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Solimar Research

Should Cap-And-Trade Program Rethink "Disadvantaged Communities?

Adam Christian on
Aug 20, 2015

On an unusually hot February afternoon in downtown Los Angeles, I conducted a field walk assessment to help a client identify potential sites for a bikeshare "mobility hub." Standing on a  corner near the Convention Center, I noted that we were at the border between two Census tracts. Ordinarily, this border wouldn't matter much—the neighborhood isn't discernibly different on one side or the other—but in this case, I was helping the client apply for a state grant program that gives special consideration to projects located in "disadvantaged communities." 

 If located on the south side of the street, the project would be located in a "disadvantaged" census tract, but not on the north side.  "Well, let's clearly locate the hub on the south side," the client advised, with some incredulous laughter. Humorous as it may sound, this decision speaks to the serious policy weight—and dollars—the State of California has put behind the concept of "benefitting disadvantaged communities."  

Given that discretionary grant programs worth hundreds of millions of dollars—from the Active Transportation Program established by SB 99 to the newly-minted Transit and Intercity Rail Program (TICRP) and Affordable Housing and Sustainable Communities (AHSC) program funded by cap-and-trade revenues—are using this policy framework to evaluate and fund projects, this concept deserves to be scrutinized more deeply than it has been to-date. 

 Nine years after the passage of AB 32, the Global Warming Solutions Act, the spigot of the State's cap and trade revenues has begun flowing in earnest, with the recent announcement of a combined $346 million in TICRP and AHSC  iscretionary grants. The first round of funding offers an opportunity for reflection. Which projects were funded? How well is cap-and-trade meeting its policy goals? How might the program guidelines be improved for the next round? 

I assisted in writing a successful $38 million TICRP grant application to implement L.A. Metro's  Willowbrook/Rosa Parks Station Area Master Plan and operational improvements on Metro's Blue Line. I also prepared two AHSC applications on behalf of local cities in Southern California that were unsuccessful. 

While it is impossible to know the decisive factor(s) in the selection process, the success, and failure, of these various projects in securing grant funds is in all likelihood strongly tied to their location in a particular census tract. 

SB 535 requires at least 25 percent of the state's cap-and-trade revenues to benefit "disadvantaged communities," he idea being to mitigate the impacts of pollution and global warming on the State's most vulnerable residents. As the environmental justice movement has long recognized, poor communities are often disproportionately impacted by health harms associated with the location of infrastructure, from freeways to power plants. 

As well intentioned as SB 535's mandate is, it disregards some crucial nuances of the relationship between poor neighborhoods and poor people. 

To define what a "disadvantaged community" is, the California Environmental Protection Agency's CalEnviroScreen 2.0 tool assigns a score to each of the state's 8,035 Census tracts, based on a combination of economic, demographic, and environmental factors, ranging from the straightforward (household median income) to the more obscure ("level of linguistic isolation"). Census tracts scoring in the highest quartile are assigned disadvantaged community—or "DAC"—status. DAC status results in preferential treatment during the grant application evaluation process. Given the intense competition for grant monies, an extra point attributable to DAC status can very well represent the difference between a funded and an unfunded project. 

Perhaps the most troublesome application of DAC status is to the AHSC program. In the first round of funding this year, 77 percent of AHSC grants were located in DACs – 27 percentage points more than the AHSC guidelines called for, and 52 percentage points more than the 25 percent required under SB 535. All of the nine AHSC grants awarded within the City of Los Angeles are located in DACs; none west of the 405 Freeway. To its credit, the SGC did award 2 AHSC grants to affordable housing projects in the City of San Francisco that are not located in DACs. 

Ironically, this preference threatens to further entrench geographic patterns of income inequality. It encourages the production of affordable housing in areas that are typically lower income – and therefore less expensive in the first place. 

Shouldn't the fundamental policy goal of AHSC be to encourage affordable housing in affluent, transit-adjacent communities? Wouldn't environmental justice be better served with affordable housing in places like West Los Angeles/Santa Monica where the Expo Line Phase II light rail line will be opening in Summer 2016? These communities are typically closest to employment centers where such housing is needed most.

In future rounds, the SGC has the discretionary authority to revise downward its DAC goal for the AHSC program without running afoul of SB 535. The SGC should exercise that authority, and leave itself maximum flexibility to fund projects in locations with a diverse mix of socioeconomic profiles.

(Granted, the SGC cannot control what its pool of applicants looks like. Maybe the high concentration of AHSC-funded projects located in DACs is a product of the applicant pool rather than the evaluation policies set by SGC. But sometimes messaging is everything. The results of this first round send the unfortunate signal that if your project is not located in a DAC, it runs a lower chance of success.)

Support for such a policy reboot comes from one of the key findings in a recent Legislative Analyst's Office reporton the housing affordability crisis in California. Coastal areas viewed as highly desirable places to live have chronically under-produced housing (at all income levels). The greatest need for affordable housing is therefore in areas that are not necessarily disadvantaged. 

My objection is not SB 535's focus on disadvantaged communities in general -- for some cap-and-trade programs, this focus addresses legitimate environmental justice issues. But it has been applied with a broad brush, without commonsense regard to the differences among the 12 individual state programs funded by cap and trade revenues. Projects shouldn't be more grant-worthy just because they're on a certain side of the street. 

As the first major new revenue source for infrastructure in several decades, cap-and-trade will influence the shape of new growth and development in California for years to come. It's important for policymakers to get these grant programs right. With SGC currently taking stakeholder comments, let's hope that the guidelines for future funding rounds evolve to reflect the state's dire need for affordable housing in both disadvantaged and non-disadvantaged communities. 

Adam Christian is a senior consultant in infrastructure funding and finance at HDR, Inc and the founder of Urban Insights. 

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