<DOC>
[105 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:52634.wais]
S. Hrg. 105-914
ECONOMIC DEVELOPMENT PARTNERSHIP ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
OF THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
ON
S. 1647
A BILL TO REAUTHORIZE AND MAKE REFORMS TO PROGRAMS AUTHORIZED BY THE
PUBLIC WORKS AND ECONOMIC DEVELOPMENT ACT OF 1965
__________
JULY 14, 1998
__________
Printed for the use of the Committee on Environment and Public Works
----------
U.S. GOVERNMENT PRINTING OFFICE
52-634 cc WASHINGTON : 1999
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED FIFTH CONGRESS
JOHN H. CHAFEE, Rhode Island, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
ROBERT SMITH, New Hampshire DANIEL PATRICK MOYNIHAN, New York
DIRK KEMPTHORNE, Idaho FRANK R. LAUTENBERG, New Jersey
JAMES M. INHOFE, Oklahoma HARRY REID, Nevada
CRAIG THOMAS, Wyoming BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri JOSEPH I. LIEBERMAN, Connecticut
TIM HUTCHINSON, Arkansas BARBARA BOXER, California
WAYNE ALLARD, Colorado RON WYDEN, Oregon
JEFF SESSIONS, Alabama
Jimmie Powell, Staff Director
J. Thomas Sliter, Minority Staff Director
(ii)
C O N T E N T S
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Page
JULY 14, 1998
OPENING STATEMENTS
Baucus, Hon. Max, U.S. Senator from the State of Montana......... 3
Boxer, Hon. Barbara., U.S. Senator from the State of California.. 6
Chafee, Hon. John H., U.S. Senator from the State of Rhode Island 2
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 4
Warner, Hon. John W., U.S. Senator from the Commonwealth of
Virginia....................................................... 1
Wyden, Hon. Ron, U.S. Senator from the State of Oregon........... 16
WITNESSES
Burchell, Robert W., Center for Urban Policy Research, Rutgers
University, New Brunswick, NJ.................................. 20
Prepared statement........................................... 43
Daley, William, Secretary, Department of Commerce................ 8
Prepared statement........................................... 34
Fosler, R. Scott, President, National Academy of Public
Administration................................................. 23
Letter, EDA activities, by Phillip Singerman................. 29
Prepared statement........................................... 52
Report, National Academy of Public Administration............ 23
Singerman, Phillip, Assistant Secretary for Economic Development,
Department of Commerce......................................... 14
Prepared statement........................................... 35
Responses to additional questions from:
Senator Boxer............................................ 41
Senator Warner........................................... 39
Senator Wyden............................................ 42
Thompson, Eric P., Executive Director, Lower Savannah Council of
Governments and President, National Association of Development
Organizations, on behalf of the Coalition for Economic
Development.................................................... 32
Prepared statement........................................... 71
Villines, Floyd G., Judge/Executive, Pulaski County, Arkansas, on
behalf of the Coalition for Economic Development, Little Rock,
AR............................................................. 18
Membership list, Coalition for Economic Development.......... 71
Prepared statement........................................... 54
Report, EDA Success Story, North Little Rock, Arkansas....... 58
Tables, EDA Investment History by State...................... 66
ADDITIONAL MATERIAL
Letter, Educational Association of University Centers............ 77
Statement, National Association of Development Organizations..... 73
Text of S. 1647, Economic Development Partnership Act of 1998.... 79
ECONOMIC DEVELOPMENT PARTNERSHIP ACT, S. 1647
----------
TUESDAY, JULY 14, 1998
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:35 a.m. in
room 406, Senate Dirksen Building, Hon. John Warner [chairman
of the subcommittee] presiding.
Present: Senators Warner, Baucus, Lieberman, Boxer, Wyden,
and Chafee [ex officio].
OPENING STATEMENT OF HON. JOHN W. WARNER,
U.S. SENATOR FROM THE COMMONWEALTH OF VIRGINIA
Senator Warner. The hearing will come to order.
Good morning, everyone. This morning the subcommittee will
focus on the reauthorization of the Economic Development
Administration under the aegis of the Department of Commerce,
and we welcome a very celebrated and well-known Secretary at
the moment and I think for the indefinite future.
The Economic Development Administration has made many
valuable contributions to communities throughout the Nation.
EDA is a small but very, very important agency that contributes
significantly to the economic growth and expansion all across
our Nation.
The Economic Development Administration maintains the task
of saving and creating jobs in areas that are economically
distressed. To meet these objectives, EDA provides assistance
to distressed States and localities through grants for public
infrastructure, economic adjustment, planning, and technical
assistance, all of which are intended to promote a transition
to long-term employment and growth.
Through these programs EDA fulfills a key function in
providing State and local Governments, nonprofit organizations,
and public institutions with vital economic grants and
technical assistance. These grants are given on a cost-shared
basis, with the Federal/non-Federal ratio varying according to
the program. EDA grants focus on a number of different programs
administered by the Assistant Secretary, who will be testifying
before us today as well as the Secretary. Many States, the
Commonwealth of Virginia included, have benefited greatly from
these programs.
Grants provided under public works programs give seed
moneys for infrastructure projects intended to help these
distressed communities support private-sector investments.
Grants allow communities to meet economic challenges in a
variety of ways, making public works improvements to attract
new businesses, like industrial parks, providing technical
assistance and planning grants that allow a community to plan
for its future.
Since 1982, the Economic Development Administration has
been functioning without authorization, rather through
appropriations under the Commerce/Justice/State Appropriations
Subcommittee. Our hearing today will focus on the need for a
reauthorization of EDA, the future mission of the EDA in
helping communities help themselves.
I thank the distinguished Chairman and Ranking Member for
supporting this subcommittee Chairman in recognizing we ought
to try hard this year to get a reauthorization. I thank you.
Mr. Chairman?
OPENING STATEMENT OF HON. JOHN H. CHAFEE,
U.S. SENATOR FROM THE STATE OF RHODE ISLAND
Senator Chafee. Thank you very much, Mr. Chairman. I want
to thank you as Chairman of this subcommittee for holding this
hearing today. I'm pleased to join in the welcome that you have
extended to Secretary Daley and Assistant Secretary Singerman.
Secretary Daley and I go back a ways. I'll never forget when he
was good enough in the fall of 1993 to come up to Providence,
Rhode Island, where we conducted a rally for NAFTA in which he
spoke very persuasively in one of our major plants. It was a
big success. Again, Mr. Secretary, I want to thank you for
having done that.
Also, I'm informed that the Secretary has not one but two
children, one graduated and another one there now, at
Providence College in my State. So, we look at him as----
Senator Warner. Really? Is there a shortage of institutions
in Delaware?
[Laughter.]
Senator Chafee. He likes to have his children get around
and see different parts of the country, and we're very grateful
that he's chosen Providence College.
Your testimony will be very helpful to the full committee
as we consider, following the actions of this subcommittee,
whether to proceed with the reauthorization of the EDA. As you
all know, EDA, as the Chairman mentioned, has not been
reauthorized since 1982. And although the Environment and
Public Works Committee did report a bill out in 1994, it didn't
clear the Senate and didn't end up becoming law.
I want to be up front with everyone here as regards my
position on EDA. I have historically not been a big fan of EDA.
As a matter of fact, in 1985, I'm admitting this now because
somebody else will discover it if I don't, I sponsored an
amendment to eliminate EDA. But in recent years, I've taken
notice of the changes in the agency, under Mr. Singerman and
the leadership of Secretary Daley, and it's efforts to
streamline its operations, target its efforts toward truly
distressed communities. I've come to believe that we should
move forward with a reauthorization bill that locks in some of
the changes that have been undertaken.
So over the past few weeks, I've been reviewing S. 1647,
the legislation before us today, and have been working with the
Chairman, and will continue to do that, with hopes that we can
enact an EDA reauthorization bill this year. I'm for that and
I'll do all I can to see that it gets done.
I want to thank you, Mr. Chairman, for taking the
leadership here.
Senator Warner. Thank you.
Would others care to make any opening remarks?
Senator Baucus. Mr. Chairman?
Senator Warner. Senator Baucus.
OPENING STATEMENT OF HON. MAX BAUCUS,
U.S. SENATOR FROM THE STATE OF MONTANA
Senator Baucus. Thank you. Mr. Chairman, I want to thank
you very much for holding this hearing. I want to particularly
thank the full committee chairman for his very wise
reevaluation of the program.
Senator Chafee. Reformation.
Senator Baucus. It really is a hallmark of sort of the
ability of the Senator from Rhode Island to not be locked into
something in an unthinking way but to look at programs on the
merits and look at new evidence and new circumstances and do
what's right. I really appreciate your statement, Mr. Chairman.
It means a lot to me, as I know it does to many others on this
committee.
I also want to thank you for you for holding this hearing.
Mr. Chairman, I think it's particularly important that we
reauthorize EDA because the program has done so well for so
many people in so many parts of the country, and because if we
don't the program is no longer going to be in the jurisdiction
of this committee. It's going to be basically up to the
vagaries of the Appropriations Committee, particularly in years
when budgets are pretty thin. For those reasons, I strongly
urge this committee to report out a bill reauthorizing the
Economic Development Administration.
Since its inception in 1965, Mr. Chairman, I believe EDA
has established a very impressive track record of helping
communities help themselves. That's what it does--it helps
communities help themselves. EDA programs, whether they are
grants or loans, help communities bootstrap their own efforts
to meet economic challenges in a variety of ways--making public
works improvements, attracting businesses, providing technical
assistance, planning grants, and tailoring a whole host of
various programs to meet the specific circumstances of a
community.
In Montana, EDA has been a very powerful ally in responding
to changes in economic conditions. One example is in the
restructuring of Malmstrom Air Force Base. Through EDA,
particularly with the Revolving Loan Fund grant, EDA has been
helping that community undertake a defense conversion project.
It was the single military facility in our State. Hundreds of
jobs were lost in downsizing the Air Force Base, but the EDA
Revolving Loan Grant fund provided for the Great Falls
community will enable three firms to locate and employ over 750
people.
In this regard, I want to particularly thank Mr. Phil
Singerman, who was in Great Falls a couple of times to see
first-hand the needs of the community. Therefore, the community
is in a much better position to help provide assistance. I can
tell you, Mr. Singerman, people of Great Falls are very
appreciative of EDA.
I might also say, Mr. Chairman, EDA has been extremely
helpful in supporting the development of a major new company in
Butte, Montana. When plant construction is completed it will
make the silicon used to make silicon wafers. EDA provided the
seed money from the Revolving Loan Fund and enabled the
community of Butte, Montana, to provide certain economic
incentives. This firm will make 25 percent of all the silicon
used in silicon wafers in the world. It's a huge new plant. I
must say that it's not an American plant, it's a company
setting up an American subsidiary. But this plant, which is
much larger of the two plants--the other one will be in Idaho--
will provide 25 percent of all the silicon used in silicon
wafers in the world. That's largely because of EDA. EDA didn't
build the plant, but provided the seed money for a revolving
loan, which enabled the economic development organization in
Butte to find the company. Because of EDA's help, no doubt
about it, this happened.
I could go on and list other areas in the country. For
example, when Hurricane Andrew devastated so much of Florida,
EDA was there. In the Midwest, EDA has been helping those areas
affected by disastrous floods. And one small community in
Montana called Libby----the Chairman of the subcommittee might
have some idea of where Libby is.
Senator Warner. I do. Very good fishing.
Senator Baucus. I thought he did. Libby was a lumber town.
A huge mill there is almost gone. Libby was just really
struggling. EDA and the former Farmer's Home Administration
provided seed money for a revolving loan fund. The community
worked together and they are attracting new business. But were
it not for EDA, those poor people in Libby would be facing very
difficult plight.
Mr. Chairman, I thank you for holding this hearing. I
strongly urge this committee to report out a bill. We need some
changes, obviously, to tailor it to the 1990's and the next
century, but it's a program that's very, very worthwhile.
Senator Warner. I thank you, Mr. Baucus. Your sincerity and
enthusiasm are conveyed in your remarks.
Are others wishing to speak for a minute?
OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,
U.S. SENATOR FROM THE STATE OF CONNECTICUT
Senator Lieberman. I do, Mr. Chairman. A minute? Thanks,
Mr. Chairman. Welcome to Secretary Daley and Secretary
Singerman. And thank Senator Chafee, too, for his statement. It
struck me that the message there is that not only is Senator
Chafee is getting older and wiser, which we all are familiar
with from our service, particularly wiser, but also that EDA
has gotten better. That's the cause for his change of feeling
about EDA. I do think this reauthorization puts into law the
expression of growing bipartisan congressional satisfaction
with what EDA is doing, but also formalizes and
institutionalizes some of the changes that have occurred that
have been the reason for the growing support.
It is a particularly appropriate time for us to reauthorize
EDA after all these years without a reauthorization because of
the remarkable state that our economy is in. It's an
extraordinary time of growth and optimism. But there are still
parts of our country that are not sharing in that growth and
they need some extra help.
I can tell you that in Connecticut we have the highest
average per capita income in the country, but we've got some of
the poorest cities in the country as well. I see even in those
cities now the beginning of development and change and growth.
And in just about every case, EDA has been there with just that
additional investment that has made some critical growth
possible. Secretary Singerman, I thought he only visited
Connecticut that often. I'm very impressed that you've been to
Montana. His in-laws live in Connecticut, so I understand why
he comes there.
Senator Baucus. If the Senator will yield. He very wisely
divides his time between the State with the highest income per
capita and the State with the lowest income per capita. This
way it averages out a little bit.
[Laughter.]
Senator Lieberman. Got it. He was in Hartford a while ago.
Here's a project called Vita Root, an old abandoned industrial
facility, just a big old factory lying there just dragging down
a neighborhood, and there comes along one of the Lord's true
servants, Father Tom Berry, just a wonderful man, whose parents
worked in that factory and he has a dream that he's going to
revive it and bring it back and make it a center of economic
activity and help revive the whole neighborhood. And a few
weeks ago, Secretary Singerman came in and announced an EDA
grant which is going to make that possible. So, thanks.
EDA happens to be, as I look across the Federal Government,
the only agency of the Federal Government that is focused on,
charged with stimulating industrial and commercial growth in
economically distressed areas. This agency is really focused on
making that great statement of President Kennedy's true, which
is that a rising tide raises all boats. Well, some of those
boats stuck at the bottom need a little extra help, and I think
that's what EDA is all about.
So I appreciate the committee's interest in moving this
reauthorization. I look forward to supporting it. Thank you,
Mr. Chairman.
[The prepared statement of Sen. Lieberman follows:]
Statement of Hon. Joseph Lieberman, U.S. Senator from the State of
Connecticut
I would like to thank Senators Warner and Baucus for allowing me to
speak for a few minutes this morning. I'm an enthusiastic supporter of
EDA and its work. Phil Singerman and I were in Connecticut just 2 weeks
ago at Veeder Root Place in Hartford where, with the help of EDA
grants, an old factory in a run down neighborhood is being revitalized.
Connecticut has the highest per capita income in the country, but
has two of the poorest cities in America. We all have face problems
with urban decay in our States. Manufacturing and industry, which used
to be the centerpiece of economic activity and employment in our inner
cities, have largely disappeared. Hartford has seen 30 percent of its
factory and business sites disappear since 1986. With the loss of
manufacturing went good jobs, wholesale trade, retail businesses and a
large source of local tax revenues.
We all know of one-factory towns where the factory has closed down,
destroying the economic base of the town. When Windham Mills--mills
built over 100 years ago that produce thread--closed down in Windham,
Connecticut, no other industry moved in, leaving Windham with the
highest unemployment rate in the State and forcing workers to look for
jobs in other locales. EDA is working with the town on a $1 million
grant to help revitalize the area.
EDA is the only agency of the Federal Government that is charged
with stimulating industrial and commercial growth in economically
distressed areas of the United States. I have really appreciated their
work in Connecticut. But most of all, I appreciate that they work with
the community. They work with the community to help them develop a plan
that will bring back business activity, and with it, good jobs for
people in the community. They work with the local government to fill
out those endless applications. They help guide them through the
process--something at which the Federal Government does not always
excel. With the proposed legislation, EDA is making the application
process even easier by making eligibility: uniform for all programs and
allowing for self-certification by applicants.
I wanted to commend Phil Singerman and the rest of the EDA staff
for the job they are doing. I think its time we passed reauthorization
for EDA. Thank you.
Senator Warner. Mr. Wyden?
OPENING STATEMENT OF HON. RON WYDEN,
U.S. SENATOR FROM THE STATE OF OREGON
Senator Wyden. Thank you, Mr. Chairman. I'll be very brief.
I, too, want to express my appreciation to you and Chairman
Chafee for holding this hearing. It is an especially important
program because it deals with the Northwest economic
initiative.
As you know, you recently got a letter from Senator Gorton,
Senator Smith, Senator Murray, and myself expressing our
concern about the funding levels for this program. In our
State, we've got seven counties with unemployment at least
twice the national average as a result of dislocations,
particularly in timber and in salmon fishing. The Governors of
our region feel very strongly that after they signed a
Memorandum of Understanding indicating that there would be $3
million in funding per year for this, there has been
significantly less funding forthcoming.
In a lot of ways, this is a great compliment to all of you
because they think the program has been a huge success and
they've been able to use the money very well. We're very
hopeful, the four Senators from the Pacific Northwest, on a
bipartisan basis, that we will be able to work it out with you
all to get the full funding for this program.
Finally, let me say we're especially glad to have Secretary
Daley here. He does so much good work on so many issues, be it
the internet or economic development, a variety of other
issues, and we want to welcome him here this morning. I'm going
to have to also be in an aviation subcommittee hearing this
morning, Mr. Secretary, and I'll be submitting some questions
to you in writing. I look forward to working with you. Thank
you, Mr. Chairman.
Senator Warner. Thank you.
Yes, indeed?
OPENING STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Boxer. Mr. Chairman, I will speak for 1 minute, as
I rush off to an appropriations markup on transportation, and
would ask unanimous consent that my entire statement be placed
in the record.
Senator Warner. Without objection.
Senator Boxer. I wanted just to join the praise that my
colleagues have put out here since I arrived. This is an agency
that is working. Some 99 percent of EDA projects completed as
planned, 91 percent completed on time, and 52 percent under
budget. It's really a remarkable story to tell; every $1
million in EDA funding increasing the local tax base by $10
million, and the number of jobs doubled in the 6-years after
project completion. And we have story after story to tell.
In my great State which has these pockets of prosperity and
pockets of problems for many of the reasons, but one reason has
been the change in the Defense Department and the shut downs of
so many bases in California. Mr. Chairman, I'll tell you, it
has been brutal. And so the one quick case I'll put out is the
case of Castle Air Force Base, the biggest employer in Merced
County with more than 5,000 military personnel and 1,000
civilian workers. It pumped $250 million into the area's
economy. When the base closed in 1995 the unemployment rate
skyrocketed to 17.6 percent. At that time, California wasn't
doing that well anyway, but this was just out of sight.
EDA did not wait until the base was shuttered. They came in
and they awarded Merced County $1 million for a revolving fund.
It may not seem like a lot, but we also pumped in $2.6 million
for sewer construction, and then another $4.3 million for the
development of the US Aviation Discovery Exposition Center on
the grounds of the former base as a tourist attraction. And it
is so exciting. Forty-four businesses have been lured to the
base, Mr. Chairman, creating 1,900 new jobs in 2 years and more
than 90 percent of the existing buildings are leased, and the
aviation complex is expected to draw 300,000 visitors by the
year 2000.
In my statement, I have other examples. But I'm very, very
proud to have an opportunity to vote for this reauthorization.
Thank you.
Senator Warner. I thank the Senator.
[The prepared statement of Senator Boxer follows:]
Statement of Hon. BARbara Boxer, U.S. Senator from the State of
California
Mr. Chairman, thank you for the opportunity to comment on the
reauthorization of the Economic Development Administration, or EDA.
First, allow me to give you an example of how EDA has helped a
community in California.
In 1991, DOD announced the closure of Castle Air Force Base, the
biggest employer in Merced County, CA with more than 5000 military
personnel and 1000 civilian workers. The base pumped nearly $250
million annually into the area's economy. When the base closed in 1995,
the county's employment rate skyrocketed to 17.6 percent, double that
of the State of CA.
EDA did not wait, however, until the base was shuttered to begin
helping with economic conversion of the facility. In 1993, EDA awarded
Merced County $1 million for a revolving fund loan to assist in
business development and awarded the city of Atwater $2.6 million for
sewer construction. In 1995 and 1998, EDA awarded a total of $4.3
million for the development of the U.S. Aviation Discovery Exposition
Center on the grounds of the former base as tourist destination.
So far, 44 businesses have been lured to the base creating some
1,900 new jobs in just 2 years. More than 90 percent of the existing
buildings are leased. And, the aviation complex is expected to draw up
to 300,000 visitors by the year 2000.
Over the last 33 years, EDA has invested more than $1.6 billion in
needy communities throughout California, representing over 2700
projects. EDA has been instrumental in California by helping
communities rebound after a military base or manufacturing plant
closing. EDA has helped communities in California recover from the 1990
and 1994 earthquakes, as well as the 1992 L.A. riots. I cannot even
begin to tell you how important economic recovery is to the emotional
well-being of a community ravaged by natural disaster or a base
closing.
What is even more compelling to me is the efficiency by which the
Agency has carried out its mission:
<bullet> 99 percent of EDA projects were completed as planned;
<bullet> 91 percent were completed on time;
<bullet> 52 percent were completed under budget;
<bullet> 327 jobs were created or retained for every $1 million in EDA
investment;
<bullet> Every $1 million in EDA funding leveraged $10.08 million in
private-sector investment;
<bullet> Every $1 million in EDA funding increased the local tax base
by $10.13 million; and the number of jobs doubled in the 6-years
after project completion;
<bullet> All government agencies should be as efficient as EDA.
It is important to note that EDA does not bail out a community. It
gives the community tools by which they can create their own recovery
and security.
EDA has given real help to the poorest communities of California.
Mr. Chairman, I strongly support the reauthorization of the Economic
Development Administration and urge everyone on the Subcommittee to
support the passage of S. 1647 as well. Thank you Mr. Chairman.
Senator Warner. Mr. Secretary, we finally come to you. I
would want to once again acknowledge how memorable my
experiences were working with your father in 1975-76. He left a
profound influence on this very young aspiring political figure
in those days. And I think you've carried the mantle with great
humility and dignity.
Secretary Daley. Thank you very much, Mr. Chairman, I
appreciate those kind words.
STATEMENT OF HON. WILLIAM DALEY, SECRETARY, DEPARTMENT OF
COMMERCE
Secretary Daley. Thank you, Mr. Chairman, Chairman Chafee,
and Ranking Minority member Baucus, Senator Lieberman, and the
other members of the committee who were here. I thank you all
for scheduling this hearing.
