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City officials see promise - and peril - in changing block grant process

This article first appeared in the St. Louis Beacon, May 22, 2013 - The U.S. Department of Housing and Urban Development is pressing the city of St. Louis to change how it divvies up Community Development Block Grant funds.

The federal agency's directive — delivered in April to members of the Board of Aldermen — appears to be spurring an end to the longtime practice of dividing block grant funds by wards, a process that provides individual aldermen with the power to direct funding as they see fit.

Instead, St. Louis is likely moving toward a competitive application process where organizations and agencies will have to make the case to receive block grant money. 

Although some policymakers say a new distribution system could help fund bigger projects that cover larger areas of the city, others worry that funding will go to bigger organizations that are less responsive to individual neighborhoods. And some don't want the new process to be dominated by the mayor's office, adding that aldermen and outside professionals should have a hand in deciding where the money goes.

And while questions linger about how the block grant money gets distributed, supporters say the new process, if done correctly, could pay off in the long run.

"Hopefully, they will have transparent and clear standards for scoring applications, like foundations do or something like that," said Todd Swanstrom, a public policy professor at the University of Missouri-St. Louis. "And have some sort of oversight committee so that the decision-making is not shifted from individual aldermen to the mayor's office. In the best of all worlds, we'll have a competitive grant process where the best applications will be funded and they'll be evaluated on whether they succeed."

HUD takes a stand

Community Development Block Grants provide local governments with money designed to help areas such as youth employment programs, senior services organizations and building rehabilitation efforts. They also go to community development organizations, which improve housing quality, neighborhood beautification and specific community activities.

According to Maggie Crane, a spokeswoman for St. Louis Mayor Francis Slay, the city in 2011 applied for $21,462,421 in community development block grants and received $17,829,160. In 2012, the city applied for $17,829,160 and received $16,796,248. The amount that the city gets under the program is a fraction of what it got in the 1970s, during the program's peak.

For decades, block grant funds have been divided up by ward — some getting more than others. There are income requirements about where the money can be distributed.

Alderman Fred Wessels, who is chairman of the Board of Alderman's Housing and Urban Development Committee, said some wards in southwest St. Louis wards receive little to no money from the block grants. Some wards in the north, central and southeast parts of the city receive various degrees of funding from the grants. Wessels, a Democrat, is alderman of the 13th Ward in the southeast part of the city.

But when HUD officials met with aldermen in April, they said the ward-by-ward arrangement ran afoul of HUD regulations.  

James Heard, the director of HUD’s St. Louis field office,  told the Beacon the process for dividing the block grant money should have been competitive, with public input and follow-up to make sure the money is going toward a directed purpose. 

"Over the years, there has not been public participation," Heard said. "There have not been notices. And they have not actually done what they stated they were going to do in their consolidated planning process. So the whole process was broken."

Heard then said that "you should be able to see that the process is broken by going to north St. Louis City." He added that the dollars "have not been utilized in the areas that need it the most."

And while Heard said that HUD is not telling or forcing the city to do anything, he added that the agency is "stating that the way they’ve done it over the years does not comply with the federal regulations."

"It’s going to be us totally working with the city of St. Louis to see how they move forward," Heard said. "If it continues to go in the way that it’s going, it’s not going to be in compliance with our regulations. We can no longer approve projects that did not have public participation and that did not meet the requirements. And so going forward, our community planning development department will reject those projects."

Swanstrom used part of his endowed professorship to support community development throughout St. Louis. In an interview, he said that the ward-by-ward system for handing out block grants "really promoted a kind of parochial orientation."

And, he said, the process provided a disincentive for other non-governmental organizations to help.

"One of our reasons for change is that the city needs to learn how to use this money to leverage other money, to bring in the corporations, foundations, banks to reinvest in community development," Swanstrom said.

"And frankly, they have shunned the city because I'd imagine a fiscal foundation or especially a national foundation doesn't want to be associated with somebody's re-election campaign.  So it's really been a serious image problem for the city, even though that the reality is more complex."

"It's not like everybody's misusing the funds or whatever," he added. "In fact, a lot of them are doing good stuff. It's just not a very smart way to do it."

Instead of making a case about why their organization should receive funding, Swanstrom said the current system essentially requires community development organizations to stay in the good graces of their aldermen.

"When a new alderman was elected, sometimes he or she would cut off a CDC and start a new one, because they didn't control the old one. It might have been connected to their opponent. And so we had constant roiling of the community development organizations,” he said.

"And they were weakened by this. They weren't allowed to become stronger. And the geographic focus was so small, wards now are about 11,000 in population. Well that's just too small to do good community development planning. You do good things, but it's not the geography to be thinking about."

A promising change?

When Heard told aldermen that St. Louis needed to change how it divides the block grant, some elected officials were on board. Others weren’t as happy.

"Change is always difficult," he added.

For the most part, the elected and non-elected officials interviewed by the Beacon saw promise in changing the distribution process.

