oversight

Examination Into the Ferry Oaks Concentrated Code Enforcement Project in Salem, Oregon

Published by the Government Accountability Office on 1971-02-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

     RELEASED




Examination Into The Ferry Oaks
Concentrated Code Enforcement
Project in Salem, Oregon        8--?



Department of Housing and
  Urban Development




BY THE COMPTROLLER    GENERAL
OF THE UNITED  STATES




                            FEB. 26,197   1
                       COMPTROLLER             GENERAL      OF      THE       UNITED    STATES
                                           WASHINGTON.       D.C.         20548




     B- 169208




 cl = ear   Senator        Hatfield:

              This   is our report      on our examination       into the Ferry
     Oaks Concentrated           Code Enforcement        Project     in Salem,
     Oregon.       Because    of your expressed       interest     in this mat-
     ter, we are reporting          to you regarding      the results      of our
     examination       into citizens?     complaints    that the Ferry        Oaks
     Project     has been mismanaged.

            Our review      was made pursuant    to the authority     in
     the Budget     and Accounting   Act, 1921 (31 U.S.C.    53), and
     the Accounting     and Auditing   Act of 1950 (31 U.S.C.     67)

            Our       report         is also      being      sent           today      to Senator    Robert   W.
“5   Packwood.

                                                             Sincerely                 yours,




                                                             Comptroller                   General
                                                             of the United                 States

     The Honorable           Mark         0. Hatfield
     United States         Senate




                  50TH         ANNIVERSARY                1921-       1971
                    COMPTROLLER         GENERAL       OF      THE       UNITED      STATES
                                      WASHINGTON.      D.C.         20546




B- 169208




Dear        Senator        Packwood:

         This   is our report      on our examination       into the Ferry
Oaks Concentrated           Code Enforcement        Project     in Salem,
Oregon.       Because    of your expressed       interest     in this mat-
ter, we are reporting          to you regarding      the results     of our
examination       into citizens’     complaints    that the Ferry       Oaks
Project      has been mismanaged.

       Our review     was made pursuant     to the authority      in
the Budget     and Accounting   Act, 1921 (31 U.S.C.    53), and
the Accounting     and Auditing   Act of 1950 (31 U.S.C.     67).

            Our       report      is also     being        sent             today    to Senator        Mark   0.
Hatfield.

                                                            Sincerely               yours,




                                                              Comptroller                    General
                                                              of the United                  States

The Honorable                Robert         W. Packwood
United States              Senate




                  50TH     ANNIVERSARY              1921-       1971
COMPTROLLERGENERAL'S REPORT TO                              EXAMINATION INTO THE FERRY OAKS
THE HONORABLEMARK 0. HATFIELD AND                           CONCENTRATEDCODE ENFORCEMENT
THE HONORABLEROBERT W. PACKWOOD                             PROJECT IN SALEM, OREGON
UNITED STATES SENATE                                        Department of Housing and Urban
                                                          1 Development B-169208  2 3


DIGEST
------

WHYTHE EXAMINATION WASMADE
       Because of charges of mismanagement, the General Accounting Office (GAO)
       reviewed activities             in Salem, Oregon, in connection with the cjt.v's-&o&s
       enforcement project which was designed to arrest the spread of housing
       bl‘l~~~--iti'-an-.aC;e^a--of southeast               Salem before costly ,urban renewal.,..such
       as large-3c8le         rehabilitation              or   building
                                                            _I.~.           clearance,
                                                                . . ,,,_..- --.        became_necessary.
            Y-Y--_ :_ wv ____  >..~.i-.ll.__ ~-.__.._._-*
                                                       1-.--%'a
       The project     in Salem was carried out with grant assistance       from the De-
       partment of Housing and Urban Development (HUD) under the Housing Act
       of 1949. The city was responsible        for working with property owners to
       have all properties      in the code enforcement    project inspected and all
       code violations     corrected.

       GAO examined into        charges   that:

             --Housing      inspections   had been inadequate     and resulted        in housing   code
                violations'      being overlooked.

             --Contractors    had been paid for     unnecessary      work,   shoddy work!, or work
                not done.

             --City  inspectors  had been forced       to overlook     deficiencies       and poor
                workmanship or lose their jobs.

             --A HUD inspector   had whitewashed       the problems      rather   than required
                that they be corrected.

             --The city and HUD had discouraged       property owners from reopening
                closed cases, even though project      critics   had proven that inspec-
                tors had overlooked   code violations     and that contractors'  work had
                been of poor quality.

             --The Neighborhood   Improvement Committee's chairman had been threat-
                ened that, if she reopened closed cases involving   her properties,
                the city would reinspect   her properties and "wipe her out."



Tear Sheet



                                                                     FEB. 26,197              1
      --The city had caused rehabilitation        work on one of the properties
         of the Neighborhood    Improvement Committee's chairman to be delayed,
         which resulted   in increased rehabilitation     costs,

      --The city had required    that certain    violations    on the properties       of
         some property owners be corrected      but had not cited similar       viola-
         tions on the properties    of others   as code violations.

      --Landlords  who had placed their properties        under the leased-housing
         program had not been required  to correct       all violations.

      --For every $1 that had been spent for housing          improvements       $2 had
         been spent for administering the project.


FINDINGS AND CONCLUSIONS
    In general,  the charges    pertained    to problems encountered   in the early
    stages of the project.      GAO findings    are summarized as follows:

      --During    some inspections    made by city inspectors  before May 1968,
         code violations     were overlooked.    (See p. 8.)  The city, however,
         adopted a new housing code in January 1968 and implemented revised
         inspection    procedures   in May 1968 that resulted  in improved inspec-
         tion practices.       (See p. 9.)
      --No instances were found in which contractors        had been paid for un-             I
                                                                                              I

         necessary work.     During the early months of the project,      however,            I
                                                                                              I
         some of the rehabilitation     work paid for was of inferior     quality  or         I
                                                                                              I
         was not done.     (See p. Il.)    The causes of these problems were cor-             I
         rected in 1968 when the Congress increased the maximum amount of                     I
                                                                                              I
         grants from $1,500 to $3,000 and the city began operating         under re-          I
                                                                                              4
         vised contracting    and inspection   procedures.   be   p. 12.)
      --City   inspectors    told GAO that they never had been told to overlook
         housing code violations     or poor workmanship.   No evidence was found
         to contradict    their statements.    (See p. 13.)

      --GAO was unable to prove or disprove   the charges          that     a HUD inspector
         had whitewashed the problems.   (See p. 14.)

      --HUD and the city neither     encouraged nor discouraged    property     owners
         from having their cases reopened and having additional        rehabilita-
         tion work done. HUD authorized       the city to permit reopening of the
         cases, and the city assisted those property      owners who chose to have
         their cases reopened to secure the maximum amount of Federal financ-
         ing to correct all violations     cited upon reinspection    of their prop-
         erties.    (See pp. 15 to 18.)

      --The city official      who was charged with threatening           that the city
         would reinspect    the properties   of the Neighborhood          Improvement



                                       2
               Committee's chairman and "wipe her out" denied this charged.    {See
               p. 20.)    GAO was unable to prove or disprove the charge.  (See p. 22.)

             --Most    of the delays in the rehabilitation     of the chairman's     proper-
                ties   apparently  were caused by her.     (See p. 21.)

             --GAO could not confirm or refute charges that the code was sometimes
                enforced inequitably  during the early months of the project, because
                Salem's old housing code was vague and inspections  were not always
                adequate.   (See p. 23.)

