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FEBRUARY 7, 1997
PRESIDENT CLINTON SUBMITS FY98 BUDGET, HUD COMES OUT OK, BUT HOME RECEIVES CUT AND CDBG SUFFERS SET-ASIDES
On February 6, the Clinton Administration sent to Congress its proposed FY98 budget proposal containing $1.688 trillion in spending and projected revenues of some $1.567 trillion, resulting in a deficit of $121 billion, which is down from this year's estimate of $126 trillion. The President's FY98 budget is part of an overall plan to eliminate the federal budget deficit by 2002, with the majority of it paid for through losses to the discretionary spending and Medicare over the next five years. The budget does though call for a $6.8 billion reduction in the defense budget outlays in the next year.
The President also laid out a tax cut package which will cost approximately $98.4 billion over the course of the next five years. Some of the elements of the tax cut proposal include: a tax credit for dependent children; incentives for education and training; brownfields tax incentives; a second round of Empowerment Zones and Enterprise Communities; a new targeted welfare-to-work tax credit; and, expansion of the Work Opportunity Tax Credit.
With tight budget ceilings for all domestic discretionary programs and Congress and the President intent on reducing the deficit, funding for housing and community development programs is at risk - in direct competition with other domestic programs and the budget cutting ax.
Despite this climate, HUD was successful in obtaining an increase of about $5.5 billion in overall HUD budget authority from $19.26 in FY97 to $24.75 in FY98 - more than a 25% increase in funding. However, this increase is essentially to help offset funding shortfalls in the Section 8 program, in which about 1.8 million
contracts, covering 4.4 million Americans are set to expire in FY98. Taking these budget constraints into account the HUD budget is essentially level with that of last years budget.
Within HUD, the Office of Community Planning and Development (CPD) yet again, survived without up front cuts to the baseline of CDBG and the Homeless Assistance Programs, but HOME received a 6.5% cut dropping the funding level from $1.4 billion to $1.309. The CDBG program also suffered losses through set-asides totalling $289.6 million, the same as last year.
Budget Background
It is important to note at this time, that prior to the release of
the President's budget there was a significant amount of jockeying that
occurred between HUD, the White House Office of Management and Budget (OMB),
and the White House itself over the FY98 numbers for the Department.
Late last fall Secretary Cisneros submitted to OMB a budget request of $32.4 billion for FY98, which included a $13.5 billion request for Section 8 contract renewals alone and essentially represented a level budget for the remainder of the Department's programs.
In turn, OMB reviewed the document and then released its FY98 budget, "pass- back" of $24.6 billion to HUD earlier this winter. The OMB "pass-back" included sharp cuts to nearly all of HUD's programs, block granting of public housing and Section 8 funds to states and entitlement communities and took some significant leaps into the area of policy making. Consequently, NCDA and several other national organizations representing state and local governments registered their deep concerns to the President and OMB over the contents of the pass-back.
The OMB proposal, which outraged many supporters of HUD's programs, called for consolidating all public housing programs, tenant-based Section 8 rental assistance, and project-based Section 8 into one "family housing assistance" block grant. It also provided that if states and local governments participate in the new block grant, they would receive significant incentives, such as: increased funding from the Low Income Housing Tax Credit Program and HOPE VI; funding increases to account for "local rent inflation"; and a waiver of certain regulations. If they do not participate, funding amounts would be frozen at current levels for at least the next five years.
OMB also recommended a cut CDBG of $130 million and HOME by $100 million - both of which represent a 5% baseline cut to the programs, with an additional 2 - 2.5% cut to the FY95 level of the programs due to additional set-asides (some of which were the same as in FY96 and FY97).
HUD vigorously appealed the OMB numbers in December and the decision then came down to the President. As you can see, although the President did not accept many of the OMB policy recommendations as well as the proposed cut to the CDBG program, the basic bottomline figure for the Department remained the same. This disconcerting trend is compounded further by the fact that the Department issued recommended budget figures for the out years from FY99 to FY2002 which included significant cuts to many of HUD's programs, such as the CDBG ($4.1 billion starting in FY2000) and HOME (a decrease to $1.1 billion in FY99 and $1.0 billion from FY2000 - FY2002) programs.
Summary of Some of the Key Elements of the FY98 HUD Budget Proposal
Community Development Block Grant - The budget proposes $4.6 billion for
the CDBG program, which will include: $50 million for the Economic Development
Initiative (EDI), $50 million for Homeownership Zones; $60 million for
Lead Hazard Control; $10 million for the Bridges-to-Work Program, a new
welfare reform assistance program; $10 million for Habitat for Humanity;
and, $10 million for the National Community Development Initiative; $67
million for Indian tribes; and, $32.6 for Section 107 Special Purpose Grants.