Joining me, as you know, is Assistant Secretary of Commerce
for Economic Development Administration, Phil Singerman, who I
must say at this early stage in my brief remarks has done a
remarkable job for the EDA and for the Department of Commerce.
He represents our entire department well and we are extremely
proud of him and the team that he's put together.
I'm pleased to testify on behalf of the Economic
Development Partnership Act of 1998, which does reauthorize for
5 years the Economic Development Administration. My message is
clear and short. This legislation is critical to our ability to
efficiently help our Nation's distressed communities.
It is my goal as Secretary to run a department that is
efficient, cost-effective, and productive for the American
people. And EDA clearly achieves all of these goals. Ninety-
nine percent of its public works projects, as has been stated,
have been completed as planned. Since President Clinton took
office, the agency has cut the number of political positions
from 14 to 5, and has cut the number of regulations by 60
percent. This is a leaner EDA that has learned how to do more
with less. But most importantly, it knows how to expand
opportunities for the American citizens who need it most.
Let's be frank, there has been criticism that this program
is pork. That with an economy as strong as ours, communities do
not need help developing their infrastructure or attracting new
businesses. The fact is that these funds are predominantly
invested in areas where the unemployment rate is 40 percent
higher than the national average and per capita incomes are 40
percent below average.
The fact is that a thriving community 1 day can be a
distressed one the next. All it takes is a military base
closure, a defense industry downsizing, Department of Energy
reduction, or a natural disaster. As Chairman Chafee knows
first-hand, that happened in Narragansett overnight when
suddenly an oil spill hurt the fishing and tourism industry.
But within 30 days we gave a $1 million grant to get the
community back on its feet and therefore develop recovery
plans.
I've also heard criticism that some of these are make-work
projects; all they do is create short-term construction jobs.
This is not so. These programs create permanent jobs. The fact
is that 6 years after the projects are completed, on average,
the number of local jobs have doubled. As Senator Boxer stated,
for every $1 million Congress authorizes to fund an EDA
project, that leverages $10 million in private-sector
investment.
EDA's programs do work. Take Grand Forks, North Dakota.
After those terrible floods in 1997 that devastated North
Dakota, South Dakota, and Minnesota, we came in with a $3
million grant to construct two professional buildings in
downtown Grand Forks. Community leaders and political leaders
have come in and told me that if it hadn't been for this
investment businesses would have left downtown and the people
of Grand Forks, who had already lost so much and suffered so
much, would have lost their central business district and,
therefore, a central part of their lives.
Or take the Center for Employment Training in Santa Clara,
California. EDA grants totaling $4 million over the last few
years were used to convert an abandoned high school in a highly
distressed Hispanic neighborhood into one of the most
successful vocational training facilities in California. The
Center has now expanded its programs to include a culinary
school, medical assistant training, and every student graduates
into a job.
Another example is our $2 million grant to help Portland
State University build a distance learning center. It will link
the University's educational programs with rural and remote
areas of Oregon so underemployed and unemployed people there
can have access to academic, business, and vocational training.
I believe that in the future what we do at EDA will be even
more important. In this new economy, the pace of globalization
and technology development will accelerate. We will see
constant restructuring of firms and industries and all this
will require our Nation's communities to be more flexible,
innovative in creating jobs and attracting private-sector
investment. And a new EDA will be there to help.
This agency has reformed for the better, and this
legislation will allow it to reform even more. It will reduce
our paperwork, it encourages State and local cooperation as has
never been done, it simplifies the application procedures, it
provides maximum flexibility to grant recipients, and this
legislation will allow us to change the eligibility
requirements for EDA assistance. Gone will be the days that
once you are a designated area you remain one for life.
Replacing it will be a fairer process that says simply an
applicant is eligible based on the needs at the time he
applies.
So, Mr. Chairman, I believe that we have addressed the
concerns that Congress and others have expressed over many
years. As has been also stated, EDA has not been reauthorized
since 1982. The time has come to do this, and I look forward to
working with you, Mr. Chairman, and the entire committee to
move this bill forward. Thank you.
Senator Warner. Thank you, Mr. Secretary.
S. 1647 declares that new employment opportunities should
be created by developing expanding new and existing public
works and other facilities and resources rather than by merely
transferring jobs from one area of the United States to
another. S. 1647 further declares that the way to do this is by
supporting firms and industries which add to the growth of the
Nation's economy through improved technology, increased
exports, and the supply of goods and services to satisfy the
unmet demand.
These are worthy goals. How do we ensure that these goals
are met? That is, as a practical matter, how can we be sure
that EDA funds aren't simply used to entice businesses to
locate in a given area or to prevent businesses from leaving,
possibly enriching their business without adding to the growth
of the Nation's economy? For example, section 606 of the bill
identified the certification required for businesses receiving
financial assistance but makes no mention of job relocation. Do
you feel that the bill includes the authority you need to
ensure the creation of jobs rather than the movement of
existing jobs?
Secretary Daley. Mr. Chairman, if I could ask Mr. Singerman
to respond.
Senator Warner. Certainly.
Mr. Singerman. Thank you, Mr. Secretary. Thank you, Mr.
Chairman. The question you raise is a very important question
and it's one that EDA takes very seriously. Currently, our
legislation prohibits using EDA financial assistance to assist
businesses in relocating from one area to another. Although
this applies to a narrow band of EDA's programs, we have
applied this non-relocation requirement to all of our
assistance programs. In our regulations, we further clarify the
purpose and implementation of this criteria.
Every applicant has the affirmative duty to inform EDA of
any employer who will benefit from such assistance, who will
transfer jobs in connection with the EDA grant. EDA then
determines compliance prior to award of the grant based upon
the information provided by the applicant.
I'd like to put this in context. The research over the last
20 years from the economic development field demonstrates I
think pretty conclusively that most job growth and loss in a
community is a function of the creation of new companies, the
death of companies, the expansion of companies, the contraction
of companies. A very small percentage of employment growth in
any community is related to the in-migration and the out-
migration of firms.
I think you know from your experience that your communities
in your States really are no longer competing with one another,
but the regions within our country are competing with regions
around the world. It's not firms moving from Rhode Island to
Virginia, or from Connecticut to Montana, it's firms moving
overseas or moving, as in the case of Montana, from foreign
countries to locate in the United States. So much of what we
see is this normal fluctuation of the economy.
We have undertaken an independent study by the National
Association of State Development Agencies to determine the
effect of the incentives that States provide on firms that are
moving into their areas. EDA doesn't allow it, but, as you
know, many States compete with one another and we're taking a
very serious look at this.
I think that the procedures that we have in place, the
legislative prohibition against this, and the care with which
the local partners that we work with look at these issues
provides a high level of assurance that we're not using Federal
money to move jobs from one jurisdiction to another.
Senator Warner. Given that we're about to have a vote, I'll
make my question period very short, Mr. Chairman and others,
and we can just follow along here till the vote.
Mr. Chairman?
Senator Chafee. Mr. Secretary, I think we all agree that
EDA alone can't turn around a community economically. It can be
helpful but to have it really succeed you've got to have the
community assume the primary role. Do you think that your
legislation----and either you or Mr. Singerman can answer this,
however you want to do it----do you think your legislation
recognizes enough that the real burden is on the local
community? Yes, you can help, you can put in $2 million for a
building or $3 million, but in the long run it's going to be
determined by what the community does, I believe. Do you think
your legislation reflects that?
Secretary Daley. I feel strongly, and I'll ask Phil to also
comment, I feel strongly that it does. We start with the same
belief, Mr. Chairman, that it is the local community that has
to make this succeed. And taking the example as I used in my
statement, Grand Forks, we came up with $3 million to build the
building but it was really the local community economic
development group, the political structure, the community
groups that came up with the tenants for the buildings and for
all the development that's gone around it. That building alone
would not have made a difference had it not been for the
support of the local community. So there's no question. I think
the legislation does, and Phil may want to jump in with
particulars.
Mr. Singerman. Secretary Daley is quite right. The
underlying premise behind the way EDA works and what makes it
unique among Federal programs is that we have a close working
partnership with local economic development districts, local
governments, local universities, and out of this partnership
comes a strategic planning process which we support through our
planning funds, a process that builds consensus within the
community and identifies priorities that are necessary for the
community's economic development growth and diversification.
Every project that EDA supports is a project that also
receives financial support from State and local Governments and
other organizations in the community. These are not grants that
we kind of give to people because we think it's good for them,
but these are investments that are co-invested with local
communities in projects that they determine are of the most
importance to their communities.
Senator Chafee. OK. Thank you very much. Thank you, Mr.
Chairman.
Senator Warner. Senator?
Senator Baucus. Thanks, Mr. Chairman. First, I just want to
tell you, Mr. Secretary, that you're doing a great job, you and
Mr. Singerman.
Mr. Singerman. Thank you, Senator.
Senator Baucus. You're doing a great job in a lot of ways,
but I know particularly in this program, the EDA, you're doing
a terrific job. I don't know anybody who works harder,
particularly Mr. Singerman, in working in the right way to make
sure EDA works and works in the right way. I've seen it many
times and I'm very impressed, and I know that people in my
State are very impressed, too. I wish that all public servants
would work as hard as both of you do because it would make a
huge difference.
My question really is this. There are some critics who
think, gee, there are an awful lot of economic development
programs, why do we need another one? Why is this so unique?
Why is this so special? Why do we need it? Aren't there enough
other economic development programs that could take care of our
needs? I know that you do a lot of coordination in the
communities first, but essentially I thought I'd just let you
sound off and give you the opportunity to answer those critics,
because, as you well know, there are some who do have that
point of view.
Secretary Daley. Let me just ask Phil to do it, because
Phil ran a local economic development organization and I think
it would be good if he put it in the perspective of having run
that and now doing the Federal EDA.
Mr. Singerman. Well, I think there are too many, and we
were there first.
[Laughter.]
Mr. Singerman. EDA has been around since 1965. It is the
only Federal agency that has as its unique and sole mission
working in a collaborative partnership with local communities
to promote their economic development. There's no other Federal
program that I'm aware of that has that as its sole and unique
mission.
We work collaboratively with sister agencies within the
Federal Government and State and local Governments to bring
together the resources that are necessary for a community's
economic development activity. For example, in the area of
defense adjustment, we work very closely with the Office of
Economic Adjustment in the Department of Defense and with the
Department of Labor. In the area of disaster recovery, we work
very closely with FEMA, they have the overall responsibility,
and within that we collaborate closely both here in Washington
and on the ground with HUD, with SBA, with the Army Corps of
Engineers to help communities, such as Grand Forks, recover
promptly and effectively from their disasters.
Senator Baucus. So you're first and you're also the only
ones who really coordinates and works with all the other
economic development agencies as well as with the other
departments. Is that basically it?
Mr. Singerman. Yes.
Senator Warner. Senator, allow me to intervene. I think
that's very important, Senator Baucus. I've observed that not
only in my own State but elsewhere. I'm quite familiar with the
base closure proceedings, I have responsibilities elsewhere in
the Senate, and it has a superb track record of working with
those agencies. I'm glad you brought it out.
Senator Baucus. Thank you, Mr. Chairman.
Senator Warner. Thank you.
Senator Lieberman, if you have a question, then we can get
to Mr. Singerman's testimony. Our vote has been delayed, so I
believe we can wrap them up.
Senator Lieberman. Great. Thanks, Mr. Chairman. Gentlemen,
in the second panel we're going to hear from the National
Academy of Public Administration. I want to mention two
comments/criticisms I suppose I'd say, at least comments, and
ask you to respond to them.
First is that, in their report, ``The present multiplicity
of programs imposes unnecessarily high transaction costs on
States and localities.'' I wanted to ask you what efforts are
underway, if any, to reduce the fragmentation of the Federal
economic development effort.
And then the second is the comment in that same report,
this is not directly, the meager Federal investment in an
information sharing and technology severely constrains our
Nation's economic development efforts. If you want to give a
brief response to both of those.
Mr. Singerman. Sure. These are very important issues. We
work very closely with NAPA and found their report to be very
helpful. We've tried to overcome this fragmentation in a number
of ways, including some of the legislative recommendations that
we've made in our proposed bill. In terms of the transaction
costs, we've tried to simplify the process of working directly
with EDA on the part of local communities. So we've created a
single application form, and, as Secretary Daley said, we have
reduced regulations by 62 percent. Our legislation allows us to
accept the plans that a local community develops for another
agency, such as the Department of Transportation, for EDA's
economic development planning purposes. There also is in the
legislation recognition of the importance and the need for the
Commerce Department, through the person of the Secretary, to
work closely with other Federal agencies and to encourage other
Federal agencies to work with the Commerce Department in the
area of economic development.
In terms of information sharing, one of the results of the
NAPA study, one of the influences on us was to completely
revamp our research in national technical assistance programs
to focus on identifying best practices at the State and local
level in economic development, and then disseminating that
information widely through publications, through national
organizations and associations, and through our own regional
meetings and individual contacts.
So, both of those issues are important issues and we've
attempted over the last 3 years to address them head-on.
Senator Lieberman. Thanks for that very responsive answer.
Thanks, The Chairman.
Senator Warner. Thank you, Senator.
Mr. Secretary, you're free to go. Thank you very, very
much.
Mr. Singerman, do you have some additional remarks?
Mr. Singerman. Yes, sir.
Senator Warner. I did not go to you immediately knowing of
the Secretary's schedule. I wanted the opportunity for members
to question. We have two options: One, I can stay for about
another 6 minutes to listen to you and in time you can depart,
or I can depart now and resume the hearing in a few minutes
when I get back from the vote, and then go on to the second
panel. Which would you prefer?
Mr. Singerman. Whatever is more convenient to you, Mr.
Chairman.
Senator Warner. Whatever your preference.
Mr. Singerman. OK. I will speak for 5 minutes and summarize
my prepared written statement.
Senator Warner. This is very important so I don't want to
rush you. Do you believe you can do it in 5 minutes?
Mr. Singerman. I can, I timed it. You're very gracious.
Thank you, sir.
Senator Warner. I think you made a very profound impact so
far.
Mr. Singerman. Well, everyone has left, is that why?
Senator Warner. I've been around here 20 years. They don't
leave if they've still got a problem.
[Laughter.]
STATEMENT OF HON. PHILLIP SINGERMAN, ASSISTANT SECRETARY FOR
ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE
Mr. Singerman. Mr. Chairman, I appreciate the opportunity
to testify before this subcommittee. I would request that my
statement be made a part of the record.
Senator Warner. Without objection.
Mr. Singerman. I particularly want to thank you and the
other members and your staff for your many courtesies toward me
and my staff at EDA.
Senator Warner. Well, they're well earned. I think you can
determine from the remarks this morning that we're going to put
a head of steam behind this piece of legislation to see if we
can get that authorization.
Mr. Singerman. That would be so wonderful.
Senator Warner. And to the degree we're going to have
success, it is largely dependent on the record which you and
others have put together. That's a strong record.
Mr. Singerman. Thank you, sir.
I'd like to thank, Senator Baucus left, but I'd like to
particularly thank him and Senator Snow for introducing our
legislation upon request.
Senator Warner. Some 38 cosponsors of that.
Mr. Singerman. We're up to 40 now. And I want to thank
Secretary Daley for coming here this morning to testify before
your subcommittee.
Behind me are the EDA senior executive management team.
Their names and titles are included in my prepared statement.
Senator Warner. I think we could just take a minute to
introduce them.
Mr. Singerman. Thank you, sir. Ella Rusinko is our Deputy
Assistant Secretary for Program Research and Evaluation;
directly behind me is Chester Straub, our Deputy Assistant
Secretary for Program Operations; next to him is Ed Levin, our
Chief Counsel; and seated there is Mitch Laine, our new Chief
Financial Officer. So this is the senior management of the
agency.
Mr. Chairman, I first appeared before you and other members
of the committee in late 1996 when you honored me by confirming
me to this position. I'm very proud and pleased to report to
you today that we've accomplished a lot at EDA since then. We
have aggressively focused on improving the management and
operations of the agency, including implementing a strategic
planning process, developing program performance measures, and
strengthening our partnerships with local organizations in
economic development.
As a result of our work, EDA is administratively reformed,
reinvented, and transformed, which has in place a system for
ongoing program evaluation. We have, and you'll hear about this
later, validation of program performance, as evidenced by
numerous independent studies by objective evaluators. The
management reforms that EDA has implemented are yielding more
efficiency and effectiveness. And we are, I'm sure you'll be
pleased to know, focused on financial operations and are
working closely with the Inspector General in the Department of
Commerce.
Secretary Daley mentioned the reduction in regulations by
62 percent. We have reduced our staff by 30 percent over the
last 4 years, a figure that is unmatched by almost any other
Federal agency, and our noncareer appointees by 60 percent. We
have simplified our grants application process, and implemented
an agency-wide reorganization approved by the Administration
and this Congress.
We have implemented modern management and administrative
practices. For example, we have completed the delegation of
decisionmaking authority to the career professionals in the
regional offices, the people who are closest to the communities
and know their problems best. To provide seamless interaction
with local communities, we have instituted a team-based
approach in our field offices.
And as I mentioned, we have hired the first chief financial
officer for the agency to oversee the agency's vast management
responsibilities. For example, in addition to the funding that
we award each year, we are responsible for well over $1 billion
of prior awards, construction awards on military bases which
take between 2 and 5 years to come to fruition, and during that
time we're responsible for the fiduciary management of those
activities. So there's a major responsibility.
Senator Warner. I've hit my zero mark of time to get over
and get that vote. We'll just pick up when I return after this
vote.
Mr. Singerman. Very good.
[Recess.]
Senator Warner. My apologies. We do our best around here.
But now we have an open-ended and adequate time to receive the
benefit of your further testimony and to receive the benefit of
an equally important and distinguished group who will be in
Panel II. We won't be rushed.
Would you kindly continue.
Mr. Singerman. Thank you very much. The Economic
Development Partnership Act of 1997 constitutes a reform of
existing EDA authorizing legislation. The Partnership Act
streamlines EDA authorities, establishes consistency among
programs, and preserves the most effective tools. For example,
the proposed legislation implements long needed improvements by
allowing program flexibility to the Nation's distressed
communities, facilitates program management and oversight,
recognizes the EDA role in long-standing activities such as
defense adjustment and post-disaster economic recovery, and
formalizes EDA existing policy that focuses investment in areas
of high distress by eliminating the outmoded designation system
and replacing it with eligibility at the time of application
based upon clearly defined specified economic distress
criteria----targeting our resources to communities most in
need.
EDA has established a record of expertise and experience in
economic development, and has been an innovator in helping
distressed communities create the best economic development
practices, such as revolving loan funds and small business
incubators. EDA's unique approach to economic development has
proven itself over time.
However, the next century will host a different set of
economic challenges for American communities as they strive to
maintain global competitiveness in an increasingly
technologically dominated society. EDA needs to be there,
modernized and prepared now, to help America's distressed
communities implement their own strategies and programs for
economic recovery and growth.
To provide this opportunity to these deserving communities,
the agency and its customers require long overdue stability of
programs, flexibility of operations, and to continue to
institutionalize the administrative reforms we have enacted, we
request this committee's formal legislative reauthorization of
EDA.
Mr. Chairman, I appreciate the opportunity to testify
before you this morning, and want to express my willingness to
work with you and members of the committee and your staff on
behalf of America's distressed communities. I'd be glad to
answer any further questions that you might have.
Senator Warner. Thank you. I do have one or two. I want to
say that Mr. Baucus, of course, introduced the Administration's
bill and we have, as you say, 40 cosponsors. But by tradition,
the Chairman will work on an amended type of bill in which I
will join him as well as Mr. Baucus. So we will require that
type of cooperation which you just proffered here in your last
concluding remarks to put it together.
I just think there's a growing convergence of viewpoints
here so that a bill very close I think to the Administration's
approach can be crafted and expeditiously moved through this
committee and be reported to the floor.
Mr. Singerman. Thank you.
Senator Warner. For that, the Secretary and yourself are
deserving of a great deal of credit.
But one or two thoughts here. Realizing that one of EDA's
missions is to help communities suffering due to base
realignment and closure proceedings, would EDA be prepared for
additional Base Realignment and Closure (BRAC) rounds? In other
words, I happen to be one of those who believe that we've got
to continue with the base closure process. That next round
could be fairly significant. Would that require extra staff,
and I would try and get it for you, particularly if it would
require you to subtract some of your effort to other areas? I
think, in my own judgment, that next round of BRAC will
probably be in 2000, so it's in the future.
Mr. Singerman. First, we need to complete, and I'm sure
you're aware of this----
Senator Warner. The past BRAC round.
Mr. Singerman. That's correct. To date, only about three-
quarters of the approximately 120 bases that were closed or
downsized significantly have a closure date. So there is still
about one-quarter that are yet to be closed and some will not
close until after 2000.
Second, even after a base is closed, it takes the community
2 to 3 years to develop its reuse plans. So only now are those
bases that were closed in 1995----
Senator Warner. I just want to make this part of the
record. I would suggest the following. We're finishing up this
year's authorization bill for the armed forces in which there
is no BRAC and there will not be one. So next year, God
willing, I'll still be around to work on the next bill and we
may lay the foundation, I say may, for the year 2000, 2001. At
which time I would hope that you would be in your position and
you could follow it and, if necessary, we would put something
in the legislation establishing the next BRAC which would
adequately protect your area of responsibility. You have a
willing partner that would take it into consideration.
Mr. Singerman. Thank you.
Senator Warner. I think we'll conclude with that, Mr.
Singerman. I have some other questions which I'll submit for
the record. But the next panel has very patiently waited, and I
hope that one or more of your staff can remain so they can have
the benefit of this important testimony.
Mr. Singerman. I will remain as well, sir.
Senator Warner. That's fine. We may recall you to the
witness table.
Senator Warner. Now let's proceed with Panel II. We have
Mr. Robert W. Burchell, Center for Urban Policy Research,
Rutgers University, New Brunswick, New Jersey; R. Scott Fosler,
president, National Academy of Public Administration, here in
the Nation's Capital; Eric P. Thompson, National Association of
Development Organizations, Aiken, South Carolina; and the
Honorable Floyd Villines, on behalf of the Coalition for
Economic Development, Little Rock, Arkansas. He, I take special
note, is a public servant, having been elected by the people of
the great State of Arkansas.
Judge Villines. Thank you, sir.
Senator Warner. Why don't you lead off, Judge Villines.
STATEMENT OF HON. FLOYD G. VILLINES, JUDGE/EXECUTIVE, PULASKI
COUNTY, ARKANSAS, ON BEHALF OF THE COALITION FOR ECONOMIC
DEVELOPMENT, LITTLE ROCK, ARKANSAS
Judge Villines. Mr. Chairman, thank you for holding this
important hearing and for inviting us here today to discuss the
long overdue reauthorization of an agency that is very
important to the revitalization efforts in our economically
distressed rural and urban areas.
Senator Warner. Excuse me. Let me interrupt.
Judge Villines. Yes, sir.
