NEW LANGUAGE-PURCHASE OF AUTOMOBILES

Mr. WOODRUM. I want to ask you about this new language"Purchase of two passenger-carrying automobiles."

Mr. SPENCER. There are two automobiles in our regional offices, one in Texas and one in San Francisco. These are several years old, require considerable repairs, and if used for an additional year, will require repairs at least equal to the present statutory limitation on repairs, therefore it would be advisable to exchange them.

Mr. WOODRUM. Can you do that now?
Mr. SPENCER. That I do not know; sir.

NEW LANGUAGE-TRANSFER OF HOUSEHOLD GOODS, ETC.

Mr. WOODRUM. And then this new language "Transfer of household goods and effects as provided by the act of October 10, 1940, and regulations promulgated thereunder."

Mr. SPENCER. That is simply to give us the same privilege that other Government agencies have.

Mr. WOODRUM. How much do you think would be involved in that? Mr. SPENCER. Ordinarily, I should say not more than a thousand or two thousand dollars a year. But, of course, if we have wholesale moves, such as are being talked about now, it would run into a large sum of money

PERSONAL SERVICES FOR TENANT RELATIONS DIVISION

Mr. WOODRUM. Now, under the proviso (b)—

the amount used by the Authority for personal services in connection with the functions and duties of the Tenant Relations Division shall not exceed $120,000— what are your actual expenses on that; how much did you use?

Mr. SPENCER. I can put that in the record. I think it is about that amount, but I would rather check it and put in the correct

amount.

This limitation has been in effect only since the beginning of the present fiscal year. The salaries of the personnel now charged, or to be charged during the balance of this fiscal year, against this limitation will total $115,996.

CONSTRUCTION ADVISERS

Mr. WOODRUм. And then the provision

That all necessary expenses of providing construction advisers and their staffs at the sites of non-Federal projects, and of paying the accrued annual leave of such construction advisers and their staffs, * * * shall be reimbursed or paid by such agencies.

Can you give us the figures in the record of about what is involved in that?

Mr. SPENCER. Yes, sir.

(The information requested is as follows:)

STATEMENT REGARDING CONSTRUCTION ADVISERS

Receipts from local housing authorities for salaries and expenses of construction advisers and their staffs at the sites of non-Federal projects

[Such expenses are charged to local housing authorities pursuant to similar customary business practice of lenders charging this type of expense at the site to the borrower]

July 1, 1940, to June 30, 1941.
July 1 to Nov. 30, 1941..

Total_

$986, 955. 21 327, 209. 81

1, 314, 165. 02

Salaries and expenses of construction advisers and their staffs at the sites of non

July 1, 1940, to June 30, 1941:

Salaries

Travel

Leave (annual and sick).

Federal projects

Miscellaneous charges, supplies, etc.

July 1 to Nov. 30, 1941 (5 months):

Salaries__

Travel.

Leave (annual and sick)

Miscellaneous charges, supplies, etc.

$875, 722. 93

6, 043. 95

90, 848. 44

14, 339. 89

Total

986, 955. 21

286, 573. 02

6, 246. 11 30, 054. 98 4, 371. 70

327, 209. 81

1, 314, 165. 02

Thus, this does not involve any cost or burden on the budget of the United States Housing Administration.

SAVINGS IN HOUSING PROGRAM COSTS

Mr. WOODRUM. Are there any questions, gentlemen?

Mr. STARNES. If he will answer the question I asked a while ago, I will appreciate it.

Mr. KEYSERLING. That is on the matter of costs. I have about finished the body of my statement and I will now come to the cost question. The point I want to stress, and which I mentioned to the committee before, is the relationship between administrative expenses and program expenses on a large spending program like ours; because the real chances to save on an $800,000,000 or $1,000,000,000 program are in connection with project construction costs and how you manage them. The administrative budget problem is merely to find the cheapest way of getting the job done fastest and best.

Here is just a thumbnail sketch of some really big savings in the program itself.

First of all is the interest profit that I just referred to.

Second, there has been a savings on short-term financing. When I was here before the committee 2 years ago I predicted the United States Housing Authority would save $16,000,000 on project costs. Through the efforts of the short-term financing staff working through the local housing authorities, I can now record an actualized saving of $11,000,000 already, which has been realized by reducing project costs through lower interest rates during construction. And from this actual saving of $11,000,000, I now say that next year we will be able to come before the committee and show an actualized

$18,000,000 savings as against the $16,000,000 saving which I estimated 2 years ago.

Mr. DIRKSEN. What is the total amount of annual contribution actually paid as against the amount authorized?

Mr. KEYSERLING. The amounts actually paid come to about threequarters of those authorized on a yearly basis.

Mr. DIRKSEN. That would be $21,000,000?

Mr. KEYSERLING. They have not reached the peak yet, because the projects have not all been completed.

So we are saving $18,000,000 as against the $16,000,000 I predicted to the committee 2 years ago. That is enough to cover about 4 years of administrative expenses, and we have done that by having the financial staff and legal staff adequate to work out the thing that is cheapest.

The next saving has been on subsidy itself. In other words, we are trying in every possible way to cut operating costs. That is the main function of the operations and Maintenance Division. In Other words, it is like any other proposition of managing a billion dollars' worth of housing, cutting all the corners you can, reviewing the charges, and so forth. Now, as to the 85,000 units of our program in occupancy which have been reviewed and in which each operation has been studied, we have cut the subsidies $2,700,000 below the original project figures and below the maximum allowed by law. On the basis of the whole program, that will represent a saving of more than $5,000,000 a year. That is an annual saving, so that when you project it over the life of the program, which is 60 years, it is a $300,000,000 saving, or equivalent to a saving of more than one-third of the whole construction program. That is the subsidy saving.

