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CONGRESSIONAL RESEARCH SERVICE LIBRARY OF CONGRESS URBAN DEVELOPMENT ACTION GRANTS FOB POCKETS OF POVERTY ISSUE BRIEF RUBBER IB79083 AUTHOR: Keith , Bea Government Division THE LIBRARY OF CONGRESS CONGRESSIOHAL RESEARCH SERVICE- HAJOBDISSUES.SYSTEfl DATE OBIGINATED 9253422 DATE UPDATED Qggggggg FOR ADDITIONAL IKFORHATIOH CALL 287-5700 0220 CBS-- 1 IB7 9083 UPDATE-02/20/30 In 1978 Congress requested that the Department of Housing and Urban Development (HUD) prepare a report on the issue of extending the Urban Development Action Grant (UDAG) program to "pockets of poverty‘ -- distressed neighborhoods in generally healthy cities. Under present law UDAG is applicable only to distressed cities and urban counties. The HUD report, released in June 1979, recommended that Congress adopt legislation defining pockets of poverty and establishing unique criteria which will target UDAG assistance to low-income residents of the pockets. The Housing and Community Development Amendments of 1979, enacted by the 96th Congress in December 1979 (P.L. 96-153) includes pockets of poverty in the UDAG program. Some HUD recommendations were accepted by Congress; the law also contains language not found in the HUD report. §;I2Q£§B.QQ!2-.4.§2_£Q.L.-E.§¥..;l.§é!-.¥.§.J;§ Urban Development Action Grants (UDAGS), authorized in the housing and Community Development Act of 1977 (P.L. 95-128) and administered through the machinery of the Community Development Block Grant (CDBG) program, provide federal assistance to distressed urban areas.. Through joint public/private investment ventures, it is hoped that UDhGs will help revitalize declining or -.agnant neighborhoods. UDLG, according to both the House and Senate committee reports (H.hept. 95-236 and S.Rept. 95-175) on the housing and Community Development Act of 1977, would take advantage of ‘unique opportunities" to revive declining cities. . 1 A key element in the UDAG program is the procedure used for determining which jurisdictions are eligible to compete for the UDAG awards.e In order to make this determination, criteria were established to measure the‘ relative distress of jurisdictions and to target assistance to those areas judged to be more distressed than others. 7- Even before the UDAG program was approved by the 95the Congress, Members argued that the proposed targeting criteria unfairly excluded pockets of poverty in otherwise nondistressed cities from competing for the funding. The pockets of poverty, it was argued, need federal assistance as much as larger distressed cities. opponents claimed, however, that the UDAG funds would be “diluted” from the distressed jurisdictions if pockets were allowed to compete for the small amount of UDAG funds. The debate which began in 1977 continued into 1979. 1221. The first pockets of poverty proposal in the UDAG program ‘was introduced by Senator Tower before the senate Housing, Banking, and Urban Affairs Committee in early 1977, and again on the floor of the Senate on June 7, 1977. Thefrower amendment sought to broaden the field of UDAG* applicants be establishing distressed areas of all cities, rather than distressed c_.ies, as eligible entities. The distressed areas amendment» failed in committee and on the floor, and the distressed cities criterion was adopted into the program. 9 ~ During the floor debate, Senator Tower stated that the UDAG program, as proposed, would "discriminate" against cities and counties that are not CBS- 2 IB7 9083 UPDATE -02/20/80 judged to be distressed, but which contain poverty conditions as severe as those in distressed cities. In addition, Senator Tower objected to the proposed emphasis in UDAG on improving, geographic areas rather than L meeting the needs of the residents. Senator Bartlett also supported the amendment, claiming that precedent for authorizing development projects in distressed neighborhoods regardless of overall city condition could be found in the Public Works Employment Acts of 1976 and 1977. Senators Brooke and Proxmire spoke against the Tower amendment on the ’S§l1’at’é‘** fléfiri 1Sfia.toi‘"Pf*5il1i'fé"',1 Eli a‘:i;rma:n 1"6”:lf*thé S”éifa“fe‘"C6’1iIi”itteé’6Il' Bafi'ffn g , Housing, and Urban Affairs and sponsor of the Housing and Community Development Act of 1977, noted that the Tower amendment would dilute the funds needed in "truly distressed" cities and argued that healthy cities have a relatively strong tax