sale of the apartment houses to Section 213 housing cooperatives would eliminate this problem for the life of the cooperative's mortgage, which might be 25 years or more. Under existing law, a Section 213 housing cooperative would have to obtain the permission of the Federal Housing Administration (FHA) in order to increase its carrying charges; and any such increase would be uniform and be applicable to all members. In consequence, there is built-in control to prevent unreasonable rent increases for the life of the FHA-insured mortgage. Such control would be automatic and not require additional supervision or effort by the AEC. This disposition to Section 213 housing cooperatives would also solve the problem of possible speculation in the apartment houses and misuse of the deductions provided by law in computing their sales prices. In permitting priority purchasers to obtain deductions, the present statutes intend to assist such priority purchasers to get good housing at a lower cost to themselves. It did not intend to permit them to make a speculative profit by immediately transferring the property to third persons who could not themselves qualify as priority purchasers. Enforcement of a restraint on such transfers would ordinarily be a difficult problem, and we can understand why the AEC may not be interested in undertaking such an obligation. But, we would like to point out that such restraint is automatic if the purchaser is a Section 213 housing cooperative. The cooperative is regulated by FHA during the existence of the FHA-insured mortgage and no such transfers are possible. 2. Stable home ownership. The existing Act showed the intention of Congress to dispose of the apartment buildings so as to insure stable home ownership by residents of Los Alamos, and prevent speculation in the homes, unreasonable rises in rents, and absentee ownership by third parties not residing in Los Alamos. All of these desirable results, and others, automatically are obtained when the property is disposed of to a Section 213 housing cooperative. a. The Section 213 housing cooperative, with its long life and continued supervisory control by the FHA, gives a continued opportunity for low cost home ownership to persons who wish to reside in Los Alamos. It does so because membership in the housing cooperative is open to all persons who are living in Los Alamos or who are planning to live there. b. Inasmuch as persons residing in Los Alamos may be reassigned, it is of great advantage to them to be able to transfer or sell their dwelling at the lowest possible cost. The transfer of a dwelling in a housing cooperative does not require the payment of real estate brokerage fees, legal expenses for the preparation and transfer of deeds, Federal or State stamp taxes, and other expenses for the normal sale of an individually-owned home. Instead, for a modest fee the entire transaction is recorded on the books and records of the cooperative housing corporation. The cooperative frequently performs the task of finding a buyer for the dwelling, or depending upon the provisions in the By-Laws, the seller may find his own buyer at his own selling price. Similarly, in the event of the death of a member, the cost of transferring the dwelling to his heirs is minimal. c. In other FHA-insured housing cooperatives, it has been possible to work out arrangements that make dwellings available to persons who are assigned to hospitals, or other institutions in the neighborhood of the cooperative. A similar arrangement might well be made with the Board of Education to provide dwellings for the teachers who come to Los Alamos each fall. d. Because of its nonprofit operation, professional management, volunteer efforts of its members and excellent FHA-insured financing, the Section 213 housing cooperative can provide good housing at substantial savings over comparable rental dwellings. The members have a continuing interest in maintaining efficient, low cost operation because any increase in carrying charges must be paid by all. So these advantages are of a continuing character and available to new members as well as old. e. The members of the Section 213 housing cooperative are entitled to the same federal income tax benefits as any other homeowner. f. The FHA-approved budget for a Section 213 housing cooperative provides a forced, automatic savings plan to pay for the cost of maintenance of the physical property, and to replace items of equipment as they wear out over the years. In consequence, the physical dwellings will maintain their value for a long long period of time, and will not deteriorate into slums or substandard dwellings. g. Finally, the cooperative is able to control the standard of its immediate neighborhood and the uses to which the dwellings are put. It can prevent unauthorized use of the dwellings for commercial purposes, and it can prevent the occupancy of its dwellings by persons who do not abide by its rules and regulations. Thus, the quality and character of the Los Alamos residential areas will be maintained by cooperative ownership. 