A-82300, DECEMBER 23, 1936, 16 COMP. GEN. 617

A-82300: Dec 23, 1936

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WAS NOT REQUIRED TO BE INCLUDED IN THE AMORTIZATION PLAN THERE INVOLVED EXCEPT AS TO A FAIR ANNUAL INTEREST RETURN ON THE VALUE OF THE LAND. IS FOR INCLUSION IN ARRIVING AT THE "INITIAL COST OF THE PROJECT" UNDER LEGISLATION ENACTED SUBSEQUENT TO THE DATE OF SAID DECISION (SEC. 4 (A). THERE IS NO LEGAL OBJECTION TO OMITTING FROM SAID COST THE VALUE OF LAND ORIGINALLY PURCHASED FOR USE. IT WILL BECOME NECESSARY TO FIX THE RENTS TO BE CHARGED TO THE TENANTS OF THAT PROJECT. A TRACT OF LAND WAS ACQUIRED BY THE UNITED STATES AS A SITE AND PLANS WERE PREPARED TO CONSTRUCT A PROJECT THEREON WHICH WOULD HAVE A BUILDING COVERAGE OF APPROXIMATELY 30 PERCENT OF THE ENTIRE AREA. THE FUNDS AVAILABLE FOR THE CONSTRUCTION OF THIS PROJECT WERE CURTAILED AND THE PROJECT WAS REDESIGNED TO MAKE PROVISION FOR A SMALLER NUMBER OF LIVING UNITS WHICH WOULD REQUIRE THE UTILIZATION OF ONLY A PART OF THE LAND PURCHASED.

A-82300, DECEMBER 23, 1936, 16 COMP. GEN. 617

FEDERAL HOUSING PROJECTS - FIXING OF RENTALS - INCLUSION OF LAND VALUES IN PROJECT COSTS IN FIXING RENTAL RATES FOR THE LAUREL HOMES PROJECT, THE VALUE OF THE LANDS EMPLOYED, WHICH, IN THE CASE UNDER CONSIDERATION IN DECISION OF JANUARY 17, 1936, 15 COMP. GEN. 619, WAS NOT REQUIRED TO BE INCLUDED IN THE AMORTIZATION PLAN THERE INVOLVED EXCEPT AS TO A FAIR ANNUAL INTEREST RETURN ON THE VALUE OF THE LAND, IS FOR INCLUSION IN ARRIVING AT THE "INITIAL COST OF THE PROJECT" UNDER LEGISLATION ENACTED SUBSEQUENT TO THE DATE OF SAID DECISION (SEC. 4 (A), ACT, JUNE 29, 1936, 49 STAT. 2026), BUT THERE IS NO LEGAL OBJECTION TO OMITTING FROM SAID COST THE VALUE OF LAND ORIGINALLY PURCHASED FOR USE, BUT NOT USED, IN CONNECTION WITH SAID PROJECT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE FEDERAL EMERGENCY ADMINISTRATOR OF PUBLIC WORKS, DECEMBER 23, 1936:

THERE HAS BEEN RECEIVED YOUR LETTER OF DECEMBER 10, 1936, AS FOLLOWS:

IN CONNECTION WITH THE OPERATION OF THE LOW COST HOUSING PROJECT KNOWN AS LAUREL HOMES PROJECT, H-1801, CINCINNATI, OHIO, IT WILL BECOME NECESSARY TO FIX THE RENTS TO BE CHARGED TO THE TENANTS OF THAT PROJECT.

A TRACT OF LAND WAS ACQUIRED BY THE UNITED STATES AS A SITE AND PLANS WERE PREPARED TO CONSTRUCT A PROJECT THEREON WHICH WOULD HAVE A BUILDING COVERAGE OF APPROXIMATELY 30 PERCENT OF THE ENTIRE AREA. SUBSEQUENTLY, THE FUNDS AVAILABLE FOR THE CONSTRUCTION OF THIS PROJECT WERE CURTAILED AND THE PROJECT WAS REDESIGNED TO MAKE PROVISION FOR A SMALLER NUMBER OF LIVING UNITS WHICH WOULD REQUIRE THE UTILIZATION OF ONLY A PART OF THE LAND PURCHASED. THE AREA THAT IS BEING ACTUALLY EMPLOYED FOR THE PROJECT AS REDESIGNED WILL HAVE A BUILDING COVERAGE OF LESS THAN 30 PERCENT, THEREBY PROVIDING ADEQUATE LIGHT, AIR, RECREATIONAL AND PARK FACILITIES. IN ADDITION TO THE AREA SO EMPLOYED, THERE REMAIN THREE LARGE SEPARATE TRACTS OF VACANT LAND WHICH WILL NOT BE EMPLOYED IN CONNECTION WITH THE PROJECT AND ARE NOT NECESSARY OR USEFUL FOR THE PROPER DEVELOPMENT OR OPERATION THEREOF.

