Community Services Block Grant Act Discretionary Activities - Community Economic Development (CED) and Rural Community Facilities (RF) Report to Congress - Fiscal Year 2003

COMMUNITY ECONOMIC DEVELOPMENT

Overview

The Community Economic Development Discretionary Grant Program (CED) is authorized tinder Section 680(a)(2) of the Community Services Block Grant Act. The Office of Community Services (OCS) awards CED grants on a competitive basis to private, non-profit community development corporations (CDCs) that create employment and business development opportunities for low-income individuals and help move them towards self-sufficiency.

A CDC is an organization governed by a board of directors composed of community residents and business and civic leaders. It must have as a principal purpose the planning, development, or management of low-income housing or community development projects.

This report provides information on all CED grants awarded in Fiscal Year (FY) 2003. Persons served by CED projects include recipients of Temporary Assistance for Needy Families (TANF), non-custodial parents, residents of public housing, and homeless and other disadvantaged individuals. CED grants fund two types of projects: non construction and construction. Nonconstruction projects include investments in sectors such as manufacturing, technology, microbusiness, and agriculture. Construction projects often involve purchasing or improving real estate to create anchor buildings for community redevelopment. In FY 2003, non-construction projects were funded for periods of up to three years. Construction projects were funded for periods of up to five years.

Program History

CED has its origins in the Federal Government's "War on Poverty" in the 1960s. Initially referred to as the Special Impact Program, CED was created in 1966. It was administered first by the Office of Economic Opportunity (OEO), but was moved later to the U.S. Department of Labor (DOL). There, the first community economic development project was funded in FY 1967 in the Bedford-Stuyvesant neighborhood in Brooklyn, New York. The project provided job training and jobs to 4,000 low-income neighborhood residents at a cost of $7 million.

In FY 1968, DOL, OEO, the U.S. Department of Agriculture (USDA), and the U.S. Department of Commerce's Small Business Administration (SBA}jointly administered the Special Impact Program. That fiscal year, OEO made its first direct Special Impact grant to the Hough Area Development Corporation in Cleveland, Ohio. The Hough Area Development Corporation was the first Special Impact grantee to meet the legislative goals of community participation.

In FY 1969, OEO administered a major share of the Special Impact Program, $10 million of which went to support a cadre of CDCs including the Bedford-Stuyvesant Restoration Corporation. In 1970, the entire $30 million in Special Impact funds was placed again under OEO.

In FY 1972, the CED Program's legislative mandate was "to encourage the development of special programs by which residents of urban and rural low-income areas may, through self-help and mobilization of the community at large, with appropriate Federal assistance, improve the quality of their economic and social participation in community life in such a way as to eliminate poverty and establish pennanent economic and social benefits." In 1973, OEO's name was changed to the Community Services Administration (CSA).

In FY 1981, Congress established nine block grants, including the Community Services Block Grant (CSBG). The CSBG Act consolidated several categorical programs into a single Federal funding stream. This Act also established CSBG discretionary programs, including CED. CSA was abolished, and its programs were placed within the new Office of Community Services (OCS) in the Administration for Children and Families (ACF), U.S. Department of Health and Human Services (HHS).

Community economic development is a process by which a community garners and usesresources to attract capital in order to increase commercial, business development, andemployment opportunities for its residents. OCS supports projects that engage local enterprises, create career opportunities with upward mobility for low-income individuals, and facilitate economic growth in low-income communities.

Community Economic Development Discretionary Grant Program Priority Areas'

During FY 2003, the CED Program made funding available under the following priority areas:

Planning grants -These grants provided funds to recently established CDCs so that they could acquire the technical expertise and resources to assess their community's economic needs, detennine effective development intervention strategies, and assess the feasibility ofpotential projects. Grants were limited to CDCs that had existed for no more than three years or had existed longer than three years but had no record ofparticipation in economic development projects.

Development grants -These grants provided operational funds to organizations that had received planning grants in the two fiscal years preceding the award. Once the grants were awarded, CDCs were required to confonn to the purposes, requirements, and restrictions that applied to operational grants.

Incremental development grants -These grants provided funds to CDCs that lacked written commitments for non-CED funding, site control, and referral sources from which projects access low-income beneficiaries for jobs and businesses. The first award was for 20 per-cent of the grantee's requested amount of funding for the project. This 20 percent was to be used for development activities. When the grantee had acquired non-CED funding, site control, and low income referral sources for the project, the grantee could apply for the remaining 80 percent of the award. The total award could not exceed the maximum funding limit of$700,000 Operational grants -These grants created employment and business development opportunities for low-income individuals, families, and communities. CDCs receiving these grants were experienced in implementing economic development projects and could execute a new project shortly after the grant award. Training and technical assistance cooperative agreement -This nationwide project provided CDCs with training and technical assistance on capacity building, including planning and project evaluation. Administration and management expertise cooperative agreement -This nationwide project established a cadre of experienced CDC administrators and managers to provide consultation to grantees. This cooperative agreement also funded projects ofnationwide significance to the community economic development field.

