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Tuesday, September 17, 2002
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.

    The subcommittee met, pursuant to call, at 2:10 p.m., in Room 2128, Rayburn House Office Building, Hon. Sue W. Kelly presiding.
    Present: Representatives Kelly, Lee, Jones, Waters and Watt.
    Mrs. KELLY. Good afternoon. This hearing of the Subcommittee on Housing and Community Opportunity will come to order. I want to thank all the Members of Congress who are present today. Without objection, many people are coming back to Washington, D.C., from their districts, and they have got planes and trains, but they are interested in this topic, and they will participate fully should they be able to get here in time for the hearing. And all opening statements that they may have and questions will be made part of the official hearing record.

    Mrs. KELLY. Now, the Chair recognizes herself for a brief opening statement.
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    Today the subcommittee will examine technical assistance and capacity-building programs, crucial tools in addressing the needs of low-income individuals and communities. This hearing will help us understand how technical assistance is used, what changes, if any, are needed to make it more cost-effective, and whether additional resources are necessary.
    The Department of Housing and Urban Development provides technical and capacity-building assistance to State and local governments, public and Indian agencies, private and nonprofit organizations and individuals. HUD administers 21 technical assistance programs through 5 program offices. The annual funding for HUD technical assistance is around 1 percent of the HUD's overall budget per year, which ranges from $128 million to $201 million. The general purpose of this technical capacity—technical and capacity-building assistance is to help program participants carry out the HUD program goals.
    The terms ''technical assistance'' and ''capacity building'' are often used with some imprecision. For this reason, last year on July 12th, 2001, Chairwoman Roukema requested the General Accounting Office to conduct a review of technical assistance and capacity-building programs at the Department of Housing and Urban Development. Chairwoman Roukema thought the committee would benefit from a better understanding on the scope and purpose of these programs. Today the GAO will give us a preliminary report on their findings regarding technical assistance.
    Today's hearing will largely focus on community-based development corporations, CDCs. These organizations are the primary recipients of technical and capacity-building assistance. There are over 3,600 CDCs in the United States, located in almost every large and medium-sized city in the Nation, as well as in many rural communities. They are frequently the most productive developers of affordable housing in low-income communities and are instrumental in meeting the human needs for individuals and communities. In fact, in many communities, the government has turned to CDCs as the primary vehicle to rebuild distressed neighborhoods.
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    CDCs are generally small organizations with an average annual budget of $200,000 to $399,000 and a median staff size of six. Because of the increasingly complex nature of funding procurement and execution of community revitalization programs, CDCs often require outside help. These organizations also tend to have frequent staff turnover, and, as a result, they need increased training funds. Subsequently, technical and capacity-building funds are essential to their existence.
    We are very pleased to have with us today Congresswoman Stephanie Tubbs Jones, a representative of the GAO to discuss the findings of their study, and witnesses from several community-based development groups. We thank all of our witnesses for taking the time out of their busy schedules to share their thoughts on this issue and look forward to discussing these issues with them.
    And, Congresswoman Tubbs Jones, you didn't realize you were working with the GAO, but we are delighted to have you here.
    [The prepared statement of Hon. Sue W. Kelly can be found on page 30 in the appendix.]

    Mrs. KELLY. I would like to now recognize my friend from North Carolina for his opening statement Mr. Watt.
    Mr. WATT. Thank you, Madam Chair, and I want to thank Chairman Oxley for agreeing during the course of the markup on the Housing Affordability for America Act to assure that this hearing would be conducted to give us the opportunity to explore the merits of H.R. 3995, which has been introduced by Representative Stephanie Tubbs Jones. And I want to thank Stephanie Tubbs Jones for introducing this important legislation which I am pleased to be a cosponsor of.
    I also want to thank Chairman Roukema—I am sorry. It is H.R. 3974, not 3995. But anyway, she knows what I am talking about.
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    I want to thank Chairman Roukema for scheduling the hearing and wish her well as she is getting her treatment and is not able to be here today, and thank Representative Kelly for presiding over today's hearing.
    The Chair—Representative Kelly has indicated that one of the major problems in our community in terms of economic development is having the expertise and capacity to pull all of the resources together and to implement community development plans efficiently and effectively, and this bill is designed to do that. It is designed to do that in ways that I am sure the lead sponsor of the bill will elaborate upon. But we know in our communities how much of an impediment it is not to have both financial resources, expertise and capacity as we try to revitalize, restore, renew our communities, and anything we can do to be of assistance in that regard is always helpful.
    So I am looking forward to the testimony of the witnesses, my colleague Stephanie Tubbs Jones and the persons who have come to be on panel 2, and I especially want to welcome my friend Abdul Rasheed from North Carolina, who I have known for a long time. And I think I am going to get a chance to introduce him, so I won't elaborate. I will save all my good things for my introduction.
    So I thank the Chairman for convening the hearing and look forward to hearing the testimony of the witnesses, and I will yield back the balance of my time.
    Mrs. KELLY. Thank you, Mr. Watt.

    Mrs. KELLY. Ms. Lee, have you an opening statement?
    Ms. LEE. Thank you, Madam Chair. Let me thank you and also our chairman for moving forward with this hearing on this bill, and I want to thank Congresswoman Stephanie Tubbs Jones for sponsoring this important legislation and for your very diligent efforts to bring the real issues before this Congress with regard to community development corporations and what they need to move forward to ensure livable communities.
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    Just last week, Madam Chair, during our Congressional Black Caucus annual conference, Congresswoman Tubbs Jones and myself sponsored a forum on community development corporations. We brought in community groups from our districts and around the country to learn more about the progress they are making in building better and more livable communities and to hear more about their real and growing needs for both technical and financial assistance. Providing this assistance and passing this legislation is essential, and we heard that over and over and over again at our forum, because community development corporations have the community presence. They have the networks. They have the leadership-building capacity, enabling neighborhoods to plan and monitor, to develop livable communities.
    CDCs—and we heard this again and again and again—they are in a position to promote greater community awareness about the importance of housing, education, early childhood development and economic empowerment. Community development corporations are really the cornerstone for many of our communities.
    By using two generation approaches to the more vulnerable families in our community, and by paying close attention to school readiness strategies and outcome indicators, and leading or participating in strategic community planning for young children and families, CDCs and policymakers really can help us provide for the end of the cycle of poverty throughout our neighborhoods.
    So this bill—and I will ask that my full statement be submitted for the record, but, Madam Chair, I just want to say this bill, I think, is a very important major step to ensure that community development corporations receive the type of technical and financial assistance that they so deserve, because they are doing a major service in our communities to provide really for the economic development, economic empowerment and for livable communities for many of our areas in our region.
    So I just want to thank Congresswoman Tubbs Jones again for her vision and leadership and for really working together in a bipartisan fashion to bring this bill before us today. I look forward to the testimony.
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    Mrs. KELLY. Thank you, Ms. Lee.
    [The prepared statement of Hon. Barbara Lee can be found on page 37 in the appendix.]

    Mrs. KELLY. That concludes our opening statements. We will now begin with our first panel. Testifying on our first panel is the Honorable Stephanie Tubbs Jones, the distinguished member from this subcommittee and the Congresswoman from Ohio's 11th Congressional District. The Congresswoman has a strong interest in the issue of HUD technical assistance and has introduced legislation to increase funding.
    Not only is she a Congresswoman and a colleague, but Mrs. Tubbs Jones is one of my friends, and I am delighted to welcome you here this afternoon. I thank you for joining us to share your thoughts on this important issue. So without objection, your written statement will be made a part of the record, and you will now be recognized for a 5-minute summary of your testimony. Thank you. You may begin, Mrs. Tubbs Jones.


