Sequestration in the City: How the impending “fiscal cliff” could harm development at the local level

Last week, the country reelected President Barack Obama, and before the confetti could even hit the floor, the attention turned to the next hurdle looming for our lawmakers: the fiscal cliff. On January 2nd, deep cuts to the federal government are slated to go into effect unless Congress can agree on a deal to avoid the automatic spending reductions. So why is this important enough to discuss here? Because these broad and deep spending cuts may further stymie development in cities across America– including Stockton. So here is what’s at stake, and why we should care.

First, a bit of background. Included in the Budget Control Act of 2011, sequestration is set to kick in on January 2nd and will cut $1.2 trillion over 10 years evenly between defense and nondefense programs. This provision of the law was originally intended as a threat to force lawmakers to come to an agreement on reducing spending and reigning in the deficit. Unfortunately, no deal has been made and now sequestration has become a real possibility. Many economists predict that a plunge over the fiscal cliff will severely hamper the country’s economic recovery. These cuts also have far-reaching consequences for our cities.

It might not be apparent, but cities are dependent on assistance from many federal programs to fund everything from transportation projects, to neighborhood redevelopment, to environmental cleanup. With the impending sequestration cuts, cities around the country– many of whom continue to deal with dwindling budgets– will lose the resources needed to provide services to citizens and move ahead with crucial projects.

One of the programs that faces deep cuts is the Community Development Block Grant (CDBG) program administered by the Department of Housing and Urban Development (HUD). The CDBG program provides funding for critical projects and in an era of tightening budgets and dwindling resources, cities rely on CDBG grants to jump start development that otherwise may sit dormant. As the National Organization of Development Organizations puts it, “CDBG funds are typically used to leverage and attract private sector investments. Every CDBG dollar invested in communities is leveraged, on average, by three dollars in private funding, bringing much-needed business investments to distressed areas.”
Locally, CDBG money has played a big role in many projects. Downtown, CDBG funds are being used to clean up the Commercial Building (which I have previously profiled). The proposed downtown pocket park at the former site of the Land Hotel will leverage CDBG funding as well. With other sources of funding drying up– such as Tax Increment Financing (TIF) eliminated by Governor Jerry Brown– local agencies will continue to rely more heavily on programs such as CDBG to kick start private investment and supplement the cost of community development projects. But with sequestration, CDBG is in big trouble. As HUD Secretary Shaun Donovan stated earlier this year, sequestration “would cut Community Development Block Grant funding to levels not seen since 1975.”

Dean DeCarli Square was formerly home to a parking lot and gas station, and required extensive environmental cleanup.

Another important tool for redevelopment that could be on the chopping block is the Brownfields Program administered by the Environmental Protection Agency (EPA) which helps defray the cost of redeveloping old industrial sites and cleaning up hazardous materials, among other things. Stocktonians experience the results of the brownfields program firsthand when walking through Dean DeCarli Square, the site of a former gas station and parking lot that was cleaned up thanks in large part to funds from the EPA. As the city continues to try and rehabilitate downtown, brownfields funding will be crucial as there are undoubtedly hazardous materials lurking below the surface that will require money for clean up.

Transportation could also be inversely affected by a plunge over the fiscal cliff.

Dean DeCarli Square after a makeover thanks to the EPA’s Brownfields Program

Sequestration may drain funding from Department of Transportation (DOT) programs, such as the TIGER discretionary grant program. Grants from TIGER and other DOT programs allowed San Joaquin RTD to launch and expand Bus Rapid Transit service which has boosted the agency’s ridership numbers.

These examples represent just a sliver of the total number of programs and initiatives currently leveraged by cities that may face steep cuts from sequestration. The good news is that the President and both parties in Washington have stated their willingness to work together to avoid this scenario. However, it is still important for city leaders and citizens alike to voice their concern to their lawmakers about the potential harm that these cuts could cause. More information and resources can be found at the National League of Cities website.

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Categories: Community Commentary, Smart Growth, Transportation

Author:David A. Garcia

David A. Garcia created SCL in March of 2012. Garcia is a Stockton native with a background in urban policy and planning, holding a Bachelor's Degree from UCLA as well as a Master's Degree in Public Policy from the Johns Hopkins Institute for Policy Studies. He currently serves as the Policy Director at the UC Berkeley Terner Center for Housing Innovation. David was also COO at Ten Space, a real estate development firm focused exclusively on Downtown Stockton, and continues to advise on their projects. Prior to that, he worked three years as a researcher/analyst for a Congressional research agency in Washington, DC. The views expressed on this site are entirely of the author's

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