Box 8, Folder 17, Document 22

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Policy objectives for use of supplemental funds

Use. of “variable funding" as means of carrying out
effective program management.

Criteria for determination of supplemental fund

Strategy for handling "weak" cities.

Conclusion and Recommendation


Although tha basic intent expressed in the Model Cities
statute appears to focus primarily upon the fiscal plight of our
cities and the need for additional financial assistance, experi-
ence in local government compels me to look beyond this over-
Simplified concept. . y.

The haphazard use. of the vast array of Federal categorical
grant-in-ajd programs has largely been ineffectual in solving
major urban problems-- some of the cities most successful in
the grantsmanship game have experienced some of the most serious
civil disorders. Success in getting Federal dollars does not
insure success in making effective use of such resources.
An honest evaluation would have to conclude That the -Fertieral
Government has not generally imposed criteria which would make
effective use of its resources and meaningful local commitment
prerequisites to continucd Federal assistance.

This policy hes not greatly encouraged the development of ¢ /
local govexnment's capacity ox willingness to deal effectively V2
with jts own problams, and indeed, the Federal Government's

eaperneds to fund and deal directly with every conceivable kind
of cons neuen in pe eee Seeman has been one
of the 1 Factors in reducing the cittes® capacity to act,

Lf this trend is to be altered and meaningful decentraliza-
tion is to take place, the role of the Federal Government must
be changed from that of attempting to deal directly with the
problems of our cities, to that of building the capacity of State
and local governments to deal effectively with those problems.

This is the primary objective we have established for the
administration of the Model Cities program. The following comnent
and the resulting conclusions and recommendations are intended
to assist in attaining that objective, and to improve our ability
to effectively manage the program,



In enacting the Model Cities program, the Congress pro-
vided for a new source of funding, commonly known as Model
Cities supplemental funds. These funds are to assist localities
in carrying out the purposes of the program. The following
policy objectives have been identified for the use of supple-
mental funds.

Policy Objectives

1. To promote coordination and concentration of resources by
attracting funds, staff, and other services from existing insti-
tutions and agencies, public and private, and by filling in the
gaps in a coordinated approach with projects for which funds
would otherwise be unavailable.

2. To secure commitment of new resources and maintenance of
effort on the pert of the city, including changes in agency
prectices and service levels to make them more responsive to
model neighborhood needs.

3, Yo increase loce] acceptance of responsibilily for the pro-
gram, leading to greater care in the selection of projects and
activities and in the conduct of and the monitoring of such

4, To encourage innovation, maximum coordination of Federal
assistance, new and additional projects and activities not
assisted under a Federal grant-in-aid program, and secondarily,
to be used and credited as part or all of the required non-
Federal contribution for Pederally-assisted projects which are
part of the comprehensive model cities plan, as the Act provides.

5. To make available additional funds to ease "the financial
plight" of our cities, as noted hy President Nixon in his speech
on revenue sharing.

6. To experiment with the block grant or revenue sharing approach
with a stress upon developing capabilities for local initiative
and local decision-making in order to effectively utilize
unstructured Federal funding.



As a means of improving program management at the Pederal
level, and encovraging useful programs at the local level, the
Department of Housing and Urban Development proposes to utilize
concept of variable funding. By establishing a set of [for
rocess and performance criteriap and utilizing them to judge hove OR
© overe program cCrLror y a city, supplemental funding /
levels can be varied among cities, those with the best potential "dee

for national demonstration DUS DOSS SR ee eae yee nade assisted,
She oo eee “nO ikelihood _Of ever | mounting a viable’

‘By using process and performance criteria, HUD seeks to
avoid substituting a Federal judgment for that of the locality
in specific substantive areas or functional programs, thus
preserving local initiative. This is in keeping with both the
Demonstration Cities Act and the new Administration's concept
of revenue sharing.

Bach city will be on notice with respect to the criteria.
The city will be told its allocation fiagure for the next planning
year, and will be on notice that its acauad oe ee Figure
could well be lower Gepending upon perfurmance against the
stated criteria.

