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Francis P. v. Redevelopment Authority

July 9, 1975

FRANCIS P. AND E. EDITH MCCULLOUGH; AND JOHN AND THERESA SOKOLA; AND KENNETH W. AND MILDRED ROWLANDS; AND EDWARD AND JEANETTE MERA; AND SAMUEL J. AND JOAN PEZZNER; AND JOSEPHINE YARRISH; AND BERNARD AND HARRIET ROCKMAN; AND DONALD R. WILL; AND JOSEPH AND ROSALYN MEYER; AND IRWIN AND JUDITH GELB; AND MORRIS AND BRENDA VILENSKY; AND ANNE M. HANAHUE; AND MARTIN AND SONDRA GREENBERG; AND DAVID A. AND HARRIET MITCHNECK; AND MARY DREY; AND ALAN AND CAROL DUKES; AND BERNARD AND MILDRED NEWMAN
v.
REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE, A PUBLIC CORPORATION; AND LEON E. CASE, JR., EXECUTIVE DIRECTOR OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND HORACE E. KRAMER, CHAIRMAN OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND JOSEPH F. LONG, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND DR. P. J. WALL, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND MICHAEL B. RUSHTON, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND ROMAN R. RUBINSTEIN, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND CITY COUNCIL OF THE CITY OF WILKES-BARRE, A MUNICIPAL CORPORATION; AND CON SALWOSKI, MAYOR OF THE CITY OF WILKES-BARRE AND PRESIDENT OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND ROBERT P. BRADER, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND JOSEPH J. BURNS, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND DR. WALTER Z. NEWMAN, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND REV. WILLIAM W. REID, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND FRANK J. TRINISEWSKI, JR., MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND JOSEPH A. WILLIAMS, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND THEODORE R. ROBB, REGIONAL ADMINISTRATOR, REGION III, UNITED STATES DEPARTMENT OF HOUSING AND URBAN REDEVELOPMENT; AND JAMES T. LYNN, SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FRANCIS P. AND E. EDITH MCCULLOUGH; JOHN AND THERESA SOKOLA; KENNETH W. AND MILDRED ROWLANDS; EDWARD AND JEANETTE MERA; SAMUEL J. AND JOAN PEZZNER; JOSEPHINE YARRISH; BERNARD AND HARRIET ROCKMAN; DONALD R. WILL; JOSEPH AND ROSALYN MEYER; IRWIN AND JUDITH GELB; ANNE M. HANAHUE; MARTIN AND SONDRA GREENBERG; DAVID A. AND HARRIET MITCHNECK; MARY DREY; ALAN AND CAROL DUKES AND BERNARD AND MILDRED NEWMAN, APPELLANTS FRANCIS P. AND E. EDITH MCCULLOUGH; AND JOHN AND THERESA SOKOLA; AND KENNETH W. AND MILDRED ROWLANDS; AND EDWARD AND JEANETTE MERA; AND SAMUEL J. AND JOAN PEZZNER; AND JOSEPHINE YARRISH; AND BERNARD AND HARRIET ROCKMAN; AND DONALD R. WILL; AND JOSEPH AND ROSALYN MEYER; AND IRWIN AND JUDITH GELB; AND MORRIS AND BRENDA VILENSKY; AND ANNE M. HANAHUE; AND MARTIN AND SONDRA GREENBERG; AND DAVID A. AND HARRIET MITCHNECK; AND MARY DREY; AND ALAN AND CAROL DUKES; AND BERNARD AND MILDRED NEWMAN V. REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE, A PUBLIC CORPORATION; AND LEON E. CASE, JR., EXECUTIVE DIRECTOR OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND HORACE E. KRAMER, CHAIRMAN OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND JOSEPH F. LONG, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND DR. P. J. WALL, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND MICHAEL B. RUSHTON, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND ROMAN R. RUBINSTEIN, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND CITY COUNCIL OF THE CITY OF WILKES-BARRE, A MUNICIPAL CORPORATION; AND CON SALWOSKI, MAYOR OF THE CITY OF WILKES-BARRE AND PRESIDENT OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND ROBERT P. BRADER, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND JOSEPH J. BURNS, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND DR. WALTER Z. NEWMAN, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND REV. WILLIAM W. REID, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND FRANK J. TRINISEWSKI, JR., MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND JOSEPH A. WILLIAMS, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND THEODORE R. ROBB, REGIONAL ADMINISTRATOR, REGION III, UNITED STATES DEPARTMENT OF HOUSING AND URBAN REDEVELOPMENT; AND JAMES T. LYNN, SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE, LEON E. CASE, JR., HORACE E. KRAMER, JOSEPH F. LONG, DR. P. J. WALL, MICHAEL B. RUSHTON, ROMAN R. RUBINSTEIN, THE CITY COUNCIL OF THE CITY OF WILKES-BARRE, CON SALWOSKI, ROBERT P. BRADER, JOSEPH J. BURNS, DR. WALTER Z. NEWMAN, REV. WILLIAM W. REID, FRANK J. TRINISEWSKI, JR. AND JOSEPH A. WILLIAMS, APPELLANTS FRANCIS P. AND E. EDITH MCCULLOUGH; AND JOHN AND THERESA SOKOLA; AND KENNETH W. AND MILDRED ROWLANDS; AND EDWARD AND JEANETTE MERA; AND SAMUEL J. AND JOAN PEZZNER; AND JOSEPHINE YARRISH; AND BERNARD AND HARRIET ROCKMAN; AND DONALD R. WILL; AND JOSEPH AND ROSALYN MEYER; AND IRWIN AND JUDITH GELB; AND MORRIS AND BRENDA VILENSKY; AND ANNE M. HANAHUE; AND MARTIN AND SONDRA GREENBERG; AND DAVID A. AND HARRIET MITCHNECK; AND MARY DREY; AND ALAN AND CAROL DUKES; AND BERNARD AND MILDRED NEWMAN V. REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE, A PUBLIC CORPORATION; AND LEON E. CASE, JR., EXECUTIVE DIRECTOR OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND HORACE E. KRAMER, CHAIRMAN OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND JOSEPH F. LONG, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND DR. P. J. WALL, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND MICHAEL B. RUSHTON, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND ROMAN R. RUBINSTEIN, MEMBER OF THE REDEVELOPMENT AUTHORITY OF THE CITY OF WILKES-BARRE; AND CITY COUNCIL OF THE CITY OF WILKES-BARRE, A MUNICIPAL CORPORATION; AND CON SALWOSKI, MAYOR OF THE CITY OF WILKES-BARRE AND PRESIDENT OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND ROBERT P. BRADER, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND JOSEPH J. BURNS, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND DR. WALTER Z. NEWMAN, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND REV. WILLIAM W. REID, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND FRANK J. TRINISEWSKI, JR., MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND JOSEPH A. WILLIAMS, MEMBER OF THE CITY COUNCIL OF THE CITY OF WILKES-BARRE; AND THEODORE R. ROBB, REGIONAL ADMINISTRATOR, REGION III, UNITED STATES DEPARTMENT OF HOUSING AND URBAN REDEVELOPMENT; AND JAMES T. LYNN, SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, THEODORE R. ROBB AND JAMES T. LYNN, APPELLANTS



