[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
TECHNICAL ASSISTANCE AND CAPACITY
BUILDING PROGRAMS TO PROMOTE
HOUSING AND ECONOMIC DEVELOPMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 17, 2002
__________
Printed for the use of the Committee on Financial Services
Serial No. 107-82
83-585 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice BARNEY FRANK, Massachusetts
Chair PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska MAXINE WATERS, California
RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma KEN BENTSEN, Texas
ROBERT W. NEY, Ohio JAMES H. MALONEY, Connecticut
BOB BARR, Georgia DARLENE HOOLEY, Oregon
SUE W. KELLY, New York JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio MAX SANDLIN, Texas
CHRISTOPHER COX, California GREGORY W. MEEKS, New York
DAVE WELDON, Florida BARBARA LEE, California
JIM RYUN, Kansas FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina CHARLES A. GONZALEZ, Texas
DOUG OSE, California STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York JOSEPH CROWLEY, New York
GARY G. MILLER, California WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania
SHELLEY MOORE CAPITO, West Virginia BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
Terry Haines, Chief Counsel and Staff Director
Subcommittee on Housing and Community Opportunity
MARGE ROUKEMA, New Jersey, Chair
MARK GREEN, Wisconsin, Vice BARNEY FRANK, Massachusetts
Chairman NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska JULIA CARSON, Indiana
SPENCER BACHUS, Alabama BARBARA LEE, California
PETER T. KING, New York JANICE D. SCHAKOWSKY, Illinois
ROBERT W. NEY, Ohio STEPHANIE TUBBS JONES, Ohio
BOB BARR, Georgia MICHAEL E. CAPUANO, Massachusetts
SUE W. KELLY, New York MAXINE WATERS, California
BOB RILEY, Alabama BERNARD SANDERS, Vermont
GARY G. MILLER, California MELVIN L. WATT, North Carolina
ERIC CANTOR, Virginia WILLIAM LACY CLAY, Missouri
FELIX J. GRUCCI, Jr, New York STEVE ISRAEL, New York
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
C O N T E N T S
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Page
Hearing held on:
September 17, 2002........................................... 1
Appendix:
September 17, 2002........................................... 29
WITNESSES
Tuesday, September 17, 2002
Jones, Hon. Stephanie Tubbs, a Representative from the State of
Ohio........................................................... 4
Fayde, Reese, CEO, Living Cities................................. 11
Harris, Greta, Senior Program Director, Local Initiatives Support
Corporation.................................................... 17
Harvey III, F. Barton, Chairman and CEO, The Enterprise.......... 9
McCool, Thomas, Managing Director of Financial Markets and
Community Investment, General Accounting Office................ 7
Rasheed, Abdul, President and CEO, North Carolina Community
Development Initiative on behalf of The National Congress for
Community Economic Development................................. 13
Swack, Michael, Director, School of Community Economic
Development, Southern New Hampshire College.................... 14
APPENDIX
Prepared statements:
Kelly, Hon. Sue W............................................ 30
Cantor, Hon. Eric............................................ 32
Grucci, Hon. Felix J......................................... 33
Jones, Hon. Stephanie T...................................... 35
Lee, Hon. Barbara............................................ 37
Fayde, Reese................................................. 39
Harris, Greta................................................ 75
Harvey III, F. Barton........................................ 100
McCool, Thomas............................................... 106
Rasheed, Abdul............................................... 118
Swack, Michael............................................... 129
Additional Material Submitted for the Record
Kelly, Hon. Sue W.:
Letter to General Accounting Office, September 17, 2002...... 135
Watts, Hon. J.C. Jr., Chairman, House Republican Conference,
prepared statement............................................. 137
Harris, Greta:
Written response to questions from Hon. Stephanie Tubbs Jones 139
Harvey III, F. Barton:
Written response to questions from Hon. Stephanie Tubbs Jones 147
TECHNICAL ASSISTANCE AND CAPACITY
BUILDING PROGRAMS TO PROMOTE
HOUSING AND ECONOMIC DEVELOPMENT
----------
Tuesday, September 17, 2002
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to call, at 2:10 p.m., in
Room 2128, Rayburn House Office Building, Hon. Sue W. Kelly
presiding.
Present: Representatives Kelly, Lee, Jones, Waters and
Watt.
Mrs. Kelly. Good afternoon. This hearing of the
Subcommittee on Housing and Community Opportunity will come to
order. I want to thank all the Members of Congress who are
present today. Without objection, many people are coming back
to Washington, D.C., from their districts, and they have got
planes and trains, but they are interested in this topic, and
they will participate fully should they be able to get here in
time for the hearing. And all opening statements that they may
have and questions will be made part of the official hearing
record.
Mrs. Kelly. Now, the Chair recognizes herself for a brief
opening statement.
Today the subcommittee will examine technical assistance
and capacity-building programs, crucial tools in addressing the
needs of low-income individuals and communities. This hearing
will help us understand how technical assistance is used, what
changes, if any, are needed to make it more cost-effective, and
whether additional resources are necessary.
The Department of Housing and Urban Development provides
technical and capacity-building assistance to State and local
governments, public and Indian agencies, private and nonprofit
organizations and individuals. HUD administers 21 technical
assistance programs through 5 program offices. The annual
funding for HUD technical assistance is around 1 percent of the
HUD's overall budget per year, which ranges from $128 million
to $201 million. The general purpose of this technical
capacity--technical and capacity-building assistance is to help
program participants carry out the HUD program goals.
The terms "technical assistance" and "capacity building"
are often used with some imprecision. For this reason, last
year on July 12th, 2001, Chairwoman Roukema requested the
General Accounting Office to conduct a review of technical
assistance and capacity-building programs at the Department of
Housing and Urban Development. Chairwoman Roukema thought the
committee would benefit from a better understanding on the
scope and purpose of these programs. Today the GAO will give us
a preliminary report on their findings regarding technical
assistance.
Today's hearing will largely focus on community-based
development corporations, CDCs. These organizations are the
primary recipients of technical and capacity-building
assistance. There are over 3,600 CDCs in the United States,
located in almost every large and medium-sized city in the
Nation, as well as in many rural communities. They are
frequently the most productive developers of affordable housing
in low-income communities and are instrumental in meeting the
human needs for individuals and communities. In fact, in many
communities, the government has turned to CDCs as the primary
vehicle to rebuild distressed neighborhoods.
CDCs are generally small organizations with an average
annual budget of $200,000 to $399,000 and a median staff size
of six. Because of the increasingly complex nature of funding
procurement and execution of community revitalization programs,
CDCs often require outside help. These organizations also tend
to have frequent staff turnover, and, as a result, they need
increased training funds. Subsequently, technical and capacity-
building funds are essential to their existence.
We are very pleased to have with us today Congresswoman
Stephanie Tubbs Jones, a representative of the GAO to discuss
the findings of their study, and witnesses from several
community-based development groups. We thank all of our
witnesses for taking the time out of their busy schedules to
share their thoughts on this issue and look forward to
discussing these issues with them.
And, Congresswoman Tubbs Jones, you didn't realize you were
working with the GAO, but we are delighted to have you here.
[The prepared statement of Hon. Sue W. Kelly can be found
on page 30 in the appendix.]
Mrs. Kelly. I would like to now recognize my friend from
North Carolina for his opening statement Mr. Watt.
Mr. Watt. Thank you, Madam Chair, and I want to thank
Chairman Oxley for agreeing during the course of the markup on
the Housing Affordability for America Act to assure that this
hearing would be conducted to give us the opportunity to
explore the merits of H.R. 3995, which has been introduced by
Representative Stephanie Tubbs Jones. And I want to thank
Stephanie Tubbs Jones for introducing this important
legislation which I am pleased to be a cosponsor of.
I also want to thank Chairman Roukema--I am sorry. It is
H.R. 3974, not 3995. But anyway, she knows what I am talking
about.
I want to thank Chairman Roukema for scheduling the hearing
and wish her well as she is getting her treatment and is not
able to be here today, and thank Representative Kelly for
presiding over today's hearing.
The Chair--Representative Kelly has indicated that one of
the major problems in our community in terms of economic
development is having the expertise and capacity to pull all of
the resources together and to implement community development
plans efficiently and effectively, and this bill is designed to
do that. It is designed to do that in ways that I am sure the
lead sponsor of the bill will elaborate upon. But we know in
our communities how much of an impediment it is not to have
both financial resources, expertise and capacity as we try to
revitalize, restore, renew our communities, and anything we can
do to be of assistance in that regard is always helpful.
