Fortunately, we were able to go back to Albany, where the original ruling was modified, and the veterans have homes there today. But how much quicker, simpler, and more economical this would have been with a community facilities loan.

Our appeal for action toward the objectives of this bill is summed up in this statement: The need is increasing faster than the ability of these fast-growing communities to meet the need at the pay-as-you-go commercial going rate.

This bill recognizes the need, but we believe it can be made into a much better solution, and I would like to make a few comments on specific points:

First, the interest rate: On present averages, the bill calls for a rate of 2% percent on these Community Facilities bonds.

This rate ought to be maintained or, if possible, lowered. On this point we disagree with the suggestion of the National Association of Home Builders that "the interest rate on loans made by the Government for this purpose be not less than the going rate of interest paid on current Federal obligations of comparable maturity." We consider this impractical.

Government bonds are now yielding 4 percent and higher; in the open market, a community must pay bondholders better than that, at least 412 percent for its bonds to sell.

In turn, this means that the community must raise its local taxes to cover the high-interest rate it is forced to pay. And many communities, worried about raising their taxes further to cover that fresh commitment of 412 percent, are loath to go into a new bond issue at all. With a rate of 27% percent or lower for its bonds, the small community faces a lighter load. Certainly it will be encouraged to go ahead with a bond issue for water supply and sewers if it can show its citizens that the locality is getting a bargain, and that taxes will not be increased substantially.

The present market, in a word, excludes the average small community from floating a bond issue at a price it can afford.

Let's call a spade a spade, and a subsidy a subsidy. If this bill is really going to be made effective, it must offer a real incentive to communities to issue bonds for the hospitals, water systems, and sewer facilities that are important to the public health. That incentive is the Federal Government support of low-interest rates. Without it, the rest of the bill is well meaning but the discussion is academic.

Second, we approve most heartily the wording which will provide help for one or more municipalities together. Great Neck, Long Island, for examples, includes 11 separate incorporated villages, each a political entity.

Of course, it would be most effective for several contiguous villages to join efforts in creating a single sewage system for their common needs. This bill's encouragement to such joint ventures is most welcome.

Third, we believe it is essential to the integrity of this plan to write into the bill a protection against misuse for political or other purposes. We suggest the following caution:

In every application for a loan, the community must certify that the area involved in the proposed water or sewer system is indicated on a filed map, with appropriate bonds posted and FHA or other financing already obtained for its development.

In other words, there should be no loophole left in this bill to allow for the inflation of real estate values of land whose development is years away.

Loans should be limited to areas where there is definitely a planned development of new homes, or the redevelopment of an area of existing homes.

Fourth, let me emphasize that this method of vital subsidy at the immediate roadblock of high interest is by far the most economical way of enabling these communities to live and develop as they should. They can get along for many years on cesspools and septic tanks. We know from experience that when they can get around to it, they will put in sewers.

By that time they will have to acquire easements, dig up paved streets, destroy shrubbery, at an immense cost of money, time, and inconvenience. The time for these community facilities, whenever

possible, is in advance.

Certainly nothing is more important to the strength of this Nation than the health of people in its individual communities. And nothing is more vital to their health than good hospitals, proper water supply, and the most effective sewage disposal.

This bill, with its all-important interest rate incentive, meets these problems squarely.

The Community Developers Council heartily endorses this bill and respectfully suggests that consideration be given to our suggestions. Thank you very much, Mr. Chairman.

Mr. SPENCE. Are you engaged in the development of real estate? Mr. SILBERT. Yes, sir.

Mr. SPENCE. Isn't the most essential facility, the basic facility which is absolutely necessary in the development of real estate, water supply, and sewage disposal?

Mr. SILBERT. Well, I think I can answer it this way: One of the first things we consider in the desirability of a piece of property is whether or not water is available and whether or not there are sewage facilities.

There are other considerations, of course, but I think one can basically say that without good water supply or sewage disposal we would seriously hesitate to go forward on a piece of property.

Mr. SPENCE. Doesn't industry make the same inquiry when it is seeking new locations?

