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The stimulus: what cities need to know.

President Bill Clinton in February proposed a three-part national economic recovery plan to restart the nation's local economies and reinvest in rebuilding and reshaping the nation. He asked the Congress to enact a $30 billion economic stimulus program, a $168 billion long term human and public investment plan, and a $463 billion deficit reduction plan.

The short-term economic stimulus plan provides for an immediate increase in funding in four key areas for ready-to-go community development, transportation, and wastewater projects and summer youth jobs in cities and towns.

This analysis focuses on the President's economic stimulus spending plan, what it means to cities and towns, and what steps city and town leaders need to take to use the funds effectively to benefit communities. The Weekly will provide a detailed municipal guide to the President's Economic Stimulus plan next week.

The President's Economic Recovery Plan

The President's economic stimulus plan offers both opportunities and responsibilities for municipal leaders, but city leaders need to act right away. The most immediate impact of the President's program would come through the economic stimulus plan, providing nearly $10 billion in immediate, one-time spending for community development, summer youth employment, transportation, and sewer ready-to-go projects. The funding approved by Congress will go to those cities and towns prepared to begin projects right away.

The short term plan involves more than $15 billion in additional funding for cities and towns in the current year and about $15 billion in tax incentives. Congress passed the spending part of the stimulus plan; the tax incentives are to be considered and incorporated in the larger tax and deficit reduction, or reconciliation, legislation later this year.

The President said he hopes to create as many as 500,000 new jobs as quickly as possible through the combination of supplemental spending and tax incentives. All of the stimulus funding is through existing programs in order to accelerate delivery to local governments. to ensure new jobs in cities could begin within 90 days of final action by Congress.

The key municipal funding would be directed as follows:

CDBG: $2.5 billion

The Community Development Block Grant funds would increase current city grants by about 60 percent. The plan allows HUD to waive rules that restrict prompt spending by cities; it provides for recapture of any funds not spent by cities at the end of 1994.

The extra, one-time funds are focused on projects ready to go in 90 days for entitlement cities and 180 days for small cities. HUD expects the funds to be used for transportation, water, and sewage projects in low income neighborhoods, as well as all other eligible uses. Ten days after the stimulus legislation is signed into law, HUD will notify eligible communities and states of the final allocations they will receive from the stimulus package. Small communities must apply for funds through their states, exactly as under the existing program.

Forty days after communities and states receive this notification, they will be required to submit a statement to HUD indicating the activities that will be funded with this money. States will be required to show how the funds will be distributed.

Grant agreements making the funds available will be issued to communities within 10 days of HUD's receipt of the grantees' statements. Within 90 days of the grant awards issued by HUD, communities must have funds under contract locally. The expenditure of these funds must occur by December 31, 1994. Funds must be committed to nonentitlement communities within 90 days of the grant award. Small communities must have the money under contract locally within 90 day after that.

Transportation: $4.16 billion

The proposal includes $3 billion for ready-to-go highway projects, $750 million for ready-to-go public transportation projects, and $250 million for airport improvements with the funding dedicated to projects that can be initiated within 60 days. Funding under the stimulus package for transportation is to be spent within 90 days on

"ready-to-go" projects.

Transit funds will be distributed to transit agencies according to the Section 9 formula.

Highway funds will be distributed to states for projects already approved under the ISTEA process. Although ISTEA suballocates funds to metropolitan areas, DOT decided that distribution to states would quicken the process in order to get projects moving within the short time frame.

The following transportation programs will receive additional funding:

* An additional $3 billion will go to aid federal highway projects for resurfacing, restoration and rehabilitation.

* An additional $480 million will be provided for mass transit for the formula program for capital grants and $270 million for discretionary grants for bus projects.

* An additional $250 million will be available for the Airport Improvement Program financing such projects as runway extensions, reconstruction and equipment.

* An additional $188 million will be provided for capital improvements and will be used for projects such as station repair, equipment overhaul, track and yard rehabilitation and equipment purchases.

Environmental Protection

Clinton's economic stimulus package includes at least $2 billion for water treatment projects, energy programs and efforts to enhance national parks, forests, wetlands, and other natural resources. The spending package contains the following provisions related to the environment, energy and natural resources:

* Natural Resources - $546 million for "enhanced natural resource protection" by the National Park Service, the U.S. Forest Service, the U.S. Fish and Wildlife Service, and the Bureau of Land Management. The money is intended to go for repairs of roads, trails, and facilities, as well as natural resource improvements such as reforestation and wetlands rehabilitation. Some of the $546 million for enhanced natural resource protection may be available to states and cities. Pending project will have priority. Cities should contact their regional fish and wildlife office to find out how to apply for additional funding.

* environment - $916 million to EPA, $845 million of which would go to finance state loans to communities for building and repairing wastewater treatment plants under the Clean Water Act. The additional $845 million will be distributed to states according to the formula established in the Clean Water Act. This money will be dispersed in the same manner as existing money for wastewater treatment. Cities should contact the state agency responsible for disbursement of funds to apply for additional funding.

* Small City Environment - $282 million for the USDA Rural Development Administration for water and waste disposal grants to rural communities. The agency's authority to offer water and waste disposal loans would be increased by $470 million, with an additional appropriation of $67 million to cover the lifetime cost of the loans. The additional $282 million to U.S. Department of Agriculture Rural Development Agency for water and waste disposal grants for rural communities will be awarded in accordance to existing program guidelines. Cities should contact state agencies for information on availability of additional funds.

Summer Youth Unemployment $1 million

The stimulus package would provide an expanded and enhanced Summer Youth Program that would increase funding for the 1993 program 75 percent over the 1992 level.

The funds can be used to provide basic and remedial. education, institutional and on-the-Job training, work experience programs, employment counseling, occupational training preparation for work, outreach and enrollment activities, employability assessment, job referral and placement.

Funding for the FY 1993 Summer Youth Employment and Training Program would come from the following sources: 1) $694 million for the basic summer youth program, 2) $267 million in funds recaptured from last summers emergency supplemental, 3) a $1 billion supplemental appropriation.

Each Service Delivery Area (SDA) would receive its regular annual allocation plus 125 percent of the extra amount received last summer. $300 million would be directed for the academic enrichment portion of the program. The remaining funds - expected to be approximately $162 million - would be targeted to cities based on the SDA's relative share of economically disadvantaged youth.

Municipal officials seeking information more specific information about their local SDA or funding level under the program should contact their own State Department of Labor.


What do city leaders need to consider?

City leaders need to make sure projects are ready-to-go. There will not be time after Congress acts to begin to prepare permits and complete environmental impact statements.

There will be three important criteria for local governments:

* How quickly the city hires workers and begins work;

* Who is hired and who is benefited; and

* Whether the project will produce long term benefits to the local economy.

HUD Secretary Cisneros and Transportation Secretary Pena have made clear that the future relationship between cities and the administration will hinge upon municipal leaders acting decisively and effectively. Congressional investigators will require audits to determine whether any federal funds were misused, simply replaced local funds, or went for unintended purposes.

Failure to spend the new funding quickly is likely to lead to the funds being taken back and reallocated to other states and local governments that have demonstrated a clear need and ability to use the assistance effectively.

Sandra Yamane, Julio Barreto and Janet Quist contributed to this article.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Apr 5, 1993
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