[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)
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                                                                               Estimate
               Function 450                   2000   -----------------------------------------------------------
                                             Actual     2001      2002      2003      2004      2005      2006
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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.