To:

HOUSE JUDICIARY SUBCOMMITTEE ON THE CONSTITUTION

Honorable Steve Chabot, Chairman

"HUD’s ‘Legislative Guidebook’ and Its Potential Impact on Property Rights and Small Businesses, Including Minority-Owned Businesses"

March 7, 2002

By:

Harry C. Alford

President/CEO

National Black Chamber of Commerce, Inc.

WEBSITE: WWW.NATIONALBCC.ORG EMAIL: INFO@NATIONALBCC.ORG

1350 CONNECTICUT AVE., NW, SUITE 825, WASHINGTON DC 20036 TEL. 202-466-6888 FAX 202-466-4918

Mr. Chairman, members of the Committee, thank you for giving the National Black Chamber of Commerce, Inc. time to present testimony concerning this very important issue. The NBCC is a federation of 201 affiliated chapters located in 40 states and eight nations. We have direct access to approximately 85,000 Black-owned businesses and proudly represent the 800,000+ Black-owned businesses located within the United States. Our purpose is to promote entrepreneurship as the main vehicle to wealth building and economic vitality within African-American communities. We believe that the key to prospering in this capitalistic society of ours is to practice capitalism. Practice capitalism via understanding it and excelling in its principles.

We have great concerns about the "Guidebook" of the American Planning Association (APA). Throughout the entire APA document runs a simple and consistent theme: that the proposed regulations will bring about positive benefits. No regard is given to the risk and uncertainty they will bring to the real estate market and related business activities. Furthermore, no understanding is displayed of the consequences of turning this large amount of discretionary authority over to planners – people who, as a whole, possess neither business experience nor a basic understanding of the banking and lending markets. Entry-level businesses will be severely impacted, especially those with the least funding, education, and political connections. Quite frankly, this will be devastating to the African-American entrepreneur seeking to break free from poverty and achieve the American Dream.

This threat reminds us of when the great Interstate Highway system was put into place throughout this nation. With little thought or foresight, inner city business districts were "eminent domained" into destruction as right of ways for the new freeways. The effects were awesome and can be pointed to as the key reason for the urban blight that was to come within the following decade.

Likewise, The Legislative Guidebook is rife with regulations that display little understanding of business and the economy. Let me give you an example. The majority of independent businesspeople typically try to buy, or lease with an option to buy, their own buildings, usually an older building. Often they try to remodel those buildings. According to The Legislative Guidebook, those buildings are nonconforming. The way The Legislative Guidebook deals with "nonconformity" is all-inclusive. It offers no exceptions. Under the combined impact of Chapters 9 and 10, the process required for an older building to be brought into compliance with the new environmental regulations could create such a delay that for all practical purposes, no one could go into business without constructing a whole new building. If this required compliance process kicks in with every change of business in a nonconforming building, it is extreme enough that it may indeed activate the "takings" clause and result in costly litigation.

All of this, of course, adds delays and problems in the permit process, but delays in and of themselves are not the real problem. The real problem is that this kind of development condition may make it impossible for the first time or beginning entrepreneur, or the person who does not have enough money to buy the business firm or business product franchise and receive franchisor supervision, to find the capital to enter the market; too much risk has been introduced in the market. Furthermore, the government inspections, then re-inspections, then re-examination of its inspections would lead to a level of lending uncertainty and would approach extreme frustration to the point of "prohibition".

The Legislative Guidebook’s promotion of amortization and of an oppressive level of supervision of business signage displays a serious lack of understanding of how business functions. The average small business is nearly totally dependant on place-based communication, graphics devices and systems for its marketing and advertising. It is the most cost-effective way a business has of communicating to passing motorists that the business is part of the community, that it offers certain products or services, and that they are welcome to come inside. Signage literally can make or break a small business. The business site of a large corporation or franchise, on the other hand, can be very visible even without a large sign because its national advertising, signature building, prime location, and corporate identification makes it instantly identifiable to the passing motorist.

