    [Budget of the United States Government]
    [III. Creating a Better Government]
    [10. Community and Regional Development]
    [From the U.S. Government Publishing Office, www.gpo.gov]

                     10.  COMMUNITY AND REGIONAL DEVELOPMENT

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                     Table 10-1.  Federal Resources in Support of Community and Regional Development
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Estimate
                   Function 450                   2000   -----------------------------------------------------------
                                                 Actual     2001      2002      2003      2004      2005      2006
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary Budget Authority..........    12,210    10,965    10,350    10,693    10,864    11,095    11,332
      Mandatory Outlays:
        Existing law..........................      -796      -647      -278      -662      -719      -833      -865
        Proposed legislation..................  ........  ........       -12       -61      -123      -232      -377
    Credit Activity:
      Direct loan disbursements...............     1,891     2,180     1,918     1,798     2,012     2,011     2,011
      Guaranteed loans........................     1,418     2,798     2,450     2,020     1,760     1,829     1,860
    Tax Expenditures:
      Existing law............................     1,180     1,400     1,890     2,450     2,420     2,600     3,090
    ----------------------------------------------------------------------------------------------------------------

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      Federal support of community and regional development helps build the
    Nation's economy and helps economically distressed urban and rural
    communities secure a larger share of America's prosperity. The Federal
    Government spends nearly $12 billion a year, and offers about $1.4
    billion in tax incentives to help States and localities create jobs and
    economic opportunity, and build infrastructure to support commercial and
    industrial development. Federal programs have helped to stabilize and
    revitalize many of these communities, allowing them to expand their
    economic base and support their citizens, particularly those in need.

    Housing and Community Development

      The Department of Housing and Urban Development (HUD) provides
    communities with funds to promote commercial and industrial development,
    enhance infrastructure, and develop strategies to provide affordable
    housing close to jobs. HUD also provides grants and sponsors research to
    reduce the hazards created by lead-based paint in housing.
      Community Development Block Grants (CDBG) provide funds for various
    community development activities directed primarily at low-and moderate-
    income persons. CDBG funds help to improve housing, public works and
    services, promote economic development, and acquire or clear land.
    Seventy percent of CDBG funds are given to more than 1,000 central
    cities and urban counties, and the remaining 30 percent go to States to
    award to smaller localities. There are also several smaller programs
    funded within the CDBG program. The University Partnerships Program
    provides grants to academic institutions, including Historically Black
    Colleges and Universities, Hispanic Serving Institutions, and Tribal
    Colleges. The Indian CDBG, a set-aside within the larger CDBG program,
    focuses mainly on public infrastructure, community facilities, and
    economic development on reservations.
      In 2002, CDBG will support $4.4 billion in formula grants to States
    and entitlement communities. CDBG will also include two new initiatives.
    The first will provide $80 million in competitive grants to create or
    expand community technology centers in high

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    poverty areas and provide technical assistance to those centers. The
    second will be a competitive grant program to provide funds to ADA-
    exempt civic, community, and religiously affiliated organizations to
    make their facilities accessible to the disabled.
      The 2002 Budget provides $1.8 billion for HUD's HOME Investment
    Partnerships Program to expand the supply of affordable rental and
    homeownership housing for low and moderate-income families through
    acquisition, new construction and rehabilitation. In addition, new
    homebuyers can receive help in rehabilitating their homes and renters
    can receive help through direct tenant-based rental assistance programs.
    HOME funds are provided to every State and over 550 local governments
    who design the affordable housing programs that best address their
    needs. HOME also supports homeownership assistance counseling programs,
    and in 2002 a new down payment assistance initiative will be included.
      Performance goals for the CDBG and HOME programs in 2002 include:
       producing approximately 161,000 units of rehabilitated and
              newly constructed housing for ownership and rental through the
              CDBG program;
       creating more than 114,000 jobs through CDBG;
       producing over 71,000 units of affordable housing and
              providing direct rental assistance to nearly 10,000 tenants
              through the HOME program; and
       providing down payment assistance to 130,000 new homebuyers
              through the new down payment assistance initiative to first-
              time homeowners program.