So I am looking forward to the testimony of the witnesses,
my colleague Stephanie Tubbs Jones and the persons who have
come to be on panel 2, and I especially want to welcome my
friend Abdul Rasheed from North Carolina, who I have known for
a long time. And I think I am going to get a chance to
introduce him, so I won't elaborate. I will save all my good
things for my introduction.
So I thank the Chairman for convening the hearing and look
forward to hearing the testimony of the witnesses, and I will
yield back the balance of my time.
Mrs. Kelly. Thank you, Mr. Watt.
Mrs. Kelly. Ms. Lee, have you an opening statement?
Ms. Lee. Thank you, Madam Chair. Let me thank you and also
our chairman for moving forward with this hearing on this bill,
and I want to thank Congresswoman Stephanie Tubbs Jones for
sponsoring this important legislation and for your very
diligent efforts to bring the real issues before this Congress
with regard to community development corporations and what they
need to move forward to ensure livable communities.
Just last week, Madam Chair, during our Congressional Black
Caucus annual conference, Congresswoman Tubbs Jones and myself
sponsored a forum on community development corporations. We
brought in community groups from our districts and around the
country to learn more about the progress they are making in
building better and more livable communities and to hear more
about their real and growing needs for both technical and
financial assistance. Providing this assistance and passing
this legislation is essential, and we heard that over and over
and over again at our forum, because community development
corporations have the community presence. They have the
networks. They have the leadership-building capacity, enabling
neighborhoods to plan and monitor, to develop livable
communities.
CDCs--and we heard this again and again and again--they are
in a position to promote greater community awareness about the
importance of housing, education, early childhood development
and economic empowerment. Community development corporations
are really the cornerstone for many of our communities.
By using two generation approaches to the more vulnerable
families in our community, and by paying close attention to
school readiness strategies and outcome indicators, and leading
or participating in strategic community planning for young
children and families, CDCs and policymakers really can help us
provide for the end of the cycle of poverty throughout our
neighborhoods.
So this bill--and I will ask that my full statement be
submitted for the record, but, Madam Chair, I just want to say
this bill, I think, is a very important major step to ensure
that community development corporations receive the type of
technical and financial assistance that they so deserve,
because they are doing a major service in our communities to
provide really for the economic development, economic
empowerment and for livable communities for many of our areas
in our region.
So I just want to thank Congresswoman Tubbs Jones again for
her vision and leadership and for really working together in a
bipartisan fashion to bring this bill before us today. I look
forward to the testimony.
Mrs. Kelly. Thank you, Ms. Lee.
[The prepared statement of Hon. Barbara Lee can be found on
page 37 in the appendix.]
Mrs. Kelly. That concludes our opening statements. We will
now begin with our first panel. Testifying on our first panel
is the Honorable Stephanie Tubbs Jones, the distinguished
member from this subcommittee and the Congresswoman from Ohio's
11th Congressional District. The Congresswoman has a strong
interest in the issue of HUD technical assistance and has
introduced legislation to increase funding.
Not only is she a Congresswoman and a colleague, but Mrs.
Tubbs Jones is one of my friends, and I am delighted to welcome
you here this afternoon. I thank you for joining us to share
your thoughts on this important issue. So without objection,
your written statement will be made a part of the record, and
you will now be recognized for a 5-minute summary of your
testimony. Thank you. You may begin, Mrs. Tubbs Jones.
STATEMENT OF HON. STEPHANIE TUBBS JONES, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mrs. Jones. Thank you, Madam Chairwoman, and I appreciate--
thank you, Madam Chairwoman for holding this hearing on
technical assistance. For the record, I would like to thank
Congresswoman Roukema for her support and her agreeing to give
us this hearing on this particular issue. I would like to thank
Congressman Watt and Congresswoman Barbara Lee for attending
and being signatories to this legislation, as well as the staff
of both the Democrat Majority and Minority side.
I introduced this legislation on March 14th with my
esteemed colleague Congressman J.C. Watts, and this bill has
attracted strong bipartisan support. Congressman Watts would
have been here to testify, but unfortunately he had to preside
over a funeral in his congressional district.
I am an advocate for community development corporations,
because these organizations play an important role in poverty
elimination. Their approach is focused on economic development
through affordable housing, business development, job creation
and a range of activities that involve community residents in
antipoverty and wealth-building activities. This approach is
more critical than providing social services because it focuses
on empowerment, building infrastructure within communities.
Community development corporations grew out of the civil
rights movement of the 1960s. They were typically formed from
grassroots volunteers who were in touch with the economic needs
of poor and underserved communities. Over the past 30 years,
the government has turned to CDCs as the primary vehicle to
rebuild distressed neighborhoods. There are CDCs in nearly
every large and medium-sized city in the Nation as well as in
many rural areas.
I am going to skip over to say technical assistance and
core operating support allow community development corporations
to access training materials and other forms of assistance to
promote self-sufficiency. Core operating support helps sustain
organizations while they develop. To give an example, in my own
community of Cleveland, a community development corporation
might seek training for board members on how to manage equity
investments. A church operating a separate nonprofit might
obtain technical assistance to provide training on fund-
raising. A community development corporation might hire an
accountant or an attorney to utilize a new market's tax credit
allocation.
Most CDCs grow from efforts within communities and are run
on a shoestring. If they are effectively run on a shoestring,
at what level might they operate with a full set of shoelaces?
My colleague J.C. Watts and I introduced H.R. 3974 to provide
them with that full set of shoelaces with technical assistance,
core operating support and guidance on the ways to improve
their operations.
The government distributes $15 billion for technical
assistance, but very little goes to help CDCs operating in low-
income communities. Since the 1980s, there have been few
dollars to help these organizations. Most dollars go towards
tax credits utilized by investors or government entities that
support the project. In order to progress to the next level,
CDCs need technical assistance funds to build their internal
infrastructure and a system of accountability to ensure that
their organizations are effectively run.
The last point that I want to make is that this legislation
would establish--let me start to go back. Some argue that
existing programs adequately cover technical assistance needs
of CDCs. Existing programs are useful, but more is needed
because the scope of current programs is limited. H.R. 3974
will provide the technical assistance, core operating support--
you heard all that.
Among its other functions, it will cover emerging to mature
organizations, access to financial and construction expertise,
mentoring, assistance with leveraging private funds, training
and research, equity investments and the CRA credits for
financial institutions that work with eligible CDCs. It has no
matching requirement for funds, which is truly a mechanism to
empower organizations.
Last of all, and most important, the legislation would
establish an advisory council within HUD to examine the
capacity needs of CDCs and provide feedback and measurement of
their effectiveness. This last point is important because with
support comes responsibility. When government provides funding
for technical assistance and core operating support, CDCs need
to meet tough performance tests in return. It would provide
support to diagnose organizational problems and provide the
appropriate technical help to enable groups to fulfill their
missions and ensure that tax dollars of the American people are
efficiently and effectively used.
Madam Chairwoman, thank you again for holding this hearing
and for your commitment to housing and economic development. I
look forward to the testimony of the invited guests this
afternoon, and I want to thank each and every one of the
witnesses that have come here to testify this afternoon for
their input on this very important legislative issue.
Mrs. Kelly. Thank you very much, Mrs. Tubbs Jones.
[The prepared statement of Hon. Stephanie Tubbs Jones can
be found on page 35 in the appendix.]
Mrs. Kelly. Mr. Watt, have you questions?
Mr. Watt. Madam Chair, I think it is customary for us not
to question our colleagues.
Mrs. Kelly. Ms. Lee?
Mr. Clay?
Ms. Waters?
Ms. Waters. No questions.
Mrs. Kelly. Well, if there are no questions, then the Chair
notes that Members may have some questions that they want to
submit in writing, so without objection, we will hold the
hearing record open for 30 days.
Mrs. Kelly. This first panel is excused. We thank you very
much, and we will welcome your presence here with us. Thank you
for testifying.
And with that, if the second panel will please take their
seats at the witness table, I will begin the introductions.
On our second panel, we first welcome back Thomas McCool,
the Managing Director of Financial Markets and Community
Investment at the General Accounting Office, the investigating
arm of the U.S. Congress.
Next we also welcome back Bart Harvey, the chairman of the
board of trustees and chief executive officer of the Enterprise
Foundation. The foundation launched in 1982 and works with
partners to rebuild communities by providing low-income people
with affordable housing.
Then we will hear from Reese. And, Reese, if you would be
good enough to tell me the correct pronunciation of your name.
Ms. Fayde. Reese Fayde.
Mrs. Kelly. Thank you.
We will hear from Reese Fayde, chief executive officer of
Living Cities, formerly known as the National Community
Development Initiative, a partnership of leading foundations,
financial institutions and the Federal Government committed to
improving the vitality of cities and urban neighborhoods.
I will now yield to my friend from North Carolina to
introduce the next witness.
