<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:20219.wais]
A TOP TO BOTTOM REVIEW OF THE THREE-DECADES-OLD COMMUNITY DEVELOPMENT
BLOCK GRANT PROGRAM: IS THE CDBG PROGRAM STILL TARGETING THE NEEDS OF
OUR COMMUNITIES?
=======================================================================
HEARINGS
before the
SUBCOMMITTEE ON FEDERALISM
AND THE CENSUS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
MARCH 1, APRIL 26, AND MAY 24, 2005
__________
Serial No. 109-7
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada BRIAN HIGGINS, New York
KENNY MARCHANT, Texas ELEANOR HOLMES NORTON, District of
LYNN A. WESTMORELAND, Georgia Columbia
PATRICK T. McHENRY, North Carolina ------
CHARLES W. DENT, Pennsylvania BERNARD SANDERS, Vermont
VIRGINIA FOXX, North Carolina (Independent)
------ ------
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director/Communications Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Federalism and the Census
MICHAEL R. TURNER, Ohio, Chairman
CHARLES W. DENT, Pennsylvania WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut PAUL E. KANJORSKI, Pennsylvania
VIRGINIA FOXX, North Carolina CAROLYN B. MALONEY, New York
------ ------
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
John Cuaderes, Staff Director
Ursula Wojciechowski, Professional Staff Member
Shannon Weinberg, Counsel
Juliana French, Clerk
David McMillen, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on:
March 1, 2005................................................ 1
April 26, 2005............................................... 107
May 24, 2005................................................. 191
Statement of:
Bernardi, Roy A., Deputy Secretary, U.S. Department of
Housing and Urban Development........................... 112, 197
Bernardi, Roy A., Deputy Secretary, Department of Housing and
Urban Development; Clay Johnson III, Deputy Director for
Management, Office of Management and Budget; and David A.
Sampson, Assistant Secretary of Commerce for Economic
Development, Department of Commerce........................ 6
Bernardi, Roy A.......................................... 6
Johnson, Clay III........................................ 20
Sampson, David A......................................... 23
Posner, Paul, Director, Federal Budget & Intergovernmental
Relations, Government Accountability Office; Jerry C.
Fastrup, Assistant Director, Applied Research and Methods,
Government Accountability Office; and Saul N. Ramirez, Jr.,
executive director, National Association of Housing and
Redevelopment Officials.................................... 144
Posner, Paul............................................. 144
Ramirez, Saul N., Jr..................................... 161
Plusquellic, Don, president, U.S. Conference of Mayors;
Angelo D. Kyle, president, National Association of
Counties; Chandra Western, executive director, National
Community Development Association; and James C. Hunt,
Councilman, city of Clarksburg, WV, on behalf of National
League of Cities........................................... 49
Hunt, James C............................................ 62
Kyle, Angelo D........................................... 59
Plusquellic, Don......................................... 49
Western, Chandra......................................... 60
Schmitt, Ron, councilmember, city of Sparks, NV; Thomas
Downs, fellow, National Academy of Public Administration;
Lisa Patt-McDaniel, assistant deputy director, Community
Development Division, Ohio Department of Development, on
behalf of COSCDA; and Sheila Crowley, Ph.D., president,
National Low Income Housing Coalition...................... 224
Crowley, Sheila, Ph.D.................................... 263
Downs, Thomas............................................ 232
Patt-McDaniel, Lisa...................................... 241
Schmitt, Ron............................................. 224
Letters, statements, etc., submitted for the record by:
Bernardi, Roy A., Deputy Secretary, Department of Housing and
Urban Development, prepared statements of............ 9, 116, 199
Clay, Hon. Wm. Lacy, a Representative in Congress from the
State of Missouri, prepared statements of........... 85, 185, 218
Crowley, Sheila, Ph.D., president, National Low Income
Housing Coalition, prepared statement of................... 265
Downs, Thomas, fellow, National Academy of Public
Administration, prepared statement of...................... 234
Hunt, James C., Councilman, city of Clarksburg, WV, on behalf
of National League of Cities, prepared statement of........ 65
Johnson, Clay III, Deputy Director for Management, Office of
Management and Budget, prepared statement of............... 21
Maloney, Hon. Carolyn B., a Representative in Congress from
the State of New York, prepared statement of............... 222
Patt-McDaniel, Lisa, assistant deputy director, Community
Development Division, Ohio Department of Development, on
behalf of COSCDA, prepared statement of.................... 244
Posner, Paul, Director, Federal Budget & Intergovernmental
Relations, Government Accountability Office, prepared
statement of............................................... 147
Plusquellic, Don, president, U.S. Conference of Mayors,
prepared statement of...................................... 52
Ramirez, Saul N., Jr., executive director, National
Association of Housing and Redevelopment Officials,
prepared statement of...................................... 165
Sampson, David A., Assistant Secretary of Commerce for
Economic Development, Department of Commerce, prepared
statement of............................................... 25
Schmitt, Ron, councilmember, city of Sparks, NV, prepared
statement of............................................... 226
Turner, Hon. Michael R., a Representative in Congress from
the State of Ohio, prepared statements of............ 4, 110, 194
STRENGTHENING AMERICA'S COMMUNITIES: IS IT THE RIGHT STEP TOWARD
GREATER EFFICIENCY AND IMPROVED ACCOUNTABILITY?
----------
TUESDAY, MARCH 1, 2005
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:03 a.m., in
room 2154, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
Present: Representatives Turner, Dent and Foxx.
Staff present: John Cuaderes, staff director; Shannon
Weinberg, counsel; Ursula Wojciechowski, professional staff
member; Juliana French, clerk; Neil Seifring, Hon. Turner,
legislative director; Stacy Barton, Hon. Turner, chief of
staff; Erin Maguire, Hon. Dent, LC; David McMillen and Adam
Bordes, minority professional staff members; Earley Green,
minority chief clerk; and Cecelia Morton, minority office
manager.
Mr. Turner. Good morning. A quorum being present, this
hearing of the Subcommittee on Federalism and the Census will
come to order.
Welcome to the Subcommittee on Federalism and the Census.
This is the first oversight hearing entitled, ``Strengthening
America's Communities: Is It the Right Step Toward Greater
Efficiency and Improved Accountability?'' Today's hearing is
the first meeting of this newly established subcommittee.
Before I move on, I would like to thank our chairman Tom
Davis for establishing this new subcommittee. As a former
county administrator, Chairman Davis understands the importance
of the intergovernmental dynamics between Federal, State and
local governments, and I thank him for his leadership in
establishing this subcommittee.
On February 7, 2005, the administration unveiled a plan in
the fiscal year 2006 budget to consolidate 18 existing direct
grant, economic, and community programs managed by five Federal
agencies into a single direct grant program within the
Department of Commerce. The grants previously awarded under
these programs would be awarded in the name of the newly formed
Strengthening America's Communities grant program. The budget
for these 18 programs would drop 30 percent, from $5.31 billion
in fiscal year 2005 to $3.71 billion in fiscal year 2006.
To underscore the enormous impact that this new proposal
would have on State and local governments, consider that in
fiscal year 2005, the Community Development Block Grant program
alone was funded at $4.15 billion, $450 million more than the
$3.7 billion requested for the new Strengthening America's
Communities grant program in fiscal year 2006.
The administration's Strengthening America's Communities
initiative is described as a unified direct-grant program
focusing on America's most economically distressed communities
with the intent of creating the conditions for economic growth,
robust job opportunities and livable communities. While these
are certainly laudable goals, there is widespread concern and
many unanswered questions about this wide-reaching proposal.
The purpose of this hearing is to better understand the
administration's proposal and to begin an important dialog on
some of the strong concerns raised by stakeholders involved in
administrating these programs.
The rationale behind the reorganization of these 18
programs is to refocus the grant moneys on the original intent
of each of the programs. According to a review by the Office of
Management and Budget, most of the 18 grant programs lack clear
goals or sufficient accountability. Further, many of the grants
overlap in key areas, resulting in duplicative efforts and
wasted money. The goal of the administration's Saving American
Communities proposal--Strengthening America's Communities
proposal is to make these grant programs not only more
efficient and effective but to improve the measures of success
within a community and instill a greater accountability.
Additionally, the administration aims to simplify access to
these grant programs and set new eligibility criteria.
I commend the administration for initiating a conversation
about how to best utilize tax dollars to help distressed areas
address the community and economic development challenges they
face. There appears to be broad recognition that the programs
targeted for elimination or consolidation need reform. However,
there are several aspects of this proposal that concern me.
Most significantly, the administration is proposing a massive
realignment of programs associated with longstanding and
complex programs, such as housing, job creation, business and
community and economic development. We do not have specific
details on this reorganization plan or a transition plan to
move these programs to the Department of Commerce.
Finally, the administration has not spelled out a clear
rationale for reducing the historic role of HUD in addressing
these issues. The Department of Commerce does not have historic
successes in urban revitalization.
One concern of our subcommittee will be determining if the
proposal actually creates rather than diminishes duplication
among Federal programs. Another will be focusing upon what, if
any, metrics can be applied to the administration's proposal to
determine the proposal's likely success.
The administration has proposed a far-reaching
restructuring of the role the Federal Government plays in
improving our distressed areas. I look forward to an in depth
discussion about this proposal and how it is expected to
perform more effectively than the current programs in aiding
our communities. I welcome the views of those who administer
and analyze these programs in helping us understand the impact
of the administration's plans.
We have two panels of witnesses before us to help us
understand the implications of the Strengthening America's
Communities program. First, we will hear from Mr. Roy Bernardi,
the Deputy Secretary of the Department of Housing and Urban
Development. Because the CDBG program is a major component of
the Strengthening America's Communities program, I have asked
HUD to give the subcommittee an overview of how the current
system is run and perhaps even ideas about how the current
system can be improved.
Also, on the first panel, we will hear from Mr. Clay
Johnson III, Deputy Director for Management at the Office of
Management and Budget; and from the Department of Commerce, Mr.
David Sampson, Assistant Secretary of Commerce for Economic
Development. OMB played a large role in creating the
Strengthening America's Communities program while Commerce will
be the chief implementer under the proposed plan.
The second panel will consist of stakeholder
representatives from the U.S. Conference of Mayors, the
National League of Cities, the National Association of Counties
and the National Community Development Association. We have the
Honorable Don Plusquellic, mayor of Akron, OH, on behalf of the
U.S. Conference of Mayors; Mr. Angelo Kyle, president of the
National Association of Counties; on behalf of the National
Community Development Association and the National Association
for County Community and Economic Development, Chandra Western,
the executive director.
Last, but not least, we have the Honorable Mr. James Hunt,
councilman for the city of Clarksburg, WV, testifying on behalf
of the National League of Cities.
I look forward to the expert testimony of our distinguished
panels and the leadership that they will provide today. Welcome
to you all.
For additional information, today's hearing can be viewed
via live Webcast at reform.house.gov on the multimedia link,
live multimedia stream.
I now yield to our vice chairman, Mr. Dent, for an opening
statement.
[The prepared statement of Hon. Michael R. Turner follows:]
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Mr. Dent. Thank you, Mr. Chairman. I appreciate this
opportunity.
Last week, I had the opportunity to spend time with many of
the housing advocates in my community who expressed to me their
concerns and reservations about some aspects of the
administration's proposal with respect to the consolidation and
proposed cuts in HUD funding generally. So I just really look
forward to hearing what you have to say.
There is a great deal of concern about HOPE VI in
particular as well as some other initiatives. So, with that, I
will stop now, and just look forward to receiving your
testimony. Thank you.
Mr. Turner. We will now start with the witnesses. Each
witness has kindly prepared written testimony which will be
included in the record of this hearing. Each witness has also
prepared an oral statement summarizing their written testimony.
Witnesses will notice that there is a timer light on the
witness table. The green light indicates you should begin your
remarks, and the red light indicates that your time has
expired. In order to be sensitive to everyone's time schedule,
we ask that witnesses cooperate with us in adhering to the 5-
minute time allowance for their oral presentation, and we will
follow that with a question-and-answer period. We will not
strictly enforce the red light; if it comes on and you are in
the middle of something, feel free to conclude.
It is the policy of this committee that all witnesses are
sworn in before they testify. So if you would please stand and
raise your right hands.
[Witnesses sworn.]
Mr. Turner. Let the record show that all witnesses
responded in the affirmative.
And we will begin our testimony with Secretary Bernardi.
STATEMENTS OF ROY A. BERNARDI, DEPUTY SECRETARY, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT; CLAY JOHNSON III, DEPUTY
DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; AND
DAVID A. SAMPSON, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC
DEVELOPMENT, DEPARTMENT OF COMMERCE
STATEMENT OF ROY A. BERNARDI
Mr. Bernardi. Good morning, Mr. Chairman, and members of
the subcommittee.
I am Roy Bernardi, Deputy Secretary of the Department of
Housing and Urban Development. And on behalf of Secretary
Alphonso Jackson, HUD appreciates the opportunity to appear
today with regard to the Bush administration's Strengthening
America's Communities Initiative.
The goal of the initiative, Mr. Chairman, as you indicated,
is to consolidate collection of 18 community and economic
programs spread across five Federal departments. And I am sure
we will get into that. The subcommittee has asked that I focus
on providing an overview of how CDBG and related HUD programs
are administered by the Department. In addition to CDBG, the
proposed initiative would consolidate and replace other much
smaller HUD programs, including brownfields development grants,
grants to Round II Empowerment Zones, rural and economic
development grants, and the Section 108 loan guarantee program.
However, I will focus most of my attention on CDBG.
The CDBG program is the Federal Government's largest single
grant program to assist local jurisdictions in undertaking a
variety of community development activities targeted to
improving the lives of low and moderate-income Americans. For
the past 30 years, CDBG has provided a steady source of funding
for housing rehabilitation, public services, public facilities
and infrastructure, and economic development activities
benefiting millions of Americans.
It's unique among Federal programs in that it may be
counted as a local government match for funding under Federal
programs that require local financial contributions. CDBG owes
its existence to the Congress and is embodied in the Housing
Community Development Act of 1974, and at that time, it
consolidated 10 categorical urban development programs into a
single, predictable, flexible program where ultimate funding
decisions were reserved to local officials.
The legislative purposes of the CDBG program have remained
unchanged since 1974: The development of viable communities by
providing decent housing; establishing suitable living
environments; and expanding economic opportunities, all
targeted principally to persons of low and moderate-income.
Currently, the law requires that 70 percent of CDBG funds
benefit low and moderate-income persons.
In 1975, the CDBG's first year of operation, there were a
total of about 600 entitlement communities. In 2005, there were
about 1,100, including 165 urban counties that represent a
funding conduit for more than 2,500 local governments. And the
State portion of the appropriation is 30 percent. And, with
that, the States allocate that money to towns and villages,
over 3,000 grants annually.
Each activity funded with these dollars must meet one of
three of the program's national objectives: Funding to benefit
low and moderate-income persons; elimination of slums and
blight conditions; and the third one is meeting imminent health
or safety threats. And, obviously, CDBG is employed by
communities in many different ways. The CDBG funds are used to
directly finance activities such as construction of public
facilities and improvements, public services, economic
development, and housing. Citing one example from fiscal year
2004, the resources used by local governments to fund economic
development activities at a level of $434 million, these
investments served to create or retain 78,000 jobs, of which 76
percent went to low and moderate-income persons. And we expect
the successor to CDBG to be even more effective in this regard.
Briefly, the administration of CDBG must comply with HUD's
consolidated planning process that requires each jurisdiction
to conduct a comprehensive assessment of its community
development needs, and this is generally a 5-year plan, and
then a coordinated effort is put into place to meet these
needs.
HUD's office of CPD through its field staff has the primary
responsibility for working with the grantees and monitoring the
grantee performance, use of funds, and compliance. This
includes, for instance, the timeliness feature which I will
talk about perhaps a little bit later of how we are able to
bring down the untimeliness with the grantees.
The Department currently monitors the use of funds and the
accomplishments of its grantees through what's called
Integrated Disbursement and Information Reporting System. HUD
has studied the CDBG formula in light of concerns about
targeting to the neediest individuals and communities.
Obviously, over time, a formula study had to be done. It was
completed on February 21st of this year, and that study
provides four alternatives to the present formula that's in
place.
Over the last 28 years, since 1978, there have been many
factors, many demographic changes that lead us to believe that
a change in the formula is necessary.
In closing, I appreciate the opportunity to describe the
CDBG program and its highlights, strengths, and weaknesses. In
my previous role as mayor of the city of Syracuse, I was
obviously able to use those CDBG dollars in many positive ways.
There are many pluses to the program, but like any program, it
needs a reevaluation, a refresh if you will, to see if we can
do it in a better way and in a more effective way.
The circumstances that make a program right for a certain
area do not continue indefinitely. We learn from experiences.
How can we better target our resources? How can we operate
effectively and set clear goals and performance measurements
for the future? So, with that, I thank you for this
opportunity, and I will be happy to answer any questions you
have.
[The prepared statement of Mr. Bernardi follows:]
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Mr. Turner. Thank you.
Now we will hear from Clay Johnson III, Office of
Management and Budget.
STATEMENT OF CLAY JOHNSON III
Mr. Johnson. Mr. Chairman, Congressman Dent, thank you for
inviting me here today. I look forward to fielding your
questions. I have a very, very brief oral statement here at the
beginning.
We want government programs to work. We are not in the
business of getting rid of programs. We are in the business of
making sure that programs work. We want the government's
community and economic government programs to work to achieve
their intended results. We believe we have an opportunity to
better structure our community and economic development
programs to get more of the intended results, which are to
create vibrant communities that would not exist otherwise.
We do not believe that the money that we are spending now
is creating the satisfactory level of intended results that
were intended by the original bills or the money that's been
appropriated for the accomplishment of these goals. We think we
have an opportunity to better target areas most in need of
assistance, to spend more money on communities where the need
is real. We think we have an opportunity to make it easier for
needy communities to access the various forms of Federal
assistance that are available to them as opposed to have them
now shop the variety of programs that potentially offer them
some assistance. And we think there is a tremendous opportunity
to build more accountability into the programs to ensure that
the focus is on what we get for the money, not on how much
money we spend.
We also think it's important that the Department of
Commerce be the lead department for this, because their
mission, which is to create conditions for economic growth and
opportunity, is more consistent with the mission of these
community and economic development programs.
So, with that statement, sir, I look forward to handling,
receiving and responding to any questions you might have.
[The prepared statement of Mr. Johnson follows:]
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Mr. Turner. Thank you.
David Sampson, Department of Commerce.
STATEMENT OF DAVID A. SAMPSON
Mr. Sampson. Mr. Chairman, it is a pleasure to join my
colleagues today to brief you on the President's Strengthening
America's Communities Initiative.
President Bush has proposed an innovative strategy to help
our most economically distressed communities get on the path to
economic growth and opportunity. And what I will do is briefly
highlight the underlying principles and then the main points of
the initiative.
While America's economy is strong and getting stronger, we
all know that that economic strength is not felt equally
throughout the Nation. As members of this committee are well
aware, there are low-income communities and communities where
traditional industries do not employ as many people as they did
a generation ago where that economic opportunity can appear to
be out of reach. President Bush believes that these communities
can make the transition to vibrant broadbased, strong economies
because of the entrepreneurial spirit, the vision and the hard
work of those who live there.
He also believes that the goal of Federal economic and
community development programs should be to fundamentally
create the conditions for economic growth, more and better jobs
and livable communities, thereby reducing a community's
reliance on perpetual Federal assistance.
Why propose such a financial reform? Well, in total, the
Federal Government administers 35 economic and community
development programs housed in seven different Cabinet
agencies. This proposal calls for the consolidation of 18 of
those programs which are the direct-grant programs. Some of
these programs, based on OMB analysis, duplicate and overlap
one another. They lack clear accountability goals, and they
cannot sufficiently demonstrate measurable impact on achieving
improved community and economic performance. Many of the
communities with relatively low poverty rates receive Federal
funding at the expense of distressed communities, thereby
undermining the purpose of the programs.
The purpose of this program is to target Federal funds
better, in a more customer-friendly, easily accessible manner.
Let me explain briefly the actual components of the proposal.
The new initiative calls for two components to the
Strengthening America's Community grant program. The first is a
formula-based economic and community development grant program
which will represent the bulk of the funds. The second
component is the Economic Development Challenge Fund which is a
bonus program modeled on the concept of the Millennium
Challenge Account which will focus on incentivizing those
communities that have already taken substantial steps to
improve economic conditions and have demonstrated a readiness
for development.
Now, finally, as we move forward, we recognize there is a
lot of hard work ahead of us with regard to the implementation
of this initiative. The administration will submit legislation
for this initiative as part of a collaboration with Congress
and with stakeholder groups, including State and local
officials, and we look forward to continued collaboration with
this committee as that legislation takes shape.
I do want to share with you that a secretarial advisory
committee is being created at the Department of Commerce. The
notice of that is published in today's Federal Register, which
will provide assistance with some of the most complex issues of
the proposal, such as setting eligibility criteria and what
accountability measures will be adopted. The administration
seeks the widest possible input to help shape the legislation
that we intend to send to Congress as soon as feasible.
The President's proposed initiative will, we believe,
position communities, regions and States to be more competitive
in the worldwide economy, increasing opportunity, employment
and creating more viable communities. And, with that, I will
close. And I look forward to answering any questions that you
may have.
[The prepared statement of Mr. Sampson follows:]
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Mr. Turner. Thank you, gentlemen.
I appreciate the opportunity for us to discuss in a
question format some of the important specifics of this
program. As I said in my opening statement, certainly the
issues that you have identified and the problems with these
programs, I think, are widely recognized. The solutions as to
how we go about reforming those or finding greater
opportunities for those programs to be effective are really the
important part of our discussion today.
And Secretary Bernardi, having served as a mayor, both from
the receiving end of CDBG and then having served in your
position with HUD on the administrating side of CDBG, that many
of the grants, moneys are used in the area of community
development, quality-of-life type projects. For example, where
an abandoned house may be burdening a neighborhood and the
property is available perhaps for open-space use, the community
was able to use CDBG moneys to address that abandoned building,
increase the quality of life for the community, and the open
space would be an amenity both for the children and the people
who live in the community, providing a gathering place in some
communities which have incredibly high density where that type
of open space is not available.
In your testimony, you indicate that CDBG has been used for
housing rehabilitation programs, public services, public
facilities, infrastructure, economic development activities.
You go on to cite that some CDBG programs include child daycare
centers, senior care programs, adult literacy and education and
assistance for the homeless. The important part of CDBG has
been that each community can tailor its needs in looking to
CDBG. And what's good for Syracuse may not be good for Dayton,
OH. What's good for Dayton, OH, might not be good for Austin,
TX. In those quality-of-life projects, the types that you cite,
how would you ever be able to fashion metrics to measure the
impact on the community for those projects?
Mr. Bernardi. Each entitlement community--and I will take
Syracuse as an example. They all operate under a comprehensive
plan. And along with that comprehensive plan there is an annual
performance report. As you know, Mayor, to have that 5-year
plan involves the entire community, the citizen participation,
the advisory council boards for the CDBG program itself. And
they put forth a 5-year plan, and that 5-year plan, each and
every year with the start of the program year, they have what
they call their annual performance plan. And that tells you
what is going to occur during that particular point in time in
the year. And then that money is accessed through the grant
program, and then there is an annual performance report at the
end of the year which we receive which lists the
accomplishments and lists the goals and objectives that the
community wanted to undertake.
I understand full well we used some of our CDBG dollars for
a senior citizens center, for adult literacy, for child care.
We used it for infrastructure, for sidewalks, water, sewer. We
used it for economic development; obviously, always making sure
that it had a benefit to at least better than 70 percent of low
and moderate-income individuals. I have utilized the area
benefit, which perhaps you have, where it's 51 percent,
utilized the jobs benefit and the housing benefit. People, if
they qualify for housing, they have to be low-income. People
that qualify for multifamily housing, that multifamily housing
unit has to be better than 51 percent. So I'm familiar with the
program, and the program has served us very well.
At the same time, we understand that there are many
communities in this country that are severely distressed.
Everyone can point to distress. But the severely distressed
communities, the focus of this plan will be to provide as many
resources as we possibly can in communities that have high
unemployment, communities that have higher poverty rates, in
communities that have lost jobs because of severe distress. And
this proposal will embody all of the community development
programs into this new proposal that's proposed to Commerce.
Mr. Turner. Of the projects that you listed where you had
undertaken these community development projects as mayor and
you used CDBG dollars, did you have readily available to you
other sources of funds to accomplish those? I mean, did the
CDBG moneys make those projects possible?
Mr. Bernardi. Well, of course, the flexibility of the
program is one of its strengths. And the fact is that you could
utilize CDBG dollars as a match for other Federal funding. And
I believe it's the only program you can do that with. And, yes,
to utilize that money to begin an economic development
initiative--for example, I used it for demolition. You spoke of
that one house. We did an awful lot of demolition with CDBG
dollars.
Mr. Turner. You served as assistant secretary of the
community planning and development, primarily responsible for
administrating CDBG, prior to your current position. What type
of staff structure, what are the number of people that are
involved in order to administrate this program?
Mr. Bernardi. In the community planning and development
program area at the Department of HUD, there are approximately
800 employees; 600 are in the 42 field offices, and 200 are
headquartered here in Washington, DC. Of the 200 that are in
headquarters, approximately 40 devote almost all of their time
to the CDBG program and the loan rate loan guarantees. In the
field, with those 600 employees, I would guess that all of them
devote at least a third of their time meeting with the grantees
and doing the things, the monitoring and doing what's necessary
to ensure that the program is run correctly.
I would like to say that one nice accomplishment that we
had is that, back in 2001, there were 300 communities in this
country that were not spending their money in a timely fashion.
And by that, we define that as, if they have more than 1\1/2\
times their program year allocation in the line of credit, then
they are not doing then what they should be doing. We have been
able to bring that down to under 50 entitlement communities,
and from $370 million that was left unspent, we are under $50
million.
So I think the program, there are good people that operate
the program. And each 1 of those 42 field offices services the
better than 6,000 or 7,000 recipients of those dollars.
Mr. Turner. If Congress should agree that these programs
need to be reformed but does not agree that they should be
transferred to Commerce, does HUD have the capacity to
undertake reform and administer these programs through a
reformation of them?
Mr. Bernardi. Well, Congressman, every program can be
improved upon. And I believe that, obviously, we have good
employees. They have the capacity, the experience, the
institutional knowledge to improve on any program.
I would like to add just a little something, if I could.
The fact of the matter remains is that we are constantly
looking, under difficult budget constraints, ways in which we
can provide additional resources to those people that need it
most. Congressman Dent mentioned the HOPE VI program, but I
would like to just add as an aside, with the $1.1 billion
increase that we have in our 2006 budget for our Section 8
tenant voucher, that kind of pressure on HUD makes it very
difficult--even if the program were to remain in HUD, the CDBG
program--makes it very difficult to have the dollars that are
necessary to do the things that you would like.
Mr. Turner. Thank you.
Mr. Johnson, one of the concerns obviously from the
stakeholder community has been their participation in the
formulation of this proposal. In your comments, you indicate
that ``we worked with agencies and stakeholder groups to find
ways to improve targeting as well as performance and
accountability key elements of this proposal.'' Could you
describe the process that you went through in looking for input
from stakeholders in putting together this program and its
recommendations?
Mr. Johnson. I can't describe it in the detail you are
asking for. The people that were involved are sitting here
behind me. But I could give you a written description of it
afterwards.
But there are associations and interest groups that work
with us, and they have meetings, and we have met with them and
met with the Departments. And we evaluated these programs and
determined what the opportunities were to do this better. But I
don't have the detail that you are asking for.
Mr. Turner. I would appreciate it if you would provide us
that.
Mr. Johnson. I would be glad to do so.
Mr. Turner. Because most of the groups and organizations
that we have been involved with in that have experience in
working with these programs, who our recipient stakeholders,
believe and feel that they have not been included, and they
have not had an opportunity to participate in making
recommendations in the formulation as planned.
They obviously have an extensive amount of knowledge and
expertise, and many of them hold an opinion similar to all of
the testimony that you have given us today of the need for
reform but have divergent opinions as to the current proposal
that we have in front of us.
Mr. Johnson. OK.
Mr. Turner. Would you agree with Mr. Bernardi that if
Congress' decision was to leave the programs in HUD but to work
toward the goals of performing them, that HUD would have the
capacity and the ability under the administration's leadership
to accomplish that?
Mr. Johnson. Well, there's the physical capacity. Do they
have the bodies to administer the program. And I think the
answer to that is yes. But I think the question is, is HUD's
mission better aligned with the desired results intended by
these community and economic development programs, or is
Commerce's mission better aligned? And our proposal suggests
that Commerce's mission is more in keeping with the intended
results with these community and economic development programs.
Housing is a means to an end. And the end is more vibrant, more
vibrant economic conditions where they would not exist
otherwise. That is the business the Commerce Department is in,
and we think that it makes much more sense. Their mindset of
what they do at the Commerce Department is much more consistent
with what we want these programs to do.
Mr. Turner. In your testimony, you talked about the
accountability measures that are going to be applied here. And
in that, one of the issues raised is housing, and other areas
of economic development appear to relate to programs that are
still going to remain in HUD. So it appears that by shifting a
portion of these programs from HUD to Commerce and with HUD
continuing to administrate a great deal of its programs that
relate to urban development, that you are going to actually
create some duplication. Do you have concerns there as to how
these two agencies, having dual relationships and
responsibilities, are going to operate together?
Mr. Johnson. I don't have any concerns about it. We are
reducing duplication with this proposal; we are not increasing
duplication.
Mr. Turner. Seeing my time is up, I will turn to Mr. Dent
for another 10-minute question time period, and then we will go
for a second round.
Mr. Dent. Thank you, Mr. Chairman.
I mentioned a few moments ago that I'd attended a public
session last week with my Lehigh Valley Coalition on Affordable
Housing. And their interpretation of the proposal, the
administration's proposal, is that HUD's budget will be cut
from $32.4 billion to $28.5 billion. They are just simply
looking at the numbers and saying, this may be a consolidation,
but they are trying to cut us in the meantime. And I guess
where I am going with this question is this: By consolidating
these 18 programs, I can see the logic in transferring perhaps
some of these programs to Commerce--the Brownfields Economic
Development Initiative, for example, and probably the Urban
Empowerment Zones, those grant programs--I can see the logic in
that, having come from a State like Pennsylvania where we took
our Department of Commerce and merged it with what was then
called our Department of Community Affairs, which was kind of
like a housing and community development arm. We put them
together and created one department. It worked pretty well.
But we brought the expertise in housing and community
development from what was community affairs to commerce. And I
guess where I'm going with this is that, you know, have you in
Commerce thought enough about your ability to deal with, for
example, housing issues? Do you have the expertise there on
staff to handle these types of programs?
Mr. Sampson. Well, Congressman, the first response is the
core housing programs remain at HUD under this proposal. And I
think it's important to recognize that. And a number of those
are even strengthened and plussed up in the President's 2006
budget request.
With respect to leveraging expertise, we clearly understand
that in consolidating all 18 of these programs, the new entity
is going to have to leverage subject matter experts within the
different programs in creating this new entity within Commerce
that will be responsible for administering Strengthening
America's Communities.
Commerce has a very extensive grant portfolio currently. We
manage about a $2.3 billion grant portfolio of community and
economic development grants currently. But we clearly will have
to leverage the subject matter expertise and the lessons
learned from other agencies and other programs in creating this
new program.
Mr. Dent. I guess, just drawing on my own experience, when
we went through this in Pennsylvania, there was a lot of
initial gnashing of teeth about merging these two programs or
these two departments into one, a lot of opposition. And at the
end of the day, it worked out pretty well. I guess this gets
down to outreach. I mean, some of the folks that had initial
reservations about merging programs like these were coalitions
on affordable housing.
Have you done any meaningful outreach to these groups and
others like them around the country to let them know you are
trying to strengthen their communities? Because they are simply
seeing a consolidation and a cut, and they see this as an
attack on their housing programs and homelessness initiatives.
Mr. Sampson. Well, it's an excellent point. Let me say that
we have already conducted, since the President released his
budget on February 6th, a number of briefings for interest
groups that were held at the White House in which many of the
professional associations and groups were invited. We had
conducted group briefings. I have conducted individual
briefings for a number of specific associations. This past
weekend, I was in Key West, FL. I briefed the executive
committee of the U.S. Conference of Mayors.
We are aggressively reaching out to discuss the underlying
principles and the intent and the goals behind the President's
proposal with all affected stakeholders around the country,
even those that have expressed in very clear terms their
opposition to it. We believe that dialog is essential. We are
going further, as I mentioned in my oral testimony, that the
White House has asked the Secretary of Commerce to establish a
secretarial advisory committee, which will include a balanced
geographic and interest group representation from around the
country now that the proposal is out on the table and we move
toward crafting the legislation that will be forwarded to
Congress to deal with some of the most complex issues that you
have identified.
Mr. Dent. Thank you.
With respect to CDBG--and perhaps, Secretary Bernardi, you
might be able to help me with this. In my communities, my
cities, I have Allentown, Bethlehem, and Easton. I know some of
those municipalities currently utilize CDBG funds for example,
code enforcement, to pay their code enforcement officers out of
that. And they use it for other things. But are you finding
that there are some communities that are not appropriately
spending that CDBG funding? As you mentioned, there is a great
deal of flexibility with the dollars, and that is sort of the
beauty of it, in my view, and using those dollars--at least
where I live, it seems to be for a lot of important community
economic development issues. And I would put code enforcement
under that. It is an important part of our housing and
community development strategy.
Mr. Bernardi. Congressman, as Mayor of Syracuse, we
utilized CDBG dollars for code enforcement as well. The fact is
that, with the entitlement communities, the urban counties and
the States, as I mentioned earlier, there are 6,000 or 7,000
entities that are receiving dollars, and there's over 100,000
organizations that receive this kind of money each and every
year. Our monitoring is extensive; it's intensified. We make
sure that, where there is a difficulty, we quickly go in there
and do what we have to do. And if we find that the money has
not been spent according to the national objectives or
appropriately, that money is taken back. It has to be paid back
to the CDBG dollar program by other moneys. They can't use CDBG
funding that they have or that they are going to receive.
Mr. Dent. You mentioned about 1,100 or so communities are
eligible for CDBG grants. I guess those are all entitlement
communities?