base, in addition to revenue sharing and CDBG funds, to draw upon to assist poor neighborhoods. Senator Proxmire also stated that the Department of Housing and Urban Development (HUD) was opposed to the amendment due to administrative considerations. The vote was 53 against, 36 for, and 11 not voting. lglgg During the debate on the Housing and Community Development Amendments of 1978, Senator Tower once again introduced a pocxets of poverty amendment, both in committee mart-up and on the floor of the Senate (July 20, 1978). The 1978 amendment differed from the previous year's version in two respects. First, the 1977 proposal did not include a statutory definition of distressed areas in cities and counties; the 1978 proposal defined geographic, limits for distressed areas as "one or more contiguous census tracts having a population of at least ten thousad persons.“ A second difference between the two amendments was that in 1977 the phrase "to help alleviate physic. land economic deterioration" would have been modified by the Tower amendment to read ‘to help alleviate and prevent physical and economic deterioration.“ The 1978 Tower amendment did not include the ‘prevent? clause. 9 many of the arguments used in the 1977 debate were voiced again in 1978, with the proponents claiming that the UDAG program discriminated against people and areas in need of assistance, and the opponents claiming that the Tower amendment would dilute the effect of the program and reverse the targeting strategy intended solely for severely distressed cities. The one point both sides agreed upon was that the pockets of poverty issue did not favor one region of the country over other regions. But they agreed for adifferent reasons. Supporters of the Tower amendment claimed that there were distressed areas in generally healthy cities in the north which would benefit from the amendment, while opponents claimed that the South benefitted more than the North from the UDAG program as originally proposed without the Tower amendment because HUD determined that there were more eligible large and small cities in the South and West (1,130) than in the Northeast and North Central areas (1,097). ’ The Senateeapproved the 1978 Tower amendment (47 for, 38 against, and v15 not voting), but the amendment was removed from the omnibus legislation conference. However, the conference committee for the Housing and Community Development Amendments of 1978 acxnowledged that the pockets of poverty issue required further study, and recommended that HUD complete a report on pockets of poverty issue by Mar. 31, 1979. i§§.§Q2-§§BQ§i In June 1979 HUD released their study on the issue. ggg§gt§_ 9; gggggtyé in, cas- 3 5 1379083 UPDATE-02/20/80 Aejzanihaic.i2.I;.22:-.t!.ss2§.a.n.@._.92r;22§ is a report on the OMB program. some aracteristics of distressed and nondistressed cities,. and options for. congressional action on the pockets of poverty issue. The report is divided into five chapters: (1) an assessment of UDAG eligibility criteria; (2) the relationship of fiscal strain in communities to the Action Grants; (3) the adequacy of other federal assistance programs; (0) the commitment of local governments to their pockets of poverty; and (5) congressional options. These sections are summarized below. (1) Qgg§;m;g;gg_QQg§_glgggggligyg The report notes that some of the indicators for measuring eligibility were established by statute in P.L. 95-128, while others were selected on the basis of “the availability of ‘reasonable data'" and “the relationship of several Key variables assumed to be related to»distress.“ The report listed the indicators and established standards used by HUD in determining UDAG eligibility for large cities: .C..r-:.i..te..r2‘.a 5 §.t.andar9.§ Age of housing 34.15% built before 1940 Population growth lag 15.52% or lower rate between 1960 and 1975 Poverty rate — ‘ 11.24% or more residents at or below Per capita income growth $1,420 or less between 1969 and 1974 Unemployment rate V 6.98% or more for 1977 Job lag decline . 