The Carter administration's major innovation on behalf of urban real estate development - the $1.2 billion "action grant" program - could be in political hot water among key Democrats next year unless it aids neighborhood-level projects in large cities more directly.
Sen. William Proxmire (D. Wis.), who chairs both the Senate Banking Committee and the appropriations subcommittee that controls the Department of Housing and Urban Developments budget, has a critical eye trained on the new grant program. So do liberal congressional Democrats from urban districts in the northeast and midwest, whose re-election campaigns will be adided by the growing "neighborhood power" movement.
Gale Cincotta, feisty head of the Chicago-based National People's Action and a member of the National Commission on Neighborhoods, warns darkly that the neighborhood constituency has a lot more political muscle than the administration yet understands - and the neighborhoods demand reorientation of the action grant program.
The controversy arises from the heavy preponderance of large downtown commercial renewal and hotel property-related awards in the $150-million first round of action grants. Out of 45 cities receiving awards, only about half a dozen were for projects aimed at reviving existing residential neighborhood areas. Yet the 1977 law that created the action grant program requires a "responsible balance" among awards for neighborhood projects, commercial and employment center redevelopment, and industrial projects.
Neighborhood groups protested Baltimore's $10-million Inner Harbor award for a hotel construction loan, for example, because it appears to benefit downtown businessmen directly, rather than any existing residential neighborhood in the city. HUD Secretary Patricia Roberts Harris defended awards like Baltimore's on the grounds that they fulfill all the criteria for the action grant program superbly: Baltimore's loan will help create 1,700 new jobs, many of them for lower-income persons; it will "leverage" or attract nearly $70 million in new private investment in the city, thereby raising municipal property tax collections.
All in all, Baltimore's action grant will provide a shrewd use of federal dollars - a relatively small injection of HUD money that will act as a catalyst to impressive economic development in the city, later to be"recycled" via interest and principal payments for further use. Without the action grant, the Inner Harbor hotel project probably wouldn't be feasible, at least under current mortgage market conditions.
Exponents of the neighborhood view on action grants, like Robert Kuttner, staff director of the National Commission on Neighborhoods, don't deny the financial attractions of a project like Baltimore's. What upsets them is the recognition that the "institutional biases," as Kuttner put it, of city government and the federal government tend to be in the direction of large-scale, big-splash project - face lifts that transform the commercial core of the city.
By the same token, in Kuttner's view, government agencies tend to be less prepared to see the "leveraging" possibilities inherent in small neighborhood residential and commercial rehab projects - and therefore haven't submitted many applications for action grants to HUD of this nature.
Kuttner even suggests that HUD field offices around the country may be further skewing the mix by telling mayors and local developers to "wink" at the reasonable balance statutory requirements - to apply for "whatever downtown commercial projects they want and don't worry about Proxmire and the neighborhoods people."
HUD officials strongly deny there's been any subtle discrimination - winking, blinking or otherwise - against small scale neighborhood projects. To the countrary, Assistant Secretary for Community Planning and Development Robert C. Embry Jr. notes that his office has encouraged neighborhood projects from the start, and recently sent letters to mayors urging submission of this type of application.
"There's a limit, though," said Embry. "We can't write the applications ourselves. They've got to come from the cities, and the plain fact is we haven't gotten as many in this category as we'd like. They'll come. But they take time."
What's the outlook for the $400 million per year action grants program, with its built-in incentives for making federal dollars go further, and its intrinsic capacity for seeding political storms?
For the short term, at least, action grants probably will keep on going to large scale downtown renewal projects to a greater degree than neighborhood projects. This will raise the neighborhoods' hackles, but the mix of wards is inevitable. Major, costly redevelopment plans all over the US. were set in motion last spring when the Carter administration began pushing for enactment of the new grant program.
The White House and HUD didn't have to tell mayors and city council-men to wink at anything. Local officials took one look at the economic development potential of action grants and began putting together applications to fulfill their fondest - and often their biggest -redevelopment dreams. HUD now has about 100 of these applications, and can't simply throw them out because they're not neighborhood-oriented. A number of them will be funded this summer.
For the longer term, however, the presence of Proxmire, the neighborhoods commission, and urban-oriented congressmen watching from the sidelines will guarantee that neighborhood redevelopment projects will get at least their fair share of funds. Projects may take the form of housing rehabilitation of entire city neighborhoods, or combined renewals of commercial strips with housing on upper floors.
As the Urban Reinvestment Task Force - with its "neighborhood housing services" projects spread across the U.S. has shown - you can leverage federal money impressively by investing in cooperative public-private rehab revolving funds and neighborhood development corporations. And such ventures require smaller capital sums, leaving more grant money for other cities.
Washington D.C., which hasn't submitted a request yet for action grant funds but plans to later this year, would do well to keep this trend in mind.
Kenneth R. Harney is editor of the Housing and Development Reporter, published weekly by BNA, Inc.