A-65345, OCTOBER 28, 1935, 15 COMP. GEN. 352

A-65345: Oct 28, 1935

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ARE FOR DIRECT OPERATION BY THE GOVERNMENT. ALL RENTALS AND OTHER RECEIPTS ARE FOR COVERING INTO THE TREASURY OF THE UNITED STATES AS MISCELLANEOUS RECEIPTS. IT IS NECESSARY AT THE PRESENT TIME TO FORMULATE PLANS FOR THEIR MANAGEMENT AND OPERATION. CONDITIONS IN VARIOUS CITIES ARE DIFFERENT AND THE TYPE OF OPERATION SELECTED FOR ONE CITY MAY NOT BE SUITED TO ANOTHER. I HAVE UNDER CONSIDERATION THREE POSSIBLE METHODS OF OPERATION. IN ORDER TO CARRY OUT THE INTENT OF THE ACT AND TO MAINTAIN SUITABLE CONTROL OVER THE PROJECT IT WILL PROBABLY BE ADVISABLE TO ADOPT THIS FORM OF OPERATION ONLY IN THOSE CITIES WHICH HAVE PUBLIC-HOUSING AUTHORITIES OR OTHER PUBLIC BODIES TO WHOM THE PROJECT MAY BE LEASED.

A-65345, OCTOBER 28, 1935, 15 COMP. GEN. 352

LOW-COST HOUSING PROJECTS - MANAGEMENT AND OPERATION - FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS LOW-COST HOUSING PROJECTS PROVIDED FROM FUNDS APPROPRIATED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT OF JUNE 16, 1933, 48 STAT. 201-202, AND/OR THE EMERGENCY RELIEF APPROPRIATION ACT OF APRIL 8, 1935, 49 STAT. 119, ARE FOR DIRECT OPERATION BY THE GOVERNMENT, AND ALL RENTALS AND OTHER RECEIPTS ARE FOR COVERING INTO THE TREASURY OF THE UNITED STATES AS MISCELLANEOUS RECEIPTS, WITHOUT DEDUCTION. THESE PROJECTS MAY NOT BE OPERATED UNDER A MANAGEMENT CONTRACT, NOR LEASED AS A WHOLE TO OTHER THAN PUBLIC HOUSING AUTHORITIES OR SIMILAR PUBLIC BODIES.

COMPTROLLER GENERAL MCCARL TO THE FEDERAL EMERGENCY ADMINISTRATOR OF PUBLIC WORKS, OCTOBER 28, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF SEPTEMBER 9, 1935, AS FOLLOWS:

IN ORDER TO BE IN A POSITION TO RENT THE LOW-COST HOUSING PROJECTS IMMEDIATELY UPON THEIR COMPLETION, IT IS NECESSARY AT THE PRESENT TIME TO FORMULATE PLANS FOR THEIR MANAGEMENT AND OPERATION. CONDITIONS IN VARIOUS CITIES ARE DIFFERENT AND THE TYPE OF OPERATION SELECTED FOR ONE CITY MAY NOT BE SUITED TO ANOTHER.

I HAVE UNDER CONSIDERATION THREE POSSIBLE METHODS OF OPERATION--- LEASE OF THE PREMISES AS A WHOLE, DIRECT OPERATION OF THE PROJECT BY THE GOVERNMENT, AND OPERATION BY A MANAGER UNDER A MANAGEMENT CONTRACT. THE FIRST METHOD PRESENTS NO GREAT DIFFICULTIES, BUT IN ORDER TO CARRY OUT THE INTENT OF THE ACT AND TO MAINTAIN SUITABLE CONTROL OVER THE PROJECT IT WILL PROBABLY BE ADVISABLE TO ADOPT THIS FORM OF OPERATION ONLY IN THOSE CITIES WHICH HAVE PUBLIC-HOUSING AUTHORITIES OR OTHER PUBLIC BODIES TO WHOM THE PROJECT MAY BE LEASED.

THE SECOND METHOD, DIRECT OPERATION BY THE GOVERNMENT, RAISES THE QUESTION OF THE AVAILABILITY OF FUNDS TO MEET OPERATING COSTS. IN THE EVENT DIRECT OPERATION OF A PROJECT BY THE GOVERNMENT SHOULD BE THOUGHT ADVISABLE, I DESIRE YOUR RULING ON THE FOLLOWING POINTS:

1. MAY FUNDS APPROPRIATED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT OF 1933 AND/OR THE EMERGENCY RELIEF APPROPRIATION ACT OF 1935 (DEPENDING UPON WHICH FUNDS WERE USED IN CONSTRUCTING THE PROJECT) AND ALLOTTED TO THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS FOR HOUSING PURPOSES BE USED TO DEFRAY THE COSTS OF OPERATING THESE PROJECTS?

