Former alderman: Using poverty funds for economic development a risky venture

June 16, 2010

By Stuart R. Wahlin
Staff Writer

June 14, the Rockford City Council passed a committee report recommending that $100,000 in Community Service Block Grant (CSBG) funds be issued to the Rockford Area Economic Development Council (RAEDC). Although there was no debate on the floor during the meeting, the measure was not without opposition. Aldermen Venita Hervey (D-5), Lenny Jacobson (D-6) and Ann Thompson-Kelly (D-7) cast the only “no” votes, but the resistance began in the weeks prior.

Opposition to the measure was based on the argument that the CSBG funds issued under the federal stimulus program are specifically intended for poverty-related programs.

According to the U.S. Department of Health and Human Services, “Grantees receiving funds under the CSBG program are required to provide services and activities addressing employment, education, better use of available income, housing, nutrition, emergency services and/or health.

“Beneficiaries are low-income individuals that may be unemployed or receiving public assistance, including Temporary Assistance for Needy Families (TANF), at-risk youth, custodial and non-custodial parents, residents of public housing, persons with disabilities, persons who are homeless, and individuals transitioning from incarceration into the community,” the department states of the CSBG program’s target population.

All told, the American Recovery and Reinvestment Act (ARRA) has earmarked $1 billion for the program through the third quarter of 2010.

The Illinois Department of Commerce and Economic Opportunity (DCEO) administers the federal dollars to local community action agencies. In Rockford’s case, the agency is the city’s Department of Human Services.

During the June 7 meeting, Ald. Linda McNeely (D-13), for the second week in a row, made a successful motion, albeit narrowly, to lay the RAEDC funding matter over after an impassioned plea from Victory Bell, a Democratic former alderman who served the Fifth Ward for four decades. Bell, who retired from the council last year, is also president of the Neighborhood Network Board of Directors.

Bell told former colleagues he was “disturbed” the CSBG funds were being earmarked for an economic development group.

“It is my opinion that these stimulus funds were allocated to the community action agencies for poverty programs for Winnebago and Boone counties,” he argued. “I question if the RAEDC is an appropriate organization for awarding $100,000 from the poverty funds.”

Although Bell asked that the funding proposal be sent back to the drawing board in committee, a layover would have to suffice. Bell told The Rock River Times he doesn’t believe McNeely could have secured enough support for the committee referral June 7, because fellow Democrats Lenny Jacobson (D-6), Ann Thompson-Kelly (D-7) and Karen Elyea (D-11) were absent.

“My position is that aldermen have…an obligation to look at what is going to benefit the people in their area,” he asserted. “There are six or seven wards that have 75 percent of the poverty, and really need to begin to use not only poverty money, but economic development funds as well, to address the problem, and the ongoing problems, in those areas—education, unemployment, high dropout rate, high incarceration rates. You add all those together, and you cannot promote a healthy city.”

Bell, who noted he always supported the RAEDC as an alderman, said he fears some may misconstrue his plea.

“I think everybody’s going to look at it as if we’re just opposed to the Rockford Area Economic Development [Council],” he surmised. “That’s not the point. I understand clearly the concept of the region.”

Regardless, Bell stressed that CSBG funds are meant for community agencies directly combating poverty.

A fine line

Also during the June 7 meeting, McNeely questioned how a number of other organizations qualified for CSBG sub-grants. Rockford Urban Ministries (RUM) was awarded $35,000, Alignment Rockford was issued $25,000, the west side Weed and Seed program received $15,000, and Diversity, Inc., was granted $10,000.

“I thought that the purpose of the grants, the main purpose, was to make sure that individuals in the community were able to receive employment,” said McNeely, who was not present for the June 14 vote. “And based on the organizations that I see here, I’m not sure how they would employ the youngsters within the community.”

Human Services Director George Davis explained: “Each of these grants has to do with a project that was proposed that both maintains current employment in some cases, or provides a service that would otherwise not be available to the community. In some cases, the projects would fund materials and equipment that, of course, would be purchased locally, that supports our local economy.”