7.08% or less growth rate between 1967-1972 9 In any city, three of the six criteria standards must be met in order for the community to be found eligible for the program. The only exception is that if the rate of poverty is below the standard, then four criteria must be met;‘ if the poverty rate is more than 1.5 times the standard, only one additiona standard must be met. 1 All of thezcriteria used for large cities, except the unemployment rate, are used to determine nonmetropolitan city eliginility (25,000-500,000 population). some of the standards, however, differ as follows: per capita income, poverty, and age of housing are identical to those listed above; population growth lag standard is -.31%: and job lag is 7.1%. Cities under 25,000 population must meet each of these standards except job lag, due to the lack of such date in those cities. ‘ The first chapter of the HUD report includes an assessment of the pros and cons of each of the six variables. While each variable has been criticized, the report notes that age of housing is the variable in question most often. Critics claim the housing variable serves to direct funding to the older F ~theastern cities and away from the new Southern and western communities. others, however, have found that age of housing is statistically related to community and infrastructure decline and may be used as one indicator of the fiscal burden faced by distressed cities. The chapter concludes with ma description and comparison of alternative distress criteria and finds that "while they should be subjected to continuous refinement, [the criteria] currently generate a list of distressed communities which appears CRS- 4 IB19083 UPDATB—02/20/80 reasonable....“ (2) £i§22;.§22ai2.;n. 2i§srs§§e2_ and- !9n:2i§fre§§sd_ §2nm22i2is§- The second chapter reviews the fiscal resources of distressed and non-distressed cities. The analysis focuses on three areas: capacity to generate revenue, the relative ned for services and expenditure pressures, and the efforts made by communities to levy taxes for services and capital maintenance (tax effort). Noting that the property tax is the major source“ of revénuei for” local government, HUD established a correlation between employment growth lag, population loss, abandoned housing, and declining property values in UDAG-eligible cities. iThe HUD data also indicates that in all of the UDAG—ineligibles sampled, property values increased from 1971-1976 while the effective property tax rate remained the same. This .may be compared to one—third of the sampled UDAG-eligibles which had an increase in the effective property tax rate during the same period. [flotez the effective property tax rate is computed by dividing property taxes by the market value of the property. If a community increases its taxes at a value equal to the increase in property values, the tax rate is increased, but the effective tax rate remains constant.) The demand.for services in UDAG-eligibles appeared to be much higher than for non—eligibles, according to the sreport. HUDv states that more UDAG-eligible, communities are marked by "well above average rates of unemployment, violent crimes, fire, abandoned housing, litter, infrastructure deterioration, and ... poverty“ than ineligibles. The report also discusses the relationship of annexation to the provision of services. Young, expanding communities claim that the capital construction in recently annexed areas requires immediate massive investments which cannot quickly be offset by revenues. Analysts taxing the perspective of older cities state that the tax base. from annexed areas provides the expanding cities with a fiscal advantage over the declining cities. Based upon its own data, the HUD researchers indicate that they agree with the latterhargument. The third section of chapter two concludes that the tax effort (“the ratio of a community's local taxes to its overall revenue capacity“) is higher in distressed cities than in non-distressed cities, and “that relatively high local tax efforts have been a fact of life for some time“ in distressed cities. ~ (3) £eQer2;-AiQ-i2.2i§trs§§sd_2nd.l22:2i§rre§§ed-§2!h22it;e§- One, issue in the pockets of poverty debate concerns the availability of federal funds, besides UDAG, to distressed and nondistressed cities and counties. Opponents of the pockets of poverty amendment claim that distressed cities need all of the UDAG funds available, and that non—distressed communities still have access to other federal funds. Proponents question the adequacy of the other programs in light of the special problems in their areas. The third chapter describes federal grant programs for community development other than UDAG and compares the programs with UDAG resources. » on the basis of comparing federal revenue raised in a region to federal expenditures in the same region, the Great Lakes Begion ranxs lowest for federal expenditures received, while Southern and western states "usually receive more.