Advocates of Smart Growth frequently talk of regulations such as those embodied in The Legislative Guidebook as being necessary to develop a "sense of place". They opine about limiting "big box retail" and the corporations and franchises that make so many of the newer suburbs indistinguishable from one another. But for all of this talk, one of the biggest things that has favored corporate America from the beginning has been land use planning rules, and especially sign regulations. The more difficult it is for the small businessperson to be seen, and the more risk is introduced into the marketplace for the independent merchant, the more franchises and corporations a town will have and the fewer small businesses. Add to this the indignation the financially struggling and inexperienced small businessperson suffers due to overbearing regulation and authoritarian demands, which corporations and franchises have the money and power to avoid.

No one is bold enough to step outright on the Lanham Act and to stop the use of registered trademarks. Some cities flirt with it, but are only successful in manipulating the copy on the independent or small merchant’s sign. Regardless of rules against content-neutrality, the planners know they can get away with this bullying tactic on small businesspeople because of their inexperience and lack of capital. The Legislative Guidebook encourages this kind of behavior, and what is worse is that it encourages this behavior from individuals who have no training to understand the risks and difficulties they are introducing for the small business community, or the negative impacts that will result for cities that implement these and other policies promoted in The Legislative Guidebook.

Let me give you just one example of the kind of trouble cities will face. It is a fact that many of the older buildings small businesses lease or buy are built right up to the property line, directly against the public right of way. When a sign projects even one or two inches from the face of the building, let alone the 20 to 30 inches necessary to be readable through the windshield of a passing automobile, it is projecting over public space. The Legislative Guidebook suggests that these situations require additional regulatory oversight, which increases lending risk. However, municipalities that apply this kind of additional risk to marginal buildings will find the regulations will drive small businesses away from existing buildings and into new buildings, and it will give a tremendous advantage to the corporate and franchise operations. Thus, the regulations will work against their goals of urban renewal, deceleration of urban sprawl, and prevention of urban deterioration.

Furthermore, "pedestrian-oriented" business signs, as apparently advocated by Guidebook (2-101(2), are not functional for automobile-dependent communities. Potential consumers do not stroll around 12th & Teutonia in Milwaukee; 92nd and Central in Los Angeles; Fenkel & Livernois in Detroit; 79th & Halsted in Chicago, etc. The view is from a moving vehicle and the shopping mission is very direct and focused. One must not consider these neighborhoods synonymous with the mega malls of suburbia.

In the late 1920’s, the Supreme Court ruled that an exception or variance process must be a part of land use regulation. It is a fact, however, that such a process favors the well- financed, well-educated, and well-connected. Exception or variance processes are pervasive throughout The Legislative Guidebook. If a first-time entrepreneur has the six to twelve months to wait, and the necessary revenue, knowledge, and/or political connections, he or she might be able to obtain a variance and overcome many of these obstacles. But this is far from the norm for the small business community, and especially for the African-American small business community. The exception or variance process subjects important factors like the functionality of a district, motorists’ visual acuity, the speed of traffic, and the need for increased visibility in certain areas (such as areas focused on impulse or a heavy volume of retailing, or where people are unfamiliar with the area), to the lofty goal of promoting "aesthetics", and creates even more uncertainty for the small business community.

It is truly a sad commentary that the American Planning Association, a trade organization working to enhance the job security of its members, can do so, by using millions of dollars of federal funding, on the back of the small business community, by creating a regulatory scheme which its members will enforce, and which will have the practical effect of institutionalizing racism by closing the door of opportunity for the typical African-American who simply dreams of owning his or her own business.

Regardless of how good it is for the 30,000 APA members who will have guaranteed employment and totalitarian authority over a major portion of the economy, and regardless of how good it is for the few consulting firms that will take a healthy share of the $400 million booty, the regulations put forward in this "Legislative Guidebook" are not good for the small business community. They will introduce risk, uncertainty and exception procedures that will shrink and eliminate important financing opportunities.

It is good for another group – that is, the large corporations. Do not expect members of that group to come forward in large numbers and fight this. It rests to representatives of small business, such as the National Black Chamber of Commerce, to accomplish that. Again, thank you for this great opportunity to speak before you.