PRESIDENT ISSUES REPORT SAYING CITIES REBOUNDING, BUT NEED TO CREATE JOBS, BETTER SCHOOLS AND AFFORDABLE HOUSING

WASHINGTON - President Clinton today issued the second annual State of the Cities report, which concludes urban America is rebounding and in the best shape in a decade, but still faces critical challenges in creating jobs for low-skilled workers, improving schools, and increasing the supply of affordable housing.

The State of the Cities -- issued by the President when he spoke to the U.S. Conference of Mayors in Reno, NV via TV satellite -- says that despite great progress, cities remain threatened by concentrated poverty, shrinking populations and middle-class flight. The report, prepared by the Department of Housing and Urban Development, documents the need for the comprehensive urban agenda the President presented to Congress in his proposed 1999 federal budget.

"The first half of the 20th century saw America's cities rise to new heights," the President said. "Tragically, the second half saw many fall to new lows. Our successful economic policies of fiscal responsibility and investing in our people, including programs carried out by HUD and other agencies, have helped cities begin climbing back in the 1990s. This sets the stage for a return to urban prosperity in the 21st century, if we continue making smart investments in our future."

"The success of the Clinton economy has meant real progress for America's cities," Cuomo said. "The President's urban agenda is helping cities continue to recover from years of decline and making them better places to live and work. This is the midterm report card with an 'A' grade for cities, but there is still homework to be done."

At the same time, the U.S. Conference of Mayors issued its own report today that found urban employers are not creating enough jobs for workers with low skills. The mayors' report said a survey of 74 cities and nearby suburbs concluded that the number of current welfare recipients seeking jobs over the next five years could exceed the growth of low-skilled jobs by about 350,000. The survey included the 50 largest cities in the nation and at least one city from every state.

Cuomo, who is attending the Conference of Mayors meeting in Reno, said the State of the Cities report has three main findings:

• Driven by a robust national economy, cities are fiscally and economically the strongest they've been in a decade.

• Despite recent gains, cities still face the triple threat of concentrated poverty, shrinking populations, and middle-class flight that began two decades ago.

• Cities face three fundamental opportunity gaps -- in jobs, education, and housing -- that are critical to reducing poverty and attracting and retaining middle-class families.

The State of the Cities report concludes: "Rarely has the Nation ever been better positioned to tackle the challenges of rebuilding and re-energizing our nation's proud cities. If we are not ready to take on the challenges when the budget is in surplus, unemployment is at record lows and the stock market is at record highs, then when are we ready? Alternatively, if we have the courage and foresight - both as a Nation and on Capitol Hill - to address these challenges head-on and to enact many of the ideas and FY 1999 budget initiatives proposed by the President, we can ensure that America's cities have not only a proud past but a bright future."

Conference of Mayors President Paul Helmke, who is Mayor of Fort Wayne, IN, welcomed the State of the Cities report, saying: "The State of the Cities report shows that the federal government realizes the importance of our cities and the urban agenda. Lasting partnerships have been forged this year between the federal government and local communities."

Cuomo said the State of the Cities makes clear that the future of urban and suburban America are linked.

"America's cities are still the mighty engines powering regional economies," Cuomo said. "Suburbs can't reach prosperity without cities anymore than passengers on a train can reach their destination without a locomotive."

Programs to be expanded in the President's proposed budget for HUD involving jobs and economic opportunity in America's cities include: $400 million in grants for a Community Empowerment Fund to create and retain an estimated 280,000 jobs; funding for 15 additional urban Empowerment Zones to stimulate job creation and economic development in inner cities; expanded Community Development Block Grants to local communities; and increased funding for programs to redevelop contaminated industrial sites and to train high school dropouts for jobs.

