Congress’ ban on budget earmarks may hurt East Palo Alto’s renovation plans

East Palo Alto plans to transform this section of Bay Road into a vibrant economic district that would be part of a new downtown for the city. (Photo: Joshua Adam Hicks)

East Palo Alto spent the past decade trying to play catch-up with its wealthy Silicon Valley neighbors, but the makeover process may slow to a crawl thanks to a new-look Congress bent on killing earmarks.

The city, still trying to live down a reputation for crime and poverty, earned most of its revenue through fast-food sales and property taxes until roughly 10 years ago. Since then, the community has attracted a smattering of new tax-generating developments, including the Ravenswood Shopping Center, a Four Seasons hotel and several multi-family housing projects.

Earmarks and federal stimulus money helped fuel the development boom, providing cash for the necessary infrastructure upgrades.

Ken Brown, a lobbyist with The Ferguson Group, estimates he netted roughly $25 million in federal funding for East Palo Alto during the past 10 years. That’s nearly 200 times the amount the city spent on direct lobbying efforts during that time.

For the city, such easy returns on investment may not be as likely now that budget hawks control the House of Representatives.

Since the election in November, Republicans and even some Democrats have been calling for a ban on earmarks – those special funding provisions that politicians slip into legislation to support pet projects.

“The days of lobbyists hanging a shingle on Capitol Hill and bringing in wads of cash are over – and good riddance,” said Steve Ellis, vice president of the Washington, D.C.-based budget watchdog group Taxpayers for Common Sense. “The earmarks factories in Washington will be hurting.”

President Obama joined the chorus of earmarks bashers last week, saying during his State of the Union Address, “If a bill comes to my desk with earmarks inside, I will veto it.”

Still, members of Congress have long relied on building roads, bridges, schools and other projects funded by earmarks to win loyalty from constituents. So there’s no certainty that all of the promises will actually result in a total ban.

For East Palo Alto, the problem is that the city needs that easy federal funding more than ever. The city council just approved plans for a new re-development project near its long-neglected downtown. That project requires an estimated $55 million in upgrades to roads, utilities and other infrastructure.

City Manager M.L. Gordon said he prefers not to wait before launching the re-development plan. He fears delays could result in higher construction costs as the economy recovers and Congress debates the future of earmarks, making the project less affordable each day.

Meanwhile, East Palo Alto’s sales-tax revenues are down, and its property values have dropped, meaning the city already has less money for its share of the costs.

Brown’s job is to get around the proposed earmarks ban, to help the city land federal funds. He said he plans to adjust his approach this year, lobbying for grants from federal agencies and the executive branch rather than asking for direct handouts from Congress.

Other lobbyists are beginning to focus on tax breaks, which can be just as helpful in the absence of earmarks, often known as “pork-barrel spending.”

Still, the lack of pork could make life difficult for local governments chasing after federal funds. The process of applying for grants can be much slower than direct lobbying. It’s also more competitive.

“We probably won’t do as well without appropriations” from Congress, Gordon said, “but we’ve been successful applying for grants in recent years.”

Brown said local governments will miss the earmarks system, which he describes as an effective and efficient way to land federal dollars. In his view, Congressional representatives understand the needs of their communities better than most agencies. They also had access to the fastest cash, at least before earmarks began turning passé.

“Smaller communities have a better shot at obtaining federal dollars when the earmarks process is in place,” Brown said. “It tends to democratize the spending process, quite honestly.”

Not according to those who rail against earmarks. The Sunlight Foundation, a non-partisan government-watchdog group based in Washington, D.C., faults the appropriations process for having “no transparency or accountability.” And Taxpayers for Common Sense complains that the earmarks system is flat-out unfair.

“People who get earmarks are essentially cutting in line for their projects,” Ellis said. “Earmarks are based on political muscle rather than project merit. If a project is in the right congressional district, it’s likely to get more funding.”

For now, budget hawks are getting their way. The lame duck Congress of 2010 failed to pass an omnibus spending package that included $8.3 billion in earmarks, providing the first indication that those funding provisions are going out of fashion. California’s federal politicians had positioned their state to reap hefty benefits from the proposed spending bill. Taxpayers for Common Sense ranked California Senator Dianne Feinstein fourth in the nation for the amount of earmarks money she obtained — 152 allocations worth $269 million. California Senator Barbara Boxer ranked fourteenth with 105 earmarks worth $160 million, according to the group.

U.S. Rep. Anna Eshoo requested $11.7 million for East Palo Alto alone; allocations ranged from $750,000 for energy-efficient streetlights and $100,000 for a program to help teens graduate from high school to $8 million for improvements to the intersection at Highway 101 and University Avenue.

Local governments can still land some of the federal money they lobbied for this past year, but it’s likely they’ll have to apply for it through agencies of the executive branch. That process is bound to work more slowly than direct lobbying, and the cash may not flow as freely now that Congress and the president are trying to cut spending.

That could mean slowdowns and extra headaches for East Palo Alto, which maintains a relatively small staff of 15 administrative managers in a town of around 35,000 residents.

“There will be some growing pains from the earmarks ban, but that doesn’t mean we shouldn’t do it,” Ellis said. “We’ll have a better process in the long run.”

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