Community Development Block Grants

Community Development Block Grants (CDBG)

Community Development Block Grants (CDBGs) are large, multi-purpose annual grants to cities and states from the federal government. The CDBG program is administered by the U.S. Department of Housing and Urban Development (HUD).

The primary statutory objective of the CDBG program is to develop viable communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for persons of low- and moderate-income. The program was created in 1974 and is one of the largest federal pots of money used in state and local economic development deals.

CDBGs are allocated to local governments for general purposes, leaving cities and counties a lot of flexibility in how the money is spent. CDBG projects can include infrastructure development, rehabilitation of private and public buildings, acquisition of property for public purposes, and commercial revitalization.

They can be also be used to make loans for machinery and to assist for-profit businesses with special economic development activities. Such projects might include micro-enterprise loans to low-income entrepreneurs, the assembling of land to attract new industry, and business expansion loans to help retain existing businesses that employ low-income workers.

For private development, CDBG monies can be used to pay for infrastructure improvements leading up to the company's property. CDBG dollars can fund new sewer lines, water mains, rail spurs, highway access ramps -- all sorts of public improvements around the property to make a facility more functional or enable it to handle more production or more traffic. Planning activities may also be supported with CDBG funds.

How it works

The guidelines and funding for the CDBG program are created at the national level, and the program is administered by the U.S. Department of Housing and Urban Development (HUD).

The annual appropriation for CDBG is split between local jurisdictions designated as "entitlements communities" and states. Entitlement communities include central cities of Metropolitan Statistical Areas, other metropolitan cities with populations of at least 50,000, and qualified urban counties with populations of at least 200,000 (excluding the population of entitled cities). Entitlement communities receive direct CDBG funding from HUD each year.

States receive CDBG funds to distribute to local jurisdictions that do not qualify as entitlement communities. The amount of non-entitlement community grants is determined by a formula that takes into account poverty, population, incidence of overcrowded housing, and age of housing. The states distribute the funds directly to units of local government.

Decisions about how to spend CDBG funds are made at the local level by city and county elected officials and development departments. Grant recipients must use at least 70 percent of CDBG funds for projects that benefit low- and moderate-income residents (generally defined as members of a family earning no more than 80 percent of the area median income).

Section 108 Loan Guarantee Program

Related to CDBG is the Section 108 loan guarantee program, which allows a city (or other CDBG fund recipient) to put up as much as five years' worth of CDBG money as collateral for a commercial loan to support larger economic development and housing projects. A city applies to HUD for the loan, and HUD secures a private loan and allows the city to guarantee it with future CDBG monies. If the project is successful, the loan is repaid by the proceeds from the business activity, local property taxes, or proceeds from the sale of land or rehabilitated property. But if the projected revenues fall short or if the business fails, the city's CDBG grant will be used to pay the loan.

Accountability and outcomes

The CDBG program has a number of regulations that promote accountability and ensure that CDBG-funded projects have a positive community impact. CDBG rules require community involvement in developing programs and require extensive public reporting, including records on projected and actual use of funds.

Construction workers employed on projects receiving CDBG funds must earn at least the prevailing wage for the industry in that region, in accordance with the Davis-Bacon Act. In 1998, the CDBG law was amended to include an anti-piracy provision that prohibits the use of CDBG funds to directly assist in the relocation of a plant or facility from one area to another if it causes a "significant" loss of jobs.

There are questions, however, about how effectively cities and counties target CDBG funds to provide tangible benefits to low-income residents. Despite the intent of the program to assists low- and moderate-income areas, a large proportion of CDBG funds go to politically-favored, higher-income neighborhoods. Funds frequently flow to fancy downtown projects at the expense of neighborhoods that have greater needs for rehabilitation and infrastructure, and to projects pushed by politically-favored developers, or that aid gentrification.

CDBG can be strengthened through improved monitoring and enforcement of its anti-poverty intent. Some local governments have improved targeting and accountability of their CDBG money by adding their own requirements to the program, including wage standards, reporting requirements, and clawbacks.

Researching CDBGs

CDBG rules require extensive public reporting, including records on projected use of funds and how the money is spent.

Every jurisdiction that receives CDBG funds must submit a budget and consolidated plan in order to receive its money each year. CDBG budgets are public documents, and they must be openly debated by each city council that receives and disburses them. Granting jurisdictions must keep and disclose records on how CDBG dollars are used, and regional HUD offices oversee cities' CDBG performance.

Start your research by obtaining three documents from the jurisdiction's office that implements the grant (often a housing or community development department):

1. Annual Action Plan - specifies what the city expects to do with the upcoming year's CDBG grant. Regulations require these proposals to be detailed enough for residents to know how they will be affected.

2. Citizen Participation Plan - details how the public will be involved in the planning and implementation of the CDBG program. The plan must provide residents with timely access to local meetings, and an opportunity to review proposed activities and to review program performance, including reasonable access to records regarding the past use of funds received.

3. Grantee Performance Report (GPR) (also sometimes called the Consolidated Annual Performance and Evaluation Report, or CAPER) - provides details on how the money was actually spent and what the impact has been, including the number of jobs created for low- and moderate-income people, and whether those jobs were full- or part-time. Be aware, however, that the level of detail required in GPR has decreased in recent years, so you may need to dig deeper for full understanding of a project's impact.

Other documents you may want to seek include development agreements between the granting government and a company that benefited from CDBG funds, and the records of the periodic audits conducted by HUD regional offices.

Local officials may give discouraging feedback on the availability and accessibility of reports -- but it's important to be persistent and patient and remember that these are public documents. Also, be aware that although there is a wealth of publicly available information regarding CDBGs, it is often very difficult to pull specific projects out of reports. You may have to contact local development officials and/or file a FOIA request to get access to the project-specific documents used in tabulating figures.

Additional resources

For details on CDBG, visit HUD's website at:
http://www.hud.gov/offices/cpd/communitydevelopment/programs/index.cfm.