Mr. Watt. Thank you, Madam Chair. I am pleased that you
have given me the opportunity and pleasure of introducing my
friend and colleague from North Carolina. In North Carolina
when we think of community development corporations, we
normally think of Abdul Rasheed, who will be the fourth witness
in this panel.
He is the founding president and chief executive officer of
the North Carolina Community Development Initiative, and that
initiative provides resources and assistance to all of the
community development corporations throughout North Carolina.
The initiative was founded in 1994 to channel funds and provide
training and technical assistance to community development
corporations in North Carolina, and it is funded by private
foundations, the North Carolina General Assembly, financial
institutions and private sector resources.
I thank the Chair for allowing me the pleasure of
introducing Mr. Abdul Rasheed.
Mrs. Kelly. Thank you, Mr. Watt.
We will also hear from Dr. Michael Swack, the director of
the School of Community Economic Development at Southern New
Hampshire University. He is the former chairman of the New
Hampshire Community Development Finance Authority and has
extensive consulting and teaching experience in the areas of
financial institutions and development finance.
Finally, we will hear from Greta Harris, the senior program
director of the Local Initiative Support Corporation, otherwise
known as LISC. She comes to us today from Richmond, Virginia,
where she manages the planning and operation of LISC's Richmond
office.
I want to thank you all for taking time out of your
schedules to join us here today and share your thoughts on
these issues. Without objection, your written statements will
be made part of the record. You will each be recognized now in
turn for a 5-minute summary of your testimony, and we will
begin with you, Mr. McCool. Thank you for being with us today.
STATEMENT OF THOMAS J. MCCOOL, MANAGING DIRECTOR OF FINANCIAL
MARKETS AND COMMUNITY INVESTMENT, GENERAL ACCOUNTING OFFICE
Mr. McCool. Thank you, Madam Chairwoman and members of the
subcommittee. We are here today to discuss the results of our
review of the U.S. Department of Housing and Urban
Development's technical assistance and capacity-building
programs. HUD's fiscal year 2002 budget is over $34 billion,
most of which is passed on to State and local governments,
other agencies and organizations that carry out HUD's programs.
Technical assistance and capacity-building is an important
means through which HUD can influence how its program funds are
spent.
The Congress and HUD often use the terms "technical
assistance" and "capacity building" interchangeably, and the
definitions do overlap. Technical assistance programs can be
generally defined as training designed to improve the
performance or management of program recipients such as
teaching one on one about procurement regulations to housing
authority staff. Capacity building can be generally defined as
funding to strengthen the planning, management and other
capabilities of program recipients or providers, typically
housing or community development organizations, thereby
building institutional knowledge within these organizations.
Some of the programs have both technical assistance and
capacity-building aspects. The overall goal of both technical
assistance and capacity building is to enhance the delivery of
HUD's housing and community development programs. While HUD's
staff, whose costs are covered by HUD salary and expense
budgets, routinely provide a wide range of technical assistance
as part of their day-to-day activities, our work focused on
funding specifically authorized by Congress to be used for
technical assistance and capacity building.
We were asked to examine the universe of technical
assistance and capacity-building programs in HUD so that you
could better understand the scope and purpose of the programs.
Our statement focuses on the number of HUD technical assistance
and capacity-building programs Congress has authorized and how
much they cost; why HUD offers technical assistance and
capacity-building programs, and who provides and receives the
services; how HUD selects the program providers; and whether
HUD program offices are overseeing the programs as required and
measuring their impact.
As you have already said, Madam Chairwoman, HUD administers
21 technical assistance and capacity-building programs through
five program offices. From fiscal year 1998 to 2002, the annual
funding ranged from about 128 to 201 million, accounting for
less than 1 percent of HUD's overall budget.
While the general purpose of HUD's technical assistance and
capacity building is to help program recipients carry out HUD
program goals, each program office designs technical assistance
or capacity building to specifically relate to its programs.
Recipients could be States and units or local governments,
public and Indian housing agencies, private and nonprofit
organizations or individuals. Providers could be HUD officials
or, more commonly, State and local governments, private and
nonprofit organizations, public housing authorities.
HUD awards funding for 17 of the 21 technical assistance
and capacity-building programs competitively. The funding of
the remaining programs is awarded noncompetitively. HUD uses
three types of funding instruments, contracts, grant agreements
and cooperative agreements, and determines which type to use on
the basis of the relationship with the awardees and the level
of Federal involvement anticipated. Depending on the complexity
of the individual program office's funding instrument
requirements, the process can take between 3 months to a year
to complete.
Noncompetitive funding is either specified by statute or
based on the formula set by HUD. Specifically Congress
appropriates technical assistance and capacity-building funds
noncompetitively for the Enterprise Foundation, Habitat for
Humanity, Youthbuild USA and the Housing Assistance Council
under the Community Development Block Grant Program.
The Local Initiative Support Corporation and the Enterprise
Foundation administer the funding for, among other purposes,
the National Community Development Initiative under Section 4
of the HUD Demonstration Act of 1993 as amended. Congress also
appropriates noncompetitive funding for the National American
Indian Housing Council technical assistance programs. And in
addition, HUD's Office of Fair Housing and Equal Opportunity
use the formula to distribute fair housing and assistance
programs--I am sorry, fair housing and assistance program
capacity-building funds.
These noncompetitive technical assistance capacity-building
programs comprise $50 million, or about 25 percent, of fiscal
2001 technical assistance and about 54-1/2 million, or 30
percent, of fiscal year 2002 technical assistance funding. All
five HUD programs--sorry, all five HUD program offices perform
basic oversight of the technical assistance and capacity-
building programs they administer, such as visually observing
the technical assistance, training, or reviewing reports
submitted by the providers.
While some HUD officials maintain that they cannot measure
the impact of technical assistance or capacity building, other
officials have developed and are using measures that seem to be
reasonable indicators of the impact of their programs.
While some measures may not be practicable for every--while
such measures may not be practicable for every program, HUD
cannot demonstrate the effectiveness of this technical
assistance and capacity building without some indication of its
impact. Furthermore, without such measures, HUD cannot ensure
accountability for the near $200 million that Congress sets
aside each year for technical assistance, training or capacity-
building funding.
Finally, since technical assistance and capacity building
are important means through which HUD oversees and influences
expenditures or program funds, it would seem logical for each
of its program offices to develop more practicable guidance to
ensure the technical assistance in the capacity-building
programs are producing the intended results.
Madam Chairwoman, this concludes my statement. I would be
happy to respond to any questions you or other members of the
subcommittee may have.
Mrs. Kelly. Thank you very much.
[The prepared statement of Thomas J. McCool can be found on
page 106 in the appendix.]
Mrs. Kelly. We will move on to Mr. Harvey.
STATEMENT OF F. BARTON HARVEY, III, CHAIRMAN AND CEO, THE
ENTERPRISE FOUNDATION
Mr. Harvey. Thank you very much, Madam Chairwoman, for this
opportunity. I am Bart Harvey, chairman and CEO of the
Enterprise Foundation, and Enterprise currently is putting more
than half a billion dollars a year to work in low-income
communities, mostly through community-based groups. The real
unsung heroes, as you have heard from other witnesses, are the
heads of these grassroots groups that provide affordable homes,
economic opportunity, decent child care and safer streets where
they are needed most.
And Enterprise believes that community-based development
organizations are vitally important institutions that warrant
continued and expanded public and private support. We commend
Representative Tubbs Jones, who I will be with tomorrow evening
for the Louis Stokes award in Cleveland, and Representative
Watts for their bill and for recognizing the need for more
support for grassroots groups in their bill. And I also commend
NCCED for its work on this essential bill.
In 20 years of working shoulder to shoulder with grassroots
groups to solve some of our toughest problems, we have seen
firsthand what they can achieve, but they can't do it alone.
Even the most sophisticated organizations need reliable
resources and expert advice to maintain and expand their
successes. The huge majority of support for community-based
developers comes from the private sector, but the Federal
Government plays a vital role.
While Enterprise undertakes a large variety of capacity-
building efforts, I think there is one that is particularly
important to look at for the principles of accountable,
successful technical assistance and capacity building, and that
is the HUD Section 4 program. Through Section 4, Congress
channels Federal funds through national intermediaries like
Enterprise to help strengthen community-based groups. These
funds help grassroots groups hire and retain staff, invest in
technology, develop business plans, improve internal systems
and pursue new opportunities. And much of this funding is
committed on a multiyear basis, which is critical.
The purpose of Living Cities was really to work on all of
the environments within which these grassroot groups work.
Between 1991 and 2000, Living Cities funds directly helped
community-based groups develop almost 20,000 affordable homes,
1.7 million square feet of commercial and community facilities.