             --Landlords  who placed their properties       under the leased-housing     pro-
                gram were required  to correct not only the cited code violations           but
                also the majority  of other identified      deficiencies.    Owners of prop-
                erties not under the leased-housing      program were required     to cor-
                rect only cited code violations.       (See p. 24.)

             --Through     June 30, 1970, project   administrative costs had been about
                60 percent of the total amount of approved loans and grants.       (See
                p. 25.)      GAO was told, however, that, during 1967 and 1968, the proj-
                ect officials     worked about 6 months, at an administrative  cost of
                about $70,000, trying to correct the early problems with inspections.
                (See p. 26.)


AGENCY ACTIONS AND UNRESOLVEDISSUES
                                                      =ixdfi
        The Acting Assistant   Secretary for Renewal and Housing Management, HUD,
        stated that the project,    after starting rather slowly due to various
        problems, had become one of the more successful      in the area.

        The city manager of Salem stated that the project was a good example of
        one which had overcome early difficulties  and had been successfully com-
        pleted.   (For details on agency comments, see p. 27.)




Tear Sheet
                          Contents
                                                                  Page
DIGEST                                                              1

CHAPTER

       1   INTRODUCTION                                             4

       2   EFFECTIVENESS OF FERRY OAKS PROJECT                      8
               Adequacy of inspections                              8
               Quality   of contractor   work                      11
               Responsiveness     to complaints                    12
               Reopening of closed cases                           15
               Conclusions                                         18

       3   NEIGHBORHOOD IMPROVEMENT COMMITTEE CHAIRMAN'S
           PROBLEMS WITH PROJECT STAFF                             20

           ENFORCEMENT OF HOUSING CODE                             23
           PROJECT ADMINISTRATIVE      COSTS                       25

           AGENCY COMMENTS                                         27

           SCOPE OF REVIEW                                         28

APPENDIX

       I   Letter    dated November 3, 1970, from the Act-
              ing Assistant      Secretary    for Renewal and
              Housing Management,        Department  of Housing
              and Urban Development,        to the General Ac-
              counting    Office                                   31
  II       Letter   dated November 2, 1970, from the
              City Manager of the City of Salem, Oregon,
              to the General Accounting  Office                    33
COMPTROLLERGENERAL'S REPORT TO                         EXAMINATION INTO THE FERRY OAKS
THE HONORABLEMARK 0. HATFIELD AND                      CONCENTRATEDCODE ENFORCEMENT
THE HONORABLEROBERT W. PACKWOOD                        PROJECT IN SALEM, OREGON
UNITED STATES SENATE                                   Department of Housing and Urban
                                                       Development B-169208


DIGEST
------

WHYTHE EXAMINATION WASMADE

     Because of charges of mismanagement, the General Accounting Office        (GAO)
     reviewed activities       in Salem, Oregon, in connection with the city's   code
     enforcement    project which was designed to arrest the spread of housing
     blight   in an area of southeast Salem before costly urban renewal, such
     as large-scale     rehabilitation   or building clearance, became necessary.

     The project     in Salem was carried out with grant assistance       from the De-
     partment of Housing and Urban Development (HUD) under the Housing Act
     of 1949. The city was responsible        for working with property owners to
     have all properties      in the code enforcement    project inspected and all
     code violations     corrected.

     GAO examined into      charges   that:

         --Housing      inspections   had been inadequate     and resulted        in housing   code
            violations'      being overlooked.

         --Contractors    had been paid for     unnecessary     work,   shoddy work,       or work
            not done.

         --City inspectors   had been forced      to overlook      deficiencies       and poor
            workmanship or lose their jobs.

         --A HUD inspector   had whitewashed       the problems     rather    than required
            that they be corrected.

         --The city and HUD had discouraged       property owners from reopening
            closed cases, even though project      critics   had proven that inspec-
            tors had overlooked   code violations     and that contractors'  work had
            been of poor quality.

         --The Neighborhood   Improvement Committee's chairman had been threat-
            ened that, if she reopened closed cases involving   her properties,
            the city would reinspect   her properties and "wipe her out."
       --The city had caused rehabilitation        work on one of the properties
          of the Neighborhood    Improvement Committee's chairman to be delayed,
          which resulted   in increased rehabilitation     costs.

       --The city had required    that certain violations     on the properties     of
          some property owners be corrected    but had not cited similar       vio 1a-
          tions on the properties    of others as code violations.

       --Landlords  who had placed their properties       under the leased-hous           iw
          program had not been required  to correct      all violations.

       --For every $1 that had been spent for housing        improvements         $2 haId
          been spent for administering the project.


FINDINGS AND CONCLUSIONS

     In general,  the charges   pertained    to problems encountered   in the early
     stages of the project.     GAO findings    are summarized as follows:

       --During     some inspections   made by city inspectors  before May 1968,
          code violations     were overlooked.    (See p. 8.)  The city, however,
          adopted a new housing code in January 1968 and implemented revised
          inspection    procedures in May 1968 that resulted    in improved inspec-
          tion practices.       (See p. 9.)

       --No instances were found in which contractors        had been paid for un-
          necessary work.     During the early months of the project,      however,
          some of the rehabilitation     work paid for was of inferior     quality  or
          was not done.     (See pa 11.)    The causes of these problems were cor-
          rected in 1968 when the Congress increased the maximum amount of
          grants from $1,500 to $3,000 and the city began operating         under re-
          vised contracting    and inspection   procedures.   (See p. 12.)
       --City   inspectors    told GAO that they never had been told to overlook
          housing code violations     or poor workmanship.   No evidence was found
          to contradict    their statements.    (See p. 13.)

      --GAO was unable to prove or disprove the charges            that     a HUD inspector
         had whitewashed the problems.   (See p. 14.)

      --HUD and the city neither     encouraged nor discouraged    property owners
         from having their cases reopened and having additional         rehabilita-
         tion work done. HUD authorized       the city to permit reopening of the
         cases, and the city assisted those property      owners who chose to have
         their cases reopened to secure the maximum amount of Federal financ-
         ing to correct all violations     cited upon reinspection    of their prop-
         erties.    (See pp. 15 to 18.)

      --The city official      who was charged with threatening           that the city
         would reinspect    the properties   of the Neighborhood          Improvement
         Committee's chairman and "wipe her out" denied this charged.    (See
         p* 20.) GAO was unable to prove or disprove   the charge.   (See p. 22.)

      --Most    of the delays in the rehabilitation     of the chairman's     proper-
         ties   apparently  were caused by her.     (See p. 21.)

      --GAO could not confirm or refute charges that the code was sometimes
         enforced inequitably  during the early months of the project, because
         Salem's old housing code was vague and inspections  were not always
         adequate.   (See p. 23.)

      --Landlords  who placed their properties       under the leased-housing     pro-
         gram were required  to correct not only the cited code violations           but
         also the majority  of other identified      deficiencies.   Owners of prop-
         erties not under the leased-housing      program were required     to cor-
         rect only cited code violations.       (See p. 24.)

      --Through     June 30, 1970, project   administrative costs had been about
         60 percent of the total amount of approved loans and grants.       (See
         p. 25.)     GAO was told, however, that, during 1967 and 1968, the proj-
         ect officials    worked about 6 months, at an administrative   cost of
         about $70,000, trying     to correct the early problems with inspections.
         (See p. 26.)


AGENCYACTIONS AND UNRESOLVEDISSUES
    The Acting Assistant   Secretary for Renewal and Housing Management, HUD,
    stated that the project,    after starting rather slowly due to various
    problems, had become one of the more successful     in the area.

