has become an art center and museum. One structure condemned as unsafe after the flood was the high school gym; this has been replaced with a new and larger gymnasium building.

Before the flood, commercial, postal, and banking offices were makeshift and inadequate. A new and handsome structure houses these facilities. As in all small towns, local business had grown up in backyard garages and barns. Now, a number of these businesses have started afresh in buildings specifically designed for their needs.

WASHINGTON, N.C.

In the late 1800s and early 1900s, Washington, on the navigable Pamlico River, was the center of a busy agricultural and lumber area. As water transportation declined in importance and the market for local lumber fell off, Washington's economy suffered. Formerly there had been 11 lumber mills. Only one remains. The waterfront, adjacent to the central business district, fell into virtual disuse, and decayed.

The 1960 Census showed a population of 9,939 and 46 percent of Washington's housing substandard. But that is history. By making good use of HUD renewal assistance programs, Washington today is well on its way toward overcoming the decline and neglect of the past.

A recent advertisement in the local newspaper, announcing the selection of Washington as the site of a new plant by the Hamilton Beach Company, which will create 800 new jobs, tells the story of Washington's revitalization and brighter future:

We are newcomers to this fine Beaufort County Community. In choosing this area we looked at such impressive features as urban renewal, hospitals, schools, churches, and attitudes. We have seen tremendous progress here. What we saw in this community has a great effect on our decision to locate here.

We want to move forward with you.

North Carolina's Washington has three urban renewal projects and a General Neighborhood Renewal Program. Federal grant reservations for these activities total $4.5 million; the city's share will be $1,148 million. The first project, begun in June 1962, was the East End Area, comprising 412 acres, onethird of Washington's land area. Primarily a conservation project, retaining most of the structures in the area, it will provide new street paving, curbs, gutters, storm drainage, water mains, and other utilities. About 80 houses, beyond economic rehabilitation, will be demolished and the cleared land will be used for residential lots and parks.

The second project, Downtown-Water-front, is in the heart of the city, containing the central business district and the water-front. This project will combine rehabilitation and clearance, with clearance mainly concentrated along the river. A new Water-front Loop will be built around the business section, easing traffic congestion as well as making possible a dramatic waterfront park. Major rehabilitation and modernization of downtown commercial structures will be accompanied by new utilities, street improvements, and the preservation of several historic structures in the area.

The 169-acre West End Area contains about half of the city's substandard housing. Because of the size of the area, it is planned to do the necessary upgrading work over a period of years. The General Neighborhood Renewal Plan contemplates dividing the area into four or five projects.

Washington Heights, the newest project, will provide land for an elementary school, a public park, and some private residential reuse.

Washington's urban renewal program dates from December 1960, with the appointment by a newly-elected City Council of an Urban Renewal Committee. The Committee, composed of leading citizens, visited a number of cities where renewal was underway. It reported back that urban renewal was what Washington needed to meet a number of its problems-substandard housing, shortage of land for new construction, and rundown business district.

The Committee also recommended, however, based on what it had seen elsewhere, that no renewal be undertaken unless an adequate supply of relocation housing was provided. It was therefore decided that the city would undertake both renewal and public housing programs. A series of public meetings and hearings were held, to inform the public of the need for the programs. Full

public support has been attained. Various information media, including periodic bulletins on plans and progress, biweekly radio programs, and regular meetings with civic and neighborhood groups have contributed to the wholehearted community acceptance of the program. Residents of areas not yet scheduled for renewal action have urged city officials to speed up the program so as to include their neighborhoods, New public housing-165 units-are built and occupied. Land for more new housing will be made available. Rehabilitation work has been completed in 150 and is underway on 400 of the more than 800 structures scheduled for upgrading.

YUBA COUNTY, CALIF.

Four years ago the 35,000 citizens of Yuba County saw the need for a broader economic base to provide jobs for the growing population. The major activity in the area was agriculture and lumbering. The county possessed a rich resource of unharnessed water power, but lacked funds to investigate and plan a way to use it.

With a $400,000 planning advance from HUD a complex of dams, tunnels, power houses, and canals for generation of electric power and flood control was designed. This planning loan was repaid in full last year.

