1 February, March, and April 1965. 2 2 resulted in hung jury. 3 August 1960. defendants filed notice of appeal STATEMENT OF MARCUS R. HICKERSON, Azusa, CaliforNIA, PRESIDENT OF HOLLY CORPORATION My name is Marcus R. Hickerson. I am the President of Holly Corporation which is headquartered near Los Angeles in Azusa, California. Holly Corporation is a publicly-held corporation listed on the American Stock Exchange with more than 10,000 stockholders and assets in excess of twenty million dollars. The principal business of Holly Corporation is the subdivision, development and sale of large tracts of land with a view toward the ultimate creation of new communities. Communities successfully developed by Holly Corporation in California include Hesperia, approximately 35 miles northeast of San Bernardino in the Victor Valley, which now boasts more than 7,000 residents and Salton City, a younger development astride the inland Salton Sea approximately 40 miles southwest of Indio, which has become a popular recreation area. of these developments boast extensive recreational facilities, including golf courses, restaurants and motels and also provide business, shopping and service facilities to meet the needs of residents. Both Since early 1964, Holly has been the exclusive sales agent of McCulloch Properties, Inc. for Lake Havasu City, a large project on the Arizona shore of the lower Colorado River. This project was carefully planned for several years before the first lot was sold and to date the aggregate investment in its development exceeds ten million dollars. Lake Havasu City, although less than three years old, has attracted nationwide favorable comments as a truly outstanding community development and is unique in that, from the outset, it had industry, a branch plant of the McCulloch Corporation. Holly has followed the policy of selling only what we refer to as "developed" tracts, namely surveyed, platted and staked subdivisions in which required off-site improvements such as hard-surfaced roads, water mains, electricity and, where needed, sewer facilities, have either been installed at the time of sale, or their installation within a period of not more than a few years has been assured. In other words, any purchaser who wishes to erect a building on his lot within a reasonable time after his purchase is assured of having available to him the necessary facilities to make the building habitable. We have also followed the general policy of inviting the prospective purchaser to see the actual lot being offered to him before confirming his purchase and for this purpose, have made available free air and other transportation to virtually all prospects. You may have seen some of our ads in the Middle West which invite prospective purchasers to "Fly Free With Us to Lake Havasu City." These ads mean exactly what they say and to date more than 20,000 prospective purchasers have been flown to Lake Havasu City completely free of charge. We feel strongly that our policy of having the prospect actually look at the exact lot being offered to him assures his satisfaction with the purchase and also has the salutary effect of restraining over-enthusiastic salesmen as they realize the prospect will see the property, its location and environment with his own eyes before he confirms his purchase. In addition to our policies of selling only developed lots and having the purchaser inspect the actual lot he is buying, we have consistently supported the economic development of each of these projects by offering inducements to industry and businesses and by encouraging the erection of residential and commercial dwellings through concessions and otherwise. We recognize that new communities cannot be created overnight and we have supported at considerable expense the operation of recreational facilities until the communities can stand on their own feet. The master plans in our developments have made provision for schools, churches, and parks and we cooperate with local authorities and groups to promote the early construction of such facilities. We have been proud to participate recently in the founding of the National Association of Community and Land Developers and subscribe wholeheartedly to the statement submitted by the President of that Association to this SubCommittee. We recognize that in our business, even as in most other businesses, there have been some abuses which in the aggregate, represent an insignificantly small portion of our industry. Inasmuch as these abuses tend to give a black eye to the entire industry, we welcome their elimination. We do not feel, however, that the present bill, S. 2672, is an appropriate means of achieving this laudable objective. Land has historically been thought of as peculiarly prone to local jurisdiction and regulation. Unlike a security, each piece of land is unique and not readily fungible with any other piece of land. The only jurisdictions which can be expected to have adequate information about matters pertaining to land and its development, such as soil conditions, drainage problems, climatic conditions, topography, geology, etc., are local jurisdictions such as municipalities, counties. or special public improvement districts. States are already one step removed from the immediacy of the relationship to land of local jurisdictions, but they are nevertheless in a reasonably good position to familiarize themselves with local requirements since the laws governing local jurisdictions and their powers in most cases are uniform throughout a particular state. These local land matters are far removed from Washington and peculiarly unsuited to effective supervision by a distant Federal bureaucracy. At the present time virtually all of the so-called "situs" states, that is to say, the states in which major land developments are located, and most of the major "consumer" states to the residents of which land sales are being made, have adopted appropriate legislation to protect their respective interests. Compliance with such diverse and frequently inconsistent legislation even by a major land developer is already unduly expensive, burdensome and time-consuming. This already results in economic detriment to the land purchaser since the expense of such compliance is necessarily passed on to him. The imposition of a second tier of Federal regulation would enormously increase such expense. Speaking frankly, I would have no objection to the enactment of some appropriately amended version of the present bill if same were to vest exclusive jurisdiction over interstate land sales in the Federal Government. Frankly, our burdens would be greatly eased if instead of having to deal with numerous autonomous state bodies, we would have to deal only with a single Federal agency. Accordingly, we would not hesitate to support a bill of this type if it precluded the states from imposing their own special requirements on interstate land sales. As I have indicated, I do not think the present bill is timely. Not only do we have what appears to be reasonably adequate state regulations, but our newly formed