    Mrs. JONES. Thank you, Madam Chairwoman, and I appreciate—thank you, Madam Chairwoman for holding this hearing on technical assistance. For the record, I would like to thank Congresswoman Roukema for her support and her agreeing to give us this hearing on this particular issue. I would like to thank Congressman Watt and Congresswoman Barbara Lee for attending and being signatories to this legislation, as well as the staff of both the Democrat Majority and Minority side.
    I introduced this legislation on March 14th with my esteemed colleague Congressman J.C. Watts, and this bill has attracted strong bipartisan support. Congressman Watts would have been here to testify, but unfortunately he had to preside over a funeral in his congressional district.
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    I am an advocate for community development corporations, because these organizations play an important role in poverty elimination. Their approach is focused on economic development through affordable housing, business development, job creation and a range of activities that involve community residents in antipoverty and wealth-building activities. This approach is more critical than providing social services because it focuses on empowerment, building infrastructure within communities.
    Community development corporations grew out of the civil rights movement of the 1960s. They were typically formed from grassroots volunteers who were in touch with the economic needs of poor and underserved communities. Over the past 30 years, the government has turned to CDCs as the primary vehicle to rebuild distressed neighborhoods. There are CDCs in nearly every large and medium-sized city in the Nation as well as in many rural areas.
    I am going to skip over to say technical assistance and core operating support allow community development corporations to access training materials and other forms of assistance to promote self-sufficiency. Core operating support helps sustain organizations while they develop. To give an example, in my own community of Cleveland, a community development corporation might seek training for board members on how to manage equity investments. A church operating a separate nonprofit might obtain technical assistance to provide training on fund-raising. A community development corporation might hire an accountant or an attorney to utilize a new market's tax credit allocation.
    Most CDCs grow from efforts within communities and are run on a shoestring. If they are effectively run on a shoestring, at what level might they operate with a full set of shoelaces? My colleague J.C. Watts and I introduced H.R. 3974 to provide them with that full set of shoelaces with technical assistance, core operating support and guidance on the ways to improve their operations.
    The government distributes $15 billion for technical assistance, but very little goes to help CDCs operating in low-income communities. Since the 1980s, there have been few dollars to help these organizations. Most dollars go towards tax credits utilized by investors or government entities that support the project. In order to progress to the next level, CDCs need technical assistance funds to build their internal infrastructure and a system of accountability to ensure that their organizations are effectively run.
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    The last point that I want to make is that this legislation would establish—let me start to go back. Some argue that existing programs adequately cover technical assistance needs of CDCs. Existing programs are useful, but more is needed because the scope of current programs is limited. H.R. 3974 will provide the technical assistance, core operating support—you heard all that.
    Among its other functions, it will cover emerging to mature organizations, access to financial and construction expertise, mentoring, assistance with leveraging private funds, training and research, equity investments and the CRA credits for financial institutions that work with eligible CDCs. It has no matching requirement for funds, which is truly a mechanism to empower organizations.
    Last of all, and most important, the legislation would establish an advisory council within HUD to examine the capacity needs of CDCs and provide feedback and measurement of their effectiveness. This last point is important because with support comes responsibility. When government provides funding for technical assistance and core operating support, CDCs need to meet tough performance tests in return. It would provide support to diagnose organizational problems and provide the appropriate technical help to enable groups to fulfill their missions and ensure that tax dollars of the American people are efficiently and effectively used.
    Madam Chairwoman, thank you again for holding this hearing and for your commitment to housing and economic development. I look forward to the testimony of the invited guests this afternoon, and I want to thank each and every one of the witnesses that have come here to testify this afternoon for their input on this very important legislative issue.
    Mrs. KELLY. Thank you very much, Mrs. Tubbs Jones.
    [The prepared statement of Hon. Stephanie Tubbs Jones can be found on page 35 in the appendix.]
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    Mrs. KELLY. Mr. Watt, have you questions?
    Mr. WATT. Madam Chair, I think it is customary for us not to question our colleagues.
    Mrs. KELLY. Ms. Lee?
    Mr. Clay?
    Ms. Waters?
    Ms. WATERS. No questions.
    Mrs. KELLY. Well, if there are no questions, then the Chair notes that Members may have some questions that they want to submit in writing, so without objection, we will hold the hearing record open for 30 days.

    Mrs. KELLY. This first panel is excused. We thank you very much, and we will welcome your presence here with us. Thank you for testifying.
    And with that, if the second panel will please take their seats at the witness table, I will begin the introductions.
    On our second panel, we first welcome back Thomas McCool, the Managing Director of Financial Markets and Community Investment at the General Accounting Office, the investigating arm of the U.S. Congress.
    Next we also welcome back Bart Harvey, the chairman of the board of trustees and chief executive officer of the Enterprise Foundation. The foundation launched in 1982 and works with partners to rebuild communities by providing low-income people with affordable housing.
    Then we will hear from Reese. And, Reese, if you would be good enough to tell me the correct pronunciation of your name.
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    Ms. FAYDE. Reese Fayde.
    Mrs. KELLY. Thank you.
    We will hear from Reese Fayde, chief executive officer of Living Cities, formerly known as the National Community Development Initiative, a partnership of leading foundations, financial institutions and the Federal Government committed to improving the vitality of cities and urban neighborhoods.
    I will now yield to my friend from North Carolina to introduce the next witness.
    Mr. WATT. Thank you, Madam Chair. I am pleased that you have given me the opportunity and pleasure of introducing my friend and colleague from North Carolina. In North Carolina when we think of community development corporations, we normally think of Abdul Rasheed, who will be the fourth witness in this panel.
    He is the founding president and chief executive officer of the North Carolina Community Development Initiative, and that initiative provides resources and assistance to all of the community development corporations throughout North Carolina. The initiative was founded in 1994 to channel funds and provide training and technical assistance to community development corporations in North Carolina, and it is funded by private foundations, the North Carolina General Assembly, financial institutions and private sector resources.
    I thank the Chair for allowing me the pleasure of introducing Mr. Abdul Rasheed.
    Mrs. KELLY. Thank you, Mr. Watt.
    We will also hear from Dr. Michael Swack, the director of the School of Community Economic Development at Southern New Hampshire University. He is the former chairman of the New Hampshire Community Development Finance Authority and has extensive consulting and teaching experience in the areas of financial institutions and development finance.
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    Finally, we will hear from Greta Harris, the senior program director of the Local Initiative Support Corporation, otherwise known as LISC. She comes to us today from Richmond, Virginia, where she manages the planning and operation of LISC's Richmond office.
    I want to thank you all for taking time out of your schedules to join us here today and share your thoughts on these issues. Without objection, your written statements will be made part of the record. You will each be recognized now in turn for a 5-minute summary of your testimony, and we will begin with you, Mr. McCool. Thank you for being with us today.