The city will also be informed that exceptional performance
or evidence of potential for national demonstration purposes
could earn it extra supplemental funding. Failure to perforn,
on the other hand, could result in a severe cutback in funding
or elimination from the program.

The suggested criteria to be applied in each case, and
the process for handling the weak cities are attached. It is
anticipated that in making judgments, the relative improvement
of performance within each individual city over the previous
year will he considered, as well as the usefulness of its overall
process and performance for national demonstration purposes.

1. City commitment: including suppert from the chicf

executive officer, allécation and re-allocation of city
resources, changes in city agency policy, practice and ,
service levels to make them more responsive to the model
neighborhood and its residents.

2. Maximization of available resources, public and
private: including the utilization (or attempted utilization)
of appropriate Federal] grant pregrams, state programs, the

involvement of the private sector, and voluntary action.

3. Effective coordination of available resources: |

including the establishment of effective coordinating
mechanisms, working agreement with ether agencies, imaginative
use of resources from a variety of sources in tandem to focus

on priority problems and objectives,

4. Community involvement and citizen participation:

including the achievement of broudbased community support,
voluntary action, widespread citizen involvement in and
maximum employment of model neighborhood residents planning,
monitoring and evaluating the program as a whole and individual
projects on an on-going basis, responsiveness of other |
cooperating agencies and institutions to the necd for citizen
participation, and maximum employment of model neighborhood


5. Adminis"rative competence and cipacity of the CDA:

including progress in achieving operating results and in meeting
the planning schedule established by the city; access to the
chicf cxecuiive; and Gevelopmont of continued planning, evaluation

and data gathering activities plus the analysis of the criteria

listed above. |

BE Lainni nd DYoceseAa: ev:
fionshing betwean (a) &
(b) the cljectives, et
iccal plan: and {¢} the

Loar and reanonable rela~
Vor hood’ sa problemas

3 GY prderitier of the
RGA ih the oneeyoar achian


As we and the citiag have devealoned experiense with the
Model O3ties program, it has become inereaszingly clear that
there ars aavezal, key @laments to local progxyess and success
whieh sre reflected in tha akeve cr itera. Soma af our ciies
aye doing wall in ali of a nomber af these areas; others are
noticeakly Lacking in one cr more of them. Repeahed efforta
have heen made ko gerrect these lather oonditions and seme
eucecsses have Keen reterded. But theso efforts have been
3O4 how and when te
Therefore WE propose
Len and underkake a
and per forniance.

hampered by the shneses of an overals
penalige Inack of eAty effert and pr
to cuminuiicete the above eriteria te
range of HUD reaponsesm to inadacuate

RUD Response
The type ef net
facbery progress in mesiiy
on (1} whether the city i
{2} whether previous warning

iven by HUD when @ city shows unsatiae
the banie eriteria will vary depending
in planning, review or exeovtion,

3 of deficiencies have been given te
the gity, and (3) the dag and seriousness of the deficienecias.
In @1l cases the respanse should indicate very clearly:

o> ata



3 2 a “

-- which eriteria the city de not meaevring up te,
ee what achions Or correehionas are needed ,
ee the elty's deadline for making corrections, and,
Where Appropriate,
we penalty action that will be teken if terrectiens
AaA¥e Hob made.

Following is a L1S& of actions that would he appropriate
if cities failed, after warnings ‘are given and technical.
assistance is provided, to mensure up to the basic
criteria. It is anticipated that in most instances HUD

will utilize a serics of increasingly stronger responses
to induce corrective measures.

(a) Cities in Planning

-=-place a hold on further planning funds requisitions
(HUD -718's),

--notify the city that review of the comprchensive
plan will be held up,

~-notify the city that the amount of supplemental.
funds earmarked for the first action year will:
be reduced

-~-drop the city from the program.

(hb) Cities in Dx ecution

-~-place a hold on further supplemental expenditures
by suspeniing the Letter of “Credit,

--make holds on supplemental funds nonveinbursable,
thus reducitnae the amount of the current grant,
~ereduce the amount of supplomental Lunds carmarie ed

for the next action year- ;
-“drop the city from the program.

