FY 99 Budget
II. Jobs and Economic Opportunity

While the nation has experienced unprecedented economic prosperity, distressed communities, particularly central cities, still face critical challenges.

Poverty is disproportionately concentrated. Between 1970 and 1990, the proportion of city residents living in neighborhoods with poverty rates of more than 40 percent doubled. By 1990, more than one out of every ten city residents lived in these high-poverty neighborhoods.

Unemployment rates remain high. While nationwide unemployment rates have plummeted to 24-year lows, city unemployment rates remain substantially higher than the rates for suburbs, as well as for the nation as a whole. In all metro areas, central city unemployment rates are 5.1 percent, a full one and a half points higher than their suburbs.

Most job creation is occurring in the suburbs. While the economy has generated more than 14 million new jobs since 1993, the vast majority of those jobs are being created in suburban areas. In the early 1990s, only 13 percent of new entry-level jobs were created in central cities.

Job creation is the foundation for economically and socially healthy communities. Job creation will also be critical to make welfare reform a success, particularly in light of concentration of welfare recipients. Nationwide, recipients moving from welfare to work will need an estimated one million jobs in the next several years.

In total, HUD's budget proposal for FY 1999 increases funding for economic development and job creation by more than 15 percent over 1998 enacted levels. The major features of this effort are highlighted on the next page.

JOBS AND ECONOMIC OPPORTUNITY
Budget Authority/Loan Commitments
(Dollars in Millions)

PROGRAMS	1998	1999	1999 vs 1998
Community Empowerment Fund (CEF)/Economic Development Initiative	[$137] a/	$400	$400
Economic Development Loan Guarantees to Communities	1,261	1,261	0
Section 108 Credit Subsidy	30	30	0
Welfare to Work Vouchers (50,000)	0	283	283
Community Development Block Grant (CDBG)	4,674	4,725	51
Regional Connection Initiative	0	[100]	[100]
Brownfields	25	50	25
Empowerment Zones	5	150 a/	145
Youthbuild	[35]	45	45
Economic Development and Support Services (ROSS)	[55]	[55] b/	0
Total	5,995	6,944	949

Note: Bracketed amounts are set asides with CDBG and do not add into totals.

a/ Funding as a mandatory program under Title XX of the Social Security Act.

b/ $37 m was for EDI, with $100 m earmarked for Special Purpose Grants.

A. Community Empowerment Fund

The centerpiece of HUD's job creation efforts is the Community Empowerment Fund, an enhancement of HUD's existing Economic Development Initiative and Section 108 Loan Guarantee program. The Community Empowerment Fund (CEF) will provide resources for spurring private investment in our nation's cities and increasing opportunities for former welfare recipients to successfully move from welfare to work. The 1999 request of $400 million will leverage an estimated $2 billion in private sector loans over time and will support an estimated 280,000 jobs when projects are completed.

The Community Empowerment Fundis a creative financing tool that combines local control, private sector capital, and federal loan guarantees to rebuild distressed urban and rural communities. The Fundwillfinance a wide range of job-creation projects, including:

• loans for business expansion or modernization;
• starting new small- and medium-sized businesses;
• preservation and expansion of new and existing industrial facilities;
• neighborhood-based commercial revitalization efforts; and
• regional economic strategies.

HUD's FY 1999 proposal will provide strong incentives for standardization of economic development lending, a crucial first step in creating an effective secondary market for economic development loans.

The Community Empowerment Fund will leverage substantial private capital for economic development in distressed communities. Through the existing Section 108 Loan Guarantee program,states and local governments may borrow up to five times their annual Community Development Block Grants for business loans in distressed areas. Communities pledge their future grants as security for these loans. With this backing, HUD guarantees the loans and leverages private capital to finance the loans through sales of securities to investors. The results are low-cost, long-term financing for businesses with terms and conditions that would otherwise be unavailable.

B. Welfare-to-Work Vouchers

HUD's budget provides a flexible new tool to help states and communities meet the challenge of moving welfare recipients into jobs. Specifically, HUD proposes to provide 50,000 new welfare-to-work vouchers at a cost of $283 million, targeted to welfare recipients who need housing assistance to get or keep a job. Families could use these new vouchers to move closer to new jobs or to reduce long and cumbersome commuting patterns.