    Mr. MCCOOL. Thank you, Madam Chairwoman and members of the subcommittee. We are here today to discuss the results of our review of the U.S. Department of Housing and Urban Development's technical assistance and capacity-building programs. HUD's fiscal year 2002 budget is over $34 billion, most of which is passed on to State and local governments, other agencies and organizations that carry out HUD's programs. Technical assistance and capacity-building is an important means through which HUD can influence how its program funds are spent.
    The Congress and HUD often use the terms ''technical assistance'' and ''capacity building'' interchangeably, and the definitions do overlap. Technical assistance programs can be generally defined as training designed to improve the performance or management of program recipients such as teaching one on one about procurement regulations to housing authority staff. Capacity building can be generally defined as funding to strengthen the planning, management and other capabilities of program recipients or providers, typically housing or community development organizations, thereby building institutional knowledge within these organizations.
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    Some of the programs have both technical assistance and capacity-building aspects. The overall goal of both technical assistance and capacity building is to enhance the delivery of HUD's housing and community development programs. While HUD's staff, whose costs are covered by HUD salary and expense budgets, routinely provide a wide range of technical assistance as part of their day-to-day activities, our work focused on funding specifically authorized by Congress to be used for technical assistance and capacity building.
    We were asked to examine the universe of technical assistance and capacity-building programs in HUD so that you could better understand the scope and purpose of the programs. Our statement focuses on the number of HUD technical assistance and capacity-building programs Congress has authorized and how much they cost; why HUD offers technical assistance and capacity-building programs, and who provides and receives the services; how HUD selects the program providers; and whether HUD program offices are overseeing the programs as required and measuring their impact.
    As you have already said, Madam Chairwoman, HUD administers 21 technical assistance and capacity-building programs through five program offices. From fiscal year 1998 to 2002, the annual funding ranged from about 128 to 201 million, accounting for less than 1 percent of HUD's overall budget.
    While the general purpose of HUD's technical assistance and capacity building is to help program recipients carry out HUD program goals, each program office designs technical assistance or capacity building to specifically relate to its programs. Recipients could be States and units or local governments, public and Indian housing agencies, private and nonprofit organizations or individuals. Providers could be HUD officials or, more commonly, State and local governments, private and nonprofit organizations, public housing authorities.
    HUD awards funding for 17 of the 21 technical assistance and capacity-building programs competitively. The funding of the remaining programs is awarded noncompetitively. HUD uses three types of funding instruments, contracts, grant agreements and cooperative agreements, and determines which type to use on the basis of the relationship with the awardees and the level of Federal involvement anticipated. Depending on the complexity of the individual program office's funding instrument requirements, the process can take between 3 months to a year to complete.
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    Noncompetitive funding is either specified by statute or based on the formula set by HUD. Specifically Congress appropriates technical assistance and capacity-building funds noncompetitively for the Enterprise Foundation, Habitat for Humanity, Youthbuild USA and the Housing Assistance Council under the Community Development Block Grant Program.
    The Local Initiative Support Corporation and the Enterprise Foundation administer the funding for, among other purposes, the National Community Development Initiative under Section 4 of the HUD Demonstration Act of 1993 as amended. Congress also appropriates noncompetitive funding for the National American Indian Housing Council technical assistance programs. And in addition, HUD's Office of Fair Housing and Equal Opportunity use the formula to distribute fair housing and assistance programs—I am sorry, fair housing and assistance program capacity-building funds.
    These noncompetitive technical assistance capacity-building programs comprise $50 million, or about 25 percent, of fiscal 2001 technical assistance and about 54-1/2 million, or 30 percent, of fiscal year 2002 technical assistance funding. All five HUD programs—sorry, all five HUD program offices perform basic oversight of the technical assistance and capacity-building programs they administer, such as visually observing the technical assistance, training, or reviewing reports submitted by the providers.
    While some HUD officials maintain that they cannot measure the impact of technical assistance or capacity building, other officials have developed and are using measures that seem to be reasonable indicators of the impact of their programs.
    While some measures may not be practicable for every—while such measures may not be practicable for every program, HUD cannot demonstrate the effectiveness of this technical assistance and capacity building without some indication of its impact. Furthermore, without such measures, HUD cannot ensure accountability for the near $200 million that Congress sets aside each year for technical assistance, training or capacity-building funding.
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    Finally, since technical assistance and capacity building are important means through which HUD oversees and influences expenditures or program funds, it would seem logical for each of its program offices to develop more practicable guidance to ensure the technical assistance in the capacity-building programs are producing the intended results.
    Madam Chairwoman, this concludes my statement. I would be happy to respond to any questions you or other members of the subcommittee may have.
    Mrs. KELLY. Thank you very much.
    [The prepared statement of Thomas J. McCool can be found on page 106 in the appendix.]

    Mrs. KELLY. We will move on to Mr. Harvey.


    Mr. HARVEY. Thank you very much, Madam Chairwoman, for this opportunity. I am Bart Harvey, chairman and CEO of the Enterprise Foundation, and Enterprise currently is putting more than half a billion dollars a year to work in low-income communities, mostly through community-based groups. The real unsung heroes, as you have heard from other witnesses, are the heads of these grassroots groups that provide affordable homes, economic opportunity, decent child care and safer streets where they are needed most.
    And Enterprise believes that community-based development organizations are vitally important institutions that warrant continued and expanded public and private support. We commend Representative Tubbs Jones, who I will be with tomorrow evening for the Louis Stokes award in Cleveland, and Representative Watts for their bill and for recognizing the need for more support for grassroots groups in their bill. And I also commend NCCED for its work on this essential bill.
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    In 20 years of working shoulder to shoulder with grassroots groups to solve some of our toughest problems, we have seen firsthand what they can achieve, but they can't do it alone. Even the most sophisticated organizations need reliable resources and expert advice to maintain and expand their successes. The huge majority of support for community-based developers comes from the private sector, but the Federal Government plays a vital role.
    While Enterprise undertakes a large variety of capacity-building efforts, I think there is one that is particularly important to look at for the principles of accountable, successful technical assistance and capacity building, and that is the HUD Section 4 program. Through Section 4, Congress channels Federal funds through national intermediaries like Enterprise to help strengthen community-based groups. These funds help grassroots groups hire and retain staff, invest in technology, develop business plans, improve internal systems and pursue new opportunities. And much of this funding is committed on a multiyear basis, which is critical.
    The purpose of Living Cities was really to work on all of the environments within which these grassroot groups work. Between 1991 and 2000, Living Cities funds directly helped community-based groups develop almost 20,000 affordable homes, 1.7 million square feet of commercial and community facilities. In an independent evaluation, the Urban Institute found that community groups' strength, production and local support systems have grown significantly thanks to these efforts in the 23 target cities.
    Now, Enterprise also employs Section 4 resources outside of Living Cities locations, the 23 cities, and we have used these funds to assist more than 200 groups and nearly 100 other communities, including many rural and Native American areas. And according to another outside independent evaluation, the Section 4 program outside of the 23 targeted Living Cities locations met and exceeded Congress' goal in creating it.
    Now, what are the factors of its success? First, Section 4 provides Federal funding to strengthen community and faith-based development groups. It goes directly to these groups. Those resources are sorely needed and hard to find. This Federal support encourages greater private participation. In fact, it is vital to supporting it. It is looking for the Federal funds to be leveraged by other private support. Secondly, the money is flexible. This allows recipients to meet a wide range of local needs and opportunities in a variety of locations.
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    Third, Section 4 relies on experienced intermediaries with national reach, such as Enterprise, to deliver resources and to help improve the local public-private partnerships. We provide training and technical assistance to groups in combination with the funding, and we generate strong local support for community development going forward to further leverage Federal support.
    Fourth, Section 4 is successful due to the leverage it achieves. Section 4 recipients must match every Federal dollar with at least 3 additional dollars of private support. In practice, Enterprise far exceeds that requirement with the groups that it is working with. Matching funds and additional financial leverage are hugely important to community capacity-building initiatives. They ensure that the Federal Government maximizes the return on its investment, and they provide additional accountability on the use of Federal funds by increasing the number of stakeholders in an organization's success.
    Finally, Section 4 works because Enterprise ensures a high level of accountability through the groups that we assist. There are detailed regular reports, site visits, audits, and we assure that capacity-building funds are spent appropriately.
    The only problem with Section 4 funds is that there is not enough to support all of the groups that apply for the funding. With more resources, this proven model for strengthening community-based groups could have greater success than it already has. This is not the only way to provide this assistance, but it is one that has worked, and we really commend this bill and what it stands for concerning additive funds for capacity building.
    Mrs. KELLY. Thank you very much, Mr. Harvey.
    [The prepared statement of F. Barton Harvey can be found on page 100 in the appendix.]

