struct terrace systems, and to build water impoundment reservoirs. In each case, he had then been partially repaid upon the approval of his voucher submissions detailing his actual outlays. When he began to engage in these conservation practices, he was given the maximum $2,500 cost sharing for his farm. Over the years both Mississippi and Franklin County, where he resides, have had to impose their own maximum limitations on the program so that, for the past few years, he, like the approximately 38,000 other farmers in the state who engage in REAP practices, has been held to a $750 overall ceiling for all REAP-approved expenditures and even then is entitled to only a 30 percent Federal share of his costs in maintaining the vegetative cover on his land. Since it costs plaintiff Scarbrough approximately $7,000 a year to engage in these conservation practices and his ranch is only a marginal economic operation. making a small amount of money some years, while losing money in others, the loss of REAP cost-sharing benefits will be a significant economic factor affecting the income he derives from his ranch.

D. The REAP Program-Duty

24. The impounding of REAP funds by defendant Ash has been done without statutory or constitutional authority.

25. Defendant Butz is without authority to terminate the REAP program, on the basis of the claimed grounds, or any other.

26. Said defendants, as officers in the executive branch of government, have a constitutional duty pursuant to Article II, Sec. 3, to take care that the laws are faithfully executed. The duty includes appropriation acts. Under this duty, defendant Ash can impound only within the terms of the Anti-Deficiency Act of 1951, 64 Stat. 765, Title XII, sec. 1211, 31 USC sec. 665 (c) (2). Said statute permits impounding of appropriated funds only when:

a. to do so is necessary to allow for contingencies in program operations which may arise and which could not have been determined with certainty at the time Congress appropriated the funds; and,

b. savings are made possible because the requirements of the object of the appropriation have changed, because the efficiency of program operations has increased, or other such developments occur, such that the same Congressional objective can be achieved with the expenditure of less funds.

27. In the case of the REAP obligational authority, the Anti-Deficiency Act of 1951 is inapplicable, and there is no other express or implied Congressional authorization to impound said funds.

28. The REAP impoundment thus represents unilateral action by defendants to implement their own social and economic goals and preferences by reallocating national resources in contravention of Congressional dictates.

29. In the absence of power to impound and in the face of laws passed by Congress which he must faithfully execute, defendant Ash must release the entire $225,000,000 obligational authority to defendant Butz who must, in turn, apportion the entire amount to the states.

SECOND CLAIM

A. The FACE Program-Structure

30. FACE, Federally Assisted Code Enforcement, is a composite of secs. 115, 117 and 312 of the Housing Act of 1949, as amended. It came into being in 1964. The broad objective of that Act, as stated in sec. 2, is to realize "a suitable living environment for every American family; thus contributing to the development and redevelopment of communities and to the advance of the growth, wealth, and security of the nation." 42 USC sec. 1441. FACE assures the achievement of this goal by providing Federal funds to enable low and middle income homeowners to repair and rehabilitate their houses to comply with housing codes and, ultimately, to forestall the necessity for urban renewal and the consequent destruction of neighborhoods and communities. In the absence of FACE, such homeowners would not have the financial ability to make the requisite repairs and would find their homes condemned or face criminal penalties or be forcibly ejected, while the housing stock deteriorated.

31. FACE is a tripartite program. The first leg of FACE, sec. 117 of the Act, I.L. 89-117, sec. 311(a), 79 Stat. 478, as amended, 42 USC sec. 1468, provides for grants to local governments of 2/3 (or 3/4, in the case of communities with a population of 50,000 or less) of the costs of concentrated housing code inspection and enforcement in deteriorated or deteriorating areas. Activities supported

under sec. 117 include assisting property owners to obtain necessary financing to make the repairs and improvements necessary to comply with the code, and the costs of planning and carrying out of the provision or repair of public streets, sidewalks, curbs, street lighting, traffic lights and signs and beautification.

32. The second FACE leg, sec. 115 of the Act, P.L. 89-117, sec. 106(a), 79 Stat. 457, as amended, 42 USC sec. 1466, was enacted at the same time as sec. 117. It provides for rehabilitation grants to low-income property owners in a FACE area to enable them to make the necessary repairs when their property is in violation of the housing code. The maximum grant is $3,500. The objective of sec. 115 grants is to assist in the greater achievement of the goals of a sec. 117 concentrated code enforcement program by reducing the necessity of, or preventing, displacement of low income residents in a FACE area (who cannot afford to make the repairs themselves), the consequent personal hardship to them and the costs of relocation to the government. Section 115 grants are often used in conjunction with sec. 312 rehabilitation loans in those cases where a property owner's income is so low that the loan payments would exceed 25% of his or her monthly income.

