U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

20–219 PDF 2005

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

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

GINNY BROWN-WAITE, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(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

CHRISTOPHER SHAYS, Connecticut

VIRGINIA FOXX, North Carolina

——— ———

WM. LACY CLAY, Missouri

PAUL E. KANJORSKI, Pennsylvania

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

(III)

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

Page

IV

Letters, statements, etc., submitted for the record by—Continued

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

(1)

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.

2

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

3

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:]

4

5

6

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

7

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 moderateincome 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

8

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:]

9

10

11

12

13

14

15

16

17

18

19

20

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:]

21

22

23

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

24

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:]

25

26

27

28

29

30

31

32

33

34

35

36

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

37

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 11⁄2 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

38

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

39

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

40

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

41

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

42

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.

43

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

44

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

45

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.

46

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

47

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 firsttime home ownership for minority home ownership in this country,

and the goal is to have 51⁄2 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

48

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.

49

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

50

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.

51

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:]

52

53

54

55

56

57

58

59

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

60

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 servVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
61

ices 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 commuVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
62

nities 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

63

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.

64

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:]

65

66

67

68

69

70

71

72

73

74

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

75

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-andmortar 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.

76

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

77

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

78

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.

79

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,

80

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

81

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

82

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

83

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

84

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:]

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

(107)

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

108

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.

109

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:]

110

111

112

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

113

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

114

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 beVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00118 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
115

tween 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:]

116

117

118

119

120

121

122

123

124

125

126

127

128

129

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?

130

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

131

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

132

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,

133

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

134

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 pre1940 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

135

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 presVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00139 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
136

sure 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 stuVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00140 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
137

dents 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 pre1940 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 noncollege 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 fulltime 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.

138

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, sewVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00142 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
139

ers. 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

140

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

141

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 highneed 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.

142

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?

143

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;

144

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.

145

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

146

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:]

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

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

162

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.

163

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 assistVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00167 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
164

ance 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:]

165

166

167

168

169

170

171

172

173

174

175

176

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.

177

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 communitywide 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 commuVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00181 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
178

nity, 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.

179

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.

180

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 housVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00184 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
181

ing 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

182

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 serviceoriented 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 forVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00186 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
183

mula 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-ofliving 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

184

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:]

185

186

187

188

189

(191)

BRINGING COMMUNITY DEVELOPMENT

BLOCK GRANT PROGRAMS SPENDING INTO

THE 21ST CENTURY: INTRODUCING ACCOUNTABILITY AND MEANINGFUL PERFORMANCE MEASURES INTO THE DECADESOLD 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.

192

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

193

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:]

194

195

196

197

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 moderateincome persons.

We also monitor whether grantees have carried out their CDBGassisted 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 11⁄2 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 11⁄2 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

198

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:]

199

200

201

202

203

204

205

206

207

208

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 accomVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00212 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
209

plish 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

210

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 grantVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00214 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
211

ee 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 51⁄2; and then 108 loan guarantees

about 21⁄2 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

212

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.

213

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.

214

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

215

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 recommendaVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00219 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
216

tions 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.

217

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:]

218

219

220

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.

221

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:]

222

223

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.

224

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

225

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-AR-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:]

226

227

228

229

230

231

232

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.

233

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:]

234

235

236

237

238

239

240

241

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 Statefunded, 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?

242

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 moderateincome 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

243

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:]

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

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

264

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:]

265

266

267

268

269

270

271

272

273

274

275

276

277

278

279

280

281

282

283

284

285

286

287

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.

288

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.

289

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

290

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 moderateincome persons the program is trying to assist? And do you see enVerDate 11-MAY-2000 11:01 Jul 29, 2005 Jkt 000000 PO 00000 Frm 00294 Fmt 6601 Sfmt 6601 D:\DOCS\20219.TXT HGOVREF1 PsN: HGOVREF1
291

tire 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 wellbeing 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

292

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.

293

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

294

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

295

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

296

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.

297

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

298

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.

299

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.

300

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.]

[Additional information submitted for the hearing record follows:]

301

302

303

304

305

306

307

308

309

310

311

312

313

314

315

316

317

318

319

320

321

Æ