(2) Grant an additional 60-day notice period for the benefit of all displacees covered by section 5-723 (b) in the event any change is made in the terms under which real property along the Maine Avenue waterfront is leased or in the redevelopment plan for the waterfront area.

(3) Establish a new formula for determining rentals to be offered to persons entitled to a priority of opportunity to lease pursuant to said section. This Agency believes that this bill is not in the public interest and opposes its

enactment.

Under District of Columbia Code section 5-723(b), the present class of business concerns entitled to a priority of opportunity to lease waterfront land is limited to those displaced from squares 354 and 355 and the water frontage lying south of Maine Avenue SW. between 11th and 12th Streets SW., by reason of Public Law 85-821, enacted August 28, 1958. This bill would extend this priority to all owners of business concerns displaced by urban renewal or related activities from the Maine Avenue waterfront area between 14th Street SW. and Fort McNair.

In our opinion, the proposed legislation would not increase the relocation opportunities of waterfront displacees. Waterfront displacees not presently entitled to priorities by virtue of section 5-723(b) of the District of Columbia Code and House Report 2081, 86th Congress, 2d session, which is interpreted by this Agency to mean that Hogate's and the Flagship Restaurants are to be granted the same priority as business proprietors identified in that section, are to have a priority to lease waterfront land not needed to satisfy the priorities of those business proprietors identified in section 5-723 (b) and House Report 2081. In addition, there is a priority, pursuant to section 7(i) of the District of Columbia Redevelopment Act of 1945, as amended (D.C. Code, sec. 5-706(i)), to relocate in facilities constructed anywhere in an urban renewal project in the District of Columbia, which is available to waterfront displacees not covered by section 5-723(b).

The proposed legislation would be adverse to the administration of the redevelopment of the waterfront area and would be harmful to priority holders.

There has been considerable criticism of delays in the redevelopment of the waterfront area, and all concerned agree that further delay is undesirable. The proposed legislation would substantially delay waterfront redevelopment by (1) vitiating our notices to displacees now covered by section 5–723(b) by virtue of the necessity of reinstituting the notice period to all present priority holders; (2) preventing the leasing of any waterfront land for redevelopment for at least 6 months from the date of its enactment; (3) encouraging present priority holders to seek defeat of this on grounds that enlargement of the class of displacees entitled to the priority adversely affects the original priorities granted by the Congress; and (4) granting additional 60-day exclusive priority periods each and every time a change, however minor, is made in the redevelopment plan for the waterfront area or in the terms of the Agency's lease agreements.

With respect to (4), supra, it appears to us that the continuing possibility of revival of displacees' exclusive rights, even after lease to others of the sites in which they might become interested following exercise of their priority in the first instance, together with the added possibility that such revival could vitiate any such lease, would create such confusion as to render impossible administration of the waterfront leasing program. We believe protection after leasing should be sufficient. The provisions of section 12 of the Redevelopment Act, requiring the written consent of a plan modification of any lessee or purchaser of project land affected by such modification, affords ample protection to waterfront lessees after a lease is executed.

The rental formula in the proposed legislation appears to us to be undesirable. By limiting the rental charged displaced businesses for waterfront land to 6 percent per annum of the value of such land, the legislation may interfere with our ability to obtain long-term private financing guaranteed by the Housing and Home Finance Agency to cover our costs in preparing the waterfront area for redevelopment and adversely affect the financing feasibility of urban renewa activiites in the Southwest area and in the District. The Housing and Home Finance Agency reserves the right, in connection with leases of land in a federally assisted project, to insist upon a rate higher than 6 percent if interest rates on long-term bonds are such that a rental rate in excess of 6 percent would be required to service and retire the long-term bonds issued in the amount of the fee value of the land leased to a developer. If a limit on the percentage of land value to be charged as annual rent must be imposed, that limit should be the market rental rate prevalent in this area at the time of execution of a waterfront lease, or a rate agreed to by the Housing and Home Finance Agency.

Furthermore, in relating land value to the specific purpose for which waterfront land is used by a priority holder under a lease agreement with this Agency, the proposed valuation formula would necessitate deferring the establishment of a rental rate until after the construction of a facility by the displacee and perhaps until that facility had been in operation for some time. At such time as a valuation for the specific use could be established any interim rental would have to be adjusted. If the amount theretofore charged by the Agency proved to be excessive, the displacee would have to be given a credit. If the amount charged was inadequate, the displacee would be required to cover the arrearage. In our view, this method of establishing rentals for waterfront land would be contrary to established practice both in private industry and in government. Of still greater importance is the fact that this method of establishing rentals for the waterfront would create uncertainty regarding the rentals to be realized by this Agency from its waterfront leases and thereby make it impossible to sell long-term bonds based on lease(s) of waterfront land.