“‘ The HUD report noted, however, that one study by the Academy of Contemporary Problems found that the regional differences had decreased CBS-'5 IB79083 UPDATE’U2/2Q/30 from 1970-75, and HUD concluded that more significant variations are to be vund among the states within regions, than among regions. For more information on these regional trends, see the Senate committee print "Selected Essays on Patterns of Regional Change“ cited below. In addition to the regional data analysis, the report also examines the distribution of federal grant assistance to UDAG-ineligible communities. The report notes that federal aid to UDAG ineligibles "has increased greatly from 1970 to present:” compared to community income, federal aid from 1970-76 was higher for less distressed than for more distressed communities, while in 1977 and 1978 the positions were reversed, primarily because of two programs, Local Public Works and Anti-Recession Fiscal Assistance. (4) 9zn:§9.u:.-‘£52.. E22222:-.1_=.\;£2§_ in- .E.2<.=1;.<2.t.§.. <.>:.f... .1321r.e~I_=.1—z- In the fourth chapter, the authors review the effort UDAG—ineligibles made to allocate local resources to their pockets of poverty; comparisonsa are also made of local expenditures in distressed and non-distressed communities. A While the lack of‘ available data on local revenues and expenditures discourages generalizations on a national level, the authors note that large UDAG—eligibles appear to be committing larger shares of local resources to their pockets of poverty than ineligibles. one measure used by the analysts, non-common services (such as health care and housing), indicated that flDAG eligibles spent more money than ineligibles in pockets of poverty and provided more.services. (5) B9§E£E§-Q£ P°VertY= E£1BEiBl§§-§EQ-QB£l9Q§i In the 13St ChaPter the authors acknowledge that the residents of pocxets of poverty have special needs which could be met by the UDAG program, but assert that this assistance should be provided without "diluting" the funds available for distressed communities. ‘The report also finds that, as presently designed, “the targeting criteria governing the UDAG program ... appear reasonable, fair and effective." i According to the report, pockets of poverty should be included in UDAG for the following reasons:“ (1)w there are large pocxets of poverty in non—distressed communities which would qualify for UDAG funding as distressed communities if they were separate jurisdictions; (2) comparable poverty rates exist between low-income areas in distressed and non-distressed cities; and (3) in the past decade, cities viewed as ineligibles have been confronted with greater problems and may now require federal assistance targeted to low-income areas. HUD agreed with Senator Tower that pockets of poverty need UDAG assistance, .and the report enumerates the principles which should be considered in developing pockets of poverty legislation. These include: / - UDAG should be targeted to relatively large pockets of poverty; - projects funded by UDAG should principally benefit low and moderate income residents in the pockets; «— the UDAG grants should be accompanied by the delivery of services by the local government onna level comparable to that provided in affluent neighborhoods; - a ¢limited but reasonable" amount of DDAG funds bshould be allocated to pockets; and - the premise of UDA6 should continue to be based upon CBS- 6 7 IB79083 UPDATE-02/2Q/80 receiving firm commitments from the private sector. The report concludes with a description of legislative options on pockets of poverty, and suggestions for criteria to be used in evaluating the eligibility of pockets. The legislative options include: - authorize a new program to aid pockets of poverty; ~ alter the distress criteria to expand the list of W7V‘eligibléxjufisdictions; ‘ 7“ m"“7”‘”'” — require that existing criteria be used to define distress in pockets of poverty, not in entire jurisdictions; and - define pocxets of poverty, and target DDAG assistance to pockets with a separate set of criteria. The last option is favored by HUD. The suggested criteria to be used in targeting UDAG funds to pockets include measurement of population and poverty levels, coordination with blocal development strategies, and delivery of services. The details associated with this option follow. : (1) For jurisdictions under 50,000 population: at least 2,500 or 10% of the jurisdiction's population, whichever is higher, must reside in the pocket. Horeover, 70% of these residents must have income below 80% of the jurisdiction's median income, and 30% must be below the poverty level. 