Mr. Bernardi. Those are entitlement communities, cities of
a population of over 50,000.
Mr. Dent. And what percentage of those communities will
remain eligible under the Strengthening America's Communities
program? Do you have any idea?
Mr. Sampson. I can take a stab at that, Congressman. First
of all, the eligibility criteria have not yet been determined.
That is something that we believe is important to engage the
stakeholder communities around the country as well as with
Members of Congress before that eligibility criteria is
determined. I can share with you what the intent of the
proposal is. The intent of the proposal is that most
entitlement communities will continue to remain eligible. The
intent is to graduate from the program the wealthiest
communities in America who are still entitlement communities.
The intent is to graduate the wealthiest communities in America
and redirect that funding so that those communities who remain
eligible actually receive more money than they currently do.
But the specific line where that eligibility criteria will be
drawn has not yet been established.
Mr. Dent. OK. I have no further questions at this time.
Thank you.
Mr. Turner. Mr. Sampson, I understand you are indicating
that you cannot give us any information about the current
eligibility criteria under this proposal; that you are going to
be looking to a committee task force, if you will, that comes
together for the purpose of advising you on that. However, both
in your testimony and in written and oral, you make some
statements about the outcome of that eligibility. You indicated
that some wealthy communities will graduate from the program,
meaning that they will lose their current CDBG eligibility in
order to be able for you to focus on the most distressed
communities. And you've indicated that there are communities
that are currently entitlement communities that will receive
more money even though the overall budget for this program has
been cut--consolidate all the programs from the 2005 budget
number; it's a reduction of 30 percent, which if you look at
what the appreciation would have been, it's probably a greater
cut than that. So you've got less money, but you're indicating
that they are going to receive more money. But the eligibility
criteria is not yet defined. It would seem to me that you have
done some initial calculations to determine upon what you base
that statement. Could you share with us or this committee what
your assumptions are that you've undertaken to indicate to us
that the entitlement communities that are distressed will be
receiving more money, not less?
Mr. Sampson. What I will share with you is that is the
intended outcome of the consolidation and the restructuring. We
think that can be achieved on a couple of levels: First of all,
by reducing 18 bureaucracies to administer the current 18
programs; second, by targeting the funds much more tightly to
the most distressed communities in America, should enable us to
achieve that goal. There simply has not been an effort at this
point to draw the line on the eligibility criteria. What we
have done is looked at spreadsheets of data where you look at
multiple factors. You look at poverty rates. You look at
unemployment rates. You look at the loss of firms as possible
components of the new formula. Depending on how you weigh, any
one of those criteria will change the eligibility outcome, and
that simply hasn't been done yet. We are not sharing that with
you, not because we don't want to share it with you; we are
just telling you that hasn't been done yet. All we have is a
spreadsheet of each community and those different factors.
Now, I can tell you, as you look at that, there are clearly
a number of communities in America where you have--I think the
number is 38 percent of current HUD CDBG grants go to
communities with poverty rates below the national average. And
so that is the broadbrush picture on which we base that. I
think that if you look at some of that data and you see
communities with poverty rates of 2 to 3 percent, it's pretty
clear to us that is a good candidate for retargeting those
funds to communities with poverty rates of 20 to 26 percent.
Mr. Turner. Secretary Bernardi and Congressman Dent have
both indicated that code enforcement is one of the areas that
CDBG moneys are currently used for by cities. Certainly, in the
city of Dayton, that is an item that I am familiar with, that
they have used CDBG moneys for. Not only is it an eligibility
area, it is also an area that HUD has looked favorably upon
cities utilizing their money for. Recognizing that, throughout
this country, cities are currently under a budgetary crisis,
you can't pick up a paper anywhere in this country where there
is an urban core and not read an article about the struggles
that the cities have undergone as a result of the economic
downturn. And recognizing that some of the CDBG moneys
currently have been directed toward code enforcement, which
would be considered a basic service or operation of the city,
it's clear that for these programs to terminate and a new
program to begin with different eligibility criteria and
different utilization standards, that the cities' bottom line
of their operational budgets will be impacted, which of course
will result in them making decisions on the staffing level for
code enforcement and ultimately to basic services such as
police and fire.
Have you taken that into consideration in your proposal and
looked to the issues of the cost of transition for communities?
Mr. Sampson. That's an excellent question. Let me address
it at two levels. First of all, the question presupposes that
activities such as code enforcement would not be eligible
activities, and I don't think that's a safe assumption. That
determination has not been made. That's the sort of question
that we want the input from the secretarial advisory committee
and stakeholders around the country.
What we are asking for is that there be a very clear
connection between the local community's strategy for
expenditure of those funds and how it is actually going to
fundamentally, at the core improve the business environment and
the community viability. And if that can be demonstrated and if
there are performance metrics that can associate with that
developed by the community, we would envision very broad
flexibility in terms of how local communities can use those
funds.
With respect to the second part of your question,
transition, clearly transition issues moving from an existing
program to a new program have to be taken into account. And
that is particularly one of the issues that the secretarial
advisory committee will be charged with, is to look at the
range of transition issues. The secretarial advisory committee,
contemplating that there will be five ex officio members in
addition to the 25 citizens from around the country, those ex
officio members representing the five Cabinet agencies who will
have programs consolidated. We believe that they need to be at
the table so that all of those transition issues can be
addressed and make sure that it is a seamless transition that
does not disrupt communities nor their budgets.
Mr. Turner. Are you familiar with the comprehensive
planning process that Secretary Bernardi mentioned concerning
HUD and the 5-year plan for home and CDBG dollars?
Mr. Sampson. I'm familiar with the comprehensive plans at
the city level, having worked with those in the past. I'm not
sure that I understand the particular component that he
referenced about HUD's----
Mr. Turner. I was wondering if you could contrast for us
what the planning process that you would expect in the
Department of Commerce versus the comprehensive planning
process that HUD currently uses.
Mr. Sampson. I believe, sir, that we have to some degree an
ability to mutually certify comprehensive plans from one agency
to the other. I will be happy to go back and look at that. But
what we envision is a community strategy that takes into
account the fundamental market drivers of what is going to
attract new private sector investment in the community that
will drive new job creation, new tax revenue for those
communities and make sure that it is a market-driven strategy.
I think one of the clear lessons that we have learned,
looking at the research data over the last decades, is that
those communities that are making the most improvement in terms
of their economic and community viability are those that have
had a strong bias toward integrating and taking advantage of
market opportunities. And so we envision a comprehensive
strategy that will have strong connection with market
opportunities to leverage private sector investment for
community revitalization.
Mr. Turner. In your testimony, you identify some categories
that you see as potential metrics that would be applied to the
program, both for the planning process and ultimately if the
community is not successful in using the funds that might be
available to them. Many of the topics that you identified in
your testimony may be categories that are either unrelated to
the grant possesses itself. For example, you identify violent
crime. I don't know to what extent your program is going to be
providing funding for police services or for criminal justice.
And then the second is that you identify No Child Left
Behind. And many communities have separate school boards and
then separate city councils and county commissions, so that the
receiver of the CDBG dollars, the reformulated dollars, the
Strengthening America's Communities dollars would have no
jurisdiction or ability to impact that. Are the items that you
identify in your presentation, the metrics items that you
intend to move forward with this? Is this also something that
the community is going to determine as to what applies?
Mr. Sampson. These are illustrative in nature and not
definitive at this point or positive. What I would say, the
criteria that you have mentioned are specifically those for the
bonus fund or the community challenge fund, which is a bonus
over and above the basic formula of funding grant opportunity.
We know, first of all, that issues such as crime rates and
educational performance are absolutely critical issues in
building a positive business environment to attract new private
investment into a community.
Second, we would hope that by providing incentive funding,
that in those cases that you have mentioned where you have
separate governing bodies for schools and cities, that it would
force a much closer or incentivize a much closer collaboration
on addressing these fundamental issues to economic and
community performance with the availability of incentive
funding out there.
Mr. Turner. For the core grant program, you identify
increasing home ownership. And one of the discussions that
we've had is that HUD will retain the responsibility over the
housing grant programs that go to these communities. Isn't that
going to result in duplication of effort between Commerce and
HUD?
Mr. Sampson. I don't believe so, sir. Clearly, one of the
most important drivers in building a positive business
environment is the availability of affordable housing. There
are many communities around this country that simply cannot
successfully attract new business investment because of the
lack of affordable housing. The core mission of HUD remains the
housing mission. But what this encourages is the development of
an economic development strategy, to recognize the importance
of housing and affordable housing as a component of building a
comprehensive positive business environment.
Mr. Turner. Thank you.
Mr. Dent.
Mr. Dent. Thank you.
Mr. Sampson, I thought I heard you say something. Perhaps
you could clarify the statement. You were talking about
communities that had 2 or 3 percent poverty that were currently
receiving CDBG funds. They were entitlement communities, I take
it.
Mr. Sampson. That's correct, sir.
Mr. Dent. Could you get us a list of those communities? I
would love to see those.
Mr. Sampson. I can give you an illustrative list. I don't
have a comprehensive list. But communities such as Palo Alto,
CA; Boca Raton, FL, Scottsdale, AZ. Newton, MA, Neighborville,
IA--or, Neighborville, IL. Neighborville, IL, for example, has
a poverty rate of 2.2 percent. And when you look at other
communities in that region, such as Gary, IN, with poverty
rates of 26 percent, Chicago of 20 percent, the administration
believes that it is time to reprioritize these poverty
alleviation funds that are going to communities that do not
have high rates of poverty.
Mr. Dent. I would agree with you. How are you defining
poverty? AFDC families? Or what's the criteria?
Mr. Sampson. I don't know what--it's the standard
definition, the Census definition of poverty. I'm sorry, sir.
Mr. Dent. I just find that remarkable. Where I live, I
guess cities of Allentown and Bethlehem would be considered
entitlement communities, or 50,000 people, but the poverty
rates are considerably higher. I find it remarkable that we
have communities that are that relatively affluent that are
receiving these programs. I see CDBG as a program that is
supposed to support essentially, I won't use the term
distressed, but declining or distressed communities I guess is
the proper term.
Mr. Sampson. Well, Congressman, we believe, the
administration believes that it is fundamentally not defensible
in this kind of environment.
Mr. Dent. I would agree with that. There is also concern,
too, with how Commerce adjusts this so-called regional bias,
the regional bias. And poverty is considered as it is dictated
by the Census Bureau. And as you just mentioned, most of the
areas in poverty are found in the southwest region of this
country. Will your Strengthening America's Communities program
provide a substitute for poverty in calculating which cities
and States are eligible for these grants to prevent that bias?
Mr. Sampson. Congressman, I'm aware that there is an
ongoing effort at the Department of Commerce and at the Census
Bureau to look at modernizing the definition of poverty. I
think that is something that is ongoing that I don't--it's not
within my portfolio, so I can't speak definitively to that. But
the goal of this program is to ensure that whatever measure
that we determine the criteria, that it will clearly pass the
sensibility test; that anyone could look at these communities
and say these are some of the most impoverished communities in
America. And while we might disagree at the margins or exactly
where that line is drawn, I believe that when you look at the
broad scope of entitlement communities, there is going to be
broad consensus that there are communities that are wealthy
communities, and then there are communities that are clearly
economically distressed, and that we ought to be able to
achieve broad consensus as to what those most distressed
communities are.
Mr. Dent. And when you send over that list of communities
that are relatively affluent receiving these CDBG funds, I
would also like to see how much funding they're actually
receiving and how the formula plays out--I'm trying to
understand this, I'm new here. I'd like to see where I am in
Allentown, or Bethlehem, PA, where we have relatively poor
communities; I would like to see what those numbers are that we
receive compared to those communities and see if the funding is
driven based on poverty, or just the fact that you're over
50,000 people, does that entitle you what percentage of the
funds?
Mr. Sampson. I can tell you--I'm not the expert here on
formula, but there are a number of factors. It is more than
just population.
Mr. Bernardi. That's true.
Mr. Dent. I would just be curious to see what those
relatively affluent communities are receiving.
Mr. Bernardi. They receive, per capita, less than,
obviously, the communities that are more distressed. It's based
on formula A and formula B, and whichever formula benefits the
community is the formula that HUD provides to that community.
There are communities, as the Assistant Secretary
indicated, that are affluent communities, but on a per capita
basis they receive, based on the formula, considerably less
amount of money.
Mr. Sampson. And, Congressman, if I could just add to that,
most of the discussion this morning has focused on urban areas.
I would also point out that some of the most impoverished areas
of our country are rural and small communities that are not
entitlement communities, and we believe that there is a very
compelling case to be made that we need to focus on those
areas, and not just have the entire discussion on urban
America.
Mr. Bernardi. That's true; but if I can add, the States
receive a CDBG allocation of 30 percent, and they provide
resources to the towns and villages that are impoverished.
Mr. Dent. Well, how about a bureau where I live; we have
many municipalities--we're a very densely packed area, but
multiple municipalities, many of them are not entitlement
communities because of their population, below 50,000, small
bureaus, for example, but are contiguous to the cities. How
would they be impacted? I mean, they're not really rural
communities.
Mr. Bernardi. Well, the State of Pennsylvania----
Mr. Dent. Pennsylvania would take the 30 percent, and
then----
Mr. Bernardi. The State of Pennsylvania receives an
allocation from HUD, along with the other 49 States, and they
disperse that money to the communities that they ascertain
through a process that are in most need.
Mr. Dent. Thank you. And again, I just wanted to finish
where I began in the first round of questioning.
Some of the consolidations may make some sense logically to
me as I look at this, just from my experience, particularly in
that brownfields area in the urban empowerment, because I
believe that Congress should have the capacity to manage those
types of programs; but I get back to the housing initiatives,
and that's where my main concern is with the administration's
proposal. By consolidating, will we have better programs if the
capacity may or may not be there in Commerce to deal with these
types of programs where HUD has had a great deal of expertise
over the years?
Mr. Bernardi. We have a home program, as you know,
Congressman, and that's a $2 billion budget. It's an increase
in 2006 over 2005 that we're requesting in the American Dream
Downpayment Initiative, which is the President's initiative to
provide first-time home ownership for minority home ownership
in this country, and the goal is to have 5\1/2\ million more
minority homeowners by the end of the decade; and we're at 2.2
million right now, 40 percent of that goal, and we're very
proud of that. The home program basically goes to the
construction of affordable housing for low-income Americans.
It's a very targeted program. Those that qualify have to be at
80 percent or less median income.
So we've done very well when it comes to home ownership in
this country. As you know, it's at an all-time high of 69.2
percent; minority home ownership is over 51 percent--first time
ever over 50 percent--in the last quarter of 2003. So this
administration, through the Department of Housing and Urban
Development, Secretaries Martinez and Jackson have really
concentrated on providing home ownership opportunities to
deserving Americans, low-income Americans.
Mr. Dent. And I would concur. And I would also just add
that at least where I live, a lot of these types of funds have
been used to help us lower the density of our populations where
we have what were once unoccupied residences, rowhomes that
became three multiunit apartments, raising the density, more
trash in the streets, cars, kids in the schools and all that,
and we've done a reasonably good job of trying to deconvert
back to an owner-occupied setting. And so we've seen some
success with that.
I guess in conclusion the only thing I would say is that
HOPE VI, I know your goal there, too--and this is a little off
track, I guess, but HOPE VI, you propose to eliminate that
program this year. I guess your goal is to try to reduce or
eliminate the 100,000 or so what I call old housing
developments, but people might call them projects, I guess. We
have a very old one in my community, and we have a very
aggressive plan, and the timing of this isn't great for us. You
did a nice job of getting rid of 100,000 units apparently, but
not where I live. And there is a great deal of interest in the
cities of Allentown and Easton regarding HOPE VI, and I'm
hoping that it can be continued at least for 1 more year.
Mr. Bernardi. Congressman, the HOPE VI funding, there has
been 120,000 distressed units during the life of that program
that have been taken down, and 88,000 was the number that when
that program initiated 5 years back or so that were considered
distressed; so we've done over and above that.
The fact of the matter is there is an awful lot of money
that's in the pipeline, I believe it's over $2 billion, and we
would like to see that money move forward and provide the
opportunity to demolish those kinds of structures, and at the
same time provide housing for the folks that live there. As you
know, our budget for 2006 calls for the rescission of that $143
million.
Mr. Dent. And my only point is that the moneys intended--
we're going to spend it well in my community, should we get it;
it's going to be some very aggressive rehabilitation of what
have been distress areas, and we will do a great deal to
enhance the community.
Thank you.
Mr. Turner. Thank you.
Gentlemen, with that, we will end our questioning. I will
ask you if you have any additional statements or any thoughts
that you want to add to the record.
Mr. Bernardi. Just thank you for the opportunity to be
here, and we will continue the dialog.
Mr. Turner. Great. We thank you for participating and for
your input. This is certainly an important discussion.
We will go to our panel two, then. Thank you, gentlemen.
Turning to our second panel, then, which includes
stakeholders from the U.S. Conference of Mayors, the National
Association of Counties, National League of Cities, National
Association of Local Housing Finance Agencies, the National
Association for County Community and Economic Development, the
National Community Development Association, the National
Association of Housing and Redevelopment Officials, Council of
State Community Development Agencies have submitted a joint
testimony to our committee.
We have appearing for oral testimony Mr. Don Plusquellic,
president of the U.S. Conference of Mayors; Mr. Angelo D. Kyle,
president, National Association of Counties; Chandra Western,
the executive director of the National Community Development
Association, on behalf of the NCDA and the National Association
for County Community and Economic Development. We also have Mr.
James C. Hunt, who is a councilman, city of Clarksburg, WV, who
will be testifying on behalf of the National League of Cities.
For the second panel, as you heard from the first panel, it
is the policy of this committee that all witnesses be sworn in
before they testify. I would ask that you please rise and raise
your right hands.
[Witnesses sworn.]
Mr. Turner. Let the record show that all the witnesses
responded in the affirmative.
We want to welcome you, and we appreciate your testimony
today and your participation in what obviously is going to be
an important discussion on not only about the successes or the
problems that these programs that have been targeted represent,
but also the recommendations by the administration and other
ideas or thoughts that you might have as to how these programs
may be approved and the importance of them to your community.
We will begin with Mayor Plusquellic, president of U.S.
Conference of Mayors, and mayor of Akron, OH.
STATEMENTS OF DON PLUSQUELLIC, PRESIDENT, U.S. CONFERENCE OF
MAYORS; ANGELO D. KYLE, PRESIDENT, NATIONAL ASSOCIATION OF
COUNTIES; CHANDRA WESTERN, EXECUTIVE DIRECTOR, NATIONAL
COMMUNITY DEVELOPMENT ASSOCIATION; AND JAMES C. HUNT,
COUNCILMAN, CITY OF CLARKSBURG, WV, ON BEHALF OF NATIONAL
LEAGUE OF CITIES
STATEMENT OF DON PLUSQUELLIC
Mr. Plusquellic. Thank you. Thank you very much, Chairman
Turner.
First I would like to thank you and the other members of
the subcommittee for inviting the Conference of Mayors to share
our thoughts about this proposal to virtually eliminate the
Community Development Block Grant Program.
You were a strong leader with the Conference when you were
mayor of Dayton, and we appreciate your continued leadership in
addressing the issues before the communities of our Nation.
I am also very pleased to be here today with local
government colleagues and others supporting this effort that we
have undertaken to oppose, and I mean 100 percent unanimously
oppose, the budget proposal that would eliminate the CDBG
program by merging it with 17 other programs and moving it to
the Commerce Department, and, as you pointed out in your
opening statement, cutting the overall funding by 30 percent.
We stated this position when the proposal was first
mentioned and announced that we had no prior consultation with
anyone on this issue, and we unanimously reaffirmed this
position during the last week's winter meeting in Florida where
we met with Dr. Sampson and told him directly of our
opposition.
CDBG has been successful for 30 years, and based on that
success, the Nation's mayors urged Congress to continue the
program's current funding and leave it in the Department of
Housing and Urban Development. Our written statement, joint
statement, has been previously submitted for the record, and it
is replete with that, or it shows clearly the outstanding
performance of CDBG over the 30 years. I won't bore you with
those numbers, but it has created in just the last year 78,000
jobs. Nearly 160,000 households receive housing assistance, and
of that number 11,000 became new homeowners, a priority of
President Bush. A number of other statistics that are in that
report, they point out the proud record that we have of using
these HUD funds wisely. I might also mention that the HUD Web
site has further information on the success.
In Akron we've used these funds to clear dilapidated or old
houses that have outlived their usefulness, and we've helped
leverage private sector developers to come in and build new
housing in our oldest neighborhoods. We've helped induce the
private owner of a grocery store chain to open in an area that
was not served with a grocery store in many years. And we've
helped senior citizens, assisted handicapped children, and,
again, helped new homebuyers to purchase homes.
Much has been said, and you heard today, about OMB's rating
of CDBG and this perceived lack of performance outcome. First,
I know the national organizations representing appointed
officials and elected officials worked for a year with OMB to
try to develop new performance outcome measurements, and we
were very disappointed that OMB turned aside an agreed-upon
framework of sound performance measures instead of the
proposed--and instead proposed elimination of CDBG.
And second--and I believe this is most important, it is to
me--the performance ratings, talking about leveraging private
sector funds in particular and looking at the outcome in just
raw numbers is not only misleading, I use a clause that many
have used: ``It may be factually correct, but it's
inferentially wrong.'' It infers that somehow we're doing
something with these moneys other than what was intended, and
that we're not meeting some performance standard, that it would
be easier to measure and to achieve if we were doing that out
on some green pasture in some urban sprawl area. And I have
made an analogy to two doctors, one working in sports medicine
with 16, 17, 18-year-olds, and others working with old guys
like me. How much time do you think it would take me to come
back from an injury with all the arthritis I have--I was going
to mention this to Mr. Johnson and compare him, and just
suggest how our grandkids might respond to good doctoring. And
if you measure that doctor working with a sports medicine
clinic and the time that it takes elderly people to come back
from injuries, clearly it's not the same scale. We're talking
about two different situations.
The CDBG money is used in some of the most distressed and
difficult areas in the community, and yet they're some of the
most important, because what we do is keep from allowing that
decay from older buildings, older structures from spreading,
and we thereby bring back the whole community.
There are pockets of poverty in almost every community
across this country, and it's important to remember that when
they start talking about 38 percent going to communities that
are below the poverty line, I think one of the most important
things that we've done is reach out to the private sector, and
the comments from groups like the Real Estate Round Table and
International Council of Shopping Centers who are standing with
us are most important because they recognize the benefit of
these CDBG funds in doing the kinds of things that are vitally
necessary to bring back those older neighborhoods.
And so I hope this committee and the Congress will
recognize the great work that's been done across our country. I
look forward to working with you.
And, Congressman Turner, as you know, in our time working
together in Ohio, I have a pretty good record of managing the
city of Akron for 19 years without raising city income tax for
city activities or city purposes. During the 1990's when money
seemed to be flowing into every city, we were right-sizing by
cutting employees. I'm not one to look at programs and want to
see a lot of waste.
We are perfectly happy, when we save this program in HUD
and save this funding level at $4.7 billion, to sit down with
you and anyone else here in Washington to try to improve the
program; but cutting it does no one any good and will harm the
ability of communities across this country to address some of
our most pressing needs.
I thank you very, very much for the opportunity to testify,
and I look forward to working with you, and certainly to the
questions that you and the committee members may have. Thank
you.
Mr. Turner. Thank you, Mayor.
[The prepared statement of Mr. Plusquellic follows:]
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Mr. Turner. Next we will hear from Angelo D. Kyle,
president, National Association of Counties.
STATEMENT OF ANGELO D. KYLE
Mr. Kyle. Thank you, Mr. Chairman, Congressman Turner. We
appreciate this opportunity to testify this afternoon.
My name is Angelo Kyle. I am a county commissioner from
Lake County, IL, and I currently serve as president of the
National Association of Counties, representing the 3,066
counties in the United States. We appreciate this opportunity
to testify.
Mr. Chairman, you have asked us to question and answer
whether the Strengthening of America's Communities Initiative
is the right step toward greater efficiency and improved
accountability. Our answer is a resounding no.
In our opinion, based on 30 years of experience in Federal
community development programming, this initiative is not the
right step. The right step is to maintain the CDBG program and
incorporate the performance measures, negotiate it with OMB and
HUD.
HUD's own data tells us that in fiscal year 2004, over 23
million people were assisted by the program. Most of these
people are of low and moderate income, especially the elderly
and the disabled.
For more than 30 years the program has created a unique
flexible and valuable partnership between the Federal, State
and local governments that is both effective as well as
beneficial. In fiscal year 2005, 177 county governments
received over $600 million that will create and assist county
governments with activities designed to create jobs, leverage
private investments, rehabilitate housing units and improve the
lives of citizens through a range of service programs.
In Los Angeles County, CA, CDBG has been used to create the
largest high-tech business incubator in California, the
Business Technology Center. Since 1998, this center has created
more than 475 jobs and revitalized a formally blighted
neighborhood.
My own home of Lake County, IL, will use its $2.9 million
fiscal year 2005 allocation to assist with a range of programs
and activities such as daycare, transitional housing, homeless
assistance, fair housing, emergency food assistance, homeowner
rehabilitation, first-time homebuyer assistance, and employment
training, as well as for important infrastructure improvements,
public services, and economic development activities.
As president of the National Association of Counties, I
have made home ownership one of my primary Presidential
initiatives, especially for our first responders. The very
people that we expect to pay the ultimate price, to serve and
protect our communities, cannot pay the asking price to afford
to own a home in the same communities in which they serve.
The administration has chosen to completely eliminate CDBG
by consolidating it along with 17 others in this new program.
We oppose this proposed consolidation. First, the new program
would focus solely on economic development. Activities
undertaken with CDBG funds must meet at least one of three
national objectives: to principally benefit low and moderate-
income persons, prevent slum or blight, or to meet urgent
community development needs that pose a serious and immediate
threat to the health, safety and welfare of the community. By
emphasizing factors such as poverty and job loss, the
consolidation is silent with respect to the myriad activities
CDBG funds that meet those national objectives.
The new consolidated initiative would leave these
activities at the State and local level without a Federal
funding stream, meaning that the Federal Government would be
getting out of the business of community development. There is
a vital role for the Federal Government to play in this arena.
Community development is a related but essential complement
to economic development activities. Congress must preserve the
functions of both community and economic development at the
Federal level to maintain effective intergovernmental
partnerships that create and sustain viable communities.
Second, criticisms of CDBG are largely as a result of an
inaccurate assessment of the program, using the Office of
Management and Budget's program rating assessment tool, also
known as the PART. The PART fails to consider the broad and
wide-range nature of the program, as well as the role of local
governments in designing activities using CDBG that address
challenges that are of particular value to their community.
Third, the consolidation reflects a flawed assumption that
the CDBG dollars are no longer needed in many of the Nation's
blighted urban areas that are located in high-income counties.
I can assure you that there is a need in every part of this
country. NACo is concerned that the consolidation is funded at
$3.71 billion, which is below the $4.15 billion allocated under
the CDBG formula in fiscal year 2005 alone. How will the
consolidation address more need with less resources?
As local elected officials, we are on the ground level
interacting with citizens on a daily basis. CDBG can and still
does positively impact lives. There is simply no need to change
the architecture of the Federal Community and Economic
Development programming for one simple reason: CDBG works.
In conclusion, I want to commend the committee for bringing
attention to the CDBG program, and thank you for your
leadership and inviting us to testify, and I would be happy to
answer any questions. Thank you.
Mr. Turner. Thank you, Mr. Kyle.
Chandra Western.
STATEMENT OF CHANDRA WESTERN
Ms. Western. Good morning, Chairman Turner.
My name is Chandra Western, and I am the executive director
of the National Community Development Association. I am pleased
to be with you this morning to speak on behalf of NCDA and the
National Association for County Community and Economic
Development in support of the Community Development Block Grant
Program. Together these two associations represent over 550
communities which minister to the CDBG program locally.
First and foremost, let me say that the CDBG program works;
I know this personally. I have been a practitioner and an
advocate for this program for over 20 years. CDBG provides
State and local governments with the flexibility needed to
provide an array of services and activities in over 1,100
communities across America. It is often the carrot that brings
in other investors, both public and private, to distressed and
needy communities that would otherwise not be redeveloped.
According to HUD, for every CDBG dollar, nearly $3 is
leveraged in private funding. Because the program works so
well, we vigorously, vigorously oppose the administration's
Strengthening America's Communities Initiative, an initiative
that is designed to replace CDBG and 17 other programs. To be
frank, we were shocked to see CDBG eliminated in the
administration's fiscal year 2006 budget, and this new
initiative suggested in its place.
The arguments the administration puts forward for this new
initiative lend themselves to great scrutiny. One reason the
administration gives for the creation of this new program is to
develop one program that is focused on economic and community
development funding in order to avoid the maze Federal
departments and communities must navigate now in order to
access community and economic development funding. This begs
the question, why not fold the smaller economic development
programs from the other Federal agencies into CDBG and HUD?
CDBG, at $4.7 billion, is by far the largest of the 18 programs
that is proposed for consolidation; and HUD already has a State
and local government network in place to administer these
programs.
According to the administration, this new $3.71 billion
consolidated grantmaking program will provide funding to
communities most in need by setting eligibility criteria
determined by job loss, unemployment levels and poverty. CDBG
funds are already directed to those most in need. Currently
over 95 percent of CDBG funds are allocated to low and
moderate-income persons. In fiscal year 2004 alone, CDBG
assisted over 23 million persons in households. It also
assisted in the creation or retention of 78,000 jobs for low or
moderate-income persons.
Another reason given by the administration for the creation
of this initiative is that most other programs that have been
proposed for consolidation lack clear goals or accountability.
We do not believe this is the case. Congress decided how the
programs should have been administrated, how the program goals
are to be defined. We think that Congress was right. We have
addressed this issue for CDBG. NCDA, NACED and several other
national associations spent the last 2 years working with OMB
and HUD and reached a consensus on a performance outcome for
CDBG. We worked in good faith with OMB and with HUD, and HUD is
in the process right now of implementing the new performance
measurement system that the group created. The administration's
new initiative renders this considerably expensive and thought-
provoking effort useless.
CDBG does more than the new initiative ever could. The new
initiative focuses primarily on economic development
activities, while CDBG is much broader, providing funding for
affordable housing, public facilities, public services and
economic development.
How would existing communities fund these--CDBG programs
continue to meet these other needs if this new initiative is
enacted? The answer is they would not be able to meet these
current needs. The beauty of CDBG is that it is a program that
allows communities to decide how best to use their funds,
whether it be for housing, neighborhood revitalization or
economic development, or some other activity that the locality
decides is a priority for it. The new initiative would take
away this flexibility.
CDBG was designed as a flexible program for locally
determined needs that would address housing and community
development activities within that community. We do not believe
that this new program--or how many of the communities in this
existing program would be funded under the America Communities
Strengthening Initiative. We do not know, if the President
proposes a significant cut in the funding of community
development, how these programs would be funded. At $5.8
billion now, the new program would be $3.71 billion. That is a
30 percent cut to the existing economic and community
development programs.
In short, there are too many unknowns with the new program,
and too many positive knowns within CDBG; therefore, we support
continuation of CDBG within HUD at a funding level of $4.7
billion in fiscal year 2006.
Mr. Chairman, National Community Development Association
and National Association for County Community and Economic
Development appreciate the opportunity to testify before you
today, and we offer ourselves for comments and questions as the
hearing proceeds. Thank you very much.
Mr. Turner. Thank you.
I want to acknowledge that in addition to our Vice Chairman
Dent, we also have with us Virginia Foxx from North Carolina. I
also want to relate that our minority members of the
subcommittee have largely not been able to attend as a result
of the weather, which we all know by seeing the news the
difficulty in travel, and I appreciate that each of you have
made significant efforts to be here today. And we certainly
will make certain that everybody in the subcommittee and the
committee is aware of the testimony that we have received and
the importance of what you've told us today.
I would like to recognize James C. Hunt, National League of
Cities.
Mr. Hunt.
STATEMENT OF JAMES C. HUNT
Mr. Hunt. Thank you, Mr. Chairman and members of the
subcommittee, and I certainly feel that this is a historic
first hearing for this subcommittee.
My name is Jim Hunt, and I'm a city councilman and former
mayor of Clarksburg, WV. I'm testifying today in my capacity as
first vice president of the National League of Cities.
The National League of Cities' concerns with the
administration's Strengthening America's Communities Initiative
are threefold. The proposal would drastically reduce community
development funding that cannot be replaced. No. 2, the
proposal would alter eligibility requirements to the
disadvantage of some low and moderate-income communities. No.
3, the proposal would narrow the mission of the CDBG program,
which would reduce its flexibility and effectiveness.
The administration's proposal would consolidate 18 current
programs with a combined fiscal year 2005 budget of $5.6
billion into a new two-part grant program with only $3.7
billion in funding. That is a drastic cut, nearly $2 billion.
What is even more alarming is the majority of the funding for
this new and smaller program will come from CDBG.
CDBG has played a critical role in rejuvenating distressed
neighborhoods and alleviating economic decline in all types of
communities. It is one of the best and only tools currently
available to spur economic growth. However, CDBG is not just a
jobs creator or economic development tool; it is also a
catalyst for affordable housing and new public infrastructure.
For example, my city of Clarksburg, WV, using CDBG grant
funds, constructed a new water line that serves the FBI's new
CEGIS Division in Clarksburg, which now has 2,700 employees in
my community. This project also opened up hundreds of acres of
land that are now a hotbed of economic development activity.
Before the project these properties were idle because they had
no reliable access to water. Today these lands generate jobs,
spur economic activity and provide housing and greenspace. They
also generate new revenue for the city, the State, and
ultimately the Federal Government. Yet despite measurable
successes such as these, the Office of Management and Budget
proposes to gut CDBG in favor of the Strengthening America's
Communities. What is the rationale?
The details are still unclear as to which communities will
be eligible for SAC grants, but it seems clear that they must,
at the very least, have poverty and job rates above the
national average. If this is so, then the administration has
made the mistaken assumption that impoverished neighborhoods no
longer exist in communities ranking above the national average
on the poverty and job loss index. We at the local level,
however, know that this is far from reality.