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. Civil Action No. 73-325).

Aldisert, Gibbons and Garth, Circuit Judges.

Author: Garth

GARTH, Circuit Judge:

We are called upon to decide whether, under any of the various theories advanced by plaintiffs, they were entitled to have their residences which had been flood-damaged acquired*fn1 by the South Wilkes-Barre Redevelopment Authority rather than just rehabilitated. The district court entered judgment for all the defendants on all claims except that it directed the defendants to comply with certain provisions of the Urban Renewal Handbook.*fn2 Inasmuch as we hold that the plaintiffs are not entitled to have their properties acquired regardless of compliance with the Handbook provisions, we reverse so much of the district court's judgment in favor of the plaintiffs and direct that judgment for the defendants be entered without exception as to all claims.

I. FACTS

In June of 1972, Hurricane Agnes struck Pennsylvania and neighboring states causing severe and widespread property damage. One of the areas which experienced severe flooding was the Wyoming Valley of Pennsylvania which is drained by the Susquehanna River. The Susquehanna overflowed its banks extensively flooding the downtown and "South Wilkes-Barre" sections of the City of Wilkes-Barre.

Shortly thereafter, the United States Department of Housing and Urban Development (HUD), along with other federal and state agencies, began to coordinate efforts for disaster relief and recovery.*fn3 A separate urban renewal project was designed for the rehabilitation of South Wilkes-Barre. The responsibility for this project was entrusted to a body known as the Redevelopment Authority of the City of Wilkes-Barre (hereinafter "Authority").