4 (2) For jurisdictions over 50,000 population: pockets of poverty must contain at least 10,000 residents or 10% of the city's population, whichev,p is higher. The poverty criteria is identical to that described above. 7 (3) The criteria should assure that UDAG grants will directly benefit low income residents by locating funded projects in pockets. Also, applicants must demonstrate their commitment to helping poor residents by coordinating the project with their local economic development strategy, providing 20% of the UDAG grant as a local match, and providing services in pockets at a level commensurate with those provided in affluent areas of the city. HUD recommended that at most 15% of the UDAG budget be set aside for pockets, given the $675 million request of the President for the ODAG program in FY80. In the deliberations on the HUD appropriations bill (H.B. #394), however, the House adopted a point of order against $275 million of the request as only $400 million were authorized for the program. The Senate bill included the full $675 millidn appropriation. The conference committee approved the $675 million figure. According to a HUD press release describing the report, the ceiling of 15% of the total authorization ‘reflects an analysis of potential demand from nondistressed jurisdictions.“ HUD has estimated that 250-300 currently ineligible jurisdictions would be able to compete for UDAG assistance under the recommended criteria. £33151-Z22" 9.2! HUD-Independent Agencies Appropriation Act. nppropriations bill for many housing and community development programs, as well as for independent CBS- 7 _ £B790B3i UPDATE-02/2Q/80 agencies. Includes an appropriation of $675 million for the UDAG program. xssed House June 27, 1979. Passed Senate July 27, 1979. The conference committee approved the $675 million appropriation on Aug. 2, 1979 (H.Rept. 96‘409). Signed into law (P.L. 96-103) Nov. 5, 1979. The Housing and Community Development Admendments of 1979 (Signed into law Dec. 26, 1979). Includes a provision enabling cities and urban counties previously ineligible for action grants to qualify for assistance in pockets of poverty. The following requirements are found in this provision: (1) In cities or urban counties with populations over 50,000, the pocket of poverty must consist of a series of contiguous census tracts, enumeration districts, or block groups (as defined by the Bureau of Census) containing at least 10% of the city's or county's population, or 10,000 households. In addition, 30% of the population in the pocxet must have incomes below the national poverty level, and 70% of the pocket'sy population must have incomes below the median income level of the city or county; (2) In cities with less than 50,000 population, the pocxet of poverty must consist of contiguous census tracts, enumeration districts, or block groups containing at least 10% of the city's population, or 2,500 residents. The poverty requirements resemble those for large cities (see above); (3) No more than 20% of the appropriated UDAG funds may be used for pockets of poverty; . (0) The UDAG project must be located in the distressed area. If there is no suitable site, the project will be directly adjacent to the area and the project "will substantially contribute" to the area's development; (5) The grant recipient must provide basic services to the distressed area ‘at least equivalent" to other areas of the 1 city or county that have higher median incomes; (6) The project must ‘directly benefit" low- and moderate—income families in the area; and-‘ (7) The local government must provide a matching grant of fundst equal to 20% of the action grant. 3.3. 