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092750 1 (1970-04-10)

handle is hein.gao/gaobacwqn0001 and id is 1 raw text is: Z 1 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D C 20548 CIVIL DIVISION APR Dear Mr. Secretary. The General Accounting Office has examined into the interest costs incurred on short-term project notes issued by local housing authorities (LHAs) and local public agencies (LPAs) to finance low-rent housing and urban renewal projects under programs administered by the Department of Housing and Urban Development (HUD). Any savings affected through lower interest costs on project notes would reduce the capital costs of LHA and LPA projects and ultimately reduce Federal financing costs incurred through HUD's annual contributions and grants. Our examination included a review of applicable laws and HUD's administrative policies and procedures, discussions with officials of HUD, the Treasury Department, and the Federal Reserve System; and a review of HUD records at its headquarters office in Washington and at six of its seven regional offices. LEA and LPA project notes are exempt from Federal taxes and are secured by the full faith and credit of the United States Government. In general, these notes have commanded an extremely ready market and have met with exceptionally favorable investor acceptance. For example, for the 5 months ended July 1969, the total bids on LHA and IRA issues averaged about four times the dollar amount of notes offered to investors. LHAs and LPAs are generally required by HUD to market their new project notes monthly in separate, consolidated offerings. Each offering is advertised, awarded to the lowest bidder about 2 weeks later, and issued after about 4 additional weeks, in accordance with the sequence of short- term financing dates scheduled by HUD. Part of the proceeds from the sale of the new notes are used to retire maturing notes. HUD generally requires that, in refinancing project notes, the replacing notes overlap the maturing notes by 3 days New notes are usually issued on a Tuesday, and the notes being retired usually mature on the following Friday. HUD records relating to project notes totaling over $430 million issued by LHAs during March and June 1968 showed that about 83 percent of

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