A contract for construction of the project has been made. The power project will provide a basis for development of a variety of businesses and industries in the county in future years. As the largest development in its area north of Sacramento, it will benefit the entire region.

Mr. KLUCZYNSKI. The committee will resume its hearings.

Our next witness is John A. Baker, Under Secretary of Agriculture. Mr. Baker, will you give to the reporter your name, whom you represent, and the name of your associates, please.

TESTIMONY OF JOHN A. BAKER, ASSISTANT SECRETARY OF

AGRICULTURE

Mr. BAKER. Mr. Chairman, I am the Assistant Secretary of Agriculture, John A. Baker, and I have with me at your request four Administrators and Deputy Administrators that you asked to come up. Mr. KLUCZYNSKI. We are happy to have them. If you will just give their names to the reporter for the record.

Mr. BAKER. Mr. Howard Bertsch, Administrator of Farmers Home Administration; Mr. Kenneth Birkhead, Administrator, Rural Community Development Service; Mr. Gladwin Young, Associate Administrator, Soil Conservation Service; and Mr. Richard Hausler, Deputy Administrator, Rural Electrification Administration.

They have prepared at your request, Mr. Chairman, to make brief statements, and all of us would attempt to respond to any questions that the committee might have.

Before calling on Mr. Bertsch, Mr. Chairman, I wish to take notice of a very important announcement made before your committee. yesterday by Mr. Boutin of the Small Business Administration when he announced a new policy that will have a great deal to do with building rural America. He announced that the 20-percent local participation requirement in the local development loan program will be reduced to 10 percent for communities with populations of less than 2,500.

This is a significant and important step toward progress in rural America. We have proffered the full cooperation of the Department of Agriculture to the Small Business Administration in making a success of this new policy.

Now, if it please the committee, I will call on Mr. Bertsch, Mr. Chairman.

Mr. KLUCZYNSKI. Please proceed, Mr. Bertsch.

TESTIMONY OF HOWARD BERTSCH, ADMINISTRATOR, FARMERS HOME ADMINISTRATION

Mr. BERTSCH. Mr. Chairman, during the past 6 years the Farmers Home Administration has made what we believe to be a rather significant increase in our support of rural communities and the small businessmen that exist in rural areas.

Here is the way we see the situation:

1. Small communities cannot stay alive unless they can match their urban counterparts with modern facilities for water distribution, waste disposal, and public recreation. The Congress in the past 6 years has given us a wide range of authorities for the development of such facilities in communities up to 5,500 population.

2. Small communities cannot stay alive unless they have adequate housing. In recent years our housing program has been expanded to include communities up to 5,500 population and to provide funds for the purchase as well as the construction of homes, and to provide special provisions for senior citizens, farm laborers, and low-income families.

3. Small rural communities cannot stay alive unless they are surrounded by a large number and a wide variety of viable family farms. The supervised credit we provide in support of family farms has also been greatly strengthened in recent times.

In addition the Farmers Home Administration for 2 years has been administering for the Office of Economic Opportunity a small business loan program. Under this authority we provide small loans for the development of needed trades and services in rural areas. More than 350 different kinds of services have been provided including automobile repair, boat repair, signmaking, hatmaking, lawn mowing, radio and television repair, watch repair, hairdressing, and welding. There is a $3,500 maximum on a borrower's indebtedness, the interest rate is 4% percent and the maximum term of the loan is 15 years. As borrowers progress, enlarge their operations and acquire equity, they will graduate to the line of credit provided by the Small Business Administration in its economic opportunity loan program.

Overall, the volume of our lending operations has risen from around $300 million in 1960 to more than $1 billion a year in 1966. In 1966, some 3 million people benefited directly from our services. We expect in 1967 to finance the construction or improvement of some 1,700 rural water and waste disposal systems, 200 community recreation centers, improved housing for 48,000 families.

Equal to or even exceeding the value of the financial assistance we are able to provide is the counsel, the technical assistance, that accompanies each of our loans.

We started out in the thirties making farm loans that no other lender would make because we were able to provide something no other lender could provide-farm and home management assistance adapted to the needs of each borrower-a sort of personal counseling service.

We have carried this idea over into our dealings with rural communities.

For example, when a handful of leaders in a rural community come to us and tell us they want to talk about obtaining enough money to build a water system, we take them step by step along the route. We help them explore the various sources of funds.