In many parts of the country, jobs are being created far from where many welfare recipients live. Three quarters of welfare recipients live in cities or rural areas and the vast proportion of jobs are being created in suburban areas. Even when jobs are available, long public transit routes pose a substantial barrier for welfare recipients finding and keeping jobs. For example, 45 percent of entry-level jobs in the Cleveland metropolitan area are accessible from Empowerment Zone neighborhoods within an 80-minute, one-way commute via public transportation; 55 percent are not accessible by public transit at all.

The Department of Transportation is proposing a $600 million Access to Jobs initiative to improve transportation connections for welfare recipients. This proposal builds upon HUD's Bridges to Work Demonstration which is connecting inner-city residents to suburban jobs in five cities.

This proposal goes beyond solving the transportation barrier to helping families move closer to available jobs. HUD's request of these 50,000 additional portable housing vouchers will help families making the transition from welfare to work. The additional vouchers will be available on a competitive basis to local public housing agencies (PHAs), which will develop plans to use the new vouchers to support families transitioning from welfare to work. Plans will be developed jointly with the local welfare agency and the Welfare-to-Work grantee (generally the local private industry council), allowing both state and/or local participation in the effort.

The vouchers will be focused on families who need housing assistance to make the transition from welfare to work - that is, where housing assistance is essential to getting or keeping employment. Local agencies will have great flexibility to design and operate the welfare-to-work voucher program within broad national guidelines. For example, the agencies would propose whether to focus on particular groups of welfare recipients and how to structure the assistance to meet local needs. Local plans will be selected by HUD, in consultation with HHS and DOL. HUD intends to monitor and evaluate the impact of this program on the overall mission of moving welfare recipients to work.

C. Empowerment Zones

In 1995, the Administration selected nine Empowerment Zones (EZ), which entitled them to receive federal tax incentives and direct funding for physical improvements and social services. These communities fashioned comprehensive revitalization strategies, with all local stakeholders - residents, non-profits, businesses and government - at the table. The early results have been extremely encouraging: they have leveraged billions of dollars in private investment and new jobs and business activity is evident in many of these communities.

To build on this early success, the 1997 Taxpayer Relief Act created 20 new Empowerment Zones - 15 new urban zones and 5 new rural zones. Second-round Zones are provided with tax incentives to attract new economic activity, but need the direct spending complement that the successful first-round zones received. The President's Budget for 1999 requests $1.5 billion funded over 10 years in equal $150 million amounts for the 15 new urban Zones. The EZ program is being proposed as a mandatory expenditure under the authority of Title XX of the Social Security Act.

Following the model set forth in the first round, funding will be made available for a broad range of job stimulation activities, with an effort to link revitalization plans to welfare reform strategies. Examples of eligible activities include: community policing, health care, neighborhood development, brownfields cleanup and redevelopment, economic development projects, workforce development, and housing assistance.

D. Community Development Block Grants

A total of $4.725 billion is requested for the major Community Development Block Grant Program, an increase of more than $50 million over the 1998 enacted level. Further, HUD has substantially reduced the requested set-asides for other programs within CDBG, from $479 million in FY 1998 to $292 million in FY 1999. As a result, funding available for formula allocation to state and local governments effectively increases by $238 million in FY 1999, a six percent increase.

In addition, the CDBG funds will support $1.3 billion in new loan guarantees under the Section 108 program of the Housing and Community Development Act. This is the same level enacted in 1998.

CDBG provides communities and states with extremely flexible funding to address locally determined community and economic development priorities. CDBG funds are used to rehabilitate housing, improve infrastructure, provide job training, finance revolving loan funds, and finance other community-determined projects.

CDBG funds are allocated to 900 communities, all States and urban counties based on estimates of need and poverty rates. CDBG activities must meet one of three broad national objectives: 1) benefit low- and moderate-income persons; 2) aid in the prevention or elimination of slums and blight; and 3) meet other particularly urgent community development needs. At least 70 percent of all CDBG funds must be used for activities that benefit persons of low- and moderate-income.

CDBG funds for 1999 are shown in the following chart.

COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG)
Budget Authority (Dollars in Millions)

		1998	1999	1999 vs 1998
TOTAL APPROPRIATION		$4,674	$4,725	$51
SET-ASIDES
	Lead-Based Paint Hazard Reduction	60	0	(60)
	Youthbuild	35	0	(35)
	Economic Development Initiative	137	0	(137)
	Other	76	0	(76)
	Native American	67	67	0
	Section 107	32	50	18
	Habitat for Humanity	17	20	3
	Supportive Service	55	55	0
	Regional Connections Initiative	0	100	100
	Total Set-asides	479	292	(187)
NET FORMULA FUNDING		4,195	4,433	238
New Program Initiatives*
	Lead-Based Paint Hazard Reduction	[60]	85	85
	Youthbuild	[35]	45	45
	CEF/EDI	[37]	400	400

Note: Parentheses indicate negative numbers.