Association will endeavor to procure adherence to fair standards of business conduct by at least the major developers. Because of the widespread publicity given to the depredations of a few unscrupulous promoters, land buyers themselves have become increasingly sophisticated. In addition, a Uniform Interstate Land Sales Practices Act has been promulgated for early adoption by the National Conference of Commissioners on Uniform State Laws and this carefully drafted Act will undoubtedly produce some degree of uniformity in state regulation of interstate land sales. If, notwithstanding the foregoing, this Subcommittee should nevertheless decide that a Federal law is still required, I feel that the bill presently before the Subcommittee should be amended in certain material respects. In my opinion, the bill should completely exempt interstate land transactions where etiher the "situs" or the "consumer" state requires that the prospect be furnished with a public subdivision report providing material information about the property being sold, as well as any sales of developed lots where the purchaser is actually shown the property before a binding purchase agreement is concluded. Furthermore, I believe it is impractical to require the furnishing of a prospectus as long as 48 hours before the purchase agreement is executed, and to impose civil liabilities in respect of the use of any advertising materials such as, for example, a short direct mail letter which "omit to state a material fact necessary in order to make the statements, in the light of circumstances under which they were made, not misleading." The periods of limitation provided for in Section 14 appear to be unduly long. Finally, there should be a more explicity consideration of the problems inherent in registering additional tracts from time to time and the avoidance of needless delay and expense in connection therewith. I appreciate having the opportunity of presenting our views to your Subcommittee. STATEMENT BY N. K. MENDELSOHN, PRESIDENT, CALIFORNIA CITY DEVELOPMENT COMPANY, LOS ANGELES Our company is presently engaged in the business of developing wholly new cities in California and Colorado. The cities are known as California City and Colorado City. In each case our efforts are aimed at creating a large new city or town in which may be realized some of the desirable qualities today recog nized as lacking in American cities. These qualities, in capsule, may be described as (1) "recreation-oriented environments for urban families of modest means" and (2) land use patterns built around the creation and establishmentin perpetuity-of public open spaces throughout the framework of the community to protect against future congestion and blight. In both of our new communities we are making successful progress. In the course of our work we have built a business enterprise capable of continuity and expansion within the field of so-called "new-town" development. As a responsible business enterprise, we support constructive legislation and regulation both on a local and federal level. But we respectfully urge the most careful review of proposed legislation in term of its effect on healthy, constructive real estate development as well as on protection of consumers, which we agree is certainly of prime importance. One of the serious dangers of the proposed legislation is its possible effect on the development of attractive new towns, such as I have described above. The present administration has gone to great lengths to encourage the development of new towns which would create a more livable pattern in our urban life. On the occasion of his appointment to a new Cabinet post, Robert Weaver was urged by President Johnson to do everything possible to help our cities become more livable, and to aim at the creation of a better way of life in our cities. It has become increasingly clear that the extension of existing cities with new suburbia cannot be the answer which is being sought. Only by assembling a large amount of land, located at strategic points, and by completely planning such land for a better way of life can the goal outlined by President Johnson be reached. New towns require large investment of capital, not only for land acquisition, but for a long and patient period of careful planning and development. This means that substantial risks must be taken by private development groups, and such risks can be taken only if there is sufficient assurance to the developer that he will have available for his product the maximum freedom of market throughout the country. Any legislation which serves to limit the availability to new town developers of the potential market for their product can only serve to discourage the entry of new risk capital into this industry. One of the big factors tending to encourage new capital investment in the creation and development of wholly new towns is the tremendous fact of large scale internal migration which has been going on in the United States for decades past and which is still proceeding in large volume. The market which is generally available to developers within their own states or within the states in which new towns are developed, is normally insufficient to sustain fully the large scale enterprise which is involved in the creation of a new town concept. Easy availability and accessibility to people throughout the country is an essential ingredient in encouraging a developer to create and stay with the job of building out a complete new town. Unlike the sale of securities which may be a one-time operation on the part of a particular issuer, the offering of properties within a large new town development must necessarily be done on a piecemeal basis. First, a general plan of development is created; an image of the new town's way of life is shaped; the concept of the whole new town is clearly planned and a direction formed. The next step is the offering of a first subdivision which is a part, and maybe a relatively small part, of the new town properties. Following the sale of the first subdivision, another subdivision is offered, then another, then another, and so forth until finally the entire town is merchandised. This process may take, and probably would take in most cases, many, many years. If I may refer briefly to our own experience, in 8 years we have recorded more than 60 subdivisions, or approximately 8 a year on the average. If we also had to file a new prospectus and registration statement with the Security Exchange Commission every 45 days, the whole operation would be seriously slowed down. In California, by the time a subdivision is recorded, the developer has entered into extremely substantial firm financial commitments for improvements in order to obtain the approval of local authorities for recordation. He is also committed to the continuing cost of a sales organization and overhead. If the developer now has to delay his offering until a registration statement has been cleared with Federal authorities, he is in the position of marking time while his financial obligations and commitments are running, |