    Mrs. KELLY. Ms. Fayde.
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    Ms. FAYDE. Thank you very much. It is a pleasure to have this opportunity to address the subcommittee on this very important piece of legislation.
    What I would like to begin with is really to tell you a little bit about who Living Cities is, because I think that will make it so clear to you why we are so supportive of this endeavor. I think eloquently described by earlier speakers, we have seen really what the work of CDCs is about, but when we talk about this group, we are 16 funders. They are made up of America's large foundations and made up of large financial institutions that came together with the explicit intent of wanting to invest in American cities by investing through community development corporations in inner cities. So the Nation was to try to address the conditions of our inner cities as a way of really helping to strengthen America's cities.
    Ten years of operation and real successes we can look to: $254 million having been invested in 23 locations with leveraging of in excess of $2 billion worth of investments in housing, in community facilities and in a whole array of institutions that really support inner cities today.
    In the second decade there is a recommitment, and I underscore that it is a recommitment. It is certainly of dollars. We are expecting that the funder—the funders are expecting to put in a half billion dollars over another second decade. This is unprecedented in terms of a level of private investment in America's cities. We are also expanding our agenda to address neighborhoods and what is going on in those neighborhoods, but also the connection of that work with larger—the larger community, with cities. How do we link the residents in our inner cities to the region's economy? That is a major part of what we are doing as we see it in our expanded agenda.
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    And the third part of our recommitment is really about collaboration. Clearly this is a collaboration of funders, but it has also served as a catalyst to local funders joining with us, local partners, local organizations that are part of making all of this work take place.
    We work through CDCs, because, as others have described, we really see these as vehicles that do work. I am reminded of one mayor who said to us once that he liked CDCs because they were scrappy organizations, they were entrepreneurial and could get things done that he couldn't do with the bureaucracy in his city. I will let you all guess who that mayor was. And he was exactly right. That is something which our experience fully bears out.
    So our dollars have been early, flexible and patient. Early, flexible and patient. And that has been just an absolute key factor, I think, in making a difference for CDCs as they go out to do their work.
    When Living Cities began, we were all too familiar with the scores of Federal programs that had come before that had some successes, but also had a whole array of failures that none of us wanted to particularly remember. So we approached this work with a theory, with a very firm, clear theory, of how we wanted to see our efforts make a difference, and that theory has several parts. The first is that we wanted to build systems; that CDCs doing their work could do terrific work, but if the rest of the environment were dysfunctional, their work was going to be at least at serious risk. So that was about building partnerships broadly. Two hundred fifty partnerships we describe. I think it is probably an underestimate in terms of just what really is out there.
    We also talked about needing to have better administrative procedures on a local level as well as to streamline financing on a local level so that a CDC going out has a chance of being able to have a project be successful.
    Another part of what we wanted to take up was really this whole issue of leverage. Having one investor is just not practical. It just doesn't work. There is too much work to be done. So we have always emphasized in all the work the Living Cities has done has our dollar leveraging and what is our participation leveraging; given who we are, are we able to bring new actors to the table. And I think there, too, we have really seen that we have had some real successes.
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    And the third element has been working through experienced hands, putting the dollars in a set of hands, in this case the national intermediaries, the Local Initiative Support Corporation and the Enterprise Foundation, to really be able to efficiently put the dollars into the marketplace and have them be well used and utilized.
    And the last part is really the—in some respects is actually the first part. It is really where we come full circle, and it really is the local organizations themselves. They are the eyes that make the deals happen and make the deals last. The community development corporations on the local level is where the vision begins. It is also where the shepherding of the project from start to finish takes place, and most importantly, it is the set of eyes that watches the program after we have all gone home. That is the thing that is demonstrably different about the work that is being done in our minds through CDCs than were done through other Federal programs. That is how we see sustained development taking place, and we commend the work that has gone on in preparing this bill, because it really does support the work of those organizations.
    Thank you.
    Mrs. KELLY. Thank you very much.
    [The prepared statement of Reese Fayde can be found on page 39 in the appendix.]

    Mrs. KELLY. Mr. Rasheed.


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    Mr. RASHEED. Thank you, committee Chairwoman Kelly, Congresswoman Jones, and to all the other distinguished members of this committee, the distinguished gentleman from North Carolina, the Honorable Mel Watt. Thank you, and I am pleased to be here in your presence. I am very pleased to be here today representing the National Congress for Community Economic Development, which is the national trade association that attempts to represent the basic interests of the field.
    I also manage on a day-to-day basis the North Carolina Community Development Initiative, which is on the ground in North Carolina working in rural small towns and our population centers like the big city of Charlotte and the great city of Mecklenburg, which the Representative is from. We want to say as a national community of practitioners on the ground doing the work that first and foremost to the success of the field is investment, and this bill clearly represents increased investment in the expertise, in enabling and bringing intelligence, access to information, more capacity, if you will, to those organizations and leaders in the community who are trying to be about change, quality of life, more opportunity, and then raising their own voices in their community to participate in those discussions locally that impact on their lives on a day-to-day basis. We see the deal not as the end itself, but as the means to an end.
    We also would like to have the committee consider that this bill also helps us increase, as you have heard from all of our colleagues, the productivity of these organizations at the local community level. It is very difficult to expect and hold accountable organizations when they do not have the tools and resources to match the level of expectation that we have for them in the field, and I would advance to you, as you so well know, that we are operating and trying to work in the most difficult environments in this country, and the need is so great for increased investment. This investment will go right to the heart of trying to increase our productivity, put us in a better position to be held accountable for quantifiable, measurable outcomes that will certainly speak to the impact in the community as it relates to housing, jobs and access to increased capital.
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    And I would say that our experience in North Carolina, again as indicated by previous speakers, the private sector becomes much more comfortable in engaging with us in the local community when they have some assurance that we have the expertise, that we have the intelligence, the knowledge to, in fact, begin and finish a project; not just get into a deal, but to complete a deal. And for that reason, we have been able to attract more private sector participation. We have been able to encourage local government participation at a higher level of involvement as a result of their comfort level with the community-based organization having the access to the intelligence, to the technical assistance that it needs in order to complete the deal.
    Lastly, I would say that if we are going to sustain the work long term in the communities, that it has great momentum at this point in time, it is because we are going to increase access to intelligence, technical assistance, and capacity support. So I encourage your support for this increased investment on behalf of the national community of people on the ground doing the work every day.
    I would also encourage—I understand that there is some consideration at doing an assessment and a look at all of the technical programs that have been mentioned that are being made available to organizations across this country. I would ask you to look specifically at how those programs are engaging CDCs, because a lot of these programs are not necessarily available to CDCs in terms of their access to technical assistance. Some are, but many are not. So I think your assessment would, in fact, bear that out and give you at least the kind of intelligence that you need to adjust some of these programs, such that if the desire is there to assist CDCs, that you will have an opportunity to do so.
    Mrs. KELLY. Thank you.
    [The prepared statement of Abdul Rasheed can be found on page 118 in the appendix.]
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    Mrs. KELLY. Mr. Swack.