The funding for the South Wilkes-Barre project was obtained from several sources. The Authority received a planning and survey grant of $936,532 from HUD under Title I of the National Housing Act of 1949, as amended, 42 U.S.C. § 1441 et seq. for the purpose of surveying the magnitude of the flood damage in order to prepare an urban renewal and redevelopment project for the South Wilkes-Barre area. On the basis of this survey the Authority prepared a Flood Disaster Urban Renewal Project Plan which, among other things, included the acquisition of certain properties within the Project Area.*fn4

In March, 1973, the Authority submitted to HUD a "Combined Part I - Part II Loan and Grant Application" seeking a federal capital grant of $29,518,299. On July 20, 1973, a "Loan and Capital Grant Contract" was executed between the Authority and HUD, under the terms of which HUD approved the South Wilkes-Barre Urban Renewal Plan in the amount requested.*fn5 In addition to the HUD funds, the Commonwealth of Pennsylvania agreed to provide $9,431,000 toward the Project. Under the terms of the contract, the Authority made no financial contribution.

From its inception, it was intended by the various governmental agencies participating in the project, that primary emphasis would be placed on "rehabilitation" of flood-damaged properties rather than their "acquisition".*fn6 The Wilkes-Barre City Council decided as early as July, 1972 that the policy which should be followed was one of ". . . extensive restoration and rehabilitation and of only limited property acquisition. . . ." In accordance with this policy, the district court found that: "The Urban Renewal Plan provides for the rehabilitation of the maximum number of buildings possible within the Area." Finding No. 15.

The criteria*fn7 used by the Authority to distinguish between properties to be rehabilitated and those to be acquired established the following factors as warranting acquisition:

"(a) The structure sustained severe flood damage, such condition being deemed to exist when there are defects in a particular element or group of elements of the foundation and/or piers, exterior walls, roof, or loadbearing items, which defects seriously impair the ability of the component to function in its intended capacity and which require total replacement, reconstruction or extensive repair of the element.

(b) Acquisition to achieve planning objectives.

(c) Acquisition to remove blighting influences; this to include inadequate street layout, incompatible uses or land use relationships, overcrowding of buildings, excessive dwelling unit density, obsolete buildings not economically suitable for modernization or conversion, and other identified health and safety hazards."*fn8

The district court found that the reason why the criteria of "sub-standard to a degree warranting clearance" were more strictly defined for this Project than other projects was to ". . . discount or eliminate damage that had occurred to every property, (the general type of flood damage) and to limit the examination of the property to those things which dealt with its structural capacity to remain."*fn9

An advisory board (City Review Board) was established to review objections of property owners whose properties were not scheduled for acquisition by the Authority. This Board, in its review, applied the same criteria used by the Redevelopment Authority to determine the eligibility of properties for acquisition. The Authority, however, was not bound by the recommendations regarding acquisition made by the Review Board or by the City Council.*fn10

Out of a total of some 4,500 structures in the Project Area, the original number of structures originally scheduled for acquisition by the Authority was 634 (640 parcels).*fn11 Due to modifications in the Urban Renewal Plan, and the decisions of individual property owners to rehabilitate structures originally scheduled for acquisition, the Authority, by March 1, 1973, had reduced the number of structures it intended to acquire to 315.*fn12

The budget for the South Wilkes-Barre project allocated $14,750,000 for property acquisition based on an estimated acquisition of 640 parcels. Despite the reduction in number of properties to be acquired by the Redevelopment Authority since the original estimate, no corresponding revision was made in the budgetary allocation for property acquisition. Thus, a surplus of several million dollars exists in the amount allocated for property acquisition.*fn13

The properties owned by plaintiffs are all located within the South Wilkes-Barre Project Area and were not scheduled for acquisition by the Authority. Plaintiffs made repeated requests to have their properties included within the acquisition program but without success. Their eagerness to have their properties acquired is explained by the district court's finding: "An owner of property within the Urban Renewal Project which [property] is acquired receives the fair market value of his property at the time of acquisition disregarding the amount by which the value of the property depreciated as a result of the flood damage it sustained."*fn14 Thus, plaintiffs seek a " purchase " of their properties at pre-flood values rather than being required to restore their properties through rehabilitation loans.

