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Mr. Dowdy. Thank you, sir. I believe that is all the questions we have for you.

Mr. Doyle is our next witness.

Mr. DOWDY. General, I have been advised that you have another hearing. As far as I know, we will not require you any further. General DUKE. Thank you, sir.

Mr. DOWDY. You may proceed, Mr. Doyle.

STATEMENT OF PHIL A. DOYLE, EXECUTIVE DIRECTOR, REDEVELOPMENT LAND AGENCY

Mr. DOYLE. I am glad to be here to talk about this proposed bill and I thought perhaps if you had time I would say a little bit about what we have been doing pursuant to the act now on the books.

As we understand the bill, that is H.R. 2814, it would do three things. It would increase the number of business concerns displaced from the waterfront area having a priority of opportunity to lease waterfront land following 180 days notice to lease waterfront land. It would grant, secondly, an additional 60 days notice period for the benefit of all displacees in the event of any change in the terms under which the property is to be leased and third, it would establish a new formula for determining rentals to be offered to persons entitled to a priority to lease pursuant to the section.

The act on the statute books provided for an absolute priority or opportunity for businesses operating at one time in squares 354 and 355 which are located between 11th and 12th Streets, although I was not here at the time, but I understand the intention of that original bill was to make sure that people displaced as a result of the construction of the channel bridge would have an absolute priority.

If H.R. 2814 were passed and you gave everyone from Fort McNair down to 14th Street a priority equivalent to those people who formerly did business on the municipal wharf, I think you would in the administration, under the new law, have to give 180-day notice period and I presume that under the law, a new class, the enlarged class of priority holders would have the same rights as it were to land wherever it is located on the waterfront.

Obviously, as you increased the number who have this absolute right you would increase the overlapping. As it now stands under the present law, there are 20 or 21 business people with the absolute priority. I think there are possibly one dozen of those who expressed to us after we sent out our notice that we had the land priced; we had our redevelopment plan adopted and we had a form of lease, three documents which we thought every prudent businessman would need to make his decision. About a dozen wrote in and said they would like to have a priority. This number would be very substantially increased.

I would like to say that the intention of the Agency was that after we had taken care of those with the absolute priority under the existing act, the others would be given an absolute priority to the remaining land. The others do have, under the current law priority of opportunity because the general law in which the Redevelopment Land Agency operates requires the Agency to have a priority of opportunity. It does have such a priority and in recent months we have sold or leased four or five parcels of land to priority holders.

The agency is doing everything it can to act within the intent of Congress and to give priority holders an opportunity to relocate. We have the feeling that if this law were passed, H.R. 2814, we would not, in fact, increase the priority of opportunity for any businessman. But under the present law, the administration of it, they are going to get that priority.

Now, there have been a good many criticisms from someone who isn't struggling with the problem. It seems like a legitimate criticism in marketing the waterfront land. As you gentlemen are aware, one of the prime difficulties has been in pricing the land. A little later on I would like to speak about our efforts to get the land priced fairly, both from the standpoint of the displaced businessman and from the standpoint of the public. We think that the rental formula in the H.R. 2814 would create a good many difficulties. I think it comes back to the subject we discussed in some detail on the earlier hearing in respect to whether you priced land in general for the use permitted by the redevelopment plan or whether you price it taking into account the kind of operation and the size of the operation of a particular businessman. If you try to price it for the particular businessman, I think that you might find that you could not even price it until the businessman had at least a piece of land and erected a building on it and was in business. This would be, as I think you can see readily a rather difficult and unrealistic way to do it. The bill says it must be priced at 6 percent. That might prove to be a real impediment for two reasons. First, a 6-percent of the fee value might not at one point in time be a large enough amount to enable the agency to offset its cost in getting the sites ready. It might not be enough to enable us to market long-term bonds.

When you lease land, let us say lease land having a value of $100,000, you get 6 percent, or $6,000 a year if you are using the 6-percent rate, as your annual rental with the leasee paying the taxes. You then sell $100,000 worth of bonds which will mature in a period of 32 to 40 years depending upon the particular issue. The interest accruing on those bonds and the principal is paid out of the income from the lease. If you get the long-term bonds at 3 percent as we did in one recent case, the 3-percent difference between your lease income and the payments on the bonds are sufficient to service the bonds, that is pay the interest on them and to retire the principal.