33. The third leg, sec. 312 of the Act, P.L. 88-560, sec. 312, 78 Stat. 790, as amended, 42 USC sec. 1452b, generally, provides for rehabilitation loans of up to $12,000, at 3% interest, payable over 20 years, subject to certain maximum income limits, to property owners within a FACE area. HUD has concluded that the default rate (400 out of 21,000, as of June 30, 1971) is especially low, considering that many beneficiaries present risk situations that are marginal to conventional loan operations. Approximately 33% of the sec. 312 borrowers also receive sec. 115 grants.

34. Because the authorization for the sec. 312 loan program will expire on June 30, 1973, no sec. 312 loan may be made thereafter except pursuant to a commitment entered into prior thereto. Section 312(h), 42 USC sec. 1452 (h). 35. Section 312 is the linchpin of the FACE program since a large majority of the property owners in a FACE area cannot qualify for sec. 115 grants because of excessive income. Of those who do qualify for sec. 115 grants, a very large majority must incur expenditures which are greater than $3500. Thus, without the availability of sec. 312 loans, a FACE program cannot operate in a poverty case.

36. As of June 30, 1972, the FACE program, by providing 28,336 sec. 312 loans and 39,314 sec. 115 grants has brought about the completed rehabilitation of 345,000 dwelling units, including both federally and non-federally aided, with 151,000 more presently in the process of rehabilitation.

37. The total federal cost per rehabilitated dwelling unit during the period 1965-72 was $700. Since the loans are repaid, the construction that they represent imposes no costs on the federal tax-payer. The costs of comparable new construction are at least 15 times greater.

38. As of January, 1973, the estimated present demand for sec. 312 loans was in excess of $250 million.

B. The FACE Program-San Francisco

39. The first stage of the FACE program began in San Francisco in 1967 when four neighborhoods were designated as FACE areas: Arguello Park, Buena Vista Heights, Glen Park and Great Highway. The projects were completed in 1970. In the course of those projects, 5,773 dwelling units were inspected, of which 4.890 were determined to require rehabilitation and nearly 90% of which were rehabilitated. This was accomplished with 612 sec. 312 loans and 230 sec. 115 grants.

40. The Glen Park FACE area exemplifies what FACE can achieve. Glen Park consists of one and two-family homes (98% of the 595 buildings). Seventysix percent of the homes are owner-occupied. Many of the homes in the area required extensive rehabilitation because they dated from in the 1870's and 1880's. The neighborhood had suffered rapid decline because of the construction of a nearby freeway. Of all the homes, 37% required federal FACE financing. with the remainder financed through private means. The average expenditure per building was $1.890.

41. The second stage of the FACE program began in San Francisco in March. 1969, when three new FACE areas were designated: Alamo Square, Bernal Heights and Duboce Triangle. Plaintiffs Espinoza, Apana and Guadamuz all reside in the Duboce Triangle FACE area. Thus far, all of the 4.563 dwelling units in these new FACE areas have been inspected; 31% have completed re

habilitation; 16% are in the process; nearly all of the remainder await rehabilitation.

42. If the unrehabilitated buildings remain so, not only will the esthetic goals fail of attainment, but HUD's security interest will also be jeopardized. When FHA appraisers determine the value of property where sec. 312 loans or sec. 115 grants are made, they assume that all of the property in the FACE area will be rehabilitated.

43. Of the three second-stage FACE areas, Alamo Square presents the greatest problems, but the greatest potential. One of the few areas to survive the 1906 holocaust, it was once a very fashionable area (the Czar of Russia's consulate used to be there). Its present population is 40% white and 60% black and includes young professionals, retired people, blue collar workers and welfare recipients. Its focal point is a one-block, tree-covered park surrounded by many excellent examples of 19th century Victorian architecture. Many of these large buildings have long ago been converted to flats and apartments. A few blocks away, the $400 million Western Addition urban redevelopment project is nearing completion.

Median compliance cost is $9,895 per completed building. FACE officials believe that the remaining workload consists largely of more expensive cases partly because of the poverty of the residents, partly because of the greater deterioration involved. On a per unit basis, estimates are 50% higher than for the previously completed units. In the absence of funding, San Francisco FACE officials are concerned that the entire program for the area will fail and that the area will require much more expensive clearance and redevelopment. C. The FACE Program-Recent Budgetary History

44. Pursuant to 42 USC sec. 1460 (c), there is appropriated each year a minimum sum equal to 10% of the aggregate amount of (1) funds appropriated for grants under 42 USC secs. 1450-69b, and (2) funds appropriated for loans under sec. 312, 42 USC sec. 1452b. For FY 1973, the sum appropriated is $132,000.000. 45. Funds for sec. 312 loans are separately appropriated. Prior to FY 1972, no appropriated funds were impounded.