In addition, that portion of the rental formula contemplated by the proposed legislation which would require a reduction in the value of waterfront land due to normal public charges on such land is clearly contrary to the public interest in that it would freeze the District's tax base. The present valuation formula for waterfront land takes into account the cost to redevelopers of site preparation. The views expressed herein have not been submitted to the Bureau of the Budget for review and comment. Consequently, no determination has been made as to the relationship of this proposed legislation, and of our comments thereon, to the program of the President of the United States.

If you desire additional comments, including amplification of the foregoing, please let us know.

Sincerely,

Mr. DOWDY. Mr. Sisk?

PHIL A. DOYLE, Executive Director.

Mr. SISK. Mr. Doyle, when you opened your statement you broke the bill down into what you considered the three specific areas which sought to deal with the three objectives and, first, you felt it would increase the number of people having priority rights, if I understood you.

Mr. DOYLE. Yes.

Mr. SISK. What would the 21 go to? What figure?

Mr. DOYLE. I do not know the additional number.

Mr. SISK. You had some general idea. Is it 30 or 40 people?
Mr. DOYLE. I think it would probably double it.

Mr. SISK. Double it?

Mr. DOYLE. Yes.

Mr. SISK. To some 40 or 45?

Mr. DOYLE. Yes.

Mr. Dowdy. I think that is about right.

Mr. DOYLE. Then I think that you would inevitably have to start your 6-month notice all over again because this bill then would not leave any superpriority for those people who are on the old Municipal Fish Wharf.

Mr. ŜISK. Say that again. I did not get it.

Mr. DOYLE. It would not leave any special priority for those people who were displaced in the municipal fish wharf.

As I understand the bill, it would give this new group of priorityholders equal priority as between them and would necessitate a 6-month notice.

Mr. SISK. In other words, this group that you have been referring to as having a super priority would actually no longer enjoy that super priority?

Mr. DOYLE. Substantially dilute it, I would think, and increase the chances of overlap and as a matter of fact, it might be that from

the standpoint of paying the prices concerned you might then get in the extra group people who were much more willing to pay the prices. You see the municipal fish wharf was on stalls. Do you remember them?

Mr. SISK. Yes, I am familiar with them.

Mr. DOYLE. Relatively small spaces and I was quite surprised when this bill came out because I had been under the impression that the law as it now stands was the real intention of the people interested in this problem to take care of this group of people who had been tenants of public space and who could, I think, normally be expected to have the greatest difficulty in getting relocated.

Mr. SISK. Well, in other words, as I understand your explanation this bill rather than extending let us say, giving a 60-day additional period of time in which priority holders would be given a renewed chance either to select, or in other words make a choice would actually mean that what you do then would be to start over again entirely with 180 days.

Mr. DOYLE. That is the only way I can figure it.

Mr. SISK. I can understand that if you are bringing in a new group, you are putting the entire group on the same basis, diluting the original group of 21 and actually upgrading the priority rights of the other 20 or 21, whatever it may be. Is that generally what you would understand it to be?

Mr. DOYLE. That is right.

Mr. SISK. Then in your last objective for the last comment with reference of course to the setting in a sense of a limitation on the price, dealing with the 6 percent as I understand, you feel 6 percent would be impractical? I am not discussing really the merits or demerits. I am trying to find out how you feel this would work, if it is practical or not under present bond costs, and so on.

Mr. DOYLE. I think it would probably work out, but if it did, it would just be luck that it did. What we do is to have appraisal made every year to determine what a fair rental is and what percentage of the fee value constitutes your fair rental.

The last such appraisal which we had was 3 months ago, speaking from memory and said 6 percent was a fair rental. That is what we had been charging and that is what we are now charging.

Mr. SISK. That is 6 percent at the present time?

So

Mr. DOYLE. Yes, but the borrowing rate keeps going up. So if it be that you are going to finance on the basis of long-term bonds, even though the going rate is 6 percent the bond rate goes up to 4.5 to 5, you would have to increase the rent for that reason alone. I make this point, that I think you include it in the statute, if you want this bill passed, to give some leeway and I do not think it should be given to the agency. Just give it to the Administrator of the Housing and Home Finance Agency because he is determining these rates for projects all across the country. So if it did go to 7, we would not be prevented from leasing land.

Mr. SISK. Well, as I understand you feel generally that HHFA requires a 3-percent cushion, is that approximately it?

Mr. DOYLE. Maybe only 2.5 percent but it would have to be a fairly substantial difference to be able to amortize these bonds.

Mr. SISK. I believe that is all.

Mr. DOWDY. Mr. Garber?

