parable accommodations locally for the same price, that is one thing. We feel that before too long, say before many months are gone, we probably would have to set an end of the line and announce it so that those that are trying to hold on forever to something that is real good can't do it. But again we want to be able to provide a resource for them. In other words, if they are dragging their feet we then feel that we can evict at the end of some date, say 4 or 5 months from now. If we can say that they have had an opportunity to rebuild, that we have put them in touch with other Federal agencies or local banks, or other resources, if we have given them the opportunity and the time to do it and then they don't do it, we feel then we can say this is the end of your lease, get out.

Mr. MILLER. In the case of the lease, as I understand it, you would have the lease with the manufacturer. You would also have the lease with the person or family occupying it. Now a spot would need to be picked, and was it necessary to build trailer courts, trailer homes, that is, the locations with the pad where utilities would be offered, the sewer and the water and the electric. There it would be necessary to have a space is what I am getting at. That space would not be available for that many trailers.

Did you need to build that space?

Mr. CAVANAUGH. Well we, of course, built some trailer parks based on sites contributed locally, making the site available for at least the 1-year period, and in each location, each State, there are some of these trailer parks. But by and large most of the families preferred that the mobile home be placed on the lot where they lost their home, and the majority of these homes are on individual lots either owned or held by lease.

Mr. MILLER. Those that are not on individual lots and are on a regular trailer park, would the person that is living in the trailer pay the rental for that park and pay the utilities in that park or would HUD have a responsibility also to pay that part?

Mr. CAVANAUGH. Well the park rental itself was a local contribution. In other words, by and large all these park sites were furnished by the governing body, the locality involved. So there was no cost, say rental charge, for example, that could be computed in the rent, and there was no difference in the rent that was set for those renting in the trailer park compared to an individual site. They are paying their own utilities, of course, unless their income is such that this is adjusted because the utility cost plus the regular rental charge, plus any ongoing housing cost for lost property, if they are paying on a mortgage for a home that was destroyed. This was computed in determining the amount of rent or the rent that they could afford to pay and was part of the adjustment policy. In other words, you add the utility cost plus our nominal rent for the trailer, plus a mortgage payment that they might be paying on something destroyed. That was all part of the computation as to whether they would have to pay more than 25 percent of their income for housing costs.

Mr. MILLER. When you speak of the cost all of the cost it included not only administrative but as an example for some mobile homes it may cost $1 a mile to move those. So moving the mobile home in and back out again you could have a couple thousand dollars charged there, and that could be also calculated in total cost and considered the rate.

50-852-70-9

Mr. CAVANAUGH. The lease cost included the delivery and pickup. There was no additional cost for bringing the mobile home in.

Mr. MILLER. That maximum you listed of approximately $3,700 would include that delivery?

Mr. CAVANAUGH. It included everything including setting it up, including a living package that went in because of their loss of personal things including cooking utensils, blankets, ready to store living. This was part of this $3,700 which was the peak. It includes picking it up and taking it away.

Mr. MILLER. Thank you, Mr. Chairman.

Mr. JONES. Thank you very much Mr. Watson and Mr. Bell and Mr. Cavanaugh for being here.

Our next witness is Mr. George Bernstein, Federal Insurance Administrator of HUD accompanied by Mr. Parrette. We are glad to have you and Mr. Parrette with us.

Mr. BERNSTEIN. Thank you, Mr. Chairman, and I was going to introduce Mr. Parrette but I see there is no need to.

Mr. JONES. Mr. Parrette has been before us for many long hours.

STATEMENT OF GEORGE K. BERNSTEIN, FEDERAL INSURANCE ADMINISTRATOR, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; ACCOMPANIED BY BERNARD V. PARRETTE, OFFICE OF GENERAL COUNSEL

Mr. BERNSTEIN. Mr. Chairman, I very much appreciate the opportunity of coming here today. I understand from the initial request of the committee that you don't wish me to testify on the bills but rather on the flood insurance program in terms of its overall operation and how it would mesh with the disaster program. I think I might give a brief few minute summary of the program since Camille and then answer any questions if I can that the committee poses. Mr. JONES. You proceed in your own fashion.

