Cost of Federal Aid Administration: 20 Percent in Altoona

August 4, 2017

The Department of Housing and Urban Development (HUD) spends $10 billion a year on “community planning and development” subsidies to state and local governments. Community development sounds uplifting, but it involves mundane activities such as filling potholes.

Budget expert Tad DeHaven alerted me to this article in the Altoona Mirror yesterday:

City Council recently approved a fairly standard plan for spending its annual entitlement money from the federal Department of Housing and Urban Develop­ment.

… This year’s funding for [Community Development Block Grant] CDBG was $1.42 million — not much different from last year’s amount.

Loan paybacks of $162,000 brought this year’s CDBG total to $1.58 million, according to a summary provided by CDBG program Manager Mary Johnson.

Of that, $346,000 will go for rehabilitation of single-family homes; $306,000 for demolition of blighted properties; $301,000 for program administration; $332,000 for street paving; $235,000 for the city’s bike patrol and $67,000 for code enforcement all in low- to moderate-income areas.

Of $193,000 in HOME funding, $129,000 will go for rehabilitation of rental properties, $44,000 for an upgrade of Improved Dwellings for Altoona’s Woodrow Wilson Gardens parking lot in Garden Heights and $19,000 for program administration.

These activities are entirely local in nature, so why involve the federal government? The Woodrow Wilson apartment company pays $674,000 a year in local property taxes. Why not let the company keep some of that cash and pave its own parking lot? That would be easier than imposing federal income taxes on Altoona residents, sending the money to Washington to pay for the HUD bureaucracy, and having some of it trickle back down to Altoona.

Check this out: in the news story, “program administration” costs are $301,000 + $19,000 = $320,000 a year. Those costs consume a rather stunning 20 percent of the $1.58 million in federal aid. It goes toward the salaries of Mary Johnson and other officials, plus the costs of putting together 77-page “action plans,” 292-page “consolidated plans,” 48-page “downtown plans,” and other items listed here.

If Altoona is representative, then $2 billion of the $10 billion in federal aid is consumed by such local bureaucracy.

In addition, there are federal bureaucratic costs. The HUD “budget justification” says that 729 workers are in “community planning and development” costing $103 million in wages and benefits, or $141,000 each. These expensive paper-pushers simply hand out recycled money to the states, thus adding nothing to nation’s overall output. Indeed, because they are not producing useful goods and services in the private sector, their compensation represents a loss to the economy.

For a discussion of why HUD’s community development activities ought to be abolished, see DeHaven’s analysis here.

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