SAN FRANCISCO -- America's cities are rebounding from decades of decline but still face serious challenges to reduce concentrations of poverty, create jobs and attract middle-class residents, according to a report released today by President Clinton at the U.S. Conference of Mayors meeting.

Vice President Al Gore called the State of the Cities report,(http://www.huduser.org/publications/hsgpolicy/tsoc/contents.html) which was produced by the Department of Housing and Urban Development at the President's request, "the most significant report on the condition of urban America in a generation."

Based on an analysis of Census data that produced new findings, the report concludes that the poverty and prosperity gap separating cities and suburbs remains disturbingly wide. It found that cities remain troubled by high unemployment, a high poverty rate that is leaving poor people socially and economically isolated, and the exodus of the middle class.

The State of the Cities outlines a seven-point agenda to reduce the city-suburb gap by increasing homeownership, creating new Empowerment Zones, helping people go from welfare to work, reducing crime, cleaning up the environment, creating educational opportunity, and ensuring more affordable housing in cities.

The report was prepared under the direction of HUD Secretary Andrew Cuomo to answer two questions posed to him by President Clinton: What is the state of America's cities? What more can the Administration do to prepare cities for the future?

"President Clinton has built an extraordinary record of achievement in his first term -- a strong economy, more jobs, lower unemployment, a falling crime rate -- that has benefitted cities across the nation," Cuomo said. "The State of the Cities report will help the President build on his achievements to implement a strong urban policy in his second term."

"This is a bold report that takes an honest look at the state of America's cities," Cuomo said. "Its conclusion: while the leadership of our nation's mayors -- combined with the Administration's economic empowerment agenda -- has lifted the prospects of America's cities, many still face real challenges."

The State of the Cities concludes that three major challenges face urban America:

"Over at least the past 25 years, a significant disparity has emerged in job creation between cities and suburbs -- and cities continue to lag." While suburban unemployment averaged only 4.5 percent, urban unemployment averaged 6.2 percent in 1996. Most new jobs are being created in suburbs rather than cities, and large cities actually lost jobs in the early 1990s. In addition, in the early 1990s 87 percent of new jobs in the lower-paying and lower-skilled retail and service sectors -- the type of jobs that help people move from welfare to work -- were created in suburbs.

"Over the past few decades, America's poor have grown more socially and economically isolated and more physically concentrated." The poverty rate in cities rose from 14.2 percent in 1970 to 21.5 percent in 1993, and then dropped slightly to 20.6 percent in 1995. In addition, the concentration of the poor in cities is increasing, with over 10 percent of city residents living in census tracts with a poverty rate of 40 percent or more. Such high poverty concentrations often make neighborhoods breeding grounds for problems like high rates of crime, drug abuse, teen pregnancy, and school failure.

"The long-term migration of the middle class from cities to suburbs continues into the 1990s." Only 11 of the 30 largest cities in 1970 have more people today than two decades ago, and population losses continue in some big cities. Many cities are losing middle-class and wealthier families, while suburbs are gaining these families.

The State of the Cities says that "America cannot afford to be divided into two nations -- one doing well in the suburbs, and the other marginalized in urban neighborhoods."

"Even those who live outside the urban core have a real stake in the future of cities," the report says. "The roots of America's metropolitan economies lie in the great cities; neither city nor suburb can successfully incubate a new industry unless the resources and infrastructure are strong across the whole region. Nor can suburbs, and their residents, truly isolate themselves from the effects of economic and social decay that affects so many large cities."

The report says that "the cornerstone of a renewed urban agenda is a reinvented and reinvigorated Department of Housing and Urban Development." Cuomo will announce a sweeping reform plan this summer for the Department.

"HUD's challenge now is to match good intentions with good implementation, to bring together compassion and competence and to prove to America that we can really make a difference for America's communities," the State of the Cities says.

The report's seven-point agenda for urban America builds on Clinton Administration programs -- some already enacted, some proposed earlier, and some new. The agenda calls for:

Making the city home: an Urban Homestead Initiative. While 72.1 percent of suburban families own their homes, only 49.8 percent of families in cities are homeowners. New HUD initiatives announced today to boost urban homeownership include: 1) A cut in the Federal Housing Administration mortgage insurance premium for first-time homebuyers in central cities, cutting the closing costs by $200 on the average FHA mortgage of $85,000. This comes on top of $1,200 in such cuts since President Clinton took office. 2) A new crime-fighting program to give police officers a 50 percent discount on the purchase of HUD-owned foreclosed homes in designated inner city areas. 3) A crackdown on housing discrimination, including the doubling of housing discrimination cases HUD refers to the Justice Department for prosecution over the next four years. 4) A commitment by Freddie Mac to help 1,000 to 2,000 working poor families buy homes, if legislation allowing use of HUD Section 8 rental vouchers for homeownership is approved. 5) An expansion of HUD's Homeownership Zone program. HUD will use an additional $10 million in grants to cities this year and has requested $50 million in fiscal 1998 to create large-scale single-family housing developments that can spur millions of dollars of local investment, helping to reinvigorate the nation's cities.

A second round of Empowerment Zones and Enterprise Communities in cities. President Clinton has proposed creating an additional 15 urban Empowerment Zones and 50 urban Enterprise Communities. The Budget Agreement says the program will be expanded. HUD designated six Empowerment Zones and 66 Enterprise Communities in 1994 to provide federal aid and tax incentives to revitalize distressed communities.

New tools for the welfare to work transition. These include a $3 billion fund to help cities and states help long- term welfare recipients find and keep jobs, and a new tax credit to give employers an incentive to hire long-term welfare recipients.

Making urban neighborhoods safe and crime-free. Initiatives include the Administration program that is putting 100,000 more police officers on the street, along with many programs backed by the President to crack down on gangs, crime and drugs. HUD's One Strike and You're Out policy is keeping criminals out of public housing and evicting many already there.

Cleaning up the urban environment. The Administration has launched a landmark effort to clean up and develop brownfields sites -- polluted former industrial and commercial properties. In many cases, the sites must be cleaned up before they can be used again for commercial purposes. Fifteen Federal agencies are working together to clean up and redevelop 5,000 properties, leveraging between $5 billion and $28 billion in private investment and creating and supporting 196,000 jobs. The 1998 Brownfield Action Agenda includes $125 million in Environmental Protection Agency funding for identifying and cleaning up pollution and $100 million in HUD economic development funding and $400 million in HUD loan guarantees over four years to redevelop brownfields after they are cleaned up.

Creating educational opportunity. Educational opportunity can help children climb out of urban poverty and into good jobs, homeownership and the middle class. The Budget Agreement includes the largest Federal investment in education and the largest single increase in college aid since the GI Bill in 1945.

Ensuring better and more affordable housing for the future. HUD is working to continue the historic reinvention of public housing to make it a stepping stone to self-sufficiency. The Department is also working to protect the supply of HUD- assisted affordable housing in the private market. The report says that the Public Housing Management Reform Act of 1997, proposed by the Administration, would make needed reforms to move ahead with the transformation of public housing that began in the President's first term. (The House has passed its own version of a public housing bill and another version is before the Senate. The Administration expects to work in conference committee to reach agreement on legislation that can be signed by the President).