Senator Warner. By unanimous consent, each of your
statements in their entirety will be made a part of the record.
Therefore, you can summarize those portions you think are
important to this hearing.
Judge Villines. Thank you, sir. I will do that.
I represent 15 national organizations committed to
supporting the Economic Development Administration. Our
coalition includes national organizations representing rural
and urban economic development practitioners, professionals and
academics, and local elected officials. These organizations
include the American Economic Development Council, the
Association of University Centers, the Council for Urban
Economic Development, the National Association of Counties, and
National Association of Business Incubators, the National
Association of Development Organizations, the National
Association of Installation Developers, the National
Association of Management and Technology Assistance Centers,
the National Association of Regional Councils, the National
Association of State Development Agencies, the National
Association of Towns and Townships, the National Congress for
Community Economic Development, the National League of Cities,
the Public Works and Economic Development Association, and the
U.S. Conference of Mayors.
There are two reasons that we think it is very important
that this be done. The first is, this agency is moving into the
21st century with authorizing legislation that goes back to the
early 1980's. The agency needs reinforcement with new language
that allows it to help our rural and urban communities meet the
continuing and ever-changing challenges of economic
revitalization. Among those challenges will be access to and
expertise in information age technology. Our businesses in
small cities and rural areas will simply be unable to compete
in the global economy without access to these information and
marketing tools.
Second, reauthorization will allow the agency to focus on
its core mission and to develop multiyear plans for its
programs rather than draining off its energy in an annual
battle for survival.
The Coalition's support for EDA is based on a very simple
concept----EDA works. It is the Federal agency that does what
it was designed to do. It serves the Federal role of levelling
the playing field for these communities that need to become
productive parts of the national economy rather than a drain on
it. It is a lean, streamlined agency with a clearly defined
mission. It supports and help revitalizes our economically
distressed communities. And as a local government official, it
is important to me that EDA is there to provide the seed money
necessary for the infrastructure improvements we need to
attract new businesses and to help existing businesses expand
and grow.
I want to really emphasize the point of seed money. Without
EDA and EDA's support, many of the things that we try to do, we
just couldn't do them. An example in our testimony that will be
filed is our community of North Little Rock. There were two
census tracts in 1990 that had unemployment rates of 33 and
nearly 34 percent respectively, with no industrial or other
potential prospects. Working with EDA, we were able to get a
grant that was matched 50-50 by the local community that put in
water, sewer, streets, and out of that we ultimately got a $9
million private investment, creating some 360 jobs. Over the
years, we believe that that has helped raise the average income
in our county by nearly $10,000 a year. And that project would
not have happened had it not been for EDA.
There are several other points I'll make, and then I'll let
you move on to the other witnesses. First, EDA network is
important to us. It provides the assistance with the economic
development representatives that help watch over the project,
help us put it together, and then continue with us from the
very beginning. The planning process is also important. The
whole issue of bottoms-up planning, of allowing people in a
community to identify what their needs are and to coordinate
that with other local and Federal agencies has given us impetus
to do what ought to be done. Too often in the past, as anyone
in local government knows, you sometimes get in a position
where local communities are arguing and fighting with each
other. The planning process requiring that joint planning
really is an asset to us.
There are other points that are in my testimony that I
could go through. But since it will be part of the record, Mr.
Chairman, I will leave that to any questions that you may have.
In conclusion, Mr. Chairman and members of the committee,
the Economic Development Administration has earned the respect
of all of us who have worked with it. It is time the agency was
recognized through reauthorization, and probably that's one of
the best reforms you could do. We at the local level really
need to know that there is going to be an agency there because
economic development planning is more than a 1-year process. We
really need the assurance that we will have a partner in the
Federal Government that will assist us.
Again, thank you for the opportunity to appear before you.
I also pledge our support on the part of the Coalition to work
with you in the drafting of the bill, as you mentioned earlier.
And if you have any questions, I'll be happy to try to answer
them.
Senator Warner. Thank you. And may I say to you and the
other witnesses, it is our hope here on the committee that you
will bring your expertise to bear on the Chafee revision of the
Administration's bill and that you will give us your best
advice. And others in the room may have some interest. We want
to do a good bill, one that will go through quickly.
With that in mind, in the course of your testimony, if any
of you feel there are provisions in the Administration bill
which you would like to see revised, amended, or so forth,
please let us hear from you.
Now, Mr. Burchell. We thank you for traveling down from New
Jersey.
STATEMENT OF ROBERT W. BURCHELL, CENTER FOR URBAN POLICY
RESEARCH, RUTGERS UNIVERSITY, NEW BRUNSWICK, NEW JERSEY
Mr. Burchell. Thank you, Mr. Chairman. I'll be brief. My
testimony and the charts which you'll see are to be made part
of the record.
Senator Warner. Do you have copies of those charts?
Mr. Burchell. They're appended to the testimony, yes.
Basically, what I would like to do is to report to you the
numbers, some of which you've heard already, of a series of
studies that Rutgers and others have undertaken on various
programs of the Economic Development Administration.
We produced three 300-page reports that looked at these
programs, and we spent 2 years in an in-depth look at both
defense adjustment and public works programs. Each of the
principals was in the field a month looking at the programs. We
went across the United States. We visited 100 of the 400
programs to make sure the information was coming back to us and
coming back to us correctly. We held seminars to make sure that
those who were reporting information understood the concepts
that we were about to ask them, the difference between a
permanent job and a temporary job, between a direct job and an
indirect job, between a construction job and a permanent job.
In addition to that, we went into regional offices and a
variety of other places to do, we feel, a comprehensive study.
The study was undertaken by Rutgers, the New Jersey Institute
of Technology, Princeton University, Columbia, the National
Association of Regional Councils, and the University of
Cincinnati. We looked at 203 public works projects and 187
defense adjustment projects. No one got away. It's not a
sample. Again, we looked at every single one of the projects.
We visited--physically visited--25 percent of those 400
projects.
One of the things that we found out very quickly was that
these projects are done in very economically impacted
environments. The public works projects, again the figure was
used here, 25 to 40 percent above the average unemployment rate
of the area. These projects take place in communities where the
unemployment rate is 25 to 40 percent above State and national
averages. With regard to both the defense adjustment program
and the public works program, per capita income is 25 to 40
percent below State and national averages. So these are really
economically impacted areas.
Let me just go through very briefly the public works
program first and just take a look at these performance figures
with regard to the public works projects.
Senator Warner. Let me interrupt. This is a very impressive
amount of private-sector work that has been done. It will be a
valuable asset to the committee. Could you refer to us any
other groups that have done similar studies? We want to make
sure that we have before us all the available information.
Mr. Burchell. We did a literature search and that's part of
the information presented. In addition, there was another
study, the Mount Auburn Study done in 1992, which reached
similar conclusions as the kind of conclusions that I will
report to you.
Senator Warner. That was Mount----
Mr. Burchell. Mount Auburn. They're a research firm in
Massachusetts.
Senator Warner. Who authorized that firm to do the work?
Who authorized you or funded you?
Mr. Burchell. We bid with a consortium of research
institutions on an RFP that was put out by the Economic
Development Administration.
Senator Warner. I see. So EDA put it out, is that it?
Mr. Burchell. Right. And we competitively bid that process,
yes.
Senator Warner. How about the other study that you cited?
Mr. Burchell. I think that that was the same.
Senator Warner. But yours then is more recent?
Mr. Burchell. More recent and actually we believe more
encompassing in terms of the number of projects looked at.
With regard to the findings for the public works program,
99 percent of the projects completed as planned, 91 percent
completed on time, 52 percent completed under budget. I would
add that when a project is completed under budget, neither EDA
nor the grantee keeps that money. Rather it goes back to the
Treasury. So those are very, very significant figures given
that particular situation.
With regard to job production--327 permanent jobs for every
$1 million of EDA money invested, about $3,000 per job--one of
the lowest costs in job creation that we have seen in all of
our analysis of other programs, and $4,800 in total cost per
job, including the matching share. In addition to that, 15
construction jobs per $1 million of EDA funding. So not only do
they produce permanent jobs but also construction jobs.
Another figure that you've heard before but that has been
duly documented in these reports, for every $1 million of EDA
funding, $10 million in private-sector investment and $10
million in terms of local tax base added to the community.
With regard to defense construction projects, and they're
different in that if you were to view a hospital, the EDA
public works program would be the normal portion of the
hospital, the EDA defense adjustment program is the emergency
room. The EDA public works program operates in typically long-
term distress areas, both urban and rural, the defense
adjustment in sudden shock areas. And these are newer projects,
funded only from 1992 to 1995, and not expected to have the
kinds of results of the public works projects. But, again,
their performance is admirable.
In terms of projects moving to completion--97 to 100
percent. Projects that are on time--60 to 80 percent. Projects
that are at or under budget--90 to 100 percent. Jobs produced--
124 for defense construction per million of EDA investment. For
revolving loan funds, moneys given out to create businesses--
304 per million. Almost equivalent to the bread and butter
public works projects. So on both sides, the defense adjustment
and the public works, about a $3,000 figure per job created.
With regard to private-sector leverage, $2.2 million for
every $1 million of EDA investment on the defense construction.
And with regard to the revolving loan funds, about $2.5
million.
We also asked the grantees to evaluate how EDA was doing
its job with regard to training and technical assistance. These
are in what they call the capacity-building efforts----the
planning, the training, technical transfer, technological
transfer, product development, et cetera. We asked them to rate
EDA on a scale of 1 to 10 in terms of the quality of the
project that they helped deliver and the impact of that
project. And for the defense adjustment strategy, EDA was given
a rating of 8 out of 10. For technical assistance, close to 9
out of 10. And for market analyses, feasibility studies, and
base reuse studies, also a rating of approximately 9 out of 10.
Our conclusions are very simple. EDA projects get done on
time and efficiently. EDA projects create permanent jobs in the
locations that they're found. EDA projects create significant
amounts of private-sector leverage. And EDA also creates a
multiplier effect of about 1.5. So all of the numbers that I
have given you before, add 50 percent for its ripple effects to
the economy type of impact. We did that study with a very
sophisticated input/output model. And then finally, EDA has an
independent effect. In other words, if somebody were asked the
question, ``Would those jobs be created in those locations
without EDA presence?'' The answer is, ``no.'' Through very,
very heavy regression analysis, we determined that EDA has an
independent effect in terms of creating jobs in local areas.
Our overall conclusion is that EDA programs are having their
intended effect in the locations in which they're operable.
Senator Warner. In one sentence, it works.
Mr. Burchell. It works.
Senator Warner. I suppose if it ain't broke, don't try and
fix it. But did you look at possible revision of some
provisions of the President's bill?
Mr. Burchell. We didn't, but we looked at EDA procedures.
There, again, what is going on is very commendable. We made
some recommendations, and one of the recommendations we had is
that there should be ongoing monitoring of the public works
projects. There is incredible monitoring of the revolving loan
funds because a loan is given out and they monitor almost
forever. With regards to the public works projects, there is
informal monitoring after the project is built out. But in
order for them to keep track of jobs created on a regular
basis, and since those jobs increase over time, they should
monitor those on a regular basis.
Senator Warner. But you will follow the work of the
committee as we move ahead with this?
Mr. Burchell. Absolutely.
Senator Warner. We appreciate it, because you've got a
remarkable corporate knowledge of this entire thing. Thank you
very much.
Next, Mr. Fosler, President, National Academy of Public
Administration.
STATEMENT OF R. SCOTT FOSLER, PRESIDENT, NATIONAL ACADEMY OF
PUBLIC ADMINISTRATION
Mr. Fosler. Thank you very much, Mr. Chairman. I'm here to
testify on behalf of the Academy's panel on economic
development. This panel was chaired by former Governor Dick
Thornburgh, a Fellow of the Academy, and he had hoped to be
here and was sorry that he could not come. He is out of the
country in South Korea this week.
As you know, the Academy is an independent, nonpartisan,
nonprofit organization chartered by Congress to identify
emerging issues of governance and to provide practical
assistance to Federal, State, and local Government on how to
improve their performance.
Two years ago, the Economic Development Administration
asked the Academy to take a fresh and independent look at the
basic question, What is the appropriate future role of the
Federal Government in economic development activities?
The Academy convened a panel, chaired by Governor
Thornburgh, with a diverse group of experts from local, State,
and Federal Government and the private sector, and it reviewed
the economic development policies and programs of all Federal
agencies, not just of the EDA. It did not specifically address
the question before this committee, the reauthorization of EDA,
nonetheless, it's findings and recommendations may prove useful
to the committee in its deliberations.
I have a copy of the panel's report, ``A Path to Smarter
Economic Development: Reassessing the Federal Role,'' and I
would ask that it be entered into the record.
Senator Warner. Without objection.
[A copy of the executive summary of the referenced report
follows:]
A Dialogue on the Report: A Path to Smarter Economic Development:
Reassessing the Federal Role, November 22-23, 1996
On November 22-23, 1996, the National Academy of Public
Administration convened a conference to review its recently released
report on the Federal role in Economic Development. A Path To Smarter
Economic Development: Reassessing the Federal Role resulted from a 1-
year study by an Academy panel chaired by former Pennsylvania Governor
Richard Thornburgh. The U.S. Economic Development Administration (EDA)
and the Annie E. Casey Foundation funded the study.
The goal of the conference was to solicit feedback on the report
and to stimulate a national debate about the Academy panel's
recommendations. The conference brought together more than 100 invited
guests from across the country, representing all facets of economic
development: State, regional local and neighborhood-based
practitioners; Federal policy and program officials: private-sector
leaders; and university researchers. Participants debated the panel's
findings about the appropriate Federal role in economic development and
its recommendations for improvements.
The discussion was organized around four topics, each of which was
addressed during a set of break-out sessions. The first topic was a
broad review of the panel's findings and recommendations. The other
three topics focused on the panel's specific findings and
recommendations concerning reaming, leveraging and linking.
General Comments on the Report
Participants strongly endorsed the panel's finding that the primary
Federal role in economic development should be to support State,
regional, and local economic development efforts. They further agreed
that the current Federal system does not fulfill that role well--
little, if any, Federal leadership exists, and there is considerable
fragmentation and duplication among Federal program activities.
There also was strong agreement on the panel's recommendation to
focus the Federal role on the concepts of reaming, leveraging and
linking. There was, however, considerable support for expanding these
concepts to encompass the idea of leadership. Many believed that
together all four concepts would provide a national vision for economic
development, especially by promoting a better understanding and
application of effective economic development practices and fostering
the use of new technologies for communication and sharing of ideas
among development practitioners. Many of the specific ideas for a
stronger Federal leadership in economic development echoed the panel's
discussion on recommendations about reaming.
Considerable discussion centered on defining economic development.
The panel's report defined the scope of its work around a specific set
of Federal economic development programs--those that clearly bear the
label of economic development and are focused on specific places or
businesses. The panel was not asked to review Federal policies that
focus on the national economy in general (such as monetary, fiscal, or
trade policy). Nor was the panel asked to review the large number of
policies or programs which, while contributing to economic opportunity,
are directed toward goals that are separate national pursuits
themselves (such as transportation, defense, and environmental
protection).
The panel also noted that the diversity among local economies
precluded any single definition of effective economic development. The
panel did acknowledge the importance for the Federal Government to
coordinate the very broad range of Federal programs that impact
directly or indirectly upon State and local economic conditions.
The focus of the panel on Federal economic development programs per
se generated lively debate. Some participants believed this approach
fostered an unfortunate separation between economic and community
development, while others believed it did not go far enough in
distinguishing between the two. Others argued that without a broader
Federal definition of effective economic development, it was impossible
to define the Federal role in reaming, leveraging, linking and
leadership; in essence, it was difficult to advance the practice of
economic development without knowing which direction to take. For
example, many participants said the report should have examined more
closely the technology programs as well as the role of universities in
economic development.
The issue of the proper definition of economic development was not
resolved during the conference, although all acknowledged that it must
be more clearly addressed as steps are taken to implement the panel's
recommendations.
Reaction to Findings and Recommendations About Learning
The most strongly supported recommendations in the panel's report
were those concerning the Federal role in advancing the knowledge base
of economic development. Many argued that this should be the most
important Federal role. An important element of the discussion was the
belief of some that the Federal role in learning must be driven by a
benchmark definition of economic development, which should be used to
change the habits or practices of economic development practitioners.
Regarding specific panel recommendations. there was:
<bullet> strong agreement with the need to advance the state-of-the-
art by giving a higher priority to federally financed research,
evaluation and demonstrations. As important, however, was the
identified need to build reaming networks across the country to
convey information about economic development. Participants noted
that economic development practices are more often driven by
anecdotes than by data, and that learning networks are an effective
tool for conveying the lessons derived from such experiences,
anecdotes, and information.
<bullet> lively debate regarding increasing attention to the costs and
benefits of recruitment. Some believed the report did not go far
enough in pointing out the negative consequences of recruitment,
such as overly generous subsidies, while others thought the report
unfairly singled out this strategy. The issue clearly provoked
strong feeling among participants and divergent views on how it
should be addressed at the Federal level. Most agreed, however,
that excessive expenditures on recruitment deals is an
embarrassment to economic development professionals and that, in
general, the public and elected of finials need better information.
<bullet> strong agreement with the panel's recommendations about the
need to improve Federal data collection and analysis. Participants
were particularly concerned that Federal data be more useful for
State and local practitioners. There was some skepticism among the
group, however, about consolidating Federal data organizations.
Most participants did not believe this is politically feasible and
did not want to expend the political capital on a very uncertain
outcome.
Reaction to Findings and Recommendations About Leveraging
Conference participants endorsed the panel's idea that Federal
economic development resources generally should be used to influence
policy directions at the State and local level. Considerable
discussion. however, ensued around the panel's critique of short-term
deals and its concern that projects rather than strategies drive the
development process. Many participants supported the panel's criticism
of ``projectitis,'' and there was broad agreement that strategic
analysis and planning are essential. However. panel members and
participants agreed that such criticism should not undermine the
importance of projects per se, which can be a central element of many
economic development activities.
Although many participants believed that project decisions are best
made at the State and local level some felt that the Federal
Government--both executive and legislative branches--would continue to
earmark funds for specific projects. Other participants, however,
supported the panel's call for a reduced Federal role in making
individual project.
Regarding specific panel recommendations, there was:
<bullet> agreement with the idea of using Federal resources to
encourage State and local development organizations to focus their
development efforts on regional solutions. It also was suggested
that the Federal Government should make a concerted effort to
identify and remove Federal barriers to local cooperation.
<bullet> strong endorsement of targeting Federal resources to the
development needs of distressed places. both urban and rural.
Participants also noted the need to ensure linkages between Federal
policies that target distressed areas and those that target
distressed populations.
<bullet> firm support for Federal assistance for capacity building.
They noted that Federal policy efforts depend on the implementation
abilities of local development professionals and public and private
leaders. The group supported allowing institutional frameworks to
evolve from the bottom up rather than being imposed from the top
down.
Reaction to Findings and Recommendations About Linking
As noted earlier, there was strong agreement among conference
participants that the current Federal approach to economic development
did not support State and local economic development well. Most
participants agreed with the panel's finding that the duplication and
fragmentation among Federal programs imposed high transaction costs for
State and local development efforts.
There was lively debate on how to address this issue. Some
participants believed State, regional and local efforts were solving
the problem of fragmentation. Development officials have become
proficient at coordinating efforts and packaging various program
resources. Other participants noted that although there were many
positive examples of effective local coordination and resource
packaging, it was unfortunate that practitioners spent so much time on
grant and administrative entrepreneurship rather than on innovative
problem solving for their communities. These same participants further
noted that although Federal administrative waivers had gained great
currency, the need for waivers represented a failure in policy and
program design. Participants vigorously debated whether fragmentation
could be addressed better at the Federal level or whether current
coordination models, such as the State Rural Development Councils and
the new performance partnerships of the Metropolitan Planning
Organizations under the Department of Transportation, were the more
appropriate solutions to the problem of fragmented Federal programs.
Regarding specific panel recommendations:
<bullet> many participants strongly disagreed with the panel's
recommendation for wholesale consolidation of Federal economic
development programs. Instead, they suggested an incremental
approach that would involve restructuring Federal program
activities around a geographical focus--rural programs and urban
programs--or around substantive development areas such as business
development, international trade, or infrastructure development.
Others advocated focusing on administrative consolidation, such as
eliminating duplicative planning requirements, conflicting grant
cycles, or repetitive reporting requirements. A key concern about
consolidation was the perceived difficulty of overcoming the vested
authorities and interests of congressional subcommittees and
executive branch agencies. Most participants were wary of expending
political capital for what they believed would be a futile effort.
<bullet> although most participants supported the panel's
recommendation for overall Federal policy guidance, most did not
see a viable mechanism for such effort or the political feasibility
of one group asserting authority over others in the Federal system.
Participants regretted that the National Performance Review's
recommendation for a Federal coordination council for economic
development was never implemented. Many participants believed that
the most viable option for policy coordination was at the State
level through a mechanism similar to the rural development
councils.
<bullet> there was general agreement on the panel's recommendations to
foster interfirm linkages by forming industry associations and
reducing legal and regulatory barriers to collaborations among
firms.
Although participants agreed with the panel's findings that the
current Federal approach to economic development did not support State
and local development efforts, there was no consensus on the best ways
to improve the system. Many participants expressed concern that efforts
to reform could open the door to cuts in funding for Federal programs.
A Strategy for Implementing the Report
Conference participants were asked to consider next steps beyond
the Academy report. A key issue is whether the economic development
community will seek to influence the nature of that change or simply
let it happen. Two levels of response followed: EDAs reaction to the
panel's findings and recommendations, and the suggestions by conference
participants for implementing the study results.
EDA's Agenda
Philip Singerman, assistant secretary of commerce for economic
development, addressed the conference at its end, presenting his
personal reaction to the panel's study. Overall, he felt very positive
about the panel's findings and supports the spirit and intent of all
the recommendations. He noted that he and other staff had the
opportunity to observe the panel's deliberations over the past year
and, as a result, already had taken actions consistent with several key
panel recommendations.
Of particular note is the agency's commitment to focus its research
and technical assistance efforts on producing better information about
economic development issues identified by the panel. Specifically, EDA
is already focusing on:
<bullet> measurement and evaluation, by supporting a national study to
develop a methodology for evaluating its economic development
programs
<bullet> distressed areas, by supporting a study to examine the
effectiveness of State science and technology strategies on the
needs of disadvantaged communities
<bullet> clusters, by examining the Federal role in cluster
development
<bullet> recruitment, by sponsoring research to develop legitimate
methodologies that will enable local communities to assess better
the costs and benefits of such economic activities
<bullet> infrastructure finance, by cooperating with the Office of
Economic Adjustment and the Department of Defense, the agency is
identifying innovative approaches for financing the infrastructure
critical for areas responding to a base closure or defense industry
downsizing.
