Kit Bond

Mr. BOND

Mr. BOND. The Senator from Michigan has stated his case clearly and forcefully. EPA certainly seems to have seriously erred, if its representative indicated an outcome before the permit process has concluded. Having said that, however, there is a related provision, as the Senator has mentioned, in the House bill on PCB's. As a result, this matter will have to be discussed in conference. EPA has been made aware of the mistakes that have weakened his trust in the Agency's ability to be fair and objective in this permitting process. I cannot speak for the Administrator, but I believe that it may be possible for the Agency to review this situation and start afresh. There may be something that we can do in Conference report language that would help the concerned citizens feel that they are being treated reasonably and the real environmental risks are being considered.

Mr. BOND. I will certainly work to inform and convince the conferees that such language is important and may be appropriate.

Mr. BOND. I will do my best to accommodate his requests.

Mr. BOND. Mr. President, I now send an amendment to the desk.

Mr. BOND. Mr. President, I ask unanimous consent that further reading of the amendment be dispensed with.

Mr. BOND. Mr. President, what I have offered today is an amendment to provide a section 8 mark-to-market transition demonstration program for the restructuring of mortgages on FHA-insured multifamily housing projects with expiring oversubsidized section 8 project-based contracts. At the end of my remarks, unless others wish to make comments on it, I will ask this amendment be set aside. My purpose in sending it today is to allow it to be printed in the Record so that all my colleagues have an opportunity to review the amendment. This amendment reflects our best efforts at solving a critical and costly issue which is necessary to preserve affordable low-income housing. Because it is a very complex amendment, it has gone through significant work, readjustments, revisions, and recriminations. I felt it would be wise to give all Members and their staffs an opportunity to give this amendment thorough consideration. If there are improvements on it or if there are ways we can change it now or when we go into conference, I hope Members will come forward and offer their views and their advice on it. It is absolutely essential we deal with this problem right away so we will not trap ourselves in an escalating series of commitments that are beyond our financial resources to satisfy. I know many Members are at this point perhaps only marginally aware of the exorbitant costs needed to maintain some one million units of FHA-insured section 8 project-based housing that are affordable to low- income families. This marginal awareness is understandable because the section 8 new construction and modern rehabilitation programs were financed in previous years through oversubsidized 15- and 20-year section 8 project-based contracts which are only now coming due for contract renewal. This housing is a valuable resource for low-income families, but the cost of renewing section 8 for this housing often will be an unreasonable expense. We have an opportunity now and an obligation to readjust the cost of this housing to the cost of market rents. The Banking Committee recently held a hearing on the mark-to-market issue which emphasized the escalating costs of this section 8 project-based assistance. In response, the Banking Committee is currently preparing to mark up a bill to establish a comprehensive program to reduce the costs of expiring project-based section 8 contracts, limit the financial exposure of the FHA multifamily mortgage insurance fund for costly mortgage defaults, and preserve, to the maximum extent possible, the section 8 project-based housing stock for very low- and low-income families. In conjunction with the efforts of the Banking Committee, I am proposing today an interim section 8 mark-to-market demonstration as a stepping stone to the Banking Committee bill to provide HUD and certain public agencies with the authority and tools to test various approaches to restructure mortgages and reduce the cost of section 8 project-based assistance to these multifamily housing projects. I expect and hope that Congress will enact a comprehensive reform bill this year. I give my special thanks to Chairman D'Amato and Senator Mack as well as to Senator Sarbanes and Senator Kerrey for their interests, their dedication and commitment to finding a bipartisan approach