Using national averages to measure assistance needs ignores
the reality that our Nation is comprised of local economic
regions that are unique. For example, the majority of families
who earn below the regional medium household income in the
greater Washington, DC-Baltimore metropolitan area may earn
more than the national poverty rate, but they are just as much
in need of assistance because of the cost of living, and this
region is significantly higher than the national average.
Second, OMB claims that the programs like CDBG have no
measurable results. The administration's proposal suggests new
performance standards like job creation, new business formation
rates, commercial development and private sector investment as
tools to determine whether the communities receiving the
Strengthening America's Communities funds are achieving
results. Unfortunately measuring results by these criteria
makes little sense for the communities that are chronically
impoverished, have little to offer in the way of resources, and
are unlikely to show significant progress over a relatively
short period. In short, they are being set up to fail.
Clarksburg, WV, recently used a $250,000 Small Cities Grant
to demolish vacant and dilapidated buildings in certain
neighborhoods throughout our city. These structures were havens
for crime, targets for vandalism and fire, and an attractive
nuisance for children. We use the vacant lots created by the
projects to expand businesses, as well as create space for
larger yards and garages for our citizens. It is very difficult
to assess the impact of removing a drug den from a neighborhood
using economic criteria alone; moreover, it is difficult to
assess the economic impact in relation to this type of project
over a short period, yet the administration's proposal appears
to try to do just that.
Mr. Chairman, closing down a drug den may not immediately
create job growth, spur new business formation or encourage new
commercial and residential development; however, it will
immediately increase the quality of life of its neighbors. That
is measurable and is the foundational beginning for any plan to
attract new commercial and residential development in the
future. Throughout West Virginia, when you travel to virtually
every city from large to small, you don't have to drive very
far to find the areas of our cities and towns where poverty and
despair reign.
Mr. Chairman, the one-size-fits-all approach proposed by
the administration will likely stifle the flexibility and
effectiveness currently found in the CDBG. For these reasons
the National League of Cities and its member cities throughout
the country will aggressively advocate for the continued
existence of a strong and distinct CDBG grant program. We hope
that you will help us by urging your colleagues in the
Appropriations Committee to fully fund CDBG formula grants at
$4.35 billion, and $4.7 billion overall. Thank you for this
opportunity to appear.
Mr. Turner. Thank you.
[The prepared statement of Mr. Hunt follows:]
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Mr. Turner. We're going to go now to a round of 10-minute
questions.
One of the things that I think is most important for us, as
we talk about CDBG, is the fact that each and every community
can utilize these funds for different goals and objectives. I
know that in the city of Dayton, for example, every
neighborhood is different, so that our use of CDBG funds for
economic development projects, community development projects,
housing projects would each be different.
Now, I would ask Mayor Plusquellic and Commissioner Kyle
and Mr. Hunt, if you would each speak on that issue of--I am
certain that all your communities are not the same, and that
the varied needs of CDBG--varied needs of your community permit
you, through CDBG, to tailor them to the needs of your
community.
Mr. Plusquellic. Thank you. Mr. Congressman, I would also
add that the funding mechanisms are different and the available
resources are different from community to community, State to
State. Your county was very aggressive in starting a program to
help provide economic development dollars for each community to
share. There's a formula that's used. And so in some ways I
would look at Dayton and Akron and say even within the same
State, you might have additional resources to be used for
economic development purposes that the city of Akron doesn't
have because we chose to do something else along the way to
provide extra money for housing on a countywide basis.
So every situation is different, every community is
different, and every funding resource formula is different. And
so it adds to the need to have a program that is flexible and
allows us not to just adopt this cookie cutter--as Jim Hunt had
suggested earlier--that the Federal Government is attempting to
do.
I think that flexibility may be, in all honesty, the one
that sort of gets us in trouble sometimes because some Members
here on the Hill here have something that they don't
necessarily agree with. They might not understand why that
someone might use money for a certain purpose. But when you
look at a neighborhood and you look at one--and I talk about
spending money, for instance, on a grocery store. Most people
probably in America can't even fathom that there isn't a
grocery store right down the street somewhere from them.
But if you look at the older neighborhoods where businesses
have abandoned--and I love working with the private sector; I
have a great relationship with our business community--but it's
pretty hard for me to get them enticed to go in on some market
basis to fix the roof of an elderly person's home just on a
market basis. It's a matter of helping that senior citizen stay
in her house or his house and have a better quality of life,
which is exactly what many of these dollars do. And so having
the opportunity for me to go in one neighborhood in Akron and
say the most important thing that I can do here is to try to
provide the incentive necessary to get a private developer to
come in and put in a grocery store so the residents of that
neighborhood that don't have a grocery store for miles can get
their basic necessities, and go to another neighborhood where
there is a high percentage of elderly people still living in
their homes--and they want to do that--to help them live in a
safe environment, putting a new roof on, maybe providing some
extra wiring, new wiring that's needed to make the home not
only more livable, quality of life, but safer, and help entice
a new family to come in when that senior citizen leaves, I
think, are two examples of how we in Akron use the dollars
differently, which may be completely different, for instance,
than the way Dayton might have used it for downtown development
or other things.
Mr. Turner. Commissioner Kyle.
Mr. Kyle. Thank you, Mr. Chairman.
In Lake County, IL, we utilize the CDBG funding in a
variety of ways. And I think that has been one of the assets of
the CDBG program is its flexibility. As you know, a lot of the
Federal-funded programs are very stringent in what you can
utilize those allocations for, so I think the flexibility is
actually an asset to the program.
We've utilized the funding for our Affordable Housing
Commission in Lake County, IL, where we not only promote and
market affordable housing opportunities, but we also provide
funding to those community developers who specialize in the
construction of affordable housing. Also, we utilize it for
emergency food assistance programs.
And I think what we must realize is that there are pockets
of poverty in every community. You will identify homelessness
and hunger in Palms Springs, CA, to Greenwich, CT, in
Hollywood. In several of the most affluent capital cities and
counties in the United States you will find pockets of poverty.
So if we have a significant amount of the citizens of a
particular community who will drive up the median income of
that particular city or county, do we just ignore the pockets
of poverty that will still exist in those communities? I think
that's the important thing here.
Also, we've utilized our funding for daycare services, and
we would like to question whether or not those types of service
delivery systems will continue out of the Department of
Commerce. Will public services continue? Will infrastructure
improvements continue? And I think we must realize and not just
confine the Community Development Block Grant Program into just
bricks-and-mortar type of a program. Community development
programs also develop morale in a program--in a community. It
also develops self-esteem, self-confidence, self-motivation.
These types of programs actually produce productive citizens in
a community, and I think that criteria is oftentimes not
measured in the significance of these Community Development
Block Grant Programs, and they cannot always be measured in
bricks and mortar and hammers and nails.
Mr. Turner. Thank you very much.
Councilman Hunt.
Mr. Hunt. Mr. Chairman, one of the things that when you
look at why different neighborhoods have a different look with
CDBG is I think one critical component of the CDBG is that we
asked low and moderate-income persons to come to meetings on
these planning; so what the needs in Dayton, OH, and in
Clarksburg, WV, they're going to reflect the needs of these
moderate and low-income persons that come out.
And I think, as most of us will attest, that some of those
meetings are the most critical ones we hold as public
officials. And when you look at it in Akron, when they say we'd
like a grocery store, in West Virginia that's not generally a
problem, but when you look at community centers in rural areas,
community centers are the lifeblood of the communities.
So I think the one thing that you look at CDBG is the
flexibility; the other is we've asked people, just according to
the statute that we follow that says, what are your needs in
your community? And that's why you're going to get a different
face on it completely across the country. And I think it would
be difficult to punish the CDBG recipients for doing exactly
what the statute asked.
Mr. Turner. I asked you that question in order to ask you
this next one. One of the things that we have as justification
for dismantling these programs and reconstituting them is that
the performance measures that are currently being utilized in
judging the CDBG program have not favorably reflected upon the
program. The performance measure that is currently being used
is the PART analysis, known as the Program Assessment Rating
Tool. I'm going to read you one paragraph of it and I'd like
you to respond to it because I think this is something that you
might have a contrary view to.
And the question is: Is the program designed so that it is
not redundant or duplicative of any other Federal, State, local
or private effort? And the answer in the measurement analysis
here says, ``Federal, State and local programs, as well as
other for-profit and nonprofits, address similar objectives.
CDBG funds are rarely the only resource for the community
development activities of public agencies or nonprofits.''
Now, my experience and my understanding has been that of
the types of projects that you are describing, that you don't
have readily available to you another either Federal, State or
local source to fund those. I would like your comments on that
and I will start with the mayor.
Mr. Plusquellic. Well, I think it's the leveraging issue.
There's certainly other funding sources that we all have,
depending on our State laws and local ordinances and the
provision of--the level of political will that the local
government leaders have to ask their own people to step to the
table to provide resources. And we have different mental health
levies that go on in Ohio, we have different school levies and
needs of school. All of these issues someone could say somehow
they're overlapping, but when we can use CDBG moneys to attract
private sector investment in particular, but even if we have
to, to make a project work, put some other local resources to
work.
We put some money in, city dollars, into the grocery store
project. I'm not sure how somebody sitting in some office here
in the Beltway thinks that's a bad thing that there are other
sources out there. The question is are there other sources to
make up for the significant cut here, even if you accept--which
I don't, and the Conference of Mayors does not--that this is,
you know, really fully funded to really meet the people that
are the most neediest?
If you look at the 30-something percent cut, and you look
at the 30-something percent that they say are below the poverty
line, if you wiped out that percentage just on a per capita
basis, you would say there is no more money then for the
neediest. I mean, I can do the math if I get the list that you
have requested from OMB and from Dr. Sampson, but even if we
were talking about the same level of funding, shifting and
doing some things that are supposed to be for improving a
program, we don't see it that way because the funding level is
much lower.
So bringing other funds, bringing other resources to the
table is exactly what public-private partnerships are all like,
and I think bringing in some of the public agencies, for
instance, and having city governments or others put money into
it--that could be a county, it could be a park district,
depending on the State law--that have other resources, I don't
see as a bad thing. I see it as a collaborative effort in each
community to meet the needs of that community. And I go back to
this flexibility that you mentioned earlier; that's why these
funds are flexible and each community gets to decide what their
priorities are.
Mr. Turner. Commissioner.
Mr. Kyle. Thank you.
I think we could look at your question also in reverse. If
we're looking at some potential duplication of services or
deliveries out of the CDBG program and in the Department of
Commerce, we can also look at it from the standpoint of if
we're specifying the housing-related projects, we could also
transfer the Housing and Economic Development-related projects
from the Department of Commerce over to CDBG. And then we could
also eliminate some duplications in reverse from that aspect
also.
But the significance of the CDBG program, as we have
indicated, they provide certain unique programs like
transitional programs, transitioning individuals who have, for
example, been incarcerated. We have a recidivism program in
Lake County, IL, where we're providing funding through CDBG to
transition individuals that have been incarcerated back into
the work force with job skills development and those types of
issues; also individuals who have fallen into drug addiction
and transitional programs to transition them back into the work
force to make them productive citizens also.
So these types of programs, they also produce an element of
pride in your community, which would be a criteria that's
lacking in a lot of other Federal-funded programs. And as I
indicated, these types of things are difficult to measure,
particularly with the criteria and the standards that are being
utilized to measure these types of delivery systems.
Mr. Turner. Thank you.
Ms. Western.
Ms. Western. I think that is a very good question, but what
I would like to comment on really is looking at the proposal
the administration has put forward in terms of consolidating
programs from CDBG and 17 others into a new program. When CDBG
was created as a consolidation of seven other programs because
there was too much redundancy and too difficult in terms of
applying for funding across the national--the Federal level--if
you look at the program, CDBG has 28 eligible activities, and
it allows for each community to determine its priority needs
based on three national objectives that the Congress determined
was what the program should undertake. And so when you look at
duplication of effort, and you've already rolled in seven
programs into one, and now you're looking at trying to roll in
18 programs into 1, the Federal Government itself duplicates
the effort; it's not that the program is duplicative of other
efforts.
I think CDBG is the program that should be the one that
focuses on cities and communities and neighborhoods because it
allows for locally determined, identified, prioritized needs
based on what Congress intended them to do with these funds.
And if you see everyone doing different things differently,
that's why the program exists, because it supports every
community's goals and objectives through this one source of
funding, and HUD.
Mr. Turner. Councilman Hunt.
Mr. Hunt. Mr. Chairman, you know, the private sector does
do affordable housing, they do have a very effective affordable
housing program, and that is, if you can afford it, they will
build it. And I think that's, in a nutshell, a little bit of
the difference of when we talk about affordable housing. And
that's why it's not an overlap with the private sector or other
programs is that in many cases the private sectors had the
opportunity to come into my town and into Akron and into other
communities at any point and purchase these dilapidated
properties. The taxpayers have already invested in water and
sewer, sidewalks, streets, facilities that run right in front
of these dilapidated properties. Any private developer can do
it.
One of the challenges, however, is when you add in asbestos
regulations, when you add in the different costs of removing
these properties, what the cheapest thing to do is and what's
happening all over America is we go out to greenspace and we
start putting in new roads and water and sewer. And I will tell
you that the cost of putting in water and sewer for a
neighborhood of 30 in a subdivision is clearly more expensive
than tearing down a dilapidated house and salvaging the
neighborhood for those other residents.
And you have to look at it on a real-world basis, when you
walk those neighborhoods and that house comes down, and all of
a sudden--and I don't think there's any public official that
can contest this, is when you tear down a house in a
neighborhood, the building permits on the adjacent properties
go up, and somebody who wasn't going to put a deck on now
invests in a deck, somebody who wasn't going to put siding on
now puts siding on.
It's not even something you say it thinking, gee, somebody
will argue with you because we will all see it. And when
improvements are made in neighborhoods, no matter how bad they
are--and that's why graffiti removal, when you start looking at
gang activities in most of our communities--in West Virginia
there was an article in the Charleston Gazette about gang
activity in West Virginia, something I never thought we'd see--
when you look at it, it's signified by the graffiti that is
growing out in these small little West Virginia towns. When we
take an active role of graffiti removal--we're not going to
eliminate gangs in West Virginia with methamphetamines, but we
do have the tools that we can go after some of these
activities.
So I just say, I mean, when you look at neighborhood
redevelopment, private sector is in there every day--predatory
lending; there are a lot of nasty things in our neighborhoods.
CDBG are funding the type of activities that work toward the
betterment of those neighborhoods.
Mr. Turner. Thank you.
Mr. Dent.
Mr. Dent. Yes, thank you.
Mr. Hunt, you made a good point there about the uses of
these CDBG funds. In my experience it's been very useful when
moneys, public moneys, whether they be CDBG or other public
moneys, be used for demolition or mediation or buying those
power hoses to remove the graffiti, or whatever the case may
be, or even tearing down an old dilapidated house and putting a
little pocket park, or maybe even a parking lot, depending on
the circumstances of a densely packed neighborhood.
But the administration has a point, and I think, Mr. Kyle,
you spoke to the issue a little bit, but I guess I have a
problem with a community like Boca Raton, FL, getting the CDBG
money if, in fact, it has the capacity in the local community
to take care of some of those projects themselves. I would
rather reserve those precious public dollars for those
communities that are truly distressed, that do need to tear
down that dilapidated, drug-infested house, whatever the case
may be.
But does the administration have a point; should we not be
looking at those communities that are not very impoverished,
but are somehow getting these dollars?
Mr. Hunt. And we're not going there with guns getting the
money; there are rules and regs that are portrayed for this.
And there's no question, you make a good point; but it's
like, let's reevaluate the program within the existing
confines. It doesn't seem to make sense that if that's the one
issue of which we haven't even clarified how much of those
dollars and what they've been spent on, because there are
eligible activities even within those communities, that they
have to be targeted to low-income and moderate-income persons.
But even if that's the case, then let's solve that problem
without completely dismantling one of the most effective
community development programs.
And I think even through the testimony, like I said, we
don't have a clear number of how much of that is actually
occurring when you look at clearly you do have examples of
communities, of low and moderate-income communities, that are
using these funds.
Mr. Plusquellic. I think it would be difficult for me to
give testimony on behalf of a wealthy community. Akron is not a
wealthy community in that measurement. But I'm sure one of the
things they would say is they send more than their share of
taxes here to Washington, and they ought to get some of it
back; I'm sure that would be their first argument. And if, in
fact, there are still people who meet the requirements--because
keep in mind, Congress established the requirement that the
moneys still have to be spent 70 percent low and moderate. If
they don't meet that requirement, they can't get the funds.
So, I mean, I think there is a protection there, I guess,
from wealthy communities spending these dollars on wealthy
people, which is sort of the inference in that 38 percent,
which I said is so, in my opinion, misleading; it's probably
accurate, factually correct, but inferentially wrong. It infers
that they're spending it on wealthy people in wealthy
neighborhoods, and that just can't be by the regulations
themselves.
Mr. Dent. OK. And finally I guess, Mr. Kyle, you had
mentioned something about, I guess, measuring the program, you
talked about capital funding. I thought you made some reference
to capital funding shouldn't be the primary emphasis. Did you
say that? I was trying to get a clarification. I've always
liked using these public dollars for capital purposes because I
could see the results in my community, whether you're tearing
down the building, removing the graffiti, even if you are going
to hire a couple code enforcement officers. Whatever the case,
I want to make sure there is something tangible as opposed to
paying for something that's less measurable.
Mr. Kyle. Sure. I appreciate the question. We utilize the
funding, our CDBG funding, in Lake County, IL for programs like
emergency food assistance, to provide food in food pantries
throughout various blighted and dilapidated neighborhoods. We'd
also used the funding, as I'd indicated, for day care, for
those individuals who cannot afford day care but still have to
go to work every day. We utilize the funding also for a
recidivism program, which is a program to make those
individuals who have been incarcerated, teaching them job
skills, development, job training, and transition them back
into productive citizens. We also utilize that program also for
a drug transitional program, to counsel and train individuals
of how to stay off of drugs and how to make them more
productive citizens.
So these are the types of programs that are not necessarily
brick and mortar but they are pragmatic in nature and systemic,
whereas we don't necessarily have to build a building to
provide these programs.
Mr. Dent. I guess just from my experience with the program,
where I live at least, it seems that those programs you
mentioned, while they are worthy, whether it's child care or
helping people return from prison back to the mainstream of
life, they are worthy initiatives, but I am just not aware of,
like where I live, of community development funds, for example,
being used for that type of initiative. It's more in line with
what Mr. Hunt had talked about.
Mr. Kyle. Sure.
Mr. Dent. And that's where I would like to see the focus.
Mr. Kyle. Sure.
Mr. Plusquellic. May I comment? Many of these programs
connect up with other things we are doing. Let me give you an
example, and I can't speak for 1,100 communities across the
country, but if we are helping a new homeowner, single mother,
purchase a first home, and, for whatever reason our system,
whatever, whoever is responsible for not allowing every person
19, 21, 25, 30 years old to know and understand how to get good
credit and keep good credit, we have a credit counseling agency
that works with them for some period of time so that we are not
just encouraging go buy a new home, we will give you some down
payment, you can work in there, and then you go back and charge
everything on credit card and you lose your home, that we in
our community believe strongly and the President of the United
States has said he believes strongly in home ownership. So it
may be a social service agency and money spent for that, but we
try to connect it up.
We've supported home delivery, a local group raises a lot
of donations locally, but we have supported at various times
for home meal delivery for senior citizens, that we fix the
roof and add the safe wiring, so that it connects up with
helping seniors stay where they want to stay and not feel
afraid to live in that neighborhood.
So I think many of these things that you look at are
connected up to the hard types of capital investment that you
are suggesting. And I am not sure what the percentage--in Akron
we only spend about a half a million out of the 13 million on
those social service agencies. So in most communities it's a
small part.
Mr. Dent. That is fine. That would be my thinking as well.
And I want to conclude just by saying the administration,
as I mentioned a few minutes ago, I believe there is some logic
to taking some of these programs they've identified--and,
again, I'm looking at the brownfields in particular and maybe
urban empowerment zone grants, just to name two--but there
might be some logic in consolidating them or shifting them into
commerce, based on my experience, that it might look more like
economic development activities as opposed to perhaps community
development or housing activities. And I would just like to
hear what your thoughts would be.
I am not suggesting that CDBG be moved over, but what do
you think? Are they onto something here with some of these
programs, whether they come out of HUD, or perhaps agricultural
or wherever the program may be, should they not be moved to
Commerce?
Mr. Plusquellic. Well, let me say something first of all
that I meant to say. I have personally deep respect for Dr.
Sampson. We have worked in Akron with Dr. Sampson and EDA, the
Commerce Department, on several things including an incubator
project. I believe he is a very knowledgeable professional, and
competent, and knows and understands economic development.
I think much of the testimony we have heard is there are so
many other ways that community development block grant moneys
are used that improve the communities that don't go into these
numbers that OMB pumps out and the statistics. You just can't
measure those things on straight job development.
So I believe he is sincere in trying to make this work, but
in our meeting he mentioned that EDA--I believe the numbers are
correct, I'm sure someone in the room will correct me if I'm
wrong--EDA administers a program right now at about $370
million. And first and foremost, to stick this HUD program of
$4.7 billion into a program and compare the efficiency and
effectiveness of a program that primarily deals with business
people, and now you are dealing with elderly and low-income
folks in dilapidated neighborhoods, and all that just doesn't
make sense at all. Is there a piece of the--I don't have the
agencies here. Is there some piece?
Someone mentioned brownfields. Could that be moved under
Commerce because it's dealing with business and revitalizing?
This is my own personal--this isn't the Conference of Mayors;
we haven't taken a position on that. But I think, like you,
that might make some logic for some small part of those 17
programs that you are talking about. We believe strongly that
CDBG should not be moved, and that's the--you don't move a big
program, doing a lot of other things, into one over here that's
only dealt with business development.
Mr. Dent. I understand. The main concern here today is
CDBG, and the other programs, well, we could have a discussion
perhaps another time.
Mr. Plusquellic. I was trying to say yes without giving in
completely, Mr. Congressman. I hope you understood.
Mr. Dent. Thank you.
Mr. Hunt. I think one thing is important to look at the
arithmetic, though, on the proposal, is that clearly CDBG is
going to bear the brunt of the cuts. So the other 18 programs
combined, even if they all went to Commerce, CDBG was retained
as funding. I mean, you are paying for all those 18 programs
out of the current CDBG program. And I would make the comment a
lot of times the brownfields' perception is that this is an
urban issue and it's not.
We just last week took ownership of a former glass factory
in our town that was put up for public auction that had gone
through the Federal brownfields remediation. And, to be quite
honest, one of the challenges and one reason that CDBG might
have a role there is the private sector are very leery of going
in the first owner of a brownfields site. We had a courthouse
sale. We had over $400,000 of liens in our community against
this site where we'd expended cleanup, and no private sector or
person came up for a property that's valued well over $1
million. So from what our understanding is and talking to the
private sector is that you may well have to expend CDBG money
to make it attractive enough for the private sector to stay.
Mr. Dent. I agree with you 100 percent on that. I represent
the largest brownfield site in America in Bethlehem Steel, the
old Bethlehem Steel site. I know what you are talking about.
And that public money, whether it's CDBG or other funds, you
have to put it in there because nobody is going to take their
private dollars and remediate that site and accept the
liabilities. We have a good brownfield program where I live.
Mr. Kyle. And if I could just add, Congressman, is that
when we talk about brownfield funding, if you would look at the
objectives of the brownfield funding out of CDBG, which is
primarily for redevelopment purposes, and the brownfield
funding out of the EPA is for cleanup. So therefore you have
the same type of funding, but the funding has different
objectives and different goals.
Ms. Smith. I would just like to say that all the programs
that are being proposed for consolidation and be moved over at
Commerce are already eligible under CDBG. In fact, brownfields
used to be a part of CDBG before it became a separate program
that identified specific activities in conjunction with other
funding. And brownfields are still eligible under CDBG as a
part of the CDBG program. So I would think that the economies
of scale would be more readily maximized if you put everything
over in the CDBG and at HUD, already an existing infrastructure
for delivery. It goes directly to communities where the
programs are going to be funded anyway, and it provides
communities with parameters in what they can spend the funds
on, based on how they have identified their needs to public
participation process so they can determine what to spend the
money on, when, and why.
So, I mean, I think that the whole proposal is
counterproductive in terms of maximizing efficiency to move the
big program and what it's been doing for 30 years over to
Commerce without any infrastructure or any idea how the
distribution of funds is going to take place to accomplish the
same things we are already doing, and doing very well.
Mr. Turner. With that, that ends our questioning. And like
the panel before you, I will give you an opportunity if there
is any closing remarks or additional thoughts that you would
like to provide for the record.
Mr. Plusquellic. Thank you. I would like to thank you once
again, Congressman Turner, and the others, for allowing us an
opportunity to state as strongly, hopefully, as we can here
today how important CDBG funds are. I would like to make an
offer that when this is settled and everybody realizes that HUD
has done a good job, every program can be improved and we can
look at working together, that we get some of the folks from
inside the Beltway here who run numbers to get on a bus--I
didn't say a plane because that would be wasteful government
spending--but get on a bus and take a tour of America and go
through eastern and western Pennsylvania where the Governor
gets $55 million of CDBG to distribute to the small
communities. Come to Ohio and see what all the cities there are
doing with the CDBG. And continue across the country to
actually see from year to year, and measure those neighborhoods
that cannot statistically ever measure up to some green
pasture. And if they would do that and see some of the great
things that go on, they would have a better way of sitting here
in front of Congress testifying on what's really going on in
America thanks to the partnership that has existed since
Richard Nixon was President of the United States in a program
that he proposed to Congress and they accepted.
And so I make that offer on behalf of the U.S. Conference
of Mayors to work with your committee, work with anyone else
here in Washington, even the folks at OMB, to show them what's
really going on. We appreciate the opportunity for us to
express what we believe is the success story of CDBG, and thank
you for that opportunity, and look forward to working with you
in the future.
Mr. Kyle. Thank you very much. And on behalf of the
National Association of Counties, we also appreciate the
opportunity to testify this afternoon. And we wanted to, of
course, reiterate how vital and crucial the sustainability of
the community development block grant is to counties across
this country. It has been a most successful program throughout
counties throughout the United States, and we wanted to point
out the significance.
Even if you look here in Washington, DC, the capital of the
United States, the most powerful city in the world, there is
homelessness right outside of the gates of the White House,
there is hunger right around Capitol Hill. These types of
social-oriented issues cannot go ignored, and we cannot go into
a state of denial about these issues. These issues are most
prevalent throughout all the parts of this country. So we want
to reiterate the importance and significance of the community
development block grant to counties across the country and to
this Nation. Thank you.
Mr. Hunt. And once again I would like to thank you for
holding this hearing. If you talk sometimes about did we do
anything wrong--and probably with CDBG you go to an apartment
complex when they are cutting the ribbon and you let the owners
and the residents puff their chests out and say what a great
project this is. Very seldom do you see a big banner that says
CDBG.
And I think when we look across America what is has done
for us at the National League of Cities, and, I'm sure with our
sister organizations, is that now we do know where those four
initials go on a lot of these projects. And I think that's
something that says that, you know, if you have to brag about
it, sometimes something's wrong. And we weren't bragging about
CDBG; we were doing the work that CDBG was intended, and these
projects were cropping up all over America and with not a whole
lot of applause at that point. And I don't think we want to
change that to where poor residents throughout America have to
know that their own initiative has kind of been superseded by a
Federal program, but it certainly has worked well throughout
America. Thank you.
Mr. Turner. I want to thank the panel. In the near term
this subcommittee will continue its oversight of the many
issues discussed today. Over the coming months we will delve
into these programs to ascertain their strengths, weaknesses,
and what impediments exist to their efficient and effective
implementation. The subcommittee will also explore what
legislative modifications Congress should consider to improve
the administration of these programs. I look forward to taking
an in-depth look at these issues, and hope it will lead us down
a path to solutions beneficial to the stakeholders and working
with each of you in that.
I want to thank members of our first panel also for taking
their time today, as with our second panel. And in the event
that there may be additional questions either from members who
are present or not present and for questions we didn't have
time for today, the record will remain open for 2 weeks for
submitted questions and answers.
Thank you. And with that, we will stand adjourned.
[Whereupon, at 12:12 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Wm. Lacy Clay and
additional information submitted for the hearing record
follow:]
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THE 1970's LOOK: IS THE DECADES-OLD COMMUNITY DEVELOPMENT BLOCK GRANT
FORMULA READY FOR AN EXTREME MAKEOVER?
----------
TUESDAY, APRIL 26, 2005
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
room 2154, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
Present: Representatives Turner and Dent.
Staff present: John Cuaderes, staff director; Shannon
Weinberg and Jon Heroux, counsels; Peter Neville, fellow;
Juliana French, clerk; Erin Maguire, LC/Mr. Dent; Adam Bordes,
minority professional staff member; and Cecelia Morton,
minority office manager.
Mr. Turner. A quorum being present, this hearing of the
Subcommittee on Federalism and the Census will come to order.
Welcome to the subcommittee's oversight hearing entitled
``The 1970's Look: Is the Decades-Old Community Development
Block Grant Program Formula Ready for an Extreme Makeover?''
In March this subcommittee held a hearing reviewing the
Bush administration's Strengthening America's Communities
Initiative. During that hearing we learned that HUD had
undertaken certain in-house initiatives to improve the
administration of the program. It is one of those initiatives
that brings us here today, a review of the CDBG formula and the
development of four possible grant formula reforms. This is the
first in a series of oversight hearings dedicated to the review
of the Community Development Block Grant Program at the
Department of Housing and Urban Development.
The Community Development Block Grant Program [CDBG], is
one of the largest Federal direct block grant programs in
existence. For fiscal year 2005, Congress appropriated $4.71
billion for the CDBG program, including $4.15 billion for CDBG
formula grants alone.
State and local governments use CDBG grant moneys to fund
various housing, community development, neighborhood
revitalization, economic development and public service
provision projects. Such projects must address at least one of
three projectives: One, to principally benefit low and
moderate-income individuals; two, eliminate or prevent blight;
and three, remedy urgent threats to the health or safety of the
community when no other financial resources are available.
For over 30 years the CDBG program has been a critical tool
in the arsenal of cities to help create livable communities for
individuals and families. Without question, the program
provides vital funds for addressing poverty as well as
community development means, from eradicating blight to
providing potable water and building sewers. And while CDBG
enables States and local governments to accomplish many of the
objectives outlined in the original authorization, the program
exhibits several problems that require remedy.
The formula for which the bulk of CDBG funds are
distributed to entitlement communities and nonentitlement
communities is quite complex. The 1974 legislation creating the
CDBG program identified poverty, blight, deteriorating housing,
physical and economic distress, decline, living environment
suitability and isolation of income groups as some of the
factors to be considered in determining community development
need.
The original formula specified in the CDBG statute only
considered three variables to assess and target these needs;
poverty, population and overcrowding. However, Congress also
intended for the CDBG program to address housing, economic
development, neighborhood revitalization, and other community
development activities not exclusively associated with poverty.
Analysis of the formula shortly after 1974 showed that
while the CDBG formula targeted poverty populations fairly
well, it failed to adequately address older and declining
communities. Accordingly, in 1997 Congress amended the law by
creating a second parallel formula. The original formula became
known as Formula A, the new formula became known as Formula B.
Formula B was designed to target older and declining
communities by using the new variables of growth lag and pre-
1940 housing. Jurisdictions received the greater sum of the two
formula calculations.
The last modification of the grant formula came in 1981.
Congress amended the formula by adding the 70/30 split
requiring that funds be split 70 percent to 30 percent between
entitlement and nonentitlement areas respectively. Since 1978,
the factors used in these calculations have remained constant,
while the demographic composition of the Nation has changed
dramatically. In particular, the number of entitlement
communities has grown drastically. In fiscal year 2004, there
were more than 1,100 designated entitlement communities. More
than 250 new entitlement communities were certified since 1993
alone, as compared to only 128 new entitlement community
designations between 1982 and 1993. And while the number of
entitlement communities sharing the 70 percent portion of CDBG
funds continues to grow, the overall funding of the program has
not kept pace. Thus, a larger portion of the population is
sharing a relatively static portion of CDBG funds, resulting in
smaller per capita grants per jurisdiction. At the same time,
the number of nonentitlement communities grows smaller,
effectively increasing their share of the 30 percent portion of
CDBG.
Additional questions of fundamental fairness have arisen in
recent years. First, there are numerous instances of richer
communities receiving higher per capita awards than poorer
communities. Second, similarly situated communities often get
disparate per capita awards.
The purpose of this hearing is to consider two basic
questions regarding the structure of the allocation formula.
First, is the current formula, last modified in 1981, still
applicable and effective today? And second, if the answer to
the first question is no, what factors should Congress
consider, and what changes to the formula would be appropriate?
To help us answer these questions we have the Honorable Roy
Bernardi, the current Deputy Secretary of the Department of
Housing and Urban Development and former Assistant Secretary of
Community Planning and Development.
On February 21, 2005, HUD published a document entitled
CDBG Formula Targeting to Community Development Need, the
result of a study on the declining effectiveness of the current
grant formula in targeting a need, as compared to the study.
The study demonstrates that the current formula continues to
target need. The top 10 percent of communities with the
greatest community development need to receive 4 times as much
as the lowest 10 percent of communities. Further, the per
capita grants awarded to the most needy of communities have
decreased, while the per capita grants awarded to the least
needy of communities have increased. To address these
deficiencies the document details four alternative formulas.
The subcommittee looks forward to hearing more of those details
from Mr. Bernardi on this study.
Following Mr. Bernardi, we will hear from Mr. Paul Posner,
Director of Federal Budget and Intergovernmental Relations at
the Government Accountability Office.
Joining Mr. Posner from GAO is Mr. Jerry C. Fastrup,
Assistant Director of Applied Research and Methods.
Rounding out our second panel of witnesses, we are pleased
to welcome Mr. Saul Ramirez, Jr., executive director of
National Association of Housing and Redevelopment Officials.
Mr. Ramirez served as the Deputy Secretary of HUD during the
Clinton administration, as well as the Assistant Secretary of
Community Planning and Development from 1997 to 1998.
I look forward to the expert testimony our distinguished
panel of leaders will provide us today, and I thank all of you
for your time and welcome you.
[The prepared statement of Hon. Michael R. Turner follows:]
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Mr. Turner. And I want to recognize--Mr. Dent from
Pennsylvania, who is here with us today, and ask if he has any
opening comments.