ATTACHED IS A PLAT SHOWING THE LAND NOW OWNED BY THE GOVERNMENT, THE AREA TO BE USED FOR THE PRESENT PROJECT, AND THE THREE TRACTS OF VACANT LAND. THESE VACANT TRACTS ARE SHOWN ON THE PLAT AS TRACTS NOS. 1, 2, AND 3. TRACT NO. 1 HAS A FRONTAGE ON JOHN STREET OF OVER 600 FEET, ON ARMORY AVENUE OF 160 FEET, AND AT THE SOUTHERNMOST POINT A DEPTH OF 360 FEET. TRACT NO. 2 CONSISTS OF THREE PIECES OF PROPERTY HAVING A TOTAL FRONTAGE ON LYNN STREET OF ABOUT 600 FEET. THE TWO NORTHERLY PORTIONS OF THIS AREA HAVE A DEPTH OF ABOUT 80 FEET AND THE MOST SOUTHERLY PORTION A DEPTH OF 200 FEET. TRACT NO. 3 ADJOINS A CITY PLAYGROUND. ITS DIMENSIONS ARE APPROXIMATELY 100 BY 150 FEET. THE ACTUAL COST OF TRACT NO. 1 WAS $309,901.24, TRACT NO. 2, $155,133.34, AND TRACT NO. 3, $50,621.49.

YOUR ATTENTION IS PARTICULARLY DIRECTED TO THE FACT THAT THIS VACANT LAND CAN BE DEVELOPED EITHER AS ONE PROJECT IN CONJUNCTION WITH THE PRESENT PROJECT OR AS THREE INDEPENDENT PROJECTS. TRACT NO. 1 IS OF SUFFICIENT SIZE AND CONTIGUITY TO BE DEVELOPED AS AN INDEPENDENT PROJECT WHETHER FOR HOUSING OR OTHER PURPOSES. TRACT NO. 2 LYING ON LYNN STREET IS VERY WELL ADAPTED TO BEING DEVELOPED INDEPENDENTLY EITHER AS A HOUSING OR A COMMERCIAL PROJECT. TRACT NO. 3 COULD BE DEVELOPED MOST ADVANTAGEOUSLY AS A COMMUNITY HOUSE FOR ONE ENTIRE HOUSING PROJECT OR AS A PART OF THE CITY PARK OR PLAYGROUND.

IF MORE FUNDS ARE MADE AVAILABLE TO THE GOVERNMENT FOR THIS PURPOSE, THESE TRACTS WILL BE DEVELOPED AS NEW HOUSING PROJECTS. IF FUNDS ARE NOT MADE AVAILABLE, IT IS EXPECTED TO SELL OR LEASE SAID TRACTS TO THE CINCINNATI HOUSING AUTHORITY, SO THAT THE HOUSING AUTHORITY MAY DEVELOP A PROJECT OR PROJECTS OF ITS OWN. IF THE HOUSING AUTHORITY CANNOT DO SO, THE LAND WILL BE DISPOSED OF OTHERWISE.

BY LETTER DATED JANUARY 17, 1936, NO. A-65368, THE COMPTROLLER GENERAL ADVISED ME THAT THE RENTS ON THE TECHWOOD HOUSING PROJECT IN ATLANTA SHOULD BE FIXED AT AN AMOUNT SUFFICIENT TO AMORTIZE 100 PERCENT OF THE CAPITAL COSTS, EXCLUDING LAND COSTS, PLUS A FAIR ANNUAL INTEREST RETURN ON SUCH CAPITAL COSTS AND ON THE VALUE OF THE LAND EMPLOYED. SINCE THAT TIME, ACT, PUBLIC NO. 837-74TH CONGRESS, APPROVED JUNE 29, 1936, HAS BEEN ENACTED WHICH PROVIDES IN PART AS FOLLOWS:

"SEC. 4 (A). IN THE ADMINISTRATION OF ANY LOW-COST HOUSING OR SLUM CLEARANCE PROJECT DESCRIBED IN SECTION 1, THE FEDERAL EMERGENCY ADMINISTRATOR OF PUBLIC WORKS SHALL FIX THE RENTALS AT AN AMOUNT AT LEAST SUFFICIENT TO PAY (1) ALL NECESSARY AND PROPER ADMINISTRATIVE EXPENSES OF THE PROJECT; (2) SUCH SUMS AS WILL SUFFICE TO REPAY, WITHIN A PERIOD NOT EXCEEDING SIXTY YEARS, AT LEAST 55 PERCENTUM OF THE INITIAL COST OF THE PROJECT, TOGETHER WITH INTEREST AT SUCH RATE AS HE DEEMS ADVISABLE.'

IN ACCORDANCE WITH THE PROVISIONS OF SAID ACT, AND THE APPLICABLE LIMITATIONS REFERRED TO IN THE LETTER OF THE COMPTROLLER GENERAL MENTIONED ABOVE, IT IS MY DESIRE TO FIX THE RENTS ON THE LAUREL HOMES PROJECT IN AN AMOUNT SUFFICIENT.

