Mr. SMITH. I believe there will be quite a few people who will try to test this out.

Senator STEVENS. I would urge you to do so. I think from what I understand of your statement, and I don't know if this line runs through my backyard so I am sort of in the same boat with you and I would like to see you try it.

Senator GRAVEL. In fact, the reason we are having this testimony at this hearing, is to protect Senator Stevens' property. [Laughter.] Senator STEVENS. Not really.

Senator GRAVEL. Mr. Smith, we are grateful for your testimony. Certainly the wishes and desires of the property owners in that area have not gone unheeded. I think we are very optimistic that something can be done and we have a resolution to get the national FHA to lift their restriction and then go to additional legislation to the broader aspects of the problem. I think relief is imminent; in this hearing we will see that it happens.

Senator STEVENS. You understood the statement that they made and that is if they proceed on this basis the liability would be the same as if you made the loan prior? In other words, no subsequent damage by virtue of the existing circumstance would relieve anyone from liability, either the existing owner or the new owner or a new building. Mr. SMITH. That is right.

Senator STEVENS. This is clearly understood now, I assume.

Mr. SMITH. Yes.

Senator STEVENS. I think that is very good. Thank you very much. Senator YOUNG. We thank you for your testimony.

Mr. SMITH. We certainly thank you.

Mrs. SMITH. Thank you.

(The following material was supplied for the record :)

(The following and similar petitions, signed by 154 property owners, were submitted for the record :)

PETITION

We, the undersigned property owners of the area known as the "L-K" street slide area, hereby request relief from the "High Risk" classification put on us by the federal housing administration.

We feel that this classification is unjust as we are the only area in the entire United States that are denied financing and relief as provided by the federal housing administration on said property.

Senator YOUNG. Mr. Donald L. Mellish, president of the National Bank of Alaska.

Mr. GOTTBERG. Mr. Chairman, Mr. Mellish was unable to attend the meeting and I am to represent him. I am Bob Gottberg, vice president in charge of the mortgage department of the National Bank of Alaska. Senator YOUNG. Fine. We are very glad to have you testify.

STATEMENT OF ROBERT GOTTBERG, VICE PRESIDENT MORTGAGE DEPARTMENT, NATIONAL BANK OF ALASKA

Mr. GOTTBERG. Thank you.

I was asked to testify only as to whether earthquake insurance is required on any mortgage loans made in this area. At the present time it is being required and I would say that it would be required as long as it is designated as a high risk area. Approximately 80 to 90 percent of all long-term mortgages in Alaska are sold to outside institutional investors and they are making this requirement.

Senator GRAVEL. Very good. I just would like to ask, have you made any private loans in this area that has been designated a high risk area?

Mr. GOTTBERG. We have made some very short-term loans there, Senator.

Senator GRAVEL. But no long-term loans?

Mr. GOTTBERG. Our bank has not. Other mortgage institutions in town have made them and have sold them to outside institutional investors and these institutional investors have required that.

Senator GRAVEL. So in essence the only difference between their securing financing has been the requirement that you have earthquake insurance?

Mr. GOTTBERG. That is correct, for conventional loans.

Senator GRAVEL. But there have been no FHA loans at all?

Mr. GOTTBERG. That is correct. You see, the conventional mortgage, the borrower must put between 20 and 25 percent down which is a much higher down payment than if you could take an FHA or a VA with $40,000 and no down payment.

By the way, Senator, before I forget, somebody was talking when the FHA man was testifying and they asked if in Fairbanks flood insurance was required. FHA does not but VA does.

Senator GRAVEL. So they are inconsistent in that record.

Even if a person had earthquake insurance today, he still could not get an FHA loan on his house, is that correct?

Mr. GOTTBERG. That is correct.

Senator GRAVEL. So the FHA is being more strict than the private money market.

Mr. GOTTBERG. That is correct.

Senator GRAVEL. No more questions.

Senator YOUNG. Have you any questions, Senator Jordan?
Senator JORDAN. Only one question.

How expensive is this earthquake insurance?

Mr. GOTTBERG. Senator Jordan, I do not remember how much those run in that particular area. That is something I would have to research. Since we have not been making loans there of any consequence I just don't remember off the top of my head how much that is.

Senator JORDAN. I would not think it would be tremendously expensive. Normal disaster loans are made in the areas where disasters.

49-577-706

are rare such as the one down in Mississippi, and the insurance on those is very low because the incidence of recurrence is remote.

Mr. GOTTBERG. I remember at one time in the Turnagain area they were charging $2 per thousand which would be almost half of the amount that you would pay in this area for fire coverage. It is about $4.50 a thousand.

Senator JORDAN. Mr. Chairman, I would like somebody to furnish that for the record. In these hearings I would like to get all the facts I can because we do want to get this requirement removed in this area if we can, and it should be, I am certain of that. I can see where owners are at a tremendous disadvantage in selling their property or getting a loan on it if it is designated as high-risk area. The insurance figure should not be very hard to obtain and if somebody could furnish it I would like to have that. Somebody back home is sure to ask that question and I want to be able to answer it.

Mr. GOTTBERG. I will be most happy to check it out.

Senator JORDAN. Thank you.

Senator YOUNG. Thank you very much.