In an independent evaluation, the Urban Institute found that
community groups' strength, production and local support
systems have grown significantly thanks to these efforts in the
23 target cities.
Now, Enterprise also employs Section 4 resources outside of
Living Cities locations, the 23 cities, and we have used these
funds to assist more than 200 groups and nearly 100 other
communities, including many rural and Native American areas.
And according to another outside independent evaluation, the
Section 4 program outside of the 23 targeted Living Cities
locations met and exceeded Congress' goal in creating it.
Now, what are the factors of its success? First, Section 4
provides Federal funding to strengthen community and faith-
based development groups. It goes directly to these groups.
Those resources are sorely needed and hard to find. This
Federal support encourages greater private participation. In
fact, it is vital to supporting it. It is looking for the
Federal funds to be leveraged by other private support.
Secondly, the money is flexible. This allows recipients to meet
a wide range of local needs and opportunities in a variety of
locations.
Third, Section 4 relies on experienced intermediaries with
national reach, such as Enterprise, to deliver resources and to
help improve the local public-private partnerships. We provide
training and technical assistance to groups in combination with
the funding, and we generate strong local support for community
development going forward to further leverage Federal support.
Fourth, Section 4 is successful due to the leverage it
achieves. Section 4 recipients must match every Federal dollar
with at least 3 additional dollars of private support. In
practice, Enterprise far exceeds that requirement with the
groups that it is working with. Matching funds and additional
financial leverage are hugely important to community capacity-
building initiatives. They ensure that the Federal Government
maximizes the return on its investment, and they provide
additional accountability on the use of Federal funds by
increasing the number of stakeholders in an organization's
success.
Finally, Section 4 works because Enterprise ensures a high
level of accountability through the groups that we assist.
There are detailed regular reports, site visits, audits, and we
assure that capacity-building funds are spent appropriately.
The only problem with Section 4 funds is that there is not
enough to support all of the groups that apply for the funding.
With more resources, this proven model for strengthening
community-based groups could have greater success than it
already has. This is not the only way to provide this
assistance, but it is one that has worked, and we really
commend this bill and what it stands for concerning additive
funds for capacity building.
Mrs. Kelly. Thank you very much, Mr. Harvey.
[The prepared statement of F. Barton Harvey can be found on
page 100 in the appendix.]
Mrs. Kelly. Ms. Fayde.
STATEMENT OF REESE FAYDE, CEO, LIVING CITIES
Ms. Fayde. Thank you very much. It is a pleasure to have
this opportunity to address the subcommittee on this very
important piece of legislation.
What I would like to begin with is really to tell you a
little bit about who Living Cities is, because I think that
will make it so clear to you why we are so supportive of this
endeavor. I think eloquently described by earlier speakers, we
have seen really what the work of CDCs is about, but when we
talk about this group, we are 16 funders. They are made up of
America's large foundations and made up of large financial
institutions that came together with the explicit intent of
wanting to invest in American cities by investing through
community development corporations in inner cities. So the
Nation was to try to address the conditions of our inner cities
as a way of really helping to strengthen America's cities.
Ten years of operation and real successes we can look to:
$254 million having been invested in 23 locations with
leveraging of in excess of $2 billion worth of investments in
housing, in community facilities and in a whole array of
institutions that really support inner cities today.
In the second decade there is a recommitment, and I
underscore that it is a recommitment. It is certainly of
dollars. We are expecting that the funder--the funders are
expecting to put in a half billion dollars over another second
decade. This is unprecedented in terms of a level of private
investment in America's cities. We are also expanding our
agenda to address neighborhoods and what is going on in those
neighborhoods, but also the connection of that work with
larger--the larger community, with cities. How do we link the
residents in our inner cities to the region's economy? That is
a major part of what we are doing as we see it in our expanded
agenda.
And the third part of our recommitment is really about
collaboration. Clearly this is a collaboration of funders, but
it has also served as a catalyst to local funders joining with
us, local partners, local organizations that are part of making
all of this work take place.
We work through CDCs, because, as others have described, we
really see these as vehicles that do work. I am reminded of one
mayor who said to us once that he liked CDCs because they were
scrappy organizations, they were entrepreneurial and could get
things done that he couldn't do with the bureaucracy in his
city. I will let you all guess who that mayor was. And he was
exactly right. That is something which our experience fully
bears out.
So our dollars have been early, flexible and patient.
Early, flexible and patient. And that has been just an absolute
key factor, I think, in making a difference for CDCs as they go
out to do their work.
When Living Cities began, we were all too familiar with the
scores of Federal programs that had come before that had some
successes, but also had a whole array of failures that none of
us wanted to particularly remember. So we approached this work
with a theory, with a very firm, clear theory, of how we wanted
to see our efforts make a difference, and that theory has
several parts. The first is that we wanted to build systems;
that CDCs doing their work could do terrific work, but if the
rest of the environment were dysfunctional, their work was
going to be at least at serious risk. So that was about
building partnerships broadly. Two hundred fifty partnerships
we describe. I think it is probably an underestimate in terms
of just what really is out there.
We also talked about needing to have better administrative
procedures on a local level as well as to streamline financing
on a local level so that a CDC going out has a chance of being
able to have a project be successful.
Another part of what we wanted to take up was really this
whole issue of leverage. Having one investor is just not
practical. It just doesn't work. There is too much work to be
done. So we have always emphasized in all the work the Living
Cities has done has our dollar leveraging and what is our
participation leveraging; given who we are, are we able to
bring new actors to the table. And I think there, too, we have
really seen that we have had some real successes.
And the third element has been working through experienced
hands, putting the dollars in a set of hands, in this case the
national intermediaries, the Local Initiative Support
Corporation and the Enterprise Foundation, to really be able to
efficiently put the dollars into the marketplace and have them
be well used and utilized.
And the last part is really the--in some respects is
actually the first part. It is really where we come full
circle, and it really is the local organizations themselves.
They are the eyes that make the deals happen and make the deals
last. The community development corporations on the local level
is where the vision begins. It is also where the shepherding of
the project from start to finish takes place, and most
importantly, it is the set of eyes that watches the program
after we have all gone home. That is the thing that is
demonstrably different about the work that is being done in our
minds through CDCs than were done through other Federal
programs. That is how we see sustained development taking
place, and we commend the work that has gone on in preparing
this bill, because it really does support the work of those
organizations.
Thank you.
Mrs. Kelly. Thank you very much.
[The prepared statement of Reese Fayde can be found on page
39 in the appendix.]
Mrs. Kelly. Mr. Rasheed.
STATEMENT OF ABDUL RASHEED, PRESIDENT AND CEO, NORTH CAROLINA
COMMUNITY DEVELOPMENT INITIATIVE, ON BEHALF OF THE NATIONAL
CONGRESS FOR COMMUNITY ECONOMIC DEVELOPMENT (NCCED)
Mr. Rasheed. Thank you, committee Chairwoman Kelly,
Congresswoman Jones, and to all the other distinguished members
of this committee, the distinguished gentleman from North
Carolina, the Honorable Mel Watt. Thank you, and I am pleased
to be here in your presence. I am very pleased to be here today
representing the National Congress for Community Economic
Development, which is the national trade association that
attempts to represent the basic interests of the field.
I also manage on a day-to-day basis the North Carolina
Community Development Initiative, which is on the ground in
North Carolina working in rural small towns and our population
centers like the big city of Charlotte and the great city of
Mecklenburg, which the Representative is from. We want to say
as a national community of practitioners on the ground doing
the work that first and foremost to the success of the field is
investment, and this bill clearly represents increased
investment in the expertise, in enabling and bringing
intelligence, access to information, more capacity, if you
will, to those organizations and leaders in the community who
are trying to be about change, quality of life, more
opportunity, and then raising their own voices in their
community to participate in those discussions locally that
impact on their lives on a day-to-day basis. We see the deal
not as the end itself, but as the means to an end.
We also would like to have the committee consider that this
bill also helps us increase, as you have heard from all of our
colleagues, the productivity of these organizations at the
local community level. It is very difficult to expect and hold
accountable organizations when they do not have the tools and
resources to match the level of expectation that we have for
them in the field, and I would advance to you, as you so well
know, that we are operating and trying to work in the most
difficult environments in this country, and the need is so
great for increased investment. This investment will go right
to the heart of trying to increase our productivity, put us in
a better position to be held accountable for quantifiable,
measurable outcomes that will certainly speak to the impact in
the community as it relates to housing, jobs and access to
increased capital.
And I would say that our experience in North Carolina,
again as indicated by previous speakers, the private sector
becomes much more comfortable in engaging with us in the local
community when they have some assurance that we have the
expertise, that we have the intelligence, the knowledge to, in
fact, begin and finish a project; not just get into a deal, but
to complete a deal. And for that reason, we have been able to
attract more private sector participation. We have been able to
encourage local government participation at a higher level of
involvement as a result of their comfort level with the
community-based organization having the access to the
intelligence, to the technical assistance that it needs in
order to complete the deal.
