The Community Development Block Grant (CDBG) and other economic development programs are intended to target federal assistance to communities with high rates of poverty and aging housing stock. They were established to help meet the housing needs of low-income homeowners, homebuyers and renters, expand the community’s supply of affordable housing, and promote economic development. The programs attempt to accomplish these goals by providing assistance to poverty stricken communities to revitalize, expand, and upgrade their physical infrastructure to attract new industries, expand businesses, diversify their economies, and generate job and investment growth.1
The Federal government spent more than $4.2 billion on Community Development programs in FY2011.2 This represents a 24 percent increase over what was spent in FY2008, not including the costs to administer the programs.3
Economic development activities most commonly associated with these programs include: planning and developing strategies for job creation and retention; developing new markets for existing products; constructing roads and sewer systems to attract industry to undeveloped areas, and establishing business “incubators” to provide facilities for new business operations.4
The GAO has identified substantial overlap in economic development efforts at four agencies — the Departments of Commerce; Housing and Urban Development (HUD); Agriculture (USDA); and the Small Business Administration (SBA). Grants, loan guarantees and direct loans are also provided for “entrepreneurial efforts” such as helping employers develop business plans and identify funding sources.5 The GAO found that these efforts are often fragmented or overlap because of legislative or regulatory restrictions that target funding on the basis of characteristics such as geography, income levels, and population density (rural or urban). A shocking 60 percent of the programs fund only one or two activities while simultaneously targeting similar geographic areas.6
Further, the GAO report noted that agencies lack key information about the programs they administer; do not consistently monitor or evaluate these programs; have few incentives and no guide for collaboration; and that federal statutory or regulatory authorities often impede agencies’ ability to work with one another.7
Granting states the maximum flexibility to collaborate and coordinate activities in community and economic development with other anti-poverty efforts would enable them to conserve resources and consolidate or eliminate some programs — objectives the GAO report shows the federal government has been unable to achieve during the two decades covered by the GAO report.8
Ronald Reagan acted almost immediately as President to increase the efficiency of the Community Development Block Grant. In one of his first bills, the Omnibus Budget Reconciliation Act of 1981, President Reagan handed over a portion of the program for states to control. Using the Omnibus bill, the President grouped 50 programs including the small cities portion of the CDBG into 9 distinct block grants for states to better serve their constituents. Sadly, over the years, the program has become little more than a slush fund for big-city mayors.
The CDBG program was created in 1974 to provide communities with resources to address community development needs. It is now one of the longest continuously run programs at the Department of Housing and Urban Development. It provides annual grants on a formula basis to 1,209 general units of local government and States.9