Mr. SILBERT. I guess that would depend upon the size of the industry. If it was an extremely substantial industry and they had unlimited resources where they could install their own water system or their own sewage disposal plant, possibly that might not be a consideration. But in terms of the normal, moderate-sized industry that we have no Long Island, for instance, this is absolutely a prerequisite to a determination of where to locate its plants.

Mr. SPENCE. The great majority of large industry is absolutely dependent on an adequate water supply, is it not?

Mr. SILBERT. That is right. Without water, they cannot exist. Mr. SPENCE. And whether or not they have water largely depends on the location. Many localities have lost industry because of inadequate water supply?

Mr. SILBERT. Absolutely true.

The areas closer in on Long Island where water facilities are now available have all been used up, so builders are compelled now to go

out in the outlying areas; there the serious problem is availability of water facilities.

Mr. SPENCE. So the impact that this bill, if enacted into law, would have on the unemployment situation would be rather large, because it would not only require employment to build these facilities, but it would require other industries to produce them. And then in addition, it would have the effect of inducing industries to locate in these vicinities; isn't that true?

Mr. SILBERT. I think that is absolutely true. I think those areas that have been able to present to industry a reason for going to their community to make employment for their constituents, have to a great extent been aided by the fact that they did have available water and sewage facilities to induce these large plants to locate there.

Mr. SPENCE. Mr. Widnall.

Mr. WIDNALL. Mr. Silbert, you have made a very good statement, and I like particularly the reference you have to an amendment that could be offered to this bill, which would prevent the inflation of

real estate values.

I have a couple of questions that Mr. Halpern asked me to ask you on his behalf.

Do you feel the passage of this legislation would have any effect on the cost of the house to the average home buyer?

Mr. SILBERT. I think there definitely would be a reaction to the price of the house, because what you are doing is reducing one of the important items in the construction of the house, namely the installation of the water system and the sewage disposal system. If that could be reduced by virtue of the fact that the interest rate, which is one of the big items, is reduced, correspondingly the price of the house would be reduced.

Mr. WIDNALL. Have you made any attempt to pin down what 1 percent reduction in the interest rate would mean?

Mr. SILBERT. No, I haven't. As a matter of fact, this morning coming down I was trying to figure that out for you.

I can't get it offhand, but I think it would be an interesting figure to see. I think it would be a startling one.

Mr. WIDNALL. It would be helpful.

Mr. SILBERT. I should say it would.

Mr. WIDNALL. What is the current practice out in Nassau County with respect to sewage disposal? About what percentage of the homes have septic tanks and what sewage systems?

Mr. SILBERT. Our practice on Long Island today, unfortunately, at the moment, has a preponderance of septic tanks and cesspools.

These communities would very much like to install these sewage systems, because there is a duplication of cost involved when sewers ultimately go in.

I would say that on Long Island today and I have a statement here that I picked up out of the New York Times 3 or 4 days ago, in which they indicated that one-third of the homes now being built across the country are still using septic tanks and cesspools.

I would assume that in Long Island that figure may be a little higher.

Mr. WIDNALL. If you had the full use of sewer systems out there, would there then be pressure to reduce the size of lots?

Mr. SILBERT. Normally, that would occur, because we have limitations, in most of the areas, where the sewer disposal system and the water supply are on the same plot.

As a result of the proximity of these two systems, there are statutory requirements as to how close one can be to another. As a result, these plots have necessarily had to be expanded, and this has a counterbalancing effect.

What it does then is to compel the municipalities to upzone areas in order to have larger plots, and by doing that prices must go up. This runs counter to what we builders would like to do, namely; to deliver a more economical house to the veteran and other purchasers. We just can't do it if they upgrade these areas.

Mr. WIDNALL. Of course, it works the other way, too. The minute you downgrade it you have more demand for school construction because you move more families in.

Mr. SILBERT. That is why I would like you to read this article in the Herald Tribune. Because this is something that ultimately will have to, in my own humble opinion, have some sort of Federal aid program, because the individual homeowner today cannot carry the burden of these increased school costs. It is our personal thinking that this is basically an obligation of the Federal Government to help in some way provide schools for the children that we are trying to develop to make our country as great as it is.

