Blocked Out

Here's one way to sound the alarm about the impending death of a federal program that tens of millions benefit from and almost no one has heard of: Accuse President Bush of copycatting al-Qaeda. At a February meeting of the U.S. Conference of Mayors, National League of Cities, and National Association of Counties, Baltimore Mayor Martin O'Malley invoked the September 11 attacks on “our metropolitan cores,” then went on to say: “Years later, we are given a budget proposal by our commander in chief, the president of the United States, and with a budget axe, he is attacking America's cities. He is attacking our metropolitan core.”

O'Malley's incendiary words got the Community Development Block Grant (CDBG) program, which provides nearly $5 billion yearly in aid to cities and counties, what was no doubt its first segment on Paula Zahn Now.

O'Malley waxed apocalyptic for a reason: The Bush administration's budget proposes to eliminate the CDBG and related programs run by the Department of Housing and Urban Development (HUD), creating in their place a much smaller operation under the Department of Commerce. (For that matter, all grants to state and local governments are slated to decline by $10.7 billion next year alone, according to the Center on Budget and Policy Priorities.) The change would effectively kill infrastructure funding that cities have relied on ever since Richard Nixon and Congress created the CDBG in 1974.

Members of Congress are rushing to the program's defense. If they aren't former mayors or governors themselves, they have good friends who are, and they're dealing with declining revenues and increasing costs for responsibilities like homeland security. It's a fair bet they'll succeed in protecting the three-decade-old fund, devoted to “providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income.” That's the good news. The downside is that the program they're saving needs serious rethinking in order to deliver on that mission.

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Make no mistake: Many cities have worked miracles with the money. New York uses a big chunk to reclaim abandoned buildings and turn them over to responsible new owners. Cleveland supports and coordinates a constellation of community-development corporations that create homes and businesses. Cities demolish dilapidated houses or fix them up. Savvier ones use the federal funds to leverage private investment. The CDBG builds homeless shelters and day-care facilities. Legal services, code enforcement, services for people with AIDS -- all of these get vital CDBG support. The program has helped hundreds of thousands of poor Americans turn their lives around.

It also provides badly needed revenue sharing for cities -- and a great deal of flexibility in how to spend the money. Local officials decide how to spend their block-grant allocations, and ever since Ronald Reagan's day, they haven't had to submit their plans for federal approval. “There is an inherent schizophrenia in the CDBG program between investing in poor places to make them better neighborhoods and investing in poor people to make them better citizens,” says Chris Walker, who has studied the CDBG for the Urban Institute. “You can do one or the other.” Which city is doing a better job, the one that builds homeless shelters or the one that builds an industrial park?

There's something else the program's supporters don't like to talk about. It's common for local officials to spend grants on projects that meet the technical requirements of the law but have a tenuous connection to the program's core mission. “They could squeeze a lot in there that was questionable, in a public-purpose sense, but perfectly legitimate,” says Anna Kondratas, who ran the CDBG during George Bush Senior's presidency, under HUD Secretary Jack Kemp. “You can monitor spending and say, ‘I don't like this project because it's not helping the low-income population.' But it's a block grant, and they can do what they want with it.”

Advocates for the poor and local officials have always wrestled over where the money goes, with local officials pushing for more freedom to spend it on a broad range of infrastructure and advocates pleading for more targeted help for the poor. Kondratas and Kemp tried to require cities and counties to spend much of their money on the poorest beneficiaries -- those making less than half of their area's median income. But Democratic mayors and governors were suspicious of the administration's motives, leading Congress to rebuff the effort. In the 1990s, congressional Democrats sided firmly with the mayors.

HUD reports that 94 percent of funds go to aid lower-income people. But the regulations are written so broadly that paving a street or building a sewer qualifies, so long as it runs through an area with some concentration of residents of modest income. Indeed, more than half of CDBG spending goes to infrastructure projects. Just 1 percent goes to senior centers; 2.5 percent to housing-code enforcement; 11 percent to social services; 2 percent for parks.

Jurisdictions have also been using the money to expand airports, billing the work as job creation. Elizabeth City, North Carolina, is using $1 million in CDBG money to build nearly six miles of sewer lines to its airport so that a Pentagon contractor -- whose parent company has annual net revenues of $195 million -- can expand its operations there. An Oklahoma aircraft-parts company got $373,123 for water and sewer service to its new facility.

Smaller grants end up spent on aesthetic improvements -- like four-sided clocks ($13,000, Lorain, Ohio) or trees and “vintage” street lighting ($91,000, Methuen, Massachusetts) -- to depressed downtowns. Binghamton, New York, rebuilt a downtown street, upgraded a park carousel, and put up signs for tourists, all while cutting funding for a homeless shelter nearby.

Sheila Crowley, president of the National Low Income Housing Coalition, points to her longtime home of Richmond, Virginia, where a street of small businesses cuts through a very poor residential area. The city used CDBG money to landscape the strip, tallying the spending as job creation for local residents. Today the drag has been transformed into a chichi row of home-decor shops -- but the workers, like the shoppers, drive in from elsewhere. “The program needs to be tied to identified needs,” Crowley says, “to housing and immediate neighborhood work that benefits low-income folks.”

The size of a city's grant depends on its number of poor people and the condition of their housing, but every city with more than 50,000 residents and every county with more than 200,000 gets some money, no matter its poverty rate. “Even in 1974, when we were first playing with computer runs, we could see there were all sorts of places that were essentially suburban -- weren't central cities, weren't poor -- that were eligible,” says David Garrison, a senior fellow at the Brookings Institution's Metropolitan Policy Program who helped give birth to the CDBG as legislative counsel to the National League of Cities and U.S. Conference of Mayors. “Once you're on the list, you never get off! … What we thought was a small and manageable problem in 1974 is much larger now.”

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The Bush administration pounced on these vulnerabilities. Its Office of Management and Budget (OMB) savaged the CDBG for failing to invest for maximum impact in needy neighborhoods. Under the new “Strengthening Communities Initiative” that would replace the CDBG at the Commerce Department, results would be tracked carefully and grants based on the number of jobs created, private dollars lured, and homes purchased. Funds would be directed to areas with high poverty rates and job loss.

The OMB's criteria and complaints were reasonable -- except that they're found in no law or regulation, and no city had ever been asked to meet them before. (The White House used the same bait and switch to condemn other locally controlled block-grant programs, including adult education, which is slated for a 64-percent cut.) “So now the program is a failure, even though it's what Congress told you to do,” laughs Chandra Western, executive director of the National Community Development Association. Western's group and other trade organizations for CDBG administrators have hustled to prove the program's results by developing a new system to track the CDBG's accomplishments.

At the same time, the CDBG's defenders are determined to keep the block grants pretty much the way they are. That course was endorsed by Garrison and others on a panel at the National Academy of Public Administration. But in a zero-sum, starve-the-beast budget climate, that choice has serious consequences. The administration is pressing for massive, long-term cuts to other spending that benefits the poor, including, in the HUD budget alone, Section 8 rent vouchers, public-housing maintenance, and housing for the disabled and people with AIDS. Something has to go, and programs exclusively dedicated to the poor are the ones with the worst budget prospects.

That may be the CDBG's saving grace. “The thing that keeps this program going for districts that have blight and poverty is that their brother in the suburbs also gets this money,” notes Garrison. “If this money is only going to cities for slums and blight, the program wouldn't survive politically.”

Alyssa Katz is editor-at-large of City Limits, New York's urban affairs news magazine.

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