HUD STUNS PRACTITIONERS AND WITHDRAWS PROPOSED FAIR HOUSING RULE

Originally published on October 28, 1998, the proposed fair housing rule which was intended to provide grantees with information on how HUD would review the Analysis of Impediments to Affirmatively Furthering Fair Housing and the actions local governments take to ameliorate identified impediments, was withdrawn on Wednesday, April 14. NCDA, which won an extension from HUD on this proposed rule, submitted comments as did many communities, non-profit entities, and individuals on problematic issues contained in the proposed rule. After many discussions and participation with grantees, public interest groups and the general public, it appeared that a meeting of the minds had taken place and HUD would publish a rule that addressed the issues of concern from grantees, and put more pressure on local governments to do more about ensuring that fair housing is accessible to all Americans. It appears that after the extension of the comment period, and more contentious issues arose, HUD decided to withdraw the rule and begin anew with greater dialogue between communities and non-profits before a new proposed rule is published. There is no set time-frame for the consultation with communities, interest groups or non-profits to begin, nor were we provided with an estimation on when a new rule will be published. NCDA's concerns and comments are still a part of "the record" and we will keep you posted on HUD's progress during the consultation phase.

CONFEREES PASS THE FY 2000 BUDGET RESOLUTION

Last week, both houses of Congress finished work and passed the FY 2000 budget resolution. As we reported in the April 9 issue of the Washington Report function line 450, which contains the Community Development Block Grant Program (CDBG), the Economic Development Administration (EDA) and programs from the Rural Development Administration (RDA), was reduced from its current level of $8.8 billion to $5.3 billion for FY 2000. This has changed. The final version of the Budget Resolution reduces function line 450 to $6.3 billion in FY 2000 and eventually levels off at $3.8 billion from FY 2002 to FY 2009. In FY 2001 the cut is from $6.3 billion to $4 billion, in FY 2002 the cut is from $4 billion to $3.6 billion. After FY 2002 the line levels off at $3.8 billion. There is language in the resolution that directs the tax-writing committee to draft legislation providing for a ten-year $777.8 billion tax cut. The size of the much wanted tax cut has been reduced from $900 billion to $777.8. Perhaps the size of the cut in function line 450 is directly related to the size of the tax cut. This is not clear, but it is may lead us to believe that the proposed deep cuts to community and regional development programs are of concern to some. These funding levels are better than before the final version, but still completely unacceptable.

What happens next? Now the Appropriations Committee will determine funding levels for each of the 13 subcommittees. It will be up to the Chairs and the leadership of the subcommittees to determine program and agency funding levels.

Has our time-frame changed? We don't believe that we will see any real numbers for the HUD/VA subcommittee before Memorial Day. This still gives us time to tell Congress how important CDBG, HOME and HUD programs are and to let them know how each community will be affected. NCDA and its partners are still pushing for increases in CDBG and HOME funding. The letter that was sent to the members in March is still the format we are using, $5 billion for CDBG and $1.8 billion for HOME. We still believe as do the appropriations staff

that budget caps will have to be increased to ensure level funding. We have not hear that Congress is supporting great reductions in CDBG, HOME or other HUD programs.

NCDA PROVIDES TESTIMONY AT GAO HEARING-- AS GAO ISSUES AN UNFAVORABLE REPORT ON IDIS

On Thursday April 29, NCDA and the National Association for County Community and Economic Development (NACCED), the Council of State Community Development Agencies, GAO and HUD provided both oral and written testimony before the Senate Subcommittee on Housing and Transportation on IDIS. David Robinson, Senior Planner from Lake County Planning and Development Department in Lake County, IL represented both NCDA and NACCED. This hearing was scheduled to coincide with the release of GAO's year-long study of the impact and effectiveness of HUD's Integrated Disbursement and Information System. NCDA as well as many public interest groups, communities, counties, states and HUD field offices participated in the study. NCDA met with representatives from GAO in April of 1998. The results of this investigation is detailed in this report.

The following are excerpts from GAO's testimony on their findings:

["This report discusses] our recent work on the Department of Housing and Urban Development's (HUD) management controls over four block grant programs, which was conducted at the request of this Subcommittee and the Subcommittee on Housing and Community Opportunity, House Committee on Banking and Financial Services...In 1995 HUD revamped its approach to managing these formula block grants. It developed the Grants Management System to emphasize a collaborative approach to grants management and de-emphasize the compliance monitoring of grantees. This revamped system relies on information grantees enter into HUD's Integrated Disbursement and Information System (IDIS). Concerned about HUD's approach to program monitoring under this revised system, you and Chairman Rick Lazio asked us to examine whether HUD's on-site monitoring of grantees is adequate and whether IDIS provides the data HUD needs to accurately assess grantees' performance.