    Empowerment Zones and Economic Development Tax Incentives

      The Community Renewal and Tax Relief Act of 2000 provided for the
    designation of nine new Empowerment Zones (EZs), seven in urban areas
    and two in rural areas, bringing the total number of EZs to 40. EZs
    provide tax incentives and grants to carry out 10-year, community-wide
    strategic plans to revitalize designated areas.
      The Act also created a new program under which 40 Renewal Communities
    will be competitively designated by HUD and an Advisory Council by
    December 31, 2001. Renewal Communities will be areas of pervasive
    poverty, unemployment and general distress, will receive tax incentives
    and wage credits.
      In 2002, the Administration will work with communities to improve
    utilization of tax incentives available to EZ/ECs that currently are
    underutilized.

    Community Capacity Building

       The Department of Commerce's Economic Development Administration
    (EDA) provides assistance to communities to help build capacity and
    address long-term economic challenges through its nationwide program
    delivery network. EDA's public works grants help build or expand public
    facilities to stimulate industrial and commercial growth, such as
    industrial parks, business incubators, access roads, water and sewer
    lines, and port and terminal developments. EDA also assists communities
    in addressing sudden and severe economic downturns and in adjusting to
    downsizing and closure of defense facilities. The 2002 Budget requests
    funding for EDA programs of $335 million, the level authorized for 2002.
      EDA's performance targets for 2002 include:
       Creating or retaining nearly 58,000 jobs and generating $1.94
              billion in private-sector leveraged investment by 2011 with
              infrastructure development investments made in 2002. Interim
              performance measures in achieving long-term performance
              targets include nearly 5,800 jobs created or retained and $190
              million in private sector investment by 2005.
       Achieving $277 million in State and local dollars being
              committed to EDA projects in 2002.
       Targeting 40 percent of EDA grants to areas of highest
              distress nationwide in 2002.

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    Community Development Financial Institutions

       The Community Development Financial Institutions (CDFI) Fund seeks to
    promote economic revitalization and community development in distressed
    areas by increasing the availability of capital and leveraging private
    sector funds for community development banks, credit unions, venture
    capital funds, and microenterprise loan funds.
       The 2002 Budget includes $68 million for the CDFI Fund. CDFI will
    also administer the New Markets Tax Credit, which is expected to
    stimulate $15 billion in new private capital investment in CDFIs and
    other qualified entities over 10 years.
      The 2002 goals for the CDFI Fund include:
       providing financial and technical assistance to 100 CDFIs
              through the Core, Intermediary, and Technical Assistance
              programs; and
       leveraging $448 million in community development investments
              through the Bank Enterprise Awards program.

    Rural Community Advancement

       Because their needs are different, no single approach will help both
    urban and rural communities. To address this, the budget provides
    flexible funding through the Rural Community Advancement Program (RCAP).
    RCAP grants, loans, and loan guarantees stimulate economic development,
    help build rural community facilities, such as health clinics, day care
    centers, as well as water and wastewater systems. Under RCAP, States
    have increased flexibility within the three funding streams for Water
    and Wastewater, Community Facilities, and Business and Industry. The
    Department of Agriculture (USDA) State Directors have the authority to
    transfer up to 25 percent of the funding between any of the programs
    contained within a stream in order to tailor RCAP assistance to the
    specific rural economic development needs of individual States. USDA
    also provides loans through the Intermediary Relending Program (IRP),
    which provides funds to an intermediary such as a State or local
    government agency that, in turn, provides funds for economic and
    community development projects in rural areas.
      The 2002 goals for these USDA programs include:
       retaining and creating 58,000 new jobs through the Business
              and Industry and IRP loan programs.

