Despite overall economic growth in the United States during the 1980s, the economic and social health of many cities declined. While crime, poverty, and the physical and social deterioration of urban neighborhoods increased, intergovernmental aid to cities declined between 1980 and 1993 by about 19.4 percent in constant dollars. Meanwhile, the out-migration of many middle-income residents and businesses has caused city tax bases to shrink, hampering the ability of local governments to assist economically and socially distressed areas suffering from a mix of interrelated problems. Over the past several decades, the public and private sectors have tried different strategies to assist people living in distressed communities. Some of these efforts have focused on improving the chances for individuals in these areas to obtain the education, social services, and other support they need to leave their neighborhoods. Others have focused on improving the neighborhood’s physical environment through affordable housing or economic development. Still others have combined aspects of both approaches by addressing the needs of residents and their environment. These latter efforts are referred to as comprehensive by community development experts because they consider the housing, social service, and economic development needs of the community. They are considered community-based because they focus on a specific geographic area and involve the residents in planning and implementing the effort. Comprehensive community-based efforts have often begun within a community in response to neighborhood conditions—rather than in response to a federal program—and are operated by local nonprofit organizations. While the structures of these organizations and the programs they provide vary, figure 1.1 illustrates a likely design for a comprehensive community-based development effort. During the 1960s, as a part of its overall strategy to better serve the needs of the poor, the federal government supported broad comprehensive initiatives, such as the Community Action Program (CAP) and Model Cities. CAP established community action agencies (CAA) at the local level to combine and redirect a wide range of federal, state, local, and private resources to make a comprehensive attack on poverty. Participation by beneficiaries and decentralization of decision-making were also major elements of the program. As we reported in 1992, the program lacked sufficient authority and political support at the federal and local levels to influence agencies’ practices and improve service delivery. Model Cities sought to rebuild deteriorated neighborhoods in selected cities by coordinating the array of resources from assistance programs at all levels of government, particularly in housing, education, health, and transportation. Like CAP, Model Cities attempted to unify these efforts into an interrelated system. The program was administered by city demonstration agencies that were an integral part of city administrations. In retrospect, according to our 1992 report, the results of the Model Cities program were mixed because the program lacked incentives to promote cooperation and consensus on priorities. The Model Cities program was terminated as of January 1975 by the Housing and Community Development Act of 1974. The act consolidated seven community development categorical grant programs into the Community Development Block Grant (CDBG) program. Federal support and sponsorship for comprehensive efforts slowed after this, and funding for many community development programs declined in the 1980s. Meanwhile, the private sector, which had started its own comprehensive effort to revitalize distressed communities, continued to shape the comprehensive approach. The Ford Foundation, early in the 1960s, developed the Gray Areas Project in New Haven, Connecticut. Its purpose was to address the multiple needs of a distressed inner city neighborhood by rehabilitating existing housing, providing new affordable housing, and addressing residents’ social and economic needs. Experiences from the private and the federal efforts of the 1960s led to the concept of the Community Development Corporation (CDC). CDCs are private nonprofit organizations that focus their efforts on specific distressed geographic areas. As originally envisioned, these groups emphasized economic and physical development as well as social service delivery. Their boards of directors were composed of residents from the area and representatives of concerned businesses and institutions. CDCs typically entered into partnerships with local governments and corporate entities and relied on both public and private funding. Since the early 1970s, the number of Community-Based Development Organizations—also known as CDCs—has more than tripled, according to a Fannie Mae Foundation study. Studies by the National Congress for Community Economic Development indicate that there are currently at least 2,500 CDCs around the country. However, many of these CDCs do not offer comprehensive services but focus primarily on housing production or economic development. As federal involvement in community development declined and private participation grew, entities known as intermediaries evolved to provide CDCs with financial and technical assistance. In 1979, the Ford Foundation created the Local Initiatives Support Corporation (LISC), a national intermediary set up to provide grants, loans, and technical assistance to nonprofit community development organizations. Another prominent national intermediary—the Enterprise Foundation—has focused on strengthening nonprofit housing development groups, forging local housing partnerships, and helping local groups link needed services into housing, as well as on