[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.