Mr. Dent. I thank you, Mr. Chairman.
My only comment is that I look forward to receiving your
testimony. I have a lot of questions on this issue. Thank you.
Mr. Turner. Thank you. We will now start with the
witnesses. Each witness has kindly prepared written testimony,
which will be included in the record of this hearing.
Witnesses will notice there is a timer light at the witness
table. The green light indicates that you should begin your
prepared remarks, and the red light indicates that your time
has expired. The yellow light will indicate when you have 1
minute left in which to conclude your remarks.
It is the policy of this committee that all witnesses be
sworn in before they testify. Swearing in the first panel, Mr.
Bernardi, if you would rise and raise your right hands.
[Witness sworn.]
Mr. Turner. Let the record show that the witness has
responded in the affirmative. And beginning then with Mr.
Bernardi's testimony.
STATEMENT OF ROY A. BERNARDI, DEPUTY SECRETARY, U.S. DEPARTMENT
OF HOUSING AND URBAN DEVELOPMENT
Mr. Bernardi. Well, thank you, Chairman Turner, Congressman
Dent. On behalf of the President and Secretary Jackson, I
appreciate the opportunity to speak with you today about a
recently released HUD report on the CDBG formula and how it
performs relative to community development need.
As you are aware, the President, via his 2006 budget, has
proposed to consolidate 18 programs from 5 agencies within the
Department of Commerce, and that's including the CDBG program.
These programs would be consolidated into one program, the
Strengthening America's Communities Initiative. This initiative
would support communities' efforts to meet the goal of
improving their economic conditions through, among other
things, the creation of jobs. Therefore, under the President's
proposal, the CDBG program would be eliminated.
Notwithstanding, I offer the following testimony on the
proposed CDBG formula targets, which may be helpful in your
review of the Strengthening America's Communities Initiative.
This is the fifth time HUD has prepared a report like this
since 1974 on how the CDBG formula targets the need. Like our
previous reports, we generally ask the question, how is the
CDBG program doing in terms of meeting the community
development need in this country?
The first report provided the framework for creation of the
dual formula that first allocated funds, as you mentioned, Mr.
Chairman, in 1978. The current formula is comprised of Formula
A and Formula B. HUD calculates the amount of each grantee
under both formulas. The grantees are then assigned the larger
of the two grant amounts. Generally communities with poverty
and overcrowding get higher grants under Formula A, while
communities with old housing and slow population growth get
higher grants under Formula B.
In 1983 and 1995, we found that CDBG formulas had become
increasingly less effective in targeting need. The problem is
that while the variables and the formulas have not changed
since 1978, this country has. I'm sure it comes as no surprise
to anyone here in the United States, it is a significantly
different country than it was 30 years ago. We have seen
significant demographic and economic change. Some communities
experience tremendous growth, while others are facing decline.
Not surprisingly, when we began to crunch the numbers from the
latest census, we noticed that the CDBG formula continues to be
a less effective vehicle for targeting need.
Today I'd like to outline our findings and offer some
options, should you consider changing the program's formula to
meet today's needs.
As with prior studies, we designed an index to try to rank
each community based on its relative level of community
development need. This needs index uses variables that relate
directly to the statutory objectives of the CDBG program, such
as poverty, crime, unemployment and population loss. A total of
17 variables were identified for entitlement communities; those
are cities and large urban counties that receive direct
funding. For the States, or the nonentitlement program, we
created a needs index using 10 variables. Applying techniques
used in the previous four studies, those variables are combined
into a single score for each community.
When we compare how the current formula is allocated
against this needs index, we see some stark examples of funding
disparity. For example, communities with similar need may
receive significantly more or less funding on a per capita
basis. We also find examples of communities with less need
receiving roughly the same amount of funding as higher-need
areas. Exhibit 1 illustrates this point. And I apologize for
the complexity, but I think this will become clear shortly.
This chart shows how CDBG's current formula is targeted
today. You will see along the bottom of this chart communities
are ranked by their relative community development need,
starting with the lowest need communities on the left, and
ending with the highest need communities on the right. The
solid line represents an appropriate funding level relative to
the need for the per capita grant amount of the grantee
community. The jagged line represents the per capita allocation
for grantees under the current formula.
This chart on my right demonstrates that CDBG's current
formula is far from perfect. For example, some low need
communities, such as Newton, MA; Portsmouth, NH; Royal Oak, MI
are allocated more than $25 per person, while other low-need
communities are receiving $5 to $7 per capita.
The starkest contrast, however, is among the high need
communities on the right side of the chart, and I will use
three communities as an example. The cities of St. Louis, Miami
and Detroit have similar needs according to the needs index,
but get very different grant amounts. St. Louis receives $73
per capita, well above the needs index line; Detroit gets about
$50 per capita, which is right about at the needs index line,
and Miami receives $26 per capita, well below the needs index.
Now why is this? There are several reasons, and, Chairman
Turner, you mentioned some of those. Two big reasons are with
respect to the pre-1940 housing variable and the growth lag
variable in Formula B. As distressed communities have
demolished their older housing, and less distressed communities
renovated their older housing, the pre-1940 housing shifted
money from distressed communities to less distressed
communities.
In terms of growth lag, the relatively few communities that
get funding under this variable get a lot of funding, because
the growth lag here is at 20 percent, so it is pegged with
communities' population in 1960. It is the communities with
growing lag that represent the spikes you'll see in the chart;
like I mentioned, St. Louis at about $70 per capita--St. Louis
lost an awful lot of population, from about 780,000 down to
about 330,000, so that growth lag differential, that 20
percent, they receive a large portion of that.
There are other elements to the CDBG current formula that
tend to benefit smaller college towns with a high population of
students earning little or no income. When you consider these
students in measuring poverty, which we do under the present
formula, it is misleading, as many receive funds from parents
and others. You get a relatively higher grant as compared with
similar communities with no significant student population, but
with absolutely higher poverty.
Finally, the dual formula structure tends to provide
greater funding to communities funded under Formula B,
developed for declining areas, than equally needy Formula A
grantees, which was developed for growing areas.
Let me also take a moment to talk on the nonentitlement
formula that allocates 30 percent of the CDBG funding to the
States. The nonentitlement formula does not have the wild
swings in funding as the formula our cities and counties use.
As a result, there are no stark differences in funding between
States, no matter their need. With the exception of Puerto
Rico, the formula for the 50 States doesn't really target need
at all. But Puerto Rico obviously probably is a Formula--I'm
sure is a Formula A grantee because 50 percent of it is
poverty.
The report considers four alternatives, and they all
improve targeting to need, and I will just do a brief summary
of each one, if I may, please.
Alternative 1 on the left, it keeps the current dual
formula, but corrects some of the most serious problems. For
example, it defines the age of the housing stock a little more
precisely. Instead of counting just the number of units built
before 1940, this option would measure housing older than 50
years--and here is the key--and occupied by a person of
poverty.
By establishing a means test on this housing variable,
alternative 1 generally redistributes funds from less needy
communities to communities in decline, correcting that
imbalance that you see in the present formula. Exhibit 2 shows
the impact of these corrections; that would be alternative 1.
It substantially reduces the overfunding of low-need
communities like Newton, Portsmouth and Royal Oak, and only
modestly reduces the funding difference between Miami and St.
Louis. Similar changes to the nonentitlement formula also have
positive effects on targeting.
Alternative 2. Now, this is a very simple approach designed
to minimize differences in funding among places with similar
need. It is a single formula that uses four measures of need,
poverty, female-headed households with children, housing 50
years and older and occupied by a poverty household, and
overcrowding. As Exhibit 3 shows, this alternative greatly
improves the fairness of the formula by reducing the per capita
grant variation, so you don't have those fluctuations and those
lines. The disadvantage of alternative 2 is that the high-need
communities tend to fall below the needs line. Miami, St. Louis
and Detroit all receive the same amount of money; however,
they're below the needs line.
Now alternative 3, that adjusts alternative 2 to increased
fundings for communities in decline and exhibiting fiscal
distress. As shown on exhibit 4, this does improve targeting to
the most needy, compared to alternative 2. For example, under
alternative 3, Detroit and St. Louis would receive grants of
approximately $50 per capita, and Miami would receive a grant
of about $44 per capita. Alternative 3 has somewhat greater
variation between similar needy grantees relative to
alternative 2; however, alternative 3 achieves greater
targeting to the most needy communities.
Now, the last alternative, alternative 4, resembles
alternative 3, but what we've done here is it eliminates the
70/30 funding split between the entitlement and nonentitlement
communities, and that's the funding obviously for the
nonentitlement areas and the entitlement areas would be
allocated under a single formula. This approach would currently
result in a split of approximately 69/31, 69 to the
entitlements, 31 to the nonentitlements. A chart for
alternative 4 would show that the same distribution as the
chart for alternative 3.
In conclusion, today's formula--again, a formula that
hadn't been modified since 1978--places great emphasis on
certain variables that may not be a true reflection of today's
need.
I want to thank the committee for allowing me to make this
presentation, and I will be happy to attempt to answer any of
your questions.
Mr. Turner. Thank you.
[The prepared statement of Mr. Bernardi follows:]
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Mr. Turner. And unfortunately we're going to have a lot of
questions between the two of us, and I know that some of it you
may need to provide us additional information after the
hearing, or you might have someone else who you might be able
to consult in providing us the specific questions.
In looking at this issue on community block grants, one of
the things that I recalled was that when I was a student at
Ohio Northern University in political science from 1978 until
1982, one of the textbooks that I had actually had a discussion
of the CDBG formula allocation as it was occurring through
1978--through 1981, as you referenced in your testimony. And it
was interesting because the discussions that they have--and
this textbook is from 1978 it goes through the various
allocation formulas that were considered and its impacts. And
it talks about some of the allocation formulas that were
rejected and some of the elements that were considered and
accepted. And it talks about the ailing Northeastern and
Midwestern cities, such as St. Louis, Buffalo and Detroit, and
the least needy cities such as Dallas, Albuquerque and Phoenix.
Now, this sentence is from 1978, but if we look at the
information that we have before us today, intuitively I think
that most of us would agree that if you take out of that list
Detroit and Dallas, we would all have an understanding that in
any comparative need that you might structure, we would want a
comparison where the need of Detroit is recognized versus the
need of Dallas in a weighting. Dallas has needs, Dallas has
poverty; but intuitively we all know that if you drive through
Detroit, and if you drive through Dallas, and you have the
issues of community development as a topic that you want to
remedy, your view of the needs of those two communities would
have Detroit expressing a higher need and Dallas expressing a
lesser need, as just stated even in 1978 as this was discussed
in this textbook.
In looking at the four formulas that HUD has prepared, in
two out of the four Detroit loses, and in all of the four
Dallas wins. So we would have, in that intuitive comparison,
formulas before us where we're trying to say in these four
formulas that the community needs of Detroit are perhaps
lessened, and the community needs and development of Dallas are
increased. That's kind of troubling to me.
And so I've looked to the issue then of how the proposals
are structured, and with your charts, you have mapped less need
versus high need based upon some assumptions that are used then
to structure your formula. And it's those assumptions, not
necessarily the four examples, that I would like to ask my
questions about predominantly, because it seems as if the
moment that you define a low need and a high need, based upon
factors that you put together here, that the outcomes of your
four recommendations are going to be, of course, biased toward
those. And in looking at them, there are a few things that
jumped out at me.
One, obviously, is immigration. It appears to me, in
reading these materials--and obviously this is a very complex
report, so I'm going to need your assistance in deciphering it,
but it appears that immigration, being identified as a new
element of an expression of need, is reflected in your charts
at a weighting of what percentage? From the materials that I
saw here, I believe it's 15 percent. Is that accurate?
Mr. Bernardi. That's correct.
Mr. Turner. OK. The part that troubled me the most was when
I read this, it said a new dimension of community distress that
surfaced as a result of the rapid growth in the immigration
population. And certainly immigration has not been a new
phenomenon. Our committee is the Federalism and the Census, and
so I had a visit from census people the other day, and they
gave me this great big, thick book, which I looked into the
issues of immigration. And if you look at a chart from 1900 to
2003, there is definitely a spike that occurred around 1990 in
immigration. But there is, then, a capping that occurs in the
amount of immigration that is permitted, legal immigration. And
then if you look in the Statistical Abstract of the United
States, 2004, 2005, the National Data Book, if you look at
immigration from 1901 to 2002, it shows that the rate of
immigration per thousand population--immigration population in
contrast to the U.S. citizen population in thousands--that we
do have a peak in the 1980's and 1990's, but that we have
returned to a pace that is similar to the current--the pace
that was experienced back when I was in college and they were
discussing redoing this formula.
For example, from 1971 to 1980, this report indicates that
our rate per thousand is 2.1. From 1981 to 1990, it rises to
3.1; 1991 to 2000, 3.4; spikes in the 1990's, 6.1, 7.2; but it
has fallen such that it goes below 3 from 1995 forward to
through 1999, and then hovers around 3, 3.7 in the beginning of
2000.
So it seems to me that when we start with the assumption
that it's a new phenomenon, it's not. The new phenomenon was we
had a temporary spike--and you guys probably can't, because I
don't have as big a graph as you do, but we had a temporary
spike, and that certainly was a phenomenon that did occur. But
it's not new, and we've always had immigration. It's maybe new
in certain concentrations in areas of the South, and it may be
new in the composition of that population that are immigrants--
certainly poverty is not new in concentrations in immigrants.
And since our census statistical data shows that it has leveled
off and returned to the same levels as when we first put this
formula together, I'm wondering if we would be making a mistake
at this point to now weight the formula by 15 percent on
something that we know from this point going forward should be
about the same as we experienced from 1978 until the early
1990's. Your thoughts.
Mr. Bernardi. As you mentioned, the immigrant population
increased in the 1970's and 1980's, I believe you're
indicating, up into the 1990's, and you feel it's leveled off--
--
Mr. Turner. According to the census data, it is now at the
same level----
Mr. Bernardi. What we did with this study is we took 17
variables and we related these variables back to the primary
objective of the CDBG formula program. The variables measured
decent housing, suitable living environment, economic
opportunities, and low and moderate income. And as they used a
factor analysis with these 17 variables, this analysis
basically groups these variables down to several individual
factors, and those individual factors in the previous studies
were poverty, problems in aging communities and communities in
decline. The present formula has an 80 percent single factor
for poverty, age of housing and decline; and that, as you
mentioned, the 15 percent factor related to the fiscal--stress
related to immigrant growth; in here, the Santa Ana, Anaheim,
CA.
This material was done on information, I believe, right up
through 2004. And the overcrowding number in the alternatives
has been substantially reduced. If you look at the current
formula, overcrowding in Formula A is at 25 percent, and
alternative 1 takes it to 30 percent, but then it goes to 20
percent in alternative 2, and down to 10 percent for
alternative 3.
The overcrowding takes place in cities like Miami and areas
like you mentioned in the South and the Southwest, but our
folks felt that percentage would be an accurate indication of
what the stress would be because of overcrowding.
Mr. Turner. Well, and that actually goes to my next area of
questions concerning the immigrant population, because there is
a weighting for overcrowding, there is a weighting for density
of population. It seems to me perhaps as double-counting when
you factor in immigration, because what you're doing is you're
saying these are expressions of poverty in a community,
overcrowding, density, poverty itself, the make-up of the
households, but then when you overlay immigration upon it,
you're, it seems to me--especially with the weighting of 15
percent in your charts--double-counting what you're going to
find in those communities as a result of the impact of
immigration.
Mr. Bernardi. Overcrowding--a great deal of the immigrant
population utilizes, as far as I understand it, more of the
services than they contribute into the services. And the fact
is the overcrowding number is more than 1.01 person per room.
And you find that the overcrowding number--and then when you
cap it with the low-density places with a high concentration of
poverty, they put a 5 percent weight on that. I don't see it as
double-counting, but that's open for discussion.
Mr. Turner. The next question I have with regard to
immigration--and then we'll turn to Mr. Dent, and then I have
another series of questions of the other factors--is that if we
are to accept that it's new, a proposition that I don't
necessarily accept, and we are to accept that the migration of
immigrant populations are a factor that needs to be taken into
consideration, the type of aid that is provided to cities, I
wonder whether or not the Community Development Block Grant
Program is the appropriate place to do that in that you already
have, by the understanding that immigrant populations are going
to migrate to areas of the country that have growth, jobs and
opportunity--that, in fact, you aren't then shifting Community
Development Block Grant funds which are stability in focus, in
part, to address issues of growth where there is also economic
growth that might be available to remedy some of those needs.
Mr. Bernardi. True. But as I mentioned earlier, a larger
percentage of the immigrant population utilized more services
than they provide in services. And that's only a part of the
needs index, as we indicated, as 15 percent. I think the
strength of this is that 80 percent is on the poverty, age of
household and communities in decline.
Mr. Turner. My question was is it possible that the topic
that you're trying to remedy is one that--of immigration and
the burdens of needs that are being placed on communities that
are seeing large migration--immigration populations might be
best served not by modifying CDBG, but by looking at what
specific needs and assistance should be provided separately
from the CDBG program?
Mr. Bernardi. Of course. I mean, you could look at any
segment of our society and create a new program if you wanted
to, Congressman, as to how you would address that.
As far as we're concerned, though, when we did this report
in 1983 and 1995--we were mandated by Congress to do this
report--we did this as part of our 2004 budget submission. And
I think everyone feels very strongly that the formula program
does not target strongly the need as it was intended at the
inception of the program in 1974. And there's many different
ways in which you can change this formula, but I mean, there is
a formula 5 that I didn't bring with me today, and that is a
little bit of a tweak between alternative 2 and alternative 3.
You can reduce or increase any of these factors to compensate
for an area in which you feel perhaps there is an overweight.
Mr. Turner. Thank you.
Mr. Dent.
Mr. Dent. Thanks, Mr. Chairman.
Good morning, Mr. Secretary.
Mr. Bernardi. Good morning.
Mr. Dent. I enjoyed your presentation.
I guess my question is in order to make this system more
fair, you can probably write a lot of formulas, but what is
really driving the iniquities? Why are some of these lower-need
communities getting their greater share per capita spending
than the higher-need communities? Is it population decline? Is
it the student population, housing stock? What factors are
really driving this disparity, particularly in the entitlement
communities more so than the nonentitlement communities?
Mr. Bernardi. As I indicated in my presentation, you take a
look at Newton, MA; Portsmouth, NH; and Royal Oak, MI they all
receive between $28 and $37 per capita, and they do that
because they're a Formula B community. And in a Formula B
community----
Mr. Dent. Is that older housing stock?
Mr. Bernardi. That is correct. They have the older housing
stock, the Formula B provides a higher dollar amount to them,
and that's the pre-1940 housing. So by adjusting that, by not
just having it pre-1940 housing as it is under the present
formula, under these new proposals it's 50-year housing or
older, which would make it 1955--and that would be on a growth
basis, in 5 years it would be 1960--but what we do is those
houses 50 years or older would have to be occupied by a person
in poverty, a person in poverty defined as two people making a
certain amount of money, three people----
Mr. Dent. So it is not just the age of the house, but the
age of the house plus the person living in poverty. I take it
Newton, MA, has a lot of older homes, but they're not
necessarily lower-income people living in those homes.
Mr. Bernardi. Exactly.
Mr. Dent. Other factors in determining this formula, tax-
exempt property or rental housing, is that a factor you use in
determining any of the needs of communities? Many communities
have higher--larger percentage of rental property, you probably
have higher cases of poverty, for example. Or a lot of
communities, older cities, have probably larger amounts of tax-
exempt properties, which may include colleges and universities,
which again skews the formula. So I guess my question is do you
use any of those indicators in determining the wealth of the
community?
Mr. Bernardi. The indicator of housing was not used. As a
matter of fact, we have a grant program called the Home
Program, which deals with affordable housing in this country.
So housing was not used, and rent in and of itself was not used
as a tabulation for the formulas that have been presented.
In alternative 3, the one difference that was used there is
they used a per capita income basically to make a determination
when it comes to the wealth of a community, for example. If a
local jurisdiction's per capita income is lower than the per
capita income of the metropolitan area, that local jurisdiction
would receive additional dollars. If their per capita income,
conversely, is higher than the per capita income of that
metropolitan area, by a factor analysis that our people put
together, they would receive less.
So what you do with alternative 3 that you don't do with
alternative 2 is you put in that per capita income caveat.
Mr. Dent. On a related question; do any of these
alternative proposals use cost of living as an evaluator of
need? Do you use that at all?
Mr. Bernardi. I don't believe so, no.
Mr. Dent. OK. And I guess it would be fair to say, if I
heard your original testimony correctly and clearly, that it
seems that the disparities are less among the nonentitlement
grantees than the entitlement grantees; is that a fair
statement?
Mr. Bernardi. That is correct.
Mr. Dent. Let me ask another question I have. On page 4 of
your testimony, you're showing some of the disparities. I think
you said the disadvantage of alternative 2 is that high-need
communities tend to fall below our needs line. Miami, St. Louis
and Detroit all would get the same amount; however, they would
fall below the needs index. And I was trying to understand why
those communities would fall under the needs index under that
alternative. Do you see where I am in your testimony?
Mr. Bernardi. Yes.
Mr. Dent. You were pointing out the disadvantage of
alternative 2.
Mr. Bernardi. Well, alternative 2, if you look at the
chart, it basically brings all of the communities together, and
it doesn't provide additional dollars to the highest-need
communities. The highest needs tend to fall below that needs
index line. As you can look at that chart to the right where it
says highest needs under alternative 2, the majority of those
communities are below the needs index line. And then when you
take alternative 3, you can see that a majority of them go from
below the needs index line to above it.
Alternative 2 does a nice job, and it brings the
communities that receive a higher per capita, because, as I
indicated to you earlier with Formula B with that pre-1940
housing, those three examples that we used, those communities,
that brings them back down to a $5 to $7 per capita range as
opposed to when they were a $20 to $30, but it does not provide
a greater percentage of dollars to the higher-need communities
as alternative 3 does.
Mr. Dent. OK. You do a lot with these formulas. Here is the
bottom-line question for me. Is there any way I could see how
my communities in my district fare under the current formulas
that are used to distribute the CDBG dollars, particularly for
the entitlement communities, versus how they would do under the
various alternatives you've outlined here today? You might not
have it in front of you here, I understand----
Mr. Bernardi. I do have it in front of me.
Mr. Dent. You do? Wow, I'm really impressed.
Mr. Bernardi. It indicates here that the majority of your
communities will lose funding. All of your communities are
Formula B.
Mr. Dent. These are the entitlement communities, or these
are the nonentitlements?
Mr. Bernardi. Both.
Mr. Dent. Both, OK.
Mr. Bernardi. Both Burkes County and Montgomery County
receive more than--I can get this to you if you'd like.
Mr. Dent. Yeah, I'd like to see that. Lehigh and
Northampton Counties, and Berks and Montgomery, would you break
it out into county-by-county basis? Is that how you have it
broken down?
Mr. Bernardi. We do have it that way, yes.
Mr. Dent. That would be great. Thank you.
Mr. Turner. Mr. Bernardi, a clarification. In the
discussion on housing, you talked about the age of housing, and
that the pre-1940 standard versus rolling 50 years, and you
went further to say occupied by an individual. And actually,
according to what your standards are, it's not really an
individual, it's a family in poverty, because you don't count
individuals in poverty, which we will get to in a minute, which
I believe is a mistake. But by counting the households that are
greater than 50 years that are occupied by a family that's in
poverty, do you have a factor of counting abandoned housing
stock? Because certainly that would be an element representing
a blighting influence, and I didn't note that anywhere.
Mr. Bernardi. We don't. But you're correct, that obviously
is a blight to the community. As the mayor of Syracuse and
yourself, as mayor of Dayton, we realize the number of
abandoned homes that we have.
Mr. Turner. You and I have had this discussion about
abandoned housing--frequently abandoned housing does not
necessarily just represent migration trends. It doesn't
necessarily mean that a neighborhood is no longer desirable or
suitable. Sometimes it means the lifecycle transition of a
house or a building, having gone from owner-occupied to a
rental unit, from a rental unit to abandonment with title
problems where acquisition is inhibited. And the community's
ability to go in and rehabilitate that unit, thereby returning
a family or an individual to the neighborhood, would be limited
to the extent that you reduce their community development block
grant funds by the vacancy of the house. You are, in fact, then
penalizing them--removing a funding source for housing
rehabilitation based on the fact that they're experiencing
abandoned housing.
Mr. Bernardi. Well, as you know, Congressman, the CDBG
moneys can be used for acquisition and demolition; and a great
deal of that is done in the high-distressed communities,
Northeast, the areas where pre-1940 housing under the present
formula is taken down. And what that does, obviously, it hurts
your number as far as the allocation because of the pre-1940
housing percentage.
Mr. Turner. But everyone would agree that one of the goals
and objectives of CDBG is the acquisition and renovation of
abandoned housing units, which are a blighting influence, and
this ranking of need would specifically remove those units
which are targeted for CDBG funds from the indication or the
assessment of need.
Mr. Bernardi. I'm sorry, I didn't follow you.
Mr. Turner. We all agree that CDBG for funds--or one of
their intended uses is to address the blighting influence of
abandoned housing in communities, correct? So I'm just asking
you to recognize that your graphs of low need to high need
removes an element of need of abandoned housing that the
program is specifically designed to try to address.
Mr. Bernardi. Well, I've just been informed that we're
doing research on vacant housing, and it's something to be
considered.
Mr. Turner. OK. The next topic which is identified in the
GAO report is the issue of using metropolitan per capita
income. And I found it interesting because I'm familiar with
David Rusk's work, and I didn't quite get the nexus between his
work and utilizing the metropolitan per capita income element
here. But in your testimony, Mr. Dent asked you if you take
cost of living into consideration, and you indicated you did
not.
Mr. Bernardi. No.
Mr. Turner. By taking metropolitan per capita income into
consideration and not taking costs, aren't you taking--aren't
you heavily weighting toward what could be low-cost, wealthy
communities?
Mr. Bernardi. Low-cost wealthy areas.
Mr. Turner. Yes. Because if you take metropolitan per
capita income--and I believe from my reading from this--and
please correct me if I'm misunderstanding this--in reading this
paragraph it seems to me that you're saying communities that
have a high metropolitan per capita income are burdened with
higher costs in being able to deliver services and
accomplishing community development projects; and therefore,
you're taking that as an element into consideration and
providing them funding. But if you don't take costs into
consideration, you're rewarding communities that may have high
per capita income and low costs, I believe. Am I incorrect
there? Is there some adjustment that you're making?
Mr. Bernardi. High per capita income and low costs,
personally I don't see how they go hand in hand----
Mr. Turner. Well, high-growth areas where there is a
significant amount of opportunities will have wages that have
upward pressure that may not yet have expressed high cost of
living in either housing or other elements of family support.
Mr. Bernardi. Initially; but eventually that catches up,
and catches up in a hurry.
I think what we've done here is to look for jurisdictions
where the per capita income is lower, obviously, than the per
capita income in that metropolitan area. That would demonstrate
to me that's a community that has some concerns, has some
decline. And that's why that community would receive, according
to alternative 3, additional funding.
Mr. Turner. And I guess I don't quite understand, then, to
what extent that is taking into consideration how that is
applied. It would seem to me that a community that has low per
capita income, and it is also in a metropolitan economy that
has low per capita income, would have less opportunity, not
more opportunity, because we know in metropolitan regions they
tend to be--they are not hard-set boundaries in metropolitan
regions for an economy. So that the individuals who are in
poverty, who are in a community where the regional per capita
income is higher, would have economic mobility greater than
someone living in a community where they're in poverty and the
per capita income around them is lower.
Mr. Bernardi. True. You would have more of an opportunity
if you're in a region where the per capita income in that
region is higher even if your jurisdiction is lower, yes.
Mr. Turner. Which goes to my questioning. This is a new
element that had not been there before.
Mr. Bernardi. If I may, you can look at a city that has a
low per capita income, and then look to the metropolitan area
and you see a higher per capita income, and the fact is that
the people who put this together were looking for a way to
weight, if you will, those individuals living just a few miles
from other individuals who, because of many varied
circumstances, that per capita income is extremely lower.
Mr. Turner. And I think certainly the disparity that those
individuals experience would be greater, but the economic
community development, economic opportunity that that community
has, is not necessarily impacted by that. It might actually be
enhanced. You might have a greater opportunity for regional
resources rather than a lesser opportunity if your region has a
lower per capita income, but that is just my thoughts on that.
And I appreciate you explaining it to me because it did not
make sense to me at first.
I'd like to turn next to the issue of looking to family
households and excluding the single poverty individual who is a
nonsenior, nonelderly single population. Am I correct that is
occurring? There is a huge footnote down here that I do not
understand. I understand the intent, that there was a concern
that off-campus college students in college towns might have an
impact in the overall numbers.
Getting back to intuition, it would just seem to me
nationally that we probably have more individuals who are
living in poverty in single households than we have in single
off-campus college students. Now, I could be wrong, but that's
just my guess.
And to go the next step of then just excluding all single,
nonelderly households in order to get to the off-campus college
students seems extreme. Your footnote goes on to explain the
rationale and the basis for it, and claims statistically that
it does parallel itself, but it seems to me that the footnote
said, in order to prove that eliminating all single, nonelderly
households that are in poverty to get to the off-campus college
students, we prove that it doesn't have that much of an impact
if we globally do it; and you went, I think, by going to go and
look at the population of off-campus college students.
If you can look at the population of off-campus college
students, why aren't we just doing that instead of eliminating
all single poverty households that are not elderly?
Mr. Bernardi. As we mentioned earlier regarding those
communities that are affluent communities, if you will, that
receive above the line in the need index, the Portsmouths and
the Newtons, there that is older housing, and just by having to
indicate that it's pre-1940 housing, they receive a benefit
there. And there are many, many individuals that reside in
those properties that are anything but poor people in need.
Mr. Turner. I understand your point----
Mr. Bernardi. In other words, I don't believe you could
just do it for the university areas and not have the desired
outcome that you would want, the weighted under Formula B right
now that provides to those affluent communities with the pre-
1940 housing.
Mr. Turner. And perhaps you need to provide me more
information on this, but let me read these next two sentences
to explain my question. It says that, because this variable
excludes single, nonelderly persons in poverty, there is a
sense that it may misrepresent the needs of communities with
particularly high portions of their population made up of non-
college students who are single, nonelderly and in poverty.
That is my sense----
Mr. Bernardi. It would be nice to get everyone into the
mix----
Mr. Turner. The next sentence, though, says, to test this,
HUD requested a special tabulation of census data that
specifically excluded full-time college students from the
poverty count. And my question, which perhaps you can provide
me information later, is if you can do that, why not just do
that instead of excluding all non-college students, single
nonelderly in poverty? Because it seems that the footnote says
we're going to exclude all these non-college students, single,
poverty, nonelderly, because we have tested it with the census
data, and it gives us the same number as if we just exclude
full-time college students. And it goes on to say that people
aren't necessarily going to believe that or trust that. I'm one
of those. So if you can, why don't you just eliminate full-time
college students? And perhaps that is something that you can
provide us information.
Mr. Bernardi. I'll be happy to do that.
But as I mentioned a moment ago, you still have to address
the pre-1940 housing and those affluent communities that
presently operate under Formula B and receive a
disproportionate share per capita based on pre-1940 housing.
Then you would have to add another caveat, if you will, to
address that.
Mr. Turner. I understand your housing point.
Mr. Dent, further questions?
Mr. Dent. Thanks, Mr. Chairman.
When you're driving these formulas, have you looked at tax
effort or a community's fiscal capacity in determining grant
levels? In other words, some communities that are quite poor
have very high tax efforts, and some of those communities that
are of perhaps lower need may have much lower tax efforts. Have
you ever looked at that as a potential component to the
formula?
Mr. Bernardi. I don't believe so. I don't believe that the
taxes of a particular jurisdiction come into play at the
ability of the community, if you will, to provide for services
that some communities could not because of their ability to
have the higher sales tax or to have a higher property tax
base.
Mr. Dent. I guess the reason I'm asking is in my State of
Pennsylvania, we used to run these complicated school subsidy
formulas, and we always tried to throw in a tax effort whenever
we could. Do you measure poverty here by TANF families, or what
is the definition of poverty under this?
Mr. Bernardi. The definition of poverty is a family--an
individual with a certain income, two people with a certain
income, three people with a certain income.
Mr. Dent. OK. Is that essentially--is that the TANF
criteria, more or less?
Mr. Bernardi. I believe so.
Mr. Dent. OK. And the next question I have is, you know,
we're doing two things here. We're trying to look at the
formula that drives the money out to the various communities,
but the question I have is how are these CDBG funds generally
spent by the neediest communities, and how would they be spent
generally by the lower-need communities, and what's the
difference? In the communities that Chairman Turner and I
represent, a lot of those dollars are being used for
demolition, deconverting rental units back down to owner-
occupied settings, and all types of what I would consider
legitimate community development, putting money into areas
where we would not be able to invest, be able to draw private
sector investment, but basically preparing sites, preparing
land, preparing housing.
What do you see the difference of how the moneys are spent
between these high-need communities versus the low-need
communities?
Mr. Bernardi. Well, as you know, Congressman, the
flexibility of the program within parameters allows each
community to basically spend the money within the guidelines of
the rules and regulations.
I can tell you, with the 2004 expenditures, basically, oh,
I think it was $1.6 billion out of the $4.1 billion, about 26
percent was used for housing rehabilitation. And I think the
low-need communities, as Congressman Turner mentioned earlier,
when you have to do an awful lot of rehabilitation, maybe do
some demolition housing, housing is maybe the highest
expenditure.
There are also communities that can use it for public
services, like adult literacy, child day care, but there's a
cap of 15 percent. So the communities would look at their
priorities and make a determination as to how they want to
utilize those dollars. There's also public facilities,
percentages used for sidewalks, streets, sewers. Economic
development is another area where resources are used.
Mr. Dent. I guess the final question I have, do you think
it will be difficult for Congress to come to some kind of
consensus on this given the complexities of the methodologies
that you are using? Because at the end of the day, if most
Congressmen are like me, they will look at their communities
and see how they will do under the old system, look how they
will do under the new system and that will drive a lot of their
decisionmaking. Have you thought about that at all?