NCDA is also seeking clarification over the a reference in the narrative of the HUD Budget document, which states, "HUD's economic development programs (EDI, Section 108 and CDBG) generate jobs, which can be targeted to those leaving welfare for work." The Association has requested an explanation from HUD as to whether or not the Department is proposing increased targeting of CDBG funds or merely referring to one of the possible uses locally.
While NCDA appreciates President Clinton's effort to maintain "level funding" for the CDBG program, despite efforts from within the Administration to cut the program, we continue to strongly oppose the use of CDBG set-asides to fund new initiatives and existing Administration favorites. These programs should be funded separately as the Administration has done with the Youthbuild program and not included as set-asides thereby decreasing the overall funding for entitlement communities.
Section 108 Loan Guarantee Program - HUD has proposed $1.3 billion in loan guarantee authority in FY98. This program finances acquisition of real property, rehabilitation of publicly owned real property and economic development activities and has been heavily marketed by HUD over the past several years. The program is currently undergoing some potentially significant change as Price Waterhouse and HUD finalize new underwriting guidelines for the program.
Home Investment Partnerships (HOME) Program - The HUD budget proposes a 6.5% reduction in the HOME program, which has been touted over the past year as one of the Department's greatest success stories and was heralded by Secretary Andrew Cuomo during his confirmation hearings. Although a portion of the $91 million cut from HOME will be used to fund the Native American Housing Block Grant and therefore Indian funds will no longer be taken off the top of the HOME program, (this amount was previously approximately $21 million in previous years), there still remains, at best a 5% cut to the program. On a more positive note, HOME was also spared from set-asides in FY98, no longer funding the Housing Counseling program as it did in FY97.
Homeless Programs - HUD is seeking a total of $823 million, which is level with the past two years, in aid to help combat homelessness. As the budgets have since FY95, the current document includes the reorganization of the McKinney Homeless Assistance programs into a local "Continuum-of-Care" approach to homeless intervention.
HOPWA - The Homeless Fund does not include funding for Housing Opportunities for Persons with AIDS (HOPWA). The Department is requesting nearly a 20% increase in funding for the program from $171 million in FY97 to $204 million.
Additional CPD Initiatives - The Department also intends to fund the Youthbuild Program separately at $30 million. HUD will initiate a second round competition of Empowerment Zones and Enterprise Communities with $100 million in FY98. This $100 million in funding represents only one part of the Clinton Administration's $2 billion commitment to support EZ/ECs. The Administration's goal is to create 20 new Empowerment Zones and 80 new Enterprise Communities. In addition, as part of the President's Brownfields Initiative, announced last year, HUD will provide $25 million in competitive economic development grants to communities to redevelop contaminated brownfields after they are cleaned up.
Public Housing Operating Fund - The budget calls for $2.5 billion for public housing operating subsidies, up slightly from the figures in FY97, but no where near recouping the loss in funding the system has experienced over the past several years.
Public Housing Capital Fund - HUD requested $2.9 billion for the public housing development and modernization fund.
Housing Certificate Fund - $594 million was requested to fund 50,000 new incremental rental certificates to enable housing authorities to work with their community partners to make welfare reform work. HUD is continued to request and been denied new incremental certificates over the past several years, but is optimistic this year due to the connection to welfare reform.
Preservation - The Department is not recommending funding for this program in FY98 and has not done so since FY95.
HOPE VI - The FY98 Budget requests $524 million for the HOPE VI program to revitalize severely distressed budget housing. Out of the total, $421 million in HOPE VI funds would pay for the demolition, site restoration, and on- and off- site replacement of obsolete public housing units. The remaining $103 million would pay for Section 8 rental certificates to relocate 10,000 families whose units are scheduled for demolition.
Section 202 and Section 811 Elderly and Disabled Programs - $474 million total, breaking down to $300 million for Elderly (202) and $174 million for Disabled (811). This is a severe cut of more than 45% to these programs from the FY97 figures which were down from those in FY96. There is likely to be heated debate over these figures for these politically charged programs.
Section 8 Contract Renewals - In FY98, HUD proposes to renew expiring Section 8 contracts on 1.8 million units that house 4.4 million low income people. The Section 8 renewal crisis is occurring in large part, because 15 and 20-year subsidy contracts are just now beginning to expire for the first time, while shorter- term contracts are also up for re-renewal. Within a decade, virtually all of HUD's roughly three million Section 8 project- and tenant-based contracts will be converted to 1-year terms.