2. MAY INCOME RECEIVED FROM RENTALS OF A PROJECT BE USED TO DEFRAY OPERATING COSTS AND THE NET BALANCE REMAINING BE TURNED INTO THE TREASURY?

3. MAY INCOME RECEIVED FROM RENTALS BE USED TO REIMBURSE THE FUNDS APPROPRIATED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT OR THE EMERGENCY RELIEF APPROPRIATION ACT AND USED TO PAY OPERATING COSTS PRIOR TO THE TIME WHEN THE RENTALS WERE SUFFICIENT TO MEET THESE COSTS?

THE THIRD METHOD, UNDER A MANAGEMENT CONTRACT, WOULD INVOLVE THE SELECTION OF A MANAGER AND THE MAKING OF A CONTRACT WITH HIM. IF THIS METHOD IS ADOPTED, I PROPOSE TO CANVASS THE FIELD IN THE CITY WHERE THE PROJECT IS LOCATED AND, WITH THE ADVICE AND ASSISTANCE OF THE LOCAL HOUSING COMMITTEE, WHICH IS COMPOSED OF THE LEADING CITIZENS OF THE CITY AND AFTER A CAREFUL STUDY BY MY OWN STAFF, TO SELECT A PERSON FAMILIAR WITH THE PROBLEMS OF REAL-ESTATE MANAGEMENT. I PROPOSE TO ENTER INTO A CONTRACT WITH HIM WHICH WILL CONTAIN, AMONG OTHER PROVISIONS, THE FOLLOWING:

1. THAT THE GOVERNMENT WILL SUPPLY CERTAIN OF THE MATERIALS AND SERVICES, SUCH AS ELECTRIC CURRENT, STEAM FOR HEATING, POSSIBLY COAL, AND OTHER SUPPLIES WHICH CAN BE PURCHASED MORE CHEAPLY BY THE GOVERNMENT THAN BY AN INDIVIDUAL.

2. THAT THE MANAGER WILL SUPPLY AND FURNISH ALL OTHER MATERIALS AND PERSONNEL NEEDED FOR THE COMPLETE OPERATION OF THE PROJECT, COLLECT ALL RENTS AND OTHERWISE MANAGE THE PROPERTY AS AN ORDINARY REAL-ESTATE AGENCY MANAGES PRIVATE PROPERTY TURNED OVER TO IT FOR RENTAL PURPOSES. THE AGREEMENT WILL CONTAIN A SCHEDULE OF RENTS TO BE CHARGED THE FUTURE TENANTS OF THE PROJECT AND WILL PROVIDE THAT THE RENTS RECEIVED WILL BE DEPOSITED TO THE ACCOUNT OF THE MANAGER IN A SEPARATE ACCOUNT FOR THIS PURPOSE IN A BANK OR TRUST COMPANY APPROVED BY THE GOVERNMENT.

3. THAT THE MANAGER WILL PAY OUT OF THE RENTS COLLECTED ALL COSTS OF OPERATION. A SCHEDULE OF THE OPERATING COSTS WILL BE EMBODIED IN THE CONTRACT AND THE MANAGER WILL BE LIMITED IN HIS EXPENDITURES TO THE AMOUNTS SET FORTH IN THE CONTRACT.

4. THAT THE MANAGER WILL RETAIN OUT OF THE RENTALS RECEIVED (A) A PERCENTAGE OF THE RENTS TO BE AGREED UPON AFTER NEGOTIATIONS WITH THE PROSPECTIVE MANAGER, OR (B) A LUMP SUM TO BE AGREED UPON AFTER SUCH NEGOTIATIONS. THE PAYMENT WILL BE BASED AS NEARLY AS POSSIBLE UPON THE CUSTOMARY FEES OF REAL-ESTATE OPERATORS FOR HANDLING THE RENTAL OF PROPERTY IN THE CITY.

5. IN THE EVENT THAT THE RENTALS IN ANY MONTH ARE NOT SUFFICIENT TO PAY THE OPERATING COSTS OF THE PROJECT AND THE MONTHLY PAYMENT DUE TO THE MANAGER ON ACCOUNT OF HIS FEE, THE GOVERNMENT WILL PAY TO THE MANAGER, OUT OF A FUND WHICH WILL BE SET ASIDE BY ME UNDER THE MONEYS APPROPRIATED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT OR THE EMERGENCY RELIEF APPROPRIATION ACT OF 1935, A SUM SUFFICIENT TO REIMBURSE HIM FOR THE ACTUAL DEFICIENCY.