Mr. Bernardi. We have. That's why we have four alternatives
that are in front of you. Regardless of which alternative you
were to choose, if you were to choose a change in the system,
there are going to be communities that will receive more
dollars and there will be communities--everyone will be
affected.
But, then again, the variables that are being used here,
it's how close you want to target to need the objectives of the
program, decent housing, economic opportunity, quality of life
and providing dollars for people of low and moderate income.
The communities right now spent about 95 percent of their
allocations to benefit low and moderate income individuals;
that was 60 percent. It was raised to 70, then to 80 by
Congress just 10 years ago.
But the communities, in your previous question, communities
utilize the moneys. I think, to help the people that they think
need it the most, depending on what areas they want to do,
whether it's housing or whether it's a program for senior
citizens through the public service cap.
Mr. Dent. When you talk about those communities, I don't
want to talk about winners and losers, but those communities
may do better than others. I have a good sense of which
communities would need a greater boost through CDBG than some
others that might not fare as well or do worse or could afford
perhaps to do a little worse. Would these formulas be able to
break these, break this down by municipality? I know you have a
county-by-county analysis. But you could actually break it down
by municipality in my district so I could see the----
Mr. Bernardi. Yes. We do all that information. We can
provide for you exactly what would occur with each urban
county, for example, for an entitlement community, for your
non-entitlement communities. Also, when the program went from a
categorical grant program to the formula here back in the
1970's, there was a phase-in period that was put into place by
Congress. I think it was anywhere from 3 to 5 years.
If you choose to change the formula, you could do the same
thing here so that the community would be phased in to
receiving that extra money so they have the capacity and the
wherewithal how to use the capacity at the same time if they
were to lose those dollars.
Mr. Dent. That would help me quite a lot. I could pick at
you all day in terms of the formula--what form it should be in
and shouldn't be in--but if I could look at all four
alternatives and break it down, I could get a sense of what is
the fairest for my district. I am trying to drive the money to
the communities most in need. That would be helpful to me and
in my decisionmaking process if we went forward with some kind
of formal funding.
Mr. Bernardi. We have that information and would be happy
to provide it to you.
Mr. Dent. That would help me to see what is more equitable
versus what is less equitable. So thank you.
Mr. Turner. Well, Mr. Secretary, for just a moment, I want
to get back to the immigration issue, because, as we were
talking about the David Rusk issue of the inelasticity or
elasticity of metropolitan areas--basically your document, as
it reflects David Rusk, is talking about the ability for a
metropolitan area to grow into a regional metropolitan
government type versus those that are geographically frozen,
small central cities, perhaps growing affluent suburbs.
Taking into consideration, as you do, the disparity of per
capita income between the metropolitan area and the urban core,
as a percentage, I indicated that I believe that may be
incorrect, because you are an individual who is in poverty in a
community where that is not that great disparity, has less of
an overall economic opportunity than a person who is in a
situation where the metropolitan area is significantly higher
than the urban core.
But getting back to immigration. We have here percentage
point change in poverty rate as an element that you consider.
And we have in here metropolitan per capita income disparity
between the urban core and the suburban area, and we have in
here concentration of poverty. Those are weighted, and then as
we discussed immigration, I was indicating--I believe that some
of the factors that you have double count the expression of
immigration and opportunity--and I just want to walk through
that.
I am not asking you a question, but you can comment on it
if you would like. It would seem to me that if you have an
area, if we have a small urban core that geographically is
frozen but cannot grow, but a successful metropolitan area,
where the per capita income is higher in the suburbs than in
the urban core, significantly, which is what you are trying to
register and capture, that would be an area that would attract
immigrants, and that, again, the urban core, not having an
ability to grow and probably having the less expensive housing
options available would attract that immigrant population.
Because it's under David Rusk's model, geographically
unable to grow to capture the economic growth in its suburbs,
it would have a percentage change in poverty that would go up.
It would have, because its population is growing, a higher
concentration of poverty than it had before, and it would
remain in an area where its per capita income is in a
significant disparity to its metropolitan area.
So that's one of the reasons I am concerned that you used
these elements that are things that I believe will occur in an
area that's experiencing immigration, and then you go back in
and weight your system an additional 15 percent for
immigration, when, I think in the elements that you are
capturing, the expression of immigration is already going to be
reflected.
Mr. Bernardi. So, if I may, you are looking to localize
this then. You are saying immigration would tend to be in areas
where there's a low per capita income, but we estimate the
metropolitan area is high income. There's more opportunity.
There's less expensive housing, so these individuals--I don't
know how you capture that.
Mr. Turner. My concern is that your factors, by then going
back and adding immigration, what you are doing is saying, we
are going to look at poverty and community development needs.
Then you are factoring over on top of those an expression of
certain types of poverty by the individual whose impoverished,
the immigrant.
I think that double counts the expression of poverty in the
community that probably does not serve us. And that's my
analysis of this, and any other additional analysis and
comments that you make or further discussion, I would love to
hear.
Mr. Bernardi. I appreciate what you are saying. It also
seems to me that when you talked about the college towns and
making a separate distinction as to why we can't just make the
adjustment in the way the university housing is or the college
housing is--and I would like to say that these are just
alternatives.
Mr. Turner. I understand.
Mr. Bernardi. I told you I have an alternative five that I
like even better than the first four alternatives.
Mr. Turner. I would love to see it.
Mr. Bernardi. But you can tweak these numbers, and you can
eliminate, like, for example, between two and three, as I
mentioned, what we did there to provide additional dollars to
the high-need communities is we took the overcrowding, the
number that you are talking about, that would tend to come with
an immigrant population and reduce that by 10 percent, and at
the same time, we increased by 10 percent housing 50 years or
older. So there are ways in which you can even make more
distinctions than we have made here.
Mr. Turner. OK. When you were present for the Strengthening
America's Communities Hearing, David Sampson from Commerce gave
us some initial discussions concerning how that program, if it
were to be approved, would allocate its community development
to dollars.
And his discussion was that a task force is going to be
formed that would flush out what these elements or factors were
to be considered. But his testimony here pretty much focused on
poverty only and looking at communities that had a poverty
expression greater than the national average.
I didn't see in yours, and it may be there, and I just
don't see it, that where you have communities that have a
poverty in excess of the national average, that there's an
additional weighting toward them versus just the expression of
poverty generally. Is that accurate?
Mr. Bernardi. Well, the numbers that Mr. Samson provided
you, I believe, he said that 38 percent of the cities that
received CBDG resources were below the poverty number. That's
not the case. It's more like 22 percent.
The fact of the matter is, I think this particular formula
that we presently operate under and the alternatives that we
proposed, I think, target more of a need. As you can see by the
numbers here, I think the poverty of family and elderly poverty
is 50 percent in formulas two and three.
Mr. Turner. Going back to the factors again. When you
identify what the factors are--and, by the way, the report, I
do want to compliment you on your report. This is an excellent
report in being able to read and digest it and being able to
look at the extent of data analysis that has gone on this.
Whether or not anyone agrees with the outcomes or the specific
recommendations, the work that is done here is just excellent
work.
Getting to, then, once you have identified these factors
that you believe and the new demographics could be taken into
consideration--when you go to put that chart together of less
need and high need, you then weight these factors. We just had
discussions whether or not the elements as a factor should even
be considered. The next process is the weighting of those
factors.
The discussion in the document pretty much, that I got from
it, in discussing how that weighting occurred, is a judgment
based on this factor is either higher and lower, and so then a
number higher or lower is picked.
But I didn't get any information as to how the exact number
was picked: 80 percent for factor one; 15 percent for factor
two; 5 percent for factor three. Do you have information that
tells us what that process was in determining that?
Mr. Bernardi. I am sure we do, and I can get that to you.
But as I mentioned, the 17 variables taken into consideration
break down into four areas. There were three variables on
decent housing, three on unsuitable living environment, four
for economic opportunities, and then low and moderate income
had the remainder. I will be happy to get you that information
as to how they weighted it so that it came down to the number
that we have.
Mr. Turner. I know Mr. Dent was asking for additional
information on how the four formulas are applied to
communities. I don't recall specifically if he also asked in
looking at how the alternatives are applied to cities and then
looking at the equation that is in the front. I don't think we
have the data of the actual application of the equation to each
city so that a city could pick it up and see how their number
was decided based on the data that was in front of them. Could
we have that information given to us?
Mr. Bernardi. Well, we can give you the information right
now as to what I know each community would receive or would not
receive based on each one of the alternatives. Now, to give you
the information behind how that was calibrated?
Mr. Turner. Right.
Mr. Bernardi. We will do it, sure. I should say, my people
behind me will do it.
Mr. Turner. Grandfathering has been a question that comes
up frequently. GAO makes note in the written testimony,
grandfathering provisions in the current law which allow
communities that no longer meet eligibility requirements to
remain entitled.
Some of the questions that we have here are, how many
communities fall into this category right now and how long
really is grandfathering permanent, and is there a geographical
trend that shows certain areas falling out of entitlement
status and into grandfathering status?
Mr. Bernardi. I don't believe we have too many areas that
are falling out of entitlement. We have had a significant
increase in entitlement communities, as you mentioned in your
opening statement. But I would be happy to tell you how we
grandfather.
Mr. Turner. Or if you could tell us who is, what is the
time period and give information about that process.
Perhaps you could give us your thoughts on the issue of
rural areas. I mean, throughout this report and also through
the GAO report, they have identified the issue of rural areas
and their needs being different than urban areas. If you could
give us your thoughts as to how that might be taken into
consideration and what we might need to do in looking at the
needs of rural areas.
Mr. Bernardi. There were 10 variables used for the non-
entitlement communities. The non-entitlement communities are
the States that represent those rural areas that you mentioned
here. I believe that the alternatives here address the
disparities that occur from it. From the beginning, though,
there was not as much of a fluctuation and a shift between
States and non-entitlement communities as there were within
entitlement communities.
Mr. Turner. Any closing remarks for us, Mr. Bernardi?
Mr. Bernardi. Just that seated behind me here, there's a
gentleman named Harold Bunce, and he did the report first
report back in 1976. And the gentleman to his left is Kevin
Neary, and he participated in the reports in 1983 and 1995. And
Todd Richardson is right off my left shoulder here; he just
basically is the architect for this report.
I would like to say, this is the third full report that HUD
has taken a look at when it has come to redoing the formula.
You know, regardless, Congressman Dent indicated that we all--
everyone wants to know what is going to happen in their area.
It's a difficult decision as to whether or not you make the
determination to change this formula. There's going to be,
obviously, some swings regardless of which alternative you
choose.
But it still targets the need, as you mentioned, Mr.
Chairman, in your opening statement, still targets those that
are most in need, but the disparities have grown over the
years.
And I want to thank you for the opportunity, and we will be
happy to answer all the questions in writing that we have not
answered here today. If you have any followup, just let us
know. Thank you.
Mr. Turner. Thank you so much for the time and effort and
the time and effort of your staff. What a great service you
have done in putting this report together. I am certain this is
going to result in a great discussion as we look forward to the
topic of CDBG, whether or not there needs to be changes in the
formula, and, if so, how that might occur in an equitable
manner for our country.
Mr. Bernardi. Thank you.
Mr. Turner. We will take a 5-minute recess as we bring
forward the second panel.
[Recess.]
Mr. Turner. I will call the subcommittee on Federalism and
the Census back to order beginning with panel two.
Panel two includes Paul Posner, Director, Federal Budget &
Intergovernmental Relations, Government Accountability Office;
Jerry Fastrup, Assistant Director, Applied Research Methods,
Government Accountability Office; and Saul N. Ramirez, Jr.,
executive director, National Association of Housing and
Redevelopment Officials.
I believe, Mr. Posner, we are starting with you.
I'm sorry, gentlemen, I was just reminded we need to swear
the committee in because this committee does swear in
witnesses.
[Witnesses sworn.]
Mr. Turner. Please note on the record that all witnesses
have responded in the affirmative.
Again, Mr. Posner, I believe we are starting with you.
STATEMENTS OF PAUL POSNER, DIRECTOR, FEDERAL BUDGET &
INTERGOVERNMENTAL RELATIONS, GOVERNMENT ACCOUNTABILITY OFFICE;
JERRY C. FASTRUP, ASSISTANT DIRECTOR, APPLIED RESEARCH AND
METHODS, GOVERNMENT ACCOUNTABILITY OFFICE; AND SAUL N. RAMIREZ,
JR., EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF HOUSING AND
REDEVELOPMENT OFFICIALS
STATEMENT OF PAUL POSNER, ACCOMPANIED BY JERRY C. FASTRUP
Mr. Posner. Thank you, Mr. Chairman, and Congressman Dent.
I want to begin by referring to a report GAO issued
February 16th of this year, and we call it, 21st Century
Challenges: Reexamining the Base of the Federal Government. I
think it is very pertinent to what we are talking about here.
Because what we say in that report is, we do have a fiscal
problem. We know we have deficits, but over the longer term, we
are going to have a real fiscal crisis. We are on an
unsustainable fiscal path, really not just at the Federal level
but our local States and governments, as you well know, are
facing significant structural pressures on both the revenue and
spending sides of the budget.
The point of all of this is that, at some point, all major
program activities at the Federal level--arguably, the States
have been through this in the recent crucible of fiscal
crisis--are going to have to be on the table, not to be changed
at the margin, like we often do, but really fundamentally
reexamining the base to test their relevance, for a 21st
Century period, and then new economy, to test their
effectiveness.
And one of the things we talk about in here is to test
their targeting. Programs are going to have to justify why they
should be exempt from such a process. As we are fond of saying,
in this process, fiscal necessity may, in fact, become a mother
of reform and reinvention in the public sector.
We think the HUD study, in fact, should generate and
provide us a good basis to generate this kind of reexamination
basis for the CDBG formula. In fact, this hearing, and I
commend you for holding this hearing, is a good example of how
such a process can get under way.
I think that the questions about the formula that have just
been illustrated in the previous discussion are germane and
whether or not this program is consolidated and whether or not,
frankly, fundings are changed.
Now, first, I want to say, my testimony is based on years
of formula design work that GAO has done. I have made sure that
Jerry Fastrup accompanies me here at the table. He is our
senior public finance economist with--I don't want to tip off
his age--but maybe 30 years of experience of working with the
Congress on formula design. And not only is he an extremely
knowledgeable and sharp technician, but he understands how to
explain these issues to various audiences over the many years.
Again, in our view, targeting is always in season to talk
about. But the fiscal impetus we have arguably provides a more
important impetus. The declining Federal resources is clearly
challenging politically, but it does provide an important
window to have this discussion. For example, if you are facing
cuts, you can provide cuts across the board. But targeting
enables you to hold harmless those communities and others with
least capacity to absorb the cuts. More targeting, arguably,
when you have less resources is needed to address the fiscal
gaps between those with high and those with low needs.
In our view, targeting generally entails two kinds of
dimensions or two kinds of design decisions. One is the
eligibility, what grantees are eligible for the program in the
first place and how to allocate money among those grantees. In
our testimony, we talk about two general evaluation criteria
that are useful to think about this and other programs.
One is treating equals equally. In other words, low-income
communities with high needs should be expected to have similar
per capita allocations under a well-targeted formula. And two,
allocating proportionally greater funds to those areas with
higher needs and lower capacity to fund the program on their
own.
As the HUD report suggests--and I do want to echo your
point, Mr. Chairman, we think the HUD report is a well-done
piece of policy analysis--that the CDBG formula does target
based on needs, but longstanding inequities exist. And the HUD
report does a very good job, I think, of laying out how such
factors skew the targeting in such areas as the definition of
older housing, lagging growth. The use of two formulas and
poverty measures that measure individuals rather than families
tend to skew the formula both by providing dissimilar or highly
disparate allocations to places with similar needs.
For example, Buffalo with the same score in the same index
as New York: Buffalo gets $68 per capita; New York gets $27 per
capita. And places with higher needs can get lower amounts than
places with lower needs.
I like one sentence in this report to quote, because I
think it's very apt. HUD says it's desirable to capture the
concept of age without overly rewarding communities that have
aged gracefully. I think that captures well some of the issues
of the formula design that we are having here.
All of these longstanding problems have been exacerbated by
funding declines in real dollar terms after inflation, that
there's been a decline in the per capita grant by about two-
thirds over the year.
What this says is, when you have a shrinking pool of money,
it makes targeting arguably more important to address the high
needs communities' needs. And with regard to the alternatives,
HUD's report and all the charts you have seen offers the four
options from modest to substantial reallocation. The first two
provide technical improvements in redefining needs indicators
by addressing such factors as age of housing and how a student
issues greater targeting for poverty--going to one rather than
two formulas, which we think eliminates a lot of the imbalances
between communities within similar needs baskets.
The third formula introduces an entirely different element
into the equation, which is the issue of income and measuring
the relative income of communities, measured by two factors.
One is the community's own income, and second, as you indicated
in your previous discussion, the metropolitan area's income.
As HUD's analysis shows, this factor substantially improves
targeting, but additional analysis is needed, because as our
statement indicates, these two specific measures tend to offset
one another, that lower-income communities in higher
metropolitan area income areas, their income needs get offset.
And so as we think about how we introduce income into this
formula, there's some substantial design issues that have to be
further flushed out.
But I don't want to lose the main point here, is that
fiscal capacity is an important element to consider for this
formula, as it is for most other Federal formulas, particularly
as we triage scarce Federal funds.
The relative capacity of areas in local governments to fund
their open needs should become more important. In a world of
unlimited resources, we might never have to make these choices.
But in the world of greater and ever shrinking resources,
arguably we do.
In fact, communities with lower tax bases will have to
raise higher taxes to fund the same level of needs as others.
So if we were to close the gaps between the lower-income
communities and the higher-income communities, some recognition
of the relevant capacity as well as the relevant needs among
these communities, in our view, is important to put on the
table.
Key questions remain: How do we do this? How much targeting
to low-income places do we really want compared to other
balancing considerations? And how should this kind of targeting
be done?
If we are going to include fiscal capacity as a factor, for
example, should we do it solely through the allocation formula,
or should we rethink the whole eligibility criteria which is
defined solely by population to move beyond population, in
other words, to needs or to fiscal capacity/income or both is a
real question, I think, facing you and the Congress.
I think the important point here is that we are having this
debate now. Recognizing the changes in funding is always
controversial, always difficult, always challenging. The more
time we have to make and phase in adjustments before, you know,
fiscal issues really come to be more pressing, why, the better
off we will all be.
Thank you.
[The prepared statement of Mr. Posner follows:]
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Mr. Turner. Mr. Ramirez.
STATEMENT OF SAUL N. RAMIREZ, JR.
Mr. Ramirez. Thank you, Mr. Chairman. Thank you for having
us here to testify on such an important issue. I am Saul
Ramirez, executive director for the National Association of
Housing and Redevelopment Officials or NAHRO. We were
established in 1933, and we have more than 21,000 agency and
associate members that are involved in housing, community
development, redevelopment, not-for-profits and for-profits.
I also want to recognize and appreciate the privilege and
opportunity to speak on behalf of the following national
organizations. The National League of Cities, the National
Association of Counties, the National Conference of Black
Mayors, the Council of State Community Development Agencies,
the National Association of County, Community and Economic
Development, the National Association of Local Housing Finance
Agencies and the National Community Development Association.
Mr. Chairman, in particular, we want to thank you for your
advocacy on behalf of important Federal community and economic
development policies and programs. We especially appreciate the
leadership you have shown in asking tough but necessary
questions of the administration regarding the President's
proposal to eliminate the community development block grant
program. There are better ways to examine important
longstanding Federal programs than to call for their total
elimination and replacement with new untested initiatives.
CDBG is effective and successful, but there is always room
for improvement. For example, NAHRO, along with others, have
joined us in testifying today as well as the National Council
of State Housing Agencies worked with HUD and OMB to design a
new outcome-based performance measure system to evaluate HUD's
formula grant programs, including CDBG. We would hope that this
committee would encourage the Department to begin implementing
this system as soon as possible.
Like you, Mr. Chairman, I am a former mayor, in my case,
Laredo, TX. And like you, I believe CDBG is one of the most
powerful and versatile fuels for the engines that motor
economic growth as well as a catalyst for affordable housing,
community development and infrastructure improvements.
An Assistant Secretary for Community Planning and
Development, and also Deputy Secretary of the Department of
Housing and Urban Development, the Department worked with
communities and interest groups to improve the timeliness of
the expenditures of the CDBG funds. Over the past several years
and under two administrations, untimely grantees have been
reduced from over 300 to less than 50.
And I bring this up to make an important point. When
stakeholders agree, CDBG can be improved. Interest groups and
grantees are more than willing to come to the table with
Congress and the Department to work toward responsible change.
Mr. Chairman, we also believe that introducing major
changes to the community development block allocation and its
formula, no matter how well intended, will divide America's
communities. Is the CDBG formula in need of an extreme
makeover? Well, if by extreme makeover, you mean an immediate
and radical redistribution of funds, NAHRO and our partners
would say no.
We do support, though, the notion of a fair and equitable
distribution of CDBG dollars, but urge you to proceed with
caution. If Congress feels change is truly necessary, then we
would think likely that change could happen in a way that
mitigates uncertainty and avoids sudden and substantial losses
in funding.
Let's note also that CDBG is not strictly an antipoverty
program. The statute requires that at least 70 percent of all
CDBG funds expended go toward activities to benefit low and
moderate-income persons. However, communities are, in fact,
targeting much more aggressively than the statute requires.
In 2004, approximately 95 percent of funds expended by
entitlement communities and 96 percent of State CDBG funds
expended were for activities that principally benefited low and
moderate-income persons, as you highlighted earlier, Mr.
Chairman.
In previous studies, HUD also is mentioned, ``the ability
to target funds to needy communities.'' HUD states in their
report, ``HUD determined that the data continued to target the
funds to the neediest communities and recommended continuing
the dual formula as specified in the statute.''
HUD's current formula study is an interesting jumping-off
point, as has been brought out by others, for what should be a
thoughtful, deliberative conversation on targeting. Even the
new study declares, as you have highlighted, Mr. Chairman, that
current entitlement communities that are targeted, an average
of 10 percent of communities with the most need get 4 times
larger per capita grants than the 10 percent communities with
the least need.
Abandoning a system that continues to target the need is
not a decision that should be made slightly, especially when
the decision will result in, and I will quote the report again,
in significant redistribution of funds.
Dramatically changing the formula structure in a swift
manner would create uncertainty and inhibit CDBG's current
ability to leverage billions of dollars of both private and
public investment in some of our poorest neighborhoods.
For example, the New England region would be hit under all
four alternatives dramatically. The whole New England region
would lose substantially. In talking to local officials for a
large New England community, we asked what this impact would
be, and the answer was quite grim. Scheduled physical
improvements as well as going forward with repair and
rebuilding streets, sidewalks, parks and playgrounds, as well
as the acquisition of blighted properties would be greatly
diminished, and under each of these four alternatives,
neighborhood facility projects would not go forward.
These facilities are the types that help communities meet
the needs of those low and moderate-income individuals and
families.
Mr. Chairman, if and when we proceed to change the current
formula, hard choices would have to be made in communities
throughout the Nation. In fact, in the Districts of both you
and the vice chair and the ranking member of the subcommittee,
significant changes would occur. For example, Dayton would lose
a substantial amount of money under this proposal, as well as
the State of Ohio. The program that distributes money to
smaller non-entitlement communities, again, would be severely
impacted.
There are other areas that would be severely impacted as
well. For example, St. Louis would lose anywhere from 15 to 50
percent, and the city of Bethlehem loses, under all four
alternatives, ranging from 13 to 34 percent. Adopting and
immediately implementing any of the four alternatives outlined
in the study will produce massive funding shifts.
Simply by signaling an intention to move quickly on one of
these alternatives, Congress could introduce tremendous
uncertainty into the required consolidated planning process as
well as those that communities employ for strategic planning
throughout our Nation. As I mentioned earlier in my statement,
we urge Congress to proceed with caution on this matter. And if
you choose to move forward at all, we would be prepared to work
with you in whatever was necessary to carry that out.
The pursuit of a more equitable system must be balanced by
a desire to avoid the kinds of sudden and dramatic shifts that
create uncertainty and undermine a community's ability to,
again, strategically plan improvements for the long-term to
improve the quality of life of their citizens.
If a subcommittee decides to forward a recommendation on to
the Financial Services Committee and the subcommittee of
jurisdiction, then we must underscore the fact that any
subsequent review undertaken by that committee must involve a
fully deliberative process that includes participation from
local and State governments, public interest groups and
community development professionals.
In short, Mr. Chairman, in this respect, I urge you and
others interested and affected parties to not let over 30 years
of accumulated experience in this field to go by the way side
in a discussion as critical and as important as this one is.
In conclusion, under the current formula structure, the
CDBG program continues to make real and positive differences in
communities throughout America. For example, in 2004, it
created or retained more than 90,000 jobs around our Nation. It
created over 130,000 rental units and single family homes that
were rehabbed; 85,000 individuals received employment training.
Over 1.5 million youth were served by after-school enrichment
programs and other activities like child care services, which
are provided to over 100,000 of these kids in over 205
communities across the country. Nearly 700 crime prevention and
awareness programs were funded with these very flexible and
available dollars.
Half the persons directly benefiting from community
development assistance were minorities that included African-
Americans, Hispanics, Asians and American Indians. More than
11,000 Americans were able to reach homeownership through the
program, and these are just some of the fruits of the success
that this current formula structure has provided our great
Nation.
Programs should evolve over time as this one has. Those who
oversee them should also buildupon past successes and pay close
attention to what is already working well.
We thank you for the opportunity to testify before you here
today, and NAHRO, as well as the other interest groups that
have participated in this testimony, stand ready to be of
further assistance to the subcommittee to be able to answer any
questions you may have in addressing this critical issue.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Ramirez follows:]
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Mr. Turner. Thank you, gentlemen.
Mr. Ramirez.
Mr. Ramirez. Yes.
Mr. Turner. As you know and as you noted in your comments,
this committee of Government Reform has oversight over both
Commerce and HUD. This specific subcommittee has oversight over
HUD. As you are aware, we began the process of looking at the
administration's Strengthening America's Communities Initiative
and are continuing our review of HUD- generated proposals for
looking at the allocation formula.
Your statement of wanting to participate in that discussion
is exactly, of course, why you are here and why you were
invited.
I have to tell you that I am a little disappointed in your
presentation in that I would pretty much summarize it to say
that we should use caution, look to the overall impact, that
this is a valuable program, that any changes would result in
uncertainty, and that if we are going to have a discussion
about it, you would like to be involved.
We are having a discussion about it now. You are involved.
We had Mr. Bernardi here and had what I thought was a fairly,
highly substantive discussion of HUD-generated four
recommendations of merit for which this formula could be
adjusted.
I would appreciate if you had a policy and substantive
response and analysis to those--which I believe had been made
available to you prior to the hearing----
Mr. Ramirez. Yes.
Mr. Turner [continuing]. As to the elements of those
recommendations and your evaluation of them.
You made a statement in your testimony, which is not
necessarily accurate from HUD's perspective, in that you said
that to abandon focusing on the issue of need would be wrong,
basically, I am paraphrasing.
The whole purpose of this hearing is to look at HUD under
these four different recommendations, definition of need, which
then drive the elements that are represented in the four
different recommendations.
Could you please speak a moment about HUD's document----
Mr. Ramirez. Yes.
Mr. Turner [continuing]. And their factors that they
utilize----
Mr. Ramirez. Yes.
Mr. Turner [continuing]. In identifying need.
Mr. Ramirez. I would be glad to. First, let me apologize
for any disappointment that we may have caused you, Mr.
Chairman, or the committee. Perhaps we are a little jittery
considering that, outside of your interest, there's been little
interest for enhancing open dialog on this matter. And we
appreciate the opportunity, sir.
Mr. Turner. Mr. Ramirez, that's obviously--that's one of
the reasons we are doing this.
Mr. Ramirez. Thank you for the opportunity.
Mr. Turner. I appreciate you doing that--because this
document that was produced inside of HUD was released in
February, a significant amount of work within the
administration occurred on this.
Mr. Ramirez. Yes.
Mr. Turner. I think it's appropriate for us to then take a
look at it, take it apart, and turn to your groups and
organizations and say, this document is out there. Somebody has
taken a look at these issues. We should all take a look at
these issues so we can make the best decisions.
Mr. Ramirez. Yes, sir, and you are absolutely right. And to
answer the question on the substantive piece of policy behind
this. We believe that the alternatives that have been presented
are weighed too heavily on what we would call creating the
equivalent of an antipoverty program.
We believe that when President Nixon created this program
with the authorization of Congress to move forward with it,
that it was dedicated primarily to help low and moderate-income
areas for very specific needs that those areas needed within
local jurisdictions and to create maximum flexibility to
accomplish that. I think that the statistics would reflect that
communities have taken on that charge and have been quite
effective in dealing with it.
We believe that looking at what works within the formula is
a much more prudent way of addressing the redistribution
question than to go out and to dramatically shift the intent of
the redistribution of these dollars and what this program was
originally intended to do, which was to be very specific about
creating certain kinds of opportunities, to create activities
within those communities, to deal with those needs that they
may have, whether it's to remove blighted areas from
neighborhoods to deal with the very poor in certain pockets of
their community, or to deal with the community-wide initiative
that is necessary for economic development.
And so the short answer is that the tweaks that have been
proposed, although a great jumping off point to have a much
deeper discussion as to how to deal with it, we believe it's
more a question of actual weighting of what is currently in the
formula and trying to meet what the intent of Congress is, in
this case, as you see fit to be able to accomplish certain
activities most effectively.
And as you would know as a former mayor, CDBG is one of the
most flexible tools that we have to address some very specific
needs within our respective communities in our prior lives and
those that are currently trying to address them now.
Mr. Turner. You are absolutely right--and in the hearing
concerning the value of CDBG and its importance and its
effectiveness in addressing issues of blight and poverty, both
in terms of its importance and achievement and in terms of its
ability to be improved, and that's what everyone in this
community has said.
Mr. Ramirez. Yes, sir.
Mr. Turner. And I really look forward to working with you
on that.
So going to the issue of HUD, obviously, in these charts,
and trying to propose alternatives for shifting the eligibility
formula, redefines, as you indicated, the issue of need.
Whether you agree with those elements or not is obviously one
element of this hearing. Another is whether or not there's any
interest or need, if you will, of looking at changing the
formula.
Are there current inequities in the current formula? We
know that entitlement communities have gone from 606 to 1,100.
We know that funding has not kept pace with the entitlement
community, such that we have communities that are having
declining, diminished CDBG receipts and effectiveness. That
seems to be in part an issue, not just an issue of the
allocation of funding, but the eligibility is causing portions
of that--we had testimony from Mr. Bernardi concerning like
communities that were treated inequitably.
So let's start first, not with the proposal we have in
front of us, but just with the issue of if you believe that
there are inequities that do occur in the system, and if those
inequities are an item that would be important for us to
review?
Mr. Ramirez. Well, let me carry out my answer on that to
say that there may be particulars to my answer that some of the
interest groups that I have testified on behalf of have not
fully vetted some of the answers I have been giving to their
membership, and it may not reflect their position on this
issue.
But you brought up some very interesting points. For
example, the grandfathering and perpetuity of communities that
are no longer eligible is a growing drag on the intent of the
formula in trying to meet the distribution potential of that
formula. Close to almost 200 communities now are grandfathered
into the current formula that under the guidelines do not
qualify any longer to receive these resources under the current
definition. And I do believe that GAO does address that as one
of the points that should be looked at and perhaps considered
by this committee as part of looking at what it does.
The other is that the ability to effectively redistribute
the resources on whether it's an annual or biannual basis has
always been a challenge under the existing formula. And it's
not necessarily that the weights are--that the factors are
incorrect; it's how quickly those weights can be adjusted to
accurately reflect the condition that the dollars are looking
to address within communities around the country. That has been
a constant challenge in trying to redistribute these resources.
We do not agree that the college town comment is accurate.
And if it is, it's not accurate enough to really factor in
other families that live within those communities, singles that
are below the poverty line, disabled that are below the poverty
line that are within those communities that are not accurately
accounted for in any of these four alternatives that are before
us as another weakness that exists within the redistribution
proposals that are there.
We also feel that we have been able to effectively address
some of the--through the formula, as it is currently weighted
for issues such as dealing with blighted properties throughout
the community, and how that helps redevelop neighborhoods and
communities as a whole.
And so there are factors in there, by and large, that we
believe are critical to the success of any funding
distribution.
The question that we believe needs to be asked is that, in
looking at prior analysis of the formula that HUD has
conducted, that both analyses that had several years in between
them recognize the validity of the formula itself and its
effectiveness to the point of, again, as you mentioned, 10
percent of the poorest were getting four times as much, and 10
percent of the richest were getting less.
If we want to increase that number, of whether it's at the
low end, which is what we are looking at to accomplish, we need
to see what those factors at the top end are that are causing
that 10 percent of overfunding for those that are not as needy
within that.
And so this formula is somewhat of a left turn from the two
prior analyses that HUD has made in trying to figure out a more
effective way to distribute these dollars under the formula. We
think that one of the biggest weights that has been
incorporated into these four alternatives shifts the focus of
the program and its intent and pushes the program more toward
being an antipoverty program--which I don't believe was the
original intent and has not been the intent of 30 years of use
of these resources.
Mr. Turner. Thank you very much. I appreciate your comments
there. That was an excellent description of the issue of what I
believe you said, that there may be some inequities--there are
issues that we need to look at, the solutions that are
currently here--here are some of the concerns that you have
about them.
Mr. Ramirez. Thank you, sir.
Mr. Turner. There are two reasons to take a look at this
from what I am hearing from people who are testifying, one of
which is just the issue of time and datedness, which raises the
issue of perhaps this is something we need to look at because
of the amount of time that has gone by--the issue of
inequalities that can be expressed or inherent fact in the fact
of passage of time and demographic change.
Mr. Posner, the questions--the issue that you raise which
is another topic is the issue of the fiscal pressure of the
program.
For this analysis, the HUD recommendations do not really
attempt to provide us with any savings. They merely provide a
reallocation of whatever number of dollars are allocated.
But, certainly, as we look to our fiscal pressures, we are
always going to take a look at the effectiveness of our
programs. And, certainly, effectiveness is one element of
eligibility.
