[Budget of the U.S. Government]
[VI. Investing in the Common Good: The Major Functions of the Federal Government]
[20. Community and Regional Development]
[From the U.S. Government Publishing Office, www.gpo.gov]


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                 20.  COMMUNITY AND REGIONAL DEVELOPMENT

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                 Table 20-1.  FEDERAL RESOURCES IN SUPPORT OF COMMUNITY AND REGIONAL DEVELOPMENT                
                                            (In millions of dollars)                                            
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                                                                            Estimate                            
            Function 450                1996   -----------------------------------------------------------------
                                       Actual      1997       1998       1999       2000       2001       2002  
----------------------------------------------------------------------------------------------------------------
Spending:                                                                                                       
  Discretionary Budget Authority...     11,645      9,313     10,920      8,333      7,681      7,751      7,870
  Mandatory Outlays:                                                                                            
    Existing law...................        317        343       -112         63        126        255         63
    Proposed legislation...........  .........        157          5         20  .........        -15        -13
Credit Activity:                                                                                                
  Direct loan disbursements........      1,963      2,313      2,460      1,908      2,118      2,210      2,143
  Guaranteed loans.................        839      1,454      1,941      2,055      2,090      2,159      2,022
Tax Expenditures:                                                                                               
  Existing law.....................      2,650      2,700      2,740      2,720      2,700      2,640      2,425
  Proposed legislation.............  .........         40        450        551        565        544        489
----------------------------------------------------------------------------------------------------------------

  ----------------------------------------------------------------------
  Federal support for community and regional development helps build the 
Nation's economy, and helps economically distressed urban and rural 
communities earn a larger share of America's prosperity. The Federal 
Government spends over $12 billion a year, and offers about $2.7 billion 
in tax incentives, to help States and localities create jobs and 
economic opportunity, and build infrastructure to support commercial and 
industrial development.
  The needs of States and localities are varied and hard to measure. 
Still, Federal programs in this area have proved successful in creating 
stable and healthy communities that offer greater economic opportunity. 
The Government helps communities with basic infrastructure needs pay for 
constructing roads, improving water and sewage systems, and constructing 
affordable housing. For those affected by layoffs and rising job 
insecurity, Federal programs promote jobs skills through employment 
training and education, and promote access to jobs by helping businesses 
and rehabilitating commercial properties. Communities that are hard hit 
by natural disasters receive Federal assistance to rebuild 
infrastructure, businesses, and homes. States and localities also use 
these Federal funds to leverage private resources for their community 
revitalization strategies.

Department of Housing and Urban Development (HUD)

  HUD provides communities with flexible funds to promote commercial and 
industrial development; enhance infrastructure; clean up abandoned 
industrial sites, or ``brownfields''; and develop strategies for 
providing affordable housing close to jobs. HUD estimates that projects 
for which it provided economic assistance from 1993 to 1996 created or 
saved 1.4 million jobs.

  Community Development Block Grant (CDBG): The CDBG program, for which 
the budget proposes $4.6 billion, gives States and localities flexible 
funds for activities that meet one of three national objectives: (1) 
benefit low- and moderate-income persons, (2) help prevent or eliminate 
slums or blight, or (3) meet other urgent community needs that pose 
immediate threats to public health. Every Federal dollar spent for CDBG 
leverages an estimated $2.31 

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in private and other investment. Communities spend CDBG funds to improve housing, public works, public services, and economic development, and to acquire or clear land.
  Seventy percent of CDBG funds go to over 900 designated central cities 
and urban counties, the remaining 30 percent to States to award to 
smaller localities. CDBG's Section 108 Loan Guarantee Program gives 
Federal guarantees to private investors who buy debt obligations issued 
by local governments, thus giving communities efficient financing for 
housing rehabilitation, economic development, and large-scale physical 
development projects. Indian CDBG programs provide services for Native 
Americans, primarily focusing on public infrastructure, community 
facilities, and economic development. In 1996, 84 Tribes received a 
total of $49 million in CDBG grants through competition.

  HOME: The budget proposes $1.3 billion in flexible HOME grants to 
States and communities to address their most severe housing needs. This 
program (classified in the Income Security function) generates an 
estimated $1.80 in private and other investment for every Federal dollar 
spent. Eligible activities include new construction, rehabilitation, 
acquisition of standard housing, assistance to home buyers, and tenant-
based rental assistance. From the program's inception in 1992 to June 
1996, recipients have committed or used HOME funds to build or 
rehabilitate 201,000 housing units and to help 26,500 families pay their 
rent.

Department of Agriculture

  The Agriculture Department (USDA) gives financial assistance to rural 
communities and businesses to provide safe drinking water and adequate 
wastewater treatment facilities; boost employment; and further diversify 
the rural economy. The budget proposes $2.5 billion in such assistance. 
Grants, loans, and loan guarantees go for constructing rural community 
facilities, such as health clinics and day care centers; constructing 
water and wastewater systems; and creating or expanding rural 
businesses. USDA offers loan assistance for building community 
facilities and water and wastewater facilities at interest rates tied to 
the community's income--the lowest-income communities receive 
significantly subsidized interest rates. These programs are designed to 
help rural communities with fewer than 10,000 residents. Since 1993, 
over 4,500 communities have received financial assistance to build or 
upgrade drinking water or wastewater systems, and the rural business and 
industry loan guarantee program has created or saved over 110,00 rural 
jobs.

