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MONDAY, JUNE 4, 2001
U.S. House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Financial Services,
Washington, DC.

    The subcommittee met, pursuant to call, at 1:30 p.m., in room C-501, Ceremonial Courtroom, Hale Boggs Federal Office Building, New Orleans, Louisiana, Hon. Sue W. Kelly, [chairwoman of the subcommittee], presiding.

    Present: Chairwoman Kelly.

     Also Present: Representatives Baker, Vitter and Jefferson.

    Chairwoman KELLY. This hearing of the House Financial Services Subcommittee on Oversight and Investigations will come to order. Without objection, all Members' opening statements and questions will be made part of the record.

    For the information of the people who are testifying and those in the audience, there will be a period of time in which your testimony will be recorded. You have 5 minutes to testify, at which point, 4 minutes into it, if you're getting close, I'm going to tap the end of this gavel. Don't get alarmed. It just means you're coming close toward the end. A minute is still a pretty long time, so keep talking. I'll let you know. I'll really bang the gavel if you go way over. But, we really are here to hear what you have to say, so feel comfortable about saying it, because that's why you're here and we're glad you're here.
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    This afternoon, we're going to discuss the report issued last month by the Inspector General of HUD on the Housing Authority of New Orleans and the distressing problems that were disclosed in that report.

    In 1996, the subcommittee held a hearing here chaired by a different subcommittee chairman, but in this same building, on the problems that HANO has had in providing a safe, decent, and sanitary housing. The Inspector General's report calls into question claims of improvements made by the HANO under the Cooperative Endeavor Agreement.

    It's my hope that we will identify how HANO's problems have affected the lives of the thousands of residents who depend on it for housing and to search for ways to improve their living conditions. All of us, regardless of where we live, want to make a better life for our families. We need a place where our children can grow without fear, without danger. We need an open, clean, peaceful neighborhood. HANO residents deserve management that quickly responds to maintenance requests, keeps its promises to make long-term neighborhood improvements, and wisely spends its funds.

    I want to begin by thanking my colleague on the Financial Services Committee, Congressman Richard Baker, a deeply concerned Representative from nearby who both brought this situation to my attention and asked me to convene this hearing. We're grateful for his support and his expertise on this issue. Also later this afternoon, we will welcome Congressman William Jefferson, who represents this area. For his hospitality, we welcome him and thank him for welcoming us to this great city and we welcome Congressman David Vitter, a strong advocate for the people of Louisiana.
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    Both Congressman Baker and Jefferson were here 5 years ago, and I can understand the passion and frustration that they must feel for trying again to get a handle on the problems at HANO and see some real improvements. We also want to thank Chief Judge A.J. McNamara of the Eastern District of Louisiana and his staff for their cooperation in using this courtroom.

    The Inspector General's recent report on HANO raises some really troubling questions about events over the past 5 years. The report states that after spending over $139 million of the $243 million it received for modernization of the units in these past 8 years, HANO has not revitalized even one of its conventional sites. The report also states that management at HANO has constantly changed without improvement in results. In fact, HUD's own staff wrote that HANO can plan, but not implement, and that whatever progress has been touted as ''all''—and I'm quoting from the report—''smoke and mirrors'' end of quote.

    HANO's most recent scores on HUD's public housing assessment system are, once again, failing, after claiming they made improvements for the last 2 years. That claim might have been shaky at best, according to the report, since HUD management in Washington wouldn't even allow its own New Orleans Housing Office to verify the earlier report.

    The bottom line is that hundreds of millions of dollars have been spent by HANO in the last 10 years, but apparently without a lot of positive result. Five years ago, the HUD Investigator General testified that, and I'm quoting: ''The best path for HUD is a total takeover of the authority.''

    Last month, the same IG official concluded that HANO cannot renovate, demolish, build, or manage its units. That is where HANO was 5 years ago, and 5 years of operating under a cooperative endeavor agreement hasn't changed that fact. I do not doubt that there have been some positive actions taken in the last year to stop the bleeding, but it might be time for some more drastic action to help HANO's residents finally get the housing and management that they're entitled to.
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    At this point, I'd like to let Members of the subcommittee and their staff know that it's my intention to enforce the 5-minute rule and I will hope that we will cooperate with this. I want to advise everyone here, we have plenty of time to hear everyone's viewpoints, but I also want to remind you that we need to maintain decorum that is required in all congressional hearings and in Federal courtrooms. So please do not applaud or comment loudly for a particular witness or a subcommittee Member.

    At this time, I'd like to turn to Congressman Baker for his formal opening statement. Thank you, Congressman Baker.

    Mr. BAKER. Thank you, Chairwoman. I certainly appreciate your willingness to travel from New York to come to this great city and to be of help to us in this most difficult problem.

    I must first confess to those who are today though, Madam Chairwoman, I have a difficult mission ahead of me. I'm an LSU graduate and I have to say you Tulane Greenway supporters, congratulations. That doesn't flow off my lips very easily, but I've said it. My dad is a Tulane grad and my daughter is a Tulane grad. They often refer to me as the only illiterate in the family, so I hope you carry the Louisiana banner proudly to the World Series and bring back home that title for us one more time.

    This is a very difficult problem, Madam Chairwoman, Congressman Vitter. Unfortunately, it is a frustrating, long-standing problem. I have been involved in these discussions with prior secretaries of HUD, with other folks within the Inspector General's office, with all levels of HUD officials. When I first began this effort some years ago and traveled through many of the projects and spoke to the residents, I left this city with a very heavy heart, realizing that the United States Government was the largest slum landlord operator in the United States. And it has been a continuing haunting realization that we are simply not making the progress that any reasonable person should expect for the quality of lives for the individuals affected.
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    It's my hope that the subcommittee, after listening to the testimony today, will explore any and all alternatives and spare no effort in pursuit of an appropriate resolution.

    This time, for the first time, I'm hoping that this subcommittee with this committee's leadership, working with the officials at HUD, that we can make changes that residents will see as being real. This is not just about a waste of taxpayer dollars. It's not just about Government inefficiency. It is, however, about the quality of people's lives. I don't want to go through another 5 year window and sit in this courtroom again with other Members of Congress and read another Inspector General's report that tells us that no matter how many dollars we spend, no matter how hard we try, that people still continue to live in the worst abysmal conditions one can imagine.

    So, I thank Congressman Vitter for his willingness to participate. I am appreciative that Congressman Jefferson will be here later this afternoon. And Chairwoman Kelly, I am extremely appreciative for your willingness to come to the city, take the necessary report back to Chairman Oxley, and let's all join hands together. This is not a partisan issue. It's not a Federal/State battle. It is a problem for all of us that we ought to be able to join hands and get this fixed this time the right way. Thank you very much.

    Chairwoman KELLY. Thank you very much, Mr. Baker. We'll now go to Congressman Vitter for his opening statement.

    Mr. VITTER. Thank you very much, Chairwoman Kelly, for your leadership for coming to our part of the world to address this important issue and thank you, Richard, for your leadership over many years on this troubling matter. The last time this subcommittee met here to discuss the issue was 1996. I was not a Member of Congress then and really, I'm coming to the issue in a fairly new and fresh way as a Member of Congress.
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    But I did grow up in the area. I have continued to read about the news accounts of this very troubling matter and so, just as a citizen looking from afar, I've long been concerned about this decay of the housing stock of New Orleans that has not only a remedy has failed to be found by the housing leadership, actually the decay has been led by HANO and mismanagement there. And so I'm very interested in the issue as a resident of the region of southeast Louisiana and, pending what we hear at this hearing, I certainly fully support the idea that we now need to do something fundamentally dramatically different. We have been talking about this problem and we have been negotiating interim stop gap measures for well over 5 years and nothing fundamental has apparently changed. So I'm very, very eager to hear from residents and hear from anyone interested in what we should do differently so that we can move beyond these recurring themes and recurring problems with some more dramatic action. And I thank you for letting me be a part of this hearing. I'm not a Member of the committee or the subcommittee but, as a local representative, I'm certainly very interested in and I appreciate the invitation to be here.

    Chairwoman KELLY. Well, I thank you very much. There are no more opening statements from the congressional Members here, so we're going to begin with our first panel. Before us today we have Ms. Deborah Davis who's the Chairwoman of the Desire Resident Council Association and she's a 44-year resident. In addition, we have Ms. Laura French, former Chairwoman of the Residents' Council and a resident of the St. Bernard Apartments who's lived in HANO facilities for 55 years.

    You're both aware that this subcommittee is holding an investigative hearing and, when doing so, that the Chair may decide to take testimony under oath. Do either of you have any objection to testifying under oath? The response is no. That's fine. The Chair advises you that under the rules of the House and the rules of this subcommittee, you're entitled to be advised by counsel. Do any of you desire to be advised by counsel during your testimony today? The response is no. Thank you very much.
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    In that case, if you would please rise and raise your right hand, I'm going to swear both of you in.

    [Witnesses sworn.]

    Chairwoman KELLY. Thank you very much. Each of you is now under oath. Without objection, your written statements will be made part of the record. You're each now going to be recognized in turn to give a 5-minute summary of that testimony.

    Ms. Davis, we'd like to begin with you.


    Ms. DAVIS. Thank you. I want to thank everybody for the opportunity to sit before Representatives of the House and also Congressmen and allowing us the opportunity to vent as we discuss some of the experiences of redeveloping Desire. One of the things I'd like to touch upon at this time is the living conditions. Desire, though it may have been built with brick veneer, was built very strong. It lasted 44-plus years. And we are content that even in this leased state, it's still a home to us. It's still strong and it's still a neighborhood to residents who still reside in Desire.

    In 1992, the National Committee for Distressed Housing paid New Orleans a visit and found that there was some discrepancy in the way of management and how they would appropriate the funding, and they found that Desire was distressed because of poor management and the lack of funding being invested in the public housing. So they allowed, by the grace of God, we were blessed with a HOPE VI grant. This HOPE VI grant is supposed to create opportunity of home ownership for people everywhere and not only for people everywhere, the economic development, the counseling necessary for residents who've been through distressed conditions, de facto demolition. Mismanagement at that time was at its worst. And at this time we're still waiting on the remedies that this good initiative was supposed to bring to our neighborhood and our community.
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    One of the problems was that, because of the fact that we were granted a HOPE VI grant to the tune of $44 million, some of the funding and comp which was directed to stabilize the community until all agreements were signed, until all approvement from HUD was adhered to, was drawn back. So we experienced the lack of maintenance. On the bad side, we experienced a tremendous amount of lack of maintenance.

    To this day, the monies have not been let other than to hire a program manager and to allow some planning and contract negotiation to take place with developers, and we're still at this point still waiting. The only difference with that is that although it may be the process to handle good business, we find that this process does not take care of the human side, which was very necessary, was more necessary to us than the brick and mortar itself, because when a community goes through de facto demolition, it leaves a tremendous amount of scars on the individual lives, the children who live there, the seniors who live there and also the young adults. They bear the scars of no one caring.

    So as a result of that, one of the initiatives that was supposed to be was the community support services, which would allow residents to get the proper counseling, having gone through this distress. Oh, lord. It would allow residents also to be trained and placed in job training opportunities so that when Desire, in all its opportunity and all of the great wisdom that was going to be applied, residents would be ready to meet the opportunity. We find that we are not. We're not advocating taking the funds away, because it doesn't take away the problems or the experience that we bear in our bodies and in our emotions. We're saying we're still waiting. It's a good program. It was, even though HOPE VI was designed by a Republican, we found at that time and were elated that somebody cared enough to really come in and look into the problems that residents had been facing for years and that we—and also that they would look at us as human beings, not as the problem, because residents did not tear Desire down. Residents did not cause the lack of economic development not to be afforded in our community or residents didn't cause the fact that we are not able to become a tax file base or have experienced all the amenities that normal Americans would have in their lives.
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    In fact, we've been penalized and we're just afraid that as we speak we're experiencing the slow wheel of slavery all over again just because we're not being able to transition and to mainstream America through economic development. We're not lazy people. Very creative people. God has kept us with the dignity of being called a race of people, of being called humans. He's reserved that in us. And now they're ready to take back and steal HOPE against hope that someone would undo the—that prohibit us from moving forward because this was not a complicated process. This is not. In fact, residents believe they can do it themselves with the necessary experience behind some professionalism, consultants and developers. We can do it ourselves.

    The other broken promise. One of the other things I'd like to touch upon is that the MOU design, because the grant agreement didn't allow the residents enough participation to help design their future. So the Housing Authority established a grant agreement in which we find that at this time they're not adhering to it, because the process of setting forth developers' agreements and having input into developing those agreements and implementing those agreements was taken away from us. But we are hopeful that through discussion and those things we'll get back on track.

    Also, one of the broken promises was that the amount of money afforded Desire community and its neighborhood, we had hoped that the Section 3 component, which allowed Federal dollars to be contracted out and that these contractors, developers, would come back in turn, you know, relinquish some of the funding so that we are able to get the proper training, even some secondary schooling, jobs creation, business creation, with the amount of money. That's one of the broken promises that has not been kept.
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    Another one is that we had hoped the amount of units, we find ourselves now, because of all of the revisions that have taken place, the amount of units that has been decided to be replaced, I think when the dust cover, there's something like 260 some odd units whereas you had over 1,100 people who transitioned out of Desire to relocate somewhere else in some minority community. What we find ourselves now is that, because of the housing stock in New Orleans that were not adequate, we do not have enough housing that would adequately satisfy the waiting list necessarily, the people who trust this process to come back online. We need more units in the tune of some 800 subsidized units. In fact, the whole agency ought to be looking more at adding rather than tearing it down, because we experienced a type of hopelessness now.

    Chairwoman KELLY. Ms. Davis, I thank you very, very much for your testimony. I want you to know that this morning I went out with some of the people from HANO. I went to Desire and what you're bringing up is a question I asked them. I saw the buildings had been demolished and I said, what's happened to the people and are there enough units available for these people to be housed in? And I have to say that the response I got from a couple of them was exactly the thing you just did. They shook their head. They've been tracking as many people as they possibly can, but you know and I know there are people who we don't know where they went, because the units were knocked down and there was no track that got to follow them, because it's been happening for some time.

