HUD’s Community Development Fund missing $2.4 billion

The largest “Community Development” program by far is HUD’s Community Development Block Grant.  In 2009 it cost $6.4 billion dollars – which is the least amount it cost in years.  The program gives money directly to states and local governments with a stipulation of how the money is supposed to be spent.

The annual CDBG appropriation is allocated between States and local jurisdictions called “non-entitlement” and “entitlement” communities respectively. Entitlement communities are comprised of central cities of Metropolitan Statistical Areas (MSAs); metropolitan cities with populations of at least 50,000; and qualified urban counties with a population of 200,000 or more (excluding the populations of entitlement cities). States distribute CDBG funds to non-entitlement localities not qualified as entitlement communities.

HUD determines the amount of each grant by using a formula comprised of several measures of community need, including the extent of poverty, population, housing overcrowding, age of housing, and population growth lag in relationship to other metropolitan areas.

HUD does a good job of keeping track of exactly how much (right down to the penny) that it transfers to state and local governments.  You can see an excel sheet of their 2009 activities here(xls).  The problem with the sheet is that it only accounts for just over $4 billion in spending.  However, according to the OMB Public Budget, and HUD’s own Congressional justification(pdf), the CDFG account spent $6.4 billion.  Where did that other $2.4 billion go towards?

I don’t think there’s anything sinister going, I’m beginning to think however, that that information isn’t available online.

Community Development

There is a subfunction of our government called “Community Development”. What does it do? It is the designation given to federal programs that are meant to renew, repair, or develop land that would not otherwise be used. It concentrates on local governments and accounted for nearly $7 billion in spending in 2009 which was about a couple billion less than the previous year and the projected amount for the following year. The U.S. Treasury only reports 9 total accounts for this sub-function, but there are a lot more than 9 government programs. Here they are:

The two most expensive accounts are the Community Development Fund(CDF) and the Community Development Financial Institutions Fund Program(CDFI). Together they accounted for $6,622 million of the total $6,860 million spent on community development. The cover a lot of items and will be covered in separate posts. This post will cover the remaining $238 million spent on community development.

The Neighborhood Stabilization Program is the third most expensive account in community development at $116 million in 2009. This program is a direct result of the bursting of the housing bubble in 2008 and I should’ve(but didn’t) count it as an expense related to the recession. It came into existence in Fiscal Year 2009. The purpose of the program is for:

stabilizing communities that have suffered from foreclosures and abandonment. Through the purchase and redevelopment of foreclosed and abandoned homes and residential properties, the goal of the program is being realized.

The program has helped states and local governments accomplish the following:

  • Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties;
  • Purchase and rehabilitate homes and residential properties abandoned or foreclosed;
  • Establish land banks for foreclosed homes;
  • Demolish blighted structures;
  • Redevelop demolished or vacant properties

The next biggest account at 49 million dollars is HUD’s research division, Office of Policy Development and Research (PD&R).  That’s just the cost of research and technology.  Add to that the account, “PD&R Personnel Compensation and Benefits” which was another $16 million in 2009.  Combine them together and here’s what the total $65 million buys us:

PD&R’s primary function is to support HUD’s mission and the policy agenda of the Secretary. PD&R performs policy analysis, research, surveys, studies, and evaluations; both short- and long-term; to help the Secretary and other principal staff make informed decisions on HUD policies, programs, and budget and legislative proposals. These activities provide the Department and the nation with current information on housing needs, market conditions, and HUD programs, as well as research on important housing and community development issues.

In addition to its research and policy analysis functions, PD&R has other related responsibilities, including assisting in the oversight of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, providing data support to program office operations, building partnerships with universities that assist their communities, and administering various activities related to the international community.

You can check out their website and see that the group does provide an enormous amount of data and research.  Even though the accounts are labeled “Community Development”, their research goes well beyond just that function.

The Renewable Energy Program is an unique account because it’s the one of only 2 accounts labeled “community development” that isn’t controlled by HUD.  This one is under the auspices of the Department of Agriculture.  I would think that it would be controlled by the Department of Energy, but I guess that’s not for me to decide.  It’s cost was $27 million in 2009.  It’s purpose is to provide loans to small, rural businesses and farms that make investments in renewable energy or invest in energy efficient projects.  While it’s a relatively small program, I would be curious to find out how effective the program actually is.

The “Brownfields Redevelopment” program has a pretty worthy goal.  It provides grants to publiccommercial projects that are attempting to redevelop polluted(and possibly polluted) industrial lands.  In 2009 the program cost $22 million, and helped transform 7 previously polluted sites into now used commercial sites.

The “Empowerment Zones/enterprise Communities/renewal Communities” program, at a cost of $17 million dollars a year attempts to revitalize failing urban zones.  The overall strategy of the program is to provide tax incentives to attract businesses to an area.  The employers get lower taxes, and the city attracts working people to it’s center.  The total cost of the program is much greater than $17 million.  However, those costs don’t show up as outlays because they’re tax write-offs which makes them “non-budgetary”.

The last two accounts are the “Community Development Loan Guarantees Program”.  One of the accounts is mandatory, the other discretionary.  Together they only cost $8 million in 2009.  This money runs the section 108 loans.  They are loans HUD gives out to entities for community development.  The cost of the program is pure overheard, as, no one has ever defaulted on their loan.

I realize this has been a pretty dry article.   However, hopefully you now know a little bit more of what your tax dollars help fund.  Even if you don’t think the government shouldn’t be funding these types of programs, you have to admit that the money is being spent on worthy goals with long last, beneficial results.  I will cover the much larger CDFI and CDF programs in a later post

Community Development Month

August is going to be “Community Development Month” here.  No, it’s not some crackpot way to try and promote my blog.  Rather, it’s the part of the Federal Budget I’ll be mostly studying this month.  The Office of Management and Budget has a spending category called “Community and Regional Development”.  Within that there are 3 subgroups, “Community Development”, “Area and regional development”, and “Disaster relief and insurance”.

Altogether, this function of the government only gets about $27 billion a year, making it the 3rd smallest function.  Beat out by Energy, and general government.  I point this out, because I only meant this to be “Community Development Week” because it was so small.  However, upon studying it further, it’s turned into a much larger task.  For instance, “Community Development” only has 9 accounts associated with it in 2009, but many of those accounts represent more than 1 program.  For instance, the “Community Development Fund” covers 8 or 9 programs administrated by the Department of Housing and Urban Development.  There’s also a Renewable Energy Program ran by the Department of Agriculture that covers expenses for 3 different programs.

It probably sounds like a dry topic, but I’m learning about programs that I never heard of, fixing problems I didn’t know existed.  For instance, there is a fund to encourage cities to clean up polluted land and get it redeveloped.  There are other programs that I will go through as the month goes on.

This is meant to emulate the work I did on the “Income Security” function.  However, this time, available information prevailing, I will be going into even more detail than before.  If it’s interesting to me and others, I hope to do this with each of the sub-functions.  By the end of it, I should be an expert on the federal budget.  We’ll see…