# Presentation: 704794

## Economic Development AdministrationPrincipal Features Of New Regulations(70 FR 47002)

**Notes:**
EDA published new regulations as an interim final rule on August 11, 2005.  Its promulgation of new regulations began a 93-day public notice and comment period (August 11, 2005 through November 14, 2005) during which interested parties could submit written comments on the interim final rule.  EDA also held a public hearing on the new regulations on September 1, 2005 at the Department of Commerce.  

With limited exceptions, the new regulations became effective on October 1, 2005.  I will explain the exceptions during this presentation.   The interim final rule, including the amendments made to it on December 15, 2005 that I will discuss today, can be found on EDA’s website at www.eda.gov. 

## Goals Of New Regulations

- Update.
- Clarify.
- Simplify.

**Notes:**
1. Update:  The new regulations reflect amendments made to EDA’s authorizing legislation, the Public Works and Economic Development Act of 1965 (PWEDA), by the Economic Development Administration Reauthorization Act of 2004 (Pub. L. No. 108-373); for example, one new part discusses performance incentives (that’s new in the 2004 Act), which I will discuss a little bit later.  
2. Clarify:  The new regulations reflect the current practices and policies of EDA’s economic development assistance programs, as these have evolved over the past seven years; and
3. Simplify:  The new regulations reorder EDA’s former regulations in a more logical sequence, expand the use of defined terms and present information in a more technically concise and user-friendly manner.  We have dropped a number of provisions that were no longer needed or obsolete.  

## Part 300:  General Information

- Mission statement appears in
- 	§ 300.1.
- 2.	EDA is shifting to a regional focus on long-term results (definition of “Region” in § 300.3).
- 3.	“Investment” or “Investment Assistance” replaces the use of the defined term “grant.”

**Notes:**
EDA’s mission statement is paramount.  It appears immediately in the first part of the new regulations [in section 300.1]:  “To lead the federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy.”  We want applicants and our economic development stakeholders to know upfront the importance of encouraging economic growth on a regional basis.  
Accordingly, there is a shift to a regional focus on long-term results (as shown in the definition of “Region” in section 300.3 of the new regulations).  We want applicants to carefully consider the project’s utility and purpose and its regional impact (for example, the competitive advantages of a region increasingly lie within the region itself, so the formation of clusters is very important).
The terms “Investment” and “Investment Assistance” replace the use of the defined term “grant” in the former regulations.  This change reflects EDA’s priority that EDA investments must generate a “return.”  This “return” is helping distressed regions compete economically and enter the mainstream marketplace by creating jobs and private capital investment, whether through infrastructure grants, strategic planning or economic adjustment assistance.  

## Part 301:  Eligibility And Investment Rates

- EDA has adopted Congressional recommendations on investment rates.
- The American Community Survey is the benchmark database for measurement of distress.
- Regions of greatest need should receive greatest assistance.

**Notes:**
As of October 1, 2005, EDA will use the most recent American Community Survey (ACS) published by the U.S. Census Bureau to determine economic distress levels according to unemployment rates or per capita income levels.  EDA believes that the ACS is the most accurate and reliable metric currently available to measure the economic distress of a region (or other geographical area).  However, where a recent ACS is not available, EDA will base its decision upon the most recent federal data from other sources, including data available from the Census Bureau and Bureaus of Economic Analysis, Labor Statistics, or Indian Affairs.
The new regulations establish an investment rate regime to determine the level of EDA investment and local match required for a project.  In accordance with PWEDA, the new allocation criteria shift the focus from the applicant’s overall economic situation to the “relative needs” of the region where the project is located to ensure that EDA funds are provided to the most economically distressed regions.
[BACKGROUND]:  The December 15, 2005 rulemaking revised the investment rate table in section 301.4 (Table 1) to show that projects located in regions demonstrating (i) a 24-month unemployment rate at least 1% greater than the national average or (ii) per capita income not more than 80% of the national average will be eligible to receive a maximum allowable investment rate of 50%.  The 30% and 40% maximum allowable investment rate categories in the August 11, 2005 interim final rule were eliminated. The higher threshold levels of economic distress for the 60%, 70% and 80% maximum allowable investment rate categories remain the same as provided in the August 11, 2005 interim final rule.

##      Part 303:  Planning Investments and CEDS

- EDA has adopted Congressional recommendations on Planning investment rates.
- Goal is to make the CEDS a “living” document.
- Effective strategy development and implementation require a public-private partnership.