I would like, if you will, to talk for a moment about the
issue of immigration. I didn't notice in your report whether or
not you had looked at that issue. My understanding, in looking
at their report, is that they talk about immigration and its
pressure on communities and what results as being a host of
other--a migration of immigration population. Then they also
talk about the expression of poverty in a community. And I
believe those things that they then weight as expressions of
poverty are the same that they say that a community, having
expressions of immigration, migration, will have. So, to me, it
sounds like double counting.
And then when you get to this less need/more need chart,
and they weight immigration by 15 percent, it also seems, not
only simple accounting, but it's a rather arbitrary allocation
of weight and need.
Have you thought about that issue?
Mr. Posner. I am going to turn to Mr. Fastrup for the
detailed comments on it. Let me make one overall point about
the fiscal issue and some lessons learned, if you will.
We had a program that is no longer with us called General
Revenue Sharing, and General Revenue Sharing went away in the
fiscal crisis of the 1980's or the fiscal crunch of the 1990's.
And I think one of the things that disturbed people was the
untargeted way the money went to every unit of local government
regardless. It was somewhat weighted for per capita income and
fiscal efforts as well as population.
But, nonetheless, there were significant concerns that, as
the Federal budget got tighter, we were sending money to
wealthier communities, and there were proposals to cap and
better target that program, which never could reach political
agreement.
I think at some point, when you are an advocate of
programs, and you are facing a fiscal situation like we are
coming into, you have to start being concerned about whether
the formula starts undermining your support. So I think, from
many perspectives, in addition to just wise money management
and good government as well as potential sustainability of
support, you know, looking at this is an important issue.
With regard to immigration, let me ask Jerry to comment on
it.
Mr. Fastrup. Well, the first thing that I would note is
that to make a clear distinction between HUD's need criteria
and the actual formula alternatives they present, they are two
separate distinct things.
In their need criteria, the immigrant population doesn't
come into their need index directly. It only comes into it
indirectly, and it comes in indirectly in two ways: One through
the poverty measure, to the extent these immigrants are low-
income people that get picked up in the census counts, they are
reflected in that.
The other way it's picked up is in their second factor that
you point out that's weighted 15 percent in their overall needs
index. The only things in there that capture that immigration
is overcrowded housing, which the study says is correlated with
high immigrant populations, and to the extent that correlation
is there, their need index picks up immigration in that way.
But it's a very indirect effect.
With regard to the actual allocations and how well their
allocations--how much their allocations are affected by
immigration in the actual four alternatives they put forward,
that only shows up in the use of an overcrowded housing factor
in the formula. And that factor is already there in the
formula.
And under the current formula, the overcrowded factoring
gets a weight of 25 percent. In your alternatives, they have
alternatives that reduce that weight and increase that weight.
So looking at--depending on the particular formula you look at,
to the extent that overcrowded housing reflects immigration,
you get--you put a greater emphasis or a lesser emphasis on
that factor, depending on which particular alternative you are
looking at.
The other point that we made in our statement is that if
you are looking at the CDBG program as a program that's trying
to compensate for fiscal distress and economic decline and the
need to rehabilitate dilapidated housing and those kinds of
things, but just strikes us that overcrowded housing is a sign
of a tight labor market and housing market and upward pressure
in the housing market, that's usually a sign of strong growth
rather than decline.
So our take on it is that the need criteria that's both
built into the HUD criteria and the weight that is put on
overcrowded housing in the formula are not what I would call
one of the stronger points there.
I think, as the Secretary pointed out, their need criteria
and the formula is heavily directed toward poverty, which is a
more generally agreed upon criterion there.
Mr. Ramirez. May I followup on that, Mr. Chairman, real
quick, as an additional point, that one of the things--and I
would agree with what Jerry has just mentioned, that what we
see also is that rent costs do need to be somehow factored into
this calculation in hot markets, because that does tend to push
out the low and moderate-income families from safe, decent
affordable housing.
So there does need to be some weight attached to it. And I
didn't want the record to go without that being in included in
there that that is our position.
Mr. Turner. Excellent. Thank you.
Mr. Dent.
Mr. Dent. Thank you.
Mr. Ramirez, my only question deals with some of the things
that Chairman Turner talked about.
I do appreciate the effort that the Department went through
to put together a process and methodology to come up with a new
need-based system of CDBG grants. As you pointed out in your
testimony, clearly entitlement communities in my district do
not fare particularly well under this, and I would just ask
that your organization come back to us at some point with some
type of alternative proposal that you think would be reflective
of a--would be an equitable basis of distributing those grants.
Based on my analysis of the appendix here, it seems that
maybe the Northeastern States don't do very well. I notice
Pennsylvania and Ohio don't appear to do very well; you
mentioned New England doesn't do very well. It appears that the
Southern and Western States for whatever reasons are the
beneficiaries of this new formula. It seems in all four
alternatives, that would be the case.
So I guess that's my request of you, which is to come back
to me and to the committee with some alternatives that you
would find acceptable.
Mr. Ramirez. We will, Congressman. Thank you.
Mr. Turner. Mr. Ramirez, one of the discussions that you
noted that we had with Mr. Bernardi was the issue of housing,
and specifically the issue of vacant housing. I'm concerned
that by targeting or by only counting in a need those units
that are occupied by what, according to this analysis,
constitutes--or they have identified as constituting a family,
that you are missing the issue of the blighting influence of
abandoned residential structures. CDBG obviously is a program
that we attempt to utilize the dollars to target abandoned
structures for rehabilitation and restoration and eliminating
the blighting influence.
Could you talk about that for a moment as to how you would
see that would be an impact that would not be beneficial for
communities?
Mr. Ramirez. Well, first off, the quick response is we
agree with your concerns. We think that by removing an accurate
assessment of those types of dwellings, that it will only
accelerate the condition of that neighborhood and the overall
blight of a community if it's not addressed effectively.
In a prior life, me in the prior life, as a mayor, I can
tell you that during my 8 years as a mayor, I was able to
eliminate well in excess of 3,500 blighted properties around
our community during that 8-year period that in essence
revitalized or regenerated neighborhood pride and viability.
So we share your concerns, Mr. Chairman, that those are
issues that need to be weighed carefully. They are already in
the current formula. Again, we believe that there is always
room for improvement, but we have seen substantial success in
trying to address it. It's a matter of where we weigh the
factors that we want to incorporate into this formula, and how
effectively we can redistribute those dollars, once those
weights are applied, that will maximize the effectiveness of
this distribution of dollars, sir.
Mr. Turner. Mr. Ramirez, I'd also like you to comment on--
and then Mr. Posner--the issue of the metropolitan per capita
income. Mr. Posner, the GAO report identifies areas where there
is a wide disparity of the per capita income between the urban
core and the metropolitan area may actually reflect communities
of economic growth and communities where there is little
difference than you're looking at a community that overall
might not have the opportunity economically for those who are
experiencing poverty.
In the GAO report, it's on page 9. You would have heard the
discussions that we had with Mr. Bernardi. Mr. Ramirez, what
are your thoughts on that?
Mr. Ramirez. We believe that communities, even those that
have a higher per capita income, do have pockets of poverty
within them. In fact, many of those communities struggle with
their labor force that services those communities around the
country in providing safe and decent housing, and not forcing
many of the service-oriented labor force to seek shelter and
grow their communities within blighted areas.
And so we do believe that's the balance, to some degree,
that this formula has struck. It does allow for communities,
high per capita communities to deal with these pockets of
poverty and address the low and moderate-income families within
those communities.
Can it be improved? Well, we believe it can, but I am not
prepared at this point to tell you how, because we would have
to run several different scenarios to find the optimum level of
distribution. But it is an effective way of dealing with that
particular problem, sir.
Mr. Turner. Mr. Posner.
Mr. Posner. I'll refer to Mr. Fastrup in a minute. But
overall I think we saw the two factors in alternative 3 kind of
offsetting one another. On the one hand, you're trying to
target aid proportionately to cities and areas that have lower
incomes to raise on their own; on the other hand, you're
providing greater aid to those communities if they happen to be
nested in higher-income metropolitan areas. This is something I
think that needs a lot more thinking. I think they're headed in
the right direction by trying to capture the element of
capacity and wealth.
Mr. Fastrup. I would say that the HUD study proposes
putting the metropolitan and local community per capita
increment formula as a means of ratcheting up the degree to
which funding is targeted to high-need communities. And to the
extent that the committee wants to do that, that's one means of
doing it.
However, when we look at the use of both metropolitan per
capita income and comparing that to the community's per capita
income, the effect is the low-income communities would get more
money targeted to them, but by putting the metropolitan per
capita income in there, it offsets that degree of targeting to
a significant degree so that two communities with the same per
capita income, the one living in the higher-income metropolitan
area, which generally is going to be an area that is better off
economically, that community gets more money than the community
with the same income located in a poorer metropolitan area. And
we question whether that's an effective way to produce the kind
of targeting to low-income areas, and taking into account the
economic capacity of the various areas across the country.
Now, one rationale that one could offer for doing that is
to argue that areas with high metropolitan incomes tend to be
high-cost-of-living areas; that's a legitimate position to
take. However, the particular method by which HUD does this, it
basically assumes that all of the difference in per capita
income between a low-income metropolitan area and a high-income
metropolitan area, they're implicitly assuming that's all cost
of living differences, and that's not true.
So I think that method of putting metropolitan income into
the formula is overdoing it to some extent. But the real nexus
of the problem is the fact that the Federal Government does not
have good statistics on just what these differences in cost of
living are in order to be able to more precisely take them into
account in the formula. And if you wish, we can talk about that
some more, too.
Mr. Turner. At this point, actually, I don't have any
further questions, and I was going to ask if you had anything
else that you wanted to comment on to add to the record, in
your thoughts to both the questions that have been asked,
comments that you've heard from others.
Mr. Ramirez.
Mr. Ramirez. Just in conclusion, Mr. Turner, we want to
thank you for airing out these issues on such an important item
of import to communities throughout the country. And we will
take your charge and dispatch it accordingly to bring back to
you different alternatives that we see that may be viable
within the existing formula to better enhance its methodology
in trying to hit the marks that Congress intended it to hit or
intends to hit, and look forward to working with you in this
committee, and others, in making that happen, sir.
Mr. Turner. Mr. Posner.
Mr. Fastrup.
Mr. Posner. Just to thank you for holding this hearing, and
to illustrate how, as those of us who are talking about the
fiscal choices facing us frequently talk about the hard choices
we face, and this hearing very well illustrates that.
Mr. Fastrup. I would just like to commend the HUD study for
what it has accomplished here because I think what it's showing
for the first time is that in these charts here, those jagged
edges indicate that communities with similar needs are
receiving widely disparate funding levels that can't be
justified on the basis of income differences, cost of living
differences, or anything else; and that simple equity--whether
or not you want to direct more funding to high-need communities
or not, simple equity would argue for narrowing those wide
disparate differences.
I think the HUD study has identified the key factors that
are the cause of that, namely the growth lag factor and the
pre-1940 housing that doesn't take into account the income
status of the households that are living in those houses are
largely responsible for that, along with the use of two
formulas that work at cross purposes with one another, and that
the biggest single improvement would come by just using a
single formula largely based on poverty and housing conditions
and the kinds of things that are in these two formulas.
And I would add that because of the poor targeting of the
program, you do run the risk, in tight fiscal times, of
following the way that the general revenue-sharing program of
perceptions of poor targeting, leading people to ask is this
really the highest priority use of Federal dollars or not. And
to the extent that the targeting of this program is improved,
it strengthens the rationale for having this program; to the
extent that it's not, you run the risk of people saying is this
really the best use of Federal money.
Mr. Turner. Mr. Fastrup, I think that you have given us the
most excellent summary of the purposes of this hearing and the
importance of it, so thank you for that. And I want to thank
GAO for your efforts in reviewing this program.
We all know the importance of CDBG, the importance of
strengthening it and making sure that we preserve it. We know
there have been discussions about its effectiveness. And
looking at the HUD proposals helps us begin the discussion on
what are the elements that can make it effective and more
effective so that we can ensure its long-term viability,
knowing, Mr. Ramirez, as you had said, of both of us being
former mayors and the importance it has in the lives of people
in our communities.
With that, I want to thank you for your time, and we will
be adjourned.
[Whereupon, at 12:20 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Wm. Lacy Clay and
additional information submitted for the hearing record
follow:]
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BRINGING COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAMS SPENDING INTO THE
21ST CENTURY: INTRODUCING ACCOUNTABILITY AND MEANINGFUL PERFORMANCE
MEASURES INTO THE DECADES-OLD CDBG PROGRAM
----------
TUESDAY, MAY 24, 2005
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
room 2154, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
Present: Representatives Turner, Dent, Maloney, and Clay.
Staff present: John Cuaderes, staff director; Shannon
Weinberg and Jon Heroux, counsels; Juliana French, clerk; Neil
Siefring, Representative Turner/LA; Susan Stoner,
Representative Dent/LA; Adam Bordes, minority professional
staff member; and Jean Gosa, minority assistant clerk.
Mr. Turner. A quorum being present, this hearing of the
Subcommittee on Federalism and the Census will come to order.
Welcome to the subcommittee's oversight hearing entitled,
``Bringing Community Development Block Grant Programs Spending
into the 21st Century: Introducing Accountability and
Meaningful Performance Measures into the Decades-Old CDBG
Program.''
In March, this subcommittee held a hearing reviewing the
Bush administration's ``Strengthening America's Communities''
initiative. During that hearing, we learned that HUD had
undertaken certain in-house initiatives to improve the
administration of the program. One of those initiatives was to
implement an improved set of performance measures.
CDBG is one of the largest Federal direct block grant
programs in existence. In fiscal year 2005, Congress
appropriated $4.71 billion for the CDBG program, including
$4.15 billion for CDBG formula grants alone. State and local
governments use CDBG grant moneys to fund various housing,
community development, neighborhood revitalization, economic
development, and public service provision projects.
To receive their annual CDBG grant, grantees must develop
and submit to HUD a consolidated plan. In their consolidated
plan, each grantee must identify its goals for its use of CDBG
moneys. These goals then serve as the criteria against which
HUD evaluates each grantee's plan and the performance of each
activity under the plan.
Grant recipients may use CDBG funds for a wide variety of
activities. For example, CDBG funds can be used for the
acquisition of real property, the relocation and demolition of
buildings, the rehabilitation of residential and non-
residential structures, the provision of public services, and
the construction and improvement of public facilities.
In contrast, grant recipients may not use CDBG funds for
the acquisition of buildings used for the general conduct of
government. Nor may grantees use CDBG funds for political
activities, certain types of income payments, or the
construction of new housing by local governments.
Following approval of a grantee's consolidated plan, HUD
will make a full grant award unless it has determined that the
grantee failed to implement its plan in a timely manner and in
a way that is consistent with the Housing and Community
Development Act.
Critics, as well as some proponents of the program, have
questioned whether the consolidated plan is an adequate system
for assessing whether certain uses of grant funds are
consistent with the goals of the Nation and whether grant
recipients are actually administering the funds properly.
Currently, the consolidated plan is the only means by which
HUD can measure the performance and outcome of grantee
activities. With that said, some observers have questioned
whether HUD takes the consolidated plan process seriously
enough. Critics of the program have even questioned whether HUD
reads each consolidated plan, suggesting that HUD simply does
not have the time or manpower to review the more than 1,100
consolidated plans within the 45-day period mandated by the
statute.
A primary justification used by the administration for
proposing its Strengthening America's Communities Initiative
earlier this year is that CDBG received very low scores on the
Office of Management and Budget's Program Assessment Rating
Tool [PART]. The fundamental question, however, is whether PART
is any better of a performance measurement tool for CDBG than
is the consolidated plan.
Many CDBG stakeholders attributed CDBG's low PART score to
evaluation limitations inherent in the PART tool itself. They
argue that PART lacks the proper assessment matrix tools to
score block grant programs like CDBG effectively and
accurately. These stakeholders also claim that it may be
impossible for evaluators to effectively measure the CDBG
program because of its multifaceted nature and because grant
moneys can be spent on a wide variety of activities that may
have ``non-tangible'' benefits.
With those questions and arguments in mind, today's hearing
will specifically explore: one, how communities spend CDBG
moneys; two, whether HUD and grantees effectively target funds
toward the needs identified in the program's authorization
language; and, three, how, if at all, Congress can measure
these expenditures for effectiveness of use.
To help us answer these questions, we have on our first
panel the Honorable Roy Bernardi, Deputy Secretary of the
Department of Housing and Urban Development and former
Assistant Secretary of Community Planning and Development.
On our second panel we have four distinguished witnesses.
First, we have the Honorable Ron Schmitt, city councilman from
Sparks, NV and a founding member of the Human Services Advisory
Board in Washoe County. The Human Services Advisory Board led
to the creation of the Washoe County Human Services Consortium,
the public/private entity that decides how the area will spend
its combined CDBG funds.
We will next hear from Thomas Downs, fellow at the National
Academy of the Public Administration. Earlier this year, the
Academy published specific recommendations on how to improve
reporting and performance measurement systems for the CDBG
program.
Next, we will hear from Lisa Patt-McDaniel, assistant
director of the Community Development Division of the Ohio
Department of Development. Ms. Patt-McDaniel is testifying
today on behalf of the Council of State Community and Economic
Development Agencies.
Last, we have Dr. Sheila Crowley, president of the National
Low Income Housing Coalition.
I look forward to the expert testimony our distinguished
panel of leaders will provide the subcommittee, and we thank
all of you for your time here today.
[The prepared statement of Hon. Michael R. Turner follows:]
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Mr. Turner. We will now start with the witnesses. Each
witness has kindly prepared written testimony, which will be
included in the record of this hearing. Witnesses will notice
that there is a timer light at the table. The green light
indicates that you should begin your comments; the yellow light
will indicate you have 1 minute left in which to conclude your
remarks; and the red light indicates that your time has
expired.
It is the policy of the committee that all witnesses be
sworn in before they testify.
Mr. Bernardi, would you please rise and raise your right
hand?
[Witness sworn.]
Mr. Turner. Let the record show that the witness has
responded in the affirmative.
Mr. Bernardi, if you would now begin your comments.
STATEMENT OF ROY A. BERNARDI, DEPUTY SECRETARY, U.S. DEPARTMENT
OF HOUSING AND URBAN DEVELOPMENT
Mr. Bernardi. Thank you. Good morning, Mr. Chairman and all
the individuals in attendance. Thanks for the opportunity to
address the subcommittee's inquiry into the three specific
Community Development Block Grant issues that you just
mentioned: how communities spend their CDBG moneys; whether the
funds are effectively targeted toward identified needs; and how
these expenditures can be measured for effectiveness.
The Housing and Community Development Act of 1974 allows
grantees to determine their own local needs, to set their local
priorities, and design programs to address both. There are two
limits that help target the use of CDBG funds. First, every
assisted activity must either benefit low and moderate-income
persons, or prevent and eliminate slums or blight, or meet an
urgent community development need the grantee does not have the
financial resources to address. And the second condition is a
grantee must spend at least 70 percent, over 3 years, of its
funds for activities that benefit low and moderate-income
persons.
HUD field offices monitor grantees' use of funds to meet
these conditions. For the last 4 years, these assisted
activities, as reported and categorized, have remained stable.
Approximately 95 percent of the funds go to activities
benefiting low and moderate-income persons.
We also monitor whether grantees have carried out their
CDBG-assisted activities in a timely manner. The timeliness
standard provides that 60 days before the end of its current
program year a grantee may not have more than 1\1/2\ times its
current grant in its line of credit. Because the amount of
funds above this standard remaining in grantees' lines of
credit was increasing, in the fall of 2001, when I was then
Assistant Secretary for CPD, we established a new policy giving
untimely grantees 1 year to meet the standard or risk a grant
reduction in the amount equal to the amount by which it
exceeded the 1\1/2\ standard.
This policy has been extremely successful. The number of
untimely grantees fell from over 300 to approximately 60, and
the amount of excess, undistributed funds fell from $370
million to approximately $30 million. This was a winner for the
taxpayers, for HUD, for the grantees, and obviously for the low
and moderate-income persons that we serve.
HUD's Integrated Disbursement and Information System
[IDIS], is used to report information on grantees' use of
funds. Obtaining consistency in reporting and improving data
quality are challenges because of the large number of both the
grantees--better than 1,100--and also the assisted activities.
Nevertheless, HUD's recent efforts to address data quality have
yielded great improvements. To modernize our information
system, HUD has contracted to develop a more user-friendly IDIS
by spring of 2006. Further improvements will also make the
front-end application process and the completion and reporting
process consistent.
Can the expenditure of CDBG funds be measured for
effectiveness? Yes, they can. In January 2003, my office began
encouraging recipients of CPD's four formula grant programs--
that are, CDBG, HOME, ESG, and HOPWA by issuing a notice to
develop performance measurement systems. Since local choice
drives the use of these funds, HUD believes performance-based
measurement systems should be developed at the same level. To
date, 246 grantees have reported using performance measurement
systems, while 225 are developing them. That is adding up to
approximately 43 percent of all CDBG grantees.
As we have reported previously, HUD has been working with
the stakeholders, including the key grantee representatives, in
OMB to help develop outcome measures. This effort formed the
basis for a proposed measurement system that will soon be
completed and published in the Federal Register Notice, a draft
of this. In 90 days it will be there for public comment and
input, and after we review that public comment and input, we
will then publish a final notice after that 90-day period of
time.
The proposed outcome performance measurement system will
produce data to identify the results of formula grant
activities. It will allow the grantees and HUD to provide a
broader, more accurate picture. The goal is to have a system
that will aggregate results across the spectrum of the programs
at the city level, the county, State. We are committed to
improving the way we track performance and show results for our
program.
These are significant challenges, but I am convinced that
we can get the measurable information and reliable results
taxpayers are entitled to. And I thank you, Mr. Chairman, for
the opportunity to be here in front of your committee.
[The prepared statement of Mr. Bernardi follows:]
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Mr. Turner. Thank you, Mr. Secretary.
First off, let me begin by recognizing the accomplishment
that you noted in your testimony of the issue where communities
were not expending their funds in a timely manner. Your efforts
to obtain compliance from communities, working with them and
making certain that the funds were expended timely, and that
you looked toward a greater enforcement of that requirement
clearly showed results, and you ought to be commended for that
effort.
Mr. Bernardi. Thank you. We are very proud of that.
Mr. Turner. We began this series of CDBG hearings with the
notation that the PART performance measurements had indicated
that CDBG did not have a clear purpose as a program. And I am
going to read the first assessment under PART of CDBG, where it
says: ``Is the program purpose clear?'' It says: ``The program
does not have a clear, unambiguous mission. Both the definition
of community development and the role CDBG plays in that field
are not well defined.''
Much of the testimony that we are going to receive today,
like yours, describes ways in which we can track or measure the
activities undertaken through CDBG. The PART performance
measurement, however, begins by saying that the purpose of the
program is not clear and that, as a result of that flaw, mere
measurement or study of the expenditure of CDBG may not be the
answer. In fact, from this the justification of the
Strengthening America's Communities proposal came forward.
Do you think we just need a better system to track
effectiveness, or do you think the program itself could be made
more effective, thereby producing data that would show its
having an impact on communities?
Mr. Bernardi. Well, the PART score that we receive from
OMB, there were four sections to it, and as you pointed out,
Mr. Chairman, the program purpose and design we received a zero
score. Candidly, the program purpose and design I think is
spelled out in the Community Development Block Grant Act of
1974. The program was meant to be utilized by local officials
with determination after a tremendous amount of community input
as to how best they would utilize those resources, and there
were seven fundamental areas in which those resources would be
used with another 25 indicators. So it is a very flexible
program; it is a program that was meant to be utilized at the
local level.
However, they are absolutely correct in some of the other
areas. It is very difficult to have a strategic plan and there
are program management results that you would like and program
results and activities. The program scored ineffective when you
start with the score of zero on program purpose and design,
obviously, even though we received a 67 for program management.
And I feel very strongly, having worked with the good folks in
CDBG both at headquarters and in the 42 field offices, that
they do a very good job in administering the program.
Could the goals and objectives be looked at again and
perhaps be spelled out in more clarity and detail? Absolutely.
Can we measure better than we do now? Yes, we can. You
mentioned the consolidated plan. That is a 5-year plan, and
that is where the communities list their goals and objectives
and what they hope to accomplish within that 5-year period of
time. Then there is an annual action plan, and that is at the
end of each program year, where that community indicates how
much of that 5-year plan they have actually accomplished. Then
there is a CAPER Report that is at the end. That is an
evaluation performance and that indicates what they have
actually done. I believe that we have been able to indicate
outputs fairly regularly. Through our Information Disbursement
Information System. Each grantee is able to indicate to us the
number of jobs that have been created, the number of units that
have been assisted, the number of loans that have been
recorded.
But those are outputs. And what OMB and I believe others
are looking for is to make sure that we can have outcomes: Has
the quality of live been improved? Has that neighborhood been
served? Has the community been enhanced because of the
expenditures of those dollars? As an example, if you go into a
neighborhood and you create some business opportunities or you
provide more business opportunities for the people that are
presently there, how does that reflect in your sales tax
revenue; is it higher, is it lower? How do you capture that
information? It is very difficult to do. Has crime been reduced
by utilizing CDBG dollars in a certain neighborhood? Again,
very difficult to measure.
But the fact of the matter is that we are putting together
with, what I mentioned earlier, this notice that will be
published very soon, and where many, many stakeholders were
involved in putting this all together as to how we can have a
national measurement system, but at the same time allow the
communities to have their local performance measurement system
be part of that.
Mr. Turner. You mentioned in your testimony, and many
others following you will also mention, the Integrated
Disbursement and Information System. There have been some
problems with that system in its implementation. Could you
elaborate more on the status of that and discuss the
resolutions of some of the problems that people were
experiencing?
Mr. Bernardi. Well, the system has been in existence since
1996, and it allows grantees to enter information on their
activities and to draft funds for individual activities. The
system has worked very well when it accounts for the dollars,
obviously. Over $7 billion each year go through that system.
However, we are looking to improve that system by the spring of
2006. We are going to require more complete information on
accomplishments; we are going to allow grantees to submit
information via the Federalgrants.gov; we are going to improve
the type and content of reports available to HUD for
monitoring. We want to make it easier to reduce the grantees'
time and at the same time be able to consolidate, if you will,
into one format the consolidated plan, the annual performance
plan, the CAPER plan so that the individuals at HUD that are
looking at all this can ascertain what has happened over a 5-
year period, over a 1-year period of accomplishments. This IDIS
system has worked very, very well, but it needs some
improvements, and we are in the process of making those.
Mr. Turner. You mentioned the consolidated plan process,
and we discussed the issue of HUD's review of those in both
your testimony and my opening statement. Has HUD rejected
consolidated plans from communities; and what is the process
for rejection of a consolidated plan if one is to be rejected;
and what type of discussion, feedback, or interaction occurs
with the community if a consolidated plan is viewed as either
deficient or could be improved?
Mr. Bernardi. Well, the consolidated plan is reviewed by
each one of our field offices for all of our entitlement
grantees, and as long as it adheres to the national
objectives--providing the majority of the resources for low and
moderate-income individuals; to eliminate slum and blight; and
obviously the third objective is, in the event of an emergency,
to utilize those funds for that emergency--the consolidated
plan I believe works very well. There is not a rejection of the
consolidated plan per se, as long as the goals and objectives
that are spelled out in that consolidated plan meet the goals
and objectives of the CDBG program.
We do have what we call risk monitoring. Each and every
year our personnel takes a look at how everyone is performing,
and there is a matrix, if you will, of areas, whether it is
financial, whether it is capacity, and they look at that and
they say to themselves, OK, this year who are we going to
monitor either onsite or offsite? Of our 1,100 approximate
grantees, we monitor about a third of those every year to see
that they are in accordance with the consolidated plan, that
they are spending their money in a timely way, that their goals
and objectives and their annual action plan are being realized.
This is a very good system, and I feel that our employees, CDBG
employees out there in those field offices, they know full well
who is performing, who is not, who needs information
technology, who needs additional capacity, and our staff is
always ready and willing and is out there providing it for
these folks.
Mr. Turner. In the consolidated plan review process, is
there a feedback loop for best practices? Certainly HUD, in the
period of time that this program has been in existence, has
seen throughout the country programs and either services or
community development projects that are more successful than
others. And when a community puts forth a consolidated plan
where the goals and objectives of the program could be
enhanced, perhaps with knowledge of what another community's
success has been, does HUD undertake that discussion with the
community in the consolidated plan process to help enhance the
success of the projects that those funds are invested in?
Mr. Bernardi. In the early years I believe we were more
engaged in the preparation of the consolidated plan. Now we
pretty much leave it to the communities to make the
determinations that they can justify, obviously, as to how they
want to utilize their dollars. We feel very strongly that they
know best. Of course, we look at those consolidated plans to
make sure that they adhere to the rules that are in place.
At the same time, if a community ends up in trouble with a
particular project, if the plan is not being adhered to, we can
take action. We don't like to reclaim dollars unless we
absolutely have to. What we try to do is maybe sit down with
the community. Our folks in the field OK, this is an ineligible
objective or you are not going to be able to reach this
objective because you don't have the capacity; whatever the
reasons are. We try to work with the grantee so that either the
objective can be met or the objective can be changed to
something else. In the final analysis, if they are not able to
do what they have to do according to the rules and regulations,
then we will take that money back. However, the way we do that
is they are not able to repay us with additional CDBG dollars,
it has to be their own local dollars. Or, in some cases, in the
next grant that they are going to receive, we reduce the amount
of money that they have spent in an eligible way.
Mr. Turner. From your answer, it would appear that HUD's
view of the consolidated plan is more an issue of compliance
rather than an issue of consultation on degree of likelihood of
success.
Mr. Bernardi. By and large, that is what it is about too,
yes.
Mr. Turner. In your testimony you talked about the
different categories for which the funds could be used and
limitations upon the expenditures by categories and the
limitation for a government entity or a community in spending
those funds on its own staff or functions within public
service. There doesn't appear to be a limitation, though, on
whether a government entity receiving CDBG funds would make the
decision to spend all of its CDBG moneys on its own staff
functions in the eligible criteria. Is that correct or is there
a limitation?
Mr. Bernardi. The way it breaks down is that there are caps
in two areas. There are caps on administration and planning,
and that cap is 20 percent. There is also a cap on public
service, which is 15 percent. I can report that, on an average,
on administration and planning, the average is about 14
percent. So you can see that the grantees spend less on
administration and planning, and, obviously, we feel that is a
good thing. When it comes to public services, the cap used to
be 10 percent. That was changed to 15 percent in the 1980's,
but I believe around 62 or 63 entitlement communities were
grand-fathered in at a higher number. But 15 percent is the cap
on public services.
The other areas the communities can pretty much make the
determination as to how they want to spend their dollars, in
what areas. As an example of the 2004 appropriation, on an
average, about 33 percent of the dollars were spent on public
facilities and improvements; on housing activities
approximately 25 percent; administration and planning, as I
indicated, 14 percent; economic development 9 percent;
acquisition 5\1/2\; and then 108 loan guarantees about 2\1/2\
percent. Those numbers, as we have looked at those, have not
fluctuated to any large degree since 2000 in the last 4 years.
And did you notice, I am sure, Congressman, a community
finds a need for those dollars, and I know Dayton is an example
of this, and I looked at the expenditures of Dayton in the
early part of this decade, and those moneys were spent for code
enforcement, approximately 30 percent. So you will find that
communities, once they develop a consolidated plan, an annual
action plan, they make the determination as to how best they
can utilize those moneys that are going to affect low and
moderate-income persons.
Mr. Turner. There are no restrictions, though, overall that
would prevent a community, a local government entity from going
down the smorgasbord, if you will, of eligible uses and
allocating 100 percent of its CDBG money for its own staff
functions within those eligible uses?
Mr. Bernardi. When you say staff functions within those
eligible uses, it would still have to be a 20 percent. They
could not spend more than that for administration and planning.
Mr. Turner. Well, it is administration and planning, but in
other areas, for example, as you indicated, code enforcement,
code inspection. That is not necessarily administration and
planning, so additional funds--and there you cited a figure
that was higher than the 20 percent. One of the criticisms that
we hear about CDBG is the opportunity for local governments to
utilize the funds rather than for community development, but to
fund what many people consider local government activities that
perhaps the local tax base should be supporting rather than
CDBG.
Mr. Bernardi. As long as the dollars are used to provide
goods and services for individuals who meet the low and
moderate-income threshold. The flexibility of the program
allows the entities to use the money as they see fit.
Now, let us take the example of code enforcement. If that
money was not being utilized through the CDBG program, would a
particular community have the local capacity to provide the
kind of inspections to make sure that housing stock in their
poor neighborhoods was being addressed? Now, that is a local
decision that is made, and, basically, as long as it can be
justified that it is benefiting people of low and moderate-
income, we are not going to be disapproving of that.
Mr. Turner. And I understand that there are many times very
good reasons and justifications for a community to utilize
those funds to support the actual local government activities
in the eligible use categories, but my question is there is no
overall limitation. A government entity could, in going down
the smorgasbord of eligible uses, allocate 100 percent of its
CDBG moneys for staff functions within those eligible uses and
not be in violation of the restrictions placed upon CDBG.
Mr. Bernardi. I believe you are correct. But as a former
mayor myself, as you know, when you deal with your legislative
body in your public hearings, the chances of 100 percent of the
money going to any one particular activity obviously are
remote. I don't know that any communities do that, offhand.
Mr. Turner. That goes to my next question. To what extent
do you track the percent of CDBG moneys that are utilized by a
community for its own staff functions? When you told me the
different categories that the funds break down into and what
communities are likely to spend them on, do you go the next
step and an eligible expenditure in that category to have a
definition as to what the actual funds went for? If I were to
ask you could you tell me of the top 100 cities that receive
CDBG funds in population size, what overall percentage that
they spend on their staff functions, do you track it so you
could provide that number?
Mr. Bernardi. Yes. The Consolidated Annual Performance
Evaluation Report that each grantee submits through the IDIS
system to HUD indicates exactly the percentages and the dollars
that go to each category.
Mr. Turner. Could you provide that to our committee for the
top 100?
Mr. Bernardi. Sure.
Mr. Turner. It would be very good to take a look at that.