A full understanding of the practical difference between property being scheduled for acquisition as compared to property being rehabilitated requires a brief analysis of the rehabilitation loan aspect of the Urban Renewal Plan. All properties within the Project Area not acquired must be rehabilitated by the property owners in accordance with city codes and ordinances.*fn15 Thus, regardless of the cost involved, property owners who remain in the South Wilkes-Barre Project Area must undertake rehabilitation of their damaged structures.

The district court also found that the Authority gave no consideration to the economic feasibility of rehabilitation or to the "debt-carrying capacity" of individual property owners, in determining which properties should be acquired and which rehabilitated.*fn16 Hence, even under the liberal terms of government-financed 42 U.S.C. § 1452b loans, it was found that some property owners were unable to bear the financial burden involved in rehabilitation.*fn17 The alternative for such individuals is the possible abandonment of their properties. The Authority classified seventy-five (75) properties, not scheduled for acquisition, as potentially subject to abandonment.*fn18

Having unsuccessfully sought to persuade the Authority to acquire their properties, plaintiffs commenced this action asserting jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction), 28 U.S.C. § 1343(3)(4) (civil rights jurisdiction), 5 U.S.C. § 701 et seq. (Administrative Procedure Act), and 28 U.S.C. §§ 2201 & 2202 (Declaratory Judgment Act). We agree with the district court that jurisdiction is properly founded upon 28 U.S.C. § 1331 and 28 U.S.C. § 1343(3).*fn19 See Holmes v. New York City Housing Authority, 398 F.2d 262 (2d Cir. 1968).

The district court, after a non-jury trial, filed a comprehensive opinion which rejected plaintiffs' interpretation of the statute (42 U.S.C. § 1452b) and of the Urban Renewal Handbook and refused to order the Authority to acquire plaintiffs' properties. However, its judgment (see note 2 supra), while denying the primary relief sought by the plaintiffs, did require that the defendants comply with certain provisions of the Handbook. The plaintiffs appealed (at 74-1997) from the entire order of judgment; the State defendants (at 74-1998) and the Federal defendants (at 74-1999) cross-appealed, but only from the compliance provisions of paragraph 1 of the judgment.*fn20

The plaintiffs' arguments fall roughly within the following categories. First, they argue that a proper interpretation of the relevant provisions of the Urban Renewal Handbook would afford each plaintiff the right to have his property acquired by the Authority. Second, plaintiffs argue that, either alone or in combination with their interpretation of the Handbook, they each have a constitutional right (Due Process, Equal Protection) to have their respective properties acquired rather than subjected to rehabilitation.

II. THE URBAN RENEWAL HANDBOOK

The Handbook's issuance, functions and provisions must be understood to appreciate the arguments made by the parties. At the time of the Hurricane Agnes disaster in Pennsylvania, the provisions governing federal disaster relief were contained in the Disaster Relief Act of 1970, 42 U.S.C. § 4401 et seq.*fn21 Under the provisions of the Disaster Relief Act of 1970, the President had the authority to appoint a "Federal coordinating officer" immediately upon the designation of a major disaster area. 42 U.S.C. § 4411. This "coordinating officer" was to function under the Office of Emergency Preparedness. By Executive Order No. 11575, December 31, 1970, 36 F.R. 37, as amended by Executive Order No. 11662, March 29, 1972, 37 F.R. 6563, the President delegated much of his authority under the Act to the Director of the Office of Emergency Preparedness. Subsequently, by Executive Order No. 11725, June 27, 1973, 38 F.R. 17175, as amended by Executive Order No. 11749, December 10, 1973, 38 F.R. 34177, the functions assigned to the Director of the Office of Emergency Preparedness were transferred to the Secretary of Housing and Urban Development.*fn22 Thus, it is HUD that has officially assumed primary responsibility for administering federal disaster relief efforts from December 1973 and, based on the record in the present case, had de facto assumed that responsibility even earlier.*fn23

An explanation of the role played by the Secretary of HUD is a prerequisite to an understanding of why HUD's Urban Renewal Handbook is a focal point of dispute between the parties. Since it is HUD which largely administers federal disaster relief programs, it is HUD's internal operating regulations which plaintiffs urge should govern the administration of the South Wilkes-Barre Urban Renewal Project. These regulations are embodied in the Urban Renewal Handbook, RHM 7200.1 et seq. and particularly in RHA 7210.1.*fn24

An overview of the relevant provisions of RHA 7210.1 is essential to an appreciation of the issues presented.

