Say Goodbye to Community Development Funding – Bush plans to reduce and cut crucial HUD programs. Comments from Tony Preite, Director, Montana Department Of Commerce

Under a proposed White House plan, the Department of Housing and Urban Development (HUD) would lose substantial funding for its community development programs, and funding for rural housing and economic development programs would be eliminated. President Bush also plans to transfer existing programs that he deems redundant to other agencies such as Commerce and Labor.

By Jonathan Weisman
Washington Post Staff Writer

Full Story: http://www.washingtonpost.com/wp-dyn/articles/A7862-2005Jan13.html

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TO: Local Government Officials, Staff, Community And Economic Development Agencies, Organizations And Others Interested In The Montana Community Development Block Grant (CDBG) Program

FROM: Tony Preite, Director, Montana Department Of Commerce

SUBJ: 1. Bush Administration Proposes 50% Cut in CDBG Funding

2. Summary of Proposed Changes, Public Hearing Announcement, Application Deadlines, Allocation and Distribution of Funds, and Other Issues Effecting Montana’s CDBG Program

DATE: January 20, 2005

I am honored to have been selected by Governor Brian Schweitzer to serve as the Director of the Montana Department of Commerce. During my service as Executive Director of the Bear Paw Development Corporation of Northern Montana and as State Director of USDA Rural Development, I had the opportunity to work with the staff of the Montana Department of Commerce to accomplish many local economic development, housing, and public facility projects. I have always had the highest regard for the Department’s programs and staff and now look forward to serving Montana communities as the new Department Director.

As many of you know, Governor Schweitzer has proposed one of the most ambitious economic development plans in our state’s history. The Governor is committed to provide the resources necessary to dramatically move Montana forward. He has included in his budget the funds which will allow the Department of Commerce to undertake the task of business and job expansion that will greatly benefit all Montanans. Unfortunately, President Bush’s proposed budget seeks to drastically reduce and even eliminate some of the very programs that are essential to the success of the Governor’s efforts to accelerate economic and community development. If the President’s proposal is approved, all Montanans will have significantly fewer resources to meet their critical economic and community development needs.

1. Bush Administration Proposes 50% Cut in CDBG Funding

Montana’s CDBG program is a federally funded, competitive grant program designed to help communities of less than 50,000 population with their highest priority community development needs. All CDBG projects must principally benefit low and moderate income persons. The program was established by the federal Housing and Community Development Act of 1974. The Montana Department of Commerce (MDOC) administers the program under contract with the U.S. Department of Housing and Urban Development (HUD). In 1982, MDOC took over administration of the “Small Cities” CDBG program for communities of less than 50,000 population from HUD. The MDOC Business Resources Division administers the Economic Development category. The MDOC Community Development Division administers the Housing and Public Facilities categories.

Since the Department of Commerce began administering the State CDBG Program in 1982, the annual budget for the CDBG program that has been set by Congress has seldom varied, up or down, by more than about five percent. Last week it was announced that the Bush Administration is proposing to cut the Federal Fiscal Year (FFY) budget for the CDBG program by up to 50%. This would obviously have a devastating impact on the program, nationally, and for Montana communities. Billings, Great Falls, and Missoula are all "Entitlement" CDBG communities and receive CDBG funding on a formula basis to support their community development programs. All other communities under 50,000 are served by the State CDBG Program administered by this Department. The Administration’s proposal would also transfer administration of the CDBG program from HUD to the U.S. Department of Commerce.

Since 1982, Montana communities have received CDBG funds to address a variety of critical community needs, while principally benefiting low and moderate income families. This CDBG funding has been matched with other federal, state, and local funding to accomplish hundreds of millions of dollars of important local economic development, housing, and public facility projects. In fact, there are few Montana communities that have not benefited from the CDBG program at one time or another. Obviously, there is no way to project how Congress will respond to this proposed cut in CDBG funding.

The information that follows regarding Montana’s proposed FFY 2006 program and budget was developed before the Bush Administration’s proposed cuts became public. We will proceed with the development of application guidelines for the FFY 2006 (calendar year 2005) CDBG program, assuming a funding level equal to last year’s program, until we receive more definitive information regarding the funding for next year’s program. If Congress concurred in a 50% cut for CDBG, local officials could expect that the setasides for economic development, housing, and public facilities projects proposed in this memo would be reduced by half.

We will try to keep Montana local government officials, and others interested in the CDBG program, informed of any new developments regarding the proposed cut in funding for CDBG. If you would like to receive updates on the CDBG budget issue, contact either Gus Byrom or Karyl Tobel at the telephone number or e-mail address on the next page and provide your e-mail address to them.