    The city manager of Salem stated that the project was a good example of
    one which had overcome early difficulties  and had been successfully com-
    pleted.   (For details on agency comments, see p. 27.)
                                     CHAPTER 1

                                   INTRODUCTION

       The General Accounting     Office   has examined into charges
of mismanagement of the federally         supported  Ferry Oaks code
enforcement   project   in Salem.      The scope of our review is
described   on page 28.

         Section   117 of the Housing Act of 1949, as amended
 (42 U.S.C. 14681, authorizes             the Secretary          of Housing and
Urban Development          to make grants         to cities,       other munici-
palities,       and counties      to assist       these local governments             in
carrying       out projects     of concentrated           code enforcement        in
deteriorating         areas.    Cities    are responsible            for inspecting
all properties          in the code enforcement            project       and then
working      with the property         owners to have all code violations
corrected.        Cities     are to offer       assistance       to the property
owners in obtaining           contractors       to correct       the code viola-
tions and in obtaining            Federal     rehabilitation           loans and
grants,      if the property       owners desire          and are eligible        for
such Federal       financial      assistance.

      The concentrated       code enforcement       program is expected
to arrest    the spread of blight       before more intensive        urban
renewal,    such as major rehabilitation         or clearance,      becomes
necessary.      A minimum of property       demolition     and dislocation
of residents     is intended    under the program.

         Salem contracted        with HUD for a concentrated               code en-
 forcement       project     in November 1966.          Under this contract,
the city agreed to undertake                a program of concentrated            code
enforcement         in a 36-block      area of southeast          Salem--Ferry
Oaks--containing            406 structures,       nearly    all of which were
residential.           The contract      required     that the project         be com-
pleted,      with all the structures            meeting Salem's housing code,
by October 6, 1969.             The completion        date was subsequently
extended       to October 6, 1970.           The contract       also placed a
limitation        of $900,579 on the amount of Federal                 financial
participation,           which included      $678,779 for the code enforce-
ment project          and a maximum of $17,800 and $204,000 for re-
location       grants and rehabilitation            grants,     respectively.
These amounts do not include  Federal   rehabilitation     funds
loaned to property  owners at 3-percent    annual interest     under
section  312 of the Housing Act of 1964 (42 U,S.C. 1452b).

        At June 30, 1970, 357(l)           structures        had been certified
by city inspectors        as,meeting       Salem's minimum housing code,
31 structures        had been demolished,          and 17 structures         were
being rehabilitated.          Rehabilitation          work    had not  been
started     on one structure.        Of the 357 structures            certified
as meeting the code,         83  had   been     rehabilitated      using     Federal
grants totaling        $162,443,   95 had been rehabilitated               using
Federal funds (loaned at an interest                  rate of 3 percent)         to-
taling     $325,150,    and 12 had been rehabilitated              using combined
Federal     loans and grants totaling             $82,317.

      Rehabilitation      of the area was directed             and controlled
by the Ferry Oaks Project        Office    of Salem's Department            of
Community Development.         The project      office     was established
in November 1966, but rehabilitation             work in Ferry Oaks was
not begun until      March 1967.      The first      rehabilitation        grant
was approved in May 1967, and the first                loan was approved
in August 1967.

       Progress on the project         was slow, and through May 31,
1968--about     18 months after      the project     was authorized    and
about 14 months after      rehabilitation        work started--only     71
structures     had been certified       as meeting the code or had
been demolished     and the cases closed.          At that date the proj-
ect office     had approved 34 grants for $39,880,            seven loans
for $12,533 and one combined loan-grant              for $2,250.


1This   number includes        two structures     which do not meet the
 code.      Because of the advanced age and/or poor health             of
 the owners-occupants,           the city's   Community Board of Appeals
 waived the requirements            that the properties   be improved
 until    after   the present occupants         ceased to live there.
 For reporting       purposes,      however,  the city considers    the
 properties      as meeting the code because the 3oard of Appeals
 waived the code requirements.




                                         5
         City officials        attributed       the slow progress          to several
factors,      p rincipal      of which were (1) the code enforcement
program was new to both HUD and the city                      and, as a result,
it was being administered                by trial      and error,      (2) some of
the project         personnel      appointed      by the city      in the early
stages of the project              were not qualified         to carry out the
duties      assigned     to them, (3) the former director                  of the
city's      Department      of Community Development              had not delegated
required       authority      to the project         staff  to permit        them to do
their     jobs,     (4) numerous project            staff  changes,       particularly
 in project       leadership,        and (5) much of the work had to be
reinspected         because inspections           in the early       stages of the
project      had been inadequate.

       Criticism       of the Ferry Oaks project             began in the sum-
mer of 1967 and continued              throughout     our fieldwork            which
was completed        in September        1970.    The principal          critics     of
the project       were members of the Ferry Oaks Neighborhood
Improvement       Committee,      particularly      the chairman,            Mrs. J. N.
Watkins,       and one of her close personal             friends,        Mrs. M. W.
McGladrey.        Mr. Allen     "Bud" Morrison,        staff      writer       for
Salem's      Oregon Statesman,         and other newspaper            reporters
also criticized          the project      in newspaper       articles,

       After   considering      the complaints      about the project     by
Mrs. McGladrey       and the criticism        of the project     by newspaper
reporters,     we identified       the following     basic charges made
by critics     of the project.        These charges       are discussed   in
detail     in subsequent     chapters    of this report.

       1. Federal      code enforcement          project   funds had been used
          to rehabilitate         houses in       the project    areathat,after
          rehabilitation,         still    did    not meet minimum housing
          code standards         which they       were required     to meet by
          the city's       contract     with     HUD.    (See p. 8.)

       2. Mrs. Watkins     had been constantly     harassed by project
          personnel,    and rehabilitation     work on her property
          had been delayed,     which had caused her to incur       ad-
          ditional   costs-- all because she had criticized       the
          management of the project.         (See p* 20.1

       3. Code requirements   had been enforced                  capriciously      and
          inequitably   by the project staff.                  In some cases


                                          6
   property     owners had been required          to make certain
   improvements,      while similar     deficiencies       on other
   properties     had not been cited as code violations;
   landlords     had been treated      more favorably        than
   owners-occupants;       requirements      had been enforced        on
   Mrs. Watkins',property         as punishment       for her crit-
   icizing    the project,     but similar      requirements      had
   not been enforced       on the properties        of other owners.
   (See p. 23.)

4. Administrative       costs of the project had been exces-
   sive--for      every $1 that had been spent for housing
   improvements,       $2 had been spent for administering
   the project.        (See pe 25.)




                               7
                                     CHAPTER 2

                  EFFECTIVENESS OF FERRY OAKS PROJECT

        Critics     of the project          charged that Federal             code en-
forcement       funds were being spent for rehabilitating                       houses
which,     after    rehabilitation,          still      did not meet minimum
housing code standards              they were required            to meet by the
city's     contract     with HUD. City officials                  attributed     the
failure      of the houses to meet project                  objectives       to certain
project      management deficiencies,               each of which are discussed
in this chapter.            Our conclusions           regarding      how effectively
the city met project             objectives        are discussed         on page 18.

ADEQUACY OF INSPECTIONS

         The critics     charged that city inspections         of houses had
been inadequate         and that,    as a result,    serious   housing code
violations       had not been detected       and cited.      They cited the
cases of eight        property    owners as evidence       to support   their
charges.        Six cases which had been closed were reopened and
the structures        were reinspected;      a total    of 119 additional
code violations        were disclosed.       In another case the inspec-
tor had failed        to detect rotten     joints    and an inadequate
foundation       which later     caused some of the flooring         to par-
tially     collapse.      In the eighth    case the inspector       had over-
looked a deteriorated          portion   of the foundation.