Mr. WIDNALL. Mr. Silbert, I have some figures here for last year. In Nassau County they floated an $8,331,000 sewer bond issue at 3.495 percent. Where was that utilized? Do you know?

Mr. WOLK. I believe that was in the Nassau County area, the area close to the New York City borderline, probably around the south shore of Long Island. But it is an infinitesimal percentage of the sewage facility required for Long Island per se.

Mr. WIDNALL. When you are going ahead with a development, or you propose to develop, do you consult with the city about construction of sewer facilities?

Mr. WOLK. Yes, we do. As a matter of fact in some areas of Long Island, some of the builders had offered to install a sewage disposal system, and then turn it over to the authorities to be made part of an integrated county or town sewer plan. But because the town or county was not prepared to go into an overall sewage development plan, they would not go along with these individual sewage disposal systems and when I say "individual," I mean, not individual house system but individual development plan.

Mr. WIDNALL. Wouldn't you have the same problem if we passed this bill?

Mr. WOLK. No, you wouldn't, because technically, the plant that we were suggesting, the developers were suggesting, they were going to put up their own, covering possibly a 300- or 400-house development, and then turn it over to the county and the county said "No, we want to have a complete plan, and we will build our own. The plant that you as a developer may build may be all right for the volume of homes that you are going to put on the particular site, but it may be more important for us to have a plant located 5 miles away, and work it into an integrated plant."

Mr. WIDNALL. Has there been any allegation by the county they couldn't float bonds for that purpose?

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Mr. WOLK. Well, as Mr. Silbert pointed out, there are so many schools and other budgetary expenses involved that possibly, because of the soil condition of our area, the fact that we can put in an individual house septic tank or cesspool, they feel that the overall sewage system plan can wait while these other things that are more imminent are taken care of.

Mr. WIDNALL. Do you have an indication, then, or have you anything by way of record, factual information, that the 2% percent interest rate would give the go-ahead to this program? You would still have to have the approval of the county authorities?

Mr. WOLK. That is very probable, except that I think there are some areas further out on Long Island, not necessarily Nassau County, but some of the incorporated villages, that probably cannot arrange the private financing, and cannot absorb the expenses that are involved in private financing, whereas a bond issue of this type would encourage the installation of a sewage plant, and more important, the point that Mr. Spence brought up about location of industry. One of our big problems out on Long Island is that we are basically, percentagewise, a great residential area; the various communitites have in their zoning established areas for industrial use.

But merely setting up a zoning map and saying, "This shall be used for industry," doesn't mean that industry is going to come out that way, because industry, when it goes out shopping for sites, it's almost a competitive situation, one community vying against another to get that industry to locate. And one of the most important things, as Mr. Spence brought out, is the availability of the community facilities required for that industry's operating in that particular community. It is true, as Mr. Silbert pointed out, that some plants would construct their own water and sewage facilities, but from the competitive standpoint, when they come out to locate, they do not want to have to put in those facilities.

They will more than support the community that does put them in, by its employment, and its contribution to the real estate taxes, all of which would reflect in possible reduction of school taxes.

There are many areas of Long Island where, if they could borrow through this plan, and install public water and public sewer plants, they might not only encourage à sensible development of residential areas but encourage industry to come out and help support the tax program, the burden of which now falls on the individual home

owner.

Mr. WIDNALL. Mr. Spence, I can think of many other questions, but I know you have another witness.

Mr. SPENCE. Thank you.

Mr. Ashley.

Mr. ASHLEY. I have just one question, Mr. Chairman.

How many communities do you build in the Long Island area?

Mr. SILBERT. Are you referring to Community Developers Council? Mr. ASHLEY. Yes, all over Long Island?

Mr. SILBERT. Yes, Long Island basically is Nassau and Suffolk Counties, and our builders are concentrating in the easterly end of Nassau County now, and in Suffolk County.

Mr. ASHLEY. I wondered, because I was interested in your statement that in the open market a community must pay bondholders better than 42 percent for its bonds, in order to sell them.