Urban Development Action Grants:

Effects of the 1987 Amendments on Project Selection

RCED-89-64: Published: Jan 30, 1989. Publicly Released: Jan 30, 1989.

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Pursuant to a legislative requirement, GAO analyzed the effect of 1987 legislative changes desined to ensure fairness in the allocation, distribution, and use of Urban Development Action Grant (UDAG) program funds, focusing on the: (1) distribution of funds among regions; (2) targeting of funds to cities and urban counties with high levels of economic distress; (3) number and types of projects that received the funds; (4) per-capita funding levels of each city, urban county, or community receiving UDAG funds; and (5) stimulation of maximum economic development activity.

GAO found that, after the 1987 amendments took effect: (1) geographic distribution of UDAG funds was more even; (2) the Department of Housing and Urban Development (HUD) awarded 59 grants totalling $146.2 million for large-city projects and 57 grants totalling $43.7 million for small-city projects; (3) the East North Central and Middle Atlantic regions continued to receive the majority of large-city funds; (4) one region decreased its share of large-city funds, while six regions increased their shares; (5) the Mountain and West North Central regions received 5.5 percent of large-city funds, but would not have qualified under the old system; and (6) the Pacific and Middle Atlantic regions received $2.7 million and $6.5 million, respectively, for small-city projects. GAO also found that: (1) large, economically distressed cities received about $26.1 million less because there were fewer eligible projects, while small cities received $7.4 million less; (2) the number of projects selected decreased because average project funding increased; (3) the amendments reduced per-capita funds for large cities from $19 to $14, and increased per-capita funding for small cities from about $295 to $338; and (4) although HUD did not request UDAG program funding for fiscal year 1989, it estimated that about $50 million would be available from cancelled, reduced, or terminated projects to finance small and large-city projects in 1989.

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