that preserves this low-income housing stock at a reasonable cost to the Government. Let me emphasize the depth of the section 8 mark-to-market problem. There are some 8,500 projects with almost one million units that are both FHA-insured and whose debt service is almost totally dependent on rental assistant payments made under section 8 project-based contracts. Most of these projects serve very low-income families, with approximately 37 percent of the stock serving elderly families. Most of these projects are also oversubsidized and are at risk of mortgage default if we do nothing and attempt to renew the project-based contract at fair market rents. Some 75 percent of this housing stock has rents that exceed the fair market rent in the local area. This means without the renewal of the section 8 project-based contracts, many project owners likely will default on their FHA-insured mortgage liabilities, resulting in FHA mortgage insurance claims and foreclosures. HUD would then own and be responsible for managing these low-income multifamily housing projects. In addition, the cost of renewing the section 8 project-based contracts on these projects reemphasizes the difficult budget and appropriations choices Congress must make in seeking to control spending and achieve a balanced budget over the next 6 years. In particular, according to HUD estimates, the cost of all section 8 contract renewals, both tenant-based and project-based, would require appropriations of about $4.3 billion in fiscal year 1997, $10 billion in fiscal year 1998, and over $16 billion in fiscal year 2000. In addition, the cost of renewing only the section 8 project-based contracts will grow from $1.2 billion in fiscal year 1997 to almost $4 billion in fiscal year 2000, and to some $8 billion in 10 years. These exploding costs are unacceptable and unsustainable. The section 8 mark-to-market demonstration included in this amendment would authorize HUD to renew for up to 1 year all expiring section 8 project-based contracts with rents at or below 120 percent of the fair market rents for an area. This safe harbor will cover many of the 240,000 units which are supported by the expiring section 8 contracts and will provide HUD with the administrative ability to focus on those FHA-insured multifamily housing projects with significantly oversubsidized rents. The projects with units which do not qualify for the contract renewal safe harbor will be eligible to participate in the section 8 mark-to- market demonstration. In addition, similar to the Banking Committee's mark-to-market draft bill, the demonstration would encourage HUD to enter into contracts with State housing finance agencies, local housing agencies, and other public agencies to administer the demonstration program and to work at the local level to restructure the FHA-insured mortgages and to reduce the cost of section 8 project-based assistance. Finally, the demonstration would provide HUD and the public agencies with a number of tools to restructure the FHA-insured mortgages and reduce the cost of section 8 project-based housing assistance. These tools include the authority to restructure mortgages so that a first mortgage will reflect the market value of a project, while HUD holds a soft second on the remainder of the front debt. This is a critical tool because it preserves both the low-income housing while reducing the cost of section 8 project-based assistance and the risk of foreclosure. The demonstration allows HUD to implement budget-based rents to squeeze out any inflated projects, while covering the debt service and operating costs of these federally assisted projects. In addition, this demonstration would exclude those projects which are not properly managed or do not meet appropriate housing quality standards. The demonstration, however, is flexible enough to address the unique characteristics of projects such as elderly projects in rural areas and the unique characteristics of localities such as those with very low vacancy rates. I again emphasize that this demonstration is still a place holder as an interim approach to preserving federally assisted low-income housing through restructuring FHA-insured mortgages and reducing the associated cost of section 8 project-based assistance. We look forward to working with the administration, the Banking Committee, and the housing industry to find a responsible permanent method of preserving this valuable section 8 housing resource. Mr. President, I yield the floor. Ms. MIKULSKI addressed the Chair.

