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December 28, 1973

Augusto GUADAMUZ et al., Plaintiffs,
Roy L. ASH et al., Defendants

Flannery, District Judge.

The opinion of the court was delivered by: FLANNERY

FLANNERY, District Judge.

This is an action for declaratory and injunctive relief brought by plaintiffs who challenge the authority of the defendants to withhold funds appropriated by Congress from two congressionally approved programs, the Rural Environmental Assistance Program (REAP) *fn1" and the Federally Assisted Code Enforcement Program (FACE). *fn2" Upon motion of the plaintiffs, this court granted a preliminary injunction on June 29, 1973, which required the defendants to ensure that impounded funds appropriated for the FACE program would not revert to the general fund of the Treasury. No injunction issued as to the funds appropriated for REAP since such funds remained available beyond the close of fiscal 1973. The case then came before the court on cross-motions for summary judgment and in accordance with Local Rule 1-9(g), the parties submitted statements of material facts as to which there was no genuine dispute. While the court had the matter under advisement, defendants moved to dismiss as moot those portions of plaintiffs' amended complaint which challenged the impoundment of FACE funds. Affidavits accompanying the motion to dismiss indicated that defendants Ash and Lynn would release for obligation all FACE funds that previously had been impounded. In opposing the motion, plaintiffs contended that approximately one-third of all FACE funds remained impounded by defendants. Despite the apparent existence of a factual controversy, the court finds that there are no material facts in dispute and that the case is ripe for summary judgment.


 Plaintiffs in this action can be divided into two groups of individuals who sue as representatives of two distinct classes adversely affected by defendants' actions. Plaintiff W. M. Scarbrough is a cattle rancher who has been a recipient of cost-sharing benefits under REAP and its predecessor program since 1944. He challenges the termination of REAP and sues on behalf of himself and all other farmers throughout the nation who would have received REAP grants but for the impound placed on REAP funds by defendants Ash and Butz. Plaintiffs Apana, Espinoza and Guadamuz are low-income property owners in San Francisco who have applied for FACE grants and loans and they bring this action on behalf of themselves and all those similarly situated who would have received FACE benefits but for the impound placed upon funds appropriated for section 312 rehabilitation loans *fn3" by defendants Ash and Lynn. In addition, there are seven organizational plaintiffs which bring this action on their own behalf.

 The court is of the opinion that these matters are appropriate for class action treatment. The prerequisites of Rule 23(a), Federal Rules of Civil Procedure, are clearly satisfied. The two classes are so numerous that joinder of all members would be impracticable; there are questions of law common to each class; the claims of the plaintiffs are typical of the classes they represent; and the representative plaintiffs will fairly and adequately protect the interests of their class. The two classes are certifiable under either Rule 23(b) (1) or 23(b) (2), Federal Rules of Civil Procedure, since the prosecution of separate actions by individual members of the classes would create a risk of inconsistent or varying adjudications which would impose incompatible standards of conduct upon the defendants or would effectively be dispositive of the interests of other members of their class. In addition, the defendants have acted on grounds that are generally applicable to each class, thereby making final injunctive or declaratory relief appropriate with respect to each class.

 The remaining plaintiffs are organizations which sue in their own right. Plaintiff San Francisco Tomorrow, Inc. is a non-profit corporation formed for the purpose of encouraging the preservation and improvement of the urban environment of the San Francisco Bay area. The majority of its members work or reside in the City and County of San Francisco. Plaintiffs Alamo Square Association, Alamo Square Citizen's Advisory Committee, Bernal Heights Association, Bernal Heights Citizen's Advisory Council, Duboce Triangle Property Owners Association, and Noe-Henry Association are unincorporated associations whose members are either residents or property owners within the three FACE areas of the City of San Francisco. The purpose of these associations is to foster neighborhood improvement and, particularly, to act as liaison to the city and federal officials administering the FACE program.


 I. REAP. The Rural Environmental Assistance Program (REAP) has been conducted in one form or another by the Department of Agriculture since 1936. The basic purpose of the program is:

"to secure . . . (1) preservation and improvement of soil fertility; (2) promotion of the economic use and conservation of land; (3) diminution of exploitation and wasteful and unscientific use of national soil resources; (4) the protection of rivers and harbors against the results of soil erosion in aid of maintaining the navigability of waters and water courses and in aid of flood control; (5) reestablishment . . . of . . . the purchasing power of the net income per person on farms . . . (6) prevention and abatement of agricultural-related pollution." *fn4"

 The federal government encourages these goals by sharing with farmers the costs of carrying out environmental practices directed to "soil restoration, soil conservation, the prevention of erosion, or the prevention or abatement of agriculture-related pollution . . . . *fn5"