    Mr. SWACK. Madam Chairwoman, committee members, thank you for—.
    Mrs. KELLY. Mr. Swack, please turn on your microphone.
    Mr. SWACK. Madam Chairwoman—.
    Mrs. KELLY. If you would, pull it a little closer. That would be good, too. Thank you.
    Mr. SWACK. Thank you for inviting me to testify in front of your committee on the Community Economic Development Enhancement Act of 2002. I am currently the director of the School of Community Economic Development at Southern New Hampshire University, a position I have held for the last 20 years. The School of Community Economic Development is, as far as I know, the only school in the country that offers both master's and doctoral degrees specifically in the discipline of community economic development. I am also proud to see that one of my students is sitting next to me today and has testified.
    I wish to share with you briefly the perspective that I have gained as an educator and a practitioner in the field of community economic development and then respond briefly to the questions that the committee has posed.
    The School of Community Economic Development at Southern New Hampshire University serves adult practitioners working in the field of community economic development. Most of our students work for private nonprofit community development organizations. Students enrolled in our master's program commute and attend classes 3 days per month over a period of 2 years. They come from all over the country. The average age of our students is 37 years old, and they range in age from their midtwenties to their early sixties. We accept about 50 new students per year in our weekend master's program. Over the past 20 years we have graduated close to 1,000 students. Over half our students have been African American, Latino or Native American. An independent survey of our graduates conducted in the year 2000 reveal that over 90 percent of our graduates have remained working in the field of community economic development since attending the school.
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    The mission of the School of Community and Economic Development is to provide education and training to a diverse group of community economic development practitioners, policymakers and community leaders and equip them with the knowledge, skills, tools and techniques to have the greatest impact at improving the economic and social well-being of their communities.
    We define community economic development as a strategy for people to develop the economies of their communities while providing benefits for community residents; a systematic and planned program promoting economic self-reliance, focusing on issues of local ownership and the capacity of local people; a program for helping consumers become producers, users become providers, and employees become owners of economic enterprises; and a method of building efficient, self-sustaining and locally controlled initiatives that support profitable ventures and effective social programs.
    Our curriculum is unique. It is a business-school-type curriculum, but the materials, cases, readings are specifically geared for people working in nonprofit community development organizations. Students are required to take courses in accounting, financial management, business development, financing, community economic development and organizational development. Over a third of the credits they earn in the program is through a project that they carry out in their home communities. Faculty and staff provide technical assistance to the projects, and students are part of a project group of peers who are often working on similar projects in their own communities.
    We also offer a number of elective classes in areas such as real estate, marketing and negotiations. Students also are required to submit work online and participate in online activities.
    People apply to their program because they want to be more effective practitioners. This is what they tell us in the personal statements they submit. They are also committed to working in the field of community and economic development because they want to improve the quality of life in their communities, and they stay working in the field.
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    What we have learned over the last 20 years is that education works. Our model, which combines classroom learning, peer support and practical application of skills in the students' home communities, has enhanced practitioner effectiveness. People have developed practical skills, built leadership skills, developed contacts and networks, and have used these skills and networks to build more effective organizations, organizations better able to develop projects, build housing, leverage financial resources, innovate and sustain themselves.
    Our model is not the only effective training model in the field today. There are other initiatives aimed at building human capital as we have heard about, and they are also effective.
    So how will this legislation help the field of community economic development? In the letter, there were a few questions posed. Why do we need a program like this since the Federal Government already spends billions? What tangible results can we expect? How have the challenges facing the CDC industry changed? What approaches are required to help communities rebuild?
    Most programs funded by the Federal Government fund projects; however, if local communities don't have the skills to help manage projects, they won't have access to funds. Building the capacity of local people and local organizations is key to the development process. Without proper skills and leadership, community organizations either are unable to access funds, or if they do, the projects they develop will fail. Funders have frequently resisted funding activities that build organizations. They don't like to pay for salaries or education. They want concrete projects, literally. In fact, we need funds for both concrete and human needs if we want to build communities. H.R. 3974 recognizes this.
    In order to access funds, an organization should be able to present a clear business plan with goals and objectives. Funding should be tied to achieving those goals and objectives. This is a process that Mr. Rasheed and his organization have developed, as have Federal programs such as the CDFI fund at the Department of Treasury. Funds should also be used to provide education and training to younger, less experienced groups so they can develop these plans. The legislation should also fund educational and training initiatives that are substantial, rigorous and well designed. Educational and training funds should allow for a range of different providers and initiatives that can serve different constituencies in different regions.
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    The CDC industry has changed over the past 20 years. Although still asked to blend economic and social goals, CDCs now need to be much more sophisticated organizationally and financially in order to succeed. Deals for housing and business development are often complex. Over the past 2 years, our school has sponsored the Financial Innovations Roundtable. The purpose of this roundtable is to develop concrete ideas that link conventional and nonconventional lenders, investors and markets in order to provide increased access to capital to low-income communities.
    One thing the roundtable has made clear: If communities are to move into the broader capital markets and better able to leverage—.
    Mrs. KELLY. Excuse me, Mr. Swack, but you had a 5-minute summary, and I would like you, please, if you would summarize that—.
    Mr. SWACK. Sure.
    I believe that the proposed legislation, H.R. 3974, can make an important contribution to building the capacity of CDC practitioners. It will help build stronger, more stable community organizations, better able to develop viable projects, get them financed, and improve the quality of life. Thank you.
    Mrs. KELLY. Thank you very much.
    [The prepared statement of Michael Swack can be found on page 129 in the appendix.]

    Mrs. KELLY. Ms. Harris.


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    Ms. HARRIS. Thank you, and good afternoon, Madam Chairwoman and members of the subcommittee. My name is Greta Harris, and I am pleased to have the opportunity to testify before you today on enhancing community development.
    I am the director of the Richmond office of the Local Initiative Support Corporation, one of 38 LISC offices nationwide located in communities represented by several members of your subcommittee.
    Over our 20-year history, LISC has provided $4.5 billion to CDCs as investments, loans and grants, helping them to build over 121,000 affordable homes and nearly 18 million square feet of shopping centers in other economic development cities. I have nearly 20 years of experience in rebuilding communities, the majority of which has been spent working at the neighborhood level in organizations that have directly benefited from strategic capacity building. I would like to share with you a bit about LISC's experience in using these funds both nationally and in Richmond, as well as about the systems we have put in place to ensure that these funds translate into real change in the neighborhoods where we work.
    The LISC experience has shown that the Section 4 capacity-building program has been extremely productive. To date, LISC has received $60 million through Section 4, which we have used to attract $200 million in private matching funds. Taken together, these resources have been invested into 427 CDCs located in 42 States and the District of Columbia. These partners in turn have produced approximately 26,000 affordable homes as well as retail, industrial and child care facilities. These activities equate to over $3.4 billion of community reinvestment activities in distressed neighborhoods. That is a 58 times increase of the amount of Section 4 funding that we have received, a remarkably productive use of Federal funds.
    In Richmond we have combined $618,000 of Section 4 funding with $1.5 million of matching private contributions to fund an operating support collaborative that mixes funding, technical assistance and training to build the capacity of 12 CDCs working in the greater Richmond community.
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    Industry wide and throughout our region, the results of the strategic placement of capacity-building dollars has been stunning. Since 1997, multifamily housing production has quadrupled, single family production tripled, and grants to existing homeowners for repairs is nearly double. Essentially these capacity-building assistance resources have allowed the CDCs to function better as nonprofit businesses. Currently 100 percent of our CDC partners use strategic business plans, up from 15 percent just 3 years ago, and many have strengthened and expanded their programmatic activities, which directly translates into positive results for the community, the end goal for which we are all striving.
    Certainly without funding, none of the successes I have outlined above would have been possible. However, funding by itself is not enough to ensure success. I strongly believe that LISC's use of Section 4 funding has been effective in part due to the systems that have been put in place, both nationally and locally, to ensure that these funds translate into direct change in our neighborhoods. For example, in Richmond there is oversight of all local funding decisions. We fund only a select number of CDCs that meet certain eligibility criteria. We target funding based on full 360-degree assessments, and we bundle funding with technical assistance and training. And perhaps most importantly, we have a close ongoing relationship with our CDC partners, which allows us to monitor their progress and to help them get back on track when issues sometimes arise. I think HUD and other funders have been rigorous and responsive partners in this program to help turn neighborhood liabilities back into community assets.
    The role of CDCs, as we see it, is not to address all of the issues facing American cities. It is to jump-start the once stagnant market engines in these neighborhoods and over time attract private capital back into these communities, thereby reconnecting them back to the economic mainstream.
    Ms. HARRIS. I invite all of you to come to Richmond or any LISC city where we are working and see firsthand the successes we are having.
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    I thank you for the opportunity to speak before you today.
    Mrs. KELLY. Thank you very much, Ms. Harris.
    [The prepared statement of Greta Harris can be found on page 75 in the appendix.]

