Statement of Roy A. Bernardi
March 14, 2002
Assistant Secretary for Community Planning and Development
U.S. House of Representatives
Committee on Financial Services
Subcommittee on Housing and Community Opportunity
Roukema and Members of the Subcommittee, thank you for the opportunity
to testify before you today. My name is Roy Bernardi and I am the
Assistant Secretary for Community Planning and Development at the
Department of Housing and Urban Development. On behalf of Secretary
Martinez I want to extend our commitment to work with you to improve
the effectiveness of the Community Development Block Grant (CDBG)
program and to assure that America's neediest communities receive
adequate Federal resources to meet local development needs.
are certainly appreciative of the additional $95 million appropriated
for the Department's CDBG formula programs for fiscal year 2003.
The increased funding will provide for larger allocations to our
grantees and result in more assistance being made available to those
most in need.
communities have fewer local resources for addressing housing and
community and economic development needs and are, consequently,
in greater need of Federal financial assistance. The lowest income
residents of these communities deserve to share in Congress' vision
of viable urban communities.
CDBG program, authorized by the Housing and Community Development
Act of 1974, as amended, is one of the most successful government
aid programs to have ever been created. A testimony to this success
is the longevity of the program and how it has adjusted over the
years in response to changes in public policy over the nearly twenty-eight
years since its inception. The CDBG program remains one of the most
flexible local tools for revitalizing neighborhoods and encouraging
economic development. Since its inception, the CDBG program has
provided approximately $100 billion to our nation's cities, towns,
counties and states to undertake a wide range of activities that
are locally determined. The imprint of the CDBG program can be seen
in nearly every jurisdiction of this great country. As a former
mayor and municipal worker, I can attest to the significant impact
that the CDBG program has had on communities large and small.
prior to accepting my current position at HUD, I served as mayor
of Syracuse, New York. This provided me with first hand knowledge
of the usefulness of the CDBG program as a tool to encourage revitalization
and growth, especially in older, poorer cities. More than that,
however, was the appreciation I developed for the devolution of
this wonderful Federal program back to the community level and for
the insightfulness of the designers of this program in recognizing
the basic truth that the people know what their needs are better
than government officials. As a mayor, I often interacted with mayors
and other officials on issues related to community development and
the dwindling availability of resources. The CDBG program, however,
has remained one of the most useful and dependable sources of funding
for municipalities. In fact, our proposed reduction, not elimination,
of funding to the wealthiest communities will still provide those
communities with a steady, annual funding stream - albeit at a lower
are currently 865 cities and 158 counties "entitled" to receive
CDBG funds directly from HUD; these are our entitlement communities.
In addition, 49 states and the Commonwealth of Puerto Rico award
more than 3,000 grants to smaller cities and counties from CDBG
funds allocated to the states by HUD each year. HUD administers
CDBG funds to Hawaii's three nonentitlement counties.
this vast number of grantees exists a wide variety of recipients,
some quite wealthy, especially when compared with the poorest grantees.
It is, therefore, quite understandable that calls would be made
to re-evaluate the method of allocating the limited resources of
the CDBG program. The continually increasing number of grant recipients
has resulted in CDBG funds being stretched further and further with,
in some localities, a lessening of the impact CDBG dollars can have
on local housing, neighborhood development, public facilities, economic
development and the provision of social services.
though CDBG formula funding has grown 11 percent since 1980, many
large cities have seen a decrease in their CDBG funds, while some
of their wealthy suburbs have received increased funding. For example,
New York City's 2002 CDBG grant was 16 percent less than its 1980
grant, while over this same time period Greenwich, CT's CDBG funding
increased 43 percent and Westchester County's increased 51 percent.
Likewise, Boston's funding decreased 5 percent, while Newton's increased
11 percent, over the same time period. Even some distressed cities
have seen substantial decreases in their CDBG funding over the past
20 years. St. Louis and Cleveland, with per capita incomes less
than three-fourths the national average, receive 21 percent less
CDBG dollars today than they did in 1980. This proposal represents
a small, but important step in redirecting CDBG dollars from areas
with sufficient fiscal capacity to meet their housing and community
development needs to those communities with greater needs and fewer
the CDBG program may be heralded as the dependable flagship of Federal
financial resources, the Department clearly recognizes that current
economic realities require at least some rethinking of how we do
business. The Department supports targeting of CDBG funds to provide
assistance to lower income persons to the greatest extent permissible
under the Housing and Community Development Act of 1974 (the Act),
1191, a bill introduced to amend this Act, proposes a fairly stringent
targeting of CDBG funds in an effort to assure that the needs of
the lowest income communities are met. With respect to H.R. 1191,
it would be premature for the Department to respond to this bill,
at this time, since it has not yet been voted out of committee.