The most critical affordable housing issue facing the Department this year was the need to renew the expiring contracts. Therefore, HUD's budget contains $9.2 billion in budget authority to renew for one year all subsidy contracts that will expire in FY98. The FY98 budget also requests sufficient budget authority to renew all Section 8 contracts that expire between FY99 and FY2002. The FY98 request for renewals is up from $3.55 billion in FY97. By implementing a series of tough reforms, HUD will be able to keep future spending in check.
Next Steps
Submission of the budget officially opens the debate on Capitol Hill.
Ultimately, Congress will determine whether new programs will be funded
and existing programs maintained or cut. Supporters of HUD programs are
hopeful that the warm response that Andrew Cuomo received during his confirmation
hearings foreshadows a more favorable response to HUD's budget. However
there are still many members on Capitol Hill that are still interested
in eliminating the Department and devolving support for its programs. NCDA
will keep you informed as the budget process proceeds forward. Please note
the enclosed HUD comparison chart of the FY98 and FY97 budget request.
CUOMO CONFIRMED - ASSUMES ROLE AS HUD SECRETARY
The Senate voted 99-0 on January 29 to confirm Andrew Cuomo as the new secretary of the Department of Housing and Urban Development. Cuomo received no opposition following a solid recommendation from the Senate Banking, Housing and Urban Affairs Committee. After being nominated, Cuomo received strong support from Vice-President Gore; Senate Banking Committee chairman Senator Alfonse D'Amato (R-NY); his predecessor at HUD, Henry Cisneros; and housing and community development groups from around the country. Later, that same day Andrew Cuomo was officially sworn in as Secretary.
Earlier at his hearing before the Senate Banking Committee, Cuomo indicated that he would work to reduce the cost of HUD's programs, but would also strive to meet the needs of the poor and homeless. He also defended HUD's primary mission and praised efforts to shift housing decisions to states and localities.
There has been no further word on the appointment of Assistant Secretaries, however indications at this time are that Assistant Secretary Nicolas Retsinas (Housing and FHA), Michael Stegman (Policy Development and Research), and Kevin Marchman (Acting Assistant Secretary for Public and Indian Housing) will be remaining. The Assistant Secretary for Community Planning and Development (CPD) has not yet been named.
CPD'S 1996 ANNUAL REPORT TO CONGRESS NOW AVAILABLE
The 1996 Consolidated Annual Report for HUD's Community Development Programs entitled, "Government's Working: Neighborhood by Neighborhood - Block by Block" is now available. The document, which is the culmination of various grantee reporting mechanisms, covers the most recent activity of the CDBG, HOME and Homeless Assistance programs, as well as several other CPD programs.
Some of the most noteworthy statistics include:
CDBG
Between FY93 and FY96, HUD's Community Planning and Development's Economic
Development Investments created or retained 1.4 million jobs. In FY93,
866 entitlement grantees in the program (733 Metropolitan Cities and 133
Urban Counties). Overall, between 14-17 million households benefitted from
the CDBG program.
HOME
The report also noted that this year CPD's Community Connections/Consolidated Plan was named by Harvard University's John F. Kennedy School of Government a 1996 winner of the prestigious Innovations in American Government Award, a competition that drew 1,550 entries from all levels of government. Harvard cited Community Connections as a model of enhanced government accountability and responsiveness.
Call 1-800-998-999 for additional copies of the Annual Report and appendices. Both are also available on HUD's home page at http://www.hud.gov.
HUD ANNOUNCES EDI AND CIIC AWARDS SEPARATELY FROM HOMEOWNERSHIP ZONES
While communities still await the announcement of the Homeownership Zones, which Secretary Andrew Cuomo indicate will occur in the next few weeks, the publication of the EDI awards were made in late December, with very little fanfare. HUD awarded $20 million in grants and Section 108 loan guarantees through HUD's economic development initiative (EDI) that was initially announced on July 11, 1996.
The original Notice of Funding Availability (NOFA) made available $50 million in grants for the Homeownership Zone program and the Economic Development Initiative (EDI), however in September the notice was amended to establish that $30 million of the original $50 million would be designated for Homeownership Zones, while the remaining $20 million would fund Community and Individual Investment Corporations (CIICs) and all other eligible EDI projects.
$11.5 million in EDI grants and $40.7 million in Section 108 loan guarantees were awarded to: Riverside, CA ($975,000 in EDI funds) for retail downtown development; Atlanta, GA ($1.25 million) to complete improvements in mixed-use housing; Quincy, MA ($1 million) to renovate historic shipyard; Somerville, MA ($1 million), to redevelop industrial and commercial sites; Portland, OR ($2.25 million) to rehabilitate a warehouse; Islip, NY ($1 million) for acquisition and rehabilitation of the Bay Shore Mini Center; Detroit, MI ($3 million) to finance and renovate a historic building for hotel and conference center activities; and, Fort Worth, TX ($1 million) to provide infrastructure improvements to retail center.