Chapter 1, section 1 of 7210.1 defines the objectives of rehabilitation as: the prevention of blight, the preservation of historic properties, and the renewal, improvement and maintenance of properties ". . . so as to justify the provision of financial assistance for the construction or reconstruction of public facilities and improvements. . . ." The Federal defendants' brief at 14 summarizes as follows the balance of Chapter 1, section 1, making appropriate reference to the related provisions of 7207.1:

"(1) a rehabilitation area may be an entire project area or a section of a project area in which clearance and redevelopment is the other type of treatment (RHA 7210.1, c. 1, sec. 1 . . .), i.e., the project may contain an area in which everything is rehabilitated and another area in which everything is acquired and demolished; (2) a rehabilitation area or an area within a project, may also include spot clearance (RHA 7207.1, RHA 7210.1, c. 1, sec. 1 . . .); (3) a clearance area may include spot rehabilitation (RHA 7207.1, RHA 7210.1, c. 1, sec. 1 . . .); and (4) restrictive, mandatory requirements are imposed upon acquisition, clearance and redevelopment (RHA 7207.1, RHA 7210.1). . . ." (emphasis in original).

Section 2 identifies the factors which must be present in a project area for which rehabilitation is the proposed treatment. One of the factors which plaintiffs emphasize in their argument is that ". . . All properties to remain in the rehabilitation area are feasible of upgrading to [acceptable standards]. . . ."*fn25

Section 3, (Eligible Costs), section 4, (Contract Services), as well as sections 7 (Rehabilitation Report), 8 (Minimum Requirements during Execution) and 9 (Rehabilitation by the Local Public Agency) do not bear directly upon our discussion and have not been the subject of either analysis or interpretation by the parties.

Section 5 describes Property Rehabilitation Standards and contrasts them with local code standards. The Appendix to this section suggests a form of statement to be incorporated in the Plan prescribing special conditions under which properties which do not conform to the required standards may be acquired.

Section 6 (Determining the Feasibility of Property Rehabilitation) is the section on which plaintiffs rely most heavily. They contend that a proper interpretation of this section requires individual "property" and "family" surveys, the results of which determine the feasibility of rehabilitation. If rehabilitation proves to be infeasible, plaintiffs argue that this section, in conjunction with 7210.1, Section 2, mandates acquisition.

Since the parties have focussed on this section of the Handbook in support of their various arguments, we have reproduced the relevant portions as Appendix I, infra.

Having recognized the significance of the Handbook and having surveyed its provisions, we now turn to the plaintiffs' argument.

III.

The plaintiffs argue that the provisions of the Handbook were mandatorily applicable to the South Wilkes-Barre Project. They then proceed to interpret the Handbook provisions, principally § 7210.1, as requiring acquisition of their properties. Specifically they argue:

A. The Handbook requires as a precondition for rehabilitation the feasibility of upgrading [flood-damaged] property to acceptable standards. Feasibility is to be determined by individual physical and family surveys. The plaintiffs claim that such surveys of their properties would reveal the infeasibility of rehabilitation. Rehabilitation being infeasible, they argue that acquisition is mandated.

B. The rehabilitation provisions of the Handbook have their statutory genesis in 42 U.S.C. § 1441 et seq. Under § 1452b an individual must be an "acceptable risk" to be entitled to a rehabilitation loan. Plaintiffs argue that they lack the "debt-carrying" capacity to qualify as "acceptable risks." Since they do not qualify for rehabilitation loans, they cannot rehabilitate their properties - leaving acquisition as the only and mandated alternative.

The State and Federal defendants, while differing somewhat in their respective approaches to the question of whether the Handbook is mandatorily applicable to the Project, in all other respects agree that the plaintiffs have no right to have their properties acquired by the Authority. On the issue of the mandatory application of the Handbook, the State defendants in their cross-appeal take the position that the Handbook is designed only to guide agency personnel. The Federal defendants, while concurring in that interpretation, do not challenge the applicability of the Handbook to the South Wilkes-Barre Project, stating:

". . . We are of the view that the HUD Handbook is not legally mandatory, except in a contractual sense, because it is not a 'regulation' and its purpose is to facilitate the internal processes of the program rather than create individual rights. However, . . . it is the Federal Government's position that the HUD Handbook should be complied with to the extent directed by the district court in this case. . . . Since [however] that position is not founded on the reasoning adopted by the district court, we do not oppose the non-federal effort to obtain its reversal. . . ."