46. In FY 1972, Congress appropriated $90 million for sec. 312. Of this, OMB impounded $40 million. Because the appropriation is not limited by fiscal years, it remains available for FY 1973. During FY 1973, loan repayments of approximately $11 million are also available for new borrowers. Only the $40 million impounded during FY 1972 and the FY 1973 repayments have been released by OMB.

47. In FY 1973, Congress appropriated $70 million for sec. 312 loans, intending to provide $120 million for the program for the fiscal year. OMB has impounded the entire FY 1973 appropriation of $70 million.

D. The FACE Program-Plaintiffs

48. Plaintiffs Augosto Guadamuz and Otilla Guadamuz are residents and property owners within a FACE area in San Francisco, California. They are the parents of nine children, two of whom are minors living with them. Plaintiff's Guadamuz immigrated to the United States from Nicaragua in 1946. Since then, plaintiff Augosto Guadamuz has been employed as a cabinet maker. Until 1970, he had been regularly employed. Since then, increasing unemployment within the San Francisco Bay Area has led him to a series of jobs that lasted from one week to several months. In mid-September, 1972, he injured his back and has not been employed since. His family's only income is $325 per month from unemployment insurance benefits.

Plaintiffs Guadamuz' property includes two apartments, in addition to their own flat. Both apartments are in such dilapidated condition that they cannot be rented. They have provided no income whatsoever for the past year. The last tenant devastated one of the apartments, including breaking nearly all of the windows. If these apartments could be rehabilitated, an FHA appraiser estimated that they could each be rented for $170 per month.

The Guadamuz property was inspected by San Francisco FACE officials in September, 1971. The report revealed substantial, serious deterioration of the building and substantial violations of the building code. Proper rehabilitation to assure code compliance would require replacement of nearly all of the electrical wiring, outlets and switches, extensive repairs to both front and rear porches and stairs; complete replacement of the flooring in all bathrooms: repairs to several walls, doors and ceilings; replacement of 240 sq. ft. of hazardous sidewalk; complete replacement of water and gas piping; repair and replace

ment of several plumbing appliances; and recovering of the roof. The total cost of the rehabilitative effort would be $14,219, including $3,200 for electrical work, $6,428 for plumbing, $444 for roofing, and $3,400 cost of materials. Plaintiff Augosto Guadamuz will perform all necessary labor. A recent FHA appraisal of plaintiffs' property concluded that although “deferred maintenance is obvious, with FACE rehabilitation available this building has good potential."

San Francisco FACE officials have approved, and submitted to HUD, an application from plaintiffs for a sec. 115 grant of $3,500 and a sec. 312 loan of $10,750. The loan would require no payments during the first six months to allow sufficient time to effect the repairs and rent the two apartments. This would then permit plaintiffs to make the monthly mortgage payment of $61.19 even if plaintiff Guadamuz remains unemployed, or underemployed.

Since sec. 312 loans are unavailable due to the present impoundment, San Francisco FACE officials have advised plaintiffs that neither the grant (because the $3,500 maximum available cannot meet the costs of repairs) nor the loan is available. They have advised plaintiffs, however, that if sec. 312 funds were available, all that is now required is HUD approval of their application.

Plaintiffs Guadamuz have attempted to obtain financing to permit them to make the necessary repairs from several conventional sources, all to no avail. Unless they can receive a sec. 312 loan and sec. 117 grant, they will be forced to sell their property to someone who can afford to make the repairs,or be subject to the imposition of penalties and/or ejectment from and condemnation of their property.

49. Plaintiff Karen E. Apana is a resident and property owner within a FACE area in San Francisco, California. Plaintiff Apana is a credentialed school teacher. Because of the excessive supply of unemployed school teachers in California, she is presently employed as a part-time substitute teacher in San Francisco.

A FACE code inspection report has revealed that plaintiff Apana's home is in a very delapidated condition. Substantial electrical repairs must be made; since acquiring the property, two minor electrically-caused fires have broken out; extensive repairs and replacement of plumbing is necessary; ventilation of heaters, stove and water heater is required; the interior and exterior walls, windows and doors must be extensively replaced and repaired; the sidewalk fronting the property is in a state of serious disrepair due to cracks and holes; several of the floor surfaces must be replaced.

On or about September 12, 1972, plaintiff Apana purchased said property in the Duboce Triangle FACE area. She did so with full knowledge that it was in a FACE area, had undergone code inspection, that it was in very substantial disrepair and, thus, in violation of the Building Code of San Francisco. Plaintiff was advised, however, that the seller had applied for a sec. 312 rehabilitation loan and that San Francisco FACE officials had determined that they would recommend a sec. 312 loan of $8.000. This was confirmed by plaintiff in a conversation with San Francisco FACE officials prior to the purchase of the property.