2. Summary of Proposed Changes, Public Hearing Announcement, Application Deadlines, Allocation and Distribution of Funds, and Other Issues Effecting Montana’s CDBG Program

The following presents a summary of proposed changes to the Montana Community Development Block Grant (CDBG) Program Application Guidelines for Economic Development, Housing, and Public Facility projects. This summary focuses on the key issues that local government officials and others need to be aware of in order to offer comments. The final guidelines will be distributed to local governments and other interested persons in February, 2005 for Planning and Public Facilities projects; in June, 2005 for Housing projects; and in February 2005 for Economic Development projects.

Since the establishment of the Montana CDBG program in 1982, the Montana Department of Commerce has attempted to keep the CDBG program as useful to local governments as possible, consistent with the federal laws and regulations under which it must operate. The proposals presented in this report are an important part of the Department’s on-going effort to continually re-evaluate and improve the program. It is important that local officials and others interested in community development review and provide comments on these proposals.

A. Joint Public Hearing – Community Development Block Grant (CDBG) Programs – February 8, 2005

A public hearing on the proposed CDBG Application Guidelines will be held Tuesday, February 8, 2005 at 1:30 P.M. in Room 228, the 2nd floor Large Conference Room of the Montana Department of Commerce, Park Avenue Building, 301 S. Park Avenue, Helena, Montana. Written comments may also be submitted to:

Community Development Division
Attention: Gus Byrom
Montana Department of Commerce
P.O. Box 200523
Helena, Montana 59620-0523
Email: [email protected]
Telephone: (406) 841-2777
Fax: (406) 841-2771

Business Resources Division
Attention: Karyl Tobel
Montana Department of Commerce
P.O. Box 200505
Helena, Montana 59620-0505
Email: [email protected]
Telephone: (406) 841-2733
Fax: (406) 841-2731

Comments must be received no later than 5:00 P.M., Tuesday, February 15, 2005 in order to be incorporated into the formal hearing record.

B. Proposed Application Deadlines

For several years, the HUD and Congress have been placing increasing pressure on all of the states that administer the State CDBG Program to expedite the expenditure of their CDBG funds. In response to Congress’ concerns and with HUD’s encouragement, the Montana Department of Commerce (MDOC) accelerated the funding cycle for Housing and Public Facilities beginning with the Federal Fiscal Year (FFY) 2002 CDBG program. To accomplish this, the Department conducted grant competitions for FY 2002, 2003, and 2004 funding allocations within a single 24-month period. This acceleration of the grant competitions was a one-time only event.

The objective of this “fast forward” action was to establish a long-term annual grant application cycle that would provide for the ranking of both housing and public facility applications in the calendar year prior to the state’s actual receipt of the federal fiscal year (FFY) CDBG allocation that would fund those projects. This change in the application cycle has now been achieved. CDBG Public Facilities applications for FFY 2006 funds would be due in May 2005 and a Housing and Neighborhood Renewal competition for FFY 2006 funds would have applications due in November 2005.

Within the public facilities and housing categories, communities would be applying for FFY 2006 funds without knowing precisely how much CDBG funding will be available. The award of FY 2006 funds will be contingent on Montana receiving its CDBG grant funds from Congress and HUD. Congress recently reduced funds for the CDBG FFY 2005 program by approximately 5 percent from 2004 levels.

In addition to accelerating the expenditure of CDBG funds, the new funding cycle offers several advantages for Montana communities:

• With projects ranked in the calendar year prior to receiving the CDBG fiscal year allocation, the local projects can begin start up activities immediately as soon as the CDBG allocation for Montana is determined and grants are awarded by MDOC. MDOC staff can also begin preparatory activities, such as drafting contracts, during the time between application ranking and grant award. MDOC CDBG staff can conduct the project administration workshop for the new grant recipients soon after the grant awards for public facilities and housing projects are announced. Local staff can also begin some project start up activities in anticipation of the funding announcement, such as beginning the environmental review process.

• In the past, projects that would be jointly funded by TSEP and CDBG had to be submitted to CDBG after the Legislature has acted on the TSEP application. The new CDBG cycle allows TSEP and CDBG projects to be submitted concurrently. This will also make it easier to coordinate the public hearing requirements for both programs. The Legislature is currently reviewing TSEP applications submitted in May 2004. The next round of the TSEP application process will commence next year with the applications due in May 2006.