Senator STEVENS. May I ask a question.

Bob, under this new FHA statement if the high-risk designation isn't removed but the FHA agrees to process loan applications for insurance, do you see an impediment to selling those mortgages if they have FHA insurance and do have earthquake insurance?

Mr. GOTTBERG. If it is insured by FHA and there is earthquake insurance, I would think they would begin to market that mortgage. Senator STEVENS. Thank you.

Senator YOUNG. Thank you very much.

Mr. GOTTBERG. A further check on earthquake insurance reveals that on the majority of the construction in the L Street slide area there would be a 15 percent deductible clause; or, in other words, if it were a $40,000 structure and it was completely destroyed, $6,000 of it would not be covered by insurance. With this type of insurance I do not feel that the loans would be marketable on a mass basis.

Also the insurance rate desired by Senator Jordan is almost prohibitive. It is $2.50 per hundred if written in conjunction with other insurance such as a homeowner's policy. If there is no other insurance by that company, it would go as high as $3.50 per hundred. The next and I believe the final witness in this morning's session is Robert E. Sharp, the city manager of Anchorage.

We welcome you, sir, and you may proceed with your testimony.

STATEMENT OF ROBERT E. SHARP, CITY MANAGER, CITY OF

ANCHORAGE, ALASKA

Mr. SHARP. Mr. Chairman and members of the committee, first we appreciate very much the opportunity to be heard here this morning and we would like to compliment the committee for making this trip to Alaska. I won't repeat much of what has been said as to the L-R Street slide area and the very comprehensive report the Corps of Engineers gave you this morning.

Mr. Chairman, during the course of your meeting when I saw the extra chairs being brought into the room I rather question which was the most hazardous, the impairment on the fire capacity of this room

or the L-K slide area. I could not help but comment to my
that perhaps it is a good thing the fire marshal is not here.
Senator JORDAN. There is a back door, though.
Mr. SHARP. We are glad that there is, Senator.

seatmates

Now in a more serious vein we have brought the prepared statement that has been filed and also a map of the area that generally parallels the boundaries that the corps has described this morning. (The statement and map referred to follow :)

PREPARED STATEMENT OF ROBERT E. SHARP, CITY MANAGER, CITY OF ANCHORAGE, ALASKA

Mr. Chairman and members of the Joint Senate Commerce/Public Works Committee, the city of Anchorage appreciate the opportunity to be heard on several subjects within the jurisdiction of this Joint Committee. Specifically, we want to present testimony on the L-K street slide area, obstructions to navigation and lack of navigational aids in Cook Inlet, and highway access to the Port of Anchorage.

L-K STREET SLIDE AREA

Following the 1964 Alaska earthquake, extensive soil studies were made in the Anchorage area and, as a result, certain areas were stabilized through Urban Renewal and other programs. The L-K Street slide area is some 4,000 feet in length parallel to the bluff and extending back from the toe of the slope as much as 1.200 feet. In the central section it extends back as far as K Street. The soils study conducted at the time indicated it was feasible, from an engineering standpoint, to stabilize the central portion of the slide area by a combination of filling and grading to flatten the slope and increase the passive resistance between the toe of the upper bluff and the railroad. Improvements in drainage was also recommended. In other areas-more specifically, 4th Avenue-Federal and State Disaster Urban Renewal funds were made available for remedial measures, but these funds were not sufficient to accomplish the remedial measures recommended in the L-K slide area. In fact, the financial feasibility of the remedial measures mentioned in the soils report has not been demonstrated.

Shortly after the Soils Report was rendered, the Federal Housing Administration discontinued insurance of mortgages on real property in this area. This administrative decision has obviously caused great hardship in this area, which is almost fully developed with residential type units, by reduced value of real property and inability to sell real property because of the lack of FHA insurance. The City of Anchorage has made repeated attempts to obtain funds to determine if any substantial risk actually exists and, if so, to obtain funds for remedial measures. We have had no success with the Department of Housing and Urban Development in this regard. The City of Anchorage has further urged the Federal Housing Administration, without success, to remove its prohibition on the issuance of FHA insurance of mortgages in this area.

Insofar as we know, the hazard which may exist in the L-K slide area is no greater than the hazards which exist for properties in flood areas, areas in which natural slides occur in a dozen states, and other, similar hazards to real property. Yet, the Federal Housing Administration has not imposed a prohibition on insurance of mortgages in these other areas over the country. To select the single area in Anchorage over all the other hazardous conditions which exist in the country for this prohibition of FHA insurance appears unwarranted to us. We would welcome the assistance of this Committee in resolving this problem which affects a considerable number of homes and other residential units in the City of Anchorage.

NAVIGATIONAL OBSTRUCTIONS IN COOK INLET

The City of Anchorage owns and operates the Port of Anchorage. The Port of Anchorage serves not only the Greater Anchorage area with a population of approximately 125,000, including military, but also a total market area which embraces portions of Southcentral. Interior. and Northwestern Alaska. The total population served by the Port of Anchorage is about 170.000, or some 60% of the total State population. During 1969, 405,484 tons of general cargo, and 1,187,258 tons of petroleum products (8.566.073 barrels) for a total tonnage of 1,592,742 were handled. Bulk cargoes, shipped at relatively low rates into the Port of