$8.5 million in EDI funds and $11.5 million in Section 108 loan guarantees were provided to three community empowerment banks as part of a new program to foster the creation of community-oriented financial institutions dedicated to economic development. The recipients are: Community First Bank, Washington, DC ($3.5 million in EDI funds); The Baltimore Community Empowerment Bank, Baltimore, MD ($1.5 million); and, the Mid-Delta Bank, serving a number of communities in Mississippi.
HUD ISSUES FISCAL YEAR 1997 PORTFOLIO REENGINEERING GUIDELINES
On January 23, 1997, HUD issued in the Federal Register a notice providing initial guidelines to implement the Demonstration Program authorized in the FY 1997 HUD/VA Appropriations. The demonstration program continues to be targeted at FHA-insured multifamily projects that have project-based Section 8 contracts with above market rents. The Demonstration is intended to explore the options for restructuring mortgages and taking other related actions in order to reduce the risk to the FHA insurance fund and lower subsidy costs while preserving housing affordability and availability.
The guidelines indicate that in order for an owner to participate in the demonstration, each owner would have to submit to HUD their intent to participate in writing. HUD would then return a Restructuring Commitment and subsequently, the owners would have to supply underwriting documents, modifications to proposed Restructuring Commitments and information relating to any appeal of a Restructuring Commitment. The owner must also notify tenants, units of general local government, and in some cases, lenders at key points in the process.
The guidelines provide information including: an overview of the goals of the Demonstration program; procedures which owners seeking to participate will be required to follow; explains HUD processing; guidance relating to the anticipated use of designees; guidance on alternative processing by lenders making new loans and by mortgagees or loan servicers where the existing FHA insured loan is retained; and guidance on the participation of projects with post FY97 expirations.
For a copy of this Notice, please contact NCDA at (202) 293-7587.
HUD CLARIFIES FINAL RULE ON LEAD-BASED PAINT COMPLIANCE
HUD and the EPA have clarified the final rule regarding disclosure of lead based paint in housing by indicating that only contracts or leases signed on or after the effective date of the regulation are subject to the rule. For owners of more than four residential units, the regulation went into effect on September 6, 1996 and for owners of one to four units, the effective date was December 6, 1996.
For a copy of the clarification document, "Guidance on the Lead-Based Paint Disclosure Rule: Part II", please call HUD at 1-800-424-5323.
MAYORS LAY OUT PRIORITIES AT WINTER MEETING - CDBG, HOME AND PUBLIC HOUSING IN TOP EIGHT
During the U.S. Conference of Mayors Winter Meeting, Mayors laid out their top priorities for 1997-1998 and they include an on-going commitment to the Community Development Block Grant (CDBG) and HOME programs. They noted that "these are two of the most successful housing and community development programs in the federal-city partnership and are critically needed to continue the revitalization of our nation's cities."
The Mayors also registered their concern with the significant cuts experienced over the past several years in operating subsidies and modernization for public housing and the on-going reductions to the Department of Labor's job training programs.
Brownfields and the provision of funding for tax incentives, clean-up and redevelopment as well as support for liability reforms was number one on the list of mayoral priorities for the coming year. The Mayors were supportive of the President's $300 million in EPA grants awarded to cities last August and have encouraged the President to do more.
Additional priorities included, welfare reform and the Welfare-to-Work Initiative which is a proposed program targeted to the top 100-150 localities with the highest incidence of hard-to-place welfare recipients. While the Mayors are supportive of the concept there is concern regarding the structure of the initiative.
NCDA continues to work closely with the U.S. Conference of Mayors in the formulation and pursuit of their priorities.
CRA INFORMATION AND QUESTIONS AND ANSWERS AVAILABLE
The Federal Financial Institutions Examination Council recently issued on behalf of the Federal Reserve System and other federal banking supervisors, answers to frequently asked questions about the Community Reinvestment Act (CRA). Some of the questions addressed include:
Are community development activities limited to those that promote economic development?
Must a community development activity occur inside a low- or moderate-income area in order for an institution to receive CRA consideration for the activity?
What are examples of community development loans and/or community development services? and,
What are examples of qualified investments?
The Office of the Comptroller of the Currency has also issued several other information documents regarding CRA and they include:
"New Opportunities to Excel: Outstanding CRA Actions for Community Banks" - December 1996 - a pamphlet which discusses some activities undertaken by small national banks that demonstrate exemplary performance under the CRA.