 Within the Department of Agriculture, REAP is administered by the Agricultural Stabilization and Conservation Service (ASCS). The ASCS, in conjunction with other divisions of the Department of Agriculture and other federal agencies, formulates long-range plans of national environmental needs. On the basis of these plans, appropriated funds are allocated each year to the states for cost-sharing. The ASCS also defines the "conservation practices" *fn6" which are in accord with the year's national priorities, as well as the maximum cost-sharing percentages for such practices. Each state has a REAP committee and within each state are county committees. The state and county committees, in conjunction with other state and federal agencies, develop state and county REAP plans. Each plan may include additional practices and alter the percentage of federal cost-sharing. Only after approval of state and county plans by the Department of Agriculture may individual farmers submit proposals to their county committees. If an individual farmer's application is approved, the federal government shares in the cost of executing the "practice" up to the applicable local percentage, subject to an overall maximum contribution of $2,500. *fn7"

 The funds for REAP are not appropriated by Congress in advance of expenditure. *fn8" Rather, each year Congress authorizes a fixed dollar upper limit on the amount of funds that the Secretary of Agriculture may obligate in the upcoming REAP program year. At the close of the program year Congress appropriates sufficient funds to liquidate the cost-sharing obligations entered into during that year. Since fiscal 1959, the President and Congress have disagreed over the level of REAP funding. Contract authority enacted by Congress during each succeeding year has significantly exceeded the amount recommended by the President. In the 1973 fiscal year budget, the President requested $140 million for REAP; Congress responded by enacting obligational authority of $225.5 million. *fn9" Despite this fact, the Department of Agriculture announced on September 29, 1972, that the 1973 REAP program level would be $140 million in order to reduce federal spending to control inflation. In December, 1972, REAP was ordered terminated by the Office of Management and Budget and the Department of Agriculture so as to limit fiscal 1973 federal expenditures to $250 billion. The decision was also based on the belief that REAP was of low priority, since the income supplements provided were no longer deemed necessary due to rising farm incomes. As a result of the decision to terminate REAP, defendant Ash has withheld from allotment and obligation all REAP contract authority for program year 1973 that was not obligated prior to December 22, 1972. The total amount thus withheld is $210,500,000. *fn10"

 II. FACE. In the Housing Act of 1949, Congress announced a national housing policy and declared as its goal "the realization as soon as feasible of . . . a decent home and a suitable living environment for every American family." *fn11" The Federally Assisted Code Enforcement Program (FACE) is one method chosen by Congress to achieve that goal. Administered by the Department of Housing and Urban Development, FACE is aimed at slum prevention through the enforcement of local housing codes and the rehabilitation of declining neighborhoods. As part of the FACE program authorized by section 312 of the Housing Act, the federal government, utilizing local and private agencies where feasible, makes low-cost, long-term housing rehabilitation loans to property owners and tenants in FACE-designated areas. *fn12" These loans may not exceed twenty years or three-fourths of the remaining economic life of a structure after rehabilitation and may not bear interest at a rate in excess of three percent per annum. *fn13" In addition, loans are restricted to those individuals whose incomes fall below limits determined by the Secretary.

 Section 312 loans and certain other costs of the program are paid out of a revolving fund which consists of both congressional appropriations and loan repayments. *fn14" Until fiscal 1972 all appropriations for the program were expended during the fiscal year. In the fiscal 1972 budget request the President recommended $40 million for the program and, although Congress appropriated $90 million, over $50 million remained uncommitted at the close of the fiscal year. The President's fiscal 1973 budget request contained a recommendation that no funds be appropriated for section 312 rehabilitation loans. Congress again disagreed with the President and appropriated $70 million for the program. *fn15" On February 5, 1973, the Office of Management and Budget filed a report with Congress pursuant to the Federal Impoundment and Information Act *fn16" which indicated that $50 million would be withheld from the program. The Office of Management and Budget stated that this action was necessary because "[existing] tax laws and the statutory limitation of the national debt (as provided under Public Law 92-599) will not provide sufficient funds in the current fiscal year to cover the total outlays in that year contemplated by the individual acts of Congress." *fn17"

  When this action first came before the court, the authorization for section 312 was to terminate on June 30, 1973. Congress, however, extended the life of the section 312 loan program until October 1, 1974. *fn18" As a result of this congressional action, the President directed the Secretary of Housing and Urban Development to make available up to $60 million in section 312 rehabilitation loans. Consequently, defendants moved to dismiss this action as moot insofar as it involved FACE funds. In response, plaintiffs contended that approximately $19 million still remained impounded by the Office of Management and Budget. The supplemental memoranda submitted by the parties indicate that plaintiffs are correct and that that ...

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