The tentative application deadlines for the grant competitions to take place in calendar year 2005 will be as follows:

 Economic Development – Open Cycle
ED Guidelines available February 2005
ED Planning Grant Guidelines available May 2005

 Planning Grant Competition for FFY 2005 Grants – Housing and Public Facilities
Applications due April 22, 2005
Grant Announcement – June 2005

 Public Facilities Competition for FFY 2006 Grants
Applications due May 27, 2005
Grant Announcement – September 2005

 Housing Grant Competition for FFY 2006 Grants
Applications due November 4, 2005
Grant Announcement – February 2006

C. Proposed Allocation and Distribution of Funds

HUD has just released Montana’s total allocation of CDBG funds for FFY 2005. CDBG funds will be allocated in the following manner:

Distribution of FFY 2005 CDBG Funds

Total FFY 2005 State CDBG Allocation $7,626,300

Less CDBG funds for State program administration $328,789
(as provided by federal law)

Amount Available for Award to Local Governments $7,297,511

Less 1/3 Allocation for Economic Development Projects $2,432,503 *

Total Available for Housing $4,865,008
And Public Facility Projects

Less Planning Grants – Housing and Public Facilities $ 225,000

Sub-Total $4,640,008
Allocation for Housing Projects (31%) $1,438,403

Allocation for Public Facilities Projects (69%) $3,201,605

Proposed Distribution of 2006 CDBG Funds

The following table summarizes the estimated distribution of CDBG funds for the 2006 program, assuming that the funding level is similar to that received for FFY 2005 – see above.

Anticipated FFY 2006 State CDBG Allocation – $7,626,300

Less CDBG funds for State program administration $328,789
(as provided by federal law)

Amount Available for Award to Local Governments $7,297,511

Less 1/3 Allocation for Economic Development Projects $2,432,503 *

Total Available for Housing $4,865,008
And Public Facility Projects

Less Planning Grants – Housing and Public Facilities $ 225,000

Sub-Total $4,640,008
Allocation for Housing Projects (38%) $1,763,203

Allocation for Public Facilities Projects (62%) $2,876,805

* One-third of the total amount available for new grants would continue to be set aside to allow economic development funds to be available to applicants on a continuous basis.

Now that the “fast-forward” schedule has been completed, the Department can return to the earlier system that based the funding allocation between Housing and Public Facilities upon the demand between the two categories for the previous two years. Using a two-year average adjusts for any variability in the demand for CDBG public facilities funding that may be associated with the biennial cycle of the State’s legislatively approved infrastructure funding programs: the Department of Natural Resources and Conservation (DNRC) Renewable Resources Grant and Loan Program and MDOC’s Treasure State Endowment Program (TSEP).

In this way, the funding reserved for each category can respond to changing demand for CDBG Housing and Public Facilities grants over time. Through this method, the amounts allocated between the two categories will change based upon actual past demand; however, the basic method of distribution remains unchanged. The chart below lists the number of Housing and Public Facilities applications and the total dollars requested for the last two years.

CDBG APPLICATIONS RECEIVED
2004-2005
HOUSING PUBLIC FACILITIES
FFY YEAR # OF APPS TOTAL $ REQUESTED # OF APPS TOTAL $
REQUESTED
2004 6 $2,633,500 10 $3,776,285
2005 9 3,803,500 14 6,494,700
Total: 15 6,437,000 24 10,270,985
% of Total Applications 38% 62%

As a result of the method of distribution described above, the allocations for the Housing and Public Facilities categories for FFY 2006 funds will be established at 38% and 62%, respectively, of the total estimated available funding for these two categories or $4,640,008. Previously, the percentage for Housing was 31% and the percentage for Public Facilities was 69%. This increase for Housing grants reflects the increasing number of housing applications and reduced number of public facilities applications during the last two years.

D. CDBG Technical Assistance Activities

Economic Development Program

The Community Development Block Grant – Economic Development Program intends to set-aside approximately $225,000 for economic development planning, capacity building, and technical assistance grants from the FFY 2005 program. The Department intends to use the set-aside for activities similar to those funded in recent years but will establish specific application policies by May 2005. The policies will specify funding priorities, application procedures, and amounts available at that time for each subcategory. Establishing policies in May will provide flexibility to address specific needs identified at the time federal funding becomes available for the CDBG program. Funds not utilized for this category may be used for regular economic development activities. All other aspects of administration of Community Development Block Grant – Economic Development funds will be unchanged from previous years.

Housing and Public Facilities Categories

For FFY 2005, within the Housing and Public Facilities categories, the CDBG program proposes to continue to set aside $200,000 for planning grants to local governments, the same level as last year. The planning grant funds can be used to assist local governments in a wide variety of planning-related activities, including preparation of community growth policies, needs assessments, capital improvements plans, housing studies, and preliminary architectural or engineering plans related to construction of water and wastewater systems, and other public facilities.