       We found that all of these structures            initially        had
been inspected      between the middle of May and early October
1967 and that all but one of the cases had been closed be-
fore May 31, 1968.        (In that one case the structure              would
have been considered        as complying    with the code if the floor-
ing had not collapsed        before the structure      was certified.)
City officials      (both former and present)       told us that the
inspections    during the early months of the project                 often
had not been as good as they should have been.                    They attrib-
uted these inadequacies         to two principal    causes.
       First,    the inspections      at that time were made by prop-
erty improvement       counselors     from the Ferry Oaks project
staff.      These counselors      were not experienced    in building
inspection     procedures,     nor were they trained     by the city's
Department     of Public    Works.      Furthermore,  the counselors,

                                            8
after making inspections,      citing  code violations,      and order-
ing the owners to correct      them, were in the awkward position
of working with the owners to get the violations            corrected.
In some instances     the counselors,    because they knew the
owners probably     could not afford    to correct    all the code
violations,    would cite only as many violations         as could be
corrected   with available   Federal   funds--$1,500      in the case
of grants.     (All but one of the examples cited by the critics
were cases in which the rehabilitation         work was financed
through grants.)

        Second, the city's      housing code was vague as to what
constituted      an unsafe or unhealthy         condition    to be cited         as
a code violation.        As a result      the counselors       applied     their
own interpretations       of the code on a case-by-case              basis,
which resulted      in an inconsistent        application      of the code.
Because the code was vague, it was difficult                 to enforce
correction      of code violations;       therefore      the counselors
tended to cite only the most obvious violations                  and the vio-
lations     that the property       owners wanted corrected.

        During the first   5 months          of 1968,   the city     improved
its   inspection  procedures   by:

       1. Adopting a new housing code in January                   1968 that
          was more specific  than its predecessor                  in defining
          minimum housing code requirements.

       2. Establishing    a policy  of strict   code enforcement
          which provided     for the inspectors   to cite all hous-
          ing code violations.

       3. Instituting  an instruction            program to train        inspec-
          tors in proper inspection             procedures.

       4. Relieving     the counselors     in May 1968 of the respon-
          sibility    for inspecting      houses and transferring
          this responsibility        to the city's     Department     of
          Public Works where the teams of inspectors               who made
          the inspections      were knowledgeable        of plumbing,
          electrical,      and structural     requirements.
     We randomly        selected and then        interviewed   24 owners
whose properties        had been inspected         under the city's  revised


                                         9
inspection    procedures.      Of these 24         owners,      all but four
told us that they believed           that their        properties      had received
very thorough     inspections     which had        resulted       in the detec-
tion of all health        and safety     hazards       and in the assurance
that all violations        had been cited.           Two of the 24 owners
told us, however,      that they thought           the inspections         had been
too stringent     and that they had been             required       to correct
items which were not hazardous.

        We reviewed     the reports     of a number of inspections           and
found that many more violations              had been cited       under the re-
vised procedures        than under the old procedures.               We compared
inspection      reports    for all properties        which had been in-
spected under both the old and the revised                   procedures   and
found that,       in all cases,     the latest     reports      had been more
inclusive.        We did not find any instances            in which property
owners had complained          to the city,     to the newspapers,        or to
others     about inadequate      inspections      after    the inspection
procedures      had been changed.




                                     10
QUALITY OF CONTRACTORWORK

      The critics    charged that contractors     had been paid for
unnecessary    work, shoddy work, or work not done.         The exam-
ples they cited in support of their       charges principally      in-
volved complaints     about the quality    of the contractors'
work and, to a much lesser degree,about         work not done or
unnecessary    work.

      We accompanied Mrs. Watkins on visits          to several   houses
which she selected    to demonstrate    the critics'     complaints.
We observed instances      in which the work done by contractors
appeared to be of inferior      quality   and several    examples in
which the work specified      in the contracts     had not been done.
We did not see any examples of what we considered            unneces-
sary work, although     there may have been some instances           in
which more important      work should have been done instead           of
that which had been done,

        We described     our observations    to city and project   offi-
cials.     They advised us that during the early months of the
project    some inferior     quality    work sometimes had been done
by contractors       and accepted by the project      staff.   They at-
tributed    this to three major causes.

      First,   the cost of all the necessary           work in many cases
had exceeded the $1,500 maximum grant allowed                to property
owners at that time.        (Most of the complaints          pertained      to
grant cases.>      As a result,     in some instances        the project
staff   had permitted   contractors        to do work which would im-
prove the appearance of the property,            rather    than work which
would correct     more serious    deficiencies,       and to cut corners--
do poor finish     work or neglect       to do some required        work--in
an effort    to keep costs under the $1,500 limit.

       Second, contractors       had been    awarded      contracts      through
competitive    bidding;    therefore   the     project      staff   had been
required    to award the contract      to    the low      bidder on each job.
Often the reason contractors         were    able to      underbid     their
competitors    was that the contractors           did    poor work which
cost them less.

        Third,    because some of the property  owners had been
satisfied      with the work, project  improvement   counselors had


                                       11
accepted contractors'      work which, the counselors                    believed,
was of inferior    quality   or was unfinished.

        In 1968 the city began taking              positive       action    to im-
 prove the quality         of the contractors'          rehabilitation         work.
The city also began negotiating                contracts     with contractors,
which enabled the city,          in effect,        to bar those contractors
who previously        had done work of inferior             quality.        This
practice     was facilitated       when the Congress increased                  the
maximum grant amount from $1,500 to $3,000 by the Housing
Act of 1968 (and further           increased       it to $3,500 by the Hous-
ing Act of 1969).           City officials       told us that contractors
that did higher        quality   work would not work in the project
when the grant was limited             to $1,500.        Transferring        the in-
spection     function     to the city's        Department       of Public Works
resulted      in more independent         and critical       final      inspections
and in freeing        counselors     to more closely         supervise       contrac-
tors'    performance--      both results       making it more difficult              for
contractors      to do inferior        quality     work or to not do the re-
quired work.

        We interviewed       37 property     owners (including       Mrs. Watkins
 and Mrs. McGladrey)         whose houses had been rehabilitated             un-
 der the project.          Of these 37 owners, 11 were those whose
properties      had been rehabilitated         before the city's        inspec-
tion and contracting          procedures     were revised    and 26 were
those whose properties           had been rehabilitated        after   the p,ro-
cedures had been revised.             Only two of the 37 owners told us
that they were not satisfied             with the work done on their
properties      (including      one whose property      had been rehabili-
tated under the revised           procedures).

          It appears that early in the project             some of the reha-
bilitation         work was of inferior     quality     or was not done;
however,        we believe  that the problems were not as signifi-
cant or as widespread          as the critics       implied.    Furthermore,
after       the maximum amount of a grant was increased             by the
Congress and the project          began operating         under the city's
revised        contracting  and inspection      procedures,     the problems
were corrected.

RESPONSIVENESS TO COMPLAINTS

        The project  critics charged that uncorrected  code vio-
lations    and shoddy workmanship   had been covered up by city

                                           12
and HUD officials.        According      to the critics       (1) inspectors
had been forced to overlook            code violations      and shoddy work
and to certify     that houses met the code or face disciplinary
action, including      losing    their    jobs,    and (2) a HUD inspec-
tor had whitewashed       the problems rather          than required     that
they be corrected.        These charges pertained           to the same
eight cases discussed on page8.