    Mrs. KELLY. Mr. McCool, I have a question for you. I would like for you to explain a little bit about how section 4 of the HUD's demonstration act in 1993 works. Has this been an effective means of demonstrating the money to the CDCs?
    Mr. MCCOOL. Madam Chairwoman, we have looked at HUD programs broadly, and we have information about section 4, but we haven't looked specifically at its effectiveness in terms of delivering funds. We haven't really dug deep into that specific part of the HUD programs.
    Mrs. KELLY. Mr. McCool, I wonder if we could ask you, please, to go back into your studies and address that before you deliver us the final product, or else do further study.
    Mr. MCCOOL. I think we are certainly willing to do further study. The actual mechanics of it we might need to work out.
    Mrs. KELLY. We can work out the mechanics. One of the serious problems we have here is, we are just having a hard time getting our arms around fact; and we count on people like you and your organization to deliver us that fact. So if you would please do that, we would appreciate it.
    I have a question for you, Mr. Rasheed. On page 5 in your testimony, you basically state that no Federal funds provide assistance directly to CDCs for capacity building and technical assistance. How is this statement consistent with the GAO statement that 120 to 200 million is spent on technical assistance and capacity building, and Ms. Fayde's statement that half a billion dollars will be spent in the next decade, and a part of that is Federal funding? Can you help us understand that, please?
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    Mr. RASHEED. Basically what CDCs are attempting to say is they don't have an opportunity to directly compete for these funds as a means of support in their programs. And I can't speak for—I will let my colleagues speak for how their statements bear out. HOME CHDO technical assistance are available at the local community level if a participating jurisdiction chooses to provide those funds. Other funds that can be available are YouthBuild funds, some CDBG funds, and homeless money. Those are the only resources we can compete for, and these are difficult for CDCs to access.
    Mrs. KELLY. Mr. Rasheed, the indication—here again, we have a question of whether or not money is provided and whether or not it is the right money; and if it is not, we need to figure out what it is. So let me ask you one other question.
    What oversight, if any, exists in the CDCs right now? As the trade association for the CDCs, what can you do, or what do you do, to ensure that quality technical assistance is being provided by the CDCs?
    Mr. RASHEED. That quality technical assistance is being provided by the CDCs?
    Mrs. KELLY. You are representing the trade organization of the CDCs. I would like to know what quality technical—and this is not an adversarial hearing. We are trying to get information, so we need that. So talk to me about what quality assurance you have built into oversight of the CDCs, what the CDCs are doing now, what your trade organization is doing. If you can't answer that, please consult with the people behind you, so we can get some facts.
    Mr. RASHEED. Currently CDCs only have a couple of technical assistance programs that we actually administer. The majority of those are technical assistance funds administered by CDCs are to first-time homebuyers and small and micro-enterprise entrepreneurs. These federal funds come from the U.S. Department of Agriculture and HUD's housing counseling programs like PRIME and Microloan T.A. As far as technical assistance programs for CDCs, these are budgets like HOME and CDBG. Other programs like CHDO and Youth Build are specific to the goals of the program, not the intentional market based approaches to revitalize the community.
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    Otherwise, in terms of just a general oversight, we try to have different kind of programs. We get involved with setting standards or trying to help elevate and participate with other organizations such as state and city CDC associations and statewide nonprofit associations. CDC, like all nonprofits, are accountable to the IRS, their boards of directors and those institutions and individuals that invest in them. They are trying to just, overall, improve and raise the bar in terms of excellence and what is necessary in order to compete with these projects and in the field of community economic development.
    Mrs. KELLY. Mr. Rasheed, do you feel there is adequate oversight from the Federal Government?
    Mr. RASHEED. For the programs that are out there, I would say, yes, there is good oversight. I am not questioning the oversight of the Federal Government in terms of the programs that they currently administer.
    Mrs. KELLY. I am raising that question. I am asking you your impression, your industry's impression, of what the Federal Government is doing to help you with oversight.
    Mr. RASHEED. I can't say they are doing a lot directly to help me in North Carolina, because I don't have any direct Federal dollars. But in terms of the field in general, basically we understand the criteria as established by HUD and other Federal programs, and we try to respond to those programs in ways that enhance our ability to get jobs done.
    Mrs. KELLY. Mr. Rasheed—were you finished?
    Mr. RASHEED. Yes.
    Mrs. KELLY. Mr. McCool, would you like to answer that for me, please.
    Mr. MCCOOL. Sorry, ma'am?
    Mrs. KELLY. I am asking a question about whether or not there is adequate HUD oversight.
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    Mr. MCCOOL. Well, again from our broad look, we think that HUD does have oversight mechanisms in place in terms of whether services are actually delivered, whether classes are actually held.
    Our question, I guess, with respect to these programs is the extent to which HUD has reasonable measures of the impact of the programs on the recipients to whom their service is delivered.
    Mrs. KELLY. On page 2 in a summary—in your summary on the GAO statement, I find here it says we are recommending that HUD, where possible, measure the impact of technical assistance and develop assistance guidance for program offices to use. The indication in other places—and I don't want to take the time of the members and the people in the room—from reading your GAO report, I got the impression that there was some question about Federal HUD oversight on these programs. So perhaps we could clear that up.
    Mr. MCCOOL. Right. But again, I think the issue had more to do—it all depends on how you define oversight versus, again, effectiveness.
    I think the oversight that we were talking about earlier had to do with whether the services were delivered, whether the money was spent in accordance with the way it was intended, as opposed to whether the technical assistance had a meaningful effect from a programmatic respect. It is the latter where we are pushing on HUD to do a better job in trying to understand whether these technical assistance capacity building programs are actually having a meaningful programmatic effect rather than, yes, they were done in accordance with the law and in compliance with what was agreed to.
    Mrs. KELLY. Mr. McCool, that is something we need to know.
    With unanimous consent, I have a letter from Ms. Roukema and myself that I would like to insert in the record, asking the GAO to conduct a review of the technical assistance capacity-building programs at HUD for additional questions that didn't seem to get answered in this GAO report. So with unanimous consent, I will insert this in the record.
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    [The following information can be found on page 135 in the appendix.]