    Department of the Interior

       The Department of the Interior's (DOI) Bureau of Indian Affairs (BIA)
    helps Native American Tribes, organizations, and individuals improve
    their economies, natural resources, and communities. BIA administers
    more than 56 million acres of Indian trust lands, and assists Indian
    landowners in developing agricultural, grazing, forestry, mineral, oil,
    and gas resources. In addition, BIA helps Indian businesses secure
    private capital through its loan guarantee program and partnerships with
    other Federal agencies. BIA also assists Tribal governments in providing
    law enforcement, fire protection, employment training, housing
    assistance, and other community services. BIA provides support for 185
    elementary and secondary schools, and 25 Tribal community colleges, and
    maintains more than 7,000 buildings, including school and dormitory
    facilities, 3,000 employee housing units, and more than 200 dams and
    irrigation facilities. Working with Federal, State, and local
    transportation agencies, BIA maintains and improves nearly 50,000 miles
    of road and 770 bridges that provide access to schools, employment,
    health, and other public services.
       BIA's goals for 2002 include:
       investing $123 million to replace the remaining six schools
              on the 2000 priority list: Fort Wingate Elementary Boarding
              School Dormitory and Santa Fe Indian Boarding School in New
              Mexico; Pollaca Elementary School and Holbrook Boarding School
              Dormitory in Arizona; Ojibwa Elementary and Middle School in
              North Dakota; and Paschal Sherman Boarding School in
              Washington;
       providing $165 million to further reduce the backlog of
              maintenance and repair needs at BIA schools. With continued
              funding at this level and stronger over

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              sight, BIA would eliminate the current $942 million backlog
              over five years;
       providing $25 million to implement recently enacted Indian
              land and water settlement agreements for tribes in California,
              Colorado, New Mexico, Michigan, and Utah; and
       providing $12 million to improve Indian trust program
              operations, while continuing to work with DOI's Special
              Trustee for American Indians on installing modern trust fund
              accounting and management systems for more accurate and timely
              information on payments to over 263,000 tribal and individual
              accounts.

    Regional Development Programs

       Federal efforts have been instrumental in shaping the economic
    development and prosperity of many U.S. regions through targeted
    assistance programs. Two areas in which longstanding efforts have been
    underway are the Tennessee Valley and the Appalachian Region. More
    recently, Federal resources have been leveraged to provide substantial
    financial and technical assistance to the District of Columbia and the
    Mississippi Delta Region, both of which have struggled with unique
    financial and economic problems.

      Appalachian Region: The Appalachian Regional Commission (ARC) targets
    its resources to highly distressed areas in 13 States in Appalachia,
    focusing on critical development issues on a regional scale, and making
    strategic investments that leverage other Federal, State, local, and
    private participation and resources.
      In 2002, ARC-supported activities throughout Appalachia are expected
    to:
       provide more than 30,000 households with access to new or
              improved water, sewage, or waste management systems;
       provide educational and worker training programs to more than
              25,000 students; and
       place 100 physicians in health professional shortage areas.

      District of Columbia: To fulfill the Federal Government's commitments
    to the District of Columbia under the Revitalization Act, the
    Administration's budget proposes $494 million for District courts and
    corrections, including $201 million to house the District's sentenced
    felon population, $147 million for the Court Services and Offender
    Supervision Agency, and $146 million for the District Courts.
       In addition, the budget requests $17 million to continue the
    District's Tuition Assistance Grant Program.

      Delta Region: The recently-created Delta Regional Authority (DRA) will
    provide a framework for coordinated Federal, State, and local government
    efforts to meet the development challenges in this region. The budget
    requests $20 million for DRA. DRA will focus on basic public
    infrastructure in distressed counties and isolated areas of distress;
    transportation infrastructure for the purpose of facilitating economic
    development in the region; business development; and job training or
    employment-related education.
       The region is comprised of 236 counties and parishes in eight States:
    Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri,
    and Tennessee. In the area's distressed counties, poverty estimates are
    more than double the national average and per capita income estimates
    are only 53 percent of the U.S. average.

    Disaster Relief and Insurance

       The Federal Government provides financial help to cover a large share
    of the Nation's losses from natural disasters. In the last 10 years, two
    major Federal disaster assistance programs--the Federal Emergency
    Management Agency's (FEMA's) Disaster Relief Fund and the Small Business
    Administration's (SBA) Disaster Loan program--have provided more than
    $43 billion in emergency assistance. The Federal Government shares the
    costs with States for infrastructure rebuilding; makes disaster loans to
    individuals and businesses to cover uninsured losses; and provides
    grants for emergency needs and housing assistance, unemployment
    assistance, and crisis counseling.
       In recent years, emergency supplemental appropriations have been used
    to finance many of the costs associated with disasters.

