The Download

The Download

March 27, 2017

Monday, March 27, 2017

Unpacking the Community Development Block Grant

The Community Development Block Grant (CDBG), a $3 billion federally-funded program that’s housed within the U.S. Department of Housing and Urban Development (HUD), is currently slated to be eliminated in the president’s proposed federal budget. The CDBG provides resources to address a wide range of community needs and provide services for vulnerable populations.

Created in 1974, HUD says CDBG is one of the longest and continuously run programs in the department.

The proposed budget states, “the program is not well-targeted to the poorest populations and has not demonstrated results.”

The proposed elimination of the program has recently grabbed headlines, having some wondering if it would mean the end of Meals on Wheels. However, as Forbes reports, that program gets most of its national funding from the Older Americans Act. Meals on Wheels programs do receive some funding from CDBG, for instance in Oakland County, CDBG accounts for 15 percent of the program’s funding.

The CDBG program touches communities throughout Michigan and across the country in many ways. The CDBG supports seniors, low-income individuals and families in housing, access to childcare and education, Head Start programs, economic development projects, infrastructure, transportation, housing, disaster relief and public services.

In 2016, the CDBG program provided Michigan communities with $111 million in funding. Last year alone more than 48 cities and counties in Michigan received funding from the program, with Jackson, Battle Creek, Kalamazoo, Lansing, Pontiac and others each awarded more than $1 million for housing and economic opportunities for low-income residents. In many of these cases, CDBG funds and foundation funds partner to help Michigan's most vulnerable residents.

Examples of projects in Michigan funded by the CDBG program include:

  • Detroit: The city received $31 million from CDBG for homeless shelters, transportation for seniors, housing rehabilitation, and other projects. The Detroit Free Press reports the city’s CDBG funding also supports many nonprofits in the city, including Eastern Market and Focus: HOPE.

  • Pontiac: received CDBG funding to remove blighted properties and replace air conditioning units at senior centers.

  • Oakland County: Some of the CDBG funding supports a shelter for women and children who are victims of abuse, offering counseling services.

  • Grand Rapids: Received funding for various projects and initiatives in the areas of legal services, crime awareness, fair housing activities, parks and recreational facilities.

  • Ada Township: Used its CDBG funds to support Hope Network, which provides transportation to seniors and those who have disabilities in the community.

  • Flint: In 2016, Flint used CDBG funds to remove asbestos and tear down more than a dozen apartment buildings to redevelop the property. The city has received funding in recent years for programs centered around homeownership assistance, youth services, fire station services and equipment.

  • Port Huron: The city plans to use its CDBG funds for sidewalk and housing repairs, along with neighborhood cleanup and code enforcement efforts.

There are also community and economic development projects that receive funding from the CDBG program, administered by the Michigan Economic Development Corporation. Just last month an application was submitted, seeking CDBG support to transform a dilapidated 1860 building into a 12-room hotel in Lexington, Michigan.

There are concerns that there are not readily available programs to fund the types of investments the CDBG program supports.

The budget proposal is expected to go to Congress sometime in April. Despite heavy coverage on the proposed budget, there has been limited conversation about how lawmakers may react to the CDBG elimination, a program that’s historically received broad, bipartisan support.

 

 

 

 

 

 

Simplifying the Excise Tax

We may see legislation introduced in Congress within the next few weeks that would simplify the excise tax for private foundations to a flat 1 percent, saving foundations time and money. The excise tax was originally introduced with support of the foundation community to support oversight of the nonprofit sector by the Internal Revenue Service (IRS).

About the excise tax:

  • Private foundations currently pay 2 percent of their net investment income in excise tax.

  • Private foundations may pay a reduced 1 percent rate if their distributions exceed the average payout rate of the foundation from the previous five years.

  • Calculating the 1 or 2 percent tax is both a cost and time burden, especially for small foundations.

  • The time and money foundations spend to calculate the tax and prepare paperwork detracts from time and funds that could be used serving the charitable needs of their communities.

  • The excise tax was created to incentivize giving, but this two-tiered system does the opposite. Examples include:

    • Funders who increase their grants one year and can’t maintain that level of grantmaking in the future, may not qualify for the reduced 1 percent tax rate.

    • Therefore, it may diminish a foundation's ability to respond to a disaster or other extraordinary incidents because if they do increase their grants in one year, they could be penalized if they don't maintain that level of grantmaking the following year. 