    The other thing I saw there that just broke my heart. I'm the mother of four children and grandmother of six. I saw two little boys coming back from the store. They had a bag. Each of them was carrying a bag. They'd gone probably to the store for their mama, and they were standing on the street corner waiting to cross that street. Two little boys about 4, 6, 7 years old. What a place to have to raise children. What a terrible thing to raise children in a situation like that where they grow up. How can they have hope? How can they know something that goes beyond and know that their lives can reach beyond?
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    I think that it's wonderful that you're here to testify. I just want to say one more thing. The first trip I made to New Orleans, I got here in 1947. I was with my parents and my family. We got on a banana boat, because my dad was very adventuresome. We took that banana boat down to pick up bananas in Honduras, Guatemala, and some other places. We stopped off in Cuba. And it was there I had an experience where we slept in a place where there were rats scratching in the walls and I was afraid and I was afraid to get out of bed and get my mama and I was afraid when I heard the rats running under my bed that if I fell asleep and my hand fell over the bed, the rat would bite me and you know and I know a rat will get a piece out of you before you even wake up.

    We can not have children growing up in that kind of a situation. I felt that fear. I don't want to see any child in America grow up like that. So I really do thank you so much, because this is about the mothers and the children in those projects. That's why I came down here. Thank you for your testimony. Let's move now to Ms. French.

    Ms. Davis, you have something you want to say?

    Ms. DAVIS. Yes, if you could permit me. Desire, although look hopeful at this time, but there are residents that is there now, if you move them, I'm not saying that things shouldn't change. I'm saying bring the necessary remedy in to alleviate some of the problems that's going on. If we move some of those seniors now, they will die in the process. And ma'am, they've just been through too much and we love them, we love our neighborhood. We take care of one another. All we're asking is that the necessary funding and wisdom be applied to alleviate more—because somebody prep—you know, if we leave it now, it's prepped to be sold. It's our neighborhood, and there is not another neighborhood in the City of New Orleans besides the rich and famous neighborhood that we would rather live in, because Desire allows us to love one another and to be neighbors. That's what I want to say.
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    Chairwoman KELLY. That's beautiful. Thank you, Ms. Davis.

    Ms. French, let's go to your testimony now, please.


    Ms. FRENCH. First I would like to say good evening to the panel. If I may, I would like to say to Congressman Baker, I heard of this hearing 5 years ago the day of the hearing, when it was over, because I would imagine I would have been here and begged someone to hear, because it's the same cry. But I would like to start, if I may, by reading a letter that I started writing to Mr. Cochran on behalf of our problems at St. Bernard.

    My name is Laura French. I live at 4090 Gibson Street, Apartment 8, northern Louisiana. I'm located in the St. Bernard housing development. To Mr. Andy Cochran, U.S. House of Representatives, HOB, Washington, DC. Dear Mr. Cochran, this letter is to follow up our telephone conversation. As I stated on the telephone, residents of the St. Bernard housing development are experiencing discrimination. Our civil rights are being violated and we are being held hostage in our too small apartments for our family size.

    Mr. Cochran, I've lived in the St. Bernard for a long, long time. I've been on the resident council for over 20 years. For the past 10 to 15 years we've had to live under dictatorship, being forced to live by rules and regulations that are not applied to persons in prison or the penitentiary systems. As I said before, we need someone to help turn this situation around, not someone who is just going to listen. I've been singing this tune for the past 5 years to congressmen, Senators, city council persons. We made the front page of the Times-Picayune for having residents living in overcrowded conditions, yet all of this fell upon deaf ears.
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    I would hope something positive comes out of this trial. I know the residents need something positive to happen in their lives during this crisis. As I stated on the telephone, we need someone to take action on these matters. Attachments are a page with some of the problems and a page with names of persons living in overcrowded apartments. Overcrowded families, families living in overcrowded apartments. There are families with up to four or more persons living in 1-bedroom units. Some of these families have been in these apartments for over 10 years. Some households have teenage sons and daughters. Even though these families have been living under these conditions for years, they have to live like this even longer since the U.S. Congress has mandated the demolishing of housing developments and placing the people here in the St. Bernard development community center. In April of 1998, like thieves in the night, HANO set the wrecking ball to the 1400 block of Milton Street, 1412 through 1450. Three buildings, consisting of 24 1-, 2-, 3- and 4-bedroom apartments were demolished. The Housing Authority was supposed to build a community center on that property. In January, 1999, in an ANROC meeting, Mr. Ron Mason, executive monitor for HANO at that time stated he had bad news for some of the leaders. There wasn't any money to build community centers and the St. Bernard development was one of the sites that would not get a community center.

    Demolition process. The Imperial Drive site was demolished. Desire, Florida, St. Thomas and C.J. Peete are in the process of being demolished. St. Bernard is the home site for all of the residents from these sites. That is fine, because we feel that it could have been St. Bernard up for demolition. HANO and HUD are placing families from these sites in St. Bernard. The only problem I have with this is they're all still giving these families 3- and 4-bedroom apartments with two and three people on the lease while forcing our residents to move out of their apartments into smaller units. Example: HANO placed a lady and three small boys from the Imperial Drive site into a 4-bedroom apartment. The oldest brother is not 7 years old yet. HANO forced a family with four dogs and a 2-year-old out of a 4-bedroom apartment and placed a family with two people from Imperial Drive in that 4-bedroom apartment.
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    Housing Authority's waiting list. There are people who left their apartments to drug activity, did time in jail, they return from jail and they receive apartments before persons who were on the waiting list before these people ever applied for a project in the first place.

    Rodents. Over the years some apartments in the St. Bernard apartments have always had problems with mice from time to time. In 1997 HANO had the vents of the concrete base of the building welded closed and the iron gates locked. When they did, cats were locked under the buildings and all the cats died. The poor cats cried until they died under these buildings. After this happened, the rats started coming into the apartments any way they could. They ate their way through the walls, air conditioner closures, clothes dryer vents, through toilet commodes, up the bathtub drain, through holes in the floor that contractors left open after renovation in the 1980s. The rats had full run of these apartments. When finally a few cats did begin to come around, the rats pulled switchblades on the cats and most of them fled.

    Roaches are a problem in a development simply because some of the residents don't fight them and the HANO has nothing to give us to help to combat the roach problem. In these apartments, everyone has to fight the roaches together or the roaches run from apartment to apartment and no one will get rid of the roaches.

    Dogs. HUD and HANO have given permission for residents to have dogs. The residents have to pay a $75 fee and register the dog as a live-in. There are too many pit bulls, Dobermans, Rotweilers and every dog you can possibly name. There are too many people living on the site for people to be allowed to have dogs. Most of the seniors don't want dogs as pets or companions. Besides, the dogs mess all over the place and we step in poops daily because the dogs don't wear Pampers. They are trained only to mess outside. HANO will let you pay $75 to have a dog in your own zero rent.
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    I'm sorry. I have to apologize. I had to stop it because our summer program was coming in and I had to start writing for the summer program. But I just want to say to the panel. It hurts. We are people living in 1- and 2-bedroom apartments. I mean large families. Mothers with three to maybe five children. Even in 2-bedroom apartments. You have teenagers sleeping together, 14, 15, boys and girls. They've been living like this for a long time. Now that the demolition is being done, they have to stay here because HUD said demolition comes first. So if you've been living like this, you're going to continue living like this, because they have to get the residents who are coming from the sites who are having demolition settled. It's unfair. We all are people. We all are human. I don't think we should have to live like this.

    Chairwoman KELLY. Thank you very much, Ms. French.

    There is one correction I'd like to make. You said that the U.S. Congress had demanded that the units be demolished. This is not true. Congress serves a function of appropriating money. It is the Housing and Urban Development agency, which comes under the Executive Branch of the Government that allows HANO to demolish these apartments. So I wanted to clear that up. Congress can make laws that govern the amount of money that goes to these agencies. We can also make some other laws, too, but in this particular instance, it was not the Congress that caused the demolition of any of these units.

    Ms. French, you wanted to say something.

    Ms. FRENCH. I'd just like to say, Ms. Kelly, whenever we question the Housing Authority about something and it's always ''HUD did it'' or ''the Congress mandated it.'' I asked, ''Let me see this. Where is this?'' ''Oh, we're going to get it for you. We're going to get it to you.'' Whatever. I haven't seen anything yet. The only thing I remember is in 1995, I believe, then-President Clinton did the one strike policy on television. But I haven't seen anything. But when they tell you ''HUD mandated it'' or Congress, those two entities. I've asked over the years, ''Let me see where HUD has said this.'' ''Oh, we're going to get it for you. So-and-so, you find it. You get it for her and give it to her.'' And it just goes on and on.
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    But, I would like to ask you, Ms. Kelly, also. You said about your visit to Desire. Did you visit St. Bernard?

    Chairwoman KELLY. We did not. We didn't have enough time. We managed to get to B.W. Cooper, St. Thomas, Fisher, Florida and Desire. That was all we were able to fit in this morning. We had a pretty busy morning, because I kept popping out of the van and going into some of these places. I felt it was important that we actually look at what the conditions are. So we didn't get a chance, but I promise you, Ms. French, that if I get back down here, if you'll let me, I'll come and you can take me for a walk. Will you do that for me?

    Ms. FRENCH. Yes, I would. And if you can't come, if you can send someone, I would appreciate that very much. We need someone to see what we're saying about our living conditions at the St. Bernard development.

    Chairwoman KELLY. That's what I tried to do as much as possible this morning. We will continue to try to work with you. I'm just so saddened by the conditions. As Ms. Davis pointed out, we know that these are neighborhoods. We know that you love each other, you support each other. We know you know your neighborhoods and it's important that we keep that neighborhood going if we possibly can. So I wanted to say to you, I don't know who told you that they would get back to you about these mandates from HUD and so forth, but HUD can mandate. Congress doesn't do that, but HUD does. Congress can dry up the money, Congress can do some other things. But if they promised you that, you keep on them and, if they don't get back to you, you've got Mr. Cochran's address now. You write to him. All right? That goes for you, too, Ms. Davis. You write to him. You write to me. Write to any one of us. Mr. Baker here is a Representative, Mr. Vitter. You write to Mr. Jefferson. We'll get back to you.
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    Ms. FRENCH. I've written to Mr. Jefferson on a couple of occasions.

    Chairwoman KELLY. Well, we'll talk to him about that. Right now, I just have a couple of questions if I can find them here. There's a couple of questions. One, have either one of you ever seen any results from something called the Institute for Resident Initiatives?

    Ms. DAVIS. Well, Desire opted not to use the Institute for Resident Initiative, because of the fact that we realized that HUD was not going to duplicate programs and we needed TA. We needed somebody to come in and at least help us expand on the program that residents are already running. So we opted not to take the funding or to use the Institute of Resident Initiatives.

    Chairwoman KELLY. That was an election you made?

    Ms. DAVIS. Yes.

    Chairwoman KELLY. OK. What about you, Ms. French? Have you seen anything?

    Ms. FRENCH. Frankly, the Institute for Resident Initiatives is now National Center for the Urban Communities.

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    Chairwoman KELLY. I'm sorry. I didn't hear that clearly.

    Ms. FRENCH. The Institute for Resident Initiatives is now the National Center for the Urban Communities. Is that the same program? That's what I'm trying to say.

    Chairwoman KELLY. No. It's at Tulane.

    Ms. FRENCH. Yes. Tulane University.

    Chairwoman KELLY. Have you ever seen any results, anything from it?

    Ms. FRENCH. Ms. Kelly, I don't know if I have to raise my hand or raise my feet. I would like to take the 5th on that.

    Chairwoman KELLY. Well, OK. I just wondered, because they've been getting about $2 million a year and I wondered if either one of you have seen any results from the programs?

    Yes, Ms. Davis.

    Ms. DAVIS. Just one. After the revision in 1999, Desire Revitalization Revision, they did a campaign to go out and sell the idea of Section 8 to residents and we lost hundreds of residents, because of the grass is greener on the other side theory. So that's about all. Also we compete against their basketball team.
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    Chairwoman KELLY. They took the Section 8. They got people on Section 8?

    Ms. DAVIS. Well, they encouraged some of our residents to take it and now they're having problems, because the income does not support the Section 8 theory.

    Chairwoman KELLY. Thank you. Are either one of you aware of the use of Drug Elimination grants in the Housing Authority and, if so, I'd like to know how effective they have been. Yes, ma'am.

    Ms. FRENCH. We were getting about $25,000 Drug Elimination funds to run a 36-week after-school program and that wasn't so successful. Our program is successful, but it could be even more. For the—program trying to spend $25,000 for 36 weeks on about 60 to 80 children. And I don't find that as enough funds to run it, but we don't know who you go to to ask for more.

    Chairwoman KELLY. Perhaps this hearing will——

    Ms. FRENCH. We have a beautiful program at St. Bernard, because we feed them hot meals and we have TOW tour and we just have arts and crafts. We have good programs, but you get what you pay for, and when you have to pay people little money, you get a little service. And we tried to ask for raises, but they say HUD and the Congress don't allow you to get more than whatever.

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    Chairwoman KELLY. HUD, Ms. French, not Congress.

    Ms. FRENCH. I'm only saying what they told me. I can only say what they tell me. Yes, we received $25,000 for 1998-1999 and 2000 and maybe for 2001. But they say it's the last year for it.

    Chairwoman KELLY. Thank you very much. I've run out of time, so I'm going to move on and ask my colleagues to ask questions.

    Mr. Baker, will you please.

    Mr. BAKER. Thank you, Madam Chairwoman.

    Ms. French, you commented that there was a fellow who got convicted over a drug problem and got access to a unit before people who had been on the waiting list for some time.

    Ms. FRENCH. OK. Let me say this. For instance, and I want to say it all. I'm not about putting anybody out. Everyone needs somewhere to live. If you committed a crime and you did your time or whatever, I don't think that should take away from you having another chance.

    Mr. BAKER. No. Sure.

    Ms. FRENCH. OK. There are persons who are on the waiting lists for an apartment with the Housing Authority and this guy, he received an apartment. He was on the waiting list also, I would assume. Somewhere in there, I don't know how long he had that apartment, a year, a month, or whatever, something happened with drug activity. I don't think it was on the site. But, by the same token, he had to move. He went to jail. So lo and behold, he got out of jail and had an apartment. I didn't know this, just through another tenant. Tenants come and talk to me. They see things. How did he get another apartment? My daughter has been waiting. My daughter was waiting for an apartment when he had an apartment. So anyway, it wasn't about him not having an apartment. I was wondering about this speedy process.
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    Mr. BAKER. Right. That's my question. What do you think went on in making that decision?

    Ms. FRENCH. I think it was who you knew.