        We asked several    city inspectors,   as well as property
improvement      counselors  who had made some of the early inspec-
tions,     if they had ever been instructed     to overlook  code
violations      or poor workmanship   and thus enable cases to be
closed more rapidly.        All of them said they had not.

         We also interviewed          a former project        improvement    coun-
selor who made some of the early inspections                      and asked him
if it were true that he had been fired                    because he had told
the Neighborhood         Improvement        Committee that he had been in-
structed      to overlook      code violations         so that houses could be
certified       as meeting the code.           He told us that he had been
asked to resign because he could not work with other project
staff     members.     He said that he never had been instructed
to overlook       or cover up code violations              but that in some
instances      his inspection         reports   had been rewritten        by his
supervisors       and items he had cited had been omitted                 from the
list     of deficiencies       requiring      correction.       We did not find
any evidence       contradictory         to the statements        of the inspec-
tors or the improvement            counselors.

        We also interviewed           a city inspector         who, according      to
project     critics,     had been ordered to intercept                a letter
which he had sent to a property                owner citing        uncorrected     de-
ficiencies        that continued       to exist      even though the rehabili-
tation     work had been done and the case closed.                     He said that
it was true that he had asked the property                       owner to return
the letter       unopened but that he did this on his own initia-
tive--he     had not been ordered to recover                 it.    He said that
he had decided to retrieve               the letter      because, after he had
sent it, he realized           that he had not followed             the practices
prescribed        for handling      these matters.         The letter       was not
returned     to the property          owner; instead,        the city required
the contractor         to correct      every cited deficiency            that he had
not corrected         when rehabilitating          the property.


                                           13
         We interviewed      the HUD inspector         who, according        to the
critics,      had whitewashed        the mistakes      of the project       rather
than required        their   correction.         The inspector      had reported
that 98 percent of the city's               original    inspections       of the
41 closed cases that he had reinspected                   appeared adequate
under the former city code.               He said that his reinspections
had not been comprehensive,              that he had spent about 15 min-
utes at each location,           and that he had looked only for ob-
vious violations          and at the items cited by city inspectors.
He said also that he could not make thorough                     inspections,
including      crawling     under houses, because he had had a limited
amount of time.

        The HUD inspector    said further       that the former city
housing code had been very vague.              For example, he said that
the code had not been clear as to whether faulty                foundations
could be cited as code violations.              The inspection     reports
he examined had been prepared under the former code, and, in
evaluating    the adequacy of the inspections,            he had to con-
sider them in the light        of the code under which they had been
made--not    under the revised      code adopted in January 1968.
The inspector     said that,    considering       the code in effect       at
the time, the original       inspections       had been adequate.        We
were unable to prove or disprove            these statements.

        The Acting Regional        Administrator       of HUDDs Region VI,
however,     in trying     to explain      to Mrs. Watkins why the HUD.in-
Spector had not noticed          certain     code violations,         made an in-
accurate     statement     which provided        the critics     with support
for their      charge of whitewash.          The Acting      Administrator        ex-
plained    that the inspector         had not detected        dry rot at one
house because his visit          there had been in the evening               and it
was dark and rainy.          Project     records    do   not  show    the  time    of
day when the inspection          was made, but a resident             of the
neighborhood       told us that the HUD inspector             had visited       the
house during the early afternoon              of a clear day.           Weather
records for Salem show that the city had no rain and almost
no cloudiness        during the day of the inspector's              visit.




                                          14
REOPENING OF CLOSED CASES

      Critics   of the project        charged that,     even though they
had proven that the inspectors'            and contractors'      work was
poor on some of the first-closed            cases and that code viola-
tions still    existed,       the city and HUD tried       to avoid re-
opening these early cases.            From our discussions       we learned
that Mrs. Watkins and the Neighborhood              Improvement    Committee
wanted every case that had been closed before May 31, 1968,
reopened (a total       of 711, the properties        reinspected,     and
the additional      rehabilitation      work done so that the proper-
ties would meet Salem's revised            housing code.

        City officials      were opposed to requiring       all the af-
fected property        owners to reopen their      cases.     These offi-
cials told us that they believed          that the property        owners
had been bothered        enough by inspections.        They also said
that they believed        that most of the property        owners in-
volved were happy with the work that had been done and that
the city,    to force them to reopen their          cases, would have
been required       to take legal action,     including     the use of
search warrants,        which would have caused so much adverse
publicity    that the project      might have been abandoned.

       The city officials         told us, however,         that they believed
that affected      property      owners who felt        that the inspections
or work done on their          houses was not adequate            should have
had the opportunity         to reopen their        cases and should have
been permitted       to have the additional           necessary     rehabilita-
tion work done and paid for with Federal                   funds.     On July 30,
1968, Salem's director           of community development           requested
permission     from HUD's Region VI to reopen, on a case-by-
case basis,      any of the first       71 closed cases which owners
requested    to be reopened.          The justification         for reopening
these cases centered          around Salem's revised           housing code
which was more specific           than the old code in defining               mini-
mum housing code requirements.

       On October 21, 1968, HUD's Region VI informed   the                   city
that   the 71 closed cases could be reopened and further




                                        15
Federal financial        aid   provided,        subject   to the following
conditions.

       1. Cases could be reopened only for those property
          owners specifically  making written requests.

       2. Work to be financed    with grants and loans would                 be
          limited  to correcting    violations of the revised
          code that had not been considered     as violations                un-
          der the old code.

     HUD's Region VI instructed          the city not to urge or in-
duce the individual      property    owners to request  that their
cases be reopened.       HUD advised the city that it was not
HUD's intention     to finance    reopened cases in which compli-
ance with the former code had been accomplished           and in
which the owners were satisfied         with the work, even though
the properties    might not fully      comply with the revised    code.

         In registered     letters       dated November 4, 1968, the city
notified      the 71 property        owners that HUD had authorized          re-
opening their        cases subject        to the conditions    previously
mentioned.        In addition,       the city cautioned     the property
owners that,        even though HUD had authorized          reopening     the
cases, it had not guaranteed                that Federal funds would be
made available         to correct      all code violations.       The city
stated that in the extreme hardship                cases, the Federal Gov-
ernment might increase            the amounts of Federal grants but
that:

       I'*** if the Federal Government disapproves               the
      request,    the property      owner will   still    be obli-
      gated to comply with the necessary             rehabilita-
      tion using his --  own   financing   or  funds."

       Of the 71 property    owners, 11 initially    indicated      to
the city that they were interested       in having their       cases
reopened.      Of these 11 property   owners, however,     five did
not request     that their cases be reopened.      We interviewed
one of the five property      owners who told us that she had
decided not to have her case reopened because she was sat-
isfied    with the work done earlier.      The other four could
not be interviewed--one     had died, two had moved away from
Salem, and one could not be located.

                                           16
      Of the 11 property   owners, six had their      cases re-
opened and had substantial     amounts of additional      rehabilita-
tion work done.    It appeared to us from a review of the
case files  that the project     staff   had assisted  these owners
in securing   the maximum amount of Federal financing         pos-
sible to correct   all ,code violations.

       Mrs. Watkins charged,      however,   that more property      own-
ers would have requested      that their     cases be reopened but
were afraid    to because of threats       made by the project      staff
that the repair     work would probably      have to be paid for by
the owners.      She said that these threats        were made in the
November 4, 1968, letter,       in private     conversations    by proj-
ect staff   with property    owners,    and  at  two   meetings  held in
November 1968 to explain      HUD's conditions       for reopening
cases.