Lastly, I would say that if we are going to sustain the
work long term in the communities, that it has great momentum
at this point in time, it is because we are going to increase
access to intelligence, technical assistance, and capacity
support. So I encourage your support for this increased
investment on behalf of the national community of people on the
ground doing the work every day.
I would also encourage--I understand that there is some
consideration at doing an assessment and a look at all of the
technical programs that have been mentioned that are being made
available to organizations across this country. I would ask you
to look specifically at how those programs are engaging CDCs,
because a lot of these programs are not necessarily available
to CDCs in terms of their access to technical assistance. Some
are, but many are not. So I think your assessment would, in
fact, bear that out and give you at least the kind of
intelligence that you need to adjust some of these programs,
such that if the desire is there to assist CDCs, that you will
have an opportunity to do so.
Mrs. Kelly. Thank you.
[The prepared statement of Abdul Rasheed can be found on
page 118 in the appendix.]
Mrs. Kelly. Mr. Swack.
STATEMENT OF MICHAEL SWACK, DIRECTOR, SCHOOL OF COMMUNITY
ECONOMIC DEVELOPMENT, SOUTHERN NEW HAMPSHIRE COLLEGE
Mr. Swack. Madam Chairwoman, committee members, thank you
for--.
Mrs. Kelly. Mr. Swack, please turn on your microphone.
Mr. Swack. Madam Chairwoman--.
Mrs. Kelly. If you would, pull it a little closer. That
would be good, too. Thank you.
Mr. Swack. Thank you for inviting me to testify in front of
your committee on the Community Economic Development
Enhancement Act of 2002. I am currently the director of the
School of Community Economic Development at Southern New
Hampshire University, a position I have held for the last 20
years. The School of Community Economic Development is, as far
as I know, the only school in the country that offers both
master's and doctoral degrees specifically in the discipline of
community economic development. I am also proud to see that one
of my students is sitting next to me today and has testified.
I wish to share with you briefly the perspective that I
have gained as an educator and a practitioner in the field of
community economic development and then respond briefly to the
questions that the committee has posed.
The School of Community Economic Development at Southern
New Hampshire University serves adult practitioners working in
the field of community economic development. Most of our
students work for private nonprofit community development
organizations. Students enrolled in our master's program
commute and attend classes 3 days per month over a period of 2
years. They come from all over the country. The average age of
our students is 37 years old, and they range in age from their
midtwenties to their early sixties. We accept about 50 new
students per year in our weekend master's program. Over the
past 20 years we have graduated close to 1,000 students. Over
half our students have been African American, Latino or Native
American. An independent survey of our graduates conducted in
the year 2000 reveal that over 90 percent of our graduates have
remained working in the field of community economic development
since attending the school.
The mission of the School of Community and Economic
Development is to provide education and training to a diverse
group of community economic development practitioners,
policymakers and community leaders and equip them with the
knowledge, skills, tools and techniques to have the greatest
impact at improving the economic and social well-being of their
communities.
We define community economic development as a strategy for
people to develop the economies of their communities while
providing benefits for community residents; a systematic and
planned program promoting economic self-reliance, focusing on
issues of local ownership and the capacity of local people; a
program for helping consumers become producers, users become
providers, and employees become owners of economic enterprises;
and a method of building efficient, self-sustaining and locally
controlled initiatives that support profitable ventures and
effective social programs.
Our curriculum is unique. It is a business-school-type
curriculum, but the materials, cases, readings are specifically
geared for people working in nonprofit community development
organizations. Students are required to take courses in
accounting, financial management, business development,
financing, community economic development and organizational
development. Over a third of the credits they earn in the
program is through a project that they carry out in their home
communities. Faculty and staff provide technical assistance to
the projects, and students are part of a project group of peers
who are often working on similar projects in their own
communities.
We also offer a number of elective classes in areas such as
real estate, marketing and negotiations. Students also are
required to submit work online and participate in online
activities.
People apply to their program because they want to be more
effective practitioners. This is what they tell us in the
personal statements they submit. They are also committed to
working in the field of community and economic development
because they want to improve the quality of life in their
communities, and they stay working in the field.
What we have learned over the last 20 years is that
education works. Our model, which combines classroom learning,
peer support and practical application of skills in the
students' home communities, has enhanced practitioner
effectiveness. People have developed practical skills, built
leadership skills, developed contacts and networks, and have
used these skills and networks to build more effective
organizations, organizations better able to develop projects,
build housing, leverage financial resources, innovate and
sustain themselves.
Our model is not the only effective training model in the
field today. There are other initiatives aimed at building
human capital as we have heard about, and they are also
effective.
So how will this legislation help the field of community
economic development? In the letter, there were a few questions
posed. Why do we need a program like this since the Federal
Government already spends billions? What tangible results can
we expect? How have the challenges facing the CDC industry
changed? What approaches are required to help communities
rebuild?
Most programs funded by the Federal Government fund
projects; however, if local communities don't have the skills
to help manage projects, they won't have access to funds.
Building the capacity of local people and local organizations
is key to the development process. Without proper skills and
leadership, community organizations either are unable to access
funds, or if they do, the projects they develop will fail.
Funders have frequently resisted funding activities that build
organizations. They don't like to pay for salaries or
education. They want concrete projects, literally. In fact, we
need funds for both concrete and human needs if we want to
build communities. H.R. 3974 recognizes this.
In order to access funds, an organization should be able to
present a clear business plan with goals and objectives.
Funding should be tied to achieving those goals and objectives.
This is a process that Mr. Rasheed and his organization have
developed, as have Federal programs such as the CDFI fund at
the Department of Treasury. Funds should also be used to
provide education and training to younger, less experienced
groups so they can develop these plans. The legislation should
also fund educational and training initiatives that are
substantial, rigorous and well designed. Educational and
training funds should allow for a range of different providers
and initiatives that can serve different constituencies in
different regions.
The CDC industry has changed over the past 20 years.
Although still asked to blend economic and social goals, CDCs
now need to be much more sophisticated organizationally and
financially in order to succeed. Deals for housing and business
development are often complex. Over the past 2 years, our
school has sponsored the Financial Innovations Roundtable. The
purpose of this roundtable is to develop concrete ideas that
link conventional and nonconventional lenders, investors and
markets in order to provide increased access to capital to low-
income communities.
One thing the roundtable has made clear: If communities are
to move into the broader capital markets and better able to
leverage--.
Mrs. Kelly. Excuse me, Mr. Swack, but you had a 5-minute
summary, and I would like you, please, if you would summarize
that--.
Mr. Swack. Sure.
I believe that the proposed legislation, H.R. 3974, can
make an important contribution to building the capacity of CDC
practitioners. It will help build stronger, more stable
community organizations, better able to develop viable
projects, get them financed, and improve the quality of life.
Thank you.
Mrs. Kelly. Thank you very much.
[The prepared statement of Michael Swack can be found on
page 129 in the appendix.]
Mrs. Kelly. Ms. Harris.
STATEMENT OF GRETA HARRIS, SENIOR PROGRAM DIRECTOR, LOCAL
INITIATIVES SUPPORT CORPORATION (LISC)
Ms. Harris. Thank you, and good afternoon, Madam Chairwoman
and members of the subcommittee. My name is Greta Harris, and I
am pleased to have the opportunity to testify before you today
on enhancing community development.
I am the director of the Richmond office of the Local
Initiative Support Corporation, one of 38 LISC offices
nationwide located in communities represented by several
members of your subcommittee.
Over our 20-year history, LISC has provided $4.5 billion to
CDCs as investments, loans and grants, helping them to build
over 121,000 affordable homes and nearly 18 million square feet
of shopping centers in other economic development cities. I
have nearly 20 years of experience in rebuilding communities,
the majority of which has been spent working at the
neighborhood level in organizations that have directly
benefited from strategic capacity building. I would like to
share with you a bit about LISC's experience in using these
funds both nationally and in Richmond, as well as about the
systems we have put in place to ensure that these funds
translate into real change in the neighborhoods where we work.
The LISC experience has shown that the Section 4 capacity-
building program has been extremely productive. To date, LISC
has received $60 million through Section 4, which we have used
to attract $200 million in private matching funds. Taken
together, these resources have been invested into 427 CDCs
located in 42 States and the District of Columbia. These
partners in turn have produced approximately 26,000 affordable
homes as well as retail, industrial and child care facilities.