In summary, we found that while the Grants Management System provides a logical, structured approach to managing the four block grant programs, HUD's implementation of the system--including on-site monitoring of grantees and IDIS--does noe ensure that programs' objectives are being met and that grantees are managing their funds appropriately. Consequently, our review and those by HUD's Inspector General have identified significant problems that call into question the integrity of the four block grant programs...



With respect to monitoring, the five field offices we visited...conduct on-site monitoring infrequently. Moreover, on-site monitoring seldom targets the grantees that receive the poorest evaluations from field offices compared with other grantees, and this monitoring is not uniform or comprehensive because the field offices lack specific guidance.



For its part, IDIS does not provide the information [HUD] needs to accurately assess grantees' performance and thus does not compensate for the shortcomings in monitoring. Because of major design flaws, the information system makes the process for establishing and maintaining accounts difficult and provides ample opportunity for major problems with entering data, does not allow such problems to be corrected easily, does not provide timely and accurate information, and has difficulty producing reports. Compounding these problems, the system's security controls are weak and therefore do not ensure that the system is safe from fraud and abuse.



We therefore have made a number of recommendations designed to improve the Grants Management System including emphasizing the importance of on-site monitoring of grantees and assessing resources necessary to support such monitoring. We also recommend that IDIS be modified or replaced and that HUD take steps to improve IDIS security including ensuring that access to the system is limited to authorized users...

NCDA's and NACCED's testimony focused on several similar concerns with IDIS, including: (1) Poor communication on the part of HUD to its grantees; (2) The real-time nature of IDIS has significant implications for financial reporting, making it impossible to extract usable financial information for annual reporting; (3) The labor-intensive nature of the system requires an excessive amount of staff time to process payment vouchers and to input project completion information; (4) The need for ongoing training on the system is crucial to the system's success; and (5) How will the new DGMS system will interface with IDIS?

Cardell Cooper, testifying on behalf of HUD, extended HUD's desire to work with Congress and grantees to improve the system. "We have set target dates to improve the system. HUD will do its part to make sure the system works," assured Mr. Cooper.

A copy of NCDA/NACCED's testimony is attached to this memo. To review the GAO report, please contact the GAO website at http://www.GAO.gov.

NCDA PROVIDES TESTIMONY AT HUD APPROPRIATIONS HEARING

Each year as a right of spring, NCDA and its partners tell Congress that we want to see increases in HUD appropriations. This year is no different. We have requested an increase to $5 billion for the CDBG program and $1.8 billion for the HOME program. A copy of our testimony is attached to this memo (read testimony by David Robinson of Lake County, IL and Thomas Laurin of San Bernadino, CA).

SENATOR GRAMM (R-TX) PUSHES FOR SUPPORT TO DISMANTLE CRA

Senators who support the Community Reinvestment Act are the current target of Senator Phil Gramm (R-TX) in his battle to deflate and discard the Community Reinvestment Act. As we reported in the Washington Report, during the week of March 8, Senator Gramm met with bank and insurance industry representatives to encourage them to put pressure on Senators to pass his version of the financial modernization bill. According to The Washington Post, one of Senator Gramm's main targets is Senator Charles Schumer (D-NY). Senator Schumer just won his seat after a very long and expensive campaign in New York where Wall Street interests contributed heavily to his election.

As reported in the April 9 issue of the Washington Report the Senate version of the bill, which passed the Banking Committee on March 4, deals several blows to the Community Reinvestment Act. If Senators who support CRA buckle to banking and insurance industry pressure, passing the bill in the Senate will be that much easier for Gramm. President Clinton has repeatedly said he would veto any bill which weakens CRA.

We have heard that Senators who usually support the Community Reivestment Act need to hear much more from their constituents on this piece of legislation in order to shore up their resolve to protect CRA. Specifically, calls and letters need to be made immediately on the following points.:

• in the Senate bill, banks that are not in compliance with CRA could affiliate with other entities and engage new powers;



• the Senate bill gives a safe harbor for institutions with a "satisfactory" or better CRA rating on its most recent CRA reviews. These institutions would be automatically deemed in compliance with CRA unless "substantial verifiable information" arises. Public comment on CRA performance would be effectively eliminated; 97 percent of institutions examined in 1997-98 received satisfactory or better reatings;



• the Senate bill has a small bank exemption. Banks with less than $100 million in assets would be exempted from CRA requirements, which represents 63 percent of all banks. This provision would have a devastating effect on rural communities because small banks are often the only source of credit available in rural areas.