Assistant Secretary Singerman concluded by encouraging the Academy
to make the results of this study known to national policymakers and
noted that this is a special opportunity to engage the administration
as it defines policy agendas for the next 4 years.
Suggestions for Next Steps by Conference Participants
Conference participants stressed the necessity of an aggressive
campaign to have the report taken seriously and its recommendations
adopted. Noting the Academy's institutional prohibition against
lobbying, participants identified steps that they, State and local
officials and other interested parties, could take including:
<bullet> distributing the report widely to leaders in Washington, DC,
States, regions, and communities convening associations of
practitioners, policymakers and interest groups to develop a
coalition to pursue implementation
<bullet> identifying champions/groups to pursue specific
recommendations
<bullet> bringing ``bottom-up'' pressure on legislators to implement
the recommendations
<bullet> encouraging the National Economic Council, the Office of
Management and Budget, the National Performance Review, or a
similar entity, to embrace the panel's recommendations
<bullet> educating business associations on the panel's findings and
encourage their active involvement in pursuing its recommendations
asking EDA to take the lead in building demand for better data
<bullet> encouraging agencies to work cooperatively to address the
fragmentation and duplication of program planning and reporting
requirements, as well as other administrative barriers to more
efficient performance.
The Academy agreed to distribute its report broadly, as well as to
make panel members available for presentations and testimony on the
study findings and recommendations. A number of conference participants
agreed to present the study to their respective colleagues and to
pursue efforts to implement the panel's recommendations.
executive summary of a path to smarter economic development:
reassessing the federal role
Over the past three decades, Federal agencies have invested
hundreds of billions of dollars to help States and communities create
jobs and economic opportunities. In light of severe pressures on the
Federal budget and new economic opportunities and challenges, Members
of Congress, citizens and economic development professionals are
asking, ``What is the appropriate future role of the Federal Government
in economic development activities?''
The following report of a panel of experts recommends rethinking
the basic premises for Federal economic development activities at the
State, local, and regional levels. It offers a coherent and experience-
based conception of how our national government might organize and
carry out genuinely effective development assistance to regions,
States, and communities.
Historically, Federal development efforts have tried to increase
overall national productivity and to help economically distressed and
poor communities gain a share of the country's general prosperity.
Toward these ends, the Federal Government has built and sustained a
variety of organizations involved in economic development at every
level of society. They include development agencies at the State and
local level, multi-county development districts, and community based
development corporations, not to mention various non-profit
organizations, banks, industrial associations, and other private-sector
partners.
The panel met over the course of a year, interviewed economic
development experts and Federal officials, and closely examined eight
communities (both rural and urban) for insights into what works and
why.
Among the panel's findings:
<bullet> The fundamental economic influences of the private sector and
market forces must be incorporated into successful economic
development plans.
<bullet> Federal investments in development efforts are critical to
many States and localities, but not all.
<bullet> No single Federal program is appropriate in all communities;
however, the present multiplicity of programs imposes unnecessarily
high transaction costs on States and localities and exacerbates
inherent weaknesses in their approaches.
<bullet> The meager Federal investment in information sharing and
technology severely constrains our nation's economic development
efforts.
In response, the panel has proposed a new approach to meet economic
development needs. It urges the Federal Government to help States and
localities learn through better information, leverage all available
resources, and link multiple Federal initiatives to assist local
communities.
The panel's report concluded with 10 specific recommendations for
improving economic development programs and practices in America. The
Federal Government should:
<bullet> Help States and communities learn about state-of-the-art
economic development practices;
<bullet> Act to reduce the economic losses resulting from unrestrained
bidding war among States and localities to recruit or retain
businesses;
<bullet> Improve the quality of economic development decisionmaking
and the assessment of policies and programs at all levels by
gathering and disseminating State, regional, and local economic
statistics and by reducing the fragmentation of the nation's
statistical system;
<bullet> Give States and communities incentives to design and
implement effective regional or inter-jurisdictional development
strategies;
<bullet> Encourage investment in development strategies that offer
opportunities to generate jobs and income over the longer term,
rather than in high-visibility projects;
<bullet> Give special assistance to States and communities seeking to
create economic opportunities in distressed communities;
<bullet> Substantially reduce the fragmentation of the Federal
economic development effort;
<bullet> Establish a permanent mechanism to provide overall policy-
level guidance to other Federal activities such as work force
training, environmental protection. technology and research. and
other endeavors that contribute to economic development outcomes;
<bullet> Reorient Federal programs. especially business finance
programs, toward strategies that address the underlying obstacles
to obtaining credit; and
<bullet> Encourage States and localities to stimulate links among
businesses to enhance overall economic performance.
The nation's economic development programs will be a critical
factor in two of the most significant domestic policy challenges of the
coming decades: America's adjustment and response to an increasingly
competitive global economy, and the recent transformation of social
policy from one based on dependency to one that stresses opportunity
and personal responsibility. A reformed Federal approach to economic
development will help States and communities make real and far greater
contributions to addressing these issues.
Mr. Fosler. Briefly, the report recommends a rethinking of
the basic premise of Federal economic development activities at
the State, local, and regional levels. The panel felt strongly
that economic development programs should be grounded in the
fundamental influence of the market, geared toward engaging the
power of the private sector, and tailored to specific
conditions of regions and communities. And to this end, it
proposed a three-pronged approach by which the Federal
Government could best support State and local economic
development efforts that were designed by the States and
localities themselves.
First, the Federal Government should help States and
localities learn about state-of-the-art economic development
practices in order to improve the quality of economic
development decisionmaking and the effective implementation of
policies and programs. They could do this, in part, also by
gathering and disseminating State, regional, and local economic
statistics and by reducing the fragmentation of the Nation's
statistical system.
Second, the Federal Government should leverage resources
committed to economic development by giving States and
communities incentives to design and implement effective
regional or interjurisdictional development strategies, and by
encouraging strategies that emphasize long-term pay-off over
high visibility projects.
And third, the panel felt that the Federal Government
should make it easier for States and localities to link Federal
resources by substantially reducing the fragmentation of
Federal economic development efforts. For example, it might
establish a mechanism to provide overall policy level guidance
to other Federal activities, such as work force training,
environmental protection, and technology and research that
contribute to economic development outcomes.
EDA does not have authority to implement all of the panel's
recommendations. For example, it would take an action by the
Congress and leadership by the President to substantially
reduce the fragmentation of Federal economic development
programs. However, the Academy has been pleased at many of the
steps EDA has taken to implement the panel's recommendations.
Assistant Secretary Singerman recently sent us a letter
detailing these steps, and I would ask that a copy of his
letter be entered into the record.
Senator Warner. Without objection.
[A copy of the referenced letter follows:]
U.S. Department of Commerce,
Economic Development Administration,
Washington, DC 20230, July 7, 1998.
DeWitt John,
National Academy of Public Administration,
1120 G Street, NW, Suite 850,
Washington, DC 20005.
Dear DeWitt: I want to give you an update on EDA's activities in
regard to the NAPA Report, ``A Path to Smarter Economic Development:
Reassessing the Federal Role'' (November, 1996). First, let me once
again thank Panel Chair Dick Thornburgh, the members of the panel,
Scott Foster, and the NAPA staff for their excellent work on this
important subject. As you will see from the following, NAPA's report
had a substantial influence on the development of EDA's policy and
reformulation of its programs.
Attachment I is the fiscal year 1998 Policy Guidance for the
Economic Development Administration, issued in March 1998. The Guidance
highlights NAPA's findings, stating that ``EDA recognizes that economic
development is a local process and understands the importance of sound
local economic development planning.''
EDA's new mission statement stresses the importance of Federal
assistance to distressed communities through local partnerships:
``EDA's mission is to stimulate employment and increased income in
distressed communities. EDA's role is to assist local communities to
develop and diversify their economies through effective partnerships
and strategic investments of resources.''
NAPA's recommendations were organized in terms of learning,
leverage and linkage.
A. Learning
Recommendation 1 was that the Federal Government should help States
and communities learn about state-of-the-art economic development
practices.
Perhaps the most significant result of the NAPA study was the
revitalization of EDA's national technical assistance and research
programs. Influenced by the NAPA process, EDA reformed its process
through focussed solicitations, competitive reviews, careful
management, and targeted efforts. Independent, recognized research
institutions were selected for analytic evaluations. Emphasis was
placed upon evaluations of economic development programs and
dissemination of results. Major studies included:
<bullet> Public Works Program: Performance Evaluation--Rutgers
University et al.
<bullet> Defense Adjustment Program: Performance Evaluation--Rutgers
University et al.
<bullet> The Impact of Incubator Investments--University of Michigan,
et. al.
<bullet> Performance Measurement and Evaluation of Economic
Development Initiatives: An Annotated Bibliography--Nexus
Associates
Dissemination efforts included presentations at EDA regional
conferences and support of information outreach through the Council for
Urban Economic Development, National Association of Development
Organizations, the National Association of Regional Councils, Public
Works and Economic Development Association, and other national
associations.
Recommendation 2 directed the Federal Government to address bidding
wars by States to recruit or retain businesses.
As a first step, EDA has commissioned an evaluation of State
incentives, conducted by the National Association of State Development
Agencies, to develop a methodology to assess the costs/benefits of
State incentives. The hope is to institutionalize this effort in a
joint Federal-local effort.
Recommendation 3 addressed the need for useful economic statistics
to support local decisionmaking.
EDA has commissioned Andrew Reamer & Associates to review the
socioeconomic data needed for economic development practitioners, and
to prepare a list of recommendations for the Federal statistical
agencies, with the long-term goal of facilitating ongoing dialog
between data users and the statistical agencies.
B. Leverage
Recommendation 4 was Federal encouragement of regional development
strategies.
EDA has reaffirmed its commitment to its local partners for
capacity building for economic development. To support this commitment
EDA has recommended additional funding to stabilize and enhance its
local partnership network of planning districts, university centers,
trade adjustment assistance centers, State and local planning
organizations, and Native American tribes.
To ensure quality performance, EDA is undertaking the first
comprehensive review of its local planning and technical assistance
programs in years:
<bullet> Evaluation of the Overall Economic Development Program
Planning Process--Corporation for Enterprise
<bullet> Performance Measures for EDA's Planning and Local TA
Programs--Applied Development Economics
<bullet> Peer Review of EDA University Centers--National Association
of Management and Technical Assistance Centers
<bullet> Evaluation of Trade Adjustment Assistance Program--The Urban
Institute
In addition, EDA has commissioned studies of ``cluster-based''
economic development by Information Design Associates as a vehicle for
regional cooperation.
Finally, as part of EDA's proposed reauthorization legislation,
cooperative agreements between States are encouraged.
Recommendation 5 is to encourage investments in development
strategies that offer opportunities to generate jobs and income over
the longer term.
The results from the evaluations already completed are being
utilized by EDA in development of program priorities. In addition to
the studies already completed, EDA is looking at the following
programs:
<bullet> Microenterprise as an Economic Adjustment Tool--Rutgers
University
<bullet> Impact of Revolving Loan Fund Investments--TBD
<bullet> Cutting-Edge and Innovative Techniques in Economic
Development--TBD
<bullet> Technology Transfer and Commercialization Efforts--TBD
<bullet> Effective Indian Economic Development Projects and
Practices--TBD
Recommendation 6 is to give special assistance to distressed
communities.
EDA has explicitly reaffirmed its policy of focussing its resources
on distressed communities.
EDA's Policy guidance states that ``EDA programs will give priority
to projects that address the economic needs of highly distressed
communities.'' During fiscal years 1996 and 1997 EDA Public Works
Projects were concentrated in communities with high unemployment and
low per capita income.
In order to further refine its understanding of distress, EDA
commissioned a study of outmigration/population loss as an indicator of
economic distress by the University of North Carolina. in addition, EDA
asked the State Science and Technology Institute to assess how State
technology strategies were addressing the needs of distressed
communities, and to recommend how States and the Federal Government
could leverage science and technology investments to benefit distressed
areas.
In its proposed reauthorization legislation, EDA has prescribed
specific quantitative measures of distress to determine eligibility of
communities for Federal assistance, to be determined at the time of
application.
C. Linkage
Recommendation 7 proposes substantial reduction of the
fragmentation of the Federal economic development effort.
Within its area of responsibility, EDA has attempted to ensure
collaboration among Federal agencies. In 1997, EDA was asked to take a
leading role in assisting communities affected by international trade.
Accordingly, EDA has convened meetings with the Departments of Labor
and Treasury to ensure a coordinated response in trade impacted areas.
EDA has 17 Memoranda of Understanding with other Federal agencies to
support joint efforts; in particular, EDA has been an active
participant in overall Federal efforts to assist disaster affected
localities and base closure communities. On July 21, 1998, EDA will
convene a meeting of representatives of Federal agencies who have a
direct interest in community economic development planning, to discuss
greater coordination of community planning requirements between Federal
agencies.
In its proposed reauthorization, EDA includes specific language
ensuring that the agency actively coordinates its activities with other
organizations, and restates the importance of the National Public
Advisory Committee on Regional Economic Development, to include
representatives of other Federal agencies.
Recommendation 8 suggests a permanent mechanism to provide overall
policy-level guidance, linking work force training, technology, and
research to economic development.
EDA has reached out to the Commerce Department's Technology
Administration and National Institute of Standards and Technology to
bring together economic development and technology deployment. A number
of joint activities are currently under consideration.
Recommendation 9 addressed the need to overcome obstacles to
obtaining credit in Federal business finance programs.
EDA is exploring a number of innovative financing techniques to
ensure optimal use of Federal funds for business finance. Commonwealth
Development Associates is studying ways to leverage capital for defense
adjustment infrastructure. In addition, EDA is working closely with the
Corporation for Enterprise Development in their study of local
revolving loan funds, and as mentioned above, is studying the impact of
EDA revolving loan fund investments. Finally, EDA is examining the use
of ``securitization'' techniques to bring private capital into loan
funds for distressed communities.
Recommendation 10 suggests the encouragement of States and
localities to stimulate links among businesses.
This recommendation is not one that falls squarely within EDA's
traditional area of responsibility.
Next Steps: Fulfilling the Promise
NAPA recommended that as a next step interested parties engage in a
serious and extended conversation about their recommendations. In
response to this suggestion, in January 1997, EDA convened the first
national economic development forum at the Department of Commerce,
where the concepts proposed by NAPA were discussed. EDA is currently
organizing the second forum, scheduled for January 1999.
I cannot emphasize enough the positive influence and reinforcement
that NAPA has had on EDA's perspectives regarding economic development.
We thank you for your efforts and look forward to continuing our
productive relationship.
Sincerely,
Phillip A. Singerman.
Mr. Fosler. While we have not formally studied or assessed
EDA's actions in this regard, it is clear that the agency has
taken the panel's recommendations seriously and has taken very
useful steps, especially in the area of technical assistance
and training. For example, Mr. Singerman's letter informs us
that EDA is working to develop a methodology to assess the cost
and benefits of State incentive programs, they've engaged a
contractor to assess how Federal statistical agencies can
better serve the needs of economic development practitioners,
and, as you've heard here, they've commissioned independent
evaluations of the agency's own programs.
Hopefully, this will be a step toward encouraging States,
localities, and regions to do similar kinds of evaluations of
their own efforts. Thoughtful, sound evaluations can be
tremendously useful to economic development efforts in sifting
the wheat from the chaff, sharing good ideas, and finding
better ways that EDA and other Federal agencies can support
their work.
For many years EDA has been at risk of being terminated.
When we were doing the research for our study we were told
repeatedly about the chilling affect that this had on the moral
and the capability of the agency. EDA is now working hard to
revitalize itself. We're pleased that the Academy report has
been of some use to the agency in this process, and hope that
the committee will also find the report useful in its own
deliberations.
Thank you, Mr. Chairman. I would be happy to answer any
questions.
Senator Warner. Thank you very much.
Last, now Mr. Thompson. We thank you for making the trip up
from South Carolina to provide us with your views.
STATEMENT OF ERIC P. THOMPSON, EXECUTIVE DIRECTOR, LOWER
SAVANNAH COUNCIL OF GOVERNMENTS AND PRESIDENT, NATIONAL
ASSOCIATION OF DEVELOPMENT ORGANIZATIONS, ON BEHALF OF THE
COALITION FOR ECONOMIC DEVELOPMENT
Mr. Thompson. Thank you, Mr. Chairman, and thank you for
the opportunity to testify before the committee on the
extremely important subject of reauthorization of EDA. I am
testifying on behalf of the Coalition for Economic Development.
I am, as you mentioned, Eric Thompson, Executive Director of
the Lower Savannah Council of Governments, a economic
development district headquartered in Aiken, South Carolina. In
other words, I'm out there where the rubber hits the road when
it comes to economic development and EDA. As President of the
National Association of Development Organizations, I'm pleased
to join with other members of our coalition in offering strong
support for EDA reauthorization.
Incidently, it's good be among friends here this morning.
We've heard some very good comments and very good support. My
fellow coalition member Judge Villines has given an excellent
overview of the importance of EDA programs to rural and urban
communities. I would like to focus on an issue of greater
importance to my region, the State of South Carolina and other
places throughout the country affected by defense industry
contract cuts and base closures.
Despite the small size of EDA, the agency has always
provided flexible programs and funding needed in times of
sudden economic distress. EDA's defense adjustment programs
help communities impacted by base closures and/or defense
contract reductions to rebuild and diversify their economies
and move further away from defense related dependency.
In the State of South Carolina there have been two major
base closings and significant cutbacks at the Department of
Energy Savannah River Site, a DOE facility located in my
region. In the Lower Savannah region, the Savannah River Site
produced material for nuclear weapons used in the U.S. defense
program. It is the largest single employer in the State of
South Carolina. With the end of the cold war, the Department of
Energy downsized the facility, resulting in a loss of over
10,000 jobs in the last 5 years, increasing unemployment
causing real estate values to stagnate and essentially halting
new home starts.
In 1997, a majority of the counties of the Lower Savannah
region, which there are six, had unemployment rates above the
State average. Three of those were listed one, two, and three
in the State as far as having the highest unemployment rate.
In order to help the Lower Savannah region adjust to this
drastic cutback, the Department of Energy needed a Federal
agency to administer DOE funds which are provided for community
transition projects. Using the existing EDA system and grant
process, DOE transferred funds to EDA to administer and now
requires that EDA approve all requests for community adjustment
assistance from DOE's Office of Work and Community Transition.
DOE is not in the economic development business. It needed an
agency who was and EDA was that agency.
One of EDA's greatest strengths is the ability to use the
existing networks of 320 economic development districts, such
as the Lower Savannah COG, for defense adjustment, disaster
relief, and overall economic development assistance. These
regional development organizations provide local governments
with professional and technical assistance. Districts, the core
of EDA's delivery systems, are multi-county public-private
partnerships whose boards are composed of local elected
officials, private sector, and minority representatives. They
are critically important in small metropolitan and rural
regions where professional and technical assistance is limited
or nonexistent.
Of the Nation's 39,000 units of general local government,
33,000 have populations of less than 3,000 people, and 11,500
local governments have no employees. Larger cities and counties
have professional staffs including engineers and planners to
assist elected officials in the decisionmaking process.
However, in most of the counties' small and rural communities,
economic development district employees are the only
professional staff who are able to navigate the mountains of
red tape, regulations, and application forms necessary to apply
for Federal and State assistance.
It is through EDA's planning grants to the districts that
distressed communities gain access to professional capacity and
technical expertise to plan for the future. Today, EDA's small
planning grants to districts support an overall economic
development program for the communities served. OEDPs are
blueprints providing a comprehensive plan for sustainable
community growth and economic development.
I have with me today a map of our six county region. This
map indicates the location of EDA assisted projects which have
resulted in over 11,000 new jobs. That map has 6 counties and
45 incorporated areas, almost every one of which has been
assisted by EDA projects.
EDA is extremely effective both in helping communities cope
with long-term economic disasters and natural disasters. It is
important to remember that not all of the base alignment and
closure of BRAC listed installations are yet closed. It takes
several years to actually shut down a facility, so the need for
EDA's defense adjustment programs will continue. We strongly
urge EDA to once again assume the leadership role in the
transition. How can we best help America's poor and
disadvantaged? By providing them a job so that they can buy
their own shelter, their own food, their own clothing. It's
hard to pull yourself up by your bootstraps when you have no
boots. EDA has helped provide the bootstraps.
On behalf of the members of the Coalition for Economic
Development, I urge the committee to work with EDA to update
the authorizing legislation so that the Nation's distressed
communities will continue to have this vital Federal partner as
we move into the next century. I can assure you that those of
us who work in economic development at the local level will do
everything we possibly can to help make EDA more effective and
more efficient.
In the South, Senator, as you said earlier, we have a
saying, ``If it ain't broke, don't fix it.'' Well, the only
thing broke with EDA is that it needs to be legitimized through
authorization legislation. So I urge you to fix EDA and
reauthorize this very needed and very much appreciated Federal
agency. Thank you, sir.
Senator Warner. That's very helpful. All of the
contributions by this panel are very helpful.
I would just summarize my own views on this. And that is
people in communities like yours, Mr. Thompson, and elsewhere
cannot cope with the extraordinary weather changes we've had
now and disasters. I read this morning of I've forgotten now
how many inches of rain in Tennessee in 48 hours. The stories
are extraordinary. I think the Government has a role coming
through the Federal disaster programs to help victims as a
consequence of our unusual weather patterns. I don't recall,
and I've lived on Planet Earth I think a little longer than
about everybody in this hearing room, I just don't remember
hearing of El Ninos as a small person.
The second thing is that as we downsize Government and
particularly downsize the U.S. military, therein again
communities that have loyally and faithfully supported their
local military bases are suddenly faced with extraordinary
readjustment. On the whole, I think most of those situations
have worked out for the ultimate benefit of the community.
I was one of the coauthors of the first BRAC bill, the
second BRAC bill, so I've been pretty close to this process. I
know how strongly Members of Congress defend their communities
and hope that the bases will stay open, but it just doesn't
happen in many instances. Somebody has got to accept the fact
that we don't have the need for the large base structure that's
currently in place to support the level of men and women
serving in the Armed Forces.
All of that to say that I think there's a vital need for
this EDA to continue, and you have my support.
I once again thank this panel and those others in
attendance who have come to indicate their support for this
program.
Thank you very much. The hearing is concluded.
[Whereupon, at 11:30 a.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional statements and the text of S. 1647 follow:]
Statement of Secretary William M. Daley, U.S. Department of Commerce
Chairman Chafee, Subcommittee Chair Warner, Ranking Minority Member
Baucus, and distinguished members of the subcommittee: thank you for
scheduling this hearing.
Joining me today is the Assistant Secretary of Commerce for
Economic Development Phillip Singerman. Following my brief testimony,
Dr. Singerman will make a statement and be available to answer any
technical questions.
I am pleased to testify on S. 1647, the Economic Development
Partnership Act of 1998, which would reauthorize, for 5 years, the
Economic Development Administration. My message is clear: this
legislation is critical to our ability to efficiently help our nation's
distressed communities.