(1) TO PAY NECESSARY AND PROPER ADMINISTRATIVE EXPENSES OF THE PROJECT.

(2) TO REPAY, WITHIN A PERIOD NOT EXCEEDING SIXTY YEARS, 55 PERCENT OF THE ACTUAL CAPITAL COST OF THE PROJECT (EXCLUDING THE COST OF THE LAND) AND TO PAY INTEREST, AT SUCH RATES AS I SHALL DEEM TO BE ADVISABLE, UPON 55 PERCENT OF SAID COST, AND UPON 55 PERCENT OF THE VALUE OF THE LAND ACTUALLY EMPLOYED FOR THE PROJECT (I.E. EXCLUDING TRACTS 1, 2, AND 3 MENTIONED ABOVE). THE VALUE OF SAID LAND SHALL BE THE ACTUAL COST (INCLUDING INCIDENTAL EXPENSES) TO THE GOVERNMENT OF THE LOTS INCLUDED THEREIN.

I SHOULD APPRECIATE YOUR ADVISING ME IF YOUR OFFICE HAS ANY OBJECTION TO FIXING RENTALS UPON SUCH BASIS.

WHILE IN THE DECISION OF JANUARY 17, 1936, 15 COMP. GEN. 619, IT WAS SAID IN PART "NO REASON IS SEEN FOR OBJECTION IF IN FIXING RENTAL RATES FOR COMPLETED FEDERAL HOUSING PROJECTS, AS HERE INVOLVED, THE VALUE OF THE LANDS EMPLOYED IS OMITTED FROM ANY AMORTIZATION PLAN ADOPTED, IF, HOWEVER, PROVISION IS MADE THEREIN FOR INCLUDING IN SUCH RENTAL RATES A FAIR ANNUAL INTEREST RETURN ON THE VALUE OF SUCH LAND-- THE ACTUAL COST THEREOF WHERE ACQUIRED FOR CONSTRUCTION OF THE PARTICULAR PROJECT" THE LEGISLATION WHICH BECAME LAW ON JUNE 29, 1936, DID NOT ADOPT THIS VIEW OF THE MATTER. THE "55 PERCENTUM," AS USED IN SECTION 4 (A) OF SAID ACT QUOTED IN YOUR LETTER, RELATES SPECIFICALLY TO "THE INITIAL COST OF THE PROJECT" IN ADDITION TO ALL NECESSARY AND PROPER ADMINISTRATIVE EXPENSES OF SAID PROJECT. THE COST OF A LOW COST HOUSING PROJECT, SUCH AS INVOLVED IN YOUR SUBMISSION AND AS REFERRED TO IN THE DECISION OF JANUARY 17, 1936, SUPRA, INCLUDES THE COST OF THE LAND, BUILDINGS CONSTRUCTION, ARCHITECTS' FEE, CARRYING CHARGES, OPERATING CAPITAL, AND OTHER CONTINGENCIES, AND THERE WOULD APPEAR TO BE NO REASON OR JUSTIFICATION FOR OMITTING FROM THE "INITIAL COST OF THE PROJECT," AS REFERRED TO IN SECTION 4 (A), SUPRA, THE COST OF LANDS NECESSARY FOR THE PROJECT. IN THE CIRCUMSTANCES THE PROPOSED FIXING OF THE RENTS ON THE LAUREL HOMES PROJECT IN AN AMOUNT SUFFICIENT TO REPAY, IN ADDITION TO NECESSARY AND PROPER ADMINISTRATIVE EXPENSES OF THE PROJECT, ONLY 55 PERCENTUM OF THE ACTUAL CAPITAL COST OF THE PROJECT, EXCLUDING THE COST OF THE LAND, AND ONLY INTEREST UPON 55 PERCENTUM OF THE VALUE OF THE LAND ACTUALLY EMPLOYED FOR THE PROJECT WOULD NOT APPEAR TO BE COMPLIANCE WITH THE LAW UNDER WHICH THE RENTALS ARE PROPOSED TO BE FIXED.

IN SPECIFIC ANSWER TO THE QUESTION SUBMITTED I HAVE TO ADVISE THAT, WHILE THERE APPEARS NO LEGAL OBJECTION TO OMITTING FROM THE COST OF THE PROJECT THE THREE TRACTS OF LAND WHICH ARE NOT TO BE USED IN THE PROJECT THE COST OF THE LAND ACTUALLY INCLUDED AS A PART OF THE PROJECT MUST BE INCLUDED IN "THE INITIAL COST OF THE PROJECT" FOR THE PURPOSE OF COMPUTING THE AMORTIZATION AND INTEREST CHARGES AND THE FIXING OF RENTAL RETURNS ON THE PROJECT.