6. THAT THE NET PROCEEDS REMAINING AFTER THE PAYMENT OF THE EXPENSES OF OPERATION AND THE FEE AND THE SETTING ASIDE OF A RESERVE TO BE USED IN THE EVENT THAT THE RENTALS IN ANY MONTH ARE NOT SUFFICIENT TO PAY THAT MONTH'S EXPENSE WILL BE TURNED OVER TO THE FEDERAL GOVERNMENT.

7. THAT THE MANAGER FURNISH BOND TO INSURE PROPER ACCOUNTING OF THE MONEYS RECEIVED BY HIM.

8. THAT THE AGREEMENT WILL EXTEND FOR A 1-YEAR PERIOD.

WILL YOU KINDLY ADVISE WHETHER YOU WILL INTERPOSE ANY OBJECTION TO MY ENTERING INTO A CONTRACT WITH AN OPERATOR OR MANAGER TO BE SELECTED BY ME CONTAINING IN SUBSTANCE THE TERMS OUTLINED ABOVE? A COPY OF ANY AGREEMENT NEGOTIATED WILL BE FORWARDED TO YOU FOR APPROVAL BEFORE ITS EXECUTION.

SECTIONS 202 AND 203 OF THE NATIONAL INDUSTRIAL RECOVERY ACT OF JUNE 16, 1933, 48 STAT. 201-202, PROVIDED FOR THE "CONSTRUCTION, RECONSTRUCTION, ALTERATION, OR REPAIR UNDER PUBLIC REGULATION OR CONTROL OF LOW-COST HOUSING AND SLUM-CLEARANCE PROJECTS.' SECTION OF THE EMERGENCY RELIEF APPROPRIATION ACT OF APRIL 8, 1935, 49 STAT. 115, AUTHORIZES A LIMITED EXPENDITURE FOR ,HOUSING" AND SECTION 12 THEREOF, 49 STAT. 119, AUTHORIZES THE CONTINUANCE OF THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS UNTIL JUNE 30, 1937, TO PERFORM SUCH OF ITS FUNCTIONS AS MAY BE AUTHORIZED BY THE PRESIDENT. BY EXECUTIVE ORDER NO. 7064, JUNE 7, 1935, THERE WAS AUTHORIZED, AMONG OTHER ACTIVITIES, THE CONTINUANCE OF THE SLUM-CLEARANCE AND LOW-COST HOUSING PROJECTS.

YOUR SUBMISSION CORRECTLY ASSUMES THAT THE LEASING OF SUCH LOW-COST HOUSING PROJECTS AS A WHOLE COULD BE ONLY TO A PUBLIC HOUSING AUTHORITY OR SIMILAR PUBLIC BODY. THE OPERATION OF SUCH PROJECTS UNDER A MANAGEMENT CONTRACT WOULD, ALSO, BE OBJECTIONABLE AS REMOVING THE PROJECT FROM PUBLIC CONTROL AND FOR THE FURTHER REASON THAT THERE WOULD BE INVOLVED THE DELEGATION TO SUCH MANAGER OF AUTHORITY TO EMPLOY PERSONNEL AND INCUR OTHER OBLIGATIONS IN THE OPERATION OF A GOVERNMENT-OWNED PROJECT. THIS LEAVES FOR CONSIDERATION ONLY THE SECOND METHOD SUGGESTED IN YOUR SUBMISSION; THAT IS, DIRECT OPERATION BY THE GOVERNMENT. THE OPERATION OF LOW-COST HOUSING PROJECTS BEING ESSENTIAL TO THE ACCOMPLISHMENT OF THE PURPOSE FOR WHICH THEY WERE CONSTRUCTED, SUCH OF THE FUNDS APPROPRIATED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT OF 1933 AND THE EMERGENCY RELIEF APPROPRIATION ACT OF 1935, AS WERE AVAILABLE FOR THE CONSTRUCTION OF SUCH PROJECTS WOULD, ALSO, BE AVAILABLE FOR THE COSTS OF THEIR DIRECT OPERATION BY THE GOVERNMENT. ALL RENTALS AND OTHER RECEIPTS FROM THE OPERATION OF SUCH PROJECTS ARE REQUIRED, UNDER SECTIONS 3617 AND 3618, REVISED STATUTES, TO BE COVERED INTO THE TREASURY OF THE UNITED STATES AS MISCELLANEOUS RECEIPTS, WITHOUT DEDUCTION.