CONGRESS GOES HOME -- PRESIDENT SIGNS BUDGET AND TAX BILLS

On July 30, before leaving Washington for the Labor Day Recess, Congress completed action on the Budget Reconciliation Bills and forwarded them to President Clinton for his signature. The bipartisan accord provides for a balanced budget by the year 2002 while cutting taxes by $95 billion over the next five years and increasing spending for several social programs.

The major thrust of H.R. 2015, the spending measure, and H.R. 2014, the tax bill, is to provide a child care tax credit, an education tax credit and relief from capital gains on investment, while changing the rules of Medicare to slow down its growth and increase spending on children's health insurance.

Among other provisions, the reconciliation package contains several elements that could directly benefit communities. These are: Creating a second round of Empowerment Zones and Enterprise Communities in 15 cities and 5 rural areas. The bill revised the tax incentives for the new EZ/EC's, allowing for special expensing for business assets and private-activity bonds.

Providing $1.5 billion in tax relief for brownfields cleanup to be available for three years.

Reduces the annual adjustment for Section 8 assisted housing projects where the rents are in excess of local fair market rents. The legislation also reduces the annual adjustment for those housing units where there has been no housing turnover.

Creation of a $3 billion program of mandatory spending for welfare-to-work activities, targeted to communities with the highest populations of "harder-to-serve" individuals. It is still uncertain as to whether or not this program will be operated through the Department of Labor or Health and Human Services and/or whether funds will go directly to localities or through the states. (For more details see the NCDA Washington Report, 7/24/97.)

In commenting on these provisions, HUD Secretary Andrew Cuomo stated, "President Clinton has won a victory for millions of families living in inner cities. The President will now be able to continue his work of revitalizing our cities and preserving affordable housing."

President Clinton signed the companion bills in a White House ceremony August 3. His signature culminates a process that began in May when a framework for a balanced budget was agreed upon by the President and Congressional Republicans.

It remains unclear at this time if President Clinton will utilize the line item veto provision to nullify some 79 items in PL 105-130 that he finds objectionable, The President has five days to announce his intentions to veto any of the elements contained in the tax bill. The only item under discussion for a veto in the spending bill is a tax issue. If the President does use his newly given powers, Congress would still have to maintain a two-thirds majority to override the veto and retain any of the overturned provisions.

The Senate will return on September 2 and the House of Representatives on September 3, when they will continue action on the FY98 spending bills, seven of which are ready for action by House-Senate Conference once conferees are named.

APPROPRIATIONS NOTE: In the NCDA Washington Report, 7/24/97, members were urged to contact their Representatives and Senators while they are home for recess regarding the proliferation of set-asides in the CDBG program. We are reigniting that CALL TO ACTION and asking members to contact your congressional delegation and remind them as to the losses locally that these "hidden cuts" incur. Also please note that there was an error in the set-aside table published on 7/24 in the Senate FY98 column. The previous chart indicated $20 million for the National Community Development Initiative (NCDI) when in fact the Senate appropriated $30 million. This correction is noted in the updated chart below.

CDBG Set-Asides Historical Breakdown

HOUSE APPROPRIATIONS MEASURE CONTAINS BAN ON SAMPLING IN THE 2000 CENSUS

Immediately upon their return the House is scheduled to begin consideration of the FY98 Commerce, Justice, State and Judiciary Appropriations bill which contains language that would ban the use of sampling and possibly shut down Census preparation activities. The language in the bill currently prohibits the Census Bureau from spending funds on sampling and three-quarters of the funds for census activities would be withheld until Congress passes legislation directing how the census should be taken in the year 2000.

Representative Alan Mollohan (D-WV) is proposing to offer an amendment to strike the "anti-sampling" language, but passage will be difficult. He offered the same amendment before the House Appropriations Committee on July 22 and was defeated by a vote of 33-25 along party lines. This will be a critical vote on the sampling issue, which has become rather partisan and contentious, and the President has already discussed the possibility of a veto of the bill if the "anti-sampling" language is retained.

Sampling is the statistical method that the Census Bureau plans to use to account for individuals who do not respond to the census questionnaire, phone calls or follow-up site visits. If sampling is not used, many individuals residing in communities across the nation are likely to go uncounted. As a result, many cities will be undercounted and will not receive the amount of funds that they otherwise would be entitled to for a variety of programs including, CDBG, HOME and others. In addition, sampling also collects poverty data that is also used in the calculation of the CDBG and HOME program formulas, thereby rendering those formulas useless.