        We asked 11 of the property       owners (excluding
Mrs. Watkins)     whose cases had been closed.whether             they had
been warned not to request         that their     cases be reopened or
whether they felt       that they had been threatened          in the No-
vember 4 letter.        Of these 11 property       owners, three (two
of whom were close associates          of Mrs. Watkins)       said that
they personally     had been warned by project          staff    not to
have their     cases reopened and two felt         that the registered
letters    or statements     made at the November 1968 meetings
had conveyed threats        to discourage     them from reopening       their
cases.     One of the three did reopen his case, however, and
received    a substantial     amount of additional        Federal finan-
cial assistance.

      We asked the remaining        10 property       owners and
Mrs. Watkins why they had not had their               cases reopened and
had additional   rehabilitation        work done.        Mrs. Watkins said
that she had been afraid        to because of the threats.               Two
owners told us that they had wanted to have their                     cases re-
opened but had not done so because they had feared that
they might not get Federal        funds and would be forced to use
their  own. One owner said that he had wanted to have his
case reopened but that the project           staff     had told him that
it would be too much trouble         to do so.        City   officials     ad-
vised us that they could not recall           telling      this to any



                                      17
property owner.     The remaining seven owners told us that
they were satisfied    with the work done on their  properties
and did not want to have their    cases reopened.

CONCLUSIONS

         We found that the charges of inadequate           inspections
and shoddy workmanship         were true in a few of the cases
closed before May 31, 1968.           This was most prevalent          in
those cases in which the rehabilitation              work had been done
under grants limited         to a maximum of $1,500.         If the eight
cases cited by the critics         as evidence to support their
claims were representative         of the condition      of houses reha-
bilitated      and certified    as meeting the code during this
early period,      it is likely    that other houses in the area
were certified       as complying    with Salem's minimum housing
code even though significant          code violations     still     existed,

      The conditions       which permitted     houses with uncorrected
code violations        to be certified    as meeting the code during
the early months of the project--poor             inspections,      inade-
quate housing code, unskillful          contractors,       and insufficient
grant funds-- have been alleviated.            This is substantiated
by the fact that during our interviews             we heard only one
complaint     pertaining     to these problems from the many prop-
erty owners in the Ferry Oaks project             whose properties        had
been rehabilitated        under the revised     procedures.

         We were unable to prove or disprove     the charges that a
HUD inspector     had whitewashed   the problems of the project.
The inaccurate      statement  made by the Acting Regional     Admin-
istrator     of HUD's Region VI, however,     did provide
Mrs. Watkins and others with a reason to believe          that this
charge was true.

      Possibly   HUD or the city should have required              that all
71 cases be reopened,       as was contended by Mrs. Watkins and
by the Ferry Oaks Neighborhood           Improvement     Committee,    to
ensure that all the houses met the city's               minimum standards
for housing.     We believe,     however,     that the approach taken
with respect    to these cases --permitting          voluntary   reopening
on a case-by-case     basis--was      reasonable.       On the basis of
what we were told during        interviews      with property     owners,


                                      18
most    of the people who would have been affected               did not
want    to have their       cases reopened because they were satis-
fied    with the work that had been done.             We believe,    as do
city    officials,    that,    had the city tried      to force the prop-
erty    owners to have their        cases reopened,     have their    prop-
erty    reinspected,     and. have additional    work done, it might
have    created    so much adverse publicity        that the project
might    have been abandoned.




                                     19
                                     CHAPTER 3

                 NEIGHBORHOOD IMPROVEMENT COMMITTEE

               CHAIRMAN'S      PROBLEMS WITH PROJECT STAFF

     Mrs. McGladrey         charged that the Neighborhood          Improve-
ment Committee's       chairman,    Mrs. Watkins,   had been subjected
to almost constant       harassment     by project  personnel        and that
the rehabilitation        work on one of her rental        properties        had
been delayed,      which caused her to incur       additional        costs--
all because she had criticized           the management of the project.

         Mrs. Watkins      advised  us that this was true--that      the
rehabilitation         on the property,     a duplex,  had been completed
2 years later        than it should have been.        She said that most
of the delays had resulted           from her being required      to appear
before      the Community Development        Board of Appeals   concerning
whether       the duplex    should be rehabilitated     to the standards
required        of new buildings.       She also told us that one city
official        had warned her that,      if she wanted to reopen closed
cases involving         two of her other properties,      the city   would
make reinspections          and "wipe her out."
        Project    and city  officials     denied these charges.        They
advised      us that Mr. and Mrs. Watkins        had caused most of the
delays     in rehabilitating       her duplex   and that the Watkinses
had benefited       from those delays.        The city  official   who pur-
portedly      had threatened     Mrs. Watkins    about the reinspections
told us that he had not made the statement              attributed    to him.

       We found no evidence           that Mrs. Watkins        had been singled
out for harassment,          only that she and her husband had been
required     to comply with city          regulations      concerning       rehabili-
tation     of extensively       damaged or deteriorated           buildings.           At
the time Mrs. Watkins'           building     was being rehabilitated,               the
city   ordinance      required    that damaged or deteriorated                build-
ings,    for which repair        costs within        any 12-month      period would
exceed 50 percent         of the appraised         values,   either      be removed
or be rebuilt       to the standards         established     for new structures.

      We reviewed    the case         files    on three other    structures
which had been rehabilitated                at costs exceeding    50 percent
of their   appraised    values.           In each instance,    the property

                                              20
owners were required   to rehabilitate    their                 structures       to
conform to the standards    for new structures.

         In accordance with the city's            Uniform Building           Code,
the Watkinses were requested            to voluntarily          remove the
building.       They appealed this request            to the Community Board
of Appeals and asked that they be allowed                     to rehabilitate
the building.        The   Ferry   Oaks   project      staff    supported      the
Watkinses'      appeal.     The board of appeals granted               them per-
mission to rehabilitate          the building       on the condition           that
it meet standards        for new buildings.           The Watkinses          appeared
before the board of appeals only one more time concerning
the need to meet standards           for new buildings--that               time to
request      and receive    a waiver of one building              code standard.
The Watkinses,       however, were ordered to appear before the
board of appeals three more times during                    the period Decem-
ber 11, 1968, through June 25, 1969, to show cause why re-
habilitation       work had not been started            by the dates set by
the board of appeals.

         We found no evidence         that the project           staff      had caused
any    "costly   delays"     of   the   Watkinses'      rehabilitation          work
but instead      found evidence         that the delays apparently                had
been the results         of the Watkinses'         actions.         For example,
it took the Watkinses           about 3 months to prepare plans,                   spe-
cifications,       and estimates        for rehabilitating             the building
and converting        it from a single-family             dwelling        to a duplex;
nearly      9 months to prepare three different                  bid solicitations
and receive      bids;     and about 5 months to do the actual re-
habilitation       work.      (They acted as their          own general         con-
tractor.)

         Finally      we found that,          although     delays might have re-
sulted      in increased         rehabilitation          costs, the Watkinses
also benefited           from the delays.            The Watkinses        used the ad-
ditional        time to convince project               and HUD staff       to permit
them to convert            the building        from a single-family            dwelling
to a duplex and thus receive                    a 3-percent       Federal    loan to
finance       the entire       cost of the rehabilitation-conversion--
$15,800.          Without     permission        to convert      the property,        the
Watkinses would have been entitled                      only to a maximum loan
of $10,000 to rehabilitate                  the building        as a single-family
dwelling        and would have had to finance                 all the costs of
converting         it to a duplex,            The Watkinses        also benefited


                                          21
in that the converted      building       could   rent   for   about     twice
as much as a single-family         dwelling.