Department of the Treasury

  Treasury's Community Development Financial Institutions (CDFI) Fund, 
for which the budget proposes $125 million, provides grants, loans, 
equity investments, and technical assistance to qualified CDFIs--
including community development banks, low-income credit unions, 
microenterprise funds, and many multi-bank community development 
corporations. The assistance, which must be matched by comparable non-
Federal money, is designed to promote economic revitalization and 
community development. Federal funds may be used for small business, 
low-income housing, community facilities, the provision of basic 
financial services, and other community development activities. In 1996, 
the CDFI Fund approved $37 million for 32 CDFIs, serving 46 states and 
the District of Columbia. The fund also awarded $13 million to 38 
traditional banks and thrifts for increasing their activities in 
economically distressed communities and investing in CDFIs.

Department of the Interior

  The Interior Department's Bureau of Indian Affairs (BIA), for which 
the budget proposes $1.7 billion in 1998, helps Tribes, Native American 
organizations, and individuals develop resources to improve their 
economies through financial assistance programs, various loans and 
grants, assistance in getting financing from other sources, and 
technical assistance in using agricultural and rangeland resources. 
BIA's guaranteed business loans in 1996 generated about $40 million in 
total financing, creating or sustaining over 1,700 jobs.
  Each year, BIA helps Tribes manage 16 million acres of forest land and 
conduct timber sales of $250 million that sustain over 10,000 forest and 
timber-related jobs, and helps Tribes manage mineral resources 

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and generate mineral income. BIA funds housing improvement and maintains 
over 4,500 single family housing units for BIA teachers and other 
reservation-based staff. Finally, BIA (with the Transportation 
Department) maintains and improves over 40,000 miles of public and BIA 
roads and 745 bridges, and addresses deficiencies at over 100 high-
hazard dams on reservations.

The Tennessee Valley Authority (TVA)

  The TVA adds to the prosperity of seven States by: (1) providing 
reliable supplies of electricity at rates that are among the Nation's 
lowest, (2) paying over $250 million a year to State and local 
governments in lieu of taxes, and (3) operating economic and regional 
development programs that provide flood protection, recreational 
facilities, navigation, and various other services. The budget proposes 
$106 million for these purposes, but TVA will develop a plan to 
eliminate Federal funding for these programs for 1999 and beyond. In 
1997 and 1998, TVA will work with Congress, State and local governments, 
and other interested parties and undertake a major effort to find 
alternate ways to fund, organize, and manage these programs. The 
proposal reflects TVA's efforts over several years to decrease its 
reliance on Federal funds to finance its activities.

The Economic Development Administration (EDA)

  The EDA creates jobs and stimulates commercial and industrial growth 
in economically distressed areas--rural and urban areas with high 
unemployment, a large share of poor people, or sudden and severe 
distress. EDA's public works grants help build or expand public 
facilities to stimulate and foster industrial and commercial growth. 
Typical projects include industrial parks, business incubators, access 
roads, water and sewer lines, and port and terminal developments. From 
1992 to 1996, EDA awarded 821 public works grants, totaling $810 
million, to help economically distressed communities build these types 
of infrastructure projects.
  EDA's capacity building grants help communities pay for expertise to 
plan, implement, and coordinate comprehensive economic development 
projects. The grants also provide technical assistance to communities 
and firms to find solutions to problems that stifle economic growth. In 
addition, EDA's economic adjustment assistance grants help communities 
solve severe adjustment problems, such as those resulting from natural 
disasters and industry relocations or major downsizings. To date, EDA 
has approved 479 disaster recovery grants, totaling $403 million, to 
help impacted communities recover from natural disasters that include 
hurricanes, flooding, earthquakes, and tropical storms.

Disaster Relief

  The Federal Government provides financial help to cover a large share 
of the Nation's losses from natural hazards. Over the past several 
years, spending from the two major Federal disaster assistance 
programs--the Federal Emergency Management Agency's (FEMA) Disaster 
Relief Fund and the Small Business Administration's (SBA) Disaster Loan 
program--has risen significantly, and private casualty insurers 
experienced their five most costly natural disasters. Why? Because the 
natural hurricane cycle seems to be entering a phase in which more 
hurricanes strike our shores; demographic and economic growth has been 
great in hurricane- and earthquake-prone areas; and global climate 
changes or cyclical weather trends seem to be increasing the number and 
severity of events.
  The Federal Government shares the costs with States for infrastructure 
rebuilding; makes disaster loans to individuals and businesses; and 
provides grants for emergency needs and housing assistance, unemployment 
assistance, and crisis counseling. In addition, the National Flood 
Insurance Program enables property owners to purchase flood insurance 
that's unavailable in the commercial market. To mitigate losses and in 
exchange for flood insurance, communities must adopt and enforce 
floodplain management measures to protect lives and new construction 
from future flooding. FEMA also encourages and supports mitigation 
measures before disasters strike by providing hazard mitigation grants, 
and sponsoring training, preparedness, and other planning events.

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Tax Expenditures

  The Federal Government provides several tax incentives to encourage 
community and regional development activities: (1) A 10 percent 
investment tax credit for rehabilitating buildings that were built 
before 1936 for non-residential purposes (costing $340 million from 1998 
to 2002); (2) tax-exempt bonds for airports, docks, and wharves, as well 
as high-speed rail facilities which need not be government-owned 
(costing $9.3 billion over the same five years); (3) tax-exemptions for 
qualifying mutual and cooperative telephone and electric companies 
(costing $325 million over the five years); and, (4) tax incentives for 
qualifying businesses in economically distressed areas that qualify as 
Empowerment Zones--including an employer wage credit, higher up-front 
deductions for investments in equipment, tax-exempt financing, and 
accelerated depreciation (costing $3.2 billion over the five years). In 
addition, the law provides tax credits for contributions to certain 
community development banks.