"Side-by-Side Comparison of Community Organization Concerns and OCC Response" - a response to concerns from community organizations regarding the impact of the most recent CRA regulations.
Advisory letter to national banks regarding the Home Mortgage Disclosure Act (HMDA) data reporting.
For copies of any and all of these CRA items contact NCDA, (202) 293-7587.
IDIS QUESTIONS ANSWERED DURING NCDA WINTER MEETING
At a session held at the NCDA Winter Meeting, entitled, "IDIS Working Session", conference participants heard from Ed Winkler and Lincoln Burruss, of HUD's Data Systems and Statistics Division, regarding the latest "fixes and enhancements" to IDIS. Some of these include:
HUD staff provided copies of the latest "fixes and enhancements," as well as the most recent addition of IDIS "Live" the information system newsletter. Copies of these materials are available by contacting NCDA.
Mr. Winkler and Mr. Burruss were joined in the session by several practitioners, which included: Steve Gartrell, Newton, MA; Steve Young, Modesto, CA; Jim Allen, Louisville, KY (on-line and drawing down); Tom McCloskey, Fall River, MA; and, Johnny Beatty, Beaumont, TX (on-line and drawing down) who described their experiences with the information system thus far and fielded questions from the audience. Some of the insights uncovered in the session included the information provided by Steve Gartrell that IDIS can be made compatible with Windows 95, it just requires some effort.
Attendees requested additional training on the system, now that it is up and running and Ed Winkler indicated that such training will be available within the next several months and will include both basic training for those who are still just beginning to work with the system and advanced training for those who are up and running and trying to trouble-shoot local situations. NCDA is continuing to work with HUD and other national organizations representing local community development and housing administrators to modify the system and provide as much useful information regarding its implementation. Stay tuned for further IDIS updates in the NCDA Washington Report.
ONLY SIX WEEKS LEFT UNTIL NATIONAL COMMUNITY DEVELOPMENT WEEK '97 !!
National Community Development week is coming soon. The cut-off to order CD Week T-shirts if March 10 so order soon. A packet of materials for CD Week was provided for you in the December 18 edition of the NCDA Washington Report if you did not receive these materials please contact NCDA as soon as possible (also note the Poster/Postcard/T-Shirt Order Form included in this mailing). Be sure to participate in this important national effort and make NCDA aware of your involvement by filling out your commitment form.
FEDERAL REGISTER NOTICES
Final Rule: Sale of HUD-Held Single Family Mortgages - FR 62 3765 -3770, 1/24/97 - The final rule from the interim rule that HUD published on August 31, 1996 regarding the sale of HUD-held single-family mortgage loans. Effective March 25, 1997.
HUD PUBLICATIONS AND NOTICES
Procurement of Consulting Services by Community Development Block Grant (CDBG) Recipients, HOME Participating Jurisdictions and Subrecipients - CPD 96-05 - Provides information and guidance to CDBG program participants, HOME participating jurisdictions and subrecipients on the procedures that should be followed for procurement.
HUD-CPD Best Practices: Spotlighting What Works: A Showcase of Community Planning Successes in the Field - Issue No. 12, January 6, 1997 - "Communities Ranked on Performance: Comparison Helps Determine Best Use of Scarce Resources."
HUD-CPD Best Practices: Spotlighting What Works: A Showcase of Community Planning Successes in the Field - Issue No. 11, December 17, 1996 - "Action Planning Gets Results: More Bang for the Buck With Action Plan Reviews and Assessments."
HUD-CPD Best Practices: Spotlighting What Works: A Showcase of Community Planning Successes in the Field - October 28, 1996 - "The HUD Consultation: In Theory, and in Practice."
HUD-CPD Best Practices: Spotlighting What Works: A Showcase of Community Planning Successes in the Field - July 19, 1996 - "Back to the Future: Field Directors Revisit the Past, Paving Way for Continued CPD Success."
IDIS "LIVE" - Issue No. 4, February 7, 1997 - Includes step-by-step instructions on downloading and printing reports in IDIS. Tips for using the Subgrant Menu in IDIS and instructions on creating a template to format IDIS reports.
NCDA AND PUBLIC INTEREST GROUP PUBLICATIONS
How to Work With Congress: A Public Information Handbook on the Congressional Legislative Process - January 1997 - Includes updated listing of key committee members for the 105th Congress.
"A Status Report on Hunger and Homelessness in America's Cities: 1996" - For copies contact the U.S. Conference of Mayors, (202) 293-7330.