With regard to RUM, a religious-based organization, federal CSBG guidelines state: “Direct Federal grants, sub-awards, or contracts under this program shall not be used to support inherently religious activities such as religious instruction, worship, or proselytization. Therefore, organizations must take steps to separate, in time or location, their inherently religious activities from the services funded under this program.”

Explaining the CSBG funding for RUM, Davis said, “This program is an ongoing project that has to do with repairing and maintaining homes in our community of individuals that could not afford to otherwise do those repairs.”

Although the program utilizes youth volunteers, he explained, it requires coordination by a paid staff and the purchase of materials.

“The other projects here have a similar focus,” he added, noting the grant for Diversity, Inc., will support staff time associated with youth education regarding risky behaviors, including sexually-transmitted diseases. The Weed and Seed grant will be used to contract a tutor. The funding for Alignment Rockford will be implemented to pay staff for coordination of projects supporting improved education in public schools.

The RAEDC, which sometimes engages in lobbying activities on behalf of the region, will also have to be very specific as to how the $100,000 CSBG grant would be used.

According to federal guidelines: “Federal grant funds provided under this award may not be used by the grantee or any sub-grantee to support lobbying activities to influence proposed or pending Federal or State legislation or appropriations. This prohibition is related to the use of Federal grant funds and is not intended to affect an individual’s right or that of any organization, to petition Congress, or any other level of Government, through the use of other resources.”

How CSBG expenditures are approved

Director Davis explained groups seeking the CSBG grants have to develop an annual work plan for approval by the 15-member Human Services Community Action Board and, ultimately, by the DCEO. He noted the plans are reviewed and revised annually to ensure they are on track.

“Projects and expenditures must address the needs of low-income residents based on income guidelines and poverty demographics,” he explained, indicating areas of activity may include basic needs and direct assistance, case management, information and referrals, education and training, as well as scholarships. Economic development also qualifies, Davis reported.

“While some funds are designated for specific areas of activity, there is a great deal of flexibility given to local communities in prioritizing services,” he stated.

However, if grants are determined to not be utilized in accordance with ARRA or the CSBG Act, the federal government may withhold the funds.

“I just think that we take a risk when we begin to stretch the qualifications, switch the priorities, of funds,” Bell said. “Economic funds are for economic development, and poverty funds are really for poverty.”

Davis, however, noted there is a direct correlation between economic development and combating poverty.

“Direct assistance to low-income residents and neighborhoods in various forms is also critical to mitigating the negative effects of poverty,” he acknowledged. “However, the balance between investments and efforts to improve conditions affecting poverty and direct programs and strategies to address specific poverty conditions is not formulaic, and CSBG funding is designed to provide local flexibility to ensure that funds achieve optimal benefit in addressing poverty conditions.”

Davis indicated CSBG funds are also intended to leverage other public or private dollars to “fill gaps” not addressed by other means to maximize the anti-poverty resources.

Bell instead suggests Community Development Block Grants (CDBG) would be more suitable for an economic development organization like RAEDC.

“My position would be that if, for example, any organization was going to use…community service [block grant] funds, they need to be concentrated in the area specifically dealing with the poor,” he said. “And I think that’s the difference. I think that, maybe, it’s what is not being considered there. It needs to say for sure: ‘This is what we’re going to do for poverty. This is what we’re going to do in certain low-income, moderate-income, areas,’ and things of that nature.”

RAEDC President Janyce Fadden acknowledged the CSBG approach as being different from previous funding from the city.

“We haven’t done it before this way, but it appears to be all in line with the way that the funds are intended to be used,” she said. “And the community has options sometimes with the funds like the CSBG to seek out providers like ourselves, who can help people become employed in the community.

“When the City of Rockford proposed making this change, we met with the management over at Human Services to discuss whether we were grant-eligible, and part of the requirements of the economic development portion of the CSBG is about our ability to create jobs,” Fadden explained. “And although we’re not the employer of record, we do work to attract jobs and help people get employed in the community. And many of the jobs that we do qualify for the income levels of the people that are being assisted by Human Services, so they felt that we were a viable option. They then discussed this with the State of Illinois Department of Commerce and Economic Opportunity, who approved moving ahead. And then, the community action agency, that is really Human Services—their board also approved this as a legitimate use of their funds.”