On the day that the sale closed, plaintiff received notice that proceedings had been commenced to condemn the property as a public nuisance. Immediately thereafter, plaintiff applied for sec. 312 rehabilitation loan. Plaintiff has been advised by San Francisco FACE officials that, but for the unavailability of sec. 312 funds, they would recommend to HUD that a loan of approximately $8,000 be granted.

On November 20, 1972, an abatement order was entered by the Director of Public Works of San Francisco condemning plaintiff's property as unsafe and a public nuisance. An appeal therefrom to the Abatement Appeals Board has been filed, thus delaying the imposition of penalties and/or ejectment from or condemnation of the property.

If she is forced to sell, the brokerage fees and the prepayment penalty to the holder of the first deed of trust will consume nearly all of her existing equity. 50. Plaintiffs Felipe and Marcella Espinoza are residents and property owners within a FACE area in San Francisco, California; residing with them are their seven minor children. Plaintiff Felipe Espinoza immigrated from Guadalajara, Mexico in 1966. For three years thereafter, plaintiff Felipe Espinoza was employed as a night porter at the Mark Hopkins Hotel. After acquiring a sufficient command of English, he enrolled in a federal job training program. Upon successful completion, he obtained his present job as a vending machine repairman and painter.

The Espinoza home was first inspected by FACE inspectors on July 27, 1971. The inspection report revealed serious, substantial violations of the housing code and the necessity of extensive replacement of electrical wiring to abate a fire hazard, substantial repair and replacement of plumbing, substantial repairs to exterior and interior walls, floors, doors and windows, a new heating system, and replacement of the entire front porch. The report concluded that four of the eight rooms were not fit for human habitation. The estimated cost of making the necessary repairs is approximately $7,000.

San Francisco FACE officials have advised plaintiffs Espinoza that, if funds were available, they would recommend that they receive a $3,500 sec. 115 rehabilitation grant and a sec. 312 rehabilitation loan of $10,000 to cover refinancing of existing indebtedness as well. However, because of defendant Ash's embargo on sec. 312 loan funds, neither the loan nor the grant can be made because the maximum grant allowable, $3,500, is insufficient to make the necessary repairs.

If the loan and grant were made, plaintiffs Espinoza could (1) make all the necessary repairs and thus prevent condemnation of their property and (2) refinance their existing loans. The result would be that their present monthly payments for principal and interest, taxes and insurance would drop from $148 to $68.50.

If the repairs are not made, plaintiffs Espinoza face the imposition of fines or ejectment from and/or condemnation of their property. Plaintiff Felipe Espinoza has monthly gross earnings of only $610.66, which, with a family of eight to support, prevents him from making the necessary repairs without the FACE assistance. If plaintiffs are unable to obtain the FACE assistance, they will be forced to sell their home at substantially less than its potential value.

51. Section 312 funds cannot be committed beyond June 30, 1973. 42 USC sec. 1452b (h). Unless defendant Ash is restrained from imposing his impoundment on sec. 312 funds, plaintiffs will be irreparably injured since they will be unable to obtain the necessary funds to rehabilitate and thus retain their property. E. The FACE Program-Duty

52. The impounding of FACE funds by defendant Ash has been done without statutory or constitutional authority.

53. Defendant Lynn has a duty to make sec. 312 funds available for commitment in order to achieve the Congressional objectives.

54. Plaintiffs incorporate by reference paragraphs 26, 27 and 28 of the First Claim, as applied to FACE.

Wherefore, plaintiffs pray that this Court:

1. Assume jurisdiction over this cause;

2. Issue an order permitting the cause to proceed as a class action on behalf of the indicated classes;

3. Enter a preliminary and permanent injunction restraining defendants, their successors in office, agents, assignees, and all persons acting by, through or under them, or subject to their supervision or control, as follows:

(a) defendant Ash from impounding, or releasing less than, the entire REAP obligational authority for FY 1973 and the impounding, withholding, delaying or otherwise effectively precluding the commitment of the full REAP obligational authority and the expenditure of the entire FY 1973 FACE appropriation;

(b) defendant Butz from terminating the REAP program;

(c) defendant Lynn from failing to make available the entire FY 1973 FACE appropriation;

4. Enter a judgment declaring that defendant ASH is without authority to impound REAP or FACE funds, as aforesaid;

5. Provide for costs of suit; and,

6. Provide such other and further relief as the Court shall deem just. Respectfully submitted,

RALPH SANTIAGO ABASOAL, San Francisco Neighborhood Legal Assistance Foundation, Inc., San Francisco, Calif. Attorney for Plaintiffs Guadamuz, Apana and Espinoza. JOHN R. KRAMER,

Georgetown University Law Center, Washington, D.C., Attorney for Plaintiff Scarbrough.

Dated: January 25, 1973, Washington, D.C.

90-538-73-61