The U.S. Conference of Mayors and other major public interest groups have begun to rally against the "anti-sampling" language and in favor of the Mollohan amendment. Mayors have been contacted and asked to weigh in on the issue. NCDA is requesting that the membership also register their support for the Mollohan amendment and census sampling in general. This is a very important issue that will affect all communities. For a copy of the a sample letter call NCDA.

CONGRESS INTRODUCES ADMINISTRATION'S PROPOSAL TO CONSOLIDATE PROGRAMS FOR THE HOMELESS

In late July both the House and Senate introduced versions of a HUD proposal that would consolidate seven homeless programs established by the McKinney Act into a single, formula-based performance fund. The measures, H.R. 2307, introduced by U.S. Representative Joseph Kennedy (D-MA) and S. 1071, introduced by Senator Alfonse D'Amato (R-NY), echo the consolidation theme reflected in an existing measure introduced by House Banking Chairman Rick Lazio (R-NY) earlier this spring. Lazio's measure, H.R. 217, also consolidates the same seven homeless programs, but differs from the Administration's bills in several key ways, including:

• H.R. 217 creates two funding sources: the competitive-based Permanent Housing Development program and the formula-based Flexible Block Grant program, while the Administration's proposal consolidates all the programs into a single formula-based block grant.
  
• H.R. 217 is more prescriptive in limiting activities such as emergency shelter assistance and supportive housing activities to a certain percentage of the funds. For instance, H.R. 217 invokes a 30 percent cap on supportive services — which ultimately decreases to 15 percent after 4 years — and limits emergency shelter assistance to 10 percent of the total grant. The Administration's plan does not contain such limitations.
  
• Unlike H.R. 217, the Administration's proposal contains a provision allowing the Secretary to transfer excess HAPF funds to a recipient's CDBG or HOME allocations should the unit of general local government make substantial progress in reducing the number of homeless individuals.
  
• Both measures require a 50 percent match, but under H.R. 217, no match is required if the grant is below $100,000. In the Administration's proposal, match dollars can be derived from any source other than from assistance under this program, including the value of any lease on a building as well as any salary paid to staff or any volunteer labor contributed to carry out the program. H.R. 217 contains similar match provisions but does not include volunteer labor. Both allow a waiver of match for fiscal distress.
  
• Both measures require that 50 percent of the grant amount be made available to private non-profit organizations. Unlike H.R. 217, however, the Administration's proposal allows a waiver of this provision if the recipient demonstrates that the requirement interferes with its ability to provide assistance under this program.
  
• The Administration's proposal allows 10 percent of any grant amounts to be used for administration, 5 percent for a state that chooses not to administer its own programs and, instead, only distributes HUD funds. H.R. 217 allows 5 percent administration across the board.

Should Congress progress with homeless consolidation legislation, it will most likely consider Senator D'Amato's measure and Congressman Lazio's measure and work out a compromise between the two. It is unlikely that either measure will move during this session, however, as public housing legislation and mark-to-market legislation will take precedence.

EMPLOYMENT AND TRAINING PROGRAM UPDATE

Appropriations
As noted in the NCDA Washington Report, 7/24/97 the House Appropriations Committee completed action on the FY98 budget for the Department of Labor, providing a total of $10.8 billion, a nearly $600 million increase over last years allocation. The budget for Training and Employment Services increased by $447 million over FY97 levels, with the increases seen in the adult training, dislocated workers and Job Corps programs. (See the chart below for details)

The House also provided $100 million for the new Opportunity Areas for Youth Advance or Out-of- School Youth program, which would be closely linked to the Empowerment Zone and Enterprise Communities programs.

Meanwhile, in the Senate Labor, Health and Human Services, Education Appropriations Subcommittee the FY98 appropriations bill provided an additional $491 million for the Department of Labor overall for a total of $10.741 billion, while the Training and Employment Services programs received a $544 million boost. However, the increases in the area of employment and training, contrary to their counterparts in the House, are found in the dislocated workers, Job Corps and out-of-school youth programs. The Senate funding subcommittee allocated $250 million for the new Opportunity Areas for Youth Advance, out funding the House by $150 million.

When Congress returns in the fall the House will take up action on the measure on the floor, while the Senate bill will move to the full Senate Appropriations Committee for approval.

