Urban and Rural Development

By Elaine Kporha

Vol. 1, No. 1, p. 26

President Carter's urban policy proposal, calling for a "new partnership to conserve America's communities," has been highly publicized, roundly criticized, and widely analyzed. It is designed to reverse the deterioration of urban life by redirecting existing federal programs and creating new approaches to the solution of economic and social problems in distressed areas.

The question now being asked by some is whether or not it offers relief to rural as well as to urban areas; in other words, to coin a phrase, is it also a rural politan" policy?

According to the Department of Housing and Urban Development Secretary, Patricia Harris, urban problems are found everywhere. The emphasis of the policy is on combating poverty and unemployment wherever it exists. Therefore, the Administration has stated that both rural and urban areas may be considered distressed" and rural areas may be eligible to participate in some urban policy programs.

Approximately 73 percent (or 3,245) Southern municipal governments have populations under 2,500. Not all of these municipalities are "distressed," but a good number of them are. According to HUD, 65 percent (or 2,131) of these small cities could meet HUD's standards for social and economic distress. (See accompanying chart.) Based on the large number of officially distressed small cities, the urban policy would appear to provide greatly needed aid for the South.

Two urban policy programs, the National Development Bank and the Urban Development Action Grants (UDAG) would, according to President Carter's statement, benefit distressed rural as well as distressed urban areas. These two programs, however, are the ones facing the greatest difficulties.

Carter's proposal for the creation of a $17.4 billion National Development Bank will encourage businesses to locate or expand in economically distressed urban and rural areas by reducing by an estimated 60% the cost of financing business and industrial development in these areas. The difficulty it faces is the unlikelihood of Congress approving any new programs requiring increased spending.

Carter also proposed a $275 million increase in Urban Development Action Grant funding. The increase would be combined with grants and loans from the National Development Bank and with other funds from the Economic Development Administration. UDAG, funded in 1977 at $1 .2 billion for three years, authorizes grants to revitalize a community's economic base through joint public-private development projects. 75 percent of the $400 million annual authorization goes to cities with populations over 50,000; 25 percent is to be used for grants to smaller cities and towns. All cities under 25,000 must meet at least three of four minimum distress standards. Eligible cities with population under 2,500 can be considered for UDAG assistance if they pass an additional test. According to final federal regulations for UDAG, the HUD Secretary must determine, in each case, that the city has demonstrated its capacity to successfully conduct a UDAG-type project.

Small cities and towns have already begun to compete for their 25 percent share of the Urban Development Action Grants. Although it is too early to evaluate the impact of the grants in specific locations, it seems timely to conclude that, generally, the smallest distressed areas cannot realistically expect urban programs to provide much relief for their distress.