HOUSE SUBCOMMITTEE PASSES MCKINNEY CONSOLIDATION LEGISLATION

The House Subcommittee on Housing and Community Opportunity passed H.R. 1073, the "Homeless Housing Programs Consolidation and Flexibility Act" on Thursday, April 15. The legislation now moves to the floor of the House for approval. The purpose of the legislation is to consolidate HUD's McKinney Act homeless assistance programs to allow for greater flexibility while moving towards a greater emphasis on permanent housing solutions.

The bill proposes to set-aside 30% of HUD's annual homeless funding for a Permanent housing Development grants competition. The remaining 70% of funding will be formula-allocated to state and local grantees based on the CDBG formula. States would receive 30% of this funding, while local governments would receive 70%. The bill calls for a new funding formula to be developed within one year of enactment of the legislation, and in consultation with national interest groups and Congress. The bill includes a hold harmless provision until the new formula is adopted. Grantees would, in the first year, be guaranteed either the greater of 90% of the average of the communities' past 4 year allocation (FY95-FY99); 85% for the second year; 80% for the third and fourth year; and 75% for the fifth year. If the total amount of funding in any one year falls below $750,000, then all of the funds would be distributed by a national competition.

The bill requires each grantee to match at least 50% of the McKinney funds when donated services (voluntary hours) are not included or match 100% of the funds when donated services (voluntary hours) are included as a match source. The match can include either cash, value of any donated or purchased material or building, value of any lease on a building, bond proceeds, salary paid to staff, cost or value of any donated goods, value of taxes, fees, or other charges foregone or waived and on-site/off-site infrastructure costs.

The bill limits a grantee's administrative expenses to 5% of the total grants received or 7.5% if the grantee implements a homeless database tracking system. Under both the Permanent Housing Development grant competition and the flexible block grant portion, grantees are required to pass-through at least 50% of the funds to non-profit organizations. Under the Permanent Housing Development grant competition, grantees are encouraged to target funds toward special need populations, where practical.

The bill authorizes $1.02 for homeless funding for HUD in FY 2000 and such sums as may be necessary for FY 2001- FY 2004. Rep. Barney Frank (D-MA) offered an amendment to increse the FY 2000 appropriations level to $1.4 billion, but the amendment failed.

U.S. CONFERENCE OF MAYORS RELEASES BROWNFIELDS REPORT

Last week the United States Conference of Mayors released its second annual report on the state of brownfields throughout the nation. For those interested in obtaining a copy of this report, download it from the USCM Web Site or contact Kevin McCarty at the U.S. Conference of Mayors at 202-293-7330.

HOMEWORKS

(1) HUD Releases Notice on HOME Commitments and Expenditures

HUD's Office of Affordable Housing released CPD Notice 99-4 -- Commitment and Expenditure of Deadline Requirements for the HOME Program -- on April 16, 1999. The notice is effective through April 16, 2000. The purpose of the notice is to provide procedures for determining whether participating jurisdictions have met the requirements for committing and expending HOME program funds in accordance with the requirements of 24 CFR 92.500(d) of the HOME Program regulation. The notice revises procedures for determining commitments and expenditures under the HOME program and also revises information on data sources for determining PJ commitments and expenditures.

In determining commitments, HUD used to review a PJ's commitments for the three most recent fiscal years. Now, HUD will review a PJ's cumulative commitments. The process for determining whether or not a PJ has met its CHDO commitment has also been modified. Field Offices must determine whether the sum of total CHDO reservations, including funds reserved for CHDO capacity building from all fiscal years (FY 92 - FY 97) is equal to or greater than 15% of the PJ's cumulative allocation for these fiscal years. The notice also provides guidance to Field Offices for monitoring the total commitments of PJ's. A copy of the notice is attached.

(2) NACCED Releases HOME Technical Assistance Guidebook

The National Association for County Community Economic Development has released "A guide to Effective Property Management in Affordable Housing." To obtain a copy, please call NACCED at 202-429-5118.

HUD NEWS

HUD RELEASES WAITING IN VAIN: AN UPDATE ON AMERICA'S HOUSING CRISES

Waiting in Vain documents that the number of families with crisis-level housing needs--the so called worst case needs--remains at or near 5.3 million, the same lever found in 1995. These families earn less than 50 percent of the area median income and pay over half of their incomes

for rent or live in severely substandard housing. For a copy of this report, contact HUD USER at P.O. Box 6091, Rockville, MD 20849.