    Mrs. KELLY. Let us go now to Ms. Jones.
    Mrs. JONES OF OHIO. Thank you, Madam Chairwoman.
    I would like to continue with some questioning, Mr. McCool. In fact, most of the programming that HUD does technical assistance with through Living Cities—and Living Cities is doing a great job, but there are only 23 cities that actually receive funding through that program; is that correct, sir?
    Mr. MCCOOL. That's correct. The Living Cities part of the section 4, that is true.
    Mrs. JONES OF OHIO. And the reality is, with all the money that HUD is spending for technical assistance, there are a limited number of cities and organizations that are accessing dollars across the country; is that fair?
    Mr. MCCOOL. That is my understanding.
    Mrs. JONES OF OHIO. Would it not be advantageous outside for other cities to have the opportunity to build the capacity of the community development corporations across this country in light of the fact they all pay into the tax base of our country?
    Mr. MCCOOL. It would certainly be advantageous for the CDCs. I guess the question always is where the Federal dollars come from and what alternative uses of Federal dollars there are.
    Mrs. JONES OF OHIO. Let us talk about that for a moment.
    The CDCs, in actuality, get very little direct money from any of the programs that you have done a review on, the 21 technical programs; is that a fair statement?
    Mr. MCCOOL. They certainly don't get a majority of the funding. They get a part of the funding.
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    Mrs. JONES OF OHIO. How much?
    Mr. MCCOOL. $10 million or 20 million.
    Mrs. JONES OF OHIO. Out of how much?
    Mr. MCCOOL. Out of the 170 to 200 million.
    Mrs. JONES OF OHIO. Over what period of time?
    Mr. MCCOOL. Over the 5-year period over which our study was conducted.
    Mrs. JONES OF OHIO. I would like for you in part of your report from the GAO to tell me specifically what money goes directly to CDCs from any of the 21 technical assistance programs.
    I would also like to know, of the 21 technical assistance programs, in what year some of those programs have received no appropriation whatsoever; because I am aware that there are some that have not received any appropriations, which means that none of that money was going out to some of these programs. And I am interested in that because when we talk about this world of technical assistance to community development corporations, it is kind of in a vacuum when the facts speak a little differently.
    Do I need to repeat any of what I have asked of you, sir?
    Mr. MCCOOL. No.
    Mrs. JONES OF OHIO. Let me ask, Dr. Swack, even with all the technical assistance programs that the GAO currently claims are provided to CDCs, what else could CDCs use to be able to improve their lot in the lot of their communities that may well be covered by this legislation?
    Mr. SWACK. I think that is a good question because it allows us to make a distinction between technical assistance and education. Technical assistance is useful, but doesn't always build capacity; and what we are talking about is, how do we build the capacity of indigenous local leadership to manage organizations, develop projects and carry them out.
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    One of the things this legislation does is, it specifically addresses the question of education as well as technical assistance. So it is not just hiring a lawyer or hiring an accountant to do something. It is building the local organization and the capacity of individuals in that community to carry out projects, put together deals, learn how to do it themselves, do better ones; and this legislation does this that.
    Mrs. JONES OF OHIO. In addition, Mr. McCool, could you include in your report what money goes to community development corporations for capacity building, not just technical assistance, in your response?
    Mr. Rasheed, would you care to answer that same question, sir.
    Mr. RASHEED. Madam Chairwoman, I think I agree with Dr. Swack in saying that what we need is resources that help build and sustain the capacities of organizations to maintain their momentum and to be flexible enough to respond to opportunities in their community. This bill does speak to that in both instances in that it will provide resources to hire the kind of professional expertise to do a specific deal. But it also is flexible enough to allow us to have resources to help educate the organization about how to operate as a business such that it can sustain itself when resources ebb and flow.
    I also would like to, if I might—go back to an earlier question, if I might, and say that most of the technical assistance dollars that you asked me about earlier actually go to cities and intermediaries and not to CDCs, and they then have to go to the city to get at those resources. Many cities choose not to provide technical assistance funding to nonprofits at all. The programs do not require a city or P.J. to provide capacity building or technical assistance. So that is what I was trying to say earlier.
    And lastly, I would say in looking at how assessing and trying to figure out how best to make these dollars available in the future, I think the oversight committee mentioned in my testimony that would involve others with the HUD staff could in fact tighten that up and bring about the oversight that you desire. We could see not only what was provided but what the impact was. We could also note technical assistance that was not provided.
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    Mrs. JONES OF OHIO. My time is up, and hopefully we are going to get another round where I will be able to ask some questions of the other members of the panel.
    Mrs. KELLY. Thank you, Ms. Jones. I want to, for the record, make Ms. Tubbs Jones' request to the GAO a part of the record so that it is understood that it is an official request.
    Mr. MCCOOL. It is understood.