3375 (Ashley) Housing and Community Development Amendments» of 1979, as originally approved by the House. On June 5, 1979, Mr. Neal introduced a pockets of poverty amendment on the floor of the House, which was subsequently replaced ' an amendment by ur. Ashley on June 7. The Ashley amendment contains the same population requirement as the Senate amendment, but also specifies: (1) contiguous census tracts would be used to identify pockets; (2) 70% of the residents of pockets in large and small cities must have low and moderate income (income below 50% of the jurisdiction's median income) and 30% must have income below the national poverty level; (3) the local government must provide services to the pockets comparable to those provided in wealthier CBS— 8 1379033’ UPDATE-02/20/80 areas of the jurisdiction which contain similar population levels and are of similar size; and (u) UDAG projects must directly benefit residents ' pockets and must be located in the distressed area. The 20% ceiling Kou appropriations for pockets is also included, as well as a prohibition for funding any grants for pockets of poverty except as provided under this section. The House approved H.n. 3875 on June 7, 1979. S. 1149 (Williams) Housing and Community Development Amendments of 1979, as originally approved by the Senate. Omnibus bill which amends various housing, community development, preservation, and other related programs. During floor considerationmof the bill on July 13, 1979, Sen. Tower introduced a pockets of poverty amendment which replaced the amendment approved by the Senate Banking, Housing, and Urban Affairs Committee. The Tower amendment does not use census tracts to identify pockets. Instead, the more flexible term "defined geographic vicinity“ with a minimum population requirement is used. In metropolitan cities or urban counties, this requirement is 10,000 residents or 10% of a city's total population; in nonmetropolitan cities,v it is 2,500 residents or 10% of the jurisdiction's population. The amendment would require UDAG grants to directly benefit low-» and moderate-income residents, and would require HUD to establish criteria for selecting eligible pockets of poverty, using at least the criteria currently used for distressed cities. The Tower amendment also prohibited any city currently eligible for a0DLG funds from applying for pockets of poverty assistance. A 20% ceiling of the total UDAG appropriations would be available for the pockets program. while the Tower amendment, as first proposed, did not include a requirement that local governments provide "comparable services,F Sen. Tsongas added an amendment to require that applicant cities for pockets of poverty assistance must provide a 20% match to .the UDAG grant.. This contribution may be made from local resources, state funds, or from certain federal program funds. The Senate approved the provisions of S. 1149 on July 13 and renumbered the bill as H.B. 3875. 0.5. Congress. Committee of Conference, 1979. Housing and Community Development Amendments of 1979; report, to accompany H.R. 2875. Washington, 0.5. Govt. Print. Off., 1979. 100 p. (96th Congress, 1st session. House. Report no. 96-706) 0.5. Congress. senate. committee on Appropriations. Selected D essays on patterns of regional change. Washington, 0.3. Govt. Print. Off., 1977.. 697 p. (95th Congress, 1st session) 0.5. icongress. senate. Committee on Banking, Housing, and Urban Affairs. Housing and Community Development Amendments of 1979; report to accompany S. 1149. Washington, 0.8. Govt. Print. Off., 1979. 104 p. (96th Congress, 1st session. Senate. Report no. 96-164) CHRONOLOGY OF EVENTS 12/2b/79 - President Carter approved the Housing and Community Development Amendments of 1979 as P.L. 96-153. 12/19/79 07/15/79 o7/13/£9 06/03/79 05/07/79 07/20/78 09/26/77 06/07/77 cns- 9 IB79083 UPDATE-02/20/80 Housing and.Community Development Amendments of 1979 enrolled in House and Senate. Conference committee met to discuss differences in pockets of poverty amendment and H.R. 3875. Senate approved H.R. 3875 in lieu of S. 11u9. HUD released the pockets of poverty study. H.B. 3375, with pockets of poverty amendment, passed House‘. The 1978 Tower amendment, introduced as an amendment to the Housing and Community Development Amendments to 1978, was approved by the Senate, out later dropped in conference. The Housing and Community Development Act or 1977 was approved, authorizing the UDAG program. The 1977 Tower amendment on pockets of poverty was introduced on the Senate floor as an amendment to the Housing and Community Development Act or 1977, but was not approved. ~ AQPITEQEAL §.1§§§§‘.§!§.§ .§..°.U§. 3.5. 0.5. Department of Housing and Urban Development. Office of Community Planning and Development. an examination of needs and options. and Urban Development, Washington, D.C. Pockets of poverty: Department of Housing 1979. 33 p. LIBRARY 0F WASHENGTTQN ! 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