BACKGROUND ON THE CLINTON-GORE ADMINISTRATION'S
COMMUNITY DEVELOPMENT RECORD
November 4, 1999
TODAY'S ANNOUNCEMENTS BUILD ON PRESIDENT CLINTON'S AND VICE PRESIDENTGORE'S SIX-YEAR RECORD OF PROMOTING GROWTH AND OPPORTUNITY IN AMERICA'S
COMMUNITIES. Since 1993, President Clinton and Vice President Gore have
been committed to tapping the potential of America's urban and rural
communities. They have a demonstrated record of creating new
initiatives and expanding existing initiatives to promote community and
economic development. The Clinton-Gore Administration has worked with
the private sector, states, and localities to help revitalize America's
communities by bringing capital, jobs, and opportunity to distressed
areas and cleaning up the urban environment. President Clinton and Vice
President Gore have created or expanded the following initiatives over
the last six years:
Helping to Bring Private Enterprise and Capital to Distressed Areas.
The Clinton-Gore Administration has re-newed the commitment of the
Federal government to help bring private enterprise into underserved
communities and improve access to capital for low-income households,
minorities, and traditionally underserved borrowers.
Fighting to Preserve the Community Reinvestment Act (CRA) under
Financial Modernization. President Clinton made clear that he was
prepared to veto long overdue legislation to modernize the financial
landscape, if it allowed a bank with an unsatisfactory CRA rating to
take advantage of the new powers under the bill. As a result, the
conferees on the financial modernization bill provided that, for the
first time, a bank's CRA rating is relevant to its merger or expansion
in non-banking activities. In addition, President Clinton fought to
eliminate provisions that would have excluded some banks from CRA
coverage and limited the effectiveness of the merger application review
process. President Clinton thus assured that CRA remains vital and
relevant in the new financial landscape.
Strengthened and Simplified CRA. In April 1995, the Clinton
Administration reformed the CRA regulations to emphasize performance.
According to the National Community Reinvestment Coalition (NCRC), the
private sector has pledged more than $1 trillion going forward in loans
to distressed communities - and more than 95 percent of these financial
commitments have been made since 1992. Banks made $18.6 billion in
community development loans in 1997 alone. Lending to minority and
low-income borrowers is also on the rise.
Created the Community Development Financial Institutions Fund.
Proposed and signed into law by the President in 1994, the CDFI Fund,
through grants, loans, and equity investments, is helping to create a
network of com-munity development financial institutions (CDFIs) in
distressed areas across the United States. The CDFI Fund's activities
leverage private sector investments from banks, foundations, and other
funding sources. Since the Fund's creation, it has made more than $190
million in awards to community development institutions and financial
institutions. This investment is expected in the next two to three
years to leverage three to four times the amount of the investments in
total capital raised for CDFI's. There are approximately 270 CDFIs
certified by the CDFI Fund throughout the nation. In FY 1999, funding
for the CDFI Fund was increased 19 percent to $95 million from $80
million. In FY2000, the CDFI Fund will receive $95 million.
135 Empowerment Zones and Enterprise Communities. The Clinton
Administration has designated 135 urban and rural Empowerment Zones
(EZs) and Enterprise Communities (ECs) across the country. This
includes a First Round of EZ and ECs, designated in 1994 and a Second
Round, designated in January, 1999. Designated communities were chosen
on the basis of their strategic revitalization plans, and receive
special incentives and resources to help carry out their plans. The
EZ/EC initiative has already leveraged over $10 billion in additional
public and private sector investment in community revitalization
efforts. The First Round EZ/EC initiative was proposed by President
Clinton and passed by Congress in 1993. The Second Round was also
proposed by the President, and the President and Congress, in FY 1999,
provided first-year funding for the new EZs and ECs. In FY2000,
Rural/Urban Empowerment Zones will receive $70 billion.
The Economic Development Initiative and Section 108 Loan Guarantee.
EDI grants are used to infuse capital into community development
projects, enhancing the debt financing provided by the Section 108 loan
guarantee program. Together, the programs support critical economic
development in distressed communities. Estimated jobs supported by EDI
and the Section 108 loan guarantee have grown by 300,000 from 1994 to
1998. During this time period EDI and the Section 108 loan guarantee
program have funded $3.5 billion for more than 650 separate project
commitments. Helping to Bring Jobs and Opportunity to Distressed Areas.
A cornerstone of the Administration's community empowerment agenda is
helping to bring jobs and opportunity back to distressed areas:
$3 Billion Welfare-to-Work Jobs Initiative. The Clinton
Administration fought for a $3 billion welfare-to-work jobs initiative,
as part of the Balanced Budget Agreement. The Administration is
implementing these welfare-to-work grants directly to both cities and
states for allocating additional resources to help long-term,
hard-to-serve welfare recipients find and keep jobs.