Asked why city staff had not opted to earmark CDBG funds, rather than CSBG dollars, for the RAEDC, Davis acknowledged: “CDBG funding can be used for similar purposes in terms of economic development. However, due to the demands on the CDBG budget this year, the continued economic challenges faced by the city placing additional demands on other economic development resources, and the fact that available CSBG funding was increased dramatically due to federal stimulus, we were able to consider support of the RAEDC’s request.”

CDBG dollars are among the alternatives being considered by aldermen to fund groups and projects that were once supported by tax increment financing (TIF) dollars. Recently, however, aldermen were advised to put the brakes on TIF expenditures. As a result, the relatively few successful TIF districts in Rockford will essentially be used to bail out those that are failing, rather than the intended practice of reinvesting the increment revenues into the neighborhoods that generated the dollars.

Regardless of the city’s financial woes, Bell argued elected leaders must address poverty as a priority.

“You’re not going to eradicate poverty, but how do you improve the conditions of those individuals who have systematically been left out of the mainstream of economics and so forth?” Bell wondered. “We in Rockford have a history of not really prioritizing strategies to improve poverty. And this has gone on for years. That’s why the school board had its 30 years of systematic discrimination.

“I really want to look at ways that we can begin to get people in the low- and moderate-income area more focused on getting involved in the issues that have confronted them in those areas,” he added. “Elected officials are going to have to start focusing on how we can improve the conditions of poverty. It’s a very serious problem.”

State election records show contributions of more than $71,000 to the campaign of Rockford Mayor Larry Morrissey (I), plus more than $19,000 to the Citizens for Rebuilding Rockford campaign supporting the mayor’s push for a 1-percentage-point sales tax increase, from RAEDC representatives, either individually, or by way of their respective businesses or employers. Notably, the Rockford Register Star, represented by General Manager Tom Lasley on the RAEDC, was among Morrissey’s contributors.

From the June 16-22, 2010 issue

By Stuart R. Wahlin

Staff Writer

June 14, the Rockford City Council passed a committee report recommending that $100,000 in Community Service Block Grant (CSBG) funds be issued to the Rockford Area Economic Development Council (RAEDC). Although there was no debate on the floor during the meeting, the measure was not without opposition. Aldermen Venita Hervey (D-5), Lenny Jacobson (D-6) and Ann Thompson-Kelly (D-7) cast the only “no” votes, but the resistance began in the weeks prior.

Opposition to the measure was based on the argument that the CSBG funds issued under the federal stimulus program are specifically intended for poverty-related programs.

According to the U.S. Department of Health and Human Services, “Grantees receiving funds under the CSBG program are required to provide services and activities addressing employment, education, better use of available income, housing, nutrition, emergency services and/or health.

“Beneficiaries are low-income individuals that may be unemployed or receiving public assistance, including Temporary Assistance for Needy Families (TANF), at-risk youth, custodial and non-custodial parents, residents of public housing, persons with disabilities, persons who are homeless, and individuals transitioning from incarceration into the community,” the department states of the CSBG program’s target population.

All told, the American Recovery and Reinvestment Act (ARRA) has earmarked $1 billion for the program through the third quarter of 2010.

The Illinois Department of Commerce and Economic Opportunity (DCEO) administers the federal dollars to local community action agencies. In Rockford’s case, the agency is the city’s Department of Human Services.

During the June 7 meeting, Ald. Linda McNeely (D-13), for the second week in a row, made a successful motion, albeit narrowly, to lay the RAEDC funding matter over after an impassioned plea from Victory Bell, a Democratic former alderman who served the Fifth Ward for four decades. Bell, who retired from the council last year, is also president of the Neighborhood Network Board of Directors.

Bell told former colleagues he was “disturbed” the CSBG funds were being earmarked for an economic development group.

“It is my opinion that these stimulus funds were allocated to the community action agencies for poverty programs for Winnebago and Boone counties,” he argued. “I question if the RAEDC is an appropriate organization for awarding $100,000 from the poverty funds.”

Although Bell asked that the funding proposal be sent back to the drawing board in committee, a layover would have to suffice. Bell told The Rock River Times he doesn’t believe McNeely could have secured enough support for the committee referral June 7, because fellow Democrats Lenny Jacobson (D-6), Ann Thompson-Kelly (D-7) and Karen Elyea (D-11) were absent.

“My position is that aldermen have…an obligation to look at what is going to benefit the people in their area,” he asserted. “There are six or seven wards that have 75 percent of the poverty, and really need to begin to use not only poverty money, but economic development funds as well, to address the problem, and the ongoing problems, in those areas—education, unemployment, high dropout rate, high incarceration rates. You add all those together, and you cannot promote a healthy city.”

Bell, who noted he always supported the RAEDC as an alderman, said he fears some may misconstrue his plea.

“I think everybody’s going to look at it as if we’re just opposed to the Rockford Area Economic Development [Council],” he surmised. “That’s not the point. I understand clearly the concept of the region.”

Regardless, Bell stressed that CSBG funds are meant for community agencies directly combating poverty.

A fine line

Also during the June 7 meeting, McNeely questioned how a number of other organizations qualified for CSBG sub-grants. Rockford Urban Ministries (RUM) was awarded $35,000, Alignment Rockford was issued $25,000, the west side Weed and Seed program received $15,000, and Diversity, Inc., was granted $10,000.

“I thought that the purpose of the grants, the main purpose, was to make sure that individuals in the community were able to receive employment,” said McNeely, who was not present for the June 14 vote. “And based on the organizations that I see here, I’m not sure how they would employ the youngsters within the community.”

Human Services Director George Davis explained: “Each of these grants has to do with a project that was proposed that both maintains current employment in some cases, or provides a service that would otherwise not be available to the community. In some cases, the projects would fund materials and equipment that, of course, would be purchased locally, that supports our local economy.”

With regard to RUM, a religious-based organization, federal CSBG guidelines state: “Direct Federal grants, sub-awards, or contracts under this program shall not be used to support inherently religious activities such as religious instruction, worship, or proselytization. Therefore, organizations must take steps to separate, in time or location, their inherently religious activities from the services funded under this program.”

Explaining the CSBG funding for RUM, Davis said, “This program is an ongoing project that has to do with repairing and maintaining homes in our community of individuals that could not afford to otherwise do those repairs.”

Although the program utilizes youth volunteers, he explained, it requires coordination by a paid staff and the purchase of materials.

“The other projects here have a similar focus,” he added, noting the grant for Diversity, Inc., will support staff time associated with youth education regarding risky behaviors, including sexually-transmitted diseases. The Weed and Seed grant will be used to contract a tutor. The funding for Alignment Rockford will be implemented to pay staff for coordination of projects supporting improved education in public schools.

The RAEDC, which sometimes engages in lobbying activities on behalf of the region, will also have to be very specific as to how the $100,000 CSBG grant would be used.

According to federal guidelines: “Federal grant funds provided under this award may not be used by the grantee or any sub-grantee to support lobbying activities to influence proposed or pending Federal or State legislation or appropriations. This prohibition is related to the use of Federal grant funds and is not intended to affect an individual’s right or that of any organization, to petition Congress, or any other level of Government, through the use of other resources.”

How CSBG expenditures are approved

Director Davis explained groups seeking the CSBG grants have to develop an annual work plan for approval by the 15-member Human Services Community Action Board and, ultimately, by the DCEO. He noted the plans are reviewed and revised annually to ensure they are on track.

“Projects and expenditures must address the needs of low-income residents based on income guidelines and poverty demographics,” he explained, indicating areas of activity may include basic needs and direct assistance, case management, information and referrals, education and training, as well as scholarships. Economic development also qualifies, Davis reported.

“While some funds are designated for specific areas of activity, there is a great deal of flexibility given to local communities in prioritizing services,” he stated.

However, if grants are determined to not be utilized in accordance with ARRA or the CSBG Act, the federal government may withhold the funds.

“I just think that we take a risk when we begin to stretch the qualifications, switch the priorities, of funds,” Bell said. “Economic funds are for economic development, and poverty funds are really for poverty.”

Davis, however, noted there is a direct correlation between economic development and combating poverty.

“Direct assistance to low-income residents and neighborhoods in various forms is also critical to mitigating the negative effects of poverty,” he acknowledged. “However, the balance between investments and efforts to improve conditions affecting poverty and direct programs and strategies to address specific poverty conditions is not formulaic, and CSBG funding is designed to provide local flexibility to ensure that funds achieve optimal benefit in addressing poverty conditions.”

Davis indicated CSBG funds are also intended to leverage other public or private dollars to “fill gaps” not addressed by other means to maximize the anti-poverty resources.

Bell instead suggests Community Development Block Grants (CDBG) would be more suitable for an economic development organization like RAEDC.

“My position would be that if, for example, any organization was going to use…community service [block grant] funds, they need to be concentrated in the area specifically dealing with the poor,” he said. “And I think that’s the difference. I think that, maybe, it’s what is not being considered there. It needs to say for sure: ‘This is what we’re going to do for poverty. This is what we’re going to do in certain low-income, moderate-income, areas,’ and things of that nature.”

RAEDC President Janyce Fadden acknowledged the CSBG approach as being different from previous funding from the city.

“We haven’t done it before this way, but it appears to be all in line with the way that the funds are intended to be used,” she said. “And the community has options sometimes with the funds like the CSBG to seek out providers like ourselves, who can help people become employed in the community.

“When the City of Rockford proposed making this change, we met with the management over at Human Services to discuss whether we were grant-eligible, and part of the requirements of the economic development portion of the CSBG is about our ability to create jobs,” Fadden explained. “And although we’re not the employer of record, we do work to attract jobs and help people get employed in the community. And many of the jobs that we do qualify for the income levels of the people that are being assisted by Human Services, so they felt that we were a viable option. They then discussed this with the State of Illinois Department of Commerce and Economic Opportunity, who approved moving ahead. And then, the community action agency, that is really Human Services—their board also approved this as a legitimate use of their funds.”

Asked why city staff had not opted to earmark CDBG funds, rather than CSBG dollars, for the RAEDC, Davis acknowledged: “CDBG funding can be used for similar purposes in terms of economic development. However, due to the demands on the CDBG budget this year, the continued economic challenges faced by the city placing additional demands on other economic development resources, and the fact that available CSBG funding was increased dramatically due to federal stimulus, we were able to consider support of the RAEDC’s request.”

CDBG dollars are among the alternatives being considered by aldermen to fund groups and projects that were once supported by tax increment financing (TIF) dollars. Recently, however, aldermen were advised to put the brakes on TIF expenditures. As a result, the relatively few successful TIF districts in Rockford will essentially be used to bail out those that are failing, rather than the intended practice of reinvesting the increment revenues into the neighborhoods that generated the dollars.

Regardless of the city’s financial woes, Bell argued elected leaders must address poverty as a priority.

“You’re not going to eradicate poverty, but how do you improve the conditions of those individuals who have systematically been left out of the mainstream of economics and so forth?” Bell wondered. “We in Rockford have a history of not really prioritizing strategies to improve poverty. And this has gone on for years. That’s why the school board had its 30 years of systematic discrimination.

“I really want to look at ways that we can begin to get people in the low- and moderate-income area more focused on getting involved in the issues that have confronted them in those areas,” he added. “Elected officials are going to have to start focusing on how we can improve the conditions of poverty. It’s a very serious problem.”

State election records show contributions of more than $71,000 to the campaign of Rockford Mayor Larry Morrissey (I), plus more than $19,000 to the Citizens for Rebuilding Rockford campaign supporting the mayor’s push for a 1-percentage-point sales tax increase, from RAEDC representatives, either individually, or by way of their respective businesses or employers. Notably, the Rockford Register Star, represented by General Manager Tom Lasley on the RAEDC, was among Morrissey’s contributors.

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