**Notes:**
1. Investment Rates:
The new regulations also set out the investment rate scheme for Planning Organizations. These provisions are:
All Planning investments will receive a minimum investment rate of 50%;
The maximum allowable investment rate for Planning investments will be the maximum allowable investment rate for the most economically distressed county or equivalent political unit within the region; and
The maximum allowable investment rate may not exceed 80%.  
2. Performance evaluations:  EDA will evaluate a Planning Organization’s performance over the preceding 36-month period in order to make an additional award. This does not mean that assistance to Planning Organizations is a “one-time only” award over a three-year period.  Based on satisfactory performance over the preceding three-year period, EDA will continue to award Planning investments for the period of time required to develop, revise or replace and implement a Comprehensive Economic Development Strategy (CEDS). 
3.  EDA will fund administrative expenses that are directly related to activities involved in developing and implementing a well-considered CEDS for economic growth.  

## 	Part 303:  Planning Investments and CEDS (CONT’D.)

- Provisions specify technical requirements of a CEDS.
- EDA will evaluate a Planning Organization’s performance over the preceding 36-month period
- 	(§ 303.4(c)).
- 3. A new section details EDA assistance for short-term planning activities.

**Notes:**
For an EDA-funded CEDS, the new regulations require that Strategy Committees of Planning Organizations have a majority of its representatives from the private sector.  Our Planning program is a flexible tool that allows local communities to establish their own priorities, but a public-private partnership arrangement must be achieved by all communities to address long-term strategic needs and target regions of greatest need.  
To be eligible for a Public Works or Economic Adjustment Assistance grant, a proposed investment must be consistent with an EDA-approved CEDS.  Therefore, the CEDS document is a very important part of our investment portfolio.  There must be a section identifying and prioritizing projects that address the region’s greatest needs or best enhance the region’s competitiveness, and there must be a section that lists the performance measures used to evaluate the Planning Organization’s development and implementation of its CEDS.  
Unlike the former regulations, the new regulations provide in detail the assistance EDA may give to support short-term Planning activities.  Applicants for short-term planning investments must also provide performance measures that can be used to evaluate the success of their programs.

## Part 304:  Economic Development Districts

- EDA has adopted Congressional recommendations on District Organization governing board requirements.
- Other changes emphasize transparency in District operations, public-private partnerships across regions, and effective implementation of a CEDS.

**Notes:**
In accordance with the Conference Report accompanying the FY06 Appropriations Act, a District Organization’s governing body must include at least one private sector representative, together with one or more of the following:  Executive Directors of Chambers of Commerce, or representatives of institutions of post-secondary education, workforce development groups, or labor groups, all of which must comprise in the aggregate a minimum of 35% of the District Organization’s governing body. The definition of “Private Sector Representative” in section 300.3 of the interim final rule includes a “designee” of any senior management official or executive holding a key decision-making position in any for-profit enterprise.  The new regulations also make clear that a District Organization’s governing body will also have at least a simple majority of its membership who are elected or appointed local government officials.  
The new regulations provide that District Organizations may engage in the full range of economic development activities listed in its EDA- approved CEDS.  These activities include (i) coordinating and implementing economic development activities in the District; (ii) carrying out economic development research, planning, implementation and advisory functions identified in the CEDS, and (iii) coordinating the development and implementation of the CEDS with other local, State, federal and private organizations.  The regulations continue to give District Organizations the discretion to contract for services as necessary. 
In connection with District designation termination, EDA added a provision to clarify that prior to terminating a District’s designation, EDA will (i) consult with the District Organization and (ii) consider all facts and circumstances surrounding the District Organization’s operations.  The provision also provides that EDA will not terminate a District’s designation based on circumstances beyond the control of the District Organization (such as a natural disaster, plant closure, overall economic downturn, or sudden and severe economic dislocation).  
The provisions for Economic Development Districts in the new regulations overall emphasize transparency of District operations, public-private partnerships across regions, and effective implementation of a CEDS.

## Part 308:  Performance Incentives

- Recipients whose projects are constructed under cost may use excess funds for  “other eligible activities” under PWEDA.
- The 2004 Act allows EDA to reward successful project performance on a “look-back” basis.
- Planning performance incentives emphasize project impact and link to CEDS.