Procedure for HUD Pcnalty Ketion

In most cases it is anticipated that a city's failure to

ily meet the basic criteria will be identified
by our Regional Svaff or the Reygioual Interagency Coordinate
ing Committee. In these cases the Assistant Ve syienal
Adiiinistrator for Model Cities will prepare a momorandum
for the Assistant Seecrelary, through the Desk Officer and
Director of Program Operations. “his memerandum should

~-whore and how the city fails to satisfy one or more of
the basic criteria,

--what previous action (i.e. Leadman talk with CDA Director
or Mayor, previcus warning letter to the city), if any,
has been taken on this matter,

-ewhat oction is ee panesnced and

--who (ARA, Regional Administrator, Desk Officer, Director
of Program Oparations, Kesistant Socretary or Secretary)
should give notice to the city and what form (ictter, ©
phone call, meeting q) it should take.

r Tp , oe =a tn te the eee | yee ee a ate a oS > .
ae Assistent. Seoretary wall aporeve, rejock or wodify the

= ‘ined eel Ss ‘ 3 - many a 2) ee at = —- ' * tao +
POCONO RE LON, POICLM ing App opYaate cases to the Seeretas,
and jaf Lfy the Vaetiow of action Lo le taken,


In a few cases, a ee failure to satisfy basic criteria
Will be identifiec iShington Staff. In these cases
the Desk Officer shoulda. be informed and he ghould discuss
the situation with the Assistant Regional Administrator.
Any inajor differences in how a problem situation should

be handled shall be raised to the Assistant Secretary.
Washingto, Staff, with REqional advice, will also
be responsible for determining if and when the appropriate
Congressional Representatives should be adviscd.of the
problem and the possible action.

The ARA will be responsible for notifying, and where
appropriate, discussing with the RICC, the problems and .
the notice and penalty action proposed for the city.

Progress Report

The Assistant Regional. Administrator will prepare a sub-
seguent report to the Assistant Secretary, through the
Desk Offiecr and Director of Program Operations, (1) noting
whether the city has made the necessary corrections or

(2) recommending additional action or penalties to he
imposed. This report, which can be very brief if the

city has respvonded satisfacterily, shovld come abqui:. the
time of the deadline set for the city's making corrections.
The AVA and Dosk Officer shovld keep abreast of the city'
progress and repoxt any unusual developments (e.g. need ‘te
institute stronyer measures, need to extend deadline,
proyress warranting earlier reinstatement of funding) to
the Assistant Secretary. ‘


It is very important that we do everything possible to
help our weak cities improve. If they are unable to
satisfy our basic criteria we should teke appropriate,
proportional steps to reduce, and in extreme cases end,
our commitment to them.

The purpose of this "Weak Citfes Strategy” then is to
ensure that (1) HUD follews a consistent approach in
dealing with probleia cities anc (2) that a solid record
is established for any penalty action that may become





The basic objective of the Model Cities program
is to build the capacity of cities (and state
government) to deal with their own urban problems.

Traditional Federal approaches have not contributed
to this objective.

A different approach is needed in order to assure
the necessary commitment of local government to
the objectives of the program so that it is not
viewed as "just another Federal grant."

Better management and stronger city commitment can
be achieved if the cities! level of funding is
dependent upon performance criteria and not upon a
fixed formula.

Elimination of weak cities from the program after
failure to respond ta indicated deficiencies will
increase the credibility of the program.



That HUD adopt and communicate to the cities, a
policy which would clearly indicate to cities that
their level of funding each year would depend upon
their performance in accordance with the clearly
stated criteria.

That each city be given a "planning figure" in
advance, but with a clear understanding that it
is not "guaranteed" but dependent upon (1) above,

That exceptional cities be referred to the Assistant
Secretaries Working Group for determination of
priority support.

That “weak" cities be handled as suggested in
paragraph V and be dropped from the program if
their response is unsatisfactory.

Respectfuily submitted,

Floyd H. Hyde
Assistant Secretary (MCGR)

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