Initiatives dealing with urban housing and homeownership in HUD's budget request include: higher FHA loan limits to enable more families to qualify for FHA-insured mortgages in the next five years -- many of them in cities; 103,000 new rental assistance vouchers for people needing affordable housing, including 50,000 for those moving from welfare to work; record funding for programs to help homeless Americans; a crackdown on housing discrimination; more HOME grants and a HOME Bank to make thousands of affordable housing units available; more funding for capital improvements for public housing; the creation of new Homeownership Zones to revitalize inner city neighborhoods; more help for families receiving Section 8 rental assistance to find housing in other neighborhoods; and more homeownership counseling.

Cuomo said the President's budget responds to a need to create new opportunity for city residents.

"America still has an opportunity gap," Cuomo said. "We have more millionaires than at any time in our history, but an estimated 600,000 Americans still sleep on our streets every night. That's why HUD's mission is more vital than ever. Closing the opportunity gap is both our challenge and our continuing commitment."

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HIGHLIGHTS OF THE 1998 STATE OF THE CITIES REPORT

Here are highlights of the 1998 State of the Cities report prepared by the Department of Housing and Urban Development:

FINDING #1: DRIVEN BY A ROBUST NATIONAL ECONOMY, CITIES ARE FISCALLY AND ECONOMICALLY THE STRONGEST THEY'VE BEEN IN A DECADE.

Cities are sharing in America's economic comeback. The national economy has produced more than 16 million new jobs in the past five years, and unemployment is at a 28-year low. Incomes are rising, particularly among those at the bottom of the economic ladder. Regional economies, with cities at their center, are now the primary engines of national prosperity.

Jobs are growing and unemployment is falling in central cities. Between 1993 and 1998, the number of employed workers living in central cities increased by 10.4 percent, or by almost 3.7 million people. Central city unemployment rates have fallen. Unemployment in central cities fell to an average of 5.3 percent in March 1998, down from 8.2 percent in March 1993. From 1991 to 1994, only 13 percent of the new low-skilled jobs were created in central cities. From 1994 to 1995, that number jumped to 34 percent.

Poverty rates for central cities have fallen from 21.5 percent in 1993 to 19.6 percent in 1996. For blacks, who have historically experienced high rates of poverty, central city poverty rates have fallen from 35.8 percent in 1993 to 31.0 percent in 1996, the lowest level in 22 years.

Many downtowns are experiencing a new renaissance as centers of tourism, sports, entertainment, and the arts.

Virtually every city in America has a stronger balance sheet today than it did a decade ago. A survey by the National League of Cities found that two-thirds of participating cities reported that they "were better able to meet city financial needs" in fiscal year 1997 than in the previous year.

Crime rates have plummeted for six years straight. Nationwide, violent crime dropped an estimated 27 percent between 1991 and 1997 and by 19 percent in large cities between 1993 and 1997. During the first six months of 1997 alone, the rate dropped by 6 percent.

City homeownership rates are at their highest levels in 15 years. While there is still more work to do to reduce the homeownership gap between central cities and suburbs, half of all central city households owned homes in 1997 -- an increase of about 1 million homeowners since 1994.

Administration Response: The President plans to continue on the course of fiscal prudence, in three ways: (1) by preserving any budget surpluses until Social Security is reformed for the 21st Century; (2) by adhering to a strategy of targeted investments in America's people and communities: and (3) by continuing to reinvent and streamline the federal government to be a better, more effective partner for America's communities.

FINDING #2: DESPITE RECENT GAINS, CITIES STILL FACE THE TRIPLE THREAT OF CONCENTRATED POVERTY, SHRINKING POPULATIONS, AND MIDDLE-CLASS FLIGHT THAT BEGAN TWO DECADES AGO.

Central cities' share of metropolitan populations continues to decline. Although most central cities continue to grow slowly, only 11 of the 30 largest cities in 1970 have more people today than two decades ago. These population losses frequently translate into a shrinking municipal tax base.

Since 1970, nearly 6 million middle-income and affluent families have left central cities. Between 1985 and 1995, the number of high-income families (defined as 150 percent of median) that located in suburbs grew by 16 percent, compared with just 2 percent for central cities.