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     In fact, emergencies have become a recurring feature of the budget
    process, where they have become magnets for special interest, non-
    emergency spending. The budget proposes a strategy that will ensure
    adequate funding for FEMA and SBA disaster programs (as well as DOI and
    USDA fire fighting programs), and limit disaster supplementals to
    extremely rare events by setting aside a reserve for emergency needs.
    The National Emergency Reserve will supplement these programs when
    significant needs arise and also supplement other Federal programs to
    the extent that they must respond to domestic disasters.
       In addition to responding to disasters, much of FEMA's focus is
    disaster preparedness and mitigation. Since 1989, FEMA has provided $2.7
    billion to States and communities following disasters for hazard
    mitigation projects to reduce the costs of future disasters. Recent
    Stafford Act changes, enacted in 2000, will ensure that a higher
    percentage of funds spent by the Federal Government and States following
    future disasters will be allocated to hazard mitigation activities.
       The budget proposes two reforms that will help to ensure that States
    and localities make a significant commitment to preparing for disasters
    before they happen. First, the Administration proposes that publicly-
    owned buildings carry disaster insurance. States and communities that do
    not carry insurance should not be rewarded with disaster assistance
    unavailable to those who do carry insurance. Second, States will be
    expected to carry a larger share (50 percent) of the cost associated
    with hazard mitigation grants, the pre-1993 practice for the program.
    Shouldering a larger share of the costs will help to ensure that States
    select truly cost-effective projects, an incentive that is missing if
    most of the funding is provided by FEMA.
       Communities participating in FEMA's flood insurance program, which
    provides the only source of affordable flood insurance to property
    owners, must mitigate future losses by adopting and enforcing floodplain
    management measures that protect lives and new construction from
    flooding. FEMA is also modernizing its inventory of flood plain maps and
    taking measures to mitigate properties experiencing repetitive flood
    damages.
       The budget proposes two reforms that will end preferential treatment
    of certain properties in the program. First, flood insurance will no
    longer be available for several thousand properties that are flooded
    regularly, but that are not required to pay risk-based premiums.
    Starting in 2002, owners of these properties will be allowed one claim
    before being removed from the program. Second, the budget proposes
    phasing out subsidized premiums for vacation homes, rental properties
    and other non-primary properties. Both measures will help stabilize the
    program's long term finances.
      The 2002 goals for FEMA include:
       increasing the number of flood insurance policies in force by
              five percent. FEMA has already overseen tremendous growth in
              the number of policies issued by the National Flood Insurance
              Program, which has grown to 4.2 million policyholders, with
              insurance coverage worth more than $500 billion.
       For SBA's disaster loan program, the Administration proposes raising
    the interest rate charged to business borrowers from about four percent
    to a comparable maturity Treasury rate (estimated to be approximately
    5.5 percent in 2002). With this change, businesses would continue to
    have access to low cost credit following disasters, but would face
    greater incentives to mitigate potential losses in the future.
       SBA plans to continue working to reduce paperwork and simplifying the
    loan application process for its disaster loan program. SBA has already
    streamlined loan processing by introducing automated loan documentation
    and approval systems.
      The 2002 goals for SBA's disaster loan program include:
       processing 80 percent of loans within 21 days of submission
              to SBA; and
       disbursing initial loan proceeds within three days of receipt
              of loan closing documents.

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    Tax Expenditures

       Tax expenditures related to the Community and Regional Development
    function will total nearly $2 billion in 2002, and $12 billion from 2002
    through 2006. About one-half of this amount is related to the tax
    incentives for EZs and ECs described earlier in this chapter.
       The Administration also proposes to permanently extend the
    Brownfields tax incentive allowing favorable treatment of expenses
    incurred in cleaning up abandoned property that may be contaminated.
    Such cleanup is important because it revitalizes urban communities. In
    addition, in 2002 the Administration will implement the New Markets Tax
    Credit, which is expected to stimulate $15 billion in private capital
    investment over the next 10 years.