FY98 Appropriations Summary for Employment and Training Services

Authorization
In May the House passed the "Employment, Training and Literacy Enhancement Act of 1997", H.R. 1385, by a narrow margin. H.R. 1385 is designed to consolidate and amend the existing programs established under the Job Training Partnership Act (JTPA), the Adult Education Act and the Wagner- Peyser Act. Overall, the bill consolidated over 50 employment, training and literacy programs into three block grants to the States - an Adult Employment and Training Opportunities Grant, a Disadvantaged Youth Employment and Training Opportunitites Grant, and an Adult Education and Literacy Grant. In addition, the bill would amend the Wagner-Peyser Act to allow States more flexibility to integrate these employment services under the Adult Training grant.

At the national level, the Secretary of Labor would oversee the employment and training programs and the Secretary of Education would oversee the adult education and literacy programs. At the state level, the governor, through a collaborative process, would bring together various representatives including business, locally elected officials, education and parents to develop a single state plan, providing for a three year strategy and policy guidance with respect to the statewide system. Through the collaborative process, local workforce development areas within the state would be established, taking into consideration certain factors. Any unit of general local government with a population of 500,000 or more could request to be automatically designated as a workforce development area.

At the local level, local workforce development boards would be established in each workforce development area. The chief elected official would appoint the members of the board, requiring the majority of representatives come from business and industry. Each local board, in partnership with the chief elected official, would develop and submit to the Governor for approval, a comprehensive three year strategic local plan. Among other duties, the board would designate the administrative entity to receive and disburse funds.

Title II of the act would amend JTPA by merging the existing summer youth employment and year-round programs into a single block grant for Disadvantaged Youth. The bill would only serve economically disadvantaged youth, except as under current law, under which 10 percent of the funds must be used to serve youth who are not economically disadvantaged but have substantial barriers to employment. Also, priority will be given to drop-outs and other hard-to-serve youth.

Seventy-five percent of the Title II funds allocated would go to the local level by federal formula. Seventy percent of the 75 percent would go down to the local level by existing JTPA formula while the remaining 30 percent would be discretionary, decided through the collaborative process. The Senate is scheduled to take up similar consolidation legislation this fall. However, if the debate follows the pattern of last year passage of new employment and training legislation is a long way off.

ECONOMIC DEVELOPMENT ADMINISTRATION (EDA) -- HOUSE AND SENATE FUNDING PROPOSALS VASTLY DIFFERENT

During the recent appropriation debates the Economic Development Administration (EDA) has received vastly different FY98 funding proposals from the House and the Senate. While the House provided a three percent increase for EDA over FY97, the Senate Appropriations Committee slashed the agency's budget by nearly 22 percent.

On July 22 the House Appropriations Committee passed a Commerce, Justice and State funding bill that provided $361 million in FY98 for EDA, however in the previous week the Senate Appropriations Committee approved a budget of only $272 million for the Administration. While the Senate severely reduced the funding for public works grants ($87.2 million) and planning assistance ($19.6 million) it funded economic adjustment grants at $63.7 million well above current year funding ($31.2 million) and the House approved level ($29.9 million). Both the House and the Senate proposed cuts to defense conversion activities, to levels of $89 and $70 million respectively, with trade adjustment assistance consistent in both bills at $9.5 million.

Floor action is required on both of these bills once Congress returns from recess in September and these substantial differences will be left to the House-Senate conferees to reconcile.

This funding activity is occurring just as a major evaluation of the Economic Development Administration's (EDA's) public works program, conducted by a team from Rutgers University, New Jersey Institute of Technology, Columbia University, Princeton University and the National Association of Regional Councils in cooperation with the University of Cincinnati, has reached completion.

The study has found the program to work well, leveraging $11 from the private and public sectors to every EDA dollar. Release of this study is also timely as EDA is also presently undergoing reauthorization proceedings as well. It is expected that both reauthorization and appropriation activity will continue throughout the fall.

EFFORTS TO EXTEND CRA TO NONBANK INSTITUTIONS MEETS WITH OPPOSITION

Efforts were recently undertaken by Representative Maxine Waters (D-CA) and Joseph Kennedy (D- MA) to extend the Community Reinvestment Act (CRA) to nonbank institutions affiliated with bank holding companies, however the House Banking Committee voted it down 28-26.

Although these efforts, which were undertaken during the markup of H.R. 10, financial institutions reform legislation, did not directly succeed they did inspire several "pro-CRA" provisions in the bill. These include: application of CRA to a new category of wholesale financial institution created by the legislation; creation of an advisory council on community revitalization to analyze the enhancement of insurance and securities activities; and, amend the Federal Home Loan Bank to allow smaller banks greater access to new opportunities for small business and low-income community development lending.

The House will proceed further on H.R. 10 throughout the fall, although it is uncertain as to whether or not the momentum for the legislation will carry it though.