Mr. BOND. Mr. President, I thank my distinguished friend from Maryland, who has stated very clearly and eloquently what I was trying to say, which is that we have a financial disaster facing us, and we cannot resolve it easily. We have to do something that preserves this low-income housing. As I indicated earlier, my purpose in presenting the amendment at this time was to allow it to be printed in the Record, to draw the attention of my colleagues to it, so that they may give us the benefit of their wisdom or any views that they have on it before we seek to adopt it tomorrow, with the full knowledge that we may well have to address it again in conference. It is vitally important for low-income housing in every State in the Nation. I hope that my colleagues will look at it. With that, Mr. President, I ask unanimous consent that the amendment be set aside for further discussion. I see colleagues on the floor who may wish to speak, so I yield the floor.

Mr. BOND. Mr. President, I appreciate my colleague asking simple questions. This obviously is a major financial problem. It is a question of preservation of housing stock, particularly for the elderly in rural areas. We also have been sensitive to the cost of this housing. Over the past several years, we have capped the automatic escalator, or annual adjustment factor, on section 8 contract rents to limit the upward cost of this housing. In addition, depending on how we treat this housing and the section 8 subsidies, the Federal Government faces significant financial exposure as a result of FHA mortgage guarantees on these projects. If we were to walk away from this housing, the FHA insurance fund could be faced with the full cost of these mortgages. This is many billions of dollars of risk and exposure. In addition, mortgage defaults will mean that FHA and HUD would have the projects in the HUD inventory, and be responsible for managing and selling them. In some cases, many of the better projects could command high rents and be taken out of the publicly assisted housing program. We have attempted to look at the alternatives. Under the demonstration, HUD could hold a soft second mortgage by paying down the insured project debt to market. This would limit the exposure of FHA which otherwise could be subject to the exposure of the full amount of the guarantee on project debt. The FHA, the Government, the taxpayers, will have a soft second mortgage on that property which will essentially kick in after the first mortgage is paid off. In this way, section 8 would be paid at the market rent and good owners of projects could stay in the program and not be forced into default and foreclosure. It was our hope in working with all of the parties involved--as I said, originally many of them with adverse and competing interests-- that we could maintain this housing for those who need assisted housing most by allowing HUD to enter into a demonstration project. We tried to involve State housing authorities in this project to do the workouts. We have provisions that would permit HUD to set a budget-based rent that would take into account the costs of maintaining the project debt service and operating expenses. Finally, the purpose of the demonstration is to preserve low-income housing at affordable prices. This is critical for the people who depend upon this housing, in North Dakota, as in Missouri. Preservation is especially critical for the elderly who depend on these projects in rural areas. It is our view that attempting to shut down on the projects and voucher out the people who are displaced would lead to a tremendous loss to the FHA insurance fund and a loss of housing. In many areas, there may not be housing to supplant this housing that has been constructed. I do not intend and will not try to justify the decisions which were made to get us into this crack. We are in a very difficult financial situation. We have a commitment to provide housing. It is my view that this is the best way we can get out of it. If the Senator and his staff would like to work with us and have a better way to do it, I am anxious to have improvements. But from our standpoint, having worked with all of the competing interests in this, this seems to be the best way to minimize the exposure to taxpayers and maintain vitally important housing for those who need assistance.

Mr. BOND. In answer to that question, there are significant tax liabilities for an owner who walks away from a project. There were tax benefits which accrued to the people who produced the project in the first place. Walking away means they lose not only the property, but they also are subject to significant tax recapture. There is a proposal from HUD that the write-down include funds sufficient to pay any tax liabilities. I do not agree with that. I do not think that in the housing business we should change the tax implications. But there are very serious tax implications if they walk away. The second mortgage is one which does not require payments in the initial years while the first mortgage is being paid off. To address the deferred maintenance, the owners will have access, for the first time, to residual sums which had been set aside in the past for maintenance, and by converting a portion of the debt on the project to the soft second and freeing the owners from the responsibility of paying that portion, paying current debt service on that portion, that will free up money for the deferred maintenance. Will it handle all of it? We cannot say. But there will be a substantial sum made available. We are calling it a demonstration project because we do not know for sure how this will work, but it is our best idea of how to deal with these related problems.

Mr. BOND. Mr. President, I am advised by the distinguished majority whip that he needs to offer amendments, I believe, that are required on the unanimous consent. If there is no objection, I will yield the floor to allow him to meet the 5 o'clock deadline which was previously entered into. I yield the floor.

Mr. BOND. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. BOND. Mr. President, I ask unanimous consent that reading of the amendments be dispensed with.

Mr. BOND

Mr. BOND. I thank the Senator from Oklahoma. I also wanted to follow up on the question the Senator from Maryland addressed. I think the information she provided is most helpful. I note many of the contractual arrangements, including the excessively large mortgages and excessive contract rents, are due to contractual agreements made by the Federal Government 20 or 30 years ago. Some excessive costs have resulted from some of the Federal regulations and standards, which could be characterized as onerous, that applied to these projects. Other costs are due to the very difficult areas where the projects were being built. They were trying to get people into areas where you would not normally build multifamily housing. This included going into rural areas where there is elderly population, or projects in depressed inner city areas where costs of construction were very high. Some of the multifamily housing in this portfolio represents the only--or certainly the best standard housing in many areas, or the only housing available to low-income families. Our purpose is to squeeze out the excessive subsidies. But we also have to be sensitive to the critical housing needs of the low-income families, and especially the elderly who were subsidized--assisted by the project. That is why this is a very difficult problem. That is why we are engaged in this discussion of how we get out of a bad situation. I yield the floor.