Mr. BERNSTEIN. Thank you, sir. Last year, at the time of Hurricane Camille under the initial flood insurance program there were only two communities in the United States that had flood insurance, Fairbanks, Alaska, and Metairie, La. The program had gotten off to a discouragingly slow start, which was due to the statutory requirement that there be individual studies to establish an actuarial insurance rate for every community in the United States that wanted flood insurance even if, as the act permitted, we sold insurance in that community at less than the acturial rate. These studies took the Corps of Engineers anywhere from 6 to 10 months to a year, and while we tried to speed up these studies as much as possible, the limited manpower of agencies such as the Corps and the magnitude of the problem entailed meant that these tremendous delays would seriously impede the availability of flood insurance for these communities. So when a provision was proposed last year by Congressman St Germain to enact an emergency program to be added to the flood insurance program for a 2-year period beginning in December of 1969 we endorsed that amendment which became law, and as of today we do not have to get an actuarial rate established for a community but we can establish what is called the chargeable rate for every community where flood insurance is made available. As a result, we have been able to

make insurance available between Camille and today in 191 additional communities, so that we now have insurance available under the national flood insurance program in 193 communities in 31 States across the Nation.

The vast bulk of this insurance is in the gulf coast area in Mississippi. Areas like Pass Christian which was so badly hit are now covered. Texas has about 40 communities with insurance, the Florida gulf coast about 35 to 40 communities covered. New Jersey has about 30 communities covered, and the rest of the coverage is scattered over about 31 States. The agency does require that communities adopt land use and control measures to qualify for the insurance even under the emergency program.

Mr. JONES. Tell us how they qualify.

Mr. BERNSTEIN. They must adopt adequate and meaningful landuse control measures by December 31, 1971, and they must officially commit themselves at the time that insurance is made available to adopt these land-use provisions by December 31, 1971.

Mr. JONES. Now let us take the Four Mile Run project. What did you require of the State of Virginia? You used an area that had recurring floods. How did they come to a base rate? What can the State do about the community?

Mr. BERNSTEIN. The community covering the Arlandria area, both Arlington and Alexandria, gave us commitments as required by the act that by the end of 1971

Mr. JONES. How were these commitments made? Were they just made by resolutions of the municipality?

Mr. BERNSTEIN. That is correct, sir.

Mr. JONES. And they were not firm contracts?

Mr. BERNSTEIN. No; they were not.

Mr. JONES. And they were not firm contracts by the board of engineers that they would make zoning restrictive after the next administration?

Mr. BERNSTEIN. That is absolutely correct. The only hold we have over them aside from the good faith of the community in making that commitment by municipal act-in this case by the city council or some other legislative body-is that on December 31, 1971, if they have not lived up to that commitment flood insurance will no longer be available in those communities.

But the act does not require that they produce the actual zoning ordinance in advance of insurance. It does give the deadline of next year. Originally that deadline was June 30 of this year.

Congress last year extended that deadline to the end of next year before the community had to comply on the theory that there was not enough time for the community to take action.

Four Mile Run is a perfect example of a great need for a different type of zoning, a different type of land use, and a different type of preventive measures, than are in effect today.

Mr. JONES. That is a great question with us. Not only does it involve insurance, but here we just authorized a project under section 201 of the 1965 Flood Control Act for remedial works to be committed by the Corps of Engineers. The corps is going to perform these works. They do not have one scintilla of assurance other than the present administration that the maintenance and operation for that will be provided.

As sure as I am a foot high, if I am still in Congress 10 years from now, they will not zone, and they will be right back up here wanting us to make further repairs.

It seems to me that if we are going to make these zoning ordinances that there should be legal and binding contracts and enforceable in the

courts.

So far, as of June 30, 1970, you have got 5,511 contracts or policies that you have issued. Why is it being so slowly recognized?

Mr. BERNSTEIN. There are two factors. If I may, I would like to first comment again on your previous statement about land use, because that is the heart of the program. If we do not get the communities to produce, this program is worthless, and it should be ended. It is throwing away money because this is 90 percent Federal subsidy in terms of the premium that is charged. It is an average of 90 percent of what the actuarial rate should bring, to bring the insurance within the means of most people in the communities.

If we do not get meaningful flood prevention, meaningful zoning, meaningful land use, then the act's purpose is not being followed.