**Notes:**
For any Public Works or Economic Adjustment investment completed under projected cost, the new regulations provide that EDA may in its discretion allow the recipient to use the excess funds to either (i) increase the investment rate of the project to the maximum percentage allowable under 301.4 of the new regulations for which the project was eligible at the time the investment award was made, or (ii) further improve the project consistent with its purpose.  
Performance Awards:  The December 15, 2005 rulemaking also involved a couple of revisions to the performance award provisions.   We revised the interim final rule to better adhere to new section 215 of PWEDA.  The 2004 Act allows EDA to reward demonstrated project performance on a “look-back” basis.  We replaced the requirement that project performance be “exceptional” with the threshold in section 215 of PWEDA that project performance “meet or exceed” the recipient’s projections for specific project goals.  EDA will place in an annual Federal Funding Opportunity the requirements, qualifications, guidelines and procedures for performance awards, with all performance awards being subject to the availability of funds.
Planning Performance Awards:  The last section in part 308 of the new regulations reflects the new planning performance award provisions of section 216 of PWEDA.  Similar to the performance awards, the Assistant Secretary will make these awards on a discretionary basis, subject to the availability of funds.  To be eligible for a planning performance award, the recipient must have (i) actively participated in the economic development activities of the District and (ii) shown that the project demonstrated exceptional fulfillment of one or more components of its CEDS.  
We are currently working to determine the allocations we’ll give to the performance awards in FY 2006.  

## Part 310:  Special Impact Areas

- EDA’s Assistant Secretary may waive CEDS requirements for individual projects.
- Waiver requires Congressional notification.
- Waivers were granted for Gulf Coast redevelopment projects.

**Notes:**
In accordance with new section 214 of PWEDA, part 310 of the new regulations allows the Assistant Secretary to waive the CEDS requirements where he determines that a recipient is unable to comply with the CEDS requirements set forth in section 303.7 of the new regulations.  The Assistant Secretary may designate the region that the project will serve as a “special impact area” and waive the CEDS requirements only after the recipient has shown that the project fulfills a pressing need of the region or addresses or alleviates underemployment or unemployment in the region.  Any waiver of the CEDS requirements applies to individual projects only and not to all projects located within the region.
If the Assistant Secretary grants the waiver designating a region as a “special impact area,” EDA must notify Congress in writing of the designation [section 214(c) of PWEDA].
The impact of Hurricane Katrina presented a unique and urgent circumstance which necessitated the waiver of EDA’s CEDS requirements.  In that case, the Assistant Secretary designated the States of Alabama, Louisiana and Mississippi as “special impact areas” for purposes of waiving the CEDS requirements under Economic Adjustment Assistance investments awarded to those States. 

## Part 315:  Trade Adjustment Assistance For Firms

- Provisions establish and clarify threshold standards for determination of eligibility.
- New adjustment proposal section emphasizes improvement of a firm’s competitive position and consideration for its workers.

**Notes:**
	As some of you may know, pursuant to Chapter 3 of Title II of the Trade Act of 1974, the Secretary of Commerce is responsible for administering the Trade Adjustment Assistance (TAA) Program.  The Secretary has delegated this statutory authority and responsibility to EDA.  The TAA Program provides technical assistance to U.S. firms experiencing a decline in sales and employment, resulting in part from an increase in imports of like or directly competitive articles, to become more competitive in the global marketplace.  We administer the TAA Program in partnership with a national network of eleven (11) trade adjustment assistance centers (TAACs).  

1.  The regulations implementing the TAA program are in part 315 of the new regulations.  We revised the definitions and consolidated the sections to enhance clarity and simplify the administration of the program.  One important defined term, “Decreased Absolutely,” imposes a new five (5) percent threshold injury requirement in the measurement of a firm’s decline in sales or production, in order to be certified as eligible to apply for trade adjustment assistance.   The firm also must show a five (5) percent or greater decrease in firm employment, and an increase in imports of like or directly competitive articles, that contributed importantly to the firm’s decrease in sales and employment.
2.  We have also included a new section on the evaluation of a firm’s adjustment proposal.  A TAAC works directly with a firm to develop an adjustment proposal once EDA has certified the firm as eligible to apply for trade adjustment assistance.   The adjustment proposal must provide a detailed analysis of the firm’s problems, strengths and weaknesses, and provide a plan for its economic recovery or adjustment.

## Next Steps

- EDA is reviewing and
- 	considering public comments.
- 2.	EDA will issue a Final Rule.

**Notes:**
EDA is in the process of reviewing and considering comments received from our economic development stakeholders during the public comment period for the interim final rule that ran from August 11, 2005 through November 14, 2005.   Thereafter, we will publish a final rule.  In publishing a final rule, EDA will respond formally to all comments received during the public comment period.  EDA greatly values input from all of its stakeholders and appreciates the time all stakeholders took to comment on the interim final rule.