June 3 Update: The Legislative Budget Package recommends a $250 million augmentation for this program above the $500 million in the Governor’s May Revise. As we note below, there is more than enough eligible projects, and MPOs have a history of funding and programming projects in a timely way. The constitutional deadline for the Legislature to pass a balanced budget is June 15, 2021.
Governor Newsom’s $267 billion May Revise budget proposal includes $500 million for “Alternative Housing Production Approaches” (see fourth page of Housing Budget Summary). Admittedly, its not a great name–the title only hints at what the program will do. But we think its a big deal.
Here is our take on the potential new program that we have nicknamed “REAP 2.0.” Our descriptions are based on the facts, intuition, and rumors available to us. (See disclaimer at bottom). And an early hat tip to Assemblymember Friedman, Governor Newsom, and SACOG for shaping this idea (we explain in Point 2 below).
1. So . . . Just What is REAP 2.o?
It’s a one-time, $500 million program to support Metropolitan Planning Organizations (MPO) to implement one of the state’s landmark climate laws, SB 375, by funding infill housing and other actions that reduce vehicle miles traveled (VMT). According to one Administration fact sheet, the funds will provide grants “for transformative and innovative projects that implement a region’s sustainable communities strategy and help achieve goals of more housing and transportation options that give Californians the opportunity to get around without having to rely on a car. These funds would leverage the Governor’s other proposed investments in housing, transit, zero-emission vehicles, and climate resilience.”
2. Props for Friedman, Newsom, and SACOG
Assemblymember Friedman was the first to forward the idea of a Sustainable Communities Strategies (SCS) block grant in AB 1147. She followed with a $250 million budget request to the Assembly Budget Committee. Her goal was to provide an incentive within SB 375 to make communities more walkable, bikable, and have increased access to public transportation. The Newsom Administration appears to supporting the concept–not surprising given its ongoing commitment to developing stronger state-regional partnerships (and a large budget surplus).
The Sacramento Area Council of Governments (SACOG) also deserves a hat tip. For the last two years, they made the case for substantial infrastructure investment needed to achieve their assigned SB 375 target, which included an ARB acknowledgment that additional investment would, in fact, be necessary. See ARB Target Setting Memo (see Page 34, note “a”). SACOG’s effort has gone a long way toward educating key policy makers on the need and value for such a program statewide.
3. Leveraging REAP for a new SCS Block Grant
The next step was to figure out what state agency could administer the program. But there were two challenges. First, given that only “one-time” funds were available, creating a new program did not make sense. An existing program was needed. Second, because SCS strategies touch on the expertise of many state agencies (e.g., housing, climate, transportation), it was difficult to assign oversight.
A good solution was the Regional Early Action Program (REAP), which operates like a regional block grant. REAP was created by the Governor in the 2018 budget. It provides grants to councils of governments (COGs) that made housing determinations (RHNA) to encourage more housing. Since most COGs are also MPOs, leveraging the existing REAP structure improves the speed in which these funds can be placed on actual projects.
That is why were are calling it REAP 2.0. See the Budget Change Proposal submitted by HCD. However, we believe there will be some significant differences from the existing program. For example: most of the new funds will go to MPOs; it will be focused more on implementation than planning, and the sub-allocation eligibility will be expanded to include transportation and transit agencies. In addition, transit, multi-modal connectors, and programs that will reduce reliance on single auto-mobile travel should all be eligible projects.
But REAP 2.0 will retain an important check. MPOs must submit their proposals to the state for approval. This assures that the investments will be transformational and accelerate the GHG reductions needed to achieve state goals for 2035 (the SB 375 target year).
4. Managed by HCD; With Multi-Agency Consultation
As we noted above, the SCS touches so many issues—housing, transit, travel demand, multi-modal mobility, and more—that it just does not fit easily with any one agency or budget package. While AHPA-REAP 2.0 will be administered by the Department of Housing and Community Development, the Budget Change Proposal states that the Governor’s Office of Planning and Research, the Strategic Growth Council, and the California Air Resources Board will play collaborating roles. Given the similarities in participating agencies and structure, it makes sense to actually house the program at HCD and incorporate the guidance of the consulting agencies.
5. Federal Recovery Funds
The Governor proposes to use federal funds from the American Rescue Plan Act (ARPA). ARPA included funding for State and Local Government Assistance. These funds must be spent or obligated by December of 2024 and expended by December 2026. See Interim Final Guidance for State and Local Funding (page 26811). Getting that much money programmed on quality projects meeting federal criteria in such a short timeframe will be no small feat. Fortunately, that is the job description of MPOs.
6. This is What MPOs Do
MPOs are well positioned for this task. They create competitive project selection processes, allocate program funding, provide oversight, and coordinate with state and federal funding partners in ways that is transparent, accountable, and perennially upheld through a regular auditing. Even better, MPOs are more adept at tailoring their programs to fit regional needs. It would be hard to pick a better partner if there were suddenly a lot of surplus funding that needed to be distributed fairly and effectively. As the state looks for partners to implement the programs needed to bring California’s economy back better, MPOs are a safe bet.
7. A Regions-Up Approach
Working regionally in a state as large and diverse as California makes sense. The approaches taken to transportation, housing, and climate issues in the San Joaquin Valley are going to be different than in San Diego. REAP is a proof point. It’s a success because COGs brought forward regionally relevant projects that are consistent with state objectives. This flexibility encourages more innovation and different kinds of projects than the typical one-size-fits-all grant program. To get a sense where regions are with the original REAP see “What is REAP Sowing” (video, 3rd Session at our Regional Leadership Forum in March 60 minutes).
8. A Rural Set Aside?
Hopefully. Not every Californian lives within a region covered by a MPO. Twenty-one counties, totaling about two percent of the state population, live outside MPO boundaries. We are optimistic that the program will include a small, competitive set aside for rural communities to invest in the same type of projects as those pursued by the MPOs.
9. A Long Recognized Need
When SB 375 was passed in 2008, the Legislature declared (in the findings) that “California local governments need a sustainable source of funding to be able to accommodate patterns of growth consistent with the state’s climate, air quality, and energy conservation goals.” The proposed AHPA-REAP-SCS Block Grant program (whatever we call it) takes a giant productive positive step in this direction. But its just scratching the service. There are many more potential projects throughout the state than even this $500 million will fund. But it will be incumbent on MPOs (with state agency oversight) to prove the concept by developing investment budgets that indeed accelerate California’s progress toward its 2035 greenhouse gas target. But again, that is what MPOs do.