It is my goal as Secretary to run a department that is efficient,
cost-effective, and productive for the American people.
EDA clearly achieves all of these goals.
Ninety-nine percent of its public works projects have been
completed as planned. Since President Clinton took office, the agency
cut the number of political positions from 14 to 5, and reduced
regulations by 60 percent.
This is a leaner EDA that has learned how to do more with less.
Most importantly, it knows how to expand opportunities for
Americans who need it most.
Let me be frank. I have heard the criticism that this is pork, that
with an economy as strong as ours, communities do not need help
developing their infrastructure or attracting new business.
The fact is these funds are predominantly invested in areas where
the unemployment rate is 40 percent higher than the national average
and per capita incomes are 40 percent below average.
The fact is a thriving community one day can be a distressed one
the next. All it takes is a military base closure, a defense industry
downsizing, a Department of Energy reduction, or a natural disaster. As
Chairman Chafee knows first hand that happened in Narragansett,
overnight, when suddenly an oil spill hurt the fishing industry. But
within 30 days, we gave a $1 million grant to get the community back on
its feet and develop recovery plans.
I also have heard the criticism that some of these are make work
projects: all they do is create short-term construction jobs. That is
not so. They create permanent jobs.
The fact is 6 years after projects are completed, on average, the
number of local jobs have doubled. And for every $1 million Congress
authorizes to fund an EDA project, that leverages $10 million in
private-sector investment.
EDA's programs work.
Take Grand Forks, North Dakota, after those terrible floods in 1997
that devastated North Dakota, South Dakota, and Minnesota. We came in
with a $3 million grant to construct two professional buildings in
downtown Grand Forks. Community leaders have told me, if it hadn't been
for that investment, businesses would have left downtown. And the
people of Grand Forks, who had already lost too much, would have lost
their central business district.
Or take the Center for Employment Training in Santa Clara County,
California. EDA grants totaling $4 million over the past few years were
used to convert an abandoned high school in a highly distressed
Hispanic neighborhood into one of the most successful vocational
training facilities in California. The Center has now expanded its
programs to include a culinary school and medical assistant training--
and every student graduates into a job.
Another example is our $2 million grant to help Portland State
University build a distance learning center. It will link the
university's educational programs with rural and remote areas of
Oregon. So underemployed and unemployed people there can have access to
academic, business, and vocational training.
I believe that in the future, what we do at EDA will be even more
important. In this new economy, the pace of globalization and
technology development will accelerate. We will see constant
restructuring of firms and industries. All of this will require our
nations communities to be more flexible and innovative in creating jobs
and attracting private-sector investment.
And a new EDA will be there to help. This agency has reformed for
the better, and this legislation will allow it to reform even more.
It lets us reduce paperwork. It encourages State and local
cooperation. It simplifies the application procedures. It provides
maximum flexibility to grant recipients.
And this legislation will allow us to change the eligibility
requirements for EDA assistance. Gone will be the days that once you
are a designated area, you automatically remain one for life. Replacing
it will be a fairer process that says simply: an applicant is eligible
based on needs at the time it applies.
So, Mr. Chairman, I believe we have addressed the concerns that
Congress and others have expressed over the years.
EDA has not be reauthorized since 1982. The time has come. And I
look forward to working with you, as the bill moves forward.
Thank you.
__________
Statement of Phillip A. Singerman, Assistant Secretary for Economic
Development, Department of Commerce
Chairman Chafee, Senators Warner and Baucus, and distinguished
Members of the Subcommittee, thank you for convening this important
hearing. I appreciate the opportunity to testify before this
subcommittee. Know of my sincere appreciation for the many courtesies
and considerations that you and Members and staff of the Committee have
extended to me and my staff. In particular, we acknowledge Senators Max
Baucus and Olympia Snowe for introducing the Administration's
legislation by request. We are grateful for the opportunity of working
with you to reauthorize the Economic Development Administration (EDA).
Allow me to next thank Secretary of Commerce William M. Daley for
his testimony today on behalf of EDA reauthorization and for his
exemplary leadership at the Department of Commerce. Leadership that has
resulted in a comprehensive management review of the operations of the
Department, implementation of improved communications throughout the
Department, focus on a Department-wide strategic planning effort, and
guidance that set forth Departmental themes, goals and objectives that
integrate bureau missions.
The Secretary and I are accompanied today by the EDA Executive
Management Team and I take this opportunity to introduce them to you:
Chester Straub, Jr., Deputy Assistant Secretary, Office of Program
Operations; Ella M. Rusinko, Acting Deputy Assistant Secretary for
Program, Research and Evaluation and Director, Office of Communications
and Congressional Liaison; Mitchell L. Laine, Chief Financial Officer,
Edward M. Levin, Chief Counsel, and, Kimberly Cain, my Special
Assistant.
A Case for EDA
Mr. Chairman, the first time I appeared before you and Members of
the Committee was at a confirmation hearing in late 1996. Since then, I
am proud and pleased to report to you today that we have accomplished a
great deal at EDA. We have aggressively focused on:
<bullet> the management and operations of the agency,
<bullet> implementing a strategic planning process that complements
the Department's plan,
<bullet> ensuring that our mission combines with Departmental themes,
developing and implementing program performance measures in
compliance with the Government Performance and Results Act of 1993
with validated results; and,
<bullet> partnerships in economic development.
Our outcomes are tangible and EDA is an administratively reformed
and reinvented Federal agency.
Distressed communities across America face tremendous economic
development challenges as we approach the year 2000 and a new age of
technology. As Secretary of Commerce William M. Daley has stated, ``We
continue to make trade and the development of our economy the most
important piece of the Department.'' The EDA mission fully supports
that objective as EDA remains focused on assisting rural and urban
distressed communities in developing a sustainable economic base which
will be both competitive in tomorrow's world marketplace and productive
in the creation of local jobs and in the leveraging of private-sector
investment. EDA continues to operate under the fundamental principle
that economic development is a local process. EDA provides strategic
assistance with which local communities in a public/private process
build the capacity to understand their economic challenges, develop the
consensus strategies necessary to create positive economic change and
implement their plans with specific actions or milestones for economic
growth. EDA cooperates with and fosters partnerships with State and
local governments, regional economic development districts, public and
private nonprofit organizations, and Indian tribes to sustain and
promote economic development across the country. EDA programs continue
to be needed to assist local, State and regional efforts to improve
economic conditions.
The Reform and Transformation of EDA
EDA is doing more with less and is a leaner, streamlined Agency
having:
<bullet> to reduced regulations by over 60 percent;
<bullet> over a 2-year period reduced Agency staff by 30 percent and
the number of non-career positions from 14 to 5, or by 60 percent;
<bullet> reduced Washington staff by 25 percent in Fiscal year 1996;
<bullet> simplified the grants application process, including its pre-
application and application forms to better serve EDA customers;
and,
<bullet> implemented an agency reorganization approved by the
Administration and the Congress.
EDA has implemented sound management and administrative practices
that include:
<bullet> continued delegation of authority to Regional Offices for the
approval of grants;
<bullet> instituted a team-based approach to program delivery in the
field with remaining Economic Development Representatives in
individual States receiving greater support from Regional offices;
<bullet> moved toward an automated on-line application process;
<bullet> focused Headquarters staff on policy direction and program
evaluation;
<bullet> developed a Strategic Plan that reflects Administration
Initiatives and Department of Commerce themes and sets forth goals
and objectives for EDA's economic development program;
<bullet> implemented program performance measures to comply with the
Government Performance and Results Act of 1993 (GPRA);
<bullet> accelerated resolution of outstanding Inspector General audit
issues;
<bullet> hired a Chief Financial Officer to oversee the agency's
financial management responsibilities; and,
<bullet> utilized resources in an optimum manner to reduce its
contingent liability for past program activity as well as to manage
increasing workloads, many the result of recent supplemental
appropriations. The agency currently manages close to a $1 billion
portfolio of approved construction projects that require
monitoring, servicing and accounting before closeout.
EDA Evaluations and Program Performance Measures
EDA has validated, robust results of the public works and defense
economic adjustment programs. In the public works evaluation,
researchers found that:
<bullet> 99 percent of the projects were completed as planned;
<bullet> 91 percent were completed on time;
<bullet> 52 percent were completed under budget;
<bullet> 327 jobs were created or retained for every $1 million in EDA
investment (an EDA job cost of $3,058);
<bullet> every $1 million in EDA funding leveraged $10.08 million in
private-sector investment;
<bullet> every $1 million in EDA funding increased the local tax base
by $10.13 million;
<bullet> the number of local jobs doubled in the 6-years after project
completion; and, at project locations the unemployment rate was 30
percent higher than the State average unemployment and 40 percent
higher than the national average unemployment, per capita income
was 40 percent less than the State and national averages, and 40
percent more were below the poverty level than in the State or
nation.
We plan to continue evaluating the balance of our programs. Thus
far, completed studies include:
<bullet> Post-Disaster Assistance: Hurricane Andrew conducted by
Aguirre International;
<bullet> The Impact of Incubator Investments conducted by the
University of Michigan, National Business Incubator Association,
Ohio University and the Southern Technology Council;
<bullet> Public Works Program: Performance Evaluation conducted by
Rutgers University, the New Jersey Institute of Technology,
Columbia University, Princeton University, the National Association
of Regional Councils and the University of Cincinnati;
<bullet> Defense Adjustment Program: Performance Evaluation conducted
by the Rutgers University-led consortia of research entities; and
<bullet> Public Works Program: Multiplier and Employment--Generating
Effects conducted by the Rutgers University-led consortia of
research entities.
Studies Underway or for which a Request for Proposal has been
announced include:
<bullet> Evaluation of the Midwest Flood Program Implementation by
Aguirre International;
<bullet> Evaluation of the Overall Economic Development Program by the
Corporation for Enterprise Development;
<bullet> Evaluation of the Trade Adjustment Assistance Program by the
Urban Institute; and, Evaluation of EDA Revolving Loan Fund
Program.
<bullet> EDA plans to apply research information to our continued,
evolving analyses of program performance. We continue to focus on
refining reporting requirements established under the Government
Performance and Results Act of 1993 (GPRA).
The Department of Commerce Inspector General's March 1998
Semiannual Report to Congress states, ``In examining the overview of
EDA's financial statements, we found that it appropriately (1) links
EDA's programs with the Department's strategic plan, (2) identifies
management actions taken to address internal control deficiencies, and
(3) reflects EDA's progress in meeting GPRA requirements.''
The report also cites areas where EDA can improve reporting results
and presentation of performance data, and we are committed to
implementing changes that comply with the Inspector General's
observations.
Why Reauthorize EDA
As EDA looks to the future, we continue to focus on our mission and
how to better serve the Nation's distressed communities in an expanding
global economy that is more technology oriented. Many of America's
communities are leaders in global competitiveness, but for every
community in this category, antitheses exist. Lagging areas of the
country may lack the technical prowess and expertise yet possess
untapped, unique and marketable resources. American communities need to
reap the benefits that local resources offer, and to do so requires
viable strategies for economic sustenance, growth and prosperity that
creates jobs. Community strategies for economically needy areas will
require thoughtful investments in infrastructure and technology
capacity in order to effectively keep pace with the rapidly changing
environments of a world economy. And, EDA is facing the economic
challenges of today for a better tomorrow.
To maintain and continue the EDA momentum in helping the Nation's
distressed communities, to complete the agency's reform process, and
for national public policy purposes, the agency needs reauthorization.
EDA has not been reauthorized since 1982 and the Public Works and
Economic Development Act, as amended, needs to be updated, streamlined
and brought into the fast-approaching 21st Century.
The Economic Development Partnership Act
The Administration's proposal (S. 1647), the Economic Development
Partnership Act (EDPA) of 1997 was transmitted to Congress on March 31,
1997 and seeks a 5-year reauthorization of EDA. The legislative
proposal was drafted over the course of more than a year and
thoughtfully weighed and considered reauthorization legislation
previously considered by the 103d and 104th Congresses. EDPA adheres to
the reform principles developed in legislation considered during the
104th Congress. EDPA constitutes an entire rewrite of the agency's
current authorizing legislation, the Public Works and Economic
Development Act of 1965, as amended. It encourages cooperation among
Federal agencies and complements EDA management initiatives focused on
the efficiency and effectiveness of the EDA mission.
EDPA facilitates program management and oversight by allowing
transfers of funds from other Departments and Agencies; requiring grant
recipients to maintain records that adhere to sound financial record
keeping practices that are available for audit; adding the Inspector
General for the Department of Commerce to the list of authorized
individuals with access to records for examination and audit; and,
permitting self-certification by applicants, as appropriate. Also, the
proposed legislation eliminates duplication through the establishment
of an overall economic development strategy for economic adjustment and
public works projects.
EDPA provides for long-needed improvements that strengthen EDA
economic development tools through changes that lessen burdens on
applicants, facilitate program delivery and enhance program flexibility
to address the needs of the Nation's most distressed communities. The
proposed legislation eliminates the designation system which under
current law means once an area is designated as ``distressed'' it
retains that designation regardless of improving economic conditions.
S. 1647 replaces the process with one that requires eligibility for EDA
assistance at time of application based on clearly defined economic
distress criteria that includes high unemployment riotously per capita
income levels, or out-migration.
Other improvements include:
<bullet> updating the requirement for the preparation and adoption of
a comprehensive economic development strategy as a basis for EDA
development assistance;
<bullet> allowing minor changes to the purpose and scope of projects
which allow recipients to enhance the economic development area;
<bullet> permitting recipients of EDA approved grants to use project
underrun funds for same project enhancements as a recognition of
grantees' prudent management of Federal dollars;
<bullet> enabling assistance for projects on military or energy
installations without requiring that the recipient have title or a
leasehold interest in the property for a specified term which
solves a current legal obstacle to the implementation of projects
in affected areas; and,
<bullet> affirmation of the EDA role in other long-standing activities
or programs, such as in defense conversion, post-disaster economic
recovery and support of University Centers.
EDPA makes many Improvements, but it carefully preserves safeguards
and protective provisions, such as prohibiting EDA assistance that
would ( 1 ) promote or extend unfair competition or tend to create
excess capacity in a given industry or (2) relocate firms from one part
of the country to another.
Conclusion
Mr. Chairman, in conclusion, EDA has transformed itself and
instituted a system for on-going self-analyses. As such, EDA has a
tremendous opportunity to actively utilize public policies and public
investments to promote American ingenuity that culminates in economic
growth and job creation. EDA has validation of program performance as
evidenced by recent studies. The management reforms that EDA has
implemented are yielding more efficiency and effectiveness in program
management and delivery. EDA is focused on its financial management
operations and is working closely with the Inspector General for the
Department of Commerce to achieve an unqualified financial statement,
which we were just shy of obtaining for 1998.
EDA has an established record of expertise and experience in
economic development and has been a pioneer helping distressed
communities create economic development best practices, such as
revolving loan funds and small business incubators. EDA works. EDA
programs work.
The next millennium will host a different set of economic
challenges for American communities: How to maintain and improve global
competitiveness in an increasingly information-dominated, technology-
oriented society where distance is becoming obsolete. EDA needs to be
there, helping America's distressed communities implement their own
targeted strategies and programs for economic recovery and growth. In
so doing, we continue to strengthen the Nation's economy which is a
product of innovation rooted in American creativity and spirited by the
American Dream.
Mr. Chairman, I reiterate my appreciation for this hearing and take
the opportunity to express our willingness to work with you on behalf
of America's rural and urban distressed communities. I would be glad to
respond to any questions which you and Members of the Subcommittee may
have on EDA. Thank you.
______
Responses by Phillip Singerman to Additional Questions from Senator
Warner
Question 1: In an era of greater accountability and insistence on
results, many agencies are struggling with devising ways to
meaningfully measure the outcome of their programs. EDA is no
exception. Indeed, G?4(9 has reported that no definitive conclusions
can be reached from the limited research that has been done to assess
the overall impact of EDA's assistance on economic development.
More recently, the GAO noted that there are no measurable
performance goals for four of the seven strategic objectives listed for
the EDA in its annual performance plan.
What can you tell the committee about recent analysis to measure
the impact of EDA's programs on economic development?
With regard to performance goals, what is EDA doing to ensure that
it has measurable performance goals for all of its strategic
objectives? Could you describe how you plan to measure performance for
each? Can all of these be measured in the upcoming year? I understand
that for several measures, the plan does not allow for assessment for 6
to 10 years.
Response: In April, 1996, GAO issued a report entitled Limited
Information Exists on the Impact of Assistance Provided by Three
Agencies that included the Economic Development Administration, the
Appalachian Regional Commission, and the Tennessee Valley Authority.
Since the issuance of that report, EDA has undertaken systematic,
rigorous evaluations of EDA program activities to develop, test and
refine performance measures and to establish benchmarks for program
performance. In addition, EDA research and national technical
assistance studies are focused on different types of activities
supported by EDA programs. Recently completed evaluations and studies
include:
<bullet> Public Works Program Performance Evaluation (Rutgers
university, et al.)--1997
<bullet> Defense Adjustment Prog. Performance Eval. (Rutgers
university, et al.)--1997
<bullet> Science and Technology Strategic Planning (State Science &
Tech. Inst.)--1997
<bullet> Impact of Business Incubator Investments (University of
Michigan, et al.)--1997
<bullet> Cluster-based Economic Development ( Information Design
Associates)--1998
<bullet> Evaluation of the Midwest Flood Recovery (Aguirre
International)--1998
<bullet> Public Works Program: Multiplier& Employment Effects
(Rutgers, et al.) -1998
Studies underway and planned include:
<bullet> Overall Economic Development Prog. Eval. (Corp. for
Enterprise Dev.)--1998
<bullet> Planning Performance Measures (Applied Development
Associates)--1998
<bullet> Trade Adjustment Assistance Program (Urban Institute)--1998
<bullet> Microenterprise Development (Rutgers University)--1998
<bullet> Univ. Center Peer Review (Natl. Assoc. of Manuf. & Tech.
Asst. Ctrs.)--1998
<bullet> State Incentive Programs (Natl. Assoc. of State Development
Agencies)--1998
<bullet> Revolving Loan Fund Program--Proposed for fiscal year 1998
<bullet> Technology Transfer & Commercialization--Proposed for fiscal
year 1998
<bullet> Brownfields/Air Quality--Proposed for fiscal year 1998
<bullet> Native American Program--Proposed for fiscal year 1998
<bullet> State International Trade Programs--Proposed for fiscal year
1999
<bullet> Trade-Impacted Communities--Proposed for fiscal year 1999
Recently completed evaluations of the performance of EDA's Public
Works and Defense Adjustment programs were conducted by Rutgers
University with the New Jersey Institute of Technology, Columbia
University, Princeton University, and the National Association of
Regional Councils and the University of Cincinnati. The Public Works
Program Performance Evaluation, completed in May, 1997 shows:
For every $1 million invested by EDA:
<bullet> 327 jobs created or retained
<bullet> $10 million private-sector investment
<bullet> $1 million in other public/non-profit investment
<bullet> $10 million increase in local tax base $3,058 cost per job
EDA investments target distressed communities:
Unemployment of 9.6 percent (median 24-month average)
Per capita income of $7,666 (median) Residents 18 percent below
poverty level (median)
Residents 11 percent minority
Quality Project Results
<bullet> 99 percent of projects completed as planned
<bullet> 91 percent of projects completed on time
<bullet> 52 percent of projects completed under budget
<bullet> Permanent private-sector jobs doubled within 6 years of
completion.
In 1996, EDA developed core performance measures for all EDA
programs (public works, economic adjustment, planning and technical
assistance, and trade adjustment). These core performance measures,
first applied to fiscal year 1997 grant awards, focus on important
program outcomes such as job creation, private-sector investment,
increased tax base, local planning and community participation, and
partnerships with State and regional economic development
organizations.
EDA established performance goals for EDA programs as part of the
fiscal year 1999 Congressional Budget submission. Measurable goals were
developed by analyzing research findings (e.g., Rutgers) and adjusting
for variables that effect performance in different years, such as
variations in the mix of project types and changes in economic
conditions. EDA will continue to use research and program evaluations--
such as those now underway for planning, university centers, and trade
adjustment assistance centers--to improve the way EDA measures
performance and manages programs.
EDA will use recent research findings (see list above) to develop
measurable goals for all strategic objectives, including technology-
based economic development, disaster assistance, conversion of military
installations to civilian uses, and sustainable development. EDA will
solicit feedback from grantees, Agency stakeholders and other
development practitioners prior to implementing new performance goals
and measures in fiscal year 2000.
Consistent with guidance from GAO, EDA performance goals and
measures focus on program outcomes, rather than outputs. The Rutgers
studies show that outcomes for economic development projects increase
over time and, typically, are not fully realized until 6 to 10 years
following project completion for infrastructure projects. Such projects
may require 3 years to complete construction and, once completed,
continue to create jobs, attract investment, increase tax base, and
diversify local economies as businesses locate and expand in EDA funded
industrial parks, incubators, and areas served by road, water and
sewer, technology and training facilities.
For revolving loan funds, jobs are generated shortly after project
approval, but projects continue to generate jobs and investment as new
loans are made from principal repayments in subsequent years. EDA
tracks the cumulative results for revolving loan fund projects,
including increases in the capital base.
EDA established requirements to report on performance (e.g., jobs
created and saved, private dollars invested, additional public and
private dollars leveraged, increased tax base) starting with fiscal
year 1997 grant awards. Public works grantees will report at project
completion and 3 and 6 years following completion. Revolving loan fund
grantees will report at 3, 6 and 9 years following project approval.
Planning and technical assistance grantees will report annually or at
project completion.
As stated above, some program activities will require from 6 to 10
years following project completion to fully realize projected outcomes.
To address this gap, EDA will review the performance of construction
and revolving loan projects that are at least 6 years old. During
fiscal year 1999, EDA will review projects completed in 1993 (6 years
ago) to validate findings from the Rutgers studies for public works and
revolving loan fund projects. This process will be repeated to test
benchmarks, validate performance goals and measures, and provide a more
accurate and complete understanding of the performance of EDA programs.
Question 2: Section 202 of the bill allows the amount of grants to
be increased to help cover increases in construction costs. This
provision would not increase the percentage offending EDA provided to a
project. How would EDA implement his provision?
Do you believe that the provision could result in applicants
initially underestimating construction costs knowing that later EDA
will cover increases in construction costs?
How would EDA guard against such practices?
Response: EDA would implement the provisions of proposed section
202 in a manner consistent with its current practice of awarding funds
for construction cost increases in public works projects, authorized by
section 107 of the Public Works and Economic Development Act of 1965,
as amended (42 U.S.C. 3137), as implemented by regulation in 13 CFR
305.10. EDA has averaged less than six such amendments per year over
the last 2 years.