    Mr. BAKER. OK. That's what I wanted to know. Because my time is limited, I've got a couple more. Other than this fellow being caught by the police and taken to jail, that got him out of the facility for some time while he was paying his dues.

    Ms. FRENCH. Yes.

    Mr. BAKER. Do you feel that there's a method that's good today where if you have a problem resident, understanding that you don't want to see anybody without a place to live, but if you've got that fellow behind the door with that big Rotweiler who's doing things you didn't want to have done around your family, is there a way to get that person out of that unit today?

    Ms. FRENCH. Well, they more or less put them out for drug activity, if the door is kicked in or if you're caught with drugs. If you're on a lease, you don't even have to be in St. Bernard, you can be in St. Rose. If you're caught with drugs and you're on the lease in the development, you're put out.

    But let me say this, Mr. Baker. The guy is back and he's not a problem. The only problem is how he got back before. People are still waiting when he was there before. The Rotweilers and all the big dogs from time to time, they fight. Sometimes they are so big or so strong when they be walking with the owner on the leash, they get away from the person walking them or what-have-you.
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    In St. Bernard we may be listed as 1400 units and that's what we have there, 1436 units, but you would think that's 1436 families. No, sir. We're about 5,000 or more strong, because a lot of these people are doubling up also. But it's too large a place for dogs, especially vicious dogs, and they are all vicious, because when you raise them in the house, people get them as puppies and raise them in a house, then they go to eating up their furniture, their shoes or what-have-you, then they put them out. It's not my dog any longer. Then he's biting and running behind everybody in the neighborhood.

    Mr. BAKER. Let me ask a follow-up of both of you before my time is up. Is it your opinion today—and both of you are long-term residents of two different projects. I believe you, Ms. French, serve on a resident council and Ms. Davis, you've been very active in public housing issues. Do you have confidence today that the Housing Authority of New Orleans can fix the problems you have or do you think it's time to make some significant change?

    Ms. DAVIS. I have confidence that they are able to fix what it is that's necessary, providing they have the proper leadership, both from the persons who appropriate the funding and HUD.

    Mr. BAKER. Well, if you knew there was $84 million in the bank account they haven't spent, what would your opinion be then?

    Ms. FRENCH. $84 million for Desire. $84 million for the sites in general?

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    Mr. BAKER. For the operation. I mean it's not enough to solve the problem. My point is that there are resources that have been made available by the Congress to the Authority, which haven't been spent and that was when I was here 5 years ago, Ms. French, it was the same explanation then. ''If we had the resources, we could fix it.'' Well, what I'm telling you is there's a lot of resources that haven't been spent during this 5-year period while we've been saying ''fix it or else.'' Is it time for ''or else''?

    Ms. FRENCH. Does that mean you all will take the $84 million back?

    Mr. BAKER. No, ma'am. What it would mean is we'd have a different set of people. We'd take the switchblades from the rats, we'd make smaller dogs or no dogs, we'd put paint on the walls, we'd put screens on the door, we'd put glass in the windows. We'd have people come down and make a difference tomorrow instead of telling you that Congress hasn't given us the money. We'd make folks do what should have been done already. I've never met a Government operation that couldn't spend the money we sent them.

    Ms. FRENCH. That's right.

    Mr. BAKER. And I'm just saying if that's what's going on here, wouldn't you, as representatives of the residents, be willing to accept a new effort, a new way of doing it?

    Ms. FRENCH. Yes, sir. By all means.

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    Ms. DAVIS. Yes.

    Chairwoman KELLY. Thank you very much, Mr. Baker.

    Mr. Vitter.

    Mr. VITTER. Thank you very much, Ms. Davis and Ms. French. I really appreciate your being here. Really appreciate your testimony. And I was not able to go on the tour this morning, but I will absolutely take you up on your offer and I'm here every weekend, so I will do it within the next 2 weeks and I'll get your name and contact information from the staff and I'll be at St. Bernard and then I'll be at Desire and personally I'll look forward to that.

    As was mentioned, this subcommittee was here 5 years ago trying to kick off a new effort at the local level, trying to make sure things were really changing. I just want to get a sense of what's changed on the ground in those 5 years. We've heard about a lot of demolition. There's obviously been a lot of demolition. What's changed in terms of safety or gas problems, fire hazards, electrical problems? What's life been like on the ground in those 5 years?

    Ms. FRENCH. It hasn't been good. Life hasn't been good, especially to—I keep stating about people. To live overcrowded. Let me say it to the panel. I raised six children in St. Bernard. I had four in a 1-bedroom apartment. No one told me to lay down and make all those babies, but, by the same token, I had them. There were larger apartments. But I had four children in a 1-bedroom apartment. I had six in a 2-bedroom apartment. So I know by experience of having to live overcrowded.
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    And this is more or less what I'm asking that they relieve the overcrowdedness of our people. You can take a little paint brush and put a little mortar and everything on the walls and they'll look nice. But if people are living in overcrowded conditions, that apartment is about to bust, so that little paint and what-have-you is not going to last long.

    Mr. VITTER. Ms. French, in the 1996 hearing, the subcommittee heard from another resident, Mrs. Demery, a former resident, and she spoke about how her son had fallen from a third floor window which had long since lost its glass and frame and her son suffered very serious permanent brain damage, physical disability. She also said two others had recently fallen from similar windows to their death. Do you know if these third story windows have all been fixed in St. Bernard?

    Ms. FRENCH. I would assume some of them have been fixed at the St. Bernard. I remember the Demery case.

    Mr. VITTER. I'd like to assume all of them have been fixed. Do we know the answer to that one way or the other?

    Ms. FRENCH. May I also say this here. I remember the Demery case, but right now the Housing Authority is in the process of removing the windows in LA113. That's something I don't know if you all are familiar with. One-eight means the older unit at St. Bernard, 113 means the newer units. They're in the process of taking—they want to remove our old windows and replace them with the newer storm windows or what-have-you. Somewhere in the early 1980s, they removed the old windows from 18 and put these storm windows in and we don't want them at 113 because the storm windows are no good. It's nothing but aluminum snap-in, and when bricks or stones is coming, the windows leave before you. We don't need them. Not that we don't want them. We don't need them. We are satisfied with our old windows. They may need a little trim to stop them from squeaking or whatever like that. We don't need those new windows.
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    Mr. VITTER. Do you know if all those broken out windows, particularly on higher floors, third floor, have been closed up?

    Ms. FRENCH. There are some third floor windows that are still broken out where people live. Yes.

    Mr. VITTER. Mrs. Demery, again 5 years ago, also testified about the loss of her 8-year-old niece.

    Ms. FRENCH. That's Aquinetta Demery.

    Mr. VITTER. Due to a fire.

    Ms. FRENCH. Is that Aquinetta Demery?

    Mr. VITTER. Judy.

    Ms. FRENCH. Aquinetta.

    Mr. VITTER. I'm being told this is a Judy Demery. But anyway, she talked about the loss of her 8-year-old niece from a fire due to faulty wiring. In your opinion, your observation, what's gone on with electrical problems and wiring in those 5 years?

    Ms. FRENCH. Well, it was wired too fast back in 1979-80. It was wired too fast. When they wired our apartments, they was rolling. They was wired too fast, and no one really came around and checked it. We did have a lot of faulty wiring and it's sad to say that a lot of people who had fires back then got put out because they said they was the tenants' fault.
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    Mr. VITTER. And just in the last 5 years, what do you think has happened with that wiring? Has it been fixed? Has it been corrected?

    Ms. FRENCH. No indeed. No, it hasn't. No, it hasn't.

    Mr. VITTER. And also the subcommittee, at that time 5 years ago, heard that fire alarms had been installed during the so-called renovation, but the residents said they've never been checked, they've never been really inspected. What do you think the state of the fire alarms is?

    Ms. FRENCH. They were checked. I would say they all were checked in some way, inspected, what-have-you. But from time to time I guess—I don't know if they're run by battery, but sometimes they go off just from a little smoke from your apartment. But, I would say that you would need, in a site that big, that large, why would you just let the whole maintenance contractor that come out every so often check for fire. You should have someone hired to check this daily, just go around to the apartments for to be checking now and then, every so many years or what-have-you. Check them and make sure they're working.

    Mr. VITTER. Ms. Davis, what about Desire? We've heard about demolition and then overcrowding which has gotten worse because of that. What about basic conditions? Public safety, electrical wire, windows, these sorts of things we're talking about? What do you think has happened to the condition of that in the last 5 years?

    Ms. DAVIS. Well, in the last 5 years, preventive maintenance implementation has—we haven't experienced that and that's what we're lacking. Someone, after they do HQS inspection and you find a problem with the apartment, will come back and remedy the apartment. And so in the last 5 years, I believe that even in the last 5 years, maintenance was kept up. Residents would be more stabilized and not relocate under duress because many of them relocated because nothing was being repaired.
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    Mr. VITTER. So again, besides the demolition and the increased overcrowding, has anything significant happened on the ground in these last 5 years?

    Ms. DAVIS. Besides demolition?

    Mr. VITTER. Yes.

    Ms. DAVIS. Nothing. I mean we're still waiting on units to come online so we can transition to this newer safe and decent and sanitary units.

    Mr. VITTER. I appreciate hearing from both of you and I'll look forward to meeting you at St. Bernard and Desire within, say, a couple of weeks. I'll look forward to that visit.

    Chairwoman KELLY. Thank you very much, Mr. Vitter.

    The Chairwoman notes that Members may have additional questions for this panel which they may wish to submit in writing so, without objection, the hearing record is going to remain open for 30 days for Members to submit written questions to the witnesses, all witnesses, and place their responses in the record. This first panel is excused with our great thanks and appreciation for your time, and we will now empanel the second panel. Thank you both very, very much for wonderful testimony today.

    Ms. FRENCH. Thank you.
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    Chairwoman KELLY. Gentlemen, are you ready? For our second panel, we're very thankful that Mr. Chet Drozdowski, the Director of the Office of Public Housing here in New Orleans, has joined us. Next to him we have Mr. Rod Solomon. Mr. Solomon is the Deputy Assistant Secretary for the Policy, Program and Legislative Initiatives Assistant in HUD's Office of the Public and Indian Housing. He is testifying in the stead of Paula Blunt who was originally scheduled to be here with us today. She is the Acting General Assistant Secretary for HUD's Office of Public and Indian Housing. But she was unable to be here because of a medical emergency in the family. So Mr. Solomon, we do welcome you and thank you for being willing to step in and speak with us here today.

    After Mr. Solomon, then we're going to hear from Mr. D. Michael Beard, the District Inspector General for the HUD Office of Inspector General. Mr. Beard testified at the 1996 hearing on HANO. Gentlemen, you are all aware that this subcommittee is holding an investigative hearing. When doing so, the Chair may decide to take your testimony under oath. Do any of you have any objection to testifying under oath? The Chair then advises each of you that under the rules of the House and the rules of the subcommittee, you're entitled to be advised by counsel. Do any of you desire to be advised by counsel during your testimony today? In that case, would you please rise and raise your right hand and I'll swear you in.

    [Witnesses sworn.]

    Chairwoman KELLY. Thank you very much. All of you are now under oath. Without objection, your written statements are going to be made part of the record. You will each now be recognized to give a 5-minute summary of your testimony, and we'll begin with you, Mr. Drozdowski.
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    Mr. DROZDOWSKI. Good afternoon, ladies and gentlemen. I would like to take the opportunity to thank the subcommittee for the opportunity to testify this afternoon. It is very rare indeed that the director of a field office has the opportunity to present his perspective on a particular issue.

    The ARD report issued by the Office of the Inspector General on 11 May 2001 is, in my opinion, a highly accurate representation of what has happened at the Housing Authority of New Orleans for the period beginning just after the Cooperative Endeavor Agreement was signed in February, 1996 to a period which ends just about December, 1999.

    My comments this afternoon will touch on the four questions from a director's perspective that have been posed by the committee in its letter to Secretary Martinez and will also look at a number of issues raised by the Office of the Inspector General including the Field Office's attempt to verify the Housing Authority's public management assessment scores in 1998 and to correlate the 1998 scores with the HANO's current advisory scores under the public housing assessment system. The comments made are relative to the period of time covered by the Inspector General's report.

    During that time, the Cooperative Endeavor Agreement had minimal impact on the quality of housing for the residents of the Housing Authority of New Orleans. During that period of time, no major relocation took place at the two HOPE VI construction sites of Desire and St. Thomas. Only minimal demolition took place at either of the two HOPE VI sites during the 3 1/2 year period. However, during the latter part of 1998, there were some modernization projects that were started at selected sites throughout the Housing Authority.
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    During the same period of time, some internal improvements of the Housing Authorities were noted. While there were recruitment of key management employees and some restructuring of the Housing Authorities organizational operations which all had a positive effect at the time, HANO began to experience major difficulties in its Section 8 department. This key department, the major component in its relocation program, would subsequently collapse in the mid-year 2000.

    From the field office perspective, the Cooperative Endeavor Agreement was expected to get new management and direction into the Housing Authority of New Orleans. It was further expected to apply aggressive action to: One, relocate the residents from the HOPE VI construction sites; Two, demolish units which had been approved by the department as part of HOPE VI; Three, engage the HOPE VI construction program; Four, improve the maintenance of the Housing Authority; Five, develop plans of action for the demolition of units identified as no longer viable to be maintained by the Housing Authority; and Six, to reorganize its internal operating structure. The Housing Authority made little progress in any of the aforementioned.

    During the first 2 1/2 years of the Cooperative Endeavor Agreement, there appeared to be an all-out effort to achieve a passing score of at least 60 percent on the department's PHMAP assessment program. It appeared to be the ultimate end game strategy of the Cooperative Endeavor Agreement. To the casual observer, getting off the trouble list might have appeared to be a major accomplishment, but for those who knew the ins and outs of the program, getting a passing score was not an accomplishment at all. There was very little correlation between the self-certified assessment program and the public housing inventory stock that is safe, sanitary and decent.
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    HANO crossed the mystical management trouble threshold in 1997 when an appeal was granted by HUD headquarters. Later in the year, in July of 1999, HANO subsequently appealed their troubled modernization status. After a review of the information, my staff recommended to me to deny the appeal as the Housing Authority had not provided sufficient justification. HANO was advised of their appeal status. Under the PHMAP regulation, an appeal denied by field officer director may be appealed directly to the assistant secretary.