 

Table 1: FY 2003 Grant Awards

Priority Area	Maximum Award	Length of Project Period	Number of Grants Awarded	Total Priority Funding
Planning	$75,000	12 months	18	$1,342,138
Development – non-construction	$350,000	3 years	3	$895,000
Development – construction	$350,000	5 years	5	$1,586,200
Incremental – non-construction	$700,000	3 years	8	$2,459,094
Incremental – construction	$700,000	5 years	18	$4,622,972
Operational – non-construction	$700,000	3 years	12	$6,105,148
Operational – construction	$700,000	5 years	12	$6,837,605
Total Non-construction and Construction Grants			76	$23,848,157
Training and Technical Assistance	$270,000	17 months	1	$270,000
Administration and Management	$500,000	17 months	1	$250,000
Total Training, Technical Assistance			2	$520,000
Grand Total	N/A	N/A	78	$24,368,157

 

Data in Table 1 reveals that in FY 2003 among all priority areas:

• 78 grants were awarded for $24,368,157;
• 41 non-construction grants (including planning grants) were awarded for $10,801,380;
• 35 construction grants were awarded for $13,046,777; and
• Two grants were awarded for $520,000 for training and technical assistance and administration and management.

Completion of Grant Projects

As shown in Table 1, grant awards had varying project periods. When this Report to Congress was written, some projects were complete, while others were still in progress. Completed projects are projects that ended before the writing of this report and have been closed successfully. Incomplete projects are those that have end dates beyond the date of this report and are still in progress; therefore, they are not expected to have been completed yet. Unsuccessful projects were not able to finalize the necessary activities needed to complete a project, such as gaining site control, securing commitments of non-CEO funds to complete the project, and/or obtaining referral sources from which the project could receive low-income beneficiaries; therefore, the grantee would determine that the project described in the application could not be completed.

Generally, non-construction grants were allowed three-year project periods, and construction grants were allowed five-year project periods. Under unusual circumstances, grantees could request an extension for up to 12 months. This might occur when a grantee was unable to secure site control within timelines established in its work plan or when a grantee faced barriers that prevented it from meeting project goals.

Table 2: Status of Grant Projects

Priority Area	Completed Projects	Incomplete Projects	Unsuccessful Projects
Planning	17	0	1
Development – non-construction	2	1	0
Development – construction	1	4	0
Incremental – non-construction	5	0	3
Incremental – construction	1	12	5
Operational – non-construction	12	0	0
Operational – construction	0	11	1
Total	38	28	10

 

As documented in Table 2:

• 38 projects were completed;
• 28 projects have not been completed yet; and
• 10 projects were unsuccessful.

All but one of the planning projects was completed successfully.

Three development projects with the three-year project period (including one construction project) were completed successfully. Five development projects with the five-year project period were not completed; since their project period does not end until FY 2008, it was not expected that these projects would be completed at the time of this report. All five-year projects have reported successful outcomes to date.

Six incremental development projects were completed. Eleven projects began in FY 2002 and received the balance of the project funding in FY 2003 for the second phase. Fifteen new projects started the first phase with FY 2003 funding; for this reason, it was not expected that they complete their project during this period. Eight projects funded in the first phase did not apply for the second phase of funding. Of these, one project was unable to secure a project site. Another, after abandoning the original site because of petroleum contamination, was not able to identify an alternate site. Three additional projects were unable to secure construction financing necessary for the project. Two other projects could not identify alternative partners after the original partners withdrew; in both projects, the partners that withdrew cited that the building square footage was too small as their rationale. An eighth project was abandoned after the organization was terminated as a childcare provider for the other agency.

During phase one of these projects,20 percent of incremental funding is used for development purposes. The grantees have two additional fiscal years in which to apply for the remaining 80 percent of incremental funding to complete phase two. Phase two grant requirements include:

1. gaining site control;
2. securing commitments ofnon-CED funds to complete the project; and
3. obtaining referral sources from which the project could receive low-income beneficiaries. This Report to Congress reflects either the 20 percent for phase one of the incremental funds, or phase two funds of the remaining 80 percent awarded to grantees from FY 2002.

All twelve non-construction operational projects were completed. Eleven construction operational projects were not completed yet because they have project periods ending in FY 2008; one project was unsuccessful.

 

Project Outcomes

The three indicators used in this Report to Congress to measure progress or success are:

1. number of jobs created;
2. number of businesses created or expanded; and
3. amount of non- CED funds secured or leveraged by grantees in addition to their CED award to implement the proposed project. In the following tables and project descriptions,"proposed" refers to what the goal described In the grantee's application. "Actual" relers to what the grantee subsequently reported as having accomplished.