Crane contended that the ward-by-ward allocation is inefficient — and, often, not very impactful to some of the city’s highest-need areas.

She went onto say that the goal with the new way of distributing block grant funding to "make sure whatever projects move forward have the great impact."

"And it’s not just this money that’s divided up and you hope that something happens," Crane said. "If you’ve got a greater pot and can do a greater project for the good of an entire area as opposed to a couple bucks here and a couple bucks there, while it helped — don’t get me wrong — it might not have a great of an impact as putting more dollars into one location that is competitively bid."

The ward-by-ward system, she said, may have indirectly led to some of the block grant money not being spent.

"Let’s say that an alderman — or anyone — has this grandiose idea, but doesn’t have the dollars to do it," Crane said. "Well what happens if that alderman then goes, 'Well, if I bank it this year and I bank it the year after and I bank it for 10 years, then suddenly I’ve got enough to do it.' That’s just not smart economics."

Wessels said he could also see the benefit of changing the process.

"We’re going to have dollars awarded to larger projects, as opposed to money getting dribbled away or just in a number of cases just not spent," Wessels said. "The projects that are funded could receive more money and, presumably, we would get more housing units completed."

Alderman Antonio French, D-21st Ward, said if the new process is instituted well, "we should be able to invest a good portion of the money that the city gets in a given year to a big project."

"So instead of a ward getting only $300,000 or $400,000 in block grant funds, we should be able to put $2 or $3 million behind one big project," French said.

And Alderwoman Christine Ingrassia, D-6th Ward, added "taking as much of the political part of it out as you can is the best way to handle the money."

"Not all aldermen receive community block grant funding. But it is divvied up ward-by-ward," said Ingrassia, who was involved in obtaining grants for the 6th Ward before she was elected to the board this year.

"And aldermen have their own decision-making in how it gets used in the ward. And residents and the other non-profits don’t necessarily have the ability to be included in that process. A lot of it was used for community development, but I don’t think it was used for community development the way its defined by HUD."

Tom Pickel, the executive director of the DeSales Housing Corporation, said that a competitive grant process could "drive collaboration among organizations and among neighborhoods — and give a wider planning focus that maybe has been in the past." 

"I think in general and over time, it’s going to be a very positive thing for the city and make for a more effective and efficient allocation of dwindling resources like community development block grants," said Pickel, whose organization serves the Fox Park and Tower Grove East neighborhoods. "It will involve a more rational planning process that has been the case in recent years. So in that respect, I think it will be a good thing long term." 

The new process, Swanstrom said, could provide more accountability to where some of the money is going.

"They're going to have a centralized contest that everybody will have a chance to apply to," Swanstrom said. "Hopefully, they will have transparent and clear standards for scoring applications, like foundations do or something like that, and have some sort of oversight committee so that the decision-making is not shifted from individual aldermen to the mayor's office. In the best of all worlds, we'll have a competitive grant process which will be the best applications will be funded and they'll be evaluation on whether they succeed."

Too quick pulling the plug?

But not everybody is enthusastic about the new process.

Alderman Stephen Conway, D-8th Ward, told the Beacon that doing away with the ward-by-ward system could lead to money going to larger organizations. And those groups, he said, may not be able to react as quickly to problems as entities that serve a smaller geographic area.

"The drawback is that the funds are disproportionately going to go to these larger organizations that aren’t accountable to the various neighborhoods," Conway said. "And they won’t have the flexibility to address problems such as going after nuisance buildings, looking after the foreclosure properties in the neighborhood and preventing properties being turned over to slum landlords through that foreclosure process."

If money goes to larger projects, Conway said "they’ll be geographically located wherever the grant applicant wants to put it."

"There’s housing issues everywhere. The volume and the number of them are different," Conway said. "The other thing is by addressing housing issues and creating diverse communities low-to-moderate income with market rates, that stabilizes neighborhoods. We will lose that flexibility, I believe, on a going forward basis." 

Conway said the funds were helpful in his ward, which encompasses several neighborhoods in south-central St. Louis. 

"Fortunately for the 8th Ward, we’ve done well and received large shares of community development block grant money in the past," Conway said. "But we’ve leveraged the renovation of our worst buildings into giving more market rate properties online. All the renovations that we have done were low-to-moderate income individuals that were qualified and purchased those properties. We used that leverage more development. I would just hope that the planners looking forward see the success in doing it in that fashion." 

Asked if there was anything could be done to change HUD's mind, Conway replied the only way would be for U.S. Rep. Lacy Clay, D-St. Louis, and Sen. Claire McCaskill, D-Mo., to work for a longer transition period and some safeguards.

"You can’t just pull the plug. There’s nothing to step into the vacuum," Conway said. "The only thing that’s left to step into the vacuum is these larger organizations that really aren’t as responsive to the individual community needs or understanding of the individual community needs." 

Beacon political reporter Jo Mannies contributed information for this story.

Jason is the politics correspondent for St. Louis Public Radio.