Poverty in cities is higher than in suburbs and among minorities than whites. While overall poverty rates have dropped, poverty is more concentrated in distressed urban areas. Despite a drop in central city poverty rates between 1993 and 1996, 1 in every 5 urban families lived in poverty in 1996, compared with fewer than 1 in 10 suburban families. While the rate of African American poverty is at its lowest level in history, 72 percent of the poor in cities are minorities.

Poverty remains highly concentrated in certain neighborhoods. The persistence of discrimination in the housing market leads to discrimination in cities. Almost one in four African American and Hispanic residents of central cities live in census tracts where more than 40 percent of their neighbors are poor, compared with only 3 percent of the white urban population.

Administration Response: A three-part strategy concentrated on using incentives to bring jobs and businesses back to central cities, improving urban schools, and promoting homeownership and affordable housing is articulated in detail in the following section.

FINDING #3: CITIES FACE THREE FUNDAMENTAL OPPORTUNITY GAPS -- IN JOBS, EDUCATION, AND HOUSING -- THAT ARE CRITICAL TO REDUCING POVERTY AND ATTRACTING AND RETAINING MIDDLE-CLASS FAMILIES.

JOBS GAP

While more jobs are being created in cities, there is still a sizable mismatch between the number of low-skilled jobs and the number of low-skilled urban residents who need work. Coordinated efforts of all levels of government and business are needed to address this challenge.

Minority youth unemployment remains high. The unemployment rate for minority youth (ages 16 to 19) was 26 percent in central cities in May 1998 -- five times the nation's overall unemployment rate.

While progress has been made in the last few years in reducing the wage gap between the highest and lowest income workers, the gap has grown over the past few years. From 1982 to 1996, the inflation-adjusted hourly wages of workers in the top one-tenth of the workforce increased from $24.80 to $25.74 an hour, while wages for workers in the bottom one-tenth fell from $6.28 to $5.46.

In addition, low-income city residents -- many of them without cars -- have a hard time getting to jobs. In Boston, for example, 98 percent of welfare recipients live within one-quarter mile of a bus route or other mass transit stop, but only 58 percent of potential entry-level jobs in the Boston metro area are within 1 mile of mass transit.

The lack of safe and affordable child care hits central cities hard, preventing many parents unable to afford higher priced child care from going to work. Only 10 percent of the families who qualify for federal child care assistance receive help. Many cities have tens of thousands of families on waiting lists for child care assistance.

Administration Response: The President's budget includes several important initiatives aimed at reducing the low-skilled jobs gap by creating jobs where people live and by connecting people to the places where jobs are being created. The President has proposed a new Community Empowerment Fund, administered by HUD, which will help create an estimated 280,000 jobs. He has also proposed increased funding for the Community Development Financial Institutions Fund and creation of a second round of Empowerment Zones. And he has proposed extending the welfare-to-work tax credit, the work opportunity tax credit, and the brownfields tax incentive.

In addition to these budget initiatives, the President has called on the private sector to expand its efforts in response to welfare reform. In May, he challenged the private Welfare-to-Work Partnership to double its number of business partners to 10,000 and to double the number of people these businesses hire from the welfare rolls to 270,000 in 1998.

To connect welfare recipients to jobs, the President has proposed $283 million for 50,000 Welfare-to-Work Housing Vouchers. His Access to Jobs transportation initiative to help welfare recipients and other low-income workers get to their jobs was recently enacted as part of the Transportation Equity Act. In addition, the President recently released the first round of 49 Welfare-to-Work competitive grants from the Department of Labor to help local communities move the hardest to place welfare recipients into employment. Welfare-to-Work funds are also being provided to local communities through formula grants to states.

The President has proposed other job and workforce development initiatives to enhance employment opportunities, including: a $250 million Youth Opportunity Areas Initiative to increase employment for out-of-school youth in high-poverty areas; over $20 billion in five years for a new Child Care Initiative; and a G.I. Bill for America's Workers to consolidate and streamline activities in the Job Training Partnership Act and empower adults to make better job training choices.