Mr. BOND. Mr. President, I will follow up the comments by my colleague from Maryland. If there was ever an Augean stable that had to be cleaned out, it is probably HUD. What was referred to in the article today by our colleague and what our colleague from North Dakota mentioned is a real problem of management by HUD of its facilities and all of the housing that it provides. It is my belief and understanding that HUD has the authority to deal with these problems. And there are a lot more problems. Let me assure you just renting to relatives and getting section 8 contracts is not the whole game. There is equity skimming. There are many other abuses. One of the things we have attempted to do in recent years is to get HUD to focus on its job which is assuring that we provide good, clean, affordable housing to people who are entitled to it and do not pay one cent more out of the taxpayers' hard-earned money than we should pay. Many of us have been on the floor ranting and raving that we have put too many programs into HUD. Congress has been at fault. We have some 240 programs that HUD is supposed to administer. And we have chastised the Secretary and predecessors of HUD for coming up with new ideas and new programs. And almost every week there has been a new program coming out of HUD. Some of us in frustration have said: Stop. Time out. Stop creating new programs. Focus the resources on the programs that you have because there are problems. I think this problem that has been identified in the article demands an IG investigation. What was it that allowed this kind of an abuse of the system to go forward? Any program that is this large will attract some abuses. Are we doing enough? Do we have a system set up within the Department to identify these abuses? And if there are violations of the law, are we referring those to the appropriate authorities either for civil or criminal penalties? I think there is a lot to the administration side of it that needs to be addressed. Fortunately, the Senator from Maryland and I have the very simple task of appropriating the dollars. When you look at the task of authorizing the programs in the Banking Committee, that is another headache. When you look at administering the programs and the executive side, that is a very large headache. And that is one which I think rightly deserves scrutiny. We will join with, if the inspector general happens not to be listening to this debate today, in requesting of the inspector general that they do give us a report on that particular situation and how well HUD is equipped to deal with abuses such as these, and others. I thank my friend from North Dakota for bringing this out into the discussion on the floor today because it is just this kind of abuse of the system that rightfully drives taxpayers nuts. I do not think anybody or certainly a very small number of people in the country would say that they did not want to provide housing assistance for those in great need. But there is an overwhelming majority that say we should not be paying one cent to provide a section 8 payment to somebody who is using a Federal program as a scam to get money off of housing a relative. I think that administration of the program is a very, very difficult challenge, one, frankly, I would not want under any circumstances. Mr. DORGAN addressed the Chair.

Mr. BOND. Mr. President, I join in thanking our colleague from North Dakota for his kind comments about Youthbuild. We did put in the $40 million requested for that program. I, too, have seen the benefits in St. Louis of the Youthbuild Program. I regret to inform my colleague that if he wants to deal with the problems of Indian housing, we do that, too. That is not Interior. That is in this committee. We will have, in the public housing reform bill that is working its way through the authorizing committees, there is a chapter that is in conference between the Senate and House Banking Committees that would reform Indian housing. Indian housing is unique. It has unique solutions. Instead of HUD micromanaging responsibilities, under the authorizing bill that is now in conference, the responsibility would be returned to the tribes to address their own needs. I suggest our colleague may want to take some time to acquaint himself with the provisions in that public housing bill that deal with Indian housing, because I share the concerns about Indian housing and how the U.S. Government has not done a good job in addressing those needs. We do Youthbuild, we do Indian housing, we do AmeriCorps, National Science Foundation, lots of things you never heard of. We are sort of a general complaint window and always glad to have comments and participation by our Members in these programs.

Mr. BOND. I thank my colleague from North Dakota. Mr. President, I ask that the pending amendments be set aside.

Mr. BOND. Mr. President, I send to the desk an amendment relating to reductions in force in HUD.

Mr. BOND. Mr. President, I ask unanimous consent reading of the amendment be dispensed with.

Mr. BOND. Mr. President, I believe this amendment is cleared on both sides. This amendment is being submitted pursuant to a request from the Secretary of HUD which inserts language similar to that provided in this bill for NASA which proposes a buyout provision to address the substantial personnel reductions confronting the Department of Housing and Urban Development at headquarters and in several other locations. The buyout authority would enable the agency to meet its personnel targets without resorting to very disruptive and potentially costly RIF procedures. In addition, to make this subject to the availability of appropriated funds, the language requires HUD to reimburse the civil service fund for expected loss revenue and increase beneficiary payments from appropriated funds. These limitations assure that no net increase in the expenditures would occur during fiscal year 1997.

Mr. BOND. I move to reconsider the vote.

Mr. BOND. Mr. President, I understand the concerns of Senators Cohen, Jeffords, and Akaka. I can assure them that I will consider their request for $4 million for the Board of Veterans' Appeals, in conference with the House. Reducing the response time to process veterans claims is extremely important. I believe the BVA should continue to look at improving the process, in addition to looking at acquiring more staff to process the claims. federal emergency management activities in arizona

Mr. BOND. I will make note of the circumstances in Arizona. As you have mentioned, if a disaster had occurred in my State, I would expect FEMA to respond quickly. We recognize that FEMA has worked to help many areas around the country, but it appears that they need to complete their commitments in Arizona. Could the Senator from Arizona tell me how long the communities have waited for a resolution?

Mr. BOND. Have they completed any of the projects?