       With respect  to the purported  threat to wipe                  out
Mrs.   Watkins,  we were unable to prove or disprove                   the   charge.




                                       22
                                  CHAPTER 4

                     ENFORCEMENT OF HOUSING CODE

         Mrs. McGladrey and Mrs* Watkins charged that the city
housing code was being enforced              capriciously       and inequitably.
They stated that some property             owners had been required               to
install      handrails,     sump pumps, downspouts,          driveways,       and
other items to correct           cited code violations           similar    to code
violations       which had not been cited on other properties.
They also claimed that landlords              who had placed their            prop-
erties     in Salem's leased-housing          program for low-income
tenants had been given preferential                treatment      and had not
been required         to correct     all code violations,           Finally
Mrs, Watkins stated that she had been required                      to rehabili-
tate her duplex to the standards              required     of new buildings,
although      other property       owners, whose buildings           were equally
as deteriorated,         had not been required          to rehabilitate         their
buildings      to the new standards.           (See pe 20.1

       We were not able to confirm the charge that some prop-
erty owners had been required             to correct   code violations       sim-
ilar    to code violations        which had not been cited on other
properties.         Most of the cases cited in support of this
charge were closed prior           to May 31, 1968, when there were
problems with the city's           inspections.      During the early
stages of the project,          the inspections      were made by inexpe-
rienced      inspectors   using a vague housing code,and,             as a re-
sult,     the inspectors     often made code interpretations            on a
case-by-case        basis which led to inconsistent         application      of
the code,        (See pe 9.1

        In addition,      inconsistencies      in citing     violations         also
resulted      because the city's        housing code, as interpreted               by
the city's      Public Works Department,         did not require           gutters
and downspouts;         however,     the code required     that,      if they
were on a house, they be in good repair.                  Since     the    code did
not require       gutters    and downspouts,     owners of houses which
did not originally          have them could not be required              to add
them.      If, however,      a house had gutters       and downspouts which
were in need of repair,            the owners were required           by the code
to repair,      replace,     or remove them and the costs could be
paid with Federal funds since the code required                     the correc-
tion.

                                        23
         With respect      to the second charge concerning            houses
placed under the leased-housing               program, we found no in-
stances in which landlords            had been given preferential
treatment        or had not been required          to correct  all code vio-
lations,         The city building      engineer,     who is responsible
for all housing code inspections,                told us that all residen-
tial     properties     receive   the same degree of inspection,            re-
gardless      of who the owners are or the use to be made of the
properties.         He said the project's          compliance  letter     sent
to the property         owner listed      all code violations       that the
property      owner was required        to correct     and also recommended
correction        of other deficiencies        to make the house more
livable.

        The city building        engineer      and the city's     supervisor     of
housing and relocation            said that all property         owners must
correct     the code violations           and t=     those owners who place
their    properties       under leased housing might be required              to
correct     the other deficiencies           recommended for correction
as well,      if it would make the properties             more livable.
City officials        explained      that,   even though houses might
meet the requirements           of the minimum housing code, they
might not meet those for leased housing.                    We reviewed     sev-
eral case files         on houses placed under leased housing and
found these statements           to be true.       Information      in the
files    indicated      that all code violations          had been corrected,
as were the majority           of the deficiencies        recommended for
correction-      -especially     those inside      the houses.




                                       24
                                       CHAPTER 5

                       PROJECT ADMINISTRATIVE              COSTS

       Mrs. McGladrey  reported   to us that newspaper    surveys
had shown that for every $1 that had been spent for housing
improvement    $2 had been spent for administering     the project,
The results    of one survey referred   to were published     in the
April   4, 1968, issue of the Oregon Statesman.

         The newspaper         article       reported      that city      records      showed
that for every $1 spent for home improvements                              in the area
it had cost the city               $1.67 to administer            the project.          The
article       stated     that through          February      29, 1968, administra-
tive     costs had totaled             $108,775,      while     home improvement
loans and grants            had totaled         only $64,935.          The article
 stated,      however,      that the amounts did not include                     costs of
 $201,374 for public            improvements          (streets,       sidewalks,       al-
leys,     etc.)     nor    amounts      other    than    grants     and   loans     spent
by homeowners          to correct        deficiencies.           Furthermore,        the
article       stated     that the seemingly            high administrative             costs
included        the cost of inspecting              more than 200 houses for
which,      in most instances,             loans and grants          had not yet been
approved        for home improvements.

       We analyzed    the June 30, 1970, progress          report    pre-
pared by the city       and submitted      to HUD's Region VI.         The
report   showed that loans and grants            of about $594,000 had
been approved.      Total   project     administrative     costs had been
about $358,000,     or 60 percent       of the amount of approved
loans and grants.        We also compared the project           administra-
tive costs with the total         estimated      cost of capital     improve-
ments in the area--about         $1.2 million.1        The cost of these
improvements     was 3.45 times greater          than the administrative
costs.

      The apparent    marked           improvement in the ratio  of the
amount of administrative               costs to the amount of loans and


1
    Includes  costs of public      improvements,     such as streets and
    alleys,  and estimated    costs-of     improvements   made by home-
    owners with their     own funds.


                                            25
grants approved was the result        of loans'    and grants'      being
increased     by about $529,000 during     the 28-month period
March 1968 through June 1970 while administrative              costs
were increased     by a much lesser    amount, $249,000,       during
the same period.       We were told by the project       staff    that
the ratio     of administrative   costs to loans and grants ap-
proved,    such as the one reported      by the Oregon Statesman OI
April    4, 1968, would be greater     when a project     was just
starting    than it would be after     the project    had been in
force a year or two.

         We found, however,               that the project        administrative       ex-
penses had been increased,                    principally      because of project
officials'          efforts      to correct         problems which had resulted
from inadequate             inspection        procedures.        One of the former
project       supervisors          told us that he estimated             that project
officials         had spent about 6 months (November 1967 through
April      19681, at an administrative                    cost of about $70,000,
 trying     to correct         these problems.             He said that during that
period       (1) all inspections              were halted      for 2 months, (2)
project       officials        spent about 2 months teaching                the project
 staff     how to properly             inspect houses, and (3) the project
 staff     spent about 2 months reinspecting                     40 homes.       Also, as
 stated on page 9, in May 1968 the project                          staff was re-
lieved      of inspection            responsibilities         and all houses which
had been inspected               but for which cases had not been closed--
a total       of about 150--were              reinspected      by city inspectors.
The cost of these reinspections                        is not included      in the
 $70,000.




                                           26
                                CHAPTER 6

                             AGENCY COMMENTS

        In a letter     dated November 3, 1970 (see app. I>, the
Acting Assistant        Secretary      for Renewal and Housing Manage-
ment commented on the matters discussed                in our draft   report
and indicated       agreement with our findings.           He stated that
the project,      after    starting      rather  slowly due to staffing
problems,    inexperience         with Federal programs,     and incomplete
guidelines     on how to proceed,           had become one of the more
successful     in the area.

        In a letter   dated November 2, 1970 (see app. II),         the
city manager of the City of Salem, Oregon, in commenting on
our draft    report   indicated    agreement with our findings.        He
stated that (1) the city had readily           admitted that there
were problems with this project          in its early stages,    both
at the local level       and with some of the direction      and support
from HUD, (2) the project        was a good example of one which
had overcome early difficulties          and had been successfully
completed,     and (3) the city of Salem, working with HUD, had
recognized     the project's    problems and had taken positive        and
corrective     steps to solve them.