* Set-asides in 1998, but proposed as free-standing programs in FY 1999.

E. Regional Connections Initiative

In light of the long-term shift of jobs and people to the suburbs, regions have become the building blocks of the larger national economy. The challenge for local communities is to take full advantage of the opportunities presented by the new regional economies.

At the same time, communities need to find ways to respond to some of the acknowledged negative impacts of the metropolitan economy: a growing job skills and training gap; the concentration of poverty in central cities; the spatial mismatch of housing and jobs; a growing disparity in local government fiscal capacity; schools at risk; rising infrastructure costs; higher vehicle miles traveled; increasing congestion; air and water pollution; and loss of prime farmland and open space. A new challenge facing communities is to make welfare reform work in the context of new regional economies.

This initiative is a $100 million set-aside within the CDBG program. It will make funds available by competition to states and localities to cooperate regionally to develop strategic plans that address key regional issues facing the nation's metropolitan areas and rural communities. The initiative will help communities adjust to the significant demographic and economic shifts that are taking place in metropolitan regions. It will encourage regional strategies that emphasize coordinated metropolitan economic growth and regional solutions to a range of environmental and social equity issues.

Regional Connections will enable communities to address one or more of the following topics: regional economic development strategies that tap the "competitive advantage" or location efficiency of the inner city; sustainable growth management or compact development strategies; regional job training/access to work initiatives; regional affordable housing strategies; or other regional concerns.

Proposed outcomes for funded projects include: strengthened partnerships between city and suburban governments and their private sector partners; enhanced regional coordination of federal resources and planning requirements; expanded use of HUD's existing Consolidated Planning process; and increased community capacity to implement more comprehensive, regional solutions to local problems.

HUD will establish an Advisory Board of distinguished urban planners, economists, and regional experts to develop the competition, and expects to contract with a qualified national organization to assist in managing the funding awards process.

F. Brownfields

The 1999 Budget proposes to double funding for the Brownfields Redevelopment program, from $25 million in 1998 to $50 million in 1999. This will significantly accelerate the Administration's commitment to provide $100 million toward brownfields redevelopment.

Brownfields are low to moderately contaminated sites, often on former industrial sites in American cities. An estimated 450,000 sites exist, and the vast majority of those are located in urban areas. None of the sites have levels of contamination which would score high enough to be placed on the National Priorities List under the Superfund program. Without any cleanup mandate, these sites could go for years without being restored to alternative and modern uses. Their clean-up not only improves the environmental condition of the area, it provides a unique opportunity to revitalize downtown areas that have been essentially abandoned.

Each Brownfields dollar is highly leveraged. The $50 million being proposed for 1999 will leverage $200 million in loans and loan guarantees and the clean-up effort will generate 28,000 construction and related jobs precisely where employment opportunities are most needed.

The Administration has established a Brownfields National Partnership among 15 agencies to turn contaminated Brownfields into greenfields of economic opportunity. HUD has also executed a Memorandum of Understanding with EPA which commits both agencies to implement strategies that will revitalize urban areas and return them to productive uses. While the work of the two agencies is coordinated closely, EPA's central focus is on assessment and clean-up. HUD resources are focused on restoring Brownfields sites to economically viable uses.

G. Youthbuild

HUD's 1999 Budget proposes $45 million for Youthbuild, as a free-standing program. In FY 1998, Youthbuild was funded as a $35 million set-aside within the CDBG program. FY 1999 appropriations will serve between 5,000 and 6,000 disadvantaged youth.

Youthbuild is a proven effective program for helping at-risk teens develop education and job skills. Youthbuild targets youth between the ages of 16 and 24 who are high school drop-outs and who are facing poverty, broken homes, and welfare. The Youthbuild program is a natural complement to the Empowerment Zones, and several Youthbuild sites operate in existing zones.

Approximately 7,300 young people have participated in Youthbuild programs to date. The one-year program combines on-site training of construction skills with off-site classroom academic and job skill development. Over 60 percent of the trainees graduate and 82 percent attain placement in jobs or school. The average wage earned by the trainees is $7.00 per hour.