HUD SECRETARY ANDREW CUOMO DELIVERS SPEECH AT NATIONAL PRESS CLUB

Secretary Cuomo delivered a rousing speech on Wednesday, April 28, at Washington's National Press Club. Much of the speech stemmed from a recent HUD report on "Places Left Behind in the New Economy." Cuomo noted that despite the astounding economic gains over the past 6 years, many communities are still suffering. Major findings of the report include: (1) Unacceptably high unemployment remains in one in six central cities; (2) Steady population loss affects one in five central cities; (3) Persistently high poverty plagues one in three central cities; (4) One in seven central cities face both high unemployment plus either significant population loss or persistently high poverty rates, or both. Most of these cities are small or mid-sized cities. In addition to these findings, the report notes that suburban pockets of concentrated poverty are becoming more common. According to HUD, these suburban communities, like many cities, have lost much of the fiscal capacity to respond to new challenges -- the capacity to join the new economy and ensure a high quality of life for residents. HUD also notes that many rural areas are struggling as well, particularly the Colonias, the Mississippi Delta, and Appalachia.

HUD ANNOUNCES PUBLIC HOUSING FORUMS

HUD will conduct public forums on its Public Housing Agency Plan interim rule that was published on February 18, 1999, and on its Section certificate and voucher merger interim rule that will be published in the next several weeks.

May 4, 1999 (This forum will address address both rules) Strom Auditorium Lower Plaza Richard B. Russell Federal Building 75 Spring Street, S.W. Atlanta, GA

May 19, 1999 (This forum will only the PHA Plan rule) Creighton University Criss Building, Room 452 2500 California Plaza Omaha, NE

Please contact HUD at 202-708-0713 with any questions pertaining to the forums. HUD is in the process of setting-up two additional forums. The dates for these forums have not been set yet, but will be posted on the following web site: http://www.hud.gov/pih/legis/titlev.html.

NCDA NOTES

PUBLICATIONS ON THE INTERNET

At the Winter Meeting in January, based on recommendations by the Technology Committee, the NCDA Board of Directors agreed to charge higher dues for those members who wish to obtain the Washington Report and other newsletter publications through regular mail instead of through NCDAonline.org. Publishing the news letter on the internet will save countless hours of staff time and make it easier for staff to do a better job of tracking legislation, meeting with Congressional staff, consulting with vendors, technical assistance providers and planning productive meetings. As our dues notices go out, we will inform the membership of the higher dues for those who still wish to get the Washington Report and other publications via regular mail. Obviously there will continue to be some publications that require regular mail, however, these will be few and far between.

CDBG 25^th ANNIVERSARY/NATIONAL CD WEEK PRODUCTS INFORMATION

Attached to the Washington Report is an updated flyer on the products available to assist communities with their celebrations of the 25^th anniversary of the CDBG program. Please note that 25^TH ANNIVERSARY LOGO STICKERS ARE STILL AVAILABLE for purchase at $100 per roll of 1,000 stickers.

NCDA has depleted its supply of CDBG postcards and have very few posters available. If you are still considering posters and post cards, please get your orders in soon. T-shirts, hats, mugs, sweat-shirts, tote-bags and puzzles are still available. It will take approximately 14 days to receive products.

FEDERAL REGISTER NOTICES

April 30, 1999. Comprehensive Improvement Assistance Program; Proposed Rule. This proposed rule would amend the regulations for the Comprehensive Improvement Assistance Program (CIAP) to permit the non-competitive distribution of CIAP funds to all eligible public housing authorities (PHAs) based on two equally-weighted factors: a PHA's share of the total number of units eligible for CIAP; and a PHA's share of the total number of bedrooms in units eligible for CIAP (with studio units counted as one-bedroom units). The purpose of this amendment is to provide small PHAs the opportunity of a transition period to become familiar with a non-competitive, capital funding process in anticipation of formula funding in FY 2000 under new statutory authority.

April 30, 1999. Section 8 Homeownership Program; Proposed Rule. This proposed rule amends the regulations for the Section 8 tenant-based rental voucher program to implement Section 8(y) of the U.S. Housing Act of 1937, as amended by Section 555 of the Quality Housing and Work Responsibility Act of 1998. Section 8(y) authorizes a public housing agency to provide tenant-based assistance for an eligible family that purchases a dwelling unit that will be occupied by the family.

April 4, 1999. Final Rule on Implementing the Housing for Older Persons Act of 1995. This final rule implements the Housing for Older Persons Act (HOPA) of 1995. This act amended the requirements for qualification for the housing of persons who are over the age of 55 for the portion of the "housing for older persons" portion of the Fair Housing Act. The new requirements under HOPA are equivalent to the original provisions of the Fair Housing Act. Under HOPA, there are three factors that must be shown: (1) the housing is intended and operated for persons 55 years of age and older; (2) that at least 80% of the occupied units be occupied by at least one person who is 55 years of age or older; and (3) the housing facility or community publish and adhere to policies and procedures that demonstrates its intent to qualify for the exemption.