    In November, 1998, HUD headquarters reversed my decision and in December, 1998 I was instructed to inform HANO that they had successfully appealed their PHMAP score. The Housing Authority was given a passing score effectively taking them off of the modernization troubled list.

    The following calendar year in 1998, HANO certified to a management score of 85.16 and an overall modernization score of 64.70. A review of my staff certified that the information provided once again raised a number of skeptical concerns. It is at this point that I requested necessary travel and per diem funds to bring a team together from my Mississippi Program Office to perform a confirmatory review of HANO's documentation and verify, among other things, the quality of maintenance and accuracy and timeliness of the required inspection of units.

    A series of email followed my initial email request. Headquarters did not provide necessary funds of approximately $5,500 to bring a team to examine the Housing Authority's documentation and housing stock citing that I had failed to lay out a sufficient case for the confirmatory review.

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    The PHMAP program has been replaced by the assessment system. The management component of the PHMAP program is still self-certified and, to this date, the Housing Authority has still received failing scores. Since 1981, the Department of Housing and Urban Development has provided for the Housing Authority slightly over $1,100,000,000, $800 million of which has been provided in the last 10 years. It is difficult to explain to the residents living in HANO properties or to the citizens of New Orleans or Louisiana or someone living in upstate New York or Des Moines what the impact of $1 billion has made to the quality of life or the sustainability of the housing program in New Orleans.

    Chairwoman KELLY. Thank you very, very much.

    Next we have Mr. Rod Solomon. Mr. Solomon, thank you very much. I apologize for the fact that we don't have a name tag in front of you, but we know who you are.


    Mr. SOLOMON. Thank you, Congresswoman, and I'm very pleased to have the opportunity, even without a name tag, to appear before the subcommittee on behalf of Secretary Martinez. On his behalf, I want to thank the Congresswoman, Congressman Baker, Congressman Vitter, and Congressman Jefferson, for holding this critical hearing on providing the tenants of the Housing Authority of New Orleans decent, safe and sanitary housing. That is the most basic mission of the Housing Authority, and the new Administration is committed to taking every reasonable step to see that that mission is carried out as well as possible.
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    In coming in and looking at this situation, HUD's actions will be based on its own prior experience and evaluations such as that of Mr. Drozdowski who, of course, has been here on the ground seeing this firsthand, and other evaluations. In that regard, we will be considering carefully the audit report that you are just about to discuss and the work of the congressionally-mandated National Advisory Council with which you, Mr. Baker and others of you have been closely involved.

    HUD will promptly take any actions to implement remedies that clearly and permanently promise to improve the living situation of the residents. I also want to note the compelling testimony that you just heard from Ms. French and Ms. Davis. That will also certainly be reported promptly to headquarters and HUD's leadership will be made aware of it.

    Secretary Martinez is committed to improving the living conditions at HANO, as he is with public housing nationwide. We have a new Deputy Secretary, Alfonzo Jackson, who has been confirmed but not sworn in yet, who has administrative experience running three large and formerly troubled housing authorities across the Nation. The Secretary has asked him personally and immediately to work on this matter directly and to look over what we have and propose remedies.

    Madam Chairwoman, the subcommittee asked a number of specific questions. My written statement responds to them, and I will be glad to answer any questions you have on them, but in the interest of moving the hearing along, I would thank you now and wait for questions later.

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    Chairwoman KELLY. Thank you very much, Mr. Solomon.

    Next we have Mr. Michael Beard.


    Mr. BEARD. Thank you, Chairwoman Kelly. I'm very pleased to be invited back to testify again.

    Our most recent report, published in May, deals with three major topics: the status of the Cooperative Endeavor Agreement; the authority's progress on its modernization; and how HUD itself had reacted to Congress's request for an advisory council. I'd like to get right to the bottom line here.

    Over to my right I have a chart up for the subcommittee to see. It is funding provided to HANO since 1992. I picked 1992, because that's the year where HUD really first started to try to turn HANO around. Since 1996 when the Cooperative Endeavor came in, it runs about $440 million, but I want you to know since 1992, $832 million made available to the Housing Authority of New Orleans.

    Over here is Tracy Edwards. She's a member of my staff. Last week, Tracy and some of her compatriots from our office went out and took 100 photographs for the purposes of coming to this hearing. The first photograph that she is going to show you is of an occupied building at the corner of Senate and Hamburg Street at St. Bernard. You will notice that half the building is occupied and the other half is under active construction. The resident who lives in the occupied half told us that the construction has been going on since around 1998 or 1999 off and on. So they've lived in this building under construction looking like that since 1998 or 1999 off and on.
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    The second picture that she will show you is an abandoned building at C.J. Peete. Now there are abandoned buildings all over in all the projects. I want you to note that this one has lots of broken windows, easy access for any kids to get in there and play around and fall out these windows. There's boards up there hanging off the top of the roof that any good wind would bring down. This is somewhat typical. There's vacant buildings all over the place.

    The third picture she's going to show you is of a building in St. Thomas. That woman standing up there on the balcony, she is the single tenant in that building. She's 70 years old. She has to climb three flights of stairs that are filled with trash and debris to get up to her apartment. See the broken windows that are in the building that she lives in?

    The next picture Tracy is going to show you is a picture of a ceiling in a stairwell in a building in Arborville on Conte Street. The stairwell reeks of mildew. I mean it literally bowls you over when you walk into the stairwell. A resident told us that dirty bath water leaks from that pipe that's in the ceiling any time someone takes a bath. The leak has damaged the ceiling and walls. The water now collects in the stairs causing a safety hazard.

    Tracy, being the nice lady that she is, was able to talk herself into several apartments. I've got a few highlighted photos from some of the apartments that she got into. This is a stove that's in a unit at Fisher on Whitney Avenue. The resident told us that only two burners work and she has reported this problem repeatedly to HANO and yet she's still having to cook her family suppers on that stove.

    We have plenty of internal photographs to show you that literally, my staff members said tears came to their eyes when they were in these places. And this next one is gross. We're going to show you a bathroom at another unit at Fischer on Whitney Avenue. I want you to take a look at that table that's sitting in the bathtub. The lady took that table away from the hole in the wall and set it in the tub to show the auditors the hole in the wall. The smell drove the auditors out of the bathroom. The bugs that came crawling out of the wall grossed them out. She told them she has had this bathroom looking like that for 3 years. Tracy has just a couple more photos of that same bathroom. The tenant told Tracy that the smell often makes her ill. You can certainly see why. $832 million over the last 5 years for the Cooperative Endeavor Agreement, $400 million, this is the way the place looks.
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    HUD removed HANO from their troubled list back in 1998. That took care of two of the three conditions for the Cooperative Endeavor Agreement to go out of existence and yet it is still in existence. Five years ago, I testified here in this very room talking about the troubles then and we heard plenty of testimony that said things are going to be fixed. They're not.

    Chairwoman KELLY. Thank you very much, Mr. Beard. Those are amazing, just amazing pictures. Tracy, thank you very much for your help.

    I'd like to just ask you, Mr. Drozdowski, and Mr. Beard repeated also, the fact that HUD allowed HANO to manipulate itself off of the troubled list in 1998. Specifically, then-Secretary Cuomo prohibited you from performing a confirmatory review, according to your testimony. Do you believe that that may be the reason that HANO was removed from the list?

    Mr. DROZDOWSKI. Yes, indeed. A confirmatory review would have done a number of things. First of all, it would have checked the work orders to make sure that we could have followed that trail of work to be done to prevent this sort of thing from happening at the Housing Authority. It was certainly within the best interest of the department to make sure that there was increased department surveillance at the Housing Authority of New Orleans. It had been troubled for a number of years, 20 years to be exact, and the history showed that very little got done at any given time in its past.

    Chairwoman KELLY. Mr. Solomon, do you think HUD would allow that to happen again?
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    Mr. SOLOMON. No.

    Chairwoman KELLY. That was a succinct answer.

    In your opinion, Mr. Drozdowski, what was former Secretary Cuomo's motivation for stopping you from performing that confirmatory review in 1998?

    Mr. DROZDOWSKI. Well, I couldn't say Secretary Cuomo specifically. It certainly went up our chain of command through field operations and the person that I was dealing with was out of the office of the Deputy Assistant Secretary for Assisted Housing, Ms. Cousar. We certainly made a case, we thought we made a case, that justified a few thousand dollars to go out and look at the conditions of the Housing Authority and to verify their scores.

    Chairwoman KELLY. I'm looking for a quote where I thought I saw his name. I wish that Secretary Cuomo were here better able to explain the actions of HUD at this time. There was a decision made in June by Secretary Cuomo to extend the CEA and continue to placate, according to you, the mayor. I think placating the mayor may have been good party politics in an election year, but it's pretty awful public policy when you see what has resulted with thousands of people living in squalor, pictures just as we've seen. I wish that the Secretary were here. I think it's very disappointing that thousands of residents in this public housing might be used as political pawns. I think it's clear that perhaps by extending that CEA, Secretary Cuomo may very well have been trying to help someone, possibly Vice President Gore, but it wasn't the people who were living in public housing that he was trying to help, and I think that's a real shame.
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    I have another question of you, Mr. Solomon. I have here in my hand a news story saying that this Administration is eliminating an $860,000 housing program that used to counsel public housing tenants on kicking drugs and it was a drug program. This program I'm talking about now has been eliminated, because this program just barely got started. The program is called Creative Wellness and what it basically did was trying to use applied kinesthesiology. They had a wellness trainer. For instance, she mentioned that sun and earth tones are good and pink and blue drain energy. I assume that the Administration decided to eliminate this particular program because it's more interested in eliminating rats and roaches than it is looking at whether or not pink and blue are particularly good colors for residents to wear. Is this true?

    Mr. SOLOMON. Yes. We felt that that program was not a proper use of Federal money, and that the money should be used for activities that were more clearly accepted to be on point for drug elimination.

    Chairwoman KELLY. I see I've run out of time, so I'm going to go on to Mr. Baker.

    Mr. BAKER. Thank you, Ms. Kelly.

    Mr. Drozdowski, I read somewhere, either in a written statement or in other documents, that since 1983, it's your opinion, about a billion dollars or so in funds have been allocated to HANO. Is that correct?

    Mr. DROZDOWSKI. That's correct, sir. We did a survey just last week. We went back to 1981, as that was actually one of the first reports that the IG had issued regarding the Housing Authority of New Orleans. Our analysis showed $1,149,000,000 to be exact.
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    Mr. BAKER. So that from 1983 to the present moment, $1,100,000,000 in round numbers has been made available to the Authority.

    Mr. DROZDOWSKI. That's correct.

    Mr. BAKER. Is it your opinion that it's a lack of funding that's prevented the Authority from making substantive changes in the quality of housing?

    Mr. DROZDOWSKI. No, sir. A billion dollars is a lot of money. It can certainly build and repair a lot of units and take down a lot of units. This is just mismanagement of the funds and the inability to get the program off.

    Mr. BAKER. So after spending a billion one, your opinion is that the prior Administrations involved in the conduct of the Housing Authority in New Orleans, perhaps officials within HUD, have resulted in inept management of taxpayer dollars for this purpose.

    Mr. DROZDOWSKI. I would agree with that statement, Mr. Baker.

    Mr. BAKER. Was it your opinion that when you wanted to engage in the confirmatory audit of HANO's scoring that some official at a higher level than your office in DC perhaps engaged in this decisionmaking process and, for some unknown reason, reversed your professional inquiry?

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    Mr. DROZDOWSKI. Yes, sir. That's correct.

    Mr. BAKER. I would want for the record to note that at that time I was engaging in conversations with Secretary Cisneros asking specifically that appropriate action be taken to remedy this problem. In that window, Madam Chairwoman, I requested the Secretary to explore the possibility of a receivership, given the long history of the HANO's under-performance. I received similar treatment, if it's any concern, and my request was not acted upon.

    Do you think that a receivership would be an adequate remedy for the problems we face?

    Mr. DROZDOWSKI. Yes, sir. In my written statement I do say that the receivership must be put on the table again to revive the Housing Authority of New Orleans.

    Mr. BAKER. What other items might be put on that table besides receivership?

    Mr. DROZDOWSKI. Well, we've look at, as an organization, as a HUD organization, public housing organization, the possibility of separating the Housing Authority into smaller units. That's a distinct possibility.

    Mr. BAKER. So you're suggesting that big mismanagement be made into little mismanagement.

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    Mr. DROZDOWSKI. Well, it's easier to correct perhaps.

    Mr. BAKER. So you would have different people engaged in project by project responsibility. Would that be fair?

    Mr. DROZDOWSKI. That would be a fair statement. Yes, sir.

    Mr. BAKER. One of the things which the proponents of HANO have made me aware of, and I tend to agree with them, is that the current body of law under which they operate is restricted with regard to making sweeping management decisions and, for that reason, a receivership might be the more advisable, because it would unleash the ability of whoever would be given the responsibility to make changes in a dramatic fashion. Is that view one that has merit?

    Mr. DROZDOWSKI. Yes, sir. It does.

    Mr. BAKER. Thank you.

    Mr. Beard, you've been engaged in this business for some time. It appears that your report of this year is not significantly different than your report of 1996 except that we have a lot more money in this report compared to the 1996 report. Are you basically telling me that conditions have remained the same, gotten worse, or has there been minor improvement, in your view?

    Mr. BEARD. Oh, there's been minor improvement, but the conditions are still the same for the tenants.
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    Mr. BAKER. Is the manner of improvement the demolition of——

    Mr. BEARD. There's been some demolition, some new windows, some new doors but, generally speaking, there has been no progress at all during the 5 years on any one of the 10 conventional sites getting any of them turned around.

    Mr. BAKER. When the buildings have been demolished, I've read that there is a lack of 4-bedroom units within the market, that the 2- and 3-bedroom units are located on the west bank. There are concentration concerns with relocating families continually to that area. What has happened to the tenants who occupied public housing that's been demolished?

    Mr. BEARD. I honestly don't know. I mean we're talking several thousand that have been removed from these projects as they're targeted and demolished. I don't know where they go.

    Mr. BAKER. Mr. Solomon, I really don't have a question. I just have a statement, because I understand the Administration's position on this matter. I just wish to state for the record concluding my remarks that these circumstances are intolerable. This is a public embarrassment. People's lives have been ruined. We've had young people falling out of windows, as Mr. Vitter has stated. Permanently injured or killed. This is not something we can stand by and tolerate any longer, and I don't know what action I can take more aggressively than I've taken in the past, but I assure Madam Chairwoman, Mr. Vitter and Mr. Jefferson that whatever it is, I don't care how radical. I would leave the word reasonable on the edge. If it takes tearing things upside down to get this fixed, we have got to start doing it.
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    Thank you, Madam Chairwoman.