COMMUNITY REVITALIZATION LEGISLATION NOT LIKELY THIS YEAR, BUT STRONG EFFORTS UNDERWAY NONETHELESS

Over the past year several pieces of "community revitalization" legislation have been introduced and considered by Congress. While passage of these bills are not likely this year, it is valuable to maintain

support for these measures and increase the chances for their inclusion in the FY99 budget talks. Some of the key "community revitalization" bills include:

Community Revitalization Tax Credit (CRTC), H.R. 465/S.411 - introduced by Senator Kay Bailey Hutchinson (R-TX) and Representative Phil English (R-PA), the measure now has 25 co-sponsors in the House and 7 in the Senate. The CRTC would provide a tax credit for up to 20 percent of the cost of renovation of 5 percent a year for 10 years for renovation and rehabilitation of qualified, non-residential buildings among many other tax and grant incentives to defray the cost of new construction, expansion, or rehabilitation of commercial structures located in designated economically distressed areas thereby reducing the risk to investors. The bill received significant support in the last Congress, but has not moved forward in the 105th. Efforts are underway to move the bill through other vehicles, such as the additional bills listed below.

American Community Renewal Act, H.R. 1031/S.432 - co-sponsored by Representatives Jim Talent (R- MO); J.C. Watts (R-OK); Floyd Flake (D-NY) and Senators Spencer Abraham (R-MI) and Joe Lieberman (D-CT). This initiative addresses community renewal in a comprehensive manner allowing up to 100 "renewal communities" to be established on a competitive basis. The renewal communities would receive tax benefits such as the Commercial Revitalization Tax Credit (CRTC). H.R. 1031 and S.432 have a significant amount of support among the leadership and have received positive publicity.

The Historically Underutilized Business Zone (HUBZone Act), S. 208 - Introduced by Senator Christopher (Kit) Bond (R-MO) seeks to revitalize distressed areas by offering federal contract preferences to small businesses locating in HUBZones, otherwise known as underutilized business zones in inner cities. The Senate Small Business Committee has passed the bill and it now awaits approval on the Senate floor.

Historic Homeownership Assistance Act, H.R. 1134/S. 496 - sponsored by Representative Clay Shaw (R-FL) and Senator John Chafee (R-RI) provides a 20% credit for costs incurred from the rehabilitation of certified historic homes.

NCDA will continue to keep an eye on these bills and monitor their progress and potential for passage.

FUNDING FOR RURAL HOUSING PROGRAM, SECTION 515, COMPLETED IN HOUSE AND SENATE

Both the Senate and the House Appropriations Committees have approved $128.6 million in FY98 for the Section 515 rural rental housing program. This level of funding is 19 percent less than the $153.2 million appropriation for the program in FY97.

The Senate and the House also provided $1.2 million in budget authority for the Section 538 multifamily loan guarantee program, while the rural rental assistance only received $493.9 million from the House and $541.4 from the Senate. The Senate bill also extends loan authority for the Section 515 and 538 programs through FY98 but reduces the term for 515 loans to 30 years versus the previous 50-year amortization period.

The Senate bill also provides $32.2 million for rural empowerment zones and enterprise communities, while the House only called for $20.55 million. Final action by the Senate and then House-Senate conference is scheduled to occur in September.

HOME SPENDING UPDATE

The latest commitment and expenditures figures on the HOME program, dated June 30, 1997, illustrate the remarkable progress of the HOME program. As Congress continues to scrutinize HUD programs, figures in the report are key to the continuation and longevity of the program. Importantly, Congress is taking notice, as HOME continues to be one of the few domestic programs unaffected by budget cuts.

According to the report, participating jurisdictions (PJs) committed approximately 98.4 percent of FY94 funds and 92.6 percent of FY95 funds. Thus far, 49.3 percent of FY96 funds have been committed. Of the committed funds, PJs have disbursed 70.9 percent of FY94 funds, 45.7 percent of FY95 funds and 11.8 percent of FY96 funds.

Most HOME funding activities are taking place in the area of rental housing (58.7 percent), followed by assistance to existing homeowners (21.4 percent) and, finally, by first-time homebuyer projects (19.9 percent). These numbers illustrate that the original goals of the HOME program are being met.

The greatest amount of activity being funded by HOME dollars continues to be rehabilitation, as more than half the funds committed (57.2 percent) are going toward this purpose. New construction (29.8 percent) continues to command the second highest figure, while acquisition (10 percent) and TBRA (3 percent) command far less.