Welfare-to-Work Tax Credit and Work Opportunity Tax Credit. The
Welfare-to-Work Tax Credit, enacted in the 1997 Balanced Budget
Agreement, provides a credit equal to 35 percent of the first $10,000 in
wages in the first year of employment, and 50 percent of the first
$10,000 in wages in the second year, to encourage the hiring and
retention of long-term welfare recipients. This credit complements the
Work Opportunity Tax Credit (WOTC), which expands eligible businesses to
include those who hire young adults living in Empowerment Zones and
Enterprise Communities. In FY 1999, the President requested and
Congress accepted extending the credit through June 30, 1999.
Community Development Block Grant (CDBG) Expansion. President
Clinton's FY 2000 budget included an expansion of CDBG. The final budget
increases funding for CDBG from $4.750 billion in FY 1999 to $4.775
billion in FY 2000, a $25 million expansion this year.
Cleaning Up the Urban Environment through Brownfields Redevelopment.
The Clinton-Gore Administration has launched a landmark effort,
including the Brownfields Tax Incentive, to clean up and redevelop
Brownfields sites. In total, the Brownfields action agenda has
marshaled funds to clean up and redevelop up to 5,000 properties,
leveraging between $5 billion and $28 billion in private investment and
creating and supporting 196,000 jobs.
PRESIDENT CLINTON AND VICE PRESIDENT GORE ARE BUILDING ON THEIR PAST
ACHIEVEMENTS THROUGH A NUMBER OF NEW INITIATIVES THIS YEAR. While
Americans are enjoying the fruits of our strong economy, we still need
to do more to improve conditions in underserved urban and rural
communities and connect these communities to the economic mainstream.
To address this need, President Clinton and Vice President Gore are
working on several fronts:
The New Markets Initiative. President Clinton's FY 2000 balanced
budget provides a new initiative designed to create the conditions for
economic success by prompting approximately $15 billion in new
investment in urban and rural areas through:
America's Private Investment Companies (APICs). Just as America's
support for the Overseas Private Investment Corporation helps promote
growth in emerging markets abroad, APICs will encourage private
investment in this country's untapped markets, by leveraging up to $1.5
billion in investment in new development projects and larger businesses
that are expanding or relocating in inner city and rural areas. In the
recently signed, VA/HUD appropriations bill, APICS were provided with
$20 million in funding. This amount would leverage up to $800 million
of new investment in America's underserved communities.
The New Markets Tax Credit. To help spur $6 billion in new equity
capital, this tax credit is worth up to 25 percent for investments in a
wide range of vehicles serving these communities, including community
development banks, venture funds, and the new investment company
programs created by this initiative (see below). A wide-range of
businesses could be financed by these investment funds, including small
technology firms, inner-city shopping centers, manufacturers with
hundreds of employees, and retail stores.
SBIC's Targeted to New Markets. For over 40 years, SBA's Small
Business Investment Company (SBIC) program has provided roughly $20
billion in equity and debt financing to more than 85,000 different
companies, helping them to grow from small businesses to household
names, like AOL and Staples. However, too little of the capital
invested has benefited our cities and rural distressed communities.
Through new regulations which were proposed this fall, SBA will now be
offering more flexibility and new financing terms for Small Business
Investment Companies (SBICs) that invest in underserved areas.
New Markets Venture Capital (NMVC) Firms. NMVC firms will make both
capital and expert guidance available to small business entrepreneurs in
inner-city and rural areas. Ten to twenty NMVC firms are planned. SBA
will match the equity and technical assistance of private investors.
Community Development Financial Institutions (CDFI) Fund. The budget
proposes to expand funding for the CDFI Fund to $125 million -- a $30
million increase from 1999. The Fund increases the availability of
credit, investment capital, financial services, and other development
services in distressed communities. The signed VA/HUD appropriations
bill for FY2000 included $95 million for the DCFI Fund that will expand
the capacity of the network of community development financial
institutions across the country, spurring the flow of capital to
distressed neighborhoods and low-income residents.
BusinessLINC. The President's FY 2000 budget includes seed money to
expand Business LINC --- an innovative public-private partnership
launched by Vice President Gore --- for new markets in economically
distressed communities. BusinessLINC (Learning, Information, Networking
and Collaboration) is designed to encourage large businesses to work
with small business owners and entrepreneurs. BusinessLINC is being led
in the private sector by the BusinessRoundtable, which has dedicated its
resources to establish local coalitions throughout the country.