    Mr. SOLOMON. Thank you. Perhaps this is unnecessary, but in case I do need to repeat it, I think the Administration understands the urgency of the situation. Again, its leadership will hear your comments directly.

    Mr. BAKER. Well, thank you. I just think the Inspector General's report and the comments of the field officer have such enormous credibility for the need for change. There is just not an adequate explanation that can be given. Certainly over the decade we have got to have earned the honor of being the worst in the country, and that is something for which we all share a great degree of shame.

    Chairwoman KELLY. Thank you very much, Mr. Baker.

    Mr. Vitter.

    Mr. VITTER. Thank you, Madam Chairwoman. I just have a couple of comments, probably no questions, but I just find this figure, any of the figures we're talking about, astounding. Since 1992, $832 million. Madam Chairwoman, in southeast Louisiana we're debating a couple of big potential public construction projects now. One is the new phase of the Convention Center, which is very important for economic development. That would take about $4- to $450 million dollars. Another possible project that the New Orleans Saints have been pushing is a brand new stadium for the New Orleans Saints. That would take about $450 million, $350 million of which would be public. You could do both of those things immediately at the same time with that amount of money and have change left over and yet we, as taxpayers, have spent that amount of money on HANO since 1992 and we have virtually nothing to show for it. It is just mind-boggling. Like I say, it is the budget for what would be the two biggest public construction projects in Louisiana history with change left over.
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    My other comment is to Mr. Solomon, as a representative of the new Administration. I urge you to take this sense of outrage and urgency back to your leadership in Washington. Sometimes I think there is a problem. A new Administration comes to town and is only hearing this hard story for the first time and has not lived through these three and four and five failed reform efforts over the last decade. But you need to read the history and you need to communicate the history, because there have been all of these failed reform efforts. There has been over $1 billion of spending with virtually no results. So I hope the new Administration digests all that and takes it to heart before it gives HANO just another pass at just another band-aid approach to limping along for the next few years. I really urge you to take that bit of history and that sense of urgency back to your leadership in Washington.

    Mr. SOLOMON. Thank you. I will do that.

    Chairwoman KELLY. Thank you very much, Mr. Vitter.

    I'd like to go back for one minute to the Cooperative Endeavor Agreement. I was running out of time and really didn't get a chance to explore that a little bit. Mr. Drozdowski, how many years do you think it's going to take to bring all the HANO facilities up to code, if ever?

    Mr. DROZDOWSKI. I've given some thought to that just over this past week. Given what they're doing now, it would probably be, at the rate they're moving, probably the year 2030 or 2031 to get anything moving.

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    Chairwoman KELLY. Thirty to 31 years?

    Mr. DROZDOWSKI. I would say that, and here's why I'm saying this. It's taken—we've given—it's been 1994 since the HOPE VI for Desire was awarded to the Housing Authority of New Orleans and we still haven't knocked the buildings down. We still have families living at Desire. Construction is scheduled to start probably in the next 16 to 18 months. It's going to take another 3 or 4 years to complete that project. It's a long, involved process and, of course, it also deals with how fast can you move with the funding that is available with the department. It's a long, drawn out process, and we've watched literally, at least since the Cooperative Endeavor was signed, probably 5 years.

    Chairwoman KELLY. Do you think that—assuming that it might be continued, when do you think that HANO might just complete even one for the revitalization? I mean just take one.

    Mr. DROZDOWSKI. The report that the Inspector General put out is quite accurate for a period of about the beginning to about 1999. Since February of 2000, a lot has started to happen. Buildings have started to come down at St. Thomas, for instance. Some buildings have started to come down at Desire. St. Thomas will probably be the first project that will be completed, and we're looking at a completion date of some time around the year 2003, beginning 2004.

    Chairwoman KELLY. So you're thinking that St. Thomas may be—we were out this morning.

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    Mr. DROZDOWSKI. A lot of work has been done there.

    Chairwoman KELLY. Yes. We saw a number of things that have been deconstructed. We saw some flat land. But the question is what about the permitting process and so on? Do you think we're still looking at 2004 to get some units there?

    Mr. DROZDOWSKI. St. Thomas is a very visible and interesting project, and I think there's a lot of support for the St. Thomas project. I think when you go further, the Desire project has less appeal. As you start working on the conventional projects, C.J. Peete and Bernard and the other projects, there's less of an appeal. I think St. Thomas will be completed on time. I think we'll have problems with the rest of the projects.

    Chairwoman KELLY. Mr. Beard, would you agree with that?

    Mr. BEARD. I'd like to make a couple of points. Ms. French told you very clearly there's no maintenance. That's how that bathroom gets created. I agree St. Thomas might be up around 2003-2004, and that's going to be handed over to a housing authority that doesn't maintain anything. It won't be too long before that building looks like that again. Until they fix the management here, particularly the maintenance, I don't care how many new buildings you build. The problem isn't going to go away.

    Chairwoman KELLY. One of the things I'd like to ask you about, gentlemen, is that there's a projected income mix at St. Thomas. Sixty seven percent of the units are going to be market rate. Only 33 percent are scheduled to be public housing eligible units. So they're not all going to be returned to the kinds of people that were removed from those units. Would you care to comment on that?
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    Mr. BEARD. We did a report a few years ago on the HOPE VI program nationwide, and this was one of the problems that we identified in that report, that HOPE VI comes in and revitalizes a neighborhood and puts in an income mix. But what really happens is the people at the bottom of the scale literally disappear. We did some stories just recently, particularly one in Atlanta. We don't know where those people went that used to live in the Techwood Homes in Atlanta. HOPE VI came in, really made that place a beautiful, livable neighborhood, but where did those people go that used to live there? I think that will happen to a lot of the residents at St. Thomas. They'll be moved out. They will not fit into this mix that we have to make this nice St. Thomas neighborhood. You'll ask me and I'll tell you, I don't know where they're going to. They're just going to disappear.

    Chairwoman KELLY. Sounded like Ms. Davis was trying to plead for that neighborhood to stay, and I'm just concerned that the neighborhoods will somehow come back if we're down to bare earth and we come up with a mix like that. It's not bad to have a mix. It's a good thing. But my concern is when we're moving people out and we're talking about thousands of people being moved out while their units get destroyed, where do they go when Ms. Davis pointed out there's not enough housing stock in New Orleans to house those people. Where are they supposed to go if we're tearing down the units? I don't know the answers to these questions. I'm simply raising them and hope that perhaps you have some thoughts that you'd care to share with us. Any one of you may answer that.

    Mr. SOLOMON. Well, just generally for these redevelopment efforts everywhere in the country, the basic alternatives for the short run and the longer run are other public housing or Section 8. The Housing Authorities have a responsibility to the residents, as long as they adhere to their leases and do what they are supposed to do, to house them somewhere. The Government's efforts are supposed to be making this situation better. That means it is incumbent, if we are going to use Section 8, that the Section 8 program be working, and that Housing Authorities—and again, I mean generally—track these families and that this be a coordinated effort. We need to make sure that those responsibilities are carried out.
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    Chairwoman KELLY. In the testimony of one of you—in a report, I should say, of one of you, I believe it was the HUD IG, Mr. Beard, was it you? You said that the Section 8 housing program is really dysfunctional or non-functioning at all. Is that still the truth?

    Mr. BEARD. That's the truth here in New Orleans in that it's the place that they could use to help relocate tenants if it were operating smoothly and efficiently, which it's not. I think the lease rate is somewhere around 60 percent of what they've got available.

    Mr. DROZDOWSKI. Sixty eight percent.

    Mr. BEARD. Sixty eight percent of what they've got available they've got leased up. So there's a lot of room there they could be using and they're just not operating effectively enough to do it.

    Chairwoman KELLY. You have the vouchers available?

    Mr. BEARD. Yes, they have vouchers available.

    Chairwoman KELLY. Is it the fact that there's no housing available for people who will accept those vouchers and accept those families? Where's the rub here?

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    Mr. DROZDOWSKI. The Section 8 program has to be worked on a regular basis. The issue, of course, is where do you find the units that are available and suitable for Section 8 rental? What our assessment is in the field office is that the Section 8 program has never been worked effectively. I've talked to my counterparts in Chicago, for instance, where they had the same sort of problem. They brought in a private contractor, contracted out the entire Section 8 program, and the Section 8 program in Chicago is working very well. So I think he's right. The point we should be making is that, at least during the period that we are looking at during the Cooperative Endeavor Agreement, the Section 8 program literally did not function properly and is now suffering the consequences of that mismanagement.

    Chairwoman KELLY. Thank you very much. That gives us at least some kind of a picture.

    Mr. Drozdowski, do you think the CEA ought to end?

    Mr. DROZDOWSKI. Yes, ma'am.

    Chairwoman KELLY. Mr. Beard, do you?

    Mr. BEARD. Yes, ma'am.

    Chairwoman KELLY. Mr. Solomon, will you take that, please, back to the Secretary?

    Mr. SOLOMON. Yes, ma'am.
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    Chairwoman KELLY. Thank you very much.

    Mr. Baker, have you further questions?

    Mr. BAKER. Yes, Madam Chairwoman. Thank you.

    Mr. Beard, I didn't get to ask the question last time that I asked of Mr. Drozdowski as to the remedies in response to we should end the CEA. Do you think receivership is now the appropriate step, and perhaps before you answer let me give you this advisory. I spoke with Ms. Gaffney last week and she has expressed some level of support for this. So maybe that helps with your decisionmaking on that point.

    Mr. BEARD. I think it's the best thing since sliced bread.

    Mr. BAKER. Great. I didn't think you needed that other piece of information, but I just wanted to make sure.

    As to administrative or judicial, do you have a preference? Receivership.

    Mr. BEARD. Judicial.

    Mr. BAKER. And what would be your reasoning for that approach?

    Mr. BEARD. Complete independence from the political process and the town.
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    Mr. BAKER. Based on the comments of Mr. Drozdowski concerning Secretary Cisneros, Under Secretary Cuomo's actions with regard to the certification by HUD of the HANO scoring, it would seem to be fairly evident to people that political considerations have driven the expenditures, or the lack thereof, I would say in this case. And again, given the observation that 68 percent of the Section 8 certificates have been used leaving 32 and we still have people in dilapidated housing, there really is no excuse for our current condition.

    Before I ask this next question of you, I need to make a preface. The current Executive Monitor, Mr. Nicotera, who I believe will be on our next panel, I believe has done good work since his appointment to this responsibility, but we've taken an intolerable, very bad, difficult situation and made it merely just bad. I have had, in conversations with him, discussions concerning the mechanisms by which we could unleash good professional judgment to do the work that needs to be done, and I intend to pursue that line with Mr. Nicotera in the next panel.

    But I make that point in his defense, but then to ask this question. Do you, and perhaps Mr. Drozdowski is the appropriate party or between the two of you for sure, have knowledge that HANO has asked for a waiver from the mandatory demolition rule for four particular projects? And I speak of Cooper, Fisher, Florida and Guste have been determined to be not meeting the appropriate standards or that they should be demolished, that HANO has asked for a 10 year waiver of that requirement meaning—let me translate for those who didn't understand that gibberish—that the current request is for tenants of those four projects which do not meet decent habitable standards by HUD's own measure, are going to be asked to stay there at least 10 more years?
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    Mr. BEARD. Let me make that very visual for you, Congressman. That bathroom is located in one of those projects. She's lived, she told us, 3 years and they're asking her to stay another 10 until they get her on the fix list. You're exactly right. They have asked for a waiver not to do anything for 10 years to that bathroom.

    Mr. BAKER. Well, I just want the resident representatives here to understand what we are trying to communicate. We are here really to try to figure out how to fix this. We are being told that we have money in accounts for various purposes that remain unspent. We're being told that we have properties which don't meet minimum standards to live in, and we're being asked to turn our heads for another 10 years. I think the power of that needs to be fully understood by those who are worried about change. The one thing we do know is what we have today is not acceptable, and we have to do everything within our power to change it and yet we find ourselves in the posture of being asked to turn our heads for another decade. Frankly, in my conversations with Congressman Jefferson about this matter, that's what disturbed him the most. I realize he's been in Congress now over a decade and he's seen young people grow up in this environment with no evident change in living condition and now he's being asked to turn his head again for another decade. Watch them grow into young adults. That's incomprehensible.

    Is it your judgment that the current circumstance and the lack of expenditure of funds can be laid to mismanagement, turnover, lack of a comprehensive plan? I know that Anderson Consulting was paid $3.7 million about 1998 or so to develop a short- and long-term plan. What happened to the money and where's the plan?

    Mr. BEARD. Their draft of that plan we really liked. I don't think anybody ever actually implemented it, but there has been a number of excellent plans made.
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    Mr. BAKER. You paid $3.7 million for a plan that was put on a book shelf?

    Mr. BEARD. It almost works out that way. I mean they plan and then it just doesn't go any further than that.

    Mr. BAKER. I read somewhere, I don't know if it was your comment or a quote from someone else, that HANO loves to plan, but doesn't like implementation.

    Mr. BEARD. That's a quote from one of the HUD people.

    Mr. BAKER. How much in the aggregate of the $832 million spent, how much of that has gone into consulting and planning?

    Mr. BEARD. I would hate to venture a guess, but I can point out to you that on the Comp Grant Funds that are $279 million, I think they had somewhere in the neighborhood of $70 million or $80 million that went to what's called ''soft costs,'' which is that sort of activity.

    Mr. BAKER. So a conservative guesstimate would be $70 million.

    Mr. BEARD. Just out of that one block of the Comp Grant Funds. You'd have to speak to them. HOPE VI has just as large a number of—they all come with their consultants, their planners, their engineers, their lawyers, their accountants. I mean it costs a lot of money to employ them.
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    Mr. BAKER. To eat here in the city is nice, but it can be expensive, too, I hear. If you had to make a recommendation to this subcommittee based on your analysis today, beyond the question of judicial receivership, are there other elements that you would want to make to us as a part of resolution of this problem?

    Mr. BEARD. We've always maintained over the years to get it out of the politics of the local city, and that was our intent this time. When we were recommending smaller entities, we were hoping that someone might be able to focus on one or more of these 10 projects and turn some of them around.

    Mr. BAKER. But that would only be subsequent to a determination of a judicial receivership to give them the authority to take appropriate action.