One of the reoccurring criticisms of CDBG is whether or not the
funds have been co-opted for government operations rather than
community development functions, even if those government
operations support community development functions. That is a
criticism that I think might impact the ability to measure
effectiveness. We would love to take a look at the information.
The proposal for Strengthening America's Communities and
the Commerce Department review of what criteria would go into
Strengthening America's Communities in determining eligible
uses and eligible communities, my understanding is that work is
proceeding with the Commerce Department in looking at what
their proposal might be. I wondered if you could talk to us a
moment about HUD's participation in that process in assisting
Commerce in reviewing both eligible communities and eligible
uses that they might propose for the Strengthening America's
Communities.
Mr. Bernardi. The legislation is being written obviously by
the folks at Commerce, but we do provide consultation and
provide them with any information that they may need.
Mr. Turner. Could you provide to our committee copies of
whatever you have provided to the Commerce Department as they
have reviewed this issue of eligible communities and eligible
uses?
Mr. Bernardi. Any information that we have, Congressman,
that you would like, if we have it, we will provide it.
Mr. Turner. Thank you. I want to go back to the question
again on the issue of measuring effectiveness. As you go
forward in looking at ways to more effectively measure the
results of the expenditures of CDBG funds, one of the things I
think people would hope that would occur is not just a proof or
justification that CDBG moneys are having an impact, but also a
process of determining whether or not the CDBG program could be
enhanced or modified. The data might prove effectiveness, but
it also might show in areas of non-performance or less
effectiveness.
What is HUD currently doing in looking at the data that it
has, and in the data that it intends to generate or hopes to
generate, for enhancing the performance of CDBG funds?
Mr. Bernardi. The first notice that we issued was in
January 2003. As I mentioned in my testimony, we asked
communities to provide us with performance measurement system,
and we have approximately 43 percent of those communities that
are doing so. But also as I mentioned, we have a notice that is
going to be published in the Federal Register very soon, and
that notice was really a collaboration, if you will, with many
different organizations, Council of State Development
associations took the lead, but others are involved in that;
OMB was involved in it. And that particular performance
measurement system that is going to be presented will not
require, but it will strongly encourage all grantees to utilize
a system that everyone can work with. But at the same time we
do not want to have local initiative be deterred in any way. If
they have their own performance measurement system, we want it
to be part of that.
We are going to be looking at objectives. We are going to
be looking at outcomes. We are going to have indicators for
this system to cover every possible area. And where we can
measure, obviously, we need to do so. We need to be able to
make sure that the number of jobs created are retained, the
number of units that have made accessible, number of jobs with
healthcare benefits. Right now we don't have that kind of
information, but when this comes forward, we believe very
strongly that after the 90-day period and everyone has had a
chance to comment on it, hopefully, when you take a look at
OMB, you take a look at the grantees, you take a look at HUD,
you take a look at NAPA, you take a look at COSCDA and all of
the other organizations that are represented behind me here. We
can come together with a performance measurement system that
not only locally, but as I mentioned in the counties, States,
and nationally, that we can have aggregate outcomes. We are
able to ascertain how the dollars are being spent better today
than they were yesterday.
Mr. Turner. One of the phrases in management that I always
think is important is the one of if you are not measuring it,
you are not managing it, and a lot of what we are hearing in
your testimony goes to the issue of measurement. Even if you
get the best measurement system, if it is only a system
intended to produce data, and not a system intended to produce
data that then results in management of the system, it is data
for the sake of data. What does HUD intend to do as it gets
additional information from the performance measures with that
data?
Mr. Bernardi. Well, right now we can measure, as I
mentioned, outputs, but we don't have the outcomes. We need to
make sure with the performance measurement system that we are
able to go right from the beginning of the goals and the
objectives to the outcome indicators to the outputs and then to
the outcomes. And when we receive that information, that is
when we will be able to ascertain whether a community or
communities are utilizing their dollars in the best possible
way. We will have something to compare it to, which we don't
have now.
Mr. Turner. And then you will work with that community in a
consultation manner? You will look at changing----
Mr. Bernardi. Sure. We do that now, but we will have more
of a yardstick, if you will. We will be able to tell their
strengths and weaknesses more than we can now.
Mr. Turner. Will it still be, as your review of the
consolidated plan process is, limited to compliance, or will it
actually be geared toward enhancement of success?
Mr. Bernardi. It will be always toward compliance, but at
the same time toward performance outcomes: have you been
utilizing your resources in a particular activities, do the
indicators point out that not only have you reached certain
numbers that you said you would reach in your annual report,
but at the same time we want to know exactly if that person, if
that entity has improved the quality of life for those
individuals and that neighborhood. As I mentioned earlier, what
has an activity done to reduce crime? What has an activity done
in a certain neighborhood to create more jobs or to provide
more sales tax dollars or to provide more real estate tax
dollars? These are the kinds of outcomes I think we need and
that we can point to, you are on the right course, community A,
you are doing the right things; we see measurable improvement
each and every year with the utilization of these dollars for
that particular activity or activities.
Mr. Turner. I would like for you to speak for a moment, if
you will, on the issue of the difficulty of measurement of
success in a community. One of the things that we heard with
Strengthening America's Communities was an attempt almost to
put an economic bubble around a community and do economic/
environmental data analysis to determine whether or not the
community is advancing.
As you mentioned in your opening comments and in our first
couple of questions, for some communities it may be very
difficult to measure progress and success. Sometimes progress
can be slowing decline or decay, not necessarily that the
community, in a very measurable or obvious way, economically
advances. Could you speak for a moment to the difficulty of
what you are trying to measure? I hear very often from
community development people that I know what community
development is when I see it. But that doesn't go very well on
a measurement application. So could you talk about the
difficulty of doing that for a community?
Mr. Bernardi. Well, the genesis of the program was to
provide flexibility, was to provide local initiative, and the
fact that you have 23 to 30 activities that you can fund makes
measuring those activities difficult, but it doesn't make it
impossible. And I think OMB, in their analysis, and other
people taking a look at it say when you are going to expend
better than $4 billion a year to help 1,100 and some
entitlement communities, all 50 States, with another maybe
3,000, 3,500 communities within those States, we had better be
sure that we provide to the taxpayers of this country not just
numbers, but how has it enhanced the quality of life; has it
really done the job that it needed to do to make it a better
community.
Certainly, many challenges. Very difficult to measure, for
example, if you put in sidewalks or streetlights, how does that
benefit the community. If it is an area benefit and 51 percent
of those people are low and moderate-income, obviously it is an
eligible activity. But at the same time, how do you measure
that? It is very difficult. But I believe that what we are
putting together with this new notice will go further toward
making sure that we can capture as much information and as many
outcomes as we can.
Mr. Turner. The previous hearing that this committee had,
reviewed the formula change options that HUD had been
reviewing, four different categories of how the formula would
be modified with respect to entitlement communities. Has HUD
similarly undertaken any type of study or consideration for
changing the eligible uses for the expenditure of CDBG moneys?
Mr. Bernardi. Well, the eligibility, as I mentioned, is
very broad. That can always be looked at in conjunction with
the Congress and with our grantees, and ascertain whether or
not you might want to reconsider some areas of eligibility, add
some areas or modify some.
Mr. Turner. But at this point you have not undertaken a
study? You do not have a staff report that looks at possible
recommendations for modifying or discussing proposing to
Congress changes in eligible uses?
Mr. Bernardi. Well, take eligible uses. If you expand them,
it is going to be even more difficult to do the kind of
measurement you want. If you reduce them, then you will do more
targeting. And if you do more targeting, obviously there is not
as much participation, then you will be able to measure
significantly better.
Mr. Turner. But is this something that HUD is taking a look
at?
Mr. Bernardi. Well, we look at everything, but as far as
the eligibility, change in eligibility, no, I don't believe so.
Mr. Turner. OK.
I want to recognize that we have Mr. Dent from Pennsylvania
with us, and Mr. Clay has joined us.
Mr. Clay, would you like to, either, at this time, make any
questions or opening comment?
Mr. Clay. Sure. Thank you, Mr. Chairman. If I could, I
would like to ask Mr. Bernardi about the CDBG program, if that
is OK.
One of the recommendations in the NAPA report addressed the
establishment of an incentive for communities to participate in
furthering the national goals and objectives of CDBG. Should
such an incentive program be based on benefits, as opposed to
penalties, for communities? If you were to implement a new
evaluation system today, would it reward communities which
demonstrate progress, or simply burden those communities not
demonstrating progress?
Mr. Bernardi. Well, Congressman, obviously, you could go
either way with that: you could penalize and you could benefit.
We are looking at the notice that will be published in the
Federal Register very soon as to performance measurements, and
that is something with public comment, if the stakeholders and
others would like to take a look at perhaps providing
incentives for communities that utilize their resources to the
ultimate capacity, we would be happy to look at that, sure.
Mr. Clay. The administration's PART evaluation graded the
CDBG program as ineffective according to various criteria
utilized. If possible, could you offer us your opinion of using
PART to evaluate the CDBG program and if the criteria used to
evaluate a program were an appropriate measurement tool for
program goals and objectives?
Mr. Bernardi. Well, the OMB PART program scored the CDBG
program as ineffective, but the only area that I feel we felt a
little uncomfortable with was in the first section. There were
four functions and we were rated a zero for program purpose and
design. The program purpose and design was the Community
Development Act of 1974, and we feel very strongly that we have
been following the program purpose and design to make it
flexible, to make it local-oriented, if you will. However,
there were good recommendations in the PART program for how we
can improve our performance measurement systems, and we have
our own performance measurement system, a notice that we sent
out to all of our grantees last year, and almost half of those
grantees are providing us with performance measurement system
outcomes. And as I mentioned just earlier, we are in the
process right now of publishing in the Federal Register a
combination of thoughts and suggestions from individuals as to
how we can better improve our system.
Mr. Clay. Doesn't the nature of a block grant with few
strings attached make assessment more challenging than other
programs with more stringent requirements? Could you detail for
me the types of methods or metrics that communities could use
to evaluate the performance of their CDBG funds?
Mr. Bernardi. Well, you are absolutely right. When you have
that kind of flexibility, the measurement of those programs
becomes more of a challenge. But we have in place a
Consolidated Annual Performance Evaluation Report, and that
pretty much lists outputs, if you will, Congressman; it will
tell you the number of jobs a community has created, it will
tell you the number of units that have been assisted, the
number of loans that have been processed. We need and are in
the process of putting together an evaluation report that will
deal with outcomes; how does that affect that neighborhood or
that community by utilizing these dollars for a certain
activity.
Mr. Clay. Just from your response, how would you evaluate,
say, a city like St. Louis, MO, which gets block grant funding
annually, a pretty good portion of it? Does it target the
neighborhoods that it is really intended for, that the city
qualifies for? Does it actually make a difference in those
communities where you have plenty of blighted property,
property owned by the city, and really a very disadvantaged
community? Have you seen St. Louis yet?
Mr. Bernardi. I have been to St. Louis on a number of
occasions. The block grant program, Congressman, is a
consolidated plan and the community spells out what it wants to
do over a 5-year period of time. There is also an annual action
plan, and each year they have to submit to HUD what they have
actually done as part of this overall consolidated plan. They
have to stay within the guidelines and the objectives of the
CDBG program, but the flexibility of that program leaves it to
the officials in that community, to the legislative body, to
the administrative body after public hearings to make the
determination in many of these eligible areas of activity how
they want to spend their money. But they have to spend it to
benefit people of low and moderate income. At least by the
books, about 70 percent of it has to be spent that way, but we
find on an average about 95 percent of the communities utilize
their CDBG dollars for low and moderate-income individuals. I
don't have the exact number for St. Louis, but maybe I could
find that for you.
Mr. Clay. Would you be willing to share that with me? And
please don't miss the point that St. Louis qualifies for this
funding based on poor citizens. We don't want to lose sight of
that.
Mr. Bernardi. Sure. The need obviously is there, of course.
Mr. Clay. Thank you for your response.
[The prepared statement of Hon. Wm. Lacy Clay follows:]
[GRAPHIC] [TIFF OMITTED] T0219.121
[GRAPHIC] [TIFF OMITTED] T0219.122
Mr. Turner. Mrs. Maloney, do you have any questions?
Mrs. Maloney. Sure. First of all, I would like to place my
statement in the record.
I just want to state that I have very strong reservations
about the administration's dramatic funding cuts for 18 key
missions by 35 percent, and reprogramming it to Commerce,
funding for so many programs that fall outside of the mission
of the Department of Commerce, and I have expressed that in a
letter, along with my Democratic colleagues, to the Budget
Committee.
I want to state that my city, New York City, CDBG provided
over $207 million, and it was used for a variety of programs
that help the community, and the $1.42 billion budget cut for
CDBG will have a devastating impact for these efforts.
The housing mission of the CDBG program was a very
important one in New York, and I truly believe that housing
cannot take place, particularly for low-income and moderate-
income, without a Federal role. And under the administration's
proposal, there is absolutely no assurance that the housing
mission of CDBG will have any future. Can you comment on that?
On top of that, the housing in general--vouchers, public
housing--the Federal role has been scaled back in the proposed
budget before us.
But I do want to say that I support valid performance
measurements, I think they are very important--transparency,
performance measurements are very important--but I doubt that
eliminating the program is the right solution, and there is no
assurance for the housing and really no assurance that the
mission will be continued if it is in fact transferred over to
Commerce.
Mr. Bernardi. Congresswoman Maloney, the CDBG program was
zeroed out of HUD's budget and, as you indicated, that money
will go to Commerce for the Strengthening America's Communities
Initiative. Presently, the Department of Commerce is putting
together the legislation for their program, and that should be
forthcoming soon. The Section 8 program that we have----
Mrs. Maloney. But my question specifically was in the
language that I read that transferred it over to Commerce with
a 35 percent cut in funding, there was no assurance the housing
mission of CDBG would have a future. See, CDBG has a history of
supporting housing and programs in public housing or around
housing in poor communities, and that was not included in the
language that went over to Commerce.
Mr. Bernardi. Well, the language to Commerce is not
available; it will be soon, as I understand it. When they put
forth their legislation, they will address how they are going
to utilize those dollars. I understand that they want to
provide for the communities that have extreme distress,
communities that have lost jobs, communities that have high
unemployment. But I have not seen and I am not privy to how
they are going to disburse those dollars.
Mrs. Maloney. See, that is what is so difficult. What is
HUD doing to preserve the housing mission of CDBG, are they
working with Commerce to preserve the housing mission that has
historically served urban areas so well?
Mr. Bernardi. We have individuals at HUD who are working
with the folks at Commerce to put together the legislation.
Mrs. Maloney. So what do you think should be in that
legislation?
Mr. Bernardi. Well, that will have to be up to the folks at
Commerce to make a determination; it was zeroed out of our
budget.
Mrs. Maloney. But you said people at HUD are over there
working to help them put it together.
Mr. Bernardi. Well, we are providing information that they
request. We are providing counsel, if they seek it.
Mrs. Maloney. See, what is, to me, so disturbing is that
after revenue-sharing, probably CDBG was the only program that
came into local governments that gave them the discretion to
use it for what they thought were the priorities in their
communities. In New York, and probably in all localities, there
is a very detailed community input, leadership from the poor
communities--and this all goes to poor communities--on how the
dollars should be used. And now it is being shifted to Commerce
with this sort of floating around in ether, no one knows what
it is going to be, with a 35 percent cut, and it is very
troubling to me. And I certainly don't think we should vote on
the budget until we know exactly what is going to be the
framework, and I, for one, believe that the housing mission
that CDBG really led on in many ways is still preserved.
I do want to say we have been called for a vote, but the
Chairman, Mr. Turner, has shown a lot of interest on this, and
I want to thank him for his sincere interest on trying to
preserve things for local communities. I understand you are a
former mayor from an urban area, and I hope your expertise will
help sort this thing out. So thank you. We are called for a
vote.
[The prepared statement of Hon. Carolyn B. Maloney
follows:]
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Mr. Turner. Thank you so much.
Mr. Bernardi, let me give you just one opportunity if you
have any closing statement to make to enter it now. Upon the
conclusion of those remarks, we are going to adjourn, go and
vote, and we will come back into session for the second panel.
Mr. Bernardi. I just want to thank you for the opportunity,
members, and happy birthday, Congressman Dent. I wish you a
wonderful day. I like the fact you didn't ask me any questions.
Mr. Dent. Well, thank you. I am depressed; I am half way to
90, so I am thinking about that.
Mr. Bernardi. Thank you, sir. And if you have any
additional questions from us, just kindly let us know and we
will be happy to respond.
Mr. Turner. Well, thank you so much for all of the great
participation that you have had with this committee's work and
all the work of your staff. Being a former mayor yourself, you
bring to this a great deal of knowledge, and I appreciate your
commitment to these programs and to community development in
our urban areas. Thank you.
Mr. Bernardi. Thank you very much.
Mr. Turner. With that, we will be adjourned, and after this
vote we will begin with the second panel. Thank you.
[Recess.]
Mr. Turner. We are going to go ahead and get started while
my colleagues are returning.
As I noted in the beginning of this hearing, it is the
policy of the committee that all witnesses be sworn in before
they testify. Therefore, as we look to our second panel, would
you please stand to be sworn in? Rise and raise your right
hands.
[Witnesses sworn.]
Mr. Turner. Let the record show that all the witnesses have
responded in the affirmative.
I want to begin by thanking all of you for taking your time
both in preparing for this committee and then attending today
to testify. This, as you know, is an important issue for many
communities, and that is the effectiveness of CDBG and how we
might be able to make it more effective. Your perspective on
CDBG and HUD's performance is certainly helpful for us, as
everyone looks to these issues.
We have with us today the Honorable Ron Schmitt,
councilmember of the city of Sparks, NV; Mr. Thomas Downs, a
fellow from the National Academy of Public Administration; Ms.
Lisa Patt-McDaniel, assistant deputy director, Community
Development Division, Ohio Department of Development, on behalf
of COSCDA; and Sheila Crowley, Ph.D., president, National Low
Income Housing Coalition.
We will begin with Mr. Schmitt.
STATEMENTS OF RON SCHMITT, COUNCILMEMBER, CITY OF SPARKS, NV;
THOMAS DOWNS, FELLOW, NATIONAL ACADEMY OF PUBLIC
ADMINISTRATION; LISA PATT-MCDANIEL, ASSISTANT DEPUTY DIRECTOR,
COMMUNITY DEVELOPMENT DIVISION, OHIO DEPARTMENT OF DEVELOPMENT,
ON BEHALF OF COSCDA; AND SHEILA CROWLEY, PH.D., PRESIDENT,
NATIONAL LOW INCOME HOUSING COALITION
STATEMENT OF RON SCHMITT
Mr. Schmitt. Thank you, Mr. Chairman. Good morning. Thank
you for the opportunity to speak to you about this very
important concern to our community. I am Ron Schmitt,
councilman of the city of Sparks, NV, and president of the
Nevada League of Cities and Municipalities.
The community of Reno, Sparks, and Washoe County comprises
approximately 380,000 citizens. Sparks is one of the fastest
growing cities in the State of Nevada, with Nevada being the
fastest growing State in the Nation since 1990.
I was a founding member of our Human Services Advisory
Board in 1996. I became involved with this process after a
focus group of citizens decided there had to be a better way to
distribute Federal, State, and local funds dedicated to our
human services providers. The process in place at that time was
very inefficient, time-consuming, and, above all, not getting a
large percent of the funds to those who needed the services.
This resulted in the formation of the Washoe County Human
Services Consortium.
The Consortium includes a board comprised of three
appointed citizens from each entity: the city of Reno, the city
of Sparks, and Washoe County. I served as a citizen for 5
years. A safety net was built into the process by making this
an advisory board who submits their recommendations of funding
to the triumvirate. The triumvirate consists of one elected
official from each entity. They have the option of ratifying or
making adjustments to the board's recommendations. With this
new process, service providers no longer had to submit three
different applications or attend three different hearings;
there was one application, one board hearing.
The old system created many inequities; some services going
unfunded, while others receiving a windfall of revenue. This
new system encourages collaboration between service providers.
A set of seven child care providers, each submitting an
application, they would submit one application for all seven
and then work together to monitor the needs and the
distribution of the funds. This has lowered the cost to monitor
the program, increased the services to the public, and
stretched our limited dollars to help our community become a
better place to live.
A successful applicant must include objectives and
measurable outcomes in their application, which become a
component of their contract. These contracts are monitored and
verified during the course of the program year. An example from
a recent application from the C-A-R-E Chest of the Sierra
Nevada, a group that provides medical equipment and supplies to
the elderly in our community, two of their primary objectives
include the reduction in the number of individuals living in
assisted care facilities and prevent in-home accidents by
providing durable medical equipment such as grab bars and
shower chairs.
Some of the measurable outcomes for this application period
were as follows: 1,548 people were assisted with 2,852 medical
equipment items; 334 people were assisted with 601 cases of
liquid nutrition. These outcomes were monitored and reported to
the board at the end of each year, when the next application
period started. This has raised the bar for our service
providers and made them review their programs for more
effective ways of doing business in order to get more service
to our community. This process has made our providers more
accountable for the dollars they receive.
Let me tell you a story about Jonelle, one of C-A-R-E
Chest's clients. She is an inspiring, unforgettable woman. Born
with cerebral palsy, the doctors thought she was never going to
speak. ``I showed them and haven't stopped talking since,'' she
boasted. Recently she moved to Nevada to be close to her
adopted family. While her MediCal is being switched to Nevada
Medicaid, Jonelle came to C-A-R-E Chest for help. She was
loaned an electric wheelchair, and upon receiving the
wheelchair, Jonelle sped off to the bus stop, thrilled to
explore her new neighborhood. She is slowly but determinedly
fulfilling her long-time dream of teaching special needs
children ``like me'' she adds.
Without the continuation of CDBG funds, many of the service
providers to our community could not continue. I again want to
thank you, Mr. Chairman, for allowing me to speak to you today
on this very important issue of our community, and thank you
for all that you do for our country.
[The prepared statement of Mr. Schmitt follows:]
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Mr. Turner. Thank you.
Mr. Downs.
STATEMENT OF THOMAS DOWNS
Mr. Downs. Thank you, Mr. Chairman. I am here on behalf of
a panel of the National Academy of Public Administration.
CDBG officials asked the Academy to recommend performance
measures that would satisfy CDBG management, State and local
grantees, and the Office of Management and Budget, while being
consistent with the requirements of the 1974 Housing Act, the
1973 Government Performance and Results Act [GPRA], and the
President's management agenda under PART. In addition, CDBG
officials asked the panel to recommend ways to incorporate
performance measurement into its management information system,
the Integrated Disbursement and Information System [IDIS].
The Academy panel produced two reports and requests
respectfully that both be included in the record. A list of
panel members and their backgrounds is attached to the
statement. The views presented here are those of the panel and
its members.
I would like to highlight the findings that most directly
relate to the CDBG issues under consideration by this
subcommittee, specifically: assessing CDBG performance under
PART, reporting CDBG performance under GPRA, incorporated
performance into IDIS, developing performance measures, and
leading the CDBG program.
The panel notes that there is considerable difference of
opinion among CDBG management, grantees, OMB, policy experts,
and, indeed, this Congress about what CDBG really is. So we
applaud your effort to address some of these issues.
I would like to begin with CDBG's PART assessment.
A PART assessment yielded an overall rating of
``ineffective'' in 2003-2004. The panel agrees with OMB that
CDBG did not effectively demonstrate performance results for
the program over its 30-year history, and that it resisted
gathering and/or reporting performance data related either to
short or long-term goals and objectives. The panel believes
that CDBG's effectiveness has not yet been established.
However, the panel disagrees with OMB that CDBG's mission
and purpose are unclear. The 1974 Housing Act clearly gives
wide latitude--intentionally, I might add--to States and
communities to spend CDBG moneys to meet the needs of poor
people and distressed communities.
The panel also disagrees with OMB's criticisms that CDBG is
not geographically or place targeted. Although the panel
appreciates OMB's view that directing funding to distressed
areas may provide greater benefits to poor people, the 1974
Housing Act has no such requirements to be geographically
targeted. Therefore, the panel believes that OMB criticized
grantees for something they were not required to be doing.
There is some disagreement in the field as to whether the
Secretary of HUD can compel communities to geographically
target. Perhaps this is an issue that the Congress should or
could clarify.
Next I would like to focus on several aspects of
performance reporting.
In our study, we found that some officials in HUD and in
the CDBG grantee community believe that performance reporting
under GPRA does not apply to them. Indeed, CDBG is a $4 billion
program, yet contributes only three performance measures to
HUD's Strategic Plan, even though the program funds nearly 100
different kinds of activities. The panel believes that CDBG
management and grantees have an obligation to contribute
adequate performance data to the GPRA process.
Much of the frustration in performance-based management in
CDBG relates to the IDIS management information system. It
works poorly, if at all, by most standards for the broader
purposes that it claims. The panel applauds CDBG for its recent
initiatives to clean up grantee data reported in IDIS so that
it can be used for management and analysis purposes. It is
essentially now an expenditure control system, not a
performance management system. The panel commends CDBG for its
recent efforts to upgrade the system and its data bases. The
panel urges Congress to encourage CDBG to fully upgrade IDIS if
performance-based management is to be taken seriously. And
Congress should monitor CDBG's progress on this issue. If, in
reality, this is going to be taken seriously, it needs some
specific performance targets itself that are closely monitored.
After careful review of the state-of-the-art in performance
measurement, and extensive consultation with CDBG, grantee
stakeholders and OMB, the panel proposed a set of performance
measures for consideration by CDBG that would satisfy both PART
and GPRA. While the panel was engaged in its effort, a Working
Group comprised of CDBG staff, OMB staff, and grantee
stakeholders developed their own set of performance measures,
which is a far preferred outcome. The panel strongly supports
this collaborative effort and urges the Congress and OMB to
adopt both the process and the outcome measures produced by
this Working Group.
Finally, the panel is concerned about the leadership of the
CDBG program. We acknowledge that OMB did not find fault with
CDBG's management under PART. But, although the panel did not
formally study this issue, it was clear that much of the
controversy about the program, like performance measurement and
a computer system, stem directly from a lack of attention in
setting program direction and holding all parties accountable
for performance, not just recently, but for years and perhaps
decades. The panel believes that until the program becomes
better led at all levels at HUD, it will continue to be the
subject of controversy.
The panel also believes that management issues resulted in
part from the low national priority afforded community
development. In spite of billions spent, there has been
insufficient attention to what the funding is being spent on
and its effectiveness. It is probably a good time for Congress
and the administration to have a harder look at the Nation's
urban policy goals and the role of CDBG. Debates about
Strengthening America's Communities is a place to start.
Mr. Chairman, thank you again for the opportunity to share
our views. I would be pleased to answer any questions you might
have.
[The prepared statement of Mr. Downs follows:]
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Mr. Turner. Thank you.
Ms. Patt-McDaniel.
STATEMENT OF LISA PATT-MCDANIEL
Ms. Patt-McDaniel. Good morning, Mr. Chairman. My name is
Lisa Patt-McDaniel. I am the assistant deputy director of the
Community Development Division in the State of Ohio's Ohio
Department of Development. The Division administers over $300
million in Federal and State funds, including CDBG, CSBG,
LIHEAP, HOPWA, HOME, and Emergency Shelter funds. I have been
involved in developing outcome measures for Ohio community
development programs and homeless programs, both Federal and
State-funded, for the past 5 years.
I am here today to testify about Community Development
Block Grant outcome measures before your subcommittee on behalf
of organizations that represent CDBG grantees: cities,
counties, and States, along with elected official
organizations. These organizations are listed in our written
submissions.
On behalf of our organizations, we would like to thank you
for your interest in the CDBG program. We look forward to
working with this subcommittee and the Subcommittee on Housing
and Community Opportunity to address issues of concern about
the CDBG program. We would also like to thank you for your
leadership on other important community development issues,
such as brownfields revitalization, planning and census issues,
and the Saving America's Cities Coalition.
You have received a copy of the Joint Grantee/HUD/OMB
Consensus Document on Outcome Measures for the CDBG, HOME,
HOPWA, and ESG programs. I would like to take this opportunity
to explain to the subcommittee how and why this document came
about, the rationale behind the chosen outcomes, and why we
believe implementation of this outcome measurement system will
benefit the CDBG program and its beneficiaries.
Joint Consensus Document grew out of an outcome framework
originally created by community development agency members of
the Council of State Community Development Agencies [COSCDA].
We were assisted in our efforts by the Renssalaerville
Institute, a nationally recognized expert in outcome framework
thinking. Our goal was to develop common outcome measures that
States could use in their programming that could also be
reported to HUD and aggregated in useful ways that would enable
us to tell Congress and our constituents of the results and
benefits of the CDBG program, while at the same time
encouraging our members to establish additional measures
specifically for their own programs and initiatives.
The national grantee organizations proposed to HUD and OMB
that they join us in an innovative consensus building process
that would build on the COSCDA framework and develop common
outcome measures that all grantees--cities, counties, and
States--could use and report on to HUD. Our goal was to answer
the question: In what way can we best demonstrate that the CDBG
program does achieve the results that Congress intended for the
program?
For our new outcome measurement system, we purposely
developed outcomes and indicators for the four programs covered
by the consolidated plan--CDBG, HOME, HOPWA, and ESG--because
these programs often represent an integrated approach to
addressing a community's or State's needs.
Mr. Chairman, I am pleased to report that our Working Group
succeeded. We found that indeed grantees at all levels of
government do have common outcomes that we seek to achieve in
our funding decisions and priorities. As you will see, these
outcomes, decisions, and priorities are all clearly linked to
the authorizing statute. To us, this means the program is
working as Congress intended it to. The outcome measurement
system is a way to understand how these outputs benefit the
communities or low-income people participating in these
projects and activities.
Now I would like to explain the outcome measurement system
a bit more.
There is a flow chart on the screen that shows the way in
which the outcomes of many of the activities of these four core
community development programs can be reported. There are three
overarching objectives, three outcome categories, and 17 output
indicators. The three objectives are: creating a suitable
living environment; providing decent affordable housing; and
creating economic opportunities, which are directly taken from
the CDBG statute, but also are applicable to the three other
programs--HOME, ESG, and HOPWA--covered by the outcome
measurement system.
In general, suitable living environment relates to
activities that are designed to benefit communities or the
people who live there by addressing issues in their living
environment. The objective of decent affordable housing would
include activities that typically cover the wide range of
housing assistance that is possible under HOME, HOPWA, or ESG.
It focuses on housing programs where the purpose of the program
is to meet an individual's, family's, or community's housing
needs. The objective of creating economic opportunities applies
to the types of activities related to economic development,
commercial revitalization, or job creation.
The outcome category ``availability/accessibility'' applies
to activities which makes services, such as infrastructure,
housing, and/or shelter available or accessible to low-income
people. A key obstacle for low and moderate-income people is
that basic community services and facilities are not available
or accessible to them.
The outcome category of ``affordability'' applies to
activities which provide affordability of a tangible service or
product in a variety of ways to low and moderate-income
persons. Sometimes the outcome a grantee is seeking is to make
an available community service more affordable to the low and
moderate-income people where they live.
Sustainability is the other outcome that has emerged as a
common result of CDBG and other programs. This outcome applies
to projects where the activities or activity are aimed at
improving a neighborhood by helping to make it livable for low
and moderate-income people, often times through multiple
activities or providing a particular service that can sustain a
section of the community.
How will this outcome measurement system help the CDBG
program? We believe that when this outcome measurement system
is implemented, we will begin to more clearly tell Congress and
OMB more about the benefits of CDBG and the other consolidated
plan programs. Aggregating the results by outcomes can help
Federal policymakers assess whether the statutory intent of the
program is being met, and the system can be an important
management tool at both the grantee and Federal level.
If we all agree that achieving these outcomes will improve
communities--and it appears that we do--we now have a common
framework within which to assess our progress and results at
the local, State, and Federal levels. And, certainly, our
organizations and HUD can and should encourage grantees to
develop specific outcomes and indicators for their own local
initiatives.
It is my understanding that this subcommittee is charged
with addressing issues of government accountability. In that
role, we would urge that in any report generated by this
subcommittee about CDBG, that you recommend that this outcome
measurement system be implemented as soon as possible. We also
ask that Congress ensure that sufficient funding is available
to modernize the IDIS system so that this new kind of reporting
can be implemented with minimal burden to our grantees.
Outcome measurement for the CDBG program will also shape
how CDBG funds are spent, both in what kinds of activities are
selected to be funded and how these decisions are made. The
current CDBG statute authorizes a menu of eligible activities
that recognizes the differences in the types of communities to
be served by the program and provides communities with
appropriate tools to address their unique problems.
I appreciate the opportunity to talk to you today and am
happy to answer any questions.
[The prepared statement of Ms. Patt-McDaniel follows:]
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Mr. Turner. Thank you.
Ms. Crowley.
STATEMENT OF SHEILA CROWLEY, PH.D.
Ms. Crowley. Chairman Turner and Mr. Dent, thank you for
the invitation to testify today.
There can be no doubt that the Community Development Block
Grant has been a force for enormous good at every low-income
community in the country. The resources that the Federal
Government has distributed through the CDBG program in the last
30 years have contributed to the improved well-being of untold
numbers of Americans.
There is no policy justification for reducing the level of
funding for CDBG. Moreover, the National Low Income Housing
Coalition adamantly opposes the proposed consolidation of CDBG
and 17 other programs in a single block grant housed at the
Department of Commerce. However, any public program should be
appraised periodically to assure that the program is responsive
to contemporary needs and emerging problems.
I want to take my time today to focus on two areas of
potential change. The first has to do with accountability. As
has been noted, OMB has been critical of CDBG based on the
assessment that grantees cannot demonstrate results that have
been achieved with CDBG funds. However, the congressional
intent is that: grantees have wide latitude in how they choose
to spend their funds; the range of eligible activities are
considerable; the income targeting is higher than in other
Federal housing and community development programs; the
planning requirements are limited; and the reporting
requirements are perfunctory.
The 1974 Housing and Community Development Act, which
created CDBG, also required the grantees prepare a Housing
Assistance Plan, do housing plan; and that did in fact result
in a linkage between housing needs and use of CDBG funds in the
early years. However, in the 1980's, the HAPs were no longer
required. Planning requirements were re-established in 1990 in
the National Affordable Housing Act, with the creation of the
Comprehensive Housing Affordable Strategy [CHAS]. The CHAS is
the primary statutory basis for the consolidated plan, which
HUD created in 1994.