Microenterprise Lending and Technical Assistance. Microenterprise
initiatives in the FY 2000 budget include the PRIME Act, which will
provide microenterprise technical assistance through competitive grants
to microenterprise development organizations that focus on low-income
entrepreneurs. As proposed in the Financial Modernization Act (H.R. )
PRIME will be administred by the SBA. President Clinton's and Vice
President Gore's proposal also includes a doubling of support for
technical assistance in SBA's Microloan Program and a doubling of
support for SBA lending to leverage over $75 million in new
microlending. The microenterprise strategy will also involve new
funding for Individual Development Accounts (IDAs) and for SBA's
One-Stop Capital Shops. On October, the President vetoed the
Commerce-State-Justice Appropriations bill which did not include funding
for any of these provisions.
New Markets Lending Companies (NMLC). For the first time in many
years, SBA will approve approximately 10 new non-bank lenders --- firms
authorized to originate loans under SBA's largest loan program - the
7(a) General Business Loan Guaranty program. Under the 7(a) program,
SBA guarantees up to 80% of a loan made by a lender to a creditworthy
small businesses that cannot otherwise secure financing on reasonable
terms. Firms must have a strategy to target lending to underserved
Additional Initiatives Designed to Improve Conditions In Underserved
Rural & Urban Communities: President Clinton and Vice-President Gore
have proposed the expansion or establishment of the following additional
initiatives designed to create the conditions for economic success by
encouraging new investment in urban and rural areas:
Empowerment Zones and Enterprise Communities. The FY 2000 budget
proposes full funding for ten years for the Second Round of Empowerment
Zones and Enterprise Communities, which were designated in January,
1999. This includes $100 million over ten years for urban EZs; $40
million over ten years for rural EZs; and $3 million for rural ECs. The
FY 2000 budget also includes $50 million to create a new Regional
Empowerment Zone Program to assist First and Second-Round urban EZ and
ECs in linking their economic development strategies to their broader
regional economies. The recently signed VA/HUD appropriations bill
provides $70 million in funding for Rural/Urban Empowerment Zones. All
of the Urban and Rural EZs (20 zones) and rural Enterprise Communities
(20 ECs) that were designated by the Vice President in January 1999 as
Round II zones will also receive funding.
Regional Connections. Regional Connections will provide competitive
funding to States and partnerships of local governments to develop and
implement new, locally driven "smarter growth" strategies that create
more livable communities by addressing economic and community
development needs across jurisdictional lines. Regional Connections, as
part of the Administrations' Livability Agenda, will complement existing
federal programs that respond to growth and investment patterns. The
budget proposes funding at $50 million in FY 2000.
The Economic Development Initiative and Section 108 Loan Guarantee
Program. This program supports critical economic development in
distressed communities in conjunction with the Section 108 loan
guarantee program to help bring economic development to residents. Over
the past 5 years, $3.5 billion in EDI loan commitments have been made -
these will create an estimated 300,000 jobs in low- and moderate-income
communities during the life of the EDI program. In FY 2000 many
projects will be eligible to participate in the Community Empowerment
Fund Trust, a pilot program, which will enable the pooling of loans and
the creation of a private sector secondary market for economic
development loans. The CEF specifically targets Welfare-to-Work and
City-Suburb Business Connections, building upon the success of HUD's EDI
and Section 108 loan guarantee program.
Low-Income Housing Tax Credit. Since its creation in 1986, the
Low-Income Housing Tax Credit (LIHTC) has given states tax credits of
$1.25 per capita to allocate to developers of affordable housing. While
building costs have increased 40 percent in the last decade, the amount
of the credit has not been adjusted for inflation. Therefore, President
Clinton and Vice President Gore propose to increase the cap on the LIHTC
from $1.25 per capita to $1.75 per capita -- restoring the value of the
credit to its 1986 level and helping to an create additional
150,000-180,000 new low-income rental housing units over the next five
Play-by-the-Rules. This program will allow renters with solid payment
track records to own a home. The 2000 Budget proposes a second round of
$15 million for this initiative.
Helping America's Communities Redevelop Abandoned Buildings.
Redevelopment of Abandoned Buildings, as part of the Administrations'
"Livability Agenda," would attack one of the primary causes of blight in
urban neighborhoods: abandoned apartment buildings, single-family homes,
warehouses, office buildings, and commercial centers. Under the
proposal, HUD will provide $50 million in competitive grant funds in
FY2000 to local governments to support the demolition or deconstruction
of blighted, abandoned buildings.