Cities Keeping CDBGs an Alarming Trend for Local Nonprofits

February 29, 2012; Source: Glendora Patch

Watch out for this trend! Cities are looking to keeping their federal Community Development Block Grant (CDBG) appropriations in-house and restricting or eliminating grants to nonprofits. Typically, local governments that receive CDBG funds almost automatically give a portion to nonprofits for “public services”—that is, human or social services necessary to complement physical housing and redevelopment strategies. They also take portions of their CDBG to support housing rehabilitation and other physical neighborhood improvement programs administered and delivered by nonprofits.

Facing increasing financial stresses, cities are finding CDBG dollars may be better kept by municipal agencies rather than farmed out to networks of nonprofits. For instance, Glendora, Calif. used to get over $450,000 annually in CDBGs, but that number fell last year to a paltry $300,000, of which $57,000 was given to nonprofits as small grants. This year, Glendora’s CDBG allocation will plummet to $197,000. Looking at a 35 percent cut in CDBG funding, the city’s planning director told the City Council he favors nixing the nonprofit grants, and discussion at the City Council seems to be heading in that direction. This would defund the small grants that Glendora typically gave to groups such as Cory’s Kitchen Food Bank, the East San Gabriel Valley Coalition for the Homeless, the Valley Meals on Wheels, and two YWCAs.

Is Glendora an anomaly? Facing local revenue constraints and increasing slashes in federal funding, local governments see holding on to CDBGs as a way of staving off layoffs of government staff and of paying for city government program delivery. We have seen these pressures hit CDBG-nonprofits before (most recently in Lynchburg, Va.), particularly in smaller cities where a grant of a few hundred thousand simply doesn’t go very far.

This is the tug-of-war that is only likely to increase as the federal government retrenches in its block grant funding for localities. There will be plenty more city planning directors, city managers, and business administrators examining their shrinking local revenues and imagining how they might repurpose CDBGs to keep local government operations alive.—Rick Cohen