.NTc0Ng.NTc0Ng

DRAFT:McLean:ez 12/1/69 TO

Attention: .l!.1.rL REGIONAL ADMINISTRATORS Assistant Regional Administrator for Model Cities FROM

Robert H. Baida, Deputy Assistant Secretary (MCGR) SUBJECT

Establishing the Start of the Second Action Year I. Purpose. T1:lis memorandum sets forth the procedure for establishing the star t of the second action year for each first round Model City. It follows discussion at the July and October meetings of Assistant Regional Administrators and response of ARA's in September to a memorandum dated July 28, 1969, asking how Regional review loads might be spaced out. II. Considerations. Among consider ati ons i n s etting t h e s tart o f s econd a ct ion years are t he f ollowing ~ 1. Nece s s i ty of spac i ng review. l oads. If ever y fir st r ound city had exactly a 12-month f i rst action year, abo~t one-half the first round cities and perhaps one-half the second round cities would come up for review at the same time. 2. Effect on the cities. In some cities, it appears from results so far, there is an advantage in entering the second action year as soon as possible. Continued planning efforts point to a better second year program mix than the presently funded first year package. Shift to the second year may give the city an opportunity to kill a few doubtful programs before they start. on the other hand, some �-2- other cities have started a lot of promising projects but have not kept pace with their monitoring and evaluati on efforts. A later shift to second year prograrnrning--perhaps 15 or 16 mont~s after the start of the firat year--may give evaluation a better chance to impact the second year decisions. 3. Adjustment to local calendars. Some cities will want to fit their Model cities program year to the city fiscal year. prefer not to do this. Others may Some cities may wish to avoid making program decisions at the time of municipal elections. There may be other local reasons for preferring one renewal time over another. 4. Effect on quality of review. Because of changing conditions in the cities--new leadership, a later start of projects, etc. - -ther e may be some cities which the RICC and the HUD staff feel will be e a sier to r eview at a later time than others . 5. Funds a vai l able to the cities . Obvious ly a cit y that is r unn ing out of money mus t be reviewed pr omptly, or perhaps given a f ew months' money t o finance a first year cont inuation until the second year planning c an be rev iewed. At tnis point, however , it appears very doubtfu l that any first round cities are going to be out of funds 12 months after their contract signing. III. carry-over of unspent funds. An important factor of entering the second action year is the disposition of funds obligated to the city for the first action year but not spent. In various ways· we have promised the cities that such funds may be carried over into succeeding years, providing the city is performing well in the program. A city that may have started �-3- s L ;·;:·iy but has steadily increased prcgram momentum during the first shou ld .?:".ot be punished in the second year. y \-:;.·-'.z Howeve2~ ., ·i:ib.e national pn1:f,ose of the Model Cities Program may not I -& l1a l l ser'\;:.~d by allocating a full second round target figure to cities whi t:~-:. have shown little or no promise in getting good programs started in the first year. Even for good cities , there may be a problem in building up a spending rate in the second year which cannot be maintained ·in the third year. For example : City A has a first round target figure of $4 million and a second round figure of the same. During the first year, while projects were starting up, it spent only $2 million . With carry- over, it then has $6 million for the second year . If the city's supplemental spending consists entirely of on-going staff or other expenses , as compared to one-time capital expenses, f or whi ch t here is no take-over sour ce in the thir d year , it c a nnot establish a $6 million spending rate in the second year without facing a l i kely cut of $2 million for the thir d year. The tendency o f all pro ject s to get more expensive without i ncreasing t h eir scope (because of pay raises, more utilization of services and other reasons ) heightens this risk. Therefore, cities shall not be allowed to use their remaining first round funds to increase their second year spending rate except to the extent that: 1. An amount equal to the first round carry-over is applied to capital or other projects which, by their nature, will not require renewal in the third year, or 2. The city can demonstrate a commitment from other sources, �i--4- pr,;:;i erably local or State, to ca.rry out the excess on-goi.r•.g project:f£1 i r,, year tr.iree, or 3. A combination of #1 and #2. In cases where the city has carry-over but cannot meet the abov9 conditions for spending the carry-over in year two, either of ·cn e following steps may be taken : A. The city's first year may be stretched out to use all or part of the carry-over. This technique should be used when a stretch-out is desirable for other reasons--in particular, when it will result in a better second year program, or Bo The city may be renewed without stretch- out, but the allowable second year spending level will be held to the second year target figure without the carr y - over, or without that part o f the carry- over not covered by paragraphs 1 to 3 immediately above . Exampl e : City A, cited above, shows that $1 mi ll i on of its projected second year programmi ng repre sents one-time expenditure , either as capital projects or as projects for which other funding i s secure for t h e third year. It's s pending guideline for the second year would be $5 mil~iono The c ity would not b e permitt ed to carry f orward $1 million of its f i rst year fund s o Where a city , because of a ppl ication of t he above, i t not allowed to add all or part of its carry-over to its second year spending level, it should be indicated to the city that it may get the remaining increase during the second year.if it can come up with �-sone~,·cime projects as described above. Ex~ple: Half-way through its second action year, City A :j.qentifies a new adult educa-t:ion .. project for which State or local funds will be available in the third year. It may start this project .on supplemental funds in advan.c e of its other funding. Given these operating considerations and policies, we now request that ARA's recommend a specific starting date ·for the second action year of each first round city. This date should be not less than ten months nor more that 18 months after start of the first action year. It will be the central Office intention to follow the AR.A's recommendations providing the total pattern of recommendations is consistent with obligation and spending patterns. If recommen- dations have to be changed ·. to meet these considerations·, it is hoped t'!lat the changes will a:ffect only a few cities. Proposed changes will be discussed with the ARA's, and time will be allowed to discuss them with the cities before final decision. �