Federal Appellee's Brief at 9, n.3.

In answer to the plaintiffs' interpretation of the Handbook, the State and Federal defendants dispute the plaintiffs' "either/or theory" - i.e., that if rehabilitation is not feasible, acquisition must be ordered. The defendants argue that nowhere in either the Handbook or in the Loan and Capital Grant Contract is acquisition mandated. In response to plaintiffs' reliance on the rehabilitation sections of the Handbook, the defendants point out that the rehabilitation aspect of this Project was funded through SBA loans and not under HUD statutes and regulations. They also respond to plaintiffs' argument concerning the necessity for individual surveys by interpreting the rehabilitation provisions of the Handbook as requiring only pre-"Loan-and-Grant" surveys to determine the rehabilitation feasibility of the area, as distinct from requiring individual surveys to determine the rehabilitation feasibility of individual properties.

The district court agreed with the plaintiffs' contention that the Handbook provisions were mandatorily applicable and accordingly required compliance by the defendants with certain specified provisions.*fn26 We do not find it necessary to decide this issue since in our view even if the defendants were required*fn27 to apply the various Handbook provisions, the plaintiffs would not thereby be entitled to acquisition of their properties.

A. The Handbook Provisions

The plaintiffs dispute the district court's conclusion that the Handbook's provisions do not require acquisition of individual properties based on each owners cost of rehabilitation and his financial resources, but only require individual "property and family surveys" as aids in forming ". . . a judgment as to the suitability of rehabilitation treatment for an area. . . ." (560a). While we may sympathize with the plight of the plaintiffs, we nevertheless believe that the district court's interpretation is correct.

In support of their interpretation, plaintiffs refer to the Handbook provisions (RHA 7207.1) specifying two basic types of urban renewal treatment: (1) clearance; and, (2) rehabilitation. They recognize that an essential condition for clearance is that more than 50 per cent of the buildings be structurally sub-standard to a degree warranting clearance or that there be a combination of "blighted" and "sub-standard" buildings totaling more than 50 per cent of the buildings in the Area.*fn28 Unless one of these conditions is met, the appropriate treatment is rehabilitation and reference must then be made to the Rehabilitation Section of the Handbook, RHA 7210.1.

It was acknowledged by plaintiffs in their brief at 17-18 and at oral argument that, based on the § 7207.1 conditions referred to above, the Project Area ". . . is obviously not a clearance and redevelopment area . . .," since only 315 of some 4500 buildings are scheduled for acquisition.*fn29 "Not being a clearance project," plaintiffs admit that, ". . . the South Wilkes-Barre Urban Renewal Project must be a rehabilitation project. . . ." It is thus upon the rehabilitation provisions of the Handbook that plaintiffs base their primary arguments.

For rehabilitation of a residential area, the Handbook requires that, ". . . All properties to remain in the rehabilitation area are feasible of upgrading to Property Rehabilitation Standards. . . ."*fn30 Plaintiffs place principal reliance upon this section in conjunction with the preamble of RHA 7210.1, Chapter 1, Section 6 in arguing that they have a right to acquisition of their properties. While the full text of RHA 7210.1, Chapter 1, Section 6 is reproduced in Appendix I, infra, the specific language relied upon by plaintiffs is as follows:

"The feasibility of rehabilitation means that, for the majority of the properties in the area, there is reasonable evidence that rehabilitation up to the [Local Public Agency's] Property Rehabilitation Standards can be supported by incomes of owner occupants or by rental revenue.

The physical and financial feasibility of renewing individual properties shall be determined on the basis of (1) property surveys, and (2) family surveys or other appropriate investigations. These surveys shall also be the basis for the establishment of [Property Rehabilitation Standards]."

Plaintiffs take the position that this language from Chapter 6, when combined with Chapter 2's requirement that all properties be feasible of upgrading, means that any property, physically incapable of rehabilitation or whose owner lacks sufficient income to make rehabilitation financially feasible, must be acquired by the Authority. We disagree.

We believe that the purpose of the property and family surveys is not to determine the physical and financial feasibility of rehabilitating each individual property in the project area but rather to determine if the area should be scheduled for "clearance and redevelopment" or "rehabilitation ". This conclusion is buttressed by the ...


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