Community Investment:

Los Angeles's Use of a Community Development Block Grant Exemption

GAO-02-726R: Published: Jun 28, 2002. Publicly Released: Jun 28, 2002.

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Under the Department of Housing and Urban Development's (HUD) Community Development Block Grant (CDBG) program, entitlement communities--also called grantees--receive funds that they can spend to support specific community development activities, such as rehabilitating housing, improving public facilities, and providing public services. Most grantees are prohibited by statute from spending more than 15 percent of their CDBG funding on public service activities, such as child care, health care, and crime prevention. However, in the aftermath of the 1992 Los Angeles civil unrest, Congress gave an exemption from this statutory cap to two grantees--the City of Los Angeles and the County of Los Angeles--allowing them to spend up to 25 percent of their funds on public services. In December 2001, the exemption was extended through 2003. Between 1993 and 2001, the City of Los Angeles spent between 20 and 25 percent of its CDBG funding to support public service activities, while the County of Los Angeles spent between 9 and 20 percent. According to HUD data for 1999 through 2001, the city and county used a majority of their public service funding to support general public services and either youth or senior services. There is no statutory or regulatory requirement that the grantees develop plans to transition to the 15 percent cap; however, HUD suggested in 1999 that the grantees develop such plans. As of May 2002, the City and the County of Los Angeles have undertaken some preliminary steps to facilitate a transition, but they do not have locally approved transition plans to decrease public service spending after 2003 in order to comply with the 15 percent spending cap.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: As GAO recommended, HUD sent letters to the City of Los Angeles and the County of Los Angeles in August 2002, requesting that each jurisdiction develop and adopt a transition plan to reduce their CDBG public service spending to the 15 percent statutory cap, and submit the approved plan to HUD. If either jurisdiction elected not to develop a transition plan, HUD requested that they submit their determination and the reasoning for such determination to HUD. The City and County of Los Angeles elected not to submit a transition plan and provided this determination to HUD.

    Recommendation: To help ensure a smooth transition in the event that the 25 percent public service cap is not extended, the Secretary of Housing and Urban Development should request that officials from the City and the County of Los Angeles submit locally approved plans to reduce their public service spending in the 2004 local fiscal year to the lower, 15 percent statutory cap.

    Agency Affected: Department of Housing and Urban Development


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