By Ariella Cohen, The Lens staff writer |

Two months after President Barack Obama and Congress averted a government shutdown by eliminating $38 billion in federal spending for 2011, New Orleans is feeling the pinch.

The $2.8 billion cut to the federal Department of Housing and Urban Development budget has crimped the city’s Office of Community Development by about $3.5 million.

“We have had some significant revisions on allocations based on federal budget cuts,” Deputy Mayor Cedric Grant said Monday in advising the City Council’s Housing and Human Needs Committee of the shortfall. The points of impact are the annual Community Development Block Grant and HOME Investment Partnership program.

The cuts, which would have been far more severe in the package endorsed by Gov. Bobby Jindal, stripped $600 million from the country’s largest and most flexible community development tool, the CDBG program, lopping the program by 16.5 percent to $3.5 billion.

The federal government’s biggest low-income housing grant program, the HOME program, was cut to $1.61 billion, a reduction of $200 million or 12 percent.

In New Orleans, the $3.5 million cut will mean less money for housing and community development nonprofits that depend on grants from the city to provide services and build houses.  It will not, however, affect the $411 million post-Hurricane Katrina allocation of disaster grants that Mayor Mitch Landrieu is relying on to pay for the 100 capital recovery projects his administration has committed to.

Almost all of the lost $3.5 million came from the department’s CDBG budget, reducing commitments to neighborhood infrastructure and programs fighting poverty and blight to $28.8 million from $31.9 million, federal grant allocation balance. Of this reduced allocation, the city already has dedicated $18.9 million to street resurfacings, public facilities improvements, NORD summer programs, demolitions and a minority contractor program. The largest layout — $7.5 million — will go to resurface streets, the second largest, $3.7 million, for demolition, the memo shows.  Another $1.8 million in CDBG grants will go to summer programs run by the New Orleans Recreation Department and $1.2 million to improve public buildings such as fire and police stations and community centers.

Softening the blow is $10 million in CDBG money that hasn’t yet been committed. Grant expects the city in the next two weeks to issue a call for proposals from housing or service organizations vying to spend the money.

The city will put a priority on rehab projects that attempt to put blighted buildings back into service while providing affordable housing in neighborhoods targeted for place-based development, Grant said.  Place-based development, an approach favored by Landrieu, promotes investment in stride with the historic, pedestrian-oriented character of urban neighborhoods.

“Our goal is very directed,” Grant explained.  “It’s place-based in about 10 different neighborhoods. It’s infill as to opposed to large projects.”

Councilwoman Stacy Head heralded the city’s decision to maintain funding for road and infrastructure improvements, pinpointing Gert Town as a neighborhood that will benefit from the investment. “It’s hard to develop a community when you have dirt roads,” she said.

Despite receiving less federal grant money than expected this year, the city hasn’t cancelled street repaving projects. This dirt road in Gert Town is one of many Councilwoman Stacy Head wants the city to prioritize.

Head is hopeful that the loss of funds will not be a major blow to the city, if only because the federal funds were managed so poorly in the past. “Every year we give away millions and millions of dollars to programs that have no track record, and in some instances, actually harm the community,” Head said. “Given that amount of waste, if the city spends all but $3 million efficiently than we will be better off.”