Most Americans are enjoying the fruits of our strong economy. But while many urban areas are doing better, we still need to do more to raise up those communities that remain disconnected from our values of opportunity, responsibility, and community. Working with the private sector and State and local governments, the President is determined to help bring distressed areas back to life. To address this need, the budget proposes a New Markets Initiative, expands the President's national service program, proposes to create more Empowerment Zones and Enterprise Communities, and increases the opportunities for home ownership. The budget includes the following:
· The New Markets Initiative: The budget provides tax credit and loan guarantee incentives to stimulate $15 billion of new private capital investments in targeted areas; build a network of private investment institutions to funnel credit, equity and technical assistance into businesses in America's new markets; and provide the expertise to targeted small businesses that will allow them to use investment to grow.
· The New Markets Tax Credit: To help spur $6 billion in new equity capital, this tax credit is worth up to 25 percent for investments in a wide range of vehicles serving these communities, including community development banks, venture funds and corporations, and the new investment company programs created by this initiative (see below). A wide-range of businesses could be financed by these investment funds, including small technology firms, inner-city shopping centers, manufacturers with hundreds of employees, and retail stores.
· America's Private Investment Companies (APICs): Just as America's support for the Overseas Private Investment Corporation helps promote growth in emerging markets abroad, APIC will encourage private investment in this country's untapped markets. For each $100 million of private equity, HUD and SBA will guarantee loans up to $200 million, creating a $300 million investment fund to target larger businesses that are expanding or relocating in inner city and rural areas.
· SBIC's Targeted to New Market: Last summer, the Vice President challenged the SBA to find ways to better meet the needs of minority firms and underserved markets. The SBA is responding by offering more flexibility and new financing terms for Small Business Investment Companies (SBICs) that invest in low and moderate income areas.
· New Markets Venture Capital (NMVC) Firms: NMVC firms will make both capital and expert guidance available to small business entrepreneurs in inner-city and rural areas. Ten to twenty NMVC firms are planned. SBA will match the equity and technical assistance of private investors.
· Empowerment Zones and Enterprise Communities: The Empowerment Zones and Enterprise Communities encourage investment in distressed communities through tax benefits for businesses, and flexible block grants for job training, day care and other purposes. The original EZs from 1994 have already used funding to leverage private dollars to create or save 1,500 jobs, train 900 persons, and serve 3,200 youth in developmental programs. In 1999, Congress provided first-year funding of $55 million for the new EZs, and $5 million in first-year funding for 20 new rural Enterprise Communities announced in January. The 2000 Budget proposes mandatory funding for ten years: $150 million a year for urban EZs and Strategic Planning Communities; $10 million a year for rural EZs; and $5 million a year for rural ECs.
· National Service: This program encourages Americans of all ages and backgrounds to help solve community problems and provides opportunities to engage in community-based service. The budget proposes $848 million for the Corporation, a 19 percent increase over 1999.
· Low-Income Housing Tax Credit: Since its creation in 1986, the Low-Income Housing Tax Credit (LIHTC) has given states tax credits of $1.25 per capita to allocate to developers of affordable housing. Even though building costs have increased 40 percent in the last decade, the amount of the credit has not been adjusted for inflation. Therefore, President Clinton and Vice President Gore propose to increase the cap on the LIHTC from $1.25 per capita to $1.75 per capita -- restoring the value of the credit to its 1986 level. Estimates suggest that the LIHTC currently helps build 75,000-90,000 affordable housing units each year. The President and Vice President's proposal to increase the cap by 40 percent will create an additional 150,000-180,000 new rental housing units for low-income American families over the next five years. Last year, over two-thirds of the House and Senate were co-sponsors on bills to raise the cap on the LIHTC --more support than any other tax legislation. This proposal will cost $1.7 billion over five years.
· Play-by-the-Rules: In 1999, the Administration proposed and Congress enacted a $25 million Neighborhood Reinvestment Corporation "Play-by-the-Rules" pilot program. This program will allow renters with solid payment track records to own their own homes. The 2000 Budget proposes a second round of $15 million for this initiative.
· Elderly Housing: The budget provides $747 million for the Department of Housing Urban Development's (HUD's) elderly housing program to address the changing needs of the elderly population and reconfigure an aging housing stock to better serve the frail elderly. In addition to providing grants to non-profits for construction of 5,970 units, funds would be provided to convert some projects to assisted living using a combination of capital grants and service coordinators to bring services from the community to residents. The budget permanently authorizes 15,000 new housing vouchers linked to Low-Income Housing Tax Credit properties to make these units affordable to extremely low-income elderly.
· Community Development Financial Institutions (CDFI) Fund: The budget proposes to expand funding for the CDFI Fund to $125 million--a $30 million increase from 1999. The Fund increases the availability of credit, investment capital, financial services, and other development services in distressed communities.
· Transportation and Housing for Families Moving From Welfare to Work: The President's budget will provide $430 million for 75,000 welfare-to-work housing vouchers, including $144 million in new funds for 25,000 additional vouchers. This is a 50 percent increase over the 50,000 vouchers the President secured last year. The vouchers will help families move closer to a new job, reduce a long commute, or secure more stable housing so they can perform better on the job.
· Helping America's Communities Redevelop Abandoned Buildings: This new Federal initiative would attack one of the primary causes of blight in urban neighborhoods: abandoned apartment buildings, single family homes, warehouses, office buildings, and commercial centers. Under the proposal, HUD will provide $50 million in competitive grant funds in FY2000 to local governments to support the demolition or deconstruction of blighted, abandoned buildings, as long as there is a plan -- with significant private-sector participation -- to redevelop the property for commercial use or multi-family and single family housing. To ensure no incentive is created to abandon buildings, the program would be sunsetted after three years and no building abandoned after October 1, 1999 would be eligible for redevelopment. Preferences will be given to communities that link existing youth training programs with the property's redevelopment.