These activities equate to over $3.4 billion of community
reinvestment activities in distressed neighborhoods. That is a
58 times increase of the amount of Section 4 funding that we
have received, a remarkably productive use of Federal funds.
In Richmond we have combined $618,000 of Section 4 funding
with $1.5 million of matching private contributions to fund an
operating support collaborative that mixes funding, technical
assistance and training to build the capacity of 12 CDCs
working in the greater Richmond community.
Industry wide and throughout our region, the results of the
strategic placement of capacity-building dollars has been
stunning. Since 1997, multifamily housing production has
quadrupled, single family production tripled, and grants to
existing homeowners for repairs is nearly double. Essentially
these capacity-building assistance resources have allowed the
CDCs to function better as nonprofit businesses. Currently 100
percent of our CDC partners use strategic business plans, up
from 15 percent just 3 years ago, and many have strengthened
and expanded their programmatic activities, which directly
translates into positive results for the community, the end
goal for which we are all striving.
Certainly without funding, none of the successes I have
outlined above would have been possible. However, funding by
itself is not enough to ensure success. I strongly believe that
LISC's use of Section 4 funding has been effective in part due
to the systems that have been put in place, both nationally and
locally, to ensure that these funds translate into direct
change in our neighborhoods. For example, in Richmond there is
oversight of all local funding decisions. We fund only a select
number of CDCs that meet certain eligibility criteria. We
target funding based on full 360-degree assessments, and we
bundle funding with technical assistance and training. And
perhaps most importantly, we have a close ongoing relationship
with our CDC partners, which allows us to monitor their
progress and to help them get back on track when issues
sometimes arise. I think HUD and other funders have been
rigorous and responsive partners in this program to help turn
neighborhood liabilities back into community assets.
The role of CDCs, as we see it, is not to address all of
the issues facing American cities. It is to jump-start the once
stagnant market engines in these neighborhoods and over time
attract private capital back into these communities, thereby
reconnecting them back to the economic mainstream.
Ms. Harris. I invite all of you to come to Richmond or any
LISC city where we are working and see firsthand the successes
we are having.
I thank you for the opportunity to speak before you today.
Mrs. Kelly. Thank you very much, Ms. Harris.
[The prepared statement of Greta Harris can be found on
page 75 in the appendix.]
Mrs. Kelly. Mr. McCool, I have a question for you. I would
like for you to explain a little bit about how section 4 of the
HUD's demonstration act in 1993 works. Has this been an
effective means of demonstrating the money to the CDCs?
Mr. McCool. Madam Chairwoman, we have looked at HUD
programs broadly, and we have information about section 4, but
we haven't looked specifically at its effectiveness in terms of
delivering funds. We haven't really dug deep into that specific
part of the HUD programs.
Mrs. Kelly. Mr. McCool, I wonder if we could ask you,
please, to go back into your studies and address that before
you deliver us the final product, or else do further study.
Mr. McCool. I think we are certainly willing to do further
study. The actual mechanics of it we might need to work out.
Mrs. Kelly. We can work out the mechanics. One of the
serious problems we have here is, we are just having a hard
time getting our arms around fact; and we count on people like
you and your organization to deliver us that fact. So if you
would please do that, we would appreciate it.
I have a question for you, Mr. Rasheed. On page 5 in your
testimony, you basically state that no Federal funds provide
assistance directly to CDCs for capacity building and technical
assistance. How is this statement consistent with the GAO
statement that 120 to 200 million is spent on technical
assistance and capacity building, and Ms. Fayde's statement
that half a billion dollars will be spent in the next decade,
and a part of that is Federal funding? Can you help us
understand that, please?
Mr. Rasheed. Basically what CDCs are attempting to say is
they don't have an opportunity to directly compete for these
funds as a means of support in their programs. And I can't
speak for--I will let my colleagues speak for how their
statements bear out. HOME CHDO technical assistance are
available at the local community level if a participating
jurisdiction chooses to provide those funds. Other funds that
can be available are YouthBuild funds, some CDBG funds, and
homeless money. Those are the only resources we can compete
for, and these are difficult for CDCs to access.
Mrs. Kelly. Mr. Rasheed, the indication--here again, we
have a question of whether or not money is provided and whether
or not it is the right money; and if it is not, we need to
figure out what it is. So let me ask you one other question.
What oversight, if any, exists in the CDCs right now? As
the trade association for the CDCs, what can you do, or what do
you do, to ensure that quality technical assistance is being
provided by the CDCs?
Mr. Rasheed. That quality technical assistance is being
provided by the CDCs?
Mrs. Kelly. You are representing the trade organization of
the CDCs. I would like to know what quality technical--and this
is not an adversarial hearing. We are trying to get
information, so we need that. So talk to me about what quality
assurance you have built into oversight of the CDCs, what the
CDCs are doing now, what your trade organization is doing. If
you can't answer that, please consult with the people behind
you, so we can get some facts.
Mr. Rasheed. Currently CDCs only have a couple of technical
assistance programs that we actually administer. The majority
of those are technical assistance funds administered by CDCs
are to first-time homebuyers and small and micro-enterprise
entrepreneurs. These federal funds come from the U.S.
Department of Agriculture and HUD's housing counseling programs
like PRIME and Microloan T.A. As far as technical assistance
programs for CDCs, these are budgets like HOME and CDBG. Other
programs like CHDO and Youth Build are specific to the goals of
the program, not the intentional market based approaches to
revitalize the community.
Otherwise, in terms of just a general oversight, we try to
have different kind of programs. We get involved with setting
standards or trying to help elevate and participate with other
organizations such as state and city CDC associations and
statewide nonprofit associations. CDC, like all nonprofits, are
accountable to the IRS, their boards of directors and those
institutions and individuals that invest in them. They are
trying to just, overall, improve and raise the bar in terms of
excellence and what is necessary in order to compete with these
projects and in the field of community economic development.
Mrs. Kelly. Mr. Rasheed, do you feel there is adequate
oversight from the Federal Government?
Mr. Rasheed. For the programs that are out there, I would
say, yes, there is good oversight. I am not questioning the
oversight of the Federal Government in terms of the programs
that they currently administer.
Mrs. Kelly. I am raising that question. I am asking you
your impression, your industry's impression, of what the
Federal Government is doing to help you with oversight.
Mr. Rasheed. I can't say they are doing a lot directly to
help me in North Carolina, because I don't have any direct
Federal dollars. But in terms of the field in general,
basically we understand the criteria as established by HUD and
other Federal programs, and we try to respond to those programs
in ways that enhance our ability to get jobs done.
Mrs. Kelly. Mr. Rasheed--were you finished?
Mr. Rasheed. Yes.
Mrs. Kelly. Mr. McCool, would you like to answer that for
me, please.
Mr. McCool. Sorry, ma'am?
Mrs. Kelly. I am asking a question about whether or not
there is adequate HUD oversight.
Mr. McCool. Well, again from our broad look, we think that
HUD does have oversight mechanisms in place in terms of whether
services are actually delivered, whether classes are actually
held.
Our question, I guess, with respect to these programs is
the extent to which HUD has reasonable measures of the impact
of the programs on the recipients to whom their service is
delivered.
Mrs. Kelly. On page 2 in a summary--in your summary on the
GAO statement, I find here it says we are recommending that
HUD, where possible, measure the impact of technical assistance
and develop assistance guidance for program offices to use. The
indication in other places--and I don't want to take the time
of the members and the people in the room--from reading your
GAO report, I got the impression that there was some question
about Federal HUD oversight on these programs. So perhaps we
could clear that up.
Mr. McCool. Right. But again, I think the issue had more to
do--it all depends on how you define oversight versus, again,
effectiveness.
I think the oversight that we were talking about earlier
had to do with whether the services were delivered, whether the
money was spent in accordance with the way it was intended, as
opposed to whether the technical assistance had a meaningful
effect from a programmatic respect. It is the latter where we
are pushing on HUD to do a better job in trying to understand
whether these technical assistance capacity building programs
are actually having a meaningful programmatic effect rather
than, yes, they were done in accordance with the law and in
compliance with what was agreed to.
Mrs. Kelly. Mr. McCool, that is something we need to know.
With unanimous consent, I have a letter from Ms. Roukema
and myself that I would like to insert in the record, asking
the GAO to conduct a review of the technical assistance
capacity-building programs at HUD for additional questions that
didn't seem to get answered in this GAO report. So with
unanimous consent, I will insert this in the record.
[The following information can be found on page 135 in the
appendix.]
Mrs. Kelly. Let us go now to Ms. Jones.
Mrs. Jones of Ohio. Thank you, Madam Chairwoman.
I would like to continue with some questioning, Mr. McCool.
In fact, most of the programming that HUD does technical
assistance with through Living Cities--and Living Cities is
doing a great job, but there are only 23 cities that actually
receive funding through that program; is that correct, sir?