I am not upset by the fact that we do not get it in advance other than a commitment of the community by resolution, because that is what the act provides. The communities are giving us what the act provides. But the fact is that it is our responsibility by the end of next year to cash in on that and make sure that the price for this subsidized insurance is obtained; namely that the community then puts into effect the land use controls and the zoning and the preventive devices that they have committed themselves to do now.

As to why the program is moving so slowly, I do not think that now it is moving that slowly. I think the 5,500 reflects the fact that the program went into effect, true, in June of 1969 but up through the first of this year we only had three communities in. The big push has come in the last several months when we have covered more than 160 or 170 communities to get to the present 193.

In an area like Minot, N. Dak., where there was a significant flood hazard, there was something like 600 policies sold in a week. Unfortunately, there is still the second factor, which is human nature.

Mr. JONES. That is another one. We just provided $9,600,000 the other day for local protective work. Again I wonder if we are going to make sure that local responsibilities are going to be useful in the years ahead in seeing that zoning and those other maintenance and operation matters are continued by the local communities. These things are getting out of hand.

Mr. BERNSTEIN. To speak practically, sir; I think on a bread-andbutter basis one of our office's great responsibilities in the coming year is going to be to withstand pressures, and I know that pressures will be placed on Congressmen, too, to water down the land use and control requirements, so that come December 31, 1971, they really do not have to come up with anything. I think it is essential that we stick to our guns and that Congress sticks to the language of the act. Mr. JONES. It is refreshing to hear you say that, because I have had a lot of misgivings about it.

Mr. BERNSTEIN. Frankly, that is one of the reasons I opposed extending the program into other areas than those covered by the act right now, which are one to four family dwellings and small businesses.

Let us see if this works. Let us see if we get our money's worth out of this program before we start throwing more money into the

program.

The basic purpose of the act, as expressed by Congress when it adopted it, is that in the long-run it will be cheaper to the public and the taxpayer to prevent flooding, to prevent losses, than to remedy after the fact with disaster relief. Therefore let us develop a program that gives the incentive of subsidized insurance to make sure that the communities come in and adopt these land use controls to prevent flooding, because prevention is still the key, not insurance.

Mr. JONES. Mr. Clausen made the observation this morning in agreement on that point. He feels that any insurance program might forestall the capital investments necessary to carry out the land use controls necessary to reduce the hazards of flooding, if it can be done.

Mr. CLAUSEN. If the chairman would yield, there has been a tendency to downgrade the dollar allocations for water-related public works and Interior Department projects, as well as soil conservation projects.

It seems to me that if we continue to expand the insurance effort you are going to minimize the amount of emphasis that we need to develop to justify the continued release of funds, and I personally believe that there is a need to at least triple the annual appropriations, particularly in the area of flood control.

Once this occurs that is the kind of investment that is going to give you much in the way of dollar return, as you and I have discussed and the Chairman and I have discussed. I am very pleased to hear your testimony.

As a matter of fact, it sounds like he is giving your speech and my speech, Mr. Chairman.

Mr. JONES. I will say that I did not expect it.

Mr. BERNSTEIN. Thank you.

Mr. Clausen, on your point I do not think the programs are inconsistent if both are properly administered. I think the act is a very sound act, the Flood Insurance Act, because there are provisions in there which some people think create hardships, but which in effect create the need for the preventive devices that you speak of.

To be specific, new construction in an area of special flood hazard cannot get the subsidized insurance and must pay an actuarial rate. Taking an area like Fairbanks, Alaska, for example, in the main street at Fairbanks you will get an actuarial rate of almost $23 or $24 a hundred. It is obviously ridiculous and prohibitive.

In an area on the gulf coast, to take Pass Christian, the actuarial rate for many of the houses there is $12 a hundred. That means new construction of houses in Pass Christian would have to pay $12 a hundred for insurance. It cannot afford that, even if it is available under the Federal program.

But the new Mississippi State zoning law, if applied properly, would have a significant effect in reducing the actuarial rate. We estimate that on an equivalent house for which they would have to pay an actuarial rate of $12 a hundred, the actuarial rate would be reduced to about 90 cents a hundred with proper zoning, with proper first floor elevations on the property.