demonstrating creative approaches to community development. The federal government also supported the use of national intermediaries. In 1978, the Congress chartered the Neighborhood Reinvestment Corporation (NRC) (42 U.S.C. 8101 et. seq. ), a public nonprofit corporation. NRC’s mission included the revitalization of declining lower-income neighborhoods and the provision of affordable housing. NRC works with local organizations that are known collectively as NeighborWorks. There are several different types of NeighborWorks organizations, including Neighborhood Housing Services (NHS). NHSs are partnerships of local business leaders, local government officials, and neighborhood residents that function as NRC’s main vehicle for revitalizing distressed neighborhoods. A major new federal initiative to assist urban and rural communities in their revitalization efforts—the Empowerment Zones and Enterprise Communities (EZ/EC) program—was adopted in 1993 under the Omnibus Budget Reconciliation Act. This program promotes the comprehensive revitalization of distressed communities by funding broad, community-based strategic plans. The bulk of the benefits under the program go to nine areas—six urban and three rural—designated as empowerment zones. Considerably fewer benefits are available to the 95 areas—65 urban and 30 rural—designated as enterprise communities. Although the Department of Housing and Urban Development (HUD) and the Department of Agriculture were responsible for designating the areas, the President also established the Community Enterprise Board—a federal, Cabinet-level entity—to assist in implementing the EZ/EC program. The Board is composed of the Vice President, who serves as its Chair; the President’s assistants for domestic policy and economic policy, who each serve as vice chairs; the secretaries of 10 Cabinet departments; and the heads of several other agencies. In addition, the Board is tasked with advising the President on how federal programs can be better coordinated across agencies to respond to the needs of distressed communities. Community development initiatives typically rely on a patchwork of different funding and technical support sources from both the public and the private sectors. Federal funds generally flow through state and local governments in the form of block grants or go directly to community organizations in the form of categorical, or program-specific, funding. Additional funding—often to support specific programs or projects—is available directly from state and local governments. Private funding and technical assistance come from a myriad of sources, including intermediaries and foundations. Several federal block grant funding sources are available to community development organizations through state and local governments. Under HUD’s CDBG program, a wide range of neighborhood revitalization activities can be funded. For example, these grants may be used to rehabilitate housing, support economic revitalization projects, and provide public facilities. HUD also offers funding for housing development through the Home Investment Partnership (HOME) program to state and local governments, which may pass a portion of the funds on to eligible housing development organizations. The Department of Health and Human Services (HHS) makes funds available through the Community Services Block Grant (CSBG) and the Social Services Block Grant (SSBG). The CSBG funds can be used for a range of activities to provide social services, such as emergency assistance, employment assistance, and elderly care. The SSBG funds can also be used for a wide variety of social services, including preventing and treating drug and alcohol abuse and training and employing disadvantaged adults and youth in housing construction and rehabilitation. The federal government also provides funding to community organizations through many separate programs operated across federal departments. This funding tends to be categorical—designated for specific activities—and must be applied for in accordance with specific program guidelines. For example, HUD offers funding for homeownership through the Housing Opportunities for People Everywhere (HOPE) program and for assistance to the homeless through the McKinney Act programs. HHS provides grants to local entities to develop and implement projects that create jobs for low-income people in distressed neighborhoods through its Community Initiatives Program. It also provides grants for substance abuse prevention and treatment demonstration projects, among other things. Other agencies—including the Departments of Commerce, Education, Justice, Labor, and Transportation; the Environmental Protection Agency; and the Small Business Administration—operate additional programs that are available to community organizations. In addition, various federal tax credit and loan guarantee programs are available to community organizations. Some states and localities administer additional programs and provide grants or loans to community organizations for affordable housing, economic development, and social services. For example, a city government may have its own homeownership program that the community organizations can use. Sometimes, state or local governments provide other types of assistance by donating land or offering to work with lenders to negotiate lower interest rates. In addition, some states and localities provide financing—sometimes tax-exempt—for specific projects. National intermediaries provide grants and loans, technical assistance, and coordination with other organizations. These organizations possess advantages of scale that allow them to give local groups access to tax credits and corporate equity investments, secondary mortgage markets, and lenders’ commitments.