Based on EDA's experience, there appears to be little risk that
applicants would underestimate costs in anticipation of obtaining a
cost increase award amendment later. Such amendments are not automatic,
they are in EDA's discretion and would assuredly be denied if it
appeared an applicant had misstated its estimated costs in its initial
application. Applicants could never ``know'' that later EDA would cover
cost increases. EDA would guard against the risk that an applicant
nevertheless might attempt to obtain an increased award through such an
exercise, by confirming from documentation submitted by the applicant
that the cost of the project has in fact increased, and that an
increase of the amount of the grant is in fact necessary for the for
the satisfactory completion and operation of the project.
Question 3: I understand that about 90 percent of the nation's
population resides in EDA designated eligible areas. Once an area has
been added to the EDA list, it cannot be dropped from it even if it no
longer meets the designation criteria.
However, EDA has the discretion to direct assistance to areas that
need it most. How does EDA determine which areas are most needy?
Are legislative changes needed in the eligibility criteria for EDA
programs?
Response: EDA currently determines which areas will receive major
EDA assistance according to the same criteria as appears in the
proposed legislation--low per capita income (80 percent or less of the
national average), a high unemployment rate (a rate for the previous 24
months 1 percent or more higher than the national average), or severe
sudden or long term economic dislocation (e.g., defense conversion,
loss of a major employer, natural or other disaster). Areas that remain
designated as redevelopment areas because they were once (but no longer
are) economically distressed, and are therefore technically eligible
for public works grant assistance, do not receive such assistance.
Legislative changes are not necessary to continue this EDA
practice, but they would confirm this policy, give it Congressional
blessing, and preclude misunderstandings on the part of prospective
applicants that might otherwise expect to receive assistance?
______
Responses by Phillip Singerman to Additional Questions from Senator
Boxer
Question 1: As you know, California has been hard hit by military
base closings. EDA has funded over 90 defense conversion projects in
California so far, but much more is still to be done. Some military
bases are not scheduled for closure until the year 2001. Does EDA plan
to increase the number and scope of these vital projects?
Response: Of the 115 base closures/realignments, EDA has actual
closure dates for 115. Of the 115 scheduled base closures 83 have
already closed including 20 bases in California. Over the course of
1999 (9) bases will close, 2000 (10) bases will close and 2001 (6) base
will close. Of the I 15 bases scheduled to close, we have assisted 90
through 206 EDA grants (as of 9130/97).
Based on EDA experience, it takes communities an average of 2 years
to put a together an economic adjustment strategy, usually funded by
DoD's Office of Economic Adjustment. Many of the subsequent community
strategy/reuse plans call for as much as 3-5 year initial
implementation phases, with total redevelopment in 10 or 20 years.
Therefore, EDA expects many BRAC 95 bases to begin to implement their
conversion strategies in fiscal year 1998, along with the other BRAC
bases that will be coming to EDA for additional funds to complete their
initial implementation strategies.
EDA expects that the bulk of its defense adjustment efforts will
continue to be associated with closing military bases and the vast
majority of that activity such as you are well familiar with in
California will be concentrated on base reuse infrastructure projects.
Such projects may range in size from several hundred thousand dollars
to several million dollars.
Question 2: How does EDA interact with other Federal agencies Such
as the Department of Defense, the Department of Labor, and the
Department of Housing and Urban Development) that are working on base
closure and what can be done to increase communication and cooperation
smith these agencies to better help local communities?
Response: The Economic Development Administration (EDA) is the
experienced economic development agency of the Federal Government. EDA
works in partnership with State and local governments, regional
economic development districts, public and private non-profit
organizations, and Indian tribes. EDA has had an ongoing partnership
with The Department of Defense Of rice of Economic Adjustment (DoD)
which operates as the lead agency for the formation of local reuse
organizations and the funding of such plans. Similarly, EDA partners
with the Department of Energy in assisting communities affected by
downsizing of Energy facilities, and the FAA's Military Airports
Program with jointly funded projects at closing bases.
Question 3: California has, in recent history, been hard hit by
several natural disasters including the earthquakes of 1990 and 1994,
and El Nino storms of the past year. What has EDA been doing to help
communities to recover from natural disasters and how does EDA interact
and coordinated with the Federal Emergency Management Agency (FEMA)?
Response: In the last 5 years, EDA's Disaster assistance program
has received over $500 million in supplemental appropriations for long-
term economic recovery assistance in 30 States and 4 territories and
commonwealths. Overall, over 80 percent of the EDA funds were used for
infrastructure construction projects, about 15 percent were for
revolving loan funds and less than 5 percent were used for economic
recovery planning and technical assistance.
EDA has worked cooperatively with FEMA for some time in post-
disaster program operations at the field level with EDA often co-
locating in FEMA disaster field offices. More recently, EDA has been
involved more closely in partnership with FEMA at the policy level in
headquarters in updating the Federal Response Plan to incorporate a
recovery component, serving on FEMA-lead Federal Recovery Task Force
groups in response to specific disasters, and supporting the economic
components of new FEMA mitigation initiatives such as ``Project
Impact'' Building Resistance Communities'' to encourage local actions
to make communities safer and to reduce the cost and impact of future
disasters.
In support of this FEMA mitigation initiative, EDA has continued
its economic focus and is committing resources to safeguard jobs and
insulate economic growth from the impacts of future disasters in
disaster-prone areas of the country to help create ``Disaster Resistant
Jobs''. On June 29, 1998 EDA and FEMA announced a Memorandum of
Agreement to cooperatively develop and deliver a ``Disaster Resistant
Jobs Training'' to help communities safeguard existing jobs and
accelerate post-disaster economic recovery. In addition, EDA and FEMA
are finalizing a Memorandum of Understanding to formalize the Project
Impact partnership which will help outline the form and structure of
cooperative activity for each agency in support of the Project Impact
Initiative and Project Impact communities.
EDA has been tasked by FEMA with a Mission Assignment for the
Florida fires to conduct analyses of the economic impact on the local
communities, and an analysis of the insurance coverage in meeting the
residents/businesses needs.
______
Responses by Phillip Singerman to Additional Questions from Senator
Wyden
Question 1: The Administration committed to provide $3 million for
the Northwest Economic Adjustment Initiative under a memo of
understanding with the Northwest Governors. Does the Administration
plan to live up to that commitment?
Response: EDA has proposals in the fiscal year 1998 pipeline
totaling approximately $5.8 million responding to timber impacted
communities which are competing for funding this fiscal year. EDA's
forest initiative awards for FY 98 are expected to exceed $3.0 million.
Between 1994 and 1997 EDA has funded timber related projects totaling
approximately $42.0 million.
Question 2: Congress provided $2 million more for the Title IX
program in FY 98 than the Administration requested. You can 't say a
shortage of funds is preventing you from fully funding the NW
Initiative. What 's the holdup in providing the funding?
Response: EDA's Seattle regional office has received $2.0 million
in addition to its regular formula base allocation for Title IX to
assist the timber impacted communities--all of which is expected to be
awarded in fiscal year 1998.
Question 3: Although this is supposed to be the fast year of the NW
Initiative, Oregon still has 7 counties in the State with unemployment
at least twice the national average as a result of dislocations of
workers in timber and salmon fishing (Coos, Harney, Hood River,
Jefferson, Lake, Morrow and Wallowa). What continuing commitment does
EDA plan to provide the Northwest to help these workers and communities
get back on their feet?
Response: EDA has been and will continue to be supportive in its
efforts in assisting timber impacted communities. EDA's intent is to
continue normal levels of assistance to these communities to help guide
them through the planning and adjustment process. EDA's participation
in the Memorandum of Understanding was intended to help offset
immediate economic impacts and to begin a short-term development
strategy. EDA maintains that the remaining long-term economic
development needs related to the Forest Initiative, are best handled
through its regular programs.
__________
Statement of Robert W. Burchell, Ph.D., Distinguished Professor,
Principal Investigator, Center for Urban Policy Research, Rutgers
University, New Brunswick, New Jersey
section i: public works program performance evaluation
Study Overview
The purpose of the research described here was to evaluate all 205
Economic Development Administration (EDA) Public Works Program projects
that received their last payment in fiscal year 1990. This means that,
as of that date, the projects were completed and structures associated
with them either occupied or soon to be occupied. Thus, at the time of
this research--6 years later--these projects had been sufficiently
established to make their evaluation possible.
Since 1965, EDA's mission has been to promote the long-term
recovery of economically depressed areas by assisting local governments
via public works project grants in generating and retaining jobs and in
stimulating commercial and industrial growth.
Study Procedures
The study was undertaken from November 1996 through March 1997 by
research teams from five universities and a major professional
organization. All principals of the research teams have extensive
experience in both economic development and infrastructure studies.
Each principal spent significant time in the field researching
individual projects and talking to grantees. Each principal and
affiliated staff participated in some aspect of research analysis and
in writing the final report. All concur with the findings presented
below.
The research team contacted by mail and telephone 205 grantees of
public works projects. To help the grantees better understand the
purpose and types of information necessary to undertake the evaluation,
all grantees were invited to attend seminars conducted by the research
team at 13 locations nationally. Sixty (60) project sites were visited
to conduct in-depth discussions with grantees to learn more about their
individual projects' impacts and to validate the information that they
were in the process of providing.
The analysis uses performance measures developed by EDA
specifically to evaluate public works projects. Performance measures
relate primarily to numbers of various types of jobs created or
retained and amounts of private- and public-sector funds leveraged.
Project Type and Context
From a universe of 205 EDA public works projects receiving a
closeout payment in fiscal year 1990, all 205 were successfully
contacted.
The composition of the 203 completed \1\ public works projects is
as follows:
---------------------------------------------------------------------------
\1\ Two projects aborted and were not constructed because of local
financial or market reasons.
Distribution of Projects
------------------------------------------------------------------------
Number Percent
------------------------------------------------------------------------
Buildings......................................... 27 13.3
Industrial Parks.................................. 59 29.1
Roads............................................. 17 8.4
Water/Sewer....................................... 87 42.8
Marine/Tourism.................................... 13 6.4
TOTAL......................................... 203 100.0
------------------------------------------------------------------------
In terms of the context of the above projects, EDA public works
projects take place in locations where levels of unemployment and
percents of the population below the poverty level are 40 percent
higher than State and national averages. These are also locations where
per capita income is typically 40 percent lower than averages at the
State and national levels.
Project Completion
Of those public works projects contacted by the research team, 99
percent (203) were completed as planned. Ninety-one percent (185) of
the projects were completed on time.
Fifty-two percent (105) were completed under budget.
Project Impacts
Project-Related Direct Impacts
Ninety-six percent (195) of the public works projects produced
permanent jobs 6 years after completion. Eighty-four percent (171)
leveraged private-sector investment over the period. On average, each
public works project produced 327 direct permanent jobs for every $1
million of EDA funding.
Based on average EDA funding of $660,557 per project, $3,058 in EDA
funds was spent per job created or retained. Total cost (all sources of
funding, including EDA) per job created or retained was $4,857.
Not including public projects, for every $1 million of EDA funding,
$10.08 million was leveraged in private-sector investment.
For all projects, for every $1 million of EDA funding, another $1
million was leveraged in Federal, State or local investment.
15.0 FTE (full-time-equivalent) construction jobs were created per
$1 million of EDA funding, carrying out solely the grant-supported
component of capital infrastructure.
Nonproject-Related Direct and Indirect Impacts
Nonproject-related direct or indirect jobs (those that occur
because of the project or the project's jobs) were found to be present
in 30 and 35 percent, respectively, of all public works projects.
Considering all projects' ability to generate nonproject-related
direct or indirect effects, for every $1 million of EDA funding, an
additional 50 jobs and $1.18 million in private-sector investment were
generated in nonproject-related direct effects, and an additional 64
jobs and $126,180 were generated in indirect effects.
Except in cases where the project was tax-exempt, public works
projects increased the local tax base at a level of $10.13 million per
$1 million of EDA funding.
Project Impacts (General)
Public works projects' economic impacts generally increase with
time. Jobs resulting 6 years after completion were, on average, twice
the number witnessed at project completion.
EDA public-sector economic stimuli create private-sector jobs at
high levels of success and low levels of cost.
Conclusions
Most of the public works projects achieved EDA's objective of
providing communities with the necessary infrastructure to expand their
economic base.
Jobs and private investment have occurred in many areas that would
not have experienced these benefits without EDA assistance.
EDA offices as an instrument of government, and EDA field
representatives who interact with grantees, are well-regarded by their
constituencies.
section ii
defense adjustment program performance evaluation
Study Overview
The purpose of the research described here is to evaluate all (190)
Economic Development Administration (EDA) Defense Adjustment Program
grant projects approved during the period fiscal year 1992 through
fiscal year 1995. The primary objective of this program and its
projects is the restructuring of local economies to diversify away from
dependence on former defense bases or defense contractors impacted by
closure or cutback.
Direct appropriated funding to EDA for the Defense Adjustment
Program began in fiscal year 1994. From 1992 to 1994, EDA received
transfers of funds for defense projects from the Department of
Defense's Office of Economic Adjustment (OEA). The program, therefore,
is relatively young, and as of 1997, the defense construction, capacity
building (planning and technical assistance), and revolving loan fund
(RLF) projects analyzed here were just taking hold. While their
relative recentcy does not allow for an evaluation of these projects at
full maturity, their accomplishments at this early phase can certainly
be quantified.
As indicated above, the Defense Adjustment projects, even if
completed, have had only a short time to mature. With time, the
permanent jobs that they create will increase and the cost per job
created will decrease. The present evaluation provides a snapshot view
of the projects' effects during an early phase of their existence. A
concurrent EDA study of the Public Works Program and other similar
studies have shown that the effects (both direct and indirect) of these
projects will increase substantially over time.
Study Procedures
The study was undertaken from November 1996 through September 1997
by research teams from five universities and a major professional
organization. All principals of the research teams have extensive
experience in both economic development and infrastructure studies.
Each principal spent significant time in the field researching
individual projects and talking to grantees. Each principal and
affiliated staff participated in some aspect of research analysis and
in writing the final report. All concur with the findings presented
below. The research team contacted by mail and telephone 190 grantees
of defense adjustment projects. To help the grantees better understand
the purpose and types of information necessary to undertake the
evaluation, all grantees were invited to attend seminars conducted by
the research team at 13 locations nationally. Forty-two project sites
were visited to conduct in-depth discussions with grantees to learn
more about their individual projects' impacts and to validate the
information that they were providing.
The evaluation is undertaken using performance measures developed
by EDA specifically to assess the productivity of defense adjustment
projects. Performance measures for defense construction and revolving
loan fund projects primarily involve numbers and types of jobs created
or retained and amounts of private-sector funds leveraged. For
capacity-building projects, the performance measure is a grantee self-
rating of the quality and impact of the EDA capacity-building effort.
Project Type and Context
From a universe of 190 EDA defense adjustment projects that were
approved from fiscal year 1992 through fiscal year 1995, all 190 were
contacted.
The 187 grant-funded projects analyzed in this study \2\ include
162 single-element projects, 20 double-element projects, and 5 triple-
element projects. These sum to 217 total project elements funded via
the 187 EDA grants.
---------------------------------------------------------------------------
\2\ Three projects were never funded due to grantee financial
problems (2) or cross purposes between the grantee and the EDA regional
office (1).
---------------------------------------------------------------------------
Since 1987, approximately 2.5 million defense-dependent jobs have
been lost due to defense downsizing. EDA's Defense Adjustment Program
is a direct response to base closures, base downsizing, and/or reduced
defense contracting. Cutbacks are often sudden and severe for their
host communities. In addition, projects are in locations where minority
populations and percents of the population below the poverty level are
20 percent higher than State and national averages. These are also
locations where per capita income is 25 percent lower than averages at
State and national levels.
Project Completion
Of those 190 defense adjustment projects contacted by the research
team, 98.5 percent (187) were initiated as planned.
Of those undertaken, about 97 and 98 percent of defense
construction and capacity-building projects, respectively, moved to
completion; 100 percent of the RLFs moved to completion.
Context of Projects
At Time of Application (Medians) (187 Initiated Projects)
----------------------------------------------------------------------------------------------------------------
Ratio to
Median State Ratio to Nation
----------------------------------------------------------------------------------------------------------------
Unemployment Rate (percent)........................................ 7.0 0.98 1.02
Per Capita Income ($).............................................. 13,034 0.72 0.73
Below Poverty Level (percent)...................................... 15.5 15.5 1.18
Minority (percent)................................................. 27.3 1.21 1.39
----------------------------------------------------------------------------------------------------------------
Of those undertaken and completed, 80 and 81 percent of the defense
construction and RLFs, respectively, were completed on time. About 56
percent of the capacity-building projects were completed on time.
Of those undertaken and completed, about 90 percent of defense
construction projects came in at or under budget; the figures for
capacity building and RLFs are 97 percent and 100 percent respectively
\3\.
---------------------------------------------------------------------------
\3\ RLFs, by their nature, cannot come in over budget. They lend
what they have.
---------------------------------------------------------------------------
Project Impacts \4\
---------------------------------------------------------------------------
\4\ As projects age and mature, project accomplishments will likely
increase over time.
---------------------------------------------------------------------------
Project-Related Direct Impacts: Defense Construction On average,
completed defense construction projects (49) have produced 30,870
permanent jobs to date, or 124 jobs per $1 million of EDA funding.
These jobs were produced at an EDA cost of $8,052 per job and a total
cost (all sources of funding) of $12,045 per job.
Defense construction projects produced 18.0 FTE \5\ construction
jobs per $1 million of EDA funding.
---------------------------------------------------------------------------
\5\ Full-time-equivalent.
---------------------------------------------------------------------------
Completed defense construction projects (43)\6\ leveraged $722
million in private-sector investment, or $2.2 million per $1 million of
EDA funding. \6\ Forty-three of 49 defense construction projects have
private-sector investment. Six projects are public sector and have no
private-sector investment.
---------------------------------------------------------------------------
\6\ Forty-three of 49 defense construction have private-sector
investment. Six project are public sector and have no private-sector
investment.
Defense Construction and Capacity-Building Projects: Permanent Jobs:
(Medians)
(49 Completed Defense Construction and 31 Completed TA* Capacity-
Building Projects)
------------------------------------------------------------------------
Capacity
Defense Building
Construction (TA)
------------------------------------------------------------------------
Jobs Per $1M EDA............................. 124 63
EDA Cost Per Job............................. $8,052 $13,633
Construction/Professional Jobs............... 18.0 FTE 13.7 FTE
Private-Sector Investment Per $1M of EDA $2.2 M N/A
Funding.....................................
------------------------------------------------------------------------
*Technical Assistance
Capacity Building
Capacity-building projects, by their definition and design, are not
intended to create jobs directly, but to increase the planning,
organizational, and technical skills needed for local economic
development. Nevertheless, some jobs result as an indirect byproduct of
those project goals. Completed capacity-building (technical assistance)
projects (31) have produced 63 permanent jobs per $1 million of EDA
funding at an EDA cost of $13,633 per job and a total cost of $19,393
per job \7\.
---------------------------------------------------------------------------
\7\ Direct job creation is an incidental benefit of capacity-
building projects, which generally support subsequent projects having
direct job creation.
---------------------------------------------------------------------------
Permanent jobs coming from capacity-building technical assistance
projects reflect developments such as stalled businesses being matched
with new markets, workers being more employable due to training, and
businesses generating more money because they have been made more
efficient.
Completed capacity-building (technical assistance) projects have
produced 13.7 FTE professional consultant jobs for every $1 million of
EDA funding.
Completed capacity-building projects have, in addition, produced
adjustment strategies, heightened community involvement and planning,
created workable implementation strategies, and undertaken market/
feasibility studies. EDA capacity-building efforts have been rated by
grantees as seen in the following table:
Grantee Rating of Capacity--Building Projects (Means)
(70 Completed Capacity-Building Projects)* (Scale of 1-10; 10 = best)
------------------------------------------------------------------------
------------------------------------------------------------------------
Quality of Adjustment Strategy............................. 8.2
Extent of Community/Business/Government Participation...... 8.5
Consistency of Implementation Efforts and the Adjustment 7.8
Strategy..................................................
Quality of Technical Assistance Effort..................... 8.8
Impact of Technical Assistance Effort...................... 8.9
Quality of Feasibility/Market Study........................ 9.1
Impact of Feasibility/Market Study......................... 8.7
------------------------------------------------------------------------
*These include all types of capacity-building projects, not just
technical assistance.
Grantee Observations:
Across the board, grantees report that the products they are
delivering with EDA oversight are both well done and have a significant
impact.
Capacity building empowers local areas to respond in a proactive
and forward-moving way to the adverse impacts on their economies.
Grantees further report the following:
Capacity-building projects are responsible for significant
networking among various forms and levels of economic development
agencies. This enables greater use and leveraging of public and
nonprofit funds.
Capacity-building projects comprise technology transfer efforts
wherein sophisticated methods of enhanced productivity are used to
measure business adjustment to new technology.
Revolving Loan Funds
With regard to revolving loan funds (RLFs), 304 jobs have been
created per $1 million of EDA funding for 16 completed projects (fully
loaned); for
those projects in process (21), there are 247 \8\ jobs created. EDA
cost per job is $3,312 for completed RLF projects and $4,079 for
projects that are in process.
---------------------------------------------------------------------------
\8\ In-process RLF projects can be analyzed in the same fashion as
completed projects because they behave similarly from the time of their
first loan onward.
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Completed RLF projects have leveraged $115 million in private-
sector investment, or $2.5 million per $1 million of EDA funding. In-
process RLF projects have leveraged $42 million in private-sector
investment, or $2.8 million per $1 million of EDA funding.
Other statistics for RLFs include combined default and write-off
rates for completed projects of 13 percent and for RLF projects in
process of 1.9 percent \9\. For both completed and in-process projects,
jobs produced per business assisted are about 22 and 24, respectively.
In 50 percent of the cases the RLF involves a business expansion (as
opposed to startup or retention), and in 67 percent of the cases it
involves the funding of manufacturing firms (as opposed to commercial
or service firms).
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\9\ A 12-15 percent combined default and write-off rate is well
within industry standards for this type of loan.
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Project Impacts (General)
Due to the recentcy of defense adjustment projects, their results
are just beginning to become evident. Most will likely contribute
significant additional employment growth in the long term.
Defense construction, as well as RLF projects, are nonetheless
producing permanent jobs at relatively low costs; capacity-building
technical assistance projects are producing smaller numbers of
permanent jobs at somewhat higher costs. Capacity-building planning
efforts and market/feasibility/reuse studies are perhaps more
importantly laying the groundwork for both defense construction and RLF
projects. Capacity-building projects could easily be given credit for
jobs produced under these two other types of implementation activities.
Revolving Loan Fund Projects (Medians)
(16 Completed and 21 In-Process RLFs)
------------------------------------------------------------------------
Completed In Process
------------------------------------------------------------------------
Jobs Per $1M EDA.............................. 304 247
EDA Cost Per Job.............................. $3,312 $4,079
Private-Sector Leverage Per $1M EDA........... $2.5 M $2.8 M
Default/Write-off Rates....................... 13 percent 1.9 percent
Jobs Created/Business......................... 22 19
------------------------------------------------------------------------
Conclusions
As reported by grantees, EDA defense adjustment projects are one of
the few avenues of flexible assistance available to communities faced
with base closures.