    Mr. BEARD. That's right.

    Mr. BAKER. I don't want to take inappropriate time. Thank you, Madam Chairwoman.

    Mr. BEARD. Let me just emphasize that the Office of Inspector General has been publishing pictures like this since 1983.

    Chairwoman KELLY. I thank you, Mr. Baker.

    I just want to put this in perspective a little bit. $3.7 million for the Anderson plan. Before I got to Congress, I rehabilitated real estate. I went out with my kids and we walked through buildings and we would take a look how we could rehabilitate real estate. I hate to see a beautiful building go to waste. So I'm going to throw out some figures.
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    I come from New York, from the greater New York area north of the city, so I'm not in the city, but I always figure it costs $400 to fix a window. $400 and they spent $3.7 million for a plan that's on a shelf. $200 for a door, $50 to put a good dead bolt lock on it. That's what we're talking about in the scale of things. You can put in a whole new kitchen for about $3,000. And we're talking about $3.7 million for a plan that's sitting on a shelf.

    You know, if you just stop and think about the scale of what we're talking about here, we can talk in terms of millions of dollars, but it's only a few hundred dollars that some of these residents need to rehabilitate a building, to rehabilitate what they're living in, to give them a decent place to live, to rehabilitate. To go in and reconstruct that bathroom with waterproof sheetrock to cover that wall, to put on new tile, to put in a bathroom sink, a toilet, a new tub, you're talking maybe, at the most, $3,000. $3,000 and we spent—I shouldn't say ''we.'' The Housing Authority spent $3.7 million on a plan that's on the shelf.

    Mr. BAKER. Will the gentlelady yield?

    Chairwoman KELLY. I certainly will yield.

    Mr. BAKER. It was my intention, Madam Chairwoman, I had what I called a virtual tour for the subcommittee that I wanted to take you on, primarily those four buildings that were being requested to have the 10 year waiver on the demolition standard. It's apparent with our next panel that we will be pressing the time envelope a bit for you to make your flight, and I may do that at another occasion when you might choose to make it available.

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    But it is almost inconceivable to me that when we look at the financial condition, you look at the physical condition, when you're talking about fixing those windows, we don't have GAAP accounting standards used here, and the $10 million of judgments awarded that are on the books as a result of individuals being harmed by the lack of maintenance, if you put that on the books, I believe you would find our organization to be insolvent, much less litigation that is in the pipe and still pending that we don't have resolution for that could run those numbers literally into the hundreds of millions of dollars.

    So that lack of maintenance has had a very significant effect far beyond just inefficient expenditure. It's unbelievably costing us huge sums of money, because we aren't maintaining these buildings properly. So one problem leads to another, which is, I think, just getting us to an end result which is just no longer defensible. Thank you.

    Chairwoman KELLY. Thank you, Mr. Baker. And you're right. We have gone on.

    Mr. Vitter, you have no further comments? We thank this panel very much. I appreciate your being here and I know that there may be additional questions, not only from us, but also from Congressman Jefferson so, without objection, the hearing record is going to remain open for 30 days for the Members to submit written questions for these witnesses and for them to place their responses in the record. This panel is excused and we'll now go to the third panel. I would like to take at this point about a 10 minute break just so everyone can shake their legs out a bit. Thank you.

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    Chairwoman KELLY. Thank you very much. If you will all please be seated, we're going to start the hearing right now. As you know, we're trying to get this hearing moved along. We move to our third panel before us.

    We're pleased to have Mayor Marc Morial. Mayor, your place is here at the table, if you will, please. And Mr. Frank Nicotera, the Executive Monitor of the Housing Authority of New Orleans. You're both aware that this subcommittee is holding an investigative hearing and, when you do so, the Chair may decide to take testimony under oath. Do either of you have any objection to testifying under oath?

    Mr. NICOTERA. No, ma'am.

    Chairwoman KELLY. Mr. Mayor, you do?

    Mayor MORIAL. I'm raising my hand.

    Chairwoman KELLY. Well, that was fast. Then the Chair advises you that under the rules of the House and rules of the committee, you're entitled to be advised by counsel. Do any of you desire to be advised by counsel during your testimony today?

    Mr. NICOTERA. No.

    Mayor MORIAL. No.

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    Chairwoman KELLY. In that case, please raise your right hand and I'll swear you in.

    [Witnesses sworn.]

    Chairwoman KELLY. Thank you very much. Each of you is now under oath. Without objection, your written statements will be made part of the record. You will each now be recognized to give a 5-minute summary of your testimony. We will begin with you, Mayor Morial.


    Mayor MORIAL. Thank you very much, Madam Chairwoman, Members of the subcommittee, Congressman Jefferson, Vitter and Baker. Madam Chairwoman, I'm pleased to be here. I want to apologize to you for not having any written testimony. I was advised that this hearing would take place on June 24. I received that letter approximately 10 days ago and wasn't notified until Wednesday/Thursday last week that this would be the new date of the hearing. As all three Louisiana Members of this panel know, the Louisiana Legislature is in session and I was required to spend Thursday in Baton Rouge and left to go to New York on Friday, so I did not have an opportunity to prepare for you any written testimony.

    But let me offer you some observations which I think are important:

    One, I really appreciate the Congress's continuing interest in public housing in New Orleans and also public housing on a national basis;
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    Two, I want to offer to you some ways in which I think that the Congress, working with the new Secretary of HUD, could be helpful to this process. One is that the HOPE VI program is broken and the HOPE VI program which is currently financing improvements at both St. Thomas and Desire, a well-intentioned program, is a program that needs dramatic overhaul, and here's why.

    First, the red tape from the Federal level through the HUD bureaucracy associated with getting these projects approved smacks of some kind of Russian or criminized bureaucracy. The approvals needed and the approvals necessary and the delays associated with both of these projects in the time, from the time that these grants were awarded to the city to the current period, we have built convention centers, we have added two new concourses to our airport and built a new ticket terminal. We've built swimming pools and amusement parks. The time period and the bureaucratic approvals and delays associated with these two projects leaves much to be desired. That, despite the good intentions of what I believe were three successive HUD secretaries: Former Secretary Kemp, Secretary Cisneros, and Secretary Cuomo, all three committed to work to try to eliminate some of the bureaucratic delays associated with this program.

    Second, with respect to HOPE VI, because HOPE VI is the primary financing vehicle, Congressman Baker, put before Public Housing Authorities for the redevelopment of Public Housing Authorities. The second very, very broken part of HOPE VI is that the mixed financing requirements are overly ambitious, and have made it very, very difficult for developers to proceed to complete these projects. What do I mean?

    The idea behind HOPE VI is that you give an amount of Federal money and you say to a developer, ''Now you go out and raise the rest through private equity, private debt, tax credits, and public money.'' At St. Thomas, a site which I believe you visited today, there are tax credits. The city, through a recent bond issue, has committed $6 million. The State, through the capital outlay process. Imagine that. We've got to go to the State capital outlay process to try to finance the redevelopment of an essentially Federal public housing development. They've committed an additional $6 million and the developer has indicated to us in order to close the final gap he may need a tax increment financing initiative from us to fill the gap.
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    The mixed financing requirements are overly ambitious and what they do at the end, respectfully, is place a good program in a situation where, if you look around the country, very few HOPE VIs have been completed. One focus is to say, ''Well, maybe the Public Housing Authorities didn't do their job.'' I'm here to say that there is a bigger problem begging for a solution, and that is that the HOPE VI program needs overhaul.

    The third area where the HOPE VI program, I believe, leaves a lot to be desired is in the area of what it does in terms of relocating public housing residents. Simply providing public housing residents with a Section 8 voucher is not enough for effective relocation and, in many instances, what these initiatives are doing is causing displacement, doubling up, tripling up of families under the guise of relocation. A better solution must be found.

    Fourth, very importantly, Public Housing Authorities must competitively compete for HOPE VI grants. There is no guarantee that you're going to get the grant, Congressman Jefferson. So what may happen is a Public Housing Authority may be waltzed down the road of demolition in an effort to comply with stringent HUD requirements of decommissioning apartments which, quote ''don't meet minimum housing standards.'' Large public housing developments are demolished and there's no money to redevelop them because not enough money has been committed to redevelop every site which is demolished.

    This program, despite its well-intentioned beginnings, despite tremendous efforts from three successive HUD secretaries, from local Public Housing Authorities, from all sorts of developers and experts, is a program crying out for significant change.

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    Second observation——

    Chairwoman KELLY. Excuse me, Mr. Mayor, but you weren't here when we established the ground rules for this hearing. It was that everyone has 5 minutes for testimony, so if you could please sum up, we'd appreciate it.

    Mayor MORIAL. Well, I'd really ask for some additional time, if I can have some additional time, Madam Chairwoman. I understand the ground rules, but these are very, very important issues. I see your aide shaking saying no, don't give the mayor any additional time. But I will comply with your request and stay as long as I can for questions. But I want to hit on two other additional points, and those are that there are two things in the——

    Chairwoman KELLY. I just want to say if you could do it in a couple of minutes, I'd appreciate it.

    Mayor MORIAL. Two quick things I want to add, and that is that currently one of the biggest advances that we've made in this city is that we have significantly reduced violent crime. I am proud of that. And it's happened because we've worked very hard and it's happened because we've placed community policing substations in public housing developments to give people in public housing the same kind of policing that people in other neighborhoods have had. We've financed that with a drug elimination grant program. Congressman Vitter, that program has been proposed for complete and total elimination, as has the community policing program.

    Second, on the budget, after HOPE VI, the only pool of money that Public Housing Authorities have for construction is the Comprehensive Modernization Program. That program, better known as the Comp Mod Program, is also proposed for approximately a 30 percent reduction in this year's budget, and I would beg and plead with this subcommittee to look very closely with that, weigh in with the appropriators on those two points. And I'd be happy to answer any questions you have.
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    Chairwoman KELLY. Thank you very much, Mr. Mayor.

    At this time, I want to turn to my colleague, Mr. Jefferson. I'm so glad you were able to be here, Mr. Jefferson. We welcome your appearance with the subcommittee and would like to at this point let you have time for a statement.


    Mr. JEFFERSON. Thank you, Madam Chairwoman. I want to thank you very much for permitting me to speak for a brief moment on this, and I want to thank my colleagues Richard and David Vitter for coming down to work with us on these important issues and thank you, Madam Chairwoman, for your attention.

    This is a very difficult subject for all of us. You have a Mayor in front of you who has worked his heart out in the city to do the best job that he could, and he's done an extraordinary job, as he has just mentioned, on the crime reduction issues, not only in public housing, but across the city. He has spoken passionately about these issues and worked hard on them. These are very tough issues. They have proven to be intractable over the years. We have tried one form after another of governance, of changing governance, of new contracts, all sorts of different arrangements, and all sorts of Federal programs. The Mayor has just described one that he thinks isn't working very well. All sorts of arrangements with our tenant leadership and trying new ways to make the programs work more effectively.

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    I haven't come here today to condemn the work of this committee. I think it's important work. I think questions need to be asked and answered. Nor have I come here to point fingers at the Administration for their efforts, because I think they've been genuine and they have been well-founded and, in many respects, they have been helpful. All of us though when we talk about these properties of brick and mortar and all these pictures and so on, we don't have any people in there. This really turns out to be all about the people who living in public housing and what happens to particularly a lot of the children who live there and who ought to have a better chance for a better life. We ought to be able to say at the end of the day that we did something for them.

    And so I've come here with an open mind with a few conditions though to it. It's easy for us to characterize what is happening here as a political exercise by a Republican committee. I don't believe that's what it is. And it's easy to say that the Mayor is a strong Democrat, as am I, and we can point fingers in that direction. But I think it has to be above all that and I know that I've talked to Richard privately about it and I know that he is working in that direction and Susan, I haven't had a chance to talk with you about it, but I'm confident that you will and that David will so that at the end of the day what we really are focused on here is how we can make quick work of what needs to be done in these developments so that we do not see another generation of children grow up in sub-standard housing in this city. That's the bottom line for me. That's the bottom line, I believe, for the local administration and ought to be the bottom line for this subcommittee.

    If we can work in that direction and work on it well, I'm sure there are some things that need to be changed at HANO. I'm sure there are things that need to be changed at HUD. I'm sure there are things that need to be changed with our Federal legislation to make it work better. Whatever the requirements are, bottom line has to be that what we do here must always be with the people who live in public housing in mind and we ought to be focused now on as quickly as possible getting to some solutions for the people out here without anything about politics. I think if we work with that as our basic condition, then I think that I'm certainly willing to work with this subcommittee and with the Chairlady and with Richard and with David and with everybody on both sides of the aisle to try and make this process work for all of us.
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    So I thank you for letting me make these brief remarks and I welcome you to our city, and I'm sorry you have to come and go so quickly. But I'm very happy to see you here and I look forward to getting back to Congress and sitting down with you and trying to work hard on these issues so we can come to resolution for the people who live in public housing, particularly for the children who live there so we can make sure that we do not have another generation of children growing up in public housing where they don't have a decent chance and they don't have the support that we need to give them.

    Chairwoman KELLY. Thank you very much, Mr. Jefferson. You're absolutely correct. This issue is not a political one. This is a matter of public policy that affects the lives of the people sitting in this audience who must live in substandard housing, and we need to all of us put our shoulders to the wheel to make sure that this policy is changed enough so that money gets to those people so they can have good lives. Thank you very much for being here and for making that statement.

    Mr. Nicotera, we'd like to go to you for your statement.


    Mr. NICOTERA. Thank you, Madam Chairwoman, Congressman Baker, Congressman Jefferson, Congressman Vitter. It's my pleasure to appear before the subcommittee today. Despite all of the testimony prior to me, I'm here to present a picture of HANO as I have seen it over the last 15 months as the Executive Monitor. From my position, I think the HANO management team that's in place right now is probably the strongest public housing management team that's been in New Orleans in years. I've been in New Orleans since 1977, and it certainly goes back that far. If you just drive around the city, despite what the critics say, there's more ongoing development and modernization at HANO properties right now than at any time in the last 30 years. The last significant development at HANO was back in the 1960s. I have some examples before you and I know Congresswoman Kelly, you had a chance to see some of those this morning at St. Thomas.
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    That demolition started in July of 2000 and, as of today, it's more than 80 percent complete. At Desire, the master site developer mobilized in March and they're continuing the demolition. That's the picture that's closest to you. That demolition is proceeding and that project will start infrastructure construction probably sometime in July or August.