We recognize that there is some concern with this bill because while
it will demand more targeting it will significantly limit, for many
communities, the very flexibility that has been the cornerstone
of the program.
In addition, the Department was asked by Congress to submit a study
of targeting of CDBG funds and HUD's administrative oversight of
the program. That study was delivered to the House Committee on
Appropriations yesterday. The report emphasized three things: (1)
targeting of CDBG funds is accomplished by the formulas used in
determining allocations; (2) the program requires that 70 percent
of a grantee's CDBG funds principally benefit low- and moderate-income
persons; and (3) activities identified as principally benefiting
persons of low- and moderate-income generally assist persons of
whom at least 51 percent are low- and moderate-income. In addition,
our analysis shows that, for low- and moderate-income benefit activities
completed during FY 1998 - FY 2000, 84 cents of each CDBG dollar
expended directly benefited low- and moderate-income persons. Finally,
HUD's administrative oversight of these targeting requirements is
based upon verifiable quantitative data. Our systematic and continuous
review of our data ensures that grantees are undertaking activities
that are principally benefiting low- and moderate-income persons.
Notwithstanding the foregoing, the Department has proposed an adjustment
to the method of allocating CDBG funds: a reduction in the level
of funds provided to the wealthiest communities to provide more
funds for distribution to the poorest communities.
CDBG funds are already targeted in two ways: first, by use of need-based
formulas; and second, by requiring that 70% of a grantee's allocation
benefit low- and moderate-income persons. In the first instance,
CDBG program funds are allocated by use of one of two need-based
formulas. The first (and original) formula is calculated by counting
poverty, 50 percent; population, 25 percent; and overcrowded housing,
25 percent. The second formula is calculated by counting poverty
at 30 percent; population growth lag from 1960 to 2000, at 20 percent;
and age of housing stock (number of units constructed before 1940),
at 50 percent. A locality's annual allocation is determined by the
higher of the two formulas with slight pro rating to assure that
the total amount of funds distributed does not exceed the total
addition to the use of two needs-based formulas to determine annual
local allocations, the Act requires that not less than 70 percent
of the CDBG funds provided to states and entitlement communities
be used for the support of activities that benefit low- and moderate-income
persons. Low- and moderate-income person means a member of a household
having an income equal to or lower than the Section 8 low-income
limit established by HUD. Generally, the incomes are less than 80
percent of the median income in an area.
the Act and our regulations require that CDBG funds primarily benefit
low- and moderate-income persons, more can be done to further target
these very funds to the neediest grantees. In a period of reduced
budget authority such as we are experiencing now, it is apparent
that a strong effort must be made to adjust allocations of our limited
funds. Our wealthiest recipient communities would have their annual
formula allocation reduced, but not eliminated, to provide for needier
communities to receive more adequate levels of funding.
The Department is currently proposing a change in determining grantee
eligibility that may better target our funds in just such a way.
Our 2003 budget proposes reducing the annual CDBG allocation to
the wealthiest one percent of eligible grantees, those with per
capita income two times the national average ($14,420 in 1989),
by 50 percent. Using the latest available data (from the 1990 census),
an example of the effect of such a reduction, based upon FY 2002
data, would provide approximately $8.6 million that could be distributed,
by formula, to all remaining grantees. This would also allow budget
resources to be shifted to other efforts, such as the proposed Colonias
Gateway Initiative that will serve some of the most distressed communities
in the country.
communities that would lose funding based upon the 1990 census data
currently available are:
as a multiple of
The following communities were inadvertently listed in the original
2003 budget summary: Colorado Springs, CO; Penn Hills, PA; Virginia
Beach, VA; and Malden, MA.
reallocating the funds from the wealthiest communities, the Department
will be able to target CDBG funds to communities that have lesser
local resources for housing, community and economic development
needs. The nine communities (with a total CDBG allocation level
of $17.3 million) were identified from 1990 census data as meeting
the threshold of exceeding the per capita income by 200 percent.
However, these communities may change once the 2000 census data
is available. A final analysis of the actual communities to receive
a reduction of a portion of their CDBG funds will not be possible
until the new per capita income data is available in the fall of
let me address possible changes to the basic formula to distribute
funds to our grantees. In FY 2002, we had access to 2000 census
data on population and growth lag. That was used. For the FY 2003
allocation we expect to have 2000 census data for the remaining
formula factors of poverty, pre-1940 housing and housing overcrowding.
We will not have, however, data for the whole country until late
fall 2002. When this complete data is available, we will conduct
a formula study. We do not expect to have that formula study completed
until sometime in the spring of 2003. Congress could then consider
the targeting issue and decide if changes should be made to the
allocation formula in FY 2004. The Department has undertaken similar
studies following each decennial census.
you very much. This ends my opening remarks.
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