3. Types of qualifying housing cooperatives. In the interests of protecting the unsurpassed reputation which Section 213 housing cooperatives have with FHA, the housing cooperatives which qualify as priority purchasers should be limited to those which will be of a viable size and able to supply the professional management which is essential for success. It has been the experience of The Foundation for Cooperative Housing, a member organization in the Cooperative League of the U.S.A., that housing cooperatives should have at least 100 members. Such a cooperative is able to afford the needed professional management. Professional management is particularly needed in Los Alamos, since the housing cooperatives will be new forms of organization and there are no other cooperatives in the neighborhood on whom to rely. The report of the Committee stated (p. 11) that the FHA was requiring that a housing cooperative had to demonstrate that it has established an adequate management program. We endorse this position of the FHA and urge that it be adopted as the position of the AEC. The AEC itself took a similar position before the Sub-committee on Communities of the Joint Committee on Atomic Energy in 1962, 87th Cong., 2d Sess. Brigadier General Betts, Director of Military Application of the AEC, agreed and told the Committee that AEC concurred in the views of Housing and Home Finance Agency (HHFA) that small housing cooperatives should not be encouraged to buy the Los Alamos apartment buildings. General Betts testified that the AEC concurred with HHFA that "the economics of managing, improving and maintaining small cooperative militate against such sales."-and that: "In the context of the foregoing, the AEC concurs in the view of HHFA that such sales are feasible, but we do not favor such sales." 4. Nonprofit cooperative housing technical service organizations. The nonprofit Foundation for Cooperative Housing and its wholly-owned nonprofit subsidiary, FCH Company, Inc., (now called FCH Services, Inc.) have helped in the organization of the housing cooperative, Los Alamos Community Homes, Inc. entirely comprised of project-connected persons and meeting all of the requirements of Section 213 of the National Housing Act as amended. This housing cooperative complied with the requirements for priority purchase under the existing Act. Of course, under the proposed more liberalized provisions, this housing cooperative will also qualify. The Foundation for Cooperative Housing is a member of the Cooperative League of the U.S.A., and FCH has participated in the successful organization of over 100 housing cooperatives in more than 20 States of the United States. Many of these cooperatives were organized under Section 213. FCH is well qualified to serve as a cooperative housing technical servicing agency, and the FHA has recognized this fact. In its administration of the Section 213 housing cooperative program, FHA has long recognized the importance of technical assistance in the organization of a Section 213 housing cooperative. FHA has administratively ruled that such technical assistance is essential, and has permitted the inclusion of the cost of such technical assistance in determining the mortgage amount on the cooperative's property. Successful development of the housing cooperative requires technical assistance from an experienced, qualified organization, such as FCH, and the efficiencies which result from such technical assistance more than compensate for its cost. In any event, the cost of these technical services must be met in some manner, and if not performed by qualified efficient organizations, the cost of such services is greatly increased. Such technical assistance does not mean that the resident members and occupants of the dwellings in the housing cooperative will not retain control. As soon as the resident members take over the operation of their cooperative housing. only the resident members will be able to vote in the elections. The resident members will elect their officers and directors on the basis of one member-one vote, and these officers and directors will control the management and continued operation of the housing cooperative. Professional management, responsible to the cooperative, will handle the day to day operations. CONCLUSION We urge that the proposed liberalizing amendments continue the priority for Section 213 housing cooperatives, allowing them the benefit of the liberalized requirements as to the percentage of occupants needed and the broader definition of eligible members; and that such housing cooperatives be required to be of a minimum size of 100 members, so as to permit economies of scale and support the needed professional management. In the event that the AEC does not recommend priority for such Section 213 housing cooperatives, we suggest that the statutory language be clarified: (a) to make it plain that the ownership of these dwellings is intended to be limited to residents of Los Alamos, and (b) to prevent speculative profits, ending up with absentee ownership of the apartment houses by persons not resident in Los Alamos. We thank you for the opportunity to present this information. SHELBY EDWARD SOUTHARD, Assistant Director. Mr. SHELBY EDWARD SOUTH ARD, CONGRESS OF THE UNITED STATES, Assistant Director, The Cooperative League of the USA, DEAR MR. SOUTHARD: This is to acknowledge and thank you for your letter of August 8, 1967 addressed to the Staff Counsel of the Joint Committee on Atomic Energy, concerning sale of multi-family housing units at Los Alamos. This letter was considered by the Subcommittee on Communities of the Joint Committee at its August 11, 1967 hearing in Los Alamos on this subject. In this connection, please furnish for the record of this hearing a list of the members of The Cooperative League of the USA, and of the officers and directors of the League. In addition, please furnish a statement describing the background and activities of the League. Thank you for your cooperation. THOMAS G. MORRIS, Chairman, Subcommittee on Communities. Hon. THOMAS G. MORRIS, THE COOPERATIVE LEAGUE OF THE USA, Chairman, Subcommittee on Communities, Joint Committee on Atomic Energy, U.S. House of Representatives, Washington, D.C. DEAR CONGRESSMAN MORRIS: In response to your letter of August 17 asking for a list of the officers and directors of the Cooperative League of the USA and of our background and activities, I am glad to enclose herewith a folder in which all this information is provided. We are glad that our previous communication proved to be helpful at the hearing in Los Alamos. The enclosure may be made a part of the hearing record if you desire. Sincerely yours, SHELBY EDW. SOUTHARD. |