    On the modernization side, just to correct some of the testimony that was heard earlier: The first large scale new units that we'll actually bring online are at the Florida development where we're doing a comprehensive modernization, reconfiguring out public housing apartment-type units into townhouses, cutting the old street through so that they can have walk-up entrances to the fronts of the units, and we're also going to build some new duplexes. And also at the Guste high rise development. We have already finished the east wing and a new elevator lobby with new elevators, which were badly needed, because the old ones would break down frequently. And we have a number of accessible units in that building, and I believe there's 88 units in the east wing which were turned over to the resident management corporation this week so that they could be reoccupied and the rest of that project will be done about this time next year.

    We've heard discussions about relocation. Well, at St. Thomas I'm happy to report that as of about 3:00 this afternoon, the last resident of St. Thomas was relocated. At Desire there's approximately 70 families left. The first stage of C.J. Peete, which is another development that we're undertaking as a mixed finance development utilizing Comprehensive Grant Funds. The first stage has been relocated and we've begun demolition on another stage.

    The Section 8 problems have been noted in the IG report and here today. But I want to compliment the current HANO management under Ben Bell and his staff. They didn't hide from this problem. Nobody tried to bury this problem. We took on a very difficult position last year when we went into the administration and found out that there were some serious problems in Section 8, there was some serious neglect on the inspection side, and we had heard rumors for years, but we started digging. We did it in a professional way like you would in any normal business. You hire an expert to come in who has a background in fraud accounting and take a look at all of the files and see if there's a problem. And that's what we did so we could come up with a comprehensive solution. It resulted in some folks being terminated. It resulted in some folks being moved. It resulted in the privatization of the inspection function so that we could get more reliable inspections and get them done quicker and so that we could get new units inspected so that residents would be relocated faster, despite all those problems.
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    As of today, the actual utilization rate of Section 8 vouchers is 81 percent, not 68 percent. And so in less than a year, we have increased it by over 10 percent. We know we need to get to 90 or 95 so that we have enough Section 8 properties available and so that it brings in some Section 8 administrative fees to HANO. That's an important resource. I think the fact of the matter is that we've completed the relocation at St. Thomas. We've completed all but 70 at Desire and, even with a broken Section 8 department, the HANO staff has been able to put in the time and effort necessary to complete relocation so we can get both of those HOPE VI projects going.

    We have been trying over the last few years, and particularly over the last year, to convert HANO to an asset management organization. And it's interesting when I hear discussion of breaking it down into smaller housing authorities, because breaking it down is not going to increase any funding for HANO. The way the HUD regulations are written now, operating subsidies are calculated on the number of units in service. Comp Grant funds or capital funds are calculated by the number of units. So the only thing that breaking HANO down into smaller authorities will do is increase administrative costs if you have to service the needs and the costs of several different boards.

    What HANO has already done is turn two properties at B.W. Cooper and Guste Homes over to resident management corporations, and those are both functioning well. Those are businesses owned by the residents that have been set up. It's something they tried to do for years. They were encouraged by the city administration, but it wasn't until the last 2 years that we finally got those programs going, and now they're doing a fine job of managing and they're there on-site. They know where the problems are. They know who the problems are, and they do a much better job of management.
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    Now as far as the HOPE VI projects, we're not going to manage St. Thomas. When St. Thomas is finished, our developer, Historic Restoration, through their management entity, will manage St. Thomas including the public housing units. We'll get a portion of the subsidy to cover our costs for asset management services, which is supervising the contractors in place. The same model will be used at Desire, the same model will be used at C.J. Peete when that is completed. So that's five of eleven conventional sites, and there certainly is room to convert some of the other sites to private management or a combination of private management and resident management. It is the way to go, in my personal opinion. I don't know that everyone shares that, but that's my personal opinion. It's good to have folks on-site who are living there 24 hours a day involved in the management of the properties.

    There have been some comments and there were some reports with regard to HANO's finances. HANO's finances on a day-to-day basis are fine. They operate within budget, they actually operated in the black the last 2 years. The only reason that HANO fails the financial indicator under the PHAS measuring system is because they have had this long-term accumulation of judgments and settlements from litigation. This started back in 1991 when HANO was under private management and, for reasons that I have never been able to determine, the private management company just stopped paying claims and stopped providing insurance. So those accumulated and when I joined HANO in 1997 as general counsel, those claims were in excess of $18 million. They're down now close to $10 million. But, because of those large, unfunded litigation costs, HANO can not pass the PHAS indicator. So that is going to be a continuing problem. It was there in 1996. It was not addressed by this Cooperative Endeavor, and I don't know why, because some type of system should have been set up to correct that. And besides, some of those folks who have legitimate claims who have been waiting for money for 4 or 5 years are entitled to recover their money.
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    As far as the Section 8 program is concerned, there's been suggestions that it should be turned over to the city and run by a non-profit. With all due respect, Mr. Mayor, the city gave us their Section 8 program in 1999 with HUD's blessing. And I know the city doesn't want it. So that is not a well-reasoned suggestion.

    With regard to Section 2002. Tearing down the four sites that are under 202 consideration and vouchering them out is not a practical solution. The New Orleans residential real estate rental market will not support that type of massive relocation, and that's not just a guess from me. We went to one of the acknowledged experts in this area, Doctor Wade Regas at the University of New Orleans. He is used by developers and government all over the Gulf Coast and the State of Louisiana, and he issued a report to HANO that supports our suspicions. So that is not a realistic possibility.

    What HANO plans to do is apply for HOPE VI grants for both Fischer and Guste, two of the sites that are under 202 consideration. Is that my minute?

    Chairwoman KELLY. You've got 1 minute.

    Mr. NICOTERA. One minute. OK. At Florida, quickly, when this side of the development is finished, which will be next year, the master plan is to move residents from the other side that's under 202 into the new units and then we can deal with the other units later.

    As far as planning. I heard some comments about the Anderson Report. It's not on the shelf. It's being used. The Comprehensive Modernization Program that HANO has undertaken, which includes a little bit of work at all of the sites on a scheduled basis, was an Anderson recommendation. And I might add that HUD hired Anderson and HUD paid Anderson directly. That was not a HANO contractor. We accepted those recommendations and we worked with them. We've modified them to meet some of the requirements of the Louisiana Housing Finance Agency, because some of their projections were a little optimistic. The fact is we don't have that much money available in tax credits every year.
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    Finally, I think we all share the same concerns and that's why we're here, and that's why I'm going to be as candid with all Members of the subcommittee as possible, provided I remember everything. We all have great concern for the residents. The residents in New Orleans have been subjected to numerous methods of management, all resulting in the same thing: a lack of units, a lack of quality units. We've made some headway in the last year, and we're continuing to make headway, but I realize that it's not enough and it doesn't meet the expectations of everyone in this room. But that's no reason to discredit the current HANO staff. If changes are to be made, don't throw the baby out with the bath water. These are dedicated folks who are intelligent, have worked in a variety of fields. They have experience, they work hard, they are the hardest working people I have ever worked with, and I have practiced law for 20 years, and they beat most lawyers I know. They're there nights and they're there weekends and they're truly committed to making things better, but they're handicapped by the past.

    Chairwoman KELLY. Excuse me.

    Mr. NICOTERA. And that's the end of my opening remarks.

    Chairwoman KELLY. Thank you very much. I appreciate that. Mr. Nicotera, I enjoyed going through the different areas with you this morning, but I'm left with a couple of questions. You said that there was a lack of the capital funds and yet I have in front of me a printout showing that the status of the open programs as of 2000, there was available to the city for capital fund programs $28 million. I have the fact and we've talked before that there's $85 million available for renovation and modernization. When I walked through and up into some of those buildings this morning, I'm going back to this little chart. I sat at my kitchen table before I came down here and just listed out the cost of a few things like $600 to install a new toilet with the plumbing, $400 for a window, $50 for a lock, a dead bolt. I'm talking about an installed price and yet, in walking through some of these areas with you, we were looking at buildings where residents themselves have stuffed pillows and clothing or cloth of some kind in to try to cover glass that had been broken out of their windows.
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    Now, doggone it, if it costs $400 to fill up some window panes in a project, how come we can't go into one of these areas and fill up those panes while they're waiting to get moved? Why should they be condemned to live in units where there are no windows being repaired? Why should children, little tiny children, grow up in these areas where they're told they have to wait because there's no money for repair when we know that there's $85 million that's untapped that could go right out to make those residents have a better life right now. As Mr. Jefferson pointed out, you're going into generation after generation. How can those kids grow up in any kind of hope for their lives, their own lives, when they see that the big guys in the neighborhood are the drug dealers, because they're the only people who can get up and out, because they make enough money to do so?

    I think we're condemning generation after generation in these houses, and I find that an unacceptable use of public funds if we don't get it done and get it done yesterday. And I don't blame you, sir, because I know you haven't been on the job that long. I do, however, feel that the Housing Authority of New Orleans bears a large share of the guilt for letting people live in these circumstances. I think, no matter how long somebody has been there, surely there must be a way to get somebody up there to replace window panes so kids don't fall out and die.

    Mr. NICOTERA. I agree with you, Madam Chairwoman, and just in discussing the funding. The fact is that as of right now, over 91 percent of our capital grant funds have been obligated and 65 percent have been expended. I'm getting that information from the last report that the local HUD office gave to the National Advisory Council just this past week. There's $243,625,000 capital funds authorized to HANO, $222,653,000 obligated and $156,553,000 expended. We have obligated all of the funds through the 1998 year and we're on schedule to do the 1999 and 2000 years. All of those funds are going into activities such as you indicated but, if there is an emergency situation where there is a broken——
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    Chairwoman KELLY. Excuse me. I'm sorry, sir, but would you give us those facts in writing, because that certainly doesn't match what I have.

    Mr. NICOTERA. It's Exhibit 1 to my written testimony.

    Chairwoman KELLY. It's Exhibit 1. Well, we just got your written testimony an hour ago.

    Mr. NICOTERA. That's right.

    Chairwoman KELLY. So we'll try to find that. Thank you.

    In the interest of time, I'm going to go first to Mr. Jefferson. Mr. Jefferson, have you any questions you'd like to ask this panel?

    Mr. JEFFERSON. Am I to understand that the people who have been moved out of St. Thomas as you're making the demolitions, all these families have been placed in livable residences and a family unit?

    Mr. NICOTERA. Generally, about 50 percent of the residents have gone to other public housing units and the rest have gone to Section 8 units owned by private landlords.

    Chairwoman KELLY. All of them?
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    Mr. JEFFERSON. Do we know where all of the people are?

    Mr. NICOTERA. We can track all the residents who have been relocated from St. Thomas, Desire and C.J. Peete.

    Mr. JEFFERSON. And they all are settled into some decent place, as far as you know?

    Mr. NICOTERA. There's supposed to be a tracking mechanism in place that does some follow-up to make sure that folks don't fall through the cracks. That's part of the services that IRI was providing.

    Chairwoman KELLY. Will the gentleman yield?

    Mr. JEFFERSON. Yes.

    Chairwoman KELLY. Earlier, Mr. Nicotera, you heard Ms. Davis say that the residents don't know where everybody went, that there is no—I believe Ms. Davis said something that indicated that there is no tracking for some of those people in Desire.

    Mr. NICOTERA. There is tracking. I do not know when it began. I think it was in 1997 or 1998. So folks who were relocated before that date, and that's before I got to HANO, then I'm not sure if everyone was tracked. I could supplement my testimony and indicate that later.
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    Chairwoman KELLY. In the Inspector General's report, there is an indication that not everyone was tracked.

    Mr. NICOTERA. Is there a particular——

    Chairwoman KELLY. Well, it says that in the report.

    Mr. NICOTERA. With your permission, I'll consult with the HANO staff and supplement my written testimony and address that issue.

    Chairwoman KELLY. I wish you would and get back to us, please.

    I'm sorry, Mr. Jefferson. Yield back.

    Mr. JEFFERSON. I'll reclaim my moment. Let me ask you this question. If you continue on the path that you're following now, having just started 15 months ago, given the problems that have been discussed here today, how long do you think it might take you to get the repairs made that need to be made? I know it's an ongoing dynamic thing. I know you can't fix them and nothing else breaks, but are you on a path now where you think you can do appropriate maintenance for these properties and on a path where you can do the things we have to do with respect to construction and demolition? How long would it take you to get to where we all want to see this project end up if we stayed on the path that you're now pursuing and nothing else changed? How long would it take to get to the end of it?

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    Mr. NICOTERA. I have to condition my answer, because we have four sites that are under this consideration for 2002 and some of those sites present difficult maintenance. If nothing is done or no additional funding is provided so that we can revitalize those properties, it's almost impossible to do routine maintenance and have it last for any appreciable period of time. I believe that if you take those four properties just out of the equation for right now, I think the plans that HANO has for ongoing modernization would show that all of the sites would be addressed, and it's not total redevelopment, but at least modernized, I believe by, I think it's 2008 or 2009. But that assumes there's a gap in funding. We can't do it with the present comprehensive grant formula. There would be probably close to a $200 million gap in funding. If we want to do everything that's on our schedule within that period, there's not enough money under the comprehensive grant program formulas.

    Mr. JEFFERSON. The last thing. So over the next 18 years you would need $200 million more if you pursue your present operating management scheme to actually catch up with your maintenance and keep it going and to bill out the——

    Mr. NICOTERA. That really just deals with the modernization and development activities.

    Mr. JEFFERSON. Modernization. That doesn't deal with the maintenance activities.

    Mr. NICOTERA. No.

    Mr. JEFFERSON. What does it take to do that and keep it going?
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    Mr. NICOTERA. Well, most of that budget is funded from the operating subsidy, although there's discussion and there is a situation now where there is kind of a spike and HANO is using a fairly large percentage of the capital funds for operating expenses which are allowed under the HUD funding formulas. They kind of got caught in a trick bag, because several years ago when the Cooperative Endeavor first came into place, they moved aggressively to demolish a lot of these sites with promises of future funding, but the future funding didn't come. If you compare HANO from 1996 until now with, let's say, Washington, DC that was put under a judicial receivership at about the same time, Washington, DC received five HOPE VI revitalization grants from 1996 to the present time. HANO received none. I'm sure there are naysayers out there who say even if we got them, we couldn't handle them. But the point is if you're going to try to really revitalize and turn the Housing Authority around, then at least give it the same opportunities that you're giving to other Housing Authorities that were in similar conditions. There's not a cheap way or a quick way to do this. We're talking about 30 years of deferred maintenance and trying to do it now less than 6 years under the Cooperative Endeavor. With the manner in which you have to get things approved at HUD every step of the way, the process just takes longer. So any solution that this subcommittee proposes has to deal with the issues at HUD as well.