If the going rate were to go to 5 percent so that we had to sell bonds at 5 percent we could not possibly pay the interest and retire those bonds on the difference between the 6-percent lease rate and the 5-percent bond rate.

The Urban Renewal Administration or the Housing and Home Finance Agency, which in the name of the Federal Government guarantees the payments on these bonds, will not ever concur with us on a lease rate until they satisfy themselves that the going bond rate is at a low enough figure that the bond could be serviced and retired out of the lease income. So it is conceivable at some point of time you would have to get instead of 6 percent you might have to get an 8-percent rate. So if this bill is to be enacted, the least that should be done to it is to either set this rate in terms of what the Housing and Home Finance Agency is doing at the particular point in time that you make the lease, or if you want to state it in general terms and say the prevailing lease rate rather than to make it an arbitrary 6 percent as you have it in the bill now.

In respect to the 60 days that you would have to hold things open again in the event of a change in plan, I agree with Mr. Sisk, that if you suddenly said you were going to use this land for apartment houses instead of business places in the first place you would destroy the whole intent of Congress anyway and certainly would have to do something of that sort. If you reduce the price substantially, I think you would have to give everyone a month or two to make up their minds, but this would be those principally who had rejected your proffer in the first place. We did have that experience. We set the prices and notified all the priority holders. Later they were reduced by approximately 10 percent. In that event on that occasion we wrote to each and every priority holder and told him that the price had been reduced and inquired whether or not that changed his mind.

In respect to changes in the plan after you have sold one piece of land, the priority holder does have a substantial power because the law under which we operate says we cannot change the plan unless we get the consent of the priority holders.

Now, our activities under the present bill, in trying to resolve the pricing problem and to satisfy ourselves that we were not taking advantage of any priority holder, or we were not selling the land at so low a rate the public would be harmed, after considerable effort we got the services of three appraisers and we asked them to constitute a review board. Their job primarily under their contract with us was to study the two appraisals which we obtained when we set the prices to which there was a substantial amount of objection by priority holders, to study those appraisals and to study any appraisals submitted by priority holders and then to give us a report.

On the 19th of February, we wrote to all the priority holders under the present act and said as follows:

Mr. DOWDY. That is this February?

Mr. DOYLE. Yes. We wrote as follows:

The agency is contracting with three appraisers to serve on an Appraisal Review Board to (1) study, (a) appraisal reports on the value of waterfront land obtained by the agency from competent disinterested appraisers, and (b) appraisal reports or information or opinions submitted by priority holders and (2) submit a report of their conclusions, based on the appraisal reports, information, and opinions referred to above, as to the fair market value of the waterfront land.

The members of the Appraisal Review Board are Mr. Robert McCuroy, Baltimore, Md.; Mr. William Harps, Washington, D.C.; and Mr. Hatcher Gibson, Washington, D.C.

If you want to submit an appraisal report or information or an opinion to the Appraisal Review Board, please mail your material to Mr. William Harps, 1302 New Jersey Avenue NW., Washington, D.C., in time to reach Mr. Harps by March 15, 1965.

With best wishes.
Sincerely,

PHIL A. DOYLE,
Executive Director.

It is our hope that within the next week or 10 days we will have the report of the Appraisal Review Board and that then the Board of Directors of the RLA can again consider whether the prices they originally established were proper prices or whether they should be adhered to or whether should be lowered. This will mean that we will have had two appraisal reports which were very detailed by two competent appraisers that we will have had those two studies and

reviewed by a review board which also takes into account any information furnished them by priority holders and I know from correspondence that some material was submitted to them.

I would think that with the actual opinions of five appraisers that we should be in position to set prices which would see n to all members of the public, and I would hope to you gentlemen and to the priority holders, as fair prices.

I might say that had the agency wished to establish a record of having leased some land we already have done so because there were among the priority holders some who were willing to enter into lease agreements on the basis of the prices established by the Board.

My feeling about it is-and I think it is shared by the Boardthat until you are absolutely certain that you are going to adhere to a set of prices, it is not fair nor in the spirit of the existing act to lease to any one person. As a matter of fact, if the prices must be established, you must have a redevelopment plan and must have a contract so that everyone can act on an equal basis. If one or more want the same site, some method must be found to settle those disputes. But the crucial and critical issue-well, from the start my connection with this activity has been in the area of pricing of the land. Now, there have been some subsidiary issues but they are all really related to the land. The subsidiary issues have related to the requirements for parking and to the amount of land which any one priorityholder might want. But I think these are all really ractors of the basic question of what the price for the land should be.