The CHDO rates again meet expectations, indicating the continued effectiveness of many communities as they work with their non-profit partners in developing affordable housing. PJs have committed well over the required 15 percent of funds to CHDOs in each fiscal year for which the books are closed, never dropping below 21 percent from FY92 through FY95.

In regards to HOME recipients, the program has again exceeded original Congressional targets. According to the report, 97 percent of rental activity dollars have gone to assist those with incomes of 0 to 60 percent of the median. On target or better percentages for the these same income earners were also reported in the areas of homeowner activity (82.1 percent) and TBRA (98 percent).

The rate of additional funds leveraged versus HOME dollars reported were also encouraging. Of the $12,332,022 committed to HOME units, $7,890,340 were from other funding sources. This amounts to $1.78 leveraged for every HOME dollar contributed.

Again, HOME spending rates have met and even exceeded the targets. Members should make a concerted effort inform and educate lawmakers as to the impact and success of this important program.

NEWS FROM HUD

On July 23, HUD Secretary Andrew Cuomo met with representatives of the national public interest groups for their bi-monthly meeting. Some of the highlights of the meeting are listed below:

Paul Leonard - Formerly the Deputy Assistant Secretary for Policy Development for the Office of Policy Development and Research has been named as the Acting Assistant Secretary for PD&R with the departure of Michael Stegman, who has returned to his post at the University of North Carolina, Chapel Hill.

Saul Ramirez, Jr., former Mayor of Laredo, TX and nominee for Assistant Secretary for Community Planning and Development has been brought on at HUD as a consultant in an effort to begin his assimilation into the Department while awaiting confirmation from Congress, which is not expected anytime before October.

Homeownership Zone Application Deadline extended to September 30, 1997 (see Federal Register notice for more details.)

In an "all-employee" meeting held on August 4 Secretary Cuomo announced the "next step" in the HUD reform plan - the location of HUD's 70 new hubs and processing centers. Under HUD's new structure, the Department's administrative functions will be centralized, consolidated and put in hubs and processing centers. All 81 field offices will remain open and the "face-to- face"/constituent work will continue to be conducted by the new "Community Builders" out in the field.

For detailed information on the Management Reform Plan visit the HUD Home Page at http://www.hud.gov/news.html under "HUD 2020 Management Reform Plan" or contact NCDA.

NCDA BIDS FAREWELL TO MARGARET MCGILVRAY

Margaret McGilvray will be leaving the NCDA Staff on August 22 to assume the position of Deputy Director of the Office of Housing for Alexandria, VA. Over the past four years Margaret has covered both housing and community and economic development issues as well as managed the NCDA portion of the NAHTI contract, published the HOMEWORKS newsletter and handled other tasks such as National Community Development Week and various specialized advocacy efforts.

While we will be sad to see her go, we are delighted that she will continue to work on community development and housing issues on the local level and will in fact remain close to NCDA as a member of the Association. We wish her good luck and best wishes in the challenges that lie ahead!

FEDERAL REGISTER NOTICES

Notice of Funding Availability (NOFA) and Program Guidelines for Homeownership Zones FY97 Correction and Extension of Deadline: FR 62 40370-40371, 7/28/97 - The application deadline is extended to September 30, 1997. The notice also provides additional certifications omitted from the prior notice and additional information about the availability of and instructions for completing the forms applicants are required to submit.

Notice of Funding Availability of Community Partnerships for Resident Uplift and Economic Development: FR 62 40642-40693, 7/29/97 -Several Federal, including HUD and HHS, and private agencies are combining over $6 million dollars in program funds and technical assistance in a consolidated competitive grant initiative entitled Community Partnerships for Resident Uplift and Economic Development. The purpose of this initiative is to create neighborhood-based programs to move families residing in public housing and the adjacent neighborhood from welfare to self-sufficiency. Approximately seven communities will be selected. There must be at a minimum two co-applicants - a public housing authority and a community development corporation, along with others as well. The initiative is geared to public housing communities that already have in place operational components such as needs assessments and economic development incentive packages. The application deadline is September 12, 1997 at 3:00 pm. The NOFA may be obtained from the HUD Resident Initiatives Clearinghouse, (800) 955- 2232.

Notice of Funding Availability (NOFA) for HOPE VI Public Housing Demolition for FY97, Correction: FR 62 41070-41071, 7/31/97 - This notice clarifies information that was provided in the NOFA for HOPE VI previously published. It clarifies "capital phrases", corrects references to the modernization indicator and the fact that there are two 10 point elements in the rating factor IV.B.

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