                                     27
                                  CHAPTER 7

                              SCOPE OF REVIEW

         Our review was conducted at the Ferry Oaks project                   of-
fice and at other city offices               in Salem and at HUD's Cen-
tral Office       in Washington,      D.C., and regional         office   (Re-
gion VI) in Seattle,          Washington.         Our review included      an
examination       of pertinent     project      records and observations
of housing      in the project      area.      We also interviewed        HUD
officials,      city officials,       former city officials           who had
been responsible        for the administration             of the project   dur-
ing its early stages,           and property       owners in the project
area-- including      the principal        project     critics.




                                         28
APPENDIXES




   29
                                                                                                                       APPENDIX              I
                                                                                                                            Page             1


                                            DEPARTMENT      OF    HOUSING       AND        URBAN    DEVELOPMENT
                                                                 WASHINGTON,     D. C.      20413




FOR
   O,=F,CE        OF    THE     ASSISTANT
          RENEWALANDHOUQlNGMANAGEMENT
                                                SECRETARY
                                                                               NOV 3 - 1970                       IN   REPLY   REFER   TO:




                Mr. B. E. Birkle
                Assisttnt   Director, Civil Division
                United States General Accounting
                Office
                Washington,    D. C.  20548
                 Dear IL!!!. Birkle:

                 This letter  is to furnish   you with the Department's    comments on
                 your draft of a proposed report to the Congress entitled:
                 "Examination   into the Ferry Oaks Concentrated   Code Enforcement
                 Program in Salem, Oregon," forwarded by a letter       of September 30,
                 to Secretary   Romney.

                 The Ferry Oaks project          was one of the first           federally     assisted
                 code enforcement      projects       in the country.         It was initially
                 approved for execution          by a letter     of consent,        October 6, 1966,
                 followed   by contract      between the city of Salem and the Depart-
                 ment of Housing and Urban Development                 for a Federal grant of
                 $734,109 for arresting          blighting     conditions,        making public       improve-
                 ments and stabilizing         the substantially          sound neighborhood          of
                 Ferry Oaks. The Federal             Government contributes           three-fourths       of
                 the cost of the project          and the city one-fourth             of the cost.

                 A code enforcement      program is ordinarily            of three years duration;
                 however, an extension       of time was granted           to allow    for the comple-
                 tion of the residential        rehabilitation.           After starting     rather
                 slowly,  due to staffing       problems,       inexperience      with Federal programs,
                 and incomplete   guidelines       on how to proceed,          the _oroject has become
                 one of the more successful         in the area.          Several problems      occurred
                 in the early months of the project               and a few residents      cited these
                 problems as examples of poor management and administration.

                  When inspection     began, the city had an inadequate              housing code and
                  the work write-ups      and rehabilitation         activities     and Federal funds
                  did not raise certain       properties       to the standards      of a code which
                  the city later     adopted.     The code has more stringent            requirements,
                  particularly    those concerning         the under-pinning       of houses and bath-
                  ing facilities.      Several residents         complained     that the workmanship


                                                                                      31
 APPENDIX      I
      Page     2

 was shoddy end that since the Federal grants were raised from
 $1,500.00 to $3,000.00 by later legislation,         they wanted their
 cases reopened and more and better workmanship.           The Regional
 Office personnel    requested authority    and granted waivers to those
 persons who desired to reopen their cases and who had actually
 suffered.   In reality,      we believe the original    cases were brought
 up to the existing      code.

 Since the project    was inrtiated,     it has been almost one hundred
 percent completed with new sidewalks,         curbs and gutters,  alleys
 fixed,   and storm sewers repaired.        The public works have been
 completed and similar       work is now proceeding    in the Richmond
 neighborhood    immediately    adjacent to the Ferry Oaks area.

 Improvements to the structures      have been manifold,       including     new
 electrical    service and circuits,   painting,      floor repairs,     bathing
 facilities,    roof repairs,   and new installations       where necessary.
ONew construction     is evident in the area; one indication          that the
 community is a viable neighborhood       and a good place to live.

 We think that one area of criticism  arose from the fact that some
 members of tne community did not want leased housing adjacent to
 their premises.  However, the complainers  also benefited  from the
 project.

 The Regional Office staff performed its surveillance    properly  and
 did not attempt a whitewash as was indicated    in the com;plaint letters.
 They made suggestions  for improvements which were carried out by the
 Ferry Oaks staff.

 We believe     the Ferry Oaks project    has accomplished    the purpose of
 the federally      assisted code enforcement   program for stabilizing    a
 basically     sound community and preventing     the spread of blighting
 conditions.       The rehabilitation   of the entire   neighborhood   was
 accomplished with a minimum of dislocation,




                                                    orman V. Watson
                                                   Acting Assistant Secretary




                                           32
                                                                                                                                             APPENDIX II




                                             TELEPHONE            (503)         581-5123                 l             ZIP            C3DE
                                                                                                                                             ON 9:   .-:I




                                                                                                November                     2,   1970



       Mr.    B. E. Birkie,      Assistant      Director
       United      States  Geneml       Accounting           Office
       Washington,        D.C.     20544


        Dear     Mr.      Birkle:


        The City    of Salem    has reviewed       the copies       of your   proposed     report   on your examination
        into the Ferry     Oaks   Code    Enforcement       Froject     in Salem.       The report    has been reviewed
        by this office    as well   as several     members      of the staff of our Department            of Community
        Development      who have      been involved       directly      in supervision      of this Code    Enforcement
        project.


       We have no specific       suggestions     as to the wording          of the                 report  other   than to suggest   that
       it might be appropriate       to include     the City’s     correspondence                       and the Department      of
       Housing  and Urban      Development        correspondence         relating                   to the reopening    of the closed
       cases as part of the material         to be included      in an appendix.

       General      speaking,           the City     of Salem        has welcomed        this review        by your office          of the
       opemtion        of the Ferry         Oaks     project.         We have readily          admitted      that there were           problems
       with    this project         in its early      stages,       both at the local        level     here in Salem and with               some
       of the direction            and support       from the Department              of Housing        and Urban        Development.
       However,         we feel that this project                 is also a good example             of a project       which     overcame
       these early       difficulties        and was successfully             completed.           We feel that we here in Salem
       working      with     the Department            of Housing        and Urban       Development           recognized        those problems
       and took positive              and corrective          steps to solve     them.        The project        has now been successfully
       completed        and is closed.


       The City       also appreciated         the objectivity      in which       the entire   report     was written        and the
       way      in which    the investigations        by your field       auditors     took place.         We feel that many          of
       the accusations         and criticisms      mised    through     the press by several           persons    living    in the area
       were      for the most part unfounded            and we are glad to see that the report                 takes     specific
       recognition        of this fact.

        We very       much appreciated        the opportunity                  to review     and comment        on your                       draft  report  and
        have taken       care to see that information                     included      in it has not been released                             and the report
        itself    has been adequately        safeguarded.                   We will,      of course,     look forward                         to the release
        of all or part of the information             included               in this report     at a later   time and                        through     the
        appropriate       federal  channels.
                                                                                                Yours          very          truly,


       cc:     Mr.      Harlan       Mann
                                                                                                Robert          S. Moore
               Mr.      Ralph       Rogers
                                                OREGON’S                          cnp,TnLcity                Manager




u-s*   GAO     lash.,     D.C.




                                                                               33