Mr. BOND. I understand the Senator's concern especially given that 3 years have passed without relief. I appreciate the Senator's bringing this to my attention, and I will do what I can to work with the Arizona delegation to rectify the situation.

Mr. BOND

Mr. BOND. Mr. President, I thank my good friend and colleague from Georgia for the time. I join with him in thanking our colleague from Texas, Senator Hutchison, for describing the scope of the problem. We have all seen the numbers in recent surveys, the percentage of adolescents between the ages of 12 and 17 who admit to using drugs within the last month. That increase has gone from 5.3 percent in 1992 to 10.9 percent in 1995. The statistics from these surveys show that the use of LSD and hallucinogens is up anywhere from 183 percent, cocaine up 166 percent, marijuana use up 144 percent. But there are other factors that give us a better idea of the pervasiveness and the impact that drugs are having in our country. When the Senator from Texas tells about the Texas border and other places where ranchers are threatened by drug lords--and we have heard the same thing from the Senator from New Mexico [Mr. Domenici], talking about how the drug efforts are really moving a foreign, hostile nation into our borders-- we ought to be seriously concerned; the problems are very acute in the border areas. There are some other statistics that are very alarming away from the borders, in the heartland of the United States. In the August 21 edition of the St. Louis Post-Dispatch, we had the very frightening news that emergencies in the medical care units in St. Louis were up an astounding amount as it relates to drugs. The overall increase in drug- related emergencies nationally has gone up significantly, but St. Louis for one had an even greater increase. Since 1992, heroin-related emergencies are up 111 percent in St. Louis hospitals and medical care facilities. That is even worse than the national rate, which is up 58 percent. We are talking about an explosion of emergencies linked to heroin. Now they say: Oh, well, it may not all be exactly statistically related to the increase in drug use. It may be some bad heroin. When you look at the numbers nationwide and you see these emergencies, these are not people responding to a survey about whom we may question their veracity. These are people who are hauled in in serious condition to an emergency room. They are not deciding whether or not to honestly answer a question of a survey. They are hoping to start breathing again. Cocaine-linked emergencies were up 38 percent in St. Louis in the last 4 years. They are up 19 percent nationwide. Marijuana-related emergencies increased 316 percent in St. Louis in the last 4 years. There is no question, from whatever statistics you use, whether you listen to the Senator from Texas talk about the problems of property being taken over on the Texas-New Mexico-Arizona borders, whether you read the general national statistics that drug use is up, whether you take a look at the hospital and emergency-room-related emergencies, we see a very clear pattern that drug use is up, the abuse of drugs is up, and the problem for our society is getting worse, not better. I believe that the Clinton administration has had countless failures in this area, and they have even taken actions which might be conducive to an atmosphere of permissiveness. The former Surgeon General, as has been pointed out here before, advocated legalization of many drugs and also advocated needle exchange programs for heroin addicts. I served as the ranking member on the Treasury-Postal Appropriations Committee and wondered why, in 1993, there was so much of a problem in getting White House personnel security clearances. Well, it has come out that some of the officials in the White House have had recent drug use and among the drugs used were crack, powdered cocaine, and hallucinogens. The administration proposed and we opposed decimating the Office of National Drug Policy. But they were bringing into the White House people who used drugs in recent times. We saw significant cuts in the funding for the efforts against drug importation. We saw cuts across the board. We saw Customs cut significantly in terms of the efforts. The DEA has been cut by 227 agents. The FBI had proposed cuts of significance. All of these areas were where we are fighting on the front line against the importation, the trafficking and the use of drugs through law enforcement efforts. I think a primary goal of drug control policy must be to reduce the amount of cocaine entering the United States. Interdiction programs target source countries in the transit zone, about 2 million square miles between the United States and South American borders, including Central America, Mexico, Caribbean Sea, and the Caribbean Islands. About 780 metric tons of cocaine are produced each year in South America, and about 30 percent is shipped through the Caribbean into the United States, Puerto Rico, and Mexico. Funding for interdiction declined from $1 billion in 1992 to $569 million in fiscal year 1995. There was no funding increase in source- country activities. So the overall funding was decreased by nearly half. As a result, cocaine seizures are down from 70,000 kilograms in 1992 to 37,000 kilograms in 1995. DOD funding for interdiction is down. Coast Guard funding for drug interdiction is down. I think the executive branch needs to develop a plan to implement a national interdiction strategy. Agencies have their own plans, but they need the coordination of the ONDP. We need to get serious once again about the war on drugs. I thank the Chair and yield the floor.