Mr. McCool. That's correct. The Living Cities part of the
section 4, that is true.
Mrs. Jones of Ohio. And the reality is, with all the money
that HUD is spending for technical assistance, there are a
limited number of cities and organizations that are accessing
dollars across the country; is that fair?
Mr. McCool. That is my understanding.
Mrs. Jones of Ohio. Would it not be advantageous outside
for other cities to have the opportunity to build the capacity
of the community development corporations across this country
in light of the fact they all pay into the tax base of our
country?
Mr. McCool. It would certainly be advantageous for the
CDCs. I guess the question always is where the Federal dollars
come from and what alternative uses of Federal dollars there
are.
Mrs. Jones of Ohio. Let us talk about that for a moment.
The CDCs, in actuality, get very little direct money from
any of the programs that you have done a review on, the 21
technical programs; is that a fair statement?
Mr. McCool. They certainly don't get a majority of the
funding. They get a part of the funding.
Mrs. Jones of Ohio. How much?
Mr. McCool. $10 million or 20 million.
Mrs. Jones of Ohio. Out of how much?
Mr. McCool. Out of the 170 to 200 million.
Mrs. Jones of Ohio. Over what period of time?
Mr. McCool. Over the 5-year period over which our study was
conducted.
Mrs. Jones of Ohio. I would like for you in part of your
report from the GAO to tell me specifically what money goes
directly to CDCs from any of the 21 technical assistance
programs.
I would also like to know, of the 21 technical assistance
programs, in what year some of those programs have received no
appropriation whatsoever; because I am aware that there are
some that have not received any appropriations, which means
that none of that money was going out to some of these
programs. And I am interested in that because when we talk
about this world of technical assistance to community
development corporations, it is kind of in a vacuum when the
facts speak a little differently.
Do I need to repeat any of what I have asked of you, sir?
Mr. McCool. No.
Mrs. Jones of Ohio. Let me ask, Dr. Swack, even with all
the technical assistance programs that the GAO currently claims
are provided to CDCs, what else could CDCs use to be able to
improve their lot in the lot of their communities that may well
be covered by this legislation?
Mr. Swack. I think that is a good question because it
allows us to make a distinction between technical assistance
and education. Technical assistance is useful, but doesn't
always build capacity; and what we are talking about is, how do
we build the capacity of indigenous local leadership to manage
organizations, develop projects and carry them out.
One of the things this legislation does is, it specifically
addresses the question of education as well as technical
assistance. So it is not just hiring a lawyer or hiring an
accountant to do something. It is building the local
organization and the capacity of individuals in that community
to carry out projects, put together deals, learn how to do it
themselves, do better ones; and this legislation does this
that.
Mrs. Jones of Ohio. In addition, Mr. McCool, could you
include in your report what money goes to community development
corporations for capacity building, not just technical
assistance, in your response?
Mr. Rasheed, would you care to answer that same question,
sir.
Mr. Rasheed. Madam Chairwoman, I think I agree with Dr.
Swack in saying that what we need is resources that help build
and sustain the capacities of organizations to maintain their
momentum and to be flexible enough to respond to opportunities
in their community. This bill does speak to that in both
instances in that it will provide resources to hire the kind of
professional expertise to do a specific deal. But it also is
flexible enough to allow us to have resources to help educate
the organization about how to operate as a business such that
it can sustain itself when resources ebb and flow.
I also would like to, if I might--go back to an earlier
question, if I might, and say that most of the technical
assistance dollars that you asked me about earlier actually go
to cities and intermediaries and not to CDCs, and they then
have to go to the city to get at those resources. Many cities
choose not to provide technical assistance funding to
nonprofits at all. The programs do not require a city or P.J.
to provide capacity building or technical assistance. So that
is what I was trying to say earlier.
And lastly, I would say in looking at how assessing and
trying to figure out how best to make these dollars available
in the future, I think the oversight committee mentioned in my
testimony that would involve others with the HUD staff could in
fact tighten that up and bring about the oversight that you
desire. We could see not only what was provided but what the
impact was. We could also note technical assistance that was
not provided.
Mrs. Jones of Ohio. My time is up, and hopefully we are
going to get another round where I will be able to ask some
questions of the other members of the panel.
Mrs. Kelly. Thank you, Ms. Jones. I want to, for the
record, make Ms. Tubbs Jones' request to the GAO a part of the
record so that it is understood that it is an official request.
Mr. McCool. It is understood.
Mrs. Kelly. We move now to Mr. Watt.
Mr. Watt. Thank you, Madam Chair.
Mr. McCool, you may think we are picking on you, but we are
not. I just wanted to go to page 3 of the draft report, and
your testimony I guess it is, and look at the chart that you
have included there, which actually outlines the programs
through which technical assistance is provided. And I take it
the ones that community development corporations really have a
shot at, under the Office of Community Planning and
Development, section 4, Capacity Building, and section 107,
Technical Assistance; is that correct?
Mr. McCool. Yes, sir.
Mr. Watt. The rest of these programs are kind of specific
technical assistance to that particular program that, in most
cases, community development corporations have little
involvement with; is that correct?
Mr. McCool. In most cases, that would be true.
Mr. Watt. Now let me just kind of trace then across. You
have done a 4-year study there, which suggests that in 1998,
the combination of capacity building and technical assistance
was $22 million; is that correct? Am I reading this correctly?
Mr. McCool. 1998?
Mr. Watt. 1998. And then in 1999, the combination of those
two funds jumped up to $32.5 million; is that right?
Mr. McCool. Yes, sir.
Mr. Watt. And then in the year 2000, actually, technical
assistance was either zeroed out or was not used in either
2000, 2001 or estimated to be used in 2002, so that what you
are left with then is only capacity building under section 4;
is that right?
Mr. McCool. It does include technical assistance, but it is
true, it is under section 4.
Mr. Watt. In actuality we went from $32.5 million in 1999
down to $26.3 million available in 2000, and actually didn't
get back to even the 1999 level in 2001; is that right?
Mr. McCool. Yes, sir.
Mr. Watt. I am just trying to make sure I am reading this
correctly because it seems to me that even based on what we
have here, there have been--there has certainly not been any
growth in these two technical assistance funds, and, in fact,
there has been a reduction in the technical assistance that is
available--I mean, capacity building and technical assistance
considered together; is that right?
Mr. McCool. Either reduction or it has been reasonably
flat.
Mr. Watt. This is obviously not your fault. I just want to
make sure that people understand that part of the problem here
is that there really has not been any increase in funding for
technical assistance. And I take it, then, the bulk of this
technical assistance--Ms. Fayde and Ms. Harris, is it correct
that the bulk of this has been going to Living Cities and the
LISC programs. Where has it been going to? Who has been getting
the bulk of this money?
Ms. Harris. The bulk of the money has actually been going
to the CDCs that partner with LISC, Enterprise and with Living
Communities initiative.
Mr. Watt. And that is directed primarily at 23 cities?
Ms. Harris. That is beyond that. Those are the Living
Communities, participating cities with section 4 dollars go
beyond those initial 23 and actually are reaching CDCs located
in, I believe, 42 States and actually reaching down at the
local level to just under 300 local jurisdictions, because in
some cases, CDCs actually work in multiple jurisdictions in a
regional area. So it does have a broader reach than just 23
cities. It certainly is not reaching all CDCs who are currently
working throughout the country, but it is broader than the 23
cities.
Ms. Fayde. Perhaps I could clarify by just explaining some
of the mechanics in terms of when the dollars are targeted
toward the 23 cities and when they are targeted in the off
years from our perspective.
Approximately every 3 years, a portion of the allocation in
this last round, it would have been $20 million, was targeted
to the Living Cities work plans that were executed by LISC and
Enterprise. Those dollars, I would suggest probably 90 percent
if not more, go through LISC and Enterprise directly to the
CDCs. But that is in those 23 cities. On the other years, if
you will, two and three, those dollars go through LISC and
Enterprise's networks as well as other organizations.
Mr. Watt. Let me interrupt you because I don't want to lose
sight. I don't want to get too technical on what is happening.
Let me just ask this general question, which I would ask
everybody but Mr. McCool, because I doubt he has an opinion on
it, to just answer yes or no. If there were more funds and if
this bill were in place, do you think that capacity and the
delivery of what is currently in place would be more effective
in our communities?
And let me start with Mr. Harvey and just go down, because
my time is already out, and just say yes or no.
Mr. Harvey. Yes. There is a great need for more technical
assistance. We aren't reaching all of the groups that we need
to reach. And if done in the right way, in an accountable way,
it will make a big difference.
Mr. Watt. Ms. Fayde, yes or no?
