October 11, 2010; Source: The News & Advance |Lynchburg, Va’s City Council is following a trend we’re seeing around the nation. According to the News & Advance, Lynchburg is eliminating the portion of its Community Development Block Grant (CDBG) entitlement funds that it used to allocate for nonprofit services. Until now, Lynchburg had set aside 25 percent of its CDBG toward nonprofits (we suspect some of that was nonprofit activity in the housing rehab and development portion of the grant as opposed to human/social services). The national average is some 15 percent.

The city’s argument is that it can put all of the money to better use by having the city allocate the funds to city projects such as streetscape improvements, community center renovations, and housing-related activities. The nonprofit portion of CDBG funds will be reduced in 2011 and eliminated in 2012 in the city plan. That means that groups such as Miriam’s House (for homeless woman and children), the YWCA of Central Virginia, The Gateway (helping homeless clients get into permanent housing), the Interfaith Outreach Association (providing emergency fuel assistance for the elderly), and Rebuilding Together (which will lose $70,000 that it had used to help low-income homeowners do home repairs), will likely be looking for private donations to replace their CDBG appropriations.

Some Council members suggested that nonprofits might be able to get discretionary grants from the city’s own local revenues, but that sounds like a bit of a snow job. The city’s discretionary contribution to nonprofits this past year was $136,000, much less than 25 percent of the city’s $1 million CDBG allocation, and dedicated to quasi-public functions such as the Virginia Legal Aid society and the Court Appointed Special Advocate program.

Look at the arguments and counterarguments. The city’s argument that it can do better, more targeted neighborhood improvement without providing assistance to human service nonprofits helping the poorest of the poor, is specious, and the notion that the city would replace federal CDBG dollars with local tax revenues to cover some of these groups’ costs doesn’t sound the least bit likely. While church-oriented Lynchburg is probably a generous charitable community, this small city’s residents are hardly likely to replace federal funds with charitable contributions in a recession.

On the other hand, it is well known that many CDBG cities use their social service part of the CDBG program as a way of getting the nonprofit community to fight over a small slice of the budget themselves, deflecting their attention away from the big dollars going to redevelopment projects and frequently for-profit builders and developers. The groups funded in Lynchburg give the appearance of being solid groups that provide services to the community’s very poor residents. The overall impression is that the city may have ginned up arguments calling for the strategic use of CDBG dollars to target specific neighborhoods, but the subtext is a public sector prepared to turn off the spigot of governmental moneys to nonprofit service providers.

Is this happening in your neck of the woods? Please let us know.—Rick Cohen