    Mr. JEFFERSON. From the point of view of this judicial receivership you just mentioned under which Washington is now——

    Mr. NICOTERA. I think they've come out of it actually.

    Mr. JEFFERSON. OK. But my question is there's been talk about that sort of thing up here on this panel, I understand, before I came here today. What would be your feeling about that sort of thing happening now, looking at what you're doing? Is it all negative? Is it all bad? Or what?
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    Mr. NICOTERA. Well, I'm kind of biased, and I don't want to make any self-serving remarks, because that may show up in the next IG report, but the fact is I'm very partial to the management staff at HANO. I feel for them and I would hate to see a situation come into play where they would be discarded. But the reality is, if you're asking for my opinion, the reality is Washington, DC was able to turn around quicker and get their buildings revitalized quicker under the judicial receivership, because they had a judge who wasn't afraid to tell HUD you need to move faster. So I think that's one benefit, but I'm sure there's certainly other models.

    Mayor MORIAL. I want to respond to that, because it's probably sort of a similar question. First of all, the Housing Authority is not part of the government of the City of New Orleans. It's a separate State-chartered political subdivision. Second, in the Cooperative Endeavor Agreement that we signed in 1996, I effectively gave up my ability to appoint the HANO board of commissioners, which was a power that the Mayor of New Orleans had had since the 1930s or 1940s when this Housing Authority was created.

    I think respectfully what you effectively have now, because I negotiated the Cooperative Endeavor Agreement, is receivership without calling it receivership. And that's because what you have is the Executive Monitor, the Executive Director of HANO, all of the top staff people at HANO were selected by HUD. HUD serves as the board of this Housing Authority, has to approve every single decision that this Housing Authority makes, and you in effect have receivership without calling it receivership.

    In the case of Washington, DC, that receivership began because the residents filed a class action suit against the Washington Public Housing Authority. That receivership was not initiated by the Department of Housing and Urban Development. I think Mr. Nicotera makes the point that I agree with. Whatever management system you have, call it what you want, describe it the way you want, unless sufficient funds are committed to address the 30 years of deferred maintenance, unless the HUD bureaucratic rules are relaxed, fast-tracked, substantially reformed or changed, then what you have is the same old same old under a different name.
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    I think that we have learned in the years that we have dealt with this that it is tremendous frustration that you can have. For the first time in the history of this agency, highly talented and skilled staff people who do not owe their jobs to politics, who, if they were running another agency and had the same resources without all of the bureaucratic layers that they've got to deal with, would get a whole lot more done. So I fundamentally believe that whatever management system you have, unless you've got the sufficient commitment of funds, the change in the bureaucracy and some adjustments in the programs, that's where the proof is and the proof of changing this agency is going to be in that.

    When I took office, I did something quite radical. I committed that I would make the residents, the majority of the board, the Housing Authority, because I was inspired by Jack Kemp and Henry Cisneros who at the time said in their speeches and their writings, ''give the residents more control.'' That move was opposed by HUD, criticized by the Inspector General, as a management system, which at the time I thought was progressive. The Cooperative Endeavor Agreement, which modeled what Henry Cisneros did in many other parts of the country now finds itself under criticism as a management system.

    The most important thing is you call it what you want to call it but, unless you deal with the underlying issues, funding on one hand, the administrative bureaucracy and the approval process which is so extenuated and attenuated, and the fundamental problems in the design, flaws in the design, particularly the HOPE VI program, I think it's going to be very difficult to substantially and fundamentally change this agency. I am prepared to work with you and I am open to anything that's going to lead to meaningful change for the people that I represent. I'm open to anything. I'm open to a quality, substantive discussion that will lead to that result. But what I do have objections to is superficial gestures or superficial changes which don't deal with the fundamental problems associated with public housing.
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    One of the problems we have historically in New Orleans, because we've got a lot of people, we're the second or third poorest city in America in terms of the degree and the numbers of people who live below the poverty line. We've probably got the highest percentage of our residents who live in public housing anywhere in America. Washington is a much smaller system. Our Executive Director is now the Executive Director in Washington, DC. Detroit, Philadelphia. Many of those systems are much smaller than ours in terms of the percentages. We have a much larger system which makes it much more difficult to change.

    What I think has worked is resident management. At B.W. Cooper, at Guste where rent collections are up, where there's more of a sense of empowerment there. But even with resident management, control over capital budgets and things like that still remain up the chain through HANO with the Department of Housing and Urban Development. So it doesn't fast track anything. It doesn't allow them to be entrepreneurial. So I am open to anything and I'm open to a discussion with this subcommittee, with our Member of Congress who represents these areas, Congressman Jefferson, to what, in fact, will work and lead to substantive and meaningful change. But what I do have an objection to is anything that's going to be superficial where people are going to say, ''Guess what? We changed the management structure. We called it a different name, but we never ever really addressed the underlying issues that face this agency.'' And I am committed to that and I am open to working with you in that regard.

    Chairwoman KELLY. Thank you very much, Mr. Mayor, and thank you, Mr. Jefferson. I want to go on record as saying that this subcommittee is not here on a superficial mission, Mr. Mayor. We're here to do business, and I appreciate what you said.

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    Mr. Baker.

    Mr. BAKER. Thank you, Madam Chairwoman. I think we're on the edge of something important here, Mayor. You and I have had conversations about this and many subjects over the years. Perhaps not always as positive as either of us would like. But I sense a willingness on your part that frankly I am encouraged by. I'm dramatically changing my direction here from earlier comments through the hearing. I am listening to your intent. It's that, with the assent of Congressman Jefferson, that if a plan can be developed that you think is real, that without regard to what the plan looks like today, because we don't know what it is, you would be willing to facilitate that plan's adoption. Do you, today, have confidence that Mr. Nicotera's efforts over the past 15 months have been very constructive?

    Mayor MORIAL. I believe so. Mr. Nicotera has worked very, very hard and has done good work as Executive Monitor.

    Mr. BAKER. Listen carefully to these questions of Mr. Nicotera, because if this goes well, I think we're together here for the first time.

    Mr. Nicotera, in our discussions over the past weeks—let me back up. I'm omitting a very important step. Let me say to you that I think the conduct of your office, your professional staff, your shop over the past 15 months has, in fact, accomplished more than any prior Administration relating to public housing in the City of New Orleans since I have been an observer of the process. So I start commending you for your efforts. Having said that, my comments are in no way relating to a lack of professionalism on your part, but a broader set of issues that relate to the constraints in which you find yourself operating, to which the Mayor has made reference.
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    In order to solve the problem which Congressman Jefferson started to pursue moments ago, how long would it take, and the answer was 7 or 8 years to do the basics if we exclude four major projects from consideration, which is——

    Mr. NICOTERA. And get more money.

    Mr. BAKER. And get plenty more money. If we were to do this a different way based on your recommendation, the only way I know of, based on our discussions, to get around the limitations that currently restrict you from engaging in the process you wish to engage in is to go to a judicial receivership. If the current staff, staff you select, were to remain at your side to put the plan in effect with a concurrent statement that this subcommittee would pursue to its utmost ability the funding needed to make the plan work, I am convinced we have a unique political opportunity here where all forces are lining up in a similar direction and, with your leadership, we could perhaps fashion an agreement that would indeed put paint on the walls, frames in the windows, and get you the money you need to relocate residents at an acceptable rate.

    By acceptable, and this is my view of it, I don't know what other Members may feel on this subject, but I'd like to see closure on this in a 5-year window and that's an extremely aggressive effort in light of the magnitude of the problem that you're left with. Do you think a judicial receivership is the appropriate step to take to get you where you need to be in order to fix the problem?

    Mr. NICOTERA. First of all, let me put a couple of qualifiers in there. I think that the Congress appointed the National Advisory Committee. I would hope that this subcommittee will take their recommendation, because——
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    Mr. BAKER. Let me add to that point. I'm the one who started that trouble.

    Mr. NICOTERA. I know.

    Mr. BAKER. Just so you know that you're not treated differently, HUD took 15 months to appoint that panel, because they should have concluded their work by now. I had a conference call with the counsel last week.

    Mr. NICOTERA. I actually walked in the room halfway through the conference call.

    Mr. BAKER. I apologize to you.

    Mr. NICOTERA. No. I appreciate it. I think you were complimentary to the HANO staff, and I appreciate that.

    Mr. BAKER. Well, my point of making this public is I have asked the Advisory Council to conclude their work by the next August meeting and report to us in September so we can move forward. We can't hold this up waiting on a council to come with another recommendation, which frankly we don't know what that will be.

    Mr. NICOTERA. Right.

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    Mr. BAKER. But I don't want to have the Advisory Council be the shield for you and this subcommittee to reach an agreement today if we can reach an agreement.

    Mr. NICOTERA. I think, first of all, I don't know if I'm the person to reach the agreement. I think the city has input into that, because they do have the power to appoint and that is an issue.

    Mr. BAKER. But my point is is that right now we both have regard for your work. You are at a pivotal point. You're telling us that with the good effort you've made, that with certain changes, you could make the kind of changes the Mayor and I and Congressmen Vitter and Jefferson both want.

    Mr. NICOTERA. There are certainly benefits to the judicial model and actually, I think now that the HUD regulations—because of HANO's size, I think the HUD regulations would almost require that.

    Mr. BAKER. So that in order for you to get where you want to be in a 5- or 6-year window with appropriate funding, a judicial receivership with maintenance of the professional staff you select to implement whatever the program turns out to be is——

    Mr. NICOTERA. I don't know that I'm ready to sign up for another tour of duty, to be honest with you.

    Mayor MORIAL. You've got to, Frank. You're drafted.

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    Mr. NICOTERA. I'm being drafted. Is that what's happening here? Can I have counsel now? Is it too late for me to have counsel? I'm sorry. I didn't mean to make light of the question, but we've been here a while. I guess I'm getting a little punchy.

    Mr. BAKER. I don't know if you were here earlier, but after rats with switchblades anything is in play to here today.

    Mr. NICOTERA. I enjoyed that. I had a very good mental picture of that.

    Mr. BAKER. So did I, as well. I've met a few in my life.

    Mr. NICOTERA. Actually, before we moved the HANO offices, you probably would have found a few of those inside the old office building. I'm glad we got the staff out of there.

    Mr. BAKER. I really think this is constructive. Mr. Mayor, would you want to——

    Mayor MORIAL. Let me say this. I'm open to discussing the specifics of a proposal like that with you, Congressman, because the money, the elimination of the restrictions and the approvals and fast tracking, that is what this agency needs. And also, sincerely, a commitment by the subcommittee to look at redesign of a number of programs. Secretary Martinez, in my initial meeting with him, indicated that he wanted some guidance from local elected officials such as mayors about what HUD programs work and what HUD programs may need change and need reform. I think in the public housing area, the HOPE VI program needs some change and needs some reform with respect to mixed financing, relocation, and many of the very difficult issues that we face today. So I am open to discussing the prospects of your proposal. It encourages me and I do think if we sat down and talked about it, I do think we might be able to come up with a constructive solution.
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    Mr. BAKER. I would suggest as a follow-up, to move things along a little bit, because I know the Chairwoman has to catch a flight and the most important thing is making sure the Chairwoman catches her flight.

    Mayor MORIAL. We've got great hotels here, Madam Chairwoman. You come to dinner with me, too.

    Mr. BAKER. I would suggest that the principals here get together for a meeting as soon as possible to discuss the concrete elements of this and, since we have a Member of the Appropriations Committee here as well who will speak for himself, I think we have a number of elements here that might be beneficial and these, indeed, are unusual circumstances and, if it starts this positively, we've got a shot of making it work as long as we're not all throwing bricks at one another, and that's not our intent. We're here today to try and help. Thank you, Mr. Mayor. Thank you, Mr. Nicotera.

    Chairwoman KELLY. Thank you very much, Mr. Baker.

    Mr. Vitter.

    Mr. VITTER. Thank you, Madam Chairwoman.

    I want to underscore and echo Richard's comments and also the Mayor's comments. I think the key is not to do something superficial. I think the key is to do something truly fundamental. In my opinion, and everyone may not agree with this, but in my opinion, just from reading the history, because I haven't been involved as a Member of Congress until recently, I think a lot of the restylings of the management in the last 5 to 10 years have been relatively superficial. I think we need to talk about something much more fundamental in terms of really smoothing the way for a much faster action, much more dramatic action that we can really demand some results on and, based on what I know of it, that would seem to point to some version of judicial receivership.
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    So I would really encourage these sorts of discussions with an aim of doing something really fundamental and not superficial. I think we've been through a few rounds of the superficial. Over 9 years we've been through $832 million of the relatively superficial, in my opinion. I just did some quick math on that. We're talking about 13,000 families under your jurisdiction. That's $70,000 a family. That's $650 a month a family. We're saying some of these conditions that were the same as they were 5 and 10 years ago. So I want to certainly echo Richard's comments and the Mayor's pledge to work toward some truly fundamental change rather than mandate superficial approaches.

    Chairwoman KELLY. Does anyone else have any more questions?

    Mr. BAKER. Madam Chairwoman, I don't have a question. I just want to compliment you for your initiative in coming to the city today. I think your effort here is going to result in some significant potential for change, and I'm most appreciative for your time and interest. Thank you.

    Mr. JEFFERSON. I want to reiterate my appreciation for having you here as well. You and I have traveled all over the world at different times. This is the first time I've had the pleasure of having you here with us, so thank you very much for coming.

    Chairwoman KELLY. Thank you. It's a real pleasure to be able to be here in New Orleans. I've been back a number of times and every time I come, I like the city more and more. So it's wonderful. It's going to be great to come down here and see this housing taken care of.
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    I want to note that some Members may have additional questions for this panel and they may wish to submit them in writing. So without objection, the hearing record is going to remain open for 30 days for Members to submit written questions to the witnesses and place their responses in the record. This third panel is excused and the subcommittee has a great appreciation for your willingness to be here and your time.

    I want to thank Mr. Baker, Mr. Jefferson, Mr. Vitter, and their very capable staffs including my staff for all of their assistance in making this hearing possible. This hearing is now adjourned.

    [The hearing was adjourned at 5:00 p.m.]