Trump budget could hit San Bernardino's revitalization efforts

President Donald Trump's proposed federal budget – which calls for deep cuts to community redevelopment funds – could hit Southern California's more rural communities hard.

The budget proposal, unveiled last week, includes a 13 percent overall reduction to the Department of Housing and Urban Development, including the complete elimination of a decades-old program called the Community Development Block Grant. The proposed cuts come as the president looks to fund a wall at the U.S. border with Mexico and a big increase to defense spending. 

The proposal could heavily impact San Bernardino, which depends on community block grants for its revitalization efforts.

The city is still struggling to fund its core functions nearly five years after declaring bankruptcy. The city is essentially out of the woods, said City Manager Mark Scott, but money is tight. The roughly $3.2 million the city gets in community development block grant funds is critical, he said. 

"It's a loss that would be very hard to replace," Scott said. "Little by little, decade after decade, we've driven people into pockets of poverty and we're one of them. 

San Bernardino uses its community development block grant largely for programs aimed at cleaning up blight and rejuvenating the city. That means things like supports for small businesses that want to open in improving areas, beautification upgrades to dilapidated rental properties, and even building code enforcement officers.

The city has also used such funds to take over condemned properties, rehab them, and put them back on the market. 

"Just in code enforcement alone, the amount of money that would spin over into the regular city budget would have a major impact on our ability to provide other services," Scott said.

In past years, the city's given out 15 percent of its block grant to community nonprofits — but can no longer afford to do so, Scott said. He told city council members as much at a meeting this week. 

 "We've got basic problems like our parks," he said. "All of our public park facilities need massive investments of capital that we just don't have."

Revitalization is one of San Bernardino's key focuses now, as the city struggles to rebuild its image and attract private investment.

One of the key examples of its efforts is Arrowhead Grove, a former public housing project currently in the middle of a massive rehabilitation and expansion, led by the nonprofit National CORE.

The roughly $100 million mixed income development aims to provide hundreds of units of low-income and affordable housing. But instead of an isolated development, the project intends to revitalize the neighborhood around it, said National CORE CEO Steve PonTell.

"We've got a specific plan for the entire area to attract additional investment into the neighborhood," he said. 

That plan includes using the city's blight eradication programs, whose funding is now in question.

"The loss of those funds can absolutely have an effect on revitalizing a neighborhood," PonTell said.

Other elements of the budget could also hit affordable housing developers.

Developers, PonTell said, generally string together a variety of funding sources to make one single development happen.

One of those critical pieces, he said, is HUD's HOME program, which in Arrowhead Grove's case, is providing about $3 million National CORE couldn't find from other sources.

Perhaps the most critical income source for such developments is the federal low-income housing tax credit, which developers generally sell to banks and banks sell to corporations that benefit from the tax break.

Since about December, PonTell said, the value of those tax credits on the open market has dropped about 20 percent, due to speculation the current administration intends to restructure the corporate tax code.

"That means [where] we had $10 million in tax credits for a project, now we've got a $2 million hole," he said.

That's already led to complications on projects National CORE has underway in San Diego, Yorba Linda, and Oceanside.

The desire to move around money in the federal budget to different priorities is understandable, PonTell said, but there needs to be some kind of buffer so local governments and developers can adjust.

"I get it, the budget's cutting," he said. "At least let's put in a thoughtful process about transitioning and what that might look like."