On the Tenant Relations item, this work has nothing to do with coddling localities, telling mothers how to take care of their children, how to educate them; it is the work of getting the tenants working, as far as possible, upon the upkeep of the project painting, the upkeep of the utilities, and things of that kind and out of that, savings in maintenance costs have been effected of about $1.50 per unit per month, or $18 per year on developments with a full tenant maintenance program. If this savings in tenant maintenance were achieved for all dwelling units the savings in operating cost, which will later be reflected in subsidy savings, would amount to about $3,200,000 a year.

As to construction, we have a technical staff working constantly upon the matter of reducing costs. Putting the thing in summary, our average construction costs for the program as a whole are $500 per unit less than when we started

Mr. FITZPATRICK. That is for the nondefense projects?

Mr. KEYSERLING. That is on everything. That takes in everything we have done, including the projects converted for defense and the other projects. The average now, including the ones we had at the beginning, is $500 lower. It is those kind of figures that really test administration; because if you have that saving on 190,000 units, you get $95,000,000.

I will say, also, that our present cost figures on our present so-called regular program are running considerably below the statutory limitations not only in our act, but also considerably below the statutory limitations in the Lanham Act which, according to the present Senate

version are being revised upwards. In other words, we are far below the average limits and, on the regular program, our costs have gone down constantly, except as I said they have gone up a little bit in this very high-cost period in the last 8 months, but we have checked that and, during the past 4 months, the cost is now running lower than during the previous 4 months. So those are items of saving.

ANNUAL CONTRIBUTIONS ON COMPLETED PROJECTS

Just in summary, and then I am completely through: First, we are operating under the control of the defense mechanism and for defense purposes; second, we are cutting our administrative budget relative to our work load; third, the work load is increasing more severely than we can measure, because of specific factors increasing costs; fourth, we are operating at great savings in our program itself, which measure many, many times our administrative budget; fifth, we are paying our administrative costs entirely out of loan profits; lastly, we are asking, quite apart from this, for an appropriation to pay annual contributions on completed projects of $17,000,000.

Mr. WOODRUM. Give us a word about that.

Mr. KEYSERLING. That is the service for reducing rents on the regular program, as lower rents are necessary to rehouse the slum dwellers.

Mr. WOODRUM. That is a subsidy?

Mr. KEYSERLING. That is a subsidy. There was a balance from the fiscal year 1941 of $5,000,000 which, added to the $8,000,000 provided by Congress for 1942, came to $13,000,000. We expect to use $11,000,000 of this in 1942, so that there will be $2,000,000 over. This year we expect to need $19,000,000 in all, so we are asking for $17,000,000 to be added to the $2,000,000 balance.

Now, our overestimates have been due in the main part to the fact as we have gone along our budgets have come to less than we thought they would, and have gradually been reduced. We have made economies. We need more subsidies this year than last year because, of course, the subsidy is paid only after the project is completed and reaches the maximum when the whole program is completed.

There is an offset against the subsidy, from what we are earning through the profit on our loans. It happens we are applying that toward administrative expenses. But the fact is that next year we figure on about $8,500,000 in interest profit, which is really an offset against the $17,000,000 we are asking to pay subsidies.

Mr. WIGGLESWORTH. Your conversion to defense work will affect you in this respect?

Mr. KEYSERLING. Yes; it will.

Mr. WIGGLESWORTH. It will reduce it, won't it?

Mr. KEYSERLING. Yes.

Mr. WIGGLESWORTH. How much?

Mr. KEYSERLING. It is very hard to figure now. I think it will be best to do it at the end of the year, when we know just where we stand. Lets make real savings and then use them, rather than counting chickens before they're hatched. This is what we have done in past years when we have come back to this committee and reported the annual contributions appropriated and not used so that those funds could be carried forward for use in the next year with a correspond

ing reduction in the new annual contribution appropriated need for

that year.

Mr. WIGGLESWORTH. I wish you would put in the record what that is.

(The information requested is as follows:)

Mr. KEYSERLING. The fact is we expect to come back next year, as we have in the past, showing certain balances to be applied next year. Mr. SPENCER. Our original estimates indicated payments would run as high as $21,000,000. However, we discounted this amount by $2,000,000 because projects converted to defense purposes would not require full subsidy. It is therefore fair to say that the factor of conversion of projects to defense has been taken into consideration, although we believe it likely that we may be able to effect further savings as we have in past years.

Mr. KEYSERLING. I think we have. Nonetheless, I am prepared to say I expect in succeeding years we will always come back and show economies, at least for a while, because we have in the past. I think we ought gradually to reduce the subsidies, too.

PUBLIC WORKS ADMINISTRATION PROJECTS

Mr. DIRKSEN. The 49 P. W. A. projects referred to in your summation are limited to defense?

Mr. KEYSERLING. These are old P. W. A. projects of the old Housing Division.

Mr. DIRKSEN. You still service those?

Mr. KEYSERLING. We had no responsibility for their construction. These projects were transferred to us when the U. S. H. A. was created and we manage them.

Mr. DIRKSEN. Are you empowered, under the statute, to sell them? Mr. KEYSERLING. Yes, we are.

Mr. DIRKSEN. Is it the policy to sell them?

Mr. KEYSERLING. It is the policy, but we have not sold any yet. Mr. DIRKSEN. Out of those, how many are in defense areas, or nondefense areas?

Mr. KEYSERLING. A great many are in defense areas, but it is difficult to use. them expressly for defense workers, because they are all occupied. But certainly it is true that a large part of the workers in those projects are, in fact, now engaged in defense activities.