The consolidated plan streamlined what was required of
entitlement jurisdictions to receive Federal Housing and
Community Development funds. As has been noted, the Conplan
combines into one document the CHAS and the annual applications
for the four block grants. The intent of the Conplan was to
increase both the autonomy and the accountability of
entitlement jurisdictions in use of Federal block grants. The
Conplan includes an assessment of the full range of housing and
community development needs in the community submitting the
Conplan.
The Conplan has the potential of being a mechanism by which
CDBG communities can be held more accountable for how their
funds are used, but there are two serious flaws. The first--and
this is a huge one--there is no statutory requirement that
jurisdictions actually spend their Federal block grant dollars,
including CDBG, on any of the needs that they identify in the
Conplan. The second flaw is that HUD has limited capacity to
monitor what jurisdictions do with their funds and hold
jurisdictions accountable for less than adequate performance.
HUD's work force was cut in half in the 1990's, without a
concomitant reduction in HUD's statutory duties. Moreover, the
political fallout from HUD challenging how a jurisdiction
spends its funds has the potential of being unpleasant, to say
the least. If Congress wants to assure that jurisdictions spend
their Federal block grant dollars appropriately, HUD needs
enough of the right staff who have the right authority to do
so.
Another improvement that would go a long way to making the
CDBG program more effective would be to lower the income
targeting requirements. Current income targeting is that 70
percent of CDBG funds benefit people with incomes at or less
than 80 percent of the area median. On a national basis, that
is approximately $40,000 a year; it is $47,000 a year in
Dayton, almost $53,000 a year in St. Louis, $49,000 a year in
Allentown. The remaining 30 percent of the funds have no income
limitations.
One of the purposes of CDBG, as defined in the statute is
the conservation expansion of the Nation's housing stock in
order to provide a decent home and a suitable living
environment for all persons. Currently, about a quarter of the
CDBG funds are used for housing. According to the 2003 American
Community Survey, on a national basis, there are 6.3 million
households with incomes at or less than 30 percent of the area
median who pay more than half of their income for their
housing. This income group is by far those with the most
serious housing problems, yet none of the Federal programs that
provide funds for housing production, preservation, or
rehabilitation are targeted to those with the most need.
In the very least, all CDBG funds should be directed to
benefit people with incomes at or less than 80 percent of area
median income and further deeper income targeting of some
portion of CDBG and a requirement that a greater portion of
CDBG funds be used for housing are in order.
Another way to more directly target the CDBG funds to needs
would be to consider housing cost burden as a factor in the
CDBG formula. Housing cost burden is by far the most serious
housing problem today. The housing factors currently in the
CDBG formula--overcrowding and the age of housing stock--are
much less relevant indicators of need than they were 20 to 30
years ago.
Again, thank you for the opportunity to testify today.
[The prepared statement of Ms. Crowley follows:]
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Mr. Turner. Again, I want to thank each of you for your
testimony, for the preparation that you put into this, for your
coming here today and participating, and for all of the staff
input.
I want to begin my questions with something very general
and broad, and go back to a question that I was asking Mr.
Bernardi, about this whole process of measuring. Again, to
reiterate, there is this philosophy of if you are not measuring
it, you are not measuring it.
But then there has to be the question of why are you
measuring it. Are you measuring it for compliance? And here,
with CDBG, we hear that the compliance requirements are very
broad, so it certainly we will find some people who will be out
of compliance and be able to move them back in. But generally
the criteria appear to be so broad that measuring for
compliance is not going to result in much usefulness in the
information.
Then there is measuring to prove effectiveness, and that is
really can we prove in the measurement information that we have
that this program is effective so that we can use that to
justify the sustainability of the program. We can sustain the
program by having measured it and improved its effectiveness,
something that each of your testimonies identify as something
that we are not quite yet able to achieve. And I appreciate all
the work that you have done in trying to assist us in being
able to prove the effectiveness through enhanced measuring.
The next category would be measuring to enhance
effectiveness. Once we get all this data and information,
actually using it as a management tool so that we can look at
what does it tell us about what uses of CDBG funds return the
greatest impact on low and moderate-income families, what
things have communities done that have not proved to be
effective.
And I am beginning this question, in part, from a comment
at the end of Ms. Patt-McDaniel's testimony that says, ``If
Congress is interested in addressing the issue of
effectiveness, it should direct HUD to find ways to train local
governments on best practices on community planning and citizen
involvement in that kind of planning.'' I was surprised, in the
testimony that we had from Mr. Bernardi, that there is not a
significant amount of effort in reviewing consolidated plans
and reviewing the information submitted by communities to
assist and enhance them in their process of expending CDBG
funds.
So I am going to ask if each of you would comment on the
issue of once we perfect this measurement, what should we be
doing with the information.
Mr. Schmitt.
Mr. Schmitt. Thank you, Mr. Chairman. I think that is a
great question. I believe in 1996, when we started, the purpose
for the outcomes and performance measures was an educational
tool for our nonprofits. Normally, most nonprofits do not
receive the same as the private sector in wages, so, therefore,
there is a lot of training going on. And it was a process of
beginning to help to show the nonprofits what they were out
there doing, where were they measuring their impact in the
community and being able to report back to the board.
I think that from that point it has evolved to another tool
to exactly what you are talking about: what does it mean to the
community; what is our overall in the community. I believe we
are in the process of developing that right now, that the
community can say, as in the case of the number of people in
assisted living, in a population that is growing in age, it is
a very critical item for us to continue focusing on, so it will
become a tool of how effective we have been in the past in
spending that money and where do we put more money as those
percentages either slip or increase in that area.
I hope I answered that question to you in what you were
looking for in the answer.
I do believe, in talk of best practices, that is the
solution for this particular issue. In 1998 we won a best
practices award for this program, and I don't believe that it
has been marketed very well to the rest of the community. In my
5 years as an elected official, there is tremendous great
talent out there in our local communities to be able to teach
and educate providers and other local governments, and I think
through some of the national coalitions of groups best
practices can be a great form of being able to pass this
information on. My recommendation to our city council and our
community is that we are not spending enough money on education
to be able to find out what best practices have worked across
the country and promoting those within our organization.
Mr. Turner. Mr. Downs.
Mr. Downs. Mr. Chairman, I think, as I said, there is a
history at HUD of feeling that the Community Development Block
Grant program is exempt from GPRA and PART, and I think in part
it was a feeling on the part of the professional staff that the
specific performance requirements would lead to micro-
management of a program that was intended to be community
decision-based. I think that is an error on the part of the
staff, and I think they are gradually disabusing themselves of
the assumption that they are exempt from performance
accounting. They are not; the law is clear.
It is harder with Community Development Block Grant funds
to develop performance measures, particularly outcome measures,
not output measures. I think that the real argument for
performance measurement with Community Development Block Grant
funds is unless you can show the American public what the $4
billion a year buys, they don't support it.
And it is clear that this approach to it being a thousand
flowers that we don't count leads to a vulnerability for the
program. I think everybody agrees to the value itself of the
program; it is the responsibility of HUD and the recipients to
participate in a performance process.
Not sounding cynical, but I would say that best practices
has to start at HUD. The inability of the IDIS to absorb
performance data cannot be overstated. It is basically an
accounting system that is used to show where the money goes, it
doesn't necessarily have the structure to support performance
recording. It has been that way since the beginning, and to
have some of the HUD staff that for years data simply comes in,
it is untouched by human hands, it is put on a giant tape and
shipped off to Suitland, MD for the archives. It is basically
untouched by any human mind for analysis. I hope that is
changing.
This system is so fundamentally broken that the recipients
know that they spend a lot of time and effort, including
contractor time, to try to put together reporting requirements
that go to HUD and go into a memory hold. That breeds cynicism,
it breeds a lack of trust in the partnership between the
national government and the local recipients. It has to be
fixed. It has to be fixed for this program to actually have
legitimate performance measures that are accepted both in the
community and nationally.
So if I was urging any state-of-the-art fix, it would start
at HUD.
Mr. Turner. Ms. Patt-McDaniel.
Ms. Patt-McDaniel. Well, your initial question was are we
measuring for compliance, are we measuring for effectiveness,
are we measuring for enhancement of programs. I think that
depends on the sophistication of the program. I would like to
think that Ohio's State program is sophisticated enough that we
are looking at the enhancement of what we are trying to do,
because I believe that myself and my staff want to wake up
every day knowing that we have spent the money in a way that
has made a real difference in the constituents for the State.
Also, whether or not HUD would have been asking us to come
up with performance measures, the Department of Development is
already deep into that process as a whole, using the balance
scorecard, which is a particular model. But even before that we
have a pretty intense citizen participation process that starts
the minute we get our grant agreement for the current fiscal
year, we start again going through our citizen participation
process.
I do believe that there is a need for technical assistance
to local governments and States on how best to implement and
look at performance measures and look at what the results are
for their own management of the programs. Certainly, it is
important to aggregate some key outcome factors so that you can
assess whether we are meeting the statutory intent.
But for any good administrator, they want to look at the
performance measures to see are they making a difference in
what they are trying to achieve, as well being in compliance,
which is step one; effectiveness, basic effectiveness, which is
step two. But, as I said, most importantly is once you become
effetcive, you want to always be looking at what you are doing
and can you do it better.
So I guess I would say that it is important for us, whether
we were being asked to do it or not, and I would have to agree
that many of the States and the entitlements who are on the
task force with me that COSCDA started, I would think that they
all felt the same way, and that is why they were engaged in the
task force.
Mr. Turner. Ms. Crowley.
Ms. Crowley. Well, I think that the question of
effectiveness has to come back to intent. And you can't say you
are going to measure effectiveness if you haven't started from
the beginning saying what it is that you want to do. And part
of the problem, as everybody has said, with the CDBG program is
that it has this huge array of things that folks can do, and
can do little bits of all of that or can concentrate on one
thing or another.
But is the amount of money that a jurisdiction gets from
the CDBG program actually going to turn the tide on some
specific problem that they have? First of all, it is
questionable if there is enough money to do that, but the
second thing is there has to be a conscious decision on behalf
of the community to actually do that; and there is simply no
requirement of that.
My sort of metaphor for these kind of programs is if you go
on bus tours through low-income neighborhoods and you find here
is a block that has been completely renovated, and then there
is a sea of blight, and then there is another house that is
sort of brightly colored. And that is the effect of this, is
that you have these little pieces of improvement, but that you
don't have an overall systemic change that is going on in the
community. And that would require that there be some
expectation that in the planning process that communities
actually pay attention to the structural problems in their
community and make a very concerted effort to address those.
Right now it is all over the place. Some folks have
described it as Balkanized, that if you have a city council
with nine members, and they all get a piece of the CDBG fund to
spend in their jurisdiction, then there is no particular way to
hold anybody accountable for what the outcome of that is.
Mr. Turner. Thank you so much.
Mr. Clay.
Mr. Clay. Thank you, Mr. Chairman. Thank you for holding
this hearing, as well.
I want to thank both panels for being here today.
Let me start with Mr. Downs. How are you?
Mr. Downs. Fine. Good to see you again.
Mr. Clay. You too. As you know, the fiscal year 2006 budget
transfers CDBG to the Commerce Department and shifts the block
grants focus away from community development toward economic
development purposes. If Congress agreed to this proposal,
wouldn't the types of performance measures being developed by
HUD and stakeholders be useless under the new Department of
Commerce administered block grants? Can you comment on that?
Mr. Downs. No. I don't know the framework that they are
actually proposing for legislative purpose within Commerce. I
think if the program itself has the same framework of an open
trust between the national government, State and local
governments for broad purposes, which is the framework for
this, it is based on an assumption about federalism, that you
have to allow local decisionmakers to make decisions about
their own communities, and that as a partnership, you would
have the same dilemmas about reporting requirements around that
performance, whether it was at HUD or at Commerce.
It is unclear that you could use the current IDIS in any
way, shape, fashion, or form in a broader arena, and it would
probably mean rebuilding from the ground up a new information
system at the national level.
Mr. Clay. Thank you for that response.
Dr. Crowley, you mentioned in your testimony that one of
the methods Congress ought to study is the useless restrictive
thresholds for income targeting among communities. Could you
explain in greater detail how this would improve program
accountability? Wouldn't this negatively impact the number of
low and moderate-income persons the program is trying to
assist? And do you see entire communities benefiting from a
lower threshold, as opposed to neighborhoods or specific areas?
Ms. Crowley. Well, I think if the intent is to improve the
well-being of low-income communities and people in those
communities, then the more deeply you can target the CDBG
dollars, the better off you are. And at this point the
targeting requirements, I think, are relatively broad, they are
very high, much higher than any other of the programs that HUD
administers, and I think they create the room for local elected
officials to make decisions to spend CDBG dollars on things
that some of us would consider questionable, you know, with
this broad notion that somehow it is going to improve the
overall community. I think the more targeted you can be, the
more accountability you will get.
Mr. Clay. So you are suggesting to target the funding, the
block grants toward the lower income census tracks.
Ms. Crowley. No, I am saying that all the funds should
benefit people who are at low income, at least. At this point
is only 70 percent of them. And that if you could more deeply
target who benefits from the funds, not necessarily individual
census tracks, but who benefits from the funds, then you would
be better off.
Mr. Clay. OK. Thank you for that response.
Ms. McDaniel, a major concern with block grants like CDBG
is that some communities are using Federal funds to supplant
their local community development budgets, therefore not
improving upon past development effort. Can you tell us what
mechanisms, if any, have been included in the new outcome
framework to ensure that CDBG funds do not supplant local
program funding streams?
Ms. Patt-McDaniel. Well, Congressman Clay, let me clarify
for you that I am in a State program, so most of our
communities don't have community development staffs. But from
my knowledge of the block grant program broadly, all the
activities that can be undertaken with community development
block grant have to be done by somebody. So a small portion of
those funds in any activity are going to go to the labor of
getting it accomplished, whether that is housing rehab,
downtown revitalization, public service.
In the outcome framework, we were looking at actual
benefits of what we did, and not what percentage of that
particular activity would end up paying for staff time.
Mr. Clay. Excuse me. What parts of the outcome do you
really favor, I mean, does it create jobs, does it create
beautification in the community? Which parts do you favor?
Ms. Patt-McDaniel. Do I favor?
Mr. Clay. Yes. Or do you like to see accomplished, so to
say.
Ms. Patt-McDaniel. Well, the beauty of the Community
Development Block Grant program is its incredible flexibility.
But everything that is done under the program comes down to the
three overarching objectives, which is: creating a suitable
living environment, creating decent affordable housing, or
creating economic opportunity.
And I would put forth that community development requires
all three of those things to be successful, and programs in--
and this is my own opinion--in programs that spend their block
grant in only one of the three areas, unless they have
resources to address the other two areas, you are not going to
be able to turn the corner, as was said, in getting an area to
prosper.
And I can't say that I favor one over the other; I think
all three are important and have to be addressed, whether it is
addressed with Community Development Block Grant, whether you
are using HOME or State funds. It has to be a comprehensive
effort.
Mr. Clay. Thank you for that response.
Thank you, Mr. Chairman.
Mr. Turner. Mr. Dent.
Mr. Dent. Thank you, Mr. Chairman.
Good afternoon. In your written testimony, Ms. Crowley, you
state, in reference to the consolidated plan, ``If Congress
wants HUD to assure that jurisdictions spend their Federal
block grant dollars appropriately, HUD needs enough of the
right staff who have the right authority to be able to do so.''
Is it your opinion that HUD does have enough staff to
undertaken this particular task?
Ms. Crowley. Well, I haven't done any careful study of the
HUD manpower stuff, but I can tell you that it did see a rapid
downsizing of HUD in the 1990's with no change in what it is
that HUD was supposed to do. So something has to give
someplace. And I think that it would be time and money well
spent to actually look at what it is that Congress requires HUD
to do, expects HUD to do, and what the staffing patterns are
that need to be in place in order to carry that out. And it
seems self-evident that there is a mismatch on that at this
point.
The other thing is that in terms of the use of the funds,
HUD staff are very limited in what they can do to effect
consequences on jurisdictions that don't use the funds
effectively or appropriately. There is very little that HUD can
actually do with that. They probably could do more than they
do, but actually they have very little authority to carry that
out.
Mr. Dent. So you are saying the compliance staff lacks
authority?
Ms. Crowley. The basis upon which you can disapprove a
consolidated plan, there is a broad thing about how it not
being consistent with the intent of the statute, but that is
huge. So it would be very hard to do that. And then the other
way you can disapprove is that it is substantially incomplete,
which is that you haven't filled out every form and you haven't
gone through every step that is required, and you haven't
signed every certification, and those kinds of things.
But that is sort of like can you complete the package, as
opposed to is what you are proposing to do in the packet does
it mean anything. So I think that there are some limitations on
what it is that HUD can do.
Having said that, there is a lot more that HUD could do. I
think that we have utterly forgotten the fair housing
requirements that jurisdictions have, and HUD's responsibility
to assure the affirmatively furthering of fair housing. Many of
the issues that need to be resolved in terms of housing in
community development have fair housing implications, and if we
had those programs better integrated, those processes better
integrated, HUD may in fact be able to exercise more authority.
But nobody really wants HUD to exercise much authority. We
want them to hold people accountable, but we also don't want
them to rock the boat. So I think HUD staff are sort of in a
really precarious position under any administration.
Mr. Dent. You have also suggested that there should be
consequences for failure. Failure by whom, HUD for not
monitoring closely enough, for the grantees, or for both?
Ms. Crowley. Well, I think that consequences for failure
mean that you somehow or another don't use your funds for what
you are supposed to do and you can't in any way demonstrate
that you are going to, that the funds are going to what it is
that they are supposed to go to. That is simply a matter of
monitoring and being able to determine precisely what happens
with that.
Part of the problem is that we give money to jurisdictions
and then jurisdictions subcontract with other folks to be able
to do that. There are levels and layers of accountability that
need to be in place. But the reality is that the grants go out
year after year without anybody really checking on that.
I am not saying that should be used as a reason not to have
the grants. I am saying what we should do is have a system in
place so that there is a way for us to be assured that the
money is being used as effectively as possible.
Mr. Dent. What consequences would you suggest that Congress
enact?
Ms. Crowley. Well, I think a basic thing that Congress
could do that would be essential is to tie the expectation that
you actually spend your dollars on what it is that you identify
are the biggest problems in your community. And that would be a
consulting process with everybody in your community, that you
actually engage in a genuine, serious citizen participation
process; that there be actual consultation with a wide range of
folks; and that you come to some agreement about what it is you
want to tackle this year and then the next 5 years, and how
your dollars can best be spent.
There is no reason why Congress can't do that. That
interferes with the notion of local autonomy making decisions,
but you are actually not taking away autonomy, you are simply
asking people to use their autonomy in a more effective and
targeted way.
Mr. Dent. Thank you.
No further questions.
Mr. Turner. Mr. Schmitt, in your testimony you talked about
the successes of your community and the processes that you put
in place for approving CDBG funds. You talked about previous
inequities. I would love to hear some anecdotal statements
about some of those inequities that you saw.
And then I would like you to go into, if you would, the
issue of have there been requests for funding that this process
has resulted in rejecting? And whether or not this process has
resulted in identifying some activities or uses that are
currently eligible under the act that your community is not
likely to fund.
And I am going to broaden the question as it goes to the
rest of the panel and I am going to tell you what that is so
you can understand the other point that I am interested in
here, and that is one of the things we tout with CDBG is local
control and the issue of flexibility. When we talk about
effectiveness, Mr. Downs, as you had said, to prove that these
$4 billion plus funds are being used in a way that is
beneficial for taxpayers, we inevitably come to the conclusion
that there is some difficulty in measuring something that is so
broad.
So my question goes to in balancing flexibility and then
the reality of knowing that we have to have accountability, is
the program too broad? And if it is too broad, do you have some
thoughts in areas where the fact that the scope is so broad
might be able to be improved?
So, Mr. Schmitt, the inequities, any applications that are
rejected, and the issue of activities or uses that are not
likely to be seen favorably with your community.
Mr. Schmitt. Thank you, Mr. Chair. The issue of inequities,
each community--the three entities: Reno, Sparks, and Washoe
County--would have as many as 50 to 60 service providers that
would be submitting applications all roughly the same time
period of the year for funding. If you were the last entity--
and usually the city of Sparks would be the last entity to do
their funding--the applicants would come forward and say, well,
the city of Reno and Washoe County gave us funding, so if you
want to see your citizens' of Sparks services taken care of,
you need to fund us also.
In many cases we only had $100,000 in the city of Sparks,
and we would have as many as 50 applications for those moneys.
So it would become that in order to make sure that the
residents of our community in the coalition got funded, the
CDBG money was funded, we would have to give them a little bit
of money, which meant that 50 agencies were getting $100,000,
which meant that probably most of that money was going to staff
members filing the quarterly reports and trying to take care of
the reporting process.
Also, agencies would come forward and say we didn't get
funding from Reno or Washoe County, and if you don't give us
funding, we are going to have to close our doors, which then
put the burden on one community. It kind of created a circuit
ride, if you will, of people going around to the agencies. With
each office being no more than 5 miles apart from one another,
it made it very inequitable. And some organizations that had
good lobbying firms would be able to get the higher percentage
of the funds from each of the communities, and some agencies
who were really struggling and didn't have the professional
staff to do that would not receive any money.
And by all the three entities coming together and turning
it to a citizens group, a focus group to be able to take care
of that, a lot of those issues got worked on out.
The issue of getting rejected, in the 9-years this process
has been going forward, there have been several agencies that
have been rejected for their funding, and it is because we now
have in place what is called a scoring system. Throughout the
process, each application is scored. If they don't receive a
passing score, then their application is most likely to get
rejected. It could still be in the pile for help improvement,
if we felt that there was some motivation of the management
there in the agency to be improved, then they could get some
funding on it.
After 9 years of this process, we see very little
applications coming forward to the staff because the process is
known throughout the nonprofit community that they don't apply
for these funds if they are not eligible for the funds. So I
believe that probably everything under the CDBG program is
eligible, but we don't have all the applications come forward;
they won't come forward because it is so well known throughout
the community of what that process is and what those moneys are
eligible for.
I believe very strongly in the issue of local control, of
being able to control the funds that are there. In many
communities I think it is used very, very wisely. The citizens
can come forward and talk about those, the elected officials
can come forward and talk about it. It does become a political
situation at times that you have certain things in the
community, but I think most elected officials understand the
good of the whole and will work for the common good and
distribute from those funds.
Accountability, we have had that throughout the very
beginning. We ask our service providers to be accountable and
we are also asking our councils and our elected officials to be
accountable to the community for those funds, and we think we
have built in some safeguards to be able to have that
accountability.
Mr. Turner. Mr. Downs.
Mr. Downs. Part of the genius of the program is its breadth
of decisionmaking that allows State and local jurisdictions to
solve problems that are unique within their community. And we
have discovered long ago that there is a fundamental difference
been Minot, ND and Miami. That is built into the program.
What is not built into the program, and what is causing it
grief now, is an easy way for communities to articulate their
program and their plan in an information system that is easily
accessible for those recipients at HUD and that the reporting
for performance and outcomes is pretty easy and transparent for
those jurisdictions.
It is not unusual, apparently, for some communities to have
four or five people who do nothing but data management,
manipulation, and entry. That is dead loss overhead for the
program. The lack of that information system at HUD doesn't
allow best practices to rise to the top so that HUD can push it
back out and say look at what Minot did in this area; this is
something that you ought to think about about how you use your
own funds.
If this communication process between the recipients and
the national government stays as broken as it is, you cannot
get realistic, timely, painless performance outcomes. You can't
hold the communities accountable for what they are producing
because you don't know what the information is.
And you can't help them understand what is new and creative
that people are using around the rest of the country. That
system is so critical, and it ought to be ease of access, it
ought to be transparent, it ought to be programmable so that
you fill in a screen, it has categories not unlike this on a
screen, you hit enter, it goes to HUD. They can then pull this
data back and begin to give feedback back about you are not
living up to your plan. It says here you are supposed to do X
and Y. You are only doing X. Why is that? That system doesn't
exist at the national level.
The information won't set all of us free of these
criticisms, but facts actually help in the decisionmaking
process here.
Ms. Patt-McDaniel. OK, well, why the statutory purposes of
this program haven't changed. As community problems have
changed and new community problems have come up, Congress has
added new eligible activities over time like brownfields,
energy efficiency, economic opportunity. These get added to the
program and make more eligible activities.
But certainly not every community eligible for block grants
needs assistance with all those issues and chooses to do all
those activities. But this approach recognizes that a broad
menu of activities must be available in order for communities
to address their community development needs.
So, with that, I think Congress got that part right. I
think you will find that--and I need to clarify that I am in a
State program. The State, the way we run our program, is so
much different from the way the city of Dayton would run its
program. But, in general, I would surmise that most grantees,
whether they are States or whether they are cities or counties,
are doing a menu of a few of those activities where they are
trying to get accomplishments. So in that effect it is not too
broad. They are picking out of that broad menu a group of
activities that they need for their community.
In the State of Ohio we have 10 programs across the four
funding sources that are our primary things that we are trying
to achieve. And this is a problem with performance measurement.
There are some key factors that we can roll up nationally that
might be able to tell you about those programs, but really the
performance measures in my mind that are going to matter the
most are the ones that a local community, a county, or a State
put on themselves based on the narrow group of activities they
have chosen to do out of the program. And then those outcome
measurements is what will provide the accountability to how
that money was spent and what we are trying to achieve.
So I don't think that the Community Development Block Grant
is too broad. I think it is broad in that it gives you several
opportunities to address your community's needs. And every
community is different. You know that what was important in the
city of Dayton is not necessarily what was important in the
city of Columbus or in the city of Cleveland, or in some of the
smaller communities.
So I think local communities need to have that flexibility
to figure out what is unique about their community, what do
they need to achieve. And then they should have measurements on
what they need to achieve, and that is how you should look to
see how effective the program is.
As I said, there are some key outcomes that can be rolled
up to the national level that may be able to tell you about the
effectiveness of the program, but even more so it is those
local performance measures that are going to tell you locally
whether that particular program is being effective in what it
is trying to achieve.
Ms. Crowley. In terms of the number or the breadth of
activities, I think the other panelists are right that it has
to be decisions that are made at the local level. However, I
think you could probably fine tune it a bit to make sure that
you do not allow things that are standard municipal functions
anyway. So if you can afford to do sewers and sidewalks in rich
neighborhoods, you shouldn't be spending your CDBG dollars to
do sewers and sidewalks in poor neighborhoods. You should be
spending your general fund dollars to do that.
So I think that where you can differentiate on what are the
things that the jurisdiction would do anyway, and how does CDBG
add to some things that the jurisdiction couldn't normally do,
wouldn't normally do for all of its citizens to be able to
benefit, to improve the well-being of low-income folks.
I do think, as I said, that there is too much flexibility
in the income targeting and that you could help a lot if you
reduce that. The thing that I think will ultimately make a
difference, though, is if there is a much better process for
the local decisionmaking to occur.
And we struggle with all sorts of different ways to do that
because there is 1,100 different jurisdictions and there is a
wide range of talent and skill and capacity at the local level,
on staff and of local elected officials. Some people can do
this very well and other people botch it completely. The folks
from Nevada sound like it is just wonderful, and I wish you
could replicate that all over the place.
And, of course, then everybody says, well, if they don't do
it right, then we want HUD to make them to do it right. Well,
HUD can't make them do it right; it doesn't have the power, the
authority, or the manpower to do that, or doesn't have the
ability to track everything that is going on.
One thought that folks have raised and that we have talked
about--that seems a little pie-in-the-sky, but now that we are
talking about it, I will raise it--is the idea of creating some
sort of alternative force at the local level that was funded by
HUD so that there would be money going directly to some
community entity whose job it was to basically monitor what
happened with Federal funds in that jurisdiction.
Do you spend your public housing dollars right? Do you
spend your vouchers right? Do you actually do what it is that
the Federal Government intends you to do with these? And to
actually have a monitoring and collaborative process that,
first of all, folks would know that there is somebody watching
and, second of all, there is somebody to elevate attention to
that from HUD officials if in fact that is warranted.
That is a pretty loose idea at this point, but it may be a
way of getting at the kind of dilemma that you have articulated
with local flexibility and then how do you make folks
accountable.
Mr. Turner. I just want to acknowledge that I think you
have made a very important point when you mentioned the
infrastructure expenditures. If there is a government function
that the government is going to do anyway, but yet they
sequester or shell game, if you will, the use of CDBG funds for
a function that doesn't really advance the low and moderate-
income community, you are going to diminish the effectiveness
of the program.
If there is something that you are going to pay for in
areas of your community that you don't have poverty, but you
use CDBG funds to do that in the area where you have poverty,
you are supplanting your own government functions with Federal
dollars that are intended to advance your impoverished areas;
to eliminate blight, to actually improve the conditions and not
just be a budgetary line item where you go to a pot of money to
let the Federal Government take responsibility for where you
are taking responsibility for the whole rest of the city.
Ms. Crowley. Right.
Mr. Turner. And I think that is a very important point. I
don't know exactly how to get to that, but I know that there is
a sense that does occur in some communities, and you have to
acknowledge that there are people who do have that concern
about CDBG moneys.
Ms. Crowley. I think a rule of thumb would be if you can
afford to put a tennis court in this neighborhood, you can
afford to put a tennis court in this neighborhood. I think you
look at where it is that has happened. Now, you know, what are
the unintended consequences of those kinds of rules? We would
have to think those through.
Mr. Turner. Right. I think it is very difficult to capture
from a policy perspective how you would address that. But that
is a criticism that you do hear of CDBG.
Does anyone else want to comment on this?
Ms. Patt-McDaniel. Congressman Turner, I would like to
respond to that, because I am also married to somebody who is
in local government, and I don't know very many local
governments right now who are operating at huge, huge
surpluses, or even slight surpluses.
And I am guessing that if you have a city--and I am trying
to think of one in Ohio--which might be considered to have some
nicer areas and some poorer areas, my guess is that a local
government has a menu of infrastructure or parks, a whole menu
of activities that they want to do, and they have resources.
They have their own GRF, they have CDBG, they may have some
State resources, but they have a variety of resources. But the
total of those resources doesn't add up to all the
infrastructure needs of that community.
So it only makes good management sense to match the
appropriate resource to the appropriate neighborhood so that if
you have CDBG, you are in desperate need of replacing the
sewer, which typically could be across the whole community, you
are going to use the CDBG funds where you could benefit the low
to moderate-income people and use the GRF in the areas where
they may not make the low to moderate-income standards.
And you may have some examples. I don't know of any
communities in Ohio who are just spending their GRF in the
richer areas of their community and using the CDBG because they
have GRF that is sitting there in a surplus and using the CDBG
to replace their infrastructure. And I am certainly not
questioning that could be the case, but if that was the case,
it was in the early 1990's, and certainly not now.
So I don't know that is a key problem with the expenditure
of CDBG funds, and I just wanted to comment on that.
Mr. Turner. Ms. Patt-McDaniel, you have done an excellent
job in responding to the complexity of the issue. I think it
was important that Ms. Crowley make that statement because it
is a concern that we do hear in communities where there is
citizen participation. And there is in every community citizen
participation with CDBG fund expenditure.
But during that process you do hear what Ms. Crowley said
in that process, that some people are concerned as to how those
funds are utilized with respect to general operating funds. And
you very well articulated that there is not a great surplus of
those sitting around, so a community is trying to balance all
its needs and resources.
But I do think the point-counterpoint, if you will, of the
issues that you two have just described was very important for
us to discuss, because it is something that you do hear in
community activist discussions about CDBG and its
effectiveness.
Mr. Schmitt or Mr. Downs, do you have anything you would
like to comment on that?
Mr. Schmitt. I would be more than happy to, Mr. Chairman.
In the State of Nevada, city of Sparks, we only have
basically two sources of revenues for local government:
property taxes and sales taxes. And I've given an example of
where taxes are generated and taxes are consumed. I have just
approved a new police beat, in fact, the first police beat for
a residential neighborhood of approximately 5,000 homes that
started in 1994, and we now have our first cop that is in that
area, because the need wasn't there, but it is homes of
$300,000 or $400,000.
And the majority of our funds are consumed in our lower-
income neighborhoods, both in street repair, sewer repairs,
police protection, fire protection, medical aid. So we already
are funding to a great extent a lot of our funds are going to
low-income and medium-income neighborhoods. So these funds are
only being used to help supplement those costs, when we are
already transferring revenues to those neighborhoods.
Thank you, Mr. Chair.
Mr. Turner. Mr. Downs.
Mr. Downs. It is possible to establish with better data
scorecards about how communities are actually spending their
funds by category and by type, over time, which is impossible
with the system right now. I am not sure that you need to
control them, but you can make their decisions and outcomes
more visible to the citzens of the communities, and even their
State, about how individual jurisdictions are handling it.
But the system has to be better than it is now, because you
can't even get to a scorecard about how communities are
defective or not about their expenditures. You could rank
communities by percent of administrative cost. You could rank
communities by how much of it they are putting into water and
sewer or roads. You could rank them by how much they are
putting into housing. You could do it by State, you could do it
by region. None of that is available now in this system.
Mr. Turner. I do not have any more questions, so I am going
to ask if any of you have any other additional comments that
you would like to place in the record as a result of the
questions or comments that you have heard.
Mr. Schmitt. Thank you very much, Mr. Chairman, and the
entire panel for their time and dedication to this issue. It is
a very important issue to our community and communities all
over the Nation. I thank you for it.
Mr. Downs. Thank you, Mr. Chairman.
Ms. Patt-McDaniel. Thank you. And I think an outcomes
framework will solve some of these problems and should be
pushed.
Ms. Crowley. Thank you for the invitation today.
Mr. Turner. Well, I want to thank you all. I know that you
have spent a tremendous amount of effort in preparing and time
out of your daily lives to be here. I want to thank also the
HUD for its participation in the earlier hearing.
As we know, CDBG has been a key component in making our
Nation's cities more viable. It has led to many triumphs cities
have had over poverty and community development need. We can
all agree the program provides vital funds to address urban
critical needs. I appreciate the additional information that
you have provided us as we look to the issue of the
effectiveness and preserving CDBG. I want to thank you.
And with that, we will be adjourned.
[Whereupon, at 12:40 p.m., the subcommittee was adjourned.]
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