Summary: The Department of Housing and Urban Development's (HUD) Economic Development Loan Fund, established by Congress in 1974, allows communities to borrow up to five times the current year's allotment under the Community Development Block Grant Program using their current and future grants as collateral. Initially, only certain communities--large metropolitan areas and urban counties that receive these block grants directly--were eligible for the loan fund. In 1990, other communities--small cities and rural areas that receive block grants through their states--became eligible for the fund. To encourage communities to make greater use of the loan program, Congress substantially increased the amount of funds available for the program in 1993. The next year, it established economic development initiative grants, which communities may use to help fund projects or to pay for some of the costs associated with borrowing under the loan program. In response to congressional concerns about how these changes have affected the loan program, this report examines (1) the extent to which communities are using the loan fund, (2) factors affecting communities' willingness to use the fund, (3) the types of projects being financing with loan proceeds, and (4) HUD's procedures for overseeing the program.