In addition, the program will continue to set aside $25,000 from the Housing and Public Facilities categories to provide funding to the Montana Economic Developers Association (MEDA) to assist Montana communities with preparation of local needs assessments through MEDA’s Resource Team Assessment (RTA) process. The RTA process has received a very positive response from communities and can be used to fulfill the CDBG Needs Assessment requirement. To date, approximately 32 communities have completed RTA-assisted community assessments. For additional information on the RTA process see the MEDA website: http://www.medamembers.org/MEDA/ or contact Gloria O’Rourke at Montana Economic Developers Association, 118 E. Seventh St., Suite 2A, Anaconda, MT 59711; phone (406) 563-5259; fax (406) 563-5476 or send e-mail to: [email protected].

E. Modify the Title of “Housing” Category to “Housing and Neighborhood Renewal”

Increasingly, the President’s Office of Management and Budget (OMB) and HUD are putting pressure on the CDBG Program to demonstrate that housing activities not only assist individual housing units, but have an overall positive, visible impact on the surrounding neighborhood, as well. To reflect this emphasis, the CDBG Program is changing the title of the housing category to “Housing and Neighborhood Renewal.” Over its history, a major objective of the CDBG Program has been not only to improve local housing conditions, but also to combat neighborhood deterioration and community blight, as well as to encourage public and private community reinvestment. The CDBG program encourages local governments to undertake appropriate, complementary community revitalization activities in conjunction with the principal housing activities proposed in a local project. This can include activities such as community cleanup and fix-up campaigns; demolishing hazardous, dilapidated, vacant buildings; preparing historic inventories prior to demolition; or improving or constructing sidewalks, streets, street lighting, or neighborhood parks or playgrounds.

F. Ceiling for Planning Grants – Housing and Public Facilities Category

Given the reduction in the federal allocation for the CDBG Program and recognizing the very high demand for planning grant funds, the Department is proposing to decrease the CDBG Planning Grant ceiling for individual applications within the Housing and Public Facilities categories from $20,000 to $15,000. This action would be consistent with the reduction in funds being provided for the program this year and would allow more applications to be funded.

G. Dates And Locations For Public Facilities Workshops For Spring, 2005

In cooperation with the Water, Wastewater, and Solid Waste Agencies Coordinating Team (W2ASACT), the CDBG program will be co-hosting two workshops designed to familiarize local governments with federal and state low-interest loan and grant programs that are available to assist local governments and water and sewer districts in financing water, sewer, and solid waste improvement projects. The dates and locations are as follows:

Wednesday, February 16: W2ASACT Workshop at Great Falls’ Heritage Inn, 8 a.m. – 5 p.m.

Wednesday, March 16: W2ASACT Workshop at Billings’ Sheraton Inn, 8 a.m. – 5 p.m.

In addition, the CDBG Program will be hosting the following four one-half day workshops focusing on specific details of CDBG requirements related to the upcoming CDBG Public Facilities application deadline May 27, 2005.

Tuesday, February 15: CDBG ½ Day Workshop – Great Falls’ Heritage Inn, 1- 4:30 p.m.

Thursday, March 17: CDBG ½ Day Workshop – Billings’ Sheraton Inn, 8:30 a.m. – noon

Tuesday, March 22: CDBG ½ Day Workshop – Missoula’s Ruby’s Inn, 8:30 a.m. – noon

Tuesday, March 29: CDBG ½ Day Workshop-Wolf Point ‘s Great Northern, 8:30 a.m.-noon

Please note that the February 15, half-day CDBG Workshop will be held in Great Falls in the afternoon before the February 16 full-day W2ASACT Workshop. The March 17, half-day CDBG Workshop will be held in Billings on the morning after the March 16 full-day W2ASACT Workshop.

Local government officials and all those interested in learning how to plan for and finance local public facilities are encouraged to attend these sessions. The four one-half day CDBG workshops will cover possible funding for senior centers, Head Start facilities, rural hospitals, and other types of public facilities, in addition to possible assistance for water and wastewater projects.

New E-mail Addresses
Effective immediately, all Montana government e-mail addresses are changing from state.mt.us to mt.gov; the earlier e-mail address: state.mt.us can still be used through December, 2005. Here are the new e-mail addresses for myself and the Department staff who work most closely with CDBG:

Tony Preite – [email protected]
Dave Cole – [email protected]
Gus Byrom – [email protected]

Joanne Gilbert – [email protected]
Gary Morehouse – [email protected]

Chris Imhoff – [email protected]
Janet Kenny – [email protected]
Frank Kromkowski – [email protected]
Karyl Tobel – [email protected]
Fran Viereck – [email protected]
Judy Carlson – [email protected]
Joe LaForest – [email protected]