EDA funding is critical to most of these types of activities and is
usually the primary source of initial funding.
The lower rate for in-process loans reflects almost no write-offs
at this stage of the loan.
section iii
multiplier and employment-generating effects of public works projects
Study Overview
The research described here evaluated the job-producing results of
public works investments. It employed nearly 200 input-output and
regression analyses to document the effects of Economic Development
Administration (EDA) public works projects on the employment growth of
their host counties. Comparisons were also made to counties where EDA
projects did not take place. Both the input-output and regression
analyses sought similar answers: Did public works projects produce
attributable permanent jobs in counties where these projects took
place? Did the resulting jobs, in turn, produce other jobs? The two
analyses are different in that the input-output analysis is constrained
by current conditions, whereas the regression analysis allows the
current structure of economic activities to change. The first presents
a static view of job-creation impacts; the second, a more dynamic view.
Both types of analyses are rigorous and standard econometric procedures
for determining relationships between public investment and permanent
job growth.
Input-Output Analysis Findings
This research examined the role of EDA-funded direct permanent
employment and private-sector investment in producing total (direct,
indirect, and induced) permanent employment and private-sector
investment in counties throughout the United States. In other words,
what are the direct employment and private-sector investment multiplier
effects? The analysis was undertaken using the IMPLAN Model to generate
indirect and induced effects from direct effects, the latter obtained
from a national survey of public works grantees. Thus, the national
survey generates direct permanent employment and private-sector
investment; the IMPLAN Model generates indirect and induced permanent
employment and private-sector investment. The sum of direct, indirect,
and induced employment and private-sector investment yields total
employment and private-sector investment.
Total employment and private-sector investment divided by direct
employment and private-sector investment produce ``multipliers'' of the
two direct effects.
Two sets of multipliers are shown in Table 1. These relate to two
forms of direct effects--project-related and nonproject-related. The
set of lower multipliers expresses total permanent employment and
private-sector investment as a function of both forms of direct
permanent employment and private-sector investment. The set of higher
multipliers expresses total permanent employment and private-sector
investment as a function of the solely project-related form of direct
permanent employment and private-sector investment. The lower
multiplier for permanent employment and private-sector investment is
the multiplier effect of permanent employment and private-sector
investment at the site that the EDA grant specified, as well as other
direct employment that located nearby; the higher multiplier for
permanent employment and private-sector investment is the multiplier
effect of permanent employment and private-sector investment solely at
the site that the EDA grant specified.
The multipliers shown in Table 1 are medians for five categories of
projects and a weighted median for all projects. The overall median
ratio for total permanent employment to both forms of direct permanent
employment (project and nonproject related) is 1.50; the equivalent
median for total private-sector investment is 1.44. Thus, if an EDA
public works project creates 200 direct permanent jobs and $6 million
in direct private-sector investment, total permanent jobs (direct,
indirect, and induced) amounts to 300 and total private-sector
investment to $8.64 million. For employment, there is some minor
variation by type of project: Industrial parks exhibit the highest
multipliers; water/sewer projects exhibit the lowest. For private-
sector investment, there is much more variation by type of project:
Buildings have by far the highest multipliers; tourism/marine projects,
the lowest multipliers.
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The multipliers for total permanent employment and private-sector
investment versus only project-related direct permanent employment and
private-sector investment are 5 percent higher for employment and 10
percent higher for private-sector investment. This finding indicates
the relatively small amount of nonproject-related direct permanent
employment and investment compared to project-related direct permanent
employment and investment identified in the grantee survey.
Regression Analysis Findings
This research evaluated the role of EDA public works investments in
the creation of permanent private-sector employment and in enhancing
employee compensation in U.S. counties.
Current models of the effect of infrastructure investment on
private-sector productivity have yet to establish a firm connection
between the two. Studies using these models often fail to control for
the potentially important effect of variations in factor prices,
especially wages, in response to public investments. A comprehensive
model of county employment effects is provided in this study as a basis
from which to view impacts.
The analysis reported here was undertaken using information from
the Public Works Program--Performance Evaluation to specify the level
of EDA investment in a public works project in a county. The resulting
jobs produced in a county reflect the numbers of jobs counted annually
as reported by County Business Patterns. Additional regression
variables, taken from both County Business Patterns and the U.S. Census
of Population and Housing, were used to help identify the independent
effect of EDA investment on county employment growth.
The analysis employed multiple regression as the primary
econometric technique, with separate equations constructed for both
employment and compensation. Variables are expressed in their
logarithmic form, reducing the influence of extreme values and enabling
a closer fit of the regression planes and higher R2s in both equations.
Regressions explain between 80 and 85 percent of the variation in
county employment and about 70 percent of the variation in compensation
levels.
Empirical results include the following:
EDA investments have a statistically significant and positive
effect on county total employment levels (see Table 2).
EDA investments have no statistically discernible effect on
compensation per employee. Thus, the resulting EDA jobs are produced at
the average wage of all jobs locally.
The elasticity of total employment with respect to EDA investment
is estimated at approximately .0074: that is, a 10 percent increase in
EDA investment in a typical county ($4,650) is estimated to be
associated with an increase of 4.2 jobs. Thus, a $10,000 EDA investment
produces approximately 9 permanent jobs.
The cost per job for the EDA program is estimated at just over
$1,100 (in 1997 dollars), counting all permanent jobs generated by the
facility or the increase in productivity that the facility offers
(direct, indirect, induced, and intangible). This estimate is
comparable to the findings in both the Public Works Program--
Performance Evaluation and the input-output analysis, which found that
the cost of a direct permanent job was about $3,000 and that the
multiplier for total jobs was about 1.5. But the input-output analysis
considered only jobs created by the EDA facility. There are also other
jobs created by the new assets themselves, leading to changes in the
structure of county economies. Thus, the overall jobs multiplier might
be even higher, bringing the cost per job more in line with the
regression analysis.
Conclusions
This study found that EDA's Public Works Program does indeed
produce permanent private-sector employment at a relatively low cost.
The estimates clearly suggest that the program is having its intended
effect. EDA appears to have converted its resources into permanent jobs
at prevailing wages in its target counties. These counties are better
off than similar counties where this type of effort is not taking
place.
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__________
Statement of R. Scott Fosler, President, National Academy of Public
Administration
Mr. Chairman and Members of the Subcommittee: I am R. Scott Foster,
President of the National Academy of Public Administration. I am here
to provide testimony on behalf of the Academy's panel on economic
development. Former Governor Dick Thornburgh, the chair of this panel
and an Academy Fellow, wished to be here, but he is on a trip to South
Korea.
National Academy of Public Administration
The Academy is an independent, nonpartisan, nonprofit organization
chartered by Congress to identify emerging issues of governance and
provide practical assistance to Federal, State, and local government on
how to improve their performance.
To carry out this mission, the Academy draws on the expertise of
more than 400 Fellows, who include current and former Members of
Congress, cabinet secretaries, senior Federal executives, State and
local officials, business executives, scholars, and journalists. Our
congressional charter is one of two granted to research organizations.
The other is held by the National Academy of Sciences which specializes
in scientific research. The Academy's emphasis is on the design and
management of government operations and programs.
The Academy Report
Two years ago, the Economic Development Administration of the
Department of Commerce asked the Academy to address the question,
``What is the appropriate future role of the Federal Government in
economic development activities?'' The Annie E. Casey Foundation also
provided support for the project.
The Academy convened a diverse panel of experts from the local,
State and Federal levels and also from the private sector. Some members
of this panel have had distinguished careers specifically in economic
development, and others have had experience in economic policy or
related areas.
We reviewed the economic development policies and programs of all
Federal agencies, not just the programs of the Economic Development
Administration. Our staff conducted field work in eight communities,
including rural and urban areas. We interviewed economic development
experts and studied the extensive literature on economic development
including evaluations of Federal and State programs. The panel then
prepared its report, and convened a national meeting of economic
development professionals from all parts of the country to discuss it.
I have brought copies of the report today, and ask for it to be
entered into the record.
The panel did not address the specific issue before this
Committee--reauthorization of the Economic Development Administration.
Nonetheless, its findings and recommendations may provide useful
information for the Committee as it considers such legislation.
Briefly, the report recommends a rethinking of the basic premises
for Federal economic development activities at the State, local, and
regional levels.
Historically, Federal development efforts have tried to increase
overall national productivity and to help economically distressed and
poor communities gain a share of the country's general prosperity.
Toward these ends, the Federal Government has built and sustained a
variety of organizations involved in economic development at every
level of society. They include development agencies at the State and
local levels, multicounty development districts, and community-based
development corporations, not to mention various nonprofit
organizations and working relationships with banks, industrial
associations, and other private-sector partners.
Among the panel's findings are the following:
The fundamental economic influences of the private sector and
market forces must be incorporated into successful economic development
plans.
Federal investments in development efforts are critical to many
States and localities, but not all.
No single Federal program is appropriate in all communities;
however, the present multiplicity of programs imposes unnecessarily
high transaction costs on States and localities and exacerbates
inherent weaknesses in their approaches.
The meager Federal investment in information sharing and technology
severely constrains our nation's economic development efforts.
The panel proposed a new approach to meet economic development
needs. It urges the Federal Government to help States and localities
learn through better information, leverage all available resources, and
link multiple Federal initiatives to assist local communities.
In order to promote learning, the Federal Government should:
Help States and communities learn about state-of-art economic
development practices.
Act to reduce the economic losses resulting from unrestrained
bidding wars by States and localities to recruit or retain businesses.
Improve the quality of economic development decisionmaking and the
assessment of policies and programs at all levels by gathering and
disseminating State, regional, and local economic statistics and by
reducing the fragmentation of the nation's statistical system.
In order to leverage State and local efforts, the Federal
Government should:
Give States and communities incentives to design and implement
effective regional or interjurisdictional development strategies.
Encourage investment in development strategies that offer
opportunities to generate jobs and income over the longer term, rather
than in high-visibility projects.
Give special assistance to States and communities seeking to create
economic opportunities in distressed communities.
In order to make it easier for States and localities to link
Federal resources, the Federal Government should:
Substantially reduce the fragmentation of the Federal economic
development efforts.
Establish a permanent mechanism to provide overall policy-level
guidance to other Federal activities such as work force training,
environmental protection, technology and research, and other endeavors
that contribute to economic development outcomes.
Reorient Federal programs, especially business finance programs,
toward strategies that address the underlying obstacles to obtaining
credit.
Encourage States and localities to stimulate links among businesses
to enhance overall economic performance.
The nation's economic development programs will be a critical
factor in two of the most significant domestic policy challenges of the
coming decades: America's adjustment and response to an increasingly
competitive global economy and the recent transformation of social
policy from one based on dependency to one that stresses opportunity
and personal responsibility. A reformed Federal approach to economic
development will help States and communities make real and far greater
contributions to addressing these issues.
EDA does not have the authority to implement all of the panel's
recommendations. For example, it would take action by the Congress and
leadership by the President to substantially reduce the fragmentation
of the Federal economic development effort.
However, EDA has taken the panel's recommendations to heart. On an
informal basis, we have been watching EDA's actions to implement the
recommendations under its statutory authority and have been pleased at
many of the steps they have taken. Phillip Singerman, Assistant
Secretary for Economic Development, recently provided to us a detailed
list of these steps, and I ask that a copy of his letter be entered
into the record. While we have not formally studied or assessed EDA's
actions, it is clear that the agency has taken the panel's
recommendations seriously and has taken some useful steps -- especially
in the area of technical assistance and training, or as the panel put
it, learning.
For example, Mr. Singerman's letter informs us that EDA is working
to develop a methodology to assess the costs and benefits of State
incentive programs. EDA has engaged a contractor to assess how Federal
statistical agencies can better serve the needs of economic development
practitioners. EDA is seeking to strengthen the planning processes of
the States and regions that it works with. And EDA has commissioned
independent evaluations of its own programs, hopefully as a step toward
encouraging the States and regions with which it works to evaluate
their own efforts. Thoughtful, sound evaluations can be tremendously
useful to economic development efforts in sifting the wheat from the
chaff, sharing good ideas, and finding better ways that EDA and other
Federal agencies can support their work.
For many years, EDA has been at risk of being terminated. When we
were doing the research for our study, we were told repeatedly about
the chilling effect this had on the morale and the capabilities of the
agency. EDA is now working hard to revitalize itself. We are pleased
that the Academy report has been of some use to the agency in this
process and hope that the Committee will also find the report useful in
its work.
Conclusion
Mr. Chairman, this concludes my prepared statement. I would be
pleased to answer any questions. Thank you.
__________
Statement of Floyd G. ``Buddy'' Villines, Judge/Executive, Pulaski
County, Arkansas
Mr. Chairman, distinguished members of the Panel: Thank you for
holding this important hearing and for inviting us here today to
discuss the long overdue reauthorization of an agency that is very
important to revitalization efforts in our economically distressed
rural and urban areas.
My name is Floyd Villines. I'm Judge/Executive of Pulaski County,
Arkansas and a former Mayor of Little Rock. I'm here today on behalf of
the Coalition for Economic Development, a group of fifteen (15)
national organizations committed to supporting the Economic Development
Administration.
Our coalition represents national organizations representing rural
and urban economic development practitioners, professionals and
academics, and local elected officials. These organizations include the
American Economic Development Council, the Association of University
Centers, the Council for Urban Economic Development, the National
Association of Counties, the National Association of Business
Incubators, the National Association of Development Organizations, the
National Association of Installation Developers, the National
Association of Management and Technology Assistance Centers, the
National Association of Regional Councils, the National Association of
State Development Agencies, the National Association of Towns and
Townships, the National Congress for Community Economic Development,
the National League of Cities, the Public Works and Economic
Development Association and the U.S. Conference of Mayors.
Members of the coalition applaud your efforts and the efforts of
Committee Chairman John Chafee to produce a reauthorization bill that
continues the reforms that have been underway at the Economic
Development Administration for several years. We also pledge our
support to work with you to reauthorize EDA.
Members of the coalition believe that reauthorization of the
Economic Development Administration is critical because:
The agency is moving into the 21st Century with authorizing
legislation that goes back to the early 1980's. The agency needs
reinforcement with new language that allows it to help our rural and
urban communities meet the continuing and ever-changing challenges of
economic revitalization. Among those challenges will be access to and
expertise in information age technology. Our businesses in small cities
and rural areas will be unable to compete in the global economic
without access to these information and marketing tools.
Reauthorization will allow the agency to focus on its core mission
and to develop multi-year plans for its programs, rather than draining
off its energy in an annual battle for survival.
The coalition's support for EDA is based on a very simple concept:
EDA works. It is a Federal agency that does what it was designed to do.
It serves the Federal role of leveling the playing field for those
communities that need to become productive parts of the national
economy, rather than a drain on it. It is a lean, streamlined agency
with a clearly defined mission. It supports and helps revitalize our
economically distressed communities. As a local government official, it
is important to me that EDA is there to provide the seed money
necessary for the infrastructure improvements we need to attract new
business and help existing businesses expand and grow.
I emphasize ``seed money'' because that is what EDA support is.
It's a boost, a leg up. It requires local governments to provide as
much as 50 percent in matching funds, although for extremely distressed
communities, this match can be reduced. Often, however, EDA funds are
the linchpin that allows us to leverage other financial resources and
to buy down loans, making those loans affordable for particularly
distressed areas. For example, in my own county, two census tracts In
the vicinity of North Little Rock were facing a 33.4 percent and a 36.7
percent unemployment rate. There was no industrial park in the area and
no attractive place to locate industry that could provide jobs to these
unemployed residents.
Through the efforts of the North Little Rock Industrial Development
Corporation and the Central Arkansas Planning and Development District,
an appropriate site was found. With a $462,000 grant from EDA and a
$300,000 plus match from North Little Rock, water, sewer and an access
road were constructed to reach the industrial park site.
Soon after completion, three companies moved in, providing 323 new
jobs, a payroll in excess of $3.1 million, with private investments of
approximately $4.4 million. We now have 13 tenants, employing 365
people, with an annual payroll of $4.1 million and private investments
totaling $9.5 million.
We believe economic development efforts in this area contributed
significantly to a $10,000 average household income increase in Pulaski
County between 1990 and 1995.
This project could not have been completed without the assistance
of EDA.
Following are but a few examples, selected from across the country,
of what EDA investments have meant to our distressed communities.
A project in cooperation with the State of Maine to build a Fish
Pier at Stonington, on Deer Isle in East Penobscot Bay. As a result of
the new pier, 100 new jobs were created and 262 jobs retained in the
fishing community. Since its completion, a seafood company with three
trailers has opened, along with smaller businesses for fish sorting.
The city has benefited as owner of the Pier through user fee charges.
The pier, called ``the Cadillac of piers'', is expected to last for 300
years.
Increase in sewage treatment capacity for the Borough of Berwick,
Pa., enabled the town to retain 506 jobs, part of a plant operation
that was a heavy user of the sewage facility. The company has expanded
its work force, creating about 450 new jobs. Cost to EDA was $1
million; cost to the community was $4.5 million. Private sector
investment was $14.250 million.
The Rochester Science Park in Rochester, N.Y., helped boost a
sagging economy that had few jobs for entry level workers. The Science
Park, funded at $1 million by EDA and $2.12 million from other sources,
has created 534 jobs and retained another 55 jobs and resulted in a
private-sector investment of $13.175 million.
The Martin Luther King Industrial Park in St. Louis is completely
filled and has generated a total of 600 new jobs while retaining 600
more. The park has attracted $50 million in private-sector investments.
--A regional business development system created by the Association
of South Central Oklahoma Governments, Duncan, in cooperation with the
city of Lawton. This is an example of a rural area taking a model
developed by a metropolitan area. The program integrated a ``going into
business and business plan preparation'' courses and seminars in
conjunction with a Vocational Technical School. The development
district worked with its member communities to pull together twelve
revolving loan funds. The program provided course work for Fort Sill
employees when the defense facility was going through a reduction in
force; has helped hundreds of individuals in their business creation
and expansion efforts and has helped course graduates that have gone
into business.
A project in a deteriorating area in inner Philadelphia that has
brought back to life the old American Bandstand Building and turned it
into a center for business incubation. The center is the brain child of
the Wharton Small Business Development Center at the University of
Pennsylvania. The center's 10 year goal is to create 200 new
businesses, 3,500 new jobs and leverage $660 million in private
investment.
Esperanza Unida (New Hope) business incubator center that serves a
predominantly Hispanic area in southside Milwaukee has been in
existence since 1971, but its efforts were redoubled in the early
1980's when all of the factories in which people worked in the
neighborhood closed down. In response, the center started an auto
repair training business, but over the years, it has expanded into 11
different training centers, all starting around market niches where
there were jobs and wages adequate to support a family.
These are but a few of the successful economic revitalization
projects in which the Economic Development Administration has played a
major role. Numerous other successful efforts can also be documented.
As I mentioned earlier, EDA is an agency that works. We believe
there are several reasons why:
The EDA network EDA's regional offices and State economic
development representatives assist local governments and other
recipients of funding. These regional office people and EDRs are
available to assist with any problems that arise. They watch over the
projects, make sure there are no problems and help us get projects
completed on time.
The EDA planning process. EDA requires an overall economic
development strategy that engages the community, various organizations
and local governments in a process to assess needs and to determine
goals. That plan is a realistic road map that keeps us focused. That
plan is developed on a regional basis, with specific input from local
governments in the economic development district, citizens and others.
The process allows us to identify our strengths and weaknesses and work
to build on those strengths and eliminate or reduce our weaknesses. It
allows us an opportunity to look at where we, as local governments, can
be working together, rather than competing, for economic growth.
The academic connection. EDA has a network of university centers
that can provide economic development practitioners with academic
research to assist them in planning and project management. In our
State, the center at the University of Arkansas-Little Rock is
currently collecting and acting as the repository for a consistent set
of data that can be used by all economic development districts in
developing their overall plans. These university centers can also
operate over a broader base than one economic development district.
The revolving loan fund program. EDA's revolving loan fund has
assisted thousands of entrepreneurs in establishing their businesses
and has kept thousands of other small businesses in operation. These
loan funds serve those that do not meet the criteria for loans from
traditional lending institutions. We all know that small businesses are
providing the majority of new jobs in America. The EDA loan fund allows
us at the local and regional level to invest in our communities by
assisting businesses that are home grown and are more likely to stay at
home.
EDA's Trade Adjustment Program. EDA's network of 12 Trade
Adjustment Assistance Centers provide vital help to businesses impacted
by our changing trade policy and the growing global competition. The
program is designed to help those businesses that receive certification
as truly impacted businesses to develop an adjustment proposal that
includes the firms recovery strategy and technical assistance needs.
EDA's eligibility criteria. The agency's emphasis is on the most
economically distressed areas in rural and urban America and on the
most viable projects. The criticism that too much of America is
eligible to receive EDA finding in not valid. While many areas that
were designated as economic development districts over the years remain
as ``designated'' districts, they receive no finding because they no
longer meet the eligibility criteria.
EDA's job creation focus. The emphasis in EDA programming is on job
creation. EDA grants are tied to job retention and the creation of new
jobs, either through new companies or expansion of existing companies.
EDA's willingness to listen. EDA has demonstrated a willingness to
change. EDA has listened to its grantees about the timeframe for
processing grant applications and for simplifying the process and has
corrected many of the problems of the past by moving decisionmaking to
the regional level. EDA has demonstrated a willingness to reform. EDA,
in actuality, has been reforming itself. The agency has listened and
responded to criticism and suggestions from Congress and from its
grantees.
All of you are aware, I'm sure, that many communities that are
struggling to comply with welfare reform. That means we must find ways
to increase the number of jobs available, and in many parts of the
country, communities are faced with an ongoing struggle to attract
enough job opportunities. EDA is the one Federal agency that places all
its program emphasis on job creation and job retention, and it is the
agency already positioned to help those rural and urban communities
struggling to respond to welfare reform requirements. In my own county,
EDA assistance has meant that we have been able to add living wage jobs
for many of our citizens. EDA has been there through the years to
assist us with our struggle for economic revitalization.
In conclusion, Mr. Chairman and members of the Panel, the Economic
Development Administration has earned the respect of all of us who have
worked with it. It is time the agency was recognized through
reauthorization for the lasting benefits it has contributed--and will
continue to contribute--to our communities.
Again, thank you for the opportunity to appear before you today.
The longer coalition testimony submitted for the record includes
numerous examples of the investments EDA has made in America's
economically distressed rural and urban areas. We have also included a
tabulation of the investments EDA has made in every State since the
agency started in 1965.
In addition, we have included a list of coalition member contacts.