    Mrs. KELLY. We move now to Mr. Watt.
    Mr. WATT. Thank you, Madam Chair.
    Mr. McCool, you may think we are picking on you, but we are not. I just wanted to go to page 3 of the draft report, and your testimony I guess it is, and look at the chart that you have included there, which actually outlines the programs through which technical assistance is provided. And I take it the ones that community development corporations really have a shot at, under the Office of Community Planning and Development, section 4, Capacity Building, and section 107, Technical Assistance; is that correct?
    Mr. MCCOOL. Yes, sir.
    Mr. WATT. The rest of these programs are kind of specific technical assistance to that particular program that, in most cases, community development corporations have little involvement with; is that correct?
    Mr. MCCOOL. In most cases, that would be true.
    Mr. WATT. Now let me just kind of trace then across. You have done a 4-year study there, which suggests that in 1998, the combination of capacity building and technical assistance was $22 million; is that correct? Am I reading this correctly?
    Mr. MCCOOL. 1998?
    Mr. WATT. 1998. And then in 1999, the combination of those two funds jumped up to $32.5 million; is that right?
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    Mr. MCCOOL. Yes, sir.
    Mr. WATT. And then in the year 2000, actually, technical assistance was either zeroed out or was not used in either 2000, 2001 or estimated to be used in 2002, so that what you are left with then is only capacity building under section 4; is that right?
    Mr. MCCOOL. It does include technical assistance, but it is true, it is under section 4.
    Mr. WATT. In actuality we went from $32.5 million in 1999 down to $26.3 million available in 2000, and actually didn't get back to even the 1999 level in 2001; is that right?
    Mr. MCCOOL. Yes, sir.
    Mr. WATT. I am just trying to make sure I am reading this correctly because it seems to me that even based on what we have here, there have been—there has certainly not been any growth in these two technical assistance funds, and, in fact, there has been a reduction in the technical assistance that is available—I mean, capacity building and technical assistance considered together; is that right?
    Mr. MCCOOL. Either reduction or it has been reasonably flat.
    Mr. WATT. This is obviously not your fault. I just want to make sure that people understand that part of the problem here is that there really has not been any increase in funding for technical assistance. And I take it, then, the bulk of this technical assistance—Ms. Fayde and Ms. Harris, is it correct that the bulk of this has been going to Living Cities and the LISC programs. Where has it been going to? Who has been getting the bulk of this money?
    Ms. HARRIS. The bulk of the money has actually been going to the CDCs that partner with LISC, Enterprise and with Living Communities initiative.
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    Mr. WATT. And that is directed primarily at 23 cities?
    Ms. HARRIS. That is beyond that. Those are the Living Communities, participating cities with section 4 dollars go beyond those initial 23 and actually are reaching CDCs located in, I believe, 42 States and actually reaching down at the local level to just under 300 local jurisdictions, because in some cases, CDCs actually work in multiple jurisdictions in a regional area. So it does have a broader reach than just 23 cities. It certainly is not reaching all CDCs who are currently working throughout the country, but it is broader than the 23 cities.
    Ms. FAYDE. Perhaps I could clarify by just explaining some of the mechanics in terms of when the dollars are targeted toward the 23 cities and when they are targeted in the off years from our perspective.
    Approximately every 3 years, a portion of the allocation in this last round, it would have been $20 million, was targeted to the Living Cities work plans that were executed by LISC and Enterprise. Those dollars, I would suggest probably 90 percent if not more, go through LISC and Enterprise directly to the CDCs. But that is in those 23 cities. On the other years, if you will, two and three, those dollars go through LISC and Enterprise's networks as well as other organizations.
    Mr. WATT. Let me interrupt you because I don't want to lose sight. I don't want to get too technical on what is happening.
    Let me just ask this general question, which I would ask everybody but Mr. McCool, because I doubt he has an opinion on it, to just answer yes or no. If there were more funds and if this bill were in place, do you think that capacity and the delivery of what is currently in place would be more effective in our communities?
    And let me start with Mr. Harvey and just go down, because my time is already out, and just say yes or no.
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    Mr. HARVEY. Yes. There is a great need for more technical assistance. We aren't reaching all of the groups that we need to reach. And if done in the right way, in an accountable way, it will make a big difference.
    Mr. WATT. Ms. Fayde, yes or no?
    Ms. FAYDE. Absolutely yes.
    Mr. WATT. Mr. Rasheed.
    Mr. RASHEED. Absolutely yes.
    But can I add, just to give an example, the dollars that are being proposed could actually be absorbed just in these 23 cities. I am talking about the additional dollars. So if those cities could use additional money to have greater impact, just think about the rest of the country.
    Mr. WATT. Dr. Swack?
    Mr. SWACK. Yes.
    Mr. WATT. And Ms. Harris?
    Ms. HARRIS. Absolutely yes, but—more money is always good, but the delivery system is critical for ensuring that those dollars reach the end goal that we are shooting for.
    Mr. WATT. Thank you, Madam Chair. I am sorry we went over.
    Mrs. KELLY. That is quite all right. We need the information and that was a good question.
    Ms. Lee.
    Ms. LEE. I would like to ask Mr. McCool this question also. First, let me just ask you in terms of technical assistance and capacity-building funds since the 1960s, since actually the community development corporations began somewhere in the 1960s, how do you see the need now? Has the mission of CDCs, from your point of view, changed, and what do you see as the outcomes? What should the goals of CDCs be at this point in the year 2002?
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    Mr. MCCOOL. Ms. Lee I am not sure if I am the right person to answer that question. I am not sure—we have been tracking the goals of CDCs. I think the people who are more closely on the—
    Ms. LEE. Let me ask you, we have to understand what the Federal Government sees as the role of CDCs. Is it economic development? Is it job creation? Is it poverty alleviation? Is it entrepreneurial development? There has got to be some kind of—
    Mr. MCCOOL. I think it is clear that all of the above is the answer, but I think there has been a shift, in my view, toward the entrepreneurial end of the spectrum in recent years, which has been reflected in a lot of what you see in terms of the partnerships that have been generated.
    Ms. LEE. In terms of direct funding assistance to CDCs, it is my understanding that right now the funding goes through the cities, right, through local governments not directly to local CDCs?
    Mr. Rasheed, could you answer that?
    Mr. RASHEED. For the majority of programs.
    Ms. LEE. But the direct funding which goes directly to CDCs at this point, are there any?
    Mr. RASHEED. No, ma'am, not for technical assistance.
    Ms. LEE. Capacity building?
    Mr. RASHEED. No. No direct funding.
    Ms. LEE. Then let me just ask, Mr. McCool, how does HUD actually measure the success? How do you evaluate the CDC movement, in essence? How do you know that CDCs are complying with what we all know they should be doing, if, in fact, there is no direct funding to CDCs?
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    Mr. MCCOOL. As part of HUD's contractual arrangements, it does ask for performance goals and does evaluate that within the context of its contractual obligations. Again, our issue is a slightly broader one looking at the programs where HUD itself, through either its own agents or through its intermediaries, provides the technical assistance and capacity building. But it is clear that this notion of trying to get a sense of what the impact and the outcomes of these programs are is part of the ongoing necessity for oversight from HUD's perspective.
    Ms. LEE. I am going to yield a minute to my colleague—let me just follow up then and just ask, I am trying to get clear, how would HUD—and I don't know if HUD has taken a position yet on this bill, but don't you think direct assistance, direct funding for CDCs in terms of capacity building and technical assistance would enhance the overall goals of the CDCs and what HUD and what our Federal Government see as the outcomes—what the outcomes should be?
    Mr. MCCOOL. Again, enhancing capacity building for CDCs, I am sure, would improve or at least generate the potential for more effective local economic development. The question is always one of alternative use of resources, which again is where we sort of drop out and let the folks who are more involved on the floor be the advocates of that sort of thing.
    Ms. LEE. Could I ask any one of the panelists if you could respond very quickly to that: In terms of the outcomes that we are looking at, would this enhance job creation, entrepreneurial development, economic development, poverty alleviation if, in fact, this bill were signed into law?
    Mr. RASHEED. Absolutely yes. And I would again point you to sections of the bill, section 4 that asks for an assessment of the community economic development expertise, one point.
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    Secondly, we also in the bill ask for an advisory council that would work with HUD to look at establishing and looking at a criteria to better evaluate the effectiveness not only of the programs and the mechanisms, but also the results we see on the ground.
    And thirdly, section 6, coordinate this with the President's annual budget request.
    Ms. LEE. Thank you very much, Madam Chair, and thank you for the time.
    Mrs. KELLY. Thank you, Ms. Lee. I, with unanimous consent, would like to give Ms. Tubbs Jones an additional 5 minutes. This is a hearing which she has requested, and I think we are beginning to open up some of the information that we need. Certainly it is evident we need a great deal more. With that in mind, I would like to turn it over to Ms. Tubbs Jones for another 5 minutes for questioning.
    Mrs. JONES OF OHIO. Thank you, Madam Chairman.
    First of all, let me thank each and every one of you for coming this afternoon to participate in this panel, and be clear that the purpose of this legislation is not to inroad on anybody's current opportunities to help community development. I am trying to expand the opportunity for community development corporations to be able to be operative.
    I come from Cleveland, Ohio, and I believe we have one of the best networks of community development corporations going, and I would like to see it happen all over the country. If I misstated that there were only 23 cities, I don't know all that you do, but I do know one program was originally focused on 23 cities.
    Let me ask you this: Currently, Mr. Harvey, there is—we don't have a study or a review of capacity building from the government for the dollars we have expended. Is that a fair statement, sir?
    Mr. HARVEY. I believe so.
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    Mrs. JONES OF OHIO. Would it be useful for the work that you do to have such a study?
    Mr. HARVEY. Absolutely.
    Mrs. JONES OF OHIO. I guess we haven't chosen an advisory council, but also an advisory council that would bring in the day-to-day people on the ground to participate, to say what we have experienced, would be useful as well?
    Mr. HARVEY. Absolutely.
    Mrs. JONES OF OHIO. Now you get 30 seconds to tell me whatever you want to tell me. That is it.
    I am coming to you, Ms. Fayde.
    Mr. HARVEY. Thank you, Congresswoman.
    What I would say is, A, your bill deals with a critical shortage of what we need. We have got community development organizations that are really carrying out public needs, and they have no direct public capacity building or technical assistance. And so from the point of view of adding more resources, it is critically important and very much needed. Putting in a system of accountability, I think, is also absolutely essential. I think all of us agree that we have to measure performance, and tough choices have to be made. And so we would like to see that.
    Mrs. JONES OF OHIO. Nine, eight, seven, six—Ms. Fayde.
    Ms. FAYDE. The question has been asked, what has changed for CDCs in recent history; and it is that the world is just a different place and a more complicated place. And I think their ability to function is therefore really jeopardized by their ability to sort of stay at stride.
    So we are talking about major demographic changes occurring in urban neighborhoods. We are talking about needing to connect people in neighborhoods to larger economic markets and world markets.
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    To be able to do that, you need more information, more experience, more skills; and I think the capacity building that is spoken to in this bill would assist the CDCs in being able to meet that challenge ably.
    Mrs. JONES OF OHIO. Ms. Harris?
    Ms. HARRIS. Thank you. I want to answer Ms. Lee's question of the role of CDC's as it has changed; and I think the ultimate goal has not over the last four or so decades. It is ultimately to create healthier living environments for families, and I think that is the goal.
    The methodologies by which the CDCs are carrying out their activities has maybe expanded. It used to be primarily organizing, and then housing, and now it has moved into economic development and job creation. And those are all great, but it does beg for more experience and technical expertise so that the CDCs can be successful and effectuate change in the communities.
    The ultimate goal of this work, or the success of it, is through partnerships. So more resources are a good thing. The delivery system for those resources to ensure impact is critical.
    Mrs. JONES OF OHIO. I thank you. I don't think I could have said it any better if I had to say it myself as one of the authors of the legislation.
    My next idea is to figure out how I can get SBA and HUD to work together to create businesses and housing and create a real community.
    So stay tuned, and thank you, Madam Chairwoman, for the opportunity.
    Mrs. KELLY. Thank you. If there are no more questions, then the Chair notes that some members may have additional questions that they may wish to submit in writing. So without objection, the hearing record will remain open for 30 days for members to submit additional written questions to the witnesses and to place the witnesses' response in the record.
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    Mrs. KELLY. The panel is excused with our great appreciation and thanks for your time. This hearing is adjourned.
    Mrs. JONES OF OHIO. One more thing, Madam Chairwoman, I would like to thank Representative Barney Frank for giving me the opportunity to be a ranking member in my second term in Congress. Thank you.
    [Whereupon, at 3:40 p.m., the subcommittee was adjourned.]