Ms. Fayde. Absolutely yes.
Mr. Watt. Mr. Rasheed.
Mr. Rasheed. Absolutely yes.
But can I add, just to give an example, the dollars that
are being proposed could actually be absorbed just in these 23
cities. I am talking about the additional dollars. So if those
cities could use additional money to have greater impact, just
think about the rest of the country.
Mr. Watt. Dr. Swack?
Mr. Swack. Yes.
Mr. Watt. And Ms. Harris?
Ms. Harris. Absolutely yes, but--more money is always good,
but the delivery system is critical for ensuring that those
dollars reach the end goal that we are shooting for.
Mr. Watt. Thank you, Madam Chair. I am sorry we went over.
Mrs. Kelly. That is quite all right. We need the
information and that was a good question.
Ms. Lee.
Ms. Lee. I would like to ask Mr. McCool this question also.
First, let me just ask you in terms of technical assistance and
capacity-building funds since the 1960s, since actually the
community development corporations began somewhere in the
1960s, how do you see the need now? Has the mission of CDCs,
from your point of view, changed, and what do you see as the
outcomes? What should the goals of CDCs be at this point in the
year 2002?
Mr. McCool. Ms. Lee I am not sure if I am the right person
to answer that question. I am not sure--we have been tracking
the goals of CDCs. I think the people who are more closely on
the--
Ms. Lee. Let me ask you, we have to understand what the
Federal Government sees as the role of CDCs. Is it economic
development? Is it job creation? Is it poverty alleviation? Is
it entrepreneurial development? There has got to be some kind
of--
Mr. McCool. I think it is clear that all of the above is
the answer, but I think there has been a shift, in my view,
toward the entrepreneurial end of the spectrum in recent years,
which has been reflected in a lot of what you see in terms of
the partnerships that have been generated.
Ms. Lee. In terms of direct funding assistance to CDCs, it
is my understanding that right now the funding goes through the
cities, right, through local governments not directly to local
CDCs?
Mr. Rasheed, could you answer that?
Mr. Rasheed. For the majority of programs.
Ms. Lee. But the direct funding which goes directly to CDCs
at this point, are there any?
Mr. Rasheed. No, ma'am, not for technical assistance.
Ms. Lee. Capacity building?
Mr. Rasheed. No. No direct funding.
Ms. Lee. Then let me just ask, Mr. McCool, how does HUD
actually measure the success? How do you evaluate the CDC
movement, in essence? How do you know that CDCs are complying
with what we all know they should be doing, if, in fact, there
is no direct funding to CDCs?
Mr. McCool. As part of HUD's contractual arrangements, it
does ask for performance goals and does evaluate that within
the context of its contractual obligations. Again, our issue is
a slightly broader one looking at the programs where HUD
itself, through either its own agents or through its
intermediaries, provides the technical assistance and capacity
building. But it is clear that this notion of trying to get a
sense of what the impact and the outcomes of these programs are
is part of the ongoing necessity for oversight from HUD's
perspective.
Ms. Lee. I am going to yield a minute to my colleague--let
me just follow up then and just ask, I am trying to get clear,
how would HUD--and I don't know if HUD has taken a position yet
on this bill, but don't you think direct assistance, direct
funding for CDCs in terms of capacity building and technical
assistance would enhance the overall goals of the CDCs and what
HUD and what our Federal Government see as the outcomes--what
the outcomes should be?
Mr. McCool. Again, enhancing capacity building for CDCs, I
am sure, would improve or at least generate the potential for
more effective local economic development. The question is
always one of alternative use of resources, which again is
where we sort of drop out and let the folks who are more
involved on the floor be the advocates of that sort of thing.
Ms. Lee. Could I ask any one of the panelists if you could
respond very quickly to that: In terms of the outcomes that we
are looking at, would this enhance job creation,
entrepreneurial development, economic development, poverty
alleviation if, in fact, this bill were signed into law?
Mr. Rasheed. Absolutely yes. And I would again point you to
sections of the bill, section 4 that asks for an assessment of
the community economic development expertise, one point.
Secondly, we also in the bill ask for an advisory council
that would work with HUD to look at establishing and looking at
a criteria to better evaluate the effectiveness not only of the
programs and the mechanisms, but also the results we see on the
ground.
And thirdly, section 6, coordinate this with the
President's annual budget request.
Ms. Lee. Thank you very much, Madam Chair, and thank you
for the time.
Mrs. Kelly. Thank you, Ms. Lee. I, with unanimous consent,
would like to give Ms. Tubbs Jones an additional 5 minutes.
This is a hearing which she has requested, and I think we are
beginning to open up some of the information that we need.
Certainly it is evident we need a great deal more. With that in
mind, I would like to turn it over to Ms. Tubbs Jones for
another 5 minutes for questioning.
Mrs. Jones of Ohio. Thank you, Madam Chairman.
First of all, let me thank each and every one of you for
coming this afternoon to participate in this panel, and be
clear that the purpose of this legislation is not to inroad on
anybody's current opportunities to help community development.
I am trying to expand the opportunity for community development
corporations to be able to be operative.
I come from Cleveland, Ohio, and I believe we have one of
the best networks of community development corporations going,
and I would like to see it happen all over the country. If I
misstated that there were only 23 cities, I don't know all that
you do, but I do know one program was originally focused on 23
cities.
Let me ask you this: Currently, Mr. Harvey, there is--we
don't have a study or a review of capacity building from the
government for the dollars we have expended. Is that a fair
statement, sir?
Mr. Harvey. I believe so.
Mrs. Jones of Ohio. Would it be useful for the work that
you do to have such a study?
Mr. Harvey. Absolutely.
Mrs. Jones of Ohio. I guess we haven't chosen an advisory
council, but also an advisory council that would bring in the
day-to-day people on the ground to participate, to say what we
have experienced, would be useful as well?
Mr. Harvey. Absolutely.
Mrs. Jones of Ohio. Now you get 30 seconds to tell me
whatever you want to tell me. That is it.
I am coming to you, Ms. Fayde.
Mr. Harvey. Thank you, Congresswoman.
What I would say is, A, your bill deals with a critical
shortage of what we need. We have got community development
organizations that are really carrying out public needs, and
they have no direct public capacity building or technical
assistance. And so from the point of view of adding more
resources, it is critically important and very much needed.
Putting in a system of accountability, I think, is also
absolutely essential. I think all of us agree that we have to
measure performance, and tough choices have to be made. And so
we would like to see that.
Mrs. Jones of Ohio. Nine, eight, seven, six--Ms. Fayde.
Ms. Fayde. The question has been asked, what has changed
for CDCs in recent history; and it is that the world is just a
different place and a more complicated place. And I think their
ability to function is therefore really jeopardized by their
ability to sort of stay at stride.
So we are talking about major demographic changes occurring
in urban neighborhoods. We are talking about needing to connect
people in neighborhoods to larger economic markets and world
markets.
To be able to do that, you need more information, more
experience, more skills; and I think the capacity building that
is spoken to in this bill would assist the CDCs in being able
to meet that challenge ably.
Mrs. Jones of Ohio. Ms. Harris?
Ms. Harris. Thank you. I want to answer Ms. Lee's question
of the role of CDC's as it has changed; and I think the
ultimate goal has not over the last four or so decades. It is
ultimately to create healthier living environments for
families, and I think that is the goal.
The methodologies by which the CDCs are carrying out their
activities has maybe expanded. It used to be primarily
organizing, and then housing, and now it has moved into
economic development and job creation. And those are all great,
but it does beg for more experience and technical expertise so
that the CDCs can be successful and effectuate change in the
communities.
The ultimate goal of this work, or the success of it, is
through partnerships. So more resources are a good thing. The
delivery system for those resources to ensure impact is
critical.
Mrs. Jones of Ohio. I thank you. I don't think I could have
said it any better if I had to say it myself as one of the
authors of the legislation.
My next idea is to figure out how I can get SBA and HUD to
work together to create businesses and housing and create a
real community.
So stay tuned, and thank you, Madam Chairwoman, for the
opportunity.
Mrs. Kelly. Thank you. If there are no more questions, then
the Chair notes that some members may have additional questions
that they may wish to submit in writing. So without objection,
the hearing record will remain open for 30 days for members to
submit additional written questions to the witnesses and to
place the witnesses' response in the record.
Mrs. Kelly. The panel is excused with our great
appreciation and thanks for your time. This hearing is
adjourned.
Mrs. Jones of Ohio. One more thing, Madam Chairwoman, I
would like to thank Representative Barney Frank for giving me
the opportunity to be a ranking member in my second term in
Congress. Thank you.
[Whereupon, at 3:40 p.m., the subcommittee was adjourned.]
A P P E N D I X
September 17, 2002
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