Please feel free to call any of them with any questions you may have
specific to their areas of expertise.
I'll be happy to answer any questions. And again, I want to assure
you, Mr. Chairman, and other members of the panel that you may rely on
members of the coalition to assist you in any way we can.
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__________
Statement of Eric P. Thompson, Executive Director of the Lower Savannah
Council of Governments, Aiken, South Carolina, and President of the
National Association of Development Organizations on behalf of the
Coalition for Economic Development
Mr. Chairman and Mr. Baucus, thank you for inviting me to testify
on reauthorization of the Economic Development Administration (EDA) on
behalf of the Coalition for Economic Development. I am Eric Thompson,
Executive Director of the Lower Savannah Council of Governments
headquartered in Aiken, South Carolina. As President of the National
Association of Development Organizations (NADO), I am pleased to join
the other members of our coalition in offering strong support for EDA
reauthorization.
My fellow coalition member Judge Villines has given an excellent
overview of the importance of EDA programs to rural and urban
communities. I would like to focus on an issue of great importance to
my region, the State of South Carolina and other places throughout the
country affected by defense industry contract cuts and base closures.
Despite the small size of EDA, the agency has always provided
flexible programs and funding needed in times of sudden economic
dislocation. EDA's Defense Adjustment Program helps communities
impacted by base closures and/or defense contract reductions to rebuild
and diversify their economies and move away from defense dependency.
EDA is the only Federal agency with flexible program tools to help
communities implement base reuse plans. The agency allows local
communities to establish their own priorities and use EDA grants to
fill funding gaps. EDA investments require local commitment and
funding. This creates a true public-private partnership to address long
term strategic needs. Working with their local partners, economic
development districts, EDA funds are highly leveraged and targeted to
areas of greatest need.
In the State of South Carolina there have been a number of base
closings and significant cutbacks at the Department of Energy (DOE)
Savannah River Site located in the Lower Savannah region.
In April 1996 the Charleston Naval Base was closed resulting in the
loss of 21,902 direct jobs with $644 million in annual payroll. When a
base closes, there is a need for a regional approach to provide a
transition to other jobs for dislocated workers and to increase
economic diversity for long-term sustainability. Military base reuse is
important, but meaningful defense adjustment must focus on the
structural recovery of defense impacted communities and not just base
reuse. EDA's programs and funding are critical in order to achieve
structural adjustment because they allow local communities to establish
their own priorities. Working with the local Economic Development
District, the Berkeley-Charleston-Dorchester Council of Governments,
EDA funds have been invested in infrastructure, a revolving loan fund
and a regional marketing plan to create and retain jobs in the region.
EDA funds significantly leveraged private-sector investment and have
resulted in the creation and retention of 12,800 jobs.
In the Lower Savannah region the Savannah River Site produced
material for nuclear weapons used in the US defense program. It is the
largest employer in the State of South Carolina. With the end of the
cold war, the Department of Energy (DOE) downsized the facility,
resulting in a loss of over 10,000 jobs, increasing unemployment,
causing real estate values to stagnate and essentially halting new home
starts. In 1997, all six counties in the Lower Savannah COG--Aiken,
Allendale, Bamberg, Barnwell, Calhoun and Orangeburg--had unemployment
rates above the State average. The rural counties of Allendale,
Bamberg, and Orangeburg have almost twice the State average and are the
three highest unemployment counties in the State.
In order to help the Lower Savannah region adjust to this drastic
cutback, the Department of Energy needed a Federal agency to administer
DOE funds provided for community transition. Using the existing EDA
system and grant process, DOE transferred funds to EDA to administer
and now requires that EDA approve all requests for community adjustment
assistance from DOE's Office of Worker and Community Transition.
While defense spending cuts appear to be bottoming out, the defense
adjustment challenge remains. Consolidation and mergers in the defense
industry and additional base closures will continue to require EDA's
support and participation in defense adjustment activities. Used for a
variety of purposes, EDA funds are tailored to meet the needs of local
communities; they are not based on rigid Federal directives and
guidelines.
One of EDA's greatest strengths is the ability to use the existing
network of 320 Economic Development Districts, such as the Lower
Savannah COG, for defense adjustment, disaster relief and overall
economic development assistance. These regional development
organizations provide local governments with professional and technical
assistance. Districts, the core of EDA's delivery mechanism, are multi-
county public-private partnerships whose boards are composed of local
elected officials, private-sector and minority representatives. They
are critically important in small metropolitan and rural regions where
professional and technical assistance is limited or nonexistent. Of the
nation's 39,000 units of local government, 33,000 have populations of
less than 3,000 and 11,500 governments have no employees.
Larger cities and counties have professional staff including
engineers and planners to assist elected officials in the
decisionmaking process. However, in most of the country's small and
rural communities, Economic Development District employees are the only
professional staff who are able to navigate the mountains of red tape,
regulations and application forms necessary to apply for Federal and
State assistance. It is through EDA planning grants to districts that
distressed communities gain access to professional capacity and
technical expertise to plan for the future. Today, EDA's small planning
grants to districts support an Overall Economic Development Program
(OEDP) for the communities served. OEDPs are blueprints providing a
comprehensive plan for sustainable community and economic development.
EDA is extremely effective both in helping communities cope with
long-term economic disasters such as resource-dependent economies
facing the decline of coal or timber industries or sudden economic
crises caused by plant and base closings and natural disasters. It is
important to remember that not all of the Base Realignment And Closure
(BRAC) listed installations are yet closed. It takes several years to
actually shut down a facility so the need for EDA's defense adjustment
programs will continue.
EDA has demonstrated its effectiveness and has earned the right to
be reauthorized. Under the leadership of Assistant Secretary Phillip
Singerman, EDA has streamlined its operations and significantly
reformed and reinvented itself. Now is the time to provide the agency
with legislative tools and congressional guidance to bring EDA into the
21st century. It is particularly important that America's distressed
communities be prepared to compete in the global marketplace through
state-of-the-art technology. We strongly encourage EDA to once again
assume a leadership role during this transition.
On behalf of the members of the Coalition for Economic Development,
I urge the committee to work with EDA to update the authorizing
legislation so that the nation's distressed communities will continue
to have this vital Federal partner as we move into the next century. I
can assure you that those of us who work in economic development at the
local level will do everything we can to help make EDA more efficient
and effective.
______
Statement of National Association of Development Organizations (NADO)
The members of the National Association of Development
Organizations (NADO), strongly support reauthorization of the Economic
Development Administration (EDA). EDA is the only Federal agency that
has the program tools necessary to address the broad range of economic
development challenges facing America's distressed communities. Whether
through infrastructure grants, strategic planning or economic
adjustment assistance, EDA helps distressed communities compete
economically and enter the mainstream. During the past 30 plus years,
the agency has created or retained more than 2.8 million jobs resulting
from 39,000 assistance projects throughout the country; generated $1.9
billion in private-sector capital through revolving loan funds that
have supported more than 7,000 businesses; and leveraged more than $10
in private-sector investment for every Federal dollar invested.
The National Association of Development Organizations is a public
interest group founded in 1967 to help professionals and local elected
officials build communities and create jobs. The association is the
leading advocate for a regional approach to economic and community
development in America's small metropolitan and rural communities.
Economic distress and development needs transcend jurisdictional
boundaries, and solutions to rural distress are most effective when
implemented at the substate regional level. NADO members provide
community, economic and rural development technical assistance to local
governments and the private sector. The members of NADO directly serve
over 1,800 counties and 15,000 cities and towns.
NADO members are regional development organizations, known
variously as economic development districts, planning and development
councils, councils of governments, area development districts and
regional councils. Regional development organizations draft long-term
strategic economic development plans, offer a wide range of technical
assistance and provide small business financing. EDA supports these
regional planning and development efforts through the economic
development district program.
There are four major reasons why Congress should pass
reauthorization legislation for the Economic Development Administration
this year.
1. Public Investment in Infrastructure Is Essential for Private Sector
Job Creation
For distressed communities outside the economic mainstream, EDA's
public works grants are the major source of infrastructure funding for
projects related directly to the creation of private-sector jobs. Among
the projects funded are water and sewer facilities serving industry and
commerce; access roads to industrial parks or sites; port investments;
and business incubator facilities. While these are not glamorous
projects, they play an essential role in the process of upgrading and
expanding the nation's aging public infrastructure which directly
impacts communities' ability to develop new businesses, retain and
expand existing companies and generate local tax revenues. Since 1965,
EDA public works investments have assisted in the creation of more than
1.5 million jobs.
The Economic Development Council of Northern Vermont (EDCNV) an
economic development district serving six counties where dairy farming
is important, created a regional dairy industrial park with EDA
funding. The focus of this industrial park is on using dairy by-
products such as whey for pharmaceutical products and fertilizer. This
kind of careful investment based on local planning continues to pay
substantial returns to the economy and builds on and adds value to
existing resources.
EDA funding for infrastructure improvements to the Mallord Fox
Creek Industrial Park in Decatur, Alabama through the North-central
Alabama Regional Council of Governments has resulted in bringing more
than 4,000 jobs to the area. This includes the recent announcement by
the Boeing Company to employ between 2,000 and 3,000 people to build
the common booster core for the new Delta IV rocket.
2. Planning Is Essential for Long Term Sustainable Development
EDA provides support for a network of 320 Economic Development
Districts (EDDs) that serve local communities with professional and
technical assistance. EDDs are multi-county public-private partnerships
whose boards are composed of local elected officials, private-sector
and minority representatives. EDDs are the core of EDA's delivery
mechanism. Districts have evolved into the central planning and service
coordination mechanism for many other Federal programs in rural areas
including job training, housing, environmental protection, aging
services, emergency management and small business assistance.
As former Representative Bill Clinger (R-PA) stated during the
debate on the Economic Development Reauthorization Act of 1994 (HR
2442), ``EDA has established a network of regional development
organizations throughout its service areas, and I cannot stress too
much their importance. EDA is directed toward rural areas of distress,
rural communities that are having trouble competing in a wide variety
of ways. What this program does is provide an expertise that would not
otherwise be available to these communities.'' NADO members heartily
agree with this analysis.
The districts are providers of professional capacity and technical
assistance. In the current fiscal year, Congress appropriated $24
million for EDA's Title III planning grants. Of this, EDA provides
slightly more than $17 million for EDD planning grants. Districts
receive an average of $53,000 from EDA. Like all EDA funds, these
planning grants leverage additional funding from nonFederal sources,
including State and local funds. EDA's planning grants support a staff
person in each EDD who prepares an Overall Economic Development Program
(OEDP) for the communities they serve. OEDPs are blueprints providing a
comprehensive plan for community and economic development. They are
developed with, and approved by, the local elected officials from all
the participating communities.
It is important to note that the real purchasing power of the
planning grants has been greatly diminished over the past 30 years by
inflation. The average planning grant to districts was approximately
$54,000 at the start of the program in 1966. Today, the average
planning grant remains only $54,000. Adjusted for inflation, the value
of a 1998 planning grant is only $10,800, or 20 cents on the dollar,
when compared to its original purchasing power in 1966. While districts
have leveraged and stretched these small but significant dollars to
help thousands of America's small metropolitan and rural communities
forge ahead and create jobs, NADO members strongly encourage Congress
to dramatically increase the authorization levels for the planning
grant program.
Larger cities and counties have professional staff including
engineers and planners to assist elected officials in the
decisionmaking process. However, in most of the country's small and
rural communities, district employees are the only professional staff
that are able to navigate the mountains of red tape, regulations and
application forms necessary to apply for Federal assistance. It is
through EDA grants to districts for planning assistance that many
distressed communities gain access to professional capacity and
technical expertise. Of the 39,000 general purpose local governments in
the US, 33,000 have populations of less than 3,000 and 11,500 have no
employees.
EDDs are also the local institution that facilitates the flow of
Federal assistance to rural and small metropolitan communities.
Districts help smaller communities prepare applications for Federal and
State assistance and often administer EDA infrastructure and economic
adjustment grants. Districts are critically important in obtaining aid
for rural counties and towns from other State and Federal agencies
including: the US Department of Agriculture's rural development grants
and loans, Department of Housing and Urban Development Community
Development Block Grants, Department of Health and Human Service
Welfare to Work and Older Americans programs, Department of Labor job
training, Small Business Administration micro-loan and Certified
Development Company programs.
Economic Development Districts are entrepreneurial, extremely
flexible and provide assistance far greater in scope than that provided
by EDA or the Federal Government programs. Because they serve local
communities and are governed by a majority of local elected officials,
they respond to the needs of the communities and deliver a variety of
services to meet locally identified needs.
The Lower Savannah Council of Governments (LSCOG) headquartered in
Aiken, South Carolina was officially established on June 20, 1967 with
an EDA grant of $31,450 and local funds of $10,500. Today, LSCOG's base
has broadened to include not only economic development but also law
enforcement assistance programs, comprehensive local and regional
planning, services to older Americans, health planning and historic
preservation. During the past 31 years, the Lower Savannah Council of
Governments has worked with EDA on a number of successful projects,
including:
Creation of the Aiken Technical Education Center and the Denmark
Area Trade School which have helped increase both the number of jobs
and the qualified persons to fill those positions.
Testing the effectiveness of exporting goods produced by small
businesses or farmers. The council identified current exporters and
industries with the potential to export goods and assisted in
developing the capacity of persons who had never participated in the
export process.
LSCOG planning staff provides mapping services which facilitate
environmental, land use and economic planning, as well as the
preparation of custom census and other data reports, using a Geographic
Information System (GIS). GIS is an organized collection of computer
hardware, software, geographic data and personnel designed to
efficiently capture, store, update, manipulate, analyze and display all
forms of geographically referenced information. A Global Positioning
System (GPS) which allows locations to be mapped with satellite
technology is also being used by LSCOG.
3. Small Business Assistance Through Revolving Loan Funds Helps Fill
Credit Gaps
EDA's revolving loan fund (RLF) program is one of the most
successful and powerful economic development tools for addressing the
credit gaps that exist in many distressed communities, particularly in
underserved rural areas. RLFs provide financing when standard lending
institutions will not fund smaller, riskier or unconventional business
ventures. These funds are lent to businesses that cannot obtain
financing through traditional lending institutions. RLFs are managed by
public or private nonprofit lending institutions as part of an overall
economic development program by lending their initial capital and then
relending funds as payments are made.
The Mount Rogers Planning District Commission (PDC), an EDA
Economic Development District, headquartered in Marion, Virginia offers
an excellent example of the impact EDA's revolving loan fund program
has in distressed communities. The commission has been a major
beneficiary of EDA grants and special funding that have provided the
critical infrastructure and site development for several industrial
parks and facilities. Established in 1986, the commission's revolving
loan fund has developed an outstanding track record with $1,368,000
loaned for 12 loans that range from $25,000 to $150,000. Over 840 jobs
have been created or saved via the commission's RLF program with a cost
per job portfolio of $1,622 per job. Of the loans, approximately 28
percent went to industry and business startups and 81 percent to
manufacturers. The RLF also targeted 4 percent of the firms that were
women or minority owned.
One of the Mount Rogers RLF's most successful borrowers, Jack
Galyean, President and Entrepreneur of Printed Circuit Solutions,
recently received the Appalachian Regional Commission (ARC)
Entrepreneur of Virginia Award. With the assistance of Mount Rogers
PDC, Mr. Galyean established one of the region's most technically
advanced/leading edge manufacturing facilities, specializing in the
printed circuit board industry. Following a successful career in
technology at Rockwell & Honeywell, he brought his expertise and
business experience home to realize his dream of establishing a
manufacturing operation in Galax, Virginia which would provide
technically advanced, much needed jobs with above average wages.
Printed Circuit Solutions Manufacturing, Inc. has grown to 30 employees
with at least 50 percent of the work force having 2 years of college or
more. The company provides wages 20 to 30 percent above the industry
average in the Galax area.
Based on the success of the RLF program, NADO members strongly
encourage Congress to help strengthen the program. The agency should be
strongly encouraged to continue to allocate resources to capitalize or
recapitalize RLFs, to review their regulations to allow more
flexibility and responsiveness to local priorities and make use of
existing training programs such as the NADO Research Foundation's
Economic Development Finance Service to ensure top level performance of
new and existing RLFs.
4. Assistance Is Needed for Communities Facing Long Term and Sudden
Economic Decline
EDA is extremely effective in helping communities cope with long-
term economic disasters, such as resource-dependent economies facing
the decline of coal or timber industries or sudden economic crises
caused by plant closings and natural disasters. The agency is also a
major player in the Federal Government's efforts to assist communities
and industries struggling with defense conversion to shift their
emphasis from military-based to private-sector economies.
NADO members applaud EDA for its past success and encourage the
agency to continue using economic development districts as part of its
defense conversion strategy. In distressed communities, the districts
are prepared to respond to and meet needs identified at the local
level. The districts have the flexibility and expertise to respond to
challenges, as well as the capacity to provide rural communities with
the ability to react to new causes of economic distress, such as base
or industry closure due to military downsizing. Through the overall
economic development program, districts can help communities plan for
defense conversion related problems and prepare a regional strategy to
counter these obstacles.
The South Western Oklahoma Development Authority (SWODA), an EDA
Economic Development District, converted a former B-52 Strategic Air
Command Base into the Clinton-Sherman Industrial Air Park owned by the
city of Sherman. Employing 500 people, the industrial park is a small
town in itself, with an airport, and commercial and industrial
operations. Currently the State of Oklahoma has formed a team with
SWODA to compete for a launch site for the next generation space
shuttle.
EDA Has Earned the Right to Be Reauthorized
The Economic Development Administration has demonstrated its
effectiveness and deserves the stability in programmatic structure and
funding that reauthorization would provide. During the past 30 plus
years, the agency has created or retained more than 2.8 million jobs
resulting from 39,000 assistance projects throughout the country;
generated $1.9 billion in private-sector capital through revolving loan
funds that have supported more than 7,000 businesses; and leveraged
more than $10 in private-sector investment for every Federal dollar
invested.
Under the leadership of Assistant Secretary Phillip Singerman, EDA
has streamlined its operations and significantly reformed and
reinvented itself. Now is the time to provide the agency with
legislative tools and congressional guidance to bring EDA into the 21st
century.
EDA infrastructure grants are not only necessary, they are
extremely successful and cost effective investment of Federal
resources. The Federal Government receives a return on their investment
far greater than the size of the Federal share of EDA infrastructure
grants. As Assistant Secretary Singerman testified during House
hearings last summer, a May 1997 performance evaluation of the EDA
Public Works Program conducted by Rutgers University shows that EDA
assistance helps distressed communities create jobs (at a cost of
$3,058 per job), expands the local tax base (an increase of $10 for
every $1 of EDA investment), and leverages private investment ($10 for
every $1 of EDA investment). The results of this evaluation were
gathered from a study of 203 public works projects that received their
final payment from EDA in fiscal year 1990.
In addition to EDA legislation, NADO members support
reauthorization of the Appalachian Regional Commission (ARC) which
provides assistance to distressed areas in this 13 State region. ARC,
working with Local Development Districts, has focused its resources on
their most distressed counties and should also be reauthorized.
To restate briefly the main reasons why Congress should reauthorize
the Economic Development Administration this year. EDA is the only
Federal agency that has the array of program tools needed to meet the
challenges facing America's distressed communities including: public
works, revolving loan funds, planning and economic adjustment. The
Economic Development Administration supports a network of 320 Economic
Development Districts (EDDs) that serve small metropolitan and rural
communities as vital providers of professional and technical
assistance. EDA has demonstrated its effectiveness and has earned the
stability in programmatic structure and funding that reauthorization
would provide.
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Educational Association of University Centers,
Cullowhee, North Carolina 28723, July 14, 1998.
Senator John Warner Chairman,
Subcommittee on Transportation and Infrastructure,
Senate Office Building,
Washington, DC 20510.
Senator Max Baucus Ranking Minority Member,
Committee on Environment and Public Works,
Senate Office Building,
Washington, DC 20510.
Dear Chairman Warner and Ranking Minority Member Baucus: The
Educational Association of University Centers, a member of the
Coalition for Economic Development, is pleased to provide comments for
the record in strong support of the reauthorization of the Economic
Development Administration (EDA).
As we all know, there are a myriad of different reasons why a
particular geographical area may fall behind the economic development
level of other regions of the country. Once this slide begins, however,
standards of living further erode and poverty increases. EDA stands
alone as our national resource to stem and hopefully reverse the
economic decline in many distressed communities. By working through
grants and local resource partners, EDA brings investment and critical
technical expertise to create sustainable economic development in the
most cost-effective manner possible.
The University Center program, funded by EDA through its technical
assistance account, provides the technical expertise component in the
menu of EDA services. As you know, there are 69 university centers
nationwide that uniquely link the knowledge, expertise, and resources
of the nation's higher education system with the private sector and
communities to solve economic development problems. By providing the
feasibility studies, community economic development planning, data
collection and dissemination, regional economic development studies,
work force competitiveness training, non-profit development and local
government official training, the university center program offers the
technical expertise underpinning any successful economic development
strategy.
University centers are often the vital link between a community's
economic development plan and the capital investment to make that plan
reality. In fact, in 1995 alone the university center program, which is
currently funded by EDA at $6.9 million, secured $200 million in
capital investments. That means that this one small EDA program
leverages $26 for every one Federal dollar EDA invests in the program.
This extraordinary level of success is indicative of the value EDA
brings to our nation's communities.
But, the university center program is only one small part of EDA's
economic development arsenal. The planning process, EDA's network of
regional offices and State economic development representatives, the
revolving loan fund, the trade adjustment assistance program are all
available to insure eligible communities get the help they need, when
they need it. In the end, EDA and all of its partners focus on creating
the jobs that are so crucial to the long-term viability of a community.
Job creation remains job one.
Under the excellent leadership of Assistant Secretary Phillip
Singerman, EDA has also instituted a number of measures to insure the
highest possible quality from all of its programs. Several years ago,
for instance, the university center program in conjunction with EDA
developed a peer review process conducted by EDA staff and experienced
University Center Directors to strengthen the overall program delivery.
These onsite program assessments seek to correct instances of
unsatisfactory performance and to proscribe new strategies for better
serving our communities. The result has been a stronger, more efficient
university center program.
While this is only one example, EDA's commitment to quality, cost-
efficient programs shines through in its strategies to prepare itself
for the 21? Century. While EDA has planted and nurtured the seedlings
of a long term and highly effective presence in America's economy, it
will take reauthorization to ensure these strategies take root and
develop the strength to resist the political winds of change. Economic
development is critical to the overall prosperity of our nation.
Perhaps it is a tired cliche, but it still holds true: we are only as
strong as our weakest link. EDA works to strengthen us all.
Reauthorization of EDA is vital to distressed communities
nationwide. The Educational Association of University Centers urges you
to act favorably and expeditiously to reauthorize EDA.
Thank you for your time and consideration of this vital matter.
Sincerely,
Thomas McClure,
Educational Association of University Centers.
__________
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