We encourage them to make a survey of their community's needs

and desires.

We suggest that they get a preliminary plan from an engineer before they go to any additional expense.

We review the preliminary plan and advise them as to whether or not the project is feasible.

And we continue to work with them in this fashion until the project is completed. And after that we meet with them once a year to review their progress.

This is the kind of supervision that enables us to make loans for the construction of rural water and waste disposal systems in areas where no other sources of credit are available.

We could not, of course, provide this kind of assistance without our network of 1,600 county offices covering all parts of rural America. Our problem at the present time is to staff these offices up to the level needed to give the kind of service required.

This same approach to the problem of rural people and their communities is now becoming the trademark of an even wider attack on the rebuilding of rural communities-the "outreach" program of the Department that seeks to make the maximum use of all Government programs in rural areas.

In this "Outreach" effort we are never going to say "no" to any request from a rural community. We are instead going to explore with that community every avenue of aid until we find the proper one. Now for the proof of the pudding.

We make our case for rural community development on the assumption that funds advanced for the development of rural communities will pay fantastic dividends. Can we prove this point?

I think we can.

Take the case of the town of Dillwyn in Buckingham County, Va. The Craddock-Terry Shoe Co. of Lynchburg wanted to open a branch factory in the town. The factory would employ 275 people but there had to be water for the sprinkler system, there had to be water for the air-conditioning unit, there had to be 75,000 gallons of water in reserve at all times.

Dillwyn at that point did not have enough water for its 500 residents.

They asked our local man what could be done. We worked out a loan and grant totaling $57,000. The water system was completed last December and the shoe factory will soon be operating at full capacity. Look at what happened in Alabama.

The Montgomery Advertiser last December 3 told how the main classroom in the Montgomery County High School in the rural community of Ramer was destroyed by fire the previous day.

This was a serious loss. And the replacement of the building will be a strain on the taxpayers, including the local businessmen.

But note this: If a newly developed Farmers Home Administration financed water system had not been in existence, the whole school would have disappeared in flames. In that case the community would not only have had to rebuild the classrooms, but the gymnasium, the grammar school-cafeteria building, the vocational building, and the band building.

Now turn to Texas. Our favorite story from there is of the housewife who said after the water system was installed, "Last night was the first time in my life I ever had a bath in over 2 inches of water— and that after having bathed the children in the tub first."

And the Green Valley story in Guadalupe County, Tex., is enough to set your heart afire. When their water system backed by a $700,000 Farmers Home Administration loan was finished, changes came swiftly. According to local reports:

New houses dot the landscape. Folks are coming "back home.” More of this is expected.

Farmers are expanding their operations or developing new moneymaking enterprises.

Farm wives are most enthusiastic, proudly showing new automatic clothes washers, dishwashers, and other facilities all made possible by a dependable water supply with "real pressure."

In one 75-family community in Texas, 36 washing machines were sold.

But the best story of all comes from Warren County, Tenn. Two years ago the Farmers Home Administration financed the laying of 130 miles of water system lines throughout that county.

What has happened since then?

Four new industrial plants have been constructed, 260 new homes costing over $3 million have been built, another 390 homes have been remodeled at a cost of some $390,000.

Seventeen small businesses, including coin-operated laundries, a horse-training stable, garages, service stations, and nursery packing barn have been developed.

New community building valued at over $500,000 have been built. This includes a church, post office building, a wing on a school building, two recreational centers, and an addition on a college.

The State has purchased $500,000 of land for a new park. A town has purchased its first fire truck.

This type of progress, this forging ahead that follows the develonment of community facilities, can be demonstrated in some 2,000 rural communities from coast to coast.

But this is only the beginning.

There are more than 30.000 rural communities that lack modern water systems, probably twice that number need modern sewer systems. The amount of poor housing that exists in our towns is staggering.

We have a tremendous iob ahead of us.

But I believe that we have already demonstrated that the rebuilding of America's rural communities can be achieved.

Thank you, sir.

Mr. KLUCZYNSKI. Thank you. It is an amazing story. I am very much impressed with your statement. This is going to help our committee. We are all working toward one goal-to help the small businessman the fellow who is most in need in the small towns.

Mr. Horton, any comments?