Mr. GARBER. Mr. Doyle, in your statement you indicated that the bill would probably increase the number of priority holders to about double the present number. I believe you stated that it was your purpose in any event to take care of all the displaced businesses regardless of whether they were considered at the present time or not. Do you not come out with about the same result then with the amendment as you do without insofar as your expressed intent is concerned?

Mr. DOYLE. Yes, I think you do and I think if this were in the bill you were writing originally that I objected to-the only reason I object to it now is that this does mean that you start the 6 months running all over again which probably means that the appraisals you got are getting older and older. I think prices are going up steadily for urban real estate and maybe we better get this thing settled now before we let another 6 months run.

Mr. GARBER. Assuming that you were able tomorrow to say that we had taken care of the 20 or 21 or whatever proportion of those have made an application for relocation, how long do you think it would be that you would need to consider the request or desires of the others that were displaced from the waterfront?

Mr. DOYLE. I think it would go something like this. Let us say we get these appraisals in the middle of April. The board decides by the 1st of May whether prices should be as they have already decided, whether they should be adjusted. We then write all 21 again and say this is the best we can do and these are the prices. If any of you want to come in, do so and we will establish public hearings. Let us say another 1 or 2 come in over and above the 12 that may be, the 11 or 12 out of the 21. Let us say it becomes 13 or 14. We could go ahead and schedule the public hearings right away and then knowing what land they were going to take, we could then write to these others and say this is the land which remains and these are the prices. So we would proceed with them in quite orderly fashion.

I think all of these leases could be executed by this time if we had not run into the price difficulty.

Mr. GARBER. Now, the presentation to those who are not presently included in the limited-priority group, what would be a reasonable time to go to them and say we are going to let you have a priority here. Do you want to relocate and if you do, we want you to apply in "X" days. How many days would you consider a reasonable time for a person to find out what he would be required to do or what his costs would be, and so on?

Mr. DOYLE. I think the people who have known about this problem because they attend meetings in our office and they knew it was policy, that 2 months would be enough time, and I think also that if someone took 3 months, it would still be land left and you could still take care of him. It is not right to the priority holders, both types, under the fish wharf and the others, put it in writing, so long as land is left, if they change their mind and want to come in, they will get a chance to exercise their priority. I do not think there is any priority holder who has ever made any complaint that we have not kept them fully informed and trying our best to let them exercise their priority. The complaint has been that the price is too high.

Mr. GARBER. Now, inasmuch as you mentioned price, these land prices were reached by appraisal procedures?

Mr. DOYLE. Yes.

Mr. GARBER. Is there any difference between what was required of the leasee or purchaser here than was generally required elsewhere in any urban renewal area in the District of Columbia?

Mr. DOYLE. Well, I think not in the generic sense because whenever you sell land in urban renewal projects, the buyer of the land or the leasee of the land has to conform to the plan. Now he has more or less, as compared with other land, restrictive requirements on urban renewal land, for instance on the residential sites, he can only put up so many units. He can only cover so much of the land, and so forth. The requirement on the waterfront which has occasioned the most dissatisfaction has been the requirement that the buildings be elevated to a certain height; that height being determined by the height to which the river, the channel gets every 30 or 40 years and was done so that in the event of flood, the water would be under the building rather than in it.

Since this requirement existed, it seemed quite reasonable to require that that space under the buildings be used for parking. This was not underground parking in that sense.

Mr. GARBER. Is that private parking or public parking?

Mr. DOYLE. That was private parking. We do have the idea at one point of even getting the same kind of underground parking under the park areas and I would think that with parking getting as scarce as it is in Washington and every other city that ultimately that might develop. You remember the waterfront has parks interspersed.

Mr. GARBER. Mr. Doyle, when you say "private parking," do you mean that the parking under the structures built by each individual priority holder is absolutely and solely under his control to the exclusion of everybody else, or does he have to admit other persons to park in that space?

Mr. DOYLE. The plan requires that he has to permit other parkers to get through it so it would be to his advantage as well as others to have circulation there. I think it would be possible to interpret that plan as meaning that he has to let the businessman next door or down the street let his customers also park in his space.

I think this is also subject to the interpretation that he can control the space except that he has to give the other fellow's customers access so there would be a line through which cars could run. This is called a double-edged sword. In some cases, you might be better off if you had the right for your customers to park in the other fellow's space in terms of the best use or utilization of all of this land. I think most of the priority holders prefer that they have absolute control of the space under their structure. Under the plan, subject to the interpretation it could have I expect they would have to give access to the next spaces.

Mr. GARBER. So in that sense, they have only a limited-they actually have no preference to the parking space under their own establishments. They would share it with other businesses?

Mr. DOYLE. I think the plan is subject to the interpretations that they have control.

Mr. GARBER. You can have control over it, but that would not entitle you necessarily to the preference of the use.

Mr. DOYLE. They have control over it in the sense they would have preference in use.