Community Facilities Act of 1959

Mr. SPENCE. What would you consider such an interest rate? Mr. HAZELTINE. An interest rate is not prohibitory when the debt service is within the revenue which is obtainable from the project. If the revenue from the project will not cover that, then I would say that they were not able to obtain funds.

Mr. SPENCE. Isn't it a fact that in most of the cities there is a constitutional limitation on the indebtedness, the tax rate, and expenditures of the municipalities?

Mr. HAZELTINE. There is a limitation on the general obligation for that community but there is no limitation on the revenue bond indebtedness.

Mr. SPENCE. I realize that. Therefore they must resort to revenue bonds.

Mr. HAZELTINE. That is correct.

Mr. SPENCE. The revenue bond usually bears a higher interest rate than the general obligation, isn't that true?

Mr. HAZELTINE. We made a study of that, and we determined that on an average, a revenue bond would bring about three-eighths of 1 percent higher interest rate than a general obligation for the types of loans we are making.

Mr. SPENCE. It seems to me that $58 million in loans in 5 years is entirely inadequate to justify the administration program, when you consider the immense need for these facilities.

Mr. HAZELTINE. I think it is quite the contrary, sir, if I may say so. The fact that we have handled only the very smallest ones, that the applications that have come to us have been in this amount-we have not turned down any reasonable application where money was not available elsewhere, so by using this $58 million which you are talking about, it sets for itself the relative need for this type of program. Mr. SPENCE. Can you insert in the record the number of applications which have been made for loans?

Mr. HAZELTINE. Very easily, sir.

Mr. SPENCE. And the number that have been granted?
Mr. HAZELTINE. We have made 220 loans.

Mr. SPENCE. How many applications have you altogether?

Mr. HAZELTINE. We have had many more, probably twice, at leastI can give you that amount-total number of applications. But one of the things which makes the present program so interesting, in my opinion, is that in many applications made to us, the information furnished by us to the applicant has rendered it possible for them to go to the regular sources of finance and get their money without completing the application and going through us.

I have a list here of the loans which we approved, which, after they were approved, were bought by other investors, so that we didn't make the loan at all. It totals some $4.3 million, and in number probably 20 very nice communities, who, at the time they started to work with us, could not obtain funds; but after we had helped them both with engineering and financial analysis assistance, we had prepared, or helped them prepare such good issues that they went privately, thus saving the Federal Treasury that expenditure.

Mr. SPENCE. Have you a list of those who made applications for loans and were refused? You have that list there, have you not? Mr. HAZELTINE. We have that list.

Mr. SPENCE. Will you insert that in the record?

Mr. HAZELTINE. We will.

The only time they were refused would be in cases where either the community was asking for much more than could possibly be considered proper for that size community, or for some other reason it was absolutely an unworkable financial setup. It would only be refused on that basis.

(The data above requested is as follows:)

Public facility loans program operations through Mar. 31, 1958

Mr. SPENCE. Do you give any character of municipal facilities a priority over others in consideration of loans?

Mr. HAZELTINE. The only priority that is given is written into the statute, the fact that there should be high priority for communities of 10,000 population or less, so that we are dealing mostly with small communities.

I have a list here of percentages, showing the size of community for the 201 loans approved through December 31, 1958. 108 of them have been made to communities with a population of under 1,000; 37 were to communities with a 1,000 to 2,000 population; 32 to communities with a 2,000 to 5,000 population; 9 to communities with a 5,000 to 10,000 population.

For a short period last year we admitted larger communities because of the fact that we thought that there should be some additional construction done, and we then made several loans to communities of more than 10,000 population.

Mr. SPENCE. What is your present limit on the population?

Mr. HAZELTINE. 10,000 or less. That is, priority is given to communities of 10,000 or less, and by giving priority that means the application goes through as fast as we can work it.

Mr. SPENCE. How many cities have made applications for loans for planning?

Mr. HAZELTINE. I have here the number of approvals. I do not have the original number of applications.

Mr. SPENCE. Can you give us the number of applications? Will you insert that in the record?

Mr. HAZELTINE. Yes, sir.

It does not have as much bearing as you might think because many of the applications originally made were made by applicants who did not understand the program, or for some reason or other had just merely put in an application which didn't fit under the statute.

(The data requested above is as follows:)

Program of advances for public works planning as of Mar. 31, 1959