EDUCATION GAP

Urban schools are failing to prepare an alarming number of America's children to meet the challenges of the new high-technology economy. In many cases, the poorest schools are serving the children with the greatest needs, and have the fewest resources to do so. More than 81 percent of urban schools have a student population that is at least 70 percent poor and 50 percent minority.

Basic achievement is lagging, especially in high-poverty inner-city schools. In both 1994 and 1996, 60 percent of the children in urban school districts failed to achieve basic levels of competency in reading and math on the National Assessment of Educational Progress. In the nation's 20 largest urban school districts, more than half of all students never graduate high school.

School violence is concentrated in large urban schools. Though school violence is not just an urban problem, violent attacks and fights are much more common in city schools, especially large ones, than they are in suburban schools. In a national survey, 1,800 urban schools reported more than 5, 400 fights in which weapons were used during the 1996-97 school year.

A sizable proportion of urban schools are literally falling apart. A recent General Accounting Office study found that 38 percent of central city schools (serving more than 5.5 million students) had at least one inadequate building, and two-thirds (with more than 10 million students) had at least one inadequate building feature, such as a roof or plumbing.

Administration Response: Urban education is a major priority in the President's budget. Proposed initiatives include: creation of Education Opportunity Zones to direct $1.5 billion over 5 years to low-achieving school districts in high-poverty areas; federal tax credits to pay interest on an estimated $22 billion School Modernization Bonds to rebuild and repair schools; $413 million for America reads to increase children's literacy; $140 million for High Hopes to launch a national effort to help young people prepare for post-secondary education; and $7.3 billion over 5 years to raise educational achievement by hiring new teachers and reducing class size in grades 1 to 3. Administration programs and universal eligibility for subsidized loans have made financial access to post-secondary education possible for everyone.

HOUSING GAP

The nation's affordable housing crisis has reached record levels, especially in central cities. At the same time, while homeownership is at its highest level ever, the central city homeownership rate continues to lag significantly behind the suburbs.

Urban homeownership - including middle-class homeownership - lags behind the suburbs. Homeownership rates are 70 percent in suburbs but just 50 percent in cities. Central city residents of all income levels are less likely to own a home than suburban residents with similar incomes. Racial discrimination at all income levels adds to the urban homeownership gap. African American and Hispanic households of all income levels are less likely to own a home than white households of the same income group.

Despite strong economic growth between 1993 and 1995, a record 5.3 million very low-income renters paid more than 50 percent of their income for rent or lived in substandard quality housing - commonly referred to as "worst-case housing needs." Households with severe housing problems are disproportionately found in central cities: 18 percent of central city renters -- 2.8 million families -- have severe housing problems.

Worst-case needs increasingly affect the working poor. Between 1991 and 1995, worst-case needs for families with at least one person earning a full-time paycheck rose by 265,000 families -- an increase of 24 percent. There has been a sharp decline in affordable housing. Between 1993 and 1995, there was a loss of 900,000 rental units affordable to very low-income families -- a reduction of 9 percent. Congress has not provided additional rental assistance vouchers since 1994.

Homelessness continues to plague cities, driven by a lack of affordable housing, inadequate access to decent jobs, and problems ranging from mental illness and substance abuse to domestic violence and outdated or non-existent job skills. Best estimates suggest that 600,000 men, women, and children are homeless on any given day, with several times that many people experiencing homelessness each year.

Administration Response: The President's budget includes proposals to expand homeownership, expand rental housing assistance, and reduce homelessness. These include an additional 100,000 Section 8 rental assistance vouchers; a new HOME Bank that will expand the use of HUD's successful HOME housing block grant funds; another round of Homeownership Zones; record funding for Homeless Assistance programs; a 40 percent expansion of the Low-Income Housing Tax Credit; increased promotion of Fair Lending; expansion of FHA loan limits, and a 73 percent increase in funding for fair housing education and enforcement.