Had we been able under the law, as we were not, to sell a couple of parcels as we are selling land, all the other land in all of our other projects on the basis of the solicitation so we can go to the marketplace and find out what the price is, the problem would have been a little simpler. As we understood the law, we were precluded from doing that, which meant that our only recourse was to rely upon opinions of competent and disinterested appraisers.

Certainly, those appraisers knew very well the difficulty that was confronting us and accordingly, exerted themselves to do a very careful job on it. As a matter of fact, when we tried to get the Appraisal Review Board formed, we wrote to those two appraisers and explained to them that we were not questioning their judgment and did not want to do anything unethical. We wondered if they would object to our doing this. They were gracious about it and said they had no objection; that we could turn their material over to the Review Board and now we hope that we will finally get a widespread meaning as is possible on the prices which will be again considered by the Board with the report of the Review Board in hand.

Conceivably then, we could be at the point of holding some public hearings on leases of land to the priorityholders who were specifically covered in the original law-namely, those in the municipal fish wharf-and as soon as those were taken care of, public hearings on leases of land to the other people not specifically covered we feel should have a similar type of priority, the only difference being that the first group would have the first choice on the land. But I do not think, or know, how important that is anyway. It is a fairly compressed area, and in making those selections on sites there is some element of judgment and guessing involved there. So maybe one of the secondary priorityholders in the long run would find, although he

had second choice in the land, he got just as good a choice as someone who got first choice.

Mr. Dowdy. And you are expecting a report from your Review Board in the next week or 10 days?

Mr. DOYLE. Yes, sir.

Mr. Dowdy. I might say, of course, Mr. Searles was here at the time of this original bill that gave priority to some 21 people I believe that were put out. I was here, too, on the committee at the time and I have some recollection of it, and as I recall we considered only those 21 because they were the only ones that were involved in the bill at the time.

Mr. DOYLE. It was the bridge.

Mr. Dowdy. It was the land that the bridge was taking and those 21 were the only ones. Now these other on the waterfront, their businesses were taken at a later time, though their situation, I suppose, was comparable.

Mr. DOYLE. I think it came in connection with authorizing the transfer of the land where the bridge abutments were to the District and the District transferring it to us on the condition these people be given a super priority.

Mr. DOWDY. It is somewhat in the nature of the bill we considered earlier today and that is the reason it was only 21.

Mr. DOYLE. I might say on the matter of the intent of Congress in trying to do our best on it, I would like to think we do so under any circumstances and I am sure we do. But the situation is such that there would be no incentive for any agency to try to do anything other than what the Congress asked anyway. This land has to be developed by someone and certainly there was no reason to try to keep the priority holders from having their chance to do it. Now, I know that some of you feel that we are just Machiavellian almost in trying to price them out of the market or developing a redevelopment plan which is hard for them to meet, but there has been no such intention and this matter of balancing between the public interest in getting a good-looking waterfront, in getting fair prices, and the interest of the priority holders; it is always a difficult thing to accomplish. Mr. DOWDY. Mr. Sisk?

Had you completed your statement, Mr. Doyle?

Mr. DOYLE. I would like to say, Mr. Dowdy, the letter dated February 18, 1965, addressed to Mr. McMillan, contains a much more complete statement than I made this morning on the bill and perhaps the record should include a copy of that.

Mr. DowDY. It will be made a part of the record.

(The letter referred to follows:)

DISTRICT OF COLUMBIA REDEVELOPMENT LAND AGENCY,

Hon. JOHN L. MCMILLAN,

U.S. House of Representatives,

Washington, D.C.

Washington, D.C., February 18, 1965.

DEAR MR. MCMILLAN: Thank you for the opportunity to submit our views on H.R. 2814.

Briefly, this proposed legislation would

(1) Increase the number of business concerns displaced from the waterfront area having a priority of opportunity to lease waterfront land from the Agency following a 180-day notice period to lease waterfront land pursuant to section 5-723(b) of the District of Columbia Code.

47-520-65-pt. 1—2

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