Proposed Versus Actual Outcomes for Fiscal Year 2003

Table 3: FY 2003 Project Outcomes

Priority Area	Jobs Created		Businesses Created or Expanded		Funds Leveraged
	Proposed	Actual	Proposed	Actual	Proposed	Actual
Planning	N/A	N/A	N/A	N/A	N/A	N/A
Development	234	247	19	12	$11,863,302	$16,813,705
Incremental	1,864	1,172	219	209	$53,719,874	$76,425,684
Operational	1,656	1,436	382	411	$56,867,131	$62,791,108
Total	3,754	2,855	620	632	$122,450,307	$156,030,497

 

Table 3 details data for projects funded in FY 2003. In that fiscal year, 2,855 jobs were created compared with the 3,754 jobs proposed.  This reflects two facts: 1) Incremental development grants are not expected to produce jobs in their first year (FY 2003); and 2) Operational construction grants have until FY 2008 to complete their goals.  (To allow time to complete construction, grantees with construction projects may not create jobs until years four and five.)

Grantees exceeded their goal of creating or expanding businesses with 632 actual jobs created compared to 620 proposed.  Finally, grantees exceeded their leveraging goals, securing almost $33.5 million (27 percent) more than proposed.

Table 4: Proposed Versus Actual Project Outcomes

Project Status	Jobs Created		Businesses Created or Expanded		Funds Leveraged
	Proposed	Actual	Proposed	Actual	Proposed	Actual
Completed	1,694	1,501	462	512	$19,484,871	$17,902,561
Not Completed	2,060	1,354	158	120	$102,965,436	$138,127,936
Total	3,754	2,855	620	632	$122,450,307	$156,030,497

Table 4 shows that completed projects produced approximately 89 percent of goals for job creation; exceeded goals for business creation/expansion by about eleven percent; and leveraged 92 percent of the funding anticipated.  Thus far, projects not yet completed have met approximately 66 percent of their job creation goals; 77 percent of their businesses goals; and already exceeded leveraging goals by 34 percent.  Grantees whose projects were not complete at the time of the writing of this Report to Congress have until FY 2008 to finish their work

 

Types of Projects

Grantees proposed to develop specific projects or businesses in their applications.  Planning projects conducted feasibility studies; the projects listed in Table 5 reflect those that the planning grantee chose to pursue by the end of the project period.  The projects and businesses for the development, incremental development, and operational grants are those proposed in the grantee applications.

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Table 5: Grantee Projects

Types of Projects	Planning	Development	Incremental	Operational	Total
Adult care	1	--	--	1	2
Agriculture	1	--	--	1	2
Child care	2	1	2	--	5
Commercial real estate       development	1	--	3	2	6
Community center	--	--	1	--	1
Construction	--	1	--	--	1
Employment services	--	--	1	1	2
Equipment maintenance	1	1	--	--	2
Health care	--	1	1	2	4
Incubator/training services	--	--	3	6	9
Loan fund	2	--	--	1	3
Maintenance	1	--	1	1	3
Manufacturing	--	--	2	4	6
Miscellaneous	--	1	--	--	1
Retail/commercial	8	3	12	3	26
Technology	1	--	--	2	3
Total	18	8	26	24	76

 

As shown in Table 5, the most common types of proposed projects were to invest in retail/commercial development (26), incubators/training services (9), commercial real estate development (6), manufacturing (6), and child care (5).   These five types totaled 68 percent (52 out of 76) of the projects.  Thirty-two projects proposed to develop retail and commercial properties, most frequently shopping centers, offices, and facilities for social service and economic development programs.  These projects usually served as anchors to community redevelopment and were located in Empowerment Zones.  Retail businesses included grocery stores, aquaculture product sales, service stations, fast food restaurants, and drug stores, among other retailers.  Commercial businesses included loan funds and professional services such as employment, landscaping, handyman services, and commercial kitchens.  Social service programs included child and adult care services for families.

CED funds were awarded for nine business incubators or comparable support services.  Many incubators were located facilities where small businesses could obtain space to develop, grow, and avail themselves of support services such as reception, accounting, and telecommunications.  Other incubators served businesses at their locations in the community. All incubators provided training and technical assistance on business planning, management, and finance.  Some incubators assisted businesses in navigating zoning requirements, becoming licensed, and applying for loans.  Additional incubators established their niches by specializing in areas such as construction, commercial food preparation, or adventure sports.

Project Descriptions

Brief descriptions of each CED grant project and a summary of its accomplishments to date are provided in Appendix A.  The descriptions are arranged by grant priority: planning, development, incremental development, operational, training and technical assistance, and administration and management.  Within each priority area, grants are alphabetized by State.

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