CMF has been advocating for years to simplify the excise tax to a flat 1 percent and has been involved in previous legislation supported by Michigan's congressional delegation.

CMF retained Cambridge Associates in 2008 to examine the complexity of the excise tax. Cambridge Associates most recently updated their analysis for 2016, looking at 14-year history of foundations paying this tax. 

What the data tells us:

  • More than 61,000 private foundations annually contribute approximately $460 million to the U.S. Treasury Department as a result of this tax. Smaller foundations more frequently pay the higher 2 percent tax than the larger foundations.

  • More than 55,000 of the private foundations have assets less than $10 million each and contribute collectively $71 million of the total $460 million.

  • However, it's estimated that it costs each of these foundations up to $2,000 each to accurately prepare paperwork and stay in compliance of the excise tax. This means that it's costing small foundations more than $110 million to pay $71 million to the federal treasury.

  • If the excise tax were simplified to a flat 1 percent, small foundations could apply that $110 million to their grantmaking.

CMF discussed the importance of simplifying the tax code with the IRS and Michigan’s congressional delegation last week in Washington, D.C.

CMF will continue to update members on new legislation that's being introduced with bipartisan support to accomplish the goal of simplifying the excise tax.

 

 

 

 

 

Leveraging Arts and Culture for Equity

A new report highlights how arts and culture programs and organizations can be used as channels to advance equity work, bridging gaps and building opportunities in our communities.

PolicyLink demonstrates how equity intersects with arts and culture in a new report: Creating Change through Arts, Culture and Equitable Development.

The guide shares current racial disparities in arts and culture:

  • Arts organizations that serve communities of color are often smaller and have less funding and/or resources than their counterparts in white communities.

  • Artists of color and cultural entrepreneurs of color often have less access to “conventional financing, and the tax dollars from tourism almost never flow back into their communities.”

  • Communities of color and low-income communities often have less access to arts and culture opportunities.

  • Lack of diversity in boards and staff of arts and culture organizations.

The guide demonstrates how funders and other community stakeholders can address these disparities and explore strategies in their communities that can help weave arts and culture to catalyze equity work in many areas including housing, transportation, health and economic development, ensuring engagement with our most vulnerable populations.

Housing:

  • Create artist-in-residence and cultural programming in affordable housing developments

  • Support low-income housing tax credits, subsidies to create affordable spaces for artists of color and cultural organizations in underserved communities

Transportation:

  • Utilize arts and culture assets in transportation planning and/or create a cultural plan that guides transit planning and investment

  • Design bus stops and parks to reflect and serve cultural communities

Economic development:

  • Restructure current funding streams to serve artists and cultural business owners of color

  • Provide culturally sensitive professional development support for low-income artists and businesses of color

Health and food:

  • Use arts and culture programming to address systemic issues in achieving health outcomes in underserved communities

  • Support arts funding to arts and cultural practices that address trauma and health disparities

As you consider examples listed above, funders can advocate for arts and culture investments targeted at vulnerable populations, using data that can show disparities to access and funding. Enhancing arts and culture programming in our communities will require collaboration, unique partnerships, community engagement and an understanding of how arts and culture can create communities that are beneficial and inclusive for all.

Want more?

Check out the executive summary.

Read the full report.

 

 

 

 

 

MEMBER SPOTLIGHT
Great Lakes Fishery Trust awards grant to support environmental education

Content excerpted and adapted from Petoskey News-Review. Read the full article.

Great Lakes Fishery Trust, a CMF member, awarded a grant to the Tip of the Mitt Watershed Council to pilot a Water Resources Education program for middle schoolers.

Tip of the Mitt Watershed Council, based in Petoskey, is focused on protecting the environmental, economic and aesthetic value of our Great Lakes, inland lakes, rivers, wetlands, etc.

A watershed is an area of land that separates water flowing to different rivers. The program supported by the trust, will provide lessons on watershed science to help students understand how water flows through a watershed and potential pollution issues. It will also help students collect data, explore issues and threats to local water resources and identify ways to protect and improve water quality.

“The Watershed Council is excited to bring this opportunity to local middle school classrooms, enriching the curriculum by engaging students in education that they can directly apply to their communities,” Maria Affhalter, water resource education director, Tip of the Mitt Watershed Council, wrote in the article.

The Great Lakes Fishery Trust